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$2,000 Thursday – Our Webinar Trade on Oil Pays off Big Already!

We didn't start the fire

It was always burning

Since the world's been turning

We didn't start the fire

No we didn't light it

But we tried to fight it – Billy Joel

No, we didn't start the fire…

However, we did go long on oil in yesterday's Live Trading Webinar as it tested the $51 line and now Iran has apparently attacket two tankers in the Strait of Hormuz with torpedoes, critically damaging one of them and US ships are heading in to assist and Oil (/CL) is already at $53 (up $2,000 per contract) and Gasoline (/RB) has blasted from our long position at $1.68 to $1.725 and that's up $1,890 per contract but both could squeeze higher as the shorts wake up to a nightmare scenario.  

This is a tragedy, we may end up in war and it's certainly not the way we wanted to be right (fortunately no one was hurt) - we simply bet that Oil and Gasoline had gotten way too low based on Fundamentals and the fact that they exploded higher on an incident simply proves our point.  We will keep $400, trailing stops (10% of the profit) at this point as we may end up with another $2,000 gain from here – hard to say how high the squeeze will take us at the moment.  

Another odd reaction is the stock of Frontline (FRO), whose tanker was hit.  Rather than going lower, FRO is up 8% this morning as it's an old tanker and they'll be happy to get the insurance and it's one of 61 tankers they own and, with oil higher, they'll be making more money – especially if trips get longer as tankers try to avoid Iranian waters.

In other commodity news, Soybeans have really taken off, and the September contracts (/ZSU19) which we had featured over at Seeking Alpha on May 10th at $825, just hit the $900 mark and those pay $50 per $1 more PER CONTRACT so that's a lovely gain of $3,750 per contract and we are very content to take those off the table now but we are still in our options play on the Soybean ETF (SOYB), which was at the time:

As to SOYB, it hasn't been this low since, well, ever – as the contract began in 2012 at $25 and never really went below $17.50 until the trade war began so $14.50 is quite a bargain and, although it an be tough betting on Trump here, it's POSSIBLE we get a trade deal and that will hurt our hedges in the Short-Term Portfolio so, in order to hedge the hedges, a bullish bet on SOYB makes sense. For the STP, we can:

 
  • Buy 50 Nov $14 calls for $1.10 ($5,500)
  • Sell 50 Nov $15 puts for 0.95 ($4,750)

That's net $750 and, if SOYB goes back to $16 on a trade deal, those options will be worth $1.50 each for $7,500 on 50 100-unit contracts, which would be a 900% gain of $6,750 – not bad for an offset and our worst case is owning SOYB at 7-year lows and we can then sell calls to reduce our net $15.15 entry.

As you can see, we hit close to the bottom on our entry and got easy fills on our contracts as SOYB headed lower.  Now the Nov $14 calls are $2 ($10,000) and the $15 puts are 0.60 ($3,000) for net $7,000, which is already up $6,250 (833%) in just over a month and, at this point, I'd cash out 1/2 the calls ($5,000) and put a stop on the other half at $1.50 ($3,750) and a stop on the short puts at 0.75 ($3,750) so we net out no less than $5,000 for a $4,250 (566%) gain but we MIGHT do much better as only 60% of the usual Soy crops have been planted (due to prices that were so low there was no point in planting) and, now that prices are improving, the weather has turned bad and the planting window may have closed.  

There's also the issue though of China culling about 1/3 of their hogs due to swine ebola (yes, it's very bad!) and that could still curtail demand, which is why I don't want to press our luck.  This is the first time we've ever played Soybeans but it was such a compelling situation that we had to jump in at the time.  As I said yesterday in the Webinar – we go where the news flow takes us and are always on the lookout for good Fundamental situations to trade off of.

Speaking of Fundamental trends, Colorado just announced they have generated $1Bn in marijuana revenue and they credit the industry with creating "tens of thousands" of jobs as well as being a huge positive for Commercial Real Estate.  PSW Investments is forming a new Cannabis Capital Fund, so we're very pleased to hear that – especially as Colorado has less than 6M people in the state, representing just 1/50th of the US population – it bodes very well for the future.  Illinois (13M people) just approved recreational marijuana use – the 11th state to do so.

So far, Michigan and Alaska are the only states that voted for Trump and have also legalized the recreational use of marijuana but it's already decrimilized in North Dakota and Ohio and Medical Marijuana is now available in 34 states so this is a genie that is NOT going back in the bottle at this point and we still like the MJ ETF (MJ), which is still hovering around $32.50 and we already have it in our Long-Term Portfolio as:

MJ Long Call 2021 15-JAN 27.00 CALL [MJ @ $32.48 $0.00] 40 12/13/2018 (582) $26,000 $6.50 $1.80 $6.13     $8.30 $0.00 $7,200 27.7% $33,200
MJ Short Call 2021 15-JAN 40.00 CALL [MJ @ $32.48 $0.00] -30 12/17/2018 (582) $-11,400 $3.80 $-0.48     $3.33 $0.00 $1,425 12.5% $-9,975
MJ Short Put 2021 15-JAN 30.00 PUT [MJ @ $32.48 $0.00] -20 12/17/2018 (582) $-16,500 $8.25 $-2.10     $6.15 $0.00 $4,200 25.5% $-12,300

We got in early and had good timing on our entry but, as a new trade, I still like it very much as I think $40 is a very conservative target for next year so, as a new trade on MJ, I would go for:

  • Sell 5 MJ 2021 $30 puts for $6.20 ($3,100) 
  • Buy 10 MJ 2021 $30 calls for $7 ($7,000) 
  • Sell 10 MJ 2021 $40 calls for $3.50 ($3,500) 

That works out to net $400 on the $10,000 spread that's $2,500 in the money to start you off.  You are obligated to buy 500 shares of MJ for $30 ($15,000) between now and Jan 2021 if that person chooses to assign you (and the stock doesn't have to be under $30 but it's doubtful you'd be assigned otherwise) so make sure you REALLY want to own 500 shares at that price but, if all goes well, MJ heads over $40 and you make $9,600 (2,400%) in 18 months – that's nice!   

The net ordinary margin on the $30 puts is just $1,990 so it's a margin-efficient trade as well and the 5 biggest holdings in the MJ ETF are GW Pharmaceuticals (GWPH), Aurora Cannabis (ACB), Cronos (CRON), Cannopy (WEED) and Tilray (TLRY) – mostly on the Toronto Stock Exchange so this is an easy way to get into the business from our 51st state.

 


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  1. Good Morning!


  2. I wonder if Iran is starting anything…. Our boy is itching for a negative headline… without his name in it. 


  3. Good morning, All!

    The webinar replay is now available!

    https://youtu.be/r_8u150QZyY


  4. Good morning!  

    RH with a really nice pop to $120 already (25%) – glad we added them…

    RH/JMD – We have played them on and off over the years and I find them to be a good, solid company.  They are still fairly small, with just  83 stores and Whole Foods has 500 so I'd have to say there's a bit of room to grow as that's essentially the customer base (people willing to pay more for quality).  I like their attention to the bottom line while growing and $90.50 is only $1.85Bn so, if they are really going to make $200M next year – that's quite a good deal.

    Year End 02nd Feb 2014 2015 2016 2017 2018 2019 2020E 2021E CAGR / Avg
    Revenue $m 1,551 1,867 2,109 2,135 2,440 2,506 2,606 2,801 +10.1%
    Operating Profit $m 54.9 165.7 185.6 53.0 92.7 256.2     +36.1%
    Net Profit $m 18.2 91.0 91.1 5.40 2.18 150.6 213.6 242.8 +52.6%
    EPS Reported $ 0.45 2.20 2.16 0.13 0.31 5.68     +66.0%
    EPS Normalised $ 0.45 2.31 2.43 0.31 1.12 6.63 8.43 9.51 +71.3%
    EPS Growth %   +413.9 +5.0 -87.2 +261.1 +492.2 +27.1 +12.8  
    PE Ratio x           13.9 10.9 9.69  
    PEG x           0.51 0.86 0.52
    Profitability

    Last Q they made $3/share but that's XMas so more like $8.50 for the year and that's still great and, more importantly, they have beat each of the last 4 Qs, though estimates are getting higher and it's hard to keep up and, in fact, $8.50 is a guide-down from $10 expected before the last earnings, when the company dropped guidance as they saw the economy slowing this year (which was an accurate, good call).  

    So, as much as I like them, recognize they WERE at $50 in the summer of 2017 and $25 the year before, though those were turnaround years (the kind we DO like to invest in) – it does indicate this stock could sell off a lot harder than it has so far so I'd go in looking for more at $75 and more at $50, where I'd put my foot down ($25 no longer realistic) so, in the LTP, since $90.50 is still a lot per share, even if I were willing to make it a $100,000 position, that's only 1,000 shares so I only want to risk being assigned 500 in stage one as I can end up stretched closer to $200,000 if we have to DD twice. 

    So, initially, for the LTP, I would just sell 5 of the RH 2021 $80 puts for $20 ($10,000) as that's net $60 if assigned and, since we know it's a small initial entry, there's no reason not to poke at a bull call spread like 10 2021 $80 ($31)/130 ($16) bull call spreads at $15 ($15,000) so that's net $5,000 on the $50,000 spread so you can't be unhappy if your "small" position makes you $45,000 (900%) and gets called away while a net $90 entry on 500 ($45,000) won't kill us – especially if we could sell more $80 calls for $30 and more $80 puts for $20 then we'd be in 500 at net $40 with the risk of owning 500 more at $80 to average $60 on 1,000 ($60,000), which is 33% below the current price so, if you want to own $60,000 worth of RH at $60 – then this spread is a no-brainer as it pays $45,000 if you don't get that great entry.  

    Keep in mind it's an aggressive spread with an aggressive target where we would LOVE to see RH go lower so we can take up a proper position at net $60 but, just in case it doesn't get cheaper – our backup plan is to make $45,000 and walk away (which is what usually happens to us when we play RH on a dip).

    Looks like we're "stuck" with the backup plan!  cheeky

    This is why I like to always have plenty of CASH!!! on the sidelines – you never know what's going to go on sale…

    All RH did is beat low expectations and raise guidance – nothing we didn't expect would happen eventually – this just happened to happen a week after we jumped in.  Thanks to JMD for pointing them out.

    Speaking of stocks that were stupidly cheap – DIS is back testing $140 again:

    Big Chart – Those 50 dmas need to hold or we'll be adding more hedges into the weekend.  Looks safe at the moment.

    By the way, I did forget to post the SOYB trade to the STP – fixed now.  I do tend to forget if I initiate a trade in the Morning Report as my search doesn't cover it when I look back (just the comments).  And, of course, that's official on SOYB for the STP – we're cashing 1/2 (25) of the long calls at $2.

    Iran/1020 – Trump still caused the situation that led to this.  Not letting him off the hook on this one.  A nice war would really distract people from his other stuff though.  Of course, it seems to have been a sub attack – could have been us or Russia or anyone, not necc. Iran.  Sadly, we can't put it past Trump to order a false flag attack…

    David Parchert

    Bolton has been itching to go to war with Iran for decades, outright publicly pushing for it. I would not be surprised if the U.S. government is responsible for the attacks in one way or another just to use it as a reasoning to attack Iran. I know that Iran is not some innocent country and their government has been responsible for aiding terrorists and providing assistance to other countries, such as Yemen and Syria, but I cannot see them doing something so blatantly in an attempt to have their own country attacked.

    I fully believe this is in some way a hardcore republican lead effort to go to war with Iran, take attention away from Trump’s criminal activity, and divert trillions more money to huge corporations and banks.

    Here's what we know so far about the suspected attack in the Gulf of Oman: – two oil tankers damaged – incident near Strait of Hormuz – oil surged surged on news – 4 tankers sabotaged last month

    The crew included 11 Russians, one Georgian and 11 Filipinos.

    The incident happened as Japanese Prime Minister Shinzo Abe is on a high-stakes visit in Tehran that sought to ease Iran-U.S. tensions, suggested the efforts had failed.

    The Iranian foreign minister has described the reported attack on oil tankers near the Strait of Hormuz as suspicious, since it occurred during a meeting between Japan’s prime minister and Iran’s supreme leader.

    Mohammad Javad Zarif made the comment in a tweet on Thursday: “Suspicious doesn’t begin to describe what likely transpired this morning.”

    He didn’t elaborate.

    Zarif described the talks between Shinzo Abe and Ayatollah Ali Khamenei as “extensive and friendly.”

    Iran’s Supreme Leader Ayatollah Ali Khameneni says that while Tehran doesn’t want an atomic bomb, “America could not do anything” to stop Iran if it did.

    Khamenei made the comment on Thursday during a meeting with Japanese Prime Minister Shinzo Abe, who came to Tehran as an interlocutor for President Donald Trump to ease tensions between Washington and Tehran.

    His visit may not have succeeded, however. Khamenei earlier was quoted as saying Iran “will in no way repeat” negotiations with the U.S. amid tension over its unraveling nuclear deal with world powers.

    Khamenei’s official website quoted him as telling Abe: “I don’t regard Trump as deserving any exchange of messages and have no response for him and will give no response.”

    Interesting times!  


  5. FRO is now up 11%….a good days 'work' indeed…..


  6. Phil// What are your thoughts on ARR?  Is this a good time to initiate a new trade and if so can you recommend a trade?  Thanks.


  7. RH- Watch out as it has about a 1/3 short position which will take about 6 days to cover. It really didn't do all that much as far as earnings but a squeeze is going on.


  8. An interesting observation
    Holding stock against Leap BCS
    Both have their advantages and disadvantages.
    However I like to give you a live example on a play I hold on NVS
    NVS is up at present by about .85 cents.
    I do hold the Jan 21 70 long call up by .65
    I hold the Jan 20 100 short call up .50
    The Jan 20 75 short put I hold is actually up by .02
    And the Jun 19 80 short call is up by a staggering 1.70
    Obviously the stock is only up .85.
    In my option play I hold only a credit of .18 cents against the Jun 19 80 caller.
    Should I have held the stock my credit against the Jun caller would be .85.
     Even that the stock has a delta of one against the Jun 19 80 caller which has only a delta of .83. we have a very unrealistic situation.
    So generally the short cherry caller should have always less gain than the stock as such, provided the delta of the caller is less than one.
    It seems that in this case due to the fact that the caller is relative deep ITM it could be explained the amount of 1.70 which is unrealistic to the stock increase.
    So you will find in general if you hold the stock, the same will fair better than a BCS in respect to cherry calls going against you.


  9. Wow- now it is "suspected" Iranian attacks since ABE was meeting with Khomeani to intercede for dtumpy.  K said "there would be NO WAY" he would meet with him . The plot sickens!


  10. Yodi – If I remember correctly, you often sell 2-5 options at a time.

    Where do you trade, and how much commission do you pay per contract ?

    Thanks.


  11. What is happening to our rally.  

    Not a good sign when those low-volume future pumps get faded every day.  

    ARR/Rookie – The REITs are really out of favor but, as long as you REALLY want to own them long-term for the dividends, sure $18.50 is a great entry and you can promise to buy 1x more for net $17.20 by selling the Jan (only 6 months) $20 puts for $2.80 and the $17.50 calls for $1.10 (no less as the monthly dividend is 0.10 so, if you get called away you just sell them again) and that drops your net to $14.60/17.30 on 2x (if assigned).  

    NVS/Yodi – Those are some wide spreads for such a big company, hard to go by what they are printing.  Still, when I see something like that I just try to figure out a way to sell the silly premium while I can.  You already sold some so I'd look ahead and see if there's an overpriced longer-contract to roll to or, since it's a week to expiration, I'd sell 1x more to collect the premium and then roll or simply DD on the stock before what more I pay for the stock exceeds the premium I just collected on the short calls.

    So, if NVS is $89.44 and I sell the $80 calls for $11 (net $91) as long as I buy the stock to cover by around $90.50, I'm still in good shape and I get the money back in 8 days.  

    Whenever I see an option price I wouldn't pay, I immediately try to figure out a way I can sell it.

    Suspects/Pirate – It really doesn't make sense that Iran would do this as it puts them at war with the entire region and the timing of doing it while Abe is visiting, literally sitting in a room and talking to them while the attack goes on – it's really not credible. 


  12. False flag attack? Really? No fucking way. The entire crew of any submarine would know if such an attack was being conducted and to believe a false flag attack occurred you’d have to believe that every single member of the crew was complicit because one guy shooting his mouth off shoreside would put every officer of that boat in Leavenworth for the rest of their lives. Second American officers are trained NOT to obey illegal orders. Some do, but the chance of finding a dozen that would do so on the same submarine is zero. Third submarine officers go through extremely rigorous selection not only for competent seamanship, but also for psychological and moral fitness because those boats carry nuclear weapons. 


  13. Hi Phil, CPRI is down badly since the original trade. Would you recommend a new trade on them? (I do not have any position with them now).


  14. Dawg-  If I remember right all Officers HAVE to follow orders directed by the Captain with No questions asked. You probably don't remember the "fake" attacks in the Bay of Tonkin during the Vietnam war? All the officers were talking about it @ the officers clubs later and who orchestrated it. Maybe you weren't even around then, but to suggest that this is not possible is naïve. Possible it could be the Russians; who knows? At this stage in the political charade that is happening, anything is possible.


  15. Phil good point on NVS yes the premium on the cherry caller is redicules.

    Albo yes correct on the contracts mostly mever go over 5 but sometimes in special cases like AAPL etc.

    Comission at TDA Trade .85 cents per contract.


  16. Yodi – Thanks.  Is there a minimum ?  


  17. Phil tried that game on NVS first the Jun 80 caller at 10.55 only than the stock at 89.46. They quickly dropped the caller to 9.80 cutting the premium to .35 cents!!!! Fools rush in where ……


  18. Albo minimum of what????


  19. Now after playing Phil's trick the NVS Jun caller is .50 against my Jan 21 70 long plus .70 more like it!!!


  20. U.S. retailers’ halting outlook reveals scale of tariff fear




  21. How Washington Learned to Love the Deficit



  22. Yodi = If you only buy or sell 2 options are you only charged $1.70 ?  Is there not a minimum before you pay the .85 per contract ?  Thanks again !


  23. Subs/Dawg – All good points but one guy with a drone could have accomplished this.  I guess you can say the same re. Iran – they'd have to have a sub full of guys who all keep quiet as well so SOMEONE is lying and I would usually assume it was Iran but Trump is on track to tell his 11,000th lie since he took office right around July 4th – and he wants a big celebration around it too!  

    Oops, looks like he may cross over much sooner:

    President Trump has made 10,796 false or misleading claims over 869 days

    I mean, you can't keep up with the guy!  

    The surprisingly true comparison between infant mortality in Ohio and Iran

    That's really sad!  

    CPRI/Alter – You do know that wasn't an official portfolio trade, right?  At the time (5/1) I said I liked M better and they too have gone lower.  At the time, on CPRI, I liked:

    As a trade on them, I like:

    Sell 5 2021 $40 puts for $4.80 ($2,400)

    Buy 10 2021 $35 calls for $17 ($17,000)

    Sell 10 2021 $50 calls for $9.25 ($9,250)

    That's net $6,350 on the $15,000 spread that's $11,000 in the money to start so the "only" $8,650 (136%) profit potential is mitigated by the fact that it's very likely to pay off and, of course, if they go lower, THEN you can sell 5 more puts and use that $2,500(ish) to roll your 10 longs $5-10 lower.

    Fashion companies go in and out of fashion but the nuts and bolts of this company seem OK with $600M in profit on $6Bn in sales and the whole company is $5Bn at $33.75 so a reasonable enough play to play it the way we played RH for the LTP:

    • Sell 10 CPRI 2021 $35 puts for $7.35 ($7,350) 
    • Buy 20 CPRI 2021 $30 calls for $9.50 ($19,000) 
    • Sell 20 CPRI 2021 $45 calls for $4 ($8,000) 

    That's net $2,650 on the $30,000 spread that's almost $8,000 in the money with a very conservative goal.  If CPRI pops to $50, we can even sell a few quarterly calls for some income.  The Oct $37.50s are $2 so if we sold just 5 that would put $1,000 in our pocket and 6 sales like that puts us deep into a credit on the spread – so we have that to look forward to.  As it stands, the upside potential is $27,350 (1,032%) if they get back to $45.  It is SO much more fun trading with a high VIX, right?  

    NVS/Yodi – Yes, with those wide spreads, what your portfolio SAYS an option is worth is very often misleading.  Sometimes I make an offer to sell just to see how fast they drop their bid, etc.

    Minimum/Albo – I think the minimum is based on your overall averages, not each individual trade you make.


  24. Albo well you need to make out the charges with your broker. I possible do more than 100 trades per month. At witching it could be 80 in one day.

    I even tried to push them further down, but they give as well a few fribies. But it does not matter if I buy 1 opt or 10 it will be .85 or 8.50 what ever is the amount. stock per 100 shares can be down to .80/100 stk


  25. Update 5: A spokesman for the Saudi-led coalition supporting Yemen's government in the country's civil war has come out and blamed Iran for Thursday's attack, saying they believe they can connect it to a similar tanker bombing last year in the Red Sea committed by Yemen's Iran-backed Houthi rebels. The spokesman called the attack a "major escalation", and reiterated in what sounded to us like a thinly veiled threat that Saudi Arabia has the capacity to protect its vital institutions.

    Not sure I remember the Houthis having a big navy….   

    Hmmmmm……….

    It's interesting when you take a look at what other Governments are saying about this attack.  Only we seem to think it's Iran so far.

    A small note from our TOPLive blog on earlier today. If is behind the attacks (and that's a big if), it would be a really, really strange turn of events as one of the tankers attacked is owned by Norwegian shipping tycoon John Fredriksen |

    Bloomberg's Julian Lee argued in a column that whoever is behind these attacks is 'no friend of Iran'.

    This would seem very clumsy timing from a country seeing the first tangible signs of any easing of the crippling sanctions imposed by the Americans. But it is absolutely understandable if you’re someone whose ultimate goal is to derail any easing of tensions between the two nations, and to effect regime change in Tehran.

    Pic


  26. Thanks, Yodi and Phil.


  27. Phil, thanks! Yes, I know it was not an official trade. With my tiny portfolio, I can't follow many of the official ones (e.g., any with the shares above $50) so have to design my own portfolios. By the way, when you launch new portfolios, it would be great to have one designed for investors with less capital – just an idea and I don't obviously know if there is much interest from anyone else.

    I have quick follow-up on CPRI. Before your today's setup, I was thinking of something like:

    - Sell 1x CPRI 2021 $30 puts for $4.80 
    - Buy 1x CPRI 2021 $22.5 calls for $14.10
    - Sell 1x CPRI 2021 $30 calls for $9.50

    for close to $0 in total. I realize there are thousands of ways to structure such trades. For me, I was thinking a) lower risk ($30 puts vs $35 puts), b) entirely in the money (so higher probability of success), c) roughly the same margin, d) close to zero cash out now. Yes, the spread is narrower but higher chance of winning and I can buy multiple positions if I wanted to earn more.

    Then, you usually go for wider spreads and happy to spend some cash establishing them. I am pretty sure I am missing something… So, for educational purposes, can you possibly comment as to why would you go for your recommendation rather than something like I have described above? Thanks again.


  28. Pirate / orders – you don't remember right. But I served on the Guardfish and I do remember, and no American submarine attacked those ships.


  29. Thoughts on BPY?


  30. Buy BPY Jan 21 $15 call and sell Sep19 $20 put and call against, Roll quarterly whichever is ITM. Thoughts??


  31. CPRI/Alter – As I was saying in yesterday's webinar, the overriding goal of your portfolio should be to make 20-40% a year and, of course, follow Buffett's #1 Rule of Investing:

    Image result for buffett don't lose money

    You are well on your way to being a Billionaire with that trade as that trade returns $750 on net about $0 and a few hundred Dollars in margin.  Figure from an allocation perspective, you'd set aside $1,500 (1/2 an assignment) so you're making 50% of an allocation block WITHOUT actually tapping your cash – that's perfect.  

    As to a small portfolio, we had a $10,000 portfolio and a $25,000 portfolio at one time but there was very little interest.  Dividing OOP trades by 5 is just as good.  

    Now, back to CPRI – My only issue with the bull call spread is you seem to have no faith in the stock going up and, while you can say it's safe and conservative – I might argue that you are tying up resources for no reason.  The above $30 ($9.50)/45 ($4) is net $4.50 and you could buy 2 of those for $900 and collect $480 for the single short put and then you are in for net $420 with the same margin but now your upside is $2,580 at $45 and this is an 18-month trade so my way makes you 3.5x more over the same period of time.  

    If this trade doesn't work out, you have $420 more at risk but, if it does work out, you have 5 full years of conservative gains in 18 months.  I would apply your super-cautious strategy to T or XOM or some other Blue Chip that's not likely to rocket higher and would be subject to an economic downturn but we're looking at CPRI because we think it's undervalued and we may be right or we may be wrong but if we played 5 trades like this and lost 3 for $1,500 – the two that we win would pay $5,000 and we'd net $3,400 – which is still a nice return.

    There's nothing at all wrong with being totally conservative and taking your approach – just sometimes, if you believe in a stock, aim a little higher and go for the bigger reward. 

    Sub/Dawg – You don't need a big sub to attack anymore so it's very hard to tell one way or the other but, as we know from Iraq – "proof" can be manufactured and the Secretary of State can stand in front of the UN with his fake evidence and lie to the whole World and there were plenty of hands dirty in that little scheme as well.  It all fell apart on them but not before we were embroiled in a conflict that killed half a Million Iraqi people along with 4,500 US Soldiers.  And, by the way, when you have a 100:1 lethality advantage over your enemy – isn't it more like just a slaughter?  

    As the President likes to say: "Very fine people on both sides"

    BPY/Millard – Malls really bother me.  Generally I tend to go for mortgage REITs, who don't actually buy property but make property-related loans.  SKT is a big exception and they aren't doing so well either.  BPY is huge and they seem to be consistent, but it would take a lot of homework for me to get comfortable with their debt-services, etc.  Notice net income is in steep decline from last year:

    And that's with a tax CREDIT, a $148M turnaround from last year in Taxes Paid and still they dropped 40% in Net Income.  Could be a one-time thing or might not be – just scary to me.

    Assets down a bit too:

    They have the same kind of debt bomb issues FTR has:

    Anyway, short story is they don't seem compellingly cheap enough to me.  If you must play them, why not just sell the 2021 $17.50 put for $1.80 as it gives you a net $15.70 entry in the worst case and, otherwise, you get an 18-month look and collect about the same as the dividend while you wait.  


  32. Dawg-  There is nothing new about subterfuge and manipulation so those in power can get what they want anyway they can. As Phil says you don't need a submarine and being lied to is what are politicians do best..back then and now. My memory is quite good and the Gulf of Tonkin was the reason for the escalation of the Vietnam War though it was pure fabrication ignored by Johnson and to get the war going.


  33. This SPY volume is making me nervous again:

    Date Open High Low Close* Adj Close** Volume
    Jun 13, 2019 289.40 289.98 288.63 289.27 289.27 30,643,445
    Jun 12, 2019 288.64 289.26 287.82 288.39 288.39 46,984,700
    Jun 11, 2019 290.99 291.40 288.18 288.90 288.90 58,641,300
    Jun 10, 2019 289.37 290.82 288.87 288.97 288.97 60,799,100
    Jun 07, 2019 285.93 288.85 285.74 287.65 287.65 74,272,200
    Jun 06, 2019 283.29 285.55 282.57 284.80 284.80 69,430,400
    Jun 05, 2019 282.33 282.99 280.32 282.96 282.96 71,169,700
    Jun 04, 2019 277.12 280.68 276.62 280.53 280.53 77,231,900
    Jun 03, 2019 275.31 276.55 273.09 274.57 274.57 96,428,000
    May 31, 2019 276.20 277.12 275.24 275.27 275.27 86,862,800

  34. What is your preferred play for SKT?


    • Red Robin Gourmet Burgers (RRGB +29.8%) says it would consider any "bona fide" offer that arrives in from Vintage Capital.
    • The restaurant operator also maintains that it's executing on the strategic priorities set for 2019.
    • Shares of RRGB have traded as high as $33.77 on the day.
    • GE Ventures is looking for a buyer for its portfolio of more than 100 start-ups, CNBC reports, as parent company General Electric (GE -0.2%) tries to turn itself around and get its debt problem under control.
    • The venture arm, which started in 2013, is in discussions with other venture firms as well as groups of limited partners who invest in those funds, according to the report.
    • GE Ventures has invested in a range of start-ups in areas including energy, technology and health care.
    • Speaking to reporters, Secretary of State Mike Pompeo blames Iran for last night's attack on two oil tankers near the Strait of Hormuz. How this is known remains unclear.
    • Iran, says Pompeo, is trying to interrupt the flow of oil.
    • Crude remains up 2.15% on the session to $52.25 per barrel.
    • Oppenheimer sees Nvidia's (NASDAQ:NVDA) "topline reaccelerating to 20%-plus growth as hyperscaler spending picks back up."
    • Analyst Rick Schafer writes that excess cryptocurrency-related inventory has cleared, which sets the stage for Q2/H2 gaming growth.
    • Oppenheimer maintains an Outperform rating and a $190 PT on Nvidia.
    • Nvidia shares are up 1.2% to $147.93.
    • NVDA has an Outperform average Sell Side rating.
    • Oppenheimer warns of a "high bar for upside" for AMD (NASDAQ:AMD) with shares up nearly 90% from a December low.
    • Analyst Rick Shafer says the "significant" PC and Server share gains are already baked into the valuation and notes that AMD would need a "sharp" H2 growth acceleration to hit the company's FY19 growth target near 10%.
    • Oppenheimer maintains a Hold-equivalent rating on AMD.
    • AMD shares are down 2.1% to $31.52.
    • The U.S. Trade Representative’s Office denies Uber's (UBER +2.2%) bid for trade relief on its Chinese-made Jump e-bikes.
    • Uber says that 96% of electric bikes sold in the U.S. are made in China, so the tariffs "caused disproportionate harm to the innovation and competitiveness of U.S. digital transportation platforms."
    • The SCOOP and STACK shale plays in Oklahoma once were viewed as potentially the next Permian Basin but drilling results have disappointed, burdened by geology that has proved inconsistent that has made the area a higher-cost U.S. shale area for producers.
    • Producers have encountered complex geology and production weighted toward gas – at a time of a global glut and persistent low prices – and poorer results from subsequent wells than from other U.S. shale basins.
    • Devon Energy (NYSE:DVN) has cut planned 2019 capital spending earmarked for its STACK position to 20% from 31% in 2018, according to Reuters calculations; Cimarex Energy (NYSE:XEC) also forecasts a cut in spending in the region, to 15% vs. 30% last year; and Alta Mesa resources (NASDAQ:AMR) has struggled to survive.
    • Marathon Oil (NYSE:MRO) and Continental Resources (NYSE:CLR) both have anchored recent activity on two sub-areas – the STACK-Meramec and the SCOOP Woodford – narrowing development to areas where wells have produced better results.
    • Some firms are looking to merge or sell operations; Encana's (NYSE:ECA) February purchase of Newfield Exploration, which had the lowest median breakeven in the STACK in 2017-18, as well as operations in North Dakota and Utah, has offered hope that some deals are possible.
    • Roan Resources (NYSE:ROAN), whose shares trade below $1.50 vs. $16-plus last year, in April said it was studying options after receiving inquiries about a potential sale or in-basin merger.
    • Avalon Capital sees a deal for Callaway Golf (ELY +13.3%) going off as high as $20 to $21 per share with Jana Partners pushing the board.
    • The deal math assumes $30M in synergies and/or savings lead to a multiple of 10.3X to 10.7X EV to EBITDA.
    • Shares of Callaway traded as high as $18.50 today.
    • CenturyLink (CTL +2.7%) has announced the expiration of its tender offers and consent solicitations for debt securities.
    • After the company noted a successful early tender result, it purchased certain of the notes for $525M in cash. The aggregate principal of the notes purchased was about $580M.
    • It won't purchase additional notes pursuant to the tender offers.
    • Also today, the company noted it was making a significant investment in a new Miami network gateway. Along with a new high-efficiency data center, the company says it will improve service for South Florida and Latin American customers for years to come.
    • Construction delays at Freeport LNG are pushing back the startup of Train 2 and Train 3 liquefaction facilities by 4-5 months, according to a field inspection report released by the Federal Energy Regulatory Commission.
    • The regulator says it now anticipates an in-service date for Train 2 in spring of 2020 and for Train 3 in late fall of 2020.
    • As recently as May 23, lead construction contractor McDermott (NYSE:MDR) said initial production from Train 1 was expected by Q3 2019 followed by a startup at Train 2 in Q4 and Train 3 in next year's Q1.
    • A delayed startup at Freeport LNG should lower U.S. liquefied natural gas feedgas demand next year by ~300M cf/day, according to an analysis by S&P Global Platts.
    • Each of Freeport's three trains has a nameplate liquefaction capacity of 600M cf/day, meaning the fully operational export facility could consume 1.9B cf/day at full tilt.
    • Jefferies says an Alphabet (GOOG +1.4%)(GOOG +1.4%) breakup due to antitrust actions isn't likely but says that outcome would still be positive for the stock.
    • Analyst Brent Thill: "Breakups are not always a bad thing for stocks, as in the case of GOOGL we believe the sum-of-the-parts may be worth more than the whole."
    • Thill cites the 1984 breakup of AT&T as precedent.
    • Jefferies reaffirms a Buy rating and $1,450 target on Alphabet.
    • Earlier this week, Needham said Alphabet investors could see a 50% upside if the Justice Department splits up the company.
    • Alphabet has a Bullish Quant rating.
    • Airline stocks are in rally mode after JPMorgan points to another round of fare increases in the U.S.
    • JP analyst James Baker says American Airlines (AAL +5.2%), Southwest Airlines (LUV +2.8%) and Hawaiian Airlines (HA +2.5%) all fired off increases of varying degrees on domestic flights.
    • Notable gainers included Spirit Airlines (SAVE +2.8%), Mesa Air (MESA +2.8%), Delta Air Lines (DAL +2%), United Continental (UAL +3.6%), Allegiant Travel (ALGT +3%) and SkyWest (SKYW +2.1%).
    • Today's rally arrives even with crude oil prices up over 3%.
    • Previously: Air fares bounce back in May (June 12)
    • Caterpillar's (CAT +0.4%retail sales growth for the three-month rolling period ended in May slightly moderated from the period ending in April but the increase is in line with expectations when considering difficult comparisons, says Buckingham analyst Neil Frohnapple.
    • The "slight order rate deceleration was expected and supports Caterpillar's outlook for a modest total sales increase in 2019," the analyst writes.
    • Construction Industries growth rates moderated slightly for the rolling period, but the slight acceleration in Resource Industries retail sales is an incremental positive, Frohnapple writes.
    • While Buckingham models "a more moderate" total Y/Y manufacturing sales growth of 3.1% in Q2, "overall, there were no major surprises from these results relative to our expectations."
    • Crude oil prices jump as much as 4% following attacks on two oil tankers in the Gulf of Oman, close to the Strait of Hormuz, where more than 30% of the world's shipped oil passes through; currently, WTI +3% to $52.67/bbl, Brent +2.8% to $61.67/bbl.
    • "If the waters are becoming unsafe, the supply to the entire Western world could be at risk," says Paolo d’Amico, chairman of INTERTANKO tanker association.
    • The two tankers – the Frontline-onwed (FRO +12.7%Front Altair and the Kokuka Courageous - reportedly sustained heavy damage and their crews were evacuated; FRO said its vessel was on fire but afloat, denying a report that the vessel had sunk.
    • Overlooked is a bearish report from OPEC that trims its forecast for growth in world oil demand this year to 1.14M bbl/day, down 70K from its May estimate of 1.21M barrels.
    • The S&P energy sector (XLE +1.3%) tops today's stock market leaderboard: XOM +1.2%CVX+1.1%COP +1.2%LPI +4.5%HES +3.8%WLL +2.7%SLB +2.6%HAL +2.4%ECA +2.4%CLR +2.2%OAS +2.2%DVN +2%NBL +2%.
    • Fiverr (FVRR) starts its first day at $26 after pricing at $21, above the $18 to $20 range.
    • Shares quickly rose as high as 33% in the early moments of trading.

  35. Morgan Stanley Business Conditions Index fell by 32 points in June, to a level of 13 from a level of 45 in May. This drop is the largest one-month decline on record.

    “The decline shows a sharp deterioration in sentiment this month that was broad-based across sectors,′ economist Ellen Zentner said in a note to clients on Thursday. 

    Every subindex of the Business Conditions Composite fell in June, expect for the credit condition category, which “is consistent with the recent easing in broad financial conditions,” Zentner said. 


  36. trump sure looks to be the only one to benefit from conflict with iran to me


  37. If you wanted oil up how would you do it? Interrupt the supply? If you wanted to cause more friction between countries already at odds, how would you do it? Hmmmm.


  38. Thanks, Phil


  39. Nice last-minute push into the close.

    This is why we play the laggers:

    Biz Conditions/Den – That's good I guess as it means the Fed may lower rates.   See, I'm getting the hang of the new market logic…

    I guess it doesn't matter how we got here:


    • President Trump wants to meet with Chinese President Xi Jinping at the G-20 Summit later this month in Japan, but Xi hasn't yet responded to Trump's invitation, said economic adviser Larry Kudlow, Bloomberg reports.
    • Asked if there's a possibility that the two leaders won't meet, Kudlow answered, "I'm just saying my president has indicated a strong desire to sit and meet. He's also indicated that if the meeting doesn't come to bear, there may be consequences."
    • Trump has threatened to raise tariffs again if Xi doesn't meet with him in Japan.
    • Kudlow said the Chinese wants a "balanced" deal, but the U.S. administration doesn't see that as possible because it's "such an unbalanced" relationship.
    • "We are asking for correctives and remedies for the existing imbalance," Kudlow said.

  40. AVGO Earnings today


  41. AVGO – Results for Quarter Beat, but lowered outlook Rev Outlook from 24.5B to 22.5B primarily due to Geo political issues.

     I think this is reasonable

    Broadcom Inc. Announces Second Quarter Fiscal Year 2019 Financial Results, Quarterly Dividend and Updated Guidance

    -- Revenue of $5,517 million for the quarter, up 10 percent from the prior year period

    -- GAAP diluted EPS of $1.64; Non-GAAP diluted EPS of $5.21

    -- GAAP operating profit margin of 18%; Non-GAAP operating profit margin of 53%

    -- $2,542 million of free cash flow, defined as cash from operations of $2,667 million less capital expenditures of $125 million, up 20 percent from the prior year period

    -- Quarterly dividend of $2.65 per share

    -- Repurchased and eliminated 4.7 million shares for $1,330 million

    -- Updating fiscal year 2019 guidance, including revenue outlook of $22.5 billion; $17.5 billion from semiconductor solutions and $5 billion from infrastructure software


  42. AVGO – Off conference Call – probably my biggest take away.   key driver for drop in outlook is really due to Huawei Ban – this was a direct driver of the inflation point in demand.  and permeated the whole network of wireless / not just Huwawei.  They indicated the Ban was really what drove other customers to take orders down and start taking inventory down more aggressively.  Additionally he does not see any other large customers that can back fill…..  perhaps in 6 months ( or probably more) there may be other customers backfilling for Huawei but for now they year is baked..

     

    My thoughts – Essentially they are at a point where even if demand comes back with the mfg lead times and customer build cycles it will not pick up inside the FY year.    QCOM, MU, XYLNX are all coming down


  43. Hey Phil, I don't think that new market logic will work out over the long term and if I'm reading your sarcasm  correctly, neither do you.


  44. Pelosi: No debt increase until spending limits are raised




  45. Good morning! 

    Futures are down a bit, gold $1,360 is very exciting for a change.  /SI back to $15 too:

    • Set for its fourth weekly gain, gold overnight jumped as much as 1.2% to $1,359.50, surpassing the key $1,350 level for the first time since April 2018.
    • "When the markets start waxing bearish economic data, it's the global recession they are concerned about, triggered by escalation of trade war," said Stephen Innes of SPI Asset Management. "With geopolitical risk premium ratcheting higher on the back of Middle East tensions and autonomy protest in Hong Kong, gold represents dependable insurance against those mounting geopolitical risks."

    Bond king Jeffrey Gundlach: ‘I am certainly long gold’

    Good for GOLD – finally:

    AVGO really getting punished, down 10%.  We do have 5 short Jan $180 puts from last July, but I'm not too worried about them at $255, it took off too fast on us and we never picked up a bull spread.

    Here's how far Business Conditions have fallen this year:

    Watch out if we lose the consumers too:

    • Choom (OTCQB:CHOOF) plans to unveils its retail concept and experience tomorrow in Niagara Falls, Ontario.
    • The company is opening one of 25 cannabis stores authorized to open in the province. The store will stock a diverse range of products, from dry flower and pre-rolls to oils and capsules.
    • The company says with a store firmly established in the key Ontario market, Choom will continue its nationwide rollout, supporting the company's overarching goal to secure one of the largest cannabis retail networks in North America.
    • Source: Press Release
    • U.S. economic adviser Larry Kudlow is the latest to warn of consequences if Chinese President Xi Jinping refuses invitations for trade talks as Beijing hiked anti-dumping duties on certain U.S. and EU-made alloy-steel seamless tubes and pipes.
    • Former PBOC governor Zhou Xiaochuan also issued a warning about a possible yuan devaluation, while the Chinese government has faced much criticism for its response to the mass protests in Hong Kong.
    • If things couldn't get worse, Xi said overnight he would promote steady development ties with Iran "no matter how the situation changes," against the backdrop of yesterday's tanker attacks in the Gulf.
    • Semis are feeling the heat after Broadcom (NASDAQ:AVGO) cut its annual sales forecast, saying it would make $2B less than it expected following the U.S. ban on exports to Chinese telecom giant Huawei.
    • The stock slumped 8.7% in AH trading, dragging many peers down with it, as it became one of the first big chipmakers to quantify the financial impact of the Trump administration's escalating trade dispute.
    • The company may have been overly cautious, however, with broker Piper Jaffray sayingBroadcom was "throwing out the entire kitchen with the kitchen sink."
    • Premarket: QCOM -1.9%INTC -1.1%XLNX -2.5%STM -2.4%MU -2.6%
    • Following yesterday's bearish report from OPEC that trimmed its forecast for world oil demand, the IEA has also slashed its estimates for the second straight month.
    • "Until recently, the focus has been on the supply side with the familiar list of uncertainties – Iran, Venezuela, Libya, and the Vienna Agreement," the agency wrote in its latest monthly report. "Now, the main focus is on oil demand as economic sentiment weakens."
    • Revising down its estimate by 100K barrels, the IEA now expects oil demand growth to reach 1.2M bpd this year, before rebounding to 1.4M bpd in 2020.
    • Crude futures -0.8% to $51.84/bbl.
    • The latest rise in the stock market has been helped along by safety stocks such as utilities, consumer staples and real estate, a reversal from earlier this year when cyclical sectors tied to the health of the economy pushed U.S. stock indexes to fresh records.
    • The move into safer stocks "really demonstrates how risk-averse investors have become in recent months," Hodges Capital portfolio manager Eric Marshall tells WSJ. "A lot of it has to do with what effect the tariffs may have on the economy and uncertainty over how the Fed will or will not respond to that."
    • At least 70% of the companies in the utilities, consumer staples and real estate sectors are trading above their 50-day moving average, according to FactSet data.
    • Also noteworthy: The 10-year yield currently is well below the 3.2% dividend yield offered by utilities stocks in the S&P 500, which is among the highest in the index and exceeds the broader S&P 500's 1.9% yield.
    • Canadian oil production will grow by an average 1.4%/year until 2035, according to a new forecast from the Canadian Association of Petroleum Producers, cutting its guidance from five years ago by half due to the lack of new pipelines and inefficient regulation.
    • Canada holds the world's third-largest crude reserves, but CAPP says "we need pipeline capacity and more efficient regulatory policy to help bring investment back to the oil sector and drive growth."
    • CAPP also forecasts capital investment in the Canadian oil and gas industry would fall to C$37B (US$27.7B) in 2019, compared with C$81B in 2014.

  46. Market Logic/Den – Well after thinking we would crash from mid 1998 through Q1 of 2000 – I am very hesitant to try to time these things – especially as the market climbed 150% while being just as obviously illogical.