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Terrific Tuesday – Draghi Fever Hits the Markets, Blasting Higher

More free money! 

This is why Goldman Sachs put Mario Draghi in charge of the European Central Bank (ECB) – exactly for a moment like this when they need to boost the US markets and this statement couldn't have been timed better – just ahead of the start of the Federal Reserve's 2-day meeting that will lead to a policy announcement tomorrow at 2pm.  Draghi said the ECB is "ready to launch another round of stimulus" as inflation remains below targets.  

That target is, of course, 2% and if we were over 2%, they would be raising rates to fight it so the entire process is ridiculous but the most ridiculous thing is basing your entire monetary policy on a singly, unreliable data-point.  Of course, the inflation target is just an excuse because, over or under, we've seen Central Banksters call it "transitory" – meaning they will totally ingnore it when it suits them.  In this case – the Masters want to see all-time highs in the markets – so low inflation is our #1 excuse to jack up the markets.  

Low rates aren't free – taxpayers subsidize the wealthy by artificially reducting rates through Government Debt (where the wealthy lend the Government money to subsidize their rate cuts) and we are being forced to do this (year 10) in order to force the prices that we pay to go unnaturally higher (in order to increase Corporate Profits so the wealthy can have more money).  Are you beginning to see a pattern here?  It didn't take long for the Oligarch-In-Chief to weigh in on the subject:

Mario Draghi just announced more stimulus could come, which immediately dropped the Euro against the Dollar, making it unfairly easier for them to compete against the USA. They have been getting away with this for years, along with China and others.

By saying it's "unfair" for Draghi to lower rates, he puts pressure on our Fed to do the same for him but it's all a game because the strings are really being pulled by the Banks, who control the Fed as well as the President(s).  Trump is also indicating he wants a weaker Dollar, which is better for US exports but another stealth tax on US consumers, whose wages are generally inflexible (so we get less valuable Dollars for the same work) while the capital gains paid through equity in Multinational Corporations are very flexible – so it's yet another way to transfer wealth from the Bottom 90% to the Top 10%.

As a test today, ask all the minimum wage workers you meet today how much money they have tied up in commodities, which also benefit from the falling Dollar and, of course, the stimulus measures aimed at boosting economies.  Keep moving up the Income Ladder until you find which of your friends or collegues have commodity investments so we can get a better handle on who benefits from the policies of the Central Banksters and the Oligarchs.  

Copper (/HGZ19) is coming off a nice bottom and we like it long above the $2.65 line with tight stops below.  Another way to play Copper for a rise is one we reviewed yesterday in our Options Opportunity Portfolio and that's Freeport-McMoRan (FCX) who are all the way down at $10.75 and we have 25 of the 2021 $10 calls, now $2.60 ($6,500), covered by 20 of the 2021 $17 calls, which are now 0.75 ($1,500) and we sold 15 of the 2021 $12 calls for $3 ($4,500) to offset the cost.

So the net of that trade, currently, is now $500 and, should FCX get back to $17 by Jan of 2021, it's a $17,500 spread which means the profit potential is $17,000 (3,400%) – so that's pretty good.  The worst case is you end up owning 1,500 shares of FCX at $12 ($18,000) and ordinary margin requirements on the trade are about $3,300 so it's a very efficient use of funds.  At $10.75, FCX has a $15.5Bn market cap and last year they made $2.6Bn (p/e of 6) but this year is going to be significantly lower, more like $500M (p/e of 31) as Copper pricing began 2018 at $3.20 so $2.60 is down 19% and that's about their entire profit margin.  Still, if you are not going to buy cyclical stocks when they are cheap (when the market conditions are against them) – when are you going to buy them?

Image result for copper demand

As you can see from the chart, Copper demand is steadily rising but production is trailing off and the trade war has dampened the effect but, over the next few years, prices are very likely to rise and that creates a great opportunity to get in now for the long term.  If the economy turns down, Copper could go lower – it bottomed out at $2 in 2016 and was $1.50 back in 2009 but, in general, it spends more time over $3 than under it.  These production trends don't change rapidly – FCX just approved the funds to begin construction of an Indonesian smelter in 2020 that will be completed in 2023 – so not many surprises in this space and Infrastructure spending would boost demand significantly.  

Speaking of currency debasement – Facebook is rolling out their own cryptocurrency today and they already have a ton of partners who will be accepting it including Visa, Mastercard and PayPal so really that's game over for most other digital currencies.  BitCoin is spiking back to $10,000 because people who buy BitCoin don't understand the difference but Libra has a chance of becoming the real thing and Governments should be worried about that too.  

Beyond E-commerce, especially for people in developing countries that lack a banking infrastructure, Libra could be useful for storing and transferring money, without paying high fees. So, if you want to send money to another country, Libra may be a cheaper way to do it than what’s currently available.  That's true of any cryptocurrency but Facebook is already being used by half the people on the planet so Libra will have a huge leg up when it comes to acceptance.  

Also, Libra is backed by a reserve fund, which should make it far more stable than BitCoin and Libra doesn't allow just any idiot to build on their platform – which should keep it more secure than other cryptos have been.  Most important though, is the reserve:  Facebook and its partners are backing Libra with a pool of real world money, promising users that they will always be able to trade the cryptocurrency in for cash. The day-to-day value of Libra, which uses the monetary symbol of three waves, is pegged to the average value of a basket of world currencies, made up of U.S. Dollars, U.K. Pounds, Euros, and Swiss Francs.  

The currency won't roll out until 2020 so the other cryptocurrencies will say this legitimizes them and they'll likely spike higher but this is a very different direction Facebook is taking and I don't think it will end well for the old-school cryptos.  Imagine though, if FB rewards all 3Bn of their users with a little Libra next year.  They will instantly become the 2nd most widely used currency in the World – behind the US Dollar.    

 


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  1. I wonder how we are going to fight the next recession (which will come eventually):

    1. Rates are already close to zero
    2. CB's  balance sheet are still heavily leveraged
    3. Everybody is running high deficits

    That doesn't leave a lot of room! The way it's going, a recession might lead to a $2T deficit in the US and the GOP solution would be to cut spending I am sure (something they suggested in 2008) rather than raising taxes, making things worse. We are so screwed and markets are going higher.


  2. Good Morning!


  3. Landlords Oppose Trump Plan to Evict Undocumented Immigrants




  4. Looks at current bond yields:

    So many negative numbers! How much more negative can we go?


  5. BYND traded above $190. 

    And I thought CMG was overpriced !


  6. Phil – Have you looked at this site - https://www.koyfin.com/home

    Lots of macro numbers there, a good format for their economic calendar including almost all countries. And tons of fundamental information on all companies. Very good.


  7. Good morning!  

    RUT right at the 50 dma.  If they hold 1,550 – then there's nothing to be bearish about (technically).

    Recession/StJ – You just have to ignore it and enjoy the rally, which is going into overdrive now with another 100-point spike at the open – 26,400, 2,922, 7,665 and 1,555 – amazing!  NYSE 12,900 as well.  

    As to how low – I don't even understand the circumstances in which someone would give Germany $100,000 to hold for 10 years to get $97,500 back.  It has to be an indication that other assets are way overpriced – either that or it's proof that the CBs are simply buying each other's paper at whatever price to keep up the illusion of liquidity.  Another way to look at it is that the US has to offer 2% because we are considered as unstable as Italy while normal countries are considered much safer places to hold cash.

    Wow, another 70 points since I noted the Dow 5 mins ago.  So glad we held our longs but sorry about the hedges (though the hedges are the only way we were willing to hold the longs).  

    26,500 should be a good shorting spot for a retrace on /YM as it's 1.25% up.  Very tight stops above!

    BYND/Albo – Imagine if CMG begins selling BYND burritos! 

    Image result for head exploding gif

    Koyfin/StJ – Very nice, thanks!  


  8. I am thinking a high probability Draghi spoke with Powell before ECB statement and this could be the beginning of coordinated easing starting with very dovish policy statements


  9. FB moving up on heavy volume.  I can't believe we missed it in Dec.  

    Coordinating/Mike – It's so crazy to pick now to boost the economies – they must be trying to get to hyperinflation as it's the only way to reduce these debts (relative to GDP) short of mass defaults.  

    Image result for debt to gdp history

    Related image

    File:Public debt percent of GDP.pdf

    Image result for debt to gdp history

    This is really nuts!  


  10. Coordinated/Phil, Mish is making the case for recession, so maybe that is what CBs are thinking too, https://moneymaven.io/mishtalk/economics/surefire-recession-signal-in-pictures-8xjAjnxcx0igtWCJABnNgA/




  11. How to Impeach Donald Trump


  12. Selling OTM calls to cover any profitable stock in my long-term portfolio and taking the day off. Two things I (almost!) never regret doing.


  13. Phil / AAPL – the short call yesterday looks like a day early and 1 dollar low?


  14. cl is looking like full 5% move


  15. http://www.globaltimes.cn/content/1154633.shtml
    "A Few Suggestions for China Rare Earth Policy"

    Pretty scary stuff


  16. what say you phil go short  cl at 54.50 for abit of a retrace of run from 52 or too dangerous of rising further


  17. Well, we got a nice rejection (20% of the move up) but now back over but we can play the next cross under 26,500 as well but I wouldn't mess around over that line.

    Recession/StJ – You couldn't tell it from this market action.  Trump said he's meeting with Xi at G20 and everyone goes nuts.

    Had a very good telephone conversation with President Xi of China. We will be having an extended meeting next week at the G-20 in Japan. Our respective teams will begin talks prior to our meeting.

    “ECB officials see Rate Cut as primary tool for any new stimulus.”

    German DAX way up due to stimulus remarks from Mario Draghi. Very unfair to the United States!

    This is how Government conducts policy now – like a teenager!

    Good timing Ati.  

    Holy Crap, OOP, unadjusted from last night (did you guys see the review?) is up 14% today!  Intra-day pricing is so silly!  

    Good day to look at the LTP, blasted back to $1,316,060 (+163.2%) also a big move from yesterday.  I won't do the review today, however as I have the radio at 2pm (won't be back).

    Tomorrow I leave for NYC and I'll be there until Monday but more or less normal days during market hours but I do want to finish the LTP before I go as it's a many-screen thing to go over so it will likely be my late-night fun today.

    Pot drinks/Albo – We have several people in the US looking to infuse our CBD into coffee, beer, etc. but no THC customers yet. 

    AAPL/Batman – Not sure what you mean – do you mean my call to sell more covers?  I feel better being protected.  

    I think this Trump announcement on China is to provide cover for Lighthizer's testimony today, which is likely to indicate that almost no progress has been made and we're nowhere near a deal!  

    Oil/Tommy – Amazing.  OPEC has been making noise of more cuts but this is mostly over China deal potential.  

    How's that for a good call this morning!  Copper contracts are $500 per penny move, which is why I rarely play them but this was good for $3,000 per contract and I'm not going to be greedy ($500 trailing stop). 

    Rares/Den – Terrifying.

    /CL/Tommy – Too crazy to play and, don't forget, I thought it was too low and we played it long yesterday.  $54 is a stop-out though.

     

     

     

     

      


  18. Entertaining myself by trading BYND.  Doubled my money buying 1 (one) 6/21 $180 put for $9.60 and selling at $20.80.  Am now long 100 shares at $162 playing for a bounce back.  Only risking 4 points.


  19. Money Talk Portfolio at $119,410, up 139% this morning, was $116,043 last Weds review – untouched, of course.  

    Butterfly Portfolio, untouched, just hit $181,546 (up 81.5%) from $164,759 YESTERDAY.   AAPL $160 calls shot up from $47.40 to $51.13 and we have 25 of those – that's most of it and it doesn't include the hit we're taking on 10 short July $195 calls which went from $5.70 to $8.20 so $2,500 down there.  

    Shows you how irrational this market move is!  

    STP down to $753,973 (+654%) from $774,355, also last Weds so down about $21,000 – small price to pay with those LTP gains.  

    On the whole, the LTP is back to about where it was ($1,297,222) on 5/17 but we're still down about $120,000 from our 4/18 high but that was up $180,000 from our 3/13 review – and we knew there was no way that would last.  Still, we could have sold in April and went away…

    What happened is we got more bearish in March and we've been pretty much neutral since.  Not that we're not adding new longs that will mature but, for the summer – we're treading water in the LTP/STP but that's what you should do (protect your gains) in an uncertain market.  That's another reason I like going to cash – with $2M in cash – I would probably have been more inclined to gamble with $500,000 but having a lot of that money in play makes me reluctant to take big risks.


  20. From the April Portfolio Review:

    Up and up the markets go, where they stop — well, they don't seem to be stopping, do they?

    Last month we couldn't believe we were already close to $2M in our primary paired portfolios.  The Long-Term and Short-Term Portfolios stood at $1,990,381 as of about the 15th of March and, although we played cautiously and added more hedges, the LTP has marched on to $1,429,270 by itself (as of the 4/18 review) while the STP took a $36,413 hit but that still left it at $704,785 for a combined total of $2,134,055 – up $1,534,055 (255%) from our original $600,000 start on Jan 2nd, 2018 and up $143,674 for the month, which is 24% of $600,000 but "just" 7.2% higher than where we were in March.

    I hate to be in this position as we're clearly benefitting from RIDICULOUS market conditions and I know from experience that, no matter how many times I say it, people won't believe how quickly we can give back a big chunk of these profits.  Just this morning, GOOGL went down 8%, INTC is down 13% in the past week…  If that can happen to big blue chip stocks – what can happen to the other crap?  

    We've been purging things we think are overvalued and we keep hedging but, when you make 255% in less than 18 months you have to KNOW that there's something wrong with the markets and, eventually, things may normalize on you.  I've discussed FOMO (fear of missing out) a lot lately and sure, we'd hate to have missed another $143,674 in gains and now those gains are a buffer against future losses but $2M is A LOT of money to risk and we're getting to the point where I'd rather cash it and start again with a fresh $600,000 – locking $1.4M away in a safer place.

    Image result for arya stark not todayBut, as Arya Stark says to the God of Liquidation: "Not today."  Not today but soon – as soon as I get more nervous I think I will call for a cash out of the portfolios so keep that in mind as we head into May as I know I would sleep much better with CASH!!! than with all these open positions.  

    We survived the 20% drop in December and came back stronger than ever but we had less money then and our portfolios dropped almost 1/3 at the lows before recovering.  That would now be $700,000 – no thanks!  I'd hate to miss more rally but it's not like we'd sit out forever – we would just miss a few months waiting for a drop that doesn't come but there are always new bargains to be found – Intel and Google, for example!  

    The thing is, our portfolios are full of bargain stocks as we have purged most of the ones that have run too far up and every time I look to purge, I have trouble finding things I want to sell so, as a discipline – I'm more likely to chuck the whole thing as that then forces me to very carerfully re-evaluate everything as we build new portfolios.  But not today, today we just consolidate our reviews, mostly from mid-April as we look ahead to our next round of adjustments leading into the next expiration day on May 17th.


  21. Remember when Game of Thrones was a thing?  That was so 30 days ago….  cheeky


  22. some comments:

    They are all ready serving Beyond Meat food items at Qdoba.

    HEXO and THC infused beverages:  This is not new news since they have had the partnership for several months. The jv is 48% owned by HEXO and 52% by TAP.  Coors is doing all the development work and HEXO will supply the THC. From what I understand, they are attempting to microencapsulate the THC so that it doesn't alter the taste of the beer or lose its potency.  The Canadian market will be a good testing ground for the grand prize…the US. 


  23.  Hi Phil.  Is NVDA likely to benefit from Facebook's new crypto?  If so, is there a suggested trade?  Thx.


  24. RE BYND. I could find no supply @ the grocery stores-zilch, nada. I asked when they would get more in and was told "lack of supply" can't keep it on the shelf. I'm long again but talk about a yo-yo. Think a strangle might work. Whoever @ Tyson sold their stake must be fired by now. With health problems for people and so many more not touching meat, because they don't know where it comes from I am not surprised at all.


  25. BYND – Sold 1/2 up 5 points.  Stops up to entry on balance.


  26. Sold last 1/2 up 11.  Out for now.

    Wish now that I had played bigger, but not worth the risk on what is basically a crap shoot.


  27. HEXO/Stock – HEXO valued at $1.4Bn with $5M in sales and a $23M loss last year and last Q they sold $13M and lost $7.7M so getting better, I guess…  TAP is $11.7Bn with $11Bn in sales and $1Bn in profits so let's say THC beer is a blockbuster and accounts for 10% of TAP sales – that's $1Bn but with, I assume good profits as the prices should be higher so maybe 20% is $200M and $100M goes to HEXO – that's going to justify their cap plus they are probably doing other things so not terrible to give them a shot though TAP is probably a safer choice.   Interesting note from HEXO CC:

    Gross revenue per gram and gram equivalent decreased to $9.11 as compared to $9.24 the same prior year period and $9.15 from the prior quarter. This is a direct result of the increase in our oil-based products sales as the product mix purchased by customers continues to shift toward smoke-free alternatives.

    That's the trend we like to see for New Age!  

    TAP does have long-term options and we were looking for put income for the OOP so let's sell 10 of the TAP 2021 $47.50 puts for $4.40 ($4,400). 

    In the LTP, let's also sell 10 of the 2021 $47.50 puts for $4.40 ($4,400) but then let's buy 20 of the 2021 $50 ($8.50)/60 ($4) bull call spreads for $4.50 ($9,000) and that's net $4,600 on the $20,000 spread so we have $15,400 (335%) upside on a nice, conservative spread.  

    NVDA/Taihu – I don't think FB is doing mining.  I think they are more like creating a currency and backing it with Dollars, which is very smart as they can become Trillionaires if they get it to take off.


  28. Phil, if this is meaningful to TAP, you're right it's going to be really big for HEXO.  And Stockbern is right, the real payday is in the US, as you well know.


  29. Phil, thanks for yesterday's advise & analysis re OIH.


  30. Phil

     I am going to Asia for 3 week end of month  ( TIME: 12 Hours ahead)

     What would you recommend for a  hedge ?

     As always thank you for the help


  31. Asia/QC – Remind me later but the DXDs we just added are good.  

    Have to run for my radio show now.  Wasn't supposed to be on this week but Jean is sick and they asked me to fill in. I doubt I'll be back for the close but I will be on later to respond to all.   


  32. STJ – SPWR up huge !

    SPWR  Upgraded at Goldman — to Buy from Neutral

    Time to cover some ?


  33. SPWR / Albo – I am only short puts at the moment. Got called away in the ramp up and didn't want to fight that move up! I guess the 3 day rule still applies – on the way up or down! But they have a PT of 11 so you have to assume that 1/2 a cover is prudent here.


  34. These guys are up 40% since the last disappointing report! Not cheap…


  35. STJ – Thanks, I agree.


  36. Phil. FTR continues to get beaten up. Have you seen any news indicating the fundamentals have changed? I understand this is a turn around that can take a couple of years. I have not DD my position yet and I am wondering is this a good point to do so. Thanks!!


  37. I made the TAP trade the 2nd official trade for the Hemp Boca Portfolio – for trades we initiate live on the show.  So it's now:

    So still good for new trades and I DO NOT want to hear a thing from people who wanted to start a new portfolio or people who want to start a small portfolio as this is a BRAND NEW $50,000 portfolio!  

    Hedge/QC – Two factors in selecting a hedge is which index is ahead of the others (that's what the Big Chart is for) and which index is most likely to fail.  From the Big Chart, the Dow is now back to the May high S&P close and Nas lagging a bit and RUT lagging a lot so Dow or S&P and BA may come down more and drag the Dow and others if the trade talks blow up so I still like DXD, which is a 2x Ultra-Short for the Dow so a 10% drop in the Dow (back to June lows) would be up 20% on DXD which is $27 so $27 x 1.2 = $32.40 so that's our target and now we consider out time-frame and you'll be gone for July and the next DXDs are Oct after July so now we know what to play:

    • Sell 10 TAP 2021 $47.50 puts for $4.40 ($4,400) 
    • Buy 30 DXD Oct $25 calls for $2.75 ($8,250) 
    • Sell 30 DXD Oct $32 calls for 0.80 ($2,400) 

    That's net $1,450 on the $21,000 spread so there's $19,550 (1,348%) upside potential against your cash outlay.  You are obligated to own 1,000 shares of TAP at $47.50 ($47,500) if it goes lower but it's nice to have a hedge that's $2 ($6,000) in the money to start and TAP at $54 has a 12% cushion before the puts kick in.  

    SPWR/Albo – In the OOP, we have the 2021 $3/7 bull call spread (50) with 30 short $5 puts and we're way over target and just waiting for the full $25,000 payout (now $14,000).  In the LTP, we took a bigger risk with $50 naked 2021 $5 calls and we're up 100% but why play it if we're going to cover at this point because selling the $10s for $2.50 put's 1/2 our $5.50 in our pocket and our best case is making $2 more but I'm sure we can make $2 from $5.50 in many other ways. 

    If we sell the $12s for $1.70 ($8,500), then we stand to get $35,000 more at $12 so $43,500 (hopefully) vs $26,000 now makes more sense as that's $17,500, which is 67% of our current net $26,000 but the 2021 $7s are $4 and the $12s are $1.70 and that's net $2.30 on the $5 spread so just $20,700 (90 spreads) would return $45,000 so we'd put over $5,000 in our pocket and still have more upside potential at $12 than covering what we have now.  

    So, for SPWR in the LTP:  

    • Buy (to close) 20 short Jan $7 puts for 0.49 ($980)
    • Sell (to close) 50 2021 $5 calls for $5.75 ($28,750) should be a bit higher tomorrow)
    • Buy 80 2021 $7 calls for $4.25 ($34,000) 
    • Sell 80 2021 $12 calls for $1.85 ($14,800) 
    • Sell 20 2021 $10 puts for $2.75 ($5,500) 

    So we cash net $27,770 and we buy a new $40,000 spread for net $13,700 so we've taken half the profits off the table and mildly increased our risk of ownership (by $6,000) so we can net another $26,300 out of this spread from here WITH extra money in our pockets – all playing with house money now!  


  38. FTR/Robert – 2019 is another negative year in their turnaround but only $140M planned to lose – though that's their entire market cap so, effectively, if you give them $100,000 – they plan to lose it this year.  

    Analyst recommendations

    According to the data compiled by Reuters, as of June 11, among the 11 analysts tracking Frontier Communications (FTR) stock, four recommend a “hold,” while seven recommend a “sell.” None of the analysts recommended a “buy.”

    According to Wall Street analysts’ consensus, Frontier’s mean target price was $2.28 per share on June 11, which implies upside potential of ~34.9% over the next 12 months from its current market price of $1.69 per share. The median target price was $2.38 on June 11. On June 10, UBS cut its target price on Frontier stock from $2.50 to $1.50.

    Analysts expect Frontier to report a ~4.6% fall in revenue to $8.2 billion in fiscal 2019 compared to $8.6 billion in fiscal 2018. The company’s adjusted EPS are expected to be -$1.43 in fiscal 2019 compared to -$1.34 in fiscal 2018.

    Frontier Creditors Prod Telecom to Overhaul Its Debt

    Advisers for three groups of creditors have held informal discussions with Frontier ahead of $2.7 billion of debt maturities in 2022, according to people with knowledge of the matter. Those notes trade at deeply distressed levels, and the company has signaled it may be ready for a more official process by adding board members with turnaround experience.

    A group including Elliott Management Corp., Apollo Global Management LLC, Franklin Resources Inc. and Capital Group Cos. had proposed swapping their unsecured debt into new secured notes in an out-of-court transaction, with some members also favoring a Chapter 11 bankruptcy filing, the people said. The other creditor groups prefer a bankruptcy filing, in part to avoid seeing their holdings pushed down in priority through a debt swap, according to the people.

    The group including Elliott, Apollo, Franklin and Capital Group holds about 60% of so-called CTF unsecured bonds maturing in 2022 and 2025, according to some of the people. Some creditors in that group are believed by market participants to have sold credit-default swaps insuring against a Frontier default. That would skew their interests against a Chapter 11 filing. A second group of creditors holds “legacy,” or non-CTF, bonds, and a third group of creditors owns a mix of CTF and legacy bonds, the people said.

     

    So things are very messy right now with stuff that has nothing to do with earnings.  UNSECURED Creditors want assurances (of course) because they have to slash the value of those notes in their own reports – showing unrealized losses now – even if they do ultimately get paid.  

    Frontier still has time to negotiate with creditors and it also will benefit from a recent $1.4 billion asset sale, which gives it cash to address small short-term maturities. The company has publicly said that it will be able to stabilize its wireline business through cost cutting while retaining customers in its broadband internet unit. It also generates positive free cash flow.

    The CTF notes are trading at levels indicating a higher likelihood of default, with the 2022 securities yielding about 26% on Friday. Credit-default swaps are pricing in a 90% chance of default within five years, according to data from CMA.

    Frontier fed speculation that it may be willing to consider reworking its debt or a Chapter 11 filing after the addition of new directors with substantial restructuring experience, including Mohsin Y. Meghji, founder of M-III Partners, who currently serves as chief restructuring officer of Sears Holdings Corp. Those directors joined the board after Robert A. Schriesheim was added in December. Schriesheim’s biography cites his former role in raising capital for Sears and current post on the board of Houlihan Lokey Inc., which specializes in turnarounds.

    Revenue and profit are dropping in Frontier’s traditional wireline telephone business as more customers defect to wireless services, and its broadband internet unit faces steep competition from cable companies. Frontier ranks as the biggest issuer among deeply distressed-debt borrowers — those with yields topping 20% — despite efforts by Chief Executive Officer Dan McCarthy to turn around the business.

    The CTF moniker stems from bonds Frontier issued after its $10.5 billion purchase of California, Texas and Florida systems from Verizon Communications Inc. in a deal that McCarthy said in 2015 would boost revenue and free cash flow, as well as help retain customers. Instead the CTF bonds, which make up the bulk of Frontier’s $2.7 billion 2022 maturity wall, pushed up leverage and failed to halt the company’s decline.

    “They’ve been lucky enough to put off the day of reckoning as a result of the asset sale, but they haven’t been able to fix the business, which is still extremely over-leveraged,” said George Schultze, founder and CEO of Schultze Asset Management in New York. He has a short position on Frontier stock.

    If they avoid bankruptcy, they could go through the roof but the creditors don't want to give them a year to find out.  Likely in the LTP (later) we're going to kill the short puts and short calls (net $7,000 loss) and wait and see on the 20,000 longs.  If they go to 0.80 and we buy 20,000 more ($16,000), we average $2.40 and another 40,000 ($16,000) at 0.40 would be $1.40 avg on 80,000 shares as we follow it down so that's our plan – losing another $32,000 if it keeps going lower.

    We did that with SIRI and CZR and it worked out great but it usually doesn't.  


  39. Long-Term Portfolio Review (LTP) – Part 1:  $1,319,213 is up 163.8% and up $21,991 since our 5/17 review. We are still down $100,000 from our April highs and about $50,000 of that was made up by the STP and, as noted in that review – we're pretty much treading water at the moment as our primary goal is to protect $2M worth of cash and positions in our paired portfolios.  I've said before and I'll say again, if you are up drastically on money that matters to you – there is no substitute for cashing out! 

    We do keep finding bargains though, like RH, LMT, STMP and CPRI, which we added since last month and, if we are adding just one new trade a week – that's 52 in a year so we're filling any portfolio from scratch with new trade ideas.  Just today we added TAP as well but it's not yet reflected in this review.

    There are always bargains to be found and these LTP positions are the ones that have run the gauntlet through several sell-offs so they are generally positions we really, Really like a lot for the long term – as they should be.

    • HMNY – Well, they are still in business…  I have to tell you, the fact that they manage to keep operating really impresses me at this point.  Supposedly they are going to report on 6/28 – that will be interesting.
    • NAK – A lottery ticket that I like a lot.
    • CDE – We got aggressive on gold at the right time, I think. 
    • CHK – Also aggressive on Nat Gas.  

    • Short Puts – All looking good now except:
    • BBBY – Too stupidly cheap at $12 again and we sold 20 of the 2021 $15 puts for $4, so net $11 and I'm still good with that target so it would be silly not to take the $8,000 we collected on the puts and add a bull call spread.   Let's buy 50 of the 2021 $10 calls for $4 ($20,000) and sell 50 of the $17.50 calls for $1.55 ($7,750) so that's net $12,250 on the new $37,500 spread, which is very reasonable but really net $4,250 – it's just that we sold the puts first – last September!  

    • ARR – Next month we have to roll the $22.50 puts, now $4.50 and the Jan $22.50 puts are $5.30 at the moment and the $20 puts are $3 so we'll see which target looks better.  The Jan $17.50 calls are $1 so, if we roll to the Jan $22.50s (+0.80) and sell the $17.50 calls ($1) we drop our net another $1.80 to $16.50 and we're right back on track – see how easy that is?  And that's not even counting the $2.60 in dividends we've collected so far! 
    • BNS – Close enough
    • ETM – Way below our target but not too much of a loss so far.
    • NRZ – On track.
    • SKT – Way below target but I love this company.  We're waiting for 2021s to come out
    • T – Off to a great start, just added it last month.  One of the World's best channel stocks – right around $30 since 2002 (low $25, high $40) and pays a great dividend ($2) so any idiot could have just bought the stock in 2002 for $30 and, 17 years later, they would have collected $34 in dividends and, if they put that back in the stock every year, it compounds out to $449 in 40 years.  Now, is that really so hard to do?

    I hate to keep hammering these points but the questions I get in the Webinars and in the Chat Room indicate that not everyone is down with making 1,220% in 40 years for an average of 30% a year instead of chasing silly momo stocks up and down like a headless chicken and ending up with much less.  There HAS to be a place in your portfolio for nice, sensible investments – it's where MOST of your money should be!  

    And, keep in mind, that is JUST buying the stock and rolling the dividends into more stock – we're not even talking about collecting premiums by selling puts and calls along the way, which could easily double those returns.  

    • AAPL – Short calls hurting a little but nothing to complain about.  This is a very small AAPL position for us so we're very happy for an excuse to DD on the longs.  
    • ALB – Improving a bit.  By the way – see last review for more details on each position – it's not something I do every month as it's mostly redundant.  
    • ALK – Close to our goal.
    • BHC – About what we expected – a bit weaker.
    • C – On track.
    • CAKE – Also weak but I have faith.

    • CELG – Just waiting for their buyout to close so we can get paid.
    • CLF – Brand new.
    • CMG – Well, now we HAVE to roll the short $600 calls, unfortunately at the highs.  The good news is the calls we sell will be at highs too.  The 2021 $480s are $295 and the $540s are $248 so that's net $47 out of a potential $60 so no point in cashing those but let's add 15 of the 2021 $700 ($147)/800 ($100) bull call spreads for $47 ($70,500) and roll the 8 short June $600s at $135 ($106,000) to 15 short Jan $740 calls at $72 ($108,000) and I can't believe the 2021 $450 puts are still $20 but let's sell 10 of the 2021 $560 puts for $43 ($43,000) to offset the short calls.  So now we've spent net $25,500 to push the short calls into 100% premium (from $135 in the money!) and we still have $26,000 left to gain on our $480/540 spread but now we have a new spread with $150,000 potential as well.  Quite a deal!  

    • CPRI – Good for a new trade. 
    • CZR – On track.
    • DAL – On track.
    • DIS – Another runaway short call but nowhere near as bad as CMG.   Our bull call spread is in the money and the short puts are dead so let's see what we can do with these:  Let's close the 10 short Jan $95 puts at 0.45 ($450) and let's roll the 15 short June $125 calls at $14.20 ($21,300) to 15 short Sept $130 calls at $12 ($18,000) and we're going to wait for a pullback to sell more calls as $140 is a bit much