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Monday Market Movement – Post Fed, Pre G20

There's a whole lot of nothing going on this week

We''re in between earnings seasons and in between market-moving events and, though we do have a GDP Report on Friday, it's the third revision to Q1, not a new report and should be steady at 3.1% so – yawn.  It's the 2nd Quarter's GDP that's in trouble as estimates have that down around 2% and possibly below.  Durable Goods come out on Wednesday and, unless they are a strong positive upside (doubtful), we're closing Q2 with a whimper, not a bang.

Other data that matters this week is Consumer Confidence tomorrow along wiht Home Sales and Personal Income and Spending on Friday along with Michigan Sentiment.  Earnings season restarts in the middle of July with bank earnings but, until then, it's pretty much all speculation as to whether things are getting better or worse on the eearnings front.  

One major data-pont that has us worried is Factory Activity, whichhas gone into contraction in the US, Europe and Japan and is sitting at decade lows as of the June surveys.  And it's not just the PMI that's in the dumps, the latest IHS Survey found strong correlation to the downside in all aspects of Manufacturing AND Services:

  • Flash U.S. Composite Output Index at 50.6 (50.9 in May). 40-month low.
  • Flash U.S. Services Business Activity Index at 50.7 (50.9 in May). 40-month low.
  • Flash U.S. Manufacturing PMI at 50.1 (50.5 in May). 117-month low.
  • Flash U.S. Manufacturing Output Index at 50.2 (50.7 in May). 37-month low. 

Don't worry though – it's not like the market is suddenly going to care about the actual data.  We've been declining since early last year yet the market continues to surge – despite the fact that we've fallen in 18 months as much as we rose in the previous 102 months. 

Yes, people think the Fed is going to help but the Fed is the one that bailed us out to the tune of $4.5Tn over the past 10 years and they STILL have a $4Tn balance sheet – are they going to now spend another $5Bn to bring manufacturing back or are we just going to stop looking at data altogether?  Not since 1999 have Fundamentals been so thrown out the Window but 1999 was a reallly good year in the markets – we didn't collapse until March of 2000.

What's scary going forward is that the Fed simply doesn't have the firepower to fix things again if they go bad.  That's why they tried to sell off assets since 2015 but, obviously, have not had much success since they've only knocked it down 10% in 4 years so far and now they are talking about going back to easing?  That seems just a bit insane, doesn't it?  If there is no harm in the Fed running up Trillions in debts, why don't they just always do that?

That is, in effect, what all the World's Central Banks are now doing – printing endless amounts of money in order to pretend everything is awesome when it most clearly is not.  It's the same with Trump, who keeps telling people how great things are when they clearly are not.  Saying it doesn't make it so.  And Trump didn't start the fire that's destroying America – he just threw gasoline in it.  Since 1989, Trump and the Top 1% gained $21Tn in wealth while the bottom 99% 50% lost $900M.

In fact, according to the People's Policy Project think tank, the Bottom 50% of Americans now have no wealth at all, with their debts exceeding their assets by a wide margin.  “We have the worst inequality in this country since the 1920s…Three wealthiest people in America have as much wealth as the bottom 50 percent,” said Pramila Jayapal (D-Wash) of the Congressional Progressive Caucus.  

How can this country move forward – even those of us in the Top 1%, if we are destroying the lives of half the people?  Trump and the GOP have been taking away their Health Care, their Job Security (though they don't notice it so far with "full employment") – the entire Social Safety net in this country is being dismantaled and the next crisis will have a devastating impact on those who are, even in all this "prosperity" are struggling to survive.  

And, of course, if you are reading this newsletter that caters to the Top 1% (and it's very unusual for any of you reading this to not be in the Top 10%), you think things are "GREAT" in America because our wealth has more than tripled in the last 20 years and the Top 10% has doubled so most of the people who work directly for us are doing well too so it's easy to lie to yourself and pretend EVERTHING IS AWESOME – but it's not, not for the real America.

That means you are also fooling yourself if you think that the data trends we're seeing are some kind of aberration, rather than serious warning signs and I would urge you to consider that when investing and keep a good supply of CASH!!! on the sidelines (30-50%) as it would not take much to send this market down 10-20% in very short order.  

 

As you can see from Citigroup's Economic Surprise Index, the surprises are getting worse and worse wile the valuations are getting higher and higher and noww, in fact, the surprises are as bad as they've been in the past 10 years while the valuations are just about as highand quite a bit higher than they were in 2007 – before the last big crash.  

Needless to say, we'll be watching earnings very, very closely for signs of danger but my spider-sense is already tingling and, if it were not for the likelihood of either a China Trade Deal or a rate cut (if there is no trade deal) then I'd be packing it in already.  I know I say this a lot but that's because we've been at this market top a lot this year but the underlying Fundamentals are getting worse, not better.  

We're still shorting the Dow (/YM) Futures at 26,800 with tight stops above that line and we'll keep doing it until it doesn't work anymore.  That's lined up with 2,960 on the S&P (/ES), 7,775 on the Nasdaq (/NQ) and 1,555 on the Russell (/RTY

 


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  1. They had some major connectivity issues on some providers this morning…  We are dependent on anything Internet now – scary.


  2. I wonder who benefits from the lack of transparency:

    https://talkingpointsmemo.com/news/trump-agriculture-climate-change-food-crops-rice

    The Trump administration’s Department of Agriculture is concealing government-funded studies about the harms climate change will wreak on the farming and food production industry, Politico reported.


  3. Just for the once who did not follow Fridays late post here again

    yodi
    June 23rd, 2019 at 1:18 am | Permalink | Tweet thisIgnore this user    

    Does it pay????
    Today I like to give you the result of a deep in ITM call sale on NLY
    On 5/20/2019 I initiated the following trade.
    Sell a leap 2021 c/p strangle for 1.34/2.17 = 3.51 x 500 = 1755.00 less 8.21 commission = 1746.79
    Buy 500 stk @ 9.29 = 4645.00 plus 8.00 commission = 4653.00
    Total net cost 2906.21
    Indicated on TOS NLY’s ex div. is 6/27/19. Obviously no div. received.
    6/22/19 I was assigned 500 stk. @ 8.00 = 4000.00 less 15.14 assignment fee = 3984.86.
    You might say so far so good received 3984.86 – 2906.21 = 1074.65!!!
    But what about the short 10 put where I received 1085.00 less 4.11 commission = 1080.89.
    The market shows for the 10 2021 putter a value of 2.15 so I show still a 2 cent premium before assignment of 500 stock at 10$. Naturally with an assignment cost of 15.00
    So again does a trade with a deep ITM caller pay. NO
    The only one who makes money here is the broker. Possible get a thank you card from TDA.


  4. Good Morning!


  5. Good morning! 

    Still in NY, heading home about 3pm – had a very productive meeting with all kinds of good stuff happening with New Age, Hemp Boca and even Trade Exchange – PSW Investments should end this year on a pretty good note!

    Big Chart – Just waiting for Nas and Russell to confirm new highs but, as noted above, I'm dubious.

    Scary/StJ – Well Trump is conducting open cyber warfare and that opens the flood-gates to everyone – we're certainly not prepared for that.

    NLY/Yodi – You say it doesn't pay but it looks to me like you did the following:

    • Pay $4,653 for 500 shares 
    • Collect $1,746.79 selling puts and calls. 
    • Get assigned 500 more shares for $3,984.86

     So here you are in 1,000 shares for $6,891 so call it $6.90/share and the short puts are gone and you still have the short calls – I don't see how that's a problem, frankly as it was $9.29 when you started and now you can sell more puts and more calls and lower the basis even further and you STILL will have dividends coming.  Maybe I'm missing something as you talk about 10 short puts but the whole point of this process is to end up with a good amount of dividend stocks at a good price – seems like you are on the way… 

    Indexes fading already.


  6. Dollar tested 95.50 and is a bit bouncy there but watch out if that fails – we'll go to 95 fast.

    /RB hit $1.90 – Wow!  Oil hit $58.22.  /NG may have finally bottomed at $2.20 after spiking below, now $2.25. 


  7. Daimler warning pressures European shares, eyes on G20


  8. Thanks to Palotay, Stj, Winston for the great discussion/idea sharing over the weekend. 


  9. Once again RUT is diving and other indexes are ignoring (for now).


  10. Phil NLY You got that wrong the calls were assigned not the puts so minus 500 stock!!! The put are still there as well very close to fully ITM


  11. Long /NQ.  Risking 10 points.



  12. Bitcoin Surpasses $11,000 as Memories of Popped Bubble Fade




  13. 10 Monday AM Reads


  14. Eldorado Said to Agree to Buy Caesars for About $8.7 Billion



  15. Gold making a move.


  16. NLY/Yodi –  you sold more calls and you had stock?     I see the problem then. 

    I forgot I promised somebody I would meet them at 12. I should be back about two for an hour and then I have to go. 


  17. We are all over the place today. I guess it's Monday!


  18. Yes Phil I covered the calls with the stock like I do with all armchair trades.You get your money back at the call price. The only problem we sold the call to deep ITM. So it is really penny pinching. I think you as well initiated this play with NLY if I recall correctly.


  19. PG stock is in deed on top of the leader. My July 26 106 caller is again well ITM. So I decided to close the position and see if something better shows up for the cash.


  20. Closed out /NQ.  Small loss  


  21. At last, a must have for all you futures traders. :)


  22. Pstas

    I like the toliet good one


  23. Yikes!  1,538 on /RTY – I can't believe the other indexes are still holding up but at least 50 points on the Dow is a good pay-off.

    /NG flew higher – $2.30 now. 

    /KC with a big pop too.

    Traffic in NYC is worse and worse.

    NLY/Yodi – I didn't initiate it with a 2x cover!  It was aiming just to get the dividend so, in theory, if you get called away, you simply buy the stock again and sell the calls again.  Dividend is 0.25 so as long as you have 0.20 or better in premium sold, doesn't matter if you get called away.  At the moment, you can't get good premium so we'd have to wait to re-enter but 2021 $10 puts are $2 so net $8 on that side is the same as the dividend, so that's a good way to start from scratch.

    LOL Pstas.  Now my IPad does all that.

    Stocks waiver amid global growth concerns, easing monetary policy

    • U.S. stocks erased much of the session's gains as investors consider the prospects of central banks easing monetary policy against worries about slower global economic growth.
    • The S&P 500, which had been near its all-time closing high of 2,954.18, edged down 0.1% to 2,947.63 in midafternoon trading.
    • The Nasdaq slips 0.2% and the Dow struggles to hold onto 0.1% gain.
    • Gold jumps 1.3% to $1,418.30 per ounce amid an expectation of lower Fed rates and geopolitical tensions between Iran and the U.S.
    • 10-year Treasury rises, pushing yield down 4 basis points to 2.03%.

    Beyond Meat lands a pizza chain partner

    • Beyond Meat (BYND -7.6%) lands another partner with PizzaRev customers now able to add the company's Italian sausage crumbles as a topping option at all PizzaRev locations.
    • PizzaRev is the first fast-casual pizza chain to feature the Beyond Meat product.
    • Source: Press Release

    Alphabet's growth is moderating – Cleveland

    • Cleveland Research says Alphabet's (GOOG -0.5%)(GOOGL -0.6%) 2019 outlook "suggests moderating growth and potential downside to prior partner forecasts."
    • The note echoes a warning from MoffettNathanson today that the company's U.S. Search revenue growth has slowed.

    BAML sees headwinds for Nike

    • Bank of America Merrill Lynch heads into Nike's (NKE -0.4%) earnings report with an Underperform rating held in place.
    • "We see F4Q EPS upside on expense controls but believe revenue upside should be limited," notes the firm.
    • "NKE is beginning to lap difficult wholesale comps vs. the F19 ship in of Air Max 270, Epic React, and World Cup merchandise."
    • "In N. America the F19 rebound against the -2% revenue decline in F18 is now over and wholesale and DTC could slow in F20."
    • BAML is a contrarian on Nike, with the average sell-side rating standing at Outperform

    Mass outage hits Netherlands telecom

    • The biggest outage in memory has hit telecom services in the Netherlands, prompting police to send duty officers into the streets with emergency services numbers out.
    • The outage started with the backbone at Royal KPN (KKPNY -0.2%), but has reached to other providers using KPN's network.
    • KPN acknowledged its fixed-line and mobile networks were down and the outage was ongoing after several hours.
    • Military police have increased presence at vital locations and airports; a spokeswoman for the country's National Coordinator for Security and Counter-Terrorism says it's "too early to say" whether there had been a cyber attack.

    Citi warns of 'fugly' Micron print

    • Citi reiterates a Sell rating and $30 PT on Micron (NASDAQ:MU), expecting tomorrow's earnings report to fall short of the company's outlook.
    • Analyst Christoper Danely thinks Micron could lose money by year's end due to the DRAM environment, which is currently in its third quarter of the downturn compared to the six to eight quarters for the past two downturns.
    • Danely: "On the bright side, we believe that the stock is close to a bottom, so long-term investors could nibble away at it."
    • Micron shares are up 0.5% to $33.42.

    McDonald's cashes in on switch to fresh Quarter Pounders

    • McDonald's (MCD -0.2%announces that Quarter Pounder sales are up 30% on average in the year since the restaurant chain swapped in fresh beef for frozen patties.
    • "We sold 40 million more Quarter Pounder burgers nationally in the first quarter of this year compared to the quarter in 2018," notes a McDonald's exec.
    • Earlier this year, McDonald's also decided to moving away from the premium line of Signature Crafted Recipes to focus on the Quarter Pounders lineup.

    Gold stocks gain as bullion extends six-year highs

    • Gold adds to six-year highs, on track for a fifth straight gain, as prospects of lower Federal Reserve rates and lingering geopolitical tensions between the U.S. and Iran fuel safe-haven buying; Comex gold +1.2% to $1,417.40/bbl.
    • ETF investors are moving back into gold, Commerzbank analysts say, as holdings of the SPDR Gold Trust jumped 4.6% on Friday from a day earlier, its biggest one-day percentage gain since September 2008.
    • Large speculators sharply increased their bullish positioning in gold futures for the fourth straight week, the Commodity Futures Trading Commission reports.
    • Gold holding above the psychologically important $1,400/oz. level is a positive signal for consolidation after last week's rally, says Carlo Alberto De Casa, chief analyst at ActivTrades.
    • Gold prices have climbed nearly 8% so far this month and more than $70/oz. just over the past week.

    Canopy slips another 3% after Q4 earnings

    • Cannabis producer Canopy Growth (CGC -2.8%) slips on average volume. Shares have retreated almost 11% since Friday when it released fiscal 2019 results (year ended 3/31/19).
    • Sales were up 191% to C$226.3M but investors appear disappointed with other fundamentals.
    • Cowen's Vivien Azer (Outperform/C$82) is "not worried" about the sequential declines in its recreational, medical and international segments (Q4 sales of C$60M was larger than the next five competitors combined) but is concerned with the third consecutive fiscal year of gross margin erosion.
    • BMO's Tamy Chen (Market Perform/C$60 from C$65) believes gross margin will improve in the coming quarters but is less confident with the potential revenue contribution from edibles and vapes and the company's ability to hit its C$1B run-rate guidance by the end of fiscal 2020, adding that operating expenses required to ramp manufacturing and processing could be higher than planned.
    • Related tickers: Tilray (TLRY -4.4%), Aurora Cannabis (ACB -1%), Cronos Group (CRON -3.3%)

    Trump continues Fed-bashing… but June looks good

    • President Trump, continuing his Twitter barrage against the Federal Reserve, likens the central bank to a "stubborn child," saying "we need rates cuts & easing to make up for what other countries are doing against us. Blew it!"
    • Still, Trump says that, despite a Fed "that doesn’t know what it is doing,"  "we are on course to have one of the best Months of June in U.S. history."
    • He didn't explain how, or by what measures, June is shaping up to be one of the best months.
    • The president adds that GDP could have been in "the 4's or even 5's" and the Dow could have been "thousands of points higher"… "if the Fed had gotten it right."
    • Last week, the Federal Open Market Committee kept policy steady at 2.25%-2.50%; the committee's last rate move was a 25-basis point boost in December 2018.

    Barrick's takeover proposal gets sharp pushback from Acacia

    • Acacia Mining says it strongly disagrees with majority shareholder Barrick Gold's (GOLD+2.5%) valuation of the company, particularly Barrick's view of its life of mine plans.
    • Barrick's share-for-share proposal last month valued Acacia at $787M, but Acacia says Barrick's proposal appears to have ignored the value of its portfolio of exploration and development assets.
    • Acacia also says Barrick's intervention in negotiations with the government of Tanzania, the length of time of Barrick's negotiations and the way the talks have been managed "have had the effect of undermining Acacia in Tanzania."
    • However, a fair value buyout offer from Barrick would be attractive, Acacia adds.

  24. Evening Phil. Do you like CCL after recent price drop?


  25. Trump / Phil – Amazing that the guy says that the economy could be growing at 5% if the Fed was more helpful. Does he forget that he is adding $1T of deficit each year? How much more help can you give the economy than that…  It's like China adding 10% to their total debt to get a 6% growth. We add 5% to get 3%. He is lucky than his 1/2 of Congress is a bunch of hypocrites who seem to care for the deficits only when they are not in power.


  26. CCL/Alter – I like RCL better, we bought those for the Hedge Fund when they were below $100 but I'm sure CCL has a base value down around here.  Remind me tomorrow when I have more screens and I'll take a closer look.

    Deficit/StJ – I am still very worried that Japan blows up and takes us all down with them.  On the other hand, if they can function at 250% debt/GDP – that means we have a lot room to go?


  27. Well, I have to run – back to normal tomorrow for the rest of the week.


  28. Gold prices continue their march toward a six-year high




  29. This looks interesting: https://lawworksaction.org


  30. Good morning! 

    My flight was 2 hours late so I'm a little behind but I'll get caught up.

    Not much going on but ABBV is huge and FDX is suing Commerce, that's interesting:

    AbbVie Strikes Deal to Acquire Allergan for About $63 Billion

    AbbVie struck a deal to buy Allergan for about $63 billion, as the two big drug makers bet a combination will deliver new sources of growth they have struggled to find on their own. 23 minutes ago

    FedEx Sues Commerce Department Over Restrictions on Huawei

    FedEx filed a lawsuit to stop the U.S. government from requiring the package giant to enforce a crackdown on the Chinese telecommunications-gear maker.

    Iran Says New U.S. Sanctions End Any Chance of Diplomacy

    Iran said new U.S. sanctions on its supreme leader closed the door on diplomacy and threatened global stability, as American officials renewed efforts to build a global alliance against Tehran.

    Global Telecom Carriers Attacked by Suspected Chinese Hackers

    Hackers believed to be backed by China’s government have infiltrated the cellular networks of at least 10 global carriers, swiping users’ whereabouts, text-messaging records and call logs.

    EPA Rule Would Have Impacts Beyond Smokestacks

    The Environmental Protection Agency’s decision to scrap Obama-era climate rules for coal-power plants will have far-reaching repercussions if the order withstands legal challenges, advocates on both sides of the issue say. 17