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Monday Market Movement – Morgan’s Misgivings

Morgan Stanley says we're in a Recession already.  

As you can see from this chart, the Treasury Yields are flashing signs we usually don't see until we are already deeply in a Recession only this time we're ignoring those signs, as well as dozens of other Economic Indicators that are screaming recession – to those who are willing to listen.  According to MS, "decelerations and disasppointments are mounting":

  • Cass Freight Index
  • Retailer earnings
  • Durable goods orders
  • Capital spending
  • PMIs
  • May payrolls
  • Semiconductor inventories
  • Oil demand
  • Restaurant performance indices…

and our own Morgan Stanley Business Conditions Index (MSBCI). Looking at the MSBCI in particular, the headline metric showed the biggest one-month drop in its history going back to 2002 and very close to its lowest absolute reading since December 2008.

This index has a tight relationship with ISM new orders and analyst earnings revisions breadth. Our analysis shows downside risk to ISM new orders (25% y/y), S&P earnings revisions breadth (6-13%) and the S&P 500 y/y (8%) if historical links hold.

MS sees no more than 1% growth for the S&P over the next 12 months and sees no better in Europe or Japan and, like PSW (only later), they are essentially calling for their clients to get much more "Cashy and Cautious" in their portfolios in what is very likely to be the top of the market for quite some time.  As they note in their report: "Our concern is that the positives of easier policy will be offset by the negatives of weaker growth: We think a repeated lesson for stocks over the last 30 years has been that when easier policy collides with weaker growth, the latter usually matters more for returns. Easing has worked best when accompanied by improving data."

MS cites changes since April (the Q2 outlook) as being:

  • A US-China trade deal that was widely expected to be resolved led instead to a new round of tariffs.
  • Global PMIs have continued to fall.
  • And Morgan Stanley’s Business Conditions Index, a survey of how our equity analysts feel about their companies, suffered its largest one-month decline ever in June. We believe all this signals risk to equities.

Related imageLiquidity has dropped off since July – something we've been warning about at PSW and, if you don't sell like selling your stocks when they are expensive and liquid – you REALLY won't like trying to sell them when they are getting less expensive and more illiquid – trust me!  While many people still have faith that the Fed will bail them out, both MS and PSW believe that story has about run its course and nothing will be safer than CASH!!! in the next downturn. 

Meanwhile, we're a week away from the beginning of Q2 earnings (officially) and, while earnings growth is projected to LOOK like 2.6% over last year, if you take away the effect of stock buybacks – that growth reduces to 0%.  Take away Trump's tax breaks and earnings begin to trend negative so all of our economy's "success" is based on how long the Government can continue to run Trillion Dollar Deficits to support Corporate America and how long the Fed can keep giving away money to Corporate America so they can spend it to buy back 2.6% of their own stock every year.  

We do have some earnings this week but nothing too exciting and, data-wise, Powell is speaking to Congress tomorrow and Wednesday and the Fed is releasing the Minutes of their recent meeting on Weds at 2pm and Bullard will be spinning those with some comments.  There are 11 Fed speeches scheduled this week, including Powell going 3 times, so that will be interesting along with Consumer Credit at 3pm this afternoon, Small Business Optimism 6am tomorrow, the Atlanta Fed Report on Wednesday along with a policy decsion from the Bank of Canada, which should be a hold at 1.75%.  Thursday is CPI and EIA and also the ECB will release their minutes and Friday gives us PP:

From a technical standpoint, it will be 3,000 or bust on the S&P 500 (/ES), 27,000 or bust on the Dow (/YM), 7,850 or bust on the Nasdaq (/NQ) and 1,600 or bust on the Russell (/RTY) and, of course, we're expecting bust and already holding a lot of aggressive shorts in our Member Portfolios (see our weekend review).  

Be careful out there, 

- Phil

 


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  1. July 8th, 2019 at 8:49 am | Permalink Ignore this user


  2. July 8th, 2019 at 8:52 am | Permalink Ignore this user

    How does that help growth is a question of mine:

    https://ritholtz.com/2019/07/extreme-concentration-of-global-wealth/

    These top 0.7% can't eat more, buy 50 houses and 100 cars! I guess they can, but would make more sense to have more money at the bottom. In addition, these top 0.7% probably have good accountants to limit tax exposure…  Taking 10% of the wealthiest in the world (no hardship for most) could almost triple the wealth of the bottom 70%. I imagine that these $12T would find their way in the economy.


  3. July 8th, 2019 at 8:58 am | Permalink Ignore this user

    Good Morning!


  4. July 8th, 2019 at 9:06 am | Permalink Ignore this user

    Good morning!


  5. July 8th, 2019 at 9:15 am | Permalink Ignore this user

  6. July 8th, 2019 at 9:15 am | Permalink Ignore this user

  7. July 8th, 2019 at 9:15 am | Permalink Ignore this user

  8. July 8th, 2019 at 9:16 am | Permalink Ignore this user
    POLITICO Playbook: New swing-district polling illustrates impeachment peril
    By: ANNA PALMER, JAKE SHERMAN and DANIEL LIPPMAN


  9. July 8th, 2019 at 9:16 am | Permalink Ignore this user

  10. July 8th, 2019 at 9:16 am | Permalink Ignore this user

  11. July 8th, 2019 at 9:16 am | Permalink Ignore this user
    IBM Patents a Watch That Unfolds Into a Full Tablet | Tom’s Guide
    By: Jesus Diaz 2019-07-08T11:21:41Z Phones


  12. July 8th, 2019 at 9:16 am | Permalink Ignore this user

  13. July 8th, 2019 at 9:16 am | Permalink Ignore this user

  14. July 8th, 2019 at 9:16 am | Permalink Ignore this user

  15. July 8th, 2019 at 9:17 am | Permalink Ignore this user

  16. July 8th, 2019 at 9:17 am | Permalink Ignore this user

  17. July 8th, 2019 at 9:17 am | Permalink Ignore this user

  18. July 8th, 2019 at 9:17 am | Permalink Ignore this user

  19. July 8th, 2019 at 9:17 am | Permalink Ignore this user

  20. July 8th, 2019 at 9:17 am | Permalink Ignore this user

  21. July 8th, 2019 at 9:18 am | Permalink Ignore this user

  22. July 8th, 2019 at 9:18 am | Permalink Ignore this user

  23. July 8th, 2019 at 9:18 am | Permalink Ignore this user

  24. July 8th, 2019 at 9:18 am | Permalink Ignore this user

  25. July 8th, 2019 at 9:18 am | Permalink Ignore this user

  26. July 8th, 2019 at 9:29 am | Permalink Ignore this user

    This is what my company is doing to change one industry in the words of our CEO:

    https://techcrunch.com/2019/06/24/the-next-service-marketplace-wave-vertical-market-networks/

    If people want the complete article, let me know.

    Big changes!


  27. July 8th, 2019 at 9:39 am | Permalink Ignore this user

    Good morning!  

    I hoped we'd have opened higher and had better shorting lines but the cross below 1,570 is good on /RTY with confirmations at 26,750, 2,975 and 7,787.50 (if we get them).  


  28. July 8th, 2019 at 9:57 am | Permalink Ignore this user

    Big Chart – Nas not too damaged (yet) by AAPL's 2.2% pullback below $200.  Watch out if those 2.5% lines start failing as 4 of the 5 indexes are right on them and, of course, if RUT fails the 7.5% line at 1,548 – that's going to be really bad.

    Wealth/StJ – Keep in mind that every time a company buys another 2.5% of their stock back (all the time these days) they are also greatly reducing the concentration of wealth.  The Top 0.7% (even the Top 1% is shrinking now) have almost half the World's Wealth – that's a broken system and, like Global Warming, the only way to fix it is to reverse the flow – slowing it down isn't going to save us but, of course, the GOP is working very hard to convince people that neither one is a problem that needs to be addressed so it can get worse and worse so that, by the time they are forced to admit there's a problem – it will be too late to fix it anyway. 

    When killing 0.7% of the people will make the other 99.3% of the people twice as wealthy – it's really only a matter of time before you get to the tipping point.  After all, 'THEY" are passing policies every day now which choose to kill "US" rather than give up their wealth.  People are not that stupid and they see what's happening and, eventually, they will revolt.

    Annaly directors, executive officers buy $5.2M of stock
    • Since May 6, 2019, Annaly Capital Management (NYSE:NLY) directors and executive officershave purchased shares with a total value of $5.2M.
    • Purchases by executive officers represented $4.3M of the total.
    • During Q2 2019, Annaly’s executive officers and directors led all large-capitalization U.S. financial companies in common stock purchases, the company says.
    Verizon -1% as Citi sees lower wireless pricing ahead
    • Verizon (NYSE:VZ) -1% premarket after Citi downgraded the company to Neutral from Buy, saying returns over the next 12 months will likely be limited by a high valuation and "rising long-term industry risks."
    • "Verizon’s consistently strong operating performance in the wireless category may not be enough to drive further multiple expansion at a time when investors are more likely to question the competitive environment and long-term risks to pricing and margins," said Michael Rollins, maintaining the stock's $62 price target.
    • A merger between T-Mobile and Sprint "creates a potentially disruptive fourth competitor [that] could be dilutive to long-term pricing and margins for the wireless industry," he added.

    Amazon And Rite Aid Move A Little Bit Closer 

    Coffee prices jolted by unexpected frost in Brazil
    • Arabica coffee futures rose to a seven-month high earlier today after frost damaged crops in some of the main growing regions in Brazil over the weekend. The frost wave atypically hit coffee plantations in the southern region of Mato Grosso do Sul and Sao Paulo state, according to Bloomberg.
    • Prices have been in a three-week uptrend after hitting a 13-year low in May.
    • Related ETF: iPath Series B Bloomberg Coffee Subindex Total Return ETN (NYSEARCA:JO).
    • Stocks with more than a passing interest in coffee prices include Starbucks (NASDAQ:SBUX), Dunkin' Brands (NASDAQ:DNKN), J.M. Smucker (NYSE:SJM), McDonald's (NYSE:MCD), Mondelez International (NASDAQ:MDLZ), Coffee Holdings (NASDAQ:JVA), Farmer Brothers (NASDAQ:FARM), Jammin Java (OTCPK:JAMN), Baristas Coffee Company (OTCPK:BCCI) and Nestle (OTCPK:NSRGY).
    Deutsche Bank launches makeover, plans 18,000 job cuts
    • Deutsche Bank (NYSE:DB) is confirming a radical transformation, through a restructuring that will see it exit the global equities business and shed 18,000 jobs.
    • The moves will cost €7.4B, and the bank is aiming to cut total costs by 25% by 2022.
    • Along with exiting global equities, it will scale back its investment bank and cut fixed income operations.
    • And it will use a "bad bank" to wind down assets that will have a value of €74B in risk-weighted assets.
    • The plan was anticipated to come soon after the bank's investment-banking chief announced an exit on Friday. Reports last week had observers expecting costs of up to €5B and up to 20,000 job cuts.

    Deutsche Bank ratings affirmed by Moody's; outlook negative
    • In the wake of Deutsche Bank (NYSE:DB) unveiling a massive restructuring, Moody's Investors Service affirms the German bank's ratings and maintains a negative outlook on its A3 long-term deposit and senior unsecured debt ratings.
    • "Accelerating the transformation of the bank, reducing higher-risk businesses that were constantly unable to earn acceptable returns considering their higher capital and leverage exposure consumption will be credit positive, if successfully executed," Moody's said.
    • It also said, "During execution, which is not without risks, Moody's believes DB bondholders will remain protected by the bank's sufficient capitalization, clean balance sheet and solid liquidity."
    • Challenges Deutsche Bank faces: Sustaining the revenue base in the remaining fixed-income-related businesses, reducing the drag of the capital release unit, as well as growing its corporate banking operations against fierce competition.
    Auto sales bounce back in China amid discounting
    • Automobile sales in China rose 4.9% in June, according to preliminary figures from the China Passenger Car Association. The monthly gain broke a streak of 12 straight months of lower auto sales in the nation.
    • The organization notes that short-term dealer incentives offered on vehicles ahead of the implementation of new emissions standards helped to boost sales during the month
    'Fundamental deterioration' sees Rosenblatt downgrade Apple
    • "After strong service revenue growth over the last 4 to 6 quarters and the launch of Apple Music and news, we believe service revenue growth will also decelerate," Rosenblatt Securities saidMonday, downgrading Apple to Sell from Neutral but keeping its $150 PT intact.
    • "Adding to our 'sell' thesis, we believe new iPhone sales will be disappointing, iPad sales growth will slow in the second half of 2019, other product sales growth, such as the HomePod, AirPod, and iWatch, may not be meaningful to support total revenue growth."
    • AAPL -1.7% premarket
    More good news for Marvel at the box office
    • Marvel has struck gold with Spider-Man: Far From Home as the film fetched nearly $600M at the box office during its first 10 days in theaters.
    • That's the best six-day record for Sony (NYSE:SNE), who produced the movie with Disney's (NYSE:DIS) Marvel Studios, in a partnership that will have broad implications for future films in the franchise.
    • Meanwhile, after 73 days in the theaters, Marvel's Avengers: Endgame has hauled in $2.772B globally and is now just $15M shy of the record to beat Avatar as the highest-grossing film of all time
    Venezuela opposition to meet with Maduro envoys
    • As part of efforts to resolve an ongoing political crisis, Venezuela's opposition will meet with representatives of President Nicolas Maduro’s government in Barbados for talks mediated by Norway.
    • Opposition leader Juan Guaido, who has been recognized as Venezuela’s rightful leader by more than 50 governments, has said any talks must lead to a sustained solution to the crisis and cannot be used by the Socialist Party to buy time.
    Volkswagen to deepen battery alliances
    • Volkswagen (OTCPK:VWAGY) will create JVs and help finance battery production to persuade skeptical cell suppliers to back its aggressive push for mass producing electric vehicles, board member Stefan Sommer told Reuters.
    • By 2025, VW needs 150 gigawatt hours worth of battery production capacity in Europe and another 150 in Asia. By 2030 this figure will double.
    • Volkswagen has said it will buy €50B worth of battery cells and has identified Sweden's Northvolt, South Korea's SKI, LG Chem (OTC:LGCEY) and Samsung SDI (OTC:SSDIY) as well as China's CATL as strategic partners.

  29. July 8th, 2019 at 10:16 am | Permalink Ignore this user

    DB is too big to fail (in Germany anyway) and the restructuring steps are good ones. Trading way below book. More hits coming for losses and dividend cuts. Basically they’re plucking out the offending eye and it’s going to hurt badly.  But I think there’s going to be some money to be made on them in the long run. 


  30. July 8th, 2019 at 10:37 am | Permalink Ignore this user

    Broadcom (AVGO 275.46 -7.20) is making financing progress for Symantec (SYMC 25.91 +0.91) M&A deal. — Bloomberg


  31. July 8th, 2019 at 11:11 am | Permalink Ignore this user

    DB/Dawg – I hope so or the whole Global economy can go down with them.

    Dollar back to 97 again, can't talk it down from there for long.  

    These guys just keep going after AAPL:

    Rosenblatt cuts Apple to Sell, seeing 'fundamental deterioration'
    • Rosenblatt has cut Apple (AAPL -2.6%) to Sell from Neutral, looking for "fundamental deterioration" over the next 6-12 months.
    • Specifically, new iPhone sales will be disappointing and iPad sales growth will slow in the second half, and sales from other products (HomePod, AirPod, Watch) may not be meaningful to total revenue growth, analyst Jun Zhang writes. Services sales growth won't be any help there either, Zhang says.
    • The firm's keeping its price target at $150, now implying 24.6% downside after Apple's recent run up (shares have gained 15% since a near-term low of $173.30 on June 3).
    • Meanwhile, most sell-side analysts are at Outperform on average, while Seeking Alpha authors are Bullish and the stock has a Quant Rating of Very Bullish.

    25% cut on AAPL – that would be nice for our SQQQ positions AND we'd have a chance to load up on AAPL at $150 – sounds good to me! 

    Oil spiked to $58.50 but rejected there so far.  Brent $65.  

    /SI with a nice bounce off $15 – would be good to see that become reliable support.  

    /YG maybe testing $1,390 again:

    That one is a very easy call to play long on a cross over $1,400 with tight stops below.

    Meanwhile, there are so many major crises to deal with that we're pretty much ignoring one that pushes the hands on the Doomsday Clock forward:

    Iran’s Breach of Nuclear Pact Tests European Resolve

    Iran confirmed that it was enriching uranium at levels that breach the 2015 nuclear agreement, leaving France, Britain and Germany with delicate decisions in the coming days over how to respond. 21 minutes ago

    The U.S. Is Overflowing With Natural Gas. Not Everyone Can Get It.

    U.S. gas production is at a record high, but the infrastructure needed to move the fuel around the country hasn’t kept up. The result is price spikes, uneven distribution and fears of stifled economic growth. 24411 hours ago

    Documentary on David Crosby coming soon – should be interesting.  He still does new stuff that's not bad:


  32. July 8th, 2019 at 11:14 am | Permalink Ignore this user

    VXX / Phil – Today is a good example of what I was talking about last week about using VXX as a proxy for the VIX. The VIX is up 7.7% or so and yet VXX is only up 2.8%, only about 35% of the VIX move. If the VIX were to go to 30 on a 100% move, VXX would only go up 35% or to $33 or so. Something to keep in mind while structuring plays. Right now, the VIX would need to go to 60 for VXX to even hit 45.


  33. July 8th, 2019 at 12:13 pm | Permalink Ignore this user

    VXX/StJ – That's because it's a composite of the front 3 months so it only gets 1/3 of the short-term impact.  If you are day-trading, it's no good but for an options play with leverage – I don't mind so much.

    Now /RTY making the nice move down.

    U.S. consumers see inflation edging up – NY Fed survey
    • U.S. consumers see inflation picking up a little within the next year but expectations that the average interest rate on saving accounts will rise fell to its lowest level in four years, according to the Federal Reserve Bank of New York's June 2019 Survey of Consumer Expectations.
    • Median inflation expectations increased by 0.2 percentage points at the one-year horizon and by 0.1 pp at the three-year horizon, with both reaching 2.7% in June after falling for two months straight.
    • The mean perceived probability that the average interest rating on saving accounts will be higher a year from now fell to 28.1% in June, its lowest reading since May 2015.
    • Median one-year ahead earnings growth expectations were stable at 2.5% in June, the same level as its trailing 12-month average.
    • Mean unemployment expectations — or the mean probability that the U.S. unemployment rate will be higher a year from now — declined slightly to 36.3% from 36.7% in May.
    Nestle looks at plant-based food options
    • Nestle (OTCPK:NSRGY +0.5%) CEO Mark Schneider says plant-based food alternatives is a mega-trend that the company plans to participate in.
    • "The whole notion of giving consumers a choice when it comes to plant-based alternatives is going to be a key theme going forward," CEO Mark Schneider told MarketWatch in an interview.
    • Nestle is working on plant-based burgers and other formats, even looking at bacon and sausage alternatives. The company is also watching the CBD market closely to see how regulations develop.
    • What to watch: Health advocates have noted that plant-based burgers from Beyond Meat (BYND +3.3%) and Impossible Foods <<IMPSBL>> are better options than red meat in some ways, but fall short in other ways. As Nestle and other big players jump in with their plant-based products, the focus on healthiness will be dissected even closer.

  34. July 8th, 2019 at 12:15 pm | Permalink Ignore this user

  35. July 8th, 2019 at 12:15 pm | Permalink Ignore this user

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  37. July 8th, 2019 at 12:15 pm | Permalink Ignore this user

    MU on a tear in the past week:


  38. July 8th, 2019 at 12:15 pm | Permalink Ignore this user

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  57. July 8th, 2019 at 12:19 pm | Permalink Ignore this user

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  61. July 8th, 2019 at 12:44 pm | Permalink Ignore this user

    SIG – Showing some signs of life.  Up 12% in the past two trading days.


  62. July 8th, 2019 at 12:51 pm | Permalink Ignore this user

  63. July 8th, 2019 at 12:55 pm | Permalink Ignore this user

    Phil any view on APU middle range paying 10.9%


  64. July 8th, 2019 at 1:05 pm | Permalink Ignore this user

    SIG – in spite of a near perfectly timed entry into 50 2021 15/20 spreads for $1.78, and the recent run up, getting brutalized for no apparent reason except the delta on the OTM short calls seems to be about 2x the delta on the ITM long calls. In other words you can get into the spread for less now than it cost before the share price started going up. Perhaps it’s time to double down. 


  65. July 8th, 2019 at 1:07 pm | Permalink Ignore this user

    DB locals worry it could be the European Leeman Brothers!!!! They paid to many fines and to many bonies, to brokers who did not know their ass from their elbow. On top different here most companies pay annual div. and option trading is worse than the roulette table.
    Difficult to explain to locals what I am doing they think I am crazy, so I better say nothing.

    So from that point of view bankers, I think do have a hard time here.


  66. July 8th, 2019 at 1:18 pm | Permalink Ignore this user

    yodi – Most Americans don’t understand options either. My wife, who is socially hyper-liberal, has an MBA and told me the other day she thinks options and futures trading “serves no purpose” is “unproductive”, “weird” and “unsustainable”. I told her in that case it’s just like gay sex. She hasn’t brought up the subject again. 


  67. July 8th, 2019 at 1:24 pm | Permalink Ignore this user

    Especially Megan super player who sees things even outright declined an invitation by Trump to the White house. Another stupid remark the guy made in respect to the team.
    Well at least the president of France was there to congratulate them. Nice to see this.


  68. July 8th, 2019 at 1:26 pm | Permalink Ignore this user

    dawgydaddy

    It is the bottom line what counts. The proof of the pudding is in the eating. Gay sex well I am not surprised!!!


  69. July 8th, 2019 at 1:45 pm | Permalink Ignore this user

    It's Monday, it's quiet, and CMG doing what it does best – which reminds me I had an inkling that CMG would approach the $750 level into earnings which are on July 23rd. So why not take a little poke at a 'time bomb' butterfly:

    Buy 1x July 26 $755 put at $33.37

    Sell 2x July 26 $750 put at $30.75

    Buy 1x July 26 $745 put at $28.37

    Cost for this reckless punt on CMG pinning $750 after earnings is $0.22. So risk $0.22 to win $5.00 – those odds look like fun. Just like betting on the horses. Obviously it's an all or nothing bet. And the market makers don't like it as the spread has widened to $0.50 already.


  70. July 8th, 2019 at 2:47 pm | Permalink Ignore this user

    APU/Yodi – They have some kind of buyout offer I haven't read up on from UGI, that's where the April pop came from and there have been no other offers.  APU gets 0.5 shares of UGI plus $7.63 in cash so playing them would be messy at best.  

    SIG/Dawg – The flatline at the bottom drained out the premium from your calls, that's all.  As you are $3.25 in the money, I'd say don't worry about it and yes, still great for a new trade if you can get the 2021 $15/20 spreads for $1.78 but I doubt that will hold up.

    DB/Yodi – Yes, I'm not a believer in their turnaround just yet.  Too many bad practices for too many years.  After all – they lent Trump money – what kind of idiots would do that?  Not joking – the guy went Bankrupt 5 times, totally screwing his partners and his lenders along the way and DB lends him $2Bn?  That's not a bank I'd be investing in.  

    LOL Dawg.  Not politically correct but funny…

    CMG/Winston – Not only is that a great idea but I actually filled it for 0.20.  Will be interested to see how it goes.  Of course, the chance of hitting $750 on the button is probably worse than 20:1 but I think the chance of getting in the range of $745-$755 is not that terrible (maybe 20%) so 20% chance to get the money back and then possible jackpot makes it fun.  


  71. July 8th, 2019 at 2:51 pm | Permalink Ignore this user
    Bond Angle cautious on Tesla
    • Bond Angle's Vicki Bryan checks in on Tesla (TSLA -1.3%) after taking in last week's deliveries report.
    • Bryan notes that Tesla has been pedaling "really, really hard and straight uphill" to churn out the June quarter at a cost.
    • "Multiple rounds of substantial price cuts starting in the third quarter last year plus additional offerings of options and deal discounts have failed to boost sales to last year's torrid pace. But they have shrunk margins faster and deeper than Tesla's severe cost-cutting measures can absorb," she warns.
    • Bryan thinks the disappointing level of demand doesn't bode well for Tesla's earnings and explains why the company elected to sell stock and bonds when market prices were near record lows rather than wait.
    • Bond Angle keeps an Underperform on Tesla's 5.3% Senior Notes due 2025.
    Morgan Stanley trims revenue forecast on Tesla
    • Morgan Stanley sticks with a full-year forecast for 347K vehicle deliveries by Tesla (TSLA-1.1%), even though the automaker topped expectations with its Q2 tally.
    • The MS forecast is below Tesla's guidance for 360K to 400K deliveries this year, which wasn't updated along with the Q2 release. Morgan Stanley also lowered its Q3 revenue estimate on Tesla to -3% Y/Y and Q4 forecast to -4% due to negative impacts from model mix shift and margin erosion.
    • "While we still expect near-term volatility in the stock to be driven by real-time data points around demand in the U.S. and international market for Tesla’s electric vehicles, we also expect discussions around the nature and value of the company’s technology to be an important part of the narrative going forward," writes analyst Adam Jonas.
    • The narrative shift toward the valuation of Tesla's tech over concerns on quarterly earnings and deliveries is expected to pick up in the back half of the year from analysts in the bull camp.
    • Morgan Stanley has an Equal weight rating on Tesla and price target of $230 vs. the sell-side consensus PT of $279.71.

    Regional banks lower after downgrade by Raymond James
    • Analyst William Wallace expects NIM to be below current guidance on expectations of two rate cuts in 2019 and 2019 loan growth will fall short of 10% guidance. East West Bancorp (EWBC-3.5%) downgraded to underperform from market perform.
    • Comerica (CMA -1.6%) is downgraded to market perform as two fed rate cuts in 2019 will lead to lower net interest income/net income.
    • SVB Financial (SIVB -3.6%) downgraded two notch to market perform from strong buy.
    • PacWest Bancorp (PACW -2.8%) downgraded two notch to market perform from strong buy.
    • Commerce Bancshares (CBSH -2.8%) downgraded to under perform from market perform.
    • Analyst expects fed to cut rates twice in 2019, however Signature Bank (SBNY -0.2%) is shielded better than its peers. Analyst further adds that the recent investments in fund banking segment and venture capital group will produce attractive balance sheet growth.
    • Press Release
    Fannie Mae home purchase sentiment slips from May – Fannie Mae
    • The Fannie Mae (OTCQB:FNMA) Home Purchase Sentiment Index fell 0.5 points in June to 91.5 after approaching its survey high in May.
    • An 8 percentage point increase in the net "mortgage rates will go down" component was more than offset by the index's other five components, all of which were either negative or flat in June.
    • The "good time to buy" component fell 4 pp.
    • "With fewer consumers expecting rates to jump back up –- thereby creating less urgency to buy now –- we expect housing market activity to remain stable," said Fannie Chief Economist Doug Duncan.
    • "Home prices will go up" and "confidence about not losing job (over the next 12 months)" each retreated 3 pp from  May.
    Biotechs and biopharmas under pressure ahead of Trump order on drug prices
    • Biopharma and biotech players are mostly in the red (again) ahead of an expected executive order from President Trump aimed at corralling U.S. drug prices. Specifically, the order will contain a "favored nation" clause that will be the basis for Medicare reimbursement, i.e., the reimbursement rates will match those in the country paying the lowest prices instead of an index of drug prices from around the world.
    • Pushback from manufacturers should be substantial. The fireworks will, no doubt, be good theatre.
    Fed risks mismatch between rates, fundamentals, Hatzius says
    • The bond market is expecting rate cuts of almost 50 basis points over the next two FOMC meetings, even though there's "mostly encouraging news on growth, inflation, and trade policy," Goldman Sachs Chief Economist Jan Hatzius writes in a note.
    • That implies that the Fed is looking to investors, which has "some potential advantages," but also risks bringing the federal funds rate "far away from the level justified by economic fundamentals," Hatzius warned.
    • The bond market is also pricing in another 50 bps of rate cuts in 2020; however if Goldman's economic expectations materialize, the central bank would normally be looking to "reverse any near-term cuts," he said.
    • 10-year Treasury yield little changed at 2.033%.
    • BlackRock's iShares 20+ Year Treasury Bond ETF (TLT +0.4%); ProShares UltraShort 20+ Year Treasury ETF (TBT -0.8%).
    Investor Movement Index slides in June
    • June TD Ameritrade IMX: 4.61 vs. 4.93 in May.
    • TD Ameritrade clients were net sellers for the first time in over two years during the June IMX period, reducing exposure to equities.
    U.S. consumers see inflation edging up – NY Fed survey
    • U.S. consumers see inflation picking up a little within the next year but expectations that the average interest rate on saving accounts will rise fell to its lowest level in four years, according to the Federal Reserve Bank of New York's June 2019 Survey of Consumer Expectations.
    • Median inflation expectations increased by 0.2 percentage points at the one-year horizon and by 0.1 pp at the three-year horizon, with both reaching 2.7% in June after falling for two months straight.
    • The mean perceived probability that the average interest rating on saving accounts will be higher a year from now fell to 28.1% in June, its lowest reading since May 2015.
    • Median one-year ahead earnings growth expectations were stable at 2.5% in June, the same level as its trailing 12-month average.
    • Mean unemployment expectations — or the mean probability that the U.S. unemployment rate will be higher a year from now — declined slightly to 36.3% from 36.7% in May

  72. July 8th, 2019 at 3:47 pm | Permalink Ignore this user

    A little recovery into the close but not much matters until we get the Fed minutes Weds.  

    Oil selling back off into the close, $57.50 and $1.90 for /RB is failing.

    IMAX still too cheap at $20:

    IMAX CEO still confident on sequel formula
    • IMAX (IMAX -1.8%) CEO Richard Gelfond pushes back against the idea that sequel fatigue is holding back box office sales this year.
    • Gelfond points to the strong opening run for Spider-Man: Far From Home and success of Avengers:Endgame. He thinks studios will continue to lean on the sequel formula due to structural changes with the movie industry.
    • As for him company, he notes IMAX's box office revenue is up 5% YTD, including a 25% rise in China.
    • Shares of IMAX are still up 7% YTD, despite a two-month long stumble.

    They look at total box office but the blockbuster movies are, of course, on IMAX screens and those things are packing them in.  Several times we've wanted to see something in IMAX and that was sold out and we had to go see it on a regular screen.  

    Spider Man was worth paying the IMAX fee for.  


  73. July 8th, 2019 at 4:09 pm | Permalink Ignore this user

    Look at IMAX's nice, steady revenue growth and yes, they spent a lot of money the last few years and it's supposed to start dropping to the bottom line this year and Q1 was $12.5M in profits so on track for $50M even if Q1 wasn't a low Q in the movie Biz.  The company is valued at $1.2Bn at $20 so p/e pushing below 20x and the growth is still there and likely to continue:

    Year End 31st Dec 2013 2014 2015 2016 2017 2018 TTM 2019E 2020E CAGR / Avg
    Revenue $m 287.9 290.5 373.8 377.3 380.8 374.4 369.6 397.5 412 +5.4%
    Operating Profit $m 65.1 57.9 87.8 58.6 31.4 45.2 42.2     -7.0%
    Net Profit $m 44.1 39.7 55.8 28.8 2.34 22.8 22.6 70.9 76.9 -12.3%
    EPS Reported $ 0.64 0.56 0.78 0.42 0.18 0.36 0.36     -10.9%
    EPS Normalised $ 0.66 0.65 0.82 0.49 0.38 0.62 0.60 1.14 1.27 -1.1%
    EPS Growth % +4.9 -0.8 +26.3 -40.7 -22.8 +65.5 +19.8 +82.2 +11.4  
    PE Ratio x           32.7 34.2 18.0 16.1  
    PEG x           0.40 0.42 1.57 0.99
    Profitability

    At $80M, the p/e is 15 and they are less than 50% rolled out in China.  Keep in mind Avengers was SHOT in IMAX and just passed Titanic (in 6 months) for the most box office ever so, if that catches on, that's a bonus no one was counting for for IMAX.  

    While projectors don't show [18K] other than our film ones… we employ a lot of technology around that. We scan the film into its digital form at the highest possible resolution, and we process it throughout the entire food chain at these higher resolutions. It's a technique called oversampling. What it means is that when you get to that 4K final content, because you've been processing it at a much higher resolution, you actually get a better quality image.

    IMAX has 609 screens in China but that's just 1% of all screens and it's not just our blockbusters but there are huge Chinese movies we've never heard of and if those directors start shooting in IMAX, revenues can go through the roof next decade.  

    IMAX currently has 1,500 screen world-wide and this year, like the past 5 years, they are putting in about 200 more but now 200 is not such a big percentage so the profits go to the bottom line despite the build-outs.  At some point they'll ramp up to 300 per year but they can absorb that now.

    The rest of the year looks good for them, 9 big movies in 6 months.

    • The Lion King: The IMAX Experience (Walt Disney Studios, July 2019)

    • Artemis Fowl: The IMAX Experience (Walt Disney Studios, August 2019)

    • The New Mutants: The IMAX Experience (20th Century Fox, August 2019)

    • IT Chapter Two: The IMAX Experience (New Line Cinema, September 2019)

    • Frozen 2: The IMAX Experience (Walt Disney Studios, November 2019)

    • Star Wars: Episode IX: The IMAX Experience (Walt Disney Studios, December 2019)

    Fast and Furious:  Hobbs and Shaw

    Joker 

    Gemini Man (Will Smith)

    We have IMAX already but, as a new trade, I like:

    • Sell 10 IMAX Jan $20 puts for $1.85 ($1,850)
    • Buy 20 IMAX Jan $17 calls for $4 ($8,000) 
    • Sell 20 IMAX Jan $21 calls for $1.70 ($3,400) 

    That's net $2,750 on the $8,000 trade that's $6,000 in the money to start so the upside potential at $21 is $5,250 (190%) in just 6 months – nothing to sneeze at.  The risk, of course, is owning 1,000 shares of IMAX for net $22.75, which is 10% more than it is now and the margin is $3,966 on ToS (ordinary) so not the greatest but it's only for 6 months.  


  74. July 8th, 2019 at 4:15 pm | Permalink Ignore this user

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  77. July 8th, 2019 at 5:43 pm | Permalink Ignore this user

    OGI – This has been my favorite cannabis stock since it has, in my opinion, the best CEO.  If you want to invest in cannabis (other than through PSW) this is a good vehicle.  They have executed flawlessly and are an innovator.  Bruce Linton, exiting CEO of Canopy Growth said this week that this would be the Canadian cannabis stock he would buy along with Canopy Ventures.  OGI have an investment in a yeast based cannabis developer, are the lowest cost per gram producer by far in Canada, are bringing chocolate edibles to market and now a proprietary nano-emulsified powder so you can add cannabis to any drink you want and feel the effects in 10 – 15 minutes.  They also want to partner with a beverage company and the stock is not that expensive relative to Canopy, Aurora and other players.  I share this since I think this stock will continue to do extremely well and outperform their competitors.  I have, for me , a sizable position and bought more on the dip 2 weeks ago.  Stock up 14% on this announcement at $7.50 with options strikes at $7.50 make this a good opportunity for a Dec 2019 7.50 covered call for what I think is a conservative entry (for cannabis mkt) and about 20% upside.

     https://www.benzinga.com/markets/cannabis/19/07/14042407/organigram-announces-proprietary-technology-for-cannabis-infused-edibles


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  105. July 9th, 2019 at 4:15 am | Permalink Ignore this user
    Negative Yields Creep Into Emerging Europe
    By: Gordana Filipovic, Maciej Onoszko


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    23 US governors join Calif. in opposing Trump mileage freeze
    By: ELLEN KNICKMEYER, Associated Press


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  126. July 9th, 2019 at 5:17 am | Permalink Ignore this user
    Show Them the Money
    By: THE EDITORIAL BOARD


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