Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

Click here to see some testimonials from our members!

Faltering Thursday – Failure at S&P 3,000

We did not hold it.  

The S&P finished "Will We Hold It Wednesday" at 2,984, dropping 19.62 points from Tuesday's close and, since our run was from 2,800 to 3,000, that wasn't even a weak retracement, which would have been 40 points so we're still on a very bullish path unless 2,960 fails today but, so far, the Futures are improving, though we do expect to at least see 2,860 tested at some point.

The Philly Fed came in quite strong this morning at 21.8 vs just 5 expected and 0.3 in the prior reading and we can add that to strong Empire State Manufacturing (4.3 vs 2 expected and -8.6 prior), strong Retail Sales (0.4% vs 0.2% expected and 0.4% prior), lower than expected Business Inventories (0.3% vs 0.4% expected and 0.5% prior) although we did have declining Import (-0.9%) and Export (-0.7%) Prices and Industrial Production (0% vs 0.2% expected and 0% prior) was awful and Housing Starts (1.25M) were a bit disappointing.

We will get Leading Economic Indicators at 10 am and they are expected to be flat and tomorrow we get the Michigan Consumer Sentiment reading, which was last seen at 98.2 and that's it for our data so mixed – no matter what happens with the last two.  Still the mixed economic reporting doesn't seem like the Fed is likely to cut rates.  Yesterday's Beige Book Report from the Fed showed most businesses see economic activity expanding modestly despite concerns over the Trade War:

Image result for fed beige bookThe outlook generally was positive for the coming months, with expectations of continued modest growth despite widespread concerns about the possible negative impact of trade-related uncertainty,” said the Fed’s Beige Book survey, a report of anecdotes drawn from business contacts around the country by the Central Bank’s 12 regional banks.  Businesses pointed to consumer spending as a strong point, despite flat vehicle sales.  Retail sales have been rising for four straight months, according to the Commerce Department.  

Businesses also continued to complain of worker shortages. Some construction companies in Idaho debated relaxing drug testing for applicants. Wages grew at a modest-to-moderate pace, the report said, with some employers expanding benefit packages to draw workers – something we discussed in detail in yesterday's Live Trading Webinar

Rising wages takes the Fed off the table and if traders begin to think that the Fed is not going to lower rates at their upcoming meeting – we could quickly go back to the May lows at 2,750 and I don't see how the Fed can justify even a 0.25% drop, let alone the 0.5% drop people are talking about.  If not for the Trade War, the economy would be chugging along and rate cuts aren't going to fix that.

IBM (our Stock of the Year) earnings were good for the Dow last night but are fading this morning on cloud competition but Netflix (NFLX) was a disaster and the stock is down over 10% into the open (something we also discussed extensively in our Live Trading Webinar) but it has nothing to do with the economy – just to do with how ridiculously valued the company was (and still is) going into the report. 

There was literally nothing NFLX could do to justify trading at over 100x earnings and that does not bode well for Amazon (AMZN) who are failing right at the $1Tn line at $2,000 for a company earning "just" $12Bn this year so 83x earnings means we need to see a path to $50Bn for AMZN (July 25th earnings) or it's time to bring that stock lower as well.   

Asia and Europe are also pulling back on earnings and Japan's Nikkei 225 Index is testing 21,000 after topping out at 21,750 at the beginning of the month so down 3.5% while the S&P, so far, has fallen from 3,020 to 2,980 (1.3%).  If you remember, Japan imploding on their debt is my #1 Global Economic concern but it looks like the UK might beat them to it as their own Office for Budget Responsibility is warning that a no-deal Brexit (which seems likely now) will plunge them into Recession, costing the UK 2.1% of its GDP.

Also, despite the BS spun by the Trump Administration, NO actual meetings with China have taken place since the G20 summit and none are currently scheduled – that's worrying people too.  Keep in mind the market rallied 2,500 Dow points (10%) since early June on hopes of a Trade Deal and hopes of a Fed Cut and it's very possible, at the moment, that neither one of those things is actually going to happen. 

 


Do you know someone who would benefit from this information? We can send your friend a strictly confidential, one-time email telling them about this information. Your privacy and your friend's privacy is your business... no spam! Click here and tell a friend!



Comments (reverse order)


    You must be logged in to make a comment.
    You can sign up for a membership or log in

    Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

    Click here to see some testimonials from our members!


  1. Good Morning!


  2. Stocks dropping on beats. Isn’t this is kind of where we were before the December Dip?


  3. I guess we'll be able to re-use these S&P 3000 hats!


  4. And congratulations America, you are beating socialism with fascism!

    https://gizmodo.com/top-online-dictionary-searches-include-fascism-and-raci-1836478893

    Donald Trump held another neo-fascist rally yesterday in North Carolina, where the crowd chanted things like “treason,” “traitor,” and “send her back,” while the president talked about Democratic members of Congress, including Rep. Ilhan Omar of Minnesota. Online dictionary searches in the U.S. from last night show just how bad things have gotten.

    Merriam-Webster reports that the most common searches last night included the terms: racism, socialism, fascism, concentration camp, xenophobia, and bigot.


  5. Looks like people are going into cash:

    https://www.axios.com/stock-market-investors-worried-cf82b942-3a37-4783-ae17-5ea44c870855.html

    Investors pulled more than $25 billion out of U.S. equity funds in the week ending July 2, right as the stocks were hitting all-time highs, data shows.


  6. Hemp, marijuana – making money:

    https://www.bloomberg.com/news/articles/2019-07-18/booming-demand-for-cbd-is-making-hemp-the-cannabis-cash-crop

    CBD is being pitched as an all-natural way to alleviate ailments including pain, inflammation, anxiety, and insomnia. Despite a paucity of science to back up such claims, CBD has become a coveted ingredient in a host of consumer products, from skin lotions to sparkling water to tinctures to dog biscuits. The surge in demand is fueling a global Green Rush, even in countries where a legal market for cannabis products was unthinkable just a few years ago. 


  7. Thoughts on automation:

    https://thebasispoint.com/10-things-you-need-to-know-about-automation-and-the-future-of-work/

    There’s still a lot of hope out there for the young and enterprising. McKinsey expects that 9% of the jobs that exist in 2030 will be in occupations we can’t even imagine right now. Imagine explaining to someone in 2009 that there would be people whose full-time jobs would be designing and posting ads on Instagram in 2019. Instagram didn’t even exist in 2009!

    So while a lot of these facts paint a scary picture of the future of work, there’s a lot to be hopeful for.


  8. options question so it looks like the Jan 2021 and the June 2021 AAPL 200/240 spreads are both around $15 is there a play to take advantage of that?


  9. Morning All

    Webinar replay is finally up. (YouTube had some weird issue with uploading this morning, but all seems well now.)

    https://youtu.be/-DJ0WMB9qcU


  10. second options question – so I had -2 NFLX Dec 380 calls that went from $26 to $10.  I want to roll them down to 340 or 350 since I see more downside, but is it better to cover here and wait for a bounce to sell the 340s (a weak retrace?) or sell half and see what happens?


  11. Looks like there maybe more to the Algo/Bots in the future:

    https://www.cnet.com/news/elon-musk-neuralink-works-monkeys-human-test-brain-computer-interface-in-2020/

    I think the 2020 date is ambitious and what would the FDA think of this?


  12. Good morning! 

    NFLX finding dip buyers at $320 and that's down from $380 (18.75%) but I'd call $300-400 the range as NFLX consolidated at $200 back in 2017, topped out at $400 ($423) in mid 2018 and then down to $230 and back to $370 still centers around $300 so it's messy but I think realistic so the run from $300 to $400 gets $20 bounce lines and $320 is the weak bounce line, $340 strong, $360 strong retrace and $380 weak retrace so, generally, they've been failing to get over the weak retrace all year and now they've dropped to the other end of the range but $320 should hold and $340 should be tough to get back over now without better news. 

    Dropping/Dawg – That's always a bad sign.   As noted above, I think if the Fed doesn't cut, we'll drop back very fast.

    Big Chart  – SPX gave up that 15% line way too easily, we'll see how the others handle their tests.  Watch for failures on those fast-rising 20-dmas and, of course, if we  fail the Russell's 50 dma at 1,537 we're DOOMED!  13,100 on NYSE is also a serious failure line (2.5% line).

    3,000 hats/StJ – That's what they said about Nasdaq 5,000 hats but it took almost 20 years…

    And that Trump rally was very scary.

    CASH!!!/StJ – Wise move. 

    Hemp/StJ – Our Hemp Boca project is really jumping too.

    AAPL/Coulter – Well I like to have more time for the stock to rise (and to sell short calls) other things being equal.  As to taking advantage, not really a good way to play it that I can think of. 

    NFLX/Coulter – Yes, I'd wait for a bounce but keep in mind that, at $11, those are very likely to expire worthless so I wouldn't be so quick to buy them back unless you get a good price.   Let's say you sell the Oct $350s for $14 – it's a little more money and a little less time but certainly riskier as they were $45 yesterday.   If you really feel like doing something, then half would be the way to go but sometimes it's nice to just take the win and be happy.


  13. You know what's hysterical, play the Trump and Hitler videos at the same time.  Trump starts speaking right away so wait for Hitler to start talking and then start Trump.


  14. Did I say hysterical – I meant terrifying! 


  15. ILMN fell hard to a very stable floor at 300 with earnings. Rated buy by UBS. They reported short term problems not worrisome for long term growth. How about a nice juicy bull call spread? Thinking of using the money after closing all positions on TESLA before earnings (was selling premium both ways). God knows where TESLA will move.


  16. cl for a bounce at 55 maybe


  17. Phil – IBM.  Nice call.


  18. Fannie Mae issued a new forecast that predicts the average U.S. rate for a 30-year fixed mortgage will be 3.7% in the second half of 2019, down from the 3.9% the mortgage financier called for a month ago. That compares to a 4.4% average rate in the first quarter and 4% in the second quarter.

    Cheaper mortgage rates will cause a heat-up in home prices, according to the forecast. Last month, Fannie Mae said it expected home prices to grow 4.6% in 2019. In the new forecast, it called for a 5.4% increase.


  19. Meanwhile the stocks of Fannie and Freddie are down  today.


  20. Rates / Albo – I guess it doesn't matter what the Fed is doing, rates are coming down.


  21. 3000 / Phil – You'll see, they'll be back with the China talks, Trump will mention how much of a bad guy Powell is and we'll be at 3000 again. Then we'll ban bad news and we'll be on our way to 10,000 :-)


  22. ILMN/JMD – Not sure how it relates to TSLA but ILMN seems to be on solid footing though overvalued at $300 ($44Bn), which is more than 10x PROJECTED sales and 50x earnings.  I never understand people fascination with these kinds of stocks when I can take IBM and their PE of about 12 and set up a simple options spread like selling 5 2021 $120 puts for $6.50 ($3,250) and buying 10 of the 2021 $130 ($22)/145 ($14) bull call spreads for $8 ($8,000) and that puts you in a $15,000 spread that's 100% in the money for $4,750 so you have 215% upside potential just betting IBM won't be lower in 18 months.  To me, that's SO MUCH less risky than any kind of bet I'd make in ILMN executing at 50x earnings that I couldn't justify taking $1 from IBM and putting it into ILMN.

    I suppose there's some kind of gambler's satisfaction in picking "winners" vs the very dull job of taking conservative positions on blue chip stocks but when I can make 100% annual returns on cash (and $6,000 in margin) I think that's exciting enough for me.

    /CL/Tommy – $55 better be bouncy.  We're at $62 on Brent so we'll see if that holds but they are on the way to test $60 more likely so I'd key off that bounce, not so much /CL but, of course it's a good long play with tight stops below $55 for a small (0.50) bounce.  

    IBM/Albo – Was strange how they opened so low on what I thought were very nice earnings. 

    3,000/StJ – I guess we're turning into a command economy. 



  23. Phil, I was going to transfer $ from my TSLA slot into a ILMN slot. Do you agree to stay away from TSLA next week?


  24. House Votes to Raise Federal Minimum Wage to $15


  25. Puerto Ricans in Protests Say They’ve Had Enough


  26. House Dems warn Omar in ‘imminent danger’ after Trump rally chants


  27. Good article about McConnell Phil. Don't these guy get irony anymore?

    "Look, I've got nothing to apologize on this front. We've got to tone the rhetoric down across the country," McConnell said. "Using, throwing around words like 'racism,' you know, kind of routinely applying it to almost everything. Let's talk about the issues. And the issues are … where they want to take America. They want to take America into a socialist country."

    Tone down the rhetoric and then bring up socialism… And by the way, what they call socialism here, they call center right in Europe! No one there seems offended by universal healthcare.


  28. TSLA/JMD – Too random I think.

    Racism/StJ – Actually, the way the Conservatives us "Socialism" it's every bit as stigmatizing as "Racism" – when they call people Socialists, they don't mean it in a "fine people on both sides" kind of way.  

    This is good:

     


  29. CHK – wow this one seems to have no floor, heading to zero?


  30. Added a few short BBBY Feb 8 puts for $.94.  Now an overweight position.


  31. albo – good luck, my BBBY has the same problem with gravity as my CHK and my /NG and my…


  32. MTM – I certainly have a few of them.  Good buy  Good buy.  Good buy…….goodbye.


  33. Do Phil / BBBY – I know you love this one —-  I don't know if they have more one-off charge off in them, but with retail looking a bit better you would think this would catch some air, in any case may indicate a reasonable holiday season..   Do you see a floor?

     I actually thought 10 might be a floor and maybe it is???  

    I don't see any issue with the dividend – do you?


  34. Quick, get the S&P 3000 hats out of the closet!


  35. CHK/MrM – It's pretty much just following /NG down.  They are certainly not going to make a profit at these prices and they lost $21M last Q when /NG was about $2.60 so $2.40 since then is going to be ugly.  

    BBBY/Albo – Under $10 is amazing.  

    Big turnaround on the indexes – even more amazing.

    Mortgage balances hit $9.5T in Q1 2019, Experian says

    • Outstanding mortgage balances increased for the seventh straight quarter reaching $9.5T, a new high and well above the $8.5T balance during the financial crisis in 2008, according to Experian data from Q1 2019.
    • Delinquency rates, though, have been falling, with payments made 30-59 days late decreasing by 61% since 2009. For Q1 2019, though, the percentage of payments made 30-59 days late crept up to 1.07% from 1.03% in Q1 2018.
    • Average U.S. mortgage debt per borrower was $202,284, up from $198,377 in Q1 2018 and $184,323 in 2015.
    • The average sales price for new homes rose 46% over the past 10 years, while median household income has only risen 3% during that period, according to U.S. Census Bureau and Federal Reserve Economic data

    That's a $137Bn company popping 10% on a 1% increase in guidance:

    On Thursday, Philip Morris International (PM) reported its second-quarter earnings results. For the quarter, the company reported adjusted EPS of $1.46 on revenue of $7.70 billion. It outperformed both analysts’ EPS estimate of $1.32 and their revenue estimate of $7.38 billion. Following its second-quarter performance, PM’s management raised its adjusted EPS guidance for 2019 to $5.14 from its earlier guidance of $5.09.

    BBBY/Batman – At this point, you have to have faith but they are under attack from all sides.  $10 should have held and hasn't but you can't go by a single day's trading though the trend is not your friend either.  They just has earnings and said things were fine, the charges that hit earnings were all non-cash but people are unwilling to let things play out.  This is going to be a losing year for them (-$137M) but next two years should make $200M, which is not a stretch at all and $10/share is $1.2Bn so not at all overpriced but people can extrapolate the -$137M to -$270M and -$500M by simply putting a worst-case spin on it and, if those people can convince their creditors that that's the case – the company can actually be in trouble simply out of the fear that's surrounding them.

    Year End 02nd Mar 2014 2015 2016 2017 2018 2019 TTM 2020E 2021E CAGR / Avg
    Revenue $m 11,504 11,881 12,104 12,216 12,349 12,029 11,848 11,392 11,168 +0.9%
    Operating Profit $m 1,615 1,554 1,415 1,135 761.3 -87.1 -575.2      
    Net Profit $m 1,022 957.5 841.5 685.1 424.9 -137.2 -551.9 233.7 224.3  
    EPS Reported $ 4.79 5.07 5.10 4.58 3.12 -1.02 -4.29      
    EPS Normalised $ 4.79 5.07 5.10 4.58 3.12 1.45 0.28 1.91 2.07 -21.3%
    EPS Growth % +5.1 +5.8 +0.6 -10.3 -31.9 -53.6 -90.2 +32.0 +8.38  
    PE Ratio x           6.99 35.5 5.30 4.89  
    PEG x           0.22 1.11 0.63 0.62
    Profitability

    KHC also obliterated.  You have to decide whether to follow the crowd and panic out or whether it's an amazing opportunity but it's pretty lonely on the opportunity side!  


  36. Phil, good comments on BBBY and KHC.  It does seem lonely on the opportunity side of the fence.  Didn't Warren Buffet say to buy when people are wanting to sell??   


  37. Phil / BBBY – Thanks for the feedback. –  I may have missed it but wanted your view on the dividend.   they are at a 6.3% yield with quick ration at at .5 and current ratio of 1.5…  Do you see any risk on them lowering or cutting / suspending the dividend?


  38. Short-Term Portfolio Review (STP):  $737,988 (up 638%) is down $36,367 from our 6/12 review and that's to be expected as the STP contains our hedges that protect our LTP – so it usually loses money during a rally.  We made bigger changes and got very aggressively bearish in our 6/27 Report, ahead of the G20, in case that went badly and, although Trump claimed he is working things out with China, that's not actually happening so far so we haven't seen much need to change things – though we did sell $26,700 worth of short puts to offset some of the damage of a rally.  

    As a rule of thumb, we are happy to spend 25-33% of our LTP gains on more hedges to lock in those gains so the more we make, the more we hedge.  We've been very lucky in this portfolio cycle to take great advantage of the dips and even luckier that the LTP has recovered after each dip without needing the money the STP made on the hedges.  That's driven the combined portfolios past the $2.2M mark from the original $600,000 so up $1.6M (266%).

    • TLT – The Fed is fighting us on this one but I like the potential here to hit $20,000 on a pullback to $125.  $7,650 upside potential

    • Short Puts – $58,491 of potential gains and the only bad thing that can happen here is we're forced to go long on these fine stocks at low prices.  Since the LTP is swimming in cash – that doesn't bother us at all and it's a great offset to our bearish positions.  So far, we're up $19,561 but with 4 brand new positions.
    • TNA – We got more aggressive and TNA is a 3x ultra-long on the Russell so just a 10% drop on the RUT could knock TNA down about $20 to $40 and that would pay $100,000 vs the current net $40,230.  A 20% drop in the RUT would take TNA down 60% to $24.50 so call it $25 and we're capped at $60,000 on 20 but get $80,000 on the other 20 so call it $140,000 and that's +$100,000 in potential protection.  

    • SQQQ – Also a 3x but Ultra-Short on the Nas and a 20% drop would be a 60% pop to $51.50 and only 50 are covered at $48 for $90,000 while the other 150 would be $21.50 ($322,500) so that's $412,500 and currently the value is $179,125 so $233,375 in potential protection.  We don't really want to be naked 150 and we'll sell more covers when and if we get a decent pop.  Selling 150 covers for $4 would recover $60,000 of our spread cost with another year to sell.

    • CAT – The CAT always comes back and this is a sensible hedge against our hedges as it should do well if there's a China Trade deal (which would trash our hedges).  Net $3,850 on the $20,000 spread has $16,150 (419%) of upside potential so I certainly like this as a new trade though we started out at net $0.

    • DXD – DXD is only a 2x ETF so a 20% drop in the Dow will only pop DXD 40% to $35.70 but our target is only $30 on 1/2 so that's fine.  It's not really $30 as we'd roll the short calls but let's call it that and $50,000 is the cap on 1/2 and $100,000 is the potential on the other half at $35 so $150,000 less the current $40,250 is $119,750 upside potential.  

    • MJ – Took an ugly turn and we can roll the 2021 $25 calls at $8 to the 2021 $20 calls at $11 for net $3 so we may as well for $9,000.

    • SDS – Another 2x ETF so 20% down on SPX would be 40% up to $42 and that's well past our $37 target so net $30,000 on 50 and the other 50 would score $55,000 for $85,000 and currently net $3,900 so this is a relative bargain and the July calls will go worthless and we'll leave them for now but be very aware that the short calls are 2020 and the long calls are Sept, so we'll have to deal with that next month – but that's how we got such a great deal on this spread with $81,100 of upside potential.   Actually, since SDS is so low now and since we're swimming in cash,  let's buy 100 of the 2021 $30 ($4.40)/$40 ($2.65) bull call spreads at net $1.75 ($17,500).  See, it's like playing leap-frog, now we've jumped over the 2020 short calls with a $100,000 covering spread for $17,500.  That's another $82,500 of upside potential.

    It should be noted that because of the time (2021) and the fully covered spread that, in a short-term correction, we would not realize anything like $82,500 in gains from the new spread and the same goes for the other spreads but, if the S&P falls and then corrects and we never realize the gains – then the LTP would recover and we wouldn't need the money anyway

    So these very long hedges work to protect you from multi-year downturns while the short-term hedges are where we expect to extract immediate cash.  That's why we tend to have a mix of types.  We also take into account that the LTP has plenty of cash and is miles ahead and has its own short calls so we can afford to take these nicely-leveraged 2021 spreads as mild protection, rather than having to be more aggressive in the short-term (with the meter running on our premium).  

    • SOYB – We like to take speculative pot-shots in the STP once in a while and this was one of them.  We caught a nice bottom on our entry but, so far, stalling at the $16 line so I'm close to pulling the plug with a small profit.

    • UGA – Timing is everything.  We were there a week ago and now back near even so we just have to hope for a run into Friday's close.  

    So that's $616,725 worth of downside protection against a 20% drop in the market which is about 1/3 the total value of the LTP.  As noted above, we certainly won't get that all unless there's a catastrophe but it's nice to know it's there if there is one.  What's key is to watch the relationship between the STP and LTP and make sure, in actual market conditions, that they are doing their jobs and that the net balance of the two does what we expect it to do.  At the moment, that's keep us from losing too much on the way down while still making a little on the way up. 

    The other bets in the portfolio are good for about $126,291 (I counted MJ for $44,000 at $40) and pretty much pay off if the market doesn't go lower so that's our counter-balance towards some of what we'll lose if the hedges end up not being required.  

    It's always about balance…


  39. Buffett/Robert – "Be greedy when others are fearful" is the quote.  I have very much the same mentality as Buffett but that comes with a kind of patience most traders don't have.  To me (and Buffett), I don't really care of BBBY or CHK or KHC keeps going down after I make an entry because I put my foot down where I think the value is and, if other people don't believe me – that's their problem, not mine.  

    In the LTP:

    • We started BBBY on 1/8/18 with 30 2020 $17.50/25 bull call spreads and 20 short 2020 $17.50 puts.  We moved to 30 2020 $15/22.50 spreads in Sept and added 30 2021 $12.50 calls as well which we cashed out in Feb when we got a nice run.  We were net even overall in Feb and just had the short puts we have now and, in June, on the next big dip we added 50 June 2021 $10/17.50  bull call spreads and now we're down $11,300 (15%) on the $75,000 spread and people are freaking out but it's no different than when we bottomed out in Dec – right before the stock doubled.  

    • CHK was also started on 1/8/18 with 50 of the 2020 $3/5 bull call spreads with short $4 puts.  We got out of the short puts in April and the spread in Feb with a small profit and now we have just the 50 2021 $2 calls that are down $3,700 but it's 18 months to go so I'd rather see earnings before acting.

     

    • KHC – Started out on 3/22/18 with just 10 short 2020 $57.50 puts.  We lost about $7,000 on those a and we got into 15 short 2021 $50 puts with 15 2021 $45/60 bull call spreads in November and those lost about $19,000 on that Feb crash and now we have 50 2021 $30 calls and 20 short 2021 $40 puts which are down $17,000 so net down $44,000 overall on the position, which is a whole allocation block for the LTP but, at $40, we'd clear $50,000 and I don't think that's an unreasonable target for 18 months and we'll see how earnings play out.

    If people didn't ask me about them all the time, I wouldn't really pay attention other than when they had earnings to see if my premise is holding up.  What other investors think something is worth doesn't interest me all that much because I'm constantly shown how wrong those people can be. 

    Of course, sometimes, like HMNY it turns out management doesn't give you the full story and we take a big hit that never recovers but for each of those we have stocks people gave up on that do come back like ALK, CELG, CLF, CMG, CZR, DIS (remember when ESPN was dooming the company?), F, GIS, GOLD, HBI, IMAX, MU, RH, SKX, TGT, WHR, WPM… – that we load up the truck on when they are down and the do recover as we expect. 

    The key is to have more winners than losers and try not to have too many trades that suck up your whole allocation block like KHC but KHC is one we think is stupidly undervalued and we'll be in it for many years and, as long as they don't go BK, we could sell short calls like 20 Oct $30 calls for $2.50 which is $1.50 in premium on a 40% cover so $3,000 in premium for 92 days out of 550 so 5 sales like that gets us $15,000 of our loss back – only we think $31 is way too low to cover so we'll wait for a better price but we COULD sell 20 of those short calls ($5,000) and 30 of the 2021 $30 calls for $4.50 ($13,500) and roll our 50 2021 $30 calls down to the $22.50 calls at $9.50 ($47,500) so for $29,000 out of pocket we'd be a lot more comfortable selling $25,000 worth of short calls (net $4,000) while we wait to see if our spread is worth $37,500 at just $30 in 18 months.  If you are comfortable with your fallback plan – there's no hurry to cover.  


  40. Phil / BBBY – I'm with you on the value plays and have lived through  LL and understood that one…. played it from 30 to 10 and back lots of pain….. made money on it over 3 years.   I'm with you on MU,DIS,IMAX,ALK,T , IBM, QCOM,MSFT – these are companies that were misplaced and came back.  I also believe that because I value something at a price and it makes sense does not mean that I did not miss something.

    On BBBY I don't need to be convinced on it and I'm not challenging your position.   I've looked at it and agree it is mis-priced, if they execute next year .  However I asked a question regarding the dividend. That's it.  I know they just started the dividend in 2017 – This is an area that I am struggling with.  I'd like your view on the dividend – nothing else, I want to make sure I'm not missing something on this.  This is a risk I've identified that I'm struggling with quantifying.     Thanks 


  41.  Well, we missed on a non-cash write-off  and their cash flow seems OK so I don’t see is it as an urgent need to cut the dividend.   However, it is accidentally to high now  and their creditors may want to see it at this point. So I don’t know if it is a sure thing to be maintained where it is.   


  42. Phil / bbby.   Dividend.  Thanks.   I would think the ceo is done with kitchen sink, but this is an interim ceo so new ceo May take another whack.  I’ll take a look at the bonds tomorrow.  I’ve only sold a 1/3 allotment of puts an was contplating more puts or a bcs.   





  43. Why Puerto Rico is in crisis