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Tuesday: Testing S&P 3,000 (again)

Image result for mr 3,0005%.

That's all we're up from when the S&P 500 hit 2,850 back in Jan of 2018.  That was 548 days ago and we're struggling to go up a full 150 points so it's very important to keep this "rally" in perspective and not use it as an excuse to overpay for stocks, just because we're in "record high" territory.  

Just this morning we got great earnings reports from Whirlpool (WHR), who we have in our Long-Term Portfolio along with Lockheed-Martin (LMT) and United Technologies (UTX), both of which are still excellent value plays.  There are plenty of good values out there – especially in the Retail and REIT spaces so, if this rally is real and if we're going to leave 3,000 in the dust – I'd rather play the value stocks to catch up than the momentum stocks to keep going.

We reviewed our portfolios last week and we pretty much decided to let everything run but we do have a ton of hedges – just in case they don't.  We could make more money being more aggressively long but I'd rather be able to sleep at night, thank you very much.  It's a big week with 144 of the S&P 500 companies reporting and 10 of 30 Dow components report with KO, BA, CAT, MCD and V still on deck.  Also, tomorrow is Mueller time though Trump's New Attorney General, Barr, has already put a muzzle on Mueller, directing him not to discuss anything that hasn't already been revealed in the report – not even the redacted items.  

Image result for mueller testimony cartoonThe Justice Department is “taking the position that anything outside the written pages of the report are things about which presidential privilege hasn’t been waived,” the former U.S. official said.  That, in and of itself, is obstruction of justice but only the Attorney General can bring those charges – and he's the one doing the obstructing!  Trump invoked the broad privilege claim just minutes before the committee voted to hold Barr in contempt of Congress   

We can certainly expect chaos in Congress into the weekend but they do seem to have agreed to a spending bill that will allow the Government to go $25Tn into debt to avoid a shutdown so Yay!, I guess

Despite the "good"earnings reports we've seen so far, the IMF has lowered it's forecast for Global Economic Growth to 3.2% for the year, from 3.3% in April, which was down from 3.5% in January.  That is not an ideal trend… 

“Risks to the forecast are mainly to the downside,” the IMF said. “They include further trade and technology tensions that dent sentiment and slow investment; a protracted increase in risk aversion that exposes the financial vulnerabilities continuing to accumulate after years of low interest rates.”

“Mounting disinflationary pressures that increase debt service difficulties, constrain monetary policy space to counter downturns, and make adverse shocks more persistent than normal,” the fund added.

Still a lot of reasons to be cautious – be careful out there!


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  1. Good Morning!

  2. Thanks, Mike.

  3. I think that these S&P 3000 hats are going to get a lot of use!

  4. Barr / Phil – Their concept of executive privilege is so wide that basically they are saying that Congress cannot investigate the president. Therefore, impeachment is not possible I guess… And if Trump were impeached, who is going to go to the White House to remove him. Barr would stop that as well anyway. Do we send the Capitol Police. Worse than a banana republic now… Sigh!

  5. We don't want socialism (translation for universal healthcare)

  6. Good morning! 

    BoJo (as I am now calling him) is officially UK Prime Minister now.  He beat the other guy 2:1 so all that BS about a close race was utter nonsense.  He's a hard-line Brexit guy and has a mandate so there's another thing that can slip out of control pretty easily.  He says they are out 10/31 – deal or no deal.

    FHFA housing price softer than hoped in May

    Amazon's Earnings: Time To Push Through Record Highs 

    Lockheed +3% after increasing 2019 guidance

    • Lockheed Martin (NYSE:LMT): Q2 GAAP EPS of $5.00 beats by $0.23.
    • Revenue of $14.43B (+7.7% Y/Y) beats by $260M.
    • Shares +0.7% PM.
    • Press Release
    • Net earnings of $1.4B, or $5.00 per share, compared to $1.2B, or $4.05 per diluted share, in the same quarter a year ago.
    • Sales by segment: Aeronautics +4%; Missiles and Fire Control +16%; Rotary and Missions Systems +6%; Space +11%.
    • Quarterly cash deployment: Capex of $249M; Repurchased 600K shares; Paid cash dividends of $622M; Record backlog of $137B.
    • Raised outlook for 2019: Diluted earnings per share of $20.85-$21.15 ($20.05-$20.35), on net sales of $58.25B-$59.75B ($56.75B-$58.25B).
    • LMT +2.9% premarket
    • Q2 results

    Harley-Davidson -2% after shipments fall short

    • Harley-Davidson (NYSE:HOG): Q2 Non-GAAP EPS of $1.46 beats by $0.07; GAAP EPS of $1.23 misses by $0.02.
    • Revenue of $1.43B (-6.5% Y/Y) misses by $10M.
    • Shares +4.14% PM.
    • Press Release
    • Harley-Davidson (NYSE:HOG) reports shipments fell 5.3% Y/Y in Q2 to 68,757 vs. 71.0K consensus the company's guidance range of 65.5K to 70.5K . Shipments in the U.S. were in line with expectations at 41K (-8.0% Y/Y), but international shipment trailed consensus at 27K (-8.9%).
    • Harley's gross margin rate during the quarter was 31.7% vs. 32.8% consensus and 34.9% a year ago. Operating margin was 12.6% vs. 12.8% consensus and 16.0% a year ago.
    • Looking ahead, Harley anticipates full-year shipments of 212K to 217K motorcycles vs. prior guidance for 217K to 222K. A slow approval process from Thailand and softer than expected European retail sales are called out as drags.
    • Shares of HOG are down 1.55% premarket to $33.75.
    • Previously: Harley-Davidson EPS beats by $0.07, misses on revenue (July 23)

    Realogy +12% on Amazon partnership

    • Amazon (NASDAQ:AMZN) and real estate brokerage company Realogy (NYSE:RLGY+12% team for the TurnKey program, which takes users through an Amazon portal to be connected to a Realogy agent.
    • Users who then buy a house will receive up to $5,000 in products and Amazon Home Services offerings, which includes smart home products and installation.
    • TurnKey will initially launch in 15 metro markets including Seattle, San Francisco, and Chicago with plans to expand in the future.
    • Realogy's brands include Coldwell Banker, Century 21, Sotheby's International Realty, and Better Homes and Gardens Real Estate.
    • Competitor Redfin (NASDAQ:RDFNdrops 1% pre-market and Zillow (NASDAQ:Zdips 0.5%.

    United Tech +2.5% after raising outlook for 2019

    • United Technologies (NYSE:UTX): Q2 Non-GAAP EPS of $2.20 beats by $0.15; GAAP EPS of $2.20 beats by $0.33.
    • Revenue of $19.63B (+17.5% Y/Y) beats by $50M.
    • Press Release
    • Adjusted EPS of $2.20, up 12% versus prior year.
    • Sales by segment: Otis flat; Carrier -1%; Pratt & Whitney +9%; Collins Aerospace Systems +66%.
    • "We continued to see outperformance at Collins Aerospace this quarter as we made significant progress on the integration of Rockwell Collins, which more than offset softness in Carrier's end markets," said CEO Gregory Hayes. "Looking ahead, we remain on track to establish Otis and Carrier as independent companies in the first half of 2020. We are also excited about the transformational merger with Raytheon that we announced in June."
    • Raised outlook for 2019: Adjusted EPS of $7.90-$8.05 (from $7.80-$8.00), on organic sales growth of 4%-5% (up from 3%-5%). Sales are still expected to be $75.5B-$77B.
    • UTX +2.5% premarket
    • Q2 results

    Travelers Q2 EPS reflects elevated non-catastrophe weather losses

    • The Travelers Companies (NYSE:TRV): Q2 Non-GAAP EPS of $2.02 misses by $0.28; GAAP EPS of $2.10 misses by $0.21.
    • Earned premium of $6.98B (+4.2% Y/Y) misses by $50M.
    • Press Release
    • Travelers (NYSE:TRVQ2 core EPS of $2.02 trails the consensus estimate of $2.30 and rose from $1.81 in the year-ago quarter.
    • TRV falls 1.1% in premarket trading.
    • Core income of $537M increased 9% Y/Y primarily due to lower catastrophe losses and higher net investment income, partially offset by elevated non-catastrophe weather-related losses and lower net favorable prior year reserve development.
    • Consolidated combined ratio of 98.4%; underlying combined ratio of 94.9%, an increase from 93.6% in Q2 2108  on higher non-catastrophe weather-related losses.
    • Net written premiums of $7.45B, up 4%, reflecting growth in all segments.
    • Core return on equity of 9.2% vs. 8.7% in the year-ago quarter.
    • Adjusted book value per share of $90.05 at June 30, 2019, up from $87.27 at Dec. 31, 2018.
    • Conference call at 9:00 AM ET.
    • Previously: The Travelers Companies EPS misses by $0.28, misses on earned premium(July 23)

    JetBlue edges higher after earnings

    • JetBlue Airways (NASDAQ:JBLU): Q2 Non-GAAP EPS of $0.60 beats by $0.03; GAAP EPS of $0.59 beats by $0.02.
    • Revenue of $2.11B (+9.3% Y/Y) beats by $10M.
    • Shares +0.26% PM.
    • Press Release
    • JetBlue (NASDAQ:JBLU) reports revenue per available seat mile rose 3.1% in Q2 and cost per available seat mile was up 1.8%.
    • "Airbus has recently communicated additional A321neo delays that will reduce our 2020 growth plans and naturally add pressure to our CASM ex-fuel," warns the airline.
    • Looking ahead, JetBlue sees Q3 revenue per available seat mile growth of 0.5% to 3.5% and full-year capacity growth of 5.5% to 6.5% vs. 4.5% to 6.5% prior view. JetBlue also continues to expect that FY20 EPS will be between $2.50 and $3.00. "As we look to the second half of 2019, we expect a return to margin expansion and EPS growth," notes JetBlue CEO Robin Hayes.
    • JBLU +0.26% premarket to $19.01.
    • Previously: JetBlue Airways EPS beats by $0.03, beats on revenue (July 23)

    Organic sales strong at Coca-Cola

    • Coca-Cola (NYSE:KO): Q2 Non-GAAP EPS of $0.63 beats by $0.02; GAAP EPS of $0.61 misses by $0.01.
    • Revenue of $10B (+31.6% Y/Y) beats by $140M.
    • Shares +0.1% PM.
    • Press Release
    • Coca-Cola (NYSE:KO) reports organic revenue was up 6% in Q2 to top the expectation for a rise of 4%. Unit case volume was up 3% and price/mix contributed two points of growth.
    • Comparable operating margin came in at 30.3% vs. 30.6% a year ago as strong underlying operating margin expansion was offset by an approximate 185 basis point negative impact from currency headwinds and net acquisitions.
    • Management says Coca-Cola continued to gain value share in total nonalcoholic ready-to-drink beverages during the quarter.
    • Looking ahead, Coca-Cola reaffirms full-year guidance for organic revenue of +5% vs +4% prior view and EPS growth of -1% to +1% ($2.08 to $2.10 vs. $2.10 consensus). Capital expenditures of ~$2.4B are anticipated.
    • Shares of Coca-Cola are up 0.44% premarket to $51.55.
    • Previously: Coca-Cola EPS beats by $0.02, beats on revenue (July 23)

    Mission to protect vital shipping in Gulf

    • Britain has called on allies to lead a new maritime alliance to protect commercial ships sailing through the Strait of Hormuz after Iran's seizure of a British-flagged tanker in the waterway last week.
    • One-fifth of all global crude exports passes through the narrow strait between Iran and Oman.
    • U.K. foreign secretary Jeremy Hunt said he had consulted with foreign ministers of Oman, the United States, France, Germany, Italy, Finland, Spain and Denmark.

    Details of the debt ceiling deal

    • A bipartisan deal – crafted by Nancy Pelosi and Steven Mnuchin – has been reached to suspend the U.S. debt ceiling until the middle of 2021, meaning the next big budgetary standoff would occur after next year’s presidential election.
    • It also eliminates the risk that the government could miss payments as early as September, which would have severe economic ramifications.
    • The deal will likely push the annual budget deficit for the U.S. above $1T next year, while Congress agrees on the details of the annual budget in separate appropriations bills to avert the possibility of a U.S. government shutdown.
    • Lawmakers also decided that no "poison pills" could be attached to that legislation, such as funding for a border wall with Mexico, or a demand for President Trump's tax returns.

    USDA rule change would end food stamps for millions

    • Currently, 43 U.S. states allow residents to automatically become eligible for food stamps through the Supplemental Nutrition Assistance Program, known as SNAP, if they receive benefits from another federal program known as Temporary Assistance for Needy Families, or TANF.
    • However, the U.S. Department of Agriculture today will propose a rule today requiring people who receive TANF benefits to pass a review of their income and assets to determine whether they are eligible for free food from SNAP.
    • A final regulation will be issued after a 60-day public comment period. If enacted, the rule would save the federal government about $2.5B a year by removing 3.1M people from SNAP.

    Trump agrees to prompt license requests for Huawei sales

    • Seven CEOs from the tech and telecom industries descended on the White House on Monday to discuss trade, national security and most importantly – Huawei.
    • The CEOs of the companies "requested timely licensing decisions from the Department of Commerce" regarding Huawei, which President Trump agreed to, while the executives expressed "strong support" for national security restrictions on U.S. telecom equipment purchases and sales to the blacklisted Chinese company.

  7. Maybe we are not so overpriced:

    Since June 2009, at the end of the Great Financial , earnings have grown 203%, The price of the SPX has risen by 232%. There has been surprisingly little multiple expansion in the last 10 years. (BR: Perhaps this is due to the collapse in earnings during the GFC).

    Bianco notes “The forward PE ratio. is slightly elevated, but nothing unusual (bottom). Nothing out of line here. No bubble…”

  8. CMG/Albo – I give them $600 due to great growth and my positions target $650-700 but $400 would not be a shocker if they have any kind of stumble – that's where we jumped in last year.

    Good call on RLGY with the ugly chart, Albo!

    Also sold some Jan 5 puts on RLGY for $1.70.  Stock has essentially been in a six year downtrend 

    CEO bought a million dollars worth of stock at $8.38 in May.

    Big Chart – All about 3,000 today (again), lined up with 27,300, 7,950 and 1,555 and the Dollar is very strong today, at 97.38 so it could drop back and boost things higher, which is more likely than it popping 97.50.

    Euro has hard Brexit to deal with as well as loosey goosey ECB policy dragging them down.  Despite all the happy talk, the fact is that our Fed has not matched the ECB at all in lowering rates further or running up the balance sheet.  

    Image result for fed ecb chart

    Image result for fed ecb chart

    Executive Privilege – This incident is at least showing us the huge flaws we have in our Democracy, which assumes people will rationally obey the rules and doesn't have very strong enforcement mechanisms.  However, you need a super-majority to change those rules so ABANDON SHIP!!!!

    Less life, more cost – that's the American Way!  (did I mention the ship should be abandoned?).  

    As to over-priced, we're not as overpriced as we have been in the past but we're still overpriced or certainly fully priced and, either way, down is easier than up from this level.

    That was my point this morning – it took us 18 months to gain 5% and we're acting like this is some impressive breakout.  

  9. phil – one more WHR question — so  in trying to roll my 120s up to 130s I decided to do it in halves (so 5 out of 10). I today bought to close 5 120s at 35.50 which was closer to the bid then the ask.  It filled right away and then the stock dropped like $4 before I could sell the 130s.  So did I make a mistake(s) there as selling the 130s now would get me around 25.50 so I would basically be paying $10 to get $10 and I guess have the same money if it stays above $130 or should I wait and see where the price settles at.  Thanks 

  10. Breakout / Phil – The Russell is actually where it was 18 month ago:

  11. Phil/All,

    Just had an alert trigger on SFM when it went below below $17.25 today. Was that on the buy.list?

  12. WHR/Coulter – They are not very liquid, last sale on the $120s was $35.47 and the bid/ask is now $27.80/31.20 as WHR has settled down $8.50 now ($140).  I guess the $35.50 was you paying top Dollar and now the $130s have come down to $22.05/25.35 – it's not a good roll if you don't get your prices!  The good news is the short $155s should go worthless.  Your $100s are now $41.85/45.25 and the $90s are $50.25/54.50. 

    Basically, you way overpaid for the 1/2 buyback of the $120s and there's no magic way to now fix it – you need to think about the options and understand how AND WHY they are changing when you go to make a play and, in this case, you had a perfectly good trade that was going to pay you in full and GREED led you to change it and now you'll make less – hopefully not too expensive a lesson. 

    Since you now have 10 of the 2021 $100 calls and 5 short 2021 $120 calls and 7 short Jan $155 calls that are now $5 (down from $9), I'd sell the 10 2021 $100s at $44 ($44,000 – no less!) and buy 25 of the $120 calls for $30 ($75,000), which would leave you with 20 long $120s and close the other 5, and then I'd sell 15 of the $145 calls for $17 ($25,500) so you'd be paying net $5,500, which means you spent net $23,250 (from the early buyback) to move from a $20,000 $100/120 spread to a $50,000 $120/145 spread and now you have much better coverage on the short calls, which will hopefully go worthless.  I don't know if you have short puts but, for balance, you could sell 7 of the 2021 $120 puts for $13.25 ($9,275) and that would cut your outlay almost in half.

    RUT/StJ – Very oddly struggling.

    SFM/Brian – I want to say no as I've never been a fan but I'll check….  Nope, I don't think I've ever liked them BUT now that WFM is gone, I like them a lot better down here at $2Bn ($16.80) since WFM/AMZN hasn't killed them and they are still growing revenues ($5.7Bn this year) and profits ($150M) are holding up so a nice little company with acquisition potential as WMT trades at 40x and TGT trades at 15x and COST trades at 34x, BJ 21x so, other than TGT, they'd make a good earnings pick-up for the others even at $3Bn (p/e 20).

    Year End 30th Dec 2013 2014 2015 2016 2017 2018 TTM 2019E 2020E CAGR / Avg
    Revenue $m 2,438 2,967 3,593 4,046 4,665 5,207 5,292 5,713 6,326 +16.4%
    Operating Profit $m 120.8 198.6 223.3 212.9 226.1 222.9 249.7     +13.0%
    Net Profit $m 51.3 107.7 129 124.3 158.4 158.5 177.4 146.9 155.9 +25.3%
    EPS Reported $ 0.37 0.70 0.83 0.83 1.01 1.22 1.38     +27.2%
    EPS Normalised $ 0.45 0.70 0.85 0.83 1.01 1.22 1.38 1.22 1.35 +22.2%
    EPS Growth % +172.6 +56.4 +21.0 -2.2 +22.0 +20.5 +7.9 -0.30 +10.4  
    PE Ratio x           14.2 12.5 14.2 12.9  
    PEG x           n/a n/a 1.36 1.30

    Hope/1020 – Not a valid investing strategy, unfortunately…

  13. Brian,

    SFM, Interesting you ask this question. Simply have a look at the stock's graph. Would I buy it. They do not even pay a divident. NO

  14. Phil/SFM. Thanks.

    Yodi, yup chart sure looks like crap, but thought Phil had done some analysis on it in the past.

  15. Overvalued / Phil – WMT is a good example, how can they trade at 36x when they are expected to grow EPS less than 4% the next 5 years. 

  16. SFM/Brian – My analysis was I like WFM better but so did AMZN so they are the new #1 in that sector.

    WMT/StJ – Good example of what I was warning about – just because SPX hits an all-time high, doesn't justify overpaying for components.  People go into a feeding frenzy at market tops and everything is used to justify everything else.  

    Indexes came down quite a bit – Nas is red.  

  17. ICE officers came for a Tennessee man. His neighbors stepped in to stop them

  18. The Last Toll Collectors

  19. US attorney general says encryption creates security risk

  20. Whirlpool -6% in quick turnaround

    • Whirlpool (NYSE:WHR) has reversed yesterday's post-earnings AH gain and is now off 5.97%.
    • It's unclear what is spooking investors after Whirlpool topped expectations for sales, EPS, North America operating income and set its full-year guidance ahead of consensus. A possible sticking point could be the free cash flow guidance that arrived in at $800M vs. $800M to $900M prior range.
    • Previously: Whirlpool +5% after profit beat, strong guidance (July 22)

    WeedMD launches cannabis processing unit

    • WeedMD (OTCPK:WDDMF +0.1%) launches a subsidiary called CX Industries that, it says, will specialize in extraction, toll processing and third-party product formulation of cannabis products from weed grown at its Aylmer, Ontario facility, adding that CX will have the capacity to process more than 200K kgs of biomass in 2020.

    Mattel gains ahead of earnings

    • Mattel (MAT +3.6%) rallies after Hasbro's Q2 earnings report comes in strong.
    • The toy company will report earnings of its own on Thursday with shares in a gentle six-week uptrend. A point of interest on the conference call could be clarification on if acquisition offers were made by MGA Entertainment.

    Hasbro +9% as Disney initiatives pay off again

    • Hasbro (HAS +9.1%) etched out a new all-time high of $119.55 after a solid earnings beat.
    • The company's relationship with Disney was highlighted on the conference call. CEO Brian Goldner pointed to strong demand for Avengers-related toys and success with innovation around Princess and Frozen dolls. Goldner expects the Disney boost to continue in Q4 as Frozen 2 and Star Wars: The Rise of Skywalker arrive and sees major Disney-related initiatives boosting results into 2020 as well.
    • Hasbro earnings call transcript

    AutoNation leads auto retail sector higher

    • AutoNation (NYSE:ANrallies 10.78% after used vehicle revenue in Q2 topped expectations and gross profit was easily above consensus ($890M vs. $866M). Analysts say they expect a smooth transition with CFO Cheryl Miller elevated to the CEO slot at the company.
    • Related auto retailers Carvana (CVNA +3.8%), Asbury Group (ABG +2.1%), Sonic Automotive (SAH +3.8%), Lithia Motors (LAD +2.2%), Penske Automotive Group (PAG+5.1%) and Group 1 Automotive (GPI +3.6%) are all notably higher on the day, while CarMax (KMX +0.7%) is showing a more modest gain.

    Earnings confidence in the auto supplier sector

    • Auto parts stocks are gaining after some related earnings reports in the auto/trucking industry came in stronger than anticipated. The expanded partnership between Daimler and BAIC announced today is also seen as a positive for the sector.
    • Gainers include Adient (ADNT +5.9%), Tenneco (TEN +5.1%), Delphi Technologies (DLPH +6.7%), BorgWarner (BWA +4.6%), American Axle & Manufacturing (AXL+5.6%), Dana (DAN +5.3%), Aptiv (APTV +2.7%), Autoliv (ALV +2.9%), Goodyear Tire & Rubber (GT +3.7%), Magna International (MGA +3.9%) and Visteon (VC +4.9%).

    CuraLeaf down 12% on FDA Warning Letter

    • CuraLeaf Holdings (OTCPK:CURLF -11.5%) is down on double normal volume on the heels of its receipt of a Warning Letter from the FDA over its promotion of unapproved cannabidiol-containing products on its website and social media platforms.
    • The company has 15 days to submit a written plan to address the violations to the agency. Failure to do so can lead to more serious action, including seizure and injunction.

    Buy Zillow on Realogy-related pullback – analyst

    • Craig-Hallum calls the Zillow (Z +0.4%)(ZG +0.3%) pullback after the Amazon-Realogy team-up a buying opportunity.
    • Analyst Brad Berning says the new relationship carries no risks for Zillow beyond the near-term reaction to the headlines and the implied competitive pressure.
    • Berning doubts people will go to Amazon looking for real estate at any "meaningful scale" and thinks Realogy is moving out of "desperation" to fend of structural headwinds. He estimates the cost of the AMZN program will "pretty much wipe out" RLGY's commissions.
    • Craig-Hallum maintains a Buy rating and $55 price target on ZG. Zillow has an Outperform average Sell Side rating.

    Coca-Cola hits all-time high as new products shine

    • Coca-Cola (KO +5%) carved out a new all-time high of $53.91 in trading early after the beverage giant's organic growth impressed.
    • During the earnings call, CEO James Quincey said almost 25% of the company's revenue is now derived from new or reformulated beverages vs. 15% two years ago. That mark could go even higher as Coca-Cola Energy moves into new global markets.
    • As for new products in Q2, Coca-Cola Zero Sugar posted its seventh straight quarter of double-digit volume growth and the Costa Coffee business contributed nicely with a new RTD chilled product in the U.K.
    • PepsiCo (PEP +0.4%) and Keurig Dr Pepper (KDP +0.4%) are both slightly higher after the sparkling KO results.
    • Previously: Organic sales strong at Coca-Cola (July 23)

    Chain store sales up 4.9%

    • Chain store sales increased 4.9% for the week ending on July 20, according to the latest report from Johnson Redbook.
    • Sales in July through the 20th were up 4.8%.

    Richmond Fed Manufacturing weakened in July

    Existing Home Sales

    Beyond Meat bid up to new high

    • Beyond Meat (NASDAQ:BYND) is up 4.07% and printed a new all-time high of $207.00 in early trading this morning.
    • Trading action indicates some shorts are being squeezed out of their BYND positions. Heading into the alternative meat company's earnings report next week, Wall Street analysts are cautious (consensus Hold rating) and Seeking Alpha authors covering the stock are negative.

    CenturyLink wraps phase one of fiber network expansion

    • CenturyLink (CTL +1%) is touting the end of the first phase of an overbuild network that will result in the largest ultra-low-loss fiber network in North America.
    • The company is expanding its intercity network by 4.7M fiber miles.
    • Phase one wrapped up in June, connecting more than 50 major cities throughout the United States, and its investments were included in full-year 2019 capex outlook. It's currently selling the fiber routes to large enterprise companies and content providers.
    • A second phase will include areas in Europe, set to be completed by early 2021.
    • CenturyLink is using existing multi-conduit infrastructure, and hybrid Corning (GLW+1.2%) SST-UltraRibbon cable that incorporates SMF-28 ULL fiber and SMF-28 Ultra fiber.

  21. Now   3000 points!


    Markets ticking higher in recent trade following report US reps will fly to China to for trade talks Monday-Wednesday of next week.

  23. We already knew that – so silly.

    Huge pop though.

  24. Hi Phil,

    Thoughts on celg? Looks like it is at approx 90$ even though the merger price is supposedly at $102. The merger is expected to complete either late 2019 or early 2020. Does 21Jan 75/90 call spread look ok? Or is there a better trade?



  25. Hello Phil and the Gang.  What do you think of a short play on AMZN in this price area.  This trade is very similar to the one you recently suggested on CMG.   To be clear, I am a fan of AMZN but not at these prices levels in this economy.  I am looking to sell lots of premium.   You could sell the 19Jun20 1980 call for $228.30 and for upside protection buy 1x  BCS 2100/2300 for $71.25 a contract which nets you with 1x BCS a credit of $157.15.  The point is I believe we are at a market high and will hang out at these levels for awhile.  The all time high for AMZN is 2050.50 so the protective BCS should give you a good cushion to the upside.  If the stock closes in June 20 at the same level or goes down you pocket the credit of $15,715.00.  To the upside, AMZN has to be over $2337 at expiration for you to loose on the trade (If AMZN is $2100 at expiration short call will cost you $120 and the BCS cover expires worthless but cost $71.25 so profit is $37.05 with original credit of 157.15).  The plan would be if AMZN goes up to add addition BCS around the $2200 level.    TD calculates margin cost at around $15,000.  You could do the same with GOOG except AMZN is closer to all time high.  I will love to hear your thoughts.  TIA.

  26. Phil, the main reason why I am using the June 20 series verses the Jan 21 series is I absolutely believe that the only way the government has of getting out of the debt crisis is by inflating everything so all things being equal, i expect stocks to increase over time.  

  27. Trump suing U S House Ways and Means Committee to protect tax returns. Gosh what is he trying to hide?

  28. CELG/Harip – The problem is it's not $100 – CELG shareholders get 1 share of BMY, which has fallen to $42.80, plus $50 in cash so currently $92.80, so what you're really looking for is a bottom on BMY, who have to pony up about $36Bn in cash and dilute their shareholders by about 43% – that's why BMY dropped from the $60s to $43 (28%) – very fair. I think it could be argued that you are better off cashing CELG (if you have it) and buying 2x BMY as you take $7 off the table and you have 2/3 BMY shares vs 1/3 when it's all done.  In the LTP, we top out on CELG at $80 and $85 on two spreads so we're not worried – yet.  I don't think it is a good trade from scracth as it's been arbed to death already.

    AMZN/Robert – That's very interesting but AMZN is up from $700 in Jan 2017 to $1,200 (70%) in Jan 2018 to $1,700 (42%) in Jan 2019 and now $2,000 (17.5%) and you want to give it another year betting it won't go 20% or more higher and burn you?  I felt very comfortable calling CMG short but not at all comfortable with AMZN – seems far too risky to me.  As you note, you expect inflation which would lead to more sales and more profits for AMZN yet you are betting they are essentially in the same place a year later.  

    Trump/Den – I don't think he did anything very illegal but it will show he simply never pays taxes by using all these loopholes and it's pretty easy to use against him when you point out that all the hard-working people who vote for him have to subsidize his lifestyle.

    New bond ETF may appeal to contrarians

    • Launched only a couple of months ago, the Quadratic Interest Rate Volatility and Inflation Hedge ETF (IVOL) saw nearly a 50% bump in assets yesterday, with AUM rising to $60M.
    • Todd Rosenbluth says the fund is notable in that it's set up to benefit from rising inflation expectations and a steeper yield curve – exactly the opposite of the current environment.

    JMP Securities defends Tesla

    • JMP Securities is as confident as ever about Tesla (TSLA +1.6%) with a particular focus today on cash flow.
    • "We think it is a mistake to look for further negative free cash flow unless operations weaken again," writes analyst Joseph Osha wrote.
    • Osha expects Tesla to cap off the year with $3.5B in cash, up from $2.2B at the end of Q1. He also thinks Tesla could refinance the convertible issue coming due in November, instead of making the payment in cash.
    • JMP has a Market Outperform rating on Tesla and price target of $347 vs. the sell-side average PT of $280.03.

    Apple wants Mac Pro tariff exclusion

    • Apple (AAPL +0.6%asked the Trump administration to exclude components from its upcoming Mac Pro from import tariffs.
    • Recent reports suggested the company plans to move Pro production from Texas to China.
    • Filings with the Office of U.S. Trade Representative show Apple seeking relief from the 25% duties on key components that match up with the Mac Pro specs, though the documents don't specify the device.
    • The exemption requests were first made public on July 18 and now enter a public comment period before the agency makes a decision.

    Ford shows off all-electric F-150 prototype

    • Ford's (F +1.6%) top electrification exec took to Medium to post a teaser video on the all-electric Ford F-150 and highlight the huge investment the automaker is making into EV trucks and SUVs
    • The video features a demonstration of an all-electric Ford F-150 prototype successfully towing more than 1.25M pounds of rail cars and trucks during a test.
    • The blog post also contains a reminder that Ford intends to build a "full electric, Mustang-inspired" SUV and will have an "incredible" charging plan.
    • Ford's EV push coincides with similar efforts and more publicized efforts from General Motors (GM +2.6%) and of course Tesla (TSLA +1.9%).

    RBC resumes Broadcom at Outperform

    NBC expects $1.2B in ad dollars from Tokyo Olympics

    • NBCUniversal (CMCSA +1.1%) has set a healthy target for the coming Tokyo Olympics, expecting to pass $1.2B in ad dollars in 2020.
    • That's the same draw for the last Summer Olympics in Rio de Janeiro, but the network is running "significantly ahead" of its sales goals this time in comparison, NBC Sports' Dan Lovinger says.
    • The Olympics are "at the top of a very short list" when it comes to massive scale, reach and message memorability as the media market grows more fragmented, he says.

    Bed Bath & Beyond cuts corporate staff

    • Bed Bath & Beyond (BBBY -0.6%) slips after announcing that it initiated a 7% reduction in corporate staff at its headquarters in New Jersey and other select locations where corporate associates are based.
    • As part of this realignment, COO Eugene Castagna departed the company and his role has been eliminated.
    • "Today's action is an important step in simplifying our corporate structure and ensuring our resources are aligned with the business we are managing today," notes Bed Bath & Beyond Interim CEO Mary Winston "We remain confident in the underlying business and our ability to leverage the strength of the Bed Bath & Beyond brand and our lasting connection with customers to deliver on our near-term priorities and transform the Company," she adds.
    • Pre-tax net savings from cost savings measures the remainder of FY19 are estimated to be approximately $18.9M.  BBBY expects to incur pre-tax cash restructuring charges of approximately $12M in FY19, primarily for severance and related costs in conjunction with the staff reduction, all of which will be expensed in Q2.
    • Bed Bath & Beyond expects full-year EPS to be at the lower end of its previously-announced range of $2.11 to $2.20.
    • Source: Press Release

    Beer tracking shows gains at Constellation, improvement at Molson

    • Molson Coors (NYSE:TAP) is up 3.71% after Nielsen data indicates an improved trend in the U.S. (-0.7% over four weeks vs. -2.6% over 12 weeks) for the MillerCoors business.
    • Wells Fargo notes that Constellation Brands (STZ +0.5%) showed the most strength during the tracking period, with sales up 9.2% over the four weeks in comparison to the flat sales at Anheuser-Busch InBev (BUD +0.6%) and Heinken (OTCQX:HEINY) over the same period. A-B's performance would have been worse if not for a 17% increase in Michelob volume.

    Financial rescue for Ohio's nuclear plants approved by state legislature

    • Ohio's state House passes a bill approving a $1B financial rescue of the state's two nuclear power reactors that also will scale back requirements that utilities generate more power from wind and solar.
    • The Davis-Besse and Perry reactors are owned by FirstEnergy Solutions, which has said it would shut the money-losing plants in 2020 and 2021 unless the state provides financial assistance; FirstEnergy Solutions is a bankrupt unit of power company FirstEnergy (FE -0.6%).
    • The bill, which passed the state Senate last week, now goes to Gov. DeWine, who has expressed support for the legislation.
    • Opponents led by the natural gas industry say they plan to ask voters to overturn the legislation in a statewide referendum next year.

    That's $1Bn that could have gone towards renewables.  I guess all those people who protested the plant ever being built were just wise economists and not environmental radicals. 

    Image result for no nukes protest

  29. Huge storm right at my place – could lose power any second.

  30. Taxes / Phil – Trump supporters would be OK with him paying no taxes I think. At this point, it would show that he is so smart that he find ways not send money to these crooks in Washington! Most of them are too ignorant to realize that it's money from their pocket!

    Just like they think it's smart to do this:

    President Donald Trump’s administration’s planned cuts to food assistance benefits would throw millions of people off the program.

    And how does that help WMT by the way?

  31. Deficit Donny / Taxes – my understanding is his taxes will show his massive real estate losses & reliance on DB / China Bank loans to support his business.  Neither of which will play well with his investment brilliance & deal maker propaganda.

  32. 16:11


    Chipotle Mexican Grill prelim Q2 $3.99 vs $3.76 S&P Capital IQ Consensus Estimate; revs $1.43 bln vs $1.41 bln S&P Capital IQ Consensus Estimate; comps +10% vs 8.3% estimate

  33. WHR update if your interested

    I closed (bought) my remaining -5 120 calls for 29.50 and sold 5 130 calls for 24.50 (the original plan to pay 5 for 10).  I bought 5 2021 120/145 spread for $13 (have an order in to try and get 10 more at 12.50)

    I kept the other 5 2021 100 calls and will look to roll or cover tomorrow (got a bit of a bounce into the bell so we will see).  Trying to increment better.  Bid/Ask at close for 2021 100s 43.55/46.85

    I already have -5 2021 100 puts, so I added -2 120 puts — hopefully on the right track with a lesson learned


  34. CMG came in nice but still how does that justify $750/share?  $770 now…  Was $400 in Jan and $285 in Jan 2018.  10% more sales leads to 85% higher stock price.  


    NEWPORT BEACH, Calf., July 23, 2019 /PRNewswire/ -- Chipotle Mexican Grill, Inc. (CMG) today reported financial results for its second quarter ended June 30, 2019.

    Second quarter highlights, year over year:

    • Revenue increased 13.2% to $1.4 billion
    • Comparable restaurant sales increased 10.0%, net of 40 bps from loyalty deferral, and included nearly 7% of comparable restaurant transaction growth
    • Digital sales grew 99.1% and accounted for 18.2% of sales for the quarter
    • Restaurant level operating margin was 20.9%, an increase from 19.7%
    • Diluted earnings per share was $3.22, net of a $0.77 after-tax impact from expenses related to restaurant asset impairment, corporate restructuring, and certain other costs, a 91.7% increase from $1.68. Adjusted diluted earnings per share excluding these charges was $3.99, a 39.0% increase from $2.87.1
    • Opened 20 new restaurants and closed 1

    1 Adjusted net income and adjusted diluted earnings per share are non-GAAP financial measures. Reconciliations to GAAP measures and further information are set forth in the table at the end of this press release.

    "We're pleased with our financial performance, which marks the sixth consecutive quarter of accelerating comps and reflects continued progress on our key strategic initiatives," said Brian Niccol, Chief Executive Officer. "These strong results were delivered despite a tougher year over year comparison and benefited from better restaurant operations, more effective marketing, and leveraging our digital make line to grow sales and expand access."

    Results for the three months ended June 30, 2019:

    Revenue in the second quarter increased to $1.4 billion, an increase of 13.2% compared with the same quarter a year ago. The increase in revenue was driven by a 10.0% increase in comparable restaurant sales.  Comparable restaurant sales improved primarily due to a nearly 7% increase in comparable restaurant transactions and an approximate 3.5% increase in the average check, which includes a benefit from menu price increases that were implemented during 2018, partially offset by approximately 40 basis points as a result of deferred revenue from our Chipotle Rewards loyalty program.

    We opened 20 new restaurants during the quarter and closed 1, bringing the total restaurant count to 2,523.

    Food, beverage and packaging costs were 33.7% of revenue, an increase of 110 basis points compared to the second quarter of 2018. The increase was primarily due to the increased cost of avocados and, to a lesser extent, increased dairy costs, partially offset by the benefit of menu price increases nationwide at the end of 2018.

    Restaurant level operating margin was 20.9%, an increase from 19.7% in the second quarter of 2018.  The improvement was driven primarily by leverage from the comparable restaurant sales increase, partially offset by wage inflation at the crew level, higher food costs, and increased delivery, marketing and promotional expenses.

    General and administrative expenses for the quarter was $121 million on a GAAP basis, or $97 million on a non-GAAP basis, excluding $4 million related to transformation expenses, and $20 million for legal reserves. GAAP and non-GAAP general and administrative expenses includes $21 million related to non-cash stock compensation, and $4 million related to higher bonus accruals from our strong operating performance and payroll taxes on stock option exercises. Without these items, underlying general and administrative expenses totaled $72 million for the second quarter of 2019, similar to the first quarter of 2019 and in-line with expectations. The $20 million for legal reserves related to legal proceedings, much of which relate to older cases, includes an estimate for the previously disclosed government investigation that has been on-going for nearly four years. 

    Impairment, closure costs, and asset disposals decreased $40.8 million for the three months ended June 30, 2019, compared to the second quarter 2018, primarily due to elevated impairment in the comparable period 2018.

    The effective tax rate decreased to 26.6% for the three months ended June 30, 2019, from 33.3% in the second quarter of 2018.  The decrease was primarily due to current quarter excess tax benefits from stock compensation, and a favorable reduction in non-deductible employee meals, partially offset by a portion of the loss contingencies related to legal proceedings recorded this quarter that are non-deductible.

    Net income was $91.0 million, or $3.22 per diluted share, an increase from $46.9 million, or $1.68 per diluted share, in the second quarter of 2018. Excluding the impact of restaurant closure costs, corporate restructuring, legal reserves, and certain other costs, adjusted net income was $112.9 million and adjusted diluted earnings per share was $3.99.

    During the quarter, our Board of Directors approved the investment of up to an additional $100 million, exclusive of commissions, to repurchase shares of our common stock. This repurchase authorization, in addition to approximately $46.6 million available as of June 30, 2019, for repurchases under previously announced repurchase authorizations, may be modified, suspended, or discontinued at any time.

  35. The World’s Central Banks Are Debating Whether to Change Their Strategies

  36. Justice Department Opens Antitrust Review of Big Tech Companies

  37. Dish Agrees to $5 Billion Deal for Wireless Assets

  38. Trump made 61 false claims last week

  39. Trump sues House panel, NY to protect state tax returns