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!

Thrilling Thursday – Mueller Fails and Draghi Disappoints

Image result for trump shoot 5th avenue cartoonAre we there yet?

The Futures were signaling peak euphoria as the Democrats failed to nail Donald Trump (as usual) despite 37 indictments of the people around him.  Mueller's testimony was a huge disappointment as he stuck to the letter of the report (as directed to by Barr) so there were no big reveals to move the needle forward on Trump's corruption.  Though there are still 5 open investigations, no one is in the mood to even talk about them after 2 years of Mueller came to nothing other than a certaintly that Russia massively intervened in the US elections to make Donald Trump President and 10 instances in which the President then obstructed the investigation into the Russian interference.  You know, no big deal and we should all drop it because there wasn't a smoking gun.

As the President said: "I could shoot someone right on 5th Avenue and they couldn't convict me."  Turns out he wasn't just bragging.  

Obviously, the markets were pleased to not have the turmoil of an impeachment as it seems unlikely now that the Democrats have enough ammunition – or the will – to go down that road when the election is only 16 months away.  There's certainly enough evidence out there to show what Trump did and the election will come down to a question of whether or not Americans care if they have a Russian-backed leader who flaunts the laws of the land.  As long as the economy stays strong – why change horses, right?

The ECB is about to change horses as Draghi holds his last press conference but they surprisingly held rates steady, despite all rhetoric to the contrarcy and that's spooking the markets, which were up sharply ahead of the decision.  If the ECB isn't lowering rates, maybe our Fed won't lower rates next week either and without lower rates – how will the economy survive?  I mean really, is this what we've come to?

Despite leaving rates unchanged, Draghi did say that they expect rates to remain at the current level AT LEAST through the first half of 2020.  10-year notes in Europe currently yield 0% and, taking into account transaction fees AND pretending there will be no inflation, the effective rate is 0.26% for the privilege of lending money to EU nations.  

As you can see from the chart, that hasn't stopped people from taking this deal on $6.3 TRILLION worth of bonds with another $5.8Tn in Asia (mostly Japan).  That's how the Japanese Government can be 250% of their GDP in debt – 100% of it is FREE and, if they push rates just a bit lower, the more they borrow – the more they make.  Who says Government Budgets are hard to manage?  

It's an amazing scam where the Government now charges you for holding your money – effectively a tax on your savings so, if you save $1M by the time you are 50 and put it in bonds, they'll take about $150,000 and give you back $850,000 when you are 65.  Investors are willing to pay a premium—and ultimately take a loss—because they need the reliability and liquidity that government and high-quality corporate bonds provide. Large investors such as pension funds, insurers, and financial institutions may have few other safe places to store their wealth.

This is also what's forcing money into the stock market, despite record-high premiums to earnings, because money literally has nowhere else to go.  Housing still seems very questionable as an investment and commodities haven't performed very well and banks aren't paying any interest so what else do you do with your savings but gamble it in the stock market.  Don't worry – I'm sure it will all work out just fine {end sarcasm font}.

It's nice that we're setting record highs but, as we discussed in yesterday's Webinar – we're loving our hedges!  


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. It was never going to matter what Mueller said anyway. He said yesterday that his report DID NOT exonerate Trump, and Trump tweeted that it did soon after. We live in a post-truth world.

    Best tweet from Scarborough yesterday:

    Jesus, forgive me for ever being a Republican.

  2. And we now have this:

    He also accused tech firms of "dogmatic" posturing, saying lawful backdoor access "can be and must be" done, adding, "We are confident that there are technical solutions that will allow lawful access to encrypted data and communications by law enforcement, without materially weakening the security provided by encryption."

    Welcome to Russia! Emphasis on lawful access from this bunch in power now!

  3. Good Morning!

  4. Some activities are quite dangerous:

    1 chance out of 100 million to die playing a board game…

  5. This chart explains it all:

  6. Good Morning

  7. Morning All.

    Webinar replay now available!

  8. Good morning! 

    Interesting chart from CS re. TSLA's earnings:



    They still see them pulling it together by Q4 but, of course, that's what they said about this Q just 3 months ago.  These analysts are off by 100% and then don't even take a breath before making the next set of predictions – amazing!  

    Screenshot 2019-07-25 11.52.51

    Tesla (TSLA) PT Lowered to $356 at Oppenheimer… via

    The worst thing for TSLA is now when they release "record" delivery projections – no one will care as it clearly isn't translating to profits.  Still, you have to consider they spent a lot of money to ramp up production and Musk claims to be moving quickly to open the China factory and they do have $5Bn in cash so I don't think they get back to $175 – maybe $220 (-15%) on this run.

    Big Chart – Rut making it look pretty but RUT move looks very forced and we'll see if it holds but NYSE making very nice bullish consolidation above the 2.5% line and other indexes also look like they consolidated above their lines and are ready to break out but, Fundamentally, I still can't get there.  

    Scarborough/StJ – LOL.  Too late though the damage is done.  This democracy is clearly broken when this kind of farce can happen.  That backdoor stuff is sick – it flies in the face of the constitution as well as simple human decency.  The lack of outrage is what's really scary.  In the EU, the Governments are freaking out about not enough privacy/security but in the US we're trying to make bigger holes.

    Wow, Dow negative already – 180-point flip.

  9. ARR/Rookie (from yesterday) – ARR is $18.73 and you can sell the Jan $17.50s for $1.35 to net  $18.85 so just 0.12 over the current price and the dividend is 0.17 so you might get called away but, if you do, you still make 0.12 and then you just buy the stock and sell more premium.  That's your upside "risk" – getting 0.12 instead of 0.17 (but you also have to factor in re-buying the stock ex-dividend for maybe a lower price) but if the stock is flat or down, then you have $1.35 (8%) downside protection and wouldn't it be silly not to have that?  Also, if you are selling the $17.50 puts for 0.50, that's 0.08/month you are making up on that side anyway.  These trades are not about maximizing your profit but about protecting your principle for 5 years while you recover your money and then the position is free and you don't have to sell calls anymore (though I'd still do half covers).   

    As Yodi noted in his example, he has 1,400 shares of ARR for 4 years and has lost $7,400 on the stock and made $1,000 on option sales and $12,000 in dividends for net $5,600.  More to the point, I assume he bought it around $24 ($33,600) and he's collected back $13,000 (38.6%) so not too terrible but slower than we like it to be though, to be fair, the stock was at $27 and now $18.60 so we're taking a snapshot at the bottom of the range. 

    Anyway, another 5 years and another $13,000 and that's $26,000 to put towards a new position while this one pays another $13,000 over the next 5 years and let's say the new position pays $13,000 so now, for the original $33,000 and the returns ($26,000) and another $7,000ish, you are then getting back $26,000 each 5 years on your $40,000:

    Principle — 5 year return 

    • 2014 $33,000 — $13,000
    • 2019 $33,000 — $13,000

    Take $7,000 out of pocket to buy another $33,000 position

    • 2024 $40,000 — $26,000
    • 2029 $40,000 – $26,000

    Use $33,000 of $52,000 to buy another position and pocket the rest

    • 2034 $21,000 – $39,000

    Use $33,000 to buy another position and pocket the rest

    • 2039 $15,000 – $52,000 

    Use $33,000 to buy another position and pocket the rest 

    • 2044 $4,000 CREDIT – $65,000 

    So yes, very boring and very tedious but, 25 years from now, you are making $65,000 a year and you now have 5 $33,000 positions ($165,000) working all from your original $33,000 with $7,000 added along the way but all that cash has been repaid as well.  

    As I was saying in the Webinar yesterday, this is what, unfortunately, takes a very long time to teach with real examples but this is the kind of portfolio you can really retire on and, even when you are gone, your family can still benefit from a regular income with fairly simple management of the positions (once you have your cash back you can lighten up on the short puts and calls).  

    And keep in mind ARR has not gone well and doesn't pay well.  The same run with T which, although it pays just 6% has way better premiums to sell and has been between $25 and $40 since 2002, would have done a whole lot better (if you played the channel correctly, of course).  

    In Yodi's example, he's just at the point where he should be ready to re-invest those dividends into either more ARR or another dividend-payer so he can double up his returns and, even 5 years from now, he'll need to put in more cash towards a full position (can buy half a position now, my example is simplified) and the returns after 10 years will not look sexy but, 10 years after that – very sexy!  

  10. By the way, the great thing about dividends is they tend to keep up with inflation.  

  11. Phil / F (Ford) - thoughts on the Quarter – I did not see this as a bad Quarter – the miss was pretty minimal and they made some reasonable improvements on the cost side in EU and South America.  They took a hit on MTM on an investment, and managed currency winds fairly well.  pulling down this years guidance was problematic.   In general I still have this as a 12/ 13 price targert maybe moving out 2. to 3 quarters.   What are your thoughts on them? What are your thoughts, would you buy anymore here?  

  12. Phil

     What are your thoughts on this company  ?

    Verra Mobility Corporation VRRM


    Just a interesting business or add to watch list 



  13. Tesla has created almost alone the EV market, being the spearhead of the trend is interesting to see how strong their statements are after facing all the attention (and risks) of markets, governments, and customers.

    I´m not a believer (after investing in 5 batteries factories) of actual EV technology as something sustainable with worldwide possibilities (imagine the electric chaos in India or Nigeria with this), If something different is feasible ("dry batts, metal-O2 batts, etc. ) perhaps will make sense in the long term otherwise it will be an alternative only for first world countries (less than 20% of world population)

  14. AAR, Like your analyze Phil. Had to add some more stock on assignment of some Jan 20 20puts sold for 2.30. not bad as you said I had to spend my div. on stock purchase. My stock average is now 21.00.

    My aim was to sell Jan 17.5 call and Jan 20 put, so my overal cash is slightly higher.

  15. F/Batman – Speaking of dividend stocks!   F guided down quite a bit and is up over 20% for the year so it's settling down.  I don't play F to go up, just to keep paying a dividend and not to stray too far from $10.  In the LTP, we sold $7 calls for $2 and we bought the stock for $9.15 so net $7.15 and we sold the $10 puts for $2.50 ($7.50) so we are effectively planning to be in 15,000 shares of F at about $7.25, less the dividend we've collected – that's not at all a bullish position – just a place we're parking some cash to collect 8% (0.60 per $7.25) on our money. 

    F Ford Motor Co. 9000 2/6/2018 534 $82,350 $9.15 $0.45 $7.88     $9.60 $-0.74 $4,005 4.9% $86,355
    F Short Call 2021 15-JAN 7.00 CALL [F @ $9.60 $-0.74] -75 2/15/2019 (540) $-15,000 $2.00 $0.79     $2.79 $-0.71 $-5,925 -39.5% $-20,925
    F Short Put 2021 15-JAN 10.00 PUT [F @ $9.60 $-0.74] -60 2/22/2019 (540) $-15,000 $2.50 $-0.84     $1.66 $0.33 $5,040 33.6% $-9,960

    VRRM/QC – I don't like their business out of principle and it's possible that their main business (speeding cameras) get legislated out of existence – that's a little worrying.  They've never actually made money but sales are growing but not as fast as 2017 ($232M) to 2018 ($370M) as the last two Q2 were $95M and a $35M loss between them.  At $13.87 you're paying $2.2Bn for $400M in sales and no profits.  To get to $100M, they'd have to drop 25% to the bottom line and I'd say the closest comp is AAXN (Taser) with $420M in sales and $29M in profits so I'd say VRRM is miles and miles away from being even remotely interesting at $2.2Bn though AXXN has a $4Bn valuation (200x earnings) so hope springs eternal as there are always fools ready to rush in and buy at ridiculous prices.

    See, I keep being reminded of why I think we should cash out of this madness.  Too many times I can point to fairly ordinary companies like these that are at ridiculous prices for no good reason.

    EV/Advill – I think EV/Solar/Fusion will be the future and not as long off as it sounds.  We are much better able to deploy solar in all parts of the world but a lot of people are saying fusion will come next decade and that will mean the electricity is cheap and available world-wide.  

    Image result for solar capacity chart

    Image result for solar capacity chart

    Image result for solar capacity chart

    Related image

    Related image

    We're actually ahead of 5 year-old forecasts:

    Image result for world solar

    ARR/Yodi – You just have to work it for the first 20 years.  After that, you can coast!

    TSLA tried to rally back and failed – back under $230.

  16. DOOM is coming - 

    "The bill [passed by the House] would create a Pension Rehabilitation Administration within the Department of Treasury to provide long-term loans to multiemployer pension plans facing insolvency. The Treasury would sell bonds and lend the money to pension plans at a low interest rate. The plans would pay the loans back over the course of 30 years.

    They'll be able to invest the money and be able to grow the fund to the point where they can gradually become solvent — at which time they will be paying the loan back. This will allow the businesses to survive, it will allow the workers to receive their pensions"

    To me this says the Fed will have no choice but to prop up asset prices for decades to come, must mean buy buy buy

  17. F has been one of my favorite low pressure positions. There's just enough movement to keep things interesting but (so far) not enough to cause pain. Just bought back worthless $11 calls today, very tempting to keep the stock uncovered for a bit. 

  18. Boris Johnson vows to ditch backstop and scale up no-deal plans

  19. Thanks Phil


  20. Phil, how do you like F as a new trade?  Suggestions?

  21. DOOM/Mike – Yeah, another crazy scheme to sweep things under the rug.  Should put GE stock through the roof though as pension obligations are a lot of what's keeping it down.  They made $2.5Bn last Q and you can buy the whole company for $91Bn at $10.44.

    If it passes, we should take a good look at companies that have deficit pension plans.

    Image result for company pension obligations

    So, if that bill gets approved, we should make some moves on some of these companies.  

    F/Ati, Robert – As a new trade on F, I think I would just sell the 2021 $10 puts for $1.65 as that's more than the 0.60 annual dividend and your net entry is $8.35 in 18 months – a $1.20 discount to the current price.  If F drops lower in between, then you can establish a long position or just sell more puts and if F goes up, you got a good price for the puts and you can sell the 2021 $10 calls, now 0.87 for $1+ and, as long as you buy F for less than $10, you are in for net $7.35 with a call away at $11 for a 49% profit in 18 months + dividends.  So the worst downside case is getting in for $8.35 (and then selling puts and calls to lower the basis), the flat case is you get $1.65 for not owning F for 18 months and the upside case is you make up to 49% – those all seem like good outcomes to me.

  22. Ati, Good Idea of Phil, I go both ways Buy stock and sell the Jan 20 9.87 straddle for 1.35 as well as the Jan 21 10 put.

  23. This is where those Pivot Point studies come in handy – you can see why 3,000 was such a powerful line to hold as all the indexes hit support at the same time.

    Now, if they don't hold, 3,000 is still a good shorting line on /ES.

  24. So here's 2 weeks' worth of gains out the window:

  25. LTP $1,603,339 + STP $722,193 = $2,325,532.  Very important to keep track to make sure we're neutral to the downside because, if I wasn't sure we could ride out a 20% correction with our hedges – I'd rather be in CASH!!!  

  26. HOV (OOP) finally on the move:

    • David Einhorn's Greenlight Capital (NASDAQ:GLRE) is shorting junk and investment-grade corporate debt as protections for creditors lessen, Bloomberg reports, citing a letter to investors.
    • The position is intended to hedge against the firm's bullish stock stances, it said.
    • “Rating agencies have been complacent and allowed debt/Ebitda and debt/equity ratios to deteriorate without a corresponding reduction in credit ratings,” Einhorn wrote in the letter.
    • With the economic recovery now a decade old, there are signs that the economy is slowing, he said.
    • Alongside the earlier-reported Dillard's, David Einhorn's Greenlight Capital (NASDAQ:GLRE) also reports new long stakes in Chemours (CC -1.3%) and Scientific Games (SGMS +3.6%).
    • "We think a lot of bad news is priced in," says Einhorn of Chemours, noting the stock peaked at $57 two years ago, and Greenlight's average entry of $23.18.
    • As for Chewy (CHWY +2%), Einhorn says it outdoes dotcom bubble poster-boy He notes Chewy has burned through $1.6B (and counting) of investor capital vs. $200M for
    • Einhorn: “For those that think the 2000 bubble was the big kahuna, consider Chewy, which went public in June 2019."
    • World Wrestling Entertainment (WWE +9%) is having its best day in eight months after a strong beat on profits in its Q2 results.
    • Revenues dipped 4.5% and missed, but OIBDA topped guidance at $34.6M, and EPS of $0.11 beat an expected $0.02.
    • Average paid subscribers to WWE Network were in line at 1.69M. Digital video views rose 17%, to 9B; hours consumed were up 22%, to 324M; and social media followers rose 10%, to just over 1.02B.
    • Revenue by segment: Media, $197M (down 2.8%); Live Events, $48.8M (down 6.7%); Consumer Products, $23.1M (down 13.5%).
    • Free cash flow was -$27.5M vs. a year-ago $66.4M, mainly due to a change in operating cash flow ($7.6M used in operations vs. $74.2M generated the prior year).
    • It reiterated full-year guidance for revenue of about $1B with adjusted OIBDA of "at least $200M" — assuming continued improvement in engagement and a second large-scale event and media rights deal in the MENA region. It's gotten nonbinding agreements for the MENA developments with the Saudi General Sports Authority.
    • Press release
    • Stocks extend losses after the head of the European Central Bank said "significant" monetary stimulus is needed as the outlook gets "worse and worse," raising recession fears.
    • The Nasdaq falls 0.7%, the S&P 500 slips 0.5%, and the Dow is off 0.5% in midday trading.
    • Meanwhile, corporate earnings flood in. Tesla (-14%) dips on disappointing profits, PayPal (-3.3%) falls on softer-than-expected revenue outlook and Valero (-3.5%) slides as refining margins narrow, and Netgear (+16%) surges after strong guidance and a new stock buyback.
    • All 11 S&P 500 industry sectors are in the red with energy (-1.2%) and materials (-0.9%) falling the most; consumer staples, at roughly flat, and health care (-0.2%) see the smallest declines.
    • Across the Atlantic, the Stoxx Europe 600 Index closed down 0.6%.
    • Crude oil gains 0.5% to $56.14 per barrel.
    • 10-year Treasury falls, pushing yield up almost 4 basis points to 2.086%.
    • 30-year fixed-rate mortgage averages 3.75% for the week ending July 25, down from 3.81% in the previous week and 4.45% a year ago, according to the Freddie Mac Primary Mortgage Market Survey.
    • “Mortgage rates continued to hover near three-year lows and purchase application demand has responded, rising steadily over the last two months to the highest year-over-year change since the fall of 2017," said Freddie Chief Economist Sam Khater.
    • Homebuilders are moving up. iShares U.S. Home Construction ETF (NYSE:ITB) rises 2.0%.
    • By name: KB Home (KBH +2.3%), PulteGroup (PHM +2.6%), Toll Brothers (TOL +1.9%), D.R. Horton (DHI +1.8%).
    • 15-year FRM averages 3.18% vs. 3.23% in the prior week and 4.02% at this time a year ago.
    • 5-year Treasury-indexed hybrid adjustable-rate mortgage averages 3.47% vs. 3.48% a week ago and 3.87% at this time a year ago.
    • Valero Energy (VLO -2.2%) slides after Q2 earnings match analyst consensus and revenues slip 6% Y/Y, as refining margins fell and higher corn prices cut into profits from ethanol sales.
    • VLO says Q2 operating income for its refining segment fell to $1B from $1.4B in the year-ago quarter, primarily driven by narrower discounts for medium and heavy sour crude oils relative to Brent crude.
    • But refinery throughput capacity utilization hit 94% for the quarter and volumes processed averaged 3M bbl/day in Q2, ~70K bbl/day more than in the year-ago quarter.
    • Higher corn prices cut ethanol profits by 83% to just $7M, compared to $43M in the prior-year quarter, and ethanol production volumes rose 13% Y/Y to 4.5M gal/day, largely due to added production from the three ethanol plants acquired last November.
    • Q2 operating income at VLO's renewable diesel segment rose to $77M vs. $30M in the year-ago quarter, as renewable diesel sales volumes nearly doubled to 769K gal/day.
    • VLO continues to expect capex of $2.5B in both 2019 and 2020, including ~40% for growth projects.
    • Public Service Enterprise (PEG -0.4%) CEO Ralph Izzo says the company plans to shut all but three of its fossil fuel-fired power plants in a bid to cut carbon emissions by 80% by 2046 from 2005 levels.
    • "Our gas [power plant] construction program is over. We do not have plans to purchase or expand the gas fleet," Izzo tells Reuters, noting the company will shut its last coal-fired power plant in Bridgeport, Conn., by June 2021.
    • PSEG plans to keep gas-fired plants in Sewaren, N.J., and Keys, Md., which were completed in 2018, and in Bridgeport, Conn., which was completed earlier this year.
    • In addition to shutting all but the three gas plants by 2046, Izzo says PSEG does not plan to extend the licenses of its three nuclear reactors at the Salem and Hope Creek stations in New Jersey beyond their current operating licenses, which expire between 2036-46.
    • To replace the missing generation, Izzo says PSEG will focus on its $2.5B energy efficiency program and offshore wind and solar energy projects.
    • PG&E (PCG -3.1%) says it will join a new fund to cover the cost of future wildfires in California, with an initial $4.8B contribution payable upon its emergence from Chapter 11 reorganization followed by ~$193M in annual contributions.
    • PG&E says the contributions will require financing to be resolved through the Chapter 11 process.
    • PG&E will be the largest contributor among power companies to support the new ~$21B fund designed to help California's investor-owned power companies cover liabilities from future wildfires caused by their equipment.

    • Boeing (BA -3.5%) opens with steep losses, shaving ~85 points off the Dow Jones Average's early decline, as Southwest Airlines (LUV +0.2%) scratched the 737 MAX from its schedule into next year while American Airlines (AAL -3.6%) warned that profit this year would take a $400M hit.
    • Southwest says it is removing the plane from its schedule through Jan. 5, becoming the first U.S. carrier to drop the grounded aircraft for the rest of this year.
    • LUV's operating income was lowered by $175M in the latest quarter as it parked its 34 MAX jets and did not receive the planes that were on order, and says the grounding will continue to raise costs as it cuts flight and seating capacity this year.
    • LUV says the extended grounding means the airline's flight and seat capacity will shrink this year by 1%-2%, compared with original plans to expand 5%; to help cover the void, LUV plans to defer the retirement of seven Boeing 737-700s.
    • American, which for now has left the MAX off its schedule through Nov. 2, says hangaring the jet would cause a $400M drag to 2019 pre-tax earnings, including the previous quarter's $175M hit.
    • Yesterday, Boeing CEO Dennis Muilenburg said the company could temporarily shut down production of the MAX if its return is delayed beyond the current October forecast.
    • Volkswagen (OTCPK:VWAGY -2.4%) impressed investors with revenue growth of 7% in Q2 to €65.2B and profit growth of 34% to €4.3B.
    • The company benefited from a higher sales mix of pricey SUVs and a strong performance from the Porsche business.
    • Volkswagen's performance stands out in comparison to the weaker reports turned in by Ford, GM and Nissan.
    • Previously: Volkswagen reports Q2 results (July 25)
    • Beyond Meat (NASDAQ:BYND) is up 3.19% on the day and the alternative meat stock printed yet another all-time high of $212.39 earlier in the session.
    • Following the +800% share price rally, it's hard to argue with Seeking Alpha contributor Long-Short Manager who says Beyond Meat is replacing Tesla as the latest cult stock. Despite the frothy valuation, Long-Short Manager does a deep dive into why investors should be careful shorting before early October.
    • Beyond Meat is due to report earnings on July 29. The company has already announced a flurry of partnership deals, but could be holding one back for earnings day
    • European bond yields earlier knee-jerked to new record lows after the ECB said options for new asset purchases could be under consideration.
    • They've reversed course, however, after Mario Draghi – at his post-meeting press conference – didn't sound nearly as dovish, saying there's currently no consensus for easier monetary policy.
    • Nevertheless, yields remain in strange territory, with the German 10-year Bund at -0.346%, Spanish 10-years at 0.39%, and Italy at 1.54%. And in case you hadn't noticed … Greek 10-year paper is priced to yield an even 2% – that's nine basis points less than the U.S. 10-year yield.
    • Alongside the big whipsaw in EU bond markets is a reversal in the euro – it's now higher by 0.35% to $1.1178.
    • Starbucks (SBUX +0.2%) is learning the art of driving traffic to stores around slower times, according to mobile locations analytics firm
    • The coffee chain saw a 8.9% increase in traffic during its recent Tie-Dye weekend compared to the same weekend a year ago. Starbucks' Reusable Cup Day and December Happy Hour promotions saw even bigger traffic spikes.
    • Starbucks is due to report earnings today after the bell. As always, comparable store sales will be a key focus of investors. Comparable sales are forecast to rise 4.0% during the quarter, including a 4.3% increase in the Americas and 3.4% rise in China/Asia Pacific.
    • Shares of SBUX are up 18% since Q1 numbers were dropped.
    • The airline sector is setting up for a topsy-turvy day of trading.
    • Spirit Airlines (SAVE -18.8%) set a negative tone by warning on higher costs and attracting a downgrade from Deutsche Bank, while American Airlines (AAL -4.6%) set unit revenue guidance below expectations. Also in the mix, Southwest Airlines (LUV -3.2%) extended its Boeing 737 groundings until January 5, 2020 and pulled out of Newark due to the lowered capacity expectations.
    • Delta Air Lines (DAL -1.6%), JetBlue (JBLU -0.9%), Hawaiian Holdings (HA -3.1%), Alaska Air Group (ALK -2.1%) and United Continental (UAL -2%) are all lower in early trading amid the developments.
    • Is the selling pressure overdone? In regard to Southwest, Michael Wiggins De Oliveira from Seeking Alpha's Deep Value Returns thinks investors may be missing what was a blowout quarter for the airline company due to the focus on the capacity drop. "The consistent magnitude of the share repurchases is being fully neglected by investors. As it stands right now, investors are getting 7.4% return of capital via repurchases and 1.4% forward dividend yield. Not to mention 3% top-line growth," he observes.
    • Investors have a somewhat mixed bag on Royal Caribbean (NYSE:RCL) to evaluate this morning.
    • The company sailed past Q2 estimates, but lowered its full-year EPS outlook to $9.55 to $9.65 vs. $9.65 to $9.85 prior and $9.59 consensus. Net revenue yields are expected to increase 7.75% to 8.25% for the full year on a constant-currency basis. Management points to "robust demand" for the Caribbean and says the strategic focus is paying off.
    • Shares of RCL are down 0.66% premarket to $114.58.
    • June Durable Goods+2.0% vs. 0.5% expected, -2.3% prior (revised from -1.3%).
    • Core Durable Goods: +1.2% vs. +0.2% expected, +0.5% prior (revised from +0.3%).
    • 3M (NYSE:MMM) surges in pre-market trade after reporting better than expected Q2 earningsand maintaining its full-year EPS outlook.
    • 3M says Q2 net income slid 39% to $1.13B, or $1.92/share, from $1.86B, or $3.07/share, in the year-ago period, while adjusted EPS fell to $2.20 from $3.07 and revenues slipped 2.6% to $8.17B, but results fell less than feared after the company's weak Q1 results and topped analyst expectations.
    • Q2 sales rose by a greater than expected 5.8% in Health Care, fell by an in-line 0.5% percent in Consumer, slipped by a smaller than forecast 2.9% in Transportation and Electronics, and slid 9% in Safety and Industrial, just shy of expectations.
    • "Our execution was strong in the face of continued slow growth conditions in key end markets, as we effectively managed costs and improved cash flow," says CEO Mike Roman.
    • 3M reaffirms FY 2019 guidance for in-line EPS of $9.25-9.75 vs. $9.36 analyst consensus estimate, and sees full-year organic local currency sales growth in the range of -1% to +2%, return on invested capital of 20%-22% and free cash flow conversion of 95%-105%.

  27. Quick question, here's a spread Ive got on at the moment:


    IBM Jan 2020 $120 Puts – short 5 (currently $1.35)

    IBM Jan 2021 $120 Calls – long 10 (currently $32)

    IBM Jan 2020 $130 Calls – short 10 (currently $21.5)


    if you're thinking it looks a little wonky thats because the spread started much higher and went against me at first so this result is after a couple of rolls and adjustments. (started as a 140/160 BCS). As it stands i believe $129 is my "breakeven" price on the whole position. of course i figure ill get one more roll of the short calls to squeeze a little more out of it. 

    So my question is… theres not much premium left in the Jan 2020 short calls (maybe $1-1.5). Should i wait until closer to the end of the year…let even more premium drain out of the short calls, and if IBM sells off take the opportunity to buy back while they're cheaper (and then re-sell on a pop).

    or do i just roll them now, it looks like for about $500 cost I can roll out to the 2021 $135 calls, which gets me $5 more spread and then the expiries are lined up and I can set it and forget it so to speak. 

  28. (From yesterday's chat).  Another huge quarterly loss at Tesla, on record delivery volume.  If they can't make money when they deliver 95k cars, how will they be profitable in the 2nd half of 2019? Deliveries will be lower in Q3 and Q4, with lower margins (now that they have worked through their higher margin backlog in US, Europe, and Asia), and will show significant YOY revenue declines.  What growth fund invests in declining revenue "growth" companies?  What other levers can they pull?

  29. ARR down big.  Any idea?  Thanksl

  30. ARR/Rookie – dealers read Phil's note recommending T over ARR, started passing it around, and the rest is history.

  31. Sorry, lost power for a bit.  Lightning storms going straight for my house this week.  I have UPS on the computer but the web went out.

    IBM/CRS – Everything is not a roll.  The short puts are very likely to expire worthless so it's really just a matter of margin whether or not you want to wait for the last $575.  The 2021 $120 ($32)/Jan 130 ($21.30) spread is about $10.70 and you COULD roll the $130s to the 2021 $140s at $17.60 for $4.30 ($4,300) out of pocket to widen your spread by $10,000 so that's not too bad and still in the comfort zone but your $10,700 bird in the hand (cashing out now) is only worth net $15,700 in the bush so it's a matter of whether you have better things to do with $15,000 than wait to make $5,000 more over 18 months.

    If you also sold 5 2021 $130 puts for $8.70 (net $7.35 after closing the $120 puts) that's another $3,675 on the spread and it starts to get interesting but keep in mind IBM is up 20% from where it was before so much more risk of a downturn and if that downturn will squeeze you out of the position rather than waiting for a recovery – then you are probably better off cashing out and waiting for the next sale.  

    TSLA/Palotay – Revenues were $11.7Bn in 2017 and $21.5Bn last year and this year looks like $25Bn and next year $30Bn.  Clearly they have to invest to make more cars and not just in the auto plant but in battery plants too.  Of course, I'm no TSLA fan but I would cut them a break as long as they are growing revenues on the assumption that they can eventually drop 5% to the bottom line ($1.5Bn) and that makes their $40Bn valuation at $230 only a little steep and certainly not since F sells $160Bn worth of cars and GM $150Bn and I figure globally it's 80M cars at about $30,000 each is $2.4Tn so TSLA's $25Bn is 1% of the global market and there's no reason they shouldn't make 2%, 3% even 4% ($100Bn) over time and then $40Bn is kind of a bargain if they are dropping $5Bn to the bottom line.

    That's JUST looking at the car business and then there's solar roofs and batteries (for cars and home storage) and flamethrowers and auto tubes and such — all things that people don't mind speculating on.

    In their favor is my thought that the World has no choice but to push EVs and solar tech so TSLA could benefit from a lot of Government interference over the next decade.  They have a good lead over other solar efforts but, to the downside – the CEO is a manic and the whole operation seems to be poorly managed and just may be a Ponzi scheme.

    Still, I stick to my opinion that TSLA bottoms out around $150 next year and then settles in closer to $250 so that's the channel I'm looking at into the 2020s but, if Musk cuts the crap and brings in some real auto guys who can execute production – they can eventually become a real auto company.

    ARR/Rookie – Down with the sector on crazy rate moves.  Good time to buy, good time to sell puts, bad time to sell calls.  

    SRET is interesting as it's a REIT ETF and pays 0.10 a month (no options but that's close to 10%/yr):

    As with any stock, if you buy it and SCALE in – you won't be disappointed by a 20% drop.

    Even with ARR, which was $24 in 2015 when Yodi got in and bottomed out at $18, 20% down is $19 so if you bought 1x at $24, selling $22 calls for $2.25 and $20 puts for $1.50 you net in for $20.25 and, if assigned, then 2x for $20.13 (though you'd probably roll the puts).  Then if the stock drops 20% more, to $16, if you doubled down, you'd be in 4x for net $18 avg – less dividends collected and other options sold.

    Scaling in lets you pretty comfortably ride out up to a 40% correction but you have to be PATIENT and start small and leave lots and lots of cash idle in your portfolio until you can release allocation blocks.  Generally we release an allocation block (allow ourselves to re-use what we've set aside) if it's more than 20% in the money and we don't see much likelihood of it failing AND we have hedges that cover the gains.  

    That means, if you have a $100,000 portfolio with $200,000 in buying power, you have 10 $20,000 allocation blocks and that means that, during the first year, your goal is to allocate 10 positions with about 1/4 of a full block in cash and not more than 1/2 a block ($10,000) in margin so that you could easily DD on any or all positions.

    While that may seem frustrating, bear in mind that we can usually make $10,000 (200%) for a successful $5,000 spread so 10 blocks of $50,000 can make $100,000 over 24 months, which is 100% of the entire portfolio!  That's not a bad first two years…

    That's the plan for a flat to up market.  If the market goes up fast, we release blocks early and add more or we cash early blocks and start new ones.  In a down market, we fix positions we can, cut our losses or DD and, hopefully, the downturn reverses and we have 2x of stocks we liked at much higher prices and suddenly the $100,000 we hoped to make is now $200,000 (if the market gets back on track) but, if not, we have new, lower flatline targets that are just fine. 

    I try to say it over and over and over again but WHY ARE YOU PLAYING WITH TLSA or CMG or any silly MoMo stock unless it's just some play money you have because 80% of your portfolio is already in nice, safe, steady-building long-term spreads?   

    The same goes for ARR if you don't have T or F or other companies I can be pretty confident my grandchildren will know the names of when they inherit this portfolio.  We have these things in the LTP because it has 60+ long-term positions but the OOP has NLY, which I consider the least-risky REIT – because we don't have as much room for mistakes in the much smaller portfolio and, even there, we're playing very conservative:

    NLY Annaly Capital Management Inc. 1000 2/22/2018 518 $10,200 $10.20 $-0.72 $10.20     $9.49 $-0.06 $-715 -7.0% $9,485
    NLY Short Call 2021 15-JAN 8.00 CALL [NLY @ $9.49 $-0.06] -10 3/21/2019 (540) $-2,380 $2.38 $-0.78     $1.60 $0.02 $780 32.8% $-1,600
    NLY Short Put 2020 17-JAN 10.00 PUT [NLY @ $9.49 $-0.06] -10 3/1/2018 (176) $-1,800 $1.80 $-0.84     $0.97 - $835 46.4% $-96

    It's all about managing position sizes and NOT reacting to every little move the market makes.  Stocks go up and down 20% for no reason at all quarter to quarter so the best thing to do is NOTHING unless the situation changes of the stock is more than 20% up or down and THEN you consider adjusting AFTER you make sure the Fundamentals haven't changed.  

    Look at the LTP reviews going back 2 years – 90% of the time, each month, we do nothing with our positions.  Just a few get adjusted each month and 80% of the time, they come back to where they were and, when they don't – THEN we make adjustments and 75% of the time – those work.  

    As I noted in the Webinar, of course we have some total failure of some allocation blocks but that's OK as long as most of your blocks are successful – especially when you are playing to win 200% and 300% and you cap your losses at $50,000 (and LTP allocation block size).  Even the MTP, which is just $50,000 base – has over $100,000 of potential gains lined up and their block size is just $10,000 so, as long as we don't blow more than 3 or 4 blocks – we still come out pretty well.  

    Portion control, balance, hedging and patience – that's what this is all about! 

  32. Phil,

    Thanks for the wonderful advise on portion control, balance and hedging… only if everyone follows them. Even for a small portfolio one can follow these rules. But margin requirement on a small portfolio can be challenging and hence only allows small position sizes. And due to this one can get carried away by putting more than one block in one position and wash out the portfolio if he chooses the stock that didn't work for you as well………

    thanks as always


  33. Phil, I see the revenue growth, but why give any credit to the Model 3 revenue if they have basically shown that they can't sell those cars at a profit for more than a couple months after the initial launch?  They had record deliveries in Q2 2019, and still lost $400M, and this quarter benefitted from demand pull forward due to the expiring tax credit, and they were still working through a backlog of high margin orders in Asia/UK.  They burned through the high margin orders in Q3/Q4 of 2018 in the US and reported a profit, but there isn't any evidence that there is enough demand for these higher margin cars to sustain their business.  A huge amount of capital investment was wasted to launch a model that doesn't have enough demand at profitable margins.  The 2nd half of this year will be characterized by more price cuts, less deliveries, and more loss.  They will try to change the narrative to justify asking for more capital by talking up the Model Y (which will probably cannibalize Model 3 sales, just like the Model 3 has cannibalized the higher margin Model S), autonomous driving (which they are way behind the ball, compared to Waymo, GM, etc), the Chinese gigafactory (which will have to compete with a dozen other EV manufacturers in China), etc.  I see this as a Ponzi/Madoff scheme which is completely reliant on capital markets continuing to pony up to plug the cash burn. They had positive cash flow this quarter, but a big part of it was by selling down old inventory at low or negative margin.   

  34. GOOG keeps on printing money it seems! Up big AH.

    In the meantime, AMZN not so much. Same story as usual, we keep on investing. Now it's next day deliveries.

  35.  So I am a vegan and I bought 200 shares of  BYND at 70 and Told myself I would just hold onto it for a few years and see what happened I sold it 85 because I thought it was getting a little crazy. Sometimes you just have to have patience and stick with your convictions 

  36. Seller's remorse – never admonish yourself – it damages the psyche, and remember you still made a profit. That's why they invented 'sell half' - it reduces the pain.

  37. First CRISPR study inside the body to start in US

  38. Trump is the true socialist

  39. Yogi Berra type articulation on options trading; 'As premium sellers, we all know that one of our biggest advantages is the simple fact that we don't have to be right about a stock's direction – we just have to not be wrong'. (courtesy TT).

  40. 10 Friday AM Reads

  41. US-born teen detained for weeks by CBP says he was told ‘you have no rights’

  42. Good morning!

    50% recovery this morning, we'll see what sticks.  Lots of good earnings reports though but the first batch of earners is usually the strongest.

    Not being wrong/Winston – Good quote.  Good example this week in the hedge fund as we were short(ish) CMG and long(ish) TSLA (not really long but not that short) but, because we had a very wide range and hedged our bets well, we didn't lose on either and expect to make money on both when the premiums calm down.

    Blocks/Pat – I've been noticing people don't get the dynamic nature of allocation.  In other words, when the portfolio is up 100%, we're more apt to DD and press our luck but when the portfolios are new – we're very quick to pull the plug on a bad trade – before it can hurt us and possibly force us to over-allocate.  The style of play changes as the portfolio matures.  As I noted, the LTP has close to $100,000 of short puts and about $300,000 in short calls so we KNOW we have that premium income coming in, no matter what happens so we feel more free to take a few chances with naked long calls – it's all situationally dependent.  

    TSLA/Palotay – I don't have it in me to be the defender of TSLA, as I still have a $150 target on them for next year but the point I was making is don't get too bearish because I COULD see the bull case on them based on the current data and we certainly have PLENTY of evidence that TSLA bulls tend to run back in as soon as bad news is forgotten.  Anyway, the main point is that TSLA is a car company and car companies often lose money and, over time, they find the right production mix to turn a profit – at least for a period of time.  TSLA is in a growth phase and it's very hard to make a profit in growth phase and Musk was in idiot to raise people's expectations – if he would have said: "We're going to burn through another $1Bn in capital in order to double production by the end of 2020" – no one would have thought this Q was a problem.

    GOOG up almost 10%, that's $75Bn.  There's only 30 S&P 500 companies bigger than $75Bn.  $75Bn is CAT, CVS, BMY…  GE is only $92Bn so GOOG gained a GE on earnings! 

  43. AAPL/Phil

    I have short 5 Sep 19 205 Calls paired with 20 180/225 Jan 21 BCS. I received 8.65 for the short calls. With the upcoming earnings should I get out even and wait for the results or would you suggest a roll to Nov/ Dec?

    PS: sorry for asking again if this was already answered as part of portfolio reviews. 

  44. Global shares most rise ahead of US-China trade talks

  45. Boram, 6-year-old South Korean YouTuber, buys $8 million property