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Fantastic Friday – Google Gains $75Bn Overnight


That's how much the market cap of Google (GOOG) gained overnight in a 10% run that brings their market cap to $860Bn and back in contention for the Trillion Dolllar Club.  There are only 30 S&P 500 companies valued at more than $75Bn:  GE (GE) is only $92Bn, Caterpillar (CAT) is $75.8Bn and CVS (CVS) is $72Bn so, essentially, GOOG added an entire blue chip to their valuation in overnight trading.  

Did $75Bn pour into the company?  No, not at all, the overnight trading is very thin with less than 500,000 shares trading and, even at $1,200 per share and even if every transaction were a buy and not a sell, that's only $600M of inflows yet the stock shows that investors gained over 100 times that amount.  That's one of the great illusions of the stock market, the APPARENT valuation of these companies has very little to do with actual money flows – it's more like an auction where whatever crazy price the last person bids on the last share sold becomes the price of hundreds of millions of other shares – regardless of whether there is actually demand for them or not.

Google's advertising revenue growth accelerated in the second quarter of 2019, after decelerating in each quarter since the second quarter of 2018. (David Foster/Yahoo Finance)We take advantage of this foolishness all the time in our options plays, where mispricings occur daily and I'm certainly not saying that Google, with their $60 per share in annualized earnings, don't deserve a $1,200 (20x) valuation – it's just that is certainly didn't really generate that kind of interest yet and it's a good example of how many, many stocks in this market are severely overpriced – having risen to all-time highs on very thin trading which povides very little support should sentiment ever turn negative.

This morning we're going to get our first look at Q2's GDP, which is expected to come in at 1.8% and that's down 42% from Q1s 3.1% growth rate – a very significant slow-down.  The Atlanta Fed's GDPNow forecast, in fact, has lowered their projections for Q2 down to 1.3%  – quite a bit lower than leading economorons and the market will not likely take it well if the Atlanta Fed turns out to be correct – we'll see at 8:30.

I don't know where "leading economorons" get their data but the Atlanta Fed looks at the same things I do and we both feel the economy is quite a bit weaker than 1.8% growth but this is an advanced estimate and can be wildly inaccurate – so anything can happpen.  Here's the data set so you can decide for yourself if 1.8% or 1.3% is closer to reality:


Inventories is a real wild-card in these forecasts and Mish did a good job of hashing out how complex that component is but it's interesting to note how much Business Inventories have risen over the past decade – up over $700Bn and that's a function of all these warehouses that hold all this stuff just waiting for you to hit the button on your Prime account so they can dispatch it to your home the next day.  

Amazon (AMZN), in fact, had disappointing earnings yesterday as the battle to create a one-day service heats up and begins to eat into the bottom line.  Amazon is also having the same issues Netflix (NFLX) is with the cost of content in their Prime Video service but they can't let it go now as it's the main reason people sign up these days as EVERYONE has free two-day delivery now. 

8:30 Update:  2.1% – a big upside surprise and that's good but it might not be taken that way by the market as it makes it even less likely the Fed will lower rates next Wednesday as it kind of throws their "slowing" narrative that justifies more easing right out the Window.  Not only is GDP well over estimates but so is the "Deflator" at 2.4% vs 1.8% expected and 0.6% in the prior reading indicating a massive uptick in inflationary pressure.  Keep in mind the Fed's inflation target is 2% so we're well over that mark and that indicates the Fed should be TIGHTENING policy, not loosening it!  

Real GDP: Percent change from preceding quarter, Q2 2019 Adv

Driving the GDP higher was a whopping 5% increase in Government Consumption (Table 1, line 22) that is responsible for more than the entire beat as Trump uses his out-of-control budget to engineer himself a positive GDP Report – well played Mr. President!  Personal Consumption dropped 1% from Q1 and Private Domestic Investment dove from 6.2% to NEGATIVE 5.5%, which would be catastrophic if not washed out by Government Spending and Residential Investment was also negative 1.5% – so the consumers are clearly pulling back

Exports were down 5.2% and Imports were flat so Trump is not "winning" his trade war at all as we're buying the same amount but selling significantly less – that would be the very definition of losing, actually.  Non-defense Government Spending (Trump's parade?) jumped an astonishing 15.9% – you NEVER see double digit jumps like that – what the Hell is he doing with our money???

ImageSpeaking of Hell, there's going to be Hell to pay if the Fed doesn't lower rates on Wednesday as Corporate Earnings, so far, have failed to bring down the S&P's Hussman's 10-Year Average P/E Ratio from it's all-time high of 45 times the trailing earnings and you'd better hope "this time is different" because – if it's the same – then we're looking at a massive correction in the not-too-distant future.  

We'll see what the Fed actually does next week but you can only justify these kind of valuations if Corporate Borrowing Costs remain close to zero and the Government can be expected to keep spending in order to boost the GDP – even while the consumers are cutting back after stretching their credit to the max.

One thing that is different this time – home loans aren't as out of control as they were in 2007 – that's a highly leveraged area of borrowing that we haven't repeated as it was based on an implied home value (that turned out to be wrong) rather than the actual ability to pay.  On the other hand, we now have $1.6Tn in student loans, based on the assumption that students will be able to make those payments from future wages – hopefully that premise doesn't turn out to be shaky too.

Image result for robot replace workers

Have a great weekend, 

- Phil


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  1. 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. 

  2. This market is moving sideways. I don't want to make predictions, but looking at the last 18 months, we have not had long period of sideways moves – it's been decisive moves up and down. 

  3. GDP beats at 2.1% but there will be cries again for the Fed to lower rates! And maybe another tax cut?

  4. There is some hope on the mileage rules:

    Four major automakers have reached an agreement with California to produce more fuel-efficient cars for the US market, despite efforts by the Trump administration to roll back emissions regulations.

    Honda, Ford, Volkswagen, and BMW of North America all agreed to a voluntary framework that will reduce emissions through 2026, the California Air Resources Board (CARB) said Thursday.

    Remember, more power to the states unless it's inconvenient for our corporate overlords! But there is going to be a lot of pressure on other manufacturers because 17 other states are ready to follow California.

  5. Maybe the dollar is a bit overvalued:

  6. Good Morning!

  7. What is fascinating is how we add $1T every year to the deficit and all we get is between 2 and 3% growth which is what we got before we got these budget busting tax cuts! Pay $1T and get $500B back doesn't seem like a great business argument.

  8. Good morning!


    is at it again. So different from what they used to be during the 2016 Primaries, & before – Proud Warriors! Now new Fox Polls, which have always been terrible to me (they had me losing BIG to Crooked Hillary), have me down to Sleepy Joe. Even considering…..

    ….the fact that I have gone through a three year vicious Witch Hunt, perpetrated by the Lamestream Media in Collusion with Crooked and the Democrat Party, there can be NO WAY, with the greatest Economy in U.S. history, that I can be losing to the Sleepy One. KEEP AMERICA GREAT!


    It's World Naked Bike Riding Day:

    World Naked Bike Ride London

    How come the US never participates in these things?

    AAPL/Ravi – It's a small ratio to the coverage so I'd leave it.  If AAPL is down or flat, you collect and if up a little, you break even and, if up a lot, you roll to 2x higher calls.  If you can't afford that (margin-wise) then you might want to lighten up but you are essentially asking if you should ditch your hedge ahead of earnings.  If you are that sure of earnings – why not just buy naked long calls?  The whole point to hedging is that we DON'T KNOW and you sold (properly) $4,325 worth of premium for the Q and if you do that for the next 6 Qs, that's $25,950 and yes, maybe you'll lose some but, on the whole, would you rather have a $25,950 hedge against your long position or not?

    Big Chart – Doesn't quite get safe but, technically, still strongly consolidating over the support lines.  

    Mileage/StJ – Thank goodness there are cooler heads in the room but these Conservatives are a relentless grind – the longer they are in office, the more battles we'll lose until we're well past the environmental tipping point.

    Dollar/StJ – I think it's fairly valued around 97.50 as the Yen should be zero with their 270% debt to GDP and the Euro-Zone may not survive the next decade and the Franc is too small to matter and they are killing themselves trying to prop up the Euro so we end up being the best of a bad bunch – but I think that's no contest for the Dollar.

    Good point on the deficit – we're spending 5% of the GDP in deficit, without that, we'd certainly be in a recession (as would the rest of the World).

    Really does make it kind of hard not to go to CASH!!!

  9. Added to my losing CNX position.  And sold more puts.

    Southeastern Asset Management's second quarter comments:

    • CNX Resources successfully separated its coal business from the natural gas company and has sold gas assets at good prices. CEO Nick Deluliis and the board, which includes three members suggested by Southeastern, can continue to sell some or all the company’s gas reserves, as well as monetize its pipeline assets. Insider buying has been significant. 

    Southeastern owns 29% of the outstanding including 10 million shares purchased at $7.65 last month.

  10. AAPL/Phil

    Thanks Phil. Agreed and I would like to have a hedge. 

  11. Reminded today of study that shows 800M global jobs will be lost to robots by 2030 – that's only 10 years away now:

    As our world becomes more and more technology-driven, robots could replace workers in a huge number of jobs, which could lead to a dystopian future where human life in 'meaningless, a leading scientist says (stock image)

    • A new report by McKinsey has looked at which jobs could be lost to automation
    • It suggests in about 60% of jobs, at least a third of activities could be automated
    • Jobs most likely to be taken include fast-food workers and machine-operators
    • Gardeners, plumbers and childcare workers are least at risk 

    In terms of jobs, the report suggests that physical jobs in predictable environments â?? including machine-operators and fast-food worker â?? are the most likely to be replaced by robots

    The report suggests that while some occupations will grow, others will decline, and new ones we are yet to envision will be created

    Predictable physical work, such as dishwashers and food-preparation workers will largely be replaced by robots, according to the study

    This is another thing we are in no way preparing for.  Andrew Yang is the only candidate discussing Universal Basic Income and, if we don't do something, there's going to be another 1.5Bn (the workers have families) poor people in the World in 10 years.

    Still my favorite video:

    That is this Administration's core strategy…

    CNX/Albo – Good value and probably unfairly beaten down over coal but they'll never get back to their glory days of earnings so $9 would be more than fair for them at this point.

    You're welcome Ravi.

  12. Phil – Thanks. $9 would put me in good shape.  However, I think they'll act to monetize their pipeline assets which should move the stock higher than that.  We'll see.   

  13. TSLA still going down.

    NFLX held their channel:

    AMZN testing 2.5% Rule:

    Europe is only weak bouncing so I don't know what our indexes are so excited about:

    Asia too:

    Not much faith in China talks next week:

  14. An impeachment would certainly make Americans more sick and tired than they already are….That may not be a bad thing. ;)

  15. AMZN, NFLX / Phil – Still tough to keep these guys down in the long run. They have been short killers for a long time. I remember people shorting NFLX at $100!

  16. You might be interested that  it is impossible to find Bynd meat anywhere in the stores. My guess is that the expansion into corp supplying has interrupted the delivery's to the stores. Hard to short however. It has gone up 50 points since I started looking in the past week. The swings make it difficult to hedge too & A long is risky before earnings. Any ideas appreciated.

  17. Feelings/1020 – I do talk to a lot of people who say the best thing about their vacations is not hearing about Trump for a week.

    U.K.'s Johnson insists EU drops Irish backstop

    • The stand-off between the U.K. and EU over Brexit hardens as new U.K Prime Minister Boris Johnson says there will be no new Brexit talks until the EU drops its demand for an Irish backstop.
    • The British pound falls 0.6% to $1.2386; Invesco CurrencyShares British Pound Sterling Trust ETF (FXB -0.4%).
    • The Irish backstop is a way to avoid a hard border between the Republic of Ireland and Northern Ireland if the U.K. leaves the European Union without an all-encompassing deal; Northern Ireland, part of the U.K, would remain in an arrangement with the EU until another trade deal is reached.
    • But opponents to the backstop fear that it would keep the U.K. trapped in the EU customs union forever.
    • There's no date scheduled for a meeting between the U.K. and EU to discuss the impasse, Downing Street says.
    • The Irish government, backed by its EU partners, argues that the backstop can't be removed and that the withdrawal agreement reached by former PM Theresa May can't be changed before Oct. 31, 2019, when the U.K. is slated to exit the EU.

    Google-China might be security concern, says Trump

    • President Trump tweets about Alphabet (GOOG +10.1%)(GOOGL +9.9%) as the company continues to ride high from its earnings beat and $25B buyback announcement.
    • Trump: "There may or may not be National Security concerns with regard to Google and their relationship with China. If there is a problem, we will find out about it. I sincerely hope there is not!"
    • During the earnings call, Alphabet execs said the company will cooperate with any potential investigations, which include the Department of Justice's broad probe into the market dominance of the tech giants.
    • Earlier this week, Treasury Secretary Steven Mnuchin said the administration was "not aware of Google working with the Chinese government in any way that raises concerns."

    No tariff waivers for Apple, tweets Trump

    • President Trump says Apple (AAPL +0.5%won't receive its requested tariff exclusions for Mac Pro parts.
    • Apple is reportedly planning to move production of the parts to China from the United States.
    • Trump, in a tweet: "Apple will not be given Tariff waivers, or relief, for Mac Pro parts that are made in China. Make them in the USA, no Tariffs!"

    Transocean wins five rig deals, adding $158M to backlog

    • Transocean (RIG -2.3%) unveils three new contract awards and a pair of extensions in its latest fleet status report, adding $158M to the company's backlog for a total of $11.4B.
    • In Canada, RIG secured a three-well contract for its Transocean Barents semi-submersible rig at a $285K dayrate, with three one-well options.
    • In Egypt, the Discoverer India drillship was awarded a 120-day contract at a $135K dayrate, plus six one-well options.
    • In the Gulf of Mexico, the Deepwater Asgard ultra-deepwater rig won a two-well contract at a $185K dayrate.
    • Also, options were exercised for the Leiv Eriksson semi-submersible in the North Sea and the Dhirubhai Deepwater KG1 drillship operating off India.

    White House rules out currency intervention – Kudlow

    • The White House rules out currency intervention, White House Economic Council Director Larry Kudlow told CNBC, adding that President Trump wants the U.S. dollar to remain the world's dominant currency.
    • Says Trump always has the option of using tariffs in trade negotiations.
    • Kudlow's take on China-U.S. trade talks set to restart next week: "I wouldn't expect any grand deal."
    • “Talking to our negotiators, I think they’re going to reset the stage and hopefully go back to where the talks left off in May," he said.
    • The Dollar Index rises 0.2% to 98.01.

    Alaska Air gains after guidance satisfies

    • Alaska Air Group (ALK +0.8%) trades higher after besting estimates with its Q2 report.
    • The airline company reports load factor improved 20 basis points during the quarter to 86.2% on revenue passenger mile growth of 1.1%.
    • For Q3, Alaska Air anticipates unti revenue growth of 2.0% to 5.0% and cost per available seat mile growth of ~5.0%.
    • Previously: Alaska Air EPS beats by $0.04, beats on revenue (July 25)

    Modest gains in restaurant sector after powerhouse reports

    • The restaurant sector isn't flying higher after stellar earnings reports from McDonald'sand Starbucks. By all appearances, the two chains nabbed even more market share during the quarter and may have made things tougher for peers with their out-of-the-ball park comparable sales growth.
    • The only restaurant stocks that have opened with any fizzle are McDonald's franchisee Arcos Dorados (NYSE:ARCO+4.7% and Chinese SBUX competitor Luckin Coffee (NASDAQ:LK+3.7% - while Dunkin Brands (NASDAQ:DNKN), Yum Brands (NYSE:YUM), Wendy's (NASDAQ:WEN) and Jack in the Box (NASDAQ:JACK) are all up less than 1%.

    Curaleaf responds to FDA Warning Letter

    • Curaleaf Holdings (OTCPK:CURLFannounces that it has promptly addressed the issues in the FDA Warning Letter it received a few days ago and sent a letter to the agency as required.
    • It removed all statements from its website that the FDA considered non-compliant, including the Curalead Hemp blog, third-party links and certain social media posts, adding that it had previously discontinued "a number" of the products cited in the letter.

    Goodyear Tire & Rubber down 9% on Q2 earnings miss

    • Goodyear Tire & Rubber (NASDAQ:GT) reports sales down 5% in Q2, driven by unfavorable currency translation and lower volume.
    • Tire unit volume dropped 4% to 37.4M for the quarter.
    • Original equipment unit volume down 11% Y/Y, reflecting lower global vehicle production and strategic fitment choices.
    • Replacement tire shipments declined less than 1% Y/Y.
    • Segment sales: America: $1.97B (-2%); EMEA: $1.14B (-9%); Asia Pacific: $520M (-8%).
    • Segment operating margin: America: 6.8% (-80 bps); EMEA: 3.9% (-400 bps); Asia Pacific: 7.9% (-450 bps).
    • Total segment operating margin rate slipped 240 bps to 6%.
    • GT -9.23% premarket.
    • Previously: Goodyear Tire & Rubber EPS misses by $0.09, misses on revenue (July 26)

    BAML expects Starbucks rally to extend

    • Starbucks (NASDAQ:SBUX) is on track to open at a new all-time high after an earnings report that featured broad-based strong comparable sales growth.
    • Analysts are giving the company credit for pulling the right levers, including slowing down unit growth.
    • Bank of America Merrill Lynch addresses the key issue of valuation now that SBUX is up +75% over the last 52 weeks. "We raise our price objective to $103 (from $100), or 31x CY’20 P/E. This is a step-up from our prior 30x to reflect better than expected comps. SBUX has historically traded in an 18x-31x forward P/E multiple range and we expect the stock to trade towards the higher end of this range," writes the BAML analyst team.
    • Shares of Starbucks are up 5.95% premarket to $96.36.
    • Previously: Starbucks EPS beats by $0.05, beats on revenue (July 25)
    • Previously: Starbucks +6% after comp sales dazzle (July 25)

    Intel targets raised, AMD remains concern

    • Analysts were tepid on Intel's (NASDAQ:INTC+4% Q2 beats, FY revenue outlook increase, and $1B smartphone modem sale to Apple. Competition from AMD (NASDAQ:AMD) +1.1% remains a primary concern.
    • Oppenheimer's Richard Schafer (Perform rating) notes that the raised FY19 guidance suggests a weaker H2 after accounting for the Q2 beat. He says the $1B sale of the smartphone modem business to Apple removes an EPS/FCF drag on Intel, but won't be accretive since any cost savings will go towards pulling in 7nm/10nm investments to prevent further share loss.
    • Credit Suisse's John Pitze sees Intel as underappreciated and weighed down with unnecessary investor concerns. Pitze thinks the share losses are manageable due to increased R&D spend. He sees AI and machine learning as driving overall compute TAM to over $200B from this year's $90B.
    • Intel gets a slate of price target changes: BofAML from $57 to $62, SunTrust from $54 to $58, and Mizuho from $52 to $58, to name a few.
    • Intel has a Hold average Sell Side rating.

    Analysts raise Alphabet targets after beats

    • UBS raises its Alphabet (NASDAQ:GOOG+8.6% target by $25 to $1,425 after yesterday's earnings report. The firm says Alphabet "checked every investor box" with intact long-term drivers.
    • Benchmark increases GOOG from $1,315 to $1,360 saying the company should trade at a healthy premium to the market and tech sector.
    • Pivotal raises from $1,250 to $1,350 but stays on the sidelines as Alphabet is at the greatest risk of a Department of Justice antitrust review.
    • Alphabet has an Outperform average Sell Side rating.

    Mattel execs highlight new launches

    • Mattel (NASDAQ:MAT) is up 6.33% premarket after the company tops earnings estimates and hit its full-year cost savings target six months ahead of plan.
    • The toy seller benefited from a strong quarter from the Barbie and Hot Wheels and business. During the earnings call (transcript), execs highlighted the global launch of Polly Pockets and upside with the BTS doll line. CEO Ynon Kreiz also explained the rationale for making movies like the Barbie film being distributed by Warner Bros.
    • Shares of Mattel are trading at their highest level in over three days in the early session.
    • Previously: Mattel EPS beats by $0.14, beats on revenue (July 25)
    • Previously: Mattel +5% after Barbie shines (July 25)

    Amazon still a star on Wall Street

    • Amazon (NASDAQ:AMZN) isn't being punished on Wall Street for forecasting operating income below expectations amid higher spending on delivery initiatives. While there's some picking at the margins by the sell-side firms below, none of them moved off their Buy-equivalent ratings.
    • Goldman Sachs: "While the deceleration at AWS will raise some concerns, we continue to believe we are still relatively early-stage in the shift of workloads to the cloud, the transition of traditional retail online, and the development of the advertising business. With revenue growth accelerating, we continue to believe AMZN represents one of the best risk/rewards in Internet and remain Buy-rated (NYSE:CL) with a 12-month price target of $2,400."
    • Bank of America Merrioll Lynch: "While higher costs are understandable, AWS revenue & op. income were below estimates & the one real blemish in the Q, in our view. AWS remains lumpy, and Amazon continues to add more cloud dollars than peers."
    • Evercore ISI: "While AMZN’s investment thesis was migrating to one of growing profitability from strong top-line growth, we think this print highlights that AMZN’s revenue growth acceleration story is far from dead."
    • JPMorgan: "Overall, the AMZN narrative has shifted back more toward top-line growth in 2019 as we expected, but the magnitude of acceleration & accompanying investment spend are both bigger than we projected."
    • Stifel: "We are increasing our FY:19 revenue forecast as we expect continued strength in Online Stores, and lowering our FY:19 operating margin forecast to reflect the company’s incremental investments in strategic areas."
    • Shares of Amazon are down 1.34% premarket to $1,947.45 to put just a minor dent in the +30% YTD return.
    • Previously: Amazon EPS misses by $0.36, beats on revenue (July 25)
    • Previously: Amazon -2% after earnings disappoint (July 25)

  18. BYND/Pirate – Stay away is my idea on that one! 

    McDonald's to new high after comparable sales impress

    • McDonald's (NYSE:MCD) reports global comparable sales in the U.S. were up 6.5% in Q2 to top the +5.3% consensus estimate.
    • U.S. comparable sales rose 5.7% vs. +4.4% consensus estimate on broad-based strength. International comparable sales increased 6.6%, reflecting positive results across all markets, primarily driven by the U.K., France and Germany.
    • Operating income was up 4% during the quarter on a constant currency basis.
    • CEO update: " We will continue to focus on our customers with innovative solutions to further elevate the guest experience and drive growth."
    • Shares of McDonald's are up 1.36% in premarket trading to $217.50 (52-week high territory).
    • Previously: McDonald's EPS and revenue in-line (July 26)

    Twitter +4% as mDAUs top estimates

    • Twitter (NYSE:TWTR+4.3% reports mixed Q2 results that beat on revenue but missed on EPS. The in-line Q3 view expects revenue of $815-875M (estimate: $829.2M) with operating income of $45-80M.
    • Q2 Average Monetizable DAUs were 139M versus the 135.4M consensus estimate with 110M International mDAUs (estimate: 107.4M) and 29M U.S. mDAUs (estimate: 27.97M).
    • Total ad engagements were up 20% Y/Y. Cost per ad engagement was flat with like-for-like price decreases across most formats.
    • The FY outlook expects GAAP operating expenses to grow 20% Y/Y to fuel growth and the company's top priorities. Capital expenses will fall between $550M and $600M.
    • Earnings call starts at 8 AM ET with a webcast here.
    • Press release.

    EU rejects Johnson's demand for new Brexit talks

    • New U.K. Prime Minister Boris Johnson got his first rebuff from the European Union, which rejected Johnson's demand to renegotiate the Brexit deal reached by his predecessor Theresa May.
    • The withdrawal agreement, which Parliament has rejected three times, is the "best and only agreement possible," EU President Jean-Claude Juncker told Johnson.
    • Meanwhile, Johnson said the EU will have to "rethink their current refusal" to restart talks on the agreement.
    • Among Johnhson's options — prepare the U.K. for a no-deal Brexit, call an election in hopes of gaining a majority.
    • The British pound falls 0.2% against the U.S. dollar to $1.2431. In the past month, the pound has declined 2.0% against the greenback.

    Oilfield service firms see grim outlook ahead

    • Helmerich & Payne (NYSE:HP) fell to six-month lows in today's trade as CEO John Lindsay warned of more pain ahead in the downtrodden oilfield services industry.
    • "The full effect of the industry's emphasis on disciplined capital spending continues to reverberate through the oil field services sector," Lindsay said. "We are reluctant to predict another bottom and see further softening" during the company's FQ4.
    • Lindsay said most of HP's customers have spent more than half of their drilling budgets in H1, and the company plans to exit the current quarter running 193-203 rigs, down from 207 rigs in the U.S. currently.
    • Rival driller Patterson-UTI Energy (NASDAQ:PTEN) also expects to run fewer rigs this quarter, averaging 142 vs. 158 previously.
    • Superior Energy Services (NYSE:SPN), meanwhile, said earlier this week it dropped three hydraulic fracturing fleets in Q2, bringing its total in operation to six, and that it may sell assets to raise cash.
    • The frack market "is a mess," says Jefferies analyst Brad Handler. "With every passing datapoint/call, there is little to suggest this market gets any better."

  19. BoJo getting his first reality check – the guy holds a pair of deuce and thinks that he can force the EU to renegotiate something that they have been negotiating for years now. 

  20. Brexit/StJ – Yeah, I think the EU is tired of UK's BS at this point – as would any club with 30 members where one Member is totally disrupting things and asking for special treatment as it quits.  FU – get out the door already!

    DOJ formally OKs Dish deal to enable Sprint/T-Mobile merger

    • The deal is secured: In a release, the Justice Dept. says that it's OK with a $26.5B merger of Sprint (NYSE:S) and T-Mobile (NASDAQ:TMUS), contingent on the two divesting assets to make Dish Network (NASDAQ:DISH) into a viable national wireless competitor.
    • Sprint is up 5.6%; T-Mobile up 3%; Dish is up 2.4%.
    • The DOJ and attorneys general for five states came to a settlement with T-Mobile and Sprint; notably, that excludes the 13 attorneys general who still have a suit pending to block the deal.
    • “With this merger and accompanying divestiture, we are expanding output significantly by ensuring that large amounts of currently unused or underused spectrum are made available to American consumers in the form of high quality 5G networks,” antitrust chief Makan Delrahim says.
    • Dish will pay $5B to take over Boost Mobile, Virgin Mobile and Sprint prepaid, and some airwaves to add to its own spectrum hoard, clearing what were key DOJ objections over Sprint/T-Mobile's combined power position in the prepaid wireless market.
    • T-Mobile and Sprint must make available to Dish at least 20,000 cell sites and hundreds of retail locations.
    • As reported, the deal also contains provisions to prevent Dish from selling the assets or handing over control of the agreement to a third party, for three years. Dish gets a seven-year wholesale deal to resell T-Mobile service under its brand along with a three-year operational support agreement.
    • The merger had previously received signs of support from the GOP majority at the FCC as well, making that agency's approval a formality.

    Ruble weakens after Bank of Russia cuts key rate, signals more

    • The ruble falls 0.4% against the U.S. dollar after the Bank of Russia cuts its key interest rate to 7.25% from 7.50% and signals that more cuts are likely as inflation and economic growth slow.
    • “If the situation evolves in accordance with the baseline forecast, the Bank of Russia expects to lower the key rate at one of the next meetings and return to the neutral rate in the first half of 2020,”  according to the central bank's statement.
    • The neutral rate refers to the bank's 6%-7% interest rate target.
    • One more cut would bring the key rate back to where it was before international sanctions and falling oil prices sent the  Russian economy into a tailspin.
    • Inflation rose less than expected at 4.7% in June, nearing the central, nearing the Bank of Russia's 4% goal.

    Drug pricing bill passes Senate committee

    • By a 19-9 vote, the Prescription Drug Pricing Reduction Act has advanced out of the Senate Finance Committee and will go before the full Senate this fall. The bill would cap out-of-pocket costs for medicines at $3,100 per year for Medicare beneficiaries beginning in 2022 and require drug makers to rebate Medicare if they hike prices above inflation.
    • Republicans tried to throw out the inflation provision but failed on a 14-14 vote.
    • Democrats tried to include a provision allowing the government to set drug prices but failed on a 12-16 vote.
    • House Speaker Nancy Pelosi says Democrats in the lower chamber plan to introduce a drug pricing measure in September, casting doubt on whether the House will take up the Senate version.
    • Predictably, the drug industry's main lobby group, the Pharmaceutical Research and Manufacturers of America, is opposed and spent more than $16M in H1 lobbying Congress and members of the Trump administration.
    • Selected tickers: AbbVie (ABBV +2.1%), Novartis (NVS +1.1%), Pfizer (PFE +0.5%), Merck (MRK -0.7%), Eli Lilly (LLY +1.1%), Amgen (AMGN -0.1%), Biogen (BIIB -1.3%), Gilead Sciences (GILD -0.1%), Roche (OTCQX:RHHBY +2.1%), Johnson & Johnson (JNJ -0.3%), Teva Pharmaceutical Industries (TEVA -0.1%), Bausch Health Companies (BHC +0.4%), Allergan (AGN +0.8%)

    History of U.S. budget deficits

  21. Pirate/BYND

    I've been playing small size weeklies on BYND with good success. All the dips get bought. Beyond fun gambling I'd stay away, its in ridiculous mode and no knowing what it will do any minute. For now however, it seems they want to pump it up so I've chosen to join the ride for fun. I think they try for 240 today, just a guess, nothing more. 

  22. BYND…and there it is.  Almost 240!  Wow. 

  23. Did anyone see ant news on SIG today to account for the big drop (as low as $17.12)?  I haven't found anything.

  24. Phil /AMZN


    Amazon has 87  strong buy recommendations with a PO of $2,289  average and  $2615 high.

    Perhaps there is  something  interesting 

  25. SIG/John – Moodys downgraded them and put them on negative watch.  

    "Signet's leverage will remain elevated as the company works to stabilize its operational performance and keep pace with the jewelry industry" Moody's Vice President Christina Boni stated. "Conservative financial policy will be required to improve its credit profile during its transformation," Boni further stated.

    AMZN/Advill – In the hedge fund we ended up with a 2021 spread that's $1,800/2,200 but it started out just taking advantage of short call-selling opportunities and we ended up rolling into the spread but it's working out so far and we do think they'll add 10% in 18 months.  $400Bn in sales now and they have proven they can turn on the profit taps when they want to.  Still, we came in at around $1,600 – I wouldn't initiate at $1,940 – just something to watch and hope for a dip at some point ($1,740 is the 200 dma).

  26. Phil – currently my portfolio is a lot of cash (and a handful of decently in the money positions im just kind of waiting on to play out). I would say 75% cash. 

    My question is, I was thinking of just parking a big chunk of the cash somewhere while i wait. I think IB pays a bit under 2% on cash balances, but why not park it in something like PIMCO Monthly Income fund, fairly conservative 4%+ per year, and daily liquid should I ever want to start getting into new positions? 

    Thoughts or alternative ideas? 



  27. Phil,
    Nokia (NOK) – 5G play; And options do not seem to have much premium at all; dividend is low; 

    Stock at $5.72; Jan 2021 Call Option prices

    $3 – $2.74
    $4 – $1.83
    $5 – $1.14
    $7 – $0.41

    If I want to open a long position, which of these is a better bet:
    1. Jan 2021, Bull Call Spread $4 to $7 for $1.42 
    2. Jan 2021, BCS $3 to $5 for $0.90  
    3. Or Just buy stock and hold.


  28. Or Option 4; Buy stock and Sell Jan 2020 $6 calls and Puts for $0.92 combined?

  29. DVA – Batman – good job on that one. Moving nicely in your direction.

  30. Picking up into the close, could be a good finish for the week.

    Cash/CRS – Well, if I have $200,000 in cash and I get 4% that's $8,000 for the year.  Or, I could sell 10 SKT March $16 puts for $1.50 ($1,500) and 10 T 2021 $30 puts for $2 ($2,000) and 5 CAKE 2021 $40 puts for $4.50 ($2,250) and 10 IMAX March $21 puts for $2 ($2,000) and that's $7,750 in your pocket right away and you still get $4,000 from IB and, if something exciting happens and you want to jump in the market – you're in position.  That's my preference.  

    NOK/Vkat – Good idea as I think NOK is at the end of their 5G spending cycle and ready to reap the rewards.  They do pay an 0.29 dividend (6%) but you can sell the 2021 $5 puts for 0.50 and that's 10% right there.  I'd buy the stock ($5.72) and sell the 2021 $5 calls for $1.15 and the $5 puts for 0.50 so you're netting in for $4.07 and called away at $5 is +18% plus 0.44 dividend is another 11% so 29% on a fairly conservative play is a nice way to go and worst case is you have 2x NOK at $4.54, which is 20% below the current price. 

    Now, given that are willing, for example, to buy 2,000 shares of NOK for net $ 8,140 and risk being assigned 2,000 more for $8,000 for net $16,140 on 4,000 shares – you could take that as a given and sell 20 of the 2021 $7 puts for $1.70 ($3,400) because, if they are assigned and the stock is $4, you can DD at $4 and average $4.65 so still not too bad and I'd rather get $1.70 than 0.50 for the $5 puts.

    If you want to go conservative with that concept (same budget) just sell 10 of those puts for $1,700 so no pressure and you can triple down or 2x roll them or whatever and you can then pair that with 2x (20) the $4/7 spreads at $1.42 ($2,840) so net $1,140 and now, if we're at $7+ in 2021, you have $6,000 and a $4,860 profit or, if we're at $4, you spent net $1,140 and you are assigned 1,000 at $7 ($7,000) and you buy 1,000 more for $4 ($4,000) so that's $12,140 for 2,000 shares ($6.70) and THEN you could sell more puts and calls to get back below $5.  

    So you can use the spread to make twice as much if NOK does well and not too bad shape if it doesn't though the dividend kind of swings it towards the stock-based play for me.

    As to the 2020 $6 puts – those are just 0.60 and the 2021 $7 puts are $1.70 and I'd MUCH rather have $1.70 than $6 and you can sell 1/3 as many and still pocket the same amount(ish) and then it's an easy 2x roll to a lower strike if you have to.

  31. Dollar finishing the week strong at 97.75, gold $1,415, silver $16.38.  

    Next week will be interesting – but not until Wednesday afternoon.

    Have a great weekend,

    - Phil

  32. NOK – Thanks Phil for the detailed explanation - I did not notice the dividend was $0.29; Hard to find it on their website; That changes things some.  I will ponder these options.


    Bill Miller's Hedge Fund Soars 46%




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