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Thursday – Fed Fails to Support S&P 3,000 – Now What?

Image result for wages profits chartWhaaaaaaah! 

The markets threw a little temper tantrum yesterday when they "only" got a 0.25% rate cut from the Fed and then, adding insult to injury, Chairman Powell did not promise more cuts for sure but said he might if wages stay low – so there's more incentive for our Corporate Masters to not pay us a fair share of the profits.   

As you can see from the chart on the right (which has gotten worse, not better, since), Corporate Profits do keep rising but wages have been on a completely different track – especially since the Financial Crisis as Corporations were bailed out and people were not.  The $15 minimum wage is hopefully going to balance that just a bit – but we're miles away from anything resembling a fair distribution.

Corporate Profits used to be 5% of GDP ($1Tn today) and Wages were 52% of GDP ($10.4Tn) in the 60s but now Corporate Profits are $2.4Tn and Wages are $8.8Tn but the difference is Corporate Profits are shared by the Top 1% while Wages are split by 100% of the workers, including the Top 1% who double dip by taking wages that are now up AVERAGING 300 TIMES what their workers make.  

Image result for ceo wages 2018

If you really want to Make America Great Again – maybe we should go back to the days when CEOs made 1/10th of what they do today and workers made 16% more than they do now.  That's the problem, in order for one rich guy to go from 20x the average wage to 312x the average wage – you have to take 16% away from the other 99 guys.  Why do they put up with that?

They might not for long as Democratic Candidate and Mayor of New York City, Bill De Blasio said in yesterday's debate that "We will tax the Hell out of the Wealthy" saying:

“For 40 years the working people have taken it on the chin in this country. For 40 years the rich got richer and they paid less and less in taxes. It cannot go on this way.  When I am president we will even up the score. We will tax the hell out of the wealthy to make this a fairer country.”

“Joe Biden told wealthy donors that nothing fundamentally would change if he were president. Kamala Harris said she’s not trying to restructure society. Well, I am."

Now, as much of a Socialist as I am, I still think that comes off a bit extreme but we do need to re-balance the scales if we're going to fix this country.  You can't fix the climate crisis without money and the rich people have it and the poor people don't and it is up to the Government to say that this is a time of crisis and we will have to address the issues and if that means we need to place a 20% bonus tax on Top 10% earners and Corporations to raise $2Tn a year – then so be it but "Tax the Hell out of the Wealthy" makes it sound like revenge porn – that's not what this is, we are simply redressing decades of imbalances without being unduly punative.

See – I can do Presidential..

Speaking of doing Presidential:  WTF is wrong with the Democrats that they can't explain the cost of Health Care?  Over and over again they fall into the trap of arguing about whether we can "afford" to spend $3Tn on Unversal Health Care, which is the aggreed-upon cost of covering every man, woman and child in this country for EVERYTHING, with nothing out of pocket.  Yes, that would cost $3Tn and yes, the Government would pay for it and would have to turn around and tax you to collect the money – BUT SO WHAT?  

We spend $3.5Tn now on health care but we do it in an inefficient system where the insurance companies stand between you and your doctor and decide what care you are eligible for and those insurance companies add $500Bn/year to the cost of the system over and above the calculated cost of "Socialized Medicine".  Also, we'd be covering 60M additional people (20% of the population) and eliminating deductibles – moving to an EU-style system where medical care is simply a free function of the state instead of a function of Corporate Profiteers.

We already have "death panels" – they are called insurance company review boards – they deny coverage all the time and people are driven bankrupt by medical bills every day DESPITE having insurance policies they've been paying for for years, never expecting that the particular illness they have is not fully covered or that they'll get sick enough to hit the coverage limit – which happens a lot these days as doctors find better and better ways to keep us alive longer.  

62.1% of all bankruptcies were because of medical bills, 476,754 people last year or 3 out of every 1,000 households but keep in mind that's PER YEAR so, over the course of 50 years, you have a 150 out of 1,000 chance of being one of the lucky people whose life is destroyed by medical bills.  Thankfully, if you are in the Top 1%, or even the Top 10%, you probably won't go bankrupt because you'll find a way to pay a $500,000 bill if you have to and that means the Government gets to pretend that outrageous medical bills are only a problem for the 3/1,000 people that actually have to go bankrupt – not the other 2/1,000 who end up on a payment plan that sucks up their retirement savings.

And, of course, if you are in the Top 10%, you are far less likely to choose the other very popular alternative to expensive medical proceedures – death!  Death is the 2nd most popular option for people facing ultra-high medical bills and that's chosen by hundreds of thousands of people each year who don't want to be an undue burden on their families just so they can selfishly live a little longer. 

Then there's the 45,000 US Citizens who die each year from not having Health Insurance at all.  What a crock that these politicians use a terrorist attack that happened 18 years ago to jusfify infinite militarty/security spending while more than 10 times that many people die each year from lack of health care (and thousands more from malnutrition) right in our own country.  

THAT is what the Democrats are trying to put a stop to – those Socialist bastards!

Now, if only they could figure out how to explain it properly…


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  1. If you look carefully, you can see that most of the 200 DMA are close to being flat. The Russell 200 DMA is actually going down. Overall, they are less than 1% higher than they were back in October. Going nowhere with big moves up and and down!

  2. Socialists / Phil – Some GOP guy the other day tweeted that Dems want to make the USA like Sweden and that we had to make a choice between freedom and socialism. First, I have been to Sweden and people there don't cry out for freedom. Second, they live longer and spend less on healthcare. And my response to that guy would be that Trump's GOP wants to make the USA like Russia – strong leader, control of the press, limits on protests and unlimited power to the oligarchs. I have been to both countries and I think that I'll pick Sweden…

  3. Good Morning!

  4. Universal Laws of the World

  5. Good Morning, All!

    The Webinar replay is now up!

  6. TWOU – Sold another 1/3 up $2.15.  Keeping the remaining 1/3 LT.

  7. Thanks for the AAPL wisdom yesterday Phil!

    I assume I could do the same trick and sell short 20 Jan '21 $150cs instead of the $140's to defer my tax hit to '21 and still lock in $$.

    And if I roll the 20 June '21 $200cs to Jan '20 $210s they would probably still be ruled 'naked calls' once I either sell the Jan '21 $140's or cover them with short $150s.

    Wondering why you suggest to sell the 10 JAN '21 $180 puts (vs the June ones)?


  8. Powell Fed raises as many questions as answers with rate cut

  9. "Now, if only they could figure out how to explain it properly… "


    HUGE cardboard illustrations presented by Oprah Winfrey and narrated by James Earl Jones…. :)

  10. …and as Michael Moore stated: Don't sweat the high school educated white males that voted for tdump. They're not coming back!  (nor do we want them)….

  11. Good morning!

    Indexes moving up again – no particular reason.  Volume was heavy(er) yesterday at 107M and nothing this morning (16M) so not meaningful yet.   Europe is not bouncing back like we are.

    Another nickel on /NG! (inventories 10:30 and we thought the heat wave would cause a draw)

    Big Chart/StJ – Good point, we've had a flattish 200 dma all year.

    Oh hey, we made it to Aug.  Can't say half a year to go anymore, only 1/3 now.

    Sweden/StJ – So funny how the Reps have turned "Sweden" into a curse word.  How many American people have actually been to Sweden?  Of course, having no actual knowledge of something never stops Americans from having strong opinions about it, right?

    The footage of the forest itself is beautiful, and gives a true glimpse into the quiet serenity and peacefulness of Sweden’s forests, which cover a staggering 27 million hectares; approximately 66% of the entire country’s land mass.

    The forestry business is of decisive importance for the Swedish national economy, more important than in any other EU country, apart from Finland. About 91,000 people are employed in the forest sector—some 2% of the country’s 4.5 million working employees. Although that number could be twice as high if indirectly employed professions (such as business owners in sparsely populated areas where lumbering is the dominant economic activity) are counted.

    AAPL/Wing – Sure, that's an alternative – just watch out if it hits your margin harder than you expect.  That's correct re. margin but you should talk to your broker about getting Portfolio Margin on your account as you must have $100,000 to be playing with those numbers.  PM takes a cover like a 2021 spread into account against "naked" short calls.  As to the 2021 $180 puts – I'd rather get the premium now and $180 is low enough that it's not a concern AND it balances your short call margin a bit.  I like the Jans over the Junes as you have some room to roll (to the June 2021 $170s) if you have to.

    Oprah/1020 – I never saw that.  Do you have a link?

    Back over 3,000.

  12. HBI/ – Are we still bullish? Stock a bit down after earnings.

  13. SKT off today after earnings, despite higher occupancy.  What is your take on earnings Phil?  Thank you.

  14. SPWR – up 34% today.

  15. /NG disappointed:

    HBI/Tshroy – Certainly still like them and they beat so not sure what happened:
    • Hanesbrands (NYSE:HBI) reports innerwear sales of $679M (-2.3% Y/Y) in Q2 and activewear sales of $448M (+10.5%).
    • Gross margin came in at 39.0% of sales vs. 39.5% consensus. Operating margin was level with consensus expectations at 14.0% of sales.
    • Looking ahead, Hanesbrands expects full-year sales of $6.89B to $6.99B vs. $6.95B consensus and EPS of $1.72 to $1.80 vs. $1.76 consensus.
    • CEO update: "This momentum combined with our second-half plans and visibility gives us confidence in our ability to achieve full-year guidance at the midpoint or higher. Champion bookings remain strong, additional product innovation is planned, the outlook for International contributions remains positive, and our operating margin is expanding. We are solidly on track to meet our cash flow and debt leverage goals."
    • Shares of Hanesbrands are up 2.67% premarket to $16.52.
    • Previously: Hanesbrands EPS beats by $0.01, beats on revenue (Aug. 1)

    Making $1.75 per $15.28 share seems good to me!
    • Hilton Grand Vacations (NYSE:HGV) slumps after dramatically lowering its profit guidance.
    • The timeshare specialist expects full-year EPS of $2.04 to $2.21 vs. $2.61 to $2.77 prior view and $2.69 consensus. A net deferral of $0.40 per share factored in. Adjusted EBITDA is projected to be between $379M and $399M due to lower contract sales.
    • Shares of HGV are down 18.93% to $26.51 and traded as low as $25.78 during the session.
    • Annaly Capital Management (NLY -0.1%) may dip today, "but we don't expect it to last," says SA contributor Rida Morwa of High Dividend Opportunities.
    • He sees any decline as a buying opportunity.
    • "Conditions are improving and that should be reflected as cooler heads prepare for a much better Q3 earnings report," said Morwa.
    • NLY took advantage of wider MBS spreads and increased leverage. As interest rate volatility and borrowing costs decline, NLY will see their BV and core earnings recover in the second half, he notes.
    • High Dividend Opportunities has previously assessed the challenges of high borrowing costs and interest rate volatility.
    • Disclosure: Morwa/High Dividend Opportunities are long NLY.
    • SA's Quant rating of Bearish contrasts with SA Authors' average rating of Bullish (1 Very Bullish, 4 Bullish, 1 Neutral).
    • Previously: Annaly -1.1% after Q2 EPS misses (July 31)
    • Toyota (TM +1.5%) unit sales +0.2% to 209,204 units vs. -3% forecast by Edmunds.
    • YTD unit sales dropped 2.6% to 1,361,312 units.
    • Toyota division sales up 0.4% to 184,179 units.
    • Lexus division sales down 1.5% to 25,025 units.
    • Total YARIS sales squeezed 44.5% to 1,370 units.
    • Total Corolla sales expanded 14.5% to 30,635 units.
    • Camry sales grew 3.1% to 27,134 units.
    • Prius sales fell 9.3% to 6,592 units.
    • On the SUV front, RAV4 sales -3.5%, Highlander sales +5.5% and Land Cruiser +31.7%.
    • RAV4 Hybrid sales up 147% and Prius Prime sales up 18%.
    • Morgan Stanley resumes IBM (NYSE:IBM) at Overweight with a $170 price target.
    • The firm says the company is in the "later innings of a transformation" that will bring back growth and margin expansion.
    • IBM shares are up 2% to $151.25. The company has a Hold average Sell Side rating.
    • There is shock but perhaps not awe over Cheesecake Factory's (CAKE +1.6%) acquisition of Fox Restaurant Concepts
    • "The main concepts targeted in the acquisition are 'on-trend,' high-return-on-investment growth vehicles that significantly enhance the company’s long-term growth potential," notes Raymond James analyst Brian Vaccaro on the deal in a take that is consistent with other restaurant sector analysis. Still, the challenge of integrating the new brands and the short-issues with the core business has led to some price target drops across Wall Street.
    • PT revisions on CAKE: Raymond James to $50 from $53, Gordon Haskett to $44 from $49, Maxim to $58 from $61, Telsey to $50 from $54, UBS to $47 from $51.
    • Previously: Cheesecake Factory posts mixed Q2, announces acquisition (July 31)
    • In wake of yesterday's Fed rate cut, the 10-year Treasury yield was volatile, but finished the session higher. It's resumed course lower today, now down four basis points and sitting at 1.98% – roughly matching about a 2.5-year low.
    • Yields are also off sharply on the short end, the two-year down four basis points to 1.83%.
    • TLT +0.55%TBT -1.1%
    • The takeaway from yesterday's shambles of a press conference by Fed boss Jay Powell is that we're in a 1995-96 mini-easing cycle. Old-timers will remember Alan Greenspan describing the limited number of cuts then as an "insurance policy" against recession.
    • They might also remember the markets getting way ahead of the Fed in anticipating even deeper cuts – a notion The Maestro blew to smithereens in early-1996 Congressional testimony (with resultant carnage in the bond markets).
    • For now, in a world with German 10-year yields at -0.44%, Spanish 10-years at 0.56%, and Italian 10-years at 1.56%, the 10-year U.S. Treasury yield at 1.98% looks positively fat.
    • 30-year fixed-rate mortgage averages 3.75% for the week ending Aug. 1, 2019, unchanged from the previous week and vs. 4.60% at this time last year, according to the Freddie Mac Primary Mortgage Market Survey.
    • "Going forward, the combination of low mortgage rates, tight labor market and high consumer confidence should set up the housing market for continued improvement in home sales heading into the late summer and early fall," said Freddie Chief Economist Sam Khater.
    • 15-year FRM average 3.20% vs. 3.18% in the previous week and 4.08% at this time last year.
    • 5-year Treasury-indexed hybrid adjustable-rate mortgage averages 3.46% vs. 3.47% a week earlier and 3.93% at this time a year ago.
    • The iShares U.S. Home Construction ETF (ITB +0.8%).
    • June Construction Spending-1.3% M/M vs. +0.3% consensus, -0.5% prior (revised).
    • Construction spending -2.1% vs. -2.3% prior Y/Y.
    • July ISM Manufacturing Index: 51.2 vs. 51.9 consensus, 51.7 prior.
    • Prices 45.1% vs 47.9.
    • New Orders 50.8% vs 50.0.
    • Employment 51.7% vs 54.5.
    • Beyond Meat (NASDAQ:BYND) is down 13.45% in early trading to $172.00 after last night's pricing on a share offering set up some jittery trading.
    • Investors looking for a strong defense from Wall Street on the slide in Beyond Meat's share price from a high of $239.71 might be in for a long wait. Analysts are largely bullish on the long-term story in place on BYND, but have a consensus price target of $151.40 based off of one-year earnings and growth estimates.
    • One person is dead and at least five are injured in central Kentucky following the explosion of a gas pipeline reportedly owned and operated by Enbridge (NYSE:ENB).
    • The 30-in. gas line ruptured nearly a mobile home park, and at least six mobile homes caught on fire, local officials say.
    • Flames initially were seen rising ~300 ft. in the air but "that burned off," and the biggest problem was heat and smoke, according to the director of Lincoln County Emergency Management.

    • Archer Daniels Midland (NYSE:ADM) is on watch after missing estimates on both lines of its Q2 report amid the challenging conditions of the U.S.-China trade battle.
    • Operating profit in the Origination segment came in below expectations ($71M vs. $86M consensus). Overall segment operating profit fell to $682M from $924M a year ago.
    • "We took aggressive action in the face of challenging external conditions, and we are confident that our work over the first half of the year will help deliver a stronger back half," says ADM's Juan Luciano on the path ahead.
    • Previously: Archer Daniels Midland EPS misses by $0.05, misses on revenue (Aug. 1)
    • Sprouts Farmers Market (NASDAQ:SFM): Q2 GAAP EPS of $0.30 misses by $0.01.
    • Revenue of $1.42B (+7.6% Y/Y) misses by $30M.
    • Press Release
    • Update with more details from the cut:
    • Goldman says QCOM's guidance provided a materially worse-than-expected view of the overall market demand, signaling the possibility of a weaker H2 for smartphones.
    • The firm sees particular weakness in the high-end 4G market in China.
    • Original post: Goldman Sachs cuts Qualcomm's (NASDAQ:QCOM) price target to $57 from $73 while maintaining a Neutral rating.
    • Yesterday, QCOM reported a mixed Q3 report with downside Q4 guidance.
    • Qualcomm shares are down 6.8% pre-market to $68.20. The company has a Neutral Quant rating.
    • General Motors (NYSE:GM) reports EBIT-adj fell 5.6% in Q2 to $3.0B vs. $2.65B consensus.
    • EBIT-adj was $3.0B for GM's North America business on continued truck and crossover strength, while the international business was break even during the quarter as performance outside of China improved. Adjusted automotive free cash flow was $2.5B during the quarter.
    • The automaker reaffirms full-year EPS guidance of $6.50 to $7.00.
    • Shares of GM are up 2.88% premarket to $41.50.
    • Previously: General Motors EPS beats by $0.19, revenue in-line (Aug. 1)
    • Yum Brands (NYSE:YUM) reports comparable sales rose 5% in Q2 to outpace the consensus estimate of +3.1%.
    • Comparable sales were up 6% for the KFC business and 7% for Taco Bell, while Pizza Hut lagged with a +2% comp.
    • Restaurant margin by chain" KFC 15.8% vs. 12.5% a year ago, Taco Bell 23.6% vs. 24.1% a year ago, Pizza Hut 1.6% vs. -2.4% a year ago.
    • Yum's operating margin came in at 36.0% of sales vs. 36.1% consensus.
    • Looking ahead, Yum Brands anticipates FY19 EPS of at least $3.75 vs. $3.82 consensus mark.
    • Shares of YUM are up 3.55% premarket to $116.50.
    • Previously: Yum! Brands EPS beats by $0.05, beats on revenue (Aug. 1)
    • Fannie Mae (OTCQB:FNMAexpects to pay a $3.4B dividend to the U.S. Treasury by Sept. 30, 2019; through Q2 2019, Fannie has paid $181.4B in dividends to the Treasury.
    • Q2 net income of $3.4B increased from $2.4B in Q1, driven by increases in credit-related income, net interest income and investment gains during the quarter.
    • Net worth of $6.4B as of June 30, 2019.
    • Q2 net revenue of $5.4B increased from $5.0B in Q1.
    • Q2 net interest income of $5.15B vs. $4.73B in Q1.
    • Q2 net investment gains of $461M vs. $133M in Q1.
    • Q2 total credit-related income of $1.10B vs. $510M in Q1.
    • Previously: Federal National Mortgage Association beats on revenue (Aug. 1)
    • Shopify (NYSE:SHOP) flies higher after topping estimates on both lines of its Q2 report.
    • Merchant solutions revenue rose 56% during the quarter to $209M and subscription solutions revenue grew 38% to $153M.
    • Shopify's GMV shot up 51% to $13.8B.
    • Adjusted net income was $15.8M vs. $2.5M a year ago.
    • Looking ahead, Shopify anticipates full-year revenue of $1.51B to $1.53B vs. $1.51B consensus and adjusted operating income of $20M to $30m.
    • Shares of Shopify are up 6.02% premarket to $337.00. The 52-week high is $340.84.
    • Previously: Shopify EPS beats by $0.12, beats on revenue (Aug. 1)

    The Fed Rate Cut Won't Help 

    • Crocs (NASDAQ:CROX) races higher after posting a mixed Q2 report, but lifting guidance ahead of expectations.
    • Sales were up 9.4% during the quarter to $359M, kicked higher by a 14.2% increase in the direct-to-consumer business and 18% gain for the e-commerce business.
    • Adjusted gross margin fell 170 basis points, primarily due to reduced purchasing power associated with the strength of the U.S. dollar. SG&A expenses fell to 39.4% of sales from 44.0% a year ago.
    • Looking ahead, Crocs anticipates Q3 revenue of $295M to $305M vs. $278M consensus and full-year revenue of +9% to +11% vs. +5% to +7% prior.
    • Shares of Crocs are up 4.99% in premarket action.
    • Previously: Crocs EPS beats by $0.14, misses on revenue (Aug. 1)
    • The Bank of England leaves its key bank rate unchanged at 0.75% as the U.K.'s future trading relationship with the EU has become more uncertain.
    • The British pound falls 0.5% against the U.S. dollar to $1.2105.
    • "The monetary policy response to Brexit, whatever form it takes, will not be automatic and could be in either direction," the BOE's Monetary Policy Committee said in its statement. "In all circumstances, the Committee will set monetary policy appropriately to achieve the 2% inflation target."
    • The MPC's vote was unanimous.
    • Committee also voted unanimously to maintain the stock of sterling non-financial investment grade bond purchases, financed by the issue of central bank reserves, at £10B ($12B) and to maintain the stock of U.K. government bond purchases at £435B ($527B).
    • Dunkin' Brands (NASDAQ:DNKN) reports U.S. comparable store sales growth of 1.7% in Q2, as a result of an increase in average ticket.
    • Dunkin' Donuts U.S. revenue grew 5.8% to $166.58M.
    • Dunkin' Donuts International revenue climbed 42.1% to $7.47M.
    • Baskin-Robbins U.S. comp declined 1.4% and revenue up 1.3% to $14.29M.
    • Baskin-Robbins International revenue fell 3.9% to $32.68M.
    • U.S. Advertising Funds revenue increased 4.1% to $123.59M.
    • Adjusted operating margin rate improved 120 bps to 35.4%.
    • Dunkin' Donuts U.S. has 46 net opening during the quarter to take the number of distribution points rose 2.2% Y/Y to 12,957.
    • Consolidated global points of distribution +342 Y/Y to 21,029.
    • During the quarter, the Company repurchased 132,899 shares at a weighted-average cost per share of $75.25.
    • FY2019 Guidance: Dunkin' Donuts U.S. comparable store sales: low-single digit; Baskin-Robbins U.S. comparable store sales: flat to slightly negative; Revenue: low-to-mid single digit percent growth; Adjusted operating income: mid-to-high single digit percent growth; Interest expese: ~$119M; GAAP EPS: $2.71 to $2.78; Adjusted EPS: $3.02 to $3.05; Share count: ~84M; Tax rate: ~27%; Capex: ~$40M; Dunkin' U.S. units: 200 to 250 units.
    • DNKN -0.05% premarket.
    • Previously: Dunkin' Brands Group EPS beats by $0.05, misses on revenue (Aug. 1)
    • Another day, another survey. The private Caixin/Markit factory PMI was 49.9 in July – slightly better than expected, but still in contractionary territory.
    • On Wednesday, data from the Chinese statistics bureau showed that the official manufacturing PMI contracted for three straight months, coming in at 49.6 for the month of July.
    • "Even though both the official and unofficial PMI surveys point to modest improvement for the Chinese manufacturing sector with downward pressure easing, headwinds still remain," said Julian Evans-Pritchard, senior China economist at Capital Economics.
    • Shanghai -0.8% to 2,909.

  16. SKT/John – I'm for buying more – people are idiots:

    Tanger Factory Outlet Centers (NYSE:SKT) sees 2019 adjusted FFO per share $2.25-$2.31; compares with consensus estimate is $2.23.

    Improves guidance for 2019 same-center NOI change to -1.50% to -2.25% from prior range of -2.00% to -2.75%, partly reflecting H1 outperformance.

    SKT +0.6% in after-hours trading.

    Q2 adjusted FFO per share of 57 cents, beating the average analyst estimate of 54 cents, compares with 60 cents in the year-ago quarter.

    Consolidated portfolio occupancy rate was 96.0% on June 30, 2019 vs. 95.4% on March 31, 2019.

    Q2 same-center NOI for the consolidated portfolio fell 0.1% and 0.3% YTD due to impact of prior bankruptcies, lease modifications, and store closures.

    Conference call on Aug. 1 at 8:30 AM ET.

    Previously: Tanger Factory FFO beats by $0.03, misses on revenue (July 31)

    Occupancy fell from 95.9% to 95.4% and rents are down a bit with incentives due to their competition flooding the market with offers but, overall, the results are great.  

    In the LTP, our last adjustment was:

    • SKT – I think they are very unfairly beaten down but it will be a long, slow recovery.  Let's buy back the 20 short Jan $20 calls for 0.10 and we can roll the 20 short Jan $22.50 puts at $6.80 ($13,600) to 40 of the Jan $17.50 puts at $2.40 ($9,600) for net $4,000 as we don't mind owning more this cheap and we did make $8,000 on the short calls and we sold the $22.50s for $5,400 so $13,400 in our pockets would pay for 20% of the assignment – if that happens so really our net on 4,000 more shares would be about $14 – that's what we're promising to do with this move.  Meanwhile, they are paying a $1.42/share dividend (7/30 is the next ex-date).  

    That left us with 2,000 shares of the stock, naked, and the 40 short puts but we're still over the target so no changes.  

    In the OOP, we can now add 1,000 shares of SKT for $15.37 ($15,370) and sell 10 of the March $15 calls for $1.50 ($1,500) and sell 10 of the March $15 puts for $1.50 ($1,500) to net in for $12.37 ($12,370) and we'll catch the Aug dividend (0.38) and Nov (0.38) for another $760 which will drop our net to $11,610 and a nice $3,390 (29%) if called away over $15 in March but I'm sure we'll adjust so we can keep it.

    SPWR so high we might have to close them.  My note from the LTP review was:

    • SPWR – Miles over our target but only net $13,840 out of $20,000 potential so another $6,160 (44.5%) left to gain if they just hold $7 is way better than interest in the bank so something you may want to consider with cash that is just laying around (selling more aggressive puts, of course).  Consider that if you have $200,000 in cash and you took $20,000 and put it in this trade, you'd get back $29,000 (if all goes well) in 18 months and that's 4.5% interest on your whole $200,000.

    See how that works?  

  17. Best reason ever to BE THE HOUSE!:


    Those down cycles just wreck your performance, no matter how good the good times are.  

  18. WLL – Reported a horrible quarter and cutting out 1/3 of workforce.

    Started a small position.  Bought stock at $11.10.  Sold Jan 13 calls for $1.52,  Sold Jan 10 puts for $1.60.

  19. Phil, you sounded presidential enough in the morning post.  You would get my vote!

  20. Presidential / Phil – Yesterday's was just as good too!

  21. With you on starting a WLL position, albo. No takers for the calls just yet…

  22. Someone asked about BDC's in the Webinar yesterday but I forgot which ones – feel free to re-ask here so we can get to them.

    WLL/Albo – Another thing from the Webinar, E&P still getting killed as we're in the trough of the cycle for investing.  Going to be a long, rough ride.  At least it's not like they're losing money while you wait and $11 is only $1Bn for the whole company – so I agree it's a good pickup down here.

    Year End 31st Dec 2013 2014 2015 2016 2017 2018 TTM 2019E 2020E CAGR / Avg
    Revenue $m 2,667 3,025 2,092 1,285 1,481 2,081 1,956 1,808 1,917 -4.8%
    Operating Profit $m 530.8 153.5 -2,836 -870.4 -1,531 537.9 424.9     +0.3%
    Net Profit $m 366.1 64.8 -2,219 -1,339 -1,238 342.5 258.6 105.5 150.3 -1.3%
    EPS Reported $ 12.2 2.12 -45.4 -21.3 -12.8 3.73 2.81     -21.2%
    EPS Normalised $ 17.3 13.0 -9.62 -18.1 -3.46 4.59 3.26 0.91 1.41 -23.3%
    EPS Growth % +7.6 -24.7           -80.2 +54.6  
    PE Ratio x           3.85 5.42 19.4 12.6  
    PEG x           n/a n/a 0.36 n/a

    Shares of Whiting Petroleum Corp. plunged 38% toward the biggest one-day decline since it went public 16 years ago and a record low in midday trading Thursday, after the oil and gas company announced massive job cuts after reporting a third straight quarter in which it reported a surprise loss, as well as revenue that missed its expectations, and lowered its full-year production guidance. Trading volume of 19.2 million shares was already more than triple the full-day average. The company said it reduced its workforce by 33%, or 254 employees, including 94 executive and corporate positions. The layoffs announced late Wednesday were a part of a restructuring aimed at $50 million in annual cost savings. The company swung to a net loss of $5.7 million, or 6 cents a share, from income of $2.1 million, or 2 cents a share, a year ago. Excluding non-recurring items, the adjusted loss per share was 28 cents, compared with the FactSet EPS consensus of 28 cents. Revenue fell 19% to $426.3 million, missing expectations of $456.3 million, while production increased 0.7%. For 2019, Whiting cut its guidance range for millions of barrels of oil equivalent (MMBOE) production to 45.0 to 46.5 from 46.7 to 47.7. The stock has now plummeted 58% over the past three months while the SPDR Energy Select Sector ETF has lost 4.0% and the S&P 500 has gained 2.9%

    Earnings call.

    Presidential/Skier, Buckey – Well that's two.  You both need to donate and then I only need 128,998 more individual donors to qualify for the Sept 12th debate.  Actually, that's not a big benchmark – maybe we should do that next cycle just so I can get up there with charts and graphs and actually explain economics to these idiots! 

    Image result for universal health care chart

    Related image

    Related image

    Related image

    Image result for universal health care chart

    Image result for universal health care chart

    How hard is that?

  23. Hello Phil and the Gang.  Does anyone see why KHC is moving?

  24. WLL – Thanks, Phil.

  25. What just happened?

  26. Comment content omitted because it is too long.

  27. KHC/Robert – Good article in Zacks.  

    Why Earnings Season Could Be Great for Kraft Heinz (KHC)

    Almost shocking to see it go up now.

    You're welcome Albo.

    On noooooooooooooooooooooo!  

    Our representatives have just returned from China where they had constructive talks having to do with a future Trade Deal. We thought we had a deal with China three months ago, but sadly, China decided to re-negotiate the deal prior to signing. More recently, China agreed to…
    …buy agricultural product from the U.S. in large quantities, but did not do so. Additionally, my friend President Xi said that he would stop the sale of Fentanyl to the United States – this never happened, and many Americans continue to die! Trade talks are continuing, and…
    …during the talks the U.S. will start, on September 1st, putting a small additional Tariff of 10% on the remaining 300 Billion Dollars of goods and products coming from China into our Country. This does not include the 250 Billion Dollars already Tariffed at 25%…
    …We look forward to continuing our positive dialogue with China on a comprehensive Trade Deal, and feel that the future between our two countries will be a very bright one!

    Wow, he's friggin' insane.  I told you he only wants the money – this was never about getting a deal with China and all about taxing people.  Clearly this is no way to conduct negotiations (with 2 month breaks after one day of talks and tweeting drastic rule changes). 

    Dow dropped 250 very fast.  Erases 1% gains across the board!

    This is why Trump wanted a Fed cut – so he could add more taxes. 

  28. Phil/STT

    do you see any news that has made the stock so much? sometimes it is just weird..I do not see such a big negative news after a decent earnings result.


  29. I like how interest rate decisions hurt the market in a bad way but trade decisions don't.

  30. Another $30B tax on the American people – Trump will go down as the person who raised taxes the most (on the bottom 99% of course).

    How can the GOP not see that this is a destructive way of governing or I guess they don't care. But then how can people not see that?

  31. Oil down 6% now, $55 failed! 

    $1.75 on /RB – tempting but too scary.  

    This is why we take our profits:

    STT/Pat – Down with the sector I think.  They made $1.45 vs $1.40 estimates but that was almost 30% lower than last year so nothing to get too excited about.  Still, last year was $80 so $57 is probably the bottom of the channel – certainly $55.  It's a shame as we were naked long on them and they were looking good but all unwound now though, long-term,   I don't mind paying $21Bn for a bank that considers $587M in profits to be a bad quarter. 

    Year End 31st Dec 2013 2014 2015 2016 2017 2018 TTM 2019E 2020E CAGR / Avg
    Revenue $m 9,864 10,274 10,360 10,207 11,170 11,982 11,742 11,564 11,673 +4.0%
    Operating Profit $m 2,666 2,437 2,298 2,120 2,899 2,999 2,724     +2.4%
    Net Profit $m 2,050 2,022 1,980 2,143 2,177 2,599 2,299 2,195 2,208 +4.9%
    EPS Reported $ 4.43 4.53 4.47 4.97 5.92 6.32 5.42     +7.4%
    EPS Normalised $ 4.61 5.12 5.40 5.40 6.47 6.39 5.54 5.78 6.38 +6.8%
    EPS Growth % +13.4 +11.1 +5.4 -0.07 +19.9 -1.2 -22.3 -9.57 +10.3  
    PE Ratio x           9.09 10.5 10.0 9.11  
    PEG x           n/a n/a 0.97 0.81

    So, in the LTP, we have:

    STT Short Put 2021 15-JAN 60.00 PUT [STT @ $57.83 $-0.26] -10 1/28/2019 (533) $-5,400 $5.40 $3.18 $-1.24     $8.58 - $-3,175 -58.8% $-8,575
    STT Long Call 2021 15-JAN 50.00 CALL [STT @ $57.83 $-0.26] 20 5/20/2019 (533) $27,700 $13.85 $-2.35     $11.50 - $-4,700 -17.0% $23,000

    We already bought back 20 short Jan $80 calls we sold for $7 at about $2 so +$10,000 there balances us out a bit.  We rolled the $60s to the $50s for $3,000 and now we're down $4,700 on those but not much damage done to a $100,000 allocation block so we're free to adjust.  

    The 20 2021 $50 calls ($10.25) can be rolled down to the $45 calls at $14 for $3.75 and that's not worth it so no rolling yet.  The $60 puts at $10.25 also can be rolled to the $50 puts at $5.20 but no sense in that either as I'd rather wait for 2022 to show up or at least June.

    So we just watch and wait and hopefully STT will get cheaper so we can roll down and add to it but, if not, then any move up will put us back in the black.  

    Holy crap – 500 point drop in the Dow and that's after Trump said Powell should have kept his mouth shut yesterday.

    Experts stated that the Fed should not have tightened, and then waited too long to undo their mistake. James Bullard of St. Louis Fed said they waited too long to correct the mistake that they made last December. “Mistake, Powell cut rate and then he started talking.”

    If the Dollar hadn't dropped half a point, we'd look a lot worse. 

    Image result for trump lunatic cartoon

  32. CNX has pulled back nicely.  Sold some Jan $6 puts for $.63.

  33. Well we knew it we were long overdue for a correction. Maybe it’ll drop another trillion worth of market cap tomorrow and we can start bargain hunting. 

  34. Finding a bottom but that was worse than yesterday's dip.

    Another Trillion/Dawg – This is not even a blip down from the top so far.

    Probably needs to be stated again: the president is increasing tariffs the day after the Fed Chair (whom the president chose) warned that tariffs represent the single biggest threat to the us and global economies. And he said it repeatedly.
    Boris Johnson’s new envoy to Brussels, David Frost, has told his EU counterparts that the UK will leave the bloc on October 31 'whatever the circumstances', in a tense first meeting between him and the European Commission.

  35. You know, that does not look like a very stable market – does it?

  36. Looks like BoJo is learning from the Trump school of diplomacy – break stuff up with no plans forward!

  37. The U.S. elections page on PredictItâ??s website.



    Our health care system costs us 5% of our life potential – still don't want to fix it?


  38. Phil:  Thanks for remembering to ask regarding the BDCs.  The stocks names are AINV, SAR, PNNT.  All have traded lower, but I wonder if they are worth watching as potential picks on a drop for yield, or are we too close to a potential recession cycle to make BDCs a good idea?   Research opinion is very divided on all three.  Thank you.

  39. Yikes:

    When all of these snapshots – a nuclear-armed North Korea, an uneasy Japan, a more assertive and repressive China, growing impatience over Taiwan, and mounting uncertainty over US policy – are viewed as a moving picture, it becomes clear that the stability underpinning Asia’s unprecedented development can no longer be assumed. It is difficult to imagine the future being better than the past; it is not at all difficult to imagine it being worse.

    Image result for asia unrest cartoon

  40. Trump Tax ( or sorry I mean Tariffs) I had some nice gains this year…..  sold out of them today –  SWKS, MU, completely and part of AVGO —- took profits off table and will wait ( wanted to by Xylynx but never hit my buy point).  I think Trumps staff will try to walk back his tweets tomorrow and any top I will probably exit AVGO as well.   I never thought that the fed rate was the problem….  In December – after the G20 meeting when he announced tariffs  markets crashed.  The fed also raised rates but I think this was well known and sort of took us over the edge and Apple announcement was another issue …..   The market flew up in the first qtr of the year and continued into q2 when it looked like a deal was to be closed ( almost hit new highs) ….. Then Huwawei issue came up. then no deal and markets again reacted….. This is all about Tarriffs – he will milk this out until next year, then strike up a deal ( does not matter how bad a deal it is he will close the deal declare victory and probably not even publish details of it. Markets will shoot up just in time for elections…….   This new tax is something he can walk back anytime  the Tariff thing can also be closed if we give give in…..   

  41. BDCs/John – These are all very high-risk to an economic downturn – keep that in mind.  None of them particularly interest me as they are thinly traded and SAR doesn't even have options while PNNT is limited like a REIT. 

    • AINV – They, in turn, invest in other thinly traded public companies, picking up a lot of warrants like lottery plays.  They dropped about 30% last fall and that's pretty normal during a downturn so keep that in mind if you decide to play them.  $16.25 is $1.1Bn and they did make $72M last year and $87M the year before but they are also prone to losing money in bad years, so the p/e is very fair here as they are kind of like a cyclical.  They pay a pretty reliable 0.45/qtr dividend and that's a plus but you can just sell March $16 calls for $1.30 to get started and then your worst case is a net $15 entry (10% off) or, if not, you got your dividend payments. 

    Frankly, as with all of these, I would just watch them and think about playing AFTER the next big drop – not at the top of the channel and AINV is the one I'd play as their affiliation with Apollo Global means they have easy access to more business and even cash should the need arise.  

    • SAR – No options and way too high in the channel – end of story.  Keep in mind these companies pay out most of their profits in dividends so there's really no growth unless they get lucky and rates rise so they can jack up their loan rates against money they already borrowed at cheaper rates (though it cuts both ways if rates fall, but that's not a concern at the moment).

    • PNNT – They are smaller but invest larger amounts ($10-50M) than the other two ($2-20M) so one bad loan can really bite them.  0.72 dividend is 11% so that's good but also means they have thin cash cushion against a default.  That pushes them into a don't buy for me.  

    FSK is worth watching, they are now the biggest BDC at $3Bn as they were a merger of 4 smaller companies and they've been raising cash and integrating so not looking good at the moment but might improve next year.  

    Year End 31st Dec 2013 2014 2015 2016 2017 2018 TTM 2019E 2020E CAGR / Avg
    Revenue $m 474.6 464.8 474.8 422.8 419.3 394 488 775.9 790.7 -3.7%
    Operating Profit $m 250.7 247.4 271.1 212.9 209 929 973.5     +29.9%
    Net Profit $m 265.8 194.8 38.4 294.3 182 569 657.1 386.3 393.3 +16.4%
    EPS Reported $ 1.04 0.78 0.16 1.21 0.74 2.26 2.17     +16.8%
    EPS Normalised $ 1.04 0.78 0.16 1.21 0.74 0.41 0.49 0.74 0.77 -17.0%
    EPS Growth % -28.2 -24.8 -79.7 +662 -38.6 -44.8 -7.9 +80.7 +4.59  
    PE Ratio x           14.0 11.6 7.74 7.40  
    PEG x           0.17 0.14 1.69 5.21

    Tariffs/Batman – Trump is using the tariff money as a slush fund and can spread it around into the elections – no way he lets go of it until next year, when he can use it to show what a great negotiator he is (like NAFTA II).

  42. 5, 10, & 30 year treasuries at new yearly highs.  TLT also at new yearly high.

  43. HI Phil, looking for an adjustment to my GOLD position;

    Long 20 Jan 2020 $10 Calls bought at $2.00 currently $7.05, and

    Short 10 Jan 2020 $15 Puts sold at $2.33 currently $.75  I bought back short calls and rolled down to the $10 (from my original position, left uncovered on the roll). These are the puts I originally sold. Thanks.

  44. TLT / Albo – you have to go to 2016 to find higher prices! 140 has been resistance – short potential around here?

  45. Premium on TLT not that great after all… Not a good play for me there.

  46. Gangs of Hong Kong

  47. Loving my short VXX calls (on spikes) + long TLT portfolio in this environment.