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Which Way Wednesday – Why Not Both Ways?

Image result for scarecrow both ways ozWhat a crazy week already.

Yesterday the Dow topped out Monday at 26,900 and fell back to 26,700 yesterday, closed at 26,909 and is now up another 40 points in the Futures as President Trump is back on Twitter this morning saying:

The Federal Reserve should get our interest rates down to ZERO, or less, and we should then start to refinance our debt. INTEREST COST COULD BE BROUGHT WAY DOWN, while at the same time substantially lengthening the term. We have the great currency, power, and balance sheet….. 

….The USA should always be paying the the lowest rate. No Inflation! It is only the naïveté of Jay Powell and the Federal Reserve that doesn’t allow us to do what other countries are already doing. A once in a lifetime opportunity that we are missing because of “Boneheads.”

By the way, that's not my emphasis, that's his – I have no idea how he gets twitter to make giant text like that.  In this case, Trump is not wrong(ish) as his "plan" is to have the Fed lower rates to zero and then WE can borrow $22,000,000,000,000 to "refinance" our existing debt (by confiscating existing bonds?) and then sell even longer-term bonds at 0% or maybe even BELOW 0% so PEOPLE WILL PAY US to lend us money in which case the more in debt we go – the more money we'll make forever and ever and ever – what could possibly go wrong with that plan?

The idea that large corporations precisely calculate the interest rate at which they are willing to undertake investment – and that they would be willing to undertake a large number of projects if only interest rates were lowered by another 25 basis points - is absurd.  More realistically, large corporations are sitting on hundreds of Billions of Dollars — indeed, Trillions if aggregated across the advanced economies – because they already have too much capacity. Why build more simply because the interest rate has moved down a little?  The small and medium-size enterprises (SMEs) that are willing to borrow couldn’t get access to credit before rates went negative, and they can’t now.  This simply makes Top 1% corporations richer and consolidates their monopoly as smaller companies can no longer compete on access to capital. 

Think about it, if you are a bank and you have to lend to a company at 2% – will you lend money to a company that has even a 1 in 50 chance of not being able to pay you back?  No, you're better off just leaving the money in the bank – its not worth the risk to lend to anyone who isn't AA or above.  Most companies, especially SMEs, can’t borrow easily at the T-bill rate. They don’t borrow on capital markets.  They borrow from banks.  There is a large difference (spread) between the interest rates the banks set and the T-bill rate.  

Image result for trump fed cartoonThe lower rates go, the less inclined banks are to lend and then liquidity dries up and we're really screwed.  Right now, the US is able to borrow $1Tn a year (Trump's annual Deficit) BECAUSE we are paying higher rates than the rest of the World.  If we offer 1% on our notes, as Trump would like – people will simply stop lending us money – there are actually supply and demand forces to debt notes that even Trump and the Fed can't control.  We have an ECB decision today and that matters because, as Barnhardt noted last month:

Mario Draghi, chief psychopath of the European Central Bank went full-stupid on June 5th, 2014 and announced mandated NEGATIVE INTEREST RATES on the excess reserves of European banks held and the European Central Bank.  What does this mean?  It means that when a European commercial bank deposits excess cash reserves with the ECB, the commercial bank must PAY the ECB to store that money.  The commercial bank does not earn any interest income on that money, it in fact has a percentage of its deposit CONFISCATED from its account every month by the ECB.

The publicly stated rationale behind this negative interest rate paradigm is “stimulus”.  If the banks have to pay to store cash, they will instead lend their excess cash out to customers rather than have a percentage  confiscated every month.  This is utter BS on multiple levels.  These top-tier central bankers know that negative interest rates have NOTHING to do with stimulus, and will, in fact, lead to exactly the opposite.  In fact, they know that the inevitable outcome of negative interest rates is the complete nationalization of the banking sector and total governmental control of all capital flows – which means today a CASHLESS ECONOMY.

Banks today are sitting on huge cash reserves because the economy sucks and banks have rightly discerned that lending money into a sucky economy is NOT IN THEIR BEST INTERESTS.  If the economy sucks, then lending money to Joe Schmoe to start a business is likely going to end up in default.  So, if YOU were a bank and your choice was between losing one percent by depositing money at the Central Bank at negative interest, or losing FIFTEEN percent on your loan portfolio because the economy sucks and a high percentage of your borrowers would default on their loans, which would you do?  Well, duh.  You would opt for the SMALLER loss of ONLY one percent, and you would continue to hold cash reserves and be VERY stingy with your loan portfolio.  

At a certain point in Trump's negative-rate fanstasy, the Fed's "discount window" will fall negative and that means the Fed will effectively pay Banksters (ie. the Top 1%) to borrow money while those same Banksters turn around and charge you to hold onto your money as well.  That means the more the banks borrow, the more they make and they don't have to do anything at all with the money because you're paying them to hold yours as well. 

And, if you think think this sounds ridiculous, just ask any poor person and they'll tell you that sounds just like how banking works for them as you may not care about a $3 ATM fee in your $50,000 bank account when you take out $200 but think about how a person with a $500 bank account who needs $20 and gets $17 feels.  That's how the bottom 40% (120M) of the people in this country live!  Then there's the monthly fees and the fees for checks – all those things you probably don't pay because you meet the "minimum deposit requirements" but, guess what, that's all changing now and they are coming after your money too! 

Image result for screwing the middle class cartoonWhy?  Because they've been doing it to the poor for decades and no one stopped them and now they are USED to getting that money and they want more.  Of course, it is the bank's duty to their shareholders to make more and more money every year and, if they have squeezed every last cent out of the bottom 40% – who else can they go after.  Well, we already know the answer is THE MIDDLE CLASS because we can see it getting crushed already.  Once they are done with them, they'll come for you but it will probably take a decade or more so we can ignore the suffering of the middle class just like we ignored the suffering of the poor, right?

And what happens when the Fed is PAYING Banks to borrow money?  Well Fed losses turn into Treasury losses and Treasury losses turn into National Debt so the interest Trump thinks he is saving by not paying interest on $22Tn, increase our debt by another $440Bn (2%) IN ADDITION TO the $1Tn he's borrowing in his annual budget so now it's $23.44Tn and then it's $25Tn and it's adding $500Bn a year in losses to the Fed just to pretend the money Trump borrows is "free".  Just another scam that makes Trump look good now but burdens our children and grandchildren for the rest of their lives.  

Related imageAnd, of course, all that money-printing debases the currency, causing it to lose value and that doesn't matter to me as my stocks and homes and businesses are priced in Dollars so their prices simply go up as the Dollar weakens but for poor people who are paid in Dollars and need those Dollars every day to buy commodities like food and clothing and pay for rising rents – the destruction of the buying power of the Dollar is devastating.  

As you can see from this handy chart, Trump and the Top 1% already own 43% of our (their) Nation's wealth and the next 4% own 29% more and the 15% below them own 21% leaving just 7% (I kid you not) to be divided up among the Bottom 80% and these ZIRP Fed policies will DRASTICALLY increase that wealth gap and, as I said above – there's not enough left for the Bottom 80% to give – so guess who they are coming after next?

20 years ago, the Top 1% had 36% of the Wealth but the Bush Tax Cuts and the market and housing crash caused the poor to give up their assets and guess who picked them up?  So the Top 1% gained 7% in the past 20 years and they certainly don't want to see LESS growth in the next 20 years, do they?  So where's it going to come from?  Who will get less so they can have more?

And, of course, it's not so much the Top 1% – they will eventually lose their wealth too because the Top 0.1%, just 320,000 US Citizens, own 25% of the wealth and that's doubled since 1990 and up from 7% in the late 70s (pre-Reagan).  Unfettered Capitalism is now transferring wealth from the Bottom 90% to the Top 0.1% at a record pace but it's not fast enough for our Top 0.1% President or the other Members at Mar A Lago.

Be careful out there!  


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  1. Good morning, All!

    It's been a while since our last webinar, but we're back! 

    Join Phil today at 1pm, here:

  2. Phil-UNBELIEVABLE is right. If the Fed capitulates to a rate cut we are totally without a prayer. I'm going to hope they tell him to go jump. No way Jose!!  Find another way. Maybe he can file bankruptcy for the whole country since that's what he did to clear his debts six times.

  3. Rates / Phil – I might be wrong but aren't rates also a factor of the market? The Fed can set the rates at 0% but if there are not takers, rates will rise naturally no matter what the Fed does… 

    Just read the rest of the post and you make that point :-)

  4. Yesterday the 3month rate was 1.95% and the 10-yr rate was 1.72%. If the Fed/3month rate is correct then the market/10-yr is wrong. My brain has a hard time believing that and I think there is a very good chance of a rate cut next week.

  5. Good Morning!

  6. AIMT – Up 10%.

    Largely benign briefing documents from AIMT. Hopefully the therapy gets a positive vote by the Advisory Committee panel on Friday

  7. Bought back the GME Jan $5 covers I sold yesterday which are down 45%.  

    Sold some Jan $4 puts for $.80.

  8. Hi Phil, thoughts on PLAY here? I do not have a position

  9. Phil thoughts on ACB in the cannabis industry.  Thx

  10. Good morning! 

    Had a very productive meeting with Kevin Harrington and his whole team yesterday.  If all goes well, they will pick up Hemp Boca as a marketing project and boy are they connected!  The only bug in the deal, at the moment, is they like to push products into TGT, WMT and COST and, so far, those guys are not accepting CBD products and AMZN will let us sell "Hemp" products (good for HEMP Boca) but they don't want to see THC or CBD on our website (or the products) as it causes "customer confusion".  So it's a balancing act between waiting for their policies to change or launching a new site/product line just to please AMZN.

    Either way though, it was a great expansion of the Rolodex (yes, I'm that old!) as I now have cards from people who can walk us right into those retailers at the top levels and I met big-time media buyers and Internationally connected distributors – all very good stuff!  

    So that was my day off but by the time I got home I laid down on the couch "for a minute" and passed right out, woke up at 11:30, couldn't get back to sleep until after 3 and then overslept.  I think I'm good now but, if you hear snoring during the Webinar – that will be why.

    Fed/Pirate – It would be great if they ignore Trump but I don't think Powell has the balls.  

    Big Chart – RUT is over the line so now we need to see those highs taken back without a rejection but this is a strong move overall.

    Good chance to get our prices on GME this morning!  Back to where they were on Monday as earnings disappointed but pretty much what we expected.  In fact, they have $200M set aside to buy back 1/2 of their stock at this price or 40% at $5 so I think they might have tanked it on purpose.  

    Our strategic plan is anchored on four key tenets: One, optimizing core business by improving efficiency and effectiveness in everything we do. Two, create a social and cultural hub of gaming within each GameStop store and online. Three, build compelling digital capabilities to reach our customers where ever they want to do business and give them the full spectrum of content and access to the products they are looking for and, four, transform our vendor and partner relationships, unlocking additional high-margin revenue streams and optimizing the lifetime value of every customer.

    Rates/StJ – It is a factor of the markets but if all the CBs push negative, then it's a questions of relativity.  It's a good argument for BitCoin, etc. as people will get fed up with having their money confiscated pretty quickly.  

    Putin wins again!  It's so coincidental (not collusion!) that everything Trump does works out to Putin's advantage, isn't it.  That Putin sure is a lucky guy…

    When U.S. sanctions forced Western banks to call in more than $200 million in loans from Oleg Deripaska’s automobile manufacturer last year, the Russian tycoon turned to a deep-pocketed backer to bail him out: the Kremlin.6

    Global Currency Decline Bruises Investors

    Currencies around the world are tumbling to multiyear lows against the dollar, bruising investors’ portfolios and fanning the flames of a global trade war.

    Rate cut/Mike – I think 0.25% is going to happen but hopefully not 0.5%, though even that will piss Trump off. 

    Trump making 9/11 about him in his speech.  

    According to Richard Alles, a retired deputy chief with the New York Fire Department, Mr. Trump was not a presence at ground zero.

    “I spent many months there myself, and I never witnessed him,” Mr. Alles, who was at the Rose Garden event on Monday, said in an interview. “He was a private citizen at the time. I don’t know what kind of role he could have possibly played.”

    And it's not like you wouldn't know Donald Trump was somewhere.  I know he wasn't there because I was in NJ and we watched every minute of it on TV and there was NO Donald Trump at ground zero.  Also, Trump Tower is pretty far from the WTC (about 4 miles) and there was no way to get downtown and it's very doubtful Trump could even see what he claims he saw.  

    AIMT/Albo – Does sound good to me. 

    GME/Albo – Well played. 

    PLAY/Mike – I don't know how their Sears deal is working out and that's a big investment they made (taking space in Sears stores).  They cut guidance  on 1.8% falling sales to $100M in Net Income and you can buy the whole company for $1.4Bn at $40 and we sold 2021 $45 puts for $9.15 to net $35.85 in the OOP and, in the LTP, we paired them with long 2021 $25 calls (just rolled and doubled) but already bought back the short puts.  Now they are back to where we doubled down last month and yes, I'm willing to take a stand here as this is a rough year and they are making 1/14th of their market cap – I think they can double that up over the next two years – at least $3 per share next year so $45 is a good target. 

    ACB/Options – Well they pulled out a $69M gain last year but went right back to losing $160M in Q1.  They have $350M in cash and about $1Bn in debt and you have to pay almost $6Bn for the pleasure of playing them.  I think that's madness but we're investing in MJ companies at start-up prices through PSW Investments – THAT is what makes sense to me.  The stock hasn't gone up or down more than 5% on earnings so I'd rather wait for the actual report than try to front-run it. 

    MJ is still cheap and spreads the risk, ACB is 8.3% of the ETF, their largest holding.  

    If you want to be bullish on pot company earnings, the MJ Oct $25s are $1.60 and the $26s are $1.10 so net 0.50 on the $1 spread that's 0.75 in the money is a sensible way to play – especially if you are able to salvage 0.75 from the Oct $25s and roll them to a longer-lower spread (waiting for the short calls to expire) if things don't work out this month.

    In fact, let's do 50 MJ Oct $25/26 bull call spreads for $2,500 in the STP and see how it plays out.

  11. Catching up on yesterday's comments:

    AAPL getting a nice pop off yesterday's event – clearing $220 is a big deal if they hold it.

    Another scandal/StJ – Funny enough, I don't even know which one you meant

    Oh, and another day, another scandal in the administration.

    CMG staying under $800 so far:

    New York City sues Chipotle for unfair labor practices

    FTR marching on:

    August 13th, 2019 at 3:03 pm | (Unlocked) | Permalink 

    FTR – We just sold the short puts and that's not helping.  Moody's just trashed their credit rating to Caa2 with a negative outlook – this is how, if you get enough people to believe it – fear of bankruptcy can turn into actual bankruptcy.  It's possible the company is doing this on purpose to force their creditors to restructure the debt but it's a very risky way to go.  Our average cost per share (if assigned) is now $1.69 so there's no point in selling $1 calls for 0.20 so just a "ride or die" position at the moment.

    August 16th, 2019 at 11:02 am | (Unlocked) | Permalink 

    FTR - Some would say this is also dead money but, like NAK, I think this is a fun gamble and could be a 10-bagger one day.

    FTR Frontier Comms. Corp. 6000 1/2/2018 617 $20,790 $3.47 $-2.34 $3.59     $1.13 $0.11 $-14,010 -67.4% $6,780
    FTR Short Put 2021 15-JAN 2.00 PUT [FTR @ $1.13 $0.11] -60 7/17/2019 (492) $-7,200 $1.20 $0.23     $1.43 - $-1,350 -18.8% $-8,550

    STT still rolling:

    State Street Shares Jump Amid Brighter Hopes for Lending Income

    August 16th, 2019 at 11:02 am | (Unlocked) | Permalink 

    STT – And sometimes they don't work!  WTF on this one?  This is a huge bank that's making $2Bn a year VERY CONSISTENTLY but, at $50, you can buy it for $18.6Bn.  Nothing to do but DD on this one so we'll roll our 20 2021 $50 calls at $6.40 ($12,800) to 40 of the 2021 $45 calls at $8.90 ($35,600) and now we're $20,000 in the money after spending $22,800 on the roll plus our original $27,700 puts us in 40 of the 2021 $45 calls for net $50,500 ($12.625 each) but the puts are a problem too so let's roll the 10 short 2021 $60 puts at $14.20 to 20 of the 2021 $50 puts at $7.80 - a bit better than even and we'll sell some calls when they bounce, like 20 of the Jan $57.50s, now $1 for hopefully $3.50 (the price of the Jan $50s) while we wait for STT to get back to 12x earnings (about $65/share).

    I think that's what I really like about Fundamental Investing – it's pretty simple, we just find value stocks and keep accumulating them while we wait for the market to get rational – which it actually does once in a while….

  12. oil seams to be going wrong way report wasnt too bad

  13. Yeah, I don't know what they were hoping for but it was up considerably from last week so a pretty normal pullback off a 10% run:

    • EIA Petroleum Inventories: Crude -6.9M barrels vs. -2.7M consensus, -4.8M last week.
    • Gasoline -0.7M barrels vs. -0.8M consensus, -2.4M last week.
    • Distillates +2.7M barrels vs. +0.1M consensus, -2.5M last week.
    • Futures +0.52% to $57.70

  14. Kudos to Albo on AIMT, which he was onto since April:

    Any thoughts on AIMT ?  Have been told that their new drug for peanut allergy could be a big one, although approval has been delayed .

    AIMT…let me look at their data.  I would happen to agree that if it works, it would be a big one.

    Albo Submitted on 2019/09/06 at 1:21 pm

    AIMT has produced excellent results in pivotal trials for AR101 in peanut allergy.

    Phil Submitted on 2019/09/06 at 1:34 pm

    AIMT/Albo – Well, if you are happy to own them on the downside, you could also sell the Sept $17.50 puts for $2.15, that's a nice 2-week return and nets you in for $15.35, worst case so a 33% cushion.  You could pair that with March $20 ($5.80)/22.50 ($4.90) bull call spreads for 0.90 so still a net $1.25 credit and $3.75 (300%) upside potential if they go up.

    Good teamwork!  

    RH/JMD – I always like them, we have them in the LTP already:

    RH Long Call 2021 15-JAN 80.00 CALL [RH @ $165.05 $6.17] 10 6/13/2019 (492) $31,000 $31.00 $60.50 $31.00     $91.50 $7.20 $60,500 195.2% $91,500
    RH Short Call 2021 15-JAN 130.00 CALL [RH @ $165.05 $6.17] -10 6/13/2019 (492) $-16,000 $16.00 $42.05     $58.05 $7.35 $-42,050 -262.8% $-58,050
    RH Short Put 2021 15-JAN 80.00 PUT [RH @ $165.05 $6.17] -5 6/13/2019 (492) $-10,000 $20.00 $-13.10     $6.90 - $6,550 65.5% $-3,450

    We bought them ahead of last earnings and already 130% in the money.   Net $30,000 on the $50,000 spread is still a pretty good deal!  

    OK, all caught up! 

  15. And notice we paid net $5,000 for that RH spread – boy do I love options!  

  16. Thanks, Phil.  I added some of your ideas !

  17. From Briefing:

    Oil dropping on report that President Trump is weighing easing sanctions on Iran make the rounds; This follows on speculation about a lighter hand from the Administration when dealing with Iran after letting noted hawk John Bolton resignation.

  18. The 43 most out-there lines from Donald Trump’s North Carolina rally

  19. Hands On Apple Watch Series 5

  20. Trump in some trouble

  21. Albo—-I have also been watching AIMT—do you think approval is baked into the stock at 24—thanks

  22. Savi – It should get approval.  The results are very strong with some safety issues, but that's par for the course.  Of course when you're dealing with the FDA you never know for sure.  If I had to guess, I'd say that it gets approved with new research required to determine long time effects.  If Pharm is still around perhaps he could respond.  He's the expert. 

    I tried to post this earlier.  It said I was posting too quickly. 8-)

    Or too often !

  23. Just to clarify, Friday is either a positive or negative review.  Final approval, if positive, should come in January.

    If positive, I think the stock could go higher and then sell off.

  24. Thanks Albo

  25. Phil—excited you are starting a new portfolio—missed the one you went thru in the webinar except for some positions—when do you plan to start the new one—I am back home now

  26. We did a deep review of the LTP in the Webinar so check the replay tomorrow if you missed it.

    Conclusion was we made silly amounts of money (over $400,000 in the LTP alone) since last month and we had lost $300,000 in the LTP the month before, so this is a new high and the best way to lock it in is to CASH OUT so, in the very least next week – I'm going to be looking to cut a lot of positions.  

    New/Savi – We just started Hemp Boca and that's up only 5% but with S&P 3,000 just 8 points away – I'm -pretty inclined to take the money and run on the STP/LTP and the OOP in the very least.  I might even cash out Money Talk next Weds and start a new one too.  

  27. Also, we had 5 trades that can make $25,000 ($5,000 each) in the next 5 months two weeks ago (8/29) - but some of those are already getting away:

    Thrilling Thursday – 5 Trade Ideas to Make $25,000 in 5 Months

    Wow, 5 for 5 on that set!  

  28. ok—-I will wait for the new money talk portfolio

  29. oh I missed that too—can i take the WBA trade now

  30. Which WBA trade – we have many.  

    From scratch on WBA, I would sell 5 2021 $50 puts for $4.20 ($2,100) and buy 10 of the 2021 $50 ($11)/60 ($5.75) bull call spreads for net $5.25 ($5,250) so that's net $3,150 on the $10,000 spread and you have $6,850 (217%) upside potential at $60.  That's a nice, conservative way to play them. 

  31. Merci Phil—missed the site so much --

  32. Phil – One of the AIMT trades I put on Friday was to sell the 9/20 $20 puts.

    Decided to close those out just to reduce some risk.  Up 57% on the trade.  

  33. Albo,  Thank you for AIMT.  I sold puts a few days ago when you mentioned them and closed them out today with an 75%+ gain.  I didn't know enough about the company to put in a BCS and I am happy enough for the return on the puts within a few days, plus I avoid the headline risk on Friday.  Thanks again.

  34. You're welcome, Savi – good to have you back.

    AIMT/Albo – Very nice, quick gains. 

    Looks like we're closing just under 3,000 on /ES – tomorrow's a big day!  

    • Cowen maintains an Outperform rating and $7 price target on Gogo (NASDAQ:GOGO), but the firm cites an "encouraging" meeting with management in a new note.
    • Analyst Lance Vitanza says management emphasized progress on the balance sheet and operationally, and the "various turnaround checkpoints passed," including resolving de-icing fluid challenges and "putting the American Airlines de-installs in the rearview."
    • Gogo shares are up 9.1% to $5.72. The company has a Hold average Sell Side rating.
    • Baker Hughes (BHGE -7.6%) falls and General Electric (GE +2%) rises after GE cuts its ownership stake to ~39.5% from 50.3% via BHGE's repurchase of $250M of its class B common stock and GE's secondary offering of 105M class A shares.
    • Stifel analyst Stephen Gengaro says even while BHGE shares initially weakened on the offering, the news is positive as a major step towards removing the overhang of GE's ownership; he reiterates a Buy rating and $34 price target on BHGE.
    • But analysts at RBC Capital trim their 2020 EPS estimate for BHGE to $1.50 from $1.62, citing lower operating margins as well as the change in class A share count.
    • For GE, the fact that the company is selling its BHGE stake at current prices – Tuesday's $24.11 closing price suggests the sale will yield ~$3.2B, or $400M lower than would have been implied if GE's March valuations had held – signals it does not expect much of a rebound anytime soon and that it cannot afford to wait around for one, Bloomberg's Brooke Sutherland writes.
    • Chesapeake Energy (CHK +0.3%) surrenders sizeable early gains amid a drop in crude oil prices, but some Wall Street analysts are upbeat on the company's plan to issue 250M-plus common shares in exchange for debt.
    • CHK slid 3.2% yesterday after it unveiled an agreement with a “large, multi-asset investment manager” to issue 250.7M common shares for $458M in convertible preferred stock and senior notes.
    • SunTrust's Neal Dingmann says the debt-for-equity swap simplifies CHK's capital structure and is a "good faith move" to signal to investors that the debt market is open as the company looks for strategic ways to reduce debt.
    • Imperial Capital's Jason Wrangler also likes the move,  saying while CHK "has used asset sales and other initiatives to reduce debt over the last few years, in the current environment with volatile/low commodity prices and limited capital markets access, this transaction is one of the few tools available" to the company.
    • Forever 21 is expected to file for bankruptcy as early this weekend, sources tell The Wall Street Journal.
    • The retailer is expected to close some of its stores during the bankruptcy process.
    • Forever 21 is Simon Property Group's (NYSE:SPG) seventh-largest in-line tenant in terms of how much rent it brings the landlord, with 99 stores across its portfolio.
    • The Senate Committee on Commerce, Science and Transportation has set a hearing next Wednesday at which it will hear from Facebook (FB +1%), Twitter (TWTR -0.2%) and Google (GOOG +0.7%GOOGL +0.7%).
    • The title of the hearing is “Mass Violence, Extremism, and Digital Responsibility" and it's the latest summoning of Big Tech to Capitol Hill to speak about societal effects.
    • "In light of recent incidents of mass violence, this hearing will examine the proliferation of extremism online and explore the effectiveness of industry efforts to remove violent content from online platforms," the committee says in its description.
    • GameStop (GME -9.4%) tipped off during its earnings call that it's on track to close between 180 and 200 underperforming stores globally by the end of the fiscal year.
    • The company says the planned closings are more opportunistic, but it will apply a more "definitive analytic approach" in the future that it anticipates will yield a much larger tranche of closures over the coming 12 months to 24 months.
    • "Optimizing our store base for an increasingly digital world is essential for the future and increasing the profit productivity," stated CEO George Sherman during the call.
    • GME earnings call transcript
    • Bank of America Merrill Lynch crunches the numbers to find a huge content advantage for Netflix (NFLX +0.8%) vs. Apple TV+.
    • "While we are closely monitoring the heightened competitive environment for Netflix, we don’t see Apple TV+ in its current form as likely to disrupt Netflix’s positioning as the subscription video-on-demand staple for consumers," notes analyst Nat Schindler.
    • The BAML team notes Apple TV+'s 9 titles available at launch is dwarfed by the +400 original series titles available on Netflix today and grand total of 3,992 movies and 1,823 series available on the service.
    • "We see Apple TV+ as likely to be hit-driven in the near term, with subscribers turning it on and off based on whether a series gains mainstream appeal. Until Apple’s content library gains scale to compare to Netflix or Amazon, it is likely as a nice-to-have for Apple device users/buyers and no substitute for Netflix’s large catalog of licensed content and originals."
    • The firm has a Buy rating and price objective of $450 on NFLX vs. the sell-side consensus rating of Outperform and PT of $387.68.
    • President Trump confirms that he's looking at various options with background check laws.
    • Trump held a bipartisan conversation with a group of Senators today on the issue, with both Democrats and Republicans stating the conversation went well.
    • Senators expect Trump to clarify his position within the next few days, which could allow some legislation to move forward.
    • Related stocks: Vista Outdoor (VSTO +6.2%), American Outdoor Brands (AOBC +1.7%) and Sturm, Ruger (RGR +1%).
    • The Trump administration is prepping a ban on flavored e-cigarettes as federal agencies probe an outbreak of a lung problem that killed at least six people and reportedly led to the sickness of hundreds of others. A potential link between THC vaping and lung disease is at the heart of the investigation.
    • President Trump and U.S. Health Secretary Alex Azar have both confirmed that a ban is possible after the vaping issues are investigated.
    • The potential for federal action has been telegraphed to investors over the last few weeks.
    • Related stocks: Altria (NYSE:MO), Philip Morris International (NYSE:PM), British American Tobacco (NYSE:BTI), Vector Group (NYSE:VGR), Imperial Brands (OTCQX:IMBBY).
    • The White House will hold meetings today with representatives from the biofuel and oil refining industries, as the Trump administration seeks a deal to help farmers by pumping up U.S. ethanol demand, Reuters reports.
    • The separate meetings – one with agriculture reps, another with oil refiners – reportedly will discuss Trump's plan to increase biofuel blending mandates after its decision last month to exempt 31 refineries from an obligation to blend ethanol with gasoline angered farmers.
    • So far, a proposal to boost nationwide blending quotas by 1B gallons next year has fallen short of demands of farmers and the biofuel industry.
    • PulteGroup (PHM +1.2%) is upgraded to to Overweight from Neutral at J.P. Morgan as part of an overall cautious report on the homebuilding sector.
    • Although the sector is up 44% YTD, driven by a rebound in several fundamental metrics and a decline in interest rates, the stocks still contain "some modest remaining upside potential," JPM analyst Michael Rehaut writes while cautioning that volatility in the group over the last 18 months requires a disciplined approach to the group.
    • PHM's valuation is attractive relative to the company's fundamental outlook, Rehaut says, who also upgrades Century Communities (CCS +4.4%) to Overweight from Neutral and Meritage Homes (MTH +3.5%) to Neutral from Underweight.
    • Also, Rehaut downgrades NVR (NVR +0.5%) to Underweight from Neutral following the stock's YTD outperformance and LGI Home (LGIH +2.4%) to Neutral from Overweight, while reiterating Overweight ratings on Lennar (LEN +1.4%), Taylor Morrison (TMHC +2.2%) and William Lyon Homes (WLH +3%).
    • General Motors (GM -1.6%) announces a recall of ~3.4M late-model pickup trucks and sport-utility vehicles in the U.S. to address a braking issue that could increase the risks of crashing.
    • The automaker says in rare instances a mechanical vacuum pump that assists in braking may lose output over time, particularly at lower speeds. reducing the vehicle’s brake-assist function.
    • The NHTSA opened a probe on the issue last year after receiving 111 incident reports, including reports of nine crashes and two injuries.
    • The GM recall action covers 2-14-2018 Chevrolet Silverado and GMC Sierras, as well as 2014-2018 Chevy Tahoes and Suburbans, GMC Yukons and Cadillac Escalades. The recall will see dealers recalibrate the electronic brake control module at no cost to customers.
    • John Bolton was fired after going ballistic over the president's interest in discussing eased sanctions on Iran as a way to bring that country's government to the negotiating table, reports Bloomberg.
    • "Bolton made sure to block any and all avenues for diplomacy with Iran, including a plan being brokered by (France's) Macron," says the Carnegie Endowment's Suzanne DiMaggio.
    • The report has helped send crude oil to a 2% loss on the day, now changing hands at $56.25 per barrel. USO -2.4%

    • Sociedad Quimica y Minera de Chile (SQM +3%) says it expects to spend $2.1B over the next five years to boost lithium production amid an expected increase in demand for the battery metal.
    • More than $1.3B will be in lithium operations, with further amounts going towards growing its nitrates and iodine capacity and maintenance, CEO Ricardo Ramos says in an investor presentation.
    • Ramos expects SQM's lithium sales volume to reach 173K metric tons by 2025 through operations in Chile and Australia, which could result in a gross profit contribution of ~$1B by 2025.
    • "Considering both demand fundamentals and supply cost structure, equilibrium price could be higher than historic average, even in double digits," according to the presentation.
    • California Gov. Gavin Newsom, in an interview with the Wall Street Journal: "As it relates to Uber (NYSE:UBER), Lyft (NASDAQ:LYFT), DoorDash (DOORD), others, some of the gig platforms, these remain ongoing negotiations, and regardless of what happens with AB5, I am committed, at least, to continuing those negotiations."
    • California legislators approved Assembly Bill 5, which requires companies like Uber and Lyft to treat contractors like employees. The proposed law would take effect on January 1, 2020.
    • Uber shares are up 3.9% to $34.82. Lyft is up 7.1% to $48.68.
    • Building on a collaboration announced last year, BAE Systems (OTCPK:BAESY +1%) has reached an agreement to acquire Prismatic as it looks to continue its development of solar-powered drones.
    • The aircraft being developed, called the PHASA-35, has a wing-span of 35 meters and weighs 150 kilograms, including a 15 kilogram payload.
    • Applications could include the delivery of 5G networks, border protection, disaster relief and surveillance.
    • The Philadelphia Semiconductor Index is up 1.1% compared to the tech sector's (NYSEARCA:XLK0.4% gain, +0.5% for the Nasdaq, and +0.3% for the S&P 500.
    • Semis move following Apple's fall launch event yesterday, which featured the expected incremental iPhone updates but pleased analysts with the lower-than-expected Apple TV+ pricing.
    • Micron is still gaining after this morning's Longbow upgrade on improving memory trends.
    • Earlier today, China exempted some U.S. goods from its retaliatory tariffs ahead of a planned meeting between the countries, which boosted optimism for China-exposed sectors.
    • Top semi movers: Inphi (IPHI +3.3%), Marvell (MRVL +3%), Skyworks (SWKS +3.1%), Silicon Labs (SLAB +2.5%), MKS Instruments (MKSI +1.7%).
    • Bank of America maintains a Buy rating on Apple (AAPL +1.7%) and raises the target from $240 to $250 after yesterday's fall launch event.
    • Key quote: "Perhaps the biggest surprise at the event was monthly price for Apple TV+ service, which was set at $4.99/month, which is lower than we expected, which makes it more attractive and can drive higher number of subscribers."
    • Barclays (Equal Weight, PT from $192 to $207): "The biggest surprise for us is $4.99/month for TV+ with a free one-yer subscription if customers purchase a new Apple device. This is reasonable pricing, given the small number of programs available during the first year, and should help Apple gain an initial audience base for its content."
    • The Lovesac (LOVE +20.3%) reported Q2 sales growth of 44.8% Y/Y to $48.15M, Comparable showroom sales increased 31.8% and Internet sales increased 71.5%.
    • Q2 Gross margin declined by 321 bps to 50.4%, decrease was driven by impact of the 10% China tariffs partially offset by reduced costs of Sactionals and Sacs products.
    • Q2 Net loss reduced to $4.77M, from $6.97M a year ago.
    • Adj. EBITDA loss expended to $3.3M, from $2M a year ago.
    • SG&A expenses were $22M (+7.3% Y/Y); and as percentage of sales 45.6%, down by 1,591 bps.
    • Net Cash used in operating activities was $23.04M, compared to $13.29M a year ago.
    • Company opened two new showrooms during the quarter.
    • “Given our first half performance and our plans for the remainder of the year, we are reiterating our full year outlook for 40% to 45% revenue growth and positive Adjusted EBITDA”, commented Shawn Nelson, CEO.
    • Previously: Lovesac EPS beats by $0.20, beats on revenue (Sept. 11)
    • A survey by Wells Fargo indicates that Walmart (WMT -0.4%) has remained aggressive on pricing in the grocery business this month.
    • The firm reports Walmart's basket slipped 1.5% in price during September from August and is down 1.7% compared to a year ago. The lower grocery prices at Walmart compare to flat prices at Kroger (KR -1.7%) in September for its comparable basket and prices that are up 0.7% YTD.
    • Weakening CPI data and Walmart's incremental ramp in price intensity are seen as negatives for the food retail space in general.
    • Related stocks: Grocery Outlet Holdings (GO +4.3%), Ingles Markets (IMKTA +1.7%), Target (TGT +0.2%), Sprouts Farmers Market (SFM -1%), Casey's General Stores (CASY -0.4%).
    • General Dynamics Mission Systems (GD -0.1%) has released the new Bluefin-12 autonomous unmanned underwater vehicle at Defense and Security Equipment International 2019.
    • It uses shared Bluefin Robotics' core capabilities, increased mission modularity and embedded intelligence to complete users' long endurance, high-consequence and changing missions.

    That's getting a bit scary…

    Nas up 1% but not that impressive with AAPL up 3%.  RUT up 2% – that's crazy!

  35. 3,000.89 at the close – why not!  

    Big stick on /YM too. 

  36. Great trade John C ! 

    Glad you got in.

  37. Future flying higher. 

  38. Is It Time to Quit Vaping?

  39. Let Trump Destroy Trump

  40. Apple Learned Its Lesson