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Just Another Manic Monday – More Signs of Global Slowing Amid China Troubles

Related imageLet's see what kind of trouble the World got into over the weekend:

So it's the same old, same old but, fortunately, we don't care because we CASHED OUT almost all of our positions last week and now we've got ringside seats for Q4, which starts in a week – it's going to be FUN!

It's not that we're particularly short on the markets – we aren't making many short bets – it's just that we've lost faith in the bullish premise and we do expect a correction but, the way the Fed and the Trump Adminstration rush in to prop up every dip in the markets – we're certainly not ready to make a bear case.  

Image result for halloween scary economy cartoonThe same cannot be said for our friend David Rosenberg, who expects a PAINFUL pullback in the next 12 months EVEN if the Fed were to cut rates to ZERO.  “The economy is already slowing down,” Rosenberg said. “Earnings are actually contracting.”  Well Duh!, Dave – we've been talking about that for ages.  The question is – will it MATTER?  Back in 2007, I used to call it the "It Just Doesn't Matter" rally as the market just seemed to ignore any bad news and go higher and higher – no matter what was thrown at it until, suddenly, in the fall of 2008 – EVERYTHING started to matter and all the good news in the World wasn't going to help.

Double Line's Jeff Gundlach says the odds of a Recession are certainly rising and that the consumers are starting to concern him as they begin to have doubts that America will be great again and curtail their spending, something that is already in evidence as Savings Rates are up 8.2% this year – that's not something Consumers tend to do when they feel confident about the future.  

Will any of this stuff matter in Q4, well the reason we opted not to risk our very strong annual gains into the last quarter is earnings are in serious decline and Q3 actual earnings and Q4 guidance will give us something close to year-end totals and, if they turn out to be disappointing overall – then how do you continue to justify record-high market prices?  We don't know whan things are going to turn – just that they will – so better safe than sorry.

We'll see our own PMI report at 9:45 this morning and then we have 3 Fed speakers to start the week off with a good spin.  The Chicago Fed was a bit better than expected this morning but +0.10 is something to rave about but better than last month's -0.41.  Tomorrow we get the Richmond Fed Report as well as Consumer Confidence and some housing date.  Wednesday we are graced with 3 more Fed speaders and more housing data but Thursday is amazing with 5 Fed speakers, GDP, Corporate Profits, the KC Fed, Business Inventories AND a 7-year note auction.  Friday is still interesting with 2 more Fed speakers, Durable Goods, Personal Income, Consumer Sentiment and Farm Prices – what a week!

That's 13 Fed speakers in 5 days (3 are Thursday afternoon) so we should be good and confused as the month comes to a close.  Even if people do want to sell off – we have end-of-quarter window-dressing into Friday and we ended June at 2,945 so closing Q3 on a positive note will give all those Fund Managers and Financial Advisers something to brag about as they ask you to trust them in Q4 (which did not work out well last year AT ALL) so you can expect our friendly Banksters to pull out all the stops to keep us as close to 3,000 on the S&P as they can.

We're still getting quite a few major earnings reports though now it's more the early reporters for Q3 than the late ones for Q2 – either way, we love the data and we're not totally against picking up bargains if we get silly sell-offs – we're just not likely to make any major commitments until we see a proper correction in the broader market.

Image

 


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  1. September 23rd, 2019 at 8:45 am | Permalink Ignore this user

    I would say we look toppy, but this market is like trained seals at a circus waiting for the next tweet!


  2. September 23rd, 2019 at 8:48 am | Permalink Ignore this user


  3. September 23rd, 2019 at 8:49 am | Permalink Ignore this user

    Looks like ZeroHedge was predictive when they picked their name – zero hedge needed since then!

    What the market turn now!


  4. September 23rd, 2019 at 9:00 am | Permalink Ignore this user

    Good Morning!


  5. September 23rd, 2019 at 9:07 am | Permalink Ignore this user

    Good Morning


  6. September 23rd, 2019 at 10:02 am | Permalink Ignore this user


  7. September 23rd, 2019 at 10:05 am | Permalink Ignore this user


  8. September 23rd, 2019 at 10:13 am | Permalink Ignore this user

    Good morning!

    Not so much for the indexes, they are still looking weak despite the Dollar fading back.


    VIX not too worried yet.

    Is $2.50 now the low on /NG?  End of an era…

    Big Chart – Will take a lot more than this to do technical damage. 20 dmas crossing over 50 dmas will provide more lift if they hold up today.

    ZH/StJ – I'll give them credit for the rally before Trump!

    Softbank chart is cool but they need to move WeWork back below One97 now….  cool


  9. September 23rd, 2019 at 10:27 am | Permalink Ignore this user

    Phil / TEVA,

    I thought we had a position for TEVA in LTP? Did miss it? I like the stock and had sold Jan 21 $13 puts. Would you recommend any adjustments here?

    Thanks 

    Pat


  10. September 23rd, 2019 at 11:15 am | Permalink Ignore this user

  11. September 23rd, 2019 at 11:15 am | Permalink Ignore this user
    The Green Rush
    By: David Remnick


  12. September 23rd, 2019 at 11:15 am | Permalink Ignore this user

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  17. September 23rd, 2019 at 11:16 am | Permalink Ignore this user
    EIA’s International Energy Outlook 2019
    By: Tuesday, September 24, 2019 9:00 am – 12:00 pm CSIS Headquarters, 2nd Fl A/B


  18. September 23rd, 2019 at 11:16 am | Permalink Ignore this user

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  22. September 23rd, 2019 at 11:17 am | Permalink Ignore this user
    Climate protests bring gridlock to DC morning traffic
    By: Doug Criss and Jay Croft, CNN


  23. September 23rd, 2019 at 11:17 am | Permalink Ignore this user

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  27. September 23rd, 2019 at 11:18 am | Permalink Ignore this user

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  32. September 23rd, 2019 at 12:12 pm | Permalink Ignore this user

    TEVA/Pat – Not for a long time (not this whole portfolio cycle) and I had not been a fan of getting back in because of the opioid thing.   They lose $3.5Bn in Q4 and even last Q they lost $670M so not all better yet and lawsuits are still pending but I'd say $8.2Bn at $7.20 is not too bad as BMY has about the same $20Bn in sales and is valued at $83Bn – also with erratic profits. In a good year, TEVA can make $3Bn so $30Bn is pretty reasonable and even 1/2 that to account for more risk but that's still $15Bn so more like $12/share should be right.  

    If you have the TEVA 2021 $13 puts, those are now $6.40 and the 2022 $10 puts are $4.60 so you can roll to 1.5x of those and that's pretty reasonable and, if you are so inclined, the $5 ($4)/10 ($2.20) bull call spread is just $1.80 so 10 of those ($2,200) against 5 of the $10 puts ($2,300) is a net $100 credit on the $5,000 spread that's $2,200 in the money to start.

    I wouldn't go to big as they may go lower but you don't need much since you can take a $100 credit on 5 short puts and 10 longs and it pays $5,000 at $10 and worst case is you own 500 shares of TEVA at $10 ($4,900).

    PMI was not very good, by the way:

    PMI composite flash shy away from estimates
    • September U.S. PMI Composite Flash: 51.0 vs. 51.2 consensus 50.9 prior.
    • Manufacturing PMI 51.0 vs. 50.1 consensus, 49.9 prior.
    • Services PMI 50.9 vs. 51.4 consensus, 50.9 prior.

    Still, it seems it's Europe that was holding us back and we're recovering now.


  33. September 23rd, 2019 at 12:15 pm | Permalink Ignore this user

    GME – Up 6% today.  Nice premium n the Jan 6 calls.


  34. September 23rd, 2019 at 12:42 pm | Permalink Ignore this user

    CarMax (KMX) has earnings tomorrow and is pretty interesting at $86.50, which is $14.3Bn.  They are on a good path towards $1Bn in earnings in 2022 so $15-20Bn valuation brings them up to about $110ish.  They also have a block ($12.9Bn) of non-recourse debt on the balance sheet that isn't the same kind of detriment collateralized debt it (though they still have to pay it, of course).   

    The notes are how they secure funding for used cars, which they buy at auction and sell.  They get the cash from outside investors rather than borrowing it but KMX is more of a broker of the notes than a holder – just silly accounting rules put the NR's on the balance sheet.  Stuff like this just doesn't fit in standard valuation models so KMX keeps trading below its real value.

    In the markets CarMax operates in, they have a 4.4% market share but only 3.3% of the US Market – so there's your room for 33% growth right there.  You know I hate to chase though so this is on our Watch List and we hope they miss tomorrow though they average a 7.5% beat and expectations ($1.33) are not very high for the summer quarter (ended 8/31).  

    Year End 28th Feb 2014 2015 2016 2017 2018 2019 TTM 2020E 2021E CAGR / Avg
    Revenue $m 12,574 14,269 15,150 15,875 17,120 18,173 18,747 19,629 20,751 +7.6%
    Operating Profit $m 797.3 969.3 1,010 1,006 1,064 1,113 1,144     +6.9%
    Net Profit $m 492.6 597.4 623.4 627 664.1 842.4 870.5 873.2 907.7 +11.3%
    EPS Reported $ 2.16 2.73 3.03 3.26 3.66 4.79 5.05     +17.2%
    EPS Normalised $ 2.16 2.73 3.03 3.26 3.66 4.79 5.05 5.27 5.67 +17.2%
    EPS Growth % +15.5 +26.2 +11.0 +7.5 +12.3 +30.7 +30.5 +10.0 +7.53  
    PE Ratio x           17.7 16.8 16.1 14.9  
    PEG x           1.77 1.68 2.13 0.95
    Profitability

    You can sell the 2022 $70 puts for $8 and that's net $62 – I think that's very reasonable and, in the LTP, I would sell 5 for $4,000 and then see how things play out but we have no LTP at the moment – so we'll just see how it goes.

    GME/Albo – I thought they'd come around.


  35. September 23rd, 2019 at 1:05 pm | Permalink Ignore this user

    MDR – And our other falling knife is up 10%.


  36. September 23rd, 2019 at 1:18 pm | Permalink Ignore this user

    Phil, Reading many of your last daily articles and opinions is clear you don´t believe even if the market could be inching up a bit, will not last, is your feeling that now is the moment to design a strategy around the downtrend? there are many stocks that will suffer a 20 to 50% loss in market valuation.

    Most of your trades are  "buy a call, sell a call, sell a put " which at the end is bullish and you then you buy insurance with SQQQ, etc.,

    What about having some put spreads or bearish..preparing the field, makes sense to you?


  37. September 23rd, 2019 at 1:29 pm | Permalink Ignore this user

    Advill Hi,

    For me a simple answer if you sit with cash on the fence, for what do you take the risk to buy insurance for a down trent which might not even come.


  38. September 23rd, 2019 at 1:38 pm | Permalink Ignore this user

    Advill with armchair trades you always have the stock. Even if the stock goes down 40% see MO they still pay their div. and I feel if one has no confidence in the stock or the market one should not be in it. Comes high or low. Obviously it is always nice to sell high and buy low, but this is not always possible. It is easy to kill a portfolio if they are just paper trades.


  39. September 23rd, 2019 at 2:04 pm | Permalink Ignore this user

    Yodi

    What you are saying is buy the stock, sell a call and buy a put

    Correct ?

    Thanks


  40. September 23rd, 2019 at 2:16 pm | Permalink Ignore this user

    qcmike Buying the stock always at the low side of the scale yes sell the further out call but buying a put is something a personally do not like, obviously a lower cost put reduces you income but could protect in a way, but you back to square one why not sit on the fence with cash in your hand. In today’s situation with recession in the air I would be more careful with selling puts. 


  41. September 23rd, 2019 at 2:19 pm | Permalink Ignore this user

    MDR/Albo – On the whole, it's just a weak bounce.

    Downtrend/Advill – I don't have a plan yet because I don't know what's going to happen.  As I said last week, you have Trump, the Fed and other CBs who are DESPERATE to keep the market going and they probably can for a while – as long as we can avoid additional shocks – like oil last week.  That didn't last but something else might.  

    So I'd love to say "here's 20 stocks to short" but that's been a suicide mission for 10 years now and, until we see a firm trend where we can short the laggards – I'd rather just stay on the side and look for bullish bargains I don't mind doubling down on if they fall 50%.  

    We still have our Butterfly Portfolio and, as Yodi notes, those are the ones to keep if you don't want to cash everything out but those are non-directional – we're still not betting bearish because it's simply been a losing bet for 10 years and to say NOW! is the time to bet bearish is just foolish.

    As I noted, we are bearish NFLX in the Hedge Fund, along with CMG, of course (and we had an STP trade for them).  TSLA we're actually playing neutral at the moment, selling $300 calls and $200 puts into their earnings.  We don't think they'll do well but we think Musk can spin enough BS about China to keep them from a big sell-off.

    CMG is still my favorite short as $850 is $24Bn and they HOPE to make $484M in 2020 so 50x forward earnings is completely ridiculous for a restaurant.  MCD has even gotten high at 27 and YUM is the same and so is JACK so a lot of QSR is drifting up to 27 but 50 isn't even in the ballpark.

    The question is, how long will it take for reality to bite CMG?  They beat Q1 expectations by 13% and last Q by 6% at $3.40 and $3.99 and sales are up 12% from last year but earnings are up more like 50% as they put their troubles behind them but people are extrapolating that trend – it's not going to continue past Q4 but, until then – they should look good.  

    Year End 31st Dec 2013 2014 2015 2016 2017 2018 TTM 2019E 2020E CAGR / Avg
    Revenue $m 3,215 4,108 4,501 3,904 4,476 4,865 5,193 5,486 6,155 +8.6%
    Operating Profit $m 532.7 710.8 763.6 34.6 270.8 258.4 327.8     -13.5%
    Net Profit $m 327.4 445.4 475.6 22.9 176.3 176.6 249.4 375.9 484.2 -11.6%
    EPS Reported $ 10.5 14.1 15.1 0.77 6.17 6.08 8.62     -10.3%
    EPS Normalised $ 10.6 14.3 15.4 1.25 6.47 8.21 10.1 13.4 17.4 -5.0%
    EPS Growth % +19.9 +34.6 +7.6 -91.9 +419.5 +26.9 +36.4 +63.5 +29.6  
    PE Ratio x           101.7 82.4 62.2 48.0  
    PEG x           1.60 1.30 2.11 1.99
    Profitability

    I'm not looking for them to miss, just looking for people to realize that making $3/qtr is $12/yr against $850 is 70x current earnings so any sort of slowdown top or bottom line should lead to a good sell-off but who knows when that will be so you have to give them time.

    Still, if $850 is ridiculous then $1,000 is completely insane so you can do the following:

    • Sell 2 CMG June 2020 $1,000 call for $38 ($7,600) 
    • Buy 3 CMG June 2020 $1,000 puts for $180 ($54,000)
    • Sell 2 CMG June 2020 $860 puts for $90 ($18,000) 
    • Sell 2 CMG Jan $740 puts for $24 ($4,800) 

    That's net $23,600 on the $42,000 spread and you have another $4,800 coming from selling April puts when the Jans expire.  All CMG has to do is be below $860 and you get paid and 1 of the $1,000 puts can make bonus money as long as we don't get burned by a fast drop.

    Margin on the short calls is just $16,960 and it's somewhat balanced out by the short puts so a pretty nice way to play the market a bit bearish.


  42. September 23rd, 2019 at 2:34 pm | Permalink Ignore this user

    Thank you both!

    The conclusion for me will be CASH!, the insurance cost? having the money just parked, but I hope when the moment arrives that this community will be aware of it.

    Dividends in my case Yodi as a non-U.S resident investor are harsh in some cases were 39% in some REITs, as a matter of fact, I´m thinking of moving to Virgin Is. or Bermuda   …LOL


  43. September 23rd, 2019 at 2:45 pm | Permalink Ignore this user

    MDR – Weak bounce, but it has provided numerous trading opportunities in the past week.

    But you're right, the jury is still out on whether they can solve their liquidity problems.


  44. September 23rd, 2019 at 2:56 pm | Permalink Ignore this user

    Other possibilities for the Watch List:

    BBT – Kind of like STT – doesn't get the respect the other big banks do.   They are buying out STI so that's hurting them for now but it's a good acquisition that will make them the 6th largest bank in the US.

    Now that HOV made a comeback LEN is on the top of my list at $55 in the real estate space.  That's $17.3Bn and they are good for $1.2Bn at least so p/e around $14 and I like that they do mortgage and title and rentals – they squeeze money out of every part of the transactions.  

    TRV is in the Dow but I like them anyway and $146.85 is $38.2Bn and they are making a very steady $2.8Bn so 13.6 p/e but bonus points for being an insurance company.  Also, consider the low rates they are getting for their investments (insurance companies have tons of reserves to invest) and it's even more impressive.  TRV doesn't do health so big bonus there – more than 1/2 is Business Insurance and Bond Insurance is 25% and the rest is mainly homeowners.  Hopefully they come down with the Dow.

    VLO is one we like to play when they are cheap and either oil prices are going lower (good for them) or gasoline prices are going higher (good for them) so $84.24 is $35Bn and they make $2Bn in a bad year and $3.5Bn in a good year so p/e between 10 and 17 – depending which way the wind blows. 

    WFC is worth watching as they are still very cheap (scandals) but mostly out of the woods.  You would think their reputation would be shot and people would avoid them but no – no one seems to care.  $49 is $216Bn and this year they will "only" make $22Bn while they rebuild their reputation – awww….  

    GS is also still very cheap at $213.50 ($76.75Bn) as they are dropping $9Bn to the bottom line so p/e below 10 is kind of silly.  Hopefully it gets sillier. 

     

    URI mostly makes money renting construction equipment and $128.68 is a bit less than $10Bn and they made $1.3Bn in 2017 and $1.1Bn last year and in Q1 and Q2 they made $440M so I certainly want to wait and see if they can pull over $300M this Q to be on track for $1.1M  – the revenues are there, the earnings were just light but could just be a buying cycle for them.  Long-term, it's a rock-steady business.  Might even be good for a Butterfly.

    CAT is still cheap below $130 and I pray for another sell-off on them.  

    So there's a few to build a list off of.  Of course I like to watch them for a while and also see which ones have the best-priced options but that's a nice group we can begin building a portfolio off of – when they go on sale!


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    American Express +1.3% after boosting dividend, announcing buyback
    • American Express (NYSE:AXP) advances 1.3% after boosting its quarterly dividend and approving a 120M-share buyback program.
    • AXP's board approved a 4-cent per share increase, or 10%, to 43 cents per share from its prior dividend.
    • Announces a program to buy up to 120M of common shares, replacing the prior repurchase authorization for up to 150M shares that was adopted in 2016.
    • At its recent price of $118.24 per share, the repurchase authorization represents ~$14.2B if it were exercised in full.
    Disney Plus launches preorders for streaming service
    • Walt Disney (DIS +0.2%) has opened up preorders for its high-stakes Disney Plus streaming service.
    • It's started a 50-day countdown to its Nov. 12 launch, and says early subscribers will be among the first to start streaming then.
    • The service costs $6.99/month, or $69.99 per year paid at once (coming out to $5.83/month). It will come with a seven-day free trial.
    • Along with streaming Disney content, it will include unlimited downloads for offline viewing on up to 10 devices, and support concurrent streaming on four devices

    Helios and Matheson Analytics (OTCPK:HMNY) +60%. 

    Emmy ratings drop by a third to record low
    • U.S. ratings for last night's Emmy Award broadcast on Fox (FOX +0.6%, FOXA +0.4%) fell to a new record low for the awards, dropping to 6.9M viewers and a 1.6 rating.
    • It's a steep drop from last year's previous record of 10.2M viewers and a 2.4 rating.
    • Ratings have been in decline for the show for a number of years, though not always as steeply as this year's one-third drop.
    UPS seen insulated from FedEx guidedown
    • The FedEx (FDX -1.8%) blame game on the impact of a slowing global economy looks puzzling to UBS.
    • Analyst Thomas Wadewitz notes FDX international export revenue decline of -3.7% in FQ1 was essentially no different than the -4.1% and -4.0% for the preceding two quarters.
    • "Greater cost inflation [in ground shipping] and a more painful impact from lost [ Amazon.com ] business also appear to be factors in the sharp guide down," he adds.
    • The read-through from Wadewitz is positive for UPS (UPS -1.2%), which has more leverage to ecommerce and is skewed more heavily to B2B in both the domestic and international express businesses.
    Trump's tweets against Fed influence fed fund futures, NBER paper says
    • President Trump's persistent Twitter attacks on the Fed are affecting how markets see interest rates and threatening the central bank's independence, according to a paper from the National Bureau of Economic Research.
    • Economists Francesco Bianchi of Duke University and Howard Kung and Thilo Kind at the London Business School found that the ~30 tweets that Trump has used to criticize the Fed has knocked about 10 basis points off the fed funds future contract.
    • “Overall, we find strong evidence that the consistent pressure applied by President Trump to pursue more expansionary monetary policy is manifested in the market expectations of a lower target rate, forecasting a steady erosion in central bank independence over the course of his presidency,” they wrote in their paper.
    • Furthermore, they add, "Our findings that market participants do not perceive the Federal Reserve as independent from the executive branch has indirect, but important, consequences for the actual autonomy of the central bank.”
    Fed's biggest dove stresses 'meeting-by-meeting' approach to policy
    • The latest Fed official to speak repeats the talking point that the FOMC isn't on a pre-set course for rating cuts.
    • James Bullard — president of the St. Louis Fed and the FOMC member who was the sole voter for a 50-basis point rate cut last week — said, “The FOMC may choose to provide additional accommodation going forward, but decisions will be made on a meeting-by-meeting basis.”
    • He adds: “The key risk is that this slowing may be sharper than anticipated.”
    • Bullard also notes that monetary policy isn't the answer to market turmoil created by uncertainty over trade policy.  “U.S. monetary policy cannot reasonably react to the day-to-day give-and-take of trade negotiations,” he said.
    • The FOMC has dramatically changed its expectations on rates in a relatively short time, Bullard said.
    • The monetary policy-setting committee cut rates twice this year compared with late in 2018 when committee members were expecting to raise rates this year.
    • “The bottom line is that U.S. monetary policy is considerably more accommodative today than it was as of late last year,” he said.
    • Previously: Bullard explains his vote for 50-basis-point rate cut (Sept. 20)
    Best Buy seen making a mark in healthcare
    • Morgan Stanley thinks Best Buy's (BBY +1.2%) "underrated" move into health care could dramatically grow the company's revenue.
    • The firm sees Best Buy's push into the healthcare market unlocking $11B to $46B potential revenues depending upon the market reaction.
    • "Best Buy is at the edge of a significant, untapped white space opportunity in healthcare," notes MS analyst Simeon Gutman.
    • Morgan Stanley keeps an Overweight rating on Best Buy and lifts its price target to $100.
    • Best Buy is expected to updates investors on its healthcare business plans at an event later this week.
    EU's negotiator sees difficulty in breaking Brexit impasse
    • Michel Barnier, the European Union's negotiator in Brexit talks, says it will be hard to break the impasse with the U.K. because British Prime Minister Boris Johnson's demand to drop the so-called Irish backstop is unacceptable.
    • “Based on current U.K. thinking, it is difficult to see how we can arrive at a legally operative solution which fulfills all the objectives of the backstop. It is in a very sensitive and difficult phase,” Barnier said.
    • The Invesco CurrencyShares British Pound Sterling Trust ETF (NYSEARCA:FXB) falls 0.4% and the iShares MSCI United Kingdom ETF (NYSEARCA:EWU) slips 0.2%.
    • Reuters reports that EU sources said no acceptable alternative for the border between Northern Ireland (a British province) and Ireland (which is part of the EU) that ensures the integrity of the EU single market and customs union has been proposed by London.
    • Johnson has pledged that he'll take the U.K. out of the EU by Oct. 31, with or without a deal.
    • For the U.K., options range from leaving the EU without a deal to giving up on Brexit altogether.
    • Previously: EC's Juncker says 'we can have a deal' on Brexit; pound rises 0.5% (Sept. 19)
    'Borderlands 3' passes 5M units in five days on sale
    • Borderlands 3 sell-in passed 5M units within five days of launch, marking the fastest-selling title in Take-Two (TTWO -3.1%) history.
    • It also became the publisher's highest-selling PC title ever, the company says.
    • The numbers are up 50% in that time frame over predecessor Borderlands 2.
    • The Borderlands franchise has now generated more than $1B in net bookings.
    • More than 70% of consumers bought the game digitally, and it delivered the highest preorder sales figure for a 2K title to date.
    Positive read on GameStop traffic
    • Foot traffic at GameStop (GME +6.5%) stores is tracking solidly in Q3, according to data from Placer.ai.
    • The firm estimates July traffic was 2.2% higher than the baseline for GameStop and and August traffic was up 4.7%.
    • Placer.ai says it believes the data shows that the company still possesses the brand equity necessary to drive a transformation.
    • Some analysts have noted that GameStop has a game console refresh cycle ahead next year in what could be a positive driver of traffic.
    Micron bull expects profitable bottom
    • Credit Suisse analyst John Pitzer expects Micron (MU +1.5%) to report its first profitable cycle bottom this week.
    • Pitzer forecasts $4.6-4.8B in revenue with $0.60-0.65 EPS, which are above consensus.
    • The analyst says the combination of profit and the supply/demand dynamic driving EPS potential for 18-24 months "should provide ample multiple expansion."
    • Credit Suisse maintains an Outperform rating and $90 price target. Micron has an Outperform average Sell Side rating.
    • Micron will report earnings on September 26.
    New York Fed's Williams talks repo ops and LIBOR's end
    • Regarding the turmoil in money markets last week, New York Fed President John Williams said the New York Fed's resurrection of overnight repo operations "had the desired effect of reducing strains in markets, narrowing the dispersion of rates, and lowering secured and unsecured rates to more normal levels relative to other benchmarks."
    • He also stressed the importance of examining "these recent market dynamics and their implications for the liquidity needs in relation to the overall amount of reserves held by the Federal Reserve," noting that the FOMC will "assess the implications for the appropriate level of reserves and time to resume organic growth of the Federal Reserve's balance sheet."
    • Turning to the main topic of his speech, Williams reminded market participants that the clock is ticking on the London Interbank Offered Rate (LIBOR) and it cannot be guaranteed after Jan. 1, 2022.
    • "We are now 831 days away from that world, and while some institutions are making good progress, others are sticking their metaphorical heads in the sand, hoping the issue will go away," he said in a speech at a conference hosted by the NY Fed in New York City this morning.
    • "Contracts that reference U.S. dollar LIBOR continue to be written, which only serves to increase the level of systemic risk," Williams said. "In rare cases where for some reason LIBOR must be referenced, robust fallback language that accounts for a future without LIBOR needs to be included."
    • He also urges market participants to address legacy LIBOR-linked contracts. "There’s no one-size-fits-all approach for closing out or converting existing LIBOR positions so market participants need to get ahead of this issue," he said.
    Beyond Meat slides as new bear steps out
    • Beyond Meat (NASDAQ:BYND) is down 4.52% in early trading after a downgrade arrives from across the Atlantic Ocean.
    • Exane BNP Paribas initiates coverage on Beyond Meat with an Underperform rating and price target of $70 (more than 50% downside).
    • "While plant-based meats will grow rapidly, we believe that barriers to entry are negligible; we thus struggle to justify BYND's valuation," notes the French firm.
    • As noted by others, major players like Kellog, Nestle and Tyson are all active in the next-gen protein space, warns Exane.
    • A majority of sell-side firms are cruising along with a Hold-equivalent rating on Beyond Meat amid the high-volatility action.
    Oppenheimer expects bumpy ride for CarMax earnings
    • Oppenheimer doles out some advice for Carmax (KMX +0.7%) investors just ahead of the retailer's Q2 report due out tomorrow.
    • "We are now concerned somewhat that Q2 sales could prove a bit 'squishy' given weather disruptions and a pull-forward into the Q1 period. Any resultant share price weakness is apt to prove short-lived, as investors continue to gradually embrace better a still solidifying, underlying operating dynamic for the company," note analyst Brian Nagel and team.
    • Oppenheimer keeps an Outperform rating on CarMax and 12-18 month price target of $100. The consensus rating of Wall Street analysts, the view of Seeking Alpha authors and the Quant rating on CarMax are all bullish heading into the earnings report.
    Kandi Vehicles wins $70M electric scooter order
    • Kandi Technologies (KNDI +2.2%) opens higher after saying DGL Group agreed to order 300K electric scooters and 500K electric self-balancing scooters, in a deal valued at RMB500M ($70.5M).
    • Kandi expects the purchased products will be completed and delivered within a year of the agreement signing date.
    • Kandi also says the two companies are in discussions about further cooperation on other pure electric transportation products.
    Steel names downgraded at J.P. Morgan on weak steel price outlook
    • U.S. Steel (NYSE:X) -3.4%, AK Steel (NYSE:AKS) -5.3% and Cleveland-Cliffs (NYSE:CLF) -3.2% pre-market after J.P. Morgan downgrades shares of the three steel producers, saying "the uncertainty around trade and supply addition announcements are weighing on sentiment and pricing, which have lowered our steel price expectation for the foreseeable future."
    • If current economic and trade conditions hold, we think steel prices will likely fluctuate between $500 and 600/ton over the near to medium term, with prices likely easing somewhat further over the next couple of months and then rebounding modestly heading into 2020," JPM's Michael Gambardella says.
    • On U.S. Steel, Gambardella cuts shares to Neutral from Overweight with a $12 price target, trimmed from $14, citing the company's reduced outlook for an adjusted Q3 loss of $0.35/share and continued idling two of its main U.S. blast furnaces.
    • JPM double-downgrades AKS to Underweight from Overweight, citing valuation headwinds and its belief that the strike at General Motors may weigh on the company's earnings, and CLF to Neutral from Overweight on lower pellet premiums and steel prices.
    Eyes turn to banks' margin pressures in Q3, Credit Suisse says
    • Lagging deposit repricing, tight lending spreads, and lower yield curve across all points are putting pressure on banks' net interest margins, writes Credit Suisse's Susan Roth Katzke in a note.
    • Near- and long-term effects of those pressures will be key as the Q3 ends, she said.
    • Notes that loan growth is tracking up 1% from prior quarter, deposit grown up just over 1%; and trading revenue likely won't be worse than "the typical seasonal decline," as investment banking activity picked up in September.
    • Credit quality metrics stay strong in the consumer sector, while "less so" in commercial, Katzke says.
    • Financial Select Sector SPDR ETF (NYSEARCA:XLF) slips 0.5% in premarket trading.
    New York Fed takes up $65.75B in overnight repo operation
    • The New York Fed takes up $65.75B in this morning's repo operations, less than the maximum amount and a sign that liquidity fears may be easing.
    • The New York Fed's Open Market Trading Desk had offered to repurchase up to $75B of Treasurys, agency debt, and agency mortgage-backed securities.
    • By collateral type, $49.7B of Treasurys with stop-out rate of 1.80% and weighted average of 1.816%; $0.6B of agency debt at stop-out rate of 1.80% and weighted average of 1.825%; and $15.45B of agency MBS at stop-out rate of 1.80% and weighted average of 1.839% were accepted.
    Nextleaf acquires water-soluble technology for cannabis beverages
    • Nextleaf Solutions (OTCPK:OILFF) has entered into an agreement to acquire intellectual property pertaining to water-soluble cannabinoid formulations.
    • Under the agreement, Nextleaf will acquire the processing methodology and ingredient formulation from a private company.
    • OILFF has granted an exclusive license to BevCanna Enterprises, for the use of intellectual property related to water-soluble cannabinoids for the development, manufacturing and sale of BevCanna products.
    • Nextleaf also has a supply agreement with BevCanna to provide cannabinoids for the production of their products.
    • Under the agreement, Nextleaf will compensate the developer for the intellectual property upon each of two milestones being met.
    • For the first milestone, which has now been met, Nextleaf will pay the developer $100,000 in cash and issue Nextleaf common shares having an aggregate value of $100,000 through the issuance of 196,078 shares at a price of $0.51 per share.
    • Upon the developer meeting the second milestone, Nextleaf will pay the developer an additional $65,000 and issue additional shares having an aggregate value of $300,000.
    Fannie, Freddie poised to pause Treasury sweeps soon – WSJ
    • Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC) are expected to start keeping their earnings as early as this week, putting on hold the arrangement in which the two mortgage-finance giants handed over most of their profits to the Treasury Department since the government put them in conservatorship during the financial crisis, writes the Wall Street Journal.
    • That will be the first step in allowing the companies to build up their capital to prepare them to become private companies once again.
    • Under the agreement, Fannie and Freddie would be allowed to keep about a year's worth of profits, or ~$20B, Federal Housing Agency Finance chief, Mark Calabria told the WSJ in an interview.
    • Each of the companies is now allowed to hold only $3B in capital.
    • "We're in the middle of negotiations with Treasury, but I think we're close," Calabria said. "I hope to have it done by the end of the month."
    • He also said that taxpayers would get additional shares in Freddie and Fannie — equivalent to new stakes in a firm preparing to launch an initial public offering — in exchange for allowing the companies to retain earnings now.
    • The two companies have paid a total of ~$300B in dividends to the U.S. Treasury, after having taken $190B from taxpayers in the years after the financial crisis.
    • KBW analyst Bose George writes that it's still unlikely Fannie and Freddie will be recapitalized during the current Trump presidency.
    Deere focus – U.S. tech over global equipment
    • With demand for farm machinery receding worldwide, Deere (NYSE:DE) dealers and industry analysts expect incoming CEO John May to focus on cutting costs and adding new technology and data services to its equipment that will justify higher prices in the U.S., WSJ reports.
    • The new tech aims to make seed and fertilizer applications more efficient, increasing crop yields and alerting farmers when equipment shows signs of breaking down.
    • The focus will target U.S. farmers, pivoting from current CEO Sam Allen's emphasis on selling more of Deere's green and yellow equipment in developing markets overseas.
    World's oldest travel firm goes bust
    • Britain's Thomas Cook (OTCPK:TCKGY) collapsed on Monday, stranding hundreds of thousands of vacationers around the globe and sparking the largest peacetime repatriation effort in British history.
    • What happened? Crippled by its £1.7B of debt, the company – which dates back to 1841 – has been hit by online competition, a changing travel market, higher fuel prices and uncertainty surrounding Brexit.
    • According to the Associated Press, Thomas Cook's four airlines will be grounded, and its 21K employees across 16 countries will lose their jobs.
    • The news also sent rival travel operator TUI (OTCPK:TUIFY) shares up nearly 7% in London.

  63. September 23rd, 2019 at 3:44 pm | Permalink Ignore this user

    Indexes up about 0.25% overall, dollar back to flat, oil back to $58.50 – this is a day we could have skipped!


  64. September 23rd, 2019 at 3:52 pm | Permalink Ignore this user

    This is messed up!  


  65. September 23rd, 2019 at 4:01 pm | Permalink Ignore this user

    Good one !


  66. September 23rd, 2019 at 4:07 pm | Permalink Ignore this user

    Now THIS is how you address the UN!

     


  67. September 23rd, 2019 at 4:10 pm | Permalink Ignore this user

    And sometimes God still speaks to us…

    Image


  68. September 23rd, 2019 at 4:10 pm | Permalink Ignore this user

    You Tube, Facebook and social media in general has devolved into the "supermarket tabloids"of the 21st century. We have endured fits of yellow journalism in the past and will overcome it once again. Best advice for all is to simply tune it out by turning it off


  69. September 23rd, 2019 at 4:16 pm | Permalink Ignore this user


  70. September 23rd, 2019 at 5:06 pm | Permalink Ignore this user

    Phil,  my GLD trade expired last Friday, the chart suggests an overbought  moment , what could you do as a fresh trade in gold?

     

    Thanks


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  96. September 24th, 2019 at 5:17 am | Permalink Ignore this user
    UK, France Germany blame Iran for Saudi oil attacks
    By: EDITH M. LEDERER and JILL LAWLESS, Associated Press


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  113. September 24th, 2019 at 6:16 am | Permalink Ignore this user
    California utility cuts power to 24,000 customers
    By: OLGA R. RODRIGUEZ, Associated Press


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