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Wednesday Worries – Traders Finally Notice Things are not Perfect

The ISM Report was, I would say, NOT good.

We knew that was going to happen on Monday, when I warned you not to be taken in by the window-dressing that was ending the quarter on a false high and we knew that two weeks ago when we cashed in our Member Portfolios at the top of the market so now we're pretty much sitting on the sidelines and laughing at all this BS – which is kind of fun, actually

I also noted on Monday that we have two Fed speakers today:  Harker at 9am and Williams at 10:50, right after the Oil Inventories.  Tomorrow there are 2 more Fed speakers along with PMI and ISM Services but, if they are bad, I can't imagine what Evans and Quarles can do to cheer us up.  Friday is Non-Farm Payroll so major disaster if that goes south and that's why we have 5 speakers after that report – including Jerry Powell at 2pm – so lots of way to prop things up – even if the data continues to suck.

We have Auto Sales today, coming in all day long but, so far, they have sucked in Europe and Asia, with double-digit declines for many companies – that hasn't been helping and the Futures are off another half a point this morning.  Over in Japan Toyota, Honda and Nissan all reported double-digit declines for the US Market in September but the month began and ended on a Sunday and Labor Day was early so it's not really as bad as it seems – just tough comps to last year.  Still, the money won't be there for the end of Q3 – that's what matters.  

That's going to matter a lot to Tesla (TSLA) – so let's keep a close eye on their report too.  

U.S. vehicle sales this year are projected to be around 17.1 million, according to Edmunds, slightly lower than the past few years. Rising car prices and higher interest rates dulled demand in the first six months of 2019.  Detroit auto makers GM and Ford, as well as Fiat/Chrysler recently ended their long-term practice of reporting monthly U.S. sales numbers, although most major car companies still disclose the results each month. The companies now report their U.S. sales quarterly.

Image result for slow sales dilbert

Related image

Speaking of Tesla, they've been releasing a lot of reports on advances in self-driving tech and also making a big deal about the Mars rocket though I can't, for the life of me, see where the profit is in that for the next 3-4 decades so it's kind of tough to reconcile as a use of Musk's time (it's not, technically, TSLA's money though it does detract from people who might have given them some).  Tesla rolled out their "Smart Summon" feature this week and already their guinnea pig customers are crashing in the mazes.  

Rumors are TSLA missed their delivery goal of 100,000 cars for the quarter but by how much is the question?  At $244, we are neither long or short Tesla in our Hedge Fund, just looking for it not to move up or down more than 20% on earnings (sold puts and calls) so we are hoping for something in the 90s on the production side without too much loss bleeding.  Overall though, I'm still looking for $150 on TSLA next year as their story begins to unravel – the way NFLX already has…

We're also still waiting for Chipotle (CMG) to bite the burrito but it's still stubbornly over $800 and they are expected to earn $3.17 per share when they announe on the 22nd – that one we are more short on as I don't see how that's sustainable with the stock at $8.50.  Even if you double earnings to $6 for 4 quarers, that's only $24 and that would still be 35 TIMES earnings at $850 – for a fast food restaurant!  IF THEY DOUBLED EARNINGS!  

So yes, CMG annoys me but reality usually wins in the end though, as Keynes said: "The market can remain irrational longer than you or I can remain solvent".  We're not there yet but another year like this one and CMG $1,700 might test that theory…

 

 


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  1. Phill//  I see that you mentioned cashing out the portfolio but when reviewing the sept. portfolio review article you are keeping some and disposing of most of it.  Is the goal to cash out where it makes sense and keep some of the ones you still have faith in?

    Thanks.


  2. Good morning, All!

    It's webinar day! Join Phil at 1pm here:

    https://attendee.gotowebinar.com/register/636244899965863180


  3. Good Morning!


  4. Good morning! 

    Portfolio/Rookie – Not sure which one you mean but there were many other comments made outside the reviews and we decided to go essentially all cash on STP, LTP, OOP and Money Talk with Butterfly and Hemp Boca just having the changes as noted in the review (so far).

    While I was doing the reviews, I noted stocks that were "keepers" by request but I did expect that would confuse people – we are NOT officially keeping anything in those first 4 portfolios other than BNKG in the STP – only because we wanted to see how it played out as it was brand new.

    BKNG Long Put 2021 15-JAN 2,100.00 PUT [BKNG @ $1,978.03 $0.00] 2 9/9/2019 (471) $56,000 $280.00 $2.40 $280.00     $282.40 $0.00 $480 0.9% $56,480
    BKNG Short Put 2021 15-JAN 1,900.00 PUT [BKNG @ $1,978.03 $0.00] -2 9/10/2019 (471) $-39,126 $195.63 $-6.83     $188.80 $0.00 $1,366 3.5% $-37,760
    BKNG Short Call 2020 17-JAN 2,000.00 CALL [BKNG @ $1,978.03 $0.00] -2 9/10/2019 (107) $-24,270 $121.35 $-14.95     $106.40 $0.00 $2,990 12.3% $-21,280
    BKNG Short Put 2020 17-JAN 1,800.00 PUT [BKNG @ $1,978.03 $0.00] -2 8/9/2019 (107) $-10,000 $50.00 $-3.40     $46.60 $0.00 $680 6.8% $-9,320

    BKNG – We just put this one on and it went the wrong way on us but earnings aren't until Nov 4th and, as far as I can tell, trade slowed down travel – especially in China where they are very big.  Note that we sold the short Jan $2,100 calls and the short Jan $1,800 calls for $171.50, which means anything between $1,628.50 and $2,271.50 is a profit and, at $2,055, it's a $116.50 ($23,300) profit in waiting.  So it's a keeper for the portfolio and we'll see how it plays out.  I'm still going to want to clear the decks so we have a proper fresh start next year.

    See how easy that is – up $5,516 in the first month from a net $17,396 credit and right on track for the full $57,396 gain – no wonder we kept it!  Not only that but we get to sell more puts and calls for $34,000 a quarter while we wait!  

    Yet another good example of why we shouldn't fear cashing out – there are ALWAYS things we can trade in either direction while we wait for the stocks we like to get cheaper.  

    Hong Kong Protests Bring More Pain as Chinese Shoppers Stay Away.

    One Hong Kong District Becomes a Combat Zone.

    Hong Kong Economic Toll, U.S. Slowdown, EU Recession: Eco Day.

    Boris Johnson to Make His ‘Final’ Brexit Offer: My Deal or No Deal.

    Are Russia and Saudi Arabia Still Pumping Too Much Oil?

    The Seven-Year Auto Loan: America’s Middle Class Can’t Afford Their Cars.

    Let's make her the bad guy to focus our hatred on!:  Ringmaster Rashida Tlaib Introduces the Impeachment Circus.

    And don't forget to hate "Liddle" Adam Schiff for doing his job ethically!: Dead Deutsche Banker's Son Peddled Trump Financial "Dirt" To The Highest Bidder - Which Adam Schiff Promptly Subpoenaed (since it would be improper for him to pay for it).

    Could Pricey Urban Meccas Become Crime-Ridden Ghost Towns?

    VC Veterans Host Emergency Meeting Of Unicorns As IPO 'Bubble' Implodes.

    Here are the stocks that have soared and sunk the most in 2019.

    These Were The Best And Worst Performing Assets In September, Q3 And YTD. 

    Global Growth Scare Sparks Safe-Haven Surge, Slam Stocks.





  5. BBBY reports after the close today.

     

    Analysts polled by Bloomberg expect Bed Bath & Beyond to report adjusted earnings of 24 cents per share on $2.75 billion in revenue. The options market is implying a 19% move in either direction following the report.

     

     

     


  6. Early turmoil in the office!


  7. Still the most corrupt administration ever!


  8. What is fascinating is that all these economic numbers were completely predictable if you took the time to inform yourself outside of Trump's tweet. Europe has not been doing well, Brexit is not new, the Middle East is a mess, China is slowing down. This didn't happen overnight! 


  9. AIMT - Piper Jaffray says a new proprietary allergist  survey  shows "massive upside" to sales potential and expectations for Aimmune's ( NASDAQ :AIMT) peanut  allergy  drug.


  10. Phil,

    Regarding best of breed NLY, you had mentioned not venturing into NLY in a recent review. I  embarrassingly just found 1000 ($10.03 cost) shares hidden in an IRA. Any change in your perspective now with NLY @8.48?  Previous low was in1/16 at 8.77. Any sense of a potential floor?

    Thanks in advance

     



  11. Added more SMLP.

    Speculative, K1, yielding 24%.




  12. 10 Wednesday AM Reads



  13. TOS has slowed to a crawl for me, anyone else?


  14. TOS working fine for me right now but often gets sluggish. I just reboot my PC or close/restart TOS to fix. 


  15. All fine here but you can go under help -> system and click on Collect garbage to clear up some memory.


  16. Guys – thanks, I don't want to mis the show!


  17. Bought some AMTD at $34.35.   Just looking for a scalp bounce trade.  Risking $1.


  18. Russell now lower again than it was in January… 2018!


  19. huge put trades, probably sales, in big names

    LOW, WMT, MCD, HD, MA, V, MA, AMAT, TGT, CSCO,   all Jan 2020


  20. And so is the NYSE that is now below its 200 DMA.


  21. Image result for sell sell sell trading places


  22. Wheeee, nice dip!

    2,900 holding for now on /ES and back to 1,470 on /RTY and 26,200 on /YM and /NQ is 7,580 but that hasn't been significant.

    BBBY/Albo – I hope they go 19% lower as I'm sure I'll want to buy them again.

    Big Chart – Very ugly now.  Death cross on the RUT is almost certain and NYSE is heading that way.  Others have very wide spreads but if NYSE goes – they will follow and that's about 5% down from here. 

    Most corrupt/StJ – Redefining the concept of corruptions.  Might be up there with Tammany Hall – but that was going on for decades – this is only year 3 for Team Trump and they might be worse already!

    Numbers/StJ – We saw this coming a mile away.  Finally got to the point where it wasn't worth the risk last month and it looks like our timing was good but this too can reverse for no reason.  They can still pull the China card and the Fed card – it won't change the global macros but it can give the markets another boost and put reality off for another few months.

    AIMT/Albo – Oh if that thing works it's going to be huge.   A LOT of people sold into the excitement though so there must be some doubters.  These guys have no money ($3M) and NEGATIVE $323M in Retained Earnings so I'd want to know what the F that is before investing at a $3M valuation since they are burning $2M per Q and that will go way up if they are going through approval process. 

     

    Bernie in hospital with heart blockage!  

    NLY/8800 – Nothing terribly wrong with them, just out of favor.  MREITs are very tricky in this kind of market and NLY has cut and cut dividends as the stock has wound down, making the net annual rate of return about 8% so it's OK to play but always conservative with good call coverage but that means you often get called away so possibly more trouble than it's worth but holding the stock naked is just silly.

    TOS/Deano – I'm not having problems but that was another lesson we learned in 2008 – you couldn't even make the trades when the market was dropping 5 or 10% on a day.


  23. Also make sure you've got enough memory allocated for TOS, Deano. It's a real memory hog. The settings can be reached by clicking the little gear icon on the login screen.


  24. AIMT – Doubters for sure.  27% of the float. is short.

    Put/Call ratio at 1.42  Think we'll get a bounce here, but there may be one more flush.


  25. Good advice on TOS Atitlan! I definitely upped that a while back when I noticed how much memory it uses and also doesn't manage memory well.


  26. LOL, I keep getting interrupted and forgetting to submit the comment.  Crazy morning!

    Jean from Hemp Boca is on the way to Thailand and we're trying to finalize specs for a greenhouse project over there and Ken from New Age is working on a CBD Manufacturing Facility in Chicago that could be huge.  

    TOS/Pstas – That's right, I have to restart it at least once a week.

    AMTD/Albo – Good luck, hopefully that's enough.  $57.50 to $34.50 is 40%, that's a good spot for a bounce but let's assume 20% is well-deserved so call it $46 to $37 is the next 20% drop and that's $9 so $1.80 ($35.20) and $3.60 ($33.40) up and down from there should be overshoots and bounces.  

    Puts/Stock – Too early for me to jump in.  More likely people protecting their positions, though I guess it's always a bit of both.

    LOW – not low enough

    WMT – You call that a sale?

    MCD – No lovin' it yet.

    HD – Needs improvement.

    MA – No credit for this one

    V – Consumer weakness and stretched credit, so I'd certainly wait

    AMAT – Barely a chip taken out of the highs

    TGT – I would seriously lower my sites

    CSCO – Was a friend of mine but I'd still wait on this one

     

    Image result for cisco kid cartoon

    Now nasty old Europe is closing, perhaps we can perk up?  

    Saved by the 2.5% Rule!  

    So 2.5% moves for us would be:

    26,325

    From 3,000 it's 8,775

    7,653

    1,500 

    They need to at least all take those back or we're probably heading down 5%

    Cashin says below 26,100 is very bad technically.  

    Disaster for oil – the opposite of the API:

    • EIA Petroleum Inventories: Crude +3.1M barrels vs. +1.6M consensus, +2.4M last week.
    • Gasoline -0.2M barrels vs. +0.4M consensus, +0.5M last week.
    • Distillates -2.4M barrels vs. -1.8M consensus, -3.0M last week.
    • Futures -0.26% to $53.48.

    Poor Aramco! 

    Poor Valero!

    /NG at our buy point but scary down here:


  27. AIMT now up 14% today.

    Big option premiums.   Covered some with the Dec 25 calls.


  28. Phil / M (Macy's)

    What are your thoughts on "M"? They seem to be undervalued but not sure if they are in trouble. I was thinking about starting a long position in them but wanted to run it by you in case I was missing anything. 

    Thanks as always 

    Pat


  29. Phil,

    Thanks for the NLY thoughts. I understand the benefits of covering with short calls. Am I correct in assuming you would only go out 1-2 months and roll up when strike is exceeded ? Also, would you advise covering now after a sharp drop or waiting for a 5% pop? Coin toss?

    Premiums are worse than meager: Oct 8s are .46/.68, 8.5 are .12/.15 and Nov 8s are .54/.64. Very low volume.

    Good lesson for me in not putting stuff under the mattress.

    When time permits…


  30. Phil/AG

    On Aug 13, 2019, when First Majestic Silver (AG) was $10.71/share,
    I did this trade:
    Sell 10 AG Jan 2021 $10  puts for $2.55 ($2,550)
    Buy  20 AG Jan 2021 $10 calls for $3.40 ($6,800)
    Sell 20 AG Jan 2021 $20 calls for $1.10 ($2,200)

    Net cost: $2,050.

    Now the price of AG is $9.21/share.
    I have plenty of time and I can just wait. Or I could roll.
    Or I could ask myself what I was thinking, buying a company that has
    no  profits. Here's the roll I'm thinking of.

    Now the AG Jan 2021 $10 calls sell for $2.20
    And the AG Jan 2021 $7 calls cost $3.70

    So I could roll the 20 long AG $10 calls to
                        20 long AG Jan 2021 $7 calls
    for $1.50 to gain $3.00 in strike.
    Cost is $3,000.

    That seems reasonable to me.
    What do you think? Thanks.


  31. NLY/8800 – I want to give you a good answer and I'm late on Webinar so remind me after.

    AG/Sag – Same, please ask again after 3.

    Webinar time!



  32. Boeing Engineer Says 737 Max Safety System Was Vetoed Over Cost





  33. VAC   in the green today  


  34. Sorry, my internet went down.  I will catch up later.  


  35. Wifi is back – This is what I was writing:

    Trump has a hostage (Pres of Finland) and is demanding Schiff resigns and says he is suing people connected to the Mueller Investigation and the current "hoax".  

    Schiff apparently knew the Whistleblower complaint was going to be filed.  I'm not at all sure why this would change anything?

    WASHINGTON — The Democratic head of the House Intelligence Committee, Representative Adam B. Schiff of California, learned about the outlines of a C.I.A. officer’s concerns that President Trump had abused his power days before the officer filed a whistle-blower complaint, according to a spokesman and current and former American officials.

    The early account by the future whistle-blower shows how determined he was to make known his allegations that Mr. Trump asked Ukraine’s government to interfere on his behalf in the 2020 election. It also explains how Mr. Schiff knew to press for the complaint when the Trump administration initially blocked lawmakers from seeing it.

    The C.I.A. officer approached a House Intelligence Committee aide with his concerns about Mr. Trump only after he had had a colleague first convey them to the C.I.A.’s top lawyer. Concerned about how that initial avenue for airing his allegations through the C.I.A. was unfolding, the officer then approached the House aide. In both cases, the original accusation was vague.

    The House staff member, following the committee’s procedures, suggested the officer find a lawyer to advise him and file a whistle-blower complaint. The aide shared some of what the officer conveyed to Mr. Schiff. The aide did not share the whistle-blower’s identity with Mr. Schiff, an official said.

    This is a new pattern for Trump, he accuses people who follow official procedures to have done something wrong.  

    “Like other whistle-blowers have done before and since under Republican and Democratic-controlled committees, the whistle-blower contacted the committee for guidance on how to report possible wrongdoing within the jurisdiction of the intelligence community,” said Patrick Boland, a spokesman for Mr. Schiff.

    In his whistle-blower complaint, the officer said Mr. Trump pressured the Ukrainian government to investigate a host of issues that could benefit him politically, including one connected to the son of former Vice President Joseph R. Biden Jr.

    reconstituted transcript released by the White House of a call between Mr. Trump and President Volodymyr Zelensky of Ukraine backed up the whistle-blower’s account, which was itself based on information from a half dozen American officials and deemed credible by the inspector general for the intelligence community.

    Mr. Trump has focused his ire on Mr. Schiff amid the burgeoning Ukraine scandal, even suggesting he could be arrested for treason. The president, who has also made thinly veiled threats against the whistle-blower and accused him of being partisan, is likely to use the revelation that the C.I.A. officer first approached the committee to try to undermine the complaint and suggest it was part of a Democratic plot against him.

    The whistle-blower’s decision to offer what amounted to an early warning to the intelligence committee’s Democrats is also sure to thrust Mr. Schiff even more forcefully into the center of the controversy.

     
    On Wednesday, Mr. Trump said Mr. Schiff should be forced to resign for reading a parody of the Ukraine call at a hearing, an act Mr. Trump has called treasonous and criminal.
     
    “We don’t call him shifty Schiff for nothing,” said Mr. Trump. “He’s a shifty dishonest guy.”
     
    Mr. Schiff’s aides followed procedures involving the C.I.A. officer’s accusations, Mr. Boland said. They referred the C.I.A. officer to an inspector general and advised him to seek legal counsel.
     
    Mr. Schiff never saw any part of the complaint or knew precisely what the whistle-blower would deliver, Mr. Boland said.
     
    “At no point did the committee review or receive the complaint in advance,” he said. He said the committee received the complaint the night before releasing it publicly last week and noted that came three weeks after the administration was legally mandated to turn it over to Congress. The director of national intelligence, Joseph Maguire, acting on the advice of his top lawyer and the Justice Department, had blocked the inspector general for the intelligence community, Michael Atkinson, from turning over the complaint sooner.

     

     Calls CNN "corrupt people".  

    So, what Schiff did that Trump accuses him of misrepresenting was this:

    Speaking in his role as the chair of the House Intelligence Committee on Thursday, Schiff attempted to parody the president's comments in the call during a hearing on the whistleblower's complaint that helped bring Trump's call with Zelensky—in which the U.S. leader appeared to ask the Ukranian president to investigate 2020 Democratic presidential candidate Joe Biden and his son—to light.

    "This is the essence of what the president communicates," Schiff said: "We've been very good to your country. Very good. No other country has done as much as we have. But you know what, I don't see much reciprocity here."

    "I hear what you want. I have a favor I want from you, though and I'm gonna say this only seven times, so you better listen good," Schiff continued, parodying Trump. "I want you to make up dirt on my political opponent, understand? Lots of it… on this and on that."

    "I'm gonna put you in touch with people and not just any people. I'm gonna put you in touch with the Attorney General of the United States…Bill Barr. He's got the whole weight of the American law enforcement behind him and I'm gonna put you in touch with Rudy. You're gonna love him, trust me," he said. "You know what I'm asking, so I'm only going to say this a few more times in a few more ways. And by the way, don't call me again; I'll call you when you've done what I asked."

    Closing out his pastiche, Schiff said: "This is in sum and character what the president was trying to communicate with the president of Ukraine."

    Schiff clearly wasn't claiming to quote the President.  https://www.factcheck.org/2019/10/schiffs-parody-and-trumps-response/

    That's not at all how Trump characterizes it – or his enablers….


  36. Repeating msg from earlier:

    Phil,

    Thanks for the NLY thoughts. I understand the benefits of covering with short calls. Am I correct in assuming you would only go out 1-2 months and roll up when strike is exceeded ? Also, would you advise covering now after a sharp drop or waiting for a 5% pop? Coin toss?

     

    Premiums are worse than meager: Oct 8s are .49/.75, 8.5s are .16/.22 and Nov 8s are .66/.72. Very low volume.

    Good lesson for me in not putting stuff under the mattress.

    When time permits…


  37. Dangerous times! People's lives are in danger now.


  38. NLY/8800 – Generally you want to sell as much premium as possible so, if you get called away, at least you get that.  The 2022 $7s are $1.70 so an 0.15 premium and the dividend is 0.25 so, if you do get called away, at least you net out for $8.70 (and then you buy again and sell again).  It works better when NLY is closer to the line but there are only $7s and $10s.  2021 has $8s that are 0.95 – that's also a reasonable sale though a bit less downside protection.

    AG/Sag – I don't see a lot of value in these guys with those mediocre earnings so hard to say put more money in just because you took a loss.  Buying near the top certainly wasn't helpful either it was already up 50% from earlier in the year.  

    Year End 31st Dec 2013 2014 2015 2016 2017 2018 TTM 2019E 2020E CAGR / Avg
    Revenue $m 251.3 245.5 219.4 278.1 252.3 300.9 333.1 343.6 434.6 +3.7%
    Operating Profit $m 29.8 -81.2 -121.2 24.7 -71.0 -249.3 -192.8      
    Net Profit $m -38.2 -61.4 -108.4 8.60 -53.3 -204.2 -167.6 1.20 -5.00  
    EPS Reported $ -0.33 -0.52 -0.84 0.052 -0.32 -1.11 -0.86      
    EPS Normalised $ -0.21 -0.020 -0.28 0.066 -0.065 -0.39 -0.30 -0.057 0.088  
    EPS Growth %                    
    PE Ratio x           n/a n/a n/a 103.3  
    PEG x           n/a n/a n/a n/a
    Profitability

    For $2Bn at $9.50 their revenues are barely 1/10th of sales and profits don't exist.  WPM, by comparison is $12Bn at $27 and made $732M last year but only $100M in the first half of this year but at least they CAN make the money to cover the cost.  

    The AG 2021 $10/20 spread is $2.45/0.80 so net $1.65 is $3,300 so you can shut that down and then just deal with the short puts and the 2021 $10 puts are $2.85 and the 2022 $7 puts are $1.80 so you can roll 10 ($2,850) to 16 ($2,880) about even and if those expire worthless, you have made money and you can always add a long spread later if you get more confident and, if AG goes lower – then you'll be glad you didn't have a long spread and you'll take a loss on the puts or, if you think it's down for bad reasons – you can still add a long spread when you do your 2023 roll.  


  39. Little uptick into the close already being erased.  

    Trump's comments made me want to sell, not buy – he's really unhinged.  


  40. Phil/AG – Thanks!


  41. Phil,

    Appreciate the add'l NLY comments




  42. ETrade followed Schwab and announced no commissions-

    E*TRADE Financial Corporation (NASDAQ: ETFC) today announced it will eliminate retail commissions for online US listed stock, ETF, and options trades. It will also reduce the options contract charge to $0.65 per contract for all traders while maintaining its active trader pricing at $0.50 per contract. These changes will take effect on October 7, 2019.



  43. Now cattle ranchers are mad at Trump, too






  44. This poll number proves how powerful Trump’s misinformation machine really is






  45. Brexit: dismay in Brussels as Boris Johnson finally reveals plan