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Thursday Flip Flop

The madness continues!  

Yesterday, the Dow dropped 200 points as Trade Talks turned sour but then recovered into the close as the White House insisted they were still talking to China but then rumors came out after the close that we were still very far apart but then China invited the US to come to Beijing to continue negotiations and we are back up 200 points yet again into this morning's open.  That little range pays $1,000 per contract in the Futures EACH TIME – so much fun!  

If only I had a friend in the White House who could tell me which way the wind was going to blow so I could place my bets…  That's rumored to be happening – a lot – but, so far, no whistles have been blown on that one.  

At the moment, it looks like Trump is going to sign the Congressional Bill censuring China on Hong Kong but the Trade Deal is still being negotiated – so look for lots more rumor-driven swings ahead.  Per yesterday's Fed Minutes, the Fed is clearly on hold now, and I doubt Trump's meeting with Powell did anything to change that. Meanwhile, Christine Lagarde will make her first policy speech as head of the ECB and how that policy compares to the US will have a huge impact on Dollar trading.

Over in the UK, Labour leader Jeremy Corbyn will urge voters to take down bankers and billionaires who “profit from a rigged system” when he unveils an Election Manifesto later today.  Britain could turn very, very Socialist overnight if the people decide to finally toss our Boris Johnson's Conservative Party and, after over two years of bugling through Brexit – that's a possibility.  

This is going on around the World and the Top 1% need to stop ignoring it and steamrolling discussions about Income Inequality and start thinking of nice ways to fix the problem (like Liz Warren's Wealth Tax) or, as John F Kennedy warned: "Those who make peaceful revolution impossible will make violent revolution inevitable." as well as:

Image result for kennedy revolution quote"

See you at the barricades…

 


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  1. Good Morning!


  2. Morning, All!

    The webinar replay is now available!

    https://youtu.be/0wB3ygSXfGg



  3. This tweet summarizes what I have been saying for over a year now:


  4. What is Tim Cook afraid of – that Trump will add tariffs on iPhones:


  5. Wow, these guys have found the secret algo:

    https://ofdollarsanddata.com/the-greatest-money-making-machine-of-all-time/

    If you have heard of Renaissance Technologies, the secretive quantitative hedge fund from Long Island founded by mathematician Jim Simons, then you probably know about the fund’s stellar performance.  As Greg Zuckerman noted in The Man Who Solved the Market, Renaissance’s flagship Medallion Fund generated 66% annualized returns (before fees) and 39% annualized returns (net of fees) from 1988-2018.

    To put this performance in perspective, $1 invested in the Medallion Fund from 1988-2018 would have grown to over $20,000 (net of fees) while $1 invested in the S&P 500 would have only grown to $20 over the same time period.  Even a $1 investment in Warren Buffett’s Berkshire Hathaway would have only grown to $100 during this time.  This means that the Medallion Fund outperformed one of the best asset classes of the last few decades by 1,000x and one of the best investors of all time by 200x!

    And while hedge funds are famously known for charging 2 and 20 (2% annual management fee and a 20% performance fee), Simons and his team generated arguably the greatest track record in investment history while charging 5 and 44.  This fee structure may not sound much higher than 2 and 20, but it is worlds away.

    For example, if we assume that Simons used the 5% management fee to cover the costs of running the fund (i.e. data, computing, etc.) and was only able to re-invest the money earned from the 44% performance fee, within less than a decade the Medallion Fund would have had more money than its original investors.  So if you gave them $1 million to manage in 1988, by the end of 1997 you would have $15.8 million, however, Simons would have $15.9 million even though he started with $0.


  6. M opened quite a bit lower on their reduced forecast.  Was looking to sell more puts, but they never reflected the sell off.


  7. SunPower (SPWR)  prices 22 mln shares of common stock at $7.00 per share.


  8. Phil/ACB

    Working out very nice. Thank you!


  9. Good morning! 

    We'll see if 3,100 holds on /ES but bad news if it doesn't.  Lined up with 27,750, 8,275 and 1,585, which is also a bad break on /RTY if it fails.  

    Big Chart – Perfectly normal for /ES to be rejected at the 20% line – even if it's a strong rally.  Now we watch the retrace and we had good consolidation at 15% so really we can first watch the small retrace of the run from 2,990 to 3,120 so 130 points is a 26-point retrace but let's call it 3,125 and then 25-points back is 3,100 and 3,075 (strong retrace) is the really critical line to watch.  

    Insiders/StJ – Someone is getting rich.  What if Trump's whole plan was to become President and act crazy and capricious and do such outrageous things that no one would notice his market manipulation timing while his proxies make billions trading his seemingly random behavior?  Kind of like Reagan:

    Renaissance/StJ – Hey, that's our business model!  

    M/Albo – They beat by 0.07 non-GAAP but missed by 0.03 GAAP and Revenues were down 4.3% at $5.17Bn, missing by 0.140Bn, so not too bad, really.  Lower tourism (thanks Trump) was most of the story and, of course, dead malls aren't helping.  

    “After seven consecutive quarters of comparable sales growth, we experienced a deceleration in our third quarter sales. While we anticipated a negative comp as we were lapping a very strong third quarter last year, the sales deceleration was steeper than we expected. However, having cleared the excess inventory we faced earlier in the year, we were able to take a more balanced approach to sales and profit in the quarter, resulting in significantly improved margin compression versus the first half of the year,” said Jeff Gennette, chairman and chief executive officer of Macy’s, Inc. “Our third quarter sales were impacted by the late arrival of cold weather, continued soft international tourism and weaker than anticipated performance in lower tier malls. We also experienced a temporary impact on our e-commerce business due in part to work on the site in preparation for the fourth quarter. The team has completed that work, the site is upgraded and our customers can expect an improved experience this holiday season. Based primarily on the impact of our third quarter sales trend, we are updating our annual guidance.”?

     

    Asset sale gains for the third quarter of 2019 totaled $17 million pre-tax, or $13 million after-tax. This compares to the third quarter of 2018, when asset sale gains totaled $42 million pre-tax, or $31 million after-tax.

    Asset sale gains for the 39 weeks ended November 2, 2019 totaled $67 million pre-tax, or $49 million after-tax. This compares to the 39 weeks ended November 3, 2018, when asset sale gains totaled $111 million pre-tax, or $84 million after-tax.

     

    Macy's, Inc. (M) is updating its previously provided annual guidance. Highlights of these revisions include:

     

    Revised 2019 Annual Guidance

    Prior 2019 Annual Guidance

    Comparable sales

    (owned plus licensed)

    Down 1.5% to down 1.0%

    Flat to up 1%

    Comparable sales

    (owned)

    Approximately 20 basis points below comparable sales on an owned plus licensed basis

    Flat to up 1%

    Net sales

    Down 2.5% to down 2.0%

    Approximately flat

    Adjusted Diluted earnings per share

    $2.57 to $2.77

    $2.85 to $3.05

    Asset sale gains

    Approximately $150 million (or $0.37 per share)

    Approximately $100 million (or $0.25 per share)

    Annual tax rate

    23%

    23%

    Complete guidance can be found in the presentation posted on the company’s investor relations website at http://www.macysinc.com/investors.

    Guiding down to $2.60 per $15 share – traders be crazy!  

    Macy’s, Inc. will host an Investor Day at 8:00 a.m. ET on Wednesday, February 5, 2020, at the New York Stock Exchange. At that time, the management team will share details of the Macy’s, Inc. growth strategy and three-year plan.

    Macy’s, Inc.’s webcast, along with the associated presentation, will be accessible to the media and general public via the company's investor relations website.

    Can't wait for that.  

    SPWR/Albo – That's disappointing, I wonder why they did that?

    ACB/DC – Well, I'm relieved.


  10. Great summary from Seth Meyers – as usual.  He's better than the Daily Show now:

    Keep in mind that Sondland was the GOP's star witness in DEFENSE of Trump!


  11. The real brite star in my port today is AMTD sold the Feb 20 35 put for 3.00 and bought the stock for 40.37,

    I think I might have mentioned my plays on this one when the stock was down 11/7. Hope some followed.


  12. Three cheers for coffee! Nice bounce off the 200dma continues, hoping to sell some $41 calls within the next week or two. 


  13. Futures prop job failing yet again.    

    Still no volume:

    Date Open High Low Close* Adj Close** Volume
    Nov 21, 2019 310.89 311.01 309.39 309.64 309.64 13,810,197
    Nov 20, 2019 311.28 311.85 309.06 310.77 310.77 79,406,200
    Nov 19, 2019 312.68 312.69 311.22 311.93 311.93 67,804,700
    Nov 18, 2019 311.53 312.28 311.03 312.02 312.02 49,228,000
    Nov 15, 2019 311.02 311.84 310.26 311.79 311.79 62,023,600
    Nov 14, 2019 308.79 309.64 308.09 309.55 309.55 51,219,900
    Nov 13, 2019 307.91 309.54 307.66 309.10 309.10 53,917,700
    Nov 12, 2019 308.75 309.99 308.15 309.00 309.00 46,484,600
    Nov 11, 2019 307.42 308.54 307.27 308.35 308.35 35,797,300
    Nov 08, 2019 307.80 309.00 307.03 308.94 308.94 49,032,100
    Nov 07, 2019 308.57 309.65 307.66 308.18 308.18 54,272,300
    Nov 06, 2019 307.03 307.40 306.06 307.10 307.10 46,487,100
    Nov 05, 2019 307.59 307.92 306.71 307.03 307.03 42,933,200
    Nov 04, 2019 307.85 308.00 306.96 307.37 307.37 60,606,900
    Nov 01, 2019 304.92 306.19 304.74 306.14 306.14 71,141,500

    AMTD/Yodi – Very nice!


  14. Regret I did not bet the farm on this one!!!!!!!!!!!


  15. Phil/ET – Thank you about K1 info for ET. 


  16. JO/Ati – Taking off nicely.  Finally popped that trend line. 


  17. With no more trading fees, there was good reason to be cautious Yodi.


  18. Yes one has to be happy with small steps it goes in both ways that is on the losing side as well.


  19. Phil, do you like GPS at these levels? (historical bottom)?


  20. Alter GPS good div. but like M the rag trade is out of fashion some what???


  21. Looks like T reached it's low yesterday, for me it looks better around 30 to 32, but will we see these numbers again?


  22. Hopefully Schwab doesn't kill the AMTD technology like ToS.


  23. SPWR / Phil, albo – Maybe that $7 price gives us some insight on a floor for the future. I imagine that this price was decided in coordination with potential investors.


  24. Phil – In consideration of that $7 floor for SPWR, anything wrong with the following very conservative trade:

    Buy 2022 5/8 BCS
    Sell 2022 5 puts

    You get a credit of about $0.40, margin is less than $200 per contract and at $7, you make about $250 so over 100% return in 2 years, still ahead of inflation. Worse case, you own SPWR at $4.60, more than 30% lower than today. Nothing fancy, nothing super risky! 


  25. GPS/Alter – GPS makes half their money from Old Navy and you'd think they have no room to cut but the tariffs haven't hurt them much and the stock is cheap and I don't see jeans going out of fashion.  Pays a $1 (0.97) dividend while you wait so $16 is a fine price to pay, especially as you can sell the 2022 $15 calls for $4 and the $13 puts for $2.90 so net $9.10/11.05 with a $1 dividend is VERY NICE for a stock that's currently at $16 so yes, I'd go for it and, if we had room in the Dividend Portfolio – I'd add it. 

    This is EXACTLY the kind of play you want to have in a Dividend Portfolio, a blue chip stock that's very unlikely to die so all we need here is 3-4 cycles and we reduce our cost basis to $0.  For example:

    2020 we put $22,100 aside for 1,000 shares of stock and the potential to be assigned.  Collect $1,000/yr in dividends = 4.5% while we wait.

    2022 we have 1,000 shares at net $9,100 (ignoring dividend and assuming we're not called away at $15,000 with a $6,000 profit and move on to another play) and we sell $15 calls and $13 puts again for another $6.10 and our basis drops to $3/8 and all we need to allocate now is $16,000 if assigned 2x and we collect $1,000 = 6.25% per year while we wait.

    2024 same deal and basis now $3,000 and we sell $15 calls and $13 puts for $6,000 and now we have a $3,000 credit and net $5 if assigned so $10,000 set aside and $1,000 interest becomes 10% while we wait.

    2026 same deal and basis now $3,000 credit and we sell $15 calls and $13 puts for $6,000 and now we have a $9,000 credit and, if assigned, net $4,000 on $2,000 shares is $2/share.  The other $20,000 we started with just 6 years ago is at work building our next cycle and this one is now spitting out $1,000 per year on net $0 in stocks and we WISH we would get assigned!  

    That's how you play it.  By 2032 you have completed the cycle on the next stock and collected $6,000 more from the first trade in dividends plus say $9,000 from only selling calls (no more puts) and that's $15,000 contributed from GPS plus you completed the cycle on your new stock so now (2032) you can easily buy 2 new stocks and by 2038 you will have completed the cycle on 4 stocks.  

    That's how you build wealth.  It's very boring the first few years but gets very interesting around year 10 and, by year 30, you are making more than you started with in dividends alone and holding 6-10x worth of stocks.

    The only trick is picking stocks that aren't going to go BK to start and the rest is easy!  

    I have a CC, back in about an hour,


  26. Big percentage moves in cannabis stocks today.  HEXO, CGC, ACB, etc.


  27. T/Yodi – I don't see low $30s coming back.

    SPWR/StJ – Assuming the sale goes off well, it will set a strong floor but a real sign of weakness to take that price when they were holding $8 well.  Some f'ing bankster talked them into a lowball price so they could be sure of a quick fee.  Nothing at all wrong with that trade.  2022 $8 puts are now $3.30 but I'd still sell the $10 puts for $4.75 as I think net $5.25 is ridiculous.  

    Oh look, a comeback in the market – what a surprise!


  28. Looking through the ruble in the energy field, especially nat gas.

    Took a small spec position in Antero Midstream (AR) at $2.00.  Covered 1/2 with the May 2.5 calls at $.38.

    Company is 90% hedged in nat gas in 2020 at $2,87 and 89% hedged in 2021 at $2,80.

    Obviously very speculative.   

    Note:  Comes with a K-1.


  29. Phil, thanks for the detailed GPS answer!


  30. AR – Is actually named Antero Resources, not Midstream.



  31. Phil:  AMC has hit what I believe is an all-time low today, $7.87 right now.  10.10% yield.  The $10 2020 call can be sold for 1.3.  EV/EBITDA of 6.5.  S&P rates as 4 Stars with a PT of 12, Credit Suisse as Outperform with a PT of 14.  Debt is high.  What is your take as a dividend play?


  32. MDR  what are you thoughts ?

    Buy or close or maybe wait

    Thanks


  33. AMC/John – I think taking a $400M loss against and $800M market cap threw people off in 2017 and they never really renewed investors' confidence since.  They aren't going to make any profits this year or next year though – so maybe those investors are right?

    Year End 31st Dec 2013 2014 2015 2016 2017 2018 TTM 2019E 2020E CAGR / Avg
    Revenue $m 2,749 2,695 2,947 3,236 5,079 5,461 5,437 5,535 5,544 +14.7%
    Operating Profit $m 189.1 183.5 227.7 212.9 101.8 265 179.9     +7.0%
    Net Profit $m 364.4 64.1 103.9 111.7 -487.2 110.1 35.0 -89.2 -41.3 -21.3%
    EPS Reported $ 4.74 0.65 1.06 1.13 -4.75 0.85 -0.21     -29.2%
    EPS Normalised $ 4.77 0.63 1.15 1.53 -4.21 1.15 -0.012 -1.07 -0.44 -24.7%
    EPS Growth % +1,848 -86.9 +84.4 +33.0            
    PE Ratio x           7.04 n/a n/a n/a  
    PEG x           n/a n/a n/a n/a
    Profitability

    They only have $100Min cash (started the year with $313) and that's how much they pay out in dividends so they are either going to lower the dividend, dilute you or both and that's WITH ultra-low interest rates on their $5Bn in debt somehow allowing them to pay just $300M in interest but that debt was up $500M last year – so maybe that's how?  So, if they have to refinance at higher rates and compete to buy programming at higher prices (those contracts roll over too) with much better-funded players  – well, I don't think I'd pay $8 either…

    MDR/QC – Gosh, I kind of like them, they bought my CBI (or merged), so I'm mad about that but I do think they don't deserve to be a $1 stock (less now).  

    They are in a big turnaround period though and still working through it but 0.82 is just $111Bn and that looks pretty good against next year's projections but this year they lose $57M, $114M and $1.86Bn in 3Qs so call it $2Bn so BS on their projections to just lose $355M this year and that means next year's $175M profit projection may be BS too.

    They have $9Bn in debt but enough cash ($677M) to buy AMC but it's only going to buy them a year at most and, like AMC, if it weren't for this low-rate environment, the doors would have closed already.  Since you can sell the 2022 $1 puts for 0.65 and net in for 0.35, I don't think there's anything wrong with risking $1,050 on 30 short puts – that way, if they do pop, you don't feel like you missed anything.  But I wouldn't count on it – they've done nothing but disappoint the last 2 Qs.  

    S&P red 3 days in a row – that's technically a slide!  We'll see how the week finishes.



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  38. R.N.C. Spent Nearly $100,000 on Copies of Donald Trump Jr.’s Book