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Monday Market Momentum – On the Road to 3,300

Image result for china trade deal cartoonThe momentum is still going.  

It's still about trade as the Trump and Xi have figured out that the more they drag this on, the more the markets seem to like it.  This weekend, China said it would cut tariffs for Frozen Pork, Pharmeceuticals and some High-Tech Components as another step in the Trade Talks.  Of course China is cutting tariffs with 23 other countries that are in the China Free Trade Agreement as well but the US not being excluded is a nice touch.  

“If we cut tariffs only for the U.S., a lot of other countries would complain,” says Wang Huiyao, founder of Beijing-based think tank Center for China and Globalization, or CCG. “This is for China to answer their concerns and support open trade. China will not be criticized for being one-sided to the U.S.”

Still, that doesn't matter to US traders, who have 3,300 Fever for the S&P 500 and that should be getting close to Dow 29,000 so we can all get 30,000 Fever in Q1 as well.  We're still short on details but the US and China are supposed to sign their "Phase 1" deal in "early January" – so we have that to look forward too and I'm sure the markets will leap higher on that "news" as well.

As we get close to closing out the Decade it's amazing to think they S&P 500 was at 666 in March of 2009 and 333 is just under 5 TIMES that level – a gain of 395% for the decade and, more importantly, more than double our pre-crash high of 1,500 – which was also the pre-crash high of 2,000.  Both of those times, the S&P 500 was projected to keep going higher and both of those times it crashed more than 50% because, after all, what is the price of a stock other than a story people seem to like – for the moment?

As you can see on this monthly chart, we're up 50% in just three years AFTER more than fully recovering from the crash so, if we were irrationally exuberant then – I can't imagine what you would call this!  We're still execising caution but, as in 1999 – it feels kind of silly being cautious when every day brings a new record highs.  Being cautious only feels good after the crash – and those are very hard to time properly.  

So we bumped up our hedges and left our longs on the table and we'll see how high they can fly into the 2020s – it's going to be a Hell of a ride – Merry Christmas!

 


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  1. Gonna need more lines!


  2. Good Morning. Xmas cheer – Boeing (BA) halted – regulatory halt. Message from my broker (IB).


  3. Good Morning!


  4.  

    Boeing announces that its Board of Directors has named current Chairman, David Calhoun, as CEO and President, effective January 13, 2020; Dennis Muilenburg has resigned 


  5. …… and investors love it! Always helpful to have a fall guy.


  6. On the other hand, someone should take responsibility for this mess! More heads should roll really! This could also have been avoided if the government had not let Boeing basically self-certify itself. So maybe look at some of these decisions that have been made there.


  7. Boeing won't recover until they move company HQ out of Chicago and back to Everett or Boeing Field in Seattle. Having a bunch of non-engineers thousands of miles and many hours away from production deciding the direction of the company does not work well.


  8. question about MDLZ? I have 20 Jan21BCS $45/52.5 and long 5 Jan21$45Puts, I have been selling quarterly 5 puts and 5 calls. currently short 5 March20 $55 and 5 Jan20 $52.5. Would you Roll BCS up and out? Other changes???


  9. Snow/ BA

    100%  BA has been doing a lot of silly decisions motivated or responding to political pressures about what, where and how to fabricate their units, in Airbus this pressure exits of the countries partners of the company but they handle it in another way.

    BA must refocus in engineering and science decisions, not in politicos


  10. Good morning!


  11. Good morning! 

    I'm off to Thailand tomorrow so forgive the short day on Christmas Eve.  My goal is to have a Secret Santa's Inflation Hedges Post for the morning report.  

    Christmas Day is 24 hours of flying for me so look for me on the Santa Tracker with your kids!  

    I arrive in Bangkok on the 26th at 4am but I think that's 4pm Christmas Day here, it's 10:30 pm there now on the 23rd so I write my post for the 26th the evening of the 26th – that should be fine.

    Friday, the 27th, I'm flying to Buriram, where the farm is, early that morning and will be there overnight, back to Bangkok the night of the 28th.  I very much doubt I'll have time to make a post Friday evening so we'll just keep using Thursday's for the weekend.  Not sure who's actually planning on working this week anyway…

    Monday is normal in Bangkok so expect a post by then but Tuesday is New Years eve there by the time the markets open here and I'm sure we will be out so Monday/Tuesday (30,31) likely to be the same post and Wednesday is a holiday.  

    Thursday/Friday (2,3) will be one post as I leave Friday at 4am to head back and I spend 24 hours on a plane again but arrive in Miami Friday afternoon.  

    Fun!

    More lines/StJ – Incredible. 

    BA with a new CEO, stock is picking up.  $320 did hold after all.  

    BA/Snow – Good point, engineering companies should be run by engineers, not finance guys.  Calhoun has an accounting degree. 

    MDLZ/Millard – I think $55 is a reasonable target and the short calls are all premium, why pay that?  Also, it's only 5 so you are well covered.  You could buy 10 of the 2022 $50 ($8.75)/57.50 ($4.75) bull call spreads for net $4 ($4,000) and sell 5 more March $55 calls for $1.85 ($1,850) and then set a stop on 10 of the 2021 $45 calls at $10.50 (now $11) to lock in those gains – but that's pretty aggressive.  Otherwise, I'd just leave it.  

    Musk trolls the bears

    • "Whoa … the stock is so high lol," tweeted Elon Musk minutes ago.
    • That tweet could have come at any number of points during Tesla's (NASDAQ:TSLA) remarkable run over the past few months, but Musk waited until the price tripped the famed "funding secured" $420 level.
    • At current pixel time, Tesla is up 3.55% on the session to exactly $420.
    • Previously: Tesla to take new $1.4B loan for Shanghai plant (Dec. 23)

    That's way up:

    Business uncertainty index up in December

    November new home sales fall short of consensus

    • November New Home Sales: 719K vs. 735K expected and 710K (revised from 733K).
    • For the three months ended November, purchases average a 720K pace, the strongest since 2007.
    • November rate is 16.9% above the November 2018 estimate of 615K.
    • Median sales price of new houses sold in November 2019 was $330,800; average sales price was $388,200.

    Lyft -5.3% as KeyBanc sees stagnating user growth

    • KeyBanc analyst Andy Hargreaves says new riders for Lyft (NASDAQ:LYFT) and Uber (NYSE:UBER) combined declined 2% in Q3, the first Y/Y new customer drop since KeyBanc started tracking the data.
    • The analyst says Lyft's slowdown probably reflects more "limited geographical expansion and less aggressive promotions." The growth could materially slow unless Lyft broadens its use cases, which KeyBanc says "will be difficult."
    • Lyft shares are down 5.3% to $45.38. UBER is down 0.8% to $30.20.

    Seadrill shoots higher as rig wins North Sea work

    • Seadrill (NYSE:SDRL+29.6% pre-market on news that Norwegian oil company Var Energi has chartered its West Phoenix offshore drilling rig for operations at the Balder field in the North Sea.
    • SDRL says it expects the total contract value for the firm portion of the contract at ~$302M, with start-up anticipated at the end of Q2 2021 and running through Q3 2023; Bassoe Offshore calculates a dayrate of $360K.
    • Var Energi's Balder Future project is a part of the Balder X project, with targeted recovery of 200M barrels of additional reserves from the Balder-Ringhorne area in the North Sea.

    That shows you how messed up valuations are these days when SDRL can pop 30% on news that they leased a rig.  That's kind of what they do!  


  12. Baird sees improving TWTR optics in 2020

    • Baird says Twitter (NYSE:TWTR) has "room to be more constructive ahead of improving optics" in H2 2020.
    • Analyst Colin Sebastian lowers his 2020 revenue estimate from $3.99B to $3.98B and EBITDA from $1.37B to $1.36B.
    • The analyst sees moderating headcount growth, incremental contributions from major events like the Olympics and U.S. election, and easier comps that will help boost H2 growth.
    • Baird maintains a Neutral rating and $39 target on TWTR, matching the average Sell Side rating.
    • Twitter shares are up 0.3% pre-market to $32.22.

    Peter Lynch picks energy

    • "You wouldn't know it from the stocks, but oil is 25% higher than a year ago," Peter Lynch tells Barron's.
    • While Lynch believes renewable energy sources may be the long-term future, he reminds that natural gas and oil will be a necessary bridge to this. "Everybody’s assuming the world’s going to not use oil for the next 20 years, or next year. I’m buying companies that I don’t think will go bankrupt."
    • As for names, Lynch didn't disclose any, but he thinks small-cap oil and natural gas players will be three-baggers.

    Exxon discovers more oil offshore Guyana

    • Just days after producing Guyana's first ever oil at the huge Liza offshore field, Exxon Mobil (NYSE:XOM) says it made another oil discovery near the field.
    • XOM says its Mako-1 well located six miles southeast of the Liza field encountered 164 ft. of a high-quality oil bearing sandstone reservoir.
    • The company says the discovery is the 15th it has made at Guyana's Stabroek Block, which it estimates contains more than 6B boe.
    • XOM is operator and owns a 45% interest in the Stabroek Block, while Hess (NYSE:HES) holds 30% and CNOOC (NYSE:CEO) owns 25%.

    Related imageOne-day shipping driving AMZN Prime use – Piper

    • A Piper Jaffray survey of Amazon (NASDAQ:AMZN) Prime members shows a strong interest in one-day shipping and the potential for a material increase in usage, especially if more items become included in the faster shipping option.
    • Analyst Michael Olson notes that "increased spending on one-day, while favorable for top line metrics, will continue to weigh on op income in Q4 and potentially beyond."
    • Olson sees Q4 operating income of $2.6B versus last quarter's $3.16B and lowers his 2020 and 2021 op. income estimates.
    • Piper maintains an Overweight rating and $2,150 price target on Amazon. The company has a Very Bullish average Sell Side rating.
    • Amazon shares are up 0.2% pre-market to $1,790.50.

    How could they possibly have expected a good number?  

    Durable goods skid in November

    • November Durable Goods: -2.0% vs. +1.5% expected and +0.2% prior (revised from -0.2%).
    • Core Durable goods: 0.0% vs. +0.1% expected and +0.3% prior (revised from +0.6%).
    • Durable Excluding Defense +0.8% vs. +1.2% prior.

    This is my favorite new medical tech:

    Microbot launches fully disposable robotic system for endovascular procedures

    • Microbot Medical (NASDAQ:MBOT+6.1% pre-market after unveiling what it says is the world's first fully disposable robotic system for use in neurovascular, cardiovascular and peripheral vascular procedures.
    • MBOT says the LIBERTY robotic system features a compact design with remote operation capabilities while reducing radiation exposure and physical strain to the physician, as well as the potential to eliminate the use of multiple consumables through its "One & Done" capabilities.
    • The company says it will publicly display and demonstrate the product on Jan. 13 in San Francisco.

    Wedbush raises Apple on 5G tailwind

    • Wedbush raises its Apple (NASDAQ:AAPL) target from $325 to $350 ahead of next year's 5G iPhone demand.
    • Wedbush: "We believe iPhone 11 is just the front end of this current 'supercycle' for Cupertino with a slate of 5G smartphones set to be unveiled in September that will open up the floodgates on iPhone upgrades across the board that the Street continues to underestimate."
    • The firm expects five new iPhones to launch in 2020 and sees 200M iPhone units sold as "a starting point" with 350M within range for an upgrade.
    • Wedbush maintains an Outperform rating on Apple. The company has a Bullish average Sell Side rating.
    • Apple shares are up 0.3% pre-market to $280.28.

    Bitcoin bounce continues

    • Technicians were looking for another leg down after Bitcoin (BTC-USD) fell and stayed below $7K a few days back, but the crypto leader has managed to put in a rally since.
    • Up modestly today, Bitcoin is currently changing hands at $7.58K - ahead more than 15% over the past few sessions.
    • The technicians are quiet this morning, but the next level some are looking at would be $7.9K.

    Genworth and China Oceanwide delay merger for the 13th time

    • Genworth Financial (NYSE:GNW) and China Oceanwide Holdings Group enter another waiver and agreement to extend their merger agreement — their 13th —  extending the deadline to March 31, 2020 from the previous deadline of Dec. 31, 2019.
    • The 13th Waiver also provides termination rights for Oceanwide to the extent that regulators subsequently impose materially adverse conditions on the transaction. In addition, the waiver provides that the parties will mutually agree upon a closing date after the receipt of all required regulatory approvals.
    • In the event Genworth and Oceanwide cannot agree on a closing date after they receive all regulatory approvals, each party has the right to terminate the merger agreement.
    • Although the Genworth-Oceanwide deal had previously received all necessary approvals from U.S. regulators, the parties recently provided supplementary information to certain regulators to reflect the Genworth Canada disposition and the passage of time since their prior approvals.
    • The approval of the New York Department of Financial Services expired earlier this year and the parties are in talks with the NYDFS to secure an appropriate reapproval.
    • Fannie Mae and Freddie Mac will also need to reapprove the Oceanwide-Genworth deal.
    • Once the two companies have received all final regulatory approvals, Oceanwide will also need to receive clearance from China's State Administration of Foreign Exchange for the currency conversion and transfer of funds.
    • The two companies originally agreed to the merger in October 2016.
    • Previously: Genworth +4.0% after sale on Genworth MI Canada closes (Dec. 12)

    Aurora Chief Corporate Officer steps down

    • Aurora Cannabis (NYSE:ACB) Chief Corporate Officer Cam Battley left the company on Saturday.
    • "Our roots run deep, and Cam has been an integral part of the development, growth and expansion of Aurora," said Terry Booth, CEO of Aurora. "We are grateful for Cam's leadership and passion over his many years with Aurora."
    • ACB -2.7% premarket

    'Skywalker' tops box office with smallest haul of new trilogy

    • Despite a mixed fan reaction and thumbs-down review from most critics, The Rise of Skywalker took in an estimated $175.5M in the U.S. and Canada over the weekend, marking the lowest opening of the new Star Wars trilogy.
    • It also garnered $198M internationally, bringing its global box office haul to $374M for the weekend, and could become Disney’s seventh $1B film released in 2019.
    • 'The Rise of Skywalker' will be the last Star Wars movie until 2022 as Disney puts the series on a "hiatus."

    Construction on Nord Stream 2 presses on

    • U.S. sanctions have temporarily stopped construction on Nord Stream 2 – as Washington opposes a project that will increase Europe's dependence on Russian energy – though a workaround is already in progress.
    • Gazprom (OTCPK:OGZPY) is the majority owner of the pipeline, which has financial backing from five European companies: Royal Dutch Shell (RDS.ARDS.B), Germany's Uniper (OTC:UNPPY) and BASF (OTCQX:BASFY), Austria's OMV (OTCPK:OMVJF) and France's Engie (OTCPK:ENGIY).
    • Should the sanctions be expanded to western companies in the Nord Stream 2 consortium, Gazprom will buy out their stakes in the project and insulate the project from sanctions.

    That's interesting as Trump's sanctions are devaluing the value of the pipeline interests that Putin (OGZPY) is offering to buy out at a discount now that the pipeline is paid for and near completion.  Putin stands to make Billions off Trump's move. 


  13. SDRL / Phil – Sales are around $1B now and they are talking about adding $300M with that new deal so it looks like 30% more but then it runs over 3 years so adds maybe 10% to sales starting in 2021! I guess we are ruling by bots who saw $300M and assumed 30%! Just ridiculous.


  14. 'Second wave of renewables' to drive 70 GW of coal retirements, Stanley says

    • Morgan Stanley forecasts 70K-190K MW of coal-fired generation is "economically at risk" from the deployment of a "second wave of renewables" in the U.S.
    • "Driven by the surprisingly low cost of renewables, we believe that carbon-heavy utilities that have not historically led the pack in clean energy deployment will accelerate their earnings growth by pursuing a 'virtuous cycle': shutting down expensive coal plants and investing in cheap renewables," Stanley analysts say, seeing American Electric Power (NYSE:AEP), Dominion Energy (NYSE:D), Southern Co. (NYSE:SO), Pinnacle West (NYSE:PNW), PPL Corp. (NYSE:PPL) and Duke Energy (NYSE:DUK) as the utilities with the "largest opportunity" to achieve a valuation rerating under this approach.
    • "Now there is a much greater opportunity to achieve kind of a triple-bottom-line benefit in the sense of customers [through lower bills], the environment and shareholders," Morgan Stanley's Stephen Byrd tells S&P Global Platts. "There is an opportunity now that we think some utilities will seize… the benefit that other utilities have achieved with their share price performance that have embraced that opportunity."

    U.S. talking with GM about self-driving cars without steering wheels – Reuters

    • The U.S. National Highway Traffic Safety Administration is holding talks with General Motors (NYSE:GM) on the company's request to deploy a limited number of self-driving vehicles without steering wheels or other human controls, acting agency head James Owens tells Reuters.
    • The NHTSA aims to make a decision soon on GM's petition as well as a request by Softbank-backed (OTCPK:SFTBY) startup Nuro to deploy a limited number of low-speed, highly automated delivery vehicles without human occupants, Owens says, adding action "definitely" would happen next year.
    • NHTSA officials are "crawling through these petitions because we want to make sure" they are at least as safe as cars already on the roads, according to Owens

    Lockheed wins two Pentagon contracts worth nearly $9B

    • Lockheed Martin (NYSE:LMT) is awarded a $7B contract modification from the U.S. Air Force for F-22 air vehicle sustainment, the Department of Defense announces.
    • Work will be performed at Joint Base Elmendorf-Richardson, Alk.; Nellis Air Force Base, Nev.; Tyndall AFB, Fla.; Joint Base Langley-Eustis, Va.; and Joint Base Pearl Harbor-Hickam, Haw.; as well as six support locations; completion is expected by year-end 2032.
    • Additionally, LMT is awarded a $1.96B contract modification by the U.S. Navy for the detail design and construction of four Multi Mission Surface Combatant ships for Saudi Arabia.
    • The DoD says work will be performed in Marinette, Wis. (50%), Washington D.C. (17%) and elsewhere: completion is expected by mid-2026.

    Apple works on satellite-to-device tech

    • Apple (NASDAQ:AAPL) has a secret team working on satellite technology that the iPhone maker could use to beam internet services directly to devices, bypassing wireless networks, Bloomberg reports.
    • It's not a far fetched idea. Apple has increasingly made moves to design and control every aspect of its products, like its own custom A-series silicon and 5G modems.
    • While a clear direction and use for satellites hasn't been finalized, CEO Tim Cook has shown interest in the project and indicated it's a company priority.
    • Related: Verizon (NYSE:VZ), AT&T (NYSE:T), Sprint (NYSE:S), T-Mobile (NASDAQ:TMUS).

    So what if AAPL charges $20/month for 1Bn IPhones, that's $240Bn a year – I'm pretty sure that's profitable enough to maintain a satellite service as it's more money than any single company has ever spent to provide service so now what's AAPL worth doubling their top-line revenues?  

    Certainly not good news for the phone companies…

    SDRL/StJ – They just did a restructuring last year – so close to BK.  Still, losing $700M this year on $1Bn in sales so maybe now they lose $900M on $1.3Bn?  So crazy!

    Year End 31st Dec 2013 2014 2015 2016 2017 2018 TTM 2019E 2020E CAGR / Avg
    Total Revenue
    $m

    5,282 4,997 4,335 3,169 2,088 1,253 1,282 1,253 1,258 -25.0%
    Operating Profit
    $m

    2,098 2,225 -258 178 -2,887 -4,162 -599      
    Net Profit
    $m

    2,653 3,979 -634 -181 -2,973 -4,483 -1,382 -728 -614  
    EPS Reported
    $

    1,465 2,221 -344 -96.7 -1,576 -44.8 -13.8      
    EPS Normalised
    $

    785 770 320 213 -508 -20.2 -11.7 -7.84 -6.03  
    EPS Growth
    %

    +25.5 -1.97 -58.5 -33.3            
    PE Ratio
    x

                       
    PEG
     

                       
     

  15. Nord Stream pipeline / Phil – Reading the latest Rachel Maddow book, it's fascinating to see how Putin and his cronies are milking Russia. There are claims that building the pipeline costs more in Russia than on the German side even with Germany's cost of labor being 2-3 times higher! Companies like Rosneft that are sitting on oceans of oil don't make money! Really interesting.


  16. That's how Putin became the richest man in the World and that's why Trump wants to be him so badly – Putin funnels off the country's wealth to his own pockets in so many ways it's mind-blowing.  Trump looks like an amateur with his little stock manipulations and emolument scams.  



  17. The December Portfolio Review is up – in case anyone needs it.  

    Volume is so low today – may as well be closed.  

    Date Open High Low Close* Adj Close** Volume
    Dec 23, 2019 321.59 321.65 321.22 321.33 321.33 23,319,773
    Dec 20, 2019 320.46 321.97 319.39 320.73 320.73 147,142,100
    Dec 20, 2019 1.57 Dividend
    Dec 19, 2019 319.80 320.98 319.52 320.90 319.33 85,310,500
    Dec 18, 2019 320.00 320.25 319.53 319.59 318.03 48,133,000
    Dec 17, 2019 319.92 320.25 319.48 319.57 318.01 61,097,700
    Dec 16, 2019 319.22 320.15 317.25 319.50 317.94 82,749,700
    Dec 13, 2019 316.87 318.67 316.02 317.32 315.77 81,503,900
    Dec 12, 2019 314.43 317.99 314.17 317.13 315.58 96,389,600
    Dec 11, 2019 314.03 314.70 313.44 314.42 312.88 53,429,100
    Dec 10, 2019 313.82 314.55 312.81 313.53 312.00 52,649,800
    Dec 09, 2019 314.44 315.18 313.80 313.88 312.34 34,838,500
    Dec 06, 2019 314.12 315.31 314.11 314.87 313.33 48,927,000
    Dec 05, 2019 312.23 312.25 310.58 312.02 310.49 40,709,000
    Dec 04, 2019 310.70 312.12 310.32 311.46 309.94 49,080,000
    Dec 03, 2019 308.65 309.64 307.13 309.55 308.04 73,941,700
    Dec 02, 2019 314.59 314.66 311.17 311.64 310.12 75,767,800

  18. JILL -Up 20% in a week.  Sold some more.  Keeping 1/4.


  19. So Peter Lynch thinks some small oil and gas stocks will be three baggers.

    I think CNX could be one.  But I'll be very happy with a double. 8-)


  20. Oil/Albo – Well if the price of oil stays over $60 then sure.  

    X is holding up OK at $11.72 but can't tell much from this low-volume action.  

    /NG came down a lot on the new contract.  /NGV20 still $2.31 but that's down 0.05!

    OJ with a big pop:

    Gold and Silver coming back – not sure if that's a good thing though as it means someone is nervous about something.

    We nailed the top on Palladium! 

    Copper way up on trade deal:

    Hogs going to China too:

    And soybeans


  21. Strange Russell action today:


  22. The Russell is strange. I've been looking at the components to see what's red – seems to be financials and utilities. *shrug*


  23. Phil, you have to tell us about your internet connection, al this on your way to Thailand?

    Have a good trip and remember…the golden triangle!


  24. Phil/travel – by the way, you keep puzzling over time – a good travel time app on your phone is essential, as I found when going back and forth to Korea. I use a very simple android app called "world clock" – you plug in a list of places when you need to know the time often, and you're set.


  25. Thailand/Advill – No, leaving tomorrow about 6.  

    Time/Snow – I know how to check the time!  I just need to get it in my head so I can plan my day well.  It's a 12-hour difference, that's easy to remember – it's just I keep forgetting forward or backwards.  

    I only care as I'm trying to keep up on PSW – I'm great at adjusting to local time when I travel after many years of practice.


  26. Phil – Hope you're in first class.

      24 hours is a killer !


  27. Of course!  I simply couldn't do coach on a trip like that. 


  28. To all of you wishing you a blessfull holiday season, and for you Phil a safe return.

    Now for all gamblers on this board one only! buy the stock WVE dropped from 37 to 14.39 now 15.73!!!! sell the Jan20 17.5 call for 4.30 +-. Your net is 11.43 before you lose. Check positions this morning. As I said just a fun game!!!


  29. Yodi -What is the stock ?


  30. Albo

    Wave Life Sciences Ltd. (WVE)