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Monday Market Musings – Winding Down 2019

Yes, I'm still in Thailand.

In fact, this is going to be a very short post as our 8am meeting went until 2pm and now we go back at 5pm, which is 5am for you guys so I'll be out (most likely) at the open.  It's all very exciting stuff but we're working on an entire country so many, many, many meetings every day – even as the holiday approaches.   

Anyway, I hope your holidays are going well.  It doesn't seem like there's too mch market movement as we head into the open and, even if there were, the volume is a total joke and shouldn't be taken seriously, regardless.  The problem with Christmas/New Years is that even the regular reporters are on vacation so, even if something were happening – would we know about it?

Not very much seems to be happening in the rest of the world as most people have better things to do than rock the proverbial boat this time of year.  Even in Seeking Alpha's News Feed – there are less than a dozen items since Friday's market close as of the first (and only at 4am, EST) item of this morning.  That means it has been a good week to be away (so far) and tomorrow is a short session and Wednesday the markets are closed.  

The Dollar remains weak and that has been market supportive but 96.50 should be bouncy back to 97 and that's going to put some downside pressure on things today and tomorrow – so be careful watching that.  Otherwise – very, very boring and hopefully it will stay that way through the week.  

You would think there is not much data in a holiday week like this but there is:   We have Retail Inventories, Home Sales and the Dallas Fed this morning, Case-Shiller, Housing Prices, Chicago PMI and Consumer Confidence tomorrow, PMI and Fed Minutes on Thursday and then Motor Vehicle Sales, ISM and Construction Spending on Friday.  Even with nothing on Wednesday – that's a full week of data. 

There are no major earnings scheduled this week but we get back into the swing of things next week and here's a nice look at the moth ahead as it's already that time of year:

Image

That's a lot of fun things we can trade in our Earnings Portfolio so we'll be looking forward to that as it should make for an interesting January to kick off the new decade.  

China has kicked off the week with a "sort of" rate cut by switching the overnight rate to LPR (Loan Prime Rate), which is 0.2% lower than the previously benchmarked Overnight Lending Rate – effectively giving a rate cut of 0.2% by simply changing the index to track a lower base.  

President Xi has also added a team of 12 Finance Ministers to combat "banking difficulties" in China's highly-leveraged loan market.  As China slows down, their $14.7Tn loan market is in big trouble and facing strings of defaults if rates go higher and Xi should be applauded for taking all these preventive measures as China's growth engine begins to slow down but the fact that it's necessary is very, very scary!

One reason behind the ineffectiveness behind monetary policy in the country could be due to a balance sheet recession of companies that are paying down high debt loads, in an attempt to deleverage, causing investments to decline and contributing to slower economic growth.  Taipei Times noted that five regional banks have had "liquidity problems this year, raising the prospect of devastating debt bombs lurking in unexpected corners." 

Devastating Debt Bombs,

Happy New Year!

 


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  1. Debt Bomb – buy, buy, buy!

    On reason for new market highs is that other assets are not so great – rates are below 2% everywhere, heck below 0% in many places. Is that a sign of economic strength? We'll be lucky to grow at 2% here in the US in 2020 and we are the greatest economy ever! Still being cautious.


  2. Good morning!


  3. Good Morning Everyone!


  4. WVE +5.3% (reports WVE-120102 demonstrates statistically significant reduction in disease-causing mutant HTT protein in CSF vs. placebo.

    Great call, Yodi !


  5. Sorry not all does work!!!!


  6. Yodi – My apologies.  I saw the news and thought the stock was up. 

    My bad ! ! !


  7. No we just have to see what happens next week. Trading will be very low this week.

    Just setting up some plays from Friday. Market trading down it looks, so be carefull


  8. MDR -Up another 15 %.  Covered some with May 2.5 calls.


  9. WVE first buy the short caller back offer .05 I colsed at .10.


  10. Giving back last week's gains already! I had to add one line today so of course, we have a down day.


  11. This week's trading is going to be pretty meaningless though – volume is pathetic!


  12. Some instructive charts using the Volume by price indicator in StockCharts. I highlight where the most of the action happened in the last year and this where you can probably find support if we ever correct:

    Looks like we picked a good spot for the NYSE Must Hold! Maybe we can use that information for new lines if we move up any more.


  13. If we go back 3 years when this latest bull leg started, the Must Hold Line on the NYSE has been very good:


  14. Tesla could hit $4,000/share by 2030 – Chowdhry

    https://seekingalpha.com/news/3528675-tesla-hit-4000-share-2030-chowdhry

    OR NOT.


  15. Doubled on WVE and bought shares @ 7.95


  16. Albo / MDR – I bailed too soon!

    Yodi – following your WVE idea.


  17. Bai2r – That's okay.  It's very speculative and could keep going up or crash and burn.


  18. Not for every one but in addition to the above WVE sold the long Jan 20 10 puts for 2.45 and I am rolling the Jan 12.5 short put to April 20, 10 put.


  19. Bai As I said not for every one but if a stock can fall 50% in one day I expect it to rebounce 20 to 25%


  20. Here is an example of rolling before the time. I hold the CC Jan20, 82.5 short call on ABBV the market wants 6.25 for that call. So 82.50 + 6.30 = 88.75. Stock trading at 88.62. Still a premium of .13 cents, so you think.

    BUT div 1.18 !!!! 1/14/20 It is obviously my .13 cents do not help here. That means time to roll if you still wish to hold the stock. Just one of my 100 thinks to do.


  21. Question?

    Do options trades have the same '3-day' settlement period as stocks?

    Basically – if close out an option today will it be 2019 or 2020 as far as reporting?

    Thanks


  22. Options are reported the day you sell. Correct me if I'm wrong.


  23. Jeffl = Options have a one day settlement.  But the rules are different at year end.

    My understanding is that if you're closing  out a long position you have until tomorrow's close to sell.

    However , if you're closing out a short option position it must be done today.

    I believe that's correct, but you should check with your broker.


  24. Yodi, Have you looked at incorporating IV Percentage (found in "Option Statistics" in the trade screen in TOS) for your armchair/poorman plays?  IV Percentage is a measure of how the stocks current implied volatility compares to the volatility range the stock has had in the past year. When the IV percentage is higher, option premiums are richer, and your probability of profit on a strangle is higher.


  25. Thanks albo and pirate

    I actually want to 'wait' until 2020 to close something out – just curious if I could do it today/tomorrow.  I have TDAM/TOS so I'll check with them.


  26. Finally nice and profitable on short MDR puts from back in October.

    And thank you for the commentary on NLY getting called away last week. Glad only a small portion was called – it's worth it to me to have that downside protection in place. 


  27. Palotay yes it is on WVE today 132% it would be obviously if the stock drops 50% in one day.


  28. Palotay, as fare as I know IV is taken in reference to the Standard and Poor as being 1. Above 1 yes you should have higher premiums below 1 lower premiums. However it very much depends on the stock, stocks with higher div. will always lower premium than stocks without div.


  29. IV Percentage/Rank compares a stocks current IV to it's historical IV range.  It gives you a basis to see if premiums are rich compared to historic values.  Like for instance, your DD trade from last week.  In TOS, it says the current IV percentage is 17% (out of 100%).  It means that currently premiums are very low compared to the average for the stock (average would be 50%).  The logic is that when premiums are low, the market is most likely underpricing volatility, and when premiums are high they are overpricing it.  It is better to buy options when IV is on the low side, and it is better to sell them when IV is on the high side (compared to the historical IV range for the stock).  Phil doesn't really talk much about this, but I have found it to be a useful tool to have in the arsenal.


  30. The implied volatility (IV) of an option contract is that value of the volatility of the underlying instrument which, when input in an option pricing model (such as Black–Scholes), will return a theoretical value equal to the current market price of said option.

    High implied volatility results in options with higher premiums and vice versa.


  31. Good morning/evening/whatever!

    Had a really long day and passed out when I got home at 10 before I could get back up and write something but better now after 3 hours' sleep.  Not much of a pullback now that we're bouncing.

    It ain't over until the VIX calms down, of course.

    Remember that tempting short on /RB?

    Big Chart – This sell-off is all StJ's fault for drawing bigger lines before the NYSE goes green.  cheeky

    NYSE/StJ – What I don't like on that 3-year chart is we did go up over 10% before but then corrected ALL the way back to where we started – which would be back to the Must Hold Line this time.  And that was a Hell of a sharp drop after a Hell of a big rally.

    TSLA/Albo – Why stop at $4,000?  That would only be $750Bn….

     
    One minor clarification. The price target is in Zimbabwe dollars, not US dollars.

    What an idiot. In no particular order, let us look at the claims.

     

    "1) No other company has the mental capacity, capital, passion or aptitude to build an at-scale supercharging network."

     

    The car industry does not waste capital building gas stations. Stations are built and operated by companies that want to profit from growing demand. Tesla does not have the capital to build a charging network and lags behind VW in spending on that front.

     

    "2) No other company has the mental capacity, capital, passion or aptitude to build at-scale battery energy storage products."

     

    If a profit can be made there are companies that are far better than Tesla at making batteries. They happen to be in the battery business.

     

    "3) Citing the exoskeleton, he says that no other company has the mental capacity, capital, passion or aptitude to build a material science company."

     

    Tesla lacks the capital to 'build' a material science company. It is and remains mostly a manufacturing company that uses established engineering and design approaches to put together dated electric vehicles that have performance issues that make them unsuitable for most families.

     

    "4) Tesla will control the "full life cycle" of deep neural network models that will lead to full self driving."

     

    Tesla is FAR BEHIND its competitors. And even the best of those are likely to lose to an entrant that we have yet to see take the playing field.

    I knew someone would say it so I didn't have to…

    Pooff

    We all know that this 'analysis' is nothing but attention seeking from the Cult. Also, appearing on a major news outlet will increase your fund gathering capabilities by some 420%. Anyhow, I would like to add that..

     

    "1) No other company has the mental capacity, capital, passion or aptitude to build an at-scale supercharging network."

     

    For example IONITY is a collab between VW, Ford, Daimler and BMW here in EU. They also have 350 kWh charging points at super markets and stuff, where people actually visit. (We will have to see what will happen to the ones in closed parking spaces though) Also, there are many other brands like Chargemaster by BP that has some 7000 public charging points in UK alone.

     

    —————————————————--

     

    "2) No other company has the mental capacity, capital, passion or aptitude to build at-scale battery energy storage products."

     

    Well, if you look at the battery supplier of Tesla, that is Panasonic, they state on their website about their battery storage systems "Large-scale energy storage for grid stabilization and so on." Hmphm — isn't it weird that the battery supplier of Tesla sells batteries..?

     

    eu.industrial.panasonic.com/…

     

    —————————————————--

     

    "3) Citing the exoskeleton, he says that no other company has the mental capacity, capital, passion or aptitude to build a material science company."

     

    ''''' MATERIAL SCIENCE COMPANY ''''' I wonder if that is the stainless steel, that Musk said to be in the SpaceX Starship interview to be just normal stainless steel, that somehow became this 'special 30x stainless steel' when it was applied to the Cybertruck? Also, the exoskeleton is useless because of collision safety, pedestrian safety and customization, among other things.

     

    —————————————————--

     

    "4) Tesla will control the "full life cycle" of deep neural network models that will lead to full self driving."

     

    Like you said it, Tesla is behind in technology. They just allow the system to be easily fooled, which results in many people thinking that wow this is a great system. Whereas, if you look away from the road in other systems, or take your hands of the wheel, the system will turn itself off, like the SAE lvl 2 would require by the LAW. Autonomous driving will not be ready for years, and the whole industry knows it. Many are developing it, and just now major companies are starting to get testing permits for real life traffic. A pile of lawsuits is already gathering at the Zombie office.

    Anyway, moving on….

    3-Day Rule/Jeff – As far as I understand, the rule is that, when you buy stocks, the brokerage firm must receive your payment no later than 3 business days after the trade is executed.  I've never thought it applied to options as there is no stock to transfer but, of course, check with your broker – even if there is a "rule" it's subject to interpretation by each broker.

    And what Albo said!

    Speaking of IV, Palotay, these are interesting – the biggest post-earnings moves of 2019:

    Image


  32. MDR/Ati – Nice recovery and good job scaling back out. 

    IV/Palotay – I don't talk about it much but I do pay attention as I like to jump on plays when the options are "too expensive" or "two cheap" but I'm just going by my observations, not really using IV indicators.  


  33. NIO – Chinese TSLA wannabe up 76% today.


  34. Stocks pare losses; don't read too much into it

    • The three major U.S. stock averages pare their earlier losses amid thin trading in the second-to-last trading session of 2019.
    • The Nasdaq, down 0.5%, declined as much as 1.1% earlier; the Dow's 0.8% slide narrows to a 0.4% slip, and the S&P 500's 0.7% drop fades to a 0.4% fall.
    • The 10-year Treasury also declines, lifting yield 4 basis points to 1.92%.
    • “This whole week’s going to be slow, so I wouldn’t attribute any day’s movements or any movements this week to anything in particular,” said Jeff Mills, chief investment officer at Bryn Mawr Trust told Bloomberg News. “The market is in an interesting spot, we’ve run up quite a bit, technically the market is overbought.”
    • Looking at S&P 500 sectors, communication services (-0.8%) is the biggest decliner, while energy (+0.2%) and financials (+0.1%) manage to buck the broader market's slide.
    • By name, CenturyLink (-1.1%) after announcing that its chairman will retire in May and Occidental Petroleum (+2.1%) as February breached $62 earlier today.
    • Crude oil edges up 0.1% to $61.76 per barrel.
    • The Dollar Index slips 0.2% to 96.69.

    New FDA food labeling rules required January 1

    • The FDA issues additional labeling guidance for packaged foods aimed at answering questions from manufacturers who are required to be in compliance with the new rules when 2020 begins (applies only to companies with at least $10M in food sales). Key points:
    • Nutrition Facts for foods that can be reasonably consumed in one meal or snack are presented in two columns, one based on a single serving and the other based on the contents of the entire package. Serving sizes will reflect what people actually eat and drink, not a recommendation of what to consume (a big change for snack foods).
    • In the spirit of cooperation, the agency will not prioritize enforcement actions for six months to allow everyone to get on board. Companies with less than $10M in food sales will have an additional year to comply.

    Tiffany dabbles with restaurants in China

    • Tiffany's (TIF -0.2%) Blue Box Cafe restaurant in its flagship store in Shanghai has a six-month waiting list, according to South China Morning Post,
    • The retailer is looking to take advantage of a growing interest in "experiences" with high-end consumers in China.
    • "Luxury retailers tapping F&B business will be a sustainable trend in the coming years riding on China's large consumption market," says CBRE China Research Director Shirley Hu.

    DAMN!  I guess FCEL was the way to go with our "Stocks of the Future":  FuelCell Energy (NASDAQ:FCEL+29%

    Help wanted: Bank of Canada governor

    • Executive search-firm Boyden publishes a job posting for the head of Canada's central bank.
    • Bank of Canada Governor Stephen Poloz announced in December that he would step down when his seven-year term ends in June.
    • "Few positions influence more directly the performance of the Canadian economy than that of the Governor of the Bank of Canada," the job posting says.
    • Requires Canadian citizenship.
    • Among other requirements: "As an exceptionally well-qualified candidate, you have unquestioned technical competence in monetary policy and, more broadly, macroeconomics, coupled with a highly developed understanding of the financial sector—both institutions and markets—domestic and international."

    MUFG Bank takes a $1.9B hit after Indonesian unit stock sinks

    • Mitsubishi UFJ Financial Group's (MUFG +0.2%) core commercial banking subsidiary, MUFG Bank, recognizes a one-time ¥207.4B ($1.91B) impairment loss on an Indonesian subsidiary.
    • The market value of the bank, PT Bank Danamon Indonesia, as of Dec. 30, 2019 declined 50% or more from the purchase cost, triggering MUFG Bank to treat the slide as an impairment loss.
    • The amortization amount can be adjusted at the end of the fiscal year, at which point it becomes final; MUFG's fiscal year ends March 31, 2020

    FedEx, UPS add new fees for bulky items

    • FedEx (FDX -1.1%) and (UPS -1.2%) are protecting their bottom lines by applying a $24 charge on packages that weigh more than 50 pounds, down from a prior threshold of 70 pounds.
    • The extra costs will hit some shippers hard and are likely to be passed on to consumers, especially in the categories of TVs, furniture and auto parts.
    • The new charges went into effect at UPS yesterday and are due to be instituted at FedEx on January 6.

    China to issue biosafety certificates to GM soybean, corn

    • China's agriculture ministry says it plans to issue biosafety certificates to a domestically grown, genetically modified soybean crop (NYSEARCA:SOYB) and two corn crops.
    • If approved, the SHZD32-01 soybean developed by Shanghai Jiaotong University would become China's first GM soybean crop to receive such a certificate, a first step toward commercialized production.
    • China granted biosafety certificates to its first GM corn varieties and two domestic rice varieties in 2009 but never moved to commercialize the crops.
    • Origin Agritech (SEED +24%) received biosafety certificates for its phytase GM corn trait in 2009 and has several new varieties of GM corn in the pipeline for biosafety approval.

    Facebook gets new Street-high target

    • Aegis Capital maintains a Buy rating on Facebook (NASDAQ:FB) and raises the target from $235 to $300. FB has a Bullish average Sell Side rating.
    • Analyst Victor Anthony thinks the "stock will power through" the regulatory and antitrust headwinds in 2020.
    • Anthony praises FB's "continued strong user growth, continued share gains of global advertising, and progress on monetizing Messenger and WhatsApp."
    • The analyst expects a "blowout" Q4 due to solid user growth and "solid" ad checks.
    • Facebook shares are down 1.4% to $205.18.

    Wedbush sees strengthening FAANG verticals in 2020

    • Wedbush analyst Daniel Ives expects Alphabet (GOOG -1.3%)(GOOGL -1.2%), Amazon (AMZN -0.9%), and Apple (AAPL -0.8%) to "further expand into healthcare and banking verticals" in 2020 through organic moves and M&A.
    • Ives sees "clear momentum for the tech space" heading into the new year, backed by "transformational trends" that include 5G, cloud, self-driving vehicles, and "the streaming content wars."
    • Related: Ives called Apple the "clear winner" of FAANG stocks into 2020 on its 5G tailwind.

    Dallas Fed Manufacturing Survey

    Chicago PMI comes in strong

    Pending home sales squeak past estimate

    Large banks outperformance is 'overdone', KBW says

    • Keefe, Bruyette & Woods analysts Frederick Cannon and Paul O'Toole see large banks' recent outperformance vs. small banks as "overdone" and "in the process of reversing."
    • Notes that large banks tend to get most of the increase in cash when the Fed expands its balance sheet, "with much of that flowing to the trust banks" — Bank of New York Mellon (BK), State Street (STT +0.2%), and Northern Trust (NTRS).
    • Small- and mid-cap banks, though, are "set up relatively well going into 2020" as they "benefit most from the relative strength of the U.S. economy, the improved interest rate outlook, and merger activity," Cannon and O'Toole write.
    • KBW sees the Fed's moves to inject liquidity into the short-term funding market as doesn't expect a rate spike at year-end "as some market participants fear."

    Banks' business lending plateaus amid industrial slowdown

    • U.S. banks' business lending activities have stalled in H2 2019, crimped by an industrial slowdown and cheap financing available in the capital markets.
    • Commercial and industrial loans held by U.S. banks increased 1.6% by mid-December, to $2.4%, but all of that growth occurred in the first half of 2019, according to Federal Reserve Data. Most of the growth was at mid-sized and small banks.
    • Commercial real estate lending at the largest banks has started to decline, but growth is continuing at some smaller banks, the Financial Times reports.
    • The decline reflects a decline in U.S. manufacturing activity. November's Institute for Supply Management survey notched four straight months of contraction.
    • Also weighing on business sentiment is uncertainty over the U.S.-China trade dispute. Next year, though, the presidential election will add to uncertainty, JPMorgan Chase CFO Jennifer Piepszak said at a conference this month.
    • Larger companies may be turning to the junk bond market for capital instead of bank loans. U.S. junk bond issuance rose almost 60% to $263B in 2019 vs. 2018, according to Dealogic.
    • Demand for credit from energy companies also contributed to the slowdown as natural gas prices slid, Brian Foran of Autonomous Research told the FT.

    Chinese scientist gets three years in prison over genetically engineered babies

    • A Chinese court has sentenced He Jiankui to three years in prison for violating regulations and ethical principles when he and two colleagues edited the DNA of twin IVF embryos to make them resistant to the HIV virus then implanted them in an HIV-negative woman who subsequently gave birth to twin girls in 2018. The father was HIV-positive.
    • The case caused an international uproar because he performed the procedure with CRISPR/Cas9, still highly experimental, without regulatory approval and oversight which the scientific community regarded as profoundly reckless and unethical.
    • Selected tickers: CRISPR Therapeutics (CRSP -5.6%), Intellia Therapeutics (NTLA -2.7%), Editas Medicine (EDIT -2.7%)

    Related image

    Tesla -4% as bull/bear debate rages into 2020

    • Tesla (NASDAQ:TSLA) is lower as Cowen redirects attention to deliveries growth.
    • Cowen expects Tesla to deliver 101K vehicles in Q4 (from a prior forecast of 95K) and 356K vehicles for the full year to miss the company target of 360K to 400K.
    • "Excluding the Netherlands and China, we expect Model 3 deliveries to be down 9% quarter over quarter and 7% year over year in the fourth quarter, which highlights the demand saturation we are seeing across most mature markets as we shift from pent-up demand to steady flow demand," writes analyst Jeffrey Osborne.
    • Osborne sees pricing/mix issues impacting short-term profit for the EV automaker and is skeptical on long-term demand out of China.
    • Cowen's updated price target of $210 on Underperform-rated Tesla contrasts of course to today's long-term PT call of $4K out of Trip Chowdhry and a generally positive vibe from Wedbush's Dan Ives. "Tesla will find success in China with Giga 3 and potentially hit the key 100,000 delivery number quicker than the U.S./Europe trajectory and be a demand tailwind," writes Ives in his 2020 preview.
    • Shares of Tesla have peeled off 3.78% on the day following a sizzling 90-day run of more than 70%.

  35. Comment content omitted because it is too long.


  36. Fed's policy committee set for new lineup of voting members

    • With the coming of the new year, the Fed's monetary policy-setting arm rotates its voting members.
    • Besides dealing with the aftermath of September's short-term funding market turmoil, the Federal Open Market Committee's new lineup may be facing the prospect of higher inflation, according to some analysts.
    •  “One is there’s going to be an inflation scare. Headline inflation is going to move up," Marc Chandler, chief market strategist at Bannockburn Global Forex, told CNBC.  "Prices for agricultural commodities could continue to increase on new demand from China."
    • But inflation will have to be persistent before the Fed takes action, Chandler said. Meanwhile, he sees the U.S. economy slowing.
    • Next year, Philadelphia Fed President Patrick Harker, Dallas Fed head Robert Kaplan, Minneapolis Fed President Neel Kashkari, and Cleveland Fed head Loretta Mester are voting members of the FOMC.
    • Of the incoming members, Kashkari is considered dovish, while Mester and Harker were skeptical of this year's rate cuts.
    • Kaplan supported two of the three cuts, and, though he was more "agnostic" before October's cut, says policy is currently appropriate.
    • St. Louis Fed President James Bullard, Chicago Fed President Charles Evans, Kansas City Fed President Esther George, and Boston Fed President Eric Rosengren sit out on voting next year; their next year for voting will be 2022.
    • Leaving are two hawkish members, George and Rosengren, who opposed the Fed's three rate cuts; Bullard voted against two of the cuts because he wanted the central bank to make bigger cuts.
    • The Federal Reserve's board of governor members — Chairman Jerome Powell, Michelle Bowman, Lael Brainard, Richard Clarida, and Randal Quarles — and the president of the New York Fed, currently John Williams, are always voting members of the committee.
    • The CME Fed Watch tool keeps the probability of the federal funds rate staying unchanged at more than 80% through the June meeting. For the December meeting, the probability of the rate staying at 1.5%-1.75% falls to 52.5%.

    Savara +96% premarket on BTD tag for Molgradex for aPAP

    • Savara (NASDAQ:SVRA) is up 96% premarket in response to its announcement that the FDA has granted Breakthrough Therapy Designation (BTD) for Molgradex, an inhaled formulation of recombinant human granulocyte-macrophage colony-stimulating factor, for the treatment of autoimmune Pulmonary Alveolar Proteinosis (aPAP).
    • Breakthrough Therapy status provides for more intensive guidance from the FDA on development, the involvement of more senior agency personnel and a rolling review of the marketing application.

    Chipotle momentum seen extending into 2020

    • Chipotle (NYSE:CMG) is being singled out in the restaurant sector just ahead of the new year.
    • Piper Jaffray names Chipotle as its top restaurant pick in what it calls a "contrarian" pick due to the hesitation on the restaurant name following the +90% YTD runup in share price. PJ points to the "superior unit-level economics" in place at the fast-casual chain. An Overweight rating and price target of $904 is kept in place.
    • SunTrust also backs Chipotle into 2020 on its view that sales momentum will sustain amid new innovation. The firm expects Chipotle to deliver impressive Q1 same-restaurant sales growth of 8%. The SunTrust analyst team keeps a Buy rating on CMG and price target of $900 vs. the average sell-side PT of $852.32.
    • On Wall Street, Chipotle has 16 Buy-equivalent ratings on the books vs. 17 Neutral-equivalent ratings and 4 Sell-equivalent ratings.
    • Chipotle is flat in very light premarket action.

    Wholesale inventories remains flat in November

    Retail Inventories down in November

    International trade in goods

    Sol-Gel's Twyneo successful in acne studies; shares up 148% premarket

    • Ultra-thinly traded micro cap Sol-Gel Technologies (NASDAQ:SLGL) rockets 148% premarket, albeit on turnover of only 43K shares, in response to positive results from two Phase 3 clinical trials, SGT-65-04 and SGT-65-05, evaluating topical cream Twyneo (microencapsulated tretinoin 0.1% and microencapsulated benzoyl peroxide 3%) for the treatment of acne vulgaris.
    • The studies met the primary endpoints of the proportion of patients achieving clear or almost clear skin at week 12 and the absolute change from baseline in inflammatory and non-inflammatory lesion count on the face at week 12.
    • The company expects to file a U.S. marketing application in H2 2020. If all goes well, market launch could commence in H2 2021.

    Hedge fund closings continue amid lagging returns

    • The hedge fund industry is about to close a year that saw more fund closings than launches for a fifth consecutive year, Bloomberg reports.
    • More than 4,000 funds have liquidated in the last five years, according to data from Hedge Fund Research.
    • Investors pulled $81.5B from hedge funds this year through November, more than twice the amount for all of 2018, eVestment data show.
    • Returns haven't kept up with a booming stock market. The Bloomberg Equity Hedge Fund Index rose 10% through November compared with the S&P 500's 28% climb.
    • Among funds that have either closed or transitioned to family offices this year are Jeffrey Vinik's Vinik Asset Management, Stephen Roberts's Horseman European Select, and Louis Bacon's Moore Capital.

    Apple 'clear winner' ahead of 5G – Wedbush

    • Wedbush analyst Daniel Ives sees a "5G Super Cycle" for Apple (NASDAQ:AAPL) in 2020.
    • The firm names Apple its top 5G-related top pick, calling the company the Street's "clear winner."
    • Apple is expected to debut at least one 5G iPhone next fall.
    • Wedbush maintains an Outperform rating and $350 target on Apple. The company has a Bullish average Sell Side rating.

    Disney on its way to another $1B Star Wars tally

    • Disney's (NYSE:DISStar Wars: The Rise of Skywalker churned up $135M over the five-day holiday weekend to take its ten-day North American tally to $362M. The film brought in $94M at global theaters over the extended weekend to give it a total box office haul of $725M.
    • The strong weekend has put the film just behind the pace of Star Wars: The Last Jedi after the film started off about 20% below the opening day haul of its predecessor.
    • Shares of Disney are flat in premarket action and are up 33% YTD.

    Goodyear Tire has 32% upside – Nomura

      • Nomura Instinet analyst Anindya Das starts Goodyear Tire (NASDAQ:GT) with a Buy and $20 price target, implying 32% upside.
      • "Goodyear is an attractive, defensive stock within the auto and auto parts space, in our view, at a time when the economic growth outlook for 2020 is somewhat muddied," he writes.
      • Das cites three catalysts: 1) strong earnings recovery outlook from 2020 and on after largely completing its restructuring. 2) high exposure to aftermarket tires; and 3) inexpensive valuation.
      • Seeking Alpha's Quant Rating for GT is Neutral-. GT excels on Value, but fails on 4 other core quantitative metrics. See our Quant Rating here.
      • GT is +0.9% in early premarket trading.

    LA Mayor mulling electric car rule for ride-share services

    • The NY Post reports that Los Angeles Mayor Eric Garcetti is considering instituting a requirement that ride-share service providers use electric vehicles as part of the city's mandate to reduce greenhouse gas emissions and achieve carbon neutral status by 2050.
    • The rule, if enacted, could be a major blow to Uber since LA is one of its top five markets. The company has already endured a setback in the state when lawmakers passed legislation classifying drivers as employees rather than independent contractors.
    • Last month, it lost its license in London, a market representing ~4% of its business, over its failure to ensure passenger safety.

    NBA TV ratings down 15%

    • Sports fans are tuning out pro basketball in the U.S., down 15% this season thus far. Through week 8, average viewers on nationally televised games was 885K compared to ~1M a year ago and ~1.2M two years ago.
    • One reason for the diminished enthusiasm is the rash of injuries to star players that have relegated them to the sidelines (Kevin Durant, Stephen Curry, Klay Thompson, Zion Williamson). The bigger issue, though, is the secular shift from cable TV bundles to internet-based alternatives.
    • Lightshed Partners media and telecom analyst Rich Greenfield says, "There is no doubt that the talent in any season can push ratings up or down, but everyone is fighting a very, very difficult underlying trend, which is less people subscribing to TV. And of the people who are subscribing to TV, they’re watching less and less every day.”

    Auto/truck makers face long-term hurdles as emission standards ratchet up

    • Auto and light truck industry investors won't have much to cheer about in the near/medium term as more stringent emissions standards take effect in Europe this week (phase-in period extends into 2021), a development long known, though.
    • In order to meet the new rules, manufacturers will have to sell many more hybrid and electric vehicles there or pay costly fines, a situation similar to China, the world's largest car market. The problem for investors is the lack of profitability since manufacturers are stuck between a rock and a hard place, environmentally friendly products will not sell if priced above gas-users but offer little or no margins if priced competitively.
    • The issue will eventually ensnare heavy-duty trucks, albeit with a longer timeline, although new fuel-efficiency rules will be implemented in the U.S. in 2021. In Europe, big trucks will have to emit 30% less greenhouse gases by 2030.

    JPMorgan, Goldman tweak repo operations to limit regulatory burdens – FT

    • JPMorgan Chase (NYSE:JPM) and Goldman Sachs (NYSE:GS) have each found ways to trade in the $1.2T U.S. repo market that will limit regulatory burdens, potentially easing a cash crunch at the end of the year, the Financial Times reports.
    • Some financial industry watchers are expecting turmoil in the next couple of days, as lenders tend to cut back on repo activities at year-end, when global regulators look at banks' balance sheets to determine whether they have enough capital to continue trading even if there were a big hit to the financial system.
    • JPMorgan has been encouraging clients to use so-called "sponsored repo" deals, where a clearing house allows dealers to net transactions off against each other, the FT reports, citing people with direct knowledge of the bank's strategy.
    • Goldman is using derivatives known as total return swaps that carry lower capital requirements than regular repo trades, the newspaper said, citing people familiar with the change.
    • The moves, designed to minimize the banks' own capital requirements, should also help alleviate cash pressures in the market, analysts said.
    • Both banks have “taken steps to be ahead of the game at year-end,” said Jeff Drobny, CEO of hedge fund manager Garda Capital Partners. “It’s sensible.”
    • Total return swaps give hedge funds a way to reproduce highly leveraged Treasury investments away from the repo market. The returns are created synthetically without owning the security and allows funds to boost potential profits without borrowing more cash through repos.
    • Previously: Fixing repo market takes 'trial and error', former Atlanta Fed head says – CNBC (Dec. 27)

  37. Projected shale output overly bullish – WSJ

    • WSJ analysis shows that shale wells are not producing as much oil and gas as producers forecasted when they were raising capital.
    • Earlier this year, the WSJ reported that recently drilled wells in the four largest U.S. oil regions are expected to produce 10% less oil and gas over their lifetimes as claimed by fracking companies. Now the gap is closer to 15% per a comparison of productivity forecasts from 29 of the largest shale producers between 2014 and 2017 to estimates from analytics shop Rystad Energy. The potential shortfall represents ~1.4B barrels over 30 years or more than $60B at current prices.
    • Excluding new wells that began producing this year, output in the Permian Basin of Texas and New Mexico would have declined by ~40% according to IHS Markit.

    Barron's names 10 top stocks for 2020

    • Alphabet (NASDAQ:GOOG), Amerco (NASDAQ:UHAL), Anthem (NYSE:ANTM), Berkshire Hathaway (NYSE:BRK.A), Comcast (NASDAQ:CMCSA), Dell (NYSE:DELL), Pfizer (NYSE:PFE), Royal Dutch Shell (NYSE:RDS.B), United Technologies (NYSE:UTX) and ViacomCBS (NASDAQ:VIAC) are next year's 10 top stocks, according to Barron's.
    • GOOG is reasonably priced given its growth prospects and dominant competitive position, Barron's believes, adding the stock could get a lift if the company takes such steps as boosting its stock buyback program, curbing expenses growth and offering more financial transparency.
    • Wall Street is not thrilled about the earnings impact of PFE's spinoff plans, but Barron's thinks the valuation on the new company looks appealing, citing management's expectation of 6% annualized sales growth through 2025, which could produce 10%-plus yearly EPS gains.
    • Comcast rival Charter has been the better performer in 2019 but Barron's says CMCSA now looks like the better bet, as it trades at a discount to Charter based on pre-tax cash flow and carries less risk because of its lower debt-to-cash-flow ratio.
    • Barron's says UTX will get easier to understand in 2020 after completion of the merger with Raytheon, which will reduce leverage and decrease risk, thanks to the stability of RTN's defense business.

    Natural gas plunges after weather forecasts flip

    • Natural gas futures (NYSEARCA:UNGfell as much as 6% today to $2.158/MMBtu, as forecasts for warmer weather sparked worries over heating demand even while U.S. government data showed a larger than expected weekly storage draw.
    • The draw for the week ended Dec. 20 cut stockpiles to 3.25T cf, 2.1% below the five-year average but 19% above the same week a year ago.
    • "There is a belief that the cold front is going to be short lived, so above-normal temperatures are coming back to the equation," says Price Futures Group's Phil Flynn.
    • Weather models yesterday predicted the U.S. would experience slightly colder temperatures in the next 11-15 days, sparking big gains for nat gas futures, but prices today quickly surrendered those gains after forecasts changed overnight and instead predicted warmer weather.
    • "Weather models are volatile… it's a very inexact science," says Brian Lovern, chief meteorologist at Bespoke Weather Services.

    November farm prices received Index +4.6% (M/M)

    • November Prices Received Index for agricultural production is 88.6% of its 2011 base, +4.6% from the October 2019 index and +0.2% from the November 2018 index.
    • The crop production index +1.7% M/M to 82.6; the livestock index +7.0% to 96.6.
    • Food grains +2.4% M/M and -7.4% Y/Y.
    • Feed grains -4.2% M/M and +7.4% Y/Y.
    • Oilseeds -0.3% M/M and was +2.4% Y/Y.
    • Fruits and nuts +0.5% M/M and -0.5% Y/Y.
    • Vegetable and melon +15% M/M and -1.3% Y/Y.
    • Other crop -5.5% M/M and -9.2% Y/Y.

    Blank check company with eyes on cannabis files for IPO

    • Greenrose Acquisition, a so-called blank check company, files a prospectus for an initial public offering of 15M units at $10 each.
    • A blank check company is formed with the purpose of entering a merger, asset acquisition, or other business combination.
    • Greenrose says it plans to focus its search for target businesses in the cannabis  industry; it doesn't currently have any specific business combination under consideration.
    • Plans to apply to list units on the Nasdaq under the symbol "GRACU".
    • Each unit consists of one share of common stock and three-quarters of one warrant; each whole warrant entitles the holder to buy one share of common stock at $11.50 per share.

    Heavily shorted Rite Aid has surged nearly 3x since earnings topper

    • Rite Aid (RAD +12.8%) rallies to a new 52-week high and has nearly tripled in nine days after reporting much better than expected Q3 earnings and guidance.
    • The stock soared 42% on Dec. 19, the day it reported earnings, but it has continued to rise every day since then.
    • RAD also is one of the most shorted stocks on the market, as more than 29% of the company's shares have been shorted, according to Refinitiv.
    • The combination has RAD shares on pace for their best month since April 2009 and has turned a 41% YTD loss prior to the company's Q3 earnings report into a 56% gain for the year.

    Nevada gaming revenues slipped 3% in November

    • Casino names trade mostly lower after the state of Nevada reported November gaming revenues fell 3.1% Y/Y to $937M: LVS -0.5%BYD -0.4%CZR -0.2%PENN -0.4%WYNN -1%MGM +0.5%.
    • The biggest revenue dropoffs occurred at South Lake Tahoe (-19.2%), North Las Vegas (-15.2%) and the Boulder Strip (-9.3%), while the biggest gains came at Sparks (+9.2%) and Wendover (+9.2%).
    • Overall revenues edged 1.3% higher to nearly $4.99B, with the biggest gains at the Las Vegas Strip (+5.5%), Wendover (+5%) and Sparks (+4.4%), and the largest drop at North Lake Tahoe (-6%).

    Good news/bad news: More coal than gifts in economic stats

    • Santa didn't bring much in the way of economic data this week, and what he did bring was more like coal than gifts.
    • Still, the weekly jobless claims number exceeded expectations and Amazon and Mastercard SpendingPulse reported strong holiday sales, which should set up cheery December retail figures when those official reports roll in.
    • Stronger-than-expectedWeekly jobless claims fell more than expected, by 13K, to 22K vs. the 223K expected; the number improves from 235K in the prior week. Continuous claims also came in better than expected.
    • Weaker-than-expected: December's Richmond Federal Reserve manufacturing survey fell to -5 from -1 in November, as shipments and new orders dropped further.
    1. November durable goods orders unexpectedly dropped by 2.0% vs. the +1.5% expected, while the core number wasn't quite so severe — unchanged vs. +0.1% consensus.
    2. November new home sales of 719K trailed the consensus of 735K and October's number was trimmed to 710K from 733K; still, the three-month average of 720K was the strongest pace since 2007.

    NY Fed Nowcast trims Q4 GDP estimate to 1.2%

    • The New York Fed Nowcast estimates Q4 real GDP at 1.2%, down from 1.3% at Dec. 20.
    • Estimates Q1 2020 real GDP at 1.5% vs. 1.6% a week ago.
    • Negative surprises from the advance durable goods report accounts for most of the decline.
    • Previously: Q4 GDP growth looking better and better (Dec. 24)

    More investors sue Danske Bank over alleged money laundering

    • About 60 investors are suing Danske Bank (OTCPK:DNKEY -0.9%) for 1.5B crowns ($224M) over alleged money laundering, their law firm said on Friday, the third such case filed against Denmark's largest lender.
    • Several countries, including the U.S., are investigating the bank over €200B ($220B) of payments that flowed through its tiny Estonia branch between 2007 and 2015, many of which were considered suspicious.
    • “We will defend ourselves against the demands and deal with any development in collaboration with the bank’s lawyers,” Danske said in a statement.
    • The investors filing the suit include pension funds, insurance companies, and asset managers from at least 12 countries and are represented by the International Securities Associations and Foundations Management Company for Damaged Danske Investors. Danish law firm Nemeth Sigetty filed the suit in Copenhagen on behalf of the investors.
    • The lawsuit alleges that the bank violated Danish capital market laws by misleading and keeping investors uninformed for years, ISAF-Danske told Reuters in a statement.
    • It said the bank didn't disclose in its financial statements that "earnings included significant earnings from known illegal high-risk money laundering activities."
    • Other Danske tickers: OTCPK:DNSKF, DNKSY

    State Street investor confidence slips in December

    Volkswagen raises electric car production target

    • Volkswagen (OTCPK:VWAGY) says it expects to reach its strategic target of 1M electric cars by the end of 2023, two years earlier than previously predicted, and plans to raise its 2025 target for electric car production to 1.5M.
    • Volkswagen says its first ID.3 electric cars will appear on Europe's roads in summer 2020; the vehicle is being produced at its Zwickau plant, which is expected to produce as many as 330K EVs/year, and preparations for the production start of the ID. family are well underway in China and the U.S.
    • "Over the next few years, Volkswagen intends to become the world market leader in e-mobility and is investing €33B in these efforts throughout the group by 2024, including €11B in the Volkswagen brand," the company says.

    Tesla confirms $1.29B loan from Chinese banks for Shanghai plant

    • Tesla (NASDAQ:TSLAenters agreements with lenders in China for a secured term loan facility of up to 9B yuan ($1.29B), Reuters reports, citing a regulatory filing.
    • It also signs agreements for an unsecured revolving loan facility for up to 2.25B yuan, noting that both loans will help fund its Shanghai car plant.
    • Agricultural Bank of China, China Construction Bank, Industrial and Commercial Bank of China, and Shanghai Pudong Development Bank are the lenders.
    • The loans may also be used to repay 3.5B yuan of debt due to be repaid on March 4, 2020.
    • Previously: Tesla to take new $1.4B loan for Shanghai plant (Dec. 23)

    MedMen updates on sale of non-core assets

    • MedMen Enterprises (OTCQB:MMNFFannounces the execution of term sheets for non-core asset sales, as well as the execution of definitive subscription agreements for its equity placement.
    • In total, the Non-Core Asset Sales and Equity Placement are expected to generate aggregate gross proceeds of ~$74M.
    • As of today, the Company has executed a non-binding term sheet for the sale of its Arizona licenses, which include three vertically-integrated licenses, and a binding term sheet for the sale of a cultivation and manufacturing license in Illinois.
    • The Company modified the size of the Equity Placement from $27M to ~$20M to limit dilution to the Company’s shareholders.
    • As such, the Company has now signed definitive documentation for the offering of 46,962,648 Class B subordinate voting shares, at a price of $0.43 per share.

  38. QUIK – Up 23% today and I'm still underwater.

    A great example of how a stop order would have saved this aggravation.


  39. Wow, MDR down more than 50% on the day now. Wish I'd closed it all…


  40. Phil/MDLZ

    I got assigned my short calls on the butterfly. (Jan ‘20 $52.5).  No big deal, but I am curious where you roll your next calls.  I am looking at selling the Mar 20 $55 calls for $1.84.  Thx.





  41. 3 years in, no sign of Trump’s replacement for Obamacare






  42. Look at that Disneyland visit article. And I've already heard about people with measles passing through major airports. If we don't have a major measles outbreak by the third week of January, I'll be astonished.


  43. How Travel Will Change in 2020


  44. Atitlan – I said it could crash and burn but I didn't expect this.


  45.  

    MDR

    McDermott - WSJ reports co is in bankruptcy talks with its lenders  (


  46. MDR – Out for now.


  47. U.S. Airstrikes Sparks Calls for U.S. to Leave Iraq