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9,050 Friday – Is the Nasdaq Ever Going to Stop?

So much for shorting the Nasdaq.

After a very mild rejection, the Nasdaq 100 went a ahead and plowed over the 9,000 line yesterday, joining the broader Composite Index, which is now at the 9,200 line – up about 50% since Dec of 2018 – just 13 months ago at 6,190.  To be fair, we had fallen from 8,133 so an optimist could say that that was a fair price and the sell-off was silly – I'm sure that what they'll say about the next sell-off, despite the last one being 22.5%, which would take us back to 7,130 if something "silly" happens again

If we call 7,500 a good base to climb from, then the 9,000 line is the 20% mark and 9,300 is a 20% overshoot of that mark (20% of the run up, not 20% of 9,000) so that's the next mountain the Nasdaq will have to climb – not even 1% away these days – we should be able to do that standing on our heads if this rally is meant to continue.  

Our index shorts were a fail as Apple (AAPL) climbed up to $310 and the end-stage of bubble rallies can often be market by parabolic moves up and one has to wonder where all this money is coming from with FAANG Stocks gaining almost $2Tn in value in the past year, which is 10% of the US GDP and our GDP only grew 2% ($400Bn) so, even if every last cent of the entire US GDP expansion went into those 5 stocks, where did the other $1.6Tn come from?

US stock market in 2019The entire planet's GDP is about $90Tn and it grew at 3.5% so there's $3.15Tn, so I guess maybe the entire World put 2/3 of their 2019 growth into those 5 stocks but the rest of the markets did expand as well – up 24% Globally – and that means we're right about the $100Tn mark in global equities, having started 2018 at $77.5Tn.

Again, let's do the math and reflect, the Global GDP was $80.6Tn at the start of 2018 and we had a good year and hit $84.8Tn to start 2019 (up 5%) and 2019 was slower, up 3.5% (thanks Trade War) to $87.8Tn to begin the 2020's and again, that's just $7Tn of growth in two years and the markets are up about $20Tn in the same time-frame.  So, very clearly, the markets are not up because money poured in – there simply wasn't enough money in the World to cover that move.  What happened is we got a speculative bubble as people kept buying at the margins while very few people actually sold, driving the APPARENT PRICE of equities higher.

ImageAs we learned the hard way in 2008/9, the APPARENT value of stocks and what people are actually willing to pay for them when you try to cash out are two very, very different things.  Always keep that in mind because we saw the market fall so fast that you couldn't even fill a sell order – there simply were no buyers for the equities at any price at some times.  This is why we hedge because, as Buffett observes: "You never know who's swimming naked until the tide goes out." 

Next week we are supposed to sign the China Trade Deal (Weds) and that's what's keeping the market aflot despite Impeachment and the War but, after that, the focus shifts back to earnings, which have to support these sky-high prices.


Just because things are expensive doesn't mean we can't have any fun.  We finally initiated a new Long-Term Portfolio as Bed, Bath and Beyond (BBBY) fell back to a level ($13.50) that we just couldn't resist playing so we sold 10 BBBY 2022 $15 puts for $5.42 to put a quick $5,000 in our pocket and, as discussed, the current Short-Term Portfolio will become the Long-Term Portfolio so we're really making a new $100,000 Short-Term Portfolio and simply adding cash to bring the STP up to a $500,000 base (+$400,000) and renaming that the LTP.  Next week, we will, of course, be moving the risky STP positions out of the LTP and deciding whether they are still valid for our new STP.

In Monday morning's PSW Report, we played Natural Gas long at $2.16 and FINALLY we got our pop this morning so the stop is now at $2.20 and that was a conviction play so we ended up doing better than 0.04 (and with more contracts) but even 0.04 is a nice $400 per contract gain on the week.  

Overall, the week has played out pretty much as we expected because, as I said on Monday:

The VIX Futures are back to 16 on all the uncertainty and we haven't been over 16 for long since October – so a move over that line should be taken very seriously if it lasts a day.  When we spiked higher in August it signaled a 200-point drop in the S&P so 40 points is nothing if this is going to be a real correction.  Of course, so far, this is nothing more than a very small blip in a very huge rally and China will be signing Phase 1 of the Trade Deal on the 15th – so it's going to be hard for the bears to sustain a down move when more "good news" is on the way.

See – the markets aren't that hard to predict, are they?  

In Wednesday's Live Trading Webinar (replay available here) we picked up long contracts on Gasoline (/RB) and they were still playable yesterday morning and I said hold on despite the drop to $1.635 (-$420/contract) but now we are at $1.67 and our 2 longs are up $1,890 and that's silly to risk so I'd cash one out (or half if you have more) and put a stop on the remaining contract(s) at $750 to lock in a very nice 2-day gain (you're welcome!).

Unless you are very, very rich, gaining $1,695 (our stop) in 2 days or, even for the week is nothing to sneeze at and it's part of your discipline as a trader to learn to take quick gains like these off the table because the weekends are uncertain and, though the potential for war with Iran makes it fun to speculate /RB will be back in the $1.70s next week – the bird in the hand isn't worth risking.  Of course, we're not limiting our gains on the other half – just setting a stop in case it pulls back.

"Well, the runway lies ahead like a great false dawn
With a cannon blast, lightnin' flash, movin' fast through the tent, Mars-bent
And the Ferris wheel turns and turns like it ain't ever gonna stop
And the circus boss leans over and whispers into the little boy's ear
"Hey, son, you want to try the big top?
 "- Springsteen 

Have a great weekend,

- Phil


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  1. Good Morning!

  2. Forget the 10% line Phil! Let's go for the 20% lines only for the Nasdaq!

  3. Everything is awesome:

    GDP growth – 2% / check
    Jobs – 150k/month / check
    Deficits – $1T / check

    This surely justify our current markets! I assume that if Trump loses the election, the GOP will rediscover that deficits are bad and we will have to cut budgets everywhere because raising taxes is not an option. I wonder how that would help the economy! 

  4. Good morning!

    Everything remains awesome:

    December jobs growth trails consensus

    • December nonfarm payrolls+145K vs. +164K consensus and +256K previous (revised from +266K).
    • Unemployment rate: 3.5% vs. 3.5% consensus and 3.5% prior.
    • Average hourly earnings rose 2.9% Y/Y, slowing from 3.1% in November and less than the 3.1% consensus.
    • November's nonfarm payrolls increase was revised down by 10,000 to +256K and October's was revised down by 4,00 to +152K.
    • Job gains have averaged 184K over the past three months; three-month average annualized pace of wage gains slowed to 2.83%.
    • 2019 ended with again of 2.1M jobs, the slowest since 2011.

    Disappointing jobs report not likely to change Fed's stance, El-Erian says

    • Today's softer-than-expected jobs growth report for December won't be enough to change the outlook for the economy and Federal Reserve policy, according to Allianz Chief Economist Mohamed A. El-Erian.
    • The good news from the report? "The further decline in the more-comprehensive U-6 measure of unemployment, to a record low," El-Erian writes.
    • The U-6, or underemployment rate, fell to 6.7%; this measure includes part-time workers who would prefer full-time jobs and those who have stopped looking for employment.
    • 10-year Treasurys edge up, pushing yield down almost 1 basis point to 1.85%.
    • Nasdaq futures rise 0.4%, S&P +0.2%, and Dow +0.1%.
    • CME FedWatch Tool puts the probability of the Fed keeping rates unchanged in January at 90.6%.

    Canada jobs recover from November plunge

    • Canada added 35.2K jobs in December vs. estimates of 25K, and against November's shocking plunge of 71.2K.
    • The unemployment rate fell to 5.6% vs. estimates for 5.8%.
    • The Canadian number comes alongside a modestly weaker-than-expected U.S. jobs print, helping the loonie (NYSEARCA:FXC) to add a handful of pips vs. the greenback.

    Well, so much for /RB, that stopped out already. 

    Lines/StJ – Those parabolas can be tough to track.

    Six Flags -11% after revenue warning, China partner stops payments

    • Six Flags (NYSE:SIX) is indicated to open at five-year lows after warning of a Q4 revenue shortfall and disclosing "severe challenges" in the development of parks in China.
    • SIX says it now expects Q4 revenue to come in $8M-$10M below the year-ago quarter, which would translate to revenues of $259.5M-$261.5M, well below $286M analyst consensus.
    • "North America parks experienced lower attendance in [Q4] vs. the same period in 2018 due to softer than expected season pass and membership sales, primarily during the holiday sales periods," the company says.
    • Separately, it says Six Flags-branded projects in China have not progressed as expected, citing the macroeconomic environment and the declining real estate market in China, which has caused Chinese partner Riverside Investment to default on its payment obligations.
    • SIX says it will not realize any revenue from the China agreements, and it expects a negative $1M revenue adjustment and a one-time $10M charge in Q4.

    Tesla PT hiked to $553 at Piper Sandler on China growth potential

    • Tesla's (NASDAQ:TSLA) growth potential in China has been underestimated by the market even after the stock's recent rally, says Piper Sandler as the firm maintains its Overweight rating and raises its price target to $553 from $423.
    • Piper's bullish view is based on its analysis of China's vehicle registration data, which showed a 19% jump in sales of the Tesla Model 3 during the last three months.
    • "If Tesla's Model 3 market share in the U.S. can be replicated in China – and if this logic extends also to Model Y – then Tesla's annual volume in China alone would eventually exceed 650K units," writes Piper analyst Alexander Potter.
    • "We're not sure Tesla can immediately replicate its U.S. success in China (due to the strength of German brands in China), but we are increasing our estimates nonetheless," Potter says, forecasting China deliveries of 112K in 2020, 225K in 2021 and 399K in 2022.
    • Earlier this week, Argus Research raised its TSLA stock price target to $556, citing stronger than expected Q4 deliveries among other reasons.
    • TSLA +0.9% pre-market.

    Ryanair raises forecast after strong holiday season

    • Ryanair (NASDAQ:RYAAY+7.6% in London trade after raising its full-year profit guidance following a stronger than expected performance over the Christmas period.
    • Ryanair now sees after-tax profit for FY 2020 ending March 31 of €950M-€1.05B ($1.05B-$1.17B) vs. previous guidance of €800M-€900M.
    • The carrier says January-April forward bookings are running 1% ahead of the same period last year, which should result in better than expected average Q4 fares; as a result, full-year passenger traffic is expected to grow to 154M vs. 153M expected previously.
    • Ryanair says Austrian subsidiary Laudamotion has continued to underperform and expects widening losses for the year.

    5% of U.S. refining capacity is on the block

    • Even with U.S. energy production at an all-time record, seven different U.S. refineries are on the block now, accounting for about 5% of U.S. crude oil processing capacity, according to data compiled by Reuters.
    • The properties are having trouble finding bidders because of unfavorable locales, worries about falling margins, and the coming restart of nearby facilities in the Caribbean.
    • There's also pressure from new international shipping fuel regulations, known as IMO 2020, and U.S. renewable fuels standards that require refineries to blend in biofuels.

    Mercedes holds on to luxury car sales crown

    • Mercedes-Benz (OTCPK:DDAIF) successfully defended its title as the world's best-selling luxury-car brand in 2019, topping archrivals BMW (OTCPK:BAMXF) and Audi (OTCPK:AUDVF) for the fourth year in a row.
    • The automaker's sales increased 1.3% to 2.34M vehicles, making it the highest annual sales volume in its history.
    • "The record year underscores once more the strong demand for Mercedes-Benz vehicles, even amidst far-reaching changes in the mobility landscape," said Mercedes Chairman Ola Kaellenius.

    Iran denies missile downed 737; allows Boeing to inspect black box

    • Canada's Justin Trudeau, along with several other Western leaders, has accused Iran of unintentionally downing Flight PS752 with a surface-to-air missile, though the head of the country's national aviation department has denied those allegations.
    • While it won't hand over the black boxes from the crash, Iran has invited the U.S. National Transportation Safety Board to take part in the investigation, after initially stating it would not allow Boeing (NYSE:BA) to take part in the probe.
    • U.S. officials have expressed concern about sending employees to Iran because of the heightened tensions, while their role could be limited by sanctions.
    • Update: Iran says it will allow Boeing to inspect aircraft’s black box.

    New Boeing docs: 'Deeply disturbing' picture

    • Documents released on Thursday by Boeing (NYSE:BA) to Congress "paint a deeply disturbing picture of the lengths Boeing was apparently willing to go to in order to evade scrutiny from regulators, flight crews, and the flying public, even as its own employees were sounding alarms internally,” Rep. Peter DeFazio (D-Ore.), chairman of the House Transportation Committee, said. "These newly-released emails are incredibly damning."
    • A selection of quotes from internal emails:
    • “This airplane is designed by clowns, who in turn are supervised by monkeys,” said one pilot to his peers in 2016.
    • On flying the MAX with a simulator: "I crashed big time my first few times, that's what scares me about showing any of this to them. You can get decent at it after 3-4 tries, but the first few are ugly."
    • "I'll be totally shocked if the FAA passes this turd."
    • "This airplane is designed by clowns, who in turn are supervised by monkeys."
    • "I just jedi mind tricked this (sic) fools. I should be given $1,000 every time I take one of these calls. I save this company a sick amount of $$$." "What did you convince them of?" "To simply produce an email from me to the DGCA that states all the airlines and regulators that accept only the MAX CBT to make them feel stupid about trying to require any additional training requirements."
    • "Amazing what a brown envelope can achieve – it isn't anywhere near as good as it would appear to be reading the report. The FAA were neither thorough nor demanding and failed to write up many issues."
    • "As for why people are voting yes… everyone has it in their head meeting schedule is most important because that's what Leadership pressures and messages. All the messages are about meeting schedule, not delivering quality. We managers were told names were being taken by senior leadership at the level D Go/NoGo meeting, now referred to internally as the Go/Go meeting… We put ourselves in this position by picking the lowest cost supplier and signing up to impossible schedules… Also, that voting list is full of people voting their self-interests… Sometimes you have to just let things fail big so that everyone can identify a problem… maybe that's what needs to happen rather than just scrape by. Best part is that we are re-starting this whole thing with the 777X with the same supplier and have signed up to an even more aggressive schedule!"
    • “We regret the content of these communications, and apologize to the FAA, Congress, our airline customers, and to the flying public for them,” Boeing said in a statement. “We have made significant changes as a company to enhance our safety processes, organizations, and culture.”
    • In a statement, the FAA said it reviewed the Boeing disclosure and found that “nothing in the submission pointed to any safety risks that were not already identified as part of the ongoing review of proposed modifications to the aircraft.”
    • Read all the emails here »

    Boeing seen lowering 787 Dreamliner production rate, Air Lease CEO says

    • Boeing (BA +1.6%) could be forced to cut production of its bigger 787 Dreamliners to 10 per month due to a drought of orders from China, says Air Lease (AL +1%) CEO John Plueger.
    • Boeing already has said it expects to lower Dreamliner production in late 2020 to 12 aircraft per month from 14 currently, but China has not been buying from Boeing recently, and "it's hard to see the rate of 12 being sustainable" beyond 2020 without China in the marketplace, Plueger said today at a Bank of America conference.
    • Plueger also said Boeing's momentum to develop a new mid-size airplane "has diminished significantly" due to the prolonged 737 MAX crisis.

    GrubHub -7.2% after saying it's not running sale

    • GrubHub (NYSE:GRUB) is sinking after hours, down 7.2%, after saying "unequivocally" it isn't running a sale process.
    • Shares had moved up yesterday and today after yesterday's report in the WSJ that indicated the company had hired advisers to consider a sale or deal.
    • Chatter today centered on Walmart as a potential suitor.

    Moody's downgrades Pier 1, cuts outlook to negative

    • Moody's has downgraded struggling Pier 1 Imports' (NYSE:PIR) corporate family rating to Ca, from Caa3, and cut its probability of default rating to Ca-PD from Caa3-PD.
    • That comes alongside its downgrade of Pier 1's senior secured term loan to C from Ca.
    • It's also changed outlook to negative from a previous stable, based on expectations for a near-term default.
    • Shares declined another 3.1% during the regular session and are down another 0.3% after hours.
    • That follows word on Monday of a plan to close up to 450 stores and reduce corporate headcount.

    KB Home slides 2.9% as Q4 revenue falls short of consensus

    • KB Home (NYSE:KBHdrops 2.9% in after-hours trading after the homebuilder's fiscal Q4 revenue of $1.56B trailed the consensus estimate of $1.60B.
    • Average selling price of $392.5K for the quarter ended Nov. 30, 2019 slipped from $395.2K in the year-ago quarter.
    • Q4 EPS of $1.31 exceeded the average analyst estimate of $1.30 and increased from 96 cents in the year ago quarter.
    • Q4 net orders rose 38% to 2,777, with net order value increasing 43% to $1.06B.
    • Ending backlog rose 24% to 5,078 home, with ending backlog value up 26% to $1.81B.
    • Conference call at 5:00 PM ET.
    • Previously: KB Home EPS beats by $0.02, misses on revenue (Jan. 9)

    Bernstein's big tech look favors Facebook, Alphabet, Snap

    • Bernstein has launched coverage on big tech, favoring Facebook (NASDAQ:FB) and Alphabet (GOOGGOOGL) over rival (NASDAQ:AMZN).
    • The firm's Mark Shmulik started Facebook at Outperform with a price target of $250, implying 15% upside, and gave Alphabet the same rating and a price target of $1,600, implying 13% upside. FB is up 0.3% after hours, while GOOGL is up 0.1%.
    • Snap (NYSE:SNAP) also gets an Outperform rating and a $20 target (15% upside). It's up 0.4% after hours.
    • Amazon gets a Market Perform rating and a $2,050 target, which implies 7.8% upside. Pinterest (NYSE:PINS) is also Market Perform, with a target of $21 (7% upside).
    • On the other end of its coverage is Twitter (NYSE:TWTR), initiated at Underperform with a $27 price target (implying 19% downside). Its shares are down 1.1% postmarket.

    Jefferies throws in the towel on Dropbox

    • Analyst Brent Thill downgrades to Buy from Hold, and trims his price target to $19 from $28.
    • The move comes after about a 30% decline in the stock over the five months.
    • DBX dipped 0.5% today to $18.37.

    My Size projects over 20M recommendation for MySizeID in 2020

    • My Size (MYSZ +13%projects over 20M size recommendations in 2020 for MySizeID, a size-recommendation tool based on shoppers' personal body measurements, taken with their smartphone sensors without using the camera.
    • The company said that it is experiencing increasing demand from retailers that are looking for a turnkey solution that helps consumers choose their appropriate size and fit while shopping online.

    Fed's Evans says sees U.S. growth 2%-2.5% this year

    • Chicago Fed President Charles Evans expects U.S. economic growth of 2.0%-2.5% likely, but "could be even better depending on how things develop during the year.
    • Furthermore, he expects the central bank could go through 2020 with no change to monetary policy.
    • Meanwhile, policy is well positioned to support attaining the Fed's 2% inflation goal, he said at a moderated discussion in Milwaukee.
    • Inflation increasing to 2.5% would be consistent with the Fed's symmetric 2% goal, he added.
    • As for the uncertainties regarding Iran-U.S. tensions, "it looks as if things are playing out in a fairly controlled fashion, at the moment at least."

    DOJ filing alleges Live Nation violations

    • The Justice Dept. has laid out details in its case against Live Nation Entertainment (LYV +0.5%), where it said the company violated a consent decree that allowed its combination with Ticketmaster.
    • That agreement was originally set to expire this year, and it restricted Live Nation from forcing venues to use Ticketmaster or from retaliating when venues chose otherwise.
    • The deal was extended last month to 2025 to resolve government concerns about violations.
    • Now the DOJ names instances in which six venues say they were told retaining a Ticketmaster rival would lead Live Nation to stop booking with them.
    • The government says violations began shortly after the original agreement in 2010, and have continued all the way up to March 2019.
    • Live Nation responds: “Live Nation settled this matter to make clear that it has no interest in threatening or retaliating against venues that consider or choose other ticketing companies. We strongly disagree with the DOJ’s allegations in the filing and the conclusions they seek to draw from six isolated episodes among some 5,000 ticketing deals negotiated during the life of the consent decree. Nevertheless, in keeping with our decision to settle, our focus is now on bringing this matter to its conclusion and continuing to deliver the best live event experiences to fans everywhere.

  5. Reading the latest trove of emails from Boeing employees talking about the 737 MAX makes you wonder why the entire leadership team is still there! There are some big problems there.

  6. BA/StJ – Who'd have thought they were such a mess.  Scary. 

    Seems like most people took the day off.  I'm all for the 4-day work-week – I just wish people would tell me!

  7. How is Thailand going?

  8. BA:  Even if BA is able to have an FAA  OK, the model is stigmatized airlines will have problems with crews and passengers there is no substitution for a model that means 70% of total sales and there is no way to replace the max before 5-7 years.

  9. thanks for the updates, Phil.  Really appreciating the futures plays and thinking behind them. I'm learning a lot.  Please keep them coming!

  10. FTR premiums are enormous relative to the stock price for the Jan 2021 options. For example SP is about 0.67 and you could sell the 0.5 C and 1 P for 35 cents. Or the $1 C and P for 70 cents. Are they too much of a BK risk to mess with?

  11. FTR is in danger of being de-listed for trading under $1 for extended time.  I dont know if that would have any direct impact on the outstanding options but they might become very illiquid.  

  12. We're still accusing Iran of shooting down that plane and Iran is still saying they didn't.

    Of course, no one has actually investigated it yet so Team Trump is just talking out their asses with the accusation.  

    Iran Says It Is Willing to Share Jet’s Black Boxes, Denies Hostile Act

    Iranian investigators said they would be willing to hand over the black boxes in a Ukrainian airliner crash to another country for analysis, as Tehran denied claims by Western officials that the Boeing 737-800 was downed by antiaircraft missiles.83

    Pompeo still claiming we had solid intelligence to justify killing the General but still refuses to say what that intelligence is – even to the Senators (GOP too) who are asking. 

    Now Pompeo says we should stay in Iraq to fight Isis but his boss says we eradicated Isis – so confusing! 

    Violent price swings were common last fall in the riskiest segment of the market for corporate bonds and loans rated below investment-grade, a sharp contrast to the relative calm in most markets at the time.7

    Thailand/Advill – Apparently all I accomplished was giving myself a whole new company to run!  It's actually going great but we have all these aggressive deadlines and, unfortunately, I'm the best man for the job so now I'm project managing and on the phone 24/7 working with teams in Thailand, Florida, California and Michigan as well as negotiating a deal (looks good) to get a free $2M processor from China from a company that's hoping to get a foothold in the Asia Cannabis Manufacturing Industry.  

    It's not a deal anyone else is likely to be able to pull off so I end up doing a lot of it myself.  Usually, with a start-up, I take the time to teach other people how to do these things so I don't have to be the go-to guy all the time. 

    The numbers are staggering though, just the hospitals we've already signed up already have 4,400 patients spending $5/day on THC oil (they don't have CBD until we start, which will have 10x more patients) and that doesn't seem like much but it's $8M/yr and that's just their trial program.  

    To make that we need 17mg of THC so 17 x 4,400 x 365 = 27.3M mg, which sounds like a lot but there's 1M mg/L and it takes about 10 pounds of Cannabis to make a liter of THC oil so 270 pounds is not even an acre and we're farming 30 acres with 2 pulls a year!  

    Of course, in the US, we have people ordering 1,000+ liters/month so all of this is nothing but that's what makes the $8M number so cool…

    The farm bill for CBD passed early last year and already this year 185,000 acres of Hemp has been planted in the US with 500,000 acres permitted next year.  Thailand's population is 1/5 the US (70M) but there's also huge demand for CBD from the rest of Asia and growing Hemp and Cannabis is still illegal in most of them so we're talking to Japan, Vietnam, Laos, Cambodia, India and Singapore about supplying them as well – this thing could go crazy very quickly and we're not even up to consumer sales yet.

    This weekend, by the way, I will be getting in touch with all the people who were interested in participating in this project but feel free to contact me first if you are ready to talk (instead of playing phone tag).

    If you want to get an idea of why they need us so badly – this is what they are proud of producing over at the University:

    This is what our plants look like:

    Ken (in this picture) was saying they have the wrong pots, wrong soil, wrong seeds, wrong lights – and that's the leading University in Thailand who has the only license to grow cannabis for the pilot program (and we have a 3-year exclusive to supply them now).  

  13. By the way, that guy at the University in charge of the program is Dr Aod – he's now one of our partners in Bien-Boca.  

    The disturbing thing in Thailand is you never know anyone's real name – it's like Cats!  They all have their "secret" Thai name that you can't pronounce even if they tell it to you but they are all called a pet name in Thai – even by their friends and then they have European-style names that are used interchangeably with their pet names.  As TS Elliot said:

    "The naming of cats is a difficult matter

    It isn't just one of your holiday games

    You may think at first I'm mad as a hatter

    When I tell you a cat must have three different names
    First of all, there's the name that the family use daily

    Such as Peter, Augustus, Alonzo or James

    Such as Victor or Jonathan, George or Bill Bailey

    All of them are sensible, everyday names


    But I tell you a cat needs a name that's particular

    A name that's peculiar and more dignified

    Else how can he keep up his tail perpendicular?

    Or spread out his whiskers or cherish his pride?
    Of names of this kind, I can give you a quorum

    Such as Munkustrap, Quaxo or Coricopat

    Such as Bombalurina, or else Jellylorum

    Names that never belong to more than one cat
    But above and beyond there's still one name left over

    And that is the name that you will never guess

    The name that no human research can discover

    But the cat himself knows and will never confess
    When you notice a cat in profound meditation

    The reason, I tell you, is always the same

    His mind is engaged in rapt contemplation

    Of the thought, of the thought, of the thought of his name
    His ineffable, effable, effanineffable

    Deep and inscrutable singular name"


    That was totally stuck in my head while in Thailand as I was constantly having to ask for people's proper names for contracts.

    BA/Advill – I believe they will allow BA to fly the Max with software fixes and special training (on how to fly a wonky plane) but, secretly, they will have marching orders to phase out the Max tout suite (3 years).  So look for BA to spend more than planned in R&D which, of course, will lead to margin disappointment – not to mention the cost of providing simulator training for the airlines.  

    Futures/Potter – They key to successful Futures trading is NOT trading 99% of the time.  As I mentioned on Monday, it's been ages since I've felt the urge to play the Futures as the markets were too crazy and there were too many cross-currents and I only like to play when I'm 90% sure so I can be right 1/2 the time and good cash-management strategies take care of the rest.

    For instance, the /YM shorts just went green finally and I'm still down on /ES (-$750 on 3) and /NQ (-$425 on 4) so for /YM, I cut my 3 short to 2 and now my basis is 28,915 and we'll see how it goes and I'll cut the others back to 2 as well – even if they are not green into the weekend.  

    If you are going to play with conviction and scale in – you HAVE to remember to scale out.  Getting greedy gets you killed! 

    FTR/Dawg – I think they are far less of a BK risk than they look like but try telling that to traders.  

    Earnings are the end of Feb but it's all about the 2022 debts they have to pay or restructure and the thinking is that they can't afford to restructure at the rates they'll have to pay (in theory).  Good note of warning from Gary:

    Gary Chodes


    Frontier sits on massive $17.5 Billion legacy debt Load.

    In June S&P downgraded the bulk of Frontier's debt to CCC with a negative outlook.

    The majority of Frontier unsecured debt trades at 45 to 47 cents/dollar (as of Dec 13.2019).

    Creditors face an existential threat in 2022 with $2.7 billion coming due.

    On December 16, 2019 the company received a non-compliance notice from NASDAQ and risks delisting in June 2020. In my opinion, the Company has now moved into the Insolvency Zone.

    My Conclusion:Unsecured Note holders will be lucky to get 7 cents on the dollar; SeniorSecured holders 24 cents on the dollar.

  14. Just got even on /NQ too, 9,024 is my short basis on 2 contracts.   Still waiting on getting back to 2 on /ES (-$300 on 3).

  15. Done with /NG longs now as $2.22 failed but very nice gains!

  16. SPCE/W – At all-time high.  Last month I took  position in these 5 year warrants.

    Figured that they could be a big long term winner.

    Already ahead by 75%.  Tempted to sell some, but will keep to my original objective.

  17. So there are good reasons to support Trump

  18. Phil / Futures

    Very well said. Plays win or lose but overtrading can cause the long lasting injuries. 

    Great gains on /CL and /NG in the last week.  thanks for a great start to a seemingly rocky year.

    Do you still maintain your thesis on shorting /NQ?  i know 9015 doesn't have the same ring to it as 9k.


  19. SPCE/Albo – Very nice.  Good timing on the entry:

    /NQ/Potter – I just think the reward potential of a 10% drop for a $20,000 gain far outweigh the risk of crossing 9,300 on the Comp, which would be about 9,100 on /NQ for a $2,000 loss.  Same goes with the other indexes.  TSLA not worth $500, AAPL tough even to justify $300, NFLX silly again at $350, GOOG too high at $1,450 ($1Tn, 30x earnings), MSFT also over 30x at $162 and also $1T…. As I noted above – it's not even remotely possible that money actually came in and bought those shares so the rise of the PRICE (not value) of the shares is a result of a small amount of the shares being speculated higher while most people are content to hold what they have and enjoy the paper gains but, if a significant amount of those people actually try to SELL those shares for cash – it's not even close to possible they'll get those prices.  

  20. AAPL – Phil, I agree on AAPL.  Some of the pop yesterday was attributed to strong sales in China in December, being up 18% year over year.  However, 4Q over prior year will be down to 10.9 million units from 11.5.  China represents about 17% of Apple sales and 19% of operating margin.  While stable in 2019, 2020 may be different.  The 5G hype for Apple is too early, but it is not hype in China, it is becoming real fast.  In December 5.4 million 5G phones were sold in China, or 170% of the 3.2 million iPhones sold. That was up from 2.5 million in October.  For Chinese New Year there will be even more models.  They will sell well.  The pricing for 5G phones was expected to be around 8,000 yuan or more but good phones are coming out at 2,500 – 5,000 yuan.  China 5G phones are expected to hit 150 million units in 2020, about ½ of global demand.  I don’t think the services proposition is as strong in China with WeChat, Tik Tok and other big gaming apps, so why do Chinese need to buy iPhones in big numbers? Samsung is now around 1% of the market in China and was 4.9% in 2016 so China’s market share remaining steady can’t even be taken for granted.  Take into consideration the Trump/Huawei effect and that doesn’t help either.  I expect the Dec 31 calendar quarter will be strong for Apple but I question guidance in Q1 post the AirPod pro and Apple watch  holiday gifting season.  Apple is trading at an all time high P/E largely stated on 5G potential.  5G will be slow to be adopted in North America on a relative basis so no need to rush and buy a 5G phone unless you wanted to get the latest and greatest phone for future proofing.

  21. Things turning a bit ugly but very nice for all my index shorts!

    Back to work next week as options expire – lots to do in the portfolio reviews and, of course EARNINGS!  

    AAPL/Stu – I think they'll do fine and 5G IPhones mean they'll have 2 solid years ahead of them as 1Bn people convert but that still doesn't justify 26x earnings, which is less than 4% ROI on your AAPL investment – it's as simple as that.  If there's not a lot of growth, EVENTUALLY the ROI begins to matter.  

    That's why I'm going to pull BA from our portfolios (now).  I don't see this thing turning around so not even the short puts are worth keeping.  BA may be able to afford to keep staff during the production pause but their suppliers are laying people off so restarting production won't be an easy thing.

  22. BA is only in the Earnings Portfolio but let's kill it:

    BA Long Call 2022 21-JAN 300.00 CALL [BA @ $330.10 $-6.24] 5 10/22/2019 (742) $38,000 $76.00 $-9.83 $76.00     $66.18 $-2.89 $-4,913 -12.9% $33,088
    BA Short Call 2022 21-JAN 350.00 CALL [BA @ $330.10 $-6.24] -5 10/22/2019 (742) $-27,000 $54.00 $-11.20     $42.80 $-2.70 $5,600 20.7% $-21,400

    Just not worth the risk.

  23. Have a good weekend folks, 

    - Phil

  24. BYND had a good week – good timing on our entry:

    BYND/Pirate – Only $6Bn now?  $250M in sales, $40M in losses – where do I sign up???  devil  Come on, you know better!  To justify $6Bn they have to make $300M and they are not even there on revenues.  Assuming they can drop 20% to the bottom line, they need $1.5Bn in sales – 6x where they are now and, even with the IPO money, they are only up 100% a year so, even assuming they could keep that up – it's 2023 before they hit $1.5Bn.  

    Total Beef Market is about $70Bn so $1.5Bn seems doable – just 2%.  I'm hearing about 10-15% of burger sales are Beyond/Impossible now but they are not replacing steak – just burgers (so far) so let's say burgers are 25% of beef market so $17.5Bn and now we need Beyond to be 10% of the burger market – still doable – just not EASY.

    U.S. beef market

    Keep in mind, that's just to justify the $100 price tag – from there they have to grow.  $25 was the IPO price and they went for $50 that day and THAT is a realistic range – not this.


    Submitted on 2019/12/12 at 12:51 pm

    BYND/Pirate – You'd a better trader than I am if you're making money on the long side of this:

    Still, back at $75 I do like them again.  That's $4.5Bn and they'll do $500M next year in sales but the average American consumes 222.2 lbs of meat per year (including chicken), which seems insane but…  

    Americans are set to eat more meat in 2018 than ever before. According to data published by the US Department of Agriculture (USDA), consumers are expected to eat 222.2 pounds (100.8 kilo) of red meat and poultry this year, up from 216.9 pounds per person in 2017. That will surpass the previous record of 221.9 pounds per person, set in 2004, Bloomberg reports. The predicted increase is ending a trend of falling meat consumption that began with the Great Recession in 2008. In 2014, the consumption of red meat and poultry was still down at 201.8 pounds per capita before it started to climb steadily, reaching 211.1 pounds in 2015 and 214.6 in 2016. The figure predicted for 2018 corresponds to a meat intake of roughly 10 ounces (or 280 grams) per day, almost double the amount recommended by government nutritionists. According to USDA’s Choose MyPlate nutrition guidelines, adults should not eat more than 5 to 6 ounces of meat per day.

    The popularity of dairy products, for example cheese and butter, has also increased to an all-time high, the USDA figures reveal. Domestic meat production is on the rise as well. The total production of red meat and poultry is expected to reach about 103.5 billion pounds in 2018, compared with 97.6 billion pounds in 2016. (ab)

    So 100Bn pounds at $2 a pound is $200Bn and let's say plants get to $40Bn in 10 years and BYND has 10% of that market so $4Bn – that seems to justify $4.5Bn as they should make much more than $225M selling that (economies of scale, etc).  So, when a Company of the Future can easily grow into conservative estimates – I have to like the play – even if it's a bit ahead of the curve now.

    Certainly I like BYND enough to sell 2022 $60 puts for $14.50 to net in for $45.50, which is 40% below the current price so let's make that the first trade of the Future is Now Portfolio:

    • Sell 5 BYND 2022 $60 puts for $14.50 ($7,250)

    Now we have $107,250 to start with though the margin is a rude $7,500 as BYND is so crazy – otherwise I would have sold 10.  

    Submitted on 2019/12/26 at 2:51 pm

    BYND/Stock – One of our Stocks of the Future.   That's a list we have to get back to accumulating after New Year's.  They actually made $5M last Q and, while that's a mile from justifying a $4.7Bn valuation at $76, they are manufacturers and should scale up well and they have been supply-constrained in sales with growing demand so I think they do $600M next year and make $100M and that's still 47x but I think they cover it by 2022 easily and they can grow from there (fish, chicken, pork, better meat) so I like them for a long-term accumulate – starting with short 2022 $60 puts at $14 – that's a net $46 entry (26% off) as a worst case. 

    Remember – I can only tell you what is going to happen and how to make money trading it – the rest is up to you!  cool

  25. Where You Want to Get Cancer

  26. 1. Trends in income and wealth inequality

  27. Phil// Any suggested trades for CHL?  Thanks.