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Trumped Up Tuesday – Let the Impeachment Begin!

Image result for trump impeachment cartoonImpeachment begins in earnest this week.

It may end just as quickly as the GOP-controlled Senate is looking to acquit Trump as soon as possible, preferably without hearing from any witnesses or reviewing any evidence.  This farce will be overseen by Chief Justice John Roberts – which is very sad for our rule of law, of course, as it legitimizes this behavior and sets a precedent for future dictators to rule our country by.  Nonetheless, at least it will be interesting.  

Trump, like Carlos Goshn, has already fled the country and is in Davos for the World Economic Forum, where he just gave the first keynote address in the 50-year history of Davos that did not mention the World at all – except to say how much better Ameirca is than the rest of it.  As noted by the NY Times:

In his 30-minute address in front of a global audience, Mr. Trump did not mention the impeachment trial back home. But he delivered what amounted to a version of his campaign speech minus the red meat to his base, speaking little of international alliances other than touting America’s supremacy in the world.

The president also took a swipe at people demanding action on climate change, the lead agenda item at this year’s conference. Mr. Trump announced that the United States would join the 1 trillion trees initiative launched at the World Economic Forum. But he also declared that “we must reject the perennial prophets of doom.”

The message at Davos was very clear to all but Mr. Trump.  So clear in fact that it was written on the roof of the building:

“Act on Climate” could be read in the snow near Davos as Mr. Trump arrived on Tuesday.

Global warming and climate change top the agenda items for the conference. A star speaker on Tuesday, alongside Mr. Trump, is the 16-year-old climate activist Greta Thunberg, who has said she wouldn’t “waste her time” speaking to Mr. Trump about climate change.  Trump has withdrawn America from the Paris Climate Accord, and his administration has expanded the use of coal, downplayed concerns about climate change and rolled back environmental protections – the signature accomplishments of his 3 years in office.

Trump described climate activists as “heirs of yesterday’s foolish fortune tellers,” knowing that his arch-enemy, 17-year old Greta Thunberg, was scheduled to speak right after him and is scheduled to make several more speehes – all of which are fully booked.  Trump was one and done.   

Ms. Thunberg took pains to distance herself from politics. “This is not about right or left. We couldn’t care less about your party politics,” she said. “From a sustainability perspective, the right, the left as well as the center have all failed. No political ideology or economic structure has been able to tackle the climate and environmental emergency.”

“I wonder, what will you tell your children was the reason to fail and leave them facing the climate chaos you knowingly brought upon them?” Ms. Thunberg, 17, said at the annual gathering of the world’s rich and powerful.  “Our house is still on fire, your inaction is fueling the flames by the hour.”

Which one of these people should be leading the Free World?

Countries and cities where cases have been reportedAnyway, Cimate is too big to worry about so instead investors are worried about tiny little viruses from China and this one is being called Wuhan with hundreds of people infected and 6 people already dead from a SARS-type of pneumonia that has been spreading from person to person.  It may be worse as provinces have been under-reporting cases to avoid panic but this morning the health ministry said: "Anyone who concealed new cases would be nailed on the pillar of shame for eternity."  15 medical workers are now infected as well and the WHO may declare a global emergency.  

The Shanghai Composite dropped 1.4% overnight and the Hang Seng fell 2.6% with the Nikkei down just under 1%.  That led to a weak open for Europe and our Futures were down 0.5% but half-recovering as of 8:30 – so we'll just have to see how things play out from here.  

Despite the short week, 225 companies will report earnings this week including many top S&P Corporations.  We didn't learn to much last week but hopefully we'll see some clear pattens emerging from this week's reports:

Image

Image

There's very little news and NO official Fed speak this week but plenty of quotes expected from Davos.  Tomorrow we have Mortgage Applications, New Home Sales, the Chicago Fed and Redbook; Thursday will be Leading Economic Indicators, the KC Fed and the Oil & Gas Reports and Friday we have PMI and that's it for the week – very dull from a data perspective so the concentration will be on earnings – and the floor of the Senate…

 


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  1. It's really pretty amazing to see indices up 10, 15 and 20% since October without really any differences in the underlying macro. Simply Trump partially fixing stuff that he broke to begin with like the China deal.


  2. Growth no better than Obama, fewer jobs created than Obama, and all that fueled by deficits which the world had never seen before! It's really exhausting to have to fact check every single word that comes out of Trump's mouth! If Trump had taken over in 2008, I am not sure where we would be today. For sure, the automobile industry would have been dead by now. 


  3. Good Morning!


  4. /NG at $1.93  I'm so glad I didn't pick up any "cheap" gas Friday. This seems crazy low however – like a 3 year low at least, isn't it?


  5. Sold 1/3 SPCE warrants on this 12% move today.


  6. Spotb VIX still hovering around 12.50 – no one is worried!


  7. Good morning!

    Wow, it's just a fact of life that markets blast higher at the open.  

    There was a nice little sell-of, which got me out of my short index positions (1 of each left) but all reversed now so back to 2 short, I suppose. 

    Big Chart – Even if we move up to all the 20% lines, we're 20% over those on the Nasdaq.  I guess we'll have to take the long-long view. 2,850 on /ES was our last major consolidation and 20% over that is 3,420 and I guess we're clearly in that range so I guess we can re-base our charts around there.  That would be 2,850 as the -10% line and 3,420 as the +10% line.

    Dow 26,400 would become the bottom (-10%) of the new range but 31,600 is ridiculous so I'm going to look at the range from 25,000 to 30,000 for now and see how that plays.  

    Nasdaq 8,000 should be -10%, 9,000 the Must Hold and 10,000 the +10% line – it's not real math but that's how the Nas moves these days (logarithmic?)

    Russell 1,600 can't be ignored so that's the Must Hold (and the realest Must Hold that we have) and 1,760 is the + 10% line.

    NYSE 13,200 is the Must Hold line and let's call 14,500 the + 10% line.  As with the RUT – we're pretty close. 

    Trump/StJ – He has to hit 16,000 lies this year to stay on pace so that's like 43 lies a day so he has to pack them into almost every sentence.  Amazingly, he's doing it!  

    /NG/Dawg – Yep, lowest in 3 years on a lot of supply speculation and no one is looking at the ramp-up cycle in exports ahead.  

    Image result for lng exports

    We just went from 5-8 during 2019 and this year we'll be exporting almost 10Bcf/day.  Production did not double in the past two years and it will start draining down as those ports become fully operational.  Total US storage is about 3.6Tcf and we're now exporting 3.6Tcf at the end of the year – ANY interruption in supply will cause massive draws.

    Image result for natural gas production 2019

    Let's say we are producing 100Bcf/day – that's 36.5Tcf/yr and our storage is 3.6Tcf so we're using 33Tcf or 90Bcf/day – which makes sense given production.  The question is, can we ramp up production fast enough to cover the 3.6Tcf of exports?  It's about 10% more and we did add almost 10% in 2019 but the gap trailed off towards the end of the year.  That's what happens in expanding commodity rallies, you go from over-supply to over-demand and back again over and over while the market looks for equilibrium.

    I just want to have at least a couple of contracts next time there's a mismatch on the demand side:

    The question is – how low can we go?  We spiked down to $1.70 back in 2016 and that was also off a high spike and in 2018 we had an epic move up.  A $1 move on an /NG contract is $10,000 and I think $3 is a lot more likely than $1 so I think it's a good risk/reward ratio – but very painful in the short run.  

    There's always UNG, at $15.12.  The 2021 $15s are $2.12 and that premium sucks but you can sell 2022 $21 calls for $1.50 for net 0.62 and the 2021s have an 0.59 Delta vs 0.37 on the 2022 short calls so I'm comfortable with that spread. 

    Or you can just buy CHK for 0.62 and sell the 2022 0.50s for 0.40 so 0.22 and more than a double if they simply don't go BK (which is iffy if /NG stays this low).  

    SPCE/Albo – Looks like they launched the stock into space.


  8. So now I'm back to 2 short /YM at 29,309 and 2 short /ES at 3,323 I don't have /RTY or /NQ shorts anymore – I thought I did.  I have 4 /NG long at $1.962 at the moment – back to 2 if we get even, of course.


  9. Is that real or is that just probing for suggestions:

    https://arstechnica.com/tech-policy/2020/01/frontier-an-isp-in-29-states-plans-to-file-for-bankruptcy/

    Frontier CEO Bernie Han and other company executives "met with creditors and advisers Thursday and told them the company wants to negotiate a pre-packaged agreement before $356 million of debt payments come due March 15," the report said. The move would likely involve Chapter 11 bankruptcy to let Frontier "keep operating without interruption of telephone and broadband service to its customers."


  10. /NG / Phil – Repeating what I mentioned yesterday, doesn't it make more sense to look at the gas pipeline people rather than /NG or even the producers themselves. Companies like ENB, KMI, WMB, MPLX don't care what the price of NatGas is, they'll charge for using their pipes no matter what. Some like ENB are getting a bit toppy though. But the divs are pretty nice.


  11. MDR filed Chapter 11 – Sure they are resetting the balance sheet to come out stronger to deliver on the backlog.  But the current shareholders will be wiped out…?

    As a result of the upcoming Chapter 11 filing, McDermott expects to be delisted from the New York Stock Exchange within the next 10 days. McDermott common stock will continue to trade in the over-the-counter marketplace throughout the pendency of the Chapter 11 process. The shares are proposed to be cancelled as part of McDermott's restructuring.


  12. MDR – You have to love the timely Underperform rating from Bernstein on January 14! 


  13. Why would they want Trump to be the keynote speaker at Davos?  Just to see what weirdness he would speak?


  14. FTR/StJ – Looks like bankruptcy to me.  All those times they swore this wouldn't happen and now they are screwing everyone.  It's funny because you could sue them for misrepresenting but, since they are going BK, what do they care?  And they are only negotiating $356M out of 16Bn?  What good does that do?  It doesn't actually make sense – perhaps the whole thing isn't true.  

    Brodkin likes to kick FTR:

    I think here is where FTR ran into trouble – the Moody's recent opinion on them:

    Frontier Communications Corporation's (Frontier) credit profile reflects the company's weakening fundamentals from secular and competitive pressures and limited liquidity flexibility to address sizable debt maturities beginning in 2022. The credit profile also reflects weak 2019 revenue and EBITDA results, continued negative net customer addition trends and reduced expectations regarding cost efficiency programs going forward. Frontier's decision to write down an aggregate $5.725 billion of goodwill in the last two quarters, which effectively removed all goodwill from the balance sheet, reflected, in part, concerns regarding the long term sustainability of the company's capital structure and reduced expectations for the overall wireline industry.



    Frontier's credit profile is supported by the company's large scale of operations, its predictable cash flow and extensive network assets. The rating is also supported by the company's improved ability to generate cash following the elimination of its common dividend in early 2018. Moody's expects Frontier to have adequate liquidity to retire the remainder of its outstanding unsecured debt maturing prior to 2022. Frontier has been meaningfully reducing its refinancing risk hurdles in the near term, including through a March 2019 refinancing of short-dated first lien term debt with a first lien bond offering. Though Frontier expects gross proceeds of $1.352 billion from the sale of western state operations in first half 2020 (subject to closing adjustments), the use of such proceeds remains undisclosed but will likely facilitate capital structure enhancement efforts. If such proceeds are used to facilitate debt exchanges and/or open market debt purchases at distressed levels, such actions could be considered a default under Moody's definition.

    I think they were very much counting on using that money to restructure and Moody's took it away from them, leading to this confab with creditors.  Of course, threatening Bankruptcy is a great tactic to negotiate with creditors – one might even say it's Presidential…

    Also, notice the meaningful drop in short interest last month.  Doesn't seem like what you'd expect if they are about to go BK.

    MDR, on the other hand….


  15. FTR / Phil – It really could be a negotiating tactic! When you owe that much money, you have leverage. Bankruptcy brings other issues I imagine like having to look for new suckers.  


  16. Pipelines/StJ – I agree, possibly some are on sale as well.  Certainly not ENB:

    MDR/Mito – Yes, most likely screwing the shareholders.  

    Trump/Tangled – Just a boring version of his rally speeches.

    FTR/StJ – BK greatly improves the balance sheet – another great Trump tactic:  Build a $1Bn casino on credit, declare BK, pay $150M for it…   Amazing how easy it is to make money in America when you have no morals.  


  17. Sold some CNX April $7 puts.

    Comments on CNX from Southeastern Asset Management, who owns 28% of the stock.

     "CNX outperformed its Southwest Appalachian peers on average by over 50%, but the macro storm has overshadowed the strong progress made in improving its asset mix quality and leadership, including a new CEO, new Chairman and two additional board members that we recommended to the company. CNX has been a leader within the industry in capital allocation: spinning out its legacy coal business, selling non-core assets at great prices, cutting costs and buying back over 7% shares outstanding in the past year. CNX has $5-10+ per share of quality midstream assets, which includes high growth cash flows from their general partner interest, in addition to over $1 per share of FCF power from its E&P operations with strong reinvestment opportunities, all vs. its $8 per share stock price. The board and management team have been battle-tested and now stand in a position of relative strength in this industry’s nadir. ..

    CNX’s 2020 production is over 80% hedged at prices above the current futures strip, which should help the company weather any additional market challenges in the near term."


  18. Trump speech.  Yeah I get that about what he said.  I just do not understand why they would have asked him to speak.


  19. Just shows you how much status the US has to burn.  Still impressive to have US President address an audience – even if it is The Donald. 

    Image result for trump davos

    Image result for trump davos

    Image result for trump davos


  20. Stock sell-off is because Chinese virus has now been reported in US.

    So crazy!


  21. Taking advantage of the dip, back to 1 short on the indexes.


  22. Stocks drop after report of U.S. coronavirus case

    • Stocks take a leg down after CNN reports that the U.S. Centers for Disease Control and Prevention is expected to announce the first case of Wuhan coronavirus in the U.S., in Washington state.
    • The Nasdaq, S&P 500 and Dow each slip 0.2%. At midday, the three major U.S. stock averages had nearly erased their declines in the morning.
    • The 10-year Treasury increases its gain, pushing yield down 5 basis points to 1.772%.
    • CNN attributes the  news to a federal sources outside to the CDC who was made aware of a  CDC media briefing slated for later today.
    • The virus, which was first identified in Wuan, China, last month, has so far infected more than 300 people and killed six in an outbreak reported in five countries.

    Coronavirus in U.S. could impact cleaning stocks

    Infectious disease drug developers rally on coronavirus outbreak in China

    • Later today, the U.S. Centers for Disease Control and Prevention will brief the media on the coronavirus outbreak in China that has stricken 291 people and killed six, mostly in the city of Wuhan in Hubei province.
    • Selected tickers that investors perceive as bullish on the news: NanoViricides (NNVC +112.4%), Novavax (NVAX +43%), Inovio Pharmaceuticals (INO +10.6%), BioCryst Pharmaceuticals (BCRX +20.9%), ImmuCell (ICCC +17.7%), Aethlon Medical (AEMD +22.3%), Nabriva Therapeutics (NBRV +9.9%)

    Ford dealers prep for electric Mustang SUV

    • Ford (F +0.5%) is training sales staff and shop technicians at about 2.1K dealerships in preparation for the launch of the all-electric Mustang Mach-E later this year.
    • The automaker requires any dealership that wants to sell the Mach-E to undertake training and purchase new equipment to service and charge the EVs, according to Detroit Free Press.
    • Ford says it's experience in launching new types of vehicles, pointing to the aluminum-bodied F-Series pivot that required service technician training across the U.S.

    Ericsson jumps as Trump says U.S. working with company on 5G

    • Shares in Ericsson (NASDAQ:ERIC) briefly spiked to a gain amid a headline from Davos that President Trump says the U.S. is working with the company on advanced networking.
    • They've quickly returned to a 0.8% decline on the day.
    • At a dinner event with numerous execs including Ericsson CEO Borje Ekholm (as well as Nokia (NOK -0.1%) CEO Rajeev Suri), Trump says the U.S. is more advanced on 5G than people realize.
    • "Ericsson’s done a great job with 5G," Trump said, adding that "spectrum, we're opening it up."
    • He also tells Suri: "You're doing very well and advanced with 5G." Suri said the U.S. is the strongest 5G market.

    Morgan Stanley cautious on Las Vegas Sands

    • Morgan Stanley sees a bumpy ride for Las Vegas Sands (LVS -4.2%) this year with consensus estimates for the mass market segment running too high.
    • "There's risk mass growth could come in even lower as net rooms growth will be essentially flat and hotel occupancies have surpassed Vegas, with the Macau tourism office suggesting last week that visitation could decline in 2020," warns analyst Thomas Allen
    • Las Vegas is seen as more exposed than Wynn or MGM due to its highest mix of Macau business.
    • MS drops Las Vegas Sands to an Equal Weight rating from Overweight and assigns a price target of $72.
    • Previously: Macau stocks fall on virus worries (Jan. 21)

    Kudlow calls for pro-growth policies, not negative rates – CNBC

    • While President Trump praises negative interest rates at the World Economic Forum in Davos, his top economic adviser, Larry Kudlow, calls the practice "ineffectual."
    • "We're forced to compete with nations that are getting negative rates, something very new," Trump said in a speech at the annual gathering. "Meaning, they get paid to borrow money, something I could get used to very quickly. Love that."
    • It doesn't exactly work that way. Those buying such debt pay a premium — more than 100 cents on the dollar. If the interest earned during the time they hold the debt is less than the premium paid, then those bonds are considered to carry negative yield.
    • Kudlow advocates more pro-growth fiscal policies like tax cuts and lower regulation, instead of monetary policy like ultra-low interest rates and quantitative easing.
    • “All this negative rates and printing money doesn’t really work, does it?” he said in an interview with CNBC.
    • “There’s nothing wrong with a balance sheet rising,” he said. “But where are the tax cuts? Where are the incentives for people to work the extra hour, take the extra incentive and take the extra risk?”

  23. Vulture investors flock to China's bad loans – WSJ

    • Large money managers including Blackstone Group (BX +0.8%), Lone Star Funds, Oaktree Capital (majority-owned by Brookfield Asset Management (BAM -0.3%)), and Bain Capital are flocking to buy nonperforming loans in China, the Wall Street Journal reports.
    • Chinese banks were holding at least 6.18T yuan ($899B) of nonperforming loans or debt at risk of default as of last September, a figure that some analysts think is an underestimate of the true amount.
    • Getting investors to acquire the bad debt on Chinese banks' balance sheet is key to Beijing's plan to revive the economy and free up capital for banks to make new loans.
    • Under the recent U.S.-China phase one trade accord, American companies will be able to apply for licenses that can buy nonperforming loans straight from banks.
    • Investors, who often buy the bad debt at 30-60 cents on the dollar, can make money by selling property secured by the loans (assuming the Chinese real estate market doesn't tank), reselling defaulted loans to other investors, or working out a deal with borrowers.

    Vulture investors flock to China's bad loans – WSJ

    • Large money managers including Blackstone Group (BX +0.8%), Lone Star Funds, Oaktree Capital (majority-owned by Brookfield Asset Management (BAM -0.3%)), and Bain Capital are flocking to buy nonperforming loans in China, the Wall Street Journal reports.
    • Chinese banks were holding at least 6.18T yuan ($899B) of nonperforming loans or debt at risk of default as of last September, a figure that some analysts think is an underestimate of the true amount.
    • Getting investors to acquire the bad debt on Chinese banks' balance sheet is key to Beijing's plan to revive the economy and free up capital for banks to make new loans.
    • Under the recent U.S.-China phase one trade accord, American companies will be able to apply for licenses that can buy nonperforming loans straight from banks.
    • Investors, who often buy the bad debt at 30-60 cents on the dollar, can make money by selling property secured by the loans (assuming the Chinese real estate market doesn't tank), reselling defaulted loans to other investors, or working out a deal with borrowers.

    Beyond Meat +13% with Starbucks looking at plant-based food

    • Beyond Meat (NASDAQ:BYND) shoots up after Starbucks says it will explore plant-based menu options as part of a multi-decade goal of becoming a resource-positive company.
    • Starbucks didn't mention Beyond Meat in its release, but stated that it's looking to migrate toward a more environmentally friendly menu.
    • BYND +13.11% to $123.43.

    Trump plans to talk 'big trade deal' with European Union

    • President Trump says "we've been talking about it for a while and hopefully we can get something done" regarding a potential trade deal with they European Union, Bloomberg reports.
    • "A deal between ourselves and essentially Europe is something we all want to be able to make," he said in speaking with reporters during a meeting with EC President Ursula von der Leyen.
    • Trump said he's heard that von der Leyen is a "very tough negotiator, which is bad news for us because we're going to talk about a big trade deal."
    • Euro rises 0.1% to 0.9 euro per U.S. dollar.

    Bad Economic Signal:  Price drop rattles containerboard sector

    • The containerboard sector is on watch after Pulp & Paper Week posts lower prices than anticipated for U.S. domestic kraftliner products.
    • Analysts are indicating that the pricing cut arrived earlier in 2020 than anticipated.
    • Containerboard and packaging stocks trading lower include International Paper (IP -2.7%), Packaging Corp of America (PKG -3%), Berry Global Group (BERY -1.7%), WestRock (WRK -3.5%), Greif (GEF -1.7%), Sealed Air (SEE -1.7%) and Cascades (OTCPK:CADNF).

    U.S. homes for sale fall to new low, Zillow says

    • The number of U.S. homes for sale fell to 1.49M in December, down 7.5% Y/Y and down 0.7% M/M to the lowest level recorded by Zillow.
    • Meanwhile, the typical home value of $244,054 in the U.S. rose 3.7% Y/Y.
    • Annual growth in home values slowed M/M in each of the past 20 months, down from an annual pace of 6.7% in April 2018.
    • The tight inventory may lead to home value growth re-accelerating, Zillow said, as the Zillow Home Value Index growth was just 0.4 percentage points slower than in November.
    • Typical rent increased 2.6% Y/Y to $1,600.
    • Among the country's 50 largest markets, the fastest growth in annual home value in December occurred in Memphis (+7.2% Y/Y), Phoenix (+6.5%), and Columbus, OH (+5.9%).
    • The slowest annual home value growth  was in San Jose, CA (-6.4%), San Francisco (-1%), and New York (+0.7%).

    Macau stocks fall on virus worries

    • The World Health Organization is considering declaring an international public health emergency over the coronavirus in China. A total of 291 cases have now been reported in the nation, including incidents in Beijing and Shanghai.
    • While analysts have reported that Macau isn't seeing a drop in tourism yet due to the outbreak, casino stocks were hit hard in Hong Kong earlier today and are pointing lower in premarket U.S. trading.
    • Premarket: Wynn Resorts (NASDAQ:WYNN-6.01%, Las Vegas Sands (NYSE:LVS-5.99%, MGM Resorts (NYSE:MGM-2.14%, Melco Resorts & Entertainment (NASDAQ:MLCO-6.99%.

    Novavax up 59% premarket on mystery respiratory virus in China

    • Vaccine developer Novavax (NASDAQ:NVAX) is up 59% premarket on robust volume in apparent reaction to the spread of an unknown respiratory virus in China that has killed six people to date.
    • Buying appears to have spread to Inovio Pharmaceuticals (NASDAQ:INO) (+13%) and BioCryst Pharmaceuticals (NASDAQ:BCRX) (+6%).

    Intel cutting PC processor prices – report

    • Intel (NASDAQ:INTC) will cut the processor prices starting in H2, according to Digitimes sources.
    • Intel is reportedly discounting the processors to maintain its market dominance against Advanced Micro Devices (NASDAQ:AMD).
    • Related: Last week, Intel discontinued its M-series Cascade Lake Xeon chips and cut the prices on the L-series CPUs.
    • Intel shares are down 0.3% pre-market to $59.42. AMD shares are down 0.3% to $50.79.


  24. Swiss uncovered suspected Davos spy plot by Russian ‘plumbers’: paper


  25. Analysts upshift and downshift on Tesla

    • New Street Research raises its price target on Buy-rated Tesla (NASDAQ:TSLA) to $800 from $530.
    • The firm says its bullish 2025 perspective on Tesla is now advanced by two years and more tangible after recent developments with the EV automaker.
    • It's a different vibe at Bernstein where analyst Toni Sacconaghi sees risk on the downside for Tesla after the nifty +100% rally in just over three months. Sacconaghi expects Model Y production to cut into Model 3 sales. Tesla is rated at Market Perform and assigned a price target of $325.
    • Shares of Tesla are up 1.52% premarket to $518.28.

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    Another Bad Economic Sign:  Dry bulk shipping rates fall again

    • The Baltic Dry Index fell 5.49% to 689 points in London.
    • Capesize rates were down 8.99% and Panamax rates were off 5.78% to drive the BDI lower.
    • Higher fuel price spreads are believed to be impacting the decisions of ship owners with longer voyages.

    L Brands +1% after KeyBanc bump

    • KeyBanc lifts L Brands (NYSE:LB) to an Overweight rating after having the retailer set at Sector Weight.
    • The firm expects a transaction involving the Victoria's Secret business and also sees the Pink and Bath & Body Works as attractive brands.
    • Analyst Edward Yruma assigns a sum-of-the-parts valuation of $25 to L Brands to rep 24% upside potential for shares.
    • LB +1.19% premarket to $20.40.

    Restaurant Brands seen as undervalued

    • Deutsche Bank lifts Restaurant Brands International (NYSE:QSR) to a Buy rating from Hold on a call tied to valuation.
    • The firm assigns a price target of $71 to the restaurant stock to rep 11% upside potential. The average sell-side PT is $78.17.
    • Shares of QSR are up 0.58% premarket to $64.50.

    JPMorgan creates the Development Finance Institution

    • The project will fund at least $100B in emerging market projects, closing the gap by helping turn development finance into a traded asset class, originating assets for distribution to investors.
    • It will also connect public and private pools of capital, from pensions and family offices to philanthropies.
    • JPMorgan (NYSE:JPM) hired Faheen Allibhoy, an 18-year-veteran of the World Bank-affiliated International Finance Corporation, to lead the new group.

    Tesla blasts U.S. safety recall petition

    • Tesla (NASDAQ:TSLA) has responded to an NHTSA petition to investigate and recall around 500K of the company's electric cars over an alleged "unintended acceleration" defect.
    • "This petition is completely false and was brought by a Tesla short-seller. We investigate every single incident where the driver alleges to us that their vehicle accelerated contrary to their input, and in every case where we had the vehicle's data, we confirmed that the car operated as designed. In other words, the car accelerates if, and only if, the driver told it to do so, and it slows or stops when the driver applies the brake."

    UBS misses targets, trims guidance

    • After missing its key targets for 2019, UBS (NYSE:UBScut its mid-term guidance, leading shares to slip 2.6% in premarket trade.
    • The bank now targets a return on Common Equity Tier 1 capital of between 12% and 15% and a cost-income ratio of 75-78% through 2022 (vs. 2021 return on CET1 capital of around 17% and a cost-income ratio of 72%).
    • UBS said it would also sell a majority stake in UBS Fondcenter to Clearstream, the post-trade services provider of Deutsche Borse (OTCPK:DBORY).

    IMF predicts sluggish global growth

    • The IMF now sees growth at 3.3% this year, below its October projections for 3.4% and also cut the 2021 forecast to 3.4% from 3.6%.
    • "We have not reached a turning point yet," IMF Managing Director Kristalina Georgieva told a news conference on the eve of the World Economic Forum in Davos. "The reality is that global growth remains sluggish."
    • "Just in the very first weeks of the new year we have witnessed increased geopolitical tensions in the Middle East and we have seen the dramatic impact that climate shocks could have. We saw them in Australia as well as parts of Africa."

  26. AP Fact Check: Trump spreads distortion at Davos


  27. Boeing halted after 5% drop – eek


  28. Just curious to know any one plaid AMBD PoorMT I did recommend 12/30
     


  29. Yodi – Thanks; I did not play but I did read a little bit about the company and what they do and such; And I am interested in taking a position. Just not sure if I want to do it in a trading account or a retirement account. Do you have a play for now? It is at about $190 now.


  30. BA getting smacked down a full 5% today:

    Boeing reportedly sees no 737 MAX signoff until summer

    • Boeing (BA -4.6%) plunges to a 52-week low following a CNBC report that it does not expect regulators to sign off on the 737 MAX return until June or July, months later than previously expected.
    • The delay would pose another headache for carriers who already missed one peak travel season without the planes.

    BA/Maya – I need to read more on where they are given production halt.   Huge danger they resolves something and fly up on you overnight – not a risk I would take – especially considering $300 is still my long-term buy mark for BA.  

    Almost there!


  31. BA – selling the Jan 2022 $300 puts for $43 will easily take you across the $300 barrier with room to spare. 


  32. We killed our BA spread in the Earnings Portfolio on 1/10 – taking advantage of the pop.  It was the 2022 $300/350 bull call spread from 10/22/19 at $76/54 and now it's $53/32.75 so only net $20.25 vs net $22 when we took a chance. I'm certainly not jumping back in off the bad news but worth keeping an eye on now that we're closer to where we liked the idea.  Put prices are huge, the 2022 $200 puts are $9 and the $250 puts are $24 – tempting but likely to have a rough ride – another delay is another $5Bn down the drain and at that point I'd have to discount their 3-year earnings to $7Bn and call $140Bn about right and that's down about 20% from where they are at $312 ($175Bn) so $250 is just about right on the money for a low if they lose next year. 

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

    86,623 90,762 96,114 93,496 94,005 101,127 92,599 79,709 110,203 3.14%
    Operating Profit
    $m

    6,562 7,473 7,443 6,527 10,344 11,987 4,404     12.8%
    Net Profit
    $m

    4,585 5,446 5,176 5,034 8,458 10,460 3,798 301 8,350 17.9%
    EPS Reported
    $

    5.97 7.38 7.44 7.83 11.8 17.9 6.52     24.5%
    EPS Normalised
    $

    5.95 7.39 7.44 7.84 11.7 17.7 13.1 0.487 15.2 24.4%
    EPS Growth
    %

    +16.3 +24.4 +0.651 +5.29 +49.9 +51.0 -26.0 -97.3 +3,013  
    PE Ratio
    x

              18.3 24.7 666 21.4  
    PEG
     

                  0.221 0.545  
     

    Not good for Airline stocks either (or our GDP!):

    BA/Winston – So tempting!

    Still, they are essentially going to make $0 this year vs $10Bn last year and another year like this is not baked in yet the time-line has been pushed back 6 months since Thanksgiving – the bottom line is they still – a year later, do not have an acceptable solution.  

    Watch only for me, for now.

    “This updated estimate is informed by our experience to date with the certification process. It is subject to our ongoing attempts to address known schedule risks and further developments that may arise in connection with the certification process,” Boeing said in a statement.

    That timeline “also accounts for the rigorous scrutiny that regulatory authorities are rightly applying at every step” of their review of the 737 Max’s flight control systems and future pilot training requirements, the company said.

    Keep in mind the reason we ditched our spread on 1/10 was because I saw BA SUPPLIERS laying people off an shutting down lines.  BA may be ready to start back up in July but it will take a while to get the supply chain back up and running.  One missing part and the whole plane doesn't fly….

    Image result for boeing supply chain


  33. Phil

    Its interesting DAL does not have any 737 MAX planes


  34. Phil

    I missed the trade of the year so what was the trade

    Thanks


  35. Vkat ABMD well it is a bit late now, as the horses have left the stable. I initiated the play when the stock was trading at 168!!!! I do not like to jump on a running train, even the stock is still a the low side of the scale. I would keep an eye on it for now.


  36. Aeroplanes – a choice of two – Airbus or Boeing. 

    Bought the synthetic stock at $310 – (cost $1.50) buying Jan 2022 $130 call / selling the Jan 2022 $130 put. Will add some protection later on when the volatility settles down.


  37. Hold that post – seems silly not to sell the March 20 $300 calls for $22.50. They roll to the Jan 2022 $400 calls – I'll settle for that.


  38. Speaking of GDP:

    Image

    Half-point drop last week as earnings started coming in.  It's that super-strong Trump Economy, for sure…

    Image result for trump gdp by quarter

    Image result for trump gdp by quarter 2020

    DAL/QC – Great point!   Kind of silly for them to sell off then, isn't it?  They don't even have them on order.  

    Delta looked at ordering the MAX, Bastian said on the earnings call Thursday, but in December 2017 it announced an order for 100 Airbus A321s with options for 100 more.

    Delta’s fleet of 916 aircraft still tilts toward Boeing, with 513 Boeing aircraft as well as 108 aircraft built by Boeing predecessor McDonnell Douglas, according to website planespotters.net. “We are still a large significant Boeing equipment operator, “said Delta spokesman Morgan Durant. However, Durant said, “Our order book of new 737-900ERs, initially placed in 2011, is now fulfilled.”

    Trade of the Year/QC – Was GOLD – in the Money Talk Portfolio:

    GOLD Long Call 2022 21-JAN 13.00 CALL [GOLD @ $18.29 $0.34] 30 11/14/2019 (731) $15,600 $5.20 $0.95 $5.20     $6.15 $0.15 $2,850 18.3% $18,450
    GOLD Short Call 2022 21-JAN 17.00 CALL [GOLD @ $18.29 $0.34] -30 11/14/2019 (731) $-9,900 $3.30 $0.48     $3.78 $0.09 $-1,425 -14.4% $-11,325
    GOLD Short Put 2022 21-JAN 17.00 PUT [GOLD @ $18.29 $0.34] -15 11/15/2019 (731) $-5,025 $3.35 $-1.09     $2.27 $-0.05 $1,628 32.4% $-3,398

    I'm doing the show on the 5th, by the way.  I think they moved the time to 5:30.


  39. Yodi/ABMD – No problem. Thank you. I will keep an eye and see if it pops a bit.


  40. Phil – 2 Questions now that everything seems toppy/stretched:

    1. You do lot of bull call spreads and short puts on the same stock typically; Can we do something similar on the bearish side; As in, buy a Bull Put Spread and sell out of the money Calls to pay for the spread.

    2. Are there butterfly spread varieties on the bearish side;  can we look into a few Bull Put Spreads and selling out of the money Calls and Puts

    We can look at some non-profitable highly values stocks like CVNA, W, SHOP and so on; Or some profit making but high values (high PE) stocks like ULTA, FLT, NFLX

    Thanks.


  41. BA / Phil – I am staying far, far away! The problem is that there is some trust issues with that company now and it's not a great thing when dealing with people's lives. I can say that I don't trust Verizon for example, but it's simply because their support people can't seem to give me straight answer. My life is not in danger. At this point, I would not fly on one of these 737 MAX and I am sure I am not the only person. BA might be losing huge chunks of the market for a while. 


  42. IBM also issued an upbeat outlook for the current year.

    https://www.wsj.com/articles/ibm-earnings-hint-at-signs-of-turnaround-11579641192

    IBM Earnings Hint at Signs of Turnaround 

    Big Blue’s fourth-quarter earnings boosted by Red Hat deal and mainframe computers

    Adjusted earnings per share for this year should be at least $13.35, up from $12.81 in 2019, the company said. Analysts surveyed by FactSet were forecasting the company to earn $13.28Adjusted earnings per share fell around 3% to $4.71 but came in ahead of expectations of analysts surveyed by FactSet. Analysts had projected $4.69 adjusted per-share earnings for the quarter ended December 31. Adjusted net income fell by about 5% to $4.2 billion, IBM said.IBM slight beat in earnings with slightly above CE outlook 

    International Business Machines Corp. IBM 0.56% reported a slight increase in quarterly revenue, ending a streak of falling sales and providing a first indication Chief Executive Ginni Rometty’s roughly $33 billion acquisition of open-source software giant Red Hat may help turn around Big Blue’s fortunes. 

     

    The company on Tuesday said fourth-quarter revenue rose 0.1% to $21.78 billion in the quarter after five straight quarters of year-over-year declines. 

     

     


  43. The new Corona Virus outbreak is coinciding with the Chinese New Year's holiday, which is the biggest holiday in China and usually sees HUGE amounts of travel and tourism.  We're talking billions of people squeezing into trains, planes and tourists attractions.  Not a recipe for anything good, unless the government just outright starts quarantining whole cities and enacting travel restrictions.


  44.  IBM 

    IBM (NYSE:IBM) +4.5% reports Q4 beats with a 0.1% Y/Y revenue growth, breaking the streak of five consecutive Y/Y declines.

    Revenue breakdown: Global Technology Services, $6.95B (consensus: $6.99B); Cloud and Cognitive Software, $7.24B (consensus: $7.12B); Global Business Services, $4.24B (consensus: $4.26B); Systems, $3.04B (consensus: $2.84B).

    Total cloud revenue was up 21% to $6.8.

    Red Hat revenue was up 24% to $1.07B, normalized for historical comparability.

    For FY20, IBM sees operating EPS of at least $13.35 (consensus: $13.29) and FCF of about $12.5B.

    Earnings call starts at 5 PM ET with a webcast here.

    Press release.


  45. Bearish/VKat – Sure, we once had a "Sell List" full of positions like that but this has been an unrelenting bullish market, making it very dangerous to short.  The thing about selling a put is I can firmly have conviction that the value will hold over time and I REALLY want to own the stock for the long haul but a short is more a matter of opinion – I can't stop people from paying 100x for NFLX or AMZN or TSLA any more than I can stop them from paying 120x - there's really no limit to the insanity and my fallback isn't that I want to remain short – even if it takes years to "recover" – so it's a much more dangerous position than a conviction long. 

    NFLX just announced good earnings but so ridiculously valued they are down anyway.  IF I were going to short NFLX at $338, I'd go the following way:

    • Buy 5 NFLX 2022 $400 put for $100 ($50,000) 
    • Sell 5 NFLX 2022 $330 puts at $60 ($30,000) 
    • Sell 3 NFLX 2021 $380 calls for $34.50 ($10,350) 
    • Sell 3 NFLX April $300 puts for $10 ($3,000) 

    That's net $6,650 on the $35,000 spread that's mostly in the money and we sold $3,000 in quarterly premium with 7 more to go ($21,000) and another short call premium of $10,350 if all goes well means we can collect over $30,000 while we wait to see if our $35,000 comes in.  That's upside potential of $58,350 (877%) if it all goes to plan (but it never does).   At the moment, the short margins should cancel each other out but if NFLX moves significantly higher or lower – you need a good $20,000 in margin to ride it out (or tight stops on the shorts).  

    Still, not too likely to burn too badly us as we collect $10,350 on the short puts if the short calls hurt us and lots of time to roll.  

    Netflix (NFLX) added more new paying subscribers in the fourth quarter of 2019 than expected, the company said in its first report since the launch of new streaming services including Disney+ and Apple TV+. However, its forecast for subscriber growth in the current quarter fell short of Wall Street’s estimates.

    Here were the main results from the report, compared to consensus expectations from Bloomberg:

    • Revenue: $5.47 billion vs. $5.45 billion expected

    • Earnings per share: $1.30, vs. $0.30 Y/Y

    • Global streaming net paid subscriber additions: +8.76 million vs. +7.65 million expected

    Netflix said it expected to add 7 million paying members in the current quarter, short of the 7.82 million expected.

    For the fourth quarter, Netflix had guided toward adding 7.6 million net streaming subscribers globally, comprising 600,000 adds in the U.S. and 7 million internationally. Netflix’s actual fourth-quarter results put it in-line with the user growth it saw in the same period last year, when it added 8.8 million global net subscribers in the final three months of the year.

    Netflix exited the fourth quarter with 167.09 million global streaming paid memberships.

    BA/StJ – I agree to a point but the problem (or benefit for BA) is that Airbus is unable to capitalize and make more planes. They are as backlogged as BA – about 7 years so no one is getting off the BA queue to jump in the back of Airbus' and passengers don't actually have a choice either – you have to really bend over backwards to avoid flying certain planes and, even then, they can switch them on you.  

    Still, BA needs to go above an beyond to regain trust for the next few years or they will start getting damaged – more likely by a China manufacturer than Airbus as Airbus would be very scared to commit tens of Billions of Dollars to ramping up production for orders that might not appear while China would be thrilled to throw tens of Billions at something to gain a foothold in the market. 

    If I were Airbus, I'd go to the middle of the line and further back customers and say "Hey, I can shave 1 year off your wait time if you front us 20% of your order price".  They'd collect $50Bn + specifically earmarked to deliver planes to people who are now super-motivated to keep their place in line and figure 2 years to increase capacity by 20-30%.  Once they are able to build more production, they can go to the back of BA's line and tell them they will fill their orders a year or two sooner than BA can if they switch.  

    IBM/Batman – I never had any doubts (also in the MTP). 

    IBM Long Call 2022 21-JAN 120.00 CALL [IBM @ $138.89 $0.58] 8 11/14/2019 (731) $17,200 $21.50 $1.75 $21.50     $23.25 $1.08 $1,400 8.1% $18,600
    IBM Short Call 2022 21-JAN 140.00 CALL [IBM @ $138.89 $0.58] -8 11/14/2019 (731) $-9,200 $11.50 $0.70     $12.20 $0.33 $-560 -6.1% $-9,760
    IBM Short Put 2022 21-JAN 135.00 PUT [IBM @ $138.89 $0.58] -4 11/14/2019 (731) $-8,460 $21.15 $-3.38     $17.78 - $1,350 16.0% $-7,110

    Wow, up to $145 already!

    Virus/Kinki – First time I'm glad to be in Florida.  For some reason, we have very few Chinese people here – not even restaurants.  I don't know why because I can be in Kalamazoo, Michigan and find a good Chinese place but nowhere in Florida!  As a New Yorker – that's cutting out one of my basic food groups…  frown


  46. FWIW the first reported case of the new Corona Virus in Japan was a Chinese traveller who purposely took cold medicine to suppress his fever while on the plane and went undetected at the airport.  It wasn't until a few days after he landed that he went to a hospital.  I wonder how many people on that airplane were infected. 

    TBH, until this outbreak dies down, I have zero plans to ride an airplane or go to a tourist attraction — which nowadays are INUNDATED with tourists from China, so there is a possible explanation for why airline stocks are down despite not having Boeing 737-Max planes.  It also makes you think how much of a hit it will be on the economy and GDP.



  47. Coronaviruses are a large group of viruses that can cause illnesses as minor as a cold, or as serious as Middle East Respiratory Syndrome (MERS) and Severe Acute Respiratory Syndrome (SARS), according to the World Health Organization. They often present with pneumonia-like symptoms.

    The viruses are transmitted from animals to humans — the virus that causes SARS, for example, was transmitted to humans from a cat-like animal called a civet. But in some instances, as appears to be the case with this new strain of coronavirus, they can also be transmitted between humans. 

    The World Health Organization said there are multiple known coronaviruses circulating in animals that have not yet been transmitted to humans.

    The outbreak began in Wuhan, a city of 11 million people. Many of the patients have reportedly been linked to Hua Nan Seafood Wholesale Market, a large seafood and animal market in the city, according to CBS News' Ramy Inocencio. But a rising number of people have apparently contracted the virus without exposure to the market, according to Chinese officials.

    The market was closed on January 1, 2020 for "environmental sanitation and disinfection," according to the World Health Organization

    outbreak-coronavirus-wuhan-china.png

    At least six people have died from the illness, according to the Wuhan Municipal Health Commission. 

    The first patient, a 61-year-old man, died January 9. Two more patients died January 15 and January 18. The Commission announced the fourth patient's death Monday, writing that an 89-year-old man died January 19 after he was admitted to the hospital with severe breathing difficulties a day earlier. The fifth and sixth deaths were announced Tuesday. 

    The Commission added that 169 patients are being treated in the local hospital. Thirty-five of those patients are in severe condition, and nine are in critical condition. 

    While the virus originated in China, cases have also been reported in Thailand, Taiwan, Japan, South Korea, and now the United States.

    It's well-established that coronaviruses can spread from animals to humans, according to the World Health Organization. But on Monday, a Chinese official confirmed there have been cases in which this virus has spread from human to human. 

    State-run CCTM quoted Zhong Nanshan, a scientist at the China's National Health Commission, as saying such transmission was "affirmative." The scientist did not say how many cases were the result of human-to-human transmission — but in one case, a hospital patient is said to have infected 14 medical workers, reports Inocencio.

    The World Health Organization announced Monday that it will convene an Emergency Committee on the virus this week in Geneva, Switzerland, to determine if the outbreak rises to the level of a public health emergency.

    Meanwhile, the CDC has deployed about 100 workers total to screen passengers at the three major ports of airline entry in the U.S.: New York, Los Angeles, and San Francisco. Approximately 5,000 passengers from Wuhan are expected to pass through those airports in the coming weeks. The CDC announced Tuesday that it will also start screening at Atlanta's international airport and O'Hare International Airport in Chicago.

    The CDC said it has developed a test to diagnose the virus. Currently, that test must be administered at the CDC, but the organization is working to share the test with domestic and international partners.

    In Hong Kong, which was ravaged by SARS in 2002 and 2003, hospitals upped their alert level to "serious" and implemented temperature checkpoints for inbound travelers.

    In China, airline workers are running temperature checks on flights leaving Wuhan. Chinese scientists said Tuesday they had determined the DNA sequence of the new coronavirus, which could aid in the development of treatments, and potentially a vaccine. 

    But there could be a problem: Hundreds of millions of people are moving through China to celebrate the Chinese New Year, stoking fears that the virus could spread even faster.

    Related image

    At least we don't have to worry about Global Warming killing us – Trump was right again!  blush


  48. Also good thing we are cutting funding for the CDC to finance the tax cuts right? Not going to bite us in the ass much I am sure.

    Related image