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Technical Tuesday – Recovering Already?

Health workers disinfected a residence in Ruichang, China, a city in Jiangxi Province. A coronavirus outbreak that has left more than 100 people dead began in the neighboring province of Hubei. 4,500 infections

That's a 60% jump since yesterday's official count and clearly we're over 5,000 now in real time but "only" 106 deaths, so down to 2% but, to be fair, new infections are happening so fast the deaths can't catch up with them so quickly.  China is already working on a second 1,000-bed hospital for the Coronavirus Patients – that should tell you enough right there.  Also, they've already run out of testing kits – so the number of patients could be substantially higher than estimated.  

Again, I don't want to be in the position of being the prophet of doom but my job is to point out potential concerns that lie ahead for the market and this is a very big one at the moment.  That guy is walking around with a fire stick – FIRE!  When you need to burn out an infection – it's probably serious…

Waiting for medical attention on Tuesday at the Wuhan Union Hospital, near the epicenter of the coronavirus outbreak.Hong Kong has 8 virus cases and will be implementing a broad series of restrictions aimed at controlling the spread of the coronavirus by limiting the number of mainland Chinese travelers entering the territory.  The restrictions, which included the suspension of high-speed and other train services between Hong Kong and the mainland, a 50 percent reduction in the number of flights, and a ban on tourism visas for many travelers, were announced by Carrie Lam, the city’s chief executive. 

In major cities like Beijing and Shanghai, many people have to stand in line in the wee hours of the morning to secure appointments with doctors. When they do get an appointment, patients get only a couple of minutes with a doctor. During flu season, residents set up camp overnight with blankets in hospital corridors.  Videos circulating on Chinese social media show doctors straining to handle the enormous workload and hospital corridors loaded with patients, some of whom appear to be dead.

Image result for coronavirus vs sarsAgain, I am sorry to dwell on this as it's depressing but the Government and the media, for the most part, are playing this down but here's a very simple illustration to let you know how serious this is.  Last week, when only 581 people were infected through Thursday, we looked at this chart and saw the virus was tracking the SARS infection rate at the 45-day stage.  Yet here we are, just 5 days later, and we're already at 4,500 cases – where SARS was after 90 days!  

That is, as they say in the medical profession – NOT GOOD!  

17 people were dead as of Thursday, 106 people are dead today, that's up 500% in 5 days – NOT GOOD!

Yet the complacency in the markets is simply astounding.  Even the WHO, who failed to declare the Coronavirus a Global Emergency last week, has now upgraded the Global Risk Assessment from "moderate" to "high", which is just one notch below "PANIC".  

I'm a numbers guy so I just watch the progression of deaths and infections to see if things are getting better or worse but up 500% (more on infections) in 5 days is certainly worse and, until we see those numbers begin to level out – it's probably not the best time to go bargain shopping.  

Not that there's nothing to play.  Yesterday we called for a bottom on Oil Futures (/CL) at $52.50 and we're at $53.50 so that's up $1,000 per contract (you're welcome!) and our long trade idea for the Oil ETF (USO) is also playing out nicely.  This morning, we're liking Natural Gas (/NG) Futures as they cross back over the $1.90 line – with tight stops below that line.  Having the flu doesn't make you sit in a cold house, does it?  

So, speaking of options plays, now is a good time to add the Natural Gas ETF (UNG) as it sits below the $15 line at $14.64.  With Natural Gas, you want to capture the hurricane season so we can make the following trade for our Short-Term Portfolio (STP):

  • Sell 20 UNG 2021 $15 puts for $2 ($4,000) 
  • Buy 40 UNG 2021 $13 calls for $3 ($12,000) 
  • Sell 40 UNG 2021 $15 calls for $2 ($8,000) 

That's net $0 on the $8,000 spread and all UNG has to do is be higher than $15 on Jan 15th, 2021 and we get $8,000 back.  Ordinary margin on the short puts is $3,300 so it's a nice, efficient way to make $8,000 in a year – perfect for our $100,000 STP.  The downside risk is having to buy 2,000 shares of UNG for $15 ($30,000) and I'd keep the loss on the short puts to $2,000 ($3/contract) to avoid it getting ugly but UNG would have to be about $13 for that to happen (in the short run).

Be careful out there.  


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  1. good morning

  2. A lot more red!

  3. Good morning!

    Durable Goods no way as good as the headline as they revised last month to -3.1% so this month's up 2.4% is net -0.7% for the two months – not really impressive.  Also, check out the core – that's the key.

    Durable Goods

    • December Durable Goods: +2.4% vs. +0.5% expected and -3.1% prior (revised from -2.0%).
    • Core Durable goods: -0.1% vs. +0.2% expected and -0.4% prior (revised from +0.0%).

    So that's down ANOTHER 0.1% from the 0.4% loss last Q that they pretended didn't happen at the time.  Maybe the Fed will save us tomorrow. 

    But who will save Macau?

    Macau being cut off from Mainland China

    • The Hong Kong Maritime Department is suspending ferry services between Hong Kong and Macau, according to local reports.
    • Authorities on Mainland China have also reportedly stopped issuing travel permits to Macau.
    • At last check, Macau has seven confirmed cases of the new coronavirus.
    • What to watch: Analysts are forecasting a huge drop in Macau gross gaming revenue for the January-February period, but are also quick to note how quickly the sector has bounced back from other outbreaks in the past. A bigger issue for long-term investors could be the overall strength of the Chinese economy.
    • Premarket action: Wynn Resorts (NASDAQ:WYNN) +0.20%, Las Vegas Sands (NYSE:LVS-1.06%, MGM Resorts (NYSE:MGM+0.30%, Melco Resorts & Entertainment (NASDAQ:MLCO-1.44%.

    Tuesday's economic calendar

    Corelogic Case-Shiller HPI

    • Nov. S&P Corelogic Case-Shiller HPI:
    • HPI Composite – 20 (S.A.): +0.5% M/M vs. +0.4% consensus, +0.5% prior (revised).
    • HPI Composite – 20 (N.S.A.): +0.1% M/M vs. +0.1% prior.
    • HPI Composite – 20 (N.S.A.): +2.6% Y/Y (N.S.A) vs. +2.4% consensus, +2.2% prior.

    Total sells 50% stake in French solar and wind portfolio for ~€300M

    • Total (NYSE:TOT) says it has sold a 50% stake in Total Quadran's portfolio of solar and wind assets in France to Banque des Territoires for ~€300M ($330.7M).
    • The portfolio consists of 11 wind farms and 35 solar plants and has a total capacity of 143 MW, the company says.
    • Separately, Total is being sued by 14 local governments and some non-governmental organizations in France for not doing enough to reduce its carbon emissions.
    • Local authorities, including from the city of Grenoble, want a court to order the company to "recognize the risks generated by its activities and to align itself on a trajectory compatible with limiting global warming to 1.5 degrees Celsius."

    Lear Corporation beat estimates in Q4

    • Lear Corporation (NYSE:LEA) reports sales declined 1% in Q4, excluding foreign exchange impact.
    • Segment sales: Seating: $3.63B (-2.9%); E-Systems: $1.19B (-1.6%).
    • North America net sales fell 5.8% to $1.74B.
    • Europe and Africa net sales down 7.3% to 1.83B.
    • Core operating margins dropped 290 bps to 5%.
    • During the quarter, the company repurchased 215.2K shares for $25M.
    • FY2020 Guidance: Net sales: $19.4B to $20.2B; Core operating earnings: $1.21B to $1.34B; Adjusted EBITDA: $1.74B to $1.87B; Interest Expense: ~$100M; Tax rate: ~22%; Adjusted net income: $780M to $880M; Restructuring costs: ~$100M; Capital spending: ~$600M; Free cash flow: $600M to $700M.
    • Previously: Lear EPS beats by $0.43, beats on revenue (Jan. 28)

    New Uber bull sees 54% upside

    • UBS starts Uber (NYSE:UBER) at Buy with a $56 price target, a 54% upside. The company has a Bullish average Sell Side rating.
    • Analyst Eric Sheridan cites Uber's exposure to global businesses prepared to scale, sector growth tailwinds, and a management team focused on capital allocation and raising the margin profile.
    • Uber shares are up 1.9% pre-market to $36.99.

    Lockheed +1% on Q4 beats, record backlog

    • Adjusted EPS of $5.29, up 21% versus prior year.
    • Sales by segment: Aeronautics +9%; Missiles and Fire Control +14%; Rotary and Missions Systems +8%; Space +14%.
    • Quarterly cash deployment: Capex of $643M; Repurchased 1.3M shares; Paid cash dividends of $675M; Record backlog of $144B.
    • Outlook for 2020: Diluted earnings per share of $23.65-$23.95, on net sales of $62.75B- $64.25B.
    • LMT +1% premarket
    • Q4 results

    Exxon sinks to 10-year low with 'little to be excited about' for near future

    • Exxon Mobil (NYSE:XOM) shares closed today at their lowest since October 2010, and the company's malaise runs deeper than the weak state of the crude oil market, writes Bloomberg's Kevin Crowley.
    • CEO Darren Woods is running a counter-cyclical strategy by investing heavily in new oil and gas assets, counting on a "windfall of cash" to arrive from the investments in the mid- to late-2020s, says Janus Henderson analyst Noah Barrett.
    • Exxon is ramping up capital spending above $30B/year, and the short-term cost of those investments is that the company cannot fund dividend payouts with cash generated from operations, instead resorting to asset sales and borrowing, according to Edward Jones analyst Jennifer Rowland, making Exxon the "clear outlier" among Big Oil companies.
    • In Exxon's Q4 earnings release this Friday, analyst consensus sees Exxon reporting GAAP earnings of $0.75/share compared to $1.41 in the year-ago quarter, adjusted earnings of $0.46/share vs. $1.29 a year earlier, and revenues of $64.4B from $71.9B a year ago.
    • Following Chevron's big asset writedown last month, analysts at J.P. Morgan think Exxon may have to follow suit, which would be "a negative for optics. Bottom line, we find little to be excited about near-term with the challenging macro backdrop" across all of Exxon's businesses.

    U.S. steel imports fall to lowest since 2010

    • Steel imports (NYSEARCA:SLX) into the U.S. fell 17% to 25.3M tons in 2019, the lowest levels since 2010 as the economy was crawling out from a severe recession, according to preliminary figures released by the U.S. Department of Commerce.
    • Preliminary imports for December totaled 1.4M tons, down 18% from the year-ago month and near the 10-year low from November, with import volumes for line pipes with a width greater than 16 in. slumping 76% Y/Y to 33.6K tons, while hot-rolled coil imports falling 10% to 150K tons and galvanized sheet imports down 20% to 143K tons.
    • While steel product imports fell last year, U.S. steel industry production increased 1.5% to 96.9M st, according to Argus Media, citing data from Worldsteel.

    Seritage Growth signs leases of over 2.5M square feet in 2019

    • In its year-end business update, Seritage Growth Properties (NYSE:SRG) sees its $180M of signed rental income since inception, plus remaining  lease up of announced projects, providing "additional stability and compelling income growth," said President and CEO Benjamin Schall.
    • During 2019, SRG signed leases totaling more than 2.5M square feet, including 814K square feet signed in Q4; retail leasing in Q4 totaled 721K square feet at average rent of $16.34 PSF.
    • In 2019, the company sold 21 properties totaling 2.5M square feet and generated gross proceeds of $144.3M, including $60M in Q4.
    • As of Dec. 31, 2019, SRG had ~$591.4M of identified liquidity, including $139.2M of cash on the balance sheet, $400M incremental funding facility under its senior secured term loan, and assets under contract for sale for anticipated gross cash proceeds of $55.2M.

    Brazil antitrust regulator OKs Boeing-Embraer deal

    • Technical staff at Brazil antitrust regulator Cade has approved Boeing's (NYSE:BA) $4.2B purchase of Embraer's (NYSE:ERJ) commercial aviation division without restrictions.
    • Cade's top administrative council could still call for a reconsideration of the case, which would then hold the decision to a vote.
    • The deal also is under investigation pending regulatory approval in the European Union, which has set an April 30 deadline to decide on the case.

    Whirlpool +1% after EBIT improvement

    • Whirlpool (NYSE:WHR) is higher after a mixed Q4 and guiding for 2020 EPS of $16.00 to $17.00 vs. $16.28 consensus.
    • The company expects an effective tax rate of 20% to 25% for the full year and free cash flow of $800M to $900M.
    • For Q4, Whirlpool reported a higher EBIT margin for the North American, Latin America and EMEA regions.
    • Previously: Whirlpool EPS beats by $0.64, misses on revenue (Jan. 27)
    • Shares of Whirlpool are up 1.19% AH to $150.00.

    Citi cautious on Netflix

    • Citi increases its price target on Netflix (NFLX -3.1%) to $350 from $325 on its view broadly accelerating cord-cutting trends will continue to benefit the firm.
    • A Neutral rating on NFLX is kept in place by Citi due to tempered short-term expectations.
    • "We believe that Netflix faces challenges in generating material operating leverage with its cash content spending. Additionally, sell-side estimates appear elevated relative to what historical patterns would suggest about the firm’s subscriber growth prospects," advises Citi analyst Jason Bazinet.

    Arconic weighing job cuts from MAX grounding, CEO says

    • Arconic (ARNC +5.8%) expects to lose $400M in sales and could cut jobs this year as a result of Boeing's halted production of the 737 MAX, CEO John Plant says.
    • Uncertainty over MAX production is the biggest challenge facing Arconic in 2020, Plant told today's earnings conference call, adding that the company is considering a mix of staff cuts, extended vacations and changes in shift patterns.
    • While business for Airbus jetliners and military aircraft is strong, it is difficult to switch workers to alternative products, Plant said.
    • But the stock powers higher, as improved operating margins helped Arconic's businesses overcome weak Q4 revenues; profit in the aerospace unit jumped 32% Y/Y as revenues rose just 1%, and income at the rolling business soared 61% Y/Y, offsetting a 5% reduction in revenue partially attributed to lower sales to the automotive industry due to the General Motors strike during the fall.

    Boeing gets $12B in financing to weather MAX crisis – CNBC

    • Boeing (BA -1.5%) lifts off its lows of the day after CNBC reports the company has secured more than $12B in financing from more than a dozen banks, shoring up its balance sheet amid the nearly yearlong grounding of the 737 MAX.
    • The company was trying to secure a loan of $10B, CNBC reported last week.
    • Boeing is expected to detail its financing strategy when it reports earnings before the market opens on Wednesday.

    JPMorgan cautious ahead of Apple earnings

    • JPMorgan lifts its Apple (AAPL -2.9%) target from $296 to $300 ahead of tomorrow's earnings report.
    • Analyst Samik Chatterjee expects an upside quarter driven by better than expected Apple Watch and AirPods sales.
    • The analyst expects $88.7B in revenue with $49.7B coming from the iPhone, $12.9B from Services, and $11.6B from Wearables.
    • Chatterjee continues to recommend Apple for long-term holders but is wary of the "high bar of investor expectations" heading into earnings.
    • Apple has a Bullish average Sell Side rating.

    Canada Goose -5% on China worries

    • Canada Goose (NYSE:GOOS) is one of the names being bid down the most in the retail sector by investors concerned about the impact of the coronavirus outbreak in China.
    • Canada Goose opened its first store in China just over a year ago and sees the region as a long-term growth opportunity.
    • Shares of GOOS are down 5.25% on the day and are off about 8% since the virus was first reported on.
    • Canada Goose isn't due to report earnings until the middle part of next month.

    Barrick to sell up to $280M in gold from Tanzania with export ban lifted

    • Barrick Gold (GOLD -0.6%) will start to ship gold worth as much as $280M from Tanzania, CEO Mark Bristow says, after resolving a three-year tax dispute with the government.
    • "The shipments will start immediately and, as we speak, we are mobilizing the concentrates… [worth] $260-$280 million depending on the price of metal prices at the time of sale," Bristow tells Reuters, adding that $100M from the proceeds of the sale of concentrates will go towards paying down a $300M settlement agreed with the government.
    • Asked about a possible sale of Barrick's Lumwana mine in Zambia, Bristow says the company is "entertaining interested parties."

    Volcker revamp to ease venture-fund curbs on banks – Bloomberg

    • Making it easier for lenders to invest in venture-capital funds is among changes that the Fed and other financial regulators are poised to propose this week, Bloomberg reports, citing three people familiar with the matter.
    • The Securities and Exchange Commission, the Fed, and other agencies last year finished a major overhaul of the Volcker Rule that banned banks from speculating with their own cash.
    • The ban was intended to curb risk-taking by Wall Street banks after the 2008 financial crisis, but the rule also prohibited them from significant investing in private equity, venture capital, and hedge funds.
    • The proposal will also ease business dealings between banks and family offices, which manage wealth of affluent investors, the people said.
    • Even with the Volcker Rule restrictions, banks have found ways to invest in startups during the past 10 years. For example, Goldman Sachs saw a $5M investment in Uber Technologies increase to an investment worth hundreds of millions of dollars when the ride-share company went public last year.
    • Industry lobbying groups argue that, since banks are already investing directly in startups, it doesn't make sense to restrict them from investing through venture-capital funds.
    • Critics of the change still remain. Easing the fund restrictions "will complete the process of neutering the (Volcker) rule," said Marcus Stanley, policy director at Americans for Financial Reform, last year.

  4. I was reading an epidemiologist report yesterday, and he mentioned that the number of cases in China is more likely much higher than what is being reported. But China is taking it very seriously. I think that we still don't know the final economic impact this thing will have. Although the human toll clearly the most important factor.

  5. On a different topic, Ken Starr who spend years digging for dirt anywhere he could on the Clintons making the case that we are having too many impeachments is pretty ironic! The news from Bolton is not getting better…

  6. Good Morning!

  7. Gold price cycles:

    Next week will mark the 40th anniversary of gold’s peak, on January 21 to be exact. Since then, gold is down one-third in real terms (gold has nearly doubled while inflation has tripled). Here’s the price of gold adjusted to today’s dollars:

  8. /NG flying off that $1.90 line! 

    Actually, that's the new contract, Jan /NGs are now $1.925 and that's plenty of money so 1/2 off  and stops on the rest at $1.92.

    Dollar flying too.

    This is strange, gold and silver disconnected:

    Palladium really got knocked back:

    China killing copper:

    FCX going back on sale.  See, if we just wait long enough, we get to buy all our favorites again…

    Big Chart – Nas not holding its new Must Hold already.

    Image result for stupid watergateStupid Watergate/StJ – This whole thing in the Senate gives me a bit more context to what Joe Welch said to Joe McCarthy back in the 50s:  "Until this moment, Senator, I think I never really gauged your cruelty or your recklessness. Have you no sense of decency?"

    I think, maybe, finally, some of the GOP Senators are finally having a McCarthy moment as they realize what a mockery they are making of our Justice System and our Government.  That simple statement during what was supposed to be McCarthy's moment of triumph turned the tables on him and ended his career.  I do keep waiting for someone to finally stand up to Trump and the GOP Senate and find the right words to wake up the people.

    Obviously, we're waiting to see if we get strong or weak bounces but I wouldn't take the opening pop too seriously.   Everything I'm reading about the virus says we have further to fall. 

  9. Phil, been trying to follow you into the TD dividend play and watching it get further away and even in this market drop the long Jul $50 calls are still $6.5 and the puts down at $1.90. Would you say this train has left the station or is there a way to still play this?


  10. StJean/novel CoV – the epidemiologist is right about many cases not being counted, but that's always the case. Many will be subclinical, many will figure they have a cold. On the other hand, many people are showing up at ERs with minor sniffles – which is fair, people should be careful and concerned. But the official WHO case definition (, which is what's always used in these outbreaks, starts with hospital admission for symptoms. SO those people who aren't sick enough to be admitted don't get counted. And only the admissions get into the denominator for the case fatality rate.

  11. StJean/novel CoV – this gets at what I was saying above, but in better detail.

  12. Thanks Snow! It still looks like we could now have 3x more cases than reported if you use the example they give. Not sure we can extrapolate completely though. But in any case, more cases. Looks like you are going to be our expert in the coming weeks!

  13. TD/Wing – This one?

    • Sell 15 TD July $55 puts for $2.25 ($3,375)
    • Buy 15 TD July $50 calls for $5.80 ($8,700)
    • Sell 15 TD July $55 calls for $2.35 ($3,525)

    That was from Christmas.  The short puts were at the mark for a while but you are late for the party now:

    Still, they had a nice dip and you can just leave it open and, if not, it's still a $5,235 spread that will pay $7,500 at $55 so the only way you don't make $2,265 (43%) by July is if you are able to fill the short puts.  No reason not to be patient then, is there?  

    Oh wait, you said dividends?  If you sell the July $50 calls for $6.50, that's net $56.50 and TD is currently $56.09 so what's wrong with that?  You could sell the $55 calls for $2.50 instead, it's reasonably more bullish.

    Virus/Snow – I love Wikipedia!  This is a great way to keep track of whether it's getting worse or not:

    I really don't like that low recovery number.

  14. This is funny/sad:

    Sometime after midnight, Donald Trump tweeted a video clip in which longtime Republican operative Rick Wilson made fun of Trump’s idiot base while appearing on Don Lemon’s CNN show. Trump added “Don Lemon, the dumbest man on television.” It’s a surefire sign that Trump knows things are going wrong for him when he starts attacking people after midnight. It’s an even more surefire sign that he knows he’s screwed when he starts insulting the intelligence of black public figures. You can watch the video of Lemon and Wilson below:



    Two things stand out here, aside from Trump’s obvious desperation and ever-present racism. First, he just basically urged his own supporters to listen to Rick Wilson expertly explaining why they’re rubes. Why would Trump want to expose his base to that kind of reality? Dumb move. Second, it’s notable that Trump didn’t dare to insult Wilson; we suspect Trump is too afraid to take him on. But again, Lemon is black and Wilson is white, so we shouldn’t be surprised that Trump attacked Lemon for something that Wilson said. You can find Rick Wilson’s new book here.

  15. Major problems/virus – It looks like recovery takes a while, suggesting it may be a lower respiratory illness. I spent the entire month of September with a viral bronchitis, where with a cold, not much more than a week is fine. Anyway, here's a major problem: people are sitting in major hospital waiting rooms for hours on end, waiting to be seen. This is exactly what caused the Samsung Medical Center MERS outbreak in Korea in 2016. One man with MERS sat in the ER waiting room for 2 1/2 days, and spread MERS to 80+ people during that period. I have a terrific graphic of that spread, offline only; I'll see if I can find a link. Anyway, the disease spread in MERS in Korea was hospital infrastructure and logistics, not lack of proper quarantine measures or guys in hazmat suits uselessly spraying useless disinfectants. That's all theater – calms the public, or anyway that was the intent. It didn't work.

  16. Ha! Found the MERS fan spread graphic online.

  17. Phil,

    Is it worth adjusting IMAX position? To roll the long call lower?


  18. Americans Will Inherit $764 Billion This Year, Mostly Tax-Free.


    Markets are underestimating the potential fallout of the coronavirus outbreak, which could be a “Lehman-type” moment for the global economy, according to economic research firm AdMacro.

    AdMacro Head of Research Patrick Perret-Green told CNBC Tuesday that the markets were being “far too casual” given the growth of China’s economy since 2003, along with the increase in its urban population and accessibility of travel


    With 60% of China’s population now in urban areas, compared to 60% rural in 2003, and passenger journeys by air increasing from 80 million to 660 million, he suggested that the cost of shutting down huge cities had not been properly priced in.

    “Xinjiang province, 56 million people where enterprises are shut for another week, Shanghai, 24 million people, Hangzhou is another 11 million people,” Perret-Green said.


    “A huge tranche of the urban population is shut down, a huge tranche of business, so a lot of Chinese companies are just going to have to declare force majeure and shut down orders.”

    In a statement issued Monday, Perret-Green said the coronavirus outbreak represented a “Lehman-type moment tipping point” which could “tip the global economy into effective recession.”


    Wow Snow, really digging through the archives on that one – nice work!

    IMAX/Kgab – Oh sure, I'll take a look as I finish up the review today – either it's a short-term virus issue or it's the Apocalypse – either way won't hurt to throw a couple more bucks at it.  

  19. Yes that was the TD spread Phil. I see the idea of buying the long calls and leaving them open then if TD rises sell the $55s later. 

    But when you say sell the $50s or $55 calls, do you mean first buy the stock? Then I'd drop my price from $56.2 down to about $49.7 but it would be called away at $50?


  20. Image

    Wow, progressive!  

    D.C. police will no longer handcuff children under 12

    Orders for durables excluding defence were down 2.5 per cent, with November revised to a 0.5 per cent drop from an initial result of 0.7 per cent growth, and due primarily to a large month on month fall in orders for commercial aircraft as Boeing’s 737 Max troubles continue to put hamper the sector.

    New orders for non-defence capital goods excluding aircraft, which is regarded as a proxy for business investment, tumbled 0.9 per cent from 0.1 per cent growth (revised lower from 0.2 per cent) in November. That marked the biggest drop since April. Economists had expected zero growth.

    “The jump in the headline hides much weaker details, with orders for Non-defense capital goods down 0.9%, the worst performance since April,”

    U.S. core capital goods orders record largest drop in eight months

    CDC Issues Level 3 Warning: Avoid All Non-Essential Travel To China

    Quick question: Is it "for fucks sake" or "for fuck sake" ? It's for a work email so has to sound professional.

    Ryanair warns of job losses as 737 MAX delivery date slips

    One of the shipping industry’s great hopes for improving its environmental performance — engines powered by liquefied natural gas — won’t offer the benefits that many vessel owners are hoping for

    A quick tally shows the coronavirus has wiped $1.5 trillion off the value of world stock markets since January 20 via

    Virus victims:


    TD/Wing – Yes, you'd just be in it for the Dividend, which is $2.27 but they just paid Jan 9 (0.568) so April and July you would catch.  Still that's $1.13ish + 0.30 is 2.8%, which is better than the bank so, if it's a safety play – that's fine.  Otherwise, you can sell the $55s and hopefully make a bit more with a bit more risk or do the spread at $6.50/2.60 and sell $55 puts for $1.65 so net $2.25 on the $5 spread pays $2.75 if all goes well and, if not, you own the shares at net $57.25 and THEN you sell more puts and calls.  

  21. Wing That is my play on TD if it helps

    TD200417C57.5    17-Apr-20    57.5    -2    CALL    0.9    0.7    22.22%
    TD200717C50    17-Jul-20    50    4    CALL    5.85    6.45    10.26%
    TD200717C55    17-Jul-20    55    -4    CALL    2.15    2.45    -13.95%
    TD200717P55    17-Jul-20    55    -4    PUT    2.4    1.9    20.83%

    TD    TORONTO-DOMINION BANK COM    200    55.06    56.11    $11,222.00

  22. Tis is last night stand Wing

  23. WHR200320C150    20-Mar-20    150    -1    CALL    6.35    8.325    -31.10%
    WHR200320P150    20-Mar-20    150    -1    PUT    7.5    4.725    37.00%
    WHR220121C130    21-Jan-22    130    1    CALL    33.15    35.225    6.26%
    WHR220121C160    21-Jan-22    160    -1    CALL    18.4    20.5    -11.41%
    WHR220121P130    21-Jan-22    130    -2    PUT    17.98    16.175    10.01%

    Result of test Poor man's Trade 1/22 actual trade

  24. Phil,  Ask your daughters about PINS. Just wondering what the younger generations thinks about them.   It has some juicy option premium that might be good to sell. 

  25. PINS/Stock – Not on the radar.   Snapchat and Instagram rule and then TickTok and YouTube/Netflix.  

    If you asked the kids to name a show on NBC – they would have no idea what you are talking about.  

    HP voices concerns about Xerox earnings

    • HP (HPQ +0.6%) tells Bloomberg that Xerox's (XRX +5.2%) earnings report this morning doesn't help with "fundamental concerns about the continued revenue declines and health of the Xerox business."
    • The company says the Xerox proposal would require shareholders to exchange the value of HP's balance sheet for "stock in a company of questionable value and exposed to meaningful risk, due to inordinate leverage and sustained, declining performance."
    • Earlier today, Xerox reported Q4 beats and guided FY20 with upside earnings and a revenue decline of 4% Y/Y at constant currency.

    M&A blockbuster jolts auto parts sector

    • Select auto parts stocks are higher after the rivet-popping announcement of a merger between BorgWarner (BWA -6.9%) and Delphi Technologies (DLPH +61.8%).
    • The M&A in the sector has appeared to give a lift to Tenneco (TEN +6.2%), American Axle & Manufacturing (AXL +3.4%), Dana (DAN +3.4%), Veoneer (VNE +4.4%), Autoliv (ALV +4.6%), Modine Manufacturing (MOD +3.5%), U.S. Auto Parts (PRTS +0.7%), Aptiv (APTV +1.8%), Visteon (VC +2.2%) and Meritor (MTOR +2%).
    • BorgWarner and Delphi say they plan to create a pioneering propulsion technologies company uniquely equipped to globally serve OEMs and aftermarket customers. Run-rate cost synergies of $125M are anticipated being achieved by 2023.

    What to watch in Tesla's Q4 report

    • Tesla (TSLA +1.5%) is due to report earnings tomorrow after the closing bell in a highly-anticipated release.
    • The headlines numbers from the EV automaker are expected to be revenue of $7.05B, EPS of $1.75 and deliveries of 112K.
    • Morgan Stanley breaks into the meatier part of the earnings, forecasting Tesla will report an auto gross margin rate of 19.7% (ex-credits) vs. 20.8% in Q3 and 20.9% consensus. MS also sees Tesla guiding for 2020 deliveries of 498K units, including 75K units from China. "We have spoken with some investors who expect the company to target as high as 600k units for FY2020 based on a faster China ramp and greater capacity extraction from Fremont. While we cannot rule out the possibility of such a target, we believe such levels would be of an aspirational nature," writes analyst Adam Jonas.
    • Beyond the numbers, Tesla's updates on the Berlin gigafactory, Shanghai production, the Model Y, the Cybertruck, a battery/powertrain event and capex needs could drive shares up or down. Of course, a capital raise would also give shares a bit of a jolt.

    Consumer Confidence

    Ballard Power says fuel cell electric vehicles on roads for 30M km

    • Ballard Power (NASDAQ:BLDP+6.1% pre-market after saying its proton exchange membrane fuel cell technology and products have powered fuel cell electric vehicles for an industry-leading cumulative total of more than 30M km (18.5M) on roads around the globe.
    • The company says its PEM fuel cell technology and products integrated into FCEVs includes at least 570 fuel cell electric buses and 2,000 commercial trucks currently deployed in Asia, Europe and North America, with some FCEBs operating for more than eight years in the field with no major fuel cell maintenance requirements.

    Chain store sales solid over MLK week

    • Chain store sales increased 5.5% for the week ending January 25, according to the latest report from Johnson Redbook.
    • Johnson Redbook estimates sales will rise 5.5% for the full month on a year-over-year comparison.
    • Chain stores are anticipating strong sales this week ahead of the onslaught of Super Bowl parties on Sunday.

  26. Thanks Phil. Yodi, I see that ..  you have a covered write (Apr) against your 200 shares so you buy the stock at about $55.8 as well as a BCS like Phil's that would cost about $840 to make $2k? What are the %% at the end of each line?

    I'm interested in WHR also .. 

  27. This was nice (other than the very inappropriate outro music):

  28. Phil,

    Any thoughts on plays on XOM? They have quarterly results on Jan 31st.


  29. Wing the %%% are the gains or loses in reference to each Strike position bought of sold.

  30. I was actually surprised by some of these names on the list:

  31. Rant by Snow/ Wuhan CV outbreak

    Someone sent me a link to this simulation:

    I read through the scenario, and it's frightening. It's frightening because the medical recommendations center around clinical interventions (the fictional anti-viral agent) and vaccines. The policy recommendations would do nothing to stop or even lessen the outbreak. By the time a vaccine becomes available, either it's unneeded or you're in extremely deep trouble. We don't have a MERS vaccine in Korea, but the outbreak is gone. All the vaccine development in the world was useless. These people, the"players" did not, apparently (there was no written description, and I didn't watch the video) consider public health measures. So what public health measure did we see during the MERS outbreak? Same damn BS we're seeing right now with the novel Wuhan CV – quarantine and guys in useless hazmat suits uselessly spraying useless disinfectant. Oh, and masks that are rated for 2.5 micron fine dust…..and how big is a virus particle, by the way?
    The problem with the MERS outbreak in Korea was structural and logistical:
    - people were not diagnosed promptly because a blood test and only a blood test is diagnostic.
    - People who didn't get diagnosed got frustrated and went hospital shopping, spreading the virus far and wide. One man sat in the Samsung ER waiting room for 2 1/2 days, infecting 80+ people in the process.
    - Once someone got admitted to a hospital bed, as is usual, family members came in to care for them, and visitors came in to pay their respects – further spreading the virus.
    That's why the "players" above couldn't prevent 65 million deaths, dammit!

  32. It's like people don't even watch the movies they make about viral outbreaks…

  33. Further rant/ Snow's policy recommendations:

    So what's needed in Korea (and I suspect in China) are a lot more nurses, reduction of traditional reliance on family for patient care, and tighter restrictions on visitors to infectious patients. There is also a crying need to stop people sitting in waiting rooms forever. Disneyland knows how to run queues (there's a fun branch of math called queueing theory); why can't hospital waiting rooms figure that out. Everyone in Korea has cellphones, and I suspect in China as well – an app would be ridiculously easy. "Give us your phone number/download this app; we'll ding you when we can see you, now get out of there". That would help tons! That's public health interventions!

  34. Snow

    How about stopping sells all bush meat,

    And no stand water on the floor in the markets

    What do you think ?

  35. QC/Outbreak – by all reports that would help a lot, no question, but to be honest, I've not been on the ground at the outbreak, so I don't know what is a problem and what isn't.

  36. Wing WHR Too late today need to be plaid when it is down. Range low 145 high 155.

    Today if you have already MMM plays buy the Jan 22 140 call 31.70 and sell the Jan 22 155 put for 16.60 ratio 2 calls 3 puts

  37. Hi Phil,

    I'm confused about UNG and could use some help. On Dec 17, 2019, you wrote: "Natural Gas does have an ETF (UNG) and we can play that conservatively with the following Options Spread:

        Buy 40 UNG 2021 $15 calls for $4.20 ($16,800)
        Sell 40 UNG 2021 $19 calls for $2.70 ($10,800)
        Sell 20 UNG 2021 $17 puts for $2.20 ($4,400)"

    So on Dec 23, 2019, I bought 10 of the 2021 Jan 15($3.65)/19($1.95) call spreads but didn't sell any puts. Cost: $-1,700.

    On Jan 17, 2020, I rolled the $15($2.36) calls to Jan 2021 $14($2.88) calls. My net cost is now $-2,220.

    Today's suggestion is:

     Sell 20 UNG 2021 $15 puts for $2 ($4,000)
     Buy 40 UNG 2021 $13 calls for $3 ($12,000)
     Sell 40 UNG 2021 $15 calls for $2 ($8,000)

    I *THINK* today or tomorrow I should buy 40 of these 13/15 spreads for $4,000 and just keep the spread I already have which is now a 14/19 spread. I'm not at all confident, and that's my main reason for not selling the puts. I'm pretty sure I don't really know what I'm doing here, and would like some advice.


  38. XOM/Harip – If you don't mind riding them out for the long-term, they are a good price now.  Could still hit $55-60 though, so I wouldn't over-commit.  My play at the moment would be:

    • Buy 500 shares XOM at $64.89 ($32,445) 
    • Sell 5 XOM 2022 $60 calls for $7.50 ($3,750) 
    • Sell 5 XOM 2022 $60 puts for $6.50 ($3,250) 

    That's net $25,445 and you get called away at $30,000 with a $4,555 (18%) gain plus the $3.48 ($1,740) dividend that pays (1/4) on 1/31 x2 is $8,035 (31.57%) after 2 years.  

    Keep in mind that's a very conservative way to play XOM and, if you get assigned 500 more, it's 1,000 shares at $55.45, almost 20% off the current price – more if you include the dividend.  

    So worst case is you get the stock for free after 4 cycles (8 years) and best case is 3 cycles (6 years) and, ignoring the compounding, don't forget that's:

    • $25,445 laid out in Jan 2020
    • $33,480 paid back in Jan 2022 ($8,035 profit) 
    • $26,000 laid out in Jan 2022 
    • $34,000 paid back in Jan 2024 ($8,000 profit) 
    • $26,000 laid out in Jan 2024 
    • $34,000 paid back in Jan 2026 ($8,000 profit)

    So you've doubled your money in 6 years and you can do that every 6 years so $50,000 in 2026 and $100,000 in 2032 and $200,000 in 2038 and $400,000 in 2044 and $800,000 in 2050 – just enough to pay for you to move to higher ground before the floodwaters take your home…  

    Or, with XOM, you could just:

    • Sell 5 2022 $60 puts for $6.50 ($3,250) 
    • Buy 10 2022 $55 calls for $11 ($11,000) 
    • Sell 10 2022 $65 calls for $5.10 ($5,100) 

    That's net $2,650 on the $10,000 spread so $7,350 (277%) upside without all that messy owning the stock.  

    App/Snow – Restaurants do that now.  An easy modification would be a nice thing to roll out as a project.

  39. Yodi/MMM – Are you planning on selling short term calls/puts after opening with this position?

    Buy 2 Jan 2022 $140 Calls + Sell 2 Jan 2022 $155 Puts?

  40. Snow / Apps for waiting rooms…. those already exist – last time I was in a waiting room they gave me the option to wait remotely and took my number to text me when they were ready to see me…  

  41. UNG/Sag – If you are taking the new spread, with short $15 calls, there's no sense in holding onto $14 calls – it's very messy.  The new spread is net $0 and pays $8,000 so, for you , it would be net $2,220 and pays $8,000 but, if you cash in 10 of the 2021 $14 calls at $2.50 ($2,500), you have a net credit on the play with 40 of the 2021 $13/15 spreads covering 10 short 2021 $19 calls (now 0.80) or you could roll to 5 short July $17s at 0.60 and, if they expire worthless, sell 5 Sept something calls for 0.60 and you will have caught up most of the short money.

    Just sold 1 /NQ at 9,111.50, 1 /ES at 3,280 and 1 /YM at 28,741 to see what happens overnight. 

  42. Vkat MMM yes but first after the dust has settled. One has to wait till the over the cliff sellers are all gone!!!!

  43. Snow, / Virus.

    Very interesting comment, basically viewing your links there is not enough money to handle an outbreak, practices in Hospitals, social behavior, and human dynamics can´t be changed to quickly to be effective in handling the outbreak, and as you say, we are talking about virus, not bacterias so size of filters, preventive measures are different.

    The market took a decision and is to go ahead, the outbreak will be solved by itself as it was in others before, 

    "Shares of Allied Healthcare Products Inc. AHPI, -32.41%, Co-Diagnostics Inc. CODX, -20.64%, Dyadic International Inc. DYAI, -10.08%, Inovio Pharmaceuticals Inc. INO, -15.60%, Moderna Inc. MRNA, -1.67%, NanoViricides Inc. NNVC, -42.09%, and Novavax Inc. NVAX, -14.71%  tumbled in Tuesday trading."

  44. MMM/Yodi  Thanks, got 4 MMM $140s @ $31.7,  -6 $155p @ $16.8

    Waiting for the dust now  :)

  45. UNG/Phil – Thanks!

  46. Las Vegas Sands Stock Could Bounce Back

  47. MRK   I'm selling some Jan2021 $82.50 puts today on top of the 8500 that someone else sold.  Like that level on a chart as well

  48. Wing with pacience

  49. AAPL and TSLA should make an interesting day tomorrow

  50. AAPL – Big run up into earnings today….   Looking for them to have a sold quarter and outlook in line or slightly above…..  Not sure the virus issue will be played – we may get some color on what they are seeing there and any supply chain concerns…

  51. Sell-offs/Advill – It's crazy how traders can get hot and cold like that.

  52. I still like these guys:

    Alaska Air EPS beats by $0.05, beats on revenue

    • Alaska Air (NYSE:ALK): Q4 GAAP EPS of $1.46 beats by $0.05.
    • Revenue of $2.23B (+8.3% Y/Y) beats by $10M.
    • Shares +0.47%.
    • Alaska Air (NYSE:ALK) is on watch after Q4 EPS arrives ahead of even the highest estimate turned in by analysts.
    • Operating revenue was up 7.9% during the quarter to $2.23B.
    • Unit revenue rose 4.2% off a 3.9% increase in traffic.
    • ALK +0.50% AH.
    • Alaska Air (NYSE:ALK): Q4 GAAP EPS of $1.46 beats by $0.05.
    • Revenue of $2.23B (+8.3% Y/Y) beats by $10M.
    • Shares +0.47%.
    • Press Release

    Starbucks EPS beats by $0.03, misses on revenue

    • Starbucks (NASDAQ:SBUX): Q1 Non-GAAP EPS of $0.79 beats by $0.03; GAAP EPS of $0.74 in-line.
    • Revenue of $7.1B (+7.1% Y/Y) misses by $10M.
    • Shares +1.9%.
    • Press Release

    Federal debt as percentage of GDP seen at 98% in 2030, CBO says

    • Federal debt held by the public is projected to balloon to 98% of the U.S. gross domestic product in 2030, its highest percentage since 1946, vs. 81% in 2020, according to a report by the Congressional Budget Office.
    • By 2050, debt would be 180% of GDP, far higher than it's ever been.
    • Projects federal budget deficit at $1.0T in 2020 and averaging $1.3T between 2021 and 2030. CBO's estimate of the deficit for 2020 is $8B higher than its previous projection issued in August 2019.
    • Sees inflation-adjusted GDP growth of 2.2% this year, largely on continued strong consumer spending and a resurgence in business fixed income. From 2021 to 2030, the CBO sees output growing at an average annual rate of 1.7%, roughly the same as potential growth.
    • Output is projected to exceed the economy's maximum sustainable output this year to a greater degree than in recent years, leading to higher inflation and interest rates.

    Foxconn doesn't expect coronavirus impact

    • Apple manufacturer Hon Hai/Foxconn (OTCPK:HNHAF,OTCPK:HNHPDsays the coronavirus outbreak won't impact its manufacturing timelines or close its factories.
    • Foxconn statement: "Foxconn is closely monitoring the current public health challenge linked to the coronavirus and we are applying all recommended health and hygiene practices to all aspects of our operations in the affected markets. Our facilities in China are following holiday schedules and will continue to do so until all businesses have resumed standard operating hours."
    • The Chinese government has extended the Lunar New Year holiday to encourage people to stay home and avoid further spreading the virus.
    • Investors and analysts will be watching Apple's earnings report after the bell for any mention of the virus and its potential impact.

    Honda to keep two Chinese factories closed

    • Honda (HMC) extends the Chinese New Year holiday shutdown at two motorcycle factories in China due to the coronavirus outbreak.
    • The automaker plans to reopen the plants located in Tianjin and Taicang on February 9.
    • The decision by Honda is in accordance with a request by the Chinese government.

    PG&E upgraded at Mizuho as Kincade Fire costs look manageable

    • PG&E (PCG +5.9%) appears headed for a fourth straight gain, as Mizuho upgrades shares to Buy from Neutral with a $22 price target, reflecting an increased likelihood that the utility will emerge from bankruptcy by the end of June.
    • If PG&E does exit by June 30, any future wildfire costs should be partly covered by the $21B state wildfire fund created by California state law AB-1054, passed last year.
    • One reason for Mizuho's optimism is that the damages from last October's Kincade Fire are shaping up as a relatively mild $700M after insurance, a sum that likely would not derail the company's deals to settle the costs of 2017-18 wildfires.
    • For those fires, PG&E agreed to pay $11B to cover insured damages, $13.5B to cover uninsured damages, and $1B to compensate state and local governments for fire costs.
    • PCG's average Sell Side RatingSeeking Alpha Authors' Rating and Quant Rating are all Neutral.

    What to watch in AMD's Q4 report

    • AMD (AMD +2.3%will report Q4 results after the bell. The Street expects $2.11B in revenue and $0.31 EPS.
    • Consensus revenue estimates: Computing and Graphics, $1.50B; Enterprise Embedded and Semi Custom, $603.8M.
    • For Computing and Graphics, AMD forecast sequential PC CPU sales growth but didn't specify the amount. The segment has been driven by strength in Ryzen desktop PCs.
    • Enterprise Embedded could show strength in server CPU sales. Last quarter, AMD guided strong double-digit percentage growth sequentially for server CPUs. Last week, Intel reported strength in its own server products.
    • Gross margin consensus is 44%.
    • The expected Q1 outlook: $1.86B in revenue and 44.1% gross margin.
    • The expected FY20 outlook has $8.62B in revenue.

    Airbus faces €3.6B in penalties from corruption probes

    • Airbus (OTCPK:EADSY +0.7%) says if its deferred prosecution agreement is approved in the courts in the U.S., U.K. and France, it would take a €3.6B provision for the payment of potential penalties to the three countries.
    • If approved, Airbus says it would book the penalties in its 2019 financial accounts; court hearings are expected on Jan. 31.
    • Shares nevertheless remain higher, as the settlement lifts a reputational and legal cloud that has hung over the company for years.

    What to watch in Apple's Q1

    • Apple (NASDAQ:AAPLwill report Q1 results after the bell. The Street expects $88.38B in revenue and $4.54 EPS.
    • Consensus revenue estimates: iPhone, $51.38B; iPad, $6.73B; Mac, $7.18B; Wearables, Home and Accessories, $9.89B.
    • Expected Q2 outlook: Revenue, $62.47B; Gross margin, 38.3%; Operating expenses, $9.31B.
    • Apple heads into the quarter with analysts largely bullish on the stronger than expected iPhone 11 sales and the potential tailwinds from this fall's 5G models. Wearables have also seen strength, driven by AirPods demand. Some analysts consider these positives as already baked into the valuation.

    Airlines react to coronavirus impact

    • United Airlines (UAL -0.1%) says it will suspend some flights to China during the first week of February due to a large drop in demand.
    • United is the U.S. airline with the most daily flights to China, but it's likely that other carriers will take similar measures.
    • Airline stocks are mostly higher today on a more favorable outlook for the length of time the coronavirus outbreak will be a factor, including notable gains for Delta Air Lines (DAL +1.4%) and American Airlines (AAL +2.3%). Across the Pacific, China Eastern Airlines (CEA +1.5%) and China Southern Airlines (ZNH +1.5%) are recovering a bit. Both airlines have canceled a large number of flights.

    Peak Permian output is approaching faster than expected – Bloomberg

    • With the current rig count flat at 400 units and average new production per rig at 810 bbl/day, Permian Basin production will peak in February 2021, then will start to fall at an accelerating rate as the burden of legacy well declines continues to grow, according to a Bloomberg analysis.
    • If the rig count falls by just 10 more units by this April, the peak would occur this year, the report says.
    • Permian production has continued to grow in recent months despite a drop in the number of rigs drilling in the basin, which fell by 17% last year, according to the Energy Information Administration, but that cannot continue, due to the rapid drop in output from shale deposits once a well is brought into use; production from new wells must more than offset the declines from a growing number of older wells for overall output to grow.

    Trump proposes Palestinian state, settlement freeze in peace plan

    • President Trump proposes the creation of a Palestinian state with a capital in East Jerusalem and a four-year freeze on new Israeli settlements.
    • "My vision presents a win-win opportunity for both sides," Trump said at a White House event.
    • The plan depends on Palestinians taking steps to become self-governing.
    • Under the proposal, the U.S. would recognize Israeli settlements on the occupied West Bank.
    • U.S. officials were bracing for initial skepticism from Palestine but hope that over time they'll agree to talks, Reuters reports.
    • The Israeli shekel rises 0.2% against the U.S. dollar.

  53. AAPL knocked it out of the park with a 10% beat.  What an amazing company!   

  54. How the House is slipping away from Republicans

  55. What Will It Take to Stop Coronavirus?

  56. Coronavirus

    Went from 4500 to over 6000 in one day.  Deaths over 130.

  57. AAPL

    Hard to say anything bad about AAPL. Great company.  But valuations are stretched and not exceeding expectations on services, and 3 of 5 measurables makes them vulnerable, again, to the argument that they are just a hardware (phone) company.  I remember a few years back how frustrating it was to see the tepid stock reaction to seemingly great quarters.  Back then they were much more reliant on phone sales.

    The services number being down is the big drag.  It along with wearables are a nice buffer when phone sales soften.  If those sales flatten, it’s hard to envision the growth to continue at least to the level of APPL’s current valuation. Additionally, It’s hard to believe that the next phone (5g) will be a knock out on its first year, especially with so many 11’s being sold.  On top of that: CORONAVIRUS affecting a growing customer and supplier.

  58. What if we mined the Moon?

  59. Hong Kong’s Colliding Crises

  60. GE and BA looking great and relatively great, respectively.