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TGIF – Stop the Rally, We Want to Get Off!

Holy cow, what a week!

Though the Futures are down a bit this morning, we're back to our late January highs, before the Coronavirus was a known threat and before Donald Trump began to publically compile an enemies list and promise retribution in 2020.  None of that seems to matter as Central Banksters around the World promise financial retribution in the form of MORE FREE MONEY – because money fixes everything, doesn't it?

The virus is proving hard to "fix" as a cruise ship in Japan now has 61 cases of the virus, more than any other country outside of China and there are 3,700 very scared people on that ship with 41 new cases since yesterday and they caught it from a man who got off the ship on Jan 25th, causing the ship to be quarantined on Feb 3rd (Monday), when one case was known to be on the ship.  8 people on another ship are now infected in Hong Kong, that ship has been quarantined since Wednesday with 3,600 people on board.  5,000 additional passengers on 3 cruises may have crossed with the other infected passengers – not to mention all the ports they docked at.  

So this virus definitely is not over until it's over.  There are now 31,523 confirmed cases and that's up 3,179 (11.2%) from yesterday and 638 deaths is up 73 (13%) and both of those numbers are continuing to slow but 305 cases outside of China is up 46 (18%) and, as we see from the cruise ships – it only takes one person with the virus to not be contained and you suddenly have a new epidemic so – not safe yet. 

Non-Farm Payrolls were just announced and they are a strong 225,000 jobs gained in January but keep in mind we added 2.4M people since last year so we need 200,000 jobs a month just to stay even – that's often forgotten when we are "amazed" by the job growth and last year we averaged 175,000/month – not really enough for all the new citizens. 

As I noted yesterday, we are still running headlong into a major poppulation crisis (as are most countries) as the number of people between 35 and 50 (30M in prime earning years) is being dwarfed by the number of people who are 55 and older (40M) so of course our forward-paying Social Security System can't possibly not fail 10 years down the road – there simply won't be enough working people to support the retired people.  

That's happening NOW, climate change is also happening NOW and our Infrastructure is a disaster that needs to be fixed NOW!  None of these things are currently concerning the markets as we're way too focused on distractions, like who's going to be elected to go down on this sinking ship in November.  I don't like to be doom and gloomy but it is my job to point out risks and these are all big ones that the market is simply not pricing in.  

Climate change is the premise for buying Tesla (TSLA) and alt-energy companies and battery companies, even nuclear companies but, for other investors, it's still a hoax while "clean" coal is not.  You can say "that's what makes a market" but it's a lot like betting whether you'll die of smoke inhalation or be burned to death while a fire is raging around you – it might not matter – there will be no winners.  

Image result for ostrich head in sand cartoonIt is true that, a lot of times, if we just ignore something it will go away.  Look how Iran went away – that was less than a month ago and we all forgot that we bombed them, and they bombed us and they shot down a plane – so last month!  We're ignorning the virus and that will hopefully go away and we ignore the divisive political nature of impeachment and that seems to have gone away (but not the divisions) – can we really ignore everything until it goes away?  

If so, I don't want to kill the buzz so let's just not worry about it and enjoy our weekend.  We shorted the S&P Futures (/ES) yesterday at 3,350 and that's a good hedge into the weekend and those are 3,333 this morning but the Nasdaq (/NQ) is still over 9,400 and we'll short them below that line - just in case people forget to ignore things between now and Monday.  

Otherwise, have a great weekend, 

- Phil

 


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  1. Good Morning!


  2. More green… Good thing we moved the lines up!


  3. Population crisis / Phil – Let's keep in mind that the US is in fact in a much better position regarding this issue than most countries because of the robust immigration. Of course, our current leaders are doing all they can to stop that and aggravate the crisis because immigrants might have something different about them (can't pinpoint the problem)! 20 years from now, our population might still be younger on average than for example China where social costs might become a problem very quickly. 


  4. Phil/ACB

    Any adjustments to this position in the earnings portfolio.  This company is struggling to make things work.

    https://seekingalpha.com/news/3539571-aurora-cannabis-to-cut-staff-take-massive-charges


  5. There's also a cruise ship w/potential sick people in NJ - https://www.nbcnews.com/health/health-news/royal-caribbean-cruise-passengers-n-j-screened-coronavirus-4-taken-n1132266

    Whether they're being overly cautious or not, it's not reassuring for people with cruise tickets. Still holding CCL shorts…


  6. Sold some more TSN Jan 21 80 puts for 8.10


  7. Better safe than sorry Atitlan! The real impact of this virus has not been estimated yet.


  8. Good morning!

    Back to even on /NQ and /ES shorts so we'll see how the day goes but I want them into the weekend – just in case there's an outbreak.  

    Just a hedge…

    Robust immigration/StJ – Yeah, we don't have that anymore.  China's on-child policy has already caused a massive problem there – won't get better for decades.  

    Image result for china population distribution

    That's a complete catastrophe in 30 years with half the population over 55.  Actually, now that I think about it – that's Florida!  The difference is, in Florida, the oldsters are "immigrants" that bring money into the state and create tourism in the form of family visits – so it's a positive economic loop for the state (and the state doesn't pay all the SS checks and medicare but it does collect the cash through hospitals and Doctors, which are good jobs).  

    Now an RCL ship is halted in NJ.

    ABC/DC – New CEO, gotta let the dust settle.    In the earnings portfolio, we spent net $800 and obligated ourselves to buy 1,000 shares for $2 so it's a $2,800 loss if we are wiped out – nothing to panic over.  

    ACB Long Call 2022 21-JAN 2.00 CALL [ACB @ $1.74 $-0.26] 30 12/24/2019 (714) $2,520 $0.84 $-0.32 $0.82     $0.53 $-0.15 $-945 -37.5% $1,575
    ACB Short Call 2021 15-JAN 3.00 CALL [ACB @ $1.74 $-0.26] -20 12/24/2019 (343) $-720 $0.36 $-0.14     $0.23 $-0.09 $270 37.5% $-450
    ACB Short Put 2021 15-JAN 2.00 PUT [ACB @ $1.74 $-0.26] -10 12/24/2019 (343) $-1,000 $1.00 $-0.08     $0.93 $0.07 $75 7.5% $-925

    We can cut and run now with a not too bad loss (about $600) and, if I were going to take advantage of the dip I'd roll down to the $1 calls at 0.85 for 0.30 ($600) and DD ($2,550) for 60 of the 2022 $1 calls covered by 30 of the $3 calls with the 10 short puts for net $3,950 and, at $1.70, it's $4,200 in the money.  That's what I'd do if I decided I like their new direction so it's add $3,150 or cut and run with a $600 loss and, at the moment – I can't decide.

    It's always the same with these guys, they get VC money and spend it like it's just paper:

    Aurora CFO Glen Ibbott says the assets impaired are mostly in South America and Denmark, and the company's core Canadian cannabis assets are not impacted.

    • Announces comprehensive transformation plan to significantly reduce the Company's expense base, rationalize capital expenditures, and better align its balance sheet with current market conditions
    • Secures credit facility amendments that remove EBITDA ratio covenants and provide additional financial flexibility as Aurora executes transformation plan

    management plans to focus the business on its core areas: 1) Canadian consumer market; 2) Canadian medical market; 3) established international medical markets; and 4) U.S. market initiatives.

    As part of the changes to operations, the Company has eliminated close to 500 full-time equivalent staff across the company, including approximately 25% of corporate positions. Additionally, management is restructuring spending plans on information technology projects, sales and marketing initiatives, travel & entertainment, professional services, and other non-revenue generating third-party costs which do not provide an immediate impact on revenue.  

    Aurora announced that its consolidated cash position was $156 million, excluding $45 million of restricted cash as at December 31, 2019. This includes gross proceeds raised under its US$400 million At-the-Market ("ATM") financing program of approximately US$245 million (or approximately $325 million) to date in fiscal 2020. As of today, the Company has remaining capacity under its current ATM program of approximately $200 million. With the cost reduction and business transformation initiatives announced today, the Company expects that utilization of the ATM capacity will be sufficient to fund operations and remaining required capital expenditures, to the points where positive EBITDA and free cash flow are achieved.

     

    Aurora today provided unaudited preliminary second quarter fiscal 2020 financial results. The Company expects cannabis revenues for the second quarter of fiscal 2020 of $62 million to $66 million, net of excise taxes. Aurora expects to record provisions for returns, price reductions and future provisions of approximately $12 million, almost all of which relates to product sold in previous quarters. Therefore, net cannabis revenues, after giving effect to these offsets, are expected to be $50 million to $54 million. These revenue expectations reflect consistent quarter-over-quarter medical revenues, a decrease in international revenues due to short-term German supply interruptions, and much lower bulk sales. For the second quarter, Aurora expects to report modest quarter-over-quarter growth in consumer cannabis revenues prior to applying these offsetting return and price reduction allowances.

    Cash cost to produce per gram of dried cannabis sold(1) is expected to remain below $1.00, sales and marketing expenses are expected to be between $28 million to $32 million and general and administrative expenses are expected to be between $70 million to $75 million.

    The outlook for cannabis revenue for Aurora's fiscal third quarter is expected to be impacted by the general industry headwinds mentioned above, and as such will likely show little to no growth relative to fiscal Q2's cannabis revenue of $62 million to $66 million, prior to the provisions for returns and price reductions.


  9. Good note on ACB and the Canadian Market:

    As my previous article on Canopy Growth (CGC) discussed, the Cannabis 2.0 rollout is struggling. The companies are trying to unload C$8 chocolate bars with only 10mg of THC. The grey market sells much more affordable items with tons more THC.

    Even worse, the vast majority of Canadian provinces with the large populations have either banned vapes in the case of Alberta and Quebec or lack the retail stores to sell vapes in the case of Ontario. The main selling cannabis products of vapes and edibles are off to a slow start.

    The combined product issues continue to suggest that Cannabis 2.0 products won't generate the sales needed to drive meaningful revenue growth for the likes of Aurora Cannabis. Even worse, the dried cannabis inventory levels surged in the latest inventory report from October.

    Takeaway

    The key investor takeaway is that Aurora Cannabis has now made the steps to reduce cultivation growth and rationalize expenses. The company still needs to match these cost reduction efforts with an ability to grow revenues in order to eliminate EBITDA losses to make the stock a buy.

    Aurora Cannabis has made another step towards running a sustainable business, but the company still has to show operating leverage and efficiency to make the stock a buy.

    I'm leaning towards cutting them in the Income Portfolio for the $600 loss and hitching our wagon to TCNNF, who are profitable (but under investigation).

    Oops, TCNNF has no options but I do like them at 10.15.


  10. Uber up 6.66%


  11. Phil, I'm in a LYFT BCS.  They report next Tuesday.


  12. Cruise ship/Phil – I'd rather have Wuhan virus than the usual cruise ship bug, norovirus.


  13. *useful, not usual*


  14. Pictures from Wuhan.

    Good essay by Bloomberg:

    When I was elected mayor of New York City, seven weeks after the terrorist attacks of Sept. 11, we faced a budget crisis and a recession. I had a choice: slash budgets and conduct mass layoffs, which would especially hurt the young, the elderly and low-income communities — or raise taxes.

    So I took the politically difficult step of proposing tax increases, including one on those making more than $500,000 a year (about $700,000 in today’s dollars). I persuaded a Republican-led State Senate and a Democratic-led State Assembly to pass the bill, and a Republican governor to sign it.

    The extra revenue — roughly $400 million per year — allowed us to invest in our future and create jobs and opportunity in the neighborhoods where they were needed most.

    That is what leadership is all about: bringing people in both parties together to get results. Over my 12 years as mayor, I also helped persuade Republicans in Albany to pass marriage equality, increase funding for public schools and enact juvenile justice reforms that helped lower the number of teenagers in confinement.

    I’m committed to helping Democrats win control of Congress this year, regardless of the fate of my own campaign. And if, for whatever reasons, our party falls short of controlling both chambers of Congress, the next Democratic president will have to reach across the aisle to end the Republican obstructionism that has gripped Washington for so long.

    That’s not something that most of my fellow Democratic candidates talk much about. Some of them prefer to shake their fists and point fingers, particularly when it comes to taxing the wealthy. I agree with the goal of making the system fairer and more progressive, including by increasing taxes on wealthy people like me. But I have a different approach, informed by my experience in both government and business.

    Unlike President Trump, I didn’t inherit my wealth, and I genuinely support causes I am passionate about: gun safety, climate change, women’s rights, universal health care, education and yes, electing Democrats — including those in 2018 who helped create a majority in the House of Representatives, which laid the groundwork for holding this president accountable.

    I believe America should always be a country where a middle-class kid like me can start a business and succeed beyond her or his wildest dreams. But just as important, America must always be a place where the middle class grows bigger and stronger. Right now that’s not happening, because the rewards of the economy are far too concentrated at the top.

    Part of the problem is global and macroeconomic. In nearly every industry, wages are mostly flat. Changing that will require major new investments in our public schools to make sure that all high school students graduate with the skills they need to enter college or start a career.

    I’ll make that a top priority as president, as I did as mayor. The tax code is also worsening inequality. We tax income from stocks and bonds at a much lower rate than income from work. We allow great wealth to pass from generation to generation with little or no tax due. And we provide countless loopholes that corporations and the rich exploit to reduce their taxes even more.


  15. In this environment, it appears Bloomberg has the best chance at ending this tdump-ster fire… 


  16. looks like they are going to push the /nq futures all the way to 9450 just for you phil.   nasty


  17. Bloomberg – Clearly the most qualified, IMO.


  18. I think the past has shown the most qualified does not always win. Good thing the Electoral Collge is there as a backstop ;)


  19. Believe it or not they just cannot find a better clown. Democrats do not have a leader to show,
    Bernie should retire and not take votes from a possible, I say may be possible candidate. Maybe I send Merkel over to show you the way, she is soon out of a job


  20. /NQ/Tommy – No worried, I have 2 short at net 9,397 so moving to 4 at 9,428.50 and we'll see how it shakes out.  In this market, as long as you can afford to wait – you're likely to see everything – like the TSLA calls I sold (still in them).

    Bloomberg/Albo – I think he's a jackass for end-running the process in the primaries but, on the other hand, you could say he's being efficient.  Like Trump, he strongly feels he's the only guy who can fix America, so it's in the interest of the American people that he be elected but, unlike Trump, if this country is being ravaged by a killer virus – I do want Mike to be the one suspending my liberties and coordinating the response team.  

    Great primer for tonight's debate.  NYT really embracing Web 3.0.

    Wait, WTF?

    Coronavirus cases inch up in U.S. but still very light

    • In today's update from the CDC, the total number of potential coronavirus cases in the U.S. is 337. Specimens tested to date include 12 positives, 225 negatives and 100 pending.
    • Two days ago, the total was 293 (11 positives, 206 negatives and 76 pending).

    The chart above says 12!  That's some pretty serious under-reporting though I guess they have to be "confirmed" but look how scary this is if those potentials begin to roll over to confirmed.

    Uber ready to join FANG after earnings – RBC

    • RBC Capital Markets analyst Mark Mahaney reiterates his view that Uber (UBER +7.9%) should join the FANG stocks after yesterday's earnings and EBITDA profitability guidance.
    • Mahaney praises the performance improvement for Uber's rideshare business, which comes as the industry becomes more "rational" and less about a race to the bottom with promotions and price cuts.
    • Uber remains Mahaney's top large-cap internet pick. He reiterates an Outperform rating and lowers the target from $64 to $59, which is still an upside of more than 50%.
    • MKM Partners upgrades Uber from Neutral to Buy and raises the target from $34 to $45.
    • Analyst Rohit Kulkarni sees the "light at the end of this tunnel" that investors have valued "as if it is going out of business."
    • The analyst cites incremental margins on Rides revenue upside as accelerating the "pathway to profitability," and he sees the trend as sustainable in the near-term.

    The euro is approaching record-low levels vs. the Swiss franc

    • The Swiss National Bank made big news a few years back when it pegged the value of the franc (NYSEARCA:FXF) to the euro (NYSEARCA:FXE), and then made even bigger news (and fortunes for some currency traders) a couple of years later when it let the peg go, and the euro plunged about 10 big numbers in minutes.
    • Since then, the SNB has mostly refrained from intervening. While the euro did eventually manage to rally back to the 1.20 level after the dropping of the peg, it's been in steady decline since 2018. And with new ECB chief Christine Lagarde pledging easy policy forever, it's hard to see why the bear market won't continue.
    • It's currently taking CHF1.07 to buy a euro, pretty close to the record-low level. The SNB already has its benchmark rate at -0.75%, so it's hard to see how more rate cuts might help. Might another peg be in order?

    Kudlow sees no signs U.S. economy is nearing end of the cycle

    • White House economic adviser Larry Kudlow said the January jobs report is a "blowout number," the U.S. economy is "fundamentally sound," and he doesn't see any evidence that "we're coming to the end of the cycle," according to interviews on Bloomberg TV and Fox Business Network.
    • Still, he "wouldn't mind" some bolder moves from the Fed.
    • President Trump, pointing to negative rates overseas, has consistently pushed for lower rates and another round of quantitative easing.
    • Kudlow also spoke about Trump's earlier phone call with Chinese President Xi Jinping. The two leaders agreed that, though the coronavirus may slow China's purchases of U.S. exports, it will be "made up" before the end of the year, he said.
    • Xi reassured Trump that China will achieve the two-year purchase targets for U.S. exports outlined under the phase one trade deal.

    Sunny days lift restaurant sales in January

    • U.S. restaurant sales reached the highest sales growth in four years at 2.3% in January, according to Black Box Intelligence.
    • Historically warm weather in parts of the U.S. is being attributed to helping sales. Higher pricing and average ticket also helped offset a 0.7% drop in comparable traffic during the month. The best performing segments based on sales growth were upscale casual, fine dining and casual dining.
    • Black Box Intelligence says keeping restaurants fully staffed remains one of the top concerns of operators at the start of the new year.
    • The top-performing restaurant stocks for the first five weeks of the year are Noodles +44%, Habit Restaurants +34% (after Yum buyout) and ONE Group Hospitality (NASDAQ:STKS) +26%. The biggest laggards are Carrols Restaurant Group -31%, RCI Hospitality -12% and Kura Sushi USA -11%

    Wynn Resorts expected to bounce back strong

    • Wynn Resorts (WYNN -4.4%) is seen by analysts as being in solid shape for the back half of the year when presumably anxiety over the coronavirus outbreak will be over.
    • Roth Capital's David Bain: "While nobody can predict where the Coronavirus ends, history suggests a buying opportunity is framed – SARS, H1N1, Swine Flu, Bird Flu, MERS, Ebola, etc., have all shown to be temporary detractors. Of note, WYNN cited its $2.4b cash position (including $1.8b in Wynn Macau) and total company-wide revolver capacity of $1.25b (solid liquidity)."
    • Union Gaming's John DeCree: "We continue to believe this is a transitory issue and expect economic stimulus, low interest rates, and pent up consumer demand to be key drivers in 2H20 for Macau overall."
    • Nomura Instinet's Harry Curtis: "When the casinos are permitted to reopen, like the post President Xi visit, pent-up demand should be strong and WYNN should resume its $4mn/day pace of EBITDA."
    • Roth Capital and Nomura keep a Buy rating on Wynn Resorts, while Union Gaming is at Neutral but recommends shares of Wynn Macau (OTCPK:WYNMFOTCPK:WYNMY) amid the share price weakness.
    • Previously: Wynn Resorts -3% after EBITDA miss (Feb. 6)
    • Previously: Wynn Resorts confident on post-virus recovery (Feb. 7)

    January jobs report isn't a 'breakout to the upside', economists say

    • Joseph Brusuelas, chief economist at RSM US LLP, doesn't see the stronger-than-expected January job gains as "breakout to the upside."
    • He points out that 44K increase in construction jobs and 72K new jobs in education and health aren't going to be repeated in February.
    • Societe Generale's head of U.S. Rates Strategy, Subadra Rajappa calls it "a steady as she goes number," adding "broadly speaking, this doesn't really change the outlook on employment."
    • But Jared Bernstein, senior fellow at Center on Budget and former chief economic adviser to former Vice President Joe Biden, says it appears job growth has been accelerating in recent months.
    • Over the past year, job gains averaged 171K per month, but in the past three months the average has accelerated to 211K per month, he writes on Twitter.
    • "Manufacturing still a clear weak sector" with jobs down 12K last month, Bernstein said.
    • “Weekly hours worked remain worryingly low,” said Julia Pollak, labor economist at ZipRecruiter, told CNBC. “That is a problem because many workers are struggling to find jobs that will schedule them to work enough hours so they can make ends meet."
    • It could also signal that employers are worried that demand for goods and services weaken in coming months, she said.

    Wholesale trade underwhelm in December

    • December Wholesale Trade: Inventories -0.2% at $674.5B vs +0.0% consensus, +0.1% in November. (revised).
    • Sales -0.7% at $494.4B.
    • Inventory to Sales ratio at 1.36.

    Luckin Coffee and Yum China hit again by coronavirus anxiety

    • Luckin Coffee (LK -4.1%) and Yum China (YUMC -1.6%) both break lower after a new report on the rapid spreading of the coronavirus on a cruise ship quarantined in Japan.
    • Analysts think the fear of being out in public in China needs to fade before Luckin and Yum China can retrace their drops from the last four weeks.

    Yields head lower despite strong economic numbers

    • This morning's employment report for January showed a well-larger than expected jobs gain of 225K. The unemployment rate unexpectedly ticked higher to 3.6%, but that came alongside a sizable move higher in the labor force participation rate.
    • Cornoavirus worry, however, continues to build. Among the items: A stall in the China property market, Burberry saying the impact is worse than that of the Hong Kong protests, Canada Goose slashing guidance, Foxconn delaying the reopening of its Shenzhen facility, and cruise ship troubles.
    • Check out Seeking Alpha's news coverage here.
    • The major averages are down about 0.5% in early action, and oil is threatening to slip below the $50 per barrel level.
    • The 10-year Treasury yield is off a big six basis points to 1.585%. TLT +1.15%TBT -2.1%

    Take-Two downgraded on murky game slate

    • Bernstein (Outperform) reduces its Take-Two (NASDAQ:TTWO) target from $151 to $137, assuming there won't be a AAA game release in CY20.
    • Analyst Todd Juenger says that "angst among TTWO investors has been high for the past several weeks, rising to a fever pitch on the announcement of Dan Houser’s departure."
    • Stephens (Equal-Weight, $110 target) notes the "uncharacteristically choppy quarter" with the results and outlooks of several titles missing expectations.
    • Analyst Jeff Cohen thinks shares will feel pressure from the lowered NBA and Borderlands outlooks and the "lack of clarity" around the FY21 release slate.
    • Yesterday, Take-Two reported top and bottom-line misses for its key holiday quarter.
    • TTWO shares are down 10.5% to $114.34.

  21. Comment content omitted because it is too long.


  22. AT&T CEO talks 'Friends' reunion, Elliott intervention

    • AT&T (T N/A) chairman and CEO Randall Stephenson appears on CNBC's Squawk Box and says he thinks "HBO Max will be one of the most exciting streaming products in the market."
    • On rumors that WarnerMedia is nearing a deal for a Friends reunion: "I read that too. We didn't announce that. We own all of the rights for Friends and Big Bang Theory, so those will obviously be stalwarts on our streaming platform in May."
    • Stephenson says Elliott Management's AT&T intervention was "an intense period," but the company agreed with the highlighted areas of opportunity and was "way down the path of executing."
    • On the race for 5G development: "We need to innovate our way out of this competitive quagmire."

    Cameco on the move after Q4 earnings topper

    • Cameco (NYSE:CCJ+4% pre-market after comfortably beating Q4 earnings and revenue expectations, and issuing an upbeat view of uranium market fundamentals.
    • Cameco says it delivered 14M lbs. of uranium in Q4, and in FY 2019 it generated $527M in cash from operations.
    • The company says it more than replaced volumes delivered in 2019, adding 36M lbs. of deliveries to its contract portfolio, resulting in total commitments to sell more than 130M lbs. of U3O8.
    • "Current prices are putting future supply availability at risk. This is not sustainable," the company says. "The longer the transition takes, the greater the likelihood that the uranium price will go beyond what is required to incent tier-one production to return to the market."

    Oppenheimer calls out transformation of big-box retailer

    • Oppenheimer gives Outperform-rated Best Buy (NYSE:BBY) a big price target boost to $105 (18% upside) as it calls out new drivers for the big-box retailer.
    • "We assumed a more constructive nearer-term stance on BBY, largely upon the view that the market had yet to appreciate fully significant, underlying improvements within the company’s developing omni-channel business mode," updates Brian Nagel.
    • "We are increasingly of the opinion that the now improved multiple of BBY should at least hold and that a still solid, if not strengthening, earnings growth algorithm for the company should underpin a continued grind higher in shares."
    • Oppenheimer's price target is well above the average sell-side PT of $86.63 and 52-week high of $91.83.
    • Shares of BBY are up 1.52% premarket to $89.95.

     

    Canada Goose -10% after hacking guidance due to coronavirus

    • Canada Goose (NYSE:GOOS) sinks after warning that the coronavirus outbreak is having a material negative impact on results.
    • The warning is taking the shine off the retailer's FQ3 earnings beat of 13% revenue growth. Gross margin arrived in at 66.0% of sales for the quarter vs. 66.9% consensus and 64.4% a year ago. Wholesale gross margin was level from a year ago at 47.7%.
    • Looking ahead, Canada Goose anticipates full-year revenue growth of +13.8% to +15.0% after originally guiding for +20% growth. Canada Goose says the health crisis has resulted in a sharp decline in customer traffic and purchasing activity, adding that retail stores and e-commerce across Greater China have and continue to experience significant reductions in revenue. In addition, due to global travel disruptions, retail stores in international shopping destinations in North America and Europe are also being affected.
    • Shares of Canada Goose are down 10.09% premarket to $29.94.

     

    Two top European energy firms reject Chinese force majeure on LNG contracts

    • Royal Dutch Shell (RDS.ARDS.B) reportedly has joined Total (NYSE:TOT) in refusing to accept a force majeure notice by China's Cnooc (NYSE:CEO) that would have freed it from its contractual obligations to take delivery of liquefied natural gas shipments.
    • While Cnooc may cancel delivery of the prompt cargoes, suppliers likely will seek compensation from the Chinese firm, Bloomberg says.
    • At least five LNG vessels headed to China have been diverted or are idling offshore as the coronavirus constrains the country's ability to take deliveries and cuts demand, according to the report.
    • PetroChina (NYSE:PTR) has been forced to delay discharge timings for multiple cargoes because it cannot get enough workers to its Rudong, Dalian and Caofeidian LNG terminals to run them at full capacity, but it has not invoked force majeure.

    Grubhub gains a bear on margin view

    • D.A. Davidson downgrades Grubhub (NYSE:GRUB) from Neutral to Underperform and cuts the target by $4 to $33 after this week's earnings report.
    • Analyst Tom Forte notes that an "increasing amount of sales" come from lower-margin sources, including quick-service and non-partner restaurants.
    • Forte targets a long-term adjusted EBITDA margin of 18%, down from the prior 22%.
    • GrubHub shares are down 3.3% to $52.83. The company has a Neutral average Sell Side rating.

    GE upgraded from Sell by longtime bear

    • Longtime bear John Inch of Gordon Haskett upgrades General Electric (NYSE:GE) to Neutral from Sell with an $11 price target, raised from $7, "in conjunction with the market rally that has boosted the company's associated peer valuations."
    • GE's businesses are "not particularly inspiring as a whole" but pose less of a risk, as the worst appears to be over for the Power business and Healthcare segment performance "could improve from current anemic levels," Inch writes.
    • GE's 2020 financial targets "appear to be readily achievable," says Inch, who believes the company can continue to further beat its own expectations in the near-term.
    • Inch remains subdued on the company's fundamentals, which remain "fraught with risks" including outsized debt, aggressive accounting, weak earnings quality and "a significantly mediocre to moribund portfolio mix."
    • GE +0.2% pre-market.

  23. Wynn Resorts confident on post-virus recovery

    • Wynn Resorts (NASDAQ:WYNN) CEO Matt Maddox stated on the casino company's conference call that the operating expense burn rate during the Macau closings is roughly $2.4M to $2.6M a day. He noted the expense is largely comprised of payroll to Wynn's 12,200 employees in Macau.
    • Maddox is just like everybody else in not knowing exactly when life in Macau will return to normal, but he is very confident on a strong recovery.
    • "Tourism was one of the first things that rebound in events like this, because people want to get out and move around and get back to normal. So we do feel good about the long-term aspects of Macau as soon as the virus is completely contained," he stated.
    • Wynn earnings call transcript

    Foxconn delays return to Shenzhen facility

    Image result for move along nothing to see here

    • Hon Hai/Foxconn (OTCPK:HNHAF,OTCPK:HNHPD) told employees in Shenzhen not to return to work on February 10, the end of the extended Lunar New Year holiday.
    • A memo obtained by Bloomberg tells employees to "wait for further notice" on a return date.
    • Foxconn mainly assembles Apple's (NASDAQ:AAPL) iPhones in Zhengzhou, but some assembly occurs in Shenzhen, and it serves as the company's Chinese headquarters.
    • Yesterday, Nikkei Asian Review sources said the coronavirus outbreak was delaying Apple's plan to ramp up AirPods production to meet demand.

    Hanesbrands trickles lower after operating profit miss

    • Hanesbrands (NYSE:HBI): Q4 Non-GAAP EPS of $0.51 in-line; GAAP EPS of $0.51 beats by $0.02.
    • Revenue of $1.75B (-1.1% Y/Y) in-line.
    • Shares -0.5% PM.
    • Hanesbrands (NYSE:HBI) is down slightly after reporting adjusted operating profit of $263M for Q4 to miss the consensus estimate of $268M.
    • Sales fell 1% to $1.75B during the quarter, while constant-currency organic sales increased slightly.
    • Looking ahead, the company sees Q1 revenue of $1.466B to $1.496B vs. $1.55B consensus and EPS of $0.23 to $0.26 vs. $0.27 consensus. Full-year EPS of $1.72 to $1.80 is anticipated vs. $1.76 consensus. "We expect to create meaningful shareholder value using our strong balance sheet, stabilized Innerwear profitability, and Champion, International and consumer-directed growth. We view 2020 to be an inflection point for sales, profit and EPS growth rates that accelerate down the P&L," says CEO Gerald Evans.
    • HBI -0.42% premarket to $14.36.
    • Previously: Hanesbrands EPS and revenue in-line (Feb. 7)

    China delays trade data; S&P cuts growth forecast

    Image result for move along nothing to see here

    • Due to the ongoing coronavirus outbreak, China has delayed trade figures for January and said it would combine the data with next month's release.
    • The epidemic has also led to growth forecasts being cut, with S&P Global Ratings revising its estimation of China's GDP growth for 2020 from 5.7% before the outbreak to 5%.
    • "Coronavirus will have a larger negative effect on the global economy than the SARS outbreak," added IHS Markit, explaining that China accounted for 4.2% of the global economy in 2003 vs. 16.3% of the world's GDP today.

    German industrial production slumps in December

    Image result for move along nothing to see here

    • The manufacturing slump continues in Germany as industrial production fell by 3.5% M/M in December, a day after factory orders were shown to have declined at the fastest pace in more than a decade.
    • That suggests Europe's largest economy may have contracted at the end of 2019.
    • Germany has already been pummeled by trade tensions, Brexit and climate change regulation engulfing its auto industry, and the latest data will likely dampen budding optimism of a recovery.

    Russia backs OPEC+ oil output cuts

    • Russia supports a recommendation to deepen OPEC+ oil supply curbs amid falling demand for crude as China battles a coronavirus outbreak.
    • The proposal could lead to a provisional cut in output of 600,000 barrels per day, which is about 0.6% of global supply and would extend current curbs of 1.7M bpd.
    • It would also pave the way for OPEC to bring forward to February a ministerial policy meeting planned for early March to formalize the decision.

    Boeing's Starliner test nearly 'catastrophic' failure, NASA says

    • Boeing (NYSE:BAnarrowly missed a "catastrophic failure" during its December flight test of the Starliner space taxi that was cut short, according to a NASA safety review panel which recommends examining the company's software verification process before letting it fly humans to space.
    • The newly revealed software bug, which Boeing said was fixed while the spacecraft was still in orbit, could have "led to erroneous thruster firings" that could have resulted in "a catastrophic spacecraft failure," one of the panel members said.
    • Boeing and NASA had been focusing on an unrelated glitch with the Starliner's automated timer after the capsule failed to reach its intended orbit 30 minutes into flight.
    • NASA still must decide whether to make Boeing repeat the unmanned docking test before the craft can carry astronauts; Boeing recorded a $410M charge last month to cover that possibility.

    Asia LNG prices plummet to record lows as China shuts down

    • Liquefied natural gas is selling at the lowest price on record in Asia, a troubling sign for U.S. energy producers who have relied on overseas shipments of shale gas amid a weak domestic market.
    • Asian LNG prices fell to $3/MMBtu today, plunging from above $5/MMBtu as recently as Jan. 15, as a glut in the commodity spreads from the U.S. all over the globe.
    • "The fundamentals were already really weak" even before the coronavirus outbreak stalled economic activity in China, says Ira Joseph, head of gas and power analytics at S&P Global Platts. "The whole market is really oversupplied."
    • That's bad news for a wide range of energy firms, from big oil names like Shell (RDS.ARDS.B) and Chevron (NYSE:CVX), to independent firms that operate export terminals such as Chienere Energy (NYSEMKT:LNG), to shale gas producers such as Range Resources (NYSE:RRC), Cabot Oil & Gas (NYSE:COG) and EQT Corp. (NYSE:EQT)
    • In the U.S., natural gas prices tumbled below $2/MMBtu last month and have remained there, a remarkable drop given that prices for the heating fuel typically are at their highest levels in winter.
    • March nat gas futures closed today at $1.862/MMbtu, down 30% from a year ago despite record consumption by U.S. power plants and a surge in exports, both seaborne and across the southern border into Mexico via pipelines.
    • At prices below $2.25, producers likely will idle drilling rigs and cut production, Bernstein analysts say. "We anticipate this will happen over the coming weeks, which should provide some support to [H2 2020] prices."

  24. Bloomberg – Efficient and COMPETENT.


  25. Phil / Wynn -   im having trouble tracking down your play from the other day – could i trouble you to repost please?

     

    thanks!


  26. At this point, anyone but Trump! Looking at his press conference yesterday reminded everybody how sick the man is! Don't agree 100% with Bloomberg, but the guys is clearly 1000% more competent and mentally stable. 


  27. STJ Yes he might be sick, but how sick are the people who vote and cheer for him???


  28. the narrative that "spring is around the corner" ergo just wait for the seasonal adjustment in the flu to catch up with the coronavirus is bogus. The spanish flu's deadliest wave started in March 1918 and peaked that summer (500-650k US deaths). There were not 135,000 daily commercial flights back then, either.

    Has anyone followed this college entrance scandal? It's been awhile since I thought about applying for college, but seriously, how hard is it to get into USC? Especially if you're the child of an over-privileged A-hole like the Pimco CEO? You sleep through some AP classes, lie about your community service, and study for a week for the SAT? Is it really that hard?


  29. There is no use, whatsoever, making up crime fiction. Just follow the real news about what republicans are doing, up and down the entire corruption chain and of course including DJT, and you'll have all the material you need for your next 50 novels:

    "Davis and Smith created invoices to pay DiBiase TANF funds for teaching classes about drug abuse, but DiBiase was in a luxury rehabilitation facility for his own drug use in California at the time and did not perform the services."




  30. WYNN/Potter – That's because it was in the morning report, not the comments:

    Tremendous Tuesday – Markets Come Roaring Back

    China has also been letting the Yuan fall (more Yuan to th Dollar) though it did bounce the last few days as people have begun hoarding money in case the banks shut down.  Macau has been ordered shut for 2 weeks and Wynn Casinos (WYNN) gets 75% of their profits from Macau so take away a month and that's 7.5% that should be knocked off on guidance. 

    WYNN is a good stock and not terribly expensive but I like the following play on them for our Earnings Portfolio:

    • Buy 3 WYNN 2022 $120 calls for $28.50 ($8,550) 
    • Sell 2 WYNN 2022 $140 calls for $20 ($4,000) 
    • Sell 5 WYNN March $130 calls for $10 ($5,000) 

    We're using the 2022 spread as a hedge against the sale of short calls and the net of the spread is a $450 credit and, if the short calls expire worthless, whatever value is left on the bullish spread (now net $4,550) is our profit.  If WYNN pops back up, we simply buy more spreads to cover and roll our short calls to a higher strike.  

    USC/BDC – What I really don't understand is what's the point of sending your kids to colleges they are too dumb to get into.  Probably doesn't end well anyway.  As to the corruption – what a great example the Administration is setting for generations to come.  

    Since taking office, Trump has made an astounding 114 visits to his own golf resorts, racking up a $127,000,000 bill to taxpayers in the process. Each one of those visits requires that the Secret Service and other White House staff come along. But they don’t come along for free. Trump charges each of those he drags off to Doral or Mar-a-Lago as if they were visitors on a holiday—on a holiday at special opposite-of-discount rates.

    By August of 2019, the Secret Service had given Donald Trump over half a million dollars for the privilege of driving golf carts around his courses. Check that again. Trump plays golf, then charges the Secret Service rental on the carts they drive while protecting him—a rate of $2,000 dollars a day. 

    But, as The Washington Post reports, that’s far from the only place where Trump is charging the country a premium rate to remain in his presence. Federal records show that Trump has been billing rooms for Secret Service agents at rates up to $650 per night. Trump has previously stated that he charges minimal fees … but the records don’t support those claims. 

    That $650 rate wasn’t just a one-off fee that landed on agents squeezing into Mar-a-Lago at some kind of peak season. That was the rate Trump charged dozens of times in 2017 alone, the Post said. But then, not every Secret Service agent had a plain old room. When visiting his Bedminster club, Trump rented the service a so-called cottage for the bargain rate of $17,000 a month. That includes billing for days when neither Trump nor the agents were present.

    None of this squares with claims from Eric Trump that when Trump travels, agents “stay at our properties for free—meaning, like, cost for housekeeping.” But then, that was Eric.

    To make things more fun, an appeals court ruled on Friday that individual Americans, even if they are members of Congress, have no standing to sue Trump for violating the emoluments clause. Which is just what this week needed: even more evidence that Trump is beyond the law.

    Wheee, things are slipping badly now – RUT leading us lower.

    Turning my /NQ frown upside down!

    /ES too! 


  31. Hitting that green support line on /ES (3,322.5) and  /NQ (9,398) and being back ahead – I'm cutting back to 2 short on each so, if we bounce back into the close, I can go back to 4 short at a higher strike but doubtful as I have to leave at 3 for a meeting so this is likely how I'll go over the weekend (2 short each).


  32. Phil / thanks for Wynn.   Where are you on /HG?


  33. copper/gold action painting a scary picture


  34. Phil/WYNN,

    for a small portfolio with margin limitation can we do

    Buy – 3 2022 120 Calls

    Sell – 1 2022 140 Calls

    Sell – 2 March 130 Calls

    once the March calls expire we can keep selling the closer months.

    regards


  35. I sold ETHE at 2X intrinsic, so of course, two days later it's trading at 3X intrinsic… 


  36. Phil / HBI – I  have '22 $13 short calls at $2.7 – am looking to pair this up with a purchase of stock at 14 ish and the selling a Jan 21 either 15 call ( 1/5 or 17 call at .9 – would like your thoughts…  It has a 4% yield at the moment, which makes it reasonable….   thanks,


  37. Phil / HBI – Was also considering a '22 13 (3.1) / 17 (1.5) as well


  38. SKX – yesterday afternoon played the Friday 35/36 BCS and pulled in 30 cents profit on a 70-cent investment, wish I'd gone big instead of playing it for beer money… but with earnings last night seemed a bit risky.

    /NQ – meant to set an alarm last night but forgot – I've noticed that the indexes seem to peak at or near 1:25am ET, if you look at the charts you'll see it happens pretty regularly. Hate getting up in the middle of the night but it might be worth it if the pattern continues next week.


  39. SKT – New multi-year low.

    Phil, their dividend increase was a total non-event.  About 1/4 of 1 cent.  Done to maintain that they've raised their dividend every year since going public.


  40. /HG/Potter – Still 1 long at $2.506 because I missed last night's run to $2.60 (certainly would have taken that off the table).  Now $2.5475 and I'm letting it ride for fun.

    WYNN/Pat – Is that a question?  That works, just a bit less downside protection but WYNN says the virus is not that big a deal for them.  I think they are lying but that's what they say so, until they change their tune, $120-130 should be about right.

    HBI/Batman – Still disappointing.  Earnings were not bad though, just same slow BS.  Dividend is only 0.60 so I don't see why buy the stock.  If you cover with the $10 calls at $4.70 that's net $2 on the $3 spread and then sell $13 puts for $2.35 and it's a net 0.35 credit on the $3 spreads and your worst case is owning them at $13.35 ($1 off) or, at $13 you get $3.35 – a lot more than the dividend.  If you end up getting assigned at $13.35, THEN you sell more $13 calls for $2 and $10 puts (now $1.10) and your net is $10 and you still make $3 in 2024 if called away at $13 so two chances to make more than the dividend pays! 

    SKX/Dawg – Nice play and we do like those guys.   Smart not to overdo it – sneaker manufacturing may be impacted.

    I also check the charts if I get up at night but not going to lose sleep over it – if it happens, it happens…

    SKT/Albo – Amazing how little respect they get.  

    Well, I have to run to a meeting – try not to let the market fall 300 more points while I'm out!

    Have a great weekend, 

    - Phil


  41. Found this article on most shorted stocks interesting, GameStop i#1 with a number of names followed on here high on the list.

     https://seekingalpha.com/article/4322003-heavily-shorted-stocks-february-2020


  42. Gamestop – 98.8% of outstanding shares shorted…WOW!!


  43. Yah that's crazy, the shares are loaned out to one broker who then lends then to another, all for a fee of course. 


  44. What if GME does a massive buyback?


  45. Phil / FXP -  I don't understand how FXP is a hedge for our STP.   If I understand correctly, FXP is -2X the 50 largest Chinese companies listed on the Hong Kong exchange.  These companies are mostly Chinese SOEs.   In fact, our baby CHL is in FXP too!    So FXP is a hedge against the Chinese economy downturning.

    As nothing we have in our Member Portffolios is Chinese, except CHL,  FXP is not really a hedge for us, right?   For us, it's a bet that the Chinese economy will grow more slowly / contract because of NCov.

    That said, a lot of non-Chinese companies with exposure to China for revenue/profit seem to be giving lower guidance or being red-flagged by analysts.  Everything from luxury to Carslsberg beer!  Who knew Wuhan was the Mecca for beer consumption!   So given we have exposure to AAPL, LB, etc. with supply chain and market exposure to China, I guess that' why we have SQQQ to hedge against this?

    Also, when is OPEC going to step up to the plate?  :)   USO still at $10.58


  46. Trump Fires Impeachment Witnesses Gordon Sondland and Alexander Vindman in Post-Acquittal Purge











  47. The Bug: a couple of good articles on the Wuhan outbreak. The better research always comes a bit later in the game, and these two articles really indicate a good grasp of epidemiology and an understanding of how to measure disease on a population basis. This is the best picture I've seen of what's really going on.
    https://www.nejm.org/doi/10.1056/NEJMoa2001316
    and
    https://smw.ch/article/doi/smw.2020.20203


  48. Thanks Snow for sharing – nice to have some facts amid the rampant speculation and back of the envelope calculations from some quarters.








  49. “Where it begins”: Young hungry locusts bulk up in Somalia




  50. Where did they go? Millions left city before quarantine