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Weakening Wednesday – Another Insane White House Briefing, Another Market Drop

WATCH WORLD LEADERS BURST INTO LAUGHTER THE UNITED NATIONS 1038 AM ...Trump wants to cut support to the World Health Organization.  

The WHO is part of the UN so this falls in-line with the general attempts by Putin Trump to destroy the United Nations, which is the only thing standing in the way of many Dictator's and Despot's plans around the World.  Our own self-proclaimed despot has always had it in for the UN but much more so since they laughed at his speach last year when he attempted to proclaim himself the best President in US history.

As ridiculous as dismantling the UN might seem, defunding the WHO in the middle of a pandemic is simply insane but not at all surprising since the WHO's job is to set standards and guidlines and that would include how to handle the coronavirus and Trump already knows he doesn't want to listen to that one.  Trump is also looking to blame the WHO for the Administration's failed response to containing the virus – he'll blame the Girl Scouts if he has to – anything but face the truth of his incompetence.  

Trump claims that he read the WHO report on Jan 15th that said they had not yet confirmed human to human transmission of the virus but he also claims he did not read Peter Navaro's (White House Trade Adviser) Jan 29th memo TO TRUMP which said:

“The lack of immune protection or an existing cure or vaccine would leave Americans defenseless in the case of a full-blown coronavirus outbreak on U.S. soil,” Mr. Navarro’s memo said. “This lack of protection elevates the risk of the coronavirus evolving into a full-blown pandemic, imperiling the lives of millions of Americans.”

Navarro warned the coronavirus crisis could cost the US trillions of dollars and put millions of Americans at risk of illness or death.  So, very, very clearly, Trump and his team KNEW the virus was coming and KNEW it was a huge threat way back in January but Team Trump kept on telling Americans through March 9th that there was nothing to worry about.  These are Trump's actual quotes over 45 days of willful inaction that has cost America 25,000 lives already:

  • Jan 22nd - “We have it totally under control. … It’s going to be just fine
  • Jan 30th – "We think we have it very well under control. We have very little problem in this country at this moment — five. And those people are all recuperating successfully. But we’re working very closely with China and other countries, and we think it’s going to have a very good ending for it. So that I can assure you.” 
  • Feb 24th – "The Coronavirus is very much under control in the USA. … Stock market starting to look very good to me."
  • Feb 26th - “And again, when you have 15 people, and the 15 within a couple of days is going to be down to close to zero, that's a pretty good job we've done."
  • Feb 28th - “It’s going to disappear. One day, it’s like a miracle, it will disappear.”
  • March 2nd - "We had a great meeting today with a lot of the great companies and they're going to have vaccines, I think relatively soon.”
  • March 6th - “Anybody that needs a test, gets a test. They’re there. They have the tests. And the tests are beautiful.”
  • March 9th - “So last year 37,000 Americans died from the common Flu. It averages between 27,000 and 70,000 per year. Nothing is shut down, life & the economy go on.”
  • March 17th - "I've always known this is a real — this is a pandemic. I felt it was a pandemic long before it was called a pandemic."

As I predicted in last week's Live Trading Webinar (join us today at 1pm for another one), when the US had 400,000 confirmed cases, we are at 609,685 cases as of 7:25 this morning and I made my case for why we are on the cusp of a total disaster in last Wednesday's PSW Report, so I won't re-hash that but clearly DEFUNDING the WHO is not the way to turn things around.  How about giving them an extra $5Bn instead of giving it to Exxon?  Maybe that would be more helpful???

From an investment standpoint, the reason politics DO matter in this case is because we have a catastrophic situation and it can either get better or get worse and that very much depends on the competency of our "leaders" and, despite being laughed at by the Governors, Trump has proclaimed himself the absolute ruler of the United States (unless there is blame – then he had nothing to do with it).  

This is not a blame thing, this is a numbers thing.  600,000 infections is 1/500 Americans.  That means, if you go to a movie – someone there is infected.  If you send your kid back to school – someone there is infected.  If you work in and office building – someone there is infected.  You get the idea….

This is a deadly, contageous disese and we don't have a cure and we don't have a vaccine.  5% of the infected people in New York are dead already and not even 15% of those infected have recovered so 160,000 outcomes still to be decided are not the kind of odds you want to be participating in – especially since even those people who recover can suffer years or a lifetime of after-effects like lung, heart and kidney disease – all crushingly expensive additions to our already over-burdened Health Care System.

The Spread Of COVID-19 Coronavirus In The United States [Infographic]That's at 1/500.  There are 8M people in NY and 200,000 infected, that's 1/40.  That means you can't go to a restaurant without crossing paths with an infected person or really go outside your door without exposing yourself to an infected person.  If NY can progress to 1/40 – so can the rest of the country – especially large cities, where 60% of our population (200M people) are.  

THAT is why it is such a big deal to shelter in place – we have no other way to contain the disease and, when you get to 1/40 or even 1/250, you get other problems like SOMEONE at work is out sick or dead and that's disruptive and then we lose 1% of our health care workers and 1% of our plumbers and electricians and nuclear plant monitors – you know – important people.  Then all the survivors get backed up and things begin to fall apart and good luck hiring and training people while the virus is spreading.

On top of that, if we let the virus get to 1/100 Americans (3M infected), where we'll be before the end of May if this Adminstration doesn't do better – then who is going to go to movies, restaurants, malls, etc. anyway?  You can lift lock-down restrictions early but if that allows the virus to spread further – you'll have a much more difficult job getting consumers and workers to go back out the second time – if there even is a second time. 

Taking a month off for Social Distancing is nothing – Europe takes August off every year and they are fine.  Two months off is uncomfortable and three is unbearable but recoverable but if we push past June (end of Q2) and we're not back to work, then this economy will begin to really collapse and the markets are not pricing that scenario in at all.  

The coronavirus stimulus package versus the Recovery Act - Los ...The Government just authorized $2Tn in spending and that is certainly enough to get us through 45 days but not 3 months and already it's clear that the money set aside for small businesses is nowhere near adequate.   Not only that but you know those $1,200 checks Americans were promised?  Not only is their distribution being slowed down because President Trump insisted that his signature be on the checks (you can't make this stuff up!) but Treasury Secretary Steve Mnuchin has authorized banks to SEIZE the virus relief checks to pay off any outstanding debts the recipients may have.  

Again, you can't make this up even though it's cartoon-villain levels of evil.  So now the money that was promised to the American people (who mostly plan to use it to buy food) will be taken as yet another bailout for the Top 1% and their Corporations.  Another trick Trump is using is that $250Bn of the relief money that is supposed to go to individuals is instead going to unemployment payments that the Federal Government would have had to pay to the states anyway (that's why you pay Unemployment INSURANCE every week – it's an insurance policy – not a gift!).   

So opening America for business again, if we do it before the virus is contained could be a far worse disaster than the one we already have while failing to get the virus contained in the next 2 weeks, before we hit 1M infections (1/300) will mean we'll have to shelter in place well into June.  The consequences of attempting to restart things too early far outweigh being overly cautious but, sadly, that's something Trump simply does not understand.

We pumped up our portfolio hedges into yesterday's rally and I sent out an Alert to all our Members detailing our Short-Term Portfolio adjustments. 

The STP specifically protects our LTP but it's a model for protecting all of our Member Portfolios.  The LTP is $500,000 so, if you have a $50,000 portfolio to protect, simply use the STP as a guide at 1/10th the position size.  

Stay safe and stay hedged!  

 


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  1. Good Morning.


  2. Good morning, All!

    Join Phil for this week's webinar, today at 1pm, here: 

    https://attendee.gotowebinar.com/register/1112106939732304654


  3. Good Morning

    Trump read something !!


  4. shame on the evil trump hes also allowing banks to steal poor peoples 1200 pandemic checks if they are in debt


  5. Phil,

    Any thoughts on MRO as a new investment at these prices?


  6. what would you use as a new SQQQ hedge FOR A 300K portfolio?


  7. Phil / Donald Pump / Numbers Check

    Great read.  His press briefings have become an enthralling, train wreck of a spectacle.  At the expense of human life.  Ironically i think CNN et al would do more damage by relaying the briefings in full rather than chopping out the parts of most impact.  Watching him flounder, gasp for air and answer 9/10 questions with the same string of words he prepared earlier shows his lack of leadership.  If we truly want him out, the media needs to stop attacking him and just point the cameras on him. Those that need convincing of his ineptitude often suffer some level of sympathy for him.

    The fact checking New Yorker in me has to mention one thing : 200k infected is NY State, Population 19.5 million , 1 in 97.    NYC 110k infections, population 8m, 1 in 75.   Not much better but…


  8. attack/potter No Attacks - It's called 'pushing back'. He would love a room with just cameras….. :(


  9. Good morning!

    Traders are more freaking out about earnings than Trump's incompetence but both were obvious and predictable so I'm not too bearish on this.  Keep in mind, this was our prediction, that we stay in the low end of the range through earnings and, while it did look like we might break over – we knew the run-up was silly.  That's why we added more hedges.

    Actually, that's a poor choice of words from a teaching point of view because it implies that we were guessing what would happen but mostly IT'S WHAT WE ARE SUPPOSED TO DO when the market goes higher – we press our hedges!  We take a percentage of our UNREALIZED gains and we put them into more hedges or improving the hedges we have – just like we did yesterday.  

    If we did it correctly, the STP/LTP combined value should stay pretty stable this morning and, if not – we make more adjustments.  There's no perfect formula to this – you have to hedge and test and hedge and test – it's like using the gas and brakes on a car and having your kid ask you "How hard to you press the gas".  It friggin' depends, doesn't it???

    I tried to TEACH my first daughter how to drive and she was terrible and it was very frustrating but my younger daughter, Jackie, I simply took to a stadium parking lot and gave her the keys and said "You've driven in the arcade – it's the same thing."  After a couple of hours and only some suggestions, we were ready to drive in circles around her school parking lot (with stop signs and turns) for a few hours and then we hit the streets. 

    Some things you have to learn by doing…

    MRO/Tech – In this market?  While a lot of oil companies look attractive, if oil can't hold $20 we might see $10 in the near future and it's not going to turn around until the World gets back to work, and that's Q3 at best.  Earnings are May 5th and they are going to be awful, they are likely to lose well over $1Bn this year and $4/share is a $3Bn valuation so for every Dollar you give them, they'll lose 0.33 for you.  Surely there are better things to invest in?   It's not like they generally make money anyway.  

    Year End 31st Dec 2014 2015 2016 2017 2018 2019 2020E 2021E CAGR / Avg
    Total Revenue
    $m

    11,348 4,833 3,398 4,707 6,263 5,140 4,051 4,101 -14.6%
    Operating Profit
    $m

    1,599 -2,153 -832 -165 1,667 633     -16.9%
    Net Profit
    $m

    3,046 -2,204 -2,140 -5,723 1,096 480 -516 -345 -30.9%
    EPS Reported
    $

    1.42 -2.51 -2.55 -1.02 1.29 0.593     -16.0%
    EPS Normalised
    $

    1.65 -1.94 -2.80 -0.848 1.07 0.574 -0.942 -0.625 -19.0%
    EPS Growth
    %

    +15.6         -46.5      
    PE Ratio
    x

              7.40      
    PEG
     

                     
     

    SQQQ/Millard – As noted above, we just rolled to new positions in the STP, which protects $500,000 so 3/5 of that would be the way I'd play it.  And, keep in mind, it depends how the $300,000 is invested to.  You have to always hedge and test and adjust and test, etc…

    Leave the cameras on/Potter – I think that's a great point but CNN feels Trump's misinformation is costing people's lives as well and that's why they are cutting away while he spouts his insane theories.  Fox covers him in full and his base is watching Fox more than CNN – I don't think the rest of the public needs too much convincing that we have a lunatic running the country.  

    I stand corrected on New York – hopefully it stays around 1/100 – which is still intolerable. 


  10. Good Morning,

    I would like to ask a question.  Is there an easy way for Basic Members to see the various portfolios? I have a "virtual portfolio" tab but it only shows the occasional  "Update" I find it difficult to keep track of all the changes especially if I didn't read all the chat from the previous nights. Is this because I am a basic member? Do full members get full access to all the portfolios? Thanks and have a great day!!


    • March Industrial Production: -5.4% M/M to 16 vs. -4.2% consensus, -0.5% prior (revised).
    • Capacity Utilization 72.7% vs. 74.0% consensus, 77.0% prior (revised).
    • Retail sales fell 3.1% M/M in March after stripping out the impact of gas and motor sales.
    • As expected, there were eye-popping drops in categories like clothing (-51% Y/Y), food services (-23%), furniture/home furnishings (-25%) and electronics/appliances stores (-25%). Department stores (KSSJWNM, JCP]]) saw a downturn of 24% during the month.
    • Grocery stores (KRTGTWMTSFMIMKTAWMKNGVC) saw a 29% Y/Y jump in sales during the month, while home improvement stores (HDLOW) may have surprised with a 7.6% increase.
    • The nonstore retailers category that includes Amazon (NASDAQ:AMZN) was up 9.7% during the month.
    • March Retail Sales-8.7% M/M vs. -7.3% consensus and -0.5% prior (revised from -0.4%).
    • Retail Sales (less auto) -4.5% M/M vs. -4.2% consensus and -0.4% prior (revised from -0.4%)
    • Ex-gas and autos: -3.1% M/M vs. -4.5% expected and -0.2% prior (revised from -0.2%).
    • Retail sales control group +1.7% M/M vs. -1.8% consensus vs. +0.1% prior (revised from +0.1%)
    • Related ETF: XRT
    • April Empire Manufacturing-78.2 vs. -35 consensus, -21.5 prior (unrevised).
    • New Orders index: -66.3 vs. -9.3 prior.
    • Shipments index: -68.1 vs. -1.7 prior.
    • Number of employees index: -55.3 vs. -1.5 prior.
    • Citing increased demand for its enterprise headsets, Plantronics (NYSE:PLTnow expects Q4 GAAP revenue of $395-405M, up from the prior range of $354-394M.
    • The company expects non-GAAP EBITDA to come in above the $20-45M guidance for the quarter, which ended on March 28.
    • PLT had $226M in cash and equivalents at quarter's end and plans to defer any debt repayment until Q1 FY21.
    • The company is suspending its quarterly dividend, which will save $25M.
    • Plantronics will report Q4 results on May 12.
    • PLT shares are up 13.8% to $14.02.
    • Cleveland-Cliffs (NYSE:CLF-5.1% pre-market after issuing downside revenue guidance for Q1, seeing sales of $345M-$375M vs. $402M analyst consensus estimate, and suspending its dividend.
    • Other preliminary Q1 results include adjusted EBITDA of $15M-$25M, mining and pelletizing sales volume of 2.1M long tons, and pre-AK Steel merger flat-rolled steel shipments of 1.1M short tons through March 12 plus 200K short tons to March 31.
    • Cleveland-Cliffs says it is "comfortable" with its liquidity position of ~$1B as of March 31.
    • The company performed stress tests of liquidity in the most extreme scenarios, in which liquidity would reach a trough of $370M in September and then improve.
    • Molson Coors (NYSE:TAP) and Hexo (NYSE:HEXO) inked a deal to explore opportunities for non-alcohol hemp-derived CBD beverages in Colorado. The new joint venture called Truss CBD USA will be majority owned by Molson Coors and will operate as a standalone entity with its own board of directors, management team, resources and go-to-market strategy.
    • All production and distribution for Truss CBD USA will be kept within Colorado state lines since it is one of a few states that has an established regulatory framework for hemp-derived CBD in food and beverages. No hemp-derived CBD products will be produced at Molson Coors facilities.
    • TAP -1.22% premarket to $46.00. HEXO +8.88%.
    • Source: Press Release
    • Demonstrating why it has a dominant position in clinical diagnostics, Abbott (NYSE:ABT) has launched its third COVID-19 test, this time a blood test that detects IgG antibodies to SARS-CoV-2.
    • Its lab-based molecular test and its rapid point-of-care test, both detecting the virus itself, are already in use.
    • Shares up 1% premarket on light volume.

    Gannett (NYSE:GCI-10%.

    Apache APA -9% following crude swoon.

    Dave & Buster's Entertainment (NASDAQ:PLAY-9%.

    InterContinental Hotels Group (NYSE:IHG-9%.

    Deutsche Bank Aktiengesellschaft (NYSE:DB-8%

    Lloyds Banking Group (NYSE:LYG-8%

    American Eagle Outfitters (NYSE:AEO-8%.

    JetBlue Airways (NASDAQ:JBLU+8% on $936M in payroll aid.

    American Airlines Group (NASDAQ:AAL+6%. as airline deal has been reached with the major airlines

    • Charles Schwab (NYSE:SCHW): Q1 Non-GAAP EPS of $0.60 misses by $0.02; GAAP EPS of $0.58 misses by $0.04.
    • Revenue of $2.62B (-3.7% Y/Y) beats by $10M.
    • Shares -3.2% PM.
    • Press Release
    • Charles Schwab (NYSE:SCHW) falls 3.2% in premarket trading even as Q1 EPS, excluding certain items, of 62 cents meets the average analyst estimate of 62 cents.
    • Q1 EPS falls from 69 cents in the year-ago quarter.
    • Q1 net revenue of $2.62B squeaks past the $2.61B consensus and falls 4% Y/Y; March core net new assets were $27.9B, up 14% M/M and 52% Y/Y.
    • Net interest revenue of $1.6B declined 6% Y/Y, due to pressure across the yield curve accelerating late in the quarter, which outweighed the impact of significantly higher levels of client cash sweep balances.
    • Q1 total net new assets rose 42% Y/Y and fell 5% Q/Q.
    • Clients opened a record 609K new brokerage accounts — over 280K in March alone — bringing total active brokerage accounts at quarter end to 12.7M, up 8% from March 2019.
    • Trading revenue, which is now reported in order flow revenue, was 13% lower than the year-ago period at $188M, due to October 2019 pricing actions, partly offset by a significant increase in transactions.
    • Given rapid accumulation of client cash sweep balances, Schwab placed a substantial amount in excess reserves at the Fed; such balances totaled $58.7B at the end of March, up from $18.8B at the end of 2019, said CFO Peter Crawford.
    • Previously: Charles Schwab EPS in-line, beats on revenue (April 15)
    • via Reuters
    • "Virtually all regular operations have come to a halt … Causing major cash flow concerns that the threaten the viability of hospitals," said the American Hospital Association earlier this month. Indeed.
    • Tenent (NYSE:THC) operates 65 hospitals and 500 other healthcare facilities,, including ambulatory surgery centers. Those furloughed include administrative and corporate office staff, as well as healthcare workers involved in elective procedures.
    • "While we are concerned for the COVID-19 patients we are caring for across our system, we are equally concerned for our other patients who must now wait to receive medically necessary procedures," says CEO Ron Rittenmeyer in a letter to employees.
    • Shares are down 3% premarket.
    • In other chilling news, Quest Diagnostics earlier this week laid off about 9% of its workforce, noting a sharp drop in testing despite having performed nearly 1M tests for coronavirus.
    • Related players: Community Health (NYSE:CYH), HCA Health (NYSE:HCA), Universal Health (NYSE:UHS).
    • Morgan Stanley (NYSE:MS), due to report earnings before the bell on Thursday, is on track for its worst session since April 1, down 3.7% after Goldman Sachs missed earnings expectations in its earnings report, partly due to reserve builds.
    • MS largely skirted the weakness seen in the larger money center banks yesterday after JPMorgan (NYSE:JPM) and Wells Fargo (NYSE:WFC) showed large builds in their reserves in anticipation of credit losses related to Covid-19, ending the day lower after opening the day up.
    • FICC and equities net revenue at Goldman were historically strong, while their asset management division results were weaker. Morgan Stanley has recently generated more of their revenues from asset management than has Goldman, which could account for part of the weakness in shares.
    • Gilead Sciences (NASDAQ:GILD) slips 3% premarket on modest volume on reports that the second study of remdesivir in China, the one in mild-to-moderately ill COVID-19 patients, has been suspended.
    • Best Buy (NYSE:BBY) says it has retained ~70% of its sales compared to last year since moving to an enhanced curbside service model with stores closed.
    • Domestic online sales are up over 250% and approximately 50% of these sales are from customers choosing to pick up their products at BBY stores.
    • Despite holding on to a decent portion of sales, Best Buy is temporarily furloughing approximately 51K domestic hourly store employees, including nearly all part-time employees. The company is retaining approximately 82% of its full-time store and field employees on its payroll, including the vast majority of In-Home Advisors and Geek Squad Agents.
    • BBY -1.93% premarket to $68.50.
    • Source: Press Release
    • Tesla (NASDAQ:TSLA) is showing an early gain this morning even with index futures pointing to a down day coming up for the market.
    • A surprise return by Goldman Sachs to the bull party on Tesla last night and Model 3 registration data out of China earlier today appear to be boosting sentiment.
    • Shares of Tesla are up 4.55% in premarket trading to follow on yesterday's 9.05% gain. Tesla has shot up 96% over the last four weeks even with the Fremont plant dark.
    • Customers in NYC and Miami can now order Uber (NYSE:UBER) Eats deliveries through the 1-800 number the company began testing in February.
    • Users can dial the number and speak with an agent to find out about menu options and pricing and complete the payment.
    • Uber hopes to roll out the service to more cities in the coming weeks.
    • The toll-free number could appeal to older customers who aren't comfortable using a smartphone or the Uber app.
    • Uber Eats has grown in importance for the company since the coronavirus pandemic slowed ride-share demand.
    • Driven by higher loan loss reserves, Citigroup (NYSE:C) Q1 EPS of $1.05 falls short of the consensus of $1.44 and declines from $1.87 in the year-ago quarter.
    • The credit reserve build of $4.89B reflects the change in Citi's economic outlook on estimated lifetime losses under the new Current Expected Credit Loss standard.
    • "Our earnings for the first quarter were significantly impacted by the COVID-19 pandemic," said CEO Michael Corbat. "We managed our expenses with discipline and had good revenue performance as the economic shocks caused by the pandemic weren’t felt until late in the quarter."
    • Citi falls 1.7% in premarket trading.
    • Allowance for loan losses was $20.8B at Q1-end, or 2.91% of total loans, vs. $12.3B, or 1.82% of total loans at the end of the prior-year period.
    • Q1-end loans were $721B, up 6% from a year earlier; deposits at the end of the quarter of $1.2T rose 15% Y/Y.
    • Q1 Global Consumer Banking posted a net loss of $754M vs. net income of $1.58B in Q4 2019 and net income of $1.32B in Q1 2019.
    • Q1 Institutional Clients Group net income of $3.63B increased 27% Q/Q and 7% Y/Y.
    1. Fixed Income Markets revenue of $4.79B rose 65% Q/Q and 39% Y/Y.
    2. Equity Markets revenue of $1.17B surged from $516M in Q4 2019 and $842M in Q1 2019.
    • Carnival (NYSE:CCL) extends the cancelation of Princess Cruises cruises until June 27 and Carnival Cruise Line cruises through the end of June due to the "no sail order" from U.S. health officials.
    • Carnival CEO Arnold Donald also said the company is working very hard at finding more liquidity options.
    • Donald also confirmed in a CNBC interview that bookings for 2021 are strong.
    • Shares of Carnival are down 2.48% premarket to $12.20.
    • Six Flags Theme Parks (SFTP), an indirect wholly-owned subsidiary of Six Flags Entertainment Corporation (NYSE:SIX) intends to offer up to $665M of senior secured notes in a private offering.
    • Net proceeds will be used to repay indebtedness and the remaining amount for general corporate matters and working capital purposes, including expenses relating to the transaction.
    • SFTP received sufficient consents from lenders for credit facility amendment which will eliminate the use of Borrower Consolidated Adjusted EBITDA from the second, third and fourth quarters of 2020 in any net leverage covenant test.
    • SIX -3.29% premarket.

  11. Portfolios/Youngy – They are not live-updated, we just review them in chat once in a while , usually on expiration weeks (like this one).  Other than that, during chat sessions, I'll occasionally highlight a trade and we'll add it to one of the portfolios.  While there is a delay for Basic Members, you should see any portfolio additions eventually, just not trade ideas or discussions that are specifically for Premium Members.  


  12. Phil / Thank you. 


  13. Costco madness seen normalizing in April

    • JPMorgan lowers estimates on Costco (NASDAQ:COST) to adjust for a potential "normalization" in the latter part of April. The firm now expects April same-store sales growth of +5.7%, including +7.0% in the U.S.
    • "We are also assuming a 30-bp headwind in core merchandise margin in 3Q given the trend since early March favoring grocery vs. discretionary with ~10 bps of incremental pressure for higher employee benefit/pay, enhanced store cleaning, etc.," writes Christopher Horvers.
    • JP's FQ3 EPS forecast on Costco goes to $1.75 vs. $2.10 consensus. That consensus mark is likely to be heading lower as more analysts reset expectations.
    • The firm keeps an Overweight rating on Costco.
    • Shares of Costco are down 1.31% premarket to $310.01.
    • Applied DNA Sciences (NASDAQ:APDN) has completed design qualification, production and shipment of five COVID-19 vaccine candidates to Italy-based Takis Biotech, to support preclinical animal testing that will begin immediately.
    • The vaccine candidates were produced by Company’s PCR-based LinearDNA manufacturing systems.
    • Preliminary testing of plasmid-based vaccine templates shows strong immune responses, catalyzes testing of Linear DNA-based constructs set to begin immediately.
    • The next step is to utilize these LinearDNA candidates to inoculate mice whose sera will be tested for the presence of antibodies that bind to purified Spike protein.
    • Those positive candidates will be tested for their ability to neutralize SARS-CoV-2.
    • The company intends to execute its cGMP plan to support human trials scheduled to begin this fall.
    • Shares are up 51% premarket.
    • Goldman Sachs (NYSE:GSQ1 EPS of $3.11 misses the average analyst estimate of $3.36 as it boosts reserves for credit losses amid uncertainty caused by the COVID-19 pandemic.
    • GS falls 2.0% in premarket trading.
    • Provision for credit losses was $937M in the quarter vs. $336M for Q4 2019 and $224M in Q1 2019, primarily due to significantly higher provisions related to corporate loans as a result of continued pressure in the energy sector and the impact of COVID-19 on the broader economic environment.
    • Q1 also included provisions related to growth in corporate loans and credit card loans, and the impact of accounting for credit losses under the CECL standard.
    • Q1 Investment Banking net revenue of $2.18B, its second highest quarterly performance, up 6% from Q4 and 25% from Q1 2019.
    • FICC generated net revenue of $2.97B, its highest quarterly performance in five years, up 33% Y/Y, due to significantly higher net revenues in FICC intermediation,
    • Q1 Equities net revenue of $2.19B, its second highest quarterly performance in five years, up 22% Y/Y.
    • Q1 Asset Management net revenue were -$96M vs. $3.00B for Q4 2019 and $1.79B in Q1 2019.
    • Q1 Consumer & Wealth Management net revenue of $1.49B rose 6% Q/Q and 21% Y/Y.
    • Global core liquid assets averaged $243B for Q1 vs. an average of $237B for Q4 2019.
    • Conference call at 9:30 AM ET.
    • Previously: Goldman Sachs EPS misses by $0.18, beats on revenue (April 15)
    • Morgan Stanley tips that Sands China (OTCPK:SCHYYOTCPK:SCHYFLVS) and Galaxy Entertainment Group (OTCPK:GXYEF) may have fared better than peers in Q1 on an EBITDA comparison, due in part to rental income from their shopping malls and some other sources of revenue.
    • The shopping malls in Macau were affected less than casino closures during Q1, according to the firm.
    • Sands China is forecast to churn up property EBITDA of $55M and Galaxy is expected to report $21M, while peers are seen being in the red for the quarter.
    • U.S. Bancorp (NYSE:USBQ1 EPS of 72 cents misses the average analyst estimate of 81 cents as the bank boosts its provision for credit losses to $993M from $395M in the previous quarter.
    • USB slips 0.8% in premarket trading.
    • Q1 net interest income of $3.22B creeps up 0.5% from Q4 2019 and slips 1.1% from Q1 2019.
    • Q1 net interest margin of 2.91% compares with 2.92% in Q4 and 3.16% in Q1 2019.
    • Q1 noninterest income of $2.53B rises 3.7% Q/Q and 10% Y/Y.
    • Q1 noninterest expense of $3.32B falls 2.5% Q/Q and rises 7.4% Y/Y.
    • Q1 average total loans of $297.7B rises 0.9% from Q4.
    • Q1 total average deposits of $362.8B rises 1.8% Q/Q.
    • Common equity tier 1 capital ratio of 9.0% at March 31, 2020 vs. 9.1% at Dec. 31, 2019 and 9.3% at March 31, 2019.
    • Conference call at 9:00 AM ET.
    • Previously: U.S. Bancorp EPS misses by $0.07, beats on revenue (April 15)
    • JPMorgan analyst Jamie Baker says the initial investor enthusiasm over the airline relief package is difficult to reconcile and the firm remains concerned that the Treasury’s aggressive negotiating stance portends a difficult road ahead for the industry.
    • Baker thinks the tough approach will be felt as airline struggle to see bookings return. "What was once thought to be free, formulaic, and easy turned out to be drawn out, somewhat expensive, and intense," he notes.
    • "Unfortunately, we simply don’t see any way for most US airlines to avoid massive layoffs unless the industry specific payroll protection grants/loans are extended. And therein lies why we have viewed the progression of the aid from 100% grants to only 70% grants plus 30% loans (for the grant portion) as a significant negative development for the sector," warns Baker.
    • Sector watch: American Airlines (NASDAQ:AAL+9.79%, Delta Airlines (NYSE:DAL) +7.42%, Southwest Airlines (NYSE:LUV+6.38%, United Airlines (NASDAQ:UAL+8.90%, JetBlue (NASDAQ:JBLU+15.15%, Hawaiian Holdings (NASDAQ:HA+12.05%, Alaska Air Group (NYSE:ALK+6.25%, Allegiant Travel (NASDAQ:ALGT+5.99%, Spirit Airlines (NYSE:SAVE+6.63%, Mesa Airlines (NASDAQ:MESA+5.77%, SkyWest (NASDAQ:SKYW+3.54%.
    • Global demand for oil (CL1:COM) in April is forecast to drop by a record 29M bbl/day to levels not seen in a quarter century, the International Energy Agency says, part of a set of dire estimates that executive director Fatih Birol calls "staggering."
    • "When we look back on 2020, we may well see it was the worst year in the history of global oil markets, [and] April may well have been the worst month," Birol said following the agency's release of its monthly oil report.
    • The report has sent a shudder through oil prices, with WTI crude breaking below $20/bbl, -2.5% to $19.70/bbl, and Brent -3.6% to $28.53/bbl.
    • The IEA estimates total global oil demand for the year overall will drop by a record 9.3M bbl/day, even with a recovery forecast for H2.
    • Oil storage is seen being exhausted by mid-year as global inventories swell to 12M bbl/day during H1, overwhelming the logistics of the oil industry in the coming weeks.

    So oil demand will drop 9.3Mb/d and OPEC is cutting 10Mb/d.  What is wrong with people?  This is not a negative – it indicates the cuts were the right size and why shouldn't they be – OPEC has the same professional analysts the IEA does. 

    I still love /CL long at $20 and USO at $4.45.

    You're welcome Youngy!


    • Bank of America (NYSE:BACQ1 EPS of 40 cents misses the 60 cents consensus as the bank takes a $3.6B reserve build due to a deteriorating economic outlook related to COVID-19.
    • Ends quarter with almost $700B in global liquidity sources.
    • Q1 net income of $4.01B falls from $6.99B in Q4 2019 and $7.31B in the year-ago quarter.
    • Q1 net interest income $12.13B vs. $12.14B in Q4 and $12.38B in Q1 2019.
    • Q1 noninterest income $10.64B vs. $11.13B Visible Alpha consensus; compares with $10.2B in Q4 and $10.6B in Q1 2019.
    • Q1 provision for credit losses of $4.76BB vs. $941M in Q4 and $1.01B in Q1; net charge-off rate of 0.46% vs. 0.39% in Q4.
    • Average loan and lease balances in the business segments of $954B rose 6% Y/Y.
    • Average deposit balances rose 6%Y/Y to $1.4T.
    • Q1 consumer banking net income $1.79B vs. $3.11B in Q4 2019 and $3.24B in Q1 2019.
    • Q1 global wealth and investment management net income of $866M fell from $1.04B in Q4 and $1.04B in Q1 2019.
    • Q1 global markets net income of $1.71B incrfeased from $574M in Q4 2019 and $1.10B in Q1 2019.
    • Q1 return on average common equity of 9.7% vs. 14.1% (excluding notable items) in Q4 and 14.3% a year ago.
    • Conference call at 8:30 AM ET.
    • Previously: Bank of America EPS misses by $0.14, beats on revenue (April 15)

    That's another thing, when the banks miss only because they increased their reserves – that's not a real negative.  They are preparing for the downside, which is a good thing.  As with OPEC, they do tend to know what they are doing and this is NOT like the financial crisis and won't be unless the virus is out of control but we're going to look for bargain banks if this keeps up.

    • MBA Mortgage Applications
    • Composite Index: +7.3% vs. -17.9% (W/W).
    • Purchase Index: -2.0.% vs. -12.0%.
    • Refinance Index: +10.0% vs. -19.0%
    • 30 year mortgage rate at 3.45% vs. 3.49%.
    • Alaska Airlines (NYSE:ALK) and Horizon Air confirm their participation in the payroll relief program under the  CARES Act.
    • The program will provide Alaska and Horizon with a total of $992M, to be used exclusively for the cost of employee payroll and benefits. Of the total, $267M will be in the form of a loan that will be repaid. The government will also have the right to purchase 847K shares at $31.61 per share.
    • The funding is expected to cover about 70% of budgeted costs through September 30.
    • Under this program, the company agreed to no involuntary furloughs or pay changes through September 30. Dividends and buybacks will be off until September 30, 2021.
    • ALK +3.15% premarket.
    • Source: Press Release
    • UnitedHealth (NYSE:UNH): Q1 Non-GAAP EPS of $3.72 beats by $0.05; GAAP EPS of $3.52 beats by $0.06.
    • Revenue of $64.42B (+6.8% Y/Y) beats by $170M.
    • Shares +1.66% PM.
    • UnitedHealth (UNHQ1 results:
    • Revenues: $64,421M (+6.8%); Premiums: $50,640M (+6.6%); Products: $8,431M (+4.4%); Services: $4,985M (+15.4%); Investment and other income: $365M (-9.9%).
    • UnitedHealthcare: $51,068M (+4.4%); Optum: $32,839M (+24.6%).
    • Net Income: $3,382M (-2.5%); EPS: $3.52 (-1.1%); non-GAAP Net Income: $3,582M (-1.5%); non-GAAP EPS: $3.72 (-0.3%).
    • CF Ops: $2,943M (-9.0%).
    • Q1 Medical Care Ratio decreased to 81.0% from 82.0% in Q1 2019.
    • 2020 guidance: GAAP EPS: $15.45 – 15.75 (unch); Non-GAAP EPS: $16.25 – 16.55 (unch); GAAP net income: $14,750M – 15,050M (unch); Non-GAAP net income: $15,525M – 15,825M (unch).
    • Shares are up 2% premarket.
    • Previously: UnitedHealth EPS beats by $0.05, beats on revenue (April 15)
    • Estee Lauder (NYSE:EL) says most retail stores in the Americas and Europe, the Middle East & Africa have been closed since mid-March due to the impact of the pandemic. Many of the company's retail stores have been reopening in Asia/Pacific, and sales growth of the online business has accelerated globally.
    • As part of a strategy to conserve cash, Estee Lauder cut the salaries of execs.
    • EL -1.21% premarket to $163.00.
    • Source: Press Release
    • Airbnb (AIRB), struggling amid pandemic travel restrictions, has secured a new $1B loan.
    • That comes just over a week after the company raised $1B in a new debt deal.
    • And Silver Lake, one of two investors in the week-ago deal, is a key player in the new deal, Reuters reports.
    • The new $1B loan is a five-year first-lien deal, with interest at Libor plus 750 basis points; investors will earn a rate of around 12%.
    • Tesla's (NASDAQ:TSLA) China car registrations jumped 450% in March from February, according to auto consultancy LMC Automotive.
    • The automaker's China registrations vaulted to 12,709 units, from February's 2,314, LMC says.
    • That follows news that Tesla started selling two more versions of its Model 3 vehicle (a Long Range and a Performance model) from the Shanghai plant.
    • Goldman Sachs is back in the game of rating Tesla (NASDAQ:TSLA) with a fresh Buy rating slapped on the EV automaker tonight.
    • "We are positive on Tesla because we believe that the company has a signi?cant product lead in EVs, which is a market where we expect long-term secular growth," notes Goldman Sachs analyst Mark Delaney.
    • Delaney points to the combination of Tesla's product leadership and early mover advantage. He also sees the Model Y helping Tesla to have more traction in the important SUV and crossover market with the price set to be lower than the Model X.
    • On valuation, Delaney says compared to other auto and technology companies, Tesla is attractively valued given its revenue growth. "We also note that Tesla’s EBITDA margin in 2021E screens relatively well vs. these peers," he adds.
    • Goldman assigns a price target of $864 on Tesla in its return to coverage.
    • Shares of Tesla are up 5.10% AH after running up a 9.05% gain during the regular session.

    • Deep divisions in the Texas oil industry came to the surface Tuesday as regulators heard advocates as well as opponents of a plan to cut the state's oil production by 1M bbl/day.
    • Urging support for the proposal, Pioneer Natural Resources (NYSE:PXD) CEO Scott Sheffield said the Texas Railroad Commission that the industry is facing a historic economic collapse with $3-$10 oil in coming weeks if no action is taken.
    • Without regulation, "we will disappear as an industry like the coal industry," Sheffield warned.
    • Texas shale producers Pioneer and Parsley Energy (NYSE:PE) want the state regulator to cut production, while many larger companies including Exxon Mobil (NYSE:XOM) and Occidental Petroleum (NYSE:OXY) have opposed the proposal.
    • Some opponents offered forecasts every bit as gloomy as supporters, including Diamondback Energy (NASDAQ:FANG) CFO Kaes Van't Hof, who told the panel that his company would "let all of our service providers go" if it is required to reduce output.
    • Enterprise Products Partners (NYSE:EPD) co-CEO Jim Teague questioned the motivations of some of the companies seeking cuts, though he did not name the firms, suggesting they may want a government order so they can get out of some contracts.
    • Marathon Oil (NYSE:MRO) CEO Lee Tillman argued that the market will resolve the oil glut in time, noting producers are planning to cut production on their own by as much as 50%, and that regulators should not be quick to "toss aside free market principles."
    • The commissioners, who are expected to vote on the proposal on April 21, did not signal their leanings.
    • Meanwhile, a group of Oklahoma oil producers has filed a request with that state for a hearing to consider production curbs; it is set to occur May 11.
    • Other top Permian producers include CVXCXOEOGAPAXECRDS.ADVNNBL
    • Frontier Communications (NASDAQ:FTR) has filed for Chapter 11 bankruptcy.
    • The company announced a restructuring support agreement with creditors (representing more than 75% of $11B in outstanding unsecured bonds) where it secures commitments for $460M in debtor-in-possession financing.
    • That, combined with cash on hand, provides more than $1.1B in liquidity.
    • The news comes ahead of debt payments due tomorrow.
    • The plan is intended to reduce debt by more than $10B.
    • Frontier expects to continue providing service to customers without interruption. Trade vendors will be unimpaired for both pre- and post-petition obligations.
    • Concerns about a long period of store closings has J.C. Penney (NYSE:JCP) exploring filing for bankruptcy protection, sources tell Reuters.
    • While the company has enough access to cash to survive for a few months and rescue financing is still an option, the long-term financial position of JCP continues is becoming even more untenable amid the uncertainty over when sales will return.
    • JCP -14.05% AH to $0.27.
    • JetBlue (NASDAQ:JBLU) says it will receive $685M in grants and $251M in direct loans from the government through the CARES Act.
    • Details: The money we receive will be split into two different portions, one which needs to be paid back and one that does not. The portion that we do not have to pay back covers about 56% of what our payroll costs were during the same six months last year. The second portion will come in the form of a low-interest loan and will have to be paid back to the government starting in October. In addition, the U.S. Government will also receive a limited number of warrants, which are the right to buy shares in JetBlue at a pre-determined price. We must also continue to provide a minimum level of domestic air service in exchange for the funds."
    • JBLU +16.23% after hours to $10.74.
    • Source: Press Release
    • Gold futures extended their rally today to hit the highest in more than seven years, gaining support from concerns that the coronavirus will have a deep effect on the global economy and whack corporate earnings.
    • June Comex gold settled +0.4% to $1,768.90/oz. after hitting an intraday peak at $1,788.80, and both figures were the highest values for a most-active contract since October 2012.
    • Gold has been driven higher by "the huge amount of money that central banks are currently pumping into the market," which will put individual countries "in debt up to their eyeballs," Commerzbank says.
    • On Monday, volumes in SPDR Gold Shares (NYSEARCA:GLD), the largest bullion-backed ETF, surged above 1K tons to the highest since mid-2013.
    • American Airlines Group (NASDAQ:AAL) says it was approved by the for Department of the Treasury for $5.8B in financial assistance.
    • The funds will come through a $4.1B direct grant and a low-interest rate loan of $1.7B. In addition to the $5.8B, American expects to separately apply for a loan from the U.S. Treasury of approximately $4.75B.
    • American Airlines Group will file a form with the SEC, which will include additional financial terms of the payroll support program, as well as the warrants proposed to be issued in connection with both the payroll support program and the loan program.
    • By comparison, American ended the day with a market cap of $4.93B.
    • AAL is up 8.44% in AH trading.
    • Southwest Airlines (NYSE:LUV) confirms that it reached an agreement in principle with the Department of Treasury on payroll relief.
    • The company's expected disbursements under the program total more than $3.2B, consisting of more than $2.3B in direct payroll support and a nearly $1B unsecured term loan. The loan is expected to have a 10-year term with low interest rates and may be repaid at any time prior to maturity at par. The loan is expected to include approximately 2.6M warrants issued to the U.S. Department of Treasury.
    • Southwest says it agreed to no involuntary furloughs and reductions in employee pay rates and benefits through September 30. Buybacks are off the table until September 30, 2021.
    • LUV +4.95% after hours to $36.50.
    • Source: Press Release
    • Marriott (NASDAQ:MAR) today sold $1.6B in 5-year paper priced to yield 5.75%, reports Bloomberg. The notes are expected to be rated Baa3/BBB-
    • The company had originally hoped to raise $1B at about a 6% yield.
    • "Two weeks ago nobody wanted to own AAA munis or corps," notes David Schawel, who says the order book for Marriott's paper was north of $20B. "What a world."
    • The American Petroleum Institute reportedly shows a build of 13.4M barrels of oil for the week ended April 10, its third consecutive increase.
    • Gasoline inventories reportedly show a build of 2.23M barrels, distillate inventories show a build of 5.64M barrels, and Cushing inventories show a build of 5.36M barrels.
    • Data from the Energy Information Administration to be released tomorrow are expected to show crude inventories rose by 10.1M barrels last week, according to analysts polled by S&P Global Platts.
    • May WTI crude recently traded electronically at $20.75/bbl after settling at $20.11 today on Nymex.

    • Alaska Airlines (NYSE:ALK), Allegiant Travel (NASDAQ:ALGT), American Airlines (NASDAQ:AAL), Delta Air Lines (NYSE:DAL), Frontier Airlines, Hawaiian Airlines (NASDAQ:HA), JetBlue (NASDAQ:JBLU), United Airlines (NASDAQ:UAL), SkyWest Airlines (NASDAQ:SKYW) and Southwest Airlines (NYSE:LUV) have all told the Treasury Department that they plan to participate in the Payroll Support Program, per a statement by Treasury Secretary Steven Mnuchin.
    • None of the companies can furlough employees as part of the deal.
    • If the $25B in grants is allotted as expected, the government is estimated to end up owning about 3.0% of American Airlines, 2.3% of United Airlines, 1.3% of JetBlue (JBLU), 1% of Delta Air Lines (DAL) and 0.6% of Southwest Airlines (LUV).
    • Energy shares (NYSEARCA:XLE) have slipped to the bottom of the S&P sector standings as WTI crude futures plunge as much as 11% before settling -10.3% to $20.11/bbl (CL1:COM), as demand weakness exacerbated by efforts to stem the spread of COVID-19 offsets the production cut agreement among major oil producers.
    • Some of the biggest movers include SM -19.3%CLR -8.4%SSL -7.5%DVN -6.6%APA -5.9%FANG -4.2%MRO -3.5%HES -3.4%OXY -3%.
    • Global oil producers worldwide are expected to cut overall output by ~19.5M bbl/day, or nearly 20% of world supply, but those commitments – which include voluntary cuts that will happen gradually in places such as the U.S. – will not be enough to reduce the growing worldwide supply glut.
    • "With demand destruction forecasts ranging from 15M-22M bbl/day… and these measures not even coming into place until May, we are likely to see a substantial overhang in the short-term," says Nitesh Shah, director of research at WisdomTree Investments.
    • "Oil prices will hover around current lows until containment measures are lifted," says Caroline Bain, chief commodities economist at Capital Economics.
    • Virgin Galactic (SPCE +4.0%) is soaring after Sir Richard Branson's Virgin Orbit lands a government contract related to its rockets.
    • It's unclear if the buying burst is a case of mistaken identity or investors seeing the Virgin Orbital development as also a positive for the space tourism company.
    • Bloomberg reports that options traders are also excited over the development, with call options 3X normal activity.
    • NBCUniversal is set to unveil an early preview of its Peacock streaming service tomorrow, for customers of parent Comcast (CMCSA +2.6%).
    • That's three months before its official national launch.
    • Its Xfinity X1 and Xfinity Flex customers will be able to get their peek at the offering at no additional cost.
    • Peacock has planned a launch that includes a free tier (with more than 7,500 hours of movies and shows), along with a Peacock Premium offering ($4.99/month), and a premium ad tier atop that for another $5/month.
    • The latest Nielsen data highlights dramatically the pantry-loading effect by U.S. consumers.
    • Tracked channel growth by food company (dollar sales year-over-year for 4-week period ending April 4): Campbell Soup (NYSE:CPB) +68%, B&G Foods (NYSE:BGS) +66%, McCormick (NYSE:MKC) +63%, General Mills (NYSE:GIS) +63%, Kraft Heinz (NASDAQ:KHC) +50%, Flower Foods (NYSE:FLO) +48%, Post Holdings (NYSE:POST) +42%, ConAgra (NYSE:CAG) +37%, Mondelez International (NASDAQ:MDLZ) +37%, Kellogg (NYSE:K) +37%, Nestle (OTCPK:NSRGY) +33%, Danone N.A. (OTCQX:DANOY) +25%, Dean Foods (NYSE:DF) +13%, Hershey +11%, Simply Good Foods (NASDAQ:SMPL) +0.7%.
    • All the food companies saw sales cool off during the last week of the tracking period from the pace of the three weeks prior.
    • Wells Fargo's John Baumgartner on the sector: "Significant uncertainty abounds re: COVID's prolonged impact but we expect Food to outperform vs. S&P and Staples peers given: (1) limited intl. supply chain risks vs. other S&P sectors, (2) benefits from increased at-home consumption, (3) defensive rotation/Food’s historical outperformance vs. S&P 500/Staples peers during economic dislocations."
    • Telsey Advisory Group believes Chipotle's (CMG) same-store sales outperformed the Black Box Industry index in both March (industry -28.3% vs. CMG -9 to -10%) and Q1 (industry -8.6% vs. CMG +2.0%).
    • Despite the encouraging data point, analyst Bob Derrington says Chipotle's premium valuation and ongoing uncertainty keep the firm waiting for a more attractive entry point.
    • As a short-term positive, Chipotle is seen as better-positioned to withstand the impact of COVID-19 than most peers due to its history of dealing with system maladies, management's tech-driven focus and the chain's broad choice of service formats (Carryout, Rapid Pickup, Delivery, Chipotlane).
    • There is also some housekeeping to do with the impact of the pandemic needing to be factored in. Telsey lowers its FY20 EPS estimate on Chipotle to $11.00 from $17.15 and expects FY20 same-store sales to show a 5% drop vs. +5.1% prior view.
    • A Market Perform rating on Chipotle and price target of $720 are kept in place by Telsey. The average sell-side PT on CMG is at $811.26.
    • Netflix (NASDAQ:NFLX) is seeing another healthy gain today, up 4.7% - this time alongside a small target bump at Imperial Capital, which is gaining optimism ahead of Q1 results.
    • Yesterday Netflix reached its highest point in a year and a half amid a higher target from Canaccord; today it's taken out its all-time high.
    • Netflix has "largely debunked" worries about forced moves from the also-successful Disney Plus (DIS +2.9%), including price cuts, or any significant taking of market share, Imperial says.
    • “This is one of a very few names in the S&P 500 which, for the most part, is impervious to the derivative effects of COVID-19,” it says, pointing to strong performance amid "the most intense market volatility" since the Global Financial Crisis of 12 years ago.
    • The firm's bumped its price target to $447 from $438, now implying 7.6% further upside from today's lofty heights.
    • Wedbush analyst Seth Basham is cautious on the home improvement sector on his view that expectations for a V-shaped recovery are too optimistic, despite the recent jump in comparable sales for Home Depot (HD -4.2%), Lowe's (LOW -5.2%) and Tractor Supply (TSCO -4.0%).
    • Basham advises investors to keep track of new housing data. "We note that HD and LOW U.S. comps correlate well to both existing home sales volume growth and median home price growth as well (on a two quarter lagged basis) and correlate even stronger to existing home sales $ turnover (volumes multiplied by home prices) y/y change on a trailing two quarter average basis (0.81 correlation since 2000)," he notes.
    • Wedbush sees "substantial risk" for Tractor Supply and downloads the retailer to Neutral. "We also see more risk for HD relative to LOW given an extreme valuation multiple gap and likelihood that HD’s comps suffer more than LOW’s in a recession given its ~1500 bps higher sales mix exposure to the more cyclical Pro customer segment," he adds. Pro sales at Home Depot are 45% of the total vs. 20% to 25% at Lowe's.
    • The firm keeps a Neutral rating on Home Depot and Outperform rating on Lowe's.
    • Stocks start with sharp losses as weak economic data and bank earnings reignite concerns over the impact of COVID-19 on the U.S. economy; S&P 500 -2.6%, Dow and Nasdaq both -2.3%.
    • U.S. retail sales during March plunged by a record 8.7%, the largest one-month decline since the Commerce Department began tracking the data in 1992, and the Empire State Manufacturing Index plunged to -78.2, surpassing the index's prior worst reading of -34.3 during the 2008-09 financial crisis.
    • The data "points to a very severe recession because this is just the beginning of a series," says Peter Cardillo, chief market economist at Spartan Capital Securities. "The consumer is not spending."
    • European bourses also are deep in the red, with Germany's DAX -3.2%, France's CAC -3.1% and U.K.'s FTSE -2.6%; in Asia, Japan's Nikkei -0.5% and China's Shanghai Composite -0.6%.
    • In the U.S., bad news continues to come in from the big banks, which are offering an early look at the damage the coronavirus downturn is set to inflict upon corporate earnings.
    • Bank of America (-6.1%), Citigroup (-3.5%) and Goldman Sachs (-2.4%) all missed earnings expectations today and increased their loan-loss reserves to prepare for a rough road ahead.
    • All 11 S&P sectors trade lower, with energy (-5.3%), financials (-4%) and materials (-3.5%) suffering the most, while healthcare (-1.4%) is down the least thanks to an earnings beat from UnitedHealth (+3.3%).
    • U.S. Treasury prices are higher, sending the two-year yield down a basis point to 0.21% and the 10-year yield 8 bps lower to 0.67%; U.S. Dollar Index +1% to 99.83.
    • WTI crude oil -0.8% to $19.96/bbl, as demand fears continue to weigh on prices.
    • Still ahead: business inventories, NAHB housing market index, EIA petroleum inventories, Fed Beige Book

  14. Overall news is not that bad but rally was way overdone so this is a normal pullback. 

    2,450 + 10% is 2,700 (2,695) so 2,950 would be 20% line and 2,820 is 15% line. 

    But what we really care about is the bigger picture and we know 2,850 is our old Must Hold and 2,300 (2,280) is our -20% line and 2,550 (2,565) is our -10% line and that's the range we expect to be in.  

    Once things calm down, we should range up or down 10% around 2,850 for the 2nd half of the year but I think for the next few months, it's more likely we stay between 2,550 and 2,850 and consolidation there would be nice and healthy for a good move back to the top of the range that's more likely to stick.  

    If you are a real long-term investor, /ES is more 800, 1,600, 2,400, 3,200 and this was the leg from 1,800 to 3,200 that didn't have enough consolidation at 2,400 to give it a foundation so the 1,600-point run from 1,600 to 3,200 has a 20% weak retrace to 2,560 and that is still bullish – it's just consolidating for a proper move over 3,200 down the road but probably by 2022.


  15. Another blockbuster oil build:

    • EIA Petroleum Inventories: Crude +19.2M barrels vs. +11.7M consensus, +15.2M last week.
    • Gasoline +4.9M barrels vs. +6.4M consensus, +10.5M last week.
    • Distillates +6.3M barrels vs. +1.4M consensus, +0.5M last week.
    • Futures (CL1:COM -1.1%)

    Russia: The Most Influential Non-OPEC Member | ????????

    MEED | Iraq exported 3.33 million barrels a-day of crude oil in April

    That's about 5,000 barrels – 200x is 1Mb.  I have no idea where they are going to put it all!  

    It's been a very bad 2 years for oil producers. 


  16. Phil/CL – Just so that I am clear on what you are thinking. At 20 (now 19.6), you are expecting a short term bounce for the next few days (before the May contract expires)? And for the long term, you are playing USO?

    (Just went long at 19.65; I trade QM, which is half the lot of CL, and more importantly is cash-settled, in case I ever forget to roll)


  17. /CL/RN – I expect an eventual bounce.  Next week we'll have to roll if we're still in them.  The /CLK20s (May) are $19.50 and the /CLM20s (June) are $26.25, which is a huge spread that I think will come down at some point.  Maybe the Ks will go up or maybe the Ms will come down – we'll have to see. 

    And USO is in the STP, which now looks like this:

    So that's $555,826 and the LTP is $504,835 and that's $1,060,661, down $80K from yesterday's $1,144,550 and I think that's because we moved our SQQQs out to 2022 (so they don't move much on a quick dip) and also the rising VIX is killing the LTP, which dropped 20% from $601,465 yesterday morning.

    It is possible, however, that earnings will be so horrific that the LTP positions will all fall apart – so we'll have to keep an eye on that!  


  18. Phil – let's do the 100 coin drop per person ourselves? (the feds will never do it, they need hand holding)


  19. Phil/CL

    GOOD MORNING!

    I am not into politics but sometimes, drastic observations and actions of some politicians cannot be ignored…or we do at our own risk of peril…so, shot off a number of emails to our politicians. They are not doing enough to educate the public on whats reality. For example, why does Trump have exclusive rights to Twitter? Why can't the democrats not use it?….ok, done with venting

    my first foray into commodities futures..bought CL at 19.46. Will DD at 19, stop at 18.6

    I don't know how to roll, when to roll or when these futures open and close during day/week..have some home work to do


  20. Butterfly Portfolio Review:  $406,394 is up 100% and that is LOWER than we were on 3/5, when we were up 126% but not really as we added $100,000 to the portfolio when we were down 49.2% because we KNEW those prices were ridiculous and we HAD to take advantage of them.  We're now up 100% on $200,000 ($200,000) vs having been up 126% on $100,000 ($126,000).  That's why we put the money to work on 3/23, catching pretty much the dead bottom of the market (hopefully).

    It's very unusual that we make changes to the Butterfly Portfolio other than expiration weeks but this was an opportunity we were not willing to let pass us by.  As I said at the time:

    Butterfly Portfolio Review: $50,751 is down 50% and we are going to add $100,000 to this portfolio so we can make some aggressive moves.  It is not our intention to have a bullish Butterfly Portfolio but you have to play the hand you are dealt and these are some ridiculously low prices we're able to take advantage of.

    I also had a great list for Jeddah in that post:

    $10K/Jeddah – I'd put $400 into 1,000 shares of FTR (0.40 – now 0.26) – just in case!  Another $360 in NAK (0.36 – now 0.51) as you can afford to gamble a bit when you are young.  Then there's F at $4.14 (now $5), X at $5.76 (now $6.36), HOV at $6.85 (now $9.84), CLF at $3.38 (now $3.76), SPWR at $5.93 (now $6.35), IMAX at $10.50 (now $10.09), GPRO at $2.51 (now $2.71), BBBY at $4.70 (now $4.63)… By sticking to things that are cheap, he can afford to buy 10% more whenever he gets $1,000 and all those stocks can double or triple in a recovery and not likely to lose more than 1/2 if they avoid BK, which would make the drip investing more powerful.

    It's not hard to make money if we wait PATIENTLY for good entries but we also have to take action when we do get those entries presented to us. 

    Keep in mind, in the Butterfly Portfolio, our primary goal is to sell premium on a quarterly basis.  Don't forget that and start dreaming of making big returns – this portfolio is from Jan, 2018 so making about 50% a year – we're not swinging for the fences in this one!   

    • AAPL – While I'm thrilled with the new position, the point is to make money and not gamble on earnings, which are 4/30.  They will probably be down about 20% from last year, which was $11Bn and next Q will be down more so let's say $16Bn instead of $22Bn and then back to $12Bn in Q3 and maybe $25Bn in Q4 so that's $53Bn vs $55Bn last year and last year they finished strong at $300 but I think that's a stretch to get back to.  July $300 calls can be sold for $12.50 so let's sell 10 of those for $12,500 and we'll sell more if earnings disappoint but that's $4.16 per long and that should be enough to roll down to the $190 calls if things go lower and then another sale and another roll and we'll be in the $180/260 spread.  So we're almost hoping Apple disappoints so we can improve our position!

    • AMZN – They are even up today.  $2,300 is 100x earnings at $1.2Tn so I'd say that's a good top but we already sold the May $2,000s but fortunately only 2 and they are now $319 ($63,800) and we can roll them to 4 short June $2,300 calls at $151 ($60,400) and we'll sell 2 June $2,100 puts for $77 ($15,400) to balance things out a bit – just in case they do pop higher the short puts will pay for the next roll.  

    • DIS – We added a lot of exposure on the puts and we made our money back so I want to take both sets of puts off the table and see what earnings and guidance (May 5th) look like for DIS before we make any bets besides the low-risk bull call spreads.  I'm worried it may be a while before movies or the parks can reopen and DIS has ESPN (no sports), cruises and hotels too!

    • MDLZ – They should be doing fine.  Earnings are 4/27 and I know we stocked up on Mac and Cheese, Oreos and Cadbury Bars (my personal treat) so I think sales won't be terribly impacted but again – now we're back to 20x earnings and that's plenty high enough.  Let's remove the risk of the short $52.50 puts and sell 15 (1/2) June $52.50 calls for $3.75 ($5,625).  If they go up, we can do a 2x roll to a higher strike and, if they go down, we sell 15 more calls for $5,000 and we then have $10,000 ($3/share) to roll the $45s to the $40s (and we can sell more puts).  

    • MJ – Clearly the $18 calls will expire worthless so we can sell 20 (1/3) the July $11 calls for $1.60 ($3,200) to put a little cash in our pockets.  Worst case is MJ pops and we only get net $1 for 20 spreads we paid $1.05 for but flat or down we collect $3,200 against our net $10,150 credit position.   We have 6 more quarters to sell so hopefully $18,000 plus whatever value the spread holds.  

    • WHR – Those June calls will certainly go worthless and earnings are 4/30 and we can sell 5 (1/3) June $105 calls for $5 ($2,500) so no reason not to do that.  

    • X – This one I think we need to give some time.  Earnings around 4/30 and they will be a disaster but BAILOUT!, so we'll have to see. July $7s are 0.75 so not really worth selling – may as well watch and wait.  

    That's $35,825 worth of premium we sold for the quarter against our $400,000 portfolio so premium selling alone can generate well over $100,000 per year (25%) PLUS whatever gains we make if our positions are successful.   

    That's essentially the strategy for our new hedge fund, which aims to distribute 2% per quarter, which beats the Hell out of what banks or most retirement accounts pay you.  I think I got back to everyone who was interested but, if I missed anyone, contact Greg (at philstockworld dot com) 


  21. Coins/BDC – Do you have everyone in America's address?

    Thanks for participating in Democracy Maya.  I wish more people would try it.  I was working with a liberal group on twitter called @Thommy_Paine but the account got suspended for violating twitter rules on political speech.  Somehow Trump is exempt.  

    As to the Futures,  those contracts expire next week and you'll need to close them by Monday or Tuesday the latest.  You can't "roll" – you just have to close April and open a June – if you choose to continue.  


  22. Lets put out the Bat sign to Pharm and get his take on possible winner in this environment. I hope he is settling well into Beantown, that is quite a change from North County.


  23. Thanks Phil


  24. Phil/JNJ

    Any thoughts on JNJ?


  25. JNJ/Wing – Can't 'cause it's Webinar Time!



  26. FYI - Federal banking agencies to defer appraisals and evaluations for real estate transactions affected by COVID-19

    So, in essence, there does not exist a procedure, nor was any suggestion made regarding how to recover capital loaned by the bank if after 120 days the collateral for which it was expensed does not measure up to the actual appraisal.  



  27. Even Google and Facebook may be facing an ad slump




  28. Phil / CLF – Announced output cuts, and div cuts.   What are your thoughts on this..   What is a good short term call to cover this say $6 or $7 ?  

    Thanks


  29. Phil – FTR still worth holding with bankruptcy?


  30. Phil

    Where do you think UNG will be at Jan 21  ?

    Thanks


  31. JNJ/Wing – I think they have been very sloppy in their R&D and that's why they keep getting fines and recalls and lawsuits so it's a culture I am not interested in.  Also, not at all cheap at $147 as that's almost $400Bn and they make about $20Bn if all goes well (but it might not this year) so 20x is not all that exciting – especially compared to GILD or PFE at 13x.  

    Appraisals/Pharm – So they are just going to randomly buy properties with no idea of what they are worth?  That seems nuts.  Excuse me, I have to go get a $100M home loan…

    CLF/Batman – I'm glad they cut the dividend but it's making all the dividend funds bail.  We knew they'd have a lot of pain before turning around.  Not sure what you mean by short-term call to cover.  We have this in the Earnings Portfolio:

    CLF Short Put 2022 21-JAN 7.00 PUT [CLF @ $3.77 $-0.51] -10 10/22/2019 (646) $-2,350 $2.35 $1.60 $1.05     $3.95 $0.15 $-1,600 -68.1% $-3,950
    CLF Long Call 2022 21-JAN 3.00 CALL [CLF @ $3.77 $-0.51] 50 3/23/2020 (646) $8,000 $1.60 $0.35     $1.95 $-0.15 $1,750 21.9% $9,750
    CLF Short Call 2022 21-JAN 7.00 CALL [CLF @ $3.77 $-0.51] -50 4/9/2020 (646) $-5,000 $1.00 $-0.18     $0.83 $-0.06 $875 17.5% $-4,125

    We just sold the $7 calls to cover when they hit $1 last week (per our last review) but now they are back to 0.80 if you were greedy and missed the chance to sell on the run-up.  Other than that, we could care less until next year.  

    FRT/Coulter – We dumped them ages ago but, if you are still in at 0.26 – you can always hope for a miracle like CZR, which has more than doubled up since bankruptcy for their shareholders but that's the exception – mostly you get nothing.  

    UNG/QC – Winter, hurricanes, etc?  I would think we get back to $18 so it's not a bad long but terrible decay in that ETF. 


  32. C lf has a 1 to 200 reverse split and they have laid off all their workers until demand picks up. Saw it on the local news last night. How that affects the options no clue.


  33. Phil / Hedges

    i know, literally the never ending question. I appreciate the time you took today on the subject.  

    Lets say you're looking for 50% downside protection.  The market drops 20% and my ultra shorts are 100% in the money.   I have 100k portfolio and i lose 10k instead of 20k. 

    but What is a number you would personally be happy with paying for that protection and hopefully losing as the market rallies.  Thats the part im having trouble with.  What is good value in percentage terms?  5%, 8%?

    thanks!


  34. Phil / clf.  I thought that in my ne of the portfolios you had uncovered them    Anyway.  5he reason for my question was I have 150 Jan ‘22 $5calls. Half covered by Jan 21 8 calls. Is there a short caller I could cover the rest with.


  35. CLF/Pirate – 1/200?  That's extreme.  

    Paying/Potter – SQQQ Sept $12 ($4.20)/$22 ($2.60) bull call spread is $1.60 and pays $10 if the Nas falls 20% so + $8.40 (525%) on the hedge.  So, if you have a $100,000 portfolio that you think will lose 20% on a 20% QQQ drop, then if you put $3,200 into 20 of those, you get $20,000 back if the Nas falls and you can't possibly lose more than $3,200 – even if you totally neglect it.

    CLF/Batman – We did uncover them at some point and then we re-covered them.  You shouldn't need me to tell you not to be greedy!  cool

    Tuesday Market Workshop – Portfolio Protection Part 5 – Don’t Get Excited

    Cleavland Cliffs (CLF) – Nice pop and we are naked long, which we hate to be as that makes us the sucker paying the premiums.  The 2022 $7 calls are 0.80 and I think we should ask for $1 as that would put $5,000 back in our pocket and take all of our cash for this trade off the table so we end up with a free $25,000 spread we can ignore for 2 years.  That's the kind of position I love to have in our portfolios!  

    I know, you never actually read the posts, right? 


  36. CHK had the 200 split


  37. Phil / CLF – I actually saw that and never got my order  filled….  Not a total loss I'll take .85 and slink away should still be OK   Thanks.



  38. Trump told testing is key to reopening during business panel call


  39. Evidence of virus’ effect on US economy grows more ominous




  40. Powerful GOP allies propel Trump effort to reopen economy



  41. Apple rolls out cheaper iPhone as pandemic curbs spending


  42. I Took the Antibody Test. And Yet.




  43. China tries to revive economy but consumer engine sputters


  44. Medical intelligence sleuths tracked, warned of new virus


  45. IMF says half the world has asked for a bailout



  46. Trump’s Flounder Period