I remain committed to the view that the price of oil will come back down and that energy stocks can be shorted.
The divergence between tech and cyclicals. How does it resolve itself?
Inflation on the ascent. Bond short? Working on it!
A Tom Collins with Tim Collins?
Thanks to Barron's Randy Forsyth!
- The Russell Index looks like machines/algos have targeted it -- in either direction! Weird action.
- The U.S. dollar declined.
- Crude fell by $1.03, to $42.70. Nat gas declined by 7 cents.
- Gold rallied by $9.10, to $1,239.
- Agricultural commodities continued their price rise: wheat +3.50, corn +8.25, soybeans +13.50.
- Lumber +4.50.
- Bonds were relatively quiet, with little change in the 10- and 30-year bond yields.
- Municipals were unchanged. Closed-end municipal bond funds were down on the day -- I would be out of the space as rates might now be moving higher ... finally. I am considering going long ProShares Short 20+ Year Treasury (TBF) , non-levered iShares 20+ Year Treasury Bond ETF (TLT) short.
- High-yield bonds were lower.
- Blackstone/GSO Strategic Credit Fund (BGB) was flat.
- Banks sold off, but not materially so. I think this trend could continue. Gun to my head, Financial Select Sector SPDR ETF (XLF) short will work for a trade now.
- Life insurance got schmeissed -- the object of my disaffection. Lincoln National (LNC) and MetLife (MET) down large fractions.
- Brokerages were weak. Morgan Stanley (MS) down 20 cents and Goldman Sachs (GS) down $1.95.
- Autos sold off.
- Oil stocks suffered from the commodity's weakness. Schlumberger (SLB) was off $1.75 and Exxon Mobil (XOM) down 80 cents. (Good for me).
- Retail stocks were mixed.
- Media mixed. Comcast (CMCSA) was down a dime and Disney (DIS) was up 75 cents.
- Biotech down. iShares Nasdaq Biotechnology ETF (IBB) was down $2.40. Allergan (AGN) turned lower and Valeant (VRX) was off more than 2%.
- My biotech basket seems like it is rolling over. A lot of people buying this group on the basis of it being oversold; I wouldn't, but that's just me.
- Consumer staples were lower, led by a downgrade of Kimberly-Clark (KMB) . Cyclicals are showing some tired action -- General Electric (GE) , as an example.
- In miscellaneous stocks: Potash (POT) reversed lower from early strength, Twitter (TWTR) is still for twits and Radian Group (RDN) was stable. Oaktree Capital Group (OAK) , a fixture on my Best Ideas List, is holding well.
- Caterpillar (CAT) was down $1.50 on a dumb upgrade (my view!) from Goldman Sachs. My fav large cap, DuPont (DD) , is holding well after outsize gains this year.
- (T)FANG was mixed, with Netflix (NFLX) and Tesla (TSLA) -- my two shorts -- down $2.35 and $1.90, respectively.
- Apple (AAPL) continues weak -- down 60 cents -- after multiple lower lows. I plan to stay short this "value trap" into tomorrow afternoon's earnings report.
- NOSH nothing.
- CRABBY nothing, either.
Here is some good stuff on RealMoneyPro:
Starbucks Looks Lukewarm to Me
I'm maintaining my short of Starbucks (SBUX) after last week's slight earnings miss relative to consensus expectations -- and as you might recall, I put SBUX on my "Best Short Ideas" list on Jan. 29 at $60.60.
Here are my concerns and observations regarding the coffee giant's latest earnings:
- Slowing U.S. sales and comps. Comps in SBUX's Americas segment slowed quarter over quarter to 50 basis points below their two-year average. Looking ahead, large comps (+4%) will also challenge forward sales.
- Moderating food sales. The contribution that food makes to comps is moderating, down to 16% in the latest period from a previous 20%. Food's contribution to aggregate comps also fell to 2% from an earlier 3%.
- Earnings quality. The quality of Starbucks' earnings is less than meets the eye. The company repurchased about $1.6 billion of shares in its latest quarter, or more than triple the amount from a year ago. Without the buyback, SBUX would have earned just $0.38 per share, falling below Wall Street consensus.
- A weakening global economy. SBUX investors' greatest fear should be the possibility of moderating global economic growth (or even a recession). If either of those happen, demand elasticity for the coffee chain's premium-priced products will face pressure.
The bottom line: Slowing growth at a peak multiple seems to like a bitter combination for investors to swallow.