So much to talk about today.
I told you so on TSLA! That has to be first. Aside from the FACT (finally, facts!) that the company is performing miles below anything that can possibly justify the lofty PRICES (never values) that the stock rose to, now we have a 3rd Model S on fire, this time in Nashville, where they usually wait to get home before they barbeque the road kill.
Fortunately, no one was injured but the RUMOR (not sure) is that this was NOT a collision so, either another road debris fire (they have that outside of California, you know) or possibly just spontaneous combustion. In fact – and this is purely speculation – it may be that TSLA's drastic slowdown in production growth has something to do with a flaw in the battery packs that may ultimately lead to a recall.
If that is the case (and it's only speculation based on some vague and possibly coincidental signs), then this may just be the beginning of TSLA's big correction, Yes, we are super-short TSLA in all of our portfolios and have been for ages. Just yesterday I told you we liked the Jan $120 puts and they opened at only $2.40 and finished the day at $4.30 for a very nice 82% gain on the day (you can get these trade ideas delivered to your mailbox daily, by the way). In our Member Chat room, we flipped into the Jan $165/155 bear put spread at $5.50 and those will return $4.50 (82%) if TSLA stays below $155 through Jan.
We're also short Elon's other overbought company, SCTY, and they dropped like a TSLA last night, which will be fantastic for the Nov $62.50 puts we bought for $7 in our Short-Term Portfolio just two weeks ago. This stuff is not that complicated folks – we find a stock that's too expensive and we short it, we find a stock that's too cheap and we go long. We use the options to leverage our bets as well as to hedge them. That's the whole "system".
Now, on to the next soon to be overbought stock – Twitter! They IPO today at $26 and we hope they go to the moon so we can short the crap out of them at $40 or better. With just $500M in revenues (no profits, silly!), Twitter is being given a $14.4Bn market cap (about what TSLA will fall to) and, as you can see from this nice WSJ chart – that will make it the most ridiculous IPO in ages – we really are in a 1999-style bubble if we're going to value these guys at $14.4Bn+.
We'll see where they go. Does the market have the appetite for another company valued at hundreds of times earnings? Sure, why not? The ECB just added to the FREE MONEY pile by dropping rates 50%, from 0.5% to 0.25%, now matching the near-zero US rates. That sent the Dollar up 1% to 81.40 but our Futures jumped up half a point as well as any free money is good free money, as far as Global Equities are concerned.
We also just got way better than expected Q3 GDP estimates at 2.8% vs 2% expected by leading economorons, miles above last Q's 0.6%. HOWEVER, this particular GDP report is DEFECTIVE, as it is based on INCOMPLETE data resulting from the Government shut-down screwing things up. It is always an ESTIMATE at best – this time it's just more of a guess than usual.
Another interesting tidbit is that prices paid (inflation) leaped from up 0.2% in Q2 to up 1.6% in Q3 so, in effect, there weren't really many more goods being produced – we just paid more for them. Even without food and energy prices, core pce was up 1.5% – possibly the onset of runaway inflation or, maybe, just bad data.
We're still shorting that 1,110 line (and the 1,100 line after that) on the Russell (/TF) and the 1,770 line on the S&P (/ES) in the Futures as well as 15,750 on the Dow (/YM) and now $95 on oil (/CL) as the rising Dollar is no good for them and we already rallied in expectation of all this cool stuff happening and now we need to start worrying that things are going so well that our Fed may decide it's taper time. Dollar over 81.50 gives us a positive sign to short!
Aside from tomorrow's Non-Farm Payroll Report, we hear from the Fed's Stein (dove) early this morning and tomorrow we get Lockhart (hawk) at 12, Bernanke (dove) at 3:30 and Williams (super-dove) at 4pm. The 3:1 dove-fest is accompanied by a whopping $5Bn shot of POMO in Friday to cap off a $15Bn week.
To give you an idea of how insane that is – next week's TOTAL POMO is $7Bn – they came in guns blazing this week and the market has responded and we've taken our licks but will be rolling and repositioning our short-term bear plays for what's likely to be a wild options expiration week next week. On Monday, we'll probably do some sort of live audio feed from our Las Vegas Live Trading Conference – I look forward to seeing many of you there!
