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Putting more Banksters in charge.
That seems to be the direction things are going now that the Top 1% have taken over every aspect of our lives. In addition to consolidating their hold on our Government, the media continues to consolidate as Sinclair Broadcasting (SBGI) is taking over Tribune Media (TRCO) in a $4Bn deal making Sinclair now the single largest owner of US local TV stations (where you get your news).
Sincleair is controlled by the Smith Family, with all 4 sons of Julian Smith serving as Executive Directors and David Smith is the CEO – a real family affair. Sinclair is famous for broadcasting "Stolen Honor," a propaganda documentary that falsely accused John Kerry of causing prisoners of war to be mistreated right before the election – pre-empting their prime-time programming across the country in order to influence the election.
When Sinclair's Washington Bureau Chief, Jon Lieberman criticized the broadcast, saying: "It's biased political propaganda, with clear intentions to sway this election … For me, it's not about right or left—it's about what's right or wrong in news coverage this close to an election," he was fired. In 2010, Sinclair aired another "informercial" critical of Barack Obama claiming, among other ridiculously untrue things, that Obama had said "You want freedom? You’re gonna have to kill some crackers! You gonna have to kill some of those babies."
That's right, all this quality programming will soon be coming to a station near you. In fact, in December 2016, Jared Kushner, son-in-law of then-President-elect Donald Trump, stated that they had reached deals with Sinclair to give the company extended access to the Trump campaign, in exchange for airing, without further commentary, interviews with the Republican Party candidate on its stations, which Kushner said had a better reach than cable networks such as CNN. Trump's FCC has now changed broadcast anti-monopoly rules to allow Sinclair to complete this mega-merger.
There's nothing we can do about it really and there's nothing I can say that wasn't said 40 years ago – and no one listened then and look what happened to us:
Not to be outdone (or outgunned) in the race to control your mind, Comcast (CMCSA) and Charter (CHTR) are forming a partnership to control the wireless airwaves. Between that and the Net Neutrality changes at the FCC, it will be interesting to see who has more control over who gets to wash your brain going forward – the few remaining content providers like Sinclair or the Companies that control the airwaves themselves like CHTR and CMCS and don't forget Google (GOOGL), because you really don't even know something exists if Google doesn't show it to you, right?
Speaking of mergers and acquisitions, on August 11th, in our Morning PSW Report, we talked about Kate Spade (KATE) as our favorite bargain stock in the retail space and our trade idea was:
If KATE never goes below $15, we simply keep the cash and don't end up owning the stock but we're more bullish than that and think the stock will go to $20 and, since we won't mind owning it for $15, we can treat the $2.50 we collected as free money and put it towards the following spread:
- Sell 10 KATE 2018 $15 puts for $2.50 ($2,500)
- Buy 10 KATE 2018 $15 calls for $5 ($5,000)
- Sell 10 KATE 2018 $20 calls for $2.95 ($2,950)
As the net of the spread is only $2,050 and we collected $2,500 for selling the puts, we still have a $450 credit so our net cost of Kate, if assigned, would be $14.55/share – and now we're back over our 15% discount target (15.4%). Our worst case is we own 1,000 shares of KATE for net $14,550 and our best case is KATE is over $20 and we make $5,000 plus the $450 we start with for a $5,450 gain on a -$450 cash outlay (1,211%?). The ordinary margin requirement on the short puts is only $1,500 – so no burden there either!
This morning it was announced that KATE will be acquired by Coach (COH) for $18.50 per share, which will close our our spread at $3,500 with a $3,950 profit (877%) including the net credit we began with and that's going to drop another $2,225 in our Options Opportunity Portfolio, where the trade was only showing a net value of $1,125 as of Friday's close:
Making 877% in 9 months is as good as making the full 1,211% in 16 months, as was originally planned. This weekend, in our Live Member Chat Room, I put up a similar style trade idea for Fiat/Chrysler (FCAU) who, at just $11.37, have a $17Bn market cap, about 1/3 of Tesla's (TSLA), even though FCAU sold $117Bn worth of cars last year vs $7Bn for Tesla (16.7 times more) and even though FCAU made a $2Bn profit vs TSLA's $680M loss (4x more – and that's being generous). Despite the obvious shortcomings, TSLA has a $50Bn market cap – about 3 times FCAU.
Now that's just stupid and we're already short TSLA so our long trade idea for FCAU (which I'll discuss live at the Nasdaq this morning) is:
FCAU– Very solid company. We tend to overlook them in favor of F or GM but FCAU is not only great but they are on the Nasdaq, so I can talk about them when I'm there tomorrow! They earn $2 per $11.37 share, which puts their p/e below 6 though they don't pay a dividend, which still makes me like F and GM better. Still, my play on them for the Nasdaq tomorrow will be:
- Buy 10 FCAU 2019 $7 calls for $5 ($5,000)
- Sell 10 FCAU 2019 $12 calls for $2 ($2,000)
- Sell 10 FCAU 2019 $10 puts for $1.50 ($1,500)
That spread is net $1,500 on the $5,000 spread with $3,500 (233%) upside potential if they are over $12 in Jan 2019. Worst case to the downside is you are assigned 1,000 shares at $10 + the $1.50 per share you are paying for the spread is net $11.50 per share – roughly the current price.
I know it "only" returns 233% on cash but the low VIX makes it much harder to find good spreads like we had for KATE and, by the way, the options market in general is suffering from a liquitidy crunch – so be very careful getting involved with thinly traded options!
We're still generally leaning bearish though that's been a real fool's game so far but, as noted in our Weekend Chat Room, there's still plenty of things that concern us into the summer and earnings, though good on the surface, have not convinced us to change our stance – though we are on the lookout for bargains, like the ones above.
