DAILY DIARY
Teeing Up the Weekend
I am calling it a day a bit early.
Thanks for reading my Diary and enjoy the weekend!
Housekeeping Item
I will be out of my (SDS) trading long rental by day's end.
Again, this leveraged vehicle is intended to be held only over short periods of time.
I will likely take a small loss.
A 'Growthy' Tone
With the price of crude higher (+$0.70), the yield on the 10-year U.S. note up by five basis points (to yield 2.56%) and conspicuous strength in industrials ( (DOW) and (MMM) +$3) and financials ( (BAC) , (C) and (JPM) ), the tape has a growthy tone to it today.
HIG Makes a Move
Hartford Financial (HIG) is quietly making a move outside of its recent trading range.
VNM's Nice Move
I highlighted (VNM) -- VanEck Vectors Vietnam ETF -- late yesterday.
Its making a nice move and appears to want to break out of its recent trading range.
At least I hope it is!
My Net Short Exposure
Besides my unpopular Disney (DIS) short, my Apple (AAPL) short - another unpopular one - is working out quite well.
I moved to medium-sized on Apple at over $202 the other day. The shares are down another -$2.50 to about $196.50 this morning.
I would describe my overall net short exposure as very large now.
About My Disney Short
There is a good exchange between Tim "Not Judy or Phil" Collins on trading methodology - specifically how I averaged into my Disney (DIS) short.
If you are on Twitter, check it out!
Subscriber Comment of the Day
From "Neil the Real Deal":
Since we're talking so much about DIS here is M*'s analysis of the new service....
Disney Strikes Back With $6.99 Price for Disney+; Impressive Content Quality and Depth on Display
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by Neil Macker, CFA ' 04-12-19 ' 7:40AM ' E-mail Note
Disney came out swinging at its investor day with an aggressive price point for Disney+, which will launch Nov. 12 for $6.99 per month or $69.99 annually. Unlike the disappointing reveal for Apple TV+, Disney not only provided a firm launch date and price but also showed and outlined the amount and quality of content that will be available at launch. Management surprisingly offered guidance of 60 million-90 million subscribers by the end of fiscal 2024. We think the wide range reflects the uncertainty around the timing of launches in international markets, which are expected to account for two thirds of subscribers. We are maintaining our wide moat rating and $130 fair value estimate.
While the investor day touched on all the firm's direct-to-consumer services, the focus was on Disney+. Management is pursuing a very aggressive strategy, as it does not expect Disney+ to achieve operating income profitability until fiscal 2024, nearly five years after launch. Cash content spending on Disney+ originals will hit $2.5 billion in fiscal 2024 with licensed content spending, internally sourced from Disney's studios, hitting a similar level. While this number is well below $12 billion in cash spending at Netflix in 2018, Disney+ is essentially buying the pay-one window for Disney movies after they've shown in theaters, so the cost borne by Disney+ is much lower than the actual production cost.
At launch, we expect that the Disney+ service will be very attractive to many consumers, given the low price point and deep content library. The service will cost just over 50% of the $12.99 monthly price of Netflix, while the annual price is only 45%. Disney+ will launch with 18 of the 21 released Pixar movies, over 35 Disney Animation movies, four Marvel films including Captain Marvel, eight of the 10 released Star Wars films, The Simpsons, and numerous TV episodes from Disney Channel and National Geographic. All content will be downloadable, a boon to parents.
Some Reality on a Bullish Day
Before agreeing with the rapidly rising bullish consensus, I suggest reading Jeff Gundlach's comments on the Fed, the deficit and the untenable level of debt (sound familiar?).
Hat tip Zero Hedge.
Averaging Up on My Disney Short
My short position in Disney (DIS) is large-sized with an average cost basis of $127.95.
Watching the Tape
My guess (and it is only a guess) is that the Nasdaq could trade lower on the day.
Adding to Banks
I have added to my already large bank holdings on the opening this morning.
More Disney
I continue to short Disney (DIS) .
My average cost is now slightly under $227.00.
Reshorting Disney
I have reestablished my Disney (DIS) short in the pre-market at $124.50.
I think we may be entering "streaming mania" right now.
Disney's market cap is more than $12 billion higher this morning after yesterday's pricing announcement. That "requires" about $1 billion of EBITD. I don't see that over the next few years as a lot of cash flow will be going away soon.
The Banks
I wanted to repeat, for emphasis, my strong case for banks from three days ago.
The Book of Boockvar
As Peter Boockvar suggests, we are all addicted to the "juice":
If you were wondering what was the cause of the stabilization in the Chinese PMI's last week for March, the loan data reported today was literally off the charts. Aggregate financing totaled 2.86 Trillion yuan, well more than the estimate of 1.85 Trillion. Of this, bank loans increased by 1.69 Trillion, 440b more than expected. To smooth out the January/February Lunar New Year impact and the month after, total loan growth rose 40% y/o/y. Bank loans are up 19.5% ytd y/o/y. Household borrowing was particularly strong, rising by 460b yuan, the biggest increase in two years. Corporate bond issuance was also up solidly as was local government bond issuance. Money supply growth was higher by 8.6% y/o/y, above the estimate of up 8.2% and the quickest since February 2018.
Bottom line, the world needs a strong economy and growth in China but this economy, which was already hooked on debt, just ramped up its addiction to the credit juice. If you can tell me how this ends well, I'm all ears because I'm bullish on China long term. This data came out after the Chinese stock market closed.
Before the stock market closed, which was unchanged, China also reported trade data. Exports jumped by 14.2% y/o/y, well more than the estimate of up 6.5% but imports (many of which contribute to eventual exports) dropped by 7.6% vs the forecast of up .2% and that's the 4th straight month of declines. Exports to the US were up just 3.7% but were pretty solid to Europe, up 24% and the rest of Asia. The question I can't answer is how much of the March exports were pent up shipments after the February Lunar New Year. Smoothing out the noise, exports were up 1.4% in Q1 y/o/y while imports dropped by 4.8% y/o/y. And that drop in imports might have quelled the enthusiasm in the upside in exports in the eyes of the Shanghai comp which as stated was flat.
Let's start quantifying what the economic overseas slowdown in the monthly data translates into. Singapore's economy in Q1 slowed to a 1.3% y/o/y gain, one tenth less than expected, down from 1.9% in Q4 and matches the slowest pace of increase since Q3 2012. Manufacturing contracted in the quarter driven by declines in electronics and engineering. The Singapore Straits stock market was unchanged overnight in response.
Industrial production in February in the Euro area wasn't as bad as estimated. It was down .2% m/o/m, 3 tenths better than expected and January was revised up by 5 tenths to an increase of 1.9%. On a y/o/y basis though, it is still down 4 straight months for the first time since 2012. While February data is old news at this point, European markets are rallying with the DAX in particular liking the China loan data. The euro is also rallying and sovereign bond yields are higher across the board which is in turn lifting US interest rates. The German 10 yr yield is positive again at .04%.
Tic Tac Oh, No!
" Happy Dogwood Sunday"
Here's a funny childhood story - that I produce annually to take us all into this Sunday's Palm Sunday and next week's Easter holiday:
I'm reminded at this time every year (by my famous artist sister Debbie) of a true story that occurred in the late 1950s when I was about 10 years old.
When I was in fourth grade at my Long Island, N.Y., elementary school, the students were notified of a 'special assembly' to be held that afternoon.
When we all arrived in the auditorium, there was a woman on the stage in a chair who explained that she was an NBC representative for a TV quiz show called Tic-Tac-Dough, which aired at that time in New York on Channel 4.
She went on to explain that Tic-Tac-Dough, the predecessor show to Hollywood Squares (which used the same concept), was looking for two students to represent Long Island on the show during Christmas vacation week. (Adults participated on the show the rest of the year.)
She began to ask the students questions, but I was shy and never raised my hand. But in response to a question, my buddy Jo Anne Zerillo raised her hand and said she didn't know the answer but "The Professor" (my nickname then!) might. She pointed at me.
I answered the question and then another, and was notified that I had been selected along with my friend and classmate Carrie Spivak to represent our area on Tic-Tac-Dough.
Jack Barry, a fellow Long Islander and a Wharton graduate (as I would later be), was the host and (along with Dan Enright) the show's producer.
If you remember Jack Barry, it's probably because his production company was responsible for the scandal-ridden game show Twenty One. It turns out that Charles Van Doren and champion Herb Stempel were provided with answers to Twenty One's question in advance after principal advertiser Geritol complained that the unrigged production was dull and boring.
Barry's production company later created other game shows like Dough Re Mi, Winky Dink and You (reputedly the world's first-ever interactive TV program), the fabulously successful Concentration and the long-running Joker's Wild.
I went on Tic-Tac-Dough several weeks later and won my first six games, breaking a record for the show.
But in the seventh game, I selected the box "Holidays" and was asked by Jack Barry to name the Sunday before the Easter holiday. He went on to say that the holiday was the name of a tree.
The music played in the background and after waiting about 10 or 15 seconds, Mr. Barry asked if I knew the answer.
I thought long and hard, but had no idea of the answer. So I figured I should take a shot and guess the answer, as I already knew the holiday had the name of a tree in it.
Under pressure from Mr. Barry, I said: "Dogwood Sunday."
As the words came out of my mouth, I could hear my mother and Grandma Koufax (who were in the audience) gasp. My mom, clear as day, said, "Oh, no!" (I can still hear her words as if it were yesterday.)
I instantly knew it was the wrong answer and said -- I swear I did! -- "No, Mr. Barry. It's Redwood Sunday!"
Jack Barry, was in front of a pyramid of empty Crest toothpaste boxes that were stacked up in preparation for a commercial later on in the show. (The "Look Ma, No Cavities!" commercial was initially aired on Tic-Tac-Dough.)
Barry then said, "Doug, I am sorry. That is the wrong answer. The correct answer is Palm Sunday. Haven't you ever heard of Palm Sunday, the Sunday before Easter?"
I immediately said -- remember, this was live television) -- "No, Mr. Barry. I never heard of Palm Sunday. I am Jewish."
Barry, who was also Jewish, fell over laughing right into the boxes of Crest toothpaste, which all fell down into a mess.
I hope you enjoyed the story about Dogwood -- er, I mean, Redwood -- Sunday.
I will never forget the experience, and I have the tape of the week's appearances to prove it. (My office has been listening to them all day.)
In this holiday spirit, I want to be the first to wish a Happy Dogwood Sunday, Holy Week and Happy Easter to my family, all of my friends, subscribers, contributors, editors, Jim "El Capitan" Cramer and the entire TST management team!