Two Minutes To Midnight
No idea what year it was. Remember clearly that we had to clear the rink by midnight. We were a rough and tumble group from Brooklyn, Queens,and Staten Island thrown together just for this game. We were badly outclassed versus this travel team from Canada. Many of them spoke French to each other on the ice. Early in the second period, I went into the corner on my goalie's defensive right with two of them, all three of us went down in a violent crash. I quickly arose, and cleared the puck. The puck, however, barely made it over my own blue line. What the? Uh oh. My right shoulder was out. Now...the pain. I got myself to the bench. I got myself over the boards. I got myself to the the locker room. I got my own shoulder back in the socket. As some of you know, the pain lasts for more than a month the first time, but that second it goes back in. Ahhh, so good.
When I got back on the ice, we were down 5-0. Late in the game, just before midnight, I took both of their defense men around the right side of their goal and slid the puck out in front of their crease. My center (offensive player) slid the puck through the Canadian goalie's five hole. Yeah, I had screwed my shoulder up. I would dislocate both shoulders an aggregate 43 times before I finally quit the game that I loved. I would break ribs, lose teeth, have to learn how to write lefty...but you know what? That was a pretty assist.
The USMCA (NAFTA 2.0)
Last night, the U.S. and Canada raced against midnight. The drama was real. The futures markets told the tale as the night unfolded. Everyone who plays this sport knew something positive was afoot on Sunday evening. Call it the USMCA. No, not the disco song by the Village People that gets folks my age to twist themselves into the shapes of certain letters at their children's weddings...but what some might call NAFTA 2.0.
Markets breath a sigh of relief this morning, as Canada will join the accord already agreed to by the U.S. and Mexico back in August. All sides are claiming positive outcomes, and that's a good thing. For traders, this will be one less trade war to worry about. Don't forget that even though the conflict remains with China, that the U.S. and South Korea agreed to a free trade agreement just last week, while nearly simultaneously the U.S. and Japan agreed to open bilateral talks on trade...much as had already been done with the EU.The ball is rolling in the right direction here, and markets have, at least for now, certainly noticed.
While it looks like the U.S. has secured greater access to Canadian dairy markets, the immediate relief should be seen for shares of U.S. automakers. Both General Motors (GM) and Ford (F) are higher in the overnight trading session, as is railroad Kansas City Southern (KSU). That line controls the shortest route between Mexico City and Laredo, Texas. Cargo moving across the U.S./Mexican border accounts for more than 30% of KSU's revenue.
The deal agreed upon last night still has to pass muster in the legislature of all three signatory nations. This implementation of this pact is most likely a 2019 story, and will obviously face the potential hurdle of a possible change in leadership at the congressional level in the U.S. For now...this looks like a job well done.
Jobs Week. Nuff said? Hmm, Not really. Friday's numbers might seem like a scene out of Robert Frost's "Stopping by Woods on a Snowy Evening." While the earnings machine really won't get cranking in full force until late next week, our central bankers will be out and about "en masse." In fact, these little critters will be out in such force that I'll highlight their appearances in red for you in my macro section down below everyday, so they can't sneak up on you.
In all, I am tracking 13 such public appearance made between now and Friday, with a whopping six of them scheduled for Wednesday alone. Though we'll hear from Fed Chair Jerome Powell at least twice this week, it may be Fed Gov. Randal Quarles, who is the Vice Chair for regulatory supervision that may garner the most attention. Quarles will testify tomorrow before the Senate Banking Committee on regulatory relief and the Consumer Protection Act in Washington.
Well, I did just tell you that I wasn't playing this name, so I am not going to pretend that I bought this on the dip, but we did discuss the possibility of a deal on Friday, and wow...is that ever what we got. Just in case all you watched over the weekend was football, Tesla (TSLA) CEO Elon Musk reached a deal with the SEC that keeps him on with the firm in that role. Musk must pay a fine of $20 million, and relinquish the firm's Chair within 45 days.
According to the SEC's press release, the firm itself must also pay a fine of $20 million, and then must establish a new committee of independent directors that will put in place additional controls and procedures to oversee Musk's communications. Bottom line...this is a major victory for both Musk and the firm.
The SEC, at least from my point of view, is far more concerned with ensuring that the communications that took place over Twitter (TWTR) on August 7th, do not happen in that way ever again than they are interested in punishing anyone. By keeping the intellect behind the firm in the role of chief executive, and by keeping the monetary side of the ruling somewhat immaterial, at least in comparison to what we think we know about Musk's wealth, the SEC has allowed the firm to remain viable. This also keeps the cult following in place.
I won't be placing capital on either side of this name from an equity perspective, that went out on Friday evening at $264.77. I see the stock trading above $308 per share in the overnight. Elon Musk has certainly showed no fear in the aftermath of this settlement. The CEO quickly sent an e-mail to the firm's employees on Saturday, claiming that profitability is on the way. Musk told his people: "We are very close to achieving profitability and proving the naysayers wrong, but, to be certain, we must execute really well tomorrow. Musk added..."If we go all out tomorrow, we will achieve an epic victory beyond all expectations."
For those looking to invest in the name, you'll have to decide for yourself where you think the value is, or even what side you should be on. I suspect that there may be some shorts that will throw in the towel on this news, so there could be an exaggerated move today. For those looking to trade the name rather than invest, there is a way, my young Padawan, but you are going to have to choose a direction.
My opinion is that the way to trade a monster like this is through the options market, by getting long what is known as a bull call spread if you like the name, or getting long a bear put spread if you do not. Tesla will report their third quarter on October 30th. What will they report? Spin the wheel, kid. Red or black. The fact is that the name will likely be volatile into that release.
My thought is this. We can't price options contracts until the shares open. That said, once they do, I imagine that you may have to pay something along the lines of $25 for either a call or a put with a strike price close to the last sale expiring on November 2nd, just after earnings. Then, moving the strike up for a bull or down for a bear by $20, perhaps a sale could be made for a price in the neighborhood of $15. Maybe more. The goal here for the trader is to set up a potential net profit of $10, by losing a rough $10 less on the call or put sold than one makes on the put or the call purchased.
Should the stock go the wrong way on this trader, at least the loss has been subsidized by that sale, and is potentially far more manageable than it might be had the trader taken an equity stake.
Economics (All Times Eastern)
08:30 - Fed Speaker: Atlanta Fed Pres. Raphael Bostic.
09:45 - Markit Manufacturing PMI (Sept-F): Flashed 55.6.
10:00 - ISM Manufacturing Index (Sept): Expecting 60.1, Last 61.3.
10:00 - Construction Spending (Aug): Expecting 0.5% m/m, Last 0.1% m/m.
12:45 - Fed Speaker: Minneapolis Fed Pres. Neel Kashkari.
12:45 - Fed Speaker: Boston Fed Pres. Eric Rosengren.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: (CALM) (.45)
After the Close: (SFIX) (.04)