Author: Dorian Holden

That was fast.

Days ago, Tesla (TSLA) was one of the year’s top performers.

From a 2020 low of $421.71, the stock just hit an all-time high of $547.  All thanks to news of its entrance into China and optimism with delivery figures.  

The company recently said it delivered 112,000 vehicles in its latest quarter bringing the total vehicles delivered in 2019 to nearly 367,500 — a 50% jump year over year.  Better, Tesla began deliveries of its Model 3 sedan in China and has ramped up production at its China facility to more than 1,000 vehicles per week, reported CNBC.

Unfortunately, it looks as if the party is over for TSLA – at least near-term.

All thanks to Morgan Stanley, which just downgraded the stock to an underweight rating (essentially a sell rating) – and raised its price target from $250 to $360.  

“We are encouraged by Tesla’s execution and think it deserves to be among the world’s most valuable auto companies, and is perhaps the most important auto company in the world given its EV leadership,” they wrote, as quoted by Barron’s. “However, we think investors will be presented with more attractive opportunities to own the stock in the future.”

At the same time, Morgan Stanley does anticipate higher volumes in China, where TSLA has ramped things up much more quickly than anticipated.

In other words, they like the stock but don’t like the current valuation.  

At the same time, shorts are piling up.  As of Wednesday, shorts were up to nearly $14.5 billion, making TSLA one of the most shorted stocks at the moment, says Business Insider.  

Technically, shares of TSLA are long overdue for a healthy pullback.  It’s now over-extended on its upper Bollinger Band (2,20), and overbought on MACD, and Williams’ %R.  From here, we could see a healthy pullback to prior support at $400 before we see higher highs.

Stay tuned for more on this story.  

Target (TGT) took a plunge after a surprise letdown.

Holiday season same-store sales only gained 1.4% in 2019, a sizable slowdown from a 5.7% growth rate year over year.  That’s a sizable letdown from the company’s own expectations for a gain of 3% to 4%. However, online sales did jump 19% year over year.

Despite the miss, Target is pointing to sales strength in higher margin products and supply efficiencies, as highlighted by Yahoo Finance, to maintain profit guidance.  At this time, Target has reiterated its adjusted EPS guidance of $1.54 to $1.74 a share.

“We faced challenges throughout November and December in key seasonal merchandise categories and our holiday sales did not meet our expectations. However, because of the durability of our business model, we are maintaining our guidance for our fourth quarter earnings per share,” said Target Chairman and CEO Brian Cornell.

Shares of TGT are currently down $8, or 6.5%.

NIO Inc.(NIO)

Shares of NIO are up nearly 10% or 36 cents on the day on reports the Chinese EV maker has secured funding needed for 2020.  According to MarketWatch, “a report in Sina Finance said the financing is about $1 billion.”

In recent weeks, the company posted stronger than expected results that topped EPS estimates by eight cents.  Sales grew 20% and were also ahead of estimates. Helping, the company announced a new battery pack to improve the driving range of its vehicles.  It also unveiled a new EV coupe SUV, the EC6, which is already being viewed as strong competition for Tesla’s Model Y due out in New Year 2020.

Nektar Therapeutics (NKTR)

Shares of NKTR are down more than 10% this morning after the US FDA rejected its opioid painkiller with a vote of 27-0.  

 “For the development of oxycodegol, the company used well-established efficacy, safety and human abuse potential study designs that have led to many prior FDA approvals of opioid medications,” Nektar said, as quoted by Barron’s.

However, the US FDA raised concerns of drug misuse and abuse, in addition to a lack of data to show drug safety and efficacy.  Following the ruling, NKTR withdrew the new drug application.

It appears phase one is a done deal.

Vice Premier Liu He will soon visit Washington D.C. to sign after the two sides said on Dec. 13, 2019 they had reached an agreement where China will substantially increase its purchases of U.S. agricultural products, pledge not to devalue its currency, and help to better protect U.S. intellectual property.

In return, the Trump Administration canceled new tariffs on $156 billion worth of Chinese imports that were set to take effect Dec. 15.  The President also agreed to cut in half the current 15% tariffs on nearly $120 billion worth of Chinese goods.

Here’s what’s in the deal, according to a U.S. Trade Representative document.

The deal includes a “dramatic expansion of U.S. food, agriculture and seafood product exports” and an agreement by China “to provide transparency, fairness, and due process in administrative proceedings and to have technology transfer and licensing take place on market terms.”

The USTR document also refers to currency manipulation.

“The chapter on Macroeconomic Policies and Exchange Rate Matters includes policy and transparency commitments related to currency issues. The chapter addresses unfair currency practices by requiring high-standard commitments to refrain from competitive devaluations and targeting of exchange rates, while promoting transparency and providing mechanisms for accountability and enforcement.”

In addition, the document refers to a commitment for China to buy at least $200 billion worth of U.S. exports, including agricultural goods, energy products and services.

At the same time, according to the South China Morning Post, the U.S. has removed China from a list of currency manipulators.  “In this context, Treasury has determined that China should no longer be designated as a currency manipulator at this time,” the US Treasury Department said.

While phase one appears to be a done deal, phase two may take some time.

According to Jia Qingguo, one of Beijing’s top foreign policy experts, as noted by the South China Morning Post, “Despite the recent announcement that we are going to have the first phase agreement, [the] relationship between China and the US is still in deep trouble and is heading south rather than north. It is getting worse.”

All on concerns about “excessive” demands from the U.S., which have left Chinese officials feeling “useless” to engage, as also reported. 

He also noted it “very unreasonable” for the US to demand that China buy its products in huge quantities, even though Beijing has made “concessions” such as agreeing in December to buy $50 billion worth of agricultural goods.

Hopefully, such concerns can be ironed out as we move forward.

The banks are out with mixed earnings.

JP Morgan Chase posted profits and revenues that crushed estimates thanks to a rebound in trading revenue in 2019.  Q4 profits were up 21% to $8.52 billion, or $2.57 a share as compared to expectations for $2.35. Managed revenue was up 9% to $29.2 billion.

Profit in the investment bank surged 48% to $2.9 billion on trading and sales. Bond trading revenue was up 86% to $3.4 billion. Stock traders posted a 15% increase in revenue to $1.5 billion, compared with the $1.35 billion estimate, as reported by CNBC.

“JP Morgan Chase produced strong results in the fourth quarter of 2019, capping off a solid year for the firm where we achieved many records, including record revenue and net income,” CEO Jamie Dimon said. “While we face a continued high level of complex geopolitical issues, global growth stabilized, albeit at a lower level, and resolution of some trade issues helped support client and market activity towards the end of the year.”

Wells Fargo Q4 Profits Fall 50%

Unlike JP Morgan Chase, Wells Fargo made a mess.

EPS of 93 cents was below expectations for $1.12.  Revenue of $19.86 billion was below estimates for $20.14 billion.  Quarterly profits came in at $2.87 billion – a considerable drop from the $6.06 billion posted year over year.   

“Wells Fargo is a wonderful and important franchise that has made some serious mistakes, and my mandate is to make the fundamental changes necessary to regain the full trust and respect of all stakeholders,” CEO Charles Scharf said, quoted by CNBC.  

“During my first three months at Wells Fargo my primary focus has been on advancing our required regulatory work with a different sense of urgency and resolve while beginning to develop a path to improve our financial results,” he added.

Citigroup Earnings Beat on Surge in Fixed-Income Trading

Citigroup EPS of $1.90 beat expectations for $1.84.  Revenue of $18.378 billion came in above estimates for $17.855 billion.  Fixed income trading came in at $2.9 billion, as compared to expectations for $1.24 billion.  Equities trading came in at $516 million, as compared to expectations for $673.3 million.

Tesla (TSLA) is already one of the year’s top performers.

From a 2020 low of $421.71, the stock just hit an all-time high of $504.10 – and could push to higher highs.  All thanks to news of its entrance into China and optimism with delivery figures.  

The company recently said it delivered 112,000 vehicles in its latest quarter bringing the total vehicles delivered in 2019 to nearly 367,500 — a 50% jump year over year.  Better, Tesla began deliveries of its Model 3 sedan in China and has ramped up production at its China facility to more than 1,000 vehicles per week, reports CNBC.

NVIDIA Corporation (NVDA)

Shares of NVIDIA are up $5.76 a share, or 2.44% after analysts at Needham upgraded the stock to hold from underperform. All after the firm met with management at the CES conference.  

“Heading into C1H20, Nvidia is facing easy year-over-year compares, specifically in graphics and data center,” they wrote, as quoted by MarketWatch. “Gaming is showing signs of positive momentum as attach rates for ray tracing games have accelerated. Hyperscalers have also begun to spend again on AI workloads.”

General Electric (GE)

Shares of GE are up on a bullish Deutsche Banknote. 

The firm expects GE to post Q4 EPS of 19 cents, topping estimates for 19 cents, driven by improvements in four segments, as reported by The Street.  

“Power-segment sales are expected to increase $26 million, compared with a decline of $144 million in the previous quarter.  Renewables sales are expected to increase $322 million, compared with a $98 million decline in the previous quarter. Aviation sales are expected to be $1.79 billion in the fourth quarter, compared with $1.72 billion in the previous period.  Healthcare revenue is expected to be $1.22 billion, compared with $970 million in the third quarter,” as also reported.

Days after Iran carried out strikes on two U.S. airbases there’s evidence one of its surface-to-air missiles downed the Ukrainian passenger plane that crashed near Tehran.   

But there’s a bit of back and forth over that.

While the U.S. says it’s “likely” Iran is responsible for downing the plane, Iran is accusing the U.S. of “spreading lines” and is denying claims that mistakenly shot it down, says CBS News.

In fact, according to the head of Iran’s Civil Aviation Authority, Ali Abedzadeh, as quoted by CNN, “If a rocket or missile hits a plane, it will free fall,” adding, “How can a plane be hit by a rocket or missile” and then “turn back to the airport?”

At the same time, the U.S. does believe the downed plane was accidental. 

President Trump for example just noted, “Somebody could have made a mistake on the other side,” as quoted by CNN.

Canadian Prime Minister Justin Trudeau has also said, “This may have been unintentional.”

Even British Prime Minister Boris Johnson also noted, “There is now a body of information that the flight was shot down by an Iranian Surface to Air Missile. This may well have been unintentional. We are working closely with Canada and our international partners and there now needs to be a full, transparent investigation.”

Right now, we know news agencies have obtained video that appears to show a missile strike around the same time the Ukrainian plane crashed earlier this week.  We also know that Ukrainian investigators were given access to the plane’s black box, according to CNN, which includes recordings of communications between the pilot and Tehran flight control.

The U.S., the UK, Canada, and the European Commission are all calling for an independent and credible investigation into the incident that killed all 176 on board.  

Stay tuned for more on this developing story.

The Dogs of the Dow returned nearly 20% in 2019.

While that was below the Dow Jones’ 25% return, the “set it and forget it” strategy behind the Dogs worked out well again – with dividend payouts to boot.

Better, the strategy has a strong history of solid returns.

In 2009, the Dogs were 16.9%. In 2010, they jumped 20.5%.

In 2011, there were up 16.3%. In 2012, they jumped 9.9%. In 2013, they returned 34.9%. In 2014, they returned 10.8%. In 2015, they did okay, returning just 2.6%.

In 2016, the Dogs returned 16% on average. In 2017, the Dogs of the Dow returned 19% for the year.  In 2018, the Dogs eked out a 1% gain, as the Dow lost 5.6% for the year, according to Forbes. The best part – dividends were paid out from each of the Dogs.

For this year, the top Dogs of the Dow include:

·      Dow Inc. (NYSE:DOW) pays a yield of 5.21%

·      Exxon Mobil (NYSE:XOM) pays a yield of 4.97%

·      IBM (NYSE:IBM) pays a yield of 4.81%

·      Verizon (NYSE:VZ) pays a yield of 4.11%

·      Chevron (NYSE:CVX) pays a yield of 4.02%

·      Pfizer Inc. (NYSE:PFE) pays a yield of 3.91%

·      Walgreens (NASDAQ:WBA) pays a yield of 3.09%

·      Cisco Systems (NASDAQ:CSCO) pays a yield of 2.95%

·      Coca-Cola (NYSE:KO) pays a yield of 2.95%

At the start of the year, investors will buy the highest yielding 10 Dow Jones stocks that fell out of favor the year prior.  Invest an equal amount in each. Sell by year end. And repeat. To this day, it’s still one of the best buy and hold strategies.  

There was plenty of fear in the markets last night.

Gold rocketed to its highest level in nearly seven years.  Oil exploded to $65.65.

Dow Jones’ futures were down as much as 333 points, as investors feared the worst.

All after Tehran launched more than a dozen ballistic missiles against U.S. military bases in Iraq, raising fears the two foes are moving closer to a bigger war.  Fortunately, there are signs retaliations from the U.S. and Iran may stop – at least for the immediate-term.

‘All is well!’ President Trump tweeted after the missile attacks, adding, ‘So far, so good’ regarding casualties. Moments earlier, Iran’s foreign minister tweeted that Tehran had taken “& concluded proportionate measures in self-defense,” adding that Tehran did “not seek escalation” but would defend itself against further aggression, as noted by the Associated Press.

And while Iranian Supreme Leader Ayatollah Ali Khamenei vowed further retaliation,  he stopped short of threatening more military action. “Last night, they were given one slap,” he said in a speech, as quoted by The Wall Street Journal. “Such military actions are not enough as far the importance of retaliation is concerned. What’s important is that their corruption-creating presence should end.”

Iraq noted 22 rockets fell, and that there were no casualties.  Meanwhile, Iran said it killed 80 U.S. military personnel, and that it damaged a good deal of military equipment.  

While Dow Jones’ futures have since recovered – and turned positive – the threat of war still exists.  In fact, according to journalist Yashar Ali, as quoted by Zero Hedge, “What makes me nervous is illustrated in the WSJ story. The Iranian government has always operated on its own timeline. If you think Iran lobbing missiles over the border is the kind of revenge they ultimately have in mind, you’re wrong.”

Plus, we have to keep an eye on Iran’s uranium enrichment plans.  Following the death of Iran’s general, Iran is abandoning all restrictions on uranium enrichment.

That means “Tehran could install new centrifuges—machines that produce enriched uranium—and further ramp up the purity of the fuel it produces closer to weapons-grade material,” says The Wall Street Journal.  “That would allow Iran to reduce to less than six months the time needed to amass enough nuclear fuel for one bomb, once it reinstalls a sufficient number of its centrifuges, a process expected to take months.”

Boeing (BA) came under substantial pressure in late 2019.

In fact, since late November 2019, BA fell from $380 to $320.  

All after revealing 2016 emails that called into question the safety of the 737 Max jet’s flight control system.  The FAA said it found the messages to be “concerning” and “is reviewing this information to determine what action is appropriate.”  In addition, FAA Chief Steve Dickson told Boeing’s CEO, “I expect your explanation immediately regarding the content of this document and Boeing’s delay,” as quoted by NBC News. 

Things got a bit worse for the company after FAA Administrator Stephen Dickson just there was no way the FAA would approve the plane to fly again in the short term.

 “If you do the math, it’s going to extend into 2020,” as quoted by CNN.

Shortly after, Boeing fired CEO Denis Muilenberg, noting:

“The Board of Directors decided that a change in leadership was necessary to restore confidence in the Company moving forward as it works to repair relationships with regulators, customers, and all other stakeholders,” as quoted by MarketWatch.

Chairman David Calhoun will become the new CEO effective January 13, 2020.

At the moment, shares of BA are up another $5 a share, as the stock begins to pivot higher from triple bottom support dating back to August 2019.  At the same time, there’s a rumor that Berkshire Hathaway is building a stake, acquiring a $5 billion position, as highlighted by Zero Hedge.

However, do keep in mind this is just a rumor at the moment – and may be the big reason why shares of BA are up more than $5 a share this morning.

There’s plenty of fear in the market.

Gold just spiked to a seven-year high.  Oil hit $70. Investors are panicking.

All as tensions between Iran and the U.S. just begin to boil over.  

In the days following a U.S. strike that killed Iranian General Qassem Soleimani, the U.S. is already detecting a heightened state of alert by Iran’s missile forces.  All as Iran’s supreme leader vows to deliver “severe revenge” to those responsible.

Iran also threatened to attack the White House, and put and $80 million bounty of Trump’s head.  However, President Trump isn’t taking threats lightly. In fact, he warns the U.S. will strike back if Iran attacks any U.S. interests following the killing of the general, adding, “If they do anything, there will be major retaliation,” as quoted by the AFP.

At the same time, Iran is abandoning all restrictions on uranium enrichment.

That means “Tehran could install new centrifuges—machines that produce enriched uranium—and further ramp up the purity of the fuel it produces closer to weapons-grade material,” says The Wall Street Journal.  “That would allow Iran to reduce to less than six months the time needed to amass enough nuclear fuel for one bomb, once it reinstalls a sufficient number of its centrifuges, a process expected to take months.”

While there are fears Iran could move to choke oil supply at the Strait of Hormuz, some analysts aren’t so sure that’ll happen.  Ed Yardeni, president and chief investment strategist at Yardeni Research, as quoted by CNBC, notes, “We don’t believe that Iran will disrupt oil supplies significantly now that the US has demonstrated a willingness to use lethal force to deter Iran’s mischief-making in the Middle East.”

With all of this uncertainty, volatility could spike – along with VIX-based stocks including:

ProShares Ultra VIX Short-Term Futures ETF (UVXY)

The ETF was designed to match two times (2x) the daily performance of the S&P 500 VIX Short-Term Futures Index. 

VelocityShares Daily 2x VIX Short-Term ETN (TVIX)

The TVIX is another great way to trade elevated volatility.  This ETF  tracks an index of futures contracts on the S&P 500VIX Short-Term Futures Index. 

iPath S&P 500 VIX Short-Term Futures (VXX)

As volatility returns to the markets, one of the best ways to profit from volatility is with the VXX ETN, which provides exposure to the S&P 500 VIX Short-Term Futures Index Total Return.