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Friday, March 31, 2023


Just Another Manic Monday

Image17,400 infected (double SARS), 364 people dead.  

On the bright side, only 2% mortality is down from 3% but maybe that's because the rate of infection are exploding fastert than people are able to die.  There were 10,000 infections on Friday and 213 deaths so 74% more infections and 71% more deaths isn't exactly what we usually call "under control" over a weekend, is it?

The Shanghai Stock Exchange re-opened from their New Year's holiday down 7.34% and, as I explained to our Members in Friday's Live Chat:

China rally has same low volume problem as US so they will be lucky not to fall 7.5%  Monday, which is pretty much limit-down in China since they halt stocks at 10% so very hard to get the average for the index past -7.5%. 

China is trying to stop the slide by stepping in economically, with the PBOC pushing in a massive $173Bn stimulus measure as well as a cut in the reverse-repo rate to push liquidity back into the system (something our own Fed has been doing since November).  Short selling has also been halted on the Chinese markets.  Apparently, oil demand in China (the World's 2nd largest consumer) was down 20% in January and that will get worse for February as more and more people are in the ever-expanding quarantine zone.  

Hong Kong's Carrie Lam (pictured) is fighting her own people who want to shut down the boarder with China and she doesn't exactly inspire that "Don't Panic" vibe wearing a mask when she's interviewed, does she.  Hong Kong's hospital workers voted 3,123 to 10 to shut down the boarders and they are going on strike today to attempt to foce a shutdown before they are overwhelmed by an epidemic they feel can get quickly out  of hand.  

My kids asked me why people in America don't seem to be worried about the virus and I told them to picture the Earth as a ball and us as ants and we hear rumors about a fire on the other side of the ball but we can't see any actual sign of it.  We can panic about it or we can go about our daily lives and those are both the wrong choices because what we need to do is realize that things that happen on the other side of the ball will, ultimately, affect us and the only wise course of action is to help.

Well, you know that's not going to happen so either this problem fixes itself while we ignore it or all the panic in the World isn't going to help us by the time it finally gets close enough to our side to become "our problem".  Our real problem is we have an unimpeachable, unidictable, untouchable President who doesn't even know what state the Chiefs are from, let alone where China is on a map!

Gilead (GILD) is up 5% pre-market because they have been working on an anti-viral vaccine for Ebola and SARS called Remdesivir and it's being rushed into human trails in China to see if it will be effective against the Coronavirus. 

I like GILD down here at $65.50 (where it should open) as it's "just" an $80Bn valuation and GILD is good for about $8Bn in profits, though not last Q when they lost $1.2Bn on write-offs and such.  Overall, they are a great company with a respectable pipeline and I think this is a great entry so we're going to add them to our Long-Term Portfolio as follws:

  • Sell 5 GILD 2022 $62.50 puts for $8 ($4,000) 
  • Buy 15 GILD 2022 $55 calls for $13 ($19,500) 
  • Sell 15 GILD 2022 $65 calls for $8.50 ($12,750) 

That's net $2,750 on the $22,500 spread so $19,750 of upside potential if GILD can simply hold $55 through Jan, 2022.  Ordinary margin on the short puts is $2,400 so it's a very efficient way to make $19,750 over 2 years.

While we can look for potential brights spots, like GILD, the bottom-line is that the entire first Quarter for China is now shot to Hell and that's a $13Tn economy so $3Tn+ potentially hit and I'd say that's at least a $1Tn hit to the Global GDP (1%), which has a good chance of pushing many countries into recession – and that's WITHOUT the virus spreading.  

So, as tempting as it may be – I wouldn't be jumping in and buying the dips just yet as we only have about the same number of recoveries as deaths, which makes this virus 42.6% fatal as it runs its course, possibly.  While the Global Media is downplaying the virus, you might want to check out some of the stuff that's being posted on Social Media from the battle zone.  Here's a woman being dragged from her home for not reporting to a quarantine center:


Yep, things are getting crazy!  Keep in mind you are being told not to worry by the Media that is owned by the same Billionaires that want you to go out and buy their products as well as the products of their sponsors.  If the empty streets of China begin to spread around the World – it's a lot more than 1% of the Global GDP that's going to fall off a cliff.   We have lots and lots of earnings reports this month and we'll see how many of them are concerned about the Virus:


There's very little Fed Speak this week – Just Bostic and Kaplan but a good amount of data ahead but we'll be more conerned with Global Data to see who's numbers are being affected by the virus already:



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Scary when the fate of the world (in the case of climate change, literally) could be in the hands of such an ignorant person!

Trade wars are easy to win! So much winning for the farmers:


Depending on perspective, net farm income in 2019 inflation-adjusted dollars is either down 33% from a record high or up nearly 40% from the decade low set in 2016. Regardless of perspective, net farm income in 2019 is slightly above the 20-year average but was supported in large part by the Trump administration’s efforts to financially shield farmers from unfair retaliatory tariffs.

Without this support, farm-related income from crop and livestock sales in 2019 inflation-adjusted dollars would have been at the second-lowest level in the last decade at $63.6 billion. The corollary to this is that farm bankruptcies could have been worse considering the record-high farm debt of $415 billion (in nominal terms) and the likely difficulties servicing this debt without the revenue from the Market Facilitation Program.

AIMT +16.7%  Company announces that the FDA approved PALFORZIA, the first approved treatment for patients with peanut allergy

26% of the float is short. so it might squeeze from here.  Or the shorts could attack since meaningful revenues are some time away.


Argus upped their Tesla price target to $808 from $556.

Good Morning!

Phil how would you hedge 3 short June 2021 CMG 840 calls going into Tomorrow's earnings?

I would argue that only a very small percentage of media outlets are pushing a 'don't worry' narrative. Almost every news story i see insists on using the word 'deadly' Infront of the virus name. 

here are a couple of thoughts in no particular order:

I live in NYC (currently riding the subway as I type this) and this 'keep it moving' attitude has gotten this city through more troubles than i can count, still I don't think there are many people who aren't scared, deep down.  I have a 6 month old baby and I'm terrified for his wellbeing

I had a Bangladeshi Uber driver last night who said to me "whatch out for the Chinese". Wow. I suppose most people can't read terrifying headlines and mortality rate statistics and then go on to talk about options 😉

If an infected individual refuses to report To quarantine….?!

Wash your hands.


TSLA Up 11%! Insane. 

Phil/The Bug – I looked through that Johns Hopkins n-Cov site, and that 17k+ number of confirmed cases makes me very uncomfortable. The WHO definition of a confirmed case calls for lab testing, and just a week or so ago the US was shipping the few test kits we had to China and telling them to get their PCR test assembly line going. Maybe they did, maybe they cranked out thousands of test kits in a few days, and drew blood from thousands of patients, and had the labs run tests. Or maybe they're calling a lot of symptomatic people "confirmed cases". The deal with the link with the wet market is still floating around, too, but look what that's based on: a patient series of 99 records in one hospital (https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(20)30211-7/fulltext), "49 (49%) of 99 patients had been exposed to Huanan seafood market". What's missing there? Ummm, how about a comparison….what proportion of the locals who would come to that hospital go to that seafood market over what period of time.

So, Potter, while "don't worry" wouldn't be the way I would phrase it either, there's some really sloppy reporting of the epidemiology going on, and I suspect there's a lot of other diseases – colds, bronchitis, etc being reported as "confirmed cases". I would bet that we have thousands of false positives in the China reported counts, and likely there's plenty of unreported false negatives as well. It's a mess.

China data is always a mess. Their scientific publications are even worse.

TSLA calls! That's a should coulda woulda didn't!!! 🙁 🙁  Who knows, albo, maybe it goes to 1000 this week…

Phil – in fairness Jersey City is in the State of Jersey, right? 😛

Oil just lost 4 yr support, load up on SCO calls!

Phil/The Bug, now don't put words in my mouth – there's a spectrum between "Don't worry" and "worried"…


Phil/The Bug  My current position is "It's a mess, the data look really bad, and I can't tell what's going on."

Just a little example on Trading.

I sold the GILD Jan 22 62.5 put for 8.45. Looking at the position an hour later the same put was than selling at 8.75. So dam it I lost already .30. So what I do to feel better, I offer to sell one more 62.5 put asking say8.85. So guess what instantly the price dropped again to 8.30.

That is how they like to fool us. But now I feel better as my acc shows again a .15 cents credit.

Just try that if you feel you cheated.

So how do we handle/hedge the TSLA short calls?

Really lucked out on CCL as a short when it was back at $51. I didn't think it'd get this low and am only holding 1/3 at this point. 

I might just try that on JO today, Yodi. 

Atitlan  CCL I do hold the stock as well. This to me is again a problem of the corona virus, see example that cruse ship in Rom, held for a full day on suspicion of infected people.
As long you do not sell the stock you will not have a loss and all the short callers meanwhile run worthless.

Sorry I do not drink too much coffee

TSLA $7000 price target now

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