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Faltering Thursday – Fed, Stimulus Fail to Convince the Market

Trillions of Dollars are being committed to "fix" the economy.

So far, the stock market is not buying it as we continue to have wave after wave of selling, though we are still inside our predicted range for the S&P 500 – it just feels very frustrating as we stuggle to get back over the -15% line at 2,420.  This morning the Futures are down yet again as traders are not convinced the Government is doing enough either to calm the markets or fight the virus.

Very simply:  What is their plan?  

If you can't answer that question – then that's the problem, isn't it.  The Government has failed to articulate a clear plan to the American people in either their response to the virus or their response to the economy.  Without a clear vision of what is going to happen, traders get nervous and go to cash but there aren't that many people willing to trade their cash for stocks — so the prices keep dropping until they can find a buyer.  You may be willing to hold onto Disney (DIS) at $85 because you think it's underpriced (it is!), but that doesn't stop your neighbor from selling it for $75, $65, etc…

But this is not price discovery, this is panic discovery because Disney is being valued at $160Bn at $85/share yet they made $11Bn last year on $70Bn in sales and they have $5.5Bn cash in the bank.  So their operating cost is about $60Bn or $5Bn per month and let's assume we are shut down for March, April, May and June and DIS can't cut costs and generates ZERO revenues – which is silly as they still have ESPN and ABC and the Disney Channel, which should do very well with 300M people staying home all day.

Even if you assume they lose the whole $20Bn, they make $10Bn a year!  The parks were not destroyed by a nuclear bomb – they don't need to be rebuilt – they just need to be cleaned!  The movies will still come out – even if it has to be on TV.  Still, if DIS loses $20Bn (and there is no bailout), they can just borrow $20Bn and pay back $2.2Bn a year for 10 years and that would impact their forward earnings by – 20%.  So DIS then makes $8Bn a year and we'll assume it stays flat and we'll multiply that by 15 assuming traders stay nervous and that's $120Bn or $80/share.   THAT is the realistic discounted value of Disney so, with the stock at $85 – it's well worth taking a look:

  • Sell 5 DIS 2022 $75 puts for $15 ($7,500)
  • Buy 10 DIS 2022 $85 calls for $25 ($25,000) 
  • Sell 10 DIS 2022 $110 calls for $12 ($12,000) 

That's net $5,500 on the $25,000 spread so the upside potential is $19,500 (354%) if DIS can get back over $110 20 months from now.  If things turn worse and we have a recession and DIS drops to say $60 – you would be forced to buy 500 shares for $75 ($37,500) plus the $5,500 we would lose on the spread (assuming we rode it to the bitter and and never adjusted) so net $86 ($43,000), which is pretty much the current price is our worst-case scenario and we would be down $13,000 at $60.  

Image result for steamboat willie animated gifBut, if we are assigned at $60 and have 500 shares of DIS, we could sell the 2024 $75 calls for (guessing) $10 and that would drop our net to $76 and, if we were willing to own 500 more shares at $60 – we could sell those puts for $10 and drop our basis to $66 – in which case we'd get all our money back with a small ($4,500) profit at $75 but we risk being assigned 500 more and our average on 1,000 would be $66.

So, if you don't REALLY want to own 1,000 shares of DIS at $66,000 – DO NOT sell 5 2022 $75 puts for $15.  You could JUST do the bull call spread for $13 and make up to $12 with no margin requirements but really you'd be risking the same $13,000 (for 10 contracts) to make $12,000 while the spread can make $19,500 with less cash out of pocket (margin is $1,924).  

Meanwhile the Futures continue to be weak and we added a hedge yesterday but there are other hedges we can add just in case the market continues to crash.  The high VIX gives us great pricing on spreads and we can take advantage of that with the Nasdaq Ultra-Short (SQQQ) with the following hedge:

  • Buy 20 SQQQ April $25 calls for $8.50 ($17,000) 
  • Sell 20 SQQQ April $40 calls for $5 ($10,000)
  • Sell 10 Delta (DAL) 2022 $18 puts for $7.50 ($7,500) 

This spread actually PAYS you a $500 credit and has $30,000 worth of upside protection.  SQQQ is a 3x short on the Nasdaq and $40 is 60% higher than $25 so a 20% drop in the Nasdaq would pay you $30,000 per unit on the spread.  

The risk is owning 1,000 shares of Delta for $18 ($18,000) but you can substitute any stock you REALLY want to own or just take the straight spread for $7,000 that pays $30,000 for a $23,000 (328%) profit if the Nasdaq drops another 20%.  My logic on Delta is that they are vital and will likely be bailed out, if not by the Government then by Warren Buffett - who is one of their biggest shareholders.  

Same logic as DIS, DAL had $47Bn in revenues last year and made $4.7Bn so it costs them $42Bn to run the airline and we'll call it $3.5Bn a month of potential losses but we know fuel is 1/3 of their costs so less flying is less costs so let's say $3Bn a month is their loss so someone has to give them $9Bn and Buffett has that much under his sofa!  And think of the advantage of being a fully functional airline when others are failing!

For a company that made almost $5Bn last year, you can buy the whole thing for $15Bn at $23.50.  

So it's not as if there's nothing to buy and it's not as if we aren't able to hedge – there are amazing opportunities in this market – if you are brave enough to weather the uncertainty of the moment…

 


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  1. What's been really shocking is the violence of this correction. In 2008 we had a 50% correction, but spread over the entire year. We had bad months, but you coud see the weakness building up. Here we lost over 30% in the space of less than 1 month! In that sense, it feels worse.


  2. And looking at other countries (mostly in Asia – but not China), it didn't have to come down to this. S. Korea is not in lock down for example. But they took it more seriously (leaders and people) from day one and were able to flatten the curve quickly. These 2 months of pretending that it was nothing in the US are simply criminal at this stage! It's really maddening.


  3. Good morning, All!

    Webinar replays are now available!

    Youtube:

    https://youtu.be/5tMn5LWLwTo

    BitChute:

    https://www.bitchute.com/video/noXdXwc7y3bD/


  4. Jeff Gundlach covers his equity shorts

    Mar. 18, 2020 8:06 PM ET|By: Stephen Alpher, SA News Editor 

    "The profits were just too great not to harvest, and the panic is palpable," tweets Jeff Gundlach. He says he covered his last three shorts at 2:37 ET this afternoon (not long after Bill Ackman had his epic meltdown on CNBC).

    Gundlach: "For the first time in years I am now not short any U.S. stocks."

     

     


  5. Wuhan Reports No New Virus Cases After Almost Two-Month Lockdown

    Wuhan reports no new virus cases after an almost two-month lockdown. China also saw an additional 34 cases of the virus, but say all were imported. Bloomberg’s Selina Wang reports on “Bloomberg Markets: China Open.” (Source: Bloomberg)


  6. Looking at TX and FL spring break photos it would have been better if colleges had cancelled spring break instead of extending it.


  7. Good Morning.


  8. I got an update from one of the Kickstarter campaigns I backed. The update stated that "some factories have gone back to work". Just one data point that suggest that China has started to get back to work.


  9. Is ToS working? The Dow is only down 400 right now! Probably not getting timely updates :-)


  10. Good morning gang! I hope everyone and their loved ones are doing well. This is a weird and challenging time.

    Is VCSH oversold? From 82 to 73…


  11. SKT / Phil – thoughts on them long term?  Keep adding or hold off?  I'm down nearly 60 % and want to add more. I know it's on your fav list but seems relentlessly worse than others. Thx!


  12. China / pstas – I guess lock downs work too… But not when kids keep going out to the beaches and bars! Italians didn't take their lock down instructions seriously at the beginning and there we are!


  13. pstas – optimism scenario:

    total numbers wise, this thing isn't that bad. US gets up to 20k fatalities but that's half of a flu season so life goes on…

    Trump admin injects X multiple $T's into the economy including expanded unemployment and  this Yang-ish $1000 to each citizen

    biotech pumps out a virus/cure combo in the next few months

    we quite quickly all go back to work and a lot of this blows over. The only difference is now there's a gazillion more dollars in the economy

    Trump gets re-elected, keeps same policies in place, the x $T aggregates in the top 0.01% as usual (stocks and bond prices get nutty).

    I have a couple Jan-21 QQQ 245 calls for exactly this premise.


  14. I don't do spreads often but with volatility so high I feel like I really should be.

    If the March 20th SPY 235 puts are 6.25, and the March 23rd 235 puts are 9.55, I sell the 20th and buy the 23rd's for 3.20. What's my realistic upside and downside? (assuming I close the position on the 20th and never hold the naked put).


  15. You had me until Trump gets re-elected BDC!


  16. Phil - should be sell Delta puts not calls right?


  17. Good morning! 

    Only down 500 points – I'd say it's a good day!  

    Big Chart – That's our rule, when all the boxes are red or green it's time to move the Must Hold lines – we should go back to the old levels.  

    Worse/StJ – It certainly does.  This blows through hedges and such so people end up having to liquidate and make matters worse.  

    Speaking of which, the consensus is that we pull money off the sidelines and take advantage of the sell-off in our portfolios so that's what we're going to do.  The LTP/STP doesn't need more money but the other portfolios should have another $100K put in them – if you are not going to buy when things are 50% off, when will you buy?  The correct answer is, of course, 80% off!  

    Anyway, we will make adjustments accordingly and adding specific hedges to each portfolio – just in case as we really want to protect the extra money we're putting in – we didn't cash out last year just to let it bleed away this year, right?

    Seriously/StJ – 1-month total lockdown and testing everyone that enters a public place (temperature) has been effective in countries that have done it and I find that encouraging because, even if it gets worse here – it CAN be stopped at a certain level.  Of course I don't trust the idiots in charge to do the right thing – Putin may not want us to stop the spread…

    Image result for italian spagetti share cartoon18,000 (222,642) more global cases today, 9,115 deaths, 84,506 recovered.  Notice how the deaths are outpacing recoveries now?  Italy 35,713 – WTF Italy?!?  2,978 deaths too!  

    Remember when we thought 4,000 dead on 9/11 was a big deal?  We were so innocent then…

    Spring Break/Tangled – Ah to be young and immune(ish).

    Back to work/Aug – I heard that there are issues like at FoxConn, with 200,000 workers, if someone on the line tests positive they have to shut the whole line and clean it, test everyone in the area and restart.  Happens more than once a day.  

    TOS/StJ – I notice that, their data gets laggy sometimes.  

    VCSH/BDC -You got me, too many cross currents.  

    SKT/Jeddah – Keeping but bear in mind FTR was a keeper too.  I just don't see them failing but, that is, of course, assuming things are normal(ish) by July.  If we plunge into a depression – there's no safe harbor.

    Tanger Factory Outlet Centers: A Bullish Approach To A Bear Market

    The Tanger Conundrum

    Tanger's Solid Fundamentals Make It A Buy

    Tanger: A Melting Ice Cube

    Call/BDC – Not a terrible idea.  I agree on SPY, seems hard to lose.  

    Thanks Dawg – Corona seems to affect my ability to tell puts and calls apart….


  18. Corona/Phil   Hey Florida Man!  Maybe you should change up your morning beverage… ;)


  19. I prefer Pacifico. But Corona is good too. 


  20. :)


  21. Senator 'snow ball' Inhofe and CEO Hamm of CLR talking up a ban on foreign oil this morning on CNBS.

    Interesting where this could go…..


  22. OMG Batman….hello all, and I hope everyone is safe and sound.  I have been a busy Pharmer, relocating from the sunny warm SD to (um)….Boston.  Biotech is my game, and Pharmboy is the name!  I am going to take it upon me to resurrect my second career, as I miss the community of PSW!  OK, off we go.

    I need to look into all the hoopla about the drugs working on the virus, but I would take them lightly right now.


  23. BP….wow.  Phil….need to load up the truck?  TOT, XOM…all trashed.  


  24. Hi Pharm!  Four seasons and good baseball – What's not to like?

    Now you just have to work on that accent…. chowdah… :)


  25. 1020…how goes it?  Anyone want to buy a house in SD….lemme know!  :)


  26. Going well Pharm – Got the twins home for the rest of their college semester and enjoying a little rain….

     

    Let me know when you need to market that palace!


  27. The wild ride on APRN continues…. Down to 10.25 this morning.


  28. Could be APRN won't be able to meet demands.


  29. Phil

     

    What about PAA?  Is any dividend remotely safe for them?


  30. Yo Pharm! Welcome to the East Coast! Missed seeing you around! Our head office is in Boston. Next time I make the trip we can hook up!


  31. Hey Pharm, welcome back, your insight and wisdom in regard to everything Pharma and markets have been missed!!

    Born and raised in Queens NY and always get asked if im from Bahston, some people I tellya. Good luck in the new digs.


  32. My son made it home from Spain. He is quarantined in my Sister and Brother in-law’s basement. They are retired Nurse/Doctor and feel that they picked the right year to retire.


  33. Welcome back Pharm! You moved almost the max distance from SD and still be in US!


  34. Oil ban/1020 – Wow, what a subsidy that would be for our oil industry.   We're already pursuing the idiotic approach of using up all the remaining US oil deposits.   I think 2030 is our drop-dead date at this pace. 

    Hola Pharmboy!   Gotta tread lightly on the oils.  We tried XOM, not good so far.  

    APRN/1020 – I guess someone listened to the Webinar….

    Traders are just so illogical!

    That is what I said yesterday, just because there is demand for something doesn't mean the company can ramp up to meet the demand.

    I was very impressed with the way GRUB and other delivery apps have stepped up with anti-virus protocols (they drop off at your front door if requested) and working with restaurants that are turning into delivery only.  Great pivoting in that industry.   Open Table partnered with Uber Eats to turn high-end restaurants into delivery services too.

    $3Bn is still silly for GRUB with $1.3Bn in sales and a $20M loss but at least they are working at it.

    PAA/Jeff – Another catastrophic pipeline play for no good reason.  Up a bit today.   I don't want to say the dividend is "safe" – nothing is safe in this uncertainty but that's not the issue, the issue is whether it's worth paying $3.3Bn ($4.50) for a company with $33Bn in sales and $2.2Bn in profits?  I may be old-fashioned but I kind of think so….

    Did I mention that traders are idiots?  

    Image result for carlin average american


  35. biodieselchris / Scenario – I was just writing about this last night to my niece that owns several OTF facilities in TX – We talked through what other countries had done and came to the conclusion that Trump has fd' this up so bad – quarantine will be minimally effective  - given this she should plan for at least 1 to 2 months of shutdown.   However with three drugs now in the running that have limited success – Gilead, Rosch, and the AVigan drug in Japan – this is our most likely outcome – the Admin Rams this through in and gets it out…. Then testing is at 20k or 30K a day – if have it you take the drug and symptoms are reduced – ie your contagious for less number of days, and the impact to lungs is diminished – the study with the JPN drug was fairly positive in China – albeit with only 340 trials.

     

    Phil – how do we take advantage of this – oh and BTW I expect Trump to Oversell this at some point – and use it to pump markets up.


  36. TSLA with a bounce today:

    Funny how a 13% up day ain't what it used to be.


  37. Pharmboy – / Avigan – What is your view on this drug – developed in Japan and being tested / evaluated in China


  38. Right now we all seem thrilled to see a green day – even up up a couple of points is a relief. But so far, every rally has been another selling opportunity. I guess we won't know when we have a bottom until it's been formed. Happens all the time. No one is 100% right on timing, the secret is to still have amno when that happens.


  39. News Feed says “Britain mobilizes troops to fight virus” – sounds more like the premise of a Monty Python sketch…


  40. Green Day – My wife's favorite band.

    She's had the 'American Idiot' ringtone on her phone for years… :)


  41. Getting filled on orders at better than my bid.  Have not seen that in forever.  Tiny trades but still.  Market to busy for HFTs to front run everything?


  42. StJ - I think we go YOLO (as they say on r/wallstreetbets) shorting volatility once the viral curve has peaked, but until then I'm playing it like you said; any up is long selling and short accumulation opportunity. I expect this weekend to be bad. Personal stories of the early unlucky ones are starting to come out and bad financial data is just now appearing. 

    Pharm - welcome back! What do you think about favipiravir? Any thoughts on biotechs that have moon-shot potential always welcome

    batman – right with your there…

    Phil – ready to start PSW Airlines yet? Let customers trade seats – make revenue on every trade. It's a no-brainer and pretty soon all these bankrupt airplanes will be on the market…


  43. Phil - thoughts on UMSV?


  44. GBTC 7 / bitcoin 5800 … nice rebound and WTF gold??

    Rhodium went from a 10000 bid to 3000 in a week. 


  45. Japanese-made flu drug favipiravir (also known as Avigan) has been shown to be effective in both reducing the…

    Read it on Flipboard

    Read it on techcrunch.com







  46. I knew the antivirals would peak everyone's interest….I really don't know and it is too early to tell.  One thing interesting that I am monitoring is this:  Some Blood Types …

    StJ – absolutely!  Would love to!

    Favipiravir, also known as T-705, Avigan, or favilavir is an antiviral drug being developed by Toyama Chemical of Japan with activity against many RNA viruses.  Promising…but flip a coin.  Too early to tell.  Lots of companies are going to take advantage of this…so don't buy the hype.

    KR is my top pick… :)   They sell foodaceuticals.


  47. How can MO keep falling.  Doesn't this make all the people who had quit smoking start again?


  48. Another market-killing press conference!

    Advantage/Batman – We picked GILD on day one of this crisis, they were the most likely winner.  I don't want to mess around with small companies – too fickle. 

    Yeah baby!

    Ammo/StJ – You said it.  

    LOL Tangled, that's a great observation! 

    Seat Trading/BDC – I morally object, would make it more expensive to fly.   USMV is not something I play with.

    Look at copper's bounce off $2!  I didn't have the balls to DD on that dip:

    /SI making nice money again off $12.

    Trump still with the blaming China and making excuses.  "The virus caught us unaware" – Why?  It was in China in December.  It was a disaster in China by February – this is the middle of March.  If an asteroid was going to hit the Earth, Trump would say "We were told it would hit the other side."

    • Copper prices plunge to the lowest levels in four years, down as much as 8% to $4,371/metric ton in Asia trading amid forecasts that the coronavirus will cause huge damage to global industrial production.
    • The price later recovered to trade at $4,713/mt, still down 16% this week after sliding 8% yesterday for its biggest one-day percentage decline in more than a decade.
    • "The Chinese decided to throw in the towel today," Marex Spectron's Anna Stablum tells the Financial Times, pointing to the Shanghai Futures Exchange, where the copper price opened with the biggest fall permitted under trading rules.
    • J.P. Morgan expects worldwide demand to drop by more than 10% Y/Y in February and March, and Goldman Sachs sees the copper supply outstripping demand by 260K mt, reversing its previous forecast for demand to outstrip supply by 140K mt.
    • This week's selloff comes despite mining in Peru, responsible for 12% of global copper supply, coming nearly to a halt after the government declared a state of emergency.
    • Top copper producers trade mixed following big recent losses: TECK +14.7%, FCX +13.4%BHP +3.9%VALE -2.1%RIO -0.8%SCCO -0.6%
    • Notes from today's COVID-19 briefing from President Trump:
    • FDA close to approving Gilead Sciences' (GILD +3.5%) remdesivir.
    • Also mentioned Regeneron's (REGN +3.7%) sarilumab.
    • More than 9K confirmed cases in U.S.
    • Has not yet "pulled the trigger" on Defense Production Act invocation.
    • Defends his early ban on flights from China.
    • FDA Commissioner Hahn:
    • 17K staff working "around the clock" during the outbreak.
    • Agency is implementing measure to quickly review and and enable access to treatments with the proviso that it remains committed to product safety and effectiveness.
    • First priority: review drugs already approved for other uses. Clinical trials will be required.
    • Immunoglobulin treatments also promising.
    • Approval of a vaccine at least a year away (still a very rapid timeframe).
    • VP Pence:
    • Work on economic relief package underway in Senate.
    • FEMA will lead the response.
    • New law enables the direct sale of industrial masks to hospitals (liability protection extended to producers like Honeywell (HON -2.6%) and 3M Company (MMM -1.9%)). Supply will increase dramatically.
    • Thousands of additional ventilators available for use.
    • Dr. Birx:
    • Half of confirmed cases in three counties.
    • Construction firms offering masks, hazmat suits and other protective gear.
    • Total (TOT +0.9%agrees to acquire 80% of the Erebus floating wind project in the Celtic Sea offshore Wales from renewable energy developer Simply Blue Energy.
    • Total, which does not disclose the value of the deal, has said it plans to invest as much as $2B annually to expand its footprint in renewable energy.
    • The company says the 96 MW capacity pioneer floating offshore project will be installed in an area with water depth of 70 meters.
    • While offshore wind so far has mainly developed in shallow water depths based on fixed bottom technology, floating wind offshore is set for strong growth in the years to come, Total says

    I like TOT, they are doing so much alt-energy and getting contracts all over the place.  For our Future is Now Portfolio, let's add:

    • Buy 10 TOT Aug $20 calls for $6.50 ($6,500) 
    • Sell 10 TOT Aug $27.50 calls for $3 ($3,000) 

    That's $3,500 on the $10,000 spread so $6,500 upside but only 6 months so a nice play.  


  49. One thing to mark on the calendar, and when this 'fear' lets up, ARNA.  Data should come out EOY or Q1 2021 on a few pivotal trials from Ph2.  If one works….ARNA will not be around.  I will do a small write up on that development product in the near future.  This will be an all or nothing trade.  We just need VIX to calm down to buy the OTM calls for a lotto play on positive data.


    • U.S. crude oil (NYSEARCA:USO) climbs to its highs of the day, with April WTI +18.3% at $24.11/bbl while May Brent +7.4% at $26.72/bbl after both benchmarks plunged to multi-year lows yesterday, but analysts see today's gains as only temporary.
    • Jefferies says 4M bbl/day could flood the markets starting next month, potentially pushing down crude oil prices into the teens, adding that "unless somebody intervenes, no oil producer benefits from the current environment."
    • Rystad Energy says the negative impact on oil demand from the coronavirus could hit 10M bbl/day in the coming weeks, and Morgan Stanley cites real time data showing traffic congestion has fallen 50%-60% Y/Y in many major cities across the globe.
    • The U.S. Department of Energy says it will buy 30M barrels of oil for the Strategic Petroleum Reserve as an initial step to fulfill Pres. Trump's directive to fill the reserve to help domestic crude producers.
    • U.S. casino stocks are moving higher on the belief that a government financial aid package of some sorts will be worked out and with some analysts recommending that investors nibble on the sector after the bruising sell-off.
    • Notable gainers include Caesars Entertainment (CZR +33%), Penn National Gaming (PENN +59.6%), Boyd Gaming (BYD +30%), Eldorado Resorts (ERI +26.9%), MGM Resorts (MGM +20.3%), Twin River Worldwide (TRWH +11%), Golden Entertainment (GDEN +13.8%), Marriott Vacations (VAC +13.5%) and Monarch Casino & Resorts (MCRI +10.6%).
    • Tesla (NASDAQ:TSLA) is back over $400 after racking up a morning gain of 13.05%.
    • The EV automaker has essential employees reporting to work today at its Bay Area locations if they are feeling well. It's still unclear if any cars are being produced amid the shelter at home order from the county. Tesla is in the same position as the rest of the corporate world in not knowing with any certainty how long the partial/full shutdown will last.
    • Earlier today, Morgan Stanley lowered its price target on Tesla to $460 from $480 and dropped its 2020 deliveries forecast on TSLA to 420K, although it kept a constructive long-term view.
    • MS analyst Adam Jonas: "The business opportunity has not fundamentally changed, and the current bull-bear skew is consistent with an Equal-weight rating. Tesla is the undisputed global market leader in battery electric vehicles today in terms of both technology and scale. With regards to the longer-term EV market opportunity and strategic position of Tesla, we believe little has changed in our minds and in our long-term forecasts. This is important. EV sales growth trajectory should be rapid and exponential."
    • The Bank of England cuts its bank rate by 15 basis points to 0.1% and will increase its balance sheet in response to the economic shock caused by measures to stem the spread of the coronavirus.
    • The British pound gains 0.7% against the U.S. dollar.
    • At a special meeting on Thursday, the central bank's monetary policy committee voted unanimously to cut the rate and to increase its holdings of U.K. government bonds and sterling non-financial investment-grade corporate bonds by £200B ($234B) to a total of £645B, financed by the issuance of central bank reserves.
    • The committee also voted unanimously that the Bank of England should enlarge the Term Funding scheme with additional incentives for small- and medium-sized enterprises (TFSME), financed by the issuance of central bank reserves.
    • The next regularly scheduled MPC meeting will end on March 25.
    • Restaurants stocks are racing higher on increased calls for financial help from the government amid mass dine-in closings with coronavirus cases in all 50 states.
    • The National Restaurant Association asked for a $145B recovery fund from the Treasury Department for the restaurant and foodservice industry in a letter addressed to President Donald Trump, House Speaker Nancy Pelosi and Senate Major Leader Mitch McConnell.
    • Analysts have also been encouraged by the quick action of companies to max out credit lines and stockpile cash ahead of the rough stretch coming up.
    • Notable gainers include Carrols Restaurants (TAST +15.9%), BJ's Restaurants (BJRI +12.7%), Brinker International (EAT +19.4%), Domino's Pizza (DPZ +9.5%), Dine Brands Global (DIN +9.4%), Denny's (DENN +0.2%), Wendy's (WEN +15.9%), Jack in the Box (JACK +18.8%), Chipotle (CMG +11.2%), Cracker Barrel (CBRL +15.4%) and Chuy's Holdings (CHUY +6.3%).
    • Entertainment chain Dave & Buster's (NASDAQ:PLAY) is up 91% after firing off a poison pill earlier in the day.
    • Food delivery player Waitr Holdings (NASDAQ:WTRH) is 50% higher on the day.
    • Meanwhile, online meal kit provided Blue Apron (NYSE:APRN) is down 30.55% in a sudden turn south after hitting a 52-week high earlier in the session.
    • Macau authorities say 80% of casino gaming tables are back up and running in.
    • The Gaming Inspection and Coordination Bureau says it will monitor casinos 24/7 to ensure disease control measures are fully enforced.
    • Of course, the big issue ahead is tourism from Mainland China and from abroad with the coronavirus outbreak still growing globally. Analysts forecast another dismal month for Macau gross gaming revenue in March before a partial recovery in April. Share prices could start creeping back up after the coronavirus outbreak peaks in Europe and U.S. to set a bottom on expectations.
    • 30-year fixed-rate mortgage averages 3.65%, up 29 basis points from 3.36% from the prior week, according to the Freddie Mac Primary Mortgage Market Survey.
    • Compares with 4.28% a year ago.
    • “Mortgage rates rose again this week as lenders increased prices to help manage skyrocketing refinance demand. This is expected to be a short-term phenomenon as lenders work through their backlog,” said Sam Khater, Freddie Mac’s chief economist.
    • 15-year FRM averages 3.06% vs. 2.77% in the prior week and 3.71% at this time a year ago.
    • 5-year Treasury-indexed hybrid adjustable-rate mortgage average 3.11% vs. 3.01% a week earlier and 3.84% a year ago.
    • Even with the jump in mortgage rates and the uncertain economic outlook due to the coronavirus, homebuilders shares are on the rise after several days of sliding.
    • Marathon Petroleum's (MPC +1.8%) Los Angeles oil refinery, the largest in California, has begun cutting production as the push to end the spread of the coronavirus dampens demand for motor fuels in the L.A. metro area, Reuters reports.
    • The 363K bbl/day refinery was the first U.S. refinery to report a coronavirus infection, as an employee tested positive and went into quarantine on March 11 along with those who worked nearby.
    • Marathon told California environmental regulators yesterday it was utilizing the safety flare system at the refinery, indicating a change in the level of production, after maintaining regular output in the week after the worker went into quarantine
    • The Trump administration is revisiting the idea of issuing ultra-long bonds as it considers how to finance a $1.3T fiscal stimulus plan, Bloomberg reports, citing people familiar with the matter.
    • President Trump's advisers are looking at issuing 50-year and 25-year bond, among other options, as they figure out how to finance additional government debt that would be the lowest cost to taxpayers, the people said.
    • The yield curve initially steepened on the report. 2-year Treasury yield is now at 0.49% and 10-year at 1.11%.
    • White House economic adviser Larry Kudlow likes the idea, according to one of the people. Treasury Secretary Steven Mnuchin, who was initially skeptical, now appears more willing to accept the idea, the people said.
    • On Wednesday, Mnuchin told Fox Business that he concluded in January that there wouldn't be enough demand for ultra-long bonds, but now "we're going to take advantage of low interest rates."
    • "With the risk of negative rates out along the curve, the issuance of 50 year debt is a good idea," RSM US Chief Economist Joseph Brusuelas says.
    • February Leading Indicators+0.1% at 112.1 vs. in-line with consensus, +0.7% prior (revised).
    • Coincident Economic Index +0.3% at 107.6.
    • Lagging Economic Index +0.4% at 109.1.
    • Lennar (LENwithdraws guidance as the uncertainty surrounding the Covid-19 economic damage and its duration throws a pall over the homebuilder's better-than-expected fiscal Q1 earnings.
    • Lennar falls 4.2% in early trading.
    • With the near shutdown of large portions of the economy, the company is "managing the inflow, and especially the outflow, of cash to maintain a strong foundation," said Executive Chairman Stuart Miller.
    • Even before the coronavirus hit, the company has been focused on reducing land spend and land holdings "to grow cash flow and fortify our balance sheet," Miller said. "That strategy was well-timed and has positioned us well."
    • Fiscal Q1 net earnings of $398.5M, or $1.27 per share, jumped from $239.9M, or 74 cents per share, in the year-ago quarter.
    • Per-share earnings crushed the average analyst estimate of 84 cents.
    • Deliveries for the quarter ended Feb. 29, 2020 increased 17% Y/Y to 10,321 homes; new orders of 12,376 homes rose 18% with new orders dollar value of $5.0B up 20%.
    • Q1 revenue of $4.51B exceeds the consensus of $4.13B and increased from $3.87B a year ago.
    • Conference call at 11:00 AM ET.
    • Previously: Lennar EPS beats by $0.43, beats on revenue (March 19)
    • BTIG analyst Mark Palmer upgrades Square (NYSE:SQ) to Neutral from Sell, saying the stock is fairly valued after falling 54% in less than a month.
    • Removes $37 priced target after stock achieved that level. Square closed at $39.50 on Wednesday.
    • "While we could not have predicted the kind of shock that sparked SQ’s steep decline, we have for some time pointed to the company’s vulnerabilities — exposure to the small firms most exposed during an economic downturn and the extension of credit as a means of spurring growth and reducing churn — that had been dismissed as the stock’s valuation became increasingly lofty," Palmer wrote in a note to clients.
    • With Square now trading at ~21.6x consensus FY21 EV/EBITDA, Palmer wouldn't recommend selling or shorting the shares.
    • Palmer cuts FY20 and FY21 estimates to reflect the impact of coronavirus; cuts FY20 estimate to $4,1056M from $5,9497M and FY20 adjusted EBITDA estimate to $311.7M from $502.8M.
    • Palmer's Neutral recommendation comes in line with the Quant rating and is still more pessimistic than the Sell-Side average rating of Bullish (15 Very Bullish, 6 Bullish, 17 Neutral, 2 Bearish, 1 Very Bearish).
    • Ford (NYSE:F) announces a series of initiatives to further bolster the company's cash position amid the coronavirus health crisis and set it up to emerge strong on the other side of the current period of "acute" uncertainty.
    • Most notably, Ford is suspending its dividend.
    • The company also notified lenders that it will borrow the total unused amounts against two lines of credit of $15.4B to offset the temporary working capital impacts of the coronavirus-related production shutdowns and to preserve its financial flexibility.
    • Ford is also withdrawing the guidance it gave on February 4.
    • -6.89% premarket to $4.19.
    • Source: Press Release
    • The Democratic House leadership last night proposed monthly cash payments of $2K to all adults and $1K to all children during the crisis. Appearing on TV this morning, Treasury Secretary Mnuchin offers $1K and $500, respectively (not positive if he's talking monthly, or a one-time payment). He says checks could be sent in as soon as three weeks.
    • As for taxes, folks will still have to file by April 15, but individuals can defer payments of up to $1M and corporations up to $10M for 90 days.
    • Talking airlines (AALDALUALLUVALK), Mnuchin suggests secured loans, and is unsure whether the government might take equity stakes.
    • Moving to oil, he says the feds probably ought to add $10B-$20B to the SPR at these low prices.
    • Fed to boost Treasury purchases to $75B Thursday and Friday, up from $50B, with purchases being increased across the curve.
    • Treasurys gain, with 10-year yield down 9 basis points to 1.10%.
    • In another move, the Fed establishes temporary U.S. dollar liquidity arrangements (swap lines) with the Reserve Bank of Australia, the Banco Central do Brasil, the Danmarks Nationalbank (Denmark), the Bank of Korea, the Banco de Mexico, the Norges Bank (Norway), the Reserve Bank of New Zealand, the Monetary Authority of Singapore, and the Sveriges Rikesbank (Sweden).
    • These facilities, like those already established between the Federal Reserve and other central banks, are designed to help lessen strains in global U.S. dollar funding markets, thereby mitigating the effects of these strains on the supply of credit to households and businesses, both domestically and abroad.

  50. going to buy the may 15 400/300 put spread on TSLA — bought the first leg at 90 — going to try and sell the 300 leg for 70 on a pullback to reality — even if they let them keep the plant open, i don't think a Tesla is at the top of peoples shopping list after their savings take a 30-40% haircut


    • March Philly Fed Business Outlook-12.7 vs. +10 consensus, +36.7 prior (unrevised).
    • From the report: Responses "indicated a notable weakening in manufacturing activity … Indicators for current activity, new orders, and shipments decreased markedly from their readings in February."
    • Moody's downgrades its rating on Occidental Petroleum's (NYSE:OXY) senior unsecured debt to Ba1 from Baa3, a week after the company cut its 2020 spending and production guidance and slashed its dividend.
    • The acquisition of Anadarko Petroleum Corp. continues to burden Occidental's balance sheet, "significantly compromising its financial flexibility to confront the collapse in oil prices," says Moody's VP Andrew Brooks.
    • "Projected asset sales required for debt reduction have slowed and face considerable headwinds in a challenged oil and natural gas price environment, leaving OXY with a significantly weakened credit profile whose prospects for near-term improvement are uncertain," Brooks says.
    • This likely is just the beginning of many credit rating downgrades to junk status in the oil and gas industry.

    That's something they should freeze – stop cutting people to junk.  3-month hold on rating changes.  

    • Questions are circling about Boeing's (NYSE:BA) financial (not aircraft) engineering after blowing $43.4B on share buybacks over the last six years.
    • In fact, Boeing's free cash flow for the last decade totaled $58.37B, of which 74% were spent on stock repurchases. It now faces dual crises including the 737 MAX and COVID-19.
    • Companies that get federal assistance in response to the coronavirus crisis should be prevented from buying back stock, Mark Cuban told CNBC yesterday. "Not a year from now. Not 20 years from now. Not ever."
    • Some history: Boeing stopped buying back shares in Q1 2009 – when its shares had plunged into the $35-range – and then started again in Q2 2013 when its shares rose to the $100-level.
    • BA shares are down another 6% premarket to $95 after cratering nearly 18% on Wednesday.
    • German manufacturers have suffered their biggest drop in business expectations in the 70-year history of industrial surveys, with overall morale sinking to the level of the 2009 recession, according to preliminary figures.
    • “The German economy is speeding into recession,” said Clemens Fuest, President of the Ifo institute, which published preliminary results of its monthly survey for March.
    • The overall business climate index for Germany, Europe’s biggest economy, sank to 87.7 from 96.0 in February.
    • Fuest said it marks the biggest drop since 1991 and brings the index to its lowest point since August 2009.
    • Ifo said in an optimistic scenario, the German economy would shrink by 1.5% this year if the industry is able to pick up production quickly once the virus is contained.
    • American Airlines Group (NASDAQ:AAL) discloses that it entered into a credit pact for $1B senior secured delayed draw term loan credit facility for general corporate uses.
    • The company says it has ~$8.4B of total available liquidity, consisting of $4.2B in unrestricted cash and short-term investments, $3.2B in undrawn capacity under American's revolving credit facilities and $1.0B in undrawn capacity under the facility.
    • SEC Form 8-K
    • Shares of AAL are down 2.06% premarket to $11.41 and off 59% for the last month
    • Bernstein cuts its Texas Instruments (NASDAQ:TXN) target from $120 to $100, citing the coronavirus impact.
    • Analyst Stacy Rasgon continues "to believe that the 2008 Global Financial Crisis is probably the best lens to view the current situation through."
    • The financial crisis led to a "massive demand stoppage."
    • Rasgon is uncertain if the coronavirus situation is more or less severe, but notes that it "seems to be happening quicker."
    • More actions: Bernstein trims Analog Devices (NASDAQ:ADI) from $115 to $90 and NXP Semi (NASDAQ:NXPI) from $140 to $90. The firm has a Market-Perform rating on ADI and an Outperform rating on NXPI.
    • Bernstein maintains a Market-Perform rating for Texas Instruments. The company has a Bullish average Sell Side rating.
    • TXN shares are up 0.5% pre-market to $100.45.
    • Coronavirus developments have exploded in the U.S. over the last week and sent the stock market spiraling lower. However, investors are taking refuge in a number of consumer-facing companies seen performing well during the rough road ahead.
    • One-week share gainers in the consumer sector: Blue Apron (NYSE:APRN+480%, Waitr Holdings (NASDAQ:WTRH+441%, United Natural Foods (NYSE:UNFI+77%, BJ's Wholesale Club (NYSE:BJ+38%, American Outdoor Brands (NASDAQ:AOBC) +35%, Fresh Del Monte (NYSE:FDP+33%, Peloton Interactive (NASDAQ:PTON+17%, B&G Foods (NYSE:BGS+15%, Hormel (NYSE:HRL+14%, Clorox (NYSE:CLX+13%, Kellogg (NYSE:K+12%, UPS (NYSE:UPS+12%, Kroger (NYSE:KR+11%, General Mills (NYSE:GIS+9%.
    • Canaccord Genuity cuts Apple's (NASDAQ:AAPL) price target by $45 to $300 due to the coronavirus impact.
    • Analyst T. Michael Walkley expects "continued soft near-term results" with the impact lasting through at least Q3.
    • The analyst cuts his 2020 iPhone unit sales estimate from 202M to 168M and 2021 from 218M to 183M.
    • Canaccord maintains a Buy rating on Apple, citing the tailwind from the long-term 5G investment cycle. Apple has a Bullish average Sell Side rating.
    • Apple shares are down 0.3% pre-market to $246.
    • Previously: Apple's biggest bull trims target (Mar. 18 2020)
    • "To help address this global challenge, we have increased our manufacturing capacity and output of equipment – including CTs, ultrasound devices, mobile X-ray systems, patient monitors and ventilators – important in the diagnosis and treatment of COVID-19 patients, while taking steps to ensure safe operations for our employees," says GE Healthcare (NYSE:GE) CEO Kieran Murphy.
    • "As the global pandemic evolves, there is unprecedented demand for medical equipment, including ventilators. We continue to explore all options to support this increased need."
    • GE -2% premarket to $6.47/share.
    • Canaccord Genuity maintains a Buy rating on Qualcomm (NASDAQ:QCOM) and cuts the target from $115 to $95, citing the expected "shock to global handset demand during the June quarter."
    • The firm expects "soft near-term results" due to the coronavirus but sees a "strong recovery longer-term" for QCOM, which remains well-positioned to benefit from 5G ramps.
    • QCOM shares are down 0.3% pre-market to $60.98. The company has a Bullish average Sell-Side rating.
    • Darden Restaurants (NYSE:DRI) reports Q4 results just ahead of what will be a dark period for the company.
    • The restaurant operator reports comparable sales were up 2.1% for Olive Garden, 3.9% for LongHorn Steakhouse and 4.2% for Capital Grille in Q4 off positive traffic and pricing contribution.
    • The board says it has suspended the company's quarterly dividend due to uncertainty driven by the significant reduction in effective restaurant seating capacity and other restrictions mandated by state and local governments in response to COVID-19. Out of an abundance of caution, the company is also fully drawing on its $750M credit facility.
    • Darden is also withdrawing its FY20 outlook due to the outbreak.
    • "With the drawdown of our revolver, and cash on the balance sheet, we will have approximately $1 billion in cash on hand," says CFO Rick Cardenas. "We believe this positions us well to deal with potential near term volatility under the current market conditions," he adds.
    • Source: Press Release
    • Previously: Darden Restaurants EPS beats by $0.02, beats on revenue (March 19)
    • Following moves from the ECB and RBA, the Bank of Japan sought to stem a bond market rout by pledging to spend billions of dollars and implement yield curve control.
    • The central bank offered to buy as much as ¥1.3T ($12B) of government bonds and supply another ¥4T of funds.
    • "Central banks are coordinating to respond so aggressively, and as innovatively as they can, to stop the meltdown," said George Boubouras of hedge fund K2 Asset Management. "But markets are screaming for more, more and more. It’s not enough. Capitalism needs a hand. Fiscal policy needs to step up – the BOJ, ECB, RBA can’t do everything."
    • Saying Japan is aiming for a "V-shaped" recovery fueled by decisive economic policies, PM Shinzo Abe says there has been no discussion about delaying or cancelling the 2020 Summer Olympics.
    • Abe's comments dovetail with those of IOC president Thomas Bach, who on Tuesday reiterated the organization's commitment to holding the Games this summer in Tokyo.
    • The Tokyo Olympic Organizing Committee has strongly resisted considering postponing the Games. Recently, when a member of the organizing committee was quoted as saying a 1-2 year delay was under consideration, the committee called a press conference to reiterate that the Games remained on track.
    • The prospect, though, seems daunting. How will athletes get sufficient practice? And will fans come?

    • New York Governor Andrew Cuomo said there are likely "tens of thousands" of COVID-19 cases in the state by residents who never knew they had the illness.
    • NYC Mayor Bill de Blasio is pushing Cuomo to approve a "shelter-in-place" order for the city as coronavirus cases surged to almost 1,900 across the five boroughs.
    • Two congressmen have tested positive for the virus – Florida Rep. Mario Diaz-Balart and Utah's Ben McAdams. The House is currently in recess, though the Senate is still in session.
    • China has reported no new domestic cases for the first time as more countries tighten borders.
    • Australian flag carrier Qantas (OTCPK:QABSY) has halted all international flights and temporarily cut two-thirds of its 30,000 workforce. India is also preparing a rescue package of up to $1.6B to aid airlines.
    • London's underground system will be partially shut down beginning today in the city’s bid to slow the spread the virus.
    • At least 2,978 people in Italy have died as a result of COVID-19, with the total number of confirmed cases in the country standing at 35,713.
    • After having decided it would hold its flagship WrestleMania event without fans amid virus fears, World Wrestling Entertainment (NYSE:WWE) says it will split the event over two nights.
    • That, of course, means two times the pay-per-view. The company will hold WrestleMania as a two-night streaming event on April 4-5 on WWE Network and PPV.
    • With the COVID-19 outbreak suspending nearly all large events, WWE had decided to hold WrestleMania as a closed-set production at its training facility. It will be hosted by former New England Patriots player Rob Gronkowski.
    • Harley-Davidson (NYSE:HOG) says it's temporarily suspending the majority production at its U.S. manufacturing facilities through March 29.
    • The company's facilities temporarily suspending production are York Vehicle Operations in Pennsylvania, as well as Wisconsin facilities Tomahawk Operations and Pilgrim Road Powertrain Operations.
    • Harley-Davidson plans to continue monitoring the situation closely and make additional adjustments as necessary in accordance with WHO and CDC guidelines.
    • Source: Press Release

  51. Data coming out is pretty bad – what/when is the next catalyst to pull us out of a bear market — I don't think everything is priced in — people think they can buy the dip because that is what they have been programmed to do in a bull market, but we are in a bear market now


  52. Markets coiled, its either going to pop or poop.


  53. Short-Term Portfolio Review (STP):  $282,168 is up 182% so the STP is doing it's job and, of course, it's full of potential if things stay this low – nicely offsetting the LTP losses.  To be clear (as someone asked yesterday) the STP is a model for hedging that works with any portfolio, not just the LTP.  

    What happened in the last cycle was we had a couple of big market sell-offs and we cashed in the STP and then said "If it gets worse, we'll move the cash to the LTP" but then it didn't get worse and the STP just got bigger and bigger while the LTP recovered.   That's one of the ways I can feel we're at a bottom, when it's time to move cash from the STP to the LTP – like the way the market tends to reverse when StJ and I are debating whether to move the lines on the Big Chart!  

    We are LOADED with CASH!!! ($457,773) and out positions have a -$175,605 net value so the trick is to work out the positions, using as little cash as possible and PRESTO! we're up another $175,000!  We generated some of that cash yesterday, by cashing in some very successful shorts and buying cheaper spreads to cover our remaining short call.  That's Phase 1.  Phase 2 is making sure we're not too bullish and Phase 3 is rolling or whatever to get that -$175,000 to turn into $0.

    • AAPL – As with all our short puts in the STP, they generally offset the cost of a hedge and, if they go bad, we just roll them over to the LTP because we REALLY do want to own 700  shares of AAPL for net $150.
    • CHL – I can't believe how bad they got.  While we do REALLY want to own them, the 5 short Sept $45 puts at $14 ($7,000) have no premium left $37.50 puts are $9 ($9,000) so we can roll to 10 of those and pick up some cash. I don't want to do all the math but this is like buying T for $15 – silly not to.  
    • FXP – That was left over from our old spread – I can't believe they are still so expense 60% out of the money.  
    • TSLA – What's left of that spread, good timing on the roll if they hold $400.  

    • SDS – Our new spread.  Keep in mind we hope to lose this – it's covering all the new LTP short puts.  
    • QQQ – Also new.  All we have to do is have the VIX calm down and we make money.  That's why we took advantage yesteray.

    • QQQ2 – Leftovers from the old spread, the first QQQ is covering it but we don't want them to get out of control so if the Nas fails to hold $175, we're damned sure going to cover again.  It's no big deal, we got offered a lot of cash for our long puts yesterday and we took them off the table (the cash was more than the spread) and now we have the naked short puts but we feel this should be the bottom for QQQ and that's $95,000 worth of short puts we can pick up if we're right!  
    • SQQQ – Added that to cover as well yesterday and that's a $100,000 spread that's currently a net credit of $17,250 though not a lot of room to roll the short calls so, again, we need to watch closely if we have another leg down.
    • SQQQ2 – That's our older set and we sold some off (more CASH!!!).  $97,500 spread at net $22,000 credit so $119,500 upside potential.  We almost make more money if the market crashes than if it recovers at this point!  Flat would be very nice though…  

    • TLT – I don't even understand bonds anymore.  Luckily, we played it right and let's keep in mind it's not because I'm a genius – the line is right there on the chart letting us know it was a high-percentage chance we'd pull back from there (not to mention common sense as that was 0% for 20 years).  Now the odds favor cashing in our 20 June $145 puts at $12 ($24,000) and then hopefully we're right about our $155 target for the short puts and short calls.  

    • UNG – Not worth changing.
    • USO – I can't believe how low this thing is.  Nor can I believe this $30,000 spread is net $5,650 despite being $20,000 in the money (less the short puts call it $10,000 in the money).  We should really just have 10,000 contracts ($3M) of these and take off until summer.  We're essentially betting oil will be more than $30 on July 4th. 


  54. Money Talk Portfolio Review:  $67,628 is down 32.4% and fortunately we hadn't invested too heavily, even with the recent additions.  We can't change anything but I'll make some quick notes:

    • VLO – Just added attempting to call a bottom and I still think net $28 is fine.  
    • FCX – Copper is a disaster but I like them to recover.  Wish we could roll but we can't.  
    • GOLD – Still mostly in the money – I'm very confident since they are flooding the world with money.   Of course, at this stage, no one is buying gold with it but give them time…
    • IBM – Holding up pretty well considering.  Another one I'd love to roll. 
    • IMAX – Big comeback today but only at the money so far.  
    • SKT – I'm fine with that entry.
    • SPWR – What an opportunity to get into these guys!  


  55. Unaware / Phil – Didn't we have MERS, SARS, H1N1 before! All these viruses that came from Asia and hit us 2 or 3 months later! How can Trump claim to be surprised! For H1N1, we tested 1M people the first month. So it can be done. It's a matter of not denying the inevitable! He can't go away fast enough.


  56. Discover (DFS) sure has been murdered in this downturn.  Down 70%!  BK risk or overreaction?


  57. And in Florida, De Santis needs to get his head out of the (beach) sand! It's just insane what is going on there! These kids are going to bring home virus loads and parents are going to get sick!


  58. DFS/Palotay – I was wondering the same thing. They're priced for BK. I've got some short puts that are pinching me pretty bad, and wondering whether to throw in the towel or hang on.


  59. Phil are you concerned that China devalues their currency versus the dollar, and that hurts our CHL position?  With the significant dollar strength against all other currencies, it seems like that is a risk.  CHL looks cheap now in dollar terms, but if they devalue that could change things significantly, no?


  60. USO – I rolled my Jul 7.5 down to 4 for about $1.50. I'm not an convinced that it will recover by July, but I do think it will recover by the end of the year. I don't imagine the Russians have an appetite for $22.50 oil for the rest of the  year. Especially if covid hits them at some point. The USO Jan 6/9 spreads are $0.72. USO should hit $9 or $10 or so if oil recovers to $40, shouldn't it?


  61. DFS/Palotay – The fear on CC companies is they get overwhelmed by non-payments.  DFS has a weaker balance sheet so more vulnerable (and lower-income customers, who themselves are more vulnerable).  

    DFS is way smaller than the others and their revenues (fees, interest) is $11.5Bn so about 8% of transactions but the profits are $3Bn, just 2.1% of transactions.  Well, they are losing close to 17% of transactions (2 months) but let's assume people still shop so call it 5% but that's all their profits for the year potentially and then what if just 1% of their people fail to pay – that's $1.4Bn right there.  

    Those are the fears.  

    Catalyst/Coulter – Well there's earnings in a couple of weeks but lots of guidance warnings should soften the blow and people are clearly pricing in the worst case in most companies.  

    Flights/Kustomz – And I bet those flights are half empty.  

    1M/StJ – Very good point.  Trump is lying and deflecting – as usual.  

    Image result for trump cookie jar cartoon

    CHL/Paloaty – In the short-run, sure.  Long-term, not worried.  Their currency has already been devalued with the Dollar at 103+.

    Hmmmm, last time the Dollar did this was when the global markets collapsed in 2000 and that went on for a while.  Fed easing stopped the climb but how can they ease at 0?  

    I was walkin' into town in my white bucks
    A man with a gun, he said hands up
    I tried to get away but too slow
    He got me and took all of my dough
    I heard him shout
    As he cut out
    Well you ain't lost nothin'
    What you cryin' about
    Your cash ain't nothin' but trash

  62. Damn, look at RH.  Down 67% from the highs.


  63. Recession/Phil

    In the last two major downturns, it took years for the stock markets to hit bottom, roughly 3 years for the dot com bust, and a little less than 2 years for the 2008 crash.

    There are reasons to question the current soundness of the economy (US or world). Most major countries have huge debt. US debt is rapidly outstripping GDP. The Covid-19 pandemic is likely to drive government debt way up, and GDP is likely to go way down. There are trillions in student loan debt, trillions in credit card debt, trillions in auto loan debt, and trillions in corporate debt.

    Could you, gently, explain why you think we won't descend into a major recession or depression lasting years?

    Thanks.


  64. NLY-I Pfd up 48% today, not a usual move.


  65. Hemp Boca Portfolio Review:  This is one we never touched as they don't do the radio show anymore (too much back and forth to Thailand).  It's down to $40,980 (-58.3%) so we can look as the adjustments we make would be good for new positions:

    • TAP – So, question 1 is "Do we still believe in the target?" for 2022 I think yes, so there's no need to roll the puts (net $43.50) and they are now $17 ($8,500) but the thing is the $35 puts are $8 so I would rather sell 10 of those ($8,000) as it's an easy goal (though $10,000 more shares commitment).  It's not about needing to roll but recognizing that $8 is a silly fear-driven price – so why not take advantage?  Question #2 is already answered, I do still like them so that means it would be silly not to take advantage of a cheap roll of the Jan $50 calls at $3 ($6,000) to 20 2022 $30 ($13)/$42.50 ($6.20) bull call spreads at $6.80 ($13,600) and we may as well buy back the short calls at $1.18 ($2,350) so now we've spent net $5,750 to adjust on top of net $5,200 we started with so $10,950 total spent on what is now a $15,000 spread but our target is now $42.50 – very doable.  If they pop, we can pay down some of that $10,950 by selling short-term calls (5 April $45s at $1.80 is $900 for 29 days out of 673 we have to sell).  

    • M – See, you have to save the DD money…  The problem with relying on your commercial real estate as an asset is what happens if commercial real estate crashes?  Still, can't turn down $6.66 so let's roll our 15 2022 $13 calls at $1.15 ($1,725) to 30 $5 calls at $3.30 ($9,900).  The short 2022 $20 calls are pointless so we'll buy those back and wait for a bounce to sell covers (famous last words!).  5 short $15 puts at $10 can be rolled to 10 short $8 puts at $4.50.

    • MJ – Damn, we were doing good for a while.  Actually MJ sales are booming so I still like them.  Let's cash out the 20 2022 $15/22 bull call spreads at 0.80 ($1,600) and buy 40 2022 $5 ($5.50)/10 ($2.80) bull call spreads for $2.70 ($5,400) and we'll roll the 10 short 2022 $20 puts at $11 ($11,000) to 20 short 2021 $15 puts at $6 ($12,000).  I was going to say the 2022 $13 puts at $5.50 but the premium will burn much faster on the $15s and the target isn't unrealistic so we have the possibility of selling another $12,000 next year too this way.  If not, we can do an even(ish) roll to the 2022 $13 puts anyway.  

    • THC – Why is a hospital stock down so much?  THC is prone to violent swings but a great stock to own when they are low.  We aren't that badly off but we can always improve so let's roll our 10 Jan $13 calls at $5.50 ($5,500) to 20 of the 2022 $10 ($7.50)/$25 ($2.50) bull call spreads at $5 ($10,000) and let's roll the 5 short 2021 $18 puts at $8.20 to 10 short 2022 $18 puts at $9 ($18,000) and we'll buy back the 10 short Jan $20 calls at $2.50 ($2,500) for net $6,800 in our pocket and we moved from a $7,000 $13/20 spread to a $30,00 $10/25 spread.  Will be great if it works!  


  66. RH/Palotay – That's a good one, I love them.  

    Why/Saguaro – Well because there's no structural damage, no labor displacement, no bankruptcies (yet).  Europe take a month off every year (August) and their economy seems to survive intact.  In fact, it's just like the virus – only restaurants, pharmacies and hospitals are open (and apparently not bathing suit stores in Germany!).  China JUST had a month of shutdown and they are already back at work.  Even with our completely inept leadership, America will figure things out and we'll be back to normal in two months and you'll be sitting in a movie theater and remembering I said this.  

    You have a President who has wrapped up his whole sense of worth in the stock market's performance – are you going to bet against what he can do if he is determined?  This isn't like the Dems want to do something and he doesn't – he wants to spend whatever they will give him and he'll keep doing it until November.  I bet we get an infrastructure bill finally passed at this rate.  

    NLY/Randers – See, I said to was stupidly low.


  67. Oil is rolling today….


  68. DWT – down almost 70% from yesterday, it will be explosive if oil fades so keep an eye on it.


  69. Spend whatever – tdump is so predictable….


  70. /ES having a good day (finally):

    Oil $26.50!  

    As I said above, we should just have 10,000 of those USO spreads…

    At least we played the /RBs (from the Webinar):

    March 18th, 2020 at 12:59 pm | (Unlocked) | Permalink 

    SLV/EMike – Dollar is going crazy – not sure when it will stop so I'd wait.  As far as /RB goes, however, Jan 2022 contracts are 0.89 and contracts pay me $420 per penny to the upside so if I buy one of them, I'm insuring I pay no more than $1 per gallon for gas for 2 years, which would save me about $9,000 on 3 family cars (vs $3 now) but if /RB went back to $1.50, at $420 per penny, I'd make $25,620 so I like the risk/reward – especially as I can roll the contract out and keep getting cheap gas for life.   /RB more likely to go up 0.61 than down, I would think.

    DWT/MrM – Holy crap!  


  71. Phil,

    Any thoughts on the sudden drop in T? Only news I saw is closure of some retail stores. Siren call to sell puts around here.


  72. Looks like its going to take a lot for DC to hammer out any sort of bailout. Not good, but not unexpected.

    8800 T will need funding from what I hear.
     


  73. This is what I meant about MJ:  https://flip.it/OFWhL6

    T/8800 – I don’t see anything on them. We already have them but I certainly like them here.  


  74. Phil – My hope is that have finally put an end to small government talks forever because at the moment, no one is complaining about government spending! But I am not fooling myself, as soon as it looks safe, the usual people will ask for cuts to the  CDC, the NIH and all the people helping get a solution today. In order to pay for the big corporate bailouts of course… that will be used for buy backs again once no one is watching!


  75. Amazon had to close prime pantry due to order volume. 

    Goverment/StJ – The second Biden is elected they will start screaming about every dime he wants to spend.


  76. Wow so I had some meetings yesterday and missed the "buying opportunity of a lifetime", look at everything rage. What a fickle market.


  77. I rolled my 20 short M puts in div portfolio to the 8 strike, for close to even. Just an FYI. 


  78. ERY is in the same category as DWT, I sold some earlier a few weeks ago for what I considered a reasonable profit at the time, I never dreamed that it would move $ 200. after that!


  79. Would it make more sense to roll my AAPL Jan ’22  $270 calls to $240s for about $7 or buy back some of the short calls?

    (Not that I have the cash for either at the moment!)

     

    10 AAPL June’21 $200 calls @ $29

    15 AAPL Jan ’22 $240calls   @ $53.5

    30 AAPL Jan’22 $270 calls  @ $60.6

    - 20 Jan’22 $350 calls  @ $36.2

    - 35 Jun’21 $320 calls. @ $44

    Thx

    Would it make more sense to roll my AAPL Jan ’22  $270 calls to $240s for about $7 or buy back some of the short calls?

    (Not that I have the cash for either at the moment!)

     

    10 AAPL June’21 $200 calls @ $29

    15 AAPL Jan ’22 $240calls   @ $53.5

    30 AAPL Jan’22 $270 calls  @ $60.6

    - 20 Jan’22 $350 calls  @ $36.2

    - 35 Jun’21 $320 calls. @ $44

    Thx


  80. Phil, Kustomz

    Thanks for the thoughts.

    FWIW: 

    Selling T Jan 28 puts for $4 provides a 9% div yield, if assigned… on AT&T (our forefathers considered the bluest of blue chips). Just saying. T supposedly is committed to improving its balance sheet and is reportedly hiring 12 year-olds to help with its IT problems and customer service issues.


  81. Phil I have removed any possibility of profiting from on oil price rise and Trump says will intervene in price war so that should be your signal to do your USO spread


  82. 8800, T may have to cut the divi along with a credit down grade, Im speculating here, but seems possible in the current environment. Interest for short term paper has jumped dramatically and will hurt not just T but all of the highly debt burdened.

     


  83. You didn't miss anything Mr M.  Going to be a month of wild swings to play.  

    M/Palotay – These crazy premiums make it a great time to do that stuff.  

    ERY/Randers – Wow, things are just nuts! 

    That's how these things blow up.  These are probably a great short.

    AAPL/Wing – I would certainly rather buy position than spend the money to uncap my gains (assuming you can't do both).  You have great profits on the short June calls (now $5.60) so I'd close those and roll the 30 $270s down for $7 and, if you need to pay for that, that's about $45,000 and you could sell some 2022 $320 calls ($30) – 15 would do it.  Then you'd have 45 2022 $240s covered with 20 of the $350s and 15 of the $320s and you can still sell 10 short calls on the next pop.  That's a nice spread.  

    T/8800 – I can't believe how bad their customer service is.  We just switched to them from Comcast and they are TERRIBLE!  Still, it's a good stock and $30 is a great price. 

    USO/Tangled – I know, it's just too good to be true.  


  84. The numbers in Italy are getting really worrisome and I fear we are on the same trajectory here! More death than China now.


  85. Italy – so you guys believe China's numbers?


  86. Dawg/numbers…..Korea is tracking China about two weeks or so behind. So, yes, I believe them – initially China didn't have a good handle and tried to cover it up – but not now. Most of lying accusations come from US media/government and is basically China bashing.


  87. AAPL/Phil  Thanks .. I only see $22 for the short June'21 $320 calls, not $5.6?


  88. Why would /CL pop 23% and /BZ stay flat?


  89. Proposed GOP Stimulus in Senate is very weak. Are we going to plunge lower tomorrow?


  90. Sorry Wing, I was looking at this June.  I guess you are stuck with those then but you can roll them to 2022 and pick up a bit of cash.  

    /CL/Dawg – Because Trump said he would ban imports, driving up /CL demand and not /BZ.  Another way to tax the American people to benefit his donors.  

    Plunging already!  These guys will never learn…  These are the same guys who screwed us up in 2008 but nobody votes them out of office (they have more power now) so they can screw things up all over again!  

    Image result for market crash tarp vote

    Image result for market crash senate vote


  91. Decisions that limited testing for the pathogen blinded the U.S. to the outbreak’s scale, impeding the nation’s ability to fight it through isolating the sick and their contacts. Here’s how it happened.1,190

    Oh, rumors have it that they will announce on the weekend a one-week shutdown of the whole country.  National Guard being mobilized as we speak to enforce it, apparently.  That will be interesting…

    New York City hospital emergency rooms started seeing a sharp rise in people coming in with flulike symptoms in early March—a concerning signal before the coronavirus crisis ramped up.49

    Employers are cutting shifts, suspending work and starting to lay off workers as the new coronavirus devastates business across the country.687

    Senators turned their full attention to the Trump administration’s proposal for $1 trillion in spending to combat the coronavirus pandemic, including aid for airlines and direct payments to American households, after passing a paid-leave bill.374

    Pressure From Athletes to Delay Olympics Intensifies

    Though the IOC has repeatedly insisted that the Tokyo Games would go ahead as planned, the organization is now facing loud criticism from its own constituents.8

    Square Gets Green Light to Open a Bank

    Federal and state banking regulators approved an application from financial-tech company Square Inc. to start its own bank in Utah.

     

    Oh great, we are Italy now:

    A sharp rise in new coronavirus cases in some states raised the U.S. total to more than 10,000, and an intensifying outbreak in Europe pushed State Department officials to advise citizens not to travel abroad.1,27642 minutes ago

    To keep grocers stocked, farm giants shift schedules, juggle operations to redirect supply chain, while adding overtime and readying workers to fill in for any who fall ill. “Platoon coverage” at a grain company.192



  92. Trump calls off June G-7 meeting because of virus


  93. My neice in NYC tested positive for coronav. She had been trying to get tested for 2+ weeks. Her brother who was in close contact with her during those 2 wks tried all day to find a place that would test him. NYC facilities ran out of test kits & NJ places put him on hold & then disconnected after a few minutes. Imagine how many cases we’ll have once people can actually get tested!! Italy part 2 indeed, very scary!!


  94. How Trump’s Attacks on the Fed Have Made Its Job Harder


  95. Hmmm, I have to cut my own hair.  This should be interesting.




  96. Cautious optimism on Wall Street, markets rise with aid hope