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Toppy Tuesday – Pressing our Hedges (Just in Case)

S&P 3,000 – woo hoo! 

That's right, we're almost back to where we were last Summer, 50% higher than we were 4 years ago (that was 2,000 Foxies!) and 100% higher than we were 7 years ago (1,500).  In 2013, the earnings per share for the combined S&P 500 were $110.98 so we divide 1,500 by $110.98 and we get a price to earnings ratio of 13.51.

Then we take 2016, when the S&P earnings had bounced back to $101.08 and the S&P was at 2,000 and…. Ha, ha – I fooled you Foxies! – $101.08 is LESS than $110.98… just seeing if you could do the math there.  Anyway, we divided 2,000 by $101.08 and we see the P/E shot up to 19.78 – those are nose-bleed levels of valuation – even in a strong growth environment.

Still, the growth expectations were justified as Corporations no longer have to pay taxes or worry about destroying the environment and, in the golden age of Trump, earnings shot up to $140 per share last year and the S&P hit 3,400 – still with a p/e of 24.28 - as if this growth will go on forever.  Why, to keep that kind of growth up you'd have to PAY corporations tax money on top of the profits they make.

Guess what?  That's what we're doing!  The Goverment just borrowed $6Tn, mainly to give to large Corporations while gutting what few remaining regulations we had left AND they let 30M jobs be destroyed, loweing the cost of labor for the rest of this decade AND they lowered Corporate Taxes even further.  Mission accomplished indeed! 

Am+People+Spoken+IIWith the S&P 500 back near 3,000, we can now divide 3,000 by 24 to see if we think we're at a realistic level of optimism.  3,000/24 for the Foxies is $125 and $125 is $15 less than $140 and $15/140 is 10.7%.  So, in order to be paying 3,000 for the S&P 500 companies as a group, we have to believe that this Global Pandemic did not disrupt corporate earnings by more than 10%.  How stupid is that?

Q1 earnings are already down 20% and that's with just 2 out of 13 weeks affected by the virus.  Q2 is going to be essentially a wipeout so, instead of making (allowing for Christmas to be about 2x a normal quarter) 30 + 30 + 30 + 50 = $140 like last year, we are likely at 24 + 0 + 20 + 40 = $84.  $84!  That's the most likely projection for the S&P 500 this year and that's assuming the re-opening goes well and things are 80% of full speed by Q4 (that's October 1st, Foxies).

I'm not saying that $84 is terrible – we were down to $18.27 in 2008 after being at $104.26 in 2006 and $81.33 in 2007 (that's right, the writing was on the wall a year before the crash).  Then, like now, people ignored the signs and thought Government stimulus would solve everything (remember Bush's checks) and we though bank failures and property crashes happening overseas were not going to be our problem.  How did that work out?  

We had massive bailouts in 2008 and earnings came all the way back to $60.92 in 2009 and 91.09 in 2010 and 99.45 in 2011 so only 3 years to get back to where we were before the crash.  But this crisis, we're playing like it's going to be 3 months and that's because the Administration, who has lied to us an average of 10 times each day Trump has been in office and is now lying to us an average of 23.3 lies per day in 2020 – a feat not likely to be equalled by any other President.

President Trump's lies over time by topic.

So why do we choose to believe the economic lie?  Mostly because we REALLY want it to be true.  And what is true about investors and consumers is that, if you can convince them to be bullish – you can actually create a bullish economy.  Usually.  Unfortunately, while the Investing Class may be getting a ton of free money thrown at them at the moment – the Consumer Class is falling further and further behind and their prospects for the rest of 2020 are not looking good – even if the virus "ends" tomorrow – which is not very likely, no matter how bravely we go outside.

So hedging, hedging is key to maintaining our portfolios.  Our Long-Term Portfolio, which started the year at $500,000 had recovered well in our last review and was sitting at $542,305 almost a month ago and, since then, the S&P 500 has gone from 2,750 to 2,950 and our LTP has popped to $649,193 so we're up $106,888 (19.7%) for the month.  The S&P is only up 7.2% so that's a lot of leverage and we can lose the money just as quickly so, in order to lock in our gains – it's logical to boost our hedges.

As a rule of thumb, we put 25-40% of our unrealized gains back into our hedges, depending on how worried we are.  As noted above, I'm a lot closer to 40% worried than 25% so let's say we have a $40,000 budget for adjustments to our Short-Term Portfolio (STP), which was at $522,026 (up 422%) last month and is now at $534,245 (up 434.2%) thanks to very nice profits on our TSLA trade, despite the losses in our index hedges.

  • CANE – A bullish bet on sugar that was going well and then derailed.  Still good for a new trade (and I like the /SB futures above the $10 line with tight stops below).

  • AAPL – Selling short puts is a way to offset our hedges.  I expect to collect the remaining $4,603.
  • JPM – Another short put and we expect to collect the remaining $1,925 as JPM stays over $50.

  • SDS – Here's the most important hedging trick of them all but it requires you to have a good amount of margin.  Note the net of the spread was $2.95/1.60 or $1.35 and now the June $22 calls, which are at the money, are $1.64.  $1.64 is MORE than we paid for the spread so we can rescue our entire investment by cashing in the June $22 calls.  SDS is a 2x S&P Ultra-Short so for it to climb $7.50 33%, the S&P would have to fall 16.5% and that would only put the $28s at the money – and we could roll them from there.  The other SDS spread, the Jan $20/40 spread, is $2.46 in the money at net $3.03 but $40 is not very likely and the $30s are $2.80 so the Jan $20/30 spread is $2.05 – just 0.41 more than our June $22 calls.  
  • So, we will cash our June $22 calls for $1.64 ($16,400) and buy 100 Jan $20/30 bull call spreads for $2.05 ($20,500), spending net $4,100 to place our 100 SDS longs $24,600 in the money and giving us $200,000 of protection at $30 (a 20% drop in the S&P) covering the 100 short June $28s.  When they expire, we can sell more short-term short calls for additional income.  The net of this spread is $45,900 and we expect to lose it at some point if the market stays bullish – it's insurance money!

  • SQQQ #1 – We should have rolled these sooner as it was a net $1.32 spread but that's no reason to sit on it.  Let's just cash the June $13s for 0.58 ($5,800) and leave the short $25s as they are very likely out of reach, needing a 33% drop in the Nasdaq to get in the money, so they are not worth 0.13 to buy back (unless you need the margin, of course).  

  • CMG – I can't believe how high they are!  Still it's right on target for our short put sale and we have a slight profit on the spread so we can leave it alone for now.  There is $10,480 left to collect on the short June contracts and our goal is to do that over and over again for 2 years. 

  • SQQQ #2 - Bear in mind we need to be protecting the 100 short calls from SQQQ #1 but that's well-handled with the 200 2022 $10 puts.  While they are far out in time, they are at the money so, rather than spend more on the longs, let's buy back the fairly useless Jan $35 short calls for $23,513 and we will sell more short calls (at a lower strike, if we get a bounce).  If we do not get a bounce, we can sell 150 Jan $20 calls for $2 ($30,000) and spend $2 ($40,000) to roll the 2022 $10 calls down to the $5 calls.  Bottome line is we have at least $300,000 worth of protection here and net $64,850 tied up in the 2-year hedge that is the cost of our insurance.  
  • TSLA – This one is right on track for our first sale and we're already up net $13,779.  I expect to collect the remaining $16,340 from the June contracts and we have 8 more cycles to sell! 

  

  • UNG – We are about even so this is good for a new trade.  Natural Gas has not recovered like oil but it's not the season for /NG, so we have to be paitent.  It's a $15,000+ (more potential) spread at net $3,715 so $11,285 potential gain but too risky to count on.   The reason it's good for the STP is because it offsets our hedging costs since we can expect a good economy (bad for our hedges) will lead oil and gas prices higher and make us money here to offset the losses above.  

  • USO – Had a very nice pop, which was great for our longs and this one is on track with $20 not unrealistic so we'll call it a $50,000 potential currently at net $17,175 so $32,825 (191%) upside potential if oil is up about 50% ($38) by the end of the year.  Again, should work if the hedges fail and this one is more likely so we'll count on it and call it good for a new trade.

So we only spent net $21,813 and we have $500,000 of downside protection in a bearish market (20% down) and we expect to lose net $44,577 over the next two years as the cost of our insurance so, as long as our LTP positions keep performing – we should be in excellent shape.  

 


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  1. Good Morning.


  2. Trump is out celebrating on Twitter that  $25 oil is great for US energy companies. You can't make this stuff up. I could be wrong but I don't think the shale patches are profitable until oil gets over $50 and at one point the producers were saying they needed it to be $60. Whatever the number is, it sure as hell isnt $25. 


  3. Hmm, what's the drop about, Fauci telling everyone to slow down the reopening?



  4. Oil / Dawgy – As usual, he is wrong! $25 works for no one in fact even the biggest companies! These low prices are in fact helping no one really – consumers don't drive as much, it's warmer so no heating needed and it's killing the economy of oil states like Texas for example! Nothing to celebrate here. 


  5. Good morning!

    Well, that was fun while it lasted.  I guess people are worried Fauci will go rogue and tell us we're all going to die…

    Trump/Dawg – That's what's so scary – does he really not know that oil $25 is a disaster or does he just knowingly lie about obvious things?  Either way, that's a frightening guy to have as the President…  23.3 lies a day – that's a real number he's kept up for all of 2020.  Try lying 23.3 times today and see how your day goes…  Then try it on camera.  Imagine being that guy – I don't think I have more than 23 total interactions in an average day – I'd have to lie to every single person I had contact with.

    $25/StJ – True, $25 doesn't help nor does $125 if no one is buying it.  Airlines have the same problem with empty seats, as do restaurants, movies, etc.  That's why running the market back up like this is MADNESS!


  6. PATHELOGICAL LIARS DO LIE TO EVERYONE THEY INTERACT WITH. THEY EVEN LIE ABOUT OBVIOUSLY ILLOGICAL THINGS LIKE WHAT TIME IT IS. ITS A  MENTAL ISSSUE.


  7. Mental is right… 


  8. Phil – Any thoughts on SKT earnings and announcements?


  9. Phil/morning commentary

    thanks for putting the S&P numbers in perspective.

    I sold all my aapl in Feb at an adjusted price of $330 (with sold calls- got called away at that price)

    Unfortunately, I did not get back in at $220, my reasons being that this virus related economic impact was longer than a few weeks. However, while I was aware of 'don't fight the fed' motto, I believed and still believe that if we have a bug in our midst that prevents us from going out to spend, the economy cannot really take off. I was wrong on the effect of the stimulus.

    similarly, I got out of my GOOGL at $1500 plus…but am not in again

    So, so far so wrong, partly because I was a little busy medically.

    Would you start to rebuild a portfolio now or wait, knwing that there is not necessarily a huge hurry to invest as I don't need the income from those funds?



  10. Donald Trump Has No Plan




  11. I'm in kind of the same place as Maya but also hedged to the gills. Very bearish overall. 200 SDS and 400 SQQQ spreads. Hoping for a nosedive. 


  12. THANKS TOMMY!

    SKT/Jeff – Funds from Operations (FFO) was 0.50 vs 0.52 expected and was 0.57 last year so that's what's worrying people as FFO is very important for REITS.  Their last 3 Qs were FFO beats and Revenues were down 10% from last year – that's the more important number.  They suspended the dividend and offered to defer April and May rents (not forgive, defer) and 88% of their tenants took them up on the offer.  

    SKT estimates that it has sufficient liquidity to meet its obligations, even under its most conservative rent collection scenario of not receiving any rent, for ~two years, assuming no dividend distributions or debt maturities.

     

    Q1 same-center NOI for the consolidated portfolio declined 3.7% for the quarter, primarily due to previously anticipated tenant bankruptcies, lease modifications, and store closures.

    Occupancy at March 31, 2020 was 94.3% vs. 97.0% on Dec. 31, 2019.

    So about as rough as we thought it was going to be but not worse so I'm still in.

    Rebuilding/Maya – I would wait as it's a coin flip whether re-opening works.  CSCO is still cheap(ish) rather than chasing AAPL or GOOGL.  

    Hedges/Dawg – They are not supposed to be bets – be careful.


  13. Csco/Phil

    thanks!

    what do you think of banks? I know the interest rate environment is bad for banks, plus risk of bankruptcies from businesses and some larger corporations and airlines..Loan losses may need to be increased.

    However, I wonder how much of above is built in to the price. If one tiptoed in to JPM? They seem pretty well positioned wrt loan losses etc. 


  14. Banks/Maya – I worry that they are lending to companies that are going to be struggling.  Lots of delinquencies in all categories so too risky to me.   We did sell JPM puts in the STP and we tried TD but thought better of it as oil collapsed (bad for Canada).  JPM and GS always seem to figure things out so, for long-term investments, this is probably a good entry.  I just don't see a pressing need for us to own a bank.

    /SB flying since I mentioned it.  

    Masks/QC – Yes, I did hear about that.  There were dozens of things the Government could have done to get ready and didn't.  What would the harm have been of ordering 2Bn masks for $4Bn (a week's worth for everyone in America) and just stockpiling them if they weren't necessary?  The reward/risk there is off the charts.  Same goes with ramping up vaccine testing, etc.  Simple things that could have been done in January were still not on the table in March. 

    • Major advertisers are looking to pull back from spending commitments made to TV networks, the WSJ notes, as upfront options begin to allow for cutting ad outlays.
    • Those upfront commitments cover most of the $42B spent on national TV ads, and they've blunted the impact of an industrywide advertising slump so far.
    • But May 1 brought options for advertisers to walk back their previously committed spending by up to 50% in Q3 – and GM, PepsiCo, Cracker Barrel, General Mills, Domino's Pizza and Sanofi are taking advantage, according to the report. GM, for example, says it's shifting TV ad dollars into digital video and e-commerce.
    • That could cut hard: Some $1B to $1.5B in Q3 ad commitments could be canceled.
    • Since realizing the pandemic's severity in March, companies raced to exit or postpone their ad commitments, according to the report: “There were dozens and dozens of calls saying, ‘we need to get out of this now,’ ” says one network exec.
    • Front-and-center national TV stocks: Disney (DIS +0.4%), Comcast (CMCSA -0.6%), ViacomCBS (VIAC +1.9%), (VIACA +2.0%), Fox (FOX -0.1%), (FOXA +0.5%), Discovery (DISCA -1.7%), AMC Networks (AMCX +2.2%), E.W. Scripps (SSP -7.7%), AT&T (T -0.3%), Nexstar (NXST -1.3%), Tegna (TGNA -0.7%), Sinclair Broadcast Group (SBGI -0.9%), Sony Pictures Television (SNE +0.4%).
    • Intel (NASDAQ:INTC) Capital has committed the funds to 11 startups that focus on AI, autonomous computing, and chip design.
    • The new investments include Anodot (real-time data monitoring), KFBIO (builds digital pathology systems), and Lilt (AI-powered language translation software).
    • The investment arm says it plans to commit $300-500M this year to AI-focused startups, particularly those specializing in intelligent edge devices and network transformation.
    • Last year, Intel Capital invested $466M in 36 companies with 35 follow-on investments. The deals led to 22 successful exits.
    • Boeing (BA +0.2%) says it recorded zero orders for the second time this year in April and customers canceled another 108 orders for the grounded 737 MAX, further whittling down the company's backlog of planes.
    • The company says it delivered just six planes last month, bringing the YTD total to 56, down 67% from a year earlier.
    • The 737 MAX cancellations were from customers including China Development Bank Financial Leasing and General Electric's GECAS aircraft leasing unit.
    • The additional cancellations coupled with Boeing's removal of some orders from its firm order tally pushed the company’s backlog down to 4,834 planes – its smallest since 2013 – after reporting last month it had unfilled orders of 5,049 planes.
    • Uber (UBER +4.2%) is aggressively pursuing GrubHub (GRUB +24.4%), according to The Wall Street Journal.
    • The company approached GrubHub earlier this year and talks are still going on with an offer on the table.
    • Consolidation within the online food delivery sector has been highly-anticipated this year, with DoorDash (DOORD) and Postmates (POSTM) also in the speculation mix. Underlying the discussions is the impact of a huge surge in demand and costs amid the pandemic.
    • Previously: GrubHub jumps on report of Uber interest (May 12)
    • Putting things in perspective, says Andrew Left, Peloton's (NASDAQ:PTON) market cap has risen $5B this year; with 300K connected subscribers it works out to $17K per subscriber.
    • Teladoc (NYSE:TDOC), on the other hand, has a market cap up $8B vs. 6.2M paid members, or $1.3K per.
    • "This is retail mania – you can love the product, but stock has peddled its way to stupidity."
    • Peloton is up another 7.35% this morning. Teladoc is little-changed.
    • Natural gas prices (NG1:COMfall as much as 3% to $1.77/MMBtu and could be headed to the lowest closing price in more than two weeks, as investors see increasing signs the commodity is starting to feel a delayed impact from coronavirus; currently, June Nymex gas -2.8% at $1.775/MMBtu.
    • “The U.S. natural gas market has become the latest victim of the coronavirus," says Price Futures' Phil Flynn. "The shutdown of economies in Europe and Asia reduced the demand for natural gas."
    • Natural gas in storage in the U.S. is at a 21% surplus vs. the five-year average, a figure analysts say could increase as the low-demand spring season progresses.
    • ViacomCBS (VIAC -0.4%VIACA +0.3%) is launching cash tender offers for up to $1B in debt securities.
    • The series includes 3.875% senior notes due 2021, 2.5% senior notes due 2023, 2.9% senior notes due 2023, 3.25% senior notes due 2023, 4.25% senior notes due 2023, 7.125% senior notes due 2023, 7.875% debentures due 2023, 5.875% junior subordinated debentures due 2057, 3.375% senior notes due 2022, 3.125% senior notes due 2022 and 2.25% senior notes due 2022.
    • Top priorities are the 3.875% senior notes due 2021 (of which $600M are outstanding); 2.5% senior notes due 2023 ($400M outstanding); 2.9% senior notes due 2023 ($400M outstanding); and 3.25% senior notes due 2023 ($181.61M outstanding).
    • Albemarle (ALB -1.8%) is downgraded to Neutral from Buy with a $61 price target, trimmed from $67, at Goldman Sachs, which cites reduced demand from makers of electric vehicles as the coronavirus crisis slows sales.
    • "The anticipated ascension of the lithium cycle will be further delayed," Goldman's Robert Koort says as he lowers his full-year lithium demand forecast by 15% and notes the firm's autos team anticipates a 17% decline in global auto builds.
    • The downgrade also is fueled by virus-related earnings challenges in the remaining 60% of Alemarle's business, largely from bromine and refinery catalysts.
    • ALB's average Wall Street analyst rating and Quant Rating are both Neutral, while its Seeking Alpha Authors' Rating is Bullish.

    I like ALB down here.  They are good for $500M in earnings and $63 is only $6.7Bn so call it 13x earnings.  For the LTP, let's sell 10 of the 2022 $50 puts for $9.50 to net in for $40.50, 35% off the current price.  In our Future is Now Portfolio, let's sell 5 of the 2022 $50 puts for $9.50.

    See, just read the news, think of a trade – make the trade.  Very simple…


  15. Speaking of lithium demand coming back:

    • Tesla (TSLA +2.6%) is higher in early trading after the situation with Alameda County officials appears to have de-escalated a bit, and with President Trump calling on California to allow Tesla to open its Fremont plant.
    • POTUS entered the Tesla vs. Alameda debate a little later than many thought, but on the side that was anticipated.
    • Pictures of new Tesla vehicles leaving the Fremont factory are being posted online, indicating that at least some level of production is taking place. On the issue of Tesla actually leaving Fremont, Wedbush's Dan Ives observes that the process could take 12 to 18 months and layer in more manufacturing and logistics risk.
    • Shares of Tesla are at their highest level of May.
    • Ryanair (RYAAY +1.4%) plans to move back to an all-Boeing (BA +1.2%) fleet by cancelling leases for Airbus (OTCPK:EADSY -6.6%) A320s for its Lauda subsidiary and likely replacing 30 Airbus jets at the Austrian airline with Boeing 737s.
    • "Until they need an order from the Ryanair Group, frankly we are wasting our time talking to Airbus," CEO Michael O'Leary added, without elaborating.
    • The major market averages open little changed, as investors seek to balance the economic benefits of the easing of virus-led business shutdowns against the risks of reopening too soon; Dow +0.3%, S&P 500 and Nasdaq both -0.2%.
    • "A lot of the market stresses have clearly faded and they're getting back to reacting to normal news. There's a general feeling that we know there is a recovery at play, demonstrated by the recovery in oil prices, and Fed statements about a second half recovery," Seema Shah, chief strategist at Principal Global Investors, tells WSJ, while adding that "sentiment is very tentative."
    • Dr. Fauci reportedly will warn the Senate Health Committee in testimony today of the "danger of trying to open" prematurely.
    • Meanwhile, Pres. Trump and congressional allies are holding off on more virus-related stimulus, as they track the impact of the $5T already poured into the economy.

    • St. Louis Fed President James Bullard expects a positive H2 2020 for the U.S. economy after a deeply negative Q2, but much depends on how long the pandemic lockdown lasts.
    • The economy staying in lockdown for more than 90-120 days risks increased bankruptcies and a Depression-scale recession he said at a virtual discussion hosted by OMFIF Tuesday.
    • He also reiterated his position that negative interest rates are "not a good solution for the U.S."
    • Meanwhile, Neel Kashkari, president of the Minneapolis Fed, at a separate event, contends that the U.S. economy won't recover until "we get our hands around the virus."
    • He sees a much slower recovery than Bullard  does, saying it might be an "uneven crawling back" to normal.
    • At another event, Dallas Fed President Robert Kaplan also states his opposition to negative interest rates.
    • He takes the stance that more fiscal stimulus is needed to overcome the impact of the pandemic.
    • Previously: Chicago Fed's Evans sees rates staying low, but not turning negative (May 11)
    • Feeling the impact of the pandemic, Honda (HMC -4.7%) falls sharply after reporting its first quarterly loss in four years and holding off on issuing a full-year forecast.
    • The Japanese automaker posted an operating loss of ¥5.2B after a 28% drop in vehicles sales during the quarter.
    • Shares of Honda are down 19.50% YTD.
    • Previously: Honda Motor reports Q4 results (May 12)
    • During Simon Property's (NYSE:SPG) earnings call late yesterday (transcript here), Chairman, CEO and President David Simon said that rent collections have been better than what "prognosticators" have predicted.
    • "We're doing better than that," he said, although he refused to give a percentage of the rent SPG has been collecting.
    • Andrew Walker, however, has a few questions …
    • He wonders why pretty much all other landlords have given percentages, but Simon management has chosen not to.
    • "We're going to be relatively conservative just given the kind of the nature of the pandemic," said Simon in response to a question about buybacks. Walker: Properties are closed and no one knows when they'll reopen, rent collections are mystery, as is asset value, and the stock yields 15%. And an analyst wants to talk buybacks?
    • Simon management sounded "lawyered up" regarding the Taubman Centers (NYSE:TCO) purchase, says Walker, but he notes the 10-Q includes not previously seen language about "no material adverse effect shall have occurred."
    • SPG +11% premarket, TCO -5%
    • Noting Simon Property (NYSE:SPG) CEO David Simon provided "scant details" on either current profitability or what the future may hold, Land & Buildings' Jonathan Litt says there's three concrete things investors can take away from last night's results and earnings call (transcript here).
    • First, that Simon will cut the dividend.
    • Second, the no comment on the Taubman Centers (NYSE:TCO) purchase suggests everything is on the table to improve the terms, or even exit the merger.
    • Third, no stock buybacks.
    • In early action, SPG has given back some big premarket gains, now up 4.4%; TCO is down 11.2%.
    • Previously: Simon Property plays it coy with rent collections, Taubman purchase (May 12)
    • Disney (DIS +0.1%) is taking reservations for Walt Disney World for July – a tentative, potential sign that the resort could reopen mid-summer after a mid-March shutdown.
    • The opening could always be put off, but Disney World's site is permitting ticket bookings for as soon as July 1.
    • And Disney Springs is set to reopen in phases starting next week. The precursor to Monday's reopening of Shanghai Disneyland was the opening of nearby ancillary shops and restaurants.
    • CEO Sandeep Mathrani tells CNBC that WeWork (WE) has paid its April and May rent in over 80% of locations. The company collected 70% of tenant rent last month.
    • Mathrani: "The remaining locations, we’re just in discussions with our landlords in a friendly way, and therefore we plan to make whole on our entire obligation."
    • The exec says WeWork spent the month of April and "tens of millions of dollars" adjusting its workspaces around social distancing requirements for returning workers.
    • At the end of Q4, WeWork had 739 locations across 140 cities and total membership was above 662K.
    • Related: Last month, Bloomberg reported that WeWork hadn't paid rent in some locations in hopes of cutting at least 30% from its rent liabilities.
    • Chamath Palihapitiya, the CEO of Social Capital and the Chairman of Virgin Galactic, on CNBC said that there is now "no doubt" that the economy is "completely" divorced from equity and bond markets, with the Fed as the "principal agent" of that "obfuscation."
    • Big tech companies have trained consumers to save, he said — by waiting, you get more value, so consumers rely on companies that give them more for less, like Amazon, Facebook, Google, which becomes part of the deflationary supercycle.
    • The profits get "trapped" at these major tech companies which disproportionately perform in the stock market, where other business with traditional business models are left behind, he added.
    • Reiterates stimulus measures must go directly into the hands of taxpayers and consumers rather than current measures which inflate asset prices — if not, we risk a Japan deflationary scenario.
    • Chamath strongly said that one must admit that asset price inflation does not "trickle down."
    • He notes that though he appreciate the efforts from the Fed to stabilize during the crisis, it now risks creating a deflationary cycle.
    • On bitcoin, says that, as a believer, he felt it originally was a "store of value." He says that investors now, like Paul Tudor Jones, have come to know the currency, as a hedge, given the fact that we are in a deflationary spiral.
    • Dave & Buster’s Entertainment (NASDAQ:PLAY) announces that John Hockin has been appointed to the board.
    • Hockin is a managing director at KKR
    • With the appointment, D&B is temporarily expanding the size of its board to ten members.
    • KKR holds a stake in Dave & Buster's of over 8%.
    • PLAY +3.13% premarket to $11.20.
    • Source: Press Release
    • ReWalk Robotics (NASDAQ:RWLK) is up 6% premarket on light volume in reaction to its announcement that Germany's DGUV (Deutsche Gesetzliche Unfallversicherung / The German Social Accident Insurance) will cover the ReWalk 6.0 robotic exoskeleton device for qualified spinal cord injury patients.
    • The binding offer applies to ~83M citizens insured against work-related, commuting and school accidents and against occupational diseases under DGUV.
    • The company says it has placed over 580 exoskeletons globally to date.
    • Saying the iPhone 12 should start Apple's (NASDAQ:AAPL) "road to recovery," Wedbush analyst Daniel Ives maintains his Outperform rating and raises the price target from $335 to $350.
    • Ives has "further confidence that the eye of the storm is in the rear view mirror for Apple from both a demand and supply chain perspective."
    • The analyst sees only a 10-15% chance that the iPhone 12 lineup launches in October, but Ives still expects strong demand since the coronavirus pandemic likely delayed smartphone upgrades.
    • Related: In March, Ives trimmed his Apple PT from the Street-high $400 to $335, citing "dark days ahead" due to the pandemic.
    • Apple shares are up 0.6% pre-market to $316.95.
    • April Consumer Price Index-0.48% M/M in-line with consensus and -0.4% prior.
    • Core CPI: -0.4% vs. -0.2% consensus and -0.1% prior. That's a record monthly drop for core CPI.
    • On a year-over-year basis, headline inflation is now at 0.3%, vs. consensus of +0.5% and 1.5% previously.
    • Core inflation on a year-over-year basis is now at +1.4% vs. consensus of +1.8%, and 2.1% previously.
    • The all items index increased 0.3% for the 12 months ending March.
    • Eldorado Resorts (NASDAQ:ERI) and Caesars Entertainment (NASDAQ:CZR) are higher in early trading after both casino companies reported earnings yesterday and gave a favorable update on the progress of the merger.
    • Eldorado execs indicated that a closing in late June or early July appears reasonable. A FTC approval on the Twin River deal and state approvals from Nevada, New Jersey and Indiana are still needed. The company is also confident on the synergy potential, cost savings targets and margin targets. Also of note, Eldorado CEO Tom Reeg stated Caesars was well-positioned in Las Vegas to succeed due to its lower mix of group business compared to peers.
    • Eldorado Resorts earnings call transcript
    • Shares of Caesars are up 3.44% premarket to $10.00 and Eldorado is 9.60% higher to $22.60.

  16. Phil

    N95

    I thought that would be a good contact for you, because he has three machine he is not using


  17. Masks/QC – We now have a direct relationship with 3M and access to hundreds of millions of masks, but thanks.

    Image

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    NOT boosting the markets!

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    When people ask me what value investing is, I say it's trying to buy a dollar for 75 cents. So what is growth investing? It's buying 75 cents for a dollar with the expectation that 75 cents becomes $7.50 in time. – Josh Brown

    Image

    Donald J. Trump @realDonaldTrump·
    As long as other countries are receiving the benefits of Negative Rates, the USA should also accept the “GIFT”. Big numbers!

    Sen. Sanders asking if the vaccine will be available to every American, regardless of income. FDA commission declines to answer.

    Image

    It's hopeless….


  18. Sen. Rand Paul suggested that because the death rate in children is low, schools should be allowed to reopen district by district. Dr. Fauci warned against being “cavalier in thinking that children are completely immune to the deleterious effects” of Covid-19. nyti.ms/2yTgYvx

    82,000 Americans are dead in a span of 2 months. Trump has no plan. He is surrounded by incompetent sycophants. He is quite literally watching cable tv and tweeting crap as Americans die. Republicans are doing nothing but enabling him. – Amy Siskind

    Image

    The headlines are supposedly about a 1.4% CPI-model, entirely attributable to gas, apparel, motor vehicle insurance, airline fares, and lodging away from home. Duh. Meanwhile, the index for food at home posted its largest monthly increase since February 1974.

    Robert Reich @RBReich

    In March, Elon Musk predicted there would be no new cases of covid by the end of April. 

    Yesterday, there were 17,776 new confirmed cases.

    Today, he wants to reopen his factory, jeopardizing the health of workers to protect his own profits.

    Billionaires aren’t the answer.


  19. Hi Phil – Do you think infrastructure has a chance of being a thing in 2021?

     

    I'm looking at GVA and STRL  Thanks.


  20. 1020  or MLM and VMC


  21. Infrastructure/1020 – The Dems just put up a $3Tn plan with NO infrastructure – I don't see it happening.


  22. Thanks stockbern  – Added MLM to my watch list.

     

    Thanks Phil – Government $$$ will be hurting as well….


  23. Don't worry, they'll print more.


  24. Unfortunately, I was thinking about state and local….


  25. GVA and STRL are mainly in the west doing 'smaller' jobs.


  26. Schools/Phil – some years ago some of my friends proposed that the best way of protecting the vulnerable during a flu outbreak was to immunize the kids, as they spread the bug around, bring it home, pass it around the family, and it often gets to vulnerable people. The larger public health community thought the idea made sense, would be more effective – but nothing changed. We still focus efforts on vaccinating the vulnerable, which protects them but does little to slow an outbreak.

    Same deal with gardisil, the HPV/cervical cancer vaccine. For many years, only young women got it, because it prevents cervical cancer. But the young women got the virus from someone, didn't they. Took forever for boys to begin to be vaccinated.


  27. Schools/Snow – I agree, that's how we used to do it.  Wasn't an option, kids just got their shots when they were told.  


  28. Bearish Bets looking good. Free Fall into the close


  29. Los Angeles County’s stay-at-home orders extended for the next 3 months – and that killed the market

    ( at least for today )


  30. Butterfly Portfolio Review:  $443,254 is up $36,860 since our last review and now back to our pre-virus highs so what a fun ride that was!  On track to making 30-40% per year is our usual position in the Butterfly Portfolio – our most consistent portfolio over the last 15 years.  In fact, this is the same one we started way back on 1/2/2018 – as we were not worried enough to cash it in in the fall.  

    • DIS – While I'm worried about DIS, it's such a conservative spread I'd rather leave it but let's not forget the reason the Butterfly Portfolio is such a consistent money-maker is because we SELL premium almost all the time.   When the market dips, we make an exception and get bullish but now we've had our fun so back to BEING THE HOUSE.  To that end, earnings are not until August so it would be silly not to sell 15 July $115 calls for $2.95 ($4,425) to make a little side money and, since we are selling those, let's sell 10 of the July $95 puts for $2.75 ($2,750) so now we've collected $7,175 for 66 days against our net $83,875 position which has 766 days to sell.  Making 12 sales like that will net us $86,100 as a bonus to whatever value the spread ends up with.  Not bad considering we paid just $55,000 for it.  This is the kind of stuff we'll be doing in our Income-Producing Hedge Fund (paperwork will be ready this week!).  

    • AAPL – Always ends up being a start position.  This must be the 4th time we've built an AAPL position in this portfolio over the past two years.  Fortunately, we only sold 10 calls so it will be aan easy roll but no hurry as the $26,700 value of the short $300 calls (40% premium) is covering our $120,000 in the money spread we got a net $56,500 credit for getting into right on the day AAPL bottomed.  

    • AMZN – The short calls are half premium and, like AAPL, they are protecting a $180,000 spread that's in the money and very easy to roll (Aug $2,450s are $140).  Another one we jumped on at the bottom for a net $2,100 credit and we even sold the short calls right at the top – nailing the channel.  

    • MDLZ – We sold the June puts but we bought back the short calls and no pop so far.  Earnings not again until Aug 1st (ish) and 4/28 was a beat – I don't think they are very affected by the virus.  We may as well sell 15 July $52.50 calls for $1.35 ($2,025) so at least we're generating some cash off this thing.  We don't even have a 2022 cover yet so no danger at all in the sale.  It's only a net $19,920 position we paid net $6,050 for so up 200% and generating 33% more over the next two months is a very nice way to play!

    • MJ – This ETF is going nowhere BUT we have 60 2022 $10 calls at a net $3,150 credit and we can sell 30 of the July $12 calls for $1 ($3,000) and roll them along if we go higher but, if not, that's almost 100% return on the credit in 66 days so – works for me!

    • WHR – There's no point to the June $160 calls so let's sell 5 Sept (next available) 120 calls for $6.50 ($3,250) to pick up a bit more income.  It's a $45,000 long spread at $100 and currently we're at net $19,702 after this call sale so plenty of room to run and lots more income to generate.  

    So we have $300,000 coming to us from AAPL and AMZN alone and they are currently net $122,070 so just those two positions have $177,930 upside potential – plenty for the whole portfolio to have 2 good years from here.  Along the way, we'll also pick up some side money selling premium so I still love this portfolio!  


  31. That took longer than I thought.  

    What an ugly close.  LA news is terrible but it's the right thing to do and others will follow and buck Trump's demand but then compliance will break down (as we discussed in my Phuket article) anyway – but still better than just opening things back up so soon (without protection and testing).  

    Economically though, I don't see what LA's plan is for the residents and businesses, they are totally collapsing the local economy so we'll see what actually happens.  


  32. Good call for pressing hedges. Look at that ugly close. Expecting follow-thru tomorrow and thru the EOW


  33. Fauci says students returning to campus in the fall is "A bridge too far!" 

    I think we're going to need a bigger hedge!

    A Bigger Boat - Movie Clip from Jaws at WingClips.com


  34. … or more cigarettes 


  35. THINK WERE GONNA NEED a BIGGER BOAT 2020 DEMS ANEGRANLUNDCOM ...


  36. LA/Phil – looks like the trade bots read the headline and decided to run with that to drop the market. 

    "

    Los Angeles County’s stay-at-home orders will “with all certainty” be extended for the next three months, county Public Health Director Barbara Ferrer acknowledged during a Board of Supervisors meeting on Tuesday.

    Ferrer, though she didn’t issue an official order, said that timeline would only change if there was a “dramatic change to the virus and tools at hand.”

    “Our hope is that by using the data, we’d be able to slowly lift restrictions over the next three months,” she said."


  37. Good evening.


  38. LA/Snow – that’s the trouble, you have all these politicos issuing vague statements for fear of being quoted and let me reverse themselves as soon as opinion goes against them.  Recipe for chaos.  


  39. How does Japan only have 15,777 cases and 624 deaths in the whole country?

    Some asian gene (an ACE2 thing)? Diet? They are the world's oldest population as well. That was used as an explanation for Italy's death rate, but Japan's is so much lower despite being older.


  40. BDC – Asians have been wearing masks for years. And they've done a massively better job at containing sick people, instead of, for example, keeping the subways running in NYC this whole fucking time. DeBlasio and Trump – the finest minds ever produced by New York City. LOL! I bet Trump eats pizza with a fork too, just like DeBlasio. 


  41. BCD:  BCG Vaccinations might be one of the reasons: Tuberculosis vaccine drawing attention in fight against coronavirus

    But Japan also has a big face-mask wearing culture — many people already wore face masks every year to prevent flu and hay fever so we already had tons of it stockpiled before this all began.  Japan is also a relatively "socially distant" culture when it comes to personal interaction (eg. bowing as opposed to handshakes, no hugs and kisses in general etc.).   Of course, Japan's hygiene and sanitary standards are world reknown.

    Japan has a diaspora of Westerners (me included), but 100% of the Western foreigners I saw here during this pandemic did not wear a face mask.  I feel like it is simply not in Western culture to wear a mask unless its Halloween or you're doing surgery or tearing down walls. 

    BTW Japan's subways and trains have been running the whole time and anybody's who's seen those videos of Tokyo's subways during rush hour knows that is a horror show.


  42. I also noticed there isn't a big "party" culture in Asian cultures like there is in Western culture.  No big birthday parties or slumber parties where you invite all your friends.  No bachelor/bachelorette parties or baby showers. No big Memorial Day/July 4th-type backyard BBQ and pool parties.  We have wedding parties, but everyone kind of just sits down and eats and drinks.  No dancing.  In fact, NO DANCING IN GENERAL.


  43. Sounds like Footloose.  


  44. A poll number that should scare President Trump



  45. No one is buying pants, but pajama sales are soaring


  46. Coronavirus Outbreak in Latin America Now Rivals Europe’s. But Its Options Are Worse.


  47. To Build Strategy, Start with the Future



  48. Anthony Fauci’s quiet coronavirus rebellion


  49. Top Science and Health Officials Offer Sobering View of Reopening Readiness