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3,100 Thursday – S&P 500 Tests Our 10% Line

3,135.

That's the 10% line above our Must Hold Level of 2,850 on the S&P 500.  If we can get over that and hold it, then we will have secured the rising 50-day moving average which will "Life Cross" over the 200-day moving average around June 19th and THAT would be a very bullish set-up into the summer – assuming the re-opening is getting into full swing by then.

So TECHNICALLY, the markets are in good shape but let's keep in mind that it cost us $6.7Tn to buy this technical rally and it's likely to cost another $2.3Tn to keep it going and that will put the National Debt around $28Tn more than 3 TIMES the $9Tn of debt we had in 2007 – before the Financial Crisis.  $10Tn was added during Obama's 8 years in office and now another $10Tn is being added during just 4 years of Trump (so far) – that's a much faster pace than Covid was spreading back when Trump said we shouldn't worry because we only had 5 cases in the US!

ImageSo the running cost of papering over a Recession seems to be about $10Tn but I'm not sure we're papering over this Recession – so far we're just boosting the market DESPITE the terrible economy.  The Atlanta Fed's GDP Now Forecast shows a projected 52% drop in Q2 GDP while the range of private forecasts projects only a 25% decline.  

That's a huge discrepancy – usually they are off by no more than 1% but it will take until July 30th before we get our first official estimate of Q2 GDP so, until then – let the speculators have their fun.  

Tomorrow we get the actual Non-Farm Payroll Report for May and it will be very hard to top April's loss of over 20M jobs, which wiped out all the jobs gained by Trump and all of the jobs gained by Obama so we're right back to the level of employment we had during the Bush crisis – which cost us $10Tn to get out of.   

Of course President Trump believes you can buy your way out of anything – so did President Bush.  Spoiled, privileged children from rich familes who get bailed out of all their mistakes by their wealthy, connected parents never learn how to actually work on a problem, do they?  They also don't understand the struggles of people who didn't grow up in such advantaged circumstances.  

The Trump Administration clearly doesn't understand the struggle that massive unemployment causes for the Bottom 90%.  States are already running out of Unemployment Insurance funds yet all the Trump Administration is worried about is keeping them from protesting – or voting. 

The virus hasn't gone away either, on May 3rd, we had 1.15M infections in the US and yesterday (June 3rd), we had 1.85M infection so 700,000 (60%) more in 30 days is 23,000 new infections per day DURING THE LOCKDOWN.  That's almost double the population of Williamsburge, Virgina infected every single day yet the market is partying like it's 1999. 

We reviewed our Short-Term Portfolio last Friday and it was at $560,870 (up 461%) at the time and, as of yesterday's close, we were down to $527,965 – down $32,905 for the weeek but that's the way it's supposed to be when the market races higher as the STP's job is to protect our long portfolios and our LTP popped all the way to $855,428 (up 71.1%) as of yesterday's close, up $181,188 from $674,240 back at our 5/19 review.  

That's about the right proportion, we expect to give up roughly 1/3 of our upside in the LTP with losses in the STP so, to make sure we lose more money on the next leg up – let's make some STP adjustments as follows:

  • SDS – Let's roll down all 300 SDS long Jan $20 calls at $3 to 300 SDS Jan $15 calls at $5 for net $2 ($60,000) so we are picking up $5 in position ($150,000) and increasing our upside Delta on the longs from 0.55 to 0.85.  That will firmly lock in our recent $180,000 in LTP gains for $60,000 (1/3) – exactly the way we are supposed to.  
  • TQQQ – Let's roll our 50 Jan $80 puts at $16.50 to 50 Jan $90 puts at $21.50 so we're widening the spread by $50,000 for $25,000 and let's buy back the short June $75 puts for $1.55 ($3,100) as that's an $8,300 profit that helps pay for the roll and we'll pay for more on our next sale (but let's stay uncovered into the weekend to boost our hedge).  

That's all we need to change for now and we can sleep well into the weekend with those hedges – not to mention tomorrow's NFP Report!  

 


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  1. 40M people have lost their jobs but the Nasdaq is an all-time high! I guess these people now have enough time to look for a new iPhone, watch Netflix and shop on Amazon!


  2. Good morning, All!

    Webinar replays are available:

    YouTube:

    https://youtu.be/Qc60AxBUq6Y

    BitChute:

    https://www.bitchute.com/video/M6lapTWVkXiu/


  3. Good Morning.


  4. My 20 year old nephew texted me yesterday to ask if he'll owe taxes on all the money he's making from day trading in his Robinhood account.  I told him he could lose a lot daytrading, but he assured me that he's watched a lot of Youtube videos and will be fine.  I know they don't ring a bell at the top but C'MON MAN!!!!


  5. Anyone's delivery/uber driver recommended a stock this month? That's always a good sign. 


  6. Nitrile gloves/Phil – I will ask around.  I assume you want a direct link to manufacturer, not a reseller?


  7. Good morning! 

    See above STP adjustment please. 

    Big Chart – Down to our last red box.  Bears need to pack it in…

    LOL EMike.  My daughter also went with Robin Hood but she's more of a long-term investor.  

    My other daughter, Jackie, has quite a knack for stocks but, sadly, no interest.  She wrote this in 2013 on "Take Your Daughter to Work Day":

    Adobe’s New Pricing Strategy Could Make Their Shares a Bargain

    Now:

    What was my advice to her?  Write about something you know and understand that you think has a lot of potential for future growth.  It's the same strategy Buffett uses – don't waste time chasing things people tell you about if it's outside your expertise.  You can grow your expertise over time but you are a lot more likely to be successful trading things you understand.  

    Gloves/Pharm – Well manufacturer preferred but if a reseller has quantity they want to sell without too much gouging – then sure I'll talk to them.


  8. "too much gouging"…..

    The new normal?  :(


  9. Sadly, yes.  Some gouging is expected.  The gloves we processed yesterday started at $9/box (100) and got bid up to $11 before our client tried to lock them in and then 0.50 got added for commissions and handling fees so $11.50 and they had the PO and Proof of Funds at noon (CA time) but then we didn't hear back from the seller for 3 hours and, when we finally did, we found out the gloves went to another buyer who paid $13.  

    I'm telling you guys, if you have either buyers or sellers of bulk PPE supplies ($50M+ range) and you want to make a quick $250,000 in commissions – let me know!

    Mostly it's masks and gloves that people are scrambling for on both ends.  There are lots of sellers and lots of buyers but no easy way to get them together as it's usually a specialty market with calm orders made so no system in place for commodity-style matching, thus wild price swings and also big opportunities.


  10. Phil – what is the delivery terms on those masks/gloves/PPEs? Does the inventory need to be in the US already?


  11. I will try to find buyers.  I design the fiber network for the State of CT and all 31 Hospital Systems in CT.  One of my Sales rep's brother is also a CEO of a hospital system in the midwest.  


  12. pink sheet stuff is going crazy – as sure as any of a top that I know of. GNUS it 11.74, ETHE 240 (NAV is 22), CIDM VISL XSPA etc etc all being pumped on r/pennystocks and hitting big


  13. Phil – PPE . Send me your contact info. via my email on file. I have a source for gloves etc.


  14. There's a +9,900% in there…


  15. Gloves/Mito – At this point, all things are being considered as it's an acute shortage.  It all comes down to what the actual product is and what the terms and timing are.

    Thanks Fel – See, we can put some things together as a group!

    Pinks/BDC – Money is just sloshing around at the moment – makes everything wet.  \

    Thanks Schley, will do.

    • U.S. stocks fall back into the red after a brief foray into positive territory in Thursday morning trading.
    • More stimulus from the European Central Bank buoyed spirits briefly, and U.S. weekly job claims fell, but not by as much as expected.
    • The Nasdaq slides 0.5%, the S&P 500 falls 0.3% and the Dow slips 0.1%.
    • The 10-year Treasury yield rises 6 basis points to 0.80%, and the U.S. Dollar Index falls 0.7% to 96.67.
    • Gold, though, up 0.7% to $1,717.40 per ounce, continues to rise.
    • Crude oil falls 1.7% to $36.66 per barrel.
    • Financials (+0.8%) and industrials (+0.3%) outperform the S&P 500 sectors, while real estate (-1.4%) and utilities (-1.2%) lag.
    • 30-year fixed-rate mortgage averages 3.18% for the week ending June 4, 2020, up from 3.15% in the previous week and 3.82% a year ago.
    • “While the economy is slowly rebounding, all signs continue to point to a solid recovery in home sales activity heading into the summer as prospective buyers jump back into the market. Low mortgage rates are a key factor in this recovery,” said Freddie Chief Economist Sam Khater.
    • 15-year FRM averages 2.62%, unchanged from the previous week, and down from 3.28% at this time last year.
    • 5-year Treasury-indexed hybrid adjustable-rate mortgage averages 3.10%, down from 3.13% in the previous week and 3.52% a year ago.
    • Many mortgage REITs are rising today — Anworth Mortgage (ANH +4.4%), Invesco Mortgage Capital (IVR +2.9%), Western Asset Mortgage (WMC +1.1%), New York Mortgage Trust (NYMT +2.1%) are among the biggest gainers in the sector.
    • Homebuilders aren't faring as well — D.R. Horton (DHI -0.8%), KB Home (KBH -1.0%), PulteGroup (PHM -0.5%), Toll Brothers (TOL -1.4%).

    • Adding to its takeoff yesterday, which saw the stock climb 74%, Global Eagle Entertainment (NASDAQ:ENT) is up another 50% today to $5.72/share.
    • Related inflight stock Gogo (NASDAQ:GOGO) is also on the rise, up 22% in early trade after advancing 17% on Wednesday.
    • Global Eagle underwent a 1-for-25 reverse split not to long ago, seeking to regain compliance with a Nasdaq rule requiring a minimum $1.00 bid price
    • Gogo (NASDAQ:GOGO) shorts look to be caught up in a squeeze this morning, with shares up 24.6%, their biggest gain in months.
    • The short percentage of the float had risen to 48.3% as of mid-May, with 25.19M shares sold short.
    • Today's run means the stock has more than doubled over the past month; shares were at $1.50 on May 5.
    • They're still down more than 50% over the time span of the past six months.
    • Shares of eBay (NASDAQ:EBAY) are soaring after the company lifts Q2 EPS guidance to $1.02 to $1.06 vs. $0.73 to $0.80 prior and $0.78 consensus. Gross merchandise volume growth of 23% to 26% is anticipated for the quarter with all major verticals accelerating significantly. At the top end of its range, organic FX-neutral revenue growth of as much as 19% is seen. 
    • SEC Form 8-K
    • EBAY +8.68% premarket to $46.45.
    • The ECB roughly one hour ago announced a near-doubling in the size of its QE program to €1.35T, and extended it to June 2021.
    • The announcement for a few minutes sent European shares and U.S. stock index futures higher, but unlimited central bank stimulus is pretty much a given at this point. The Stoxx 600 has returned to its previous level, down 0.4%; U.S. futures have retraced as well, the S&P 500 down 0.3%.
    • In response to the pandemic-related downward revision to inflation over the European Central Bank's projection horizon, the ECB is boosting its pandemic emergency purchase program by €600B ($676B) to €1.35B and extending the PEPP to at least the end of June 2021.
    • The euro rises 0.3% vs. the U.S. dollar.
    • ECB says the PEPP expansion "will further ease the general monetary policy stance, supporting funding conditions in the real economy, especially for businesses and households."
    • The maturing principal payments from securities purchased under the PEPP will be reinvested until at least the end of 2022.
    • Net purchases under the asset purchase program will continue at a monthly pace of €20B, together with the purchases under the additional €120B temporary envelope until the end of the year.
    • The Governing Council keeps the interest rate on main refinancing operations at 0.00%. Interest rates on marginal lending facility stays at 0.25% and deposit facility stays at -0.50%.
    • The council says it's ready to make adjustments to ensure that "inflation moves towards its aim in a sustained manner, in line with its commitment to symmetry."
    • Reinvestments of the principal payments from maturing securities purchased under the APP will continue, in full, for an extended period of time past the date when the Governing Council starts raising the key ECB interest rates.

    • The U.S. Global Jets ETF (NYSEARCA:JETS) is one of only a handful of ETFs that has grown to $1B in assets under management, despite the devastating impact of the pandemic on travel demand.
    • Positive updates from airlines on booking and flight schedule trends (including American today) continue to lift sentiment from the industry bottom seen in March and April.
    • Also of note is the appeal of airlines to younger investors. While Warren Buffett dramatically sold airline stocks in bulk, the sector has continued to be a favorite of bottom-dipping millennials on Robin Hood. It's too early to take a victory lap, but the chart below shows the younger crowd has done all right so far by fading the Oracle.
    • The airline sector is setting up for another good day today. Premarket: American Airlines (NASDAQ:AAL+6.85%, Delta Air Lines (NYSE:DAL) +4.57%, Southwest Airlines (NYSE:LUV+5.33%, United Airlines (NASDAQ:UAL+5.44% JetBlue (NASDAQ:JBLU+7.99%, Hawaiian Holdings (NASDAQ:HA+4.37%, Alaska Air Group (NYSE:ALK+4.42%, Allegiant Travel (NASDAQ:ALGT+0.75%, Spirit Airlines (NYSE:SAVE+13.55%, Mesa Airlines (NASDAQ:MESA+9.39%, SkyWest (NASDAQ:SKYW+4.85%.
    • "Aircraft lessors are facing roughly two years of lower rental rates due to the collapse in air travel," according to SMBC Aviation CEO Peter Barrett.
    • "It will be a tough couple of years for customers and the leasing market… We will have to manage the portfolio, but we see opportunities for businesses like ours to support a recovering industry."
    • These could include increasing market share by buying aircraft from airlines seeking to raise cash through the sale and leasebacks of their jets, writes Peggy Hollinger in the FT.
    • Related: AerCap (NYSE:AER), GECAS (NYSE:GE), Air Lease (NYSE:AL), BOC Aviation (OTC:BCCVY).

  16. BDC

    I like that penny or dime to dollar action. Jets ETF is a head scratcher.


  17. 9 states had COVID cases rise by 2% or more from yesterday: AZ (4.58%), NC, AK, AR, UT, WI, FL, KY and TX.

    All red states.

    CA was 10th at 1.95%, and the next seven states were red: ID, SC, MS, SD, TN, MO, and NE (1.94% down to 1.75%). NY was 49th at 0.24%.


  18. Bio Just wait and see the results after the riots.


  19. Yodi

    Good point. I was thinking that after catching some CS gas, your eyes start watering and you really cough. People are not thinking about coughing into their sleeve then and it it warm enough for short sleeves. They are recommending that those that have participated in protests get tested.


  20. Phil/Watchlist,

    When you get time can we looks at a few stocks in the watchlist FCAU, SAN,NRZ,MUFG, SPWR or TWO

    regards


  21. 2%/Day/BDC – Not too long before we're all infected at that rate.

    JETS/Randers – Not a bandwagon I would jump on.

    Bonds/Tangled – I wouldn't bet on it.  This is a shell game with debt that we get to play because we're the World's reserve currency and there's this fallacy that the Fed's balance sheet isn't part of our Government's debt.  It's a game that, once people lose faith in it – can turn us quickly into Greece and it's a game that many countries are playing already.  

    What's the difference between the Fed buying long-term debt or the Treasury issuing more debt?  It's just a balance-sheet issue, the debt is still in country and Fed losses and obligations are still those of the treasuries.  The difference is (and it's total BS) that the Fed gets to create $1Tn in cash, which becomes a negative on their balance sheet but then they us it to buy $1Tn worth of TBills and they declare them to be an asset, which balances out the creation of cash.  

    The assumption there is that $1Tn of 1% 3-year notes is worth $1Tn but, if the rates go up to 4% next year, then the notes discount 8% over the next two years and the Treasury has to book an $800Bn loss (added to our deficit). 

    Since none of that has happened yet, the Fed's balance sheet remains a magical land where money is created with no consequences and, of course, they Fed let's the banks play with that money and leverage it 10x – which will also leverage those losses 10x if anything goes wrong (see Buffett's long-standing warning about derivatives).  

    So far, for 10 years now, the Fed has kept rates down in what is pretty much a decade-long recession that we've pumped away with $20Tn of Government Debt and a $7Tn Fed infusion so $2.7Tn a year added to our $18Tn GDP is 30% of our GDP for the last 10 years has been stimulus.  Can we afford to keep doing this?  That's the experiment we're running now but it's that "moral hazard" that creates bigger and bigger zombie corporations that survive not because they shed unprofitable operations and gained efficiency but because they have constant access to cheap money to paper over their own losses.

    That means, when and if the shit ever does hit the fan – it's going to be an epic melt-down and there will be no one left to save us.

    • The AtlantaFed's GDPNow model now sees Q2 U.S. real GDP growth of -53.8% vs. 5.28% on June 1.
    • Adds in lower expectations on real gross private domestic investment (i.e., business investment) and lower net exports.
    • Trump administration officials see the next round of economic stimulus reaching as high as $1T, though talks on the plans have been delayed, Bloomberg News reports, citing people familiar with the matter.
    • Aides had planned to meet this week to discuss the next round of relief, but that meeting was taken off of the calendar and hasn't yet been rescheduled, they said.
    • Senate Republicans currently have no plans to act on a stimulus bill this month.

    Palo Alto Networks prices $1.75B of 0.375% convertible senior notes due 2025

    Methanex upgraded at Scotiabank after liquidity boost

    Methanex said last night it amended its $300M committed revolving credit facility and $800M non-revolving construction facility, which will provide "greater flexibility on the timeline" to complete the Geismar 3 project.

    Amyris raises $200M via private placement

    Veon in new 100B-ruble loan with Sberbank

    L Brands proposes an aggregate $1,250M notes offering

    Tuesday Morning secures $25M of additional debtor-in-possession financing

    Freddie price target upped by Nomura on capital raise prospects

    Crown Castle announces debt offering

    Varex slips 8% on launch of convertible debt offering

    Royal Caribbean -3% after new note offering

    WPX Energy prices senior notes due 2028

    TRI Pointe Group prices upsized $350M senior notes due 2028

    Southwest Airlines prices $1.8B debt offering in two tranches

    Seagate prices $500M debt offering

    AerCap Holdings prices $1.25B aggregate principal amount of senior notes

    Jefferies names cash flow darlings

    • Jefferies posts a list of ten cyclical stocks that posted more than a 10% increase in operating cash flow during Q1 despite the pandemic, an increase in Q1 cash flow compared to last year as a whole and what it calls a "reasonable" balance sheet with a net to debt equity ratio of less than 100%.
    • The group singled out by Jefferies includes Chegg (NYSE:CHGG), KLA Corp (NASDAQ:KLAC), Juniper Networks (NYSE:JNPR), Newmont (NYSE:NEM), EOG Resources (NYSE:EOG), Rollins (NYSE:ROL), Garmin (NASDAQ:GRMN), Keysight Technologies (NYSE:KEYS), Xilinx (NASDAQ:XLNX) and Fastenal (NASDAQ:FAST),
    • Gainers: Hovnanian Enterprises HOV +26%. Digital Ally DGLY +20%. Global Eagle Entertainment ENT +17%. Plug Power (NASDAQ:PLUG+15%. Energy Focus (NASDAQ:EFOI+12%.
    • Losers: Comstock Holdings (NASDAQ:CHCI-9%. Dycom Industries (NYSE:DY-9%. Alpha Pro Tech (NYSEMKT:APT-9%. BioHiTech Global (NASDAQ:BHTG-8%.
    • Casinos stocks are higher after early reports from Nevada indicate strong traffic at properties that have reopened. Casino traffic in other parts of the U.S. is also reported to be steadily improving.
    • Today's top gainers in the sector include Penn National Gaming (PENN +11.7%), Full House Resorts (FLL +5.8%), Eldorado Resorts (ERI +8.8%), MGM Resorts (MGM +5.2%), Caesars Entertainment (CZR +2.4%), Boyd Gaming (BYD +4.5%) and Red Rock Resorts (RRR +1.4%).
    • In a sudden mid-day turn, Las Vegas Sands (LVS -2.2%) is down sharply following a Bloomberg report that the company's casinos in Singapore is under investigation for money-laundering checks.
    • LVS was up as much as 4% before the story broke.
    • ZoomInfo (ZI) opens trading at $40 in its first day of trading, up 90% from its IPO price of $21.
    • The company, which operates a business intelligence platform, priced late yesterday, above its $19-$20 per share expected range.
    • Previously: ZoomInfo prices IPO at $21 (June 4)
    • Siemens (OTCPK:SIEGY) and AES Corp. (NYSE:AES) announce a 50-50 joint venture proposing to build two giant lithium ion batteries in Australia that would dwarf the world-record storage facility built there by Tesla (NASDAQ:TSLA) in 2017.
    • The Fluence JV would build twin 250MW/125MWh lithium ion batteries in Victoria and New South Wales to act as a "virtual transmission line" to allow better access for clusters of wind and solar plants.
    • The JV says it can have the units up and running within 14 months, much more quickly than building out transmission infrastructure to accommodate more renewables.
    • The batteries would eclipse the 100MW/129MWh battery at Hornsdale in South Australia, installed by Tesla in 2017 and currently billed as the world's largest.

  22. Bonds – I thought maybe the Fed smoothing the yield curve might be a short term at least boost for the mortgage REITs


  23. Watch List/Pat – Well, let's pick the 2 on that list least likely to be regretted and that's the makers: FCAU, and SPWR.  I think banking and REIT risk are still a bit high with the unknowns we face but people will still need cars and solar cells.  Of the others, I can't tell how much damage REITs have taken and if they cut dividends people tend to bail so very risky and MUFG is a massive bank that gets little respect and is critical to Japan's economy so pretty much too big to fail.  

    Year End 31st Mar 2015 2016 2017 2018 2019 2020 2021E 2022E CAGR / Avg
    Total Revenue
    ¥m

    4,963,578 5,019,354 5,069,024 4,795,751 4,823,503 5,305,215 6,848,467 6,848,733 1.34%
    Operating Profit
    ¥m

    1,614,757 1,498,769 1,303,228 1,409,377 1,145,327 829,443     -12.5%
    Net Profit
    ¥m

    1,033,760 951,403 926,442 989,665 872,690 528,152 753,691 835,269 -12.6%
    EPS Reported
    ¥

    73.1 68.2 68.0 74.3 66.6 40.7     -11.1%
    EPS Normalised
    ¥

    79.3 71.4 72.4 78.7 80.8 73.2 60.3 67.3 -1.58%
    EPS Growth
    %

    +1.46 -9.93 +1.36 +8.76 +2.72 -9.46 -17.6 +11.6  
    PE Ratio
    x

              6.29 7.64 6.84  
    PEG
     

                0.657 0.498  
     

    That's Yen but you get the idea – they are big and $4.19 is only $53Bn valuation.  Unfortunately, MUFG has crappy options which are short-term, low volume and low-premium so SAN wins by default…

    If SAN were not so crazy low, I would not consider them but $2.60 is  $42Bn and they made $6Bn last year so… low.

    So, for SAN I'd go for:

    • Buy 10,000 SAN at $2.60 ($26,000) 
    • Sell 100 SAN 2022 $2 calls for 0.85 ($8,500)
    • Sell 50 SAN 2022 $3 puts for 0.85 ($8,500) 

    That's net $9,000 and you get paid $20,000 if SAN is over $2 for an $11,000 profit and, if SAN is at $2, you then pay $15,000 for 5,000 shares and they cost you net $4,000 or 0.80 – so not a terrible downside.  On the upside, anything over $3 is an $11,000 profit, which is 137% in 18 months – that's fine.

    FCAU has much better options but we still want to be cautious:

    • Sell 30 FCAU 2022 $8 puts for $1.10 ($3,300)
    • Buy 50 FCAU 2022 $8 calls for $3.10 ($15,500) 
    • Sell 50 FCAU 2022 $10 calls for $2.25 ($11,250) 

    That's net $950 on the $10,000 spread so here we have $9,050 (952%) upside potential if FCAU can get back over $10 in 18 months.  If not, you risk owning 3,000 shares at $8.32 as a worst case – still $1.65 (16.7%) less than it is now – even if the longs are completely wiped out.  

    Some people consider that to be a risk of $24,960 in their portfolio but, if you don't think it's very likely FCAU goes below $5, then the risk is really just that $3.32 difference x 3,000 =  $9,960 and I simply can't imagine them going lower without a full-blown global melt-down (which we hedge for) so we can make a fairly aggressive allocation like this in a $100,000 portfolio.  

    SPWR and VIAC are my top table-bangers and we have both in several of our Member Portfolios already.  

    As a trade from scratch I'd go with:

    • Sell 20 SPWR 2022 $8 puts for $3 ($6,000) 
    • Buy 50 SPWR 2022 $5 calls for $4 ($20,000) 
    • Sell 50 SPWR 2022 $10 calls for $1.90 ($9,500) 

    That's net $4,500 on the $25,000 spread so $20,500 (455%) upside in just 18 months if SPWR can get to $10 (up 25%) and last Q they lost $1.4M but had a solid $450M in sales so still on last year's pace and this Q will be ugly and no profits for the year are likely but next year should be over $2Bn in sales and that makes them way too cheap at $1.4Bn.

    Fed/Tangled – The problem they have is that their old loans, which were a source of income at 4-6%, are getting refinanced at 1-3% and not always by them so their portfolios are in flux and their margins are under pressure and the future is hard to predict so I stick to NLY, CIM, AGNC, SPG, SKT and a poke at TWO because I think their management teams can ride the waves but I'm not going out to increase my exposure even further though, as SPG moves further up, it does free up a slot for another one down the road.

    SPG Simon Property Group Inc. 500 5/1/2020 34 $32,000 $64.00 $12.11 $64.00     $76.11 $3.23 $6,055 18.9% $38,055
    SPG Short Call 2022 21-JAN 65.00 CALL [SPG @ $76.11 $3.23] -5 4/29/2020 (596) $-12,000 $24.00 $2.15     $26.15 $2.46 $-1,075 -9.0% $-13,075
    SPG Short Put 2022 21-JAN 45.00 PUT [SPG @ $76.11 $3.23] -5 5/4/2020 (596) $-6,750 $13.50 $-3.88     $9.63 $0.11 $1,938 28.7% $-4,813

    We waited to be sure they had formed a good bottom and then we jumped in.

    We do pull the trigger – WHEN we get information that leads us to believe someone is particularly undervalued and THEN we pull the trigger but, otherwise, we wait PATIENTLY for a good opportunity like this one.  Deciding that "Today I want to identify 3 REITs to buy" is a TERRIBLE investing strategy that can lead to disaster as you are forcing yourself (or me) to jump into things for no particular reason AFTER you already missed the bottom.  No thanks!

    TWO Two Harbors Investment Corp. 1000 5/1/2020 34 $4,300 $4.30 $1.20 $4.30     $5.50 $0.35 $1,200 27.9% $5,500

    Same time as SPG but I wasn't as sure so we just sold the puts.


  24. SKT on the move, by the way!


  25. Phil, what software program do you use to track your portfolios?


  26. wow, AAL is up 50% in just one day


  27. Phil / SPG

    There were two trades. 

    "In the Long Term Portfolio, 

     

    we're happy to get 1,000 shares cheaply so we can 

     

    sell 10 2022 $45 puts for $14 ($14,000) and consider that free money with a net $31 entry.  As they are such a bargain, I think we can

    add 20 of the 2022 $40 ($30)/65 ($20) bull call spreads for $10 ($20,000) and then

    we have a net $7,000 entry on the $30,000 spread.  

     

    For our Dividend Portfolio, let’s:

     

    • Buy 500 shares of SPG for $64.44 ($32,220) 

    • Sell 5 2022 $65 calls for $20 ($10,000) 

    • Sell 5 2022 $45 puts for $14 ($7,000)

     

    That nets us into the stock for $15,220 and the dividend alone is $4,200 (27.5%) annually and, if we get called away at $65, that's $32,500 back for another $17,280 (113%) profit over 2 years.  Not bad for a boring, dividend stock."

     

    I did both of them. Both of them are doing really well. Thank You.

     

    Questions.

     

    1. I do want to own the stock long term for dividends. I had sold SPG 70 2022 calls. When am I likely to get assigned? Should I roll them up to 80?

     

    2. Since we sold the calls and they are in the money, what's the implication for dividends post ex-dividend date. Are the calls seller obligated to pay the dividends? I have never dealt with this before. 

     

    Thanks.


  28. Phil/Jets ETF

    FIRST, GOOD MORNING!

    you wrote: Randers, it's not a bandwagon I'd want to jump on'…should be 'Randers, it's not a "jet" I want to fly on'…..(a little humor)


  29. SPWR,

    Just a quick reminder that they are splitting into two separate companies, presumably before the end of this month.  May affect the options and option pricing.


  30. lotter

    I said that a month ago, yet, I still can't find any new information about when that reorganization is supposed to actually take place.  Messy options for sure if and when it does.


  31. Tracking/Jbiz - https://www.poweropt.com/

    AAL/BDC – And I was just saying I didn't think it was worth the risk.

    SPG/SK – You don't get assigned when the stock goes up – that's our fallback position.  The dividends should be baked into the call pricing – check with your broker though to make sure you have no obligation there but I'm pretty sure no one does that.  A short call gives the buyer the right to buy the stock from you for a set price but, in theory, you have the stock and collects his dividend – you don't have the obligation to pay him the dividend as he holds only the right to buy the stock from you at his discretion.  He can exercise the option on the ex-dividend date and then you miss the dividend – but you don't have to pay it to the caller.  

    Similarly, a short put gives someone the right to sell you their stock whenever they want but whoever is holding the stock potato on ex-dividend date is the one the payment goes to (from the company, not the contract holders).  

    So the bottom line on both SPG trades is you don't own the stock and you'll just get the cash BUT, if you REALLY want to own SPG (now $76.50) you can buy back the 2022 $45 puts at $10 and sell the $80 puts for $28.50 so you net another $18.50 in pocket on top of the original $14 so now you are in the $80 puts for net $32.50 and you would be assigned at net $47.50 on the put side – about the original $45 strike.  

    You still may not end up owning the stock but $18 is more than 20% additional upside for not owning the stock and the two spreads, if you are above $65, will pay another $40,000 profit so who needs to own the stock?

    Thanks for explaning the humor, Maya.

    SPWR/Lotter – Ah that's right.  I keep wondering why we don't have lots more of that stuff.  

    Indexes sputtering into the close as we stare down the barrel of tomorrow's NFP report.

    That pesky 3,135 line:

    Remember when the RUT was 1,700?

    No worries mon!


  32. Phil/Watchlist

    awesome….thank you for providing detailed information and logic. with SPWR the calls will defn turn messy after the split. so prudent to wait till then?

    regards


  33. Phil / SPG

    Got it for Short Calls and Puts and Dividends. Also, I understand the opportunity to get additional premium by selling $80 puts to lower cost basis to $47.50 that would provide 17% dividend yield (before the cut).

    I do have one question unanswered. 

    In the trade for the Dividend Portfolio,

    I am long SPG shares already.

    But, I have sold $70 2022 calls against those long shares. Now, those are in the money. 

    And, I do want to keep the shares long term for dividends and to avoid paying taxes

     

    When am I likely to get assigned? 

    Should I keep rolling them up to avoid getting assigned?

    I do expect SPG share price to go down as the inevitable virus infections go up. Just trying improve my understanding on the mechanics. I do agree it's a fantastic deal even I get assigned and don't keep the stock.

    SK


  34. SPWR,

    They apparently got the approval for the split, and according to the Earnings conference call transcript they expect it to happen before the end of this month/Q2.  See link below.

    https://ca.finance.yahoo.com/news/edited-transcript-spwr-earnings-conference-111347126.html


  35. May jobs at 13.3% unemployment vs 19.5% expected. Yay? Up we go. That's only the worst since 1940, so why not add 500 points to the Dow?

    But I would bet that unemployment drops to Obama-era levels next month, if we don't get a rally in infections and have to shut down again, but infections are holding steady in the 25k per day range, so far.