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Monday Market Movement – Up and Up and UP!

Another day another 1.5% gain.

This is why we can't cash out our long portfolios, as much as we'd like to.  The problem is we are going to have a very hard time protecting our ill-gotten gains from the correction – if and when it ever does come but, so far, the flow of money from the Fed and the endless stimulus by the Government is the rising tide that is floating all boats – no matter how rough the waters.  

Investors are "exhberant" but is it really irrational when so much money is being thrown at the stock market?  This is historically unprecedented.  Here we are at the start of Q3 and we already heard on Friday that Q2 was a disaster for the Auto Industry and Earnings Reports kick off next week with PEP, C, JPM, WFC, UAL, BK, GS, PNC, PGR, USB and UNH reporting by Wednesday.  This week we have just a few but nothing terribly exciting so we'll have to wait until next week to see if the markets can skip over Q2's almost certain disaster:

The top earnings releases scheduled for the week are Paychex, Aspen Group, Simply Good Foods, Walgreens Boots Alliance, Bed Bath & Beyond, and Levi Strauss.

The Atlanta Fed has increased their GDP Now Forecast to -35% from -54% for Q2 so I guess that's great news.  I'm not sure if -35% deserves new record highs in the stock market but it is certainly better than -54% thanks to that very clever re-opening thing we've been doing for the past month under the guidance of Supreme Leader Donald Trump.

According to our President, a few people "caught the sniffles" this weekend – a record amount, in fact – but it's nothing to worry about and no reason to chicken out and go back to our cowardly lockdowns that were damaging his economy.  I know I'm inspired.

"Experts say the president appears to have seized only on a death rate estimate of 1 percent or less that does not capture the entire impact of the disease, and excludes a multitude of thousands who have spent weeks in the hospital or weeks at home with mild to moderate symptoms that still caused debilitating health problems.

"A crude calculation of the U.S. death rate, based on the total number of deaths officially attributed to the virus and the number of cases diagnosed through testing, suggests the mortality rate is higher, with 4.5 percent of those infected dying.

“It’s always tricky to do this in the midst of a pandemic,” Dr. Jha said. “There are a lot of factors that go into it. But let’s say you took 1,000 Americans at random who were all infected. Our best guess is that between six and 10 would likely die of the virus.”

100 years after 'Spanish Flu': Is the world ready for the next ...So go markets!  The President says we have beaten this thing after 40M tests have been administered (to people who actually thought they had the virus) and only 2.8M of those people were actually infected and the rest were just whiners, not winners.  Now it's time for the other 290M of us to get out there and party like it's 1999 or like it's 1918, when we thoght we beat the Spanish Flu (I heard on Fox it was really from China) but then it came back stronger  and then we thought we beat it again and it came back again.  50M people died after affecting 500M people, 1/3 of the World's population at the time.  Now we have 8Bn people but this time is different, right?

Meanwhile, think of the rally like a Toga Party – we know it's stupid but that doesn't mean we can't just enjoy it and we know it's going to end with people getting sick, hurt and arrested and of course there is going to be some property damage but FUN WHILE IT LASTS!  For those of you who live in other countries and can't understand the mentality of Americans in this crisis – this clip should help:

These are the 65-80 year old people who now run our Government so why should we be surprised when they say Phucket, something I told you would happen way back in April, while we were still on Double Secret Probation:  "Monday Morning Math Notes – Looking Ahead in a Viral Market."  At that time we were also contemplating cashing out our portfolios, which had just gotten back to even and I said:

THAT is the question I've been pondering this weekend as we've had an excellent run in the markets off the bottom and all of our Member Portfolios, except the Dividend Portfolio, are back in the black and we should be THRILLED, in this kind of market – just to get our money back.  Still, the thing is – if we go back to cash – then what?  This is where the Fear of Missing Out (FOMO) comes in because, while we are comfortable that we can take our cash and make money in any kind of market – we still don't want to miss out on deals of the century, do we?

…So a fairly unchecked spread that infects all 330M Americans could kill 1.5M people but identifying sick peolple quickly through stepped up testing and "flattening the curve" could keep us under 500,000 deaths and will spread those deaths out over at least a couple of years – even if there is no vaccine and no cure.  Horrible as that is, ECONOMICALLY, we can live with that.

…One thing they don't mention about "flattening the curve" is that the aim is not to prevent you from getting the virus – you WILL get the virus – it's just a matter of WHEN.  Given that everyone will be exposed to the virus eventually (unless we go to a permanent lock-down until the virus is completely dead in the wild), policy makers don't want the curve TOO flat – as that just drags things out longer than they have to.  What they want is to keep people exposed at a level our Health Care system can handle and let's hit that line and get it over with.  They don't tell you that but it's true and it drives the policy in the background 

…So, if we assume Q2 is shot (ends June 30th) and we're down 30% but then only down 15% in Q3 and down less than 10% in Q4, I don't see the overall economy being down much more than 10% overall and that's $2Tn and the Government has put more than $2Tn into the market and is certainly willing to put in more so I don't think we should sell our long positions UNLESS we start seeing re-spreads of the virus in places where restrictions are easing.  

Otherwise, PHUKET!  

Well said Phil (that's why I read that guy every day).  We are simply living through the early stages of re-opening, as we expected and it remains to be seen how bad the consequences of re-opening are going to get.  As long as our hospitals are AT capacity and not OVER capacity, then things are actually going according to plan – the plan they don't tell you about because who want's to be the guinnea pig?  



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  1. Good Morning.

  2. Phil/AAPL … you have (still messy) 45 2022 $300/350 spread (assuming the roll on the short $320s) and 15 extra 2022 $240 calls with the 5 short puts.  I'd sell 5 Sept $360s for $23.50 ($14,100) and be happy for now, you can always sell more if they start faltering.  

    Thanks for this Phil. It would be helpful if you could say how you choose which call to sell .. why not the $370s or $375s for example .. is it the premium or the risk or the roll potential that you weigh most?


  3. /SHOP – this thing has become completely untethered from any form of rational analysis. If there is any stock on earth that's more overpriced than TSLA, this is it. 

  4. Good morning!

    Back over 3,315 on /ES and 10,500 on /NQ is amazing.  

    TSLA still going up and up but a spike down to $750 on Friday at the close was interesting.  Did not one person have a real buy order in place?

    Tesla Stock Climbs Higher as Wall Street Plays Leap Frog to Keep Up

    Tesla Target Up at J.P. Morgan, Based on Output, Deliveries

    Tesla's stock surges toward another record after the Street's most bearish analyst boosts price target

    Analyst Ryan Brinkman at J.P. Morgan raised his stock price target to $295, which is 76% below Thursday's closing price of $1,208.66, from $275, as a result of the deliveries data, but his target remains the lowest of the 32 analysts surveyed by FactSet. Brinkman reiterated his underweight rating, citing a "lofty" valuation, and cautioned that any substantially better results could include items of a one-time nature, including credit sales and release of deferred revenue associated with autonomous driving features. Meanwhile, Deutsche Bank analyst Emmanuel Rosner raised his rating to $1,000 from $900, while keeping his rating at hold, citing the "robust" deliveries data. The average rating of the analysts surveyed by FactSet is now $774.98, or 36% below Thursday's closing price. 


    GS downgrades their overall outlook on the economy:

    Goldman Sachs economists led by Jan Hatzius slashed their third quarter U.S. GDP forecasts by 8% to 25% growth in a new note to clients. Previously, Goldman Sachs expected 33% growth fueled by the re-openings of states that has sent a flood of people back to spending in bars, restaurants and retail stores. But with COVID-19 infections spiking again in several states and governors reinstating some form of lockdowns, Goldman thinks the economy is poised to underperform their prior estimates.

    “A combination of tighter state restrictions and voluntary social distancing is already having a noticeable impact on economic activity. States with the most severe deterioration in the Covid situation saw declines in consumer and workplace activity at the end of June that will likely continue into July, and activity flattened in other states,” Goldman’s team writes. “The healthy rebound in consumer services spending seen since mid-April now appears likely to stall in July and August as authorities impose further restrictions to contain virus spread. The ongoing recovery in manufacturing and construction should be largely unaffected, however.”

    Goldman economists reducing its third quarter GDP forecast could be a precursor to its equities team taking a more defensive posture on stocks soon.

    The investment bank’s equities strategists led by David Kostin have held steady in recent months with a year-end S&P 500 price target of 3,000, under-pinned by a solid acceleration of growth in the second half. But the S&P 500 — currently at 3,130 — has overshot that estimate in the hopes of a sustained V-shaped recovery amongst market goers. That may be unlikely, judging by Goldman’s revised macroeconomic thinking.


    For one, the forward price-to-earnings multiple on the S&P 500 is 21.7 times, a level not seen since the late 1990s internet bubble, according to Yardeni Research. This level of valuation seems to blatantly ignore the headline risk of the coming second quarter earnings season, where S&P 500 earnings are expected to tank 43% year-over-year. So far, there have been 34 negative pre-announcements on second quarter earnings from companies compared to 25 positive, per Refinitiv data. Second quarter revenue is projected to plunge 11.8% from the prior year.

    Meanwhile, countless tech stocks have detached from any form of economic reality.


    Alice Dilemna, Greg Guillemin - Photographie d'art | Galerie SakuraAAPL/Wing – It's based on what I think is a fair range for AAPL into September and good enough protection for the position with low enough risk on the upside.  You just have to balance those factors out against what's coming and AAPL certainly isn't immune from a poor Q2 and earnings are 7/30 which means there won't be "better" earnings between now and Sept and AAPL never pre-announce or responds to rumors nor is there likely to be any new announcements between now and then so I chose to play on the side of caution with the $360s but stayed with a small number as you can easily roll it if it goes higher or sell more if it goes lower.  

    SHOP/Dawg – WOW, $124Bn "valuation" with $1.5Bn in sales and a $125M loss last year.  WOW!!!  This is better than dot com days.  Last Q was $470M and they lost $31M so improving I guess so why not up 200% since April?

    Dollar is down 1% since Friday, that's a big help boosting things today.  Oil is down anyway and I can't imagine that won't be disappointing on Wednesday's report.

    Buffett just invested in /NG stock.

  5. Phil_  Still new and trying to get better at understanding the navigation of the site.  On May 20th, we put on Bateman's MU trade.  It ended up in your 'Top Trades'.   Why can I not see this reflected in the Butterfly Portfolio as outlined in your May review or today under 'virtual portfolio's'.  The short strangle in my case is at 60% of profitability.

  6. /ET – DC judge vacated the permit for the Dakota Access Pipeline. They've got until 8/5 to shut it down and empty it of oil pending additional environmental studies by the USACE, specifically related to a river crossing near the Standing Rock Indian Reservation. 

  7. yet another "lol CMG lol"

  8. Hmm. That Friday spike down on TSLA – any relation to the Musk-Maxwell photo hitting the wires/

  9. Phil or anyone, curious to get your thoughts on this as a new position in UNG:

    Buy 10 UNG Jan 21 $8 Calls for $3.20 ($3200)

    Sell 10 UNG Jan 21 $13 Calls for $1.20 ($1200)

    Sell 10 UNG Jan 21 $13 Puts for for $3.75 ($3750)

    I believe that's a credit of around $1790 with upside of around $6700 if UNG gets above $13. Assignment of the $13 puts seems relatively low until later in the year.

  10. MU/Hicket – I don't put every trade idea in a portfolio, that would be crazy.  We have a lot of pro traders who just want the ideas and they manage it themselves.  If you want to see us manage a trade, wait PATIENTLY for a portfolio trade.    I have a lot more trade ideas than I have room for in the portfolios!

    Happy to discuss strategy on your MU trade, of course.

    Pipeline/Dawg – I love how they push these things ahead without real approval and then get surprised when they have to dismantle it.

    CMG/RN – Wow!  Things are just going nuts.  

    Musk/Snow – I don't know what it was about but very fast recovery.  

    UNG/Swamp -  I like it but I think I'd go with 2022 $10 puts at $2.75 as it's less pressure than to go up 25% in 6 months.   Also, the 2022 $8s are $4.25 so $1.75 in premium that will burn over 18 months vs the Jan $8s that have 0.70 in premium that will burn over 6 months.  

  11. /UNG – It's starting to seem to me like holding UNG options long term is like playing poker at a casino. If you play long enough, eventually everyone's stake ends up in the rake, or in this case eroded by front month price convergence.

  12. While the sun is still shining I cleared out up to now 80 positions in my ports.

  13. This what we see in the news here

    Weltmacht in Trümmern Die Corona-Epidemie ist außer Kontrolle, die Wirtschaft am Boden, die gesellschaftliche Stimmung historisch schlecht: Amerika zahlt den Preis für Trumps Präsidentschaft.

  14. Yodi

    Read your comment on Armchair trading vs BCS. Have been reflecting on that since that post. 

    "While the sun is still shining I cleared out up to now 80 positions in my ports."

    How many positions do you have? What's the allocation percentage for each position?


  15. sk2020,
    I do not count my positions every day but check them every day. Allocation depends very much on the value of the stock. They could be 200 stock or up to 2000 and 5000. Mostly I did start with 200 stocks. BCS are general more conservative starting with 4 option plays to begin with.
    At the present time I would be very careful and conserve as much cash as you can.
    Trump seems to have lost control of the situation in the US, and trying to kill people with the thousands. People here think the man has lost its mind. The outcome in respect to the market is very difficult to predict. My two cents.

  16. Phil – VIAC, SIG,

    I see in the watch list, you indicate you're torn on VIAC.  Can you elaborate?

    Also, what's your take on SIG, they're not moving in this melt up.  Are they a canary in the COVID mine and are reflecting peoples true sentiment about being in public or is there more to it?


  17. UNG/Dawg – That is how I play it.  Gotta be in it to win it so I play when the pot is cheap and try to see as many free cards as I can.

    While the sun is still shining I cleared out up to now 80 positions in my ports.

    Good job Yodi – I hope all take that advice!  

    This is what Yodi is talking about from German papers:

    World power in ruins




    Volume 90%

    The corona epidemic is out of control, the economy is on the ground, the social mood is historically bad: America is paying the price for Trump's presidency.

    4 more years?

    VIAC/Jeddah – No longer torn, we bought it!  SIG I think is a good value stock that will ride this out and come back.  VIAC is a no-brainer though.  

    VIAC Short Put 2022 21-JAN 17.00 PUT [VIAC @ $23.70 $0.45] -30 3/23/2020 (564) $-27,000 $9.00 $-5.65 $1.90     $3.35 $-0.25 $16,950 62.8% $-10,050
    VIAC Long Call 2022 21-JAN 5.00 CALL [VIAC @ $23.70 $0.45] 50 3/23/2020 (564) $35,000 $7.00 $11.80     $18.80 - $59,000 168.6% $94,000
    VIAC Short Call 2022 21-JAN 15.00 CALL [VIAC @ $23.70 $0.45] -50 3/23/2020 (564) $-15,000 $3.00 $8.28     $11.28 $-0.03 $-41,375 -275.8% $-56,375

  18. yodi / All

    How do you keep track of risk, taxes etc.? Do you use any tool that's effective?