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59,000 Thursday – Another Record High for Viral Infections

You're gonna be tired of so much winning! - Donald Trump CODE(KEEM ...Winning!  

As Trump predicted in 2016 we are so tired of winning at this point, aren't we?  The US is clearly winning the virus race with a record 59,400 infections on Wednesday – our 5th National Record in the past 9 days – WINNING!  On Tuesday we celebrated our 3,000,000 infection in the US and we're officially at 1% of the total population infected so that's 1/100 people carrying the virus (that we know of without adequate testing - which the President says causes more cases) and it remains airborne so see how well you do today avoiding coming in contact with 100 people or things that have been touched by 100 people….

There is a certain logic to "getting it over with" – they probably can't stop it from spreading, there is no miracle cure and we're all going to get it eventually so why prolong the agony?  Well, one reason is that hospitals are out of room for new patients and also out of supplies which means the virus can spread out of control when we try to treat infected people and more infected people means less room and less supplies and that will cause more people to die and not just from the virus but hospital staff is pulled away from other duties as well – endangering non-Covid patients.  

That is why we need to "flatten the curve".  The US already has one of the worst-performing Health Care systems in the World and this is a stress test we are clearly failing.  “It’s been chaos for us,” said Randy Bury, President of the Good Samaritan Society, which has struggled to keep its 200 nursing homes supplied with hand sanitizer, masks and gowns. “The supply chain in the United States is not healthy, and we’ve learned we cannot depend on the Government.”  

Trump has resisted using federal powers to address the problem, saying in March that individual governors should find their own gear because “We’re not a shipping clerk.” With the National Strategic Stockpile depleted, states have been left to fend for themselves, though the Federal Emergency Management Agency has been distributing modest shipments of gear to nursing homes and long-term care facilities.

As to the markets, Zero Hedge nailed it this morning:

At this stage markets are basically just a liquidity meth lab, an artificial behemoth constructed and subsidized by the Fed stepping in on any downside in markets. Following $3 trillion in liquidity injections in 3 months ($12 trillion annualized) markets have entirely disconnected from the economy and any traditional valuation metrics. The Fed’s role in managing markets is becoming ever larger and has now expanded into buying $AAPL and $VZ bonds among others in addition to monetizing US debt. Call it what you like, just don’t call it capitalism, rather a nationalization of sorts.

Indeed just in June we saw the Fed making policy announcements 3 times, each time following the S&P 500 seeing downside action toward retesting its 200MA and each time markets reacted with bounces and rallies. Call it a coincidence if you like, but it’s not. These markets remains closely managed and watched by the Fed.

Wall Street analysts have largely been made obsolete as earnings growth metrics have long been rendered irrelevant with everybody bowing to the Fed put as the primary reason for buying stocks.

With no earnings growth during for the last two years, it is folly to pretend markets are about anything else but the Fed.

Skyler White: the Breaking Bad underdog who set the template for ...That's what we've been doing since early June.  As I noted yesterday, every bone in my body is screaming "GET OUT" but how can we walk away from all this free money that's being printed for us?  That's fine for those of us in the Top 1%, who are able to take advantage of all the free money that's flying around but, for the rest:

The unemployed and poor are dependent on government handouts, the middle class is sweating staring at permanent job losses mounting as the top 1% and billionaire stock owner class is subsidized by the Fed as stocks keeps rising despite the worst economic backdrop in decades. All the while the Fed is steadfastly denying against all evidence that it is contributing to ever expanding wealth inequality even though that is precisely what it is doing.

 7 Nasdaq stocks (FB, AMZN, NFLX, GOOG, MSFT, AAPL and NVDA) are now "worth" $6.75 TRILLION.  The p/e of AAPL has gone from 16 to 24 in the past 12 months and AMZN's PEG Ratio has gone from 1.32 to over 3 in the past 12 months meaning traders are getting 2/3 less bang for their Amazon buck than they were last year.  

Is this sustainable?  Of course not but post WWI Germany began their hyperinflationary climb (over 10% annually) in 1919, as did we in 2019, and it didn't peak out until 1923, when the paper mark was worth 1/1,000,000,000,000th of what it was in 1917.  They had a fabulous stock market too because stocks are an asset you trade your worthless paper money for so, to some extent, they protect you against inflation.  I mentioned yesterday that HMY was one of our recent Top Trade Picks and this is a great example of what hyperinflation looks like for gold stocks:

Perhaps it's because we discussed it as it's a smallish miner but it was on the way to a breakout yesterday anyway and we got it back around $3 so we're done with this silliness anyway.  NAK is still fun to speculate on and GOLD is soon to break out – especially if gold makes a run for 2,000 so perhaps we'll take a 2nd stab at our Stock of the Year as we hit the midpoint of the cycle.  

November 14th, 2019 was a very different World than the one we live in today but our logic is still the same:

It has been lower and may be lower again but the ongoing global uncertainty could push Gold (/YG) while a trade deal with China can get copper back closer to $3, making profits on that side of the mine as well. If it were just about the business, GOLD would not be our stock of the year but it's also about what kind of trade we can set up and how certain we are it will pay off and here's where GOLD shines. Our Trade of the Year will be:

  • Sell 15 GOLD 2022 $17 puts for $3.50 ($5,250)
  • Buy 30 GOLD 2022 $13 calls for $5 ($15,000)
  • Sell 30 GOLD 2022 $17 calls for $3 ($9,000)

The net cash outlay on the spread is $750 and it pays $12,000 if GOLD is over $17 in Jan of 2022 for a profit of $11,250 (1,500%). The ordinary margin requirement on the 15 short puts is $4,971.75 so it's a very efficient way to make $11,250. The worst-case scenario is you are assigned 1,500 shares of GOLD at $17 plus the 0.50/share loss from the $750 outlay so $17.50 is not much worse then the $16.44 you'd have to pay now to buy the shares yet you only need it to stay flat to make $11,250 – seems like a good deal to me

We'll put up a new way to trade GOLD in our Live Member Chat Room later today.

 


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  1. Phil I can hear you, but they (Trump cronies) cannot hear you. Should they admit Trump is wrong; the whole house of cards will fall down.
    I can only repeat US needs to start from point one, quarantine, lock down, masks, distance from each other and sanitary conditions.


  2. Good Morning.


  3. Phil – Thoughts on WBA earnings this morning?

    I've got the 2022 45/50 BCS with the 32.5 puts sold, not sure it requires any adjustment at this point as it still has a lot of runway? 


  4. crs101010 WBA sit back and relax let the storm go past.


  5. Thanks Yodi, thats what i figured – 2022 spread so ive got lots of time to be patient!


  6. All

    I was thinking about WBA as well after the earnings announcement.  

    What do you think of BCS WBA 2022 35/50 with $35 puts? That's net credit of $1.26.


  7. DotCom Bubble mania is back, we all know it never ends well and a pop is certain….when is the ?.



  8. /CL is diving down rapidly


  9. Supreme court Rejected trumps bid to block  NY Prosecuter from enforcing subpoena on Tax records


  10. Supreme Court Rejects Trump Bid to Block New York Subpoena Seeking Financial, Tax Records

    The Supreme Court rejected President Trump’s bid to block a New York prosecutor from enforcing a subpoena seeking years of his financial and tax records from his accountants, potentially opening the president up to widespread scrutiny


  11. Good morning!

    Nice little sell-off to start the day, 300-point reversal in /YM underway, didn't quite make 3,200 on /ES and /NQ dumped at 10,750.  /CL (yesterday's webinar trade) took a nice tumble from $41 yet again – you're welcome!

    Exactly what I was talking about yesterday.  I'd rather not trade for a month and then find one good trade than force myself to guess the best of a bad bunch daily.

    Needs/Yodi – Well good luck with that!  

    WBA/CRS – That's the problem with these pharmacies turning into supermarkets in this environment.  Oh, well, only making 0.83 per 0.40 share in a Q when 0.83 is down 43.5% from last year so let's say $1.50 x 4 in a normal year is $6 per $40 share – OMG SELLSELLSELL!!!!   Come on man, let the idiots sell all they want – this is a rock-solid company that makes money even in a Global Pandemic!

    Looking into the remained of the company's financial year, Walgreens said it sees adjusted earnings in the region of $4.65 per share to $4.75 per share, a figure that includes a coronavirus impact of between $1.03 and $1.14 per share. 

    “Prior to the pandemic our financial performance for fiscal 2020 was on track with our expectations. However, this unprecedented global crisis led to a loss in the quarter as stay-at-home orders affected all of our markets," said CEO Stefano Pessina. "

    "Shopping patterns are evolving more rapidly than ever as consumers further embrace digital options, spurring us to accelerate our ongoing investments in digital transformation and neighborhood health destinations,” he added  

    Quick, switch to TSLA!  

    ROFL!  

    And what Yodi said.  

    WBA/SK – Perfectly good but I'd let things settle down just a bit.  Downgrade police need to have their say.  

    Trump taxes – Interesting.  If he's lost the Supreme Court he's done for.


  12. Just increased my SDS longs – this  will add to uncertainty and markets should come down…..  I'm happy about the verdict, but markets should get spooked


  13. $39.50 now the stop on /CL as we're below it.  


  14. Phil/BA

    GOOD MORNING!

    I'd like your opinion on my BA position, which I start3d before the 737max drama and before the virus thingy obviously. I have moved it around to the current position…I don't know whether to hold on, get rid of the whole kaboodle and put money into something more certain, but what?

    I have:

    2021: 5 BA $150 calls, sold for $25, now $45

    2022: 10 BA 140/240 BCS for $50 net, now showing $64/31.

    2022: 15 BA $185 puts, were rolls from the $300 puts


  15. Phil / BBBY

    Down 22% today.  Still like them?  Suspect COVID effect on earnings hit hard today.

    thx!


  16. Maya1

    BA similar than WBA sit tight and watch. your 2021 caller has still a delta of .71 plenty of premium but you will have to roll finally.


  17. Yodi-thanks for your thoughts. Be well!


  18. All

    In the name of diversifying, I now have too many positions. In spite of that, I incurred a significant drawdown in one position with TSLA uncovered calls. In stead of keep rolling, I should have cut my losses early on. All in the space of few days. Expensive education.

    Would love to learn best practices around risk management. 

    What are the preferred tools to track cost basis for taxes and risk management? 

    Thanks for the insights. 


  19. Maya1 Thanks for the wishes we all need them. But especially I feel for the people living in the hot spots of the US. No management.


  20. sk2020.

    Role # 1 don't mess with naked MOMO!!!! Selling a naked call is like putting all your money on one number at the roulette table.


  21. GOLD   today 6800 contracts sold Jan22 $20 puts for $2.25-$2.30


  22. yodi 

    Thanks.

    What's MOMO?

    Do you use any app / service to keep track of cost basis and risk management?


  23. Sk 2020
    MOMO are stocks with extreme high implied volatility, such as TSLA Options Aug 20 over 102%. And a forward P/E of over 121.
    Compare with PFE or T Aug. 20 options 30 to 35% and a PE of 15 or 12.
    I keep my records on a self-developed Excel spread sheet.
    If you stick to well established stocks like T, PFE , Buy them on a dip and sell short term calls against them you cannot so quickly enter in to hot water as in TSLA.


  24. MOMO= momentum stocks…as side already, like TSLA, AMZN now, and more and more 


  25. Thank You, Yodi / Maya. 

    Phil / YouTube

    I don't see yesterday's webinar on YouTube yet. Please add them when you get a chance. 

    There was a discussion on BCS with MO. Did that become a trade? Any one know what the final trade was?

    Thanks.


  26. Hey guys!

    Sorry, I forgot I had an appointment at the bank and I had to run out and just left the phone thinking it would be fast and here I am 3 hours later!   Only one client at a time gets in so, even though I had a noon appointment, the guy before us took it to 12:45 and then they were dead slow doing our stuff.  

    As I guess you know, Greg left us so I had to do a lot of account transfers and stuff.  Sorry.


  27. Didn't miss much it seems,a rally and now fading back again.

    BA/Maya – Well, not to Monday morning QB but if you were going to stick with them at $100, which you did, you should have gone all in at the time and bought back the short $240s and rolled the longs lower.  As it is, you made a bit of a mess, selling the $150s short.  Still, not terrible – just could have been out already if you had removed the covers.  

    So you are in for $5,000 – $1,250 – what must be painful short puts.  I would think BA survives so I'd hold the shorts but if we re-shut down (virus is airborne) it could be painful to ride out.  Since you have 15 short $185 puts, I would roll the 5 short Jan calls at $45 to 10 short Aug $175 calls at $16.30 as that would be 100% premium and you can do that again in Oct and Dec to make far more than the 5 short Jans and the only way those go in the money is if the short puts get much better for you – so it's a buffer.   Given that, I'd hold onto the longs but maybe roll the 2022 $240s at $31 to the Jan $200s ar $23 because I think $240 may be fantasy land and you're talking about selling $23,000 of premium for 6 months vs $31,000 of premium for 18 months.  

    BBBY/Jeddah – Wow, that's bad.  It's a shame, they were doing well.  Not sure if I still like them, have to read up.

    TSLA/Sk – Remind me on weekend and we can go over that but generally, you have to always look ahead at what you will do if a position moves against you by 20% and, if you don't have a good plan – then you shouldn't wait very long to cut it.  That goes from whatever point you are at so really, knowing that decision will be forced on you – you have to think about what you will do if 2 consecutive 20% moves go against you.  

    Webinar/SK – Something I don't think Andy learned yet.  


  28. Market looks crazy, so I decided to do something crazy. I bought 1 AMZN put and 1 TSLA put. Let’s see what happens. Betting money, not investing, since this market is actually a casino. 


  29. The Bug – I honestly had no idea WHO and CDC were going with this contact surface spread idea and belittling airborne spread. Granted, I have a bias from  some past unpleasant experiences with CDC arrogance (long stories) but why the blazes do they think the virus makes people cough??? If it made people's nose drip snot, or gave them the runs, okay, I could see the surface spread, but the big symptom is the cough, fer cryin' out loud! Why the hell else would the virus do that except to spread?

    /end rant


  30. HP, Lenovo top Q2 global PC shipments

    Traditional PC shipments were up 11% Y/Y globally in Q2 to 72.3M units, according to new IDC data.

    HP (NYSE:HPQ) topped the market with 18M units, followed by Lenovo (17.4M), Dell (NYSE:DELL) (12M), Apple (NASDAQ:AAPL) (5.6M), and Acer (4.8M). HP and Lenovo had Y/Y growth rates over 20%, while Apple's units grew 6%.

    U.S. volume is expected to top 21M units, the highest volume since the end of 2009.

    The research firm says early indicators show strength in education, enterprise, and consumer, which were partially offset by small and medium-sized business spending freeze.

    "The strong demand driven by work-from-home as well as e-learning needs has surpassed previous expectations and has once again put the PC at the center of consumers' tech portfolio," says IDC research manager Jitesh Ubrani.


  31. AAPL – Looks like IMAC will be int in the $6.5B to $6.7B vs the $5.6B from QTR +1B —  iPads should see a similar or greater gain to help cushion the Phone softness caused be the upcoming transition.


  32. Here’s exactly how detached from reality Donald Trump is on the coronavirus




  33. This chart should be getting Trump’s attention


  34. Brooks Brothers, Founded in 1818, Files for Bankruptcy





  35. Joe Biden proposes $700 billion ‘Buy American’ campaign


  36. UN: World could hit 1.5-degree warming threshold by 2024