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Friday Follies – Marching Headlong into Earnings Season

Buckle up, it's going to be a bumpy ride!

We're 10 days into the third quarter and look how well things are going with almost every state having the virus under control except for a few idiot red states that think they are immune but, either way, the daily briefings and general public awareness have certainly turned the tide and….  what?  That's the chart from May?  Oh gosh, I'm sorry – let's take a look at the same chart as it is today thanks to our completely inept leadership:

Oh my God – get me out of this country!!!  What?  We aren't allowed to leave because we're too likely to be infected?  Inept is not the right word for our leadership then, is it?  "Contrary to the continued existence of American life" is a more accurate description for these morons, really.  You would think this is all some kind of plot to destroy America that was set into motion by a foreign Government, setting up a puppet leader who would send America spiraling down a path of division and destruction.   Nah….

The only good news here is the same good news I predicted back when Trump was first elected – this may be the end of the Republican Party – just like Herbert Hoover in 1929-1933 led to over 20 years of Democratic rule.  When Hoover was elected, the Senate had 56 Republicans and just 39 Democrats and the House had a 267-163 Republican majority and, just like they did 100 years later, they raped and looted the land and destroyed the economy and, just 4 years later, there were 59 Democratic Senators and just 36 Republicans and, in the House, there were 313 Democrats and just 117 Republicans and, by 1937, Republicans almost qualified for endangered species protection with only 17 remaining GOP Senators and just 89 House Members.

While it's still too early for the Democrats to throw Putin a thank you party for installing the Puppet of Doom for the GOP in the White Hosue, it's certainly looking like more of a Blue Tsunami than a "Blue Wave" is shaping up for the upcoming elections (if we have them).  Trump is close to 10 points behind Biden (what ever happend to that guy?) in battleground states like Pennsylvania, Michigan and Wisconsin and he's behind in Florida and North Carolina too.  Even Georgia has gone from solidly red to "toss-up" for the President and Arizona is now leaning Biden too.  

Official NASA photo of KellyArizona already flipped to Democratic Bisexual Senator Kyrsten Sinema who replaced Republican Jeff Flake and now Democrat Astronaut Mark Kelly (Gabby Gifford's husband) looks like he'll be replacing Matha McSally after just 2 years (she was appointed by GOP Governor Doug Ducey (not his real name), who has just two years left before he will be thrown out).  Arizona has been a Republican stronghold since the Goldwater Era but Trump has been the last straw for many formerly red states as Trump gambled and lost (as he often does) by aligning the fate of the Republican Party with an anti-science campaign to battle one of the worst epidemics in history.  

Rabouin reports: "Betting markets have turned decisively toward an expected victory for Joe Biden in November — and asset managers at major investment banks are preparing for not only a Biden win, but potentially, a Democratic sweep of the Senate and House too…. The shift is the latest indicator of how quickly the political and business worlds have aligned in the view that Trump is unlikely to win a second term as COVID-19 infection numbers have spiked again and the economy looks to be stalling."

"A Citigroup poll of 140 fund managers released last week found that 62% expect a Biden win, compared to 70% who expected a Trump victory in the same survey in December. And according to Kace Capital Advisors Managing Director Kenny Polcari, 'Talk of a Democratic sweep (is) now common' among investors."

This is not an anti-Trump or anti-Republican tirade, you reap what you sow, as they say.  This is about that last part – Fund Managers are already baking in a Biden victory and Democratic control of both houses and that means you shouldn't fall for that usual nonsense about how the market hates change, etc.  Biden has already proposed bumping Corporate Taxes up to 28% and uncapping Social Security contributions, reigning in the debt but still spending $1Tn on vital infrastructure – especially of the sort that will finally contain this virus (if we last that long).  

Atomic Tourism In Las Vegas | Nevada Public RadioSo Joe Biden is not going to destroy the markets or the economy – the real problem is he's still 6 months away and, meanwhille, we have to keep putting up with Trump, his antics and the lunatic asylum that enables him in Congress.  The Congressmen seem to have no sense of self-preservation as they are still standing behind the President the way you stand behind a bullseye at an atomic testing ground – this guy is toast – save yourselves dummies!   

Speaking of saving ourselves – it's time for EARNINGS – or lack thereof.   Bed Bath and Beyond (BBBY) lost $1.96 per share vs expectations of losing 0.65 per share – oops. Levi Strauss (LEVI) lost 0.48 per share vs. expections of losing just 0.05 but somehow HELE ($2.53), WBA (0.83), PSMT (0.41), WDFC ($1.06) and, very surprisingly PAYX (0.61) made money so we're off to a much better start than I thought though Carnival (CCL) may change that this morning.

Still, no technical reason to shut down the portfolios yet but I am worried that the S&P 500 is looking to finish the week below the critical 3,135 line.  The LTP stands at $847,483, so up 69.5% for the year but the STP is down to $367,886, now "only" up 267.9% for the year, mostly because of our disastrous short on Tesla (TSLA).  So we have a combined $1,215,369 and that's up a bit more than 100% from our $500,000/100,000 starting balances.

I have said that if we fail to hold a $1.2M balance in our combined portfolios I think we should cash out as it's not worth risking a double and we're not there yet and I certainly didn't expect TSLA to be responsible for $150,000 in losses but here we are.  That can all revers and we can get back to $1.4M but it can also get worse and the market uncertainty continues and I continue to be unsure it's worth the risk.  We'll see next week when we get earnings from bigger fish.

Have a great weekend, 

- Phil

 


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  1. Good Morning

    Hey had a virtual meeting with Mark Kelly and some friends of mine—Like him a lot


  2. Mark was rocking the anti-viral suit before it was cool!


  3. Good Morning.


  4. Good morning, by the way!

    News was very interesting last night, see previous post for interesting articles.

    It's almost the time of year to start playing /NG again when it dips.

    We'll see if oil comes back:


  5. Markets still not pricing the current train wreck! Corruption and incompetence still at the top!


  6. good morning all


  7. hi Phil, has the weekly webinar been posted somewhere? is there a link? Thanks 


  8. Phi / BBBY – Morning.. any further insight on them?  I'm thinking they are facing too many headwinds with 900+ physical store in our new COVID world


  9. Phil

    Any recommendations on adjusting the play on HMY?  I forget which portfolio.  Bought the stock and sold calls and puts.


  10. Phil – follow up on a new trade on GOLD?


  11. Here is the replay of his week's Webinar.

    https://youtu.be/ICcT-u3Px0U


  12. Big Chart – Double plus ungood if Dow can't break the 200 dma (26,250).

    Webinar/Andy is on that one.

    BBBY/Jeddah – Top line wasn't terrible but bottom line was very terrible but still oversold yesterday since clearly the clients are still there.  Market cap is only $1Bn down here and they are selling $2.5Bn/qtr but it's think overall margins and they were in the middle of restructuring so Covid hit them very hard.  Still, their price/sales ratio is 0.1 – that is ridiculously low for retailers – it means there's enough business there for someone more efficient to buy it an make money, which means they are a buyout candidate.  

    On Tuesday (Mondays don't count) if they are still holding $8 but below $9, I'd say they're good for a new play.

    HMY/DC – No, it's too much bother.  It will sadly only make the 150% we planned.  The short calls are rollable but they are also great protection against a reversal.  

    GOLD/Mito – $27 is $48Bn in market cap and Barrick made $4Bn last year when gold was $1,500 so let's say they produced 5M ounces so they made $80 (ish) per ounce at LESS than $1,500 per ounce, maybe $1,400 average and now, not for one second of 2020 has gold been less than $50 HIGHER than $1,400 and now $1,800 and averaging probably $1,600 so $200 per ounce more than 2019 and it's not likely costs have skyrocketed so 2020 should be VERY profitable for GOLD.  

    So, as a new trade, We just play for GOLD to stay above $18 by selling 10 not terribly aggressive 2022 $20 puts for $2.35 ($2,350) and buying 15 2022 $15 ($13)/$25 ($6.70) bull call spreads for net $6.30 ($9.450) and that's net $7,100 on the $15,000 spread with $7,900 (111%) upside potential if GOLD can stay above $25. 

    Yay Andy!  


  13. RMED-www.ramed.com

    Pharm touted this one a few weeks ago. Would like to get some comments from "our medical team" .

    Very speculative for sure but could be a razer/blade scenario if it play out. 

     

    RA Medical Systems Inc. Ra Medical Systems, Inc. is a medical device company. The Company is focused on commercializing excimer lasers for use in the treatment of dermatological and vascular diseases. It develops, manufactures and markets medical devices targeting the dermatology and vascular specialties. It operates through two segments: the vascular segment and the dermatology segment. The Company's laser technology is used for the treatment of psoriasis, vitiligo, atopic dermatitis, leukoderma, and peripheral artery disease (PAD). Its Destruction of Arteriosclerotic Blockages by Laser Radiation Ablation (DABRA) is an excimer laser and disposable catheter system treatment of vascular blockages resulting from lower extremity vascular disease. Pharos is its excimer laser device that emits highly concentrated ultraviolet light and is used as a tool in the treatment of dermatological skin disorders.


  14. /cl getting back up there


  15. I am an interventional radiologist. I did my fellowship in 1989 and did dog experiments using Laser for peripheral vascular disease. 30 years later it is still not in routine practice. Not enthusiastic


  16. Agree with millardd…I'm a vascular surgeon. Data on laser atherectomy is marginal, outcomes are not great. Not a part of my practice on that basis. I think it is used in many practices, but it certainly is not an overwhelmingly supported approach. 


  17. TSLA $2000 call for next Friday (july 17) is trading at $10. 

    This is surreal


  18. And looking further, the $2500 call for the week after (July 24) is now $15


  19. Phil / WBA- pretty major downgrade here…  The question is how fas can UK come back up…

    Narrow-moat Walgreens reported weaker-than-expected third-quarter results, largely hampered by coronavirus pandemic adversities in the U.K. Normalized earnings of $0.83 or roughly half the performance from the prior year were woefully short, with a 26% top-line decline (constant currency) in its heavily retail-focused international segment. Although the firm announced plans to move forward in expanding its physician practices initiative with VillageMD, all eyes are on cost-savings initiatives to weather the COVID-19 pandemic. With one quarter remaining in the fiscal year, management provided guidance suggesting a slow recovery. In light of the extended international weakness and plans to invest in physician practices with poor economics, we lowered our forecast and FVE to $48 from $55.

    Third-quarter revenue was largely flat or grew 1.2% on a constant currency year over year to $34.6 billion. U.S. pharmacy sales increased 3.2%, while international sales declined 26.2% on a constant currency basis. There were glimpses of positive U.S. trends in the quarter, including larger basket sizes with 9% growth in wellness and double-digit specialty growth that more than offset the 20% decline in foot traffic. The significant softness in international operations with a heavy retail focus prevented the firm from saving the quarter. At the peak, international foot traffic declined 85% and was still down 40% (versus 10% in U.S.) in June. Overall profitability declined with the significant international top-line shortfall, U.S. mix shift, and incremental $100 million COVID-19 expenses due to higher bonus payments and increased safety measures. In light of the international challenges, management announced plans to reduce its U.K. workforce by 7% and close 48 U.K. optician locations. All efforts will likely be focused on cost containment until normal operating conditions resume. Management has halted share repurchases but will maintain its dividend payout, currently yielding 4%.



  20. RMED/Pstas – I consider those to be total gambles but still fun when they work.  If you don't mind losing $4,500 in Vegas, then 10,000 shares of RMED is almost as much fun.  You can just buy 9,900 shares and get drunk with the rest of the money ($45) – then just as much fun as Vegas. 

    And what Millard and Jeff said – total gamble.

    Good finish to the week.  See, can't be too quick to dump out of things.  TSLA $1,491 – I hope $1,500 stops them.

    TSLA/Rn – Totally surreal.

    Oh no, lightning!

    WBA/Batman – Long-Term they will come back.  $40 is a great floor, could be top trade on Monday.

    TSLA/Vkat – Total manipulation.  


  21. PHIL / WBA – My target on them has been 46 to 52 so if it comes down we would load up ,,, but we need to cover — this will not be a quick bounce I don't think


  22. For RMED, what you are playing is the clinical trial data that should come out next year. Whilst it may not be regularly used in practice, it is trying to take the place of other companies that entered the area and have a COG that are 5X what Ra is producing.  As trials go, it is a play for $2 or $3.  

    I was a founder of the company (no longer involved but do own shares), but that was when it was a laser for dermatology (psoriasis, vitiligo, etc) and has since moved to CV restenosis.  


  23. Well, finishing at the highs of the day – beats the alternative. 

    Have a great weekend everyone, 

    - Phil


  24. The other piece is the laser is not a typical laser, but a 308nm light (think sunburn).  The current devices are diamond blades (think tunneling in the earth) and tear up the tissue.  The laser removes the plaque and calms the inflammatory process.  Diamond blades don't do that.

    Just my thoughts…and again, not looking to make a mint.


  25. I have financed a large number of cosmetic and medical lasers over the years (think skin resurfacing, tattoo removal, and many more applications). There is a great deal of competition in the space, and even a unique application is quickly copied. They do not hold their value well. I would be very cautious.


  26. Thanks deano. Agree on all fronts. 


  27. PHARM-RMED- and others- thanks for the comments. Speculative indeed but from what I understand, if there is a hook, it is the potential cost reduction vs. current treatments. I am told the cardiologists prefer the higher revenue treatments for obvious reasons so plenty of resistance in addition to the trails.  A lottery ticket. 


  28. snow / wired article

    An objective assessment of where we are with Covid-19

    Thanks for the link 


  29. Snow / article

    Thank you for sharing.  I'll reduce my quarantine period for amazon boxes & groceries.  Yeah I know he said to skip it entirely but after months of worrying I'll have to ease into no quarantine LOL :)


  30. Liar, Liar, Nation on Fire


  31. The Tempting of Neil Gorsuch


  32. Angela Merkel knows how to insert a dagger



  33. More like terrifying…