TGIF – Stop the Week, We Want to Get Off!

Wheeeee, what fun!

The Dow fell 353 points yesterday and that's not a big deal but it was a great deal for our PSW Report Members who were alerted, pre-market, to the idea of shorting the Dow Futures (/YM) at the 27,000 line. The Dow ended up falling all the way to 26,450, a 550-point drop that paid $2,750 per contract but we took the money and ran at about $1,200 per contract early and as the Futures shorts are just extra protection while we wait for our primary hedges to kick in.

And what are our primary hedges? Well those are the positions in our Short-Term Portfolio, which we reviewed last Tuesday at $405,464 and, as of yesterday's close, the STP stood at $460,074, up $54,610 on the dip and the portfolio itself is up 360% for the year – despite the generally bullish market. That's because of clever (though sometimes painful) trades like our Tesla (TSLA) short, which is only just beginning to pay off.

At the same time, our Long-Term Portfolio (LTP), which we reviewed last Wednesday at $901,428, is now at $966,958 so that's up $65,350 for the week so it does turn out we are correctly bearishly balanced – and now you can see why we didn't make any portfolio changes last week (other than mechanical changes on expiring positions). We knew the "rally" was a house of cards so we were very happy to be neutral on the way up, knowing that we'd make a very nice gain on the way back down.

3,135 is the top of our range on the S&P 500 and we are still way over that but it's just a blip on the weekly calendar so don't get excited, especially when the unemployment bonuses and other stimulus measures are running out and Congress does not seem able to step up to the plate with additional funding.

As we are all painfully aware, the virus is still raging out of control and the US is up there with other 3rd World countries in the number of new cases per day as a percentage of the population as we STILL have virtually no public policy to get the virus under control other than "wear a mask". No one is clearning our streets or handing out PPE equipment and our hospitals are overflowing with patients.

I hate to keep saying it but I want to dissuade you from "buying the dip" as we are only 45 days away from September 7th (Labor Day) and then it's flu season and the kids will be going back to school under the Trump/Devos extermination plan and how confident do you think consumers will be when every little sniffle or cough sends people into a panic?

This is the middle of Summer, when Trump told us the virus would die off on it's own through the magic of sunshine. He even had "experts" explain to us how UV rays killed corona. It was complete nosnese, of course, but it bought him the time he needed to make things much, much worse.

Now Trump promises things are going to get worse before they get better – I guess he's also looking forward to voting for Joe Biden…

World virus cases near 15M; Trump says things will get worse ...

Have a good weekend,

- Phil

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1020
July 24th, 2020 at 9:14 am | Permalink Ignore this user

Good Morning.

batman
July 24th, 2020 at 9:21 am | Permalink Ignore this user

Phil / INTC – I'm looking at selling the '22 $50 puts for 6.5 ish. —- Maybe a BCS to go with this… Thoughts?

phil
July 24th, 2020 at 9:51 am | Permalink Ignore this user

Good morning!

I do not get this reaction at all. They delayed the roll-out of their new state of the art chips while blowing out estimates on top and bottom line selling the old chips. WTF is wrong with traders? Data center was up 43%. Memory was up 76% (small unit) and IoT is going nowhere, surprisingly. Company will make $4.85/share this year and it's dropping to $52? Idiots!

In the STP, let's sell 20 of the 2022 $50 puts for $8.50 ($17,000)

In the LTP, let's sell 20 of the 2022 $50 puts for $8.50 ($17,000) and buy 50 of the 2022 $45 calls for $11 ($55,000) and wait for a bounce to sell short calls.

In the Earnings Portfolio, let's sell 10 of the 2022 $50 puts for $8.50 ($8,500) and buy 25 of the 2022 $45 ($11)/$55 ($6.50) bull call spreads for $4.50 ($11,250) and that's net $2,750 on the $25,000 spread that's $12,500 in the money so $22,250 (809%) upside potential is worth a toss.

pirateinvestor
July 24th, 2020 at 10:04 am | Permalink Ignore this user

I don't get it. Sqqq has not moved much even with a 2% drop yesterday and the same today. Just sits there, and TQQQ is so blasted expensive. About ready to give up on them.

phil
July 24th, 2020 at 10:29 am | Permalink Ignore this user

The need consecutive down days to get going. They settle at the day's end so they lag a bit.

batman
July 24th, 2020 at 11:14 am | Permalink Ignore this user

Phil / INTC – thanks for the Trade….

I had already started the trade with a '22 40 / 52.5 BCS and a 50 Putters at 8.6. However your thought on leaving it open ( for now) helped… I was able close out the short caller wit a small gain…. and now we Wait. I'm now looking at making doin the 40/55 BCS when the stock gets to 52 / 53 or so…

batman
July 24th, 2020 at 11:57 am | Permalink Ignore this user

VIX been creeping up for the last few days…

pstas
July 24th, 2020 at 12:01 pm | Permalink Ignore this user

INVH- Invitation Homes - https://www.invitationhomes.com/

An REIT focussed on single family home rentals. A somewhat unique business model. Of course subject to economic factors and interest rates etc. But people have been doing well with "investment property" rentals forever on a long term basis-rising rents and asset appreciation.

Very modest dividend and skimpy otions. Thoughts?

phil
July 24th, 2020 at 12:38 pm | Permalink Ignore this user

INTC/Batman – Yes, I think $50 should hold up well as a new base and then build from there. Got lots of chances to get our prices..

VIX at 26.76 – that's dicey. 29.25 on futures

Dollar getting worse and worse

INVH/Pstas - They only just started making money and sure, they have to invest and such. Means they run tax-free, which is nice but distorts the profit outlook. It's priced at $15.5Bn at $27.50 and making just 50M so you're around 80x. Too rich for my blood though they might do better down the road.

1020
July 24th, 2020 at 1:07 pm | Permalink Ignore this user

I wonder how tdump's supporters are feeling after his new attitude toward masks and now suggesting delaying the opening of schools….

JPH1121
July 24th, 2020 at 1:20 pm | Permalink Ignore this user

INTC

I would be weary of jumping on Intel from a technological perspective. Intel has Mobileye which I think will become a major factor in a few spaces from ADAS to other forms of edge computing but aside from that, Intel is lagging in every other department. They used to be infamous for their manufacturing prowess but are now getting smoked by Samsung and TSMC. Their x64 is now trailing AMD in everything but fringe instructions that are unique to Intel which cost precious real estate and offer rare improvements to performance while sucking down additional power. Their other impressive development is 3D Xpoint but they also locked that down to intel platforms.

Where I see AMD REALLY taking the lead is implementing HBM as an L4 cache. https://en.wikipedia.org/wiki/High_Bandwidth_Memory  Getting 4GB+ of memory with THAT high of bandwidth right next to the cores is going to be revolutionary. Unfortunately, I've never even heard a rumor of this occurring but I feel like AMD's decoupling of the memory controller from the processing cores is a step towards this type of implementation.

From an economical perspective--Intel has a LOT more market share than AMD and, in particular, AMD still has very little presence in the notebook market. If AMD keeps up with what they've got, it isn't far fetched to see that great accounting at intel looking a little less impressive.

Maya1
July 24th, 2020 at 1:48 pm | Permalink Ignore this user

Phil/aapl

good morning!

any thoughts on Goldman Sachs call on Apple yesterday?

are they trying to flush people out or is there some truth to it?

phil
July 24th, 2020 at 2:38 pm | Permalink Ignore this user

Schools/1020 – That was a truly bad idea.

INTC/JPH – Someone is buying their stuff and this is the end of their product cycle so of course the competition is catching up or passing them. 7nm may be delayed but it's coming and they'll have a new generation of processors.

AAPL/Maya – They always come out with these ahead of earnings. APPL was a bit stretched anyway. $400 was just silly.

JPH1121
July 24th, 2020 at 9:22 pm | Permalink Ignore this user

Hey Phil,

It isn't that simple. Yes, someone is buying their stuff. However, they are higher priced with comparable performance to AMD's parts from 2018, much less AMD's parts from 2019 or the upcoming parts this year which are expected to show some major performance increases with even lower power consumption.

The major market AMD is missing out on right now the notebook market where, I expect, they will really take off here shortly. Intel is already losing the HPC market to nVidia and AMD and there isn't a power user out there (I'm one of them) that doesn't want AMD's core count for their system on a desktop. Intel is now a tech straggler from too damn many years of having no real competition and a heavy investment in financial engineering. ARM and AMD are both gunning for Intel at this point and they both have better tools to win.

News:
July 24th, 2020 at 10:16 pm | Permalink Ignore this user

US records over 1,000 coronavirus deaths for fourth straight day

By: REUTERS