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Will We Hold It Wednesday – Dow 27,000 Again?


We'd better give some to Disney (DIS), who lost $5Bn in Q2 and has given up on releasing Mulan (live version) in theaters and will go straight to video in September.  The Covid-19 pandemic has closed Disney’s theme parks, virtually eliminated movie distribution and curtailed live sports, a key programming source for Disney TV networks. However, the world’s shut-in nature has helped the  company’s Disney DIS 0.81% + streaming service secure more than 60 million users in nearly nine months, a mark that Netflix took about eight years to achieve.  

In other playground stocks, WYNN also lost $5Bn this morning in their Q2 report and the company has $3.8Bn in cash left and already has $12.8Bn in debt.  The company is trading at about 50% of it's all-time high despite revenues being off 94.8% for the quarter and despite the fact that WYNN has only made about $2Bn in the past 5 years so a $5Bn loss is wiping out 10 years+ of profits.   

Of course the nice thing about WYNN going forward is it will be 10 years until they have to pay taxes again but it could be 100 years if they lose another 5Bn in Q3 and go bust – all this optimism assumes things will be back to normal next year but, between now and then, how much debt damage will be done.

Unfortunately, we simply don't have enough information to take a stab at WYNN for $8Bn when they are losing $5Bn a quarter.  What rational investor would pay $8 to lose $5 per quarter?  These losses are real, they have to either borrow more money next Q (you already owe $13 as a proud shareholder) or find more investors, which will dilute your position.  As fun as it would be to own the stock going forward, even if they make $500M/year, there's this debt to pay and $8Bn is still 16x FUTURE earnings – that's not a good deal by any stretch.  

Most stocks are like that at the moment and so is the entire market.  We're irrationally ignoring the the potential downside to a second wave of viral infections and we're still in the middle of the first wave with 156,839 dead Americans among the 4,771,846 infected.  Other poorly-run 3rd World countries like Brazil are now catching up to us with 2.8M infected and India has now crossed 1.9M infections so the over 1M club is growing along with other distastrous nations like Russia, South Africa, Mexico, Peru, Chile, Columbia and Iran.

That's the company the US is keeping these days but it's our own Rogue Nation that is most dangerous to the World because we are major trading partner with so many first-world countries and our tourists keep invading their lands bringing disease as well as our thuggish style of politics and we have become a serious nuclear threat as well to the Civilized World as you never know what our crazy leader is going to do next!  

We don't know what the crazy markets will do next either.  Yesterday we spent $35,000 to add $100,000 more protection to our portfolios, using about 1/3 of our unrealized gains for the month to hedge our positions and hopefully lock in the $65,000 we've made on paper. 

We've been holding onto our longs expecting the second round of stimulus and it's supposed to be coming any day now but, after that, then what?  There WILL be more stimulus but will it be enough?  Our viral cases have calmed down again now that we've gone back to lockdown but what will happen to WYNN, DIS and thousands of other businesses that need people to leave their homes to make a profit?  

Middleby (MIDD) just announced this morning, turning into another nice winner in our Long-Term Portfolio:

  • Adjusted net earnings were $30.4M, or $0.55 per diluted share, beating estimates by $0.13, but down 69% from $1.80 a year ago.
  • Excluding the impacts of acquisitions and foreign exchange rates, sales decreased 39.8% in Q2, reflecting the impact of COVID-19.
  • "As we progressed through the month of July, business activity across all of our foodservice segments demonstrated continual improvement," said CEO Timothy FitzGerald. "While the current environment is subject to uncertainty, we remain confident in our ability to leverage the strength of our industry-leading business platforms while continuing to exercise our proven financial discipline."
  • "We are well-positioned across all three business segments to capitalize on emerging trends that will accelerate during this period and we are committed to maintaining the ongoing investments to support our strategic sales and technology initiatives."
  • MIDD +5% premarket
  • Q2 results
MIDD Long Call 2020 18-DEC 100.00 CALL [MIDD @ $85.73 $0.00] 10 1/23/2020 (135) $17,700 $17.70 $-11.10 $64.20     $6.60 $0.00 $-11,100 -62.7% $6,600
MIDD Short Put 2020 18-DEC 75.00 PUT [MIDD @ $85.73 $0.00] -20 3/23/2020 (135) $-66,000 $33.00 $-25.95     $7.05 $0.00 $51,900 78.6% $-14,100
MIDD Long Call 2020 18-DEC 30.00 CALL [MIDD @ $85.73 $0.00] 20 3/24/2020 (135) $40,740 $20.37 $35.18     $55.55 $0.00 $70,360 172.7% $111,100
MIDD Short Call 2020 18-DEC 50.00 CALL [MIDD @ $85.73 $0.00] -20 3/24/2020 (135) $-16,220 $8.11 $28.79     $36.90 $0.00 $-57,580 -355.0% $-73,800

We had adjusted our original spread and left the long calls and the short puts because we still had hope and now we are catching up on thiose as well and our new spread is deep in the money and very profitable.  There are plenty of sensible things you can invest in that will make plenty of money.  Our 3/23 trade idea was only net $9,040 and already it's net $23,200 so up $14,160 (156%) in just 4 months and well on it's way to the full $40,000 we expect in December so it can still almost double from here – even if you missed our original entry!  


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  1. Headlines this morning – thousands of small businesses considering layoffs as government aid ends! 

    Just as the unemployment checks are getting smaller, we might have millions of people applying to fewer and fewer jobs. And for some reasons, some in Congress think that there is no urgency and that some are simply not looking for jobs because they get too much money!

  2. Good Morning.

  3. Also, I wonder how broad this market move is! Someone was mentioning yesterday that if you took the  biggest tech companies away from the S&P, the picture would be quite different.

  4. Good morning everyone. Here is the link for today's webinar. See you live at 1:00 pm EST


  5. good morning

  6. Hi Andy, Can you post a link to the webinar after it finishes in chat, so i can listen later today, or at least in the morning my time as I'm in Australia now. Thanks

  7. Big Chart – Nas will be off the chart soon.  Was tempted to re-short at 11,100 but too crazy.  Dow (/YM) 27,000 I will take a poke at shorting.

    Tech/StJ – Very true.  Apple is 20% of the Nasdaq's run-up, the others make up the rest and the other 90 companies are struggling.  Not much different for the S&P and they Russell and NYSE, with lots of companies, are still more than 5% BELOW the Must Hold Lines and even the Dow is only at it.  That's not really bullish – it just means the Nas is an outlier.

    Here's 27,000!  That's still 500 below the Must Hold though.

    Webinar/Stuart – It takes a long time to process the file.  Can't be done right away from what I understand.

  8. Ok Phil, understood.

  9. SPWR/Phil Thx for the thoughts Phil. Any comments about SolarEdge Technologies?

  10. It looks like we got the low hanging fruits as far as job creation:

    U.S. firms added just 167,000 jobs in July, payroll processor ADP said Wednesday, far below June’s gain of 4.3 million and May’s increase of 3.3 million. July’s limited hiring means the economy still has 13 million fewer jobs than it did in February, according to ADP, before the viral outbreak intensified.

    If you have not gotten your job back by now, there is a good chance that it could be a permanent loss with businesses going BK!

  11. Phil,

    Wonder if it now time to short /NG with the storm over….Prior to the storm friday, /NGv20 was trading at $1.95, so what accounts for an increase of 35 cents, (unsustainable?) now that it is over. Thanks as always

  12. Cashing Out/Phil

    Regarding the general guidelines you talked about Monday

    Ahead of Schedule/Randers – This is a good training week.  My rule of thumb is cash things that are up 60% with more than a year (1/2 the time) to go and up 75% with 6 months (1/4 time) to go and 85% with 2 months (10%) to go.  So the percentages apply to even day-trading.  Whatever your time-frame, if you get far ahead of goal quickly – TAKE THE MONEY!!!  


    Are those profit percentages?  Or the percentage of the spread that is left?  

    So if I hold a 2022 VIAC 8/13 BCS that was bought for net 2.20 — I should look to cash it at 3.52 (60% profit from entry) — its currently priced around 4.20 but the spreads are so wide it would probably get filled much lower.

  13. GOLD/Phil Been trying to get into your BCS on GOLD, have the 15 long '22 $15calls for $13.95, puts got away from me but could sell them in a drop. Was wondering about selling '21 $20 calls for $11 instead of the '22 $25s for $9 with the idea of rolling them out later. Gets me into the spread for $3 with 'options'.


  14. So much for shorting /YM.  

    MIDD exploding.  Going to be huge for us as we didn't chicken out on those long calls and then bought the new spread as a DD.  

    SEDG/Wing – Well I'm not one for following TMF but, SEDG is a 50% grower that's actually dropping $150M to the bottom line (maybe not this year) so they are a good play on this space but $206 is over $10Bn so you're paying 60x on revenues that will be off so maybe 100x so I would not chase it – I'd just watch it and catch them when/if they disappoint the MoMo crowd – like they did in March and dropped 50% in 30 days.. 

    Jobs/StJ – There's a lot of 1/2 open businesses out there and it's 50/50 which way they go at the moment.  There was a lot of aid before – there'd better be a lot now.

    /NG/Jasu – While profit-taking is certainly in order, I'd try to keep things in perspective.  

    First hurricane of the season and you are talking about shorting it because the storm is over and $2.20 (essentially the long-term low) is unsustainable?  I would really need to hear more about your shorting premise before I jump on that bandwagon…

    That's why we have 100 long UNG in the STP (see yesterday's note).

    Cashing out/Jeff – Yes, profit percentages.  So if you just made a 2-year trade 3 months ago and you're up 50% then you can take, for example, $150,000 and put it into something fresh that will make 200% in 2 more year or you can leave 150,000 and make 50% in 18 months.  The bird in the hand does not equal 4 in the bush so, as long as we feel good about what's in the bush – the bird in the hand is simply holding us back at that point.

    Of course, there's the safety factor too.  MIDD is up 150% and can gain another 85% but it's so deep in the money it may as well be a bond at this point so why cash it out unless we actually need the cash?  That's a factor too.  Usually I'll look to cash out according to that guideline when the alternative is having to hedge the position if I'm worried about the market.  Why hedge your bird in the hand if you can just take the money and run?  But, if it doesn't cost anything to leave some deep in the money spreads like MIDD and I don't need the cash for anything else – it beats the interest in the bank, right?

    Also, in the VIAC example (another one I got sick of banging the table on), it's at $28 – your spread is $13, it's 200% in the money and your max payout is $5 so 0.80 left to make in 18 months (less than 20%) – surely you have something better to do with $4.20 than make 20% in 18 months so ask for $4.25-4.30 and, if you get that – it's time to move on.

    GOLD/Wing – Well it's a bit late there, isn't it?  I agree with your logic.  I'd rather have the protection because Biden could strengthen the Dollar by acting responsible or doing something else a real President would do.  wink

  15. Phil / VIAC

    I got in to the VIAC BCS and puts at a cost of $4030. Now, it's valued at $37,705. Your table banging helped and Thank you for the trade.

    Maximum could be $66,000. Another $28,295 to go. 42% in 18 months. It will be a short term trade in a taxable account. Keeping it for a year reduces the taxes.

    Would you recommend me waiting until 80% or take the money and run now?

  16. Webinar time!

    VIAC/Sk – There aren't a lot of things to invest in and noting wrong with making 25% on your 80% if you don't need the money for anything else but, if the market drops 20% and this trade looks uglier – then you'll be sitting on this and you won't have the CASH!!! to take other opportunities.  You have to plan ahead so it all comes down to how much firepower you have and how comfortable you'll be riding out a drop back to the lows.

  17. Phil / MCHP – Im looking at selling some puts   Jan '22 $80 (11.5)   Thoughts on this?

  18. SKT has earnings tonight   VIAC has earnings tommorrow 

  19. MU / Phil, 

    current spread 2022 $40/$55.   I had sold a short strangle a couple of months back that expired worthless in my favor but haven't added anything else yet.  Any thoughts on short calls and puts (either short term or 2022s) to help continue to bring down the cost basis?


  20. MCHP - 

    Strong MGMT team with good cost controls – minimized GM impact the last two qaurters.

    GM at 68%, Op Margin 69%,  EPS FY 20 = 5.62, '21 = 6, '22 6.8, fy '23 7.8 ( my estimate)

    16 multiple get them to about 121 target.  Also, looks like they have bottomed out in June Quarter and are strting to 

    see demand pick up steadily.   I"m thinking of selling '22 puts at 11.5 ISH and a BCS '22 of 90 (23)/115  (12) would appreciate your thoughts on this. 


  21. Phil / MCHP - 

    Strong MGMT team with good cost controls – minimized GM impact the last two qaurters.

    GM at 68%, Op Margin 69%,  EPS FY 20 = 5.62, '21 = 6, '22 6.8, fy '23 7.8 ( my estimate)

    16 multiple get them to about 121 target.  Also, looks like they have bottomed out in June Quarter and are strting to 

    see demand pick up steadily.   I"m thinking of selling '22 puts at 11.5 ISH and a BCS '22 of 90 (23)/115  (12) would appreciate your thoughts on this. 


  22. Sorry, had a meeting right after the Webinar.  

    MCHP/Batman – Not a bargain to me.  They were below $60 in March so you'd better REALLY want to own them at net $68.50 enough to ride out another dip. I don't see them over $5 this year and next year is not likely to be up 35% from there – I just think you are too aggressive with assumptions.  You have to watch for contract cancellations due to shutdowns if the virus is prolonged

    SKT not a great report.

    On June 15, Tanger gave a business update as mandates had been lifted or eased and in-store shopping was again allowed in all 39 of its outlet centers.

    The vast majority are open air centers.

    As of June 14, open stores represented 72% of total occupied stores in the portfolio and 69% of pre-COVID-19 annualized base rent.

    Weekly traffic exceeded 85% of the prior year levels.

    At the centers which had seen in-store retail for 30 days or more, weekly traffic exceeded 90% of the prior year levels and open stores as a percentage of total occupied stores was approaching 90%.

    In June, the shoppers were returning.

    But since this business update, the company has not put out another one in July. It is due to report second quarter earnings results on Aug 5.


    Tanger Factory Outlet Centers (NYSE:SKT) reports that cash flow was positive in July now that almost all stores in its shopping centers have reopened.

    "We continue to recover from the government-mandated store closures that started in mid-March," said CEO Steven B. Tanger.

    Also notes that rent collections were "substantially better" for July vs. Q2.

    Q2 core FFO per share of 10 cents trails the consensus of 34 cents and declined from 57 cents in the year-ago quarter.

    SKT slips 1.8% in after-hours trading.

    Q2 total revenue of $64.0M vs. consensus of $88.2M and $115.7M a year ago.

    Q2 same-center net operating income was $37.4M vs. $76.4M a year earlier.

    Occupancy of 93.8% vs. 94.3% at March 31, 2020.

    During Q2, the company reduced cash outflows by ~$11M, including $1M of general and administrative and $10M of property operating expense. In addition, Tanger deferred its Nashville pre-development-stage project and certain other planned capital expenditures.

    Conference call on Aug. 6 at 8:30 AM ET.

    Previously: Tanger Factory FFO misses by $0.24, misses on revenue (Aug. 5)

    I think not losing money is fine by me.  

    MU/Potter – It's on track, why do anything?  You can sell $55 calls and $45 puts if you are bored but I wouldn't go to crazy.