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Monday Morning Markets – Moving Past 5 Million Virus Cases

5,045,564.

That's how many cases the US officially has (not that we are counting).  162,938 Americans are dead, that's much harder to cover up.  Globally we are about to cross 20M cases at 19,877,261 with 731,570 deaths so the US has more than 25% of the global cases and 22% of the deaths – despite having just 3.7% of the population so Trump is right – America is leading the world by a factor of 6 – no one transmits the virus or dies from the virus like we do!  MAGA!!!

The markets don't seem to mind and we're still up around record highs as the worst things are for the American people, the better things are for American Corporations, apparently, as the stimulus fairy comes and pays them visit after visit.  President Trump played the fairy this weekend, waving his executive action wand and unconstitutionally wishing for various bribes to the voters:

  • $400/week supplement to unemployment checks (states need to pay for it and Federal supplement comes from Disaster Fund that's meant for hurricanes, etc).
  • Suspend payments on Student Loans through 12/31 (but not the interest).
  • Extend eviction protection through 12/31 (the courts can't handle the backlog anyway)
  • Defer Payroll Taxes through 12/31 (a disaster for the Social Security and Medicare System and also puts a huge tax burden on the employees at the end of the year they are unlikely to manage for, which will be blamed on Biden as a tax increase, of course) 

In other words, Trump's Executive Orders are a whole lot of nothing but Congress and the White House have still failed to reconcile Democrats' $3.4Tn coronavirus-relief plan and Senate Republicans' far smaller $1.1Tn proposal.  The Paycheck Protection Program expired Saturday. The future of the small business rescue plan is in limbo.  “Meet us halfway and work together to deliver immediate relief to the American people,” Pelosi and Schumer said in a joint statement. “Lives are being lost, and time is of the essence.”      

Joe Biden, noting that Trump signed the “half-baked” orders at his golf club in New Jersey, said they short-change the unemployed and trigger a “new, reckless war on Social Security."  “These orders are not real solutions,” soon to be President Biden said. “They are just another cynical ploy designed to deflect responsibility. Some measures do far more harm than good.”

There's not a lot of data but 4 Fed speakers surround the 10-year note auction on Wednesday and we have a 30-year auction on Thursday and usually they like to scare investors out of stocks and into bonds ahead of these auctions so we're looking for the opportunity to short the Dow Futures (/YM) at 27,500 and the S&P Futures (/ES) at 3,350 and the Russell Futures (/RTY) at 1,580.  The Nasdaq we leave alone as it's too crazy.  You want to short the lagging index that crosses under and very tight stops above those lines!

We're still very busy with earnings season, which hasn't gone too badly so far – considering:

Image

Now we're into the smaller companies though and we'll see how they held up in Q2.  

 


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  1. Markets are fiddling while the USA is burning!


  2. The rest of the word built a wall and we are paying for it:

    Image


  3. Image


  4. Other than that, new market highs….


  5. Good Morning.


  6. Look at that chart!! That tells the story. The only Republican who had any decent job growth was Reagan and he never got to levels of the Dems! My sister said every time I repub got in she was laid off. Amazing!



  7. Phil, I know you've put out trade ideas on WBA and F but I can't find them now? Do I just have to scroll back through all of the comments or is there a central place for all of your trades? Or do you potentially have a new entry thought?



  8. China business travel returns for Marriott, revenue tumbles



  9. The Ravings of Mad King Trump – The Bulwark



  10. Never a Dull Moment in Trump World




  11. Analysis: Trump’s big power move leaves workers in limbo




  12. Good morning!

    Nasdaq heading the opposite direction at the moment and we'll wait to see who wins. 

    More stimulus is a booster no matter what but then what?  

    ROFL on travel chart.  Such a shame for my daughters, who should be seeing the World this summer.

    Republicans/Pirate – Yet people never learn.  Oh, and now they are gassing us!  

    WBA/Swamp – Well both are in our Portfolio Reviews 

    F Long Call 2022 21-JAN 4.00 CALL [F @ $7.04 $0.18] 50 7/14/2020 (529) $15,000 $3.00 $0.50 $3.00     $3.50 $0.15 $2,500 16.7% $17,500
    F Short Call 2022 21-JAN 7.00 CALL [F @ $7.04 $0.18] -50 7/14/2020 (529) $-6,750 $1.35 $0.27     $1.62 $0.09 $-1,325 -19.6% $-8,075
    F Short Put 2022 21-JAN 5.00 PUT [F @ $7.04 $0.18] -25 7/14/2020 (529) $-2,500 $1.00 $-0.30     $0.70 $-0.02 $750 30.0% $-1,750
    F Short Call 2020 21-AUG 6.00 CALL [F @ $7.04 $0.18] -15 7/14/2020 (11) $-1,050 $0.70 $0.34     $1.04 $0.14 $-510 -48.6% $-1,560

    That's from the butterfly Portfolio.  Now I would sell 15 Oct $7 calls for 0.60 instead of the Aug $6s (that will be our roll) as we're less nervous now that they will crash.  

    WBA Short Put 2022 21-JAN 45.00 PUT [WBA @ $42.55 $1.03] -20 3/2/2020 (529) $-22,000 $11.00 $-1.55 $-10.28     $9.45 $-0.50 $3,100 14.1% $-18,900
    WBA Long Call 2022 21-JAN 30.00 CALL [WBA @ $42.55 $1.03] 50 5/18/2020 (529) $59,550 $11.91 $1.97     $13.88 $2.03 $9,825 16.5% $69,375

    WBA is from the LTP, very aggressive but the LTP is now up 105.2% ($1,025,860) – so we're not going to argue with success.  

    The net of thse spread is about $60,000 and it's $45,000 in the money and I think  it's going back to $50 at least, where we'll be $100,000 in the money.


  13. Big Landlord in Talks to Put Amazon Warehouses in Malls



  14. Phil, can you look at SAN and see what you think?  Is there a trade, they still make money, had a big write down due to covid, scrapped their dividend. But, thinking ahead, Europe is further along related to Covid recovery and this might come back next year. Thank you!


  15. Hey Phil, are you just ignoring me or was this a silly question from Friday?  ;)

    AAPL/Phil back when AAPL was a bit more reasonable on July 17 you suggested selling 10 (uncovered) short Sep $385calls. I can’t easily sell uncovered short calls (no PM) but If I had the big margin I could. At these levels wouldn’t it make sense to sell some short term close to the money calls just to catch the crazy premiums? What would you suggest now?

    (Bought back my 5 short Sep $370cs at a profit on the dip then later sold 5 Nov $400calls .. a staggered roll) 

    45  '22 $300c             @ $67

    -25 Jun '21 $320c     @$44

    -20 '22 $350c            @$36

    5 '22 $240c               @$49

    -5  Nov $400c           @$35

    -5 '22 $200p             @$21

    THX!


  16. Wow, Nas was below 11,000.  

    TSLA hit 1,400, new combo high for STP/LTP!  

    TSLA Long Put 2021 15-JAN 950.00 PUT [TSLA @ $1,414.00 $-38.71] 5 6/19/2020 (158) $85,350 $170.70 $-97.30 $302.30     $73.40 $3.28 $-48,650 -57.0% $36,700
    TSLA Short Call 2020 18-SEP 1,250.00 CALL [TSLA @ $1,414.00 $-38.71] -5 7/1/2020 (39) $-55,000 $110.00 $109.90     $219.90 $-40.33 $-54,950 -99.9% $-109,950
    TSLA Short Call 2021 15-JAN 1,900.00 CALL [TSLA @ $1,414.00 $-38.71] -6 7/13/2020 (158) $-258,000 $430.00 $-292.10     $137.90 $-16.41 $175,260 67.9% $-82,740
    TSLA Short Put 2021 15-JAN 1,080.00 PUT [TSLA @ $1,414.00 $-38.71] -3 7/13/2020 (158) $-46,500 $155.00 $-41.65     $113.35 $-1.17 $12,495 26.9% $-34,005

    SAN/Jeff – I think they are very attractive down here but it's hard to tell what kind of damage has been done to foreign banks.  $2.21 is buying the whole bank for $36Bn and they make $10Bn a year so great deal if they don't collapse.  I would just play the 2022 $3 calls at 0.20 as a lottery ticket and let's say you do $20,000 and cash 1/2 out if they hit $40,000 for a free ride or stop out with a $10,000 loss so risk is $10,000 and upside at $4 would be $50,000 profit.

    AAPL/Wing – I think it was a difficult question I meant to get back to but forgot.  Your positions are like homework assignments with that mess.  You have 20 2022 $300/350 spreads that are deep in the money so pointless.  You have 25 2022 $300s covered by 25 June 2021 $320s, now $145 and they can be rolled to the 2022 $350s at $134 so $11 to roll up $30 is a good deal but the 2022 $300s are $170 so why not just take net $25 and run along with $36 on the other spread and that's that?  

    Then you'd have just the 50 2022 $240 calls and the short puts and the short Nov $400s to play with.  At the moment, you can roll the 5 short Nov $400s at $67 to 10 short Nov $460s at $32.50 for about even and you can then cover it with 15 of the June 2022 $400 ($110)/500 ($67) bull call spreads at $43, putting some of that cashed out money back to use and then you can build sensibly off that position over time.  

    Also, I'd buy back the short 2022 $200 puts for $6 and sell the June 2022 $350 puts which are now $40 but I'd wait for a nice dip to get $50-60 for them.


  17. Phil/San 

    Thank you.  


  18. Phil

    Do you know the date of AAPL split ?

    Thanks


  19. QC – Aug 31


  20. Phil,

    When time permits would like your thoughts on the proposed merger/acquisition of TDOC and LVGO. Seems like an excellent idea – combining the leader in telemed (TDOC) with a patient centric data provider (LVGO) which makes data available to patients to better understand and improve their health (very accessible high tech with AI).  Both have substantial penalties if stk holders don't approve merger (TDOC >$700 mil; LVGO >$500mil). TDOC in 175 countries, LVGO just US. Seems very synergistic. Neither profitable yet but getting close. 

    Thanks in advance


  21. Phil, 

    i was thinking over the weekend about what should be happening vs what is happening in the markets. I'd say we all agree how absurd things are but we've been shocked and slightly offended for the better part of 5 months. I know a solid amount of distrust for this rally is healthy and we'll keep us out of trouble – by avoiding buying into things with very little fundamental rationale. And i also know that initiating positions in the depths of despair (march) and riding the jet stream up like we did WAS the best way to play these markets.. But just for arguments sake, are there ideas that you or your team are having about ways to stay dynamic and play (perhaps with more risk) into current events and upcoming news?  It's not an outright urge to trade but just always to be asking the question, is there more money we could be making. I'm sure the big players are doing that. 

    thanks! 


  22. This is a FED free money driven Rally. Here is an interesting academic paper looking at effects of enlarging FED balance sheet vs SPX  "From Free markets to Fed Markets: How unconventional monetary policy distorts Equity Markets" by Thalis J Putnins

    From Free markets to Fed markets:
    How unconventional monetary policy distorts equity markets ?

    T?lis J. Putni?š

    University of Technology Sydney Stockholm School of Economics in Riga

    July 2020


  23. 10% FED balance sheet expansion correlates to 7.4% rise in Stock Market according to this economist


  24. TDOC/8800 – They are leveraging the crap out of themselves to buy LVGO so now they are going to burn a lot more cash and it's a disaster if the deals don't complete (and then work out well).   That's why TDOC lost their mojo.  $192 is $15Bn with 500M in sales so when are profits going to be $750M to justify the $15Bn and they are buying LVGO for $12Bn and neither one can afford to back out.  No thanks.

    More money/Potter – Well our STP is at $520,344 and the LTP just crossed over $1M so over $1.5M is up another $100,000 since our last review, which was less than a month ago and you think we're underplaying the market because we are satisfied to have a well-balanced portfolio that's making an average of 20% a month this year?   Should we be more aggressive and risk crashing and burning or should we keep doing what we've been doing which is waiting PATIENTLY for good bargains while cashing in our winners as the market cycles up and down?

    Just this morning I pointed out F and WBA can still be played and I highlighted SAN and Friday our Top Trade Idea was CHL – WTF do you want from me???   You think you are missing out – yes, you are missing out on losses from people who trade for the sake of trading:

    The stock-market volatility in the first half of 2020 should have been a near-perfect period for “long-short” mutual funds and exchange-traded funds to make a killing.

    Unfortunately, less than one in three such funds made money for investors during this tumultuous period.

    Long-short funds are those that allow portfolio managers to bet on securities they expect to rise in price, as well as those they expect to fall in price. They accomplish the latter through short selling, or selling borrowed stock in the hopes of repurchasing it at lower prices for a profit. Most traditional funds allow managers only to go long, or benefit from increasing prices.

    “This seemed like it was a great environment for long-short strategies as we saw U.S. equities fall into a bear market and subsequently recover much of the losses,” says Todd Rosenbluth, head of ETF and mutual-fund research at CFRA.

    It's dangerous out there, I'm playing it safe.  You may jump off a bridge if you wish but don't expect me to follow you – my mother already warned me not to follow people like that….

    Any time I'm beating the S&P and Buffett, I tend to want to stick to my strategy.

    Fed Balance/Millard – You mean like this:

    Fed's Balance Sheet Spikes as “Everything Bubble” Morphs into ...

    We're getting near a 20% rise.  However, I said this in 2007/8 – just because the Fed pumps in money doesn't mean it's enough to fill what's leaking out the hold in the bottom of the liquidity pool.  

    Can Monopoly Money Save the Stock Market? Or Will It Buy ...

    So if the Fed unwinds are we doomed?  


  25. Kudlow was going around talking about the record 9M jobs that were created the past 3 months! LOL. 

    They lost 20M jobs in April and they count people going back to their old jobs as jobs creation – and 10M still don't have their job back!


  26. Phil, 

    haha. I mostly predicted I would get response like that, which is why i attempted to chose my words carefully and made sure to include nods to how amazing everything of yours is performing. Indeed, you have the Midas touch.  I was not questioning your approach. I was not suggesting jumping off a bridge. I was not calling anything boring or wishing we were trading at a higher frequency.  I was asking if you had thoughts about how this unfolds, beyond 'this is all wrong'. They drop more stimulus, then another, then there's a vaccine, then Biden is elected?  (or none of that happens?) when does one make the switch to having faith in the market? When does one adjust their approach to factor in the massive shifts in retail investor participation? is there a way to play that card? 

    – WTF do you want from me???

    you should consider how that kind of response impacts younger, less experienced, less financially confident investors such as myself (and others).  I have a lot of respect for you,  your opinions and ideas but don't talk to me like that. 


  27. Potter – well said.


  28. Phil / T,

    You indicated CHL, like T may be hurt by folks not being able to pay their bill.  Is this the reason T is down when everything else seems to be flying or are there other variables at play?  I'm thinking of starting a position with them but can't help thinking how T's stock price will react if the market actually does go down.   thx!