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1933 Friday – Best 100 Days Since the Great Depression – Markets Love Mayhem!

The Stock Market Crash of 1929Here we go again?

The last time the S&P gained 50% in 100 days was on the bounce off the first leg of the great Depression.  In the 90 years since, we've never repeated that trick – until now, when the S&P has popped 50% in 100 days.  You'll notice we flattened out after that in 1933 and that is despite MASSIVE STIMULUS at the time.  In fact, we didn't really get the economy going again until World War II broke out and, between the military service and the war manufacturing, the US went to full employment – so much so that they even let the women work!

The Depression was persistent because it's all about jobs and jobs are all about Consumer Spending and we'll be getting our Retail Sales Report at 8:30 this morning, followed by Consumer Sentiment at 10 am.  Just like the Trump Depression, the Great Depression began when there was very low unemployment – just 2.2% in 1929.  Then the market crashed, like it did in March, and then we had a bit of a recovery but then we completely collapsed as job losses mounted and businesses could not get back on track.  

U.S. Unemployment Reaches 14.7 Percent – Chart from Great ...

I know it's hip to be complacent and pretend everything is awesome, etc. because who wants to face the reality of our situation and, believe me, I take no pleasure in being Cassandra for the group but the sky IS falling and ignoring it won't make it go away.  These are not abstract things, this is stuff that's right in front of our faces that people are simply brushing off – mostly because we have a Government that encourages you to brush it off.

While we are off our (mostly) April highs, we still have MASSIVE unemployment and we don't know what the effect of Lockdown II is going to be but, since this report was filed, there have been 11 major Retail Bankruptcies in two months, after 12 in March, April and May: 

And Brooks Brothers made it through the Great Depression!  

8:30 Update:  Retail sales were not terrible, they are up 1.2% from last month but that's below the 2% growth forecast and still far below average.  Bottom line is we're not making up those lost sales and growth (year/year) is still very weak.  When you drop 50% and then you gain 50%, you are still at 75% of where you were.  

The S&P 500 dropped 33%, to 66% and now we've gained 50% – to take us back to where we were.  Let's not get too excited about that.  Another statistic we got this morning was Unit Labor Costs, an indication of productivity and those are up 5.1%, which is not good for Corporations.  Labor Productivity decreased by 0.9% and last Q has been revised down to -2.6% so I guess we're not quite as productive working from home.

Output dropped 6.5% and hours worked decreased 5.6%, the worst drop since Q1 of 2009.  Overall, this is not terrible considering the circumstances but, if circumstances don't change – the economy can't take much more of this.

Have a great weekend, 

- Phil

 


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  1. Good Morning.



  2. That great market has only costed us another $7T to our national debt. It was $19T when Trump took over, it will be over $26T by end the year and maybe more depending on whatever stimulus we add! The GOP added 30% to our total debt in 4 years – some is the virus that was mishandled and another half is their idiotic tax cut! I guess if we add another 30% to our debt, we could possibly get to Dow 36,000 right?


  3. Tweets from an alternate reality:

    Destroy 20M jobs, get 8M of these back and claim great job creation numbers! Not from the Onion! 


  4. What a f*cking moron…..


  5. Phill// Suggestions needed on WBA trade.  I tried to follow the LTP on WBA and bought Jan 22 32.5 calls (instead of your suggested $30.00 calls) for $11.50 and now they are trading at $10.50.  Since LTP has an agressive position of  being naked on the $30 calls, is this a time to sell short calls against the long calls?

    Thanks.


  6. Woke up to wildfire smoke stink from the Lake Fire above Azusa this morning. It's some distance from us in Altadena, maybe 15 minutes down the 210 freeway, but we're sure getting the stink and the haze. And the next few days are predicted to be 100 deg temps.


  7. Good morning!

    /NG flying again this morning.

    Mishandled/StJ – What an understatement.  The rest of the World dealt with the virus without bankrupting their countries.  We have bankrupted the country and STILL haven't dealt with the virus.  

    Pence/StJ – What a loon!  

    And what 1020 said!

    WBA/Rookie – That position started out with 40 2022 $40s and 10 short 2022 $55s and 20 short 2022 $45 puts on 3/2 and then we rolled down to 50 of the 2022 $30 calls and covered with 30 of the $52.50 calls.  We bought back the short calls for a $5,350 profit and lost $6,800 on the rolled longs and made $2,400 (so far) on the short puts so the position is, overall, about even in the LTP.  I think $40 is ridiculously low for WBA and the portfolio is up 100% so we can afford to gamble but, if you can't, then by all means at least partly cover your longs.  

    $42 is $36Bn for WBA and I am, frankly, bored with reiterating my very simple premise that this stock is ridiculously undervalued so, hopefully, a picture is worth 1,000 words, because I am out of them at this point:

    In Q1, which ended 2/29, they made $952M and in Q2, at the heart of the closings, they lost $1.7Bn and, even if they lose another $1.7Bn (doubtful) they can make it all up in 3 normal quarters going forward.  

    As a more conservative play, from scratch, I would go with the following:

    • Sell 10 WBA 2022 $35 puts for $4.25 ($4,250)
    • Buy 15 WBA 2022 $35 calls for $8.50 ($12,750)
    • Sell 15 WBA 2022 $50 calls for $2.65 ($3,975) 

    That's net $4,525 on the $22,500 spread that's $9,000 in the money to start.  The upside potential is $17,975 (397%) if WBA can get back to 50 over the next 18 months, which seems very reasonable to me.

    Fire/Snow – Stay safe.


  8. Thanks Phil


  9. Snow- virus- had a talk with my sugeon during a follow up visit about the pandemic. One thing he mentioned is sketchy data on reported deaths. Apparently, it is not clear how these are being tabuluated as cause- did the patient die "with the virus" or "from the virus". For example, an elderly patient enters hospital with a pre-existing serious heart or liver problem but also tests positive for the virus. Is there a standard practice for such cases? 


  10. Hello PSW team.  Few updates on the Biotech Portfolio…

    LQDA…DD on the stock.

    MYOV….new position.  Buy stock, sell Oct 15 P and 20 C.  So, 1/4 position if the puts are assigned, makes it a 1/2….

    SRRA….new position.  Buy stock. 1/4 starter position. No options.

    PDSB….new position.  Buy Stock.  1/4 starter position. No options

    PSNL…new position. Buy stock.  1/4 starter.  Options are too wide to play.

    MEIP…new position.  Buy stock.  1/4 starter.  Options are too wide to play.


  11. For TRIL, we have the stock and the Aug 7.5C sold.  Stock was 5.82 and 7.5Cs were 1.23.  I will roll the calls next week to Nov 10s.  Positions are being taken in Nov and Dec in the 10 range.  


  12. Nice….now the market will go to 3440 SPX.  I am in next weeks SPY 340Cs for the run.  


  13. Hola Pharm!  Thanks for the update – hope all is well.

    I like the liquor chart – MAGA!


  14. Covid deaths/Pstas – yes, it's sort of problematic. But not really. I'll get to why not. But most deaths come with several causes. I once did research on Parkinson's Disease deaths using Nebraska death certificates (https://www.cambridge.org/core/journals/canadian-journal-of-neurological-sciences/article/descriptive-epidemiology-of-parkinsons-disease-through-proxy-measures/6F3F1440FA33193E44A3C2F6C1F3B10D), and Nebraska allows up to 17 causes of death.

    So for example, if you die from acute cardiac failure as the primary cause, with penetrating wound as the secondary cause, and bullet injury as a contributing cause, what did you die from? Further, would you have died anyway from the car crash you would have gotten into if you hadn't gotten shot while drunk and fighting at the bar?

    These are exactly the sorts of questions people keep raising about covid19, and while they're legitimate points, they're something epidemiologists learn to deal with in first-year epi methods 101. But that's not why I don't think they're a big deal.

    I think they're not a big deal because deaths – which in the US means hospital deaths – are biased in the US. People who get really sick, enough to require hospitalization and who later die, are people who for many reasons having to do with insurance coverage, lack thereof, social class, lack thereof, are at higher risk of death. To me the more useful parameter for tracking the epidemic is incidence, new cases. That is also strongly biased, as people get diagnosed only if they have the money & access or enough symptoms to do so. But I think it gives a more complete picture of the broad population than deaths.


  15. Epidemiology Snow….so many ways to die….clinical trials are so much easier.. :)


  16. LOL Pharmboy!
     


  17. Phil / SPY

    Before joining PSW, I had done the following hedge 

    Short  SPY 285 July Calls and long SPY 285 July Puts for a net cost of of zero.

    When SPY kept going up, I let the puts expire worthless instead of spending more buying puts and rolled the SPY 285 July calls to SPY 285 Jan 2021 calls. It's under water a lot. 

    Now, I have done your hedges using SDS, SQQQ, TQQQ. 

    What should I do with the SPY 285 Jan 2021 short calls? 

    Thanks.


  18. Pharm / Trades

    Do you have a virtual portfolio like what does with his trades? 

    It will be useful to track opportunities that way.

    Also, were you the one who suggested Sep GLD 170 trade? 

    Thanks.



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  22. SKS….portfolio. I am putting that together. GLD…yes, I suggested that one. Short calls in July expired.  Sold some Aug ones up and have rolled ever since, taking profit along the way.


  23. Pharm / GLD

    Thanks for the trade. My trade profit was as high as $19K and I didn't get out and now it's still up $9K. 

    I sold July calls and bought it back for the same cost as the price went up. 

    Looks like I should have rolled up. What's your Aug trade (just to learn)?


  24. Pharm, watching RMED, nice pullback looking to get in…still in your portfolio?
    Thanks!
     


  25. GLD/SK….I am in the Oct 185s, sold next weeks 185s at 1/2.  

    RMED/Kust….Look at the buyers of the stock from in the investors part of the website.  There are a 5 or 6 that own > 5% of the company.  When it doubles, sell 1/2 and rest are a free ride. 


  26. Biotech portfolio is here.


  27. A bit of a sell-off into the close but then the usual save at the end.  

    Who made the more jaw-dropping stick save: Ben Bishop or Jonathan ...

    Have a great weekend,

    - Phil


  28. Pharm

    Thank You. 


  29. Grazie Pharm.


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