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Just Another Manic Monday

OVER 1/2 of US housholds have lost some income since March.  

OVER 1/3 expect to lose more in the next 30 days.  

Jobs have been furloughed, businesses closed, hours reduced and salaries cut.  While the health emergency and lockdown were the biggest direct cause of unemployment, there were secondary effects, too. Pandemic-induced layoffs were responsible for 11.6 million job losses. A further 6.9 million are due to the unavailability of child care, which is why Trump wants to force children back to school and risk their lives and the lives of their families – it's making him look bad when they stay safe at home.  

The survey recorded how a public health crisis turned into a food crisis, as the responses showed that millions sometimes or often didn’t have enough to eat. That number rose to 23.8M for the week ending July 24, an increase of almost six million since the first week of May.  At the same time, after a near-total shutdown of restaurants early in the crisis, Americans – especially those with higher incomes – have gradually been getting back into the habit of dining out. Still, spending remains far below pre-pandemic levels.

The Centers for Disease Control and Prevention, in a study conducted in May and June, found that more than 10% of adults seriously considered suicide — a figure that rose to more than one-quarter among 18-24 year-olds. It also found a jump in substance abuse, and said mental health outcomes were worse among racial minorities, essential workers, and unpaid caregivers.

The Census Bureau’s survey, in addition to high levels of anxiety and depression, reported on problems with physical health, as well. It found that more than 70.9M adults did not get medical care that they needed, for a condition unrelated to Covid-19, between mid-June and mid-July.

While none of this seems to affect the stock market, you KNOW the market is wrong.  Just walking down the street tells you the economy is in trouble as so many stores and restaurants you walk past are temporarily or permanently closed.  And this is WITH the economy running on MASSIVE stimulus – MASSIVE is nowhere near a big enough word to describe the stimulus, actually, as it's been about one third of our GDP already in the first 8 months of this year with more on the way.  Even so, market returns have been mixed.  

As you can see above, it's all about the Nasdaq, driving the markets higher along with gold, as the value of our currency goes down the drain but, surprisingly, Consumer Discretionary stocks are up 21% for the year and that makes NO SENSE at all.  That's because the Consumer Discretionary (XLY) sector is 24% Amazon (AMZN), 12.5% Home Depot (HD), 6.4% McDonald's (MCD), 5.67% Nike (NKE) and 4.76% Lowe's (LOW) – not the retail stores that are shutting down on main street.  So everything is awesome (looking) in the stock market, despite the collapse of the real economy.

Once again we have an options expiration week in which we're looking to cut and run on as many positions as we can but our positions are so good, they are very hard to get rid of so we'll see what we can cash in during this week's portfolio reviews for our Members (see Thursday's Short-Term Portfolio Review to see how we're hedging – just in case we can't get out in time).

This is going to be a very strange week with no scheduled Fed speadk and very little data so the focus is likely to be on the remaining earnings reports and whether or not it looks like we'll get a fresh stimulus package as our children get ready to go back to school in two weeks – viva la infection!

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  1. Good Morning.


  2. Good Morning

    anyone having problems with TOS


  3. Savi… yes  same here


  4. I am.  Good Morning Savi  :)


  5. Good morning!

    Everything remains awesome today, I got the sniffles over the weekend but, so far, not dead – so that's good.  Hope you are all doing just as well….

    S&P (/ES) just under 3,380 with 3,387.89 the peak on Wednesday and 3,393.52 was the tippy top in February, literally the day before the market collapsed to 2,191.86 in 4 weeks – so we'll see how this goes!  Awesome!!!

    We'll see what we can close down at these record highs, the LTP is up over 100% so it is a really good time to get to CASH!!! and contemplate our next move but, every time we try to cash out, I go through our positions and realize how awesome they are and then we end up keeping them – because the STP provides us with MASSIVE protection thanks to my constant paranoia during the rally.

    Biden is up 50 to 41% in the polls and the Dems want to spend $3Tn more on stimulus and that's what's boosting the markets.   Even if the Republican's (BOO!  Hiss!) only approve a minor stimulus this Q, they are likely to be completely out of power by January and the Dems are pegged to spend whatever it takes PLUS Infrastructure ($2Tn) plus another likely $1Tn+ for clean energy.

    While the last thing we need is more spending, spending on things like infrastructure and energy that provide a lasting benefit are very different than handing more money to bankers.  Roosevelt built hyrdroelectric dams and bridges and tunnels and highways – things we still use today that generate economic wealth – that's the kind of deficit spending you should do in a crisis.

    The Men Who Built the Dam | American Experience | Official Site | PBS

    The new normal:

    No other city in America is as reliant on mass transit as New York, with millions of daily riders usually cramming into subway cars, trains and buses run by sprawling public agencies.

    But, before the coronavirus pandemic, more than 100,000 commuters also depended on a string of private bus companies to get them to their jobs in the city.

    Now, however, with fear of infection keeping most workers away from their offices even as New York slowly reopens, that herd of buses has thinned and the companies that operate them are struggling to survive.

    …DeCamp’s daily ridership had fallen from more than 6,500 passengers to less than 400, Mr. DeCamp said. With no pickup in sight, he felt he had no choice but to park his fleet of about 50 buses and furlough his work force, which included about 110 unionized drivers and mechanics.

    This is not awesome and it's happening all over the country.  This market mania will come in contact with reality one day.  

    No TOS issues for me.


  6. MU / Phil – been steadily dropping over last 2 weeks any insight on this?


  7. TOS slow data charts wont load


  8. so it is not just me—I guess that is good :-)

    1020 how are you—hope all is well


  9. Not just me -That's funny Savi, I was feeling the same!

    We're doing ok – I hope you and yours are good. Your daughter still in L.A.?

    Interesting times for the Kids!


  10. I can't even get ToS to open


  11. Glad I'm not in a futures trade…..


  12. MU/Batman – They forecast below-guidance for next Q and Q4 isn't supposed to be great either but next year should be a good one.  $45 is $50Bn for them and they are good for $4Bn in a bad year so it's a fair price at 12.5x.   We don't actually own them in this cycle but I would like to if they test $35 again – around $40Bn.

    The U.S. wanted to starve Huawei of chips. It’s working

    TSLA flying on an upgrade despite slowing sales in China.

    Registrations of locally made Tesla Inc. vehicles in China fell in July from the previous month as competition intensified in the world’s largest electric-car market.

    In July, 11,456 China-built Teslas were registered in the country, according to data from state-backed China Automotive Information Net. That’s a 24% decrease from June. Tesla doesn’t report monthly sales numbers for China.

    Rising sales in China are a major contributor to the Palo Alto, California-based company’s soaring market capitalization, which surged past Toyota Motor Corp. in July. China’s car market is recovering from a two-year slump, helped by a reopening of showrooms and an improving economy.

    Yet competitors are stepping up product introductions. NIO’s deliveries more than quadrupled in July to 3,533 vehicles, and the company is preparing to launch a new crossover coupe, followed by a sedan. BMW and Mercedes-Benz maker Daimler AG are bringing out electric models.

    Significant Risks As U.S.-China Relations Sour

     

    • While the Chinese market presents a huge opportunity, the risks are also significant.
    • Trade relations between the U.S. and China have been strained over the last few years, with the two countries imposing tariffs on hundreds of billions of dollars worth of each other’s goods.
    • Although Tesla has de-risked itself to some extent in this regard, given its increasing manufacturing in China, things could change quickly.
    • Both countries have targeted key high-tech sectors such as semiconductors and communications in the trade war, and Tesla – which is a highly technology-focused company, could be a soft-target for the Chinese government.
    • Besides the trade-related issues, political ties between the U.S. and China are also deteriorating. Last week, the U.S. State Department ordered China to shut down its consulate in Houston, Texas, and China retaliated by closing down a U.S. embassy in Chengdu.
    • The deteriorating ties and potential anti-American sentiment could turn the Chinese government and subsequently, Chinese consumers away from American brands such as Tesla, hurting its sales.

    Masks, small classes, and outdoor lessons: How 5 countries in Europe are reopening schools


  13. Snow – great time to head out for a walk before it gets hot.  :)


  14. Tan is still in LA working for Crooked Media—-yep tough times indeed


  15. GS just predicted S&P 3,600 by end of year. 

    Nas up 100, Dow down 50.


  16. Those having TOS issues – the mobile app seems to be working fine.


  17. deano

     

    TOS  down also


  18. Uh oh, TOS tends to crash when heavy selling begins.  


  19. Walk/1020 – not this week – the air is bad from the wildfires. It's stay inside and breath filtered air time. Irritating, because I do enjoy my morning walks.


  20. Yes TOS is not working does not even load


  21. Yep, TOS down, does not even load……


  22. snow – sorry to hear that, We only have smoke when the Santa Ana's are kicking up.

    When we lived in Vegas, we'd catch the drift of every So.Cal. fire….


  23. SQQQ is reverse splitting 1 to 5

    All reverse splits will be effective prior to market open on August 18, 2020 , when the funds will begin trading at their post-split price. The ticker symbols for the funds will not change. 

    Today is the day to get out, unless you want to deal with less liquid options.


  24. SQQQ/Randers – crap! There  goes my favorite cheap hedge. Thanks, randers.


  25. That is the last time for that hedge. ONly squeaked out because of selling front month calls to lower costs. Done with it!!


  26. good morning all


  27. SQQQ / Phil

    Is it better to exit positions today before the reverse split and get into newer positions tomorrow?,


  28. hi Phil, have a ?? on the ratio of puts to bcs. it varies, sometimes 1 to 2 or 1 to 3. or 3 to 5 etc. how do you figure it out? is it based on getting a good net cost of the trade after selecting the bcs?


  29. TOS- could not get on TOS this morning. Finally rebootted my pc and was able to connect. 


  30. TOS- well, that did not work for long. Now dicsonnected. 


  31. Microplastic particles found in human organs by US scientists



  32. Pelosi calls House back into session to vote on Postal bill


  33. TOS: There web version of TOS seems to be working for me but not the desktop app:

    https://trade.thinkorswim.com/


  34. Phil//  I just heard from the tech newsletters that CSCO is planning to reorg and reshuffle their product lines/etc.  Any suggested trade on it?

    Thanks.


  35. Phil any thoughts on selling calls against a position in SKT?

    I have been collecting premium over the last 6 months and just closed out Aug calls.

    Thinking of selling again but the stock is pretty low here.

    thanks


  36. TOS officially does have outages.  

    TD Ameritrade's (AMTD -1.1%) thinkorswim desktop system is experiencing issues today.

    The problems started shortly before 9:00 AM ET, according to Downdetector. The most-reported problem was with logging in.

    Outage Alert calls the episode a "major outage."

    TD Ameritrade advises that customers use the thinkorswim app, the TD Ameritrade mobile app, or the website invest.ameritrade.com until the issues are resolved.

    I wonder if I don't get that because I use ToS and especially as I use the 64-bit version, which probably has less users.

    SQQQ/Randers – What a hassle.  

    In the Earnings Portfolio, we have this SQQQ hedge:

    SQQQ Short Call 2021 15-JAN 35.00 CALL [SQQQ @ $5.34 $-0.15] -65 3/9/2020 (151) $-48,750 $7.50 $-7.29 $-8.42     $0.22 - $47,353 97.1% $-1,398
    SQQQ Short Call 2022 21-JAN 35.00 CALL [SQQQ @ $5.34 $-0.15] -30 3/20/2020 (522) $-34,200 $11.40 $-10.01     $1.40 - $30,015 87.8% $-4,185
    SQQQ Long Call 2021 18-JUN 15.00 CALL [SQQQ @ $5.34 $-0.15] 135 4/7/2020 (305) $74,250 $5.50 $-4.66     $0.84 $-0.16 $-62,910 -84.7% $11,340
    SQQQ Short Put 2021 15-JAN 17.00 PUT [SQQQ @ $5.34 $-0.15] -20 4/7/2020 (151) $-12,700 $6.35 $6.35     $12.70 - $-12,700 -100.0% $-25,400

    It's really about even so we'll just cash it out and remind me we need a re-hedge after the reverse split.  I do think I like shorting TQQQ better at this point.   Same goes for the STP, we'll cash out SQQQ and buy new spreads tomorrow if we like the prices.

    SQQQ/Jij – It's very likely that they simply adjust the positions we have but not worth taking a chance so better off getting out now and re-entering once the new prices are established. 

    Ratios/Stuart – Well the overriding factor is how much of the stock do we REALLY want to own if it crashes and is assigned to us and also how worried are we that it will crash.  Sometimes I'm super-confident and sometimes not – there's no a formula for it.

    • In the LTP, AVGO is 10,10,10 as I certainly would love to own AVGO at net $121.50 since it's $330 now.  In my mind, even if the market collapses and AVGO is $50, I'll still be comfortable holding 1,000 shares at $121.50 and I can DD with $50,000 more and have 2,000 shares for $85.75 each and it would be almost 10% of our portfolio's buying power.  Do I want AVGO to be 10% of our portfolio after a severe market correction?  Sure….
    • BRK.B, on the other hand is 25/25/10 and we net into 1,000 shares at about $120 (2 sets of puts) and that stock is $208 but Berkshire essentially is the S&P 500 – so it's a long-term bet on the market at 40% off I feel comfortable about. 

    You have to make that decision every time and also consider it in context of the other positions you have because, if the market does collapse and we get assigned – you'll become a buy and hold investor on a lot of positions (and some we'd have to cut our losses on too).  

    CSCO/Rookie – So CSCO just had a disappointing quarter and it now entering into a period of change and uncertainty?  What do you think my suggestion is?  

    CSCO Long Call 2022 21-JAN 35.00 CALL [CSCO @ $42.10 $-0.40] 40 3/5/2020 (522) $37,600 $9.40 $-0.28 $10.63     $9.13 $-0.38 $-1,100 -2.9% $36,500
    CSCO Short Put 2022 21-JAN 25.00 PUT [CSCO @ $42.10 $-0.40] -20 3/12/2020 (522) $-6,400 $3.20 $-2.20     $1.00 $0.05 $4,400 68.8% $-2,000
    CSCO Short Call 2022 21-JAN 50.00 CALL [CSCO @ $42.10 $-0.40] -40 5/18/2020 (522) $-18,200 $4.55 $-2.08     $2.48 $-0.24 $8,300 45.6% $-9,900

    SKT/Coulter – To me they are too low to cover.  I'd rather wait for a rebound than miss out on a rally.  Look at June – that was a good time to cover at $10, not now at $6.35.

    At $6.35, you can buy the entire company for $600M – they have 39 outlets with 2,800 stores under lease and made $85M last year despite a restructuring.  If this were your return on any normal asset you would be THRILLED to own it but, because you don't understand it, you let fear drive your decision process.  Don't do that.

    Last Q they lost $21M and the Q before they lost $29M and they have $338M in cash, so they can ride out 10 more bad quarters and we're losing patience in the second one where the issues they are facing have nothing at all to do with their management of the company and which we believe will not likely last more than another year?  

    What if M ($5Bn) decides they make a good acquisition?  


  37. Phil// I missed on the trade you did few months.  Should I initiate the same trade now or do you have a different trade suggestion?

    Thanks


  38. What trade are we talking about?


  39. I also use TOS 64 bit version but I am having the same problems as others.   Maybe server location dependent.  


  40. TSLA flying!


  41. Phil//  Sorry about the previous post.  I was talking about CSCO.  Thanks.


  42. Thanks Phil

    That is what I was asking.  I did sell $8 SKT calls when it was higher that I just closed out, so I was just wondering if I should wait to resell (shorter term) and I agree with your answer to wait for a bounce. I think that retail will get worse before it gets better that's all.


  43. Earnings Portfolio Review (since we already started the discussion):  $182,547 is up 82.5% for the year in this self-hedging portfolio.  That's down about $2,000 (2%) from our last review on 7/17 but that's fine as we don't trust the market so flattish is fine.  We'll see if we can find something to cut but this is a very cashy portfolio using very little margin so hard to panic.

    • HRB – Left over put leg from the trade we took off the table.  Certainly not worried about owning 1,000 shares at net $9 so no reason not to leave it there.  

    • ACB – They never really got it together but it's a small play so let's give them some time, this is their price/sales ratio compared to CGC, which has regained half their losses since the crash.  It wouldn't take much of a positive spin from ACB to get them back to $20 and that would still be 1/2 of CGC's relative valuation.

    CGC PS Ratio Chart

    • GILD – Nice, new trade we added and on track so far.  Still good for a new trade.  See, we waited PATIENTLY for it to come back down and then we bought it again (we sold at $85 because that was too much).  

    • HBI -  Our co-stock of the year in 2018 (with LB) is now a solid performer we're happy to own.   As with HRB, there's simply not enough downside to owning 1,000 shares at net $9.60 to worry about this trade.   

     

    • INTC – Another new addition to the portfolio and even cheaper than our entry at the moment so still good for a new trade.  

    • IRBT – Didn't we just have a big discussion about these guys?  Maybe it was the webinar?  Anyway, this was our original Stock of the Century back in 1999 when it was below $10 and then it hit $100 and we were done (and they spun off their military division, which was our favorite part) but then they won us back with all their cool consumer stuff but they were too expensive until this crash – so we jumped back in after PATIENTLY waiting 3 years for a chance.  Sensing a theme here?  The core is a $70,000 spread and our current net is $40,983 so a long way to go but let's buy back the short puts and short calls to reduce our risk and that leaves us with a bull call spread that can double up or we can add short puts again on a sell-off.  

    • M – This is a tough call during a crisis. We have such a good entry and I consider it to be such a great value.  I can't pull the plug on this one nor can I see covering it so it stays.  

    • SQQQ – We just pulled these hedges and we'll add new ones tomorrow.


  44. Phil / SPY Hedging

    From Aug 14th posting.

    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 July 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 50 SPY 285 Jan 2021 short calls? 

    Appreciate your thoughts. Thanks.


  45. CSCO/Rookie – As I said, it's a period of uncertainty, why start now?

    Worse/Coulter – It might but think of all the people who have nothing better to do at Christmas than shop this year.  

    SPY/Sk – As you can see, it's not a net cost of zero if you get burned like this.  The Jan $285 calls are now $59 ($295,000) so I hope you made great money on the longs.  You let it go too long and there's not too much you can do but I'd sell 50 Jan $340 puts for $21.30 and sell 50 Jan $325 calls for $27.15 and that's $242,250 and anything below $373.45 and above $291.55 makes you better off and you can roll the losing side along.  That means the S&P can go up or down 10% into Jan without hurting you further.  If you are in the middle ($332ish), then the puts are $8 and the calls are $7 and that's just $75,000 to pay back.  


  46. Phil / SPY

    Thank you for your suggestion. 
    In spite of my TSLA disaster and this, I am still up with the longs so far.

    If I sell the 325 Jan calls and 340 Jan puts, what should do with the short 285 Jan calls?

    Thanks.


  47. That is what you'd be doing with them.  The idea is to turn them into a premium sale by selling the other two and then, hopefully, you can roll them out over time more easily than the $285s.  Of course, I would set sensible stops this time.  Usually take 1/3 off if they go 25% against you and another 1/3 at 50% against you so you are only left with 1/3 (about 17) left roll and those can be rolled 2x more easily.


  48. speaking of TSLA—-got tired of seeing it go up and up so went in and bought 1 sh for my daughter--she is already up $400—just madness


  49. Phil

    I am trying to find the hedge adjustments you made last week. How do I find the daily chats from previous week. When I try by pressing previous articles button, it takes too long.

    Thanks.


  50. Homebuilders Head Higher


  51. Bad Breadth from Empire Fed


  52. Japan’s record economic plunge wipes out Abe era gains


  53. Whew,

    Got out of SQQQ,would have to be on the day of a 52 week low. Oh well, maybe there are other holdings in the portfolio at 52 week highs! Hopefully nothing drastic happens overnight and I will load up on new hedges with one less day decay . 


  54. Goldman sees S&P 500 surging to 3,600 by end-2020



  55. Previous/Sk – Use the Phil tab on top – only my articles there.