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Record-High Wednesday, Again

Up and up we go.

The S&P 500 is up 12% since the end of June and that's nothing compared to the Nasdaq but the Nasdaq is just silly now and so are the other indexes.  Sure money is pouring into the economy and the Dollar is collapsing but will making the rich SO MUCH RICHER really stop the virus that is ravaging our economy?  Of course not.  

In last week's Live Trading Webinar, we shorted the Dow Futures (/YM) at 28,000 (avg) and we're still in that trade a week later as the Dow hasn't done much in the past week – and Apple (AAPL) is in the Dow!  We could be consolidating for a move up or a move down but, as noted in our earnings anlaysis of the Dow components on July 23rd, there's no justification for a move higher – not from an actual earnings perspective anyway.

Of course there are other factors in play.  The Government has pumped $6.7Tn into the economy in the past 6 months and they are looking to pump in more.  The US is reporting less virus cases – mostly because we are doing less testing but it does turn out that Trump was right – less testing leads to less cases so, as long as we don't test, the virus will be under control, right?

As ridiculous as that logic is, 40% of the people in this country are going to vote to re-elect Donald Trump – the LIKE his policies, they THINK he is doing a great job and they want 4 more years of this.  Those people also invest in the market and they believe the economy is going great and the virus is like a cold and will quickly pass (of course now it's 6 months after Trump said the virus would disappear by April, but who can actually count anyomore?).  

There is, indeed a sucker born every minute and then the grows up and buys TSLA stock for $1,900, which is a $360Bn valuation for a company with $25Bn in sales and no profits.  Yes, it's sour grapes because we are short TSLA in the STP but I don't think this surge will last very long – up 30% in a week because the stock is splitting doesn't make a lot of sense and 60% of the population still seem like rational people – for now.

Infobox collage for MENA protests.PNGI say for now because we were just having a serious discussion last night about the possibility of a Civil War in this country if Trump refuses to leave office after being defeated or obviously rigs the election to stay in power.  Multiply the Portland protests by 1,000 and think back on the Arab Spring, which spread from Tunisia to Libya, Egypt, Yemen, Syria and Bahrain, where either the ruler was deposed (Zine El Abidine Ben Ali, Muammar Gaddafi, Hosni Mubarak, and Ali Abdullah Saleh) or major uprisings and social violence occurred including riots, civil wars or insurgencies.

Sustained street demonstrations took place in Morocco, Iraq, Algeria, Iranian Khuzestan, Lebanon, Jordan, Kuwait, Oman,and Sudan. Minor protests in Djibouti, Mauritania, Palestine, Saudi Arabia, and the Moroccan-occupied Western Sahara.  A major slogan of the demonstrators in the Arab world is ash-sha?b yur?d isq?? an-ni??m ("The people want to bring down the regime").

The wave of initial revolutions and protests faded by mid-2012, as many Arab Spring demonstrations met with violent responses from authorities,[8][9][10] as well as from pro-government militias, counter-demonstrators and militaries. These attacks were answered with violence from protesters in some cases.[11][12][13] Large-scale conflicts resulted: the Syrian Civil War;[14][15] the rise of ISILinsurgency in Iraq and the following civil war;[16] the Egyptian Crisiscoup, and subsequent unrest and insurgency;[17] the Libyan Civil War; and the Yemeni Crisis and following civil war.[18] Regimes that lacked major oil wealth and hereditary succession arrangements were more likely to undergo regime change.[19]

These brutal Dictators only perpetuated low standards of living for their people while living opulent lifestyles with the OCCASIONAL murder of some of the citizens – either journalists or opposition leaders.  Trump is LOWERING the standard of living for the majority of our citizens and the deaths are relentless and random and now he is sending our children off to be infected to spread his virus far and wide – just so he can declare a state of emergency and postpone the elections.   

Hopefully that does not happen but, if it does – what are you going to do about it?  40% of you will cheer and be happy that your guys is blowing up the system and staying in charge but about the same 40% of you will be mortified but what are you doing to make sure that doesn't happen?  Are you getting out the vote?   Are you encouraging people to register?  Are you helping your candidate?  Trump lost the popular vote by 3M and he's President now – it's not going to take a minor victory to unseat him.

And what if he doesn't leave?  

Freedom's just another word for nothin' left to lose

Nothin', don't mean nothin' hon' if it ain't free – Joplin

At what point will Americans have nothin' left to lose?  Sadly, if things continue the way they are going, we might find out.

I'd trade all my tomorrows for one single yesterday…

 


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  1. Good Morning


  2. Good Morning.


  3. Vote/Phil – Yup, get out the vote, and I'm behind that…..but the electoral college is now designed to be always close. That's not a bug, it's a feature – makes for more exciting headlines.


  4. Phil / SQQQ ,

    I am seeing quotes for SQQQ Jan 21 options today. Would the 25C/35C spread be a good hedge to get into? Mid price is 2.15


  5. Good morning!

    • The S&P is adding slightly to its record close yesterday, but just like the last hour of trading yesterday, strong conviction is lacking.
    • The S&P 500 is up 0.1%, the Dow is rising 0.1% and the Nasdaq is flat.
    • Retail is rising after a disappointing performance on Tuesday, with Target surging on digital sales. The Consumer Discretionary sector (NYSEARCA:XLY) is up 0.3%.
    • Congressional Democrats indicating they are willing to compromise on a short-term fiscal stimulus deal is helping sentiment some.
    • That's countered somewhat by President Trump saying he has little interest in talking to China about the trade deal.
    • In commodities, crude futures are down 0.9% ahead of an OPEC+ virtual meeting and U.S. inventory numbers. Spot gold if off 0.6%.
    • The dollar is struggling to break a streak of losses, with the dollar index flat. The greenback is down 5% against the euro in the past month.
    • The U.S. dollar holds a hair above a 27-month low touched overnight after a record rally in stocks, continuing U.S.-China tensions, and delays on the next round of virus relief measures pressure the greenback.
    • The dollar was essentially flat at 92.262 against a basket of currencies in European trading and just over an April 2018 low of 92.124 seen on Tuesday, Reuters reports.
    • The dollar index has lost more than 5% since the end of June and marked its biggest monthly loss in a decade in July, as investors bet that other economies will strengthen more than the U.S.
    • Marshall Gittler, head of investment research at BDSwiss Group, says the dollar weakness reflects doubts about the U.S. progress in controlling the COVID-19 pandemic, the ongoing U.S.-China trade dispute, and Congress's failure to agree on more virus relief measures.
    • “The outlook for U.S. growth – already falling behind Europe – is getting grimmer,” Gittler said in a note.
    • Investors will be looking at the minutes from the Fed's July 28-29 meeting for hints on whether the central bank will take any more action in September. Money market futures are expecting no change in policy rates until the end of next year.
    • Total return of the Invesco DB USD Bullish ETF (NYSEARCA:UUP) vs. the S&P 500 over the past year:
    • The separation between the haves and have-nots in retail is becoming clearer as big-box stores pull away from struggling department stores. And now some differentiation between winners like Target and Walmart are emerging.

    Target (TGT+9.7%) reported stellar numbers this morning. Comparable sales skyrocketed 24.3% in Q2 to smash the consensus estimate of +8.60% and set an all-time record.

    Amid lockdown measures, digital sales were the obvious beneficiary, soaring 195% year over year. 

    That performance was echoed by Walmart (WMT) yesterday, which reported comparable sales up 9.3% and digital sales 97% higher. But Walmart’s shares didn’t get the current reception Target is getting after Walmart noted that sales trends were normalizing as July ended, raising worries of tighter purse strings as federal government unemployment assistance started to go away.

    One difference in the two reports is the mix of sales, where Target has a strength that many strategists highlight: private label.

    Retail analyst Stacey Widlitz, who has Target as her top pick in the sector, told Bloomberg Target is the “one-stop shopping winner” that does “amazing in private label”.

    Many smaller retailers will be overwhelmed by the increased cost of doing business, Widlitz says. That will lead customers to strong private-label players like Target.

    “On the apparel front, the success of brands like Cat & Jack and the much younger A New Day, both of which are part of Target's 'billion-dollar owned brands club,' has set the foundation for strong growth in the post-pandemic era,” Beulah Meriam K wrote on Seeking Alpha last week.

    “A recent report from Coresight Research shows that the U.S. apparel sector is accelerating toward a ‘record number of store closures’ and predicts potential bankruptcy risks for apparel brands and malls across America,” she says. “This puts Target in a unique position to leverage its apparel brands with its vast store presence.”

    In the recent quarter, Target said apparel “moved from a 20% decline in Q1 to double-digit growth in Q2”.

    In contrast, Walmart CFO Brett Briggs noted in the company’s conference call that back-to-school apparel sales were “understandably soft”. 

    Looking at the sector as a whole, the SPDR Retail Sector ETF (NYSEARCA:XRT) is sitting just off record highs, but not active premarket.

    More broadly, the SPDR Consumer Discretionary ETF (XLY+0.25%) is edging up, led by Target and a helping hand from Lowe’s (LOW+1%).

    • Siemens (OTCPK:SIEGY) says its energy business will provide a green megawatt hydrogen production system for a hydrogen fueling station in Beijing, the company's first project of its kind in China.
    • Siemens Energy signed an agreement with China Power International Development's energy subsidiary Beijing Green Hydrogen Technology Development Co. to deliver the system.
    • The company says the agreement builds on its 2019 memorandum of understanding with State Power Investment Corp. – the ultimate controlling shareholder of China Power – on cooperation in green hydrogen.
    • Siemens recently reported that Q3 net profit was cut in half to €535M from €1.14B in the prior-year quarter, but the result was seen as a "strong beat" by analysts.

    Only down half?  That's fantastic!

    You know what else if fantastic?  Killing salmon!

    • Northern Dynasty Minerals (NYSEMKT:NAK) +5.8% pre-market after the Alaska Republican Party endorses development of the controversial Pebble Mine.
    • An Alaska Republican Party resolution says it "unequivocally" supports Pebble Mine and calls on the Army Corps to move forward and approve it, saying the mine would create more than 1,000 jobs, contribute to the state treasury and benefit Alaskans in what it describes as an otherwise impoverished area.
    • Opponents say development of an open pit gold and copper mine risks destroying one of the world's largest salmon producing systems.
    • Donald Trump Jr. recently came out against the project that his father's administration has supported.

    Let's have fun counting my kids' money:

    Remember, we took half off the table on the last surge ($2.50).  

    • Stifel drops Darden Restaurants (NYSE:DRI) to a Hold rating from Buy on its view that the risk/reward looks fairly balanced at the current valuation (18x our P/E NTM+1), especially in the context of a continued challenging sales environment for casual dining restaurants.
    • "Although we remain confident in Darden's long-term competitive position, we are not confident the pace of sales recovery will match Street estimates, which we believe is necessary to show meaningful upside from the current level," updates analyst Chris O'Cull.
    • O'Cull and team says they are concerned for industry sales recovery as many casual dining chains enter seasonally higher sales periods affected by corporate conventions, holiday parties/events, live sports, etc. that will likely be challenged by pandemic restrictions and continued reluctance on the part of consumers to gather in larger groups.
    • Stifel assigns a 12-month price target on Darden of $87 vs. the average sell-side PT of $86.77.
    • Analysts are still bullish on Darden, but the average Wall Street rating has eased off a bit after the surge of new COVID-19 cases in July.
    • Germany's main aviation industry group has proposed the creation of limited air-travel corridors between major U.S. and some European hubs to begin the process of opening up transatlantic flights. The project would see U.S. airports in Chicago, Boston, Los Angeles and Newark, New Jersey be linked with Frankfurt and Munich in Germany.
    • Extensive COVID-19 testing would be part of the process due to the outbreak still being at an elevated level in the U.S. The U.S. saw 1,205 deaths due to COVID-19 yesterday versus only 4 COVID-19-related deaths in Germany. Hospitalization rates due to COVID-19 are also higher in the U.S. than Germany on a per capita basis. In a safety measure, passengers wanting to travel across the Atlantic as part of the program will have to produce a negative test for COVID-19 no older than 48 hours.
    • Some of the global airlines that could see a revenue boost from North Atlantic routes restarting include Deutsche Lufthansa AG (OTCQX:DLAKF), Air France-KLM (OTCPK:AFRAF) and British Airways (OTCPK:ICAGY), Delta Air Lines (NYSE:DAL), American Airlines Group (NASDAQ:AAL) and United Airlines (NASDAQ:UAL).
    • Compare global airline side by side
    • Progressive (NYSE:PGR) reports July EPS of $1.38, up 111% Y/Y.
    • July net premium earned of $3.78B (+10% Y/Y).
    • Total policies 24,078.6K. Auto personal policies of 16,069.8K, Property business of 2,368.3K.
    • Press Release
    • The United States Oil Fund ETF (NYSEARCA:USO) says it received a Wells notice from the SEC related to disclosures in April and May on constraints imposed on its ability to invest in oil futures contracts, according to its latest 8-K filing.
    • The Wells notice says SEC staff have made a preliminary determination to recommend that the SEC file an enforcement action against USO, United States Commodity Fund and its CEO John Love.
    • USO says it plans to contest the allegations made in the notice and expects to engage in talks with the SEC staff.
    • USO said in April that it may not be able to meet its investment objective of reflecting the spot prices of oil after U.S. crude oil futures contracts traded in negative territory for the first time ever.

  6. Good morning everyone. Here is the link to today's Webinar. 

    https://attendee.gotowebinar.com/register/2198405739065442829


  7. Phil / VIAC Thoughts on this?

    https://www.wsj.com/articles/viacomcbs-in-talks-to-sell-tech-site-cnet-to-red-ventures-11597768972

     

    ViacomCBS in Talks to Sell Tech Site CNET to Red Ventures 

    Discussions value CNET at about $500 million; media company has been looking to shed noncore assets after last year’s merger


  8. SQQQ/Jij – Yes, now we have the right prices so let's add back SQQQ to the STP and the Earnings Portfolio with:

    • Buy 100 SQQQ Jan $25 calls at $6 ($60,000)
    • Sell 100 SQQQ Jan $35 calls at $4 ($40,000) 
    • Sell 20 WBA 2022 $37.50 puts for $5.50 ($11,000)

    That's net $9,000 on the $100,000 spread and all SQQQ has to do is go up 40%, which would be a 13% drop in the Nasdaq.  


  9. VIAC/Batman – Easy way to raise some cash and no material change to their operations.  Makes sense as they merged with CBS so they've got to get rid of some non-performers.  

    The parents most likely to keep their kids home (38%) made less than $50,000 a year. The second-most likely set of parents (29%) to consider keeping their kids home made between $50,000 and $100,000 a year.

    On the other end of the spectrum, 27% of parents making more than $150,000 a year will or likely will keep their kids home. They may be paying for “teaching pods” and “private educators” instead.

     

    In a distant fourth, only 21% of parents making between $100,000 and $150,000 a year are planning to keep their kids home, the study said. Nearly two-thirds (58%) of this demographic said they were planning to send their kids to school.

    Part of the discrepancy could also stem from how much money a school has, said study author Emily Kroshus, a professor in the University of Washington’s Department of Pediatrics.

    The study suggested that parents with more money had more confidence their school was ready to teach in-person while preventing the spread of COVID-19. “This finding really speaks to inequality in school experiences,” Kroshus told MarketWatch.

    Property taxes and school funding are linked in the U.S., and “lower-income parents are more likely to live in communities with poorly-funded schools,” she said.

    Better funded schools are more likely to have a lower teacher-student ratio, and more staff to implement and enforce safety procedures in the fall, experts say.

    “If schools have failed to meet their child’s needs pre-pandemic, it’s likely that parents will generalize those experiences to how the school will address the current situation,” Kroshus told MarketWatch.

    If parents also have older adults, like grandparents, living with them, that could complicate their decisions too. The elderly disproportionately account for COVID-19’s death toll, research shows. “Multigenerational households” have been on the rise for years, going from 12% of the population in 1980 to 20% in 2016, according to the Pew Research Center.

    Asian-American, Black and Hispanic families are more likely to live in multigenerational households, Pew noted. Black and Hispanic communities are bearing an outsized share of COVID-19 related hospitalizations and deaths — so much so, that there is some debate on whether these communities should be prioritized once a vaccine becomes available.

  10. Phil/aapl

    good morning!

    I love Apple. 
    Up 50% from prior HIGH, before the pandemic? 
    even if earnings are up 10-15% during pandemic, and even if they reduce share count by buybacks, let's say 10%…maybe you can justify stock at $380? Overdone here?
    what do you think?


  11. Phil / Hedging – curious question: is SQQQ or TQQQ a better vehicle?  The nature of these leveraged securities almost guarantee a decay over time (just remembering the number of reverse splits on SQQQ, and of course NDX at consecutive new highs doesn't help).  Are we better off with the TQQQ put spread vs. the SQQQ Call spread?


  12. AAPL, that is all.
     


  13. Phil, I was a member years ago and bought NAK accordingly when it was in the $.35 range. Can you help me remember why you like this stock so much?


  14. GILD    you can sell some Jan22 or June22 puts for some pretty good premium today 

    Jan22 $55 puts can be sold for over $5.10 




  15. UN crisis looms as US readies demand for Iran sanctions


  16. CNN Poll: Most Americans embarrassed by US response to coronavirus




  17. Phil/SQQQ

    What happens to our existing position? in IB it is showing as SQQQ2 and am already down close to 50% where I doubled. Do I just get out of that position and move into the new one that you initiated?

    regards


  18. New guy here. Learning a LOT! ty btw. Lot of complaints here lately about TDA and tos
    what other brokers you like for options/futures?


  19. AAPL/Maya – Of course overdone but I wouldn't short them.

    TQQQ/Mito – I like them better as a 20% drop will drop them 60% for a huge payout.

    NAK/Swamp – Because I thought Trump would ignore the potentially devastating environmental impact of the mine and approve them to strip-mine a wildlife refuge and endanger the salmon fisheries.  Mission accomplished!  

    GILD/Stock – That's a good one, I like them down here.  

    SQQQ/Pat – We closed them the other day.

    Welcome Moshi!  TDA is usually great, IB also popular.

    Webinar Time


  20. Moshi / Brokers

    I use TastyWorks and very happy with their technology. This is by the founders of TOS. 


  21. Moshi – I use both TOS and tastyworks. I like the way you manipulate the option chains in tastyworks. But I seem to get better execution is TOS. I have tried putting on the same trades in both platforms and (from my limited) observation TOS has always filled first, and usually at a better price. If you're only trading a couple of contracts it probably doesn't matter. But, when you get up to Phil-size it could become a problem.


  22. I also like Tastyworks for options. Very easy to execute and analyze trades. I'm so used to the charts in TOS that I keep an account with them as. well.

    Oh hey, LQMT popped today. Finally profitable for me…




  23. LQMT/Ati – Hey my kids are having a great day!