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Just Another Manic Monday

Virus cases are down.

President Trump was right – as soon as we stopped the CDC from counting cases, less cases have been reported and the official number of US virus cases has dropped off considerably.  That's SCIENCE!  As you can see from this New York Times chart, however, there's a very suspicious amount of states that are way over the US Average, which indicates the US average is simply not reporting all the cases.  SCIENCE!  

Also, as pointed out, even our best states are having more cases than the 10 WORST countries in the world (besides ours, of course).   Meanwhile, we have a new miracle cure – exactly the kind of cure rich people think up – we take the plasma from people who have recovered from covid and inject it into people who've been exposed.  It's called "convalescent plasma" and it's based on the same sciency-sounding principle that has old, rich people getting transfusions from young, healthy people to "keep their blood fresh".  

Trump has had the FDA grant this "treatment" and emergency-use authorization which is like the FDA saying "This could be total BS but we don't have any better ideas, so what the Hell?"  Trump also had the FDA grant the same authorization to hydroxychloroquine back in April and it was revoked in June once a few studies were done that showed the "treatment" to do far more harm than good.    

NONETHELESS, Global markets are rallying this morning on news of a "cure" with the Dow back above the 28,000 line but we're still shy of the February high of 29,500.  The S&P 500 is over 3,400, where it topped out before and the Nasdaq was 9,750 before the crash but now blown past it at 11,680 – 20% over the pre-crash highs and 50% over the lows of March.

Of course, the reason the Nasdaq 100 is doing so well is that it is the most concentracted index on FAAMG:  Facebook (FB), Amazon (AMZN), Apple (AAPL), Microsoft (MSFT) and Google (GOOGL) – our Trillionaire Corporate Citizens.  Those stocks are up 35% for the year, adding $3Tn in market cap in 8 months so, if you're wondering where all that stimuluss money went, look no further than into the stock valuations of our 5 Tech Titans.  

In the S&P, the Tech Titans have gained 35% while the rest of the index has gained 2% – and that was only through the end of July!  In the Nasdaq, those companies ARE the Nasdaq 100 – the other 95 don't matter as far as index weighting.  Even the Dow (30 stocks) is deeply affected by the moves of AAPL and MSFT, which have added 2,125 points out of the 350-point loss since Januar 1st.  

That's right, the Dow Jones started this year at 28,500 and now it's at 28,150 so DOWN 350 points for the year DESPITE MSFT gaining $50 and AAPL gaining $200.  Each $1 move in a Dow component adds 8.5 points to the index so 2,125 added by two companies and 2,275 lost by the other 30 in 2020 – yet we think this is some kind of fabulous bull market?  Q2 Earnings for the S&P 500 were down 35%

Earnings Scorecard: For Q2 2020 (with 63% of the companies in the S&P 500 reporting actual results), 84% of S&P 500 companies have reported a positive EPS surprise and 69% have reported a positive revenue surprise. If 84% is the final percentage, it will mark the highest percentage of S&P 500 companies reporting a positive EPS surprise since FactSet began tracking this metric in 2008.

Earnings Growth: For Q2 2020, the blended earnings decline for the S&P 500 is -35.7%. If -35.7% is the actual decline for the quarter, it will mark the largest year-over-year decline in earnings reported by the index since Q4 2008 (-69.1%).

Earnings Revisions: On June 30, the estimated earnings decline for Q2 2020 was -44.1%. Nine sectors have smaller earnings declines or higher earnings growth rates today (compared to June 30) due to upward revisions to EPS estimates and positive EPS surprises.

Earnings Guidance: For Q3 2020, 7 S&P 500 companies have issued negative EPS guidance and 25 S&P 500 companies have issued positive EPS guidance. 

Valuation: The forward 12-month P/E ratio for the S&P 500 is 22.0. This P/E ratio is above the 5-year average (17.0) and above the 10-year average (15.3).  

The Fed is, of course, injecting their own plasma into the market but will it be enough to save the patient or just another one of Trump's fake "cures"?   There's a fake conference for the Fed "in Jackson Hole" even though Powell will be speaking from his living room in his pajamas on Thursday and not from Wyoming.   Notice Powell is speaking right after what is bound to be a disastrous GDP Report – hopefully he will be able to make us feel better.

 


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  1. Good morning. Back on the radar screen. Hope everybody is staying healthy and is enjoying the investment profits. 


  2. Phil – Looking for your advice regarding AAPL. I have a Jan 15 2021 300 call bought at 39.52 now 201.42. Sold against that a Jan 15 2021 350 call at 12.47 now 154.52. I think AAPL is now fairly valued and would like to protect profits while continuing to collect premiums. Appreciate your thoughts. 


  3. NAK getting hammered.


  4. Wedbush raised TSLA price target to 3500!! 


  5. Good Morning.



  6. We used to ask who would be the first $1T company! We now have 4 of them and the next question seems to be who will be the next $10T!


  7. thecrazychicken
    Allow me to comment on your question AAPL In your Jan 21 BCS the max to achieve is 5000.
    Closing now would bring 4680. Now for 320$ more you would have to wait 5 month. You need to ask yourself the question, is it worth it. What could I do better with 4680 $ Remember this is just on a one option play. If you are confident with AAPL you could set up a spread 16 Sept. 22 450/540 BCS for 3800, walking off with extra cash from the old BCS and widening your spread from 50 to 90.


  8. thecrazychicken just check my calculation after the opening AAPL is already over 512 and rising.

    So you will still get more for your ald BCS!


  9. Phil/morning analysis

    Good morning and thank you for the dig down into the market numbers!

    Trying to sell premium into this morning's spike- TSLA, AMZN, AAPL! There is potential for some serious gain, if done super carefully.


  10. Good morning!

    AAPL/Chicken – APPL is splitting so I'd wait.  You'll get paid in full in Jan so I wouldn't do anything that doesn't get you net $50 as it's like money in the bank.  It's too deep in the money to adjust well.  

    And what Yodi said, if you can cash out now for 98% or better – why wait?

    NAK/Pg – Rumors that the project is being blocked – great time to get in!   DD at 0.80 for the kids account for me.

    Wow, big bound for the indexes.  

    SUPER carefully, Maya!


  11. Thank you Yodi and Phil. 


  12. Phil/INTC

    YOU BOUGHT BACK THE SHORT PUTS IN THE LTP over the weekend

    You also sold 20 of the 2022 INTC $50 puts for $8 and bought (naked) 10 of the $45 calls for $10.90

    Is that in a different portfolio and are you holding on to that? If so, why if you are taking it off in the LTP?


  13. The bounce is being explained on Bloomberg by the miracle COVID treatment being announced yesterday. Don't people actually do some research? It's not new (it's been used on 10's of 1000's already) and it's not a miracle:

    https://www.motherjones.com/kevin-drum/2020/08/trump-misleads-the-nation-yet-again-about-covid-19-miracle-cure/

    Needless to say, none of these are anywhere close to what most people think of when they hear about a 35 percent difference. So where did that come from? Well, if you cherry pick one of the results—7-day high vs. low—and calculate the death rate instead of the survival rate, you get 8.9 divided by 13.7. This equals 0.65, which means the high-plasma group died at a rate 35 percent lower than the low plasma group on a relative basis. 

    And fast tracking a vaccine – so many people are already anti-vaxx, what's going to happen when something is rushed without proper testing! 


  14. Now we're taking a proper downturn.

    • Some real estate investors are skipping payments on debt backing properties that were hurt the worst by the pandemic while at the same time raising funds for new opportunities that were created by the health crisis, Bloomberg reports.
    • In some cases, they're one and the same. Some lenders are willing to sell back the loans at a discount to the investors.
    • Brookfield Property Partners (BPY +1.4%), Colony Capital (CLNY +1.6%), Blackstone Group (BX +0.8%), and Starwood Capital (STWD +2.0%) have all missed payments on commercial mortgage-backed securities backed by malls and hotels, highlighting the fact that the spread of COVID-19 has devalued some real estate at the same time it has created new targets for these investors flush with cash.
    • The biggest CMBS losers have been those backing malls and hotels. Lodging and retail debt handed off to special servicers is at the highest level since 2010, according Trepp, a firm that tracks such industry data.
    • Especially for the big real estate investors, missing payments on CMBS debt doesn't have major repercussions because it's usually non-recourse debt, meaning borrowers can turn over the property and lenders won't be able to seize other assets.
    • At least 11 Brookfield malls with more than $2B in CMBS debt are delinquent or seeking payment relief due to the virus; meanwhile, it's already repurchased some of its former debt at lower prices.
    • "The lenders are willing to sell us their loans or the mortgages back at a discount," Brookfield Property CEO Brian Kingston said during its most recent earnings call. "And so in that case we've been able to essentially reacquire the asset at an attractive basis."
    • Starwood is delinquent on payments for 17 of its 30 retail properties with almost $2B in CMBS debt even as it's said to be raising $11B for a new opportunistic investment fund.
    • Management of three Starwood malls was transferred to a court-appointed receiver in April after the REIT missed payments; and debt on a four-mall portfolio was cut to junk after the properties value sank 66% in an appraisal, erasing Starwood's equity.
    • Colony Capital stopped making payments on many hotel bonds since the pandemic started, but it's continuing to invest in "digital" real estate such as cell towers, network infrastructure and data centers.
    • Blackstone is behind on payments on a $274M mortgage for four Club Quarters Hotels and is considering walking away from the properties because they would cost too much to make the competitive, Bloomberg has reported.
    • Meanwhile, BX has $46B to invest in real estate deals.
    • Hotel and retail properties, though, make up just 13% of Blackstone's real estate exposure and the Club Quarters mortgage is its only delinquent CMBS.
    • BPY's asset writedowns over the past 11 quarters:
    • Ford (F +4.4%) is making preparations for the new F-150 truck that is set to go on sale in 2021.
    • The automaker will temporarily shut a factory in Michigan next month to install machinery for the redesigned F-150 pickup and construct a new facility at a Dearborn plant to build an electric version of the F-150.
    • Sources tell Bloomberg that prototype production of the electric F-150 will start next year.
    • "We have good inventory of the current model F-150 and we’re building at a higher-than-normal rate to ensure our stocks remain high to continue to meet customer demand," says Ford on the plan for a smooth F-150 transition.
    • Ford sold close to 900K F-Series trucks last year, which is about 400K more units than Tesla is expected to deliver this year.
    • Needless to say, investors aren't valuing automakers by units sold anymore with Tesla's market cap at $382B and Ford at $27B.
    • In a court filing yesterday, Microsoft (AAPL +1.7%) entered the fight between Apple (NASDAQ:AAPL) and Fortnite creator Epic Games.
    • Epic says Apple has threatened to cut it off from developer tools needed to maintain the Unreal Engine software, which Microsoft and many other developers license for improved graphics.
    • Microsoft has an "enterprise-wide" license for the Unreal Engine and says the block would at minimum hurt the Forza Street iOS game.
    • Kevin Gammill, Microsoft’s GM of gaming developer experiences: "If Unreal Engine cannot support games for iOS or macOS, Microsoft would be required to choose between abandoning its customers and potential customers on the iOS and macOS platforms or choosing a different game engine when preparing to develop new games."
    • In the fiscal Q4 results, Microsoft's Xbox and related services revenue increased 68% Y/Y, driven by the pandemic tailwind.
    • Microsoft recently announced that its next-gen Xbox Series X console will launch in November, but the flagship Halo Infinite title is delayed until 2021.
    • Previously: Apple tells court Epic Games requested special treatment (Aug. 21 2020)
    • Transocean (RIG +10.1%has amended its previously announced exchange offers to exchange certain existing notes for up to $750M of new 2027 senior guaranteed notes. As of August 21, $1.13B of existing notes had been validly tendered or committed.
    • Based on the amended total consideration, and the amounts tendered/committed to be tendered to date, ~$518M of new notes would be issued.
    • Additionally, certain Holders have entered into support agreements for tender and exchange of ~ $350M existing notes, and the company will separately exchange such committed Notes for up to an additional $32M of New 2027 notes.
    • Transocean recently said it is exploring strategic alternatives.
    • Also read: Transocean tumbles as offshore drilling bankruptcies mount
    • Northern Dynasty Minerals (NAK -41.4%) sinks to three-month lows following weekend reports that the Trump administration is planning to block the Pebble Mine in Alaska after recently drawing opposition from Donald Trump Jr. and some influential conservative commentators.
    • The company initially issued a press release saying the reports were "incorrect," but it has since said it was launching an "advertising and outreach campaign" in hopes of advancing the controversial project.
    • Early this morning, WSJ quoted a senior Trump administration official saying "All those reports kind of said the same thing: not enough facts, nowhere near the right mitigation, and the project would result in significant degradation of the environment… We do support mining. But this just didn't work."
    • The momentum for the project appeared to shift after Donald Trump Jr. came out against the project earlier this month, saying "the headwaters of Bristol Bay and the surrounding fishery are too unique and fragile to take any chances."
    • Citing last week's fiscal first quarter results, Susquehanna raises Alibaba's (NYSE:BABA) price target from $275 to $350.
    • The firm says BABA's results were "strong across the board" and notes that pandemic has shifted shoppers towards online shopping, which will benefit Alibaba's position at the forefront of Chinese e-commerce.
    • Susquehanna maintains a Positive rating on BABA. Wall Street analysts, Quants, and SA contributors average out to Bullish to Very Bullish ratings.
    • Alibaba shares are up 3.2% to $274.20.
    • Previously: Cloud computing helps drive Alibaba's 34% revenue growth in fiscal Q1 (Aug. 20 2020)
    • Raymond James boosts its price target on Best Buy (NYSE:BBY) to $135 from $100 ahead of the retailer's earnings report later this week. The PT reps 18% upside potential and is close to a Wall Street PT high.
    • Analyst Matthew McClintock: "We are raising our estimates ahead of F2Q21 earnings well above the consensus view. We believe Strong Buy rated BBY’s best-in-class fulfillment capabilities, high mix of essential items, and well positioned peer services/GreatCall initiatives should propel Best Buy to gain further market share during the COVID-19 induced retail shakeout. Further, we believe BBY has ample liquidity to more aggressively make investments in the near-term to drive future market share opportunities over the long-term."
    • Shares of BBY are up 2.50% premarket to $116.77.
    • Best Buy was one of the stocks on Seeking Alpha's Catalyst Watch for volatility this week with its earnings report taking on added significance amid the pandemic.
    • Despite rumors to the contrary, AstraZeneca (NYSE:AZN) says it has held no talks with the U.S. government about emergency use authorization of its COVID-19 vaccine, currently dubbed AZD1222.
    • Yesterday, The Financial Times reported that the Trump administration was mulling a plan to do just that if data from a 10K-subject UK study are positive. Preliminary results should be available next month.
    • The FDA has stated that an approval of any COVID-19 vaccine will need to be supported by data from a trial involving at least 30K people. AZN is launching such a study in the U.S. but results may not be available until after the November 3rd election.
    • At a press conference yesterday to announce emergency use authorization of convalescent plasma for the respiratory infection, President Trump hinted that a similar nod for a vaccine might be imminent.
    • Leading Democrats say the White House must not approve a vaccine with sufficient data to support approval. FDA division chief Peter Marks, whose group oversees vaccine approvals, told Reuters that he will resign if the Trump administration pressures the agency to approve a vaccine without adequate data showing its safety and effectiveness.
    • Other vaccine developers at the head of the pack include Moderna (NASDAQ:MRNA), who expects to complete enrollment in its large-scale trial by the end of next month, and Pfizer (NYSE:PFE)/BioNTech (NASDAQ:BNTX) who have recruited about 1/3 of the planned participants in their study and have stated that their candidate will be ready for regulatory review in October.
    • AZN is up 4% premarket while PFE is up 1% and BNTX up 5%, all on light volume.
    • Wedbush Securities lifts its bull case price target on Tesla (NASDAQ:TSLA) after factoring in the China business upside.
    • "We believe the production and demand trajectory in China for Tesla remains robust and stronger than expected for 3Q with clear momentum heading into year-end. The pent-up demand in the China EV market for Model 3's and recent price cuts are creating a "perfect storm of demand" for Musk & Co. in this key market with increased market share vs. domestic competitors as the Giga 3 success story continues to play out," advises analyst Dan Ives.
    • Wedbush has a base case price target of $1,900 on Tesla and bull case price target of $3,500. Ives says the China growth story is worth at least $400 per share on Tesla on what he expects to be a significant increase in EV penetration in the region. "With the China growth story, Tesla could now have $35+ of earnings power by 2025/2026 vs. our prior estimate of $20-$25," he calculates.
    • Shares of Tesla are up 2.82% premarket to $2,107.75 in premarket action.
    • Tesla'a Quant Rating of 3.49 ranks 2nd in the automobile manufacturer sector.
    • Britain's largest supermarket Tesco (OTCQX:TSCDF) to create 16,000 new permanent jobs to cater the exceptional growth in its online business and may even increase the number of roles as the coronavirus lockdown boosted its sales.
    • "The supermarket expects the majority of these roles to be filled by colleagues who joined on a temporary basis at the start of the COVID-19 pandemic, but who now want to stay with the business permanently," the company said.Tesco said the roles will include 10,000 pickers to assemble customer orders and 3,000 drivers to deliver them, along with a variety of other roles in stores and distribution centres.
    • Belgian prosecutors are investigating Credit Suisse Group (NYSE:CS) for potentially helping more than 2,600 clients to hide money in Swiss accounts.
    • They're looking for evidence of money laundering and whether the Swiss bank acted as an illegal financial intermediary, a spokesman for Belgium's Federal Prosecutor's office told Bloomberg News on Monday.
    • The criminal investigation is in the fact-gathering stage and there's no decision yet on whether formal charges will be made, said Eric Van Duyse, the prosecutor's office spokesman.
    • The office obtained the bank details of Belgian clients with Credit Suisse accounts between 2003 and 2014, he confirmed. Authorities received information from French authorities last year.
    • Swiss banks have come under global tax crackdowns during the past decade as Switzerland's tradition of banking secrecy come under attack. Last year, UBS reserved $516M for a tax case in which it was ordered to pay a hefty fine for helping French client to hide funds to evade taxes.
    • Apple (NASDAQ:AAPL) topped a $2 trillion market cap last week. Morgan Stanley still sees more room for upside, raising the tech giant's target from $431 to $520.
    • Apple shares are up 2.9% pre-market to $511.90.
    • Bull Katy Huberty says Apple "trades at a discount to both tech platforms and strong consumer brands."
    • Huberty notes Apple has posted growth in revenue, earnings, and FCF over the past four quarters despite iPhone revenue dropping, which highlights "Apple’s broad ecosystem of products and services."
    • Morgan Stanley maintains an Overweight rating on Apple. Wall Street analysts average out to a bullish rating, but SA contributors sit at Neutral.
    • Reminder: Apple's 4-for-1 stock split is scheduled for August 31.
    • Here's a look at how Apple shares shook of the pandemic impact earlier this year, largely driven by 5G iPhone optimism:
    • Susquehanna keeps a Positive rating on Foot Locker (NYSE:FL) after taking in the retailer's Q2 earnings report.
    • "We believe FL is well positioned to rebound in 4Q20 driven by continued aggressive inventory management. The reinstatement of the dividend is also evidence of management's and the Board's confidence in the business heading into 2H20," notes analyst Sam Poser.
    • Poser and team think with Foot Locker trading ~4 turns below its 5-year FY2 P/E average, upside far outweighs downside risk at the current price.
    • Shares of Foot Locker are up 0.47% premarket to $27.70.
    • Foot Locker's Quant Rating of 3.17 ranks 2nd out of the 23 stocks in the apparel sector.

  15. Phil/INTC

    The puts and calls I referred to was the post earnings trade. Don't know what portfolio and if we are still sticking to it


  16. INTC/Maya – Yes, I forgot to log that in the LTP, it was from 7/24.  Thanks.

    July 24th, 2020 at 9:51 am | (Unlocked) | Permalink |

     

    In the STP, let's sell 20 of the 2022 $50 puts for $8.50 ($17,000)

     

    In the LTP, let's sell 20 of the 2022 $50 puts for $8.50 ($17,000) and buy 50 of the 2022 $45 calls for $11 ($55,000) and wait for a bounce to sell short calls.  

     

    In the Earnings Portfolio, let's sell 10 of the 2022 $50 puts for $8.50 ($8,500) and buy 25 of the 2022 $45 ($11)/$55 ($6.50) bull call spreads for $4.50 ($11,250) and that's net $2,750 on the $25,000 spread that's $12,500 in the money so $22,250 (809%) upside potential is worth a toss. 

    Treatment/StJ – Well statistically significantly better than nothing…

    And rushing the vaccine and having negative side effects to point to is exactly what the anit-vax crowd wants to happen so they can use it to "make their case" on how dangerous vaccines are.  Putin wins again!

    Putin Pulling the Strings of Baby Trump


  17. You ain't seen nothin' yet – the autumn flu's coming, the anti-vaxxers won't take the shot, we'll have two epidemics going at once. As an epidemiologist, this will be fascinating. I need to bone up on my differential calculus.


  18. I'll be buying more N95's, face shields, disinfectants and a walking stick that extends six foot….. ;)


  19. Phil/Intc

    so we are staying in those two trades!

    thanks.


  20. This is interesting ( to me). It is a risk assessment of the chance that someone has Covid-19 by county and gathering size. 

    https://covid19risk.biosci.gatech.edu/


  21. Real estate investors, banks arent lending for investment properties.


  22. Fascinating/Snow – I guess it's all part of Trumps plan to kill off his own supporters?

    INTC/Maya – Yes, I think INTC is too cheap now and still great long-term.

    Risk levels/Randers – Interesting chart.  Certainly makes you want to keep away from theaters and stadiums.

    Investment properties/Kustomz – That's smart of them.  Could crash the pricing though.  Then they'll be stuck with a lot of defaulted investment properties they can't find buyers for because other banks won't write paper on them….


  23. I lend hard money, last loan was 8 months ago. I havent heard a peep since, which surprised me considering how much banks have pulled back.


  24. I think the economy is much weaker than it seems.  


  25. Mr Stick does not seem to agree though. 


  26. Kustomz – I finance equipment. You up for a chat? If so ping me at: deanoliver at mac.com


  27. @kustomz – PPP provided some liquidity to the market that displaced the need for non-bank lending.



  28. Deano, will email you in the am.

    Crazychic, maybe they provided a temporary bridge.


  29. Exxon Booted from Dow Industrials in Major Embrace of Technology




  30. Apple acquires VR startup Spaces




  31. Pompeo shattering precedent, sparking fury with RNC speech