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GPDThursday – Can Powell Reassure the Markets?

GDP is coming at 8:30 and it's going to suck.

-32.5% is expected and it's the 2nd revision to Q2's GDP, so there's not likely to be anything very surprising.  As we noted yesterday, what really matters is how much Q3 improves but we're a long way from finding that out so people will speculate off Q2 and that's why Powell is scheduled to speak at the market open – in case we start selling off as people realize a -32.5% GDP doesn't quite square with record-high equities.  

Covid cases are over 24M this morning around the world and India is seeing a record spike and South Korea, Italy and France reporting the most new daily infections in months.  The US has gotten their infections under control by no longer testing people.  The U.S. Centers for Disease Control and Prevention’s shift in guidance on Covid-19 testing away from asymptomatic individuals this week alarmed many public-health experts who say it’s a wrong turn that could restrict how many tests are performed.  

CNN reported on Wednesday that the CDC guidance change was due to pressure from Trump administration officials, citing an unidentified official. New York Governor Andrew Cuomo called the move “political propaganda” and an effort by President Donald Trump to bring down the number of cases with less testing.

Public health experts said the new guidance, released as part of an unpublicized update to the CDC’s website, could in fact cut down on testing.  “This makes no sense,” wrote Leana Wen, a physician who formerly led Planned Parenthood and currently serves as visiting professor of health policy and management at George Washington University, in a tweet late Tuesday. “We need more testing, not less.”  Howard Forman, director of the Yale School of Public Health’s health-care management program, called the shift “insane and counter to all the best evidence that we have about how testing is supposed to work and appears to work.”

Speaking of work – another 1M people got laid off this week, indicating the jobs picture is getting worse, not better.  Also, keep in mind that the unemployment bonus has now beek gone for a whole month and Congress took a vacation instead of extending it and they are gone for 2 more weeks so we are only just starting to see the repercussions of lower consumer spending.  

The index of Consumer Confidence dropped in August to its lowest level since 2014, the Conference Board said Tuesday, which some analysts said could reflect growing consumer concerns about the diminished federal aid.  Weaker consumer sentiment also underscored Americans’ souring views about their labor-market prospects. The percentage of consumers in the Conference Board’s survey saying jobs are plentiful dropped to 21.5% in August from 22.3% in July. Meanwhile, those claiming jobs are hard to get rose to 25.2% this month from 20.1%.

With Stimulus Checks on Hold, Americans Are Spending Less at the Grocery Store

As Job Losses Loom, the Airline Recovery Is Under Threat

Retail Bankruptcies Will Push Mid-Range Malls Over the Edge

It’s massively concerning that five months into this crisis we are still seeing those levels,” said Ann Konkel, an economist at the job site, Indeed, “It’s just really pointing to how much economic pain there is right now, and I don’t really expect that to change anytime soon.”

Job postings on Indeed declined for two consecutive weeks in August, which Ms. Konkel said could point to an economic backslide. Indeed job listings for higher-wage occupations have declined more than for lower- and middle-wage positions. Such a trend could point to long-term uncertainty among employers, as those in higher-wage sectors might plan their head counts based on projections for business demand several quarters into the future, according to Indeed.

8:30 Update:  We dodged a bullet so far as GDP has been revised slightly higher (slightly less lower, actually) at -31.7%.  That's better than being revised down but keep in mind we re-opened Mid-May and a lot of people ran out and partied and then, in mid-June, we realised that was a bad idea and began shutting down again.  Now we're sending our children back to school because sending them to the beaches worked so well – so we'll see how this little experiment goes in Q3.

Powell is making all the right noises in his speech, saying the Fed is willling to allow inflation to move above the 2% line in order to get the economy back on track so the markets are flying higher once again.  I was going to call for shorts but it's best just to sit back and wait to see when and if the markets do ever calm down.  This will also push the Dollar lower and support oil.  Look for 3,500 on /ES to provide some resistance but this is a major policy change that's very bullish.

Hurricane Laura made landfall early Thursday near Cameron, La., with sustained winds of 150 m.p.h. and pushed inland.

 


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  1. Need to add more lines!


  2. We have been told the past 3 nights that this is the best economy ever – curious to know why we have needed to add $4T to the deficit to keep it that way. More deficit added this year than in the first 4 years of Obama! 

    And does the best economy ever have 10% unemployment and dips of 30% in one quarter? Once again, just curious.


  3. We have been there before as far as valuation is concerned and that didn't end well:


  4. Good morning!

    So much for shorting….

    It's hyperinflation time!

    All your assets just went down 0.5% to support the appearance of a strong economy!

    ROFL on the Nasdaq on the Big Chart – deep into the white space now.  

    P/E/StJ – MADNESS!

    I guess I'll take /NQ short below 12,000 – it's a good stopping line (12,012 now).  

    These swings in /NG are crazy!

    And that's WITH Brexit. 


  5. Phil//  Trade suggestion needed.  I had sold AAPL $200 Jan. 2022 puts for $25.00 and now they are at $5.15.  I was thinking of rolling that puts to Jun 2022 $300.00 for a credit of $15.35.  Let me know your thoughts.

    Thanks.


  6. Gotta love that Fundamental Investing!

    It's not that complicated – when something goes on sale – buy it!


  7. SPWR !  Pop!


  8. Good Morning.


  9. Phil-MU

    help needed on this trade. im long 40/55 2022 spread and it's moving against me. Im about break even with short puts and calls i sold along the way. Should i jump out ? thankyou


  10. rookie I see you did put up the question yesterday already. Rolling the put to even  Sept 300 is not a bad move, even that I, in general do not like to sell put on a stock which is on a climbing scale.


  11. Good Morning


  12. Rolling in general. Yesterday I rolled my 3x 80 calls on WSM to Jan 21 105 callers, today up 880$. Stock dropped today inicially 8$. Jan 75 put could be sold this morning for 5$ now 4$. But this is for me generally the time to sell puts. Same as Mar 19 where Phil sold all it's puts!!!!


  13. yodi

    I am trying to understand your WSM trade. 

    Have you bought WSM stock, sold Jan 21 105 calls and Jan 21 $75 puts? 

    Thanks.


  14. sk2020 This was just an example of trading. I am holding WSM since 2018 bought the stock for 50$. These are my type of vehicles I do my option trading with. The trick is profit from the div and take advantage of option. My old armchair trading. Obviously much more difficult today where the /ES trades 50plus 50 minus at the same day. It can only be a Clown's Market. Yes I rolled the Sep 80 opt to Jan 21 105 opt but yesterday. Stock was trading yesterday at 98$. Today was the day to sell the put after the stock dropped 8$. So what different does it make when you bought the stock at 50? That is the way you set up a portfolio in general. Just to let you know WSM traded 3/19/20 for 30$. Would have been a great put sale at that day. But this is Monday morning quarter back trading. Difficult to give good advice now and these days.


  15. Take for instance AVGO On Friday I did hold the Aug 21 330 call opt. Stock closed on me at 330.2. Thank God, I was not assigned. But look at the stock today 341. I did sell the 350 Oct call for 9.20 now 12$. Will it hold??? Obviously I am holding the Leap BCS against these plays!


  16. One of the more crazy stocks I hold is AMGN in one month it swings from 265 down to 233 and up to 256 again. I bought that one at 168 and riding it ever since. Even has a yield of 2.5%


  17. Now if you interested in Chop Sui Today is a day to sell puts on CHL March 21 35 put for 2.40


  18. MonkMan MU If you are closing your port and throwing your gun in to the corn, than this is fine, but really 22 is a long way off and I would play options against the BCS


  19. SPWR/Hick – Very nice but erratic.

    AAPL/Rookie – You made $20 and that's great, so done.  Now you want to make $15 more and you sell the J2022 $300 puts for $15.35 but AAPL can drop 20% and then they would be $51.  What will you do then?  If that doesn't bother you margin-wise or cash-wise then fine but if you would be forced to take a loss in the very possible event there's a 20% correction because you don't REALLY want to buy AAPL for net $285 – why do it?  

    And what Yodi said!

    You can sell 3x the WBA 2022 $45 puts for $4.40 ($13.20) and your are in for net $40.60 ($121.80) so collecting just a little less with less than 1/2 the obligation of AAPL and you'd be more diversified.  

    MU/Monk – It's 18 months from now, what are you worried about?  $55 was a bit aggressive on the short calls so you are hurt more on a downturn.  The spread is $11.50/5.75 so net $5.75.  I like MU for the long haul so I'd stick with it. 

    CHL/Yodi – Good call.  And they pay a 5% dividend.


  20. Yodi/Phil  Thanks for your suggestion.


  21. Good money on the /NQ shorts already.  We'll see if 11,900 is bouncy…

    Oil coming down too.


  22. P/E / Phil – Looking at the chart, looks like 15 is a good average (or a good support area). But that means that markets are 40% overvalued now. We went from P/E of 14 to 25 in 3 months – it's simply a reflection of the free money sloshing around. I can't bring myself to make moves now.

    As Jerry Fallwell Jr. would say – I'll step back and watch! 

    Too soon?


  23. AAPL taking a bath. 





  24. Trump says he saved 51 million jobs in pandemic. Economists, U.S. officials say otherwise



  25. Fallwell / Stj – Literal LOL!!!


  26. UNG – Quick question: I sold '22 $12 puts, they are down ~50% for me, does it make sense to do anything with them at this point? Thanks for your input


  27. Well, quick recovery but nice gains.  

    Can't re-short though, too much danger of a break up.

    UNG/Hwt – You sold them at a bad time is all.  UNG is at $14.55 and the short puts are 100% premium so I'd just let the clock run out.


  28. LOL StJ!  40% overvalued is about right.  Certainly 20%.

    AAPL/Monk – Yeah that $2Tn line is hard to hold.  

    Market Cap 2.145T

  29. Phil/BA

    GOOD MORNING!

    A little bit of second opinion please.

    I sold 10 of the Aug 28 BA $175 calls for $18, now $2.25 (covered by the Jan2022 $200 calls)

    Q: buy them back and give caller $2 in premium or take my chances with BA going up a few dollars tomorrow?


  30. Morning?  Where are you?  

    Good targeting on BA, they don't move that much and you are right on the line so I'd buy back 1/2 as a compromise.  

    The WISDOM of Solomon; NOT splitting the baby. | (601) 850-8000 – –  BowTieLawyer.MS


  31. Phil/Imax – We have a Put(15) and BCS (10-15) expiring December. Are you planning to ride the position as Europe and Asia are opening theaters? TX


  32. Phil/where

    Maui!


  33. UNG/Phil – Sorry, I meant to say that the '22 $12 puts are down from where I sold them, so I am up ~50% on them). I also went with '22 $8/$20 BCS. I was not gonna touch the BCS, but wonder whether it makes sense to buy back at least some puts (I have 15 in total). Thanks


  34. Fact check: Trump makes more than 20 false or misleading claims in accepting presidential nomination






  35. UN secretary general urges India to swiftly turn away from coal