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Record High Wednesday – Up, Up and More Up


What else can you say when the S&P 500 is up almost 20% in two months?  That's a pace of 120% annual gains, if we make that for 10 years we can turn $100,000 in to $265,599,227.91 so go market, right?  Obviously, if it becomes that easy to make money – even for just a few people, then money will very soon become meaningless so we need to have a genuine Fear Of Missing Out if this is going to be a sustained rally that takes us to 4,200 by November (another 20%) and S&P 5,000+ to close the year.

The funny thing is that the S&P 500 companies themselves – EVEN when you include the earnings powerhouses of AAPL, FB, GOOGL, AMZN and MSFT, have made 32.9% less in Q2 than they made in Q2 of 2019, which was only a 0.8% improvement from Q2 of 2018 and the S&P 500's earnings are projected to be down 23.2% in Q3 and down 14.3% in Q4, giving us a not-so-grand total of -20.4% earnings for the year.

Overall earnings per "share" of the S&P 500 are in the $120-130 range for the year, though that assumes a very nice rebound in Qs 3 &4 that are not entirely certain.  Let's say the EPS is $125, though and we divide that by 3,550, the current share price of the S&P 500 and that gives us a p/e ratio of 28.4 – about double the historic average.  

As we discussed in our "Stock Market Physics" notes yesterday (and see the original SMP article here), the higher you pump up the S&P, the more inflows you need to sustain it so it gets harder and harder to sustain it as it goes higher.  We have money flowing into the markets via Government Stimulus and Fed Stimulus and that's great while it lasts but Steve Mnuchin (of Goldman Sachs and the Treasury) just told Congress they need more stimulus NOW or "bad things will happen."  

Well, since we clearly know that Steve Mnuchin doesn't give a crap about people, he must mean bad things will happen to his money and that does make sense becuase we need almost twice as much inflows per day to keep this rally going now as we did in March.   Richmond Fed's Tom Barkin is also alarmed that the Labor Market's "weakovery" is going very slowly and may not last at that:

“What we’ve learned is that if you reopen with the right kind of distance protocols, and you have compliance with it…then we have a shot at having an economy that’s not disease-free, but at least is predictable enough that people can transact in it,” said Mr. Barkin in a phone interview Tuesday. “We are learning that there’s a model of maintaining public health that keeps this virus bouncing around as opposed to escalating.”

The ranks of the struggling are growing. The federal government’s $600 in additional weekly unemployment benefits expired in July. People have largely spent the stimulus checks they received in the spring. Lenders are bracing for more people to fall behind on debt payments. Grocery shoppers are cutting back on spending.  Almost 11% of U.S. households didn’t have enough to eat in the previous seven days, as of July.  About a third of renters reported little or no confidence they could make next month’s payment.

Coronavirus: US passes six million Covid-19 cases - BBC NewsMeanwhile, the US just topped 6M confirmed cases of Covid-19 and we slowed down a little in August but now it's Back to School time next week and we're going to be marching 50M little soldiers off into crowded classrooms with poor air circulation, where they can breathe on each other all day long and then come home to breathe on the rest of the family – what a good time is in store for all of us – what could possibly go wrong?

Well, already more than 200 employees have been barred from work in Georgia’s largest school district. A high school in Indiana had to shift to online learning after just two days. And students in Mississippi were forced to quarantine after classmates tested positive for the coronavirus during the first week of classes.  Already in the South and the Midwest, students and teachers have brought the virus to school with them, triggering quarantines, delayed openings and temporary shutdowns as positive tests roll in.

President Trump, who has pressured schools to reopen and threatened to withhold federal funding from those that do not teach in person, renewed his call on Monday, tweeting first “Open the Schools!” and later “OPEN THE SCHOOLS!!!”  The school Trump's son goes to is private and will not be opening due to the exessive risk it poses to the children.

As soon as you open classrooms, within two weeks, teachers and students will get sick, bus drivers will get sick, and staff will get sick,” Dr. Peter Hotez, Dean of Tropical Medicine at Baylor College said. “And all it’s going to take is one teacher admitted to the hospital in the school district and that’s it, it’s going to be lights out and no one will show up to work.”

So we have that to look forward to!

Hey you, Whitehouse
Ha, ha, charade you are

You well heeled big wheel
Ha, ha, charade you are
And when your hand is on your heart
You're nearly a good laugh
Almost a joker
With your head down in the pig bin

You're nearly a laugh
But you're really a cry – Pink Floyd


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  1. Here my comments and question in respect of yesterday NPauls ROKU, with an additional option play.
    •  yodi
    September 1st, 2020 at 3:57 pm | Permalink | Tweet thisIgnore this user
    ROKU Covered call. Some what not clear. leap BCS should possible be 10 off and only roll 5 150 calls to where???, so to stay by the role of selling half the calls against the leap BCS, and not having 8 longs against 16 short calls. Maybe I am wrong.
    Here my idea: Buy 10 of the June 22 150/250 BCS,  cost 31,360.00 Roll the 5 150 Jan 21 short call options to 5 April 21 185, cost of the roll 4875.00. So out of the 90,000, the sale of 500 stock, I am left with 53,765.00.
    One obviously I can increase, with the remaining cash  the BCS and as well sell more short April calls, always half the amount of options of the BCS.
    However my final comment, I feel the stock has climbed very high on the scale, and personally would wait with any option play on this stock. Yesterday T traded at 29.47, with a yield of 7%, Giuld at 65.83 with a yield of 4.13%, Just to name two.

  2. Nasdaq looking very 2001 right now!

  3. Our local school district abruptly reverted to virtual learning a couple of days before school started! It seems that keeping kids safe was simply not possible.

  4. Some good comments from Joe Weisenthal:


    We had the perfect example of trickle up and the effect that it had on the economy – basically preventing it from cratering completely. Yet, you can be sure that the GOP will go back to their trickle down theory that have been proven not to work as soon as they can (or as soon as there is a Dems president). 

  5. Good morning everyone. Hope you are all having an amazing week. Here is the link to today's webinar.

  6. Good Morning.

  7. Amazing/Andy – Indeed. Last night our neighborhood coyote was joined by a smaller coyote, maybe his mate (coyotes mate for life), maybe one of last year's puppies grown to rowdy teenager-hood. Many people hear have stopped using rat poison, so the coyotes aren't getting poisoned and developing mange, so they're looking quite handsome. The two of them played in the street, dancing around, tails wagging. Amazing.

  8. weird action on the ym futures

  9. Good morning!

    Nasdaq still up in chart heaven I see….

    Shools/StJ – Wise choice.  It's not possible – it's insane.

    At least three students at Corinth High School in northern Mississippi have tested positive for the coronavirus since school resumed last week, and about 40 are in quarantine.

    Is that 6 feet apart?  

    Cool chart Andy, amazing how many popular things suddenly cease to exist.  

    For Snow:

    Weirdness/Tommy – Very unstable action up here.  

    TSLA diving to $450.  We have a huge loss on our short Jan $380 calls in the STP but they have so much premium in them (50%) that I'm not inclined to change them.  I still think the target is very fair and we also have the short 300 puts post-adjustment.

    TSLA Short Call 2021 15-JAN 380.00 CALL [TSLA @ $445.28 $-29.78] -70 8/20/2020 (135) $-581,980 $83.14 $45.21 $-94.82     $128.35 $-27.18 $-316,470 -54.4% $-898,450
    TSLA Long Put 2021 15-JAN 190.00 PUT [TSLA @ $445.28 $-29.78] 25 6/19/2020 (135) $85,350 $34.14 $-25.39     $8.75 $0.75 $-63,475 -74.4% $21,875
    TSLA Short Put 2021 15-JAN 300.00 PUT [TSLA @ $445.28 $-29.78] -30 8/21/2020 (135) $-78,900 $26.30 $8.33     $34.63 $5.13 $-24,975 -31.7% $-103,875

    Oil taking a hell of a dive:

    Still our shorting lines:  

    • Dow 28,750
    • S&P 3,500 
    • Nasdaq 12,000 
    • Russell 1,585 

  10. Phil,

    what's your opinion about Enphase Energy (ENPH) ?

  11. Phil, NPaul still did have some question on the roll of ROKU you sugested yesterday. I was not very clear on it either, see above my comments. Could you have a look at it. TIA

  12. ENPH/Gard – It's a shame as they were just starting to make money and then the virus hit.   Not bothering investors though as it's up almost 200% from the lows so I wouldn't chase it.

    ROKU/Yodi, NPaul – Not sure what the question is?  I thought ROKU was toppy yesterday so I suggested taking $181 and running but leaving the short Jan $185 calls (since I think they will expire worthless) and covering them with a June 2022 $150/250 bull call spread – just in case it keeps going up.  That takes $66,750 off the table and locks in a nice profit since his original net was $47,250 so the rest is playing with house money though it could still make as much as $80,000 more.  Seems simple enough.

    • The Energy Information Administration reports a much-larger-than-expected drop in weekly U.S. crude inventories as the effects of Hurricane Laura in the Gulf were felt.
    • Crude futures (CL1:COM -0.4%) jumped right after the numbers arrive, but remain in negative territory.
    • Domestic production sank to 1.1M bpd to 9.7M bpd. Refinery inputs fell by 800K barrels to 13.9M bpd.
    • EIA Petroleum Inventories: Crude -9.36M barrels vs. -1.89M consensus, -4.7M last week.
    • Gasoline -4.32barrels vs. -3.04M consensus, -4.6M last week.
    • Distillates -1.676M barrels vs. -1.357M consensus +1.4M last week.
    • Ryanair Holdings (RYAAY -2.0%) reports traffic fell 53% to 7M customers in August.
    • The company operated approx. 60% of normal August schedule with a 73% load factor.
    • Ford (F +0.2%) is targeting to eliminate 1,400 U.S. salaried jobs by year end as part of a multiyear $11B restructuring, reported Reuters.
    • The layoffs will be achieved through voluntary buyouts to employees who are eligible for retirement.
    • “We’re in a multiyear process of making Ford more fit and effective around the world,” Ford’s Americas President Kumar Galhotra said in the email. “We have reprioritized certain products and services and are adjusting our staffing to better align with our new work statement.”
    • As announced earlier, COO Jim Farley will succeed Jim Hackett as CEO on October 1.
    • Previously: Ford to trim 1K North America salaried jobs – Bloomberg (Aug. 31)
    • Unloved department stores could follow other stock groups hit hardest by the pandemic that have gained traction.

    The gulf between the haves and have-nots in the Consumer Discretionary sector is narrowing again. Department stores are showing signs of gathering momentum following bullish numbers this morning.

    Macy’s (M+5.2%) is gaining premarket after reporting fiscal Q2 results that beat on the top and bottom lines. While comparable sales were down a whopping 34.7%, digital sales jumped 53%.

    Macy’s “has the unique opportunity to grab nearly $10 billion in competitor sales, which would be a 50% increase from pre-COVID-19 sales numbers,” The Value Portfolio wrote on Seeking Alpha last week. “That increase in revenue could result in a much stronger earnings and future returns. As the company recovers, it'll be able to restart paying down debt and emerge much stronger.”

    Department stores have been shunned in favor of Amazon, home-improvement chains and the big-box retailers that can focus on digital sales and curbside pickup. 

    But the Macy’s results are helping some of the basement-dwellers come to near the top of the SPDR Consumer Discretionary Sector ETF (XLY+0.7%) premarket. Kohls’ (KSS+1.8%) and Nordstrom (JWN+2.2%) are higher.

    While not seeing the surges of recovery plays like the cruise lines in recent weeks, which have been helped by hopes in deployment of rapid COVID testing, Kohl’s and Nordstrom have been quietly returning to sector performance. 

    Kohl’s and Nordstrom are up about 10% in the past month, compared with a 10.7% gain in XLY.

    “The recovery of the consumer sectors will be a powerful investing theme,” Ivan Feinseth, CIO of Tigress Financial Partners, says.

    Along with tech, Feinseth is looking at depressed retail stocks, depressed restaurant stocks and cruise lines, which were set to have a record year in January, he tells Bloomberg. 

    Over six months, department stores remain among the biggest losers, with Kohl’s down 46%, Macy’s down 47% and Nordstrom off 56%. The sector is up 31% during that time.

    Sector Watch

    Costco (COST+1%) will report its August sales numbers shortly after the closing bell.

    July comparable sales after factoring out gas and F/X were up 15.7% in the U.S., 14.8% in Canada and 18.2% for other international markets. Shares of Costco have gained in after-hours trading the last three times the retailer has reported monthly sales.

    The SPDR Consumer Staples ETF (XLP+0.3%) continues to underperform, up just 4.7% in the past month, despite the recent rally of Walmart (WMT+2.6%), up again this morning.

    More momentum from Costco, up 8% in the last month, could help the struggling sector.

    • UBS isn't getting pushed off its negative view on Macy's (M +0.8%) after the department store topped consensus marks for Q2.
    • "We think the Street underestimates the pressure on M earnings from share loss as consumers' migrate to online pureplay channels, retailers with better value-for-money propositions such as TJX, and brands' own stores and websites. Plus, COVID-19 has changed fashion trends away from work, dressy, and event items, three important categories for Macy's. We also believe many underestimate how difficult it will be for M to re-leverage fixed costs," warns analyst Jay Sole.
    • Sole and team keep a Sell rating on Macy's.
    • Shares of Macy's have dropped this morning from where they stood in the premarket session and after the first half hour of trading.
    • Previously: Macy's +8% after posting narrower-than-expected Q2 loss
    • July Factory Orders+6.4% vs. 6% consensus and +6.4% prior (revised).
    • Shipments +7.5%.
    • Unfilled orders -0.8%.
    • Cowen lifts its price target on Costco (NASDAQ:COST) to $410 from $370. The new PT is one of the highest on the Street and reps 17% upside potential.
    • "We view COST as one of top share winners during the pandemic driven by strength in food & other categories. COST well positioned for continued physical & digital traffic as its core competency is to offer members exceptional value given a fixed markup model. We also believe COST's e-comm investments in talent, infrastructure, & products will drive innovation & loyalty," writes analyst Oliver Chen.
    • Shares of Costco are up 0.75% in front of the retailer's expected release of August sales numbers after the market close today.
    • Compare valuation on Costco to peers.

  13. Phil I do not want to labor the problem, But in original comment you woud have 8 BCS and combined 16 short calls. Possible I see it wrong. The man has now 5 short Jan 21 150 calls well deep ITM and 500 stock. Therefor my sugested play above.

  14. Looks like some taking profits on AAPL

  15. Phil / COST

    any thoughts on a fun craps earnings play ?  i want to have a little fun.thankyou!

  16. ROKU/Yodi – I meant for there to be as many spreads as short calls, not 1/2.  

    COST/Monk – I'm sure they did well but not THAT well.   COST doesn't make money selling stuff, they make their money selling memberships so I think earnings will disappoint a bit but I wouldn't want to short them much.  Let's say sell 3 Oct $350 calls for $16.65 ($4,995) and buy 2 April $350 ($30)/400 ($11.50) bull call spreads for $18.50 ($3,700) so a net $1,295 credit and, if all goes well, then whatever is leftover on the spread after the short calls expire is more profit.   Still risky but fun.


    Webinar Time (10 mins).

  17. Starter position in BTAI….selling Sept 50 Cs. Net ~43.80 debit with calls STO.

  18. DD on PDSB….now 800 shares.

  19. WBA / Phil,

    Last week you were pounding the table on them, yesterday you indicated ex RAD CEO was heading up US operations for WBA and this may cause you to bail on them.  Has your premise/outlook for WBA changed?  Will start trimming down if you feel the risk has gone up as I suspect they will take a market selloff pretty badly which opens the door for a possible lower entry.  TIA!

  20. Whoa….this is simply an amazing feat… money money….

  21. lol .. all indexes up .. including VIX.  Everything must go North!!!

  22. Yodi, thanks very much for helping on Roku question and your advice on resolving the current position.

  23. WBA/Jeddah – Well, as I mentioned in the Webinar, as he's only the US CEO, I can see why the EU CEO wanted him.  I decided they are still too cheap to ignore.  

    Up/Jeddah – What other direction is there?

    Yet another superstar finish.

  24. Yes, The Crash Is Coming

  25. This is an incredibly good explanation 

    This Is Where The Money Fueling The Stock Market Is Coming From

    This Is Where The Money Fueling The Stock Market Is Coming From

    From Broker Dealer Select Business Briefs, a Flipboard magazine by Evan Sadowski, Managing Member

    With all the day-to-day noise that we are presented with in the market, it is important to remind ourselves of what consistently drives…

    Read it on Flipboard

    Read it on

  26. Second Trump appointee out at FDA amid credibility concerns