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Wednesday Worries – 25% of Small Businesses are Closed

This is concerning.

In this excellent but disturbing graphic by Visual Capitalist, major cities are averaging 30% drops in small business activity with San Francisco HALF closed and New Oreleans not far behind.  When you break it down to liesure and hospitality businesses, it's a devastating 65% and 72% in those cities and even Washington, DC has 55% of their L&H sector closed among 37% of all small businesses still shut down.  

Yet out Congresspeople can't see the need for more stimulus?  Do we need any better reason to throw the bums out?  And it's not like we're having some fantastic recovery.  Overall Small Business Activity in the US is down 21% – no better than it was in June and that's AFTER the first $4Tn in stimulus has been spent.  

There's been some spillover from Main Street to Wall Street as Bank of America's (BAC) profits are down 16% in today's report and Wells Fargo's (WFC) are down 56% but Goldman Sachs' profits almost doubled expectation at $9.68 per $215 share in a single quarter – very impressive.  We don't have much banking in the LTP and GS is a good one (well, evil, but good earnings) so let's add them with the following trade:

  • Sell 5 GS 2023 $165 puts for $20 ($10,000) 
  • Buy 10 GS 2023 $170 calls for $60 ($60,000)
  • Sell 10 GS 2023 $210 calls for $40 ($40,000) 

That's net $10,000 on the $40,000 spread that's 100% in the money to start and all GS has to do is not be lower than it is today in 2.25 years and we make $30,000 (300%) – aren't options fun?  Our worst-case scenario is owning 500 shares at net $185, 15% lower than the current price and the ordinary margin requirement is just $5,718 – so it's a very margin-efficient way to make $30,000 too!

JPMorgan Chase and Citigroup posted better-than-expected results Tuesday, while also warning that the economy isn’t out of the woods yet and there may be significant defaults on loans by customers in the future.  While the Big Banks may be able to profit off the misery of others, the regional banks will be hit hard by those small business closings so look for more troubling reports in those areas that are hit hard by shut-downs.

U.S. hospitalizations are at their highest level since August, according to data from the Covid Tracking Project, with 52,000 new cases reported YESTERDAY. Investors remain concerned that a continued uptick will result in fresh local restrictions, placing pressure on businesses and economic recovery.  Of concern yesterday was news that both JNJ and LLY had to halt their vaccine studies due to unexplained illnesses.  This is not abnormal in a study but any lack of progress is a big concern while 1,000 Americans are dropping dead every day from the Trump Virus.  

Nonetheless, the markets are back around their all-time highs ahead of the election so Trump can brag about the economy (because the market is the economy in Trump's mind) and, of course, he's now "immune" to Covid, plus whatever new BS he comes up with today so – MAGA!

Labor Secretary, Eugene Scalia's wife tested positive for Covid today – she was at that party with Trump last month and soccer star Cristiano Ronaldo tested positive and my daughter is in quarantie because someone in her dorm tested postive – so their solution is to force you to STAY IN THE DORM???  MAGA!    

The World Health Organization brands the "Herd Immunity" as unethical so, of course, it is Donald Trump's main plan for "fixing" the virus problem – simply infect everyone and we'll all be immune, like Trump.  Or dead, like Herman Cain, who died after one of Trump's rallies earlier this year.  GOP "scientists" who are pushing to allow the novel coronavirus to circulate freely among healthy young people until herd immunity is reached have found a receptive audience inside the White House, where officials say the controversial approach is in line with President Trump’s existing strategy.  

 


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  1. Good Morning.


  2. Good morning everyone!! Big drops in the temperature coming to the Northeast this weekend. Let's talk about what other drops might come…. Here is a link to today's webinar

    https://attendee.gotowebinar.com/register/3722173825261172239


  3. Good Morning



  4. So small businesses are going bankrupt, GDP around the world will contract and forecast for next year is being lowered as COVID cases are going up again everywhere and vaccine and therapeutics are still months away. And Congress is deadlocked on measures that could help the bottom 90%! Well Trump seems OK to send a $1200 check (new iPhone anyone) as long as his signature is on the check. And also OK with money that his cronies can control!

    On other news, for some reasons, most other countries have been doing better at dealing with the virus and we seem to be the exception. This will surely get better as soon as the ACA gets eliminated because nothing is better for healthcare results than another 10M people without insurance and close to 8M people with an pre-existing conditions now!

    https://arstechnica.com/science/2020/10/grim-new-analyses-show-us-covid-death-rates-remain-shamefully-high/

    “In summary, a second wave of devastation is imminent, attributable to mental health consequences of COVID-19,” the psychiatrists write. “The magnitude of this second wave is likely to overwhelm the already frayed mental health system, leading to access problems, particularly for the most vulnerable persons.”

    With the extra deaths, long-term health problems, looming mental health crisis, and loss of gross domestic product from the pandemic, Harvard economists David Cutler and Lawrence Summers estimate that cumulative financial costs of the COVID-19 pandemic will be $16 trillion.


  5. Apple analysts praise iPhone 12 pricing, rest of event met expectations

    Apple's (NASDAQ:AAPL) iPhone launch event yesterday largely met analyst expectations with pricing the primary surprise.

    Jefferies (Buy) raises its Apple target by $5 to $140, saying the lineup was "largely in-line with our expectations with a few modest positive surprises." But the firm still expects a "robust" upgrade cycle driven by the inclusion of 5G and the "aging installed base" of devices that need an upgrade.

    The firm notes that carrier promotions were "one of the most important elements of the iPhone 12 launch."

    Raymond James (Outperform, $120 price target) said the announced prices were the key takeaway and should increase Apple's ASPs. The "aggressive trade-in incentives" from carriers should fuel the upgrade cycle. The firm sees "plenty of room and plenty of reasons for estimates to move higher" when Apple reports earnings results later this month.

    Context: The iPhone 12 model pricing starts at $699 for the iPhone Mini but the Pro models (Pro and Pro Max) were priced exactly the same as last year's Pro versions, $999 and $1,099, respectively.

    Apple can command a premium price on its devices, but the phones are still launching during a period of macro uncertainty.

    According to Canalys data, H1 2020 global smartphone shipments for devices priced $600-799 were up 10% Y/Y while those priced over $800 fell 23%.

    "Those customers who might have made a purchase decision based on luxury have delayed that decision, due to the crisis. But those making a purchase out of necessity are still a stable part of the market," says Canalys analyst Ben Stanton.

    With the 5G iPhone launch, Stanton says Apple will "finally be able to target stubborn upgraders at the high-end who are looking to future-proof their next device."

    Apple shares are up 1.3% to $122.62.


  6. Good morning!

    Oil up to $41 on this API data:

    Crude -831k Cushing + 1,6M Gasoline +1,6Mi Distillates – 3,6M

    It's pretty much net 0 so I'm for shorting /CL here with tight stops above.  /RB too at $1.20.

    Just a good risk/reward play – not a lot of conviction.

    Don't forget our GS play from the main post for the LTP:

    There's been some spillover from Main Street to Wall Street as Bank of America's (BAC) profits are down 16% in today's report and Wells Fargo's (WFC) are down 56% but Goldman Sachs' profits almost doubled expectation at $9.68 per $215 share in a single quarter – very impressive.  We don't have much banking in the LTP and GS is a good one (well, evil, but good earnings) so let's add them with the following trade:

    • Sell 5 GS 2023 $165 puts for $20 ($10,000) 
    • Buy 10 GS 2023 $170 calls for $60 ($60,000)
    • Sell 10 GS 2023 $210 calls for $40 ($40,000) 

    That's net $10,000 on the $40,000 spread that's 100% in the money to start and all GS has to do is not be lower than it is today in 2.25 years and we make $30,000 (300%) – aren't options fun?  Our worst-case scenario is owning 500 shares at net $185, 15% lower than the current price and the ordinary margin requirement is just $5,718 – so it's a very margin-efficient way to make $30,000 too!


  7. Wow, StJ, that is one awful chart!  

    iPhones/Batman – What else is there to get for Christmas?  I think this will be a huge year for them.   All the Telcos will be promoting like crazy too.  


  8. Damn, holiday, no EIA until tomorrow (11am)!


  9. Mortality / Phil – I find it amazing that we are basically the only country not learning from the experience. I guess it's that anti-science bias! 


  10. So that's a quick $500 on /RB and $200 on /CL so no sense in being greedy.



  11. LQDA….DD on stock.  This one is way undervalued.


  12. Rolling BTAI Oct 50Cs to Feb 55C for net $9+ credit.


  13. Rolling PSNL Oct 22.5 to Nov 25c for $1 credit.  


  14. MYOV buy back Oct 20C and 15P.  Trying to sell Nov 15P for 1.60 or better. Currently 1.30


  15. Pharm, whats your take on the patent issue please, thanks.


  16. UTH/patent with LQDA….I am not an attorney, but UTH sues everyone and their mother that tries to use treprostinil in a formulation.  They hope to put one out of business through legal fees. UTH is extremely aggressive in preserving their PAH franchise.  My guess…and it is a wild guess…they just buy LQDA…a superior technology.  UTH is also in bed with MKND on their technology.  Market cap is < 120M.  


  17. FDA is ruling next month on data from LQDA…. Corporate presentation is here.


  18. I am also buying the LQDA Jan 2.5C for 1.35.


  19. Well we are not making the best pattern at the moment.

    Of course, we knew Monday was BS so this is just a correction of that so far.

    LQDA/Pharm – Certainly seems worth a toss. 

    /CL back at $41 is back to being a short again below the line now that it's calmed down as I can't see EIA being exciting enough to justify – last week certainly didn't and Columbus Day is not much of a driving/travel holiday, is it?

    Another reason I like shorting oil here is we're not far away from the rollover on the November contracts and December is very crowded with fake orders that NO ONE is going to want delivered so we could be heading for a nasty crash like we had in March, when there were way too many May contracts to roll into.

    Click for
    Chart
    Current Session Prior Day Opt's
    Open High Low Last Time Set Chg Vol Set Op Int
    Cash - 40.19 40.19 40.19 00:00
    Oct 13

    40.19s*
    0.82

    -
    39.37

    -
    n/a
    Nov'20 40.19 41.15 39.82 41.03 15:12
    Oct 14

    -
    0.83 294677 40.20 132930 Call Put
    Dec'20 40.49 41.43 40.12 41.31 15:12
    Oct 14

    -
    0.82 243237 40.49 392158 Call Put
    Jan'21 40.84 41.74 40.48 41.62 15:12
    Oct 14

    -
    0.77 72402 40.85 208129 Call Put
    Feb'21 41.15 42.04 40.83 41.91 15:06
    Oct 14

    -
    0.72 20792 41.19 113984 Call Put
    Mar'21 41.42 42.32 41.15 42.18 15:07
    Oct 14

    -
    0.66 29218 41.52 149666 Call Put
    Apr'21 41.77 42.53 41.44 42.42 15:05
    Oct 14

    -
    0.62 9881 41.80 60370 Call Put
    May'21 41.95 42.75 41.82 42.64 13:46
    Oct 14

    -
    0.60 4670 42.04 47188 Call Put
    Jun'21 42.19 42.93 41.90 42.81 15:08
    Oct 14

    -
    0.56 32660 42.25 205297 Call Put

    Look at that turnover today, 132,930 contracts were traded 294,677 times!  

    SCO (2x short oil) could be fun to play as it popped 200% in March/April.  Figure $30 as a target and the Jan $22 calls are $1 so let's buy 50 ($5,000) for fun in the STP and risk $2,500.

    If for some reason we get a quick double, we take half off and it's a free ride on the rest.


  20. Phil:  I am trying to understand your SQQQ play. On your 9/18 ST portfolio review, you said:

    I think what would make me happy is rolling our 100 SQQQ $25 calls at $73,000 to 200 of the June 2021 $15 ($13.50)/30 ($8.50) bull call spreads for net $5 ($100,000), using some of the TQQQ money we just cashed.

     

    But on your portfolio review, you show that you bought  the calls for $13.50, but sold the 30s for $11.70 .. or $3.20 more than above ($60,000 difference in profitability).  I am confused how that happened.  Please explain.  









  21. Why is spending $5000 on SCO calls only risking $2500?


  22. Because we intend to stop with a 50% loss.