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Tipping Point Tuesday – Schrodinger’s Stimulus Moves the Market

Rumors are everywhere.

The President held another super-spreader event in Arizona yesterday and he has threatened to hold one every day up to the elecion until every last Republican is infected with the corona virus.  It is possible that Trump, a long-time Democrat until he decided to run for President, may have always had the goal of destroying ther GOP, who now fact humiliating defeat under his "leadership", a complete loss of power and now, even a loss of population as Covid-19 is spreading through the red states like a California fire.  

Speaking to supporters at the Prescott Regional Airport, Trump bashed CNN for its coverage of the pandemic, saying it’s all the network covers. “People aren’t buying it, CNN, you dumb bastards,” he said to loud applause.  Trump also referenced his own recent case of COVID-19, the disease caused by the new coronavirus. “If you have it, you have it, you get better,” Trump said (after over $100,000 worth of treatments). Over 220,000 Americans have died of COVID-19, with 5,830 deaths in Arizona alone – but at least they don't have to listen to any more of Trump's bullshit…

"Mr. President, you’re right about one thing: the American people are tired. They’re tired of your lies about this virus," Biden said in a written statement. "They’re tired of watching more Americans die and more people lose their jobs because you refuse to take this pandemic seriously. Now, more than ever, we need a leader to bring us together, put a plan in place, and beat this virus — but you have proven yourself yet again to be incapable of doing that."

Still, he might win – his followers are certainly loyal:

Meanwhile, it's all about the latest stimulus rumor for the market but nothing seems to be actually happening so, like yesterday – get ready to be disappointed.  The news isn't so good either so I find it very hard to be enthusaistic about the markets today:


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  1. Good morning!

    I don't know what's wrong with the images and video – hopefully they can fix it later.

    • September Housing Starts+1.9% M/M to 1.415M vs. 1.463M expected, 1.388M prior (revised from 1.416M). That's up 8.1% on a Y/Y basis.
    • In August, housing starts fell 5.1%.
    • Single-family housing starts were at a rate of 1.108M last month, 8.5% higher than the revised August figure of 1.021M.
    • Building permits 1.553M vs. 1.52M expected and 1.476 M (revised from 1.470M).
    • Single-family authorizations in September were at a rate of 1.119M, up 7.8% M/M.
    • Privately-owned housing completions in September were at a seasonally adjusted annual rate of 1.413M, up 15.3% from the revised August estimate of 1.226M and up 25.8% from the September 2019 rate of 1.123M.
    • Medtronic (NYSE:MDT) announces positive 12-month results from a randomized 250-subject trial comparing its DTM Spinal Cord Stimulation (SCS) device to conventional SCS therapy with its Intellis system for the treatment of back pain.
    • At month 12, the responder rate (at least 50% pain relief) for DTM SCS was 84% versus 51% for Intellis. DTM SCS also demonstrated its superiority as measured by the proportion of patients experiencing profound back pain relief (at least 80% pain relief), 69% vs. 35%.
    • The study met the primary endpoint at month 3 which was sustained at month 12.
    • The company acquired the DTM SCS device, which employs a novel SCS waveform called Differential Target Multiplexed, via its takeover of privately held Stimgenics in January.
    • Management will host a webinar today at 1:00 pm ET to discuss the results.
    • The Department of Justice will file a suit Tuesday accusing Google of anticompetitive behavior in search and search advertising, The Wall Street Journal reports.
    • The suit will also focus on arrangements in which Google’s search application is preloaded on the Android OS, and will allege Google unlawfully prohibits competitors’ search applications from being preloaded on phones.
    • Google parent Alphabet (GOOG GOOGL -0.5%) is slightly lower ahead of trading
    • Tesla's (NASDAQ:TSLA) vehicle registrations in California fell 13% in Q3 compared to a year ago, according to data from research firm Cross-Sell.
    • The report indicated Tesla registrations for the quarter were 16,200, which was a big jump from the 9,800 registrations in Q2 during the Fremont shutdown period.
    • California registrations for Tesla's Model 3, which in the past accounted for more than half of total registrations, fell 60% during the quarter to 6,500 units.
    • Overall, Tesla reported deliveries of 139K for Q3 and hasn't yet pulled its full-year target for 500k deliveries.
    • Tesla is due to report earnings tomorrow after the closing bell.
    • TSLA +0.79% premarket to $434.24.
    • Net earnings of $1.8B, or $6.25 per share, up 10.4% versus the prior year and ahead of consensus forecasts of $6.09 per share.
    • Sales by segment: Aeronautics +8%; Missiles and Fire Control +14%; Rotary and Missions Systems +8%; Space +6%.
    • Quarterly cash deployment: Capex of $408M; Repurchased 0.2M shares; Paid cash dividends of $672M; Record backlog of $150.4B.
    • Raised outlook for 2020: Diluted earnings per share of ~$24.45 (vs. $23.75-$24.05 forecast in July), on net sales of $65.25B (compared to $63.5B-$65B).
    • Dumb Wealth argues that "Lockheed Martin will continue to grow regardless of who is President in 2021." See the SA article, Lockheed Martin Continues To Reward Dividend Growth Investors.
    • LMT +1.1% premarket
    • Q3 results
    • Evercore analyst Amit Daryanani maintains an In-Line rating on IBM (NYSE:IBM) and trims the price target by $2 to $135, saying the company is "on the right path" given the planned spinoff of the managed infrastructure unit from the Global Technology Services operation.
    • Daryanani notes that the focus going forward will be on "gaining a better sense on the financials" of the remaining company and the "stabilization of their software segment."
    • Morgan Stanley's Katy Huberty (maintains Equal-Weight, $140 target) says that "after adjusting for FX and tax rate" results were weaker than expected and FCF trailed estimates. She views the spin as positive but notes that these type of deals tend to outperform only after the spin, which makes IBM "a 2022 stock."
    • BMO Capital analyst Keith Bachman (maintains Market Perform, $138 target) also notes that "patience will be required" with IBM's underlying business trends weak heading into the spin. He says IBM lacks near-term catalysts and has "limited capital to execute meaningful M&A until 2022."
    • IBM shares are down 2.8% pre-market to $122.01.
    • Previously: IBM slips after third consecutive revenue decline (Oct. 19 2020)
    • Impossible Foods (IMPF) says it started selling its plant-based burgers in about 200 grocery stores in Hong Kong and Singapore today.
    • The company made the push into the two new Asian markets ahead of a potential launch in Mainland China, where it is still awaiting approval from Chinese regulators.
    • "We are optimistic it could happen in the next year or even in the next several months," stated CEO Pat Brown on the China expansion.
    • Brown sees Impossible building a complete plant-based supply chain in the country.
    • "They (China) could have an entirely domestic meat supply which would be great for food supply, better from a public health standpoint and vastly reduce the environmental footprint," he notes
    • Related stock: Beyond Meat (NASDAQ:BYND)
    • Travelers (NYSE:TRV) gains 2.7% in premarket trading after Q3 core EPS of $3.12 beats the average analyst estimate by 2 cents.
    • Q3 2020 EPS improved from $1.50 in the year-ago quarter on net favorable prior year reserve development, higher underlying underwriting gain, and higher net investment income, partly offset by higher catastrophe losses.
    • Q3 net realized investment gains in Q3 2020 were $29M after-tax vs. $18M in the prior-year quarter.
    • Q3 net written premiums of $7.77B beats the consensus of $7.54B and increased from $7.57B a year ago.
    • Q3 underlying combined ratio of 91.5% compares with 94.1% a year ago.
    • Q3 core return on equity of 13.5% improved from 6.5% a year earlier.
    • Adjusted book value per share of $94.89 at Sept. 30, 2020 rose from $92.76 at Dec. 31, 2019.
    • Achieved record renewal rate change of 8.2% in Business Insurance unit.
    • "In Personal Insurance, net written premiums increased by 8%, driven by strong retention and new business in both Agency Auto and Agency Homeowners," said Chairman and CEO Alan Schnitzer.
    • Agency Homeowners' renewal premium change of 8.2% was its highest since 2014.
    • Q3 underwriting gain of $339M compares with an underwriting loss of $149M in the year-ago quarter.
    • Conference call at 9:00 AM ET.
    • Previously: The Travelers Companies EPS beats by $0.02, beats on earned premium (Oct. 20)
    • BMO Capital Markets upgrades Dave & Buster's Entertainment (NASDAQ:PLAY) to an Outperform rating after having it slotted at Market Perform.
    • The firm assigns a price target of $26 to rep 50% upside from last night's closing price and stand above the average Wall Street price target of $20.18.
    • Shares of PLAY are up 5.82% premarket to $18.37.
    • Last night's announcement by D&B of new amendments to the company's credit facility seems to have attracted investor attention.
    • Wells Fargo calls L Brands (NYSE:LB) one of its top long ideas and hikes its price target on the retailer to $45 from $40.
    • "LB could possibly post the most upside to numbers in 3Q across our entire universe. The combination of BBW’s momentum and VS’ stabilization should add more firepower to the stock despite its run in 2020. We are raising our 3Q estimates well-above the Street – with EPS moving to $0.28 (vs. Street $0.07) driven by higher comps/margins at VS, but more importantly BBW."
    • The firm keeps an Overweight rating on LB into the print. See consensus estimates on L Brands.
    • Shares of L Brands are up 0.51% premarket to $33.30

  2. the articles in list are not working  either it says page isnt here and maybe you are not logged in.

  3. Good Morning.

  4. Good morning from snow covered No Wisc!!

  5. I'd bet it is beautiful Pirate….

  6. 1020 It will be when another foot lands on us this weekend. I guess this might be the first time I can cross country ski in Oct? Very strange indeed. It says a "la nina" is in the works for this winter, so it will be a very long winter indeed.

  7. Anyone in a betting mood about the stimulus? Right now the hedges are working beautifully. Thanks Phil.   You are amazing.

  8. You'd need sunglasses and lotion for our 'Winter' here in So.Cal.   :(

  9. My Roomba Has Achieved Enlightenment

  10. Dollar is diving again

  11. LQDA is moving and shaking…..

  12. …could it be rigor mortis… ;)

  13. Phil/GOOGL

    GOOD Morning!

    I own the 10 contracts of the 2022 GOOGL 1240/1440 BCS, that I paid $110 for net, now worth $120, if I want to sell it right now.

    with the DOJ lawsuit looming, do you think this will materially limit any upside over the next 15months?

    I mean if they report great earnings, will that be a negative, as it potentially reinforces the govt. case.

    in any case, what would you do with the position? If possible, I want to make the full $100K

  14. phil / ROKU

    Good Morning. Our family is dropping off the ballots in person today. Don't want to take any chance with USPS. 

    I have no hedges unfortunately and the portfolio is going up and down a lot on a daily basis. 

    Here's my ROKU trades.  

    20 BCS 2022 Jan 110 / 180

    10 BCS 2022 Jan 110 / 210

    10 BCS 2023 Sep 80 / 180 

    and sold 10 2023 Sep 100 puts 

    bought back 2022 Jan 100 puts some time ago.

    for a net debit of $43,701

    now worth $193,440 for a potential spread of $350,000. 

    What should I do? 

    Is there a way to protect the gains with out exiting?

  15. Pharm / LQDA. Thanks for the trade!  What stock price do you see as a fair valuation for them?  The more I read it feels they have a real edge but UTHR looks hell bent on legal roadblocks.  Thx!

  16. LQDA Target: well, if it is rigor mortis…they could shake to $10 or so.

  17. Pelosi – She seemed really positive on Bloomberg today…..  Indiacted they were close on testing and tracing, as well as money to workers…. however still open on business liability and tax benefits at the lower and upper levels.  Fairly positive.  I think she  is positive in general about getting something done.  She is firmly putting trump on the hook for closing out republicans – says she thinks they can get to an agreement w/ Mnuchin but Trump needs to close the republicans.   Very smart – makes him responsible for the success of failure, and also negatively impacts senators that are at risk..  

  18. Things are all over the place today.  

    Now oil is flying back up.  

    /NG really off to the races.

    /KC getting cheap again:

  19. Stimulus, now I think they get something done. So much hype, seems like it would be a tragic let down if they couldn't close a deal of some sort. 

  20. Phil//  Your thoughts on IBM earnings and the stock down.  Thanks

  21. Lawsuits must be a good thing :) , both GS – settled on 1MBD for 2.8BB and  GOOG – Anti-Trust both up on their suit news..

  22. Hello Phil and all fellows, I would like to ask some questions.

    Your bullish trades take advantage of a good climb. But, it is obviously not an appropriate operation when the market is near the top. Supposing that by 2022 the market will do a new minimum what kind of smart operation would you do for a market in long and slow decline. Regardless of the hedges you made, do you do other specific and new short trades?
    In this situation, do you close the BSDs or keep them counting on hedges to compensate for significant losses?

    I would appreciate your comments..Tks,

  23. marcel

    Why do you think the market will be in a long slow decline, hitting a new low in 2022?

  24. Stimulus/Pirate – I'm betting no but Trump is pushing for it now and Pelosi seems optimistic but I think it may be a little Lucy with the football action:

    Lucy Charlie Brown GIF - Lucy CharlieBrown Football - Discover & Share GIFs  | Charlie brown, Lucy charlie brown, Charlie brown football

    GOOGL/Maya – Not much of a profit so far but yes, it's a risk you didn't anticipate so why stay in it?  You may want to make $100,000 but you certainly don't want to lose it.  If Trump is re-elected, GOOGL is not likely to take it well.

    ROKU/SK – You are pretty well in the money but now you have $193,440 on the table to make $156,560 in profit (hopefully).  The thing is you're at the money and ROKU clearly isn't on sale at the moment, at $27.2Bn with just 1.3Bn in sales (so 20x sales) and never having made a profit.  I would protect this one by cashing out and "settling" for a 5x gain and wait for a sale to buy it again or something you aren't going to be worried about.

    IBM/Rookie – I think they are doing well considering the pandemic.  Overall they are probably at 10x earnings for the year with a pretty good excuse that the virus ate their growth projections.  Same $150 target I've always had for them.

    Long, slow decline/Marcel – Well for that you'd have to go back to our Sell List from 2007 – that took a long time to pay off.  Still, notice our TSLA trade is a bit bearish.  We simply have to adapt to the environment as it presents itself.  Rather than look for undervalued stocks, we look for overvalued ones that haven't seen a decline yet.  CMG is another bet we have like that.

  25. The President Is a Wounded Animal