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Thursday, June 8, 2023



Distressing Thursday – CDC Concerned About US Virus Trends

Coronavirus Briefing: What Happened Today - The New York Times"CDC says the U.S. is now seeing a ‘distressing trend’ in coronavirus outbreak."

I'm sorry, I don't want to keep talking about the virus that's impacting the Global Economy and life on Earth as we know it but it IS out there every day and it is the #1 Macro Concern on the planet – no matter how much you choose to ignore it.  Today Jay Butler, the CDC’s deputy director for infectious diseases, said Covid-19 cases are growing “really in all parts of the country,” with particularly high transmission in the Midwest.  “Unfortunately, we are seeing a distressing trend here in the United States.  Smaller, more intimate gatherings of family, friends and neighbors may be driving transmission as well, especially as they move indoors.”

I can testify to that as I was at the Breakers Hotel in Florida this weekend and there was a wedding in the courtyard and there were about 500 people, none of whom were wearing masks and they were having a buffet AND they were all gathered in the half of the courtyard where the food was, rather than spreading out.  And they were hugging and kissing and talking in small circles – MADNESS!!!  

Signal, GZERO MediaAnd these are wealthy people (the hotel is very expensive) so you'd think at least SOME of them have had educations and would be aware of the risks.  I felt bad for the bride, who will aways remember her wedding as a super-spreader event that leads to the deaths of dozens of guests and their families, but I felt more bad for the hotel staff – who were the only people wearing masks and gloves which offered little protection from this germ-fest.

“I recognize that we are all getting tired of the impact Covid-19 has had on our lives,” Butler said. “We’re tired of wearing masks, but it continues to be as important as it has ever been and I would say even more important than ever as we move into the fall season.”

The U.S. still has the worst outbreak in the world, with more than 8.2 million cases and at least 221,122 deaths, according to Hopkins data.  Health officials and infectious disease experts fear the situation could become dire as flu season begins and hospitals risk reaching capacity.  Butler did say he does expect there to be a vaccine soon, perhaps by the end of the year and the states have already submitted their distribution plans.

Pfizer (PFE) and Moderna (MRNA) are still the leading contenders in the vaccine race and PFE is still cheap for whatever reason at $37.08 – it was a Top Trade Alert back on September 28th at $36, so here's a chance to get in in case you missed it.  As I noted at the time, the vaccine won't be a big profit initially for PFE – it will likely be sold at cost – but the company is a great overall value play and, if the vaccine is needed annually like a flu shot, then the revenues will be there for many years to come.

Yesterday, in our Live Trading Webinar, we talked about some other stocks that were still cheap at the moment.   T was a Top Trade Alert the same day as PFE and it's a lot cheaper now than it was then (a nice way to say we called it wrong) at $26.72 on the day of their earnings.  This is idiotically low and earnings were just OK but the stock is popping to $28 because, as I said in the Webinar, just because a stock is being sold off by idiots doesn't mean it's not a bargain.  Things like earnings tend to balance that out but here's another Top Trade you can still pick up at a good price.

If T is making money, I bet China Mobile (CHL) is making money as they have 950M subscribers and AT&T has around 100M yet T is valued 50% more than CHL, which is trading at 7.6x earnings.  We already have CHL stock in our Dividend Portfolio, because it pays $1.97 (6%) per $32.65 share and we have 1,000 shares so we're going to promise to double down at $30 by selling 10 2023 $30 puts for $5.50.  That would net us into 1,000 more shares at $24.50.

You can just sell the puts for $5,500 to initiate a long position but, in our Long-Term Portfolio, we're going to also buy 30 of the 2023 $27.50 ($6)/35 ($3) bull call spreads for net $3 ($9,000) and that will put us in the $22,500 spread for net $3,500 and we're sure to be able to make that up selling a few calls along the way.  The ordinary margin on the short puts is $1,444 so it's a super-efficient play as well.  If all goes well and CHL is over $35 in Jan, 2023, then the profit on the spread will be $19,000 (542%).

See, there are still things to buy, even in a pandemic economy…



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Phil / INTC – I've been through the presentation and the CC.  The net is – they are taking a margin hit on 10Nm – they said it was mix, but the reality i – its   an ASP hit – 200 BPS – I think it would have been more, but they may moved parts into channel…  They can't compete with the 7nM product lines In some spaces so they either drop prices or loose the business.  This is not transient in my view as they were asked if '21 would be better they said probably not.  This is probably the  big reason they are finally selling the RAM bus.  The ram business will be accretive mid next year by guess – what 200 BPS.   In terms of outsourcing they are studying this and will not make a decision till next quarter or quarter after…  really had no real update on this.  I"m hoping they've got some magic, but it may be a long slog to '22 '23 for 7nM —-   This feels like a long slog, and they may get re-rated a bit for the next 12 to 24 months.   Unfortunately I have a '22 spread that I covered all of earlier so I may be able to roll – and adjust  out to 23 – I had them targeted for 60 by end of next year….. need to re look at this.    that's. my two cents – would be great to have your view once you have a change to look at this in detail.

Phil / AT&T – this was a pretty good quarter,  there churn rate was really low – like historically low.  This does not make sense….. they are not disconnecting people during Covid so I'm wondering if this is impacting it.  But the HBO + had +4Mil (8Mil) total and they are offering this as an incentive on new phones so this may help, and if it sticks after spiff runs out it would be great…..  This should be up closer to 30 now.

KMB Dropped 7% yesterday!
My following plays ideas all based on 100 stocks and one option.
That poor man’s trade!
Buy Jan 23 125 call for 22.90 Sell Jan 23 125 put for 15.80. Cash out lay 710.00. Hold back and watch the development of stock for the next few days at present the Nov 20 141 call sells for 2.50.
Here you can use the long leap call as stock replacement for selling short monthly calls.
KMB has a yield of 3.1% 
So spend 138.09 on the stock sell the Jan 125 put for 15.80 And sell the Nov 140 call for 3.10. Net cash outlay 11,920.30. Should you get assigned Nov. 20 you make 5.01 on the deal in 28 days or 7.9%. Not including the discount of the put sale in respect of the stock price!!!
On none assignment you can ride the stock and you can continue your short monthly call selling one or even three month out for a combined return (interest and opt. premium) of about 2.7% per month.
Please not prices might be different after Market opens!!!

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