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The Week Ahead – US Virus Infections Hit a New Record Ahead of Election

4 more years!  

At this pace, in 4 more days anther 240,000 American citizens will hve the "China Virus" – named so by the President despite the fact that, to this day, less than 100,000 Chinese citizens have caught the virus – TOTAL!  By election day, 480,000 more Americans will be infected, more than Germany's 8-month total and, at over 60,000 infections per day (more than Singapore or Ireland's totals), we are now pacing at a new record of infections heading into an election to decide between a candidate who belives the virus is a major threat and one who doesn't.  

Keep in mind these infections are increasing and, with 8,637,000 Americans now infected (one in 38 people), if we don't DRASTICALLY change our ways (hint, hint for next Tuesday!), we are on a truly disastrous path that is not only a threat to your health – but a dire threat to our economy as well.  This is the ticking time bomb Trump is leaving us, whether he stays in office or not.  Like George Bush II's economic collapse before him, the Democrats will inherit a disaster in progress which the next Republican Candidate will try to blame on the Democrats – and not the man who truly caused it.

In the cartoons: Trump; Isis; Anti-vaxx | Editorial | stltoday.comI would almost hope Trump does get re-elected – so that people will truly see him trapped in a bankruptcy he won't be able to walk away from but that bankruptcy – Moral, Ethical, Evironmental, Financial, Health and Reputational – is our bankruptcy and the bankruptcy of our children, which will take many, many years to recover from.

The problem is, we simply can't afford 4 more years of this – one can only hope that's finally becoming clear to the swing voters, most of whom are forced to either to risk voting by mail or risk going to the crowded polls with their masks on, waiting hours in line knowing 1 out of 48 people around them has been infected with the virus already.  

My oldest daughter was disenfranchised, she's a likely Biden voter from New Jersey who is going to college in Pennsylvania and her absentee ballot simply didn't come – despite several attempts by her to contact them and re-request a ballot.  Not sending ballots to college students who are likely not to support the President is a great way of cancelling Millions of votes, so don't count Trump out yet, he could still win this thing.

A Memphis, Tenn., poll worker turned away people wearing Black Lives Matter T-shirts, saying they couldn’t vote. Robocalls warned thousands of Michigan residents that mail-in voting could put their personal information in the hands of debt collectors and police. In Georgia, officials cut polling places by nearly 10%, even as the number of voters surged by nearly 2 Million.  Trump's recently-appointed judges have gotten into the act as well:

Hundreds of people wait in line for early voting in Marietta, Ga., on Oct. 12.

  • The 9th Circuit Court of Appeals, overturning a lower court, refused to give Arizona voters a second chance to sign mail-in ballots. Without a reversal, unsigned mail-in ballots will now be discarded.
  • Another federal appellate court also reversed a lower court and prohibited voters in Texas from clearing up signature mismatches. Voters will only learn after the election if their vote didn’t count.
  • The U.S. Supreme Court stopped a South Carolina court order that said mail-in voters should not be required to have a witness sign their ballot. All mailed ballots will now have to include a witness signature, despite concern that the requirement is overly burdensome during the COVID-19 pandemic. The ruling also prohibits voters who forgot to get a witness from fixing — or “curing” — their errors.
  • The Supreme Court on Wednesday overturned a lower court ruling that allowed Alabama counties to offer curbside voting, in a bid to lessen voters’ exposure to the coronavirus. In a 5-3 ruling, the court’s conservative majority blocked drive-up voting. The decision was criticized as harmful to Alabama’s Black voters during a health crisis that has disproportionately affected Black and Latino Americans.
  • Republicans are trying to prevent changes to allow the counting of ballots that arrive after Nov. 3. in three other battleground states — Michigan, Wisconsin and Minnesota.
  •  On Friday, the GOP went to court to try to stop the counting of mail-in votes in Nevada. The party said it needs observers to scrutinize the process, in a state where Democrats have mailed in more than two times as many ballots as Republicans.

So what?  It's just Democracy being trampled.  We used to go to war with other countries over such atrocities, now it's happening in our own back yard and people just have too many other things on their minds to worry about it, apparently.  All this uncertainty is not good for the markets and our Futures are down about 1% this morning – our first down Monday in a long time and we're back below 3,420 on the S&P 500 – again.

We talked about shorting the S&P (/ES) Futures in Friday Morning's PSW Report so congratulations to all who played along.  It's going to take a catalyst to get us much lower as the 50-day moving average is at 3,408 and that should be solid support as it's rising so certainly this area will be bouncy in the very least and we've already calculated 3,450 to be the weak bounce line according to our 5% Rule™ while 3,480 would be the strong bounce line, which was harshly rejected on Friday (as we expected).  Still, we know who we have to thank for the rally we've had so far:

See, it only cost $7Tn so far this year to keep the GDP down 10% and $7Tn is 35% of our GDP – that's a pretty expensive habit if we can't break it on November 3rd, isn't it?  

It's a busy week on the Economic Calendar as we hear from the Chicago, Dallas and Richmond Feds today and tomorrow, followed by the first look at Q3 GDP, which is supposed to be up about 31% but, before you get too excited, that's after being down 31% last Quarter and you would think that is net 0 but 100% less 31% (31) is 69% and 69% plus 31% (21) is only 90% so Q3 GDP is still down 10% from Q1 (which also sucked) but, of course, that's not the number Trump will be touting to his endlessly gullible base, is it?

Earnings continue to come in hot and heavy with too many big names to count so buckle in for a wild ride on that front as well.   So far, earnings haven't been much worse than they were in Q2 – but they aren't much better either…

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Healh Care, Materials and Real Estate seem to be the places to be in Q3!  Still:

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Just remember, no matter who wins next week – half the people are going to be very unhappy and, if even some of those people want to sell their stocks – do we have anywhere near enough buyers to stop the prices from plunging?  What if those people worry Biden might raise Capital Gains taxes next year and they want to take their low-tax profits while they can?

 


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  1. Good Morning.


  2. good morning all


  3. Phil/FB

    i’m long 100 FB at 234 and short 2022 put at 40.04 and short 2022 call at 40.59. now that FB is about 283, maybe i should roll the 240 calls to 290 or 300, or take the profit on the trade and run? any thoughts? thanks


  4. Riding the lines!


  5. Number of cases going exponential in Europe as well. Look at a company like SAP, already looking at the impact that the virus will have on the global economy and revising their own numbers lower. A new confinement is now in the cards.


  6. Is Democracy being trampled or is it being Trumpled?


  7. No, just a simple assault and battery…. :(


  8. Actually, more like Robbery, Assault and Battery…. ;)

    https://www.youtube.com/watch?v=1SBkppkWYFc


  9. I love it!  And I definitely didn't listen to enough Genesis when I was younger.


  10. Good morning!

    Interesting start with the Nas popping but that's all AAPL I think.   The rest look weak.

    3,450 is the weak bounce.

    FB/Stuart – I would think they are doing great with everyone at home all the time.  Of course, no travel advertising (or less) but election advertising is big too.  Still $283 is 34x projected earnings with an $800Bn valuation against $18.5Bn last year but $10Bn in Q1/Q2 so far and Q3/Q4 are historically better so we'll see.  With your current short calls, you effectively sold FB for $280 and a $46 (20%) profit.  The short $280s are $52 and the 2023 $300s are $60 so I'd do that roll for +$18 and you are decently protected but FB doesn't pay a dividend so I'd rather buy the 2 2023 $250 calls for $82 ($16,200) and sell 1 2023 $300 call for $60 ($6,000) and take my 100 shares off the table for $28,100 so you'd have $17,900 back in your pocket off your net $15,337 entry, locking in a $2,563 profit and you still have a well-protected and rollable $10,000 spread (assuming you roll the short calls up to the $300s at least and you have $17,900 to play with.

    Isn't it silly to own a stock when options are so much more fun?

    Big Chart – Still looks very "M"ish to me.

    Exponential/StJ – We're becoming a rogue nation for not doing our part Globally to contain the virus.

    Trumpled/Fel – I like that one!

    GTA Online Tutorial #44 - How to Look Like Donald Trump! - YouTube

    Classic, 1020 – Haven't heard those guys played in years.  Interesting Sirius classic vinyl and 70s seems to ignore them.  (yes, that's the era I'm stuck in).  

    To keep in silence I resigned

    My friends would think I was a nut

    Turning water into wine

    Open doors would soon be shut

    So I went from day to day

    Though my life was in a rut

    'Til I thought of what I'll say

    Which connection I should cut

    I was feeling part of the scenery

    I walked right out of the machinery

    My heart going boom, boom, boom


  11. Drums are my jam… the best duet ever!

    https://www.youtube.com/watch?v=sA3rJXV4R4E


  12. Big Chart / Phil – I still wonder what next Tuesday is going to bring. There is so much uncertainty at this moment. Would markets rise if Trump wins thinking that there would be no new taxes and fewer regulations, or would they fall thinking that incompetence will continue for 4 more years with no end in sight. Will they go down if Biden wins due to new taxes being raised, or go up because they think that we can go back to fact based policies. Or go up because new taxes might not be as bad and help cut the deficit. After all, every time we raised taxes, things got better eventually. Or markets take a tumble if Biden wins because Trump refuses to concede and we go in a constitutional crisis. Or go up because the Dems win the senate and we'll have massive stimulus. Just so many scenarios where we could see large moves either way.

    Almost feel like buying a strangle for sh@t and giggles now!


  13. Most of you have heard me say something along the lines of "The US does not have a covid-19 program. Telling individuals to do something and expecting that to work is not a public health program". So what is a public health program, Snow? Well, it's testing, and a lot of it, contact tracing, and isolation of those who are contagious.

    Testing is not happening because it's limited to those with symptoms and often, money. Therefore these people have likely already spread the disease. That's not testing; that's a clinical exam, and we in the US seem unable to tell the difference between a clinical exam and population screening tests.

    The answer to that is a fast, cheap test that can be widely disseminated, and such technology exists (https://globalepidemics.org/2020/07/29/america-needs-to-radically-rethink-our-covid-19-testing-approach/)

    Second, we need to use modern contact tracing methods using cell phones like most of the world is doing, and third, we need to isolate those who test positive. Korea is doing this successfully, and they have offered to show us how. Sure, we lose some privacy. How does that compare to losing health and lives?

    Finally, we need to rethink the economics of the thing. What we're doing now with the haphazard reopenings doesn't work economically or medically (https://globalepidemics.org/2020/10/14/the-economic-case-for-robust-public-health-intervention-to-stop-covid/)


  14. We are not a nation of conformists – Just wait and see the response to any National action from the 'Don't tread on me's' and the anti-vaxxers….


  15. …and those worried about any outcome should just go to cash and take a walk…


  16. And snow brings up another point, Trump keeps saying that we have many more cases because of testing. Do we also have more hospitalization and deaths because of testing? Just wondering.


  17. INTC – Interesting take on this….

    https://www.wsj.com/articles/intels-cloud-thickens-11603449000?mod=djemheard_t

    HEARD ON THE STREET

    Intel’s Cloud Thickens

    Chip maker’s data-center sales slow just as it faces key questions about manufacturing outlook

    HEARD ON THE STREET

    Intel’s Cloud Thickens

    Chip maker’s data-center sales slow just as it faces key questions about manufacturing outlook


  18. Phil / SAP – Nice haircut today 




  19. Covid leaves 6m UK small businesses and 16m jobs in ‘precarious position’


  20. Fact-checking Trump on the border wall, voter fraud and more


  21. Pandemic Fatigue Is Real—And It’s Spreading



  22. its getting ugly out there – /ES knocking on the door of -3%


  23. Strangle/StJ – Probably the best play.  I simply think that this level of stimulus is unsustainable and, either way, the piper will have to be paid.  

    Jethro Tull - Pay The Piper (1994, CD) | Discogs

    Do you still remember
    December's foggy freeze
    when the ice that
    clings on to your beard is
    screaming agony.
    And you snatch your rattling last breaths
    with deep-sea-diver sounds,
    and the flowers bloom like
    madness in the spring.

    I agree 100% Snow. 

    Hospitalizations/StJ – Sure, if we didn't test and tell people they had Covid, they wouldn't go to the hospital – problem solved.  MAGA!

    INTC/Batman – The ebb and flow of business cycles simply escapes these people, doesn't it?

    SAP/Batman – Those damned European companies and their honest takes on their outlook!

    It took 26 analysts to be that wrong about SAP.  

    (Bloomberg Opinion) — If you’re trying to convince your customers to change how they spend 15 billion euros ($17 billion) a year and the pandemic-induced lockdown accelerates the process, that should be good news, right?

    Not in the case of SAP SE. The stock tumbled 20% on Monday after the German enterprise software giant said that increased demand for its cloud product, prompted in part by more people working from home, would prove detrimental to profitability. The 32 billion euros in lost market value meant SAP sacrificed its crown as Europe’s largest technology company. Chief Executive Officer Christian Klein is reaping the sour fruits of his predecessor’s missteps.

    It’s an unenviable position. Historically, SAP has made most of its revenue from selling licenses to its software, the cornerstone of which lets companies track how they spend money. The approach let SAP book the earnings upfront and then return a few years later to sell an updated version of the software, while earning some associated support revenue.

     

    In recent years, SAP has been shifting to a cloud-based subscription model. Rather than charging the customer a lump sum, the costs are spread over the duration of the contract — usually three years. That hits not just short-term revenue but also profitability, as installing the new setup costs money.

    To make matters worse, Klein is having to invest heavily to ensure that SAP’s gamut of products all work well together. His predecessor, Bill McDermott, spent $31 billion on acquisitions during his nine years at the helm but did little to integrate them. The upshot is that, in some instances, SAP customers have systems operating on 25 different software architectures. Fixing that costs money, and profitability suffers accordingly.

    SAP expects the investment to pay off eventually. For now, however, the company has not only revised down its full-year profit and revenue outlook, but it has also abandoned its 2023 goals in favor of new targets for 2025. It expects to have 22 billion euros in cloud revenue by then, up from 6.9 billion euros last year.

    This isn’t just a question of asking investors for more time — there are deeper concerns. The failure to adapt to the cloud quickly enough means that SAP may in fact be losing customers. While cloud revenue is increasing, the pace of that increase has slowed as the order backlog for the cloud has actually declined since the end of March. In other words, the bump in sales likely stems from deals signed in previous quarters and may not continue.

    Yikes, you don't see this kind of drastic breakdown that often:


  24. That M is getting formed now Phil smiley?


  25. For people keeping track, the NYSE is now where it was back in January 2018. So all the index gains happened in 2017 and we have simply going up and around that level since then.


  26. Not a lot of improvement into the close.  Dow down at the 2.5% line with Russell.

    VIX 34!


  27. phil/FB Thank you Options are great.