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Which Way Wednesday – To Infinity and Beyond?

Record highs!

New vaccines, Biden beginning his transition, Trump losing in courts – yes, things are looking up compared to the way the World seemed about to end for the last 6 months but that doesn't fix our economy.  Even the Dow gains of 50% in 4 years are coming off a very narrow-based rally in which just two stocks, Apple (AAPL) and Microsoft (MSFT) are responsible for the majority of the index's gains.

At the beggining of the year, the S&P 500 was priced at an already-high 18.4 times the earnings expected in 2020, and 15.5 times the earnings expected in 2022. Now, it is priced at 26.1 times the adjusted 2020 earnings forecast and no one is sure of 2022.  2021, let's say the 2nd half is "normal" and we have stimulus in the first half – figure 20-21x earnings in 2021 at this pace, still 25% above the historically normal 16x earning for the index.

And, don't forget, all that assumes NOTHING ELSE GOES WRONG.  

One of the things that could go wrong is a US Recession/Depression but it looks like we're planning to stimulate our way out of that and that's what put us over the top this week – Janet Yellen is the new Secretary of the Treasury and she helped usher in the low-rater era for the Fed – it's not likely she'll want to oversee the end of it.  However, 10-year rates are now at 0.9% anyway, up from 0.5% earlier in the year (the spike up in the chart).  

TLT is one of the ETFs we like to short at the top of their channel (140 on the 10-year, 170 on the ETF) as, generally, it's very doubtful that the US will move towards a zero-rate policy even though, effectively, we're standing at the door-step.  Paying people to borrow money is simply not a sustainable economic model and, when you do that on the scale of the United States of America, who are borrowing $500Bn a month in 2020 – there's just no way to make it work.

You can sell the TLT March $170 calls for $2 and use that money to help pay for a $165 ($9)/160 ($6) bear put spread at $3 and that would be net $1 on the $5 spreads that are 100% in the money to start.  Essentially we're betting that Janet Yellen and the Fed won't flip rates negative during her first two months on the job – seems reasonable to me!  The upside potential below $160 is a 400% gain on your net investment.  That's a great way to fight inflation!

Today should be a quiet day in the markets.  We had our GDP Report this morning but it's only the 2nd estimate for Q3 and it came in at the same 33.1% everyone espected (up from the previous quarter) so not really market-moving at all.  Corporate Profits were only up 27.5%, so not keeping up with economic growth and Durable Goods are down from 2.1% to 1.3%, so growth is slowing.

Wholesale inventories are up 0.9%, which is kind of bad but we are stocking up for the Holidays.  The question is whether the consumers will show up to buy things.  Retail Inventories are up 0.8% for the same reason and one of my major remaining market fears is that holiday shopping will be a disaster, leading to Q4 being a disaster and we'll be in a tremendous economic hole for Biden to dig us out of.  Or, in Trumpland:

Remember how Trump took full credit for the post-election rally in 2016, while Obama was still President?  In fact,. during this campaign, Trump predicted the markets would collapse if Biden got elected.  You would think it would be difficult for one man to keep so much BS straight in his head at one time, wouldn't you?

Have a great holiday,

- Phil


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  1. Good Morning.

  2. Good morning everyone. Here is the link to today's webinar. We wish you all a very happy and healthy Thanksgiving!

  3. LQDA – update.  CRL letter from the FDA who sited chemistry and manufacturing…and that they could not get to inspection of the facility due to COVID. Well…..nice. Holding shares and will see how it reacts over the coming week or two.  Will DD on stock when things settle down.

  4. thanks Pharm. Waiting for NWBO too. Figured it was problems because of covid.

  5. Hi – I need some help getting started with a fresh portfolio. What is the best way to go about this? Thanks

  6. Phil – MO. In your November Dividend  portfolio update you indicated you'd close the position but it was small enough that you kept it. I'm building up my position in them and now concerned if you have doubts about them going forward. Can you clarify your stance on MO?  thx!

  7. nir123 – Welcome. I would suggest starting off by reading the last few weeks of PSW, including comments.

  8. Phill// What is your take on AAPL?  They announced Apple store fees cut from 30% to 15% for developers making <= $1M per year.  Won't that cut into their earnings and there for cut the share price down?  If so and with the Biden tax looming large, etc what is your price expectations 2022 & 2023.with the Biden tax looming large, etc


  9. Welcome, nir123 – Phil will likely ask you the standard how much ya got, what're you looking to do questions. The other thing is click on the education tab on the top of the page, leaf through those, and check out "The Man Who Planted Trees".

  10. nir123 – oh, one other thing – don't short TSLA…..

  11. Good morning! 

    Going to start by catching up with yesterday's chat.  

    AAPL/Rookie – As I keep saying, I think $2Tn is too much but I sure wouldn't short them.

    SD/JPH – That's the problem with all these statistics, they are not bases on consistent data sets.  I tend to pay more attention to trends within the data rather than the data itself to see if things are better or worse as the numbers can be very misleading when the inputs are inconsistent.  

    INTC/Swamp – I wouldn't sell any calls on that.  Potential Stock of the Year candidate but I think WBA is in the lead as the Covid vaccine may be a direct catalyst that INTC lacks at the moment. 

    Down 36% YTD Walgreens Stock Looks Attractive At Current Levels

    ETHE/BDC – Good move.

    Consumer Confidence/Malsg – Not inspiring.  Again my theory that holidays will be a bust this year.

    Fresh/Nir – Well we will have our Trade of the Year for 2021 this weekend so that's a good start and I'll probably have notes on the runners up.  Here's last year's pickHere's the discussion that led up to it.

    "So, if Sunpower isn't going to be our Trade of the Year, what is?"

    That's a good quote, knowing what we know now….

    Of course GOLD was only $16.50 last November and we cashed out of our long position before this pullback but it was SPWR that eventually won the race to a 300% gain from $5 to $20+.  Both ended up as huge winners driving our portfolios.

    MO/Jeddah – I think if the market crashes they may drop 50% but, if they do, I'd be happy to DD and keep them for the long haul.  In the context of that portfolio, it's no different than selling a put and then the stock drops a lot so you 2x roll the put and establish a long.  This is a small long instead as a starter position but, if it drops 50% and your going to stop out instead of being THRILLED to DD – you might not want to risk the ride.  

    Marlboro Finally Buys Into Legal Cannabis, Invests CA$2.4 BillionYou can buy the whole thing for $75Bn at $40.75 – a company that generally makes $5Bn a year that is very likely to end up getting into the MJ space over time, opening up a much wider consumer base.  That is not at all accounted for in this valuation.

    TSLA/Snow – LOL.  You don't want to sell the Jan $600 calls for $52.50?  I sure do!

  12. TSLA/Phil – arrrrghhh, stop that! so temptingggggg………..

  13. INTC / Phil – what do you mean by "I wouldn't sell any calls on that"? Do you mean in addition to the recently established '23 $35/$50 BCS to generate income? Or you suggest not to sell short calls at all at this time?

  14. Phill/  Thanks for the feedback but I still will like your price target for APPL 2022 and 2023.

  15. Phil/WBA Would you advise a new position for WBA at this time if we don't have one? 


  16. NAK just got killed

  17. NAK – I hope everyone sold when it was over 2 bucks….

  18. NAK – surprised it did not fall further

  19. Phil:  Lately the webinar replay has been up immediately.  Today, I cannot access it.  Do you know when it will be available.  Thank you and Happy Thanksgiving!

  20. Not much selling into the holidays – this is amazing.

    INTC/Hwtdr – I mean I'd wait for better prices to sell short-term calls.  A spread is a different animal, we do that to control our risk.

    WBA/Wing – It may be our Stock of the Year for 2021.  I will be deciding by the weekend.

    NAK/Jeff – We talked about it during the Webinar.  Army Corp ruled against them – going to be hard to recover into a Biden Administration so I expect a small bounce off the appeal in a week or two but then I think we'll have to give up.

    Replay/John – I'm pretty sure those aren't ready until the next day.  

    Have a very happy Thanksgiving my extended family!

    I am very thankful that we've had each other to endure this ridiculous year with and, even though we may have had our little political disagreements – there is not a finer group of people to be locked down with!  

    - Phil

    Happy Thanksgiving from Canada | Outlander Kitchen

  21. Thanks Phil.  Happy Thanksgiving to you and your family.  Same goes for everyone here at PSW.  What a great group of members. 

  22. Phil – Happy Thanksgiving !!!  Hope you have a great day with your Mom and Family…..

  23. The webinar can not be viewed.  Usually, I can click on the link register and watch it. Not today.

    Have a great day everyone.

  24. Happy and Safe Thanksgiving to you and yours Phil and to everyone else in this group. Some of us don't say much but still enjoy reading the exchanges from members and getting to know you a little.  Funny how we all have our online personas .. imagine if we were all to meet f2f one day.  How  would our online characters fit with what we find in person?! Wonder how much we would share aside from our interest/obsession with trading options. Maybe we should have an intro page where we each say a little about our other interests .. maybe we would find more overlap than we would expect. 

  25. Intro Page / wingwalker  We used to have something like that.  Phil/Oldtimers:  whatever happened to our Introductions Page?

    Happy Tryptophan Day All!

  26. wingwalker

    Here ya go:; There is a link in the New Members' Guide at the top of the page.  Not sure how many people use it these days.

  27. Thanks  Laddoo, but it claims that the page is not there when you click the link.

    Found it in the New Members Guide at

    Most recent entry was in 2018, - don't see you there or most of the names I know from this group.

    Nice idea though!