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Which Way Wednesday – Beige Book Edition


That's our job as investors and even you traders out there try to spot trends with your little charts (so cute!).  Investors tend to focus more on the data and yesterday, both Fed Chairman Powell and Treasury Secretary Mnuchin warned Congress that their continued failure to act and pass a stimulus bill is hurting an already weak economy.  We can see that in the data trends this week:

  • Chicago PMI – 58.2, weaker than expected by leading Economorons
  • Pending Home Sales – Down 1.1% vs +1.5% expected
  • Auto Sales – Slowing 
  • ISM Manufacturing – 57.5%, weaker than expected
  • Construction Spending – Up 1.3%, better than expected
  • Morgage Applications – Down 0.6%, much worse than expected 

America needs A Monorail!! - Monorail Guy | Meme GeneratorThat's our data so far and we'll get the Fed's Beige Book this afternoon but of course it's going to be gloomy, you could hear the panic in Powell's voice talking to Congress, BEGGING them to DO SOMETHING as the Fed seems to be out of tricks at this point, with rates already at 0.25%.  We need MORE FREE MONEY and we need it NOW!

As we expected, Black Friday was a bust but you wouldn't know it reading the front page of the Wall Street Journal though there is an article about it here.  It's titled "Shoppers Spent Less Over Black Friday Weekend" but I'd say they are underselling it just a little as in-store shopping traffic was down 37% and the people who did shop spent 14% less than last year.  I know math is frowned up by Conservatives but I'm one of those annoying liberals who believes in facts, so it seems to me that if a retailer sold $100,000 last year and 37% less people shopped this year, that would be $67,000 but then if they spent 14% less on top of that, that then becomes $57,000.  

Week in Review: Brexit trade deal down to the wire - Carrick Investment  ServicesSo the headline could have read "Black Friday Sales Down 43% from Last Year" or "OH MY GOD, This is Terrible" but the WSJ went way our of their way to make it sound not so bad, knowing that their average reader doesn't believe in math… or facts…

The New York Time called it "Bleak Friday" quoting:  "This wasn’t a Black Friday, it was a bleak Friday in stores,” said David Bassuk, global co-head of the retail practice at AlixPartners, a consulting firm. “It is such a stark contrast to past years. The stores were really ghost towns.”   

Cyber Monday certainly didn't make up for it, with on-line sales up just 15% from last year, which would have been disappointing in a normal year anyway.  And (again, sorry about the math), that's up 15% to $10.8Bn compared to the $48Bn that was spent in stores or, more importantly, the $41Bn that was NOT spent this year.

Statista - The Statistics Portal for Market Data, Market Research and  Market StudiesAs Powell said yesterday, things are NOT back to normal.  Less than 20% of the workers have returned to their offices so far and that's down from almost 30% in October as that turned out to be a mistake (we told you so) as pretending the pandemic is over didn't actually make it be over – this was shocking news to Conservatives, of course, who think you just have to believe something is true to make it true.  

We are not going to wish our way to an economic recovery and we are not going to wish our way to stopping the pandemic – it's going to take hard work and sacrifice on all of our parts but, hopefully, the new year will bring real leadership that will inspire us to pull together and make those sacrifices to rebuild our country – not just sit around waiting for a miracle cure.  

They sold me a dream of Christmas

They sold me a Silent Night

They told me a fairy story

'Till I believed in the Israelite

And I believed in Father Christmas

And I looked to the Sky with excited eyes

'Till I woke with a yawn in the first Light of dawn

And I saw him and through his disguise

I wish you a hopeful Christmas

I wish you a brave New Year

All anguish pain and sadness

Leave your Heart and let your road be clear

They said there'll be snow at Christmas

They said there'll be peace on Earth

Hallelujah, Noel, be it Heaven or hell

The Christmas we get we deserve – Greg Lake 


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  1. Good morning to all 

    May I mention here that our site is shown on my lap top as a "NOT SURE SITE" and other can steal your pass word and credit card!!!!!

  2. Phil good morning……    on trade of year, will discussing this at the webinar today?

  3. Good morning! 

    That was a problem yesterday, Yodi, but we fixed it.  The certificate expired and that's how they make sure you pay your fees.  Maybe refresh your cache or something as we absolutely fixed that yesterday morning.

    Trade of the Year/Batman – I do it for BNN and I'm on next week so you'll have to wait.

    TSLA is tipping lower.  Shorting them at $600 should have been the trade of the year!

    Shoppers Spent Less Over Black Friday Weekend

    Britain became the first Western nation to grant emergency-use authorization for a Covid-19 vaccine, clearing a shot developed by Pfizer and Germany’s BioNTech to be distributed in limited numbers within days.27

    Big Companies Urge Action on Climate Change

    Bets on More Fed Bond-Buying Help Contain Treasury Yields

    Barr Says No Evidence of Widespread Voter Fraud in Election

    Georgia Official Urges Trump to Condemn Threats Against Election Workers

    Options Trading Is More Popular Than Ever Despite the Risks

    Partisan Fight Over Fed Lending Programs Escalates 

    But there is hope:

    “I want to make sure we’re going to fight like hell by investing in America first,” said Biden. He ticked off energy, biotech, advanced materials and artificial intelligence as areas ripe for large-scale government investment in research. “I’m not going to enter any new trade agreement with anybody until we have made major investments here at home and in our workers” and in education, he said.

    And this time, he insisted, rural America will not be left behind. There is no way Democrats can go another four years and lose almost every rural county in America. For their sake and the country’s, Democrats have to figure out what is going on there and speak to rural voters more effectively.

    “You know, it really does go to the issue of dignity, how you treat people,” Biden said. “I think they just feel forgotten. I think we forgot them.”

    “I respect them,” Biden added, and he plans to prove it by “tackling the virus” in “red and blue areas alike.”

    We have “got to end the rural health care crisis right now by building on Obamacare, assuming it survives at all, with a public option [and] automatically enroll people eligible for Medicaid. There’s strong support for that — and particularly [from] people in rural states, like Texas and North Carolina, that reject expansion. We can boost funding. I visited 15 rural hospitals. And the biggest problem is there’s not enough reimbursement for them to be able to keep open.” And they are often the biggest employer in that town or city.

    A lot of these rural hospitals and clinics could benefit from telemedicine, but they don’t have the broadband connectivity. “We should be spending $20 billion to put broadband across the board,” Biden said. “We have got to rebuild the middle class,” but “especially in rural America.”

    Yet this BS is still happening:

    President Trump is said to have discussed pre-emptive pardons for Donald Jr., Eric and Ivanka Trump, as well as Jared Kushner and Rudolph Giuliani

    Pre-emptive pardoning?   What did they do???  

  4. Looking forward to trade of the year on my show! 

  5. Phil / Trade of Year – I saw this more of a Phil stock world benefit…..  

  6. Good morning, everyone. Here is the link for today's webinar. Enjoy.

  7. Good Morning.

  8. Oil holds steady with OPEC working to bridge gaps on policy

  9. The GOP’s electoral mischief

  10. UN calls on humanity to end ‘war on nature,’ go carbon-free

  11. Phil / protection,

    I have 20 '22 SDS $10 / $20 BCS @ $3.55 and 10 Jun '21 SQQQ $15 / $30 BCS @ $4.65. What would you suggest in terms of adjustments, if any, and their timing? I am thinking rolling long SQQQ to Jan '22 $10, selling Jan '22 $25 and leaving short $30 calls, but am concerned about the market overextension and possible pullback. On SDS was thinking lightening up on the short calls.

  12. Trade of the Year/Batman – We've been discussing it for months, I'd call that a benefit.  You already know the top candidates and they are all good trades.

    Speaking of candidates, VZ caught an upgrade today but no one has noticed T yet.  VZ is trading at 14x earnings and pays a 4.14% dividend, T is trading at 19 times earnings and pays a 7.2% dividend.  

    15x on T would be $23 and you can sell the T 2027 $27 for $4 and then you would be paying net 15x earnings for T while putting 2 year's dividends in your pocket up front.

    We could then buy the stock for $28.90 and sell the 2023 $25 calls for $4.90 to net in for $24 and, with the puts, our net is $20/23.50 (if assigned) with the call-away at $25 (up 25%) and the 7% dividends on top – so a nice use of sideline cash.  

    So we could do 500 shares for $14,450 and sell the 5 2023 $27 puts for $2,000 and sell 5 2023 $25 calls for $2,450 and that nets us in to 500 shares for net $10,000 – just $20 per share so getting called away at $25 is a $5 ($2,500) profit PLUS anticipated $2,080 in dividend over 2 years is $14,580 back on $10,000 is 45.8% on this very conservative trade.  

    Of course 45.8% wouldn't make it the Trade of the Year so we'd use a spread instead, probably 50 of the 2023 $27 ($3.75)/32 ($1.85) bull call spreads at net $1.90 ($9,500) against 20 of the short puts ($4,000) for net $5,500 on the $25,000 spread that's 40% in the money to start.  No dividend but the upside at $32 is $19,500 (354%) and that's right in our Trade of the Year territory but I'm not sure VZ getting an upgrade is enough of a catalyst to make T a clear winner… yet. 

    SDS/Hwt – Didn't we do that yesterday?

  13. Phil / SDS

    I did not see the response and thought you may have overlooked the question, would appreciate your help

  14. IBM   somebody bought 1100 Jan23 $110/$160 bull call spreads for roughly $16.80

  15. Phil / Trade of year…  Thanks – on T I've got a trade very similar to this one – think this was in a portfolio at one time….  Where I bought the stock and sold puts for '23 … have not sold the calls yet as I'm waiting for it to hit 30….getting close….   as for the spread are you looking at selling a $23 put?

  16. SDS/Hwtdr – That's strange, I remember answering it but I don't see it either.  Anyway, the gist is I'd roll the 2022$10s ($3.70) to the 2023 $10s ($5) and sell 10 (half) the 2023 $20 calls for $2.50 so you are paying net $3.50 for the new spread so it's a free roll to a more aggressive position and you can set a stop on 1/2 the 2022 $20s ($1.75) at, say $2.50 to keep out of trouble.    Same concept with the SQQQs.

    Big recovery all around today – especially oil. 

    Absolutely no reason for this move – must be something OPEC said.

    • EIA Petroleum Inventories: Crude -0.7M barrels vs. -2.4M consensus, -0.8M last week.
    • EIA Gasoline +3.5M barrels vs. +2.4M consensus, +2.2M last week.
    • EIA Distillates +3.2M barrels vs. -0.2M consensus -1.4M last week

    T/Batman – No I'm perfectly happy selling the $27 puts for $4 and netting in for $23 that way.

    And this is why WBA is still my top contender for Trade of the Year:

    • The Department of Health and Human Services and CVS have agreed on plan for the pharmacy player to give Eli Lilly's (NYSE:LLY) recently-approved Covid-19 treatment bamlanivimab to patients in nursing homes and long-term care facilities.
    • It's a three-month pilot plan with only enough doses to treat 1K patients – this versus the nearly 200K new cases reported in the U.S. on Monday.
    • Bamlanivimab is meant for folks with mile-to-moderate Covid symptoms who would typically be advised not to leave home. The drug, however, needs to be administered intravenously by a clinician, meaning a potentially dangerous hospital visit. The HHS/CVS plan would allow for bamlanivimab to be administered without that visit.
    • CVS is up 3% midday, LLY is down 0.3%.

    I was hoping it would get a bit cheaper but may be too late for that.

  17. Phil / PETS,

    In your November portfolio review, you indicated the puts were not worth selling at the time.  I'm seeing the 2022/30P @ $7.6.  This is 25% of stock price!  I see puts have higher premium over calls as Mr. Market has a negative view on them I guess.  What's your take?

  18. WBA  Trade of the year still have 600 stock at 72.50 and some hot puts at 50 55 as well some good lost BCS total 35k minus not plus!!!

  19. SDS / Phil,

    Would you leave appreciated short calls (SDS and SQQQ) or cover them at this time, at least partially?

  20. Phil

    Received a text for a Top Trade

    What was the trade ? my text will not link


  21. SDS/Hwt – I'd leave the short calls with stops, maybe take 1/3 off the table as I really don't see us going much higher but you never know.

    • A third of the Federal Reserve's 12 districts reported economic activity slowing in early November, while another third saw little or no growth according to the Fed's latest Beige Book report.
    • "Philadelphia and three of the four Midwestern Districts observed that activity began to slow in early November as COVID-19 cases surged," the report says.
    • "Most Districts reported that firms' outlooks remained positive; however, optimism has waned--many contacts cited concerns over the recent pandemic wave, mandated restrictions (recent and prospective), and the looming expiration dates for unemployment benefits and for moratoriums on evictions and foreclosures."
    • Federal Reserve Chairman Jerome Powell has been on Capitol Hill this week, pushing again for more fiscal stimulus funds. Powell told the House Financial Services Committee today there could be the "light at the end of the tunnel" for the economy around mid-2021.
    • Nine out of the 10 biggest-gaining stocks in the S&P (SP500) +0.1% are in the Energy (NYSEARCA:XLE) +4.7% sector. which is continuing its volatility from November.
    • At the bottom of the sectors yesterday, XLE is far and away the leader. WTI futures +2.5% are shrugging off a smaller-than-expected draw in U.S. crude inventories for last week.
    • Traders look like they're banking on a deal from OPEC+ tomorrow to extend oil production cuts, but that's far from a done deal, according to Price Futures Group's Phil Flynn.
    • "The UAE wants to have a bigger share of the global production pie and wants OPEC charters to compensate for previous commitments that were ignored," Flynn writes today. "The drama is putting the oil bull market in jeopardy and if it was not for the fact that the UK approved the first Covid 19 vaccine in the Western world, the oil market might have been hit harder."
    • The Nasdaq (COMP) -0.1% is also drifting. It's push and pull between Tesla on the downside and Alphabet on the upside among the megacaps.
    • NetApp +10% is the top-performing S&P stock following encouraging quarterly results. Whirlpool -4% is among the largest decliners, behind Salesforce's post-deal drop.
    • Real Estate (NYSEARCA:XLRE) -1% is in the sector basement. Rates are still edging higher, with the 10-year Treasury yield up 2 basis points to 0.95%.
    • The S&P 500 energy sector (XLE +4.3%) is today's top performer, rebounding from Monday's 5.4% thud which followed a one-third increase in November through the 27th.
    • Today's strength is backed by higher oil prices, with January WTI crude (CL1:COM) +2.3% to $45.60/bbl, the EIA's weekly inventory report that showed a 700K-barrel drawdown in oil stockpiles, and lingering optimism about a pickup in end demand in 2021 as the arrival of COVID vaccines helps global economies rebound.
    • Four of today's top five gainers on the S&P 500 are oil and gas producers: APA +8.6%HFC +8.5%DVN +8.1%OXY +8.1%.
    • Other notable outperformers include MRO +7.1%VLO +5.6%PSX +4.6%XOM +4.4%CVX +4.3%.
    • Word filtering out of OPEC+ talks indicate some headway toward a deal on oil production cuts after previously postponing an official meeting to discuss cuts.
    • The "vibe appears to be a lot more diplomatic and delegates say that they are positive consensus will be reached tomorrow," tweets Amena Bakr, deputy bureau chief and chief OPEC correspondent at Energy Intelligence.
    • OPEC+ likely will agree to extend current production cuts of 7.7M bbl/day by three months starting in January, says Tariq Zahir, managing member at Tyche Capital Advisors; if not, "we could see crude go substantially lower," as new lockdowns and the dramatic increase in COVID-19 in the U.S. hurt energy demand.
    • The major action averages (NYSEARCA:SPY) flat (NASDAQ:QQQ) -0.1% (NYSEARCA:DIA) -0.1% (NYSEARCA:IWM) -0.2% could be a good proxy for the month coming as investors assess November's run.
    • Stocks have gone up in "pretty much a straight line since the election", says Nuveen's Bob Doll. And investor sentiment gauges are reflecting that performance.
    • As contrary signals, extreme bullish readings are often precursors for consolidation or correction.
    • The latest Investors Intelligence survey for the week ended Dec. 1 shows a persistently high percentage of bulls, ticking up to 64.7% from 64.6% the week before. Bears dropped by 50 basis point to 16.7%, the lowest since September 2018 (see the chart below from Ed Yardeni at

    • The bull/bear spread is at 48, and a measure above 40 is extended, Peter Boockvar, CIO at Bleakley Advisory Group, notes.
    • The CNN Fear & Greed index hit 93 intraday yesterday and now sits at 86 today.

    • "After an amazing month of November, these types of stimulus levels tells me that we'll likely chop around and consolidate in December until we shake out some of this ebullience," Boockvar says.
    • This week's employment report could be the next short-term pivot point for the market.
    • A weak report could put pressure on yields and equities and "shake out some of that positive sentiment," Matt Mishkin, investment strategist at John Hancock Investment Management, told Bloomberg.
    • “If you see a weakening of the jobs data and you see more pronounced economic deterioration … I think that puts weaker footing on the 2021 improvement narrative,” he says.

    • Mondel?z International (MDLZ -0.9%) approves an extension of the company’s share repurchase program for an additional three years to December 31, 2023.
    • The new authorization replaces one which was set to expire on December 31.
    • In conjunction with the extension, the board approved a $4B increase to the share repurchase program authorization, of which approximately $2B was remaining, to bring the total remaining authorization to repurchase share to approximately $6B.
    • Source: Press Release
    • See consensus dividend estimates on MDLZ.
    • Shares of L Brands (NYSE:LB) are on the move as the company presents today at the Morgan Stanley Virtual Global Consumer & Retail Conference. After being in negative territory, L Brands is now up 0.55%.
    • The company confirmed that it plans to work on separating the Bath & Body Works business sometime early next year. Analysts have been talking up the upside of splitting Bath & Body Works from the Victoria's Secret drag for almost a year.
    • It was also highlighted that demand for Bath & Body Works products remains sky high as it continues to sit as a favored shopping destination (online and stores) for consumers during the pandemic.
    • Webcast of the L Brands conference presentation.
    • Axios sources say Uber (NYSE:UBER) is in advanced talks to sell its Elevate unit to Joby Aviation in a deal that could be announced before the end of the year.
    • In October, Axios reported that Uber was considering strategic alternatives for the cash burning Elevate business, which shuttered its NYC helicopter service early on in the pandemic.
    • Uber CEO Dara Khosrowshahi has worked to find alternatives for non-core businesses like the self-driving vehicle and freight units.
    • The pandemic has battered the core rideshare business and provided a tailwind for the Eats business, bolstered by the newly closed Postmates acquisition.
    • During its recent Q3 report, Uber missed consensus estimates on the top and bottom lines but remained confident in its target of achieving quarterly adjusted EBITDA profitability before the end of 2021.
    • Uber shares are up 4% to $51.59.
    • Related: Earlier today, rival Lyft updated its Q4 guidance to the lower end of its previously provided revenue growth range due to the ongoing pandemic pressure.
    • OPKO Health (OPK +8.1%) perks up on modestly higher volume in apparent response to a report from that Blackstone may be interested in its growth hormone royalty business.
    • According to Sian Capital's Anish Monga, the asset could fetch $2B – 3B.
    • Developing….
    • Verizon (NYSE:VZ) is up 0.9% today after an upgrade to Buy at MoffettNathanson, which is seeing attractive valuation ahead of some expected nice mix-shifting on its unlimited plans.
    • The stock may not have heavy upside, but it's "simply too cheap," the firm says: It trades at an "unprecedented discount to the S&P 500, and its relative yield versus the 10-year remains near all-time highs."
    • That's due in part because Verizon is set to benefit from "uplift" in its average revenue per user, where the firm expects meaningful growth next year. The carrier is steadily upgrading customers to higher-ARPU unlimited plans, it notes.
    • MoffettNathanson is raising its price target to $66 from $59, implying 8% further upside.
    • Meanwhile it took the opportunity to reiterate its Buy stance on T-Mobile (TMUS -0.4%), and raised that price target to $164 from $158 (23% upside).
    • And it reupped its Sell rating on AT&T (T +0.2%), where its $24 target now implies 17% downside.

  22. Top Trade/QC – Just the AT&T trade we discussed above.  

  23. PETS/Jeddah – At these prices they are a good sale.  

    WBA/Yodi – So now must be a good time to double down?

  24. Any thoughts on Rolls Royce?

  25. nir123

    Rolls Royce……it would be nice if I could afford one… perhaps a Bentley or an Aston Martin instead  

  26. Here is the replay of this week's webinar.

  27. stockbern

    You're right haha.. their car could be a good deal.. if they were selling it for 9x less than original value like their stock is being traded now. Any reason why this one shouldn't get back to normal?