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Wonderful Wednesday – More Free Money Gives us S&P 3,700!

Turnaround Tuesday – More Stimulus Rumors as Powell Speaks$916,000,000,000

That's the price of S&P 3,700 as the Trump Administration proposed just under $1Tn in additional stimulus including another $600 per person in direct checks.  The new stimulus does not include $300/week unemployment compensation and that's still a big sticking point with the Democrats.  Crafting a liability shield for businesses, schools and health-care providers facing coronavirus-related lawsuits has been a priority for Republicans throughout the negotiations, while Democrats have pushed to send more aid to state and local governments.  

Along with state and local aid, the $908 billion bi-partisan framework at the center of the current negotiations would add $300 to weekly unemployment benefits, provide $82Bn for schools, $16Bn for the distribution of Covid-19 vaccines and $288Bn in relief for small businesses.  Both the White House and some lawmakers are making a late push to include the new round of direct payments in the next bill. One of the most popular parts of stimulus legislation Congress passed in March, the last round of direct payments sent $1,200 per adult and $500 per child to many American households, at a cost of nearly $300Bn.

Clearly we need the stimulus.  We are still 10M jobs down from where we were in February and job growth has ground to a halt and the virus is raging out of control with 215,000 new infections yesterday as we now top 15M cases in the US, adding more new cases every day than the country had TOTAL at the beginning of April.  More cases every week (2M) than we had TOTAL at the beginning of June and more cases for the month of December (8M) than we had TOTAL through the middle of October. 

That is how fast this problem is accelerating and Mitch McConnel and the GOP have been blocking additional virus relief for over a month now playing games to time it so they can look like the good guys just ahead of the Georgia Senate elections, where voting begins next week to decide if we're going to keep McConnel as the Senate Majority leader to plague Biden the way he has been a literal plague on this Nation.

Here's a chart of the 10 WORST countries on the planet and the number of confirmed new cases per day.  India has 1.35Bn people, more than 1 Billion (4x) people more than the US and they have 1/4 the number of infections which makes us 16 TIMES WORSE than the 2nd worst country on Earth.  Actually 3rd now, as India has slipped behind Brazil.  India was giving us a run for our money in the summer but their Government was capable of learing from their mistakes and changed their policy and got thing back under control.  We did none of those things.  We are STILL doing none of those things.

Donald Trump and his Republican cohorts are a clear and present danger to our lives and our freedom.  Our very Democracy is under attack by Trump and the GOP while 3,000 American lives a day are being sacrificed on the alter of Trump's ego and where is the outrage?  Where is the spine of the Republican Senators and Congresspeople – 90% of whom have still refused to acknowledge Joe Biden's election victory?  How do we let them continue to entertain the Madness of King Trump while 2 more people die of Covid-19 in America each and every minute of the day?  

Is another $916Bn enough to buy our complacency?  As big as that number is, it's nothing compared to Japan, who just authorized another $708Bn in stimulus for their $4.9Tn Economy.  That would be like the US announcing another $2.8Tn for our $20Tn economy – now THAT's a Stimulus Package!  Japan has already spent $2.2Tn in stimulus this year so the total is now $2.9Tn or 60% of the country's GDP is now stimulus.

Nonetheless, like the US, Japan's economy is still 10% short of where it was last year.  We're very US-focused when thinking about the market but what happens when Japan, who are over 250% of their GDP in debt, has to stop the stimulus?  What about China, Canada, Australia, the EU, India?  We're still teetering on the verge of a Global Economic collapse yet, like complete idiots, we are paying record-high prices for equities.  This is just stupid – there's no other way to describe it.   

TARP was passed on October 3rd, 2008 and, at the time, it was the largest fiscal relief program in US history.  It bought us 4 months of relief before the market continued its fall from 10,000 to 6,400 on the Dow – another 33% drop AFTER the largest stimulus bill ever recorded – until now.  

3 Stock Market Lessons From 2008 As Congress Debates Another Crisis Bill |  Investing.com

This all happened 12 years ago.  Have we learned our lessons?  Certainly not!  

“Crashiversary” Week Begins – Just Another Manic Monday

Not learning our lessons is what the Conservative movement is all about.  The Constitution is not a living, breathing document to Conservatives, but more like the will of God written on stone tablets even though the man who actually did write the constitution has the following words inscribed in his own memorial:

“I am not an advocate for frequent changes in laws and constitutions, but laws and institutions must go hand in hand with the progress of the human mind. As that becomes more developed, more enlightened, as new discoveries are made, new truths discovered and manners and opinions change, with the change of circumstances, institutions must advance also to keep pace with the times. We might as well require a man to wear still the coat which fitted him when a boy as civilized society to remain ever under the regimen of their barbarous ancestors.”  – Thomas Jefferson 

You May Need The Money More Than I Do': McConnell Once Returned Trump's  Donation | WUNCTrump and his ilk are indeed our barbarous ancestors.  Unfortunately, they not only still walk among us but they also hold undue sway over our lives and our laws and the only way to progress (yes, that's why they call us "Progressives") is to vote them out of office utterly and completely in Georgia on January 5th but that voting starts on December 14th and it is VITAL that we make our voices heard.

Please do what you can for our country – money can't fix everything – citizens have to take action too.  

 


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  1. Good Morning.


  2. Good morning, everyone. Here is the link to the link to today's Webinar.

    https://attendee.gotowebinar.com/register/2716581382458436368


  3. Democrats would be smart to hold off this stimulus until after the Ga elections, but often they aren't "smart."


  4. Did anybody watch the Pen America Gala last night? Obama spoke and it was supremely eloquent and hopeful. 
     

    here's just a short sample https://youtu.be/AJwm29tgFOY


  5. Not sure why we should do anything else….


  6. Phil / AVGO – I have the following position and I'm thinking of closing this out…..   I would prefer to keep it and adjust it possibly with selling puts and rolling up….  But nothing seems to work….  I've made a good return on the stock last year and this is the last position open… everything else is closed out a a sizable  profit.   My target for AVGO is between 380 and 420 for AVGO in 12 to 18 months.   I was thinking of closing out today and wait for earnings ( which I think will be very strong) , but if you see a way to salvage it I'd prefer to do that.  Thanks for your help.

    Long  25X Jan '22 $270 (79)

    Short 25X Jan '22 $350 ( 35)


  7. Good morning!

    Smart/Pirate – Dems are stupid.  They care about the actual people who are being affected by these policies and they actually want to help more than score political points.  Weakness….

    Obama/Monk – Can you believe this is the President we had before Trump?  WTF happened?  

    Strategy/Pharm – That's crazy.  

    Nice little dip at today's open.  

    Oil inventories a disastrous build – right after Thanksgiving too! 

    • EIA Petroleum Inventories: Crude +15.2M barrels
    • EIA Gasoline +4.2M barrels
    • EIA Distillates +5.2M barrels
    • WTI crude oil (CL1:COM) turns negative after early gains, now -0.1% to $45.53/bbl.

    • Oil and gas stocks (XLE +1.9%) are off to another strong start, as crude oil futures edge higher on optimism about prospects for a new round of U.S. coronavirus spending; January WTI (CL1:COM) +1% to $46.05/bbl, February Brent (CO1:COM) +1% to $49.36/bbl.
    • The Direxion S&P Oil and Gas Exploration and Production ETF (GUSH +4%) has surged nearly 65% over the past month, reaching its highest level since June.
    • Among early gainers: OXY +4.8%FANG +3.7%EOG +3.6%PSX +2.8%VLO +2.7%WMB +2.4%MRO +2%XOM +1.7%.
    • "Despite persistent concerns about demand, oil prices are still holding their own and this morning are priced close to their recent multi-month highs," says Commerzbank commodity analyst Eugen Weinberg.
    • Crude oil prices have been rising as investors cheer progress toward COVID-19 vaccines and prospects of a fuller economic reopening despite the likelihood of a near-term hit to fuel demand.
    • ETFs: USOXLEUCOXOPVDEGUSHOIHBGRERXBNO
    • The world is entering a "long-lasting bull market" for commodities that will even benefit oil, Goldman Sachs' global head of commodities research Jeffrey Currie says.
    • Stocks start cautiously again as investors keep an eye on the latest out of D.C. on negotiations for a COVID relief bill.
    • The S&P (SP500) is up 0.2%, the Nasdaq (COMP) is off 0.1% and the Dow (DJI) is up 0.4%.
    • Treasury Secretary Steve Mnuchin's proposal is the latest on the table. The $916B bill is slightly bigger than the bipartisan Congressional plan and would include $600 direct checks but not extended unemployment relief.
    • The S&P is leaning to cyclical stocks, with Energy (NYSEARCA:XLE) and Financials (NYSEARCA:XLF) topping the sector list and Info Tech (NYSEARCA:XLK) at the bottom.
    • American Airlines +3% leads the Industrials (NYSEARCA:XLI), while in Consumer Discretionary (NYSEARCA:XLY) is seeing weakness in Amazon and homebuilders, but a rebound for Lowe's +5% as it boosts buybacks.
    • The megacaps are mostly weaker. Tesla -1% is the worst performer. JPMorgan is advising investors to keep Tesla underweight vs. the S&P as a whole.
    • And GrubHub +6% is rally as DoorDash gets set to start trading today after pricing at $102/share.

     

    • Airbnb (ABNB) is expected to price its shares above the targeted range of $56 to $60, according to The Wall Street Journal.
    • The expected pricing level indicates that Airbnb will be valued at more than $42B when trading begins tomorrow.
    • While research firm Gordon Haskett is already on the books with a Buy rating on Airbnb, Seeking Alpha author Daniel Shvartsman says Airbnb doesn't look like a bargain at the anticipated level of the launch.
    • AT&T (NYSE:T) has received bids for its DirecTV unit valuing it at more than $15B including debtThe Wall Street Journal reports, as the process moves into the late stages.
    • That means there could be a deal completed by early in 2021.
    • AT&T shares are up 3% to a session high.
    • Among those offering bids over the $15B mark was Michael Klein's blank-check firm Churchill Capital Corp. IV (CCIV +0.4%), according to the report.
    • Meanwhile, Apollo Global Management (APO -0.8%), linked to the discussions for some time, has submitted a bid valuing DirecTV under $15B, the WSJ says.
    • Churchill Capital IV, which raised $2.07B in July, was linked to the DirecTV talks in November with an eye to a deal around $15B.
    • The price is still a fraction of what AT&T paid for the assets five years ago: about $48.5B, or $67.1B including debt.
    • Lovesac (LOVE +13.7%) rallies after reporting comparable sales growth of 53.5% for Q3 and positive adjusted EBITDA of $6.0M vs. the consensus expectation for -$10.2M.
    • Gross margin expanded by 487 bps during the quarter off the sales leverage.
    • CEO update: "Our business fundamentals are strong, and our recently expanded partnership with Best Buy broadens our audience and expands Sactionals adoption in an agile, capital efficient manner. In combination with continued progress on our key strategic initiatives, we are well-positioned to capitalize on product demand and as such, we expect a strong year over year increase of 50% to 60% in Adjusted EBITDA1 for the fourth quarter. We look forward to building on our progress and success as we close out the fiscal year."
    • Lovesac's growth marks continue to compare favorably to peers.
    • With a key Investor Day just a day away, Disney (NYSE:DIS) is up 2.1% on some strong positivity coming out of Wall Street, which as a whole is looking for a strong presentation on streaming and more upbeat numbers from subscriber uptake of the company's offerings.
    • Wells Fargo has upgraded to Overweight, saying Disney is "set to complete its transformation into a global streaming content company" – pointing to deep brands in streaming, from Disney Plus to general entertainment (including Star and Hulu) and "eventually global sports" via ESPN Plus.
    • Notably, it thinks the next phase in Disney's streaming strategy is ramping up general entertainment, leveraging studios like Fox, ABC and FX to tap a "huge" total addressable market. "In the end … we think content spend and/or subs on [general entertainment] vs Disney Plus is semantics as Disney is ultimately headed to a mega-global streaming service that pulls together Disney brands, GE and live sports within 4-5 years."
    • It's increased its price target to $182, from $155, implying 16% further upside.
    • In KeyBanc's media initiation, it's rating Disney Overweight with a $177 target. The rapid growth of Disney Plus indicates the company's in good shape for the streaming future, with content breadth, global reach and strong technology, and KeyBanc says it arguably enjoys some advantages over streaming leader Netflix (NASDAQ:NFLX).
    • There's pressure on the core media networks, it says, but cash flow will ensure heavy investment in direct-to-consumer, while it expects the theme park business to recovery from the pandemic in time.
    • Morgan Stanley is maintaining its Overweight rating and raising price target to $175 from $150; as with Wells Fargo it's focusing on where Disney Plus sits vs. Hulu/Star, with Disney Plus potentially ending up the home for its branded intellectual property. The company could take an approach to its tentpole films similar to Warner Bros. day-and-date strategy of simultaneous streaming/theatrical release, the firm notes.
    • And Loop Capital thinks that tomorrow, Disney might double its prior subscription guidance for Disney Plus, and could announce an expanded tier for the offering that could "greatly" boost prospective average revenue per user. It's raising core EPS estimates for 2022, expecting a strong parks rebound as well, and raising its overall price target to $175 from $150.
    • GameStop (GME -20.3%) slides after the retailer's Q3 results fall short of expectations. Wall Street has a mixed assessment on the stock.
    • Bank of America (Underperform): "While shortages for the next gen consoles (and the Nintendo Switch) could be a drag on sell through in 4Q, overall demand appears to be very high. However, we remain very skeptical that this console cycle will be a material or lasting benefit to GME. On the contrary and as we highlight in our console cycle survey, we believe the next gen console accelerates digital penetration which is already over 50%. We also believe a very strong year for overall video game demand will make growth even tougher for GME next year."
    • Telsey Advisory Group (Outperform): "GameStop is rationalizing its store base, investing in digital capabilities, leveraging its loyalty program (~60MM PowerUp Rewards members), and adding newer businesses, such as PC gaming. These initiatives and trends, combined with a leaner store operating model and balance sheet, should help drive earnings growth and generate free cash flow. Partly offsetting our enthusiasm is the continued shift to digital gaming and increased competition across retail. We maintain our Outperform rating, but are lowering our 12-month price target by $1 to $18, based on applying an EV/EBITDA multiple of ~5x to our 2021 EBITDA estimate of $197MM."
    • Benchmark (Sell rating): "GME delivered a dramatic downturn in F3Q20 financial performance including disappointing consensus on revenue, gross profit and EBITDA. We suspect continued pressure on in-store foot traffic from players that are concerned they could contract the virus and potentially become sick from shopping at a GME location. Comparable store sales declined 24.6% and 18.7% for F3Q20 and FYTD, respectively. The public video game publishers we cover have all reported dramatic increases in digital adoption of content or an acceleration of existing digital trends that should prove sustained and effectively dislocate the high margin trade-in value proposition GME championed. We believe a vast majority of players have scant desire to buy product from a GME retail or ecommerce locations and the hottest games are often free-2-play like Fortnite. The growth in GME's ecommerce sales is a function of the virus influence rather than a compelling platform, in our view, and the idea they can compete with Amazon is comical. We think GME's desire to expand SKU offerings by selling PC gaming computers, monitors, and gaming TVs is not a transformational strategy and should constrict gross margin. We question management's understanding of the video game market; we strongly believe that they will never become 'the social/cultural hub for gaming' that they desire. Further, GME established an ATM program to offer and sell up to $100M common stock; we expect they will dilute shareholders."
    • Read the GameStop earnings call transcript for a breakdown of management's strategies.
    • Wondering about short interest on GameStop? Seeking Alpha author Paul Franke tackles the issue.
    • JPMorgan gives credit to investors that snapped up shares of Tesla (NASDAQ:TSLA) ahead of the company's S&P 500 inclusion news, but recommends investors hold back on raising their positions off the S&P development.
    • Analyst Ryan Brinkman: "We recommend investors not weight Tesla shares in their portfolio in equal proportion to the S&P because Tesla shares are in our view and by virtually every conventional metric not only overvalued, but dramatically so. For instance, Tesla trades at 1,325x LTM P/E and at 291x 2020E and 175x NTM Bloomberg consensus EPS (vs. best in class auto comps BMW, Daimler, and Toyota 14x, 10x, and 16x NTM EPS, respectively). We are certainly open to the possibility that Tesla may one day derive a material portion of its revenue from activities other than auto manufacturing (it doesn’t today), implying these may not be the appropriate valuation comps (we employ an industry-leading 35x 2022 EPS as part of our multi-pronged valuation approach) and are mindful of the company’s industry-leading growth, but Tesla’s multiple of earnings is very high in nominal terms for any company in any industry at any time in history. Measured on NTM Price-to-Sales, TSLA shares trade at 15x vs. BMW, Daimler, and Toyota 0.5x, 0.4x, and 0.9x, respectively."
    • Brinkman goes a bit further, noting TSLA is up +800% over the last two years, while EPS estimates for 2021-2024 have gone down.
    • "The company is led by visionary leadership, backed by a management team with solid functional strength. Although both technology and execution risk seem substantially less than was once feared, expansion into higher volume segments with lower price points seems fraught with greater risk relative to demand, execution, and competition," adds Brinkman.
    • JPMorgan lifts its price target to $90 from $80, which still represents about 86% downside from the current price. Of course, bear calls on Tesla have been circulating around since shortly after the company's IPO in 2010, but JP has been one of more persistent ones of late.
    • See all the current Wall Street ratings on Tesla.

  8. on bnn they are saying oil build is a incorrect as a result of decimal error on increased imports


  9. batman AVGO I have a similar position actually a bit lower you still have 20$ to go why close. Just sell short calls against your BCS. The leap does not run away!!!!


  10. Oil/Tommy – Oh that's funny!

    AVGO/Batman -   It's miles in the money, and, as Yodi says, why close when you are net $60 out of $80 so 33% left to gain in a year is very respectable.   Like everything else, they are over the top of the range so why push it?  

    If you want to be aggressive you can pick up 50 of the 2023 $350 ($107)/$420 ($70) bull call spreads for $37 ($185,000) and put a stop on 10 of your 2022 $270 calls ($155) at $150 ($150,000) so the new spread would be net $35,000 if it ever triggers and then you can stop out 10 more at $125 ($125,000) and then the rest at $110 ($55,000) so you would have taken $330,000 off the table and you'd still have a $350,000 spread covering the short $350s, which are $92 and you could put a stop on 10 of them at $100 ($100,000) to keep it all manageable.  

    If, on the other hand, AVGO just goes up, you have your extra $20 ($50,000) to make on the first spread plus $165,000 on the new spread.  


  11. Phil

    QS  what do you think of selling the FEB 30 put  ?

    Thank You


  12. Phil / AVGO – thanks…. I'll take a look at the options you provided…..  interesting way to look at the aggressive position….   


  13. YOdi –  I'm still holding off on T covers… on AVGO sitting on it is fine as well… but lots of cash tied up….   Maybe there will be some movement after earnings tomorrow


  14. batman, If you have a better way to make 20k you always part from half of it. I hold on. Stock goes up and down all the time.



  15. I bought $500 in WOZX at HBTC. Here's the project. The idea is pretty thin. It tokenizes the value of "energy efficiency." What really happened is a couple of Italian general contractors roped Wozniack into supporting a token that values his star power. It's currently trading at a $3.2B valuation, so obviously a very effective monetization scheme.




  16. DoorDash IPO at 102  runs to 180  Giving the company a $60 BILLION valuation when it lost money last year. AirBnB is expected to top $40 BILLION?????   Shades of 1999. They deliver food using contractors and book rooms – Where is the Magic in that?

    Is it just the new, young retail investors who use them bidding up the prices?  

    Hard to be a value investor these days. 


  17. Phil,

    Is there a good short trade on ridiculous stock like snow? 



  18. Facebook is being sued by US Government.

    • Social media stocks are lower on the day, but not reacting much to the fresh news that Facebook (FB -2.3%) is facing a huge antitrust suit brought by the Federal Trade Commission and a coalition of 48 state/territory attorneys general that has breakup implications in particular.
    • Pinterest (NYSE:PINS) -1.9%; Snap (NYSE:SNAP) -1.3%; Twitter (NYSE:TWTR) -0.2%; Google (GOOG -2.3%GOOGL -2.2%) are all lower, though for the most part they've been trending lower throughout midday and the afternoon along with the broader market.
    • The antitrust actions explicitly suggest that Facebook made anticompetitive acquisitions of potential rivals to its dominance, particularly WhatsApp and Instagram (both now key parts of the business) – and the federal government is explicitly calling out reversing those deals.
    • "Facebook’s acquisition of Instagram for $1 billion in April 2012 allegedly both neutralizes the direct threat posed by Instagram and makes it more difficult for another personal social networking competitor to gain scale," the FTC says.
    • Meanwhile, "The complaint alleges that, by 2012, WhatsApp had emerged as the clear global 'category leader' in mobile messaging. Again, according to the complaint, Facebook chose to buy an emerging threat rather than compete, and announced an agreement in February 2014 to acquire WhatsApp for $19 billion."
    • The suit says the permanent injunction it's seeking could call for an unwind of those acquisitions – an understatement to call that a transformative development for Facebook, which has used the deals in large part to become one of the world's most valuable companies.

    Young investors/Tx – Yep, my kids use Robin Hood and they both wanted to jump on Door Dash (Jackie is a Door Dasher) this morning.

    Shorting/Harip – I just said to short TSLA yesterday and who listened?  

    Trade of the Year Tuesday – Who Will Survive the Fall?

    So TSLA is too dangerous to short but, if I were, I would buy the Jan 2023 $800 puts for $350 and I would sell the Jan 2022 $800 puts for $295, which would put me in the calendar spread for net $55 and I would pay for 10 of those $55,000 by selling 3 Jan 2022 $750 calls for $152.50 ($45,750) so we'd be in the spread for net $9,250 and our hopes there are that the short calls expire worthless and the short puts either expire worthless or can be rolled lower and whatever value is left on the long puts greater than $9,250 is our profit.  We'll see how that goes next year.

    You have to let things finish their runs before you short.


  19. TSLA short – I added a little yesterday. Happy about them today and out of 1/2 already.


  20. TSLA – I hold the weekly 455 puts. Paid $0.25 for them a couple days ago. Let's see a 200 point haircut!


  21. txchili – it feels like 1999 again right now. Any long positions need to be well hedged, even with free money there's a limit to how much something is really worth


  22. Look at GLSI, up from 5 to 158 based on some good data. Definitely it's 1999 again.


  23. I did establish a longer-term short play on TSLA, but also purchased friday 600 puts yesterday for avg of $7. Sold most today at $28, not bad!










  24. Here my play suggestion on NIO the Chinese Tesla. 52 Week high 57.20 low 2.11. No Div.
    Jan 23 10x BCS 35/45 @ 3.03 sell 4x jan23 25 put for 7.80. Cost 3,030.00 credit 3,120.00.
    Sell 3x Jan 21 50 calls for 4.80 and 2x Feb 21 55 calls for 5.80. Credit 2,600.00
    The idea is to continue selling short term calls while you hope and waiting for 10K in 771 days.
    Obviously you can go higher or lower just in the same proportions.