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Free Money Friday – Biden Pledges Another $1.9Tn for the Bonfire

Daily Heath Ledger — stream: This town deserves a better class of...New Administration, same policy

Joe Biden pledged yesterday to give all of us another $1,400 in direct payments and, in a shocking change of policy from the previous administration, pledged real money to pay for vaccines and TESTING to start getting the virus under control.  As crazy as that sounds – we need it very badly with 2M Global Deaths and 91M Global Cases and over 20% of each coming from America, which is already on fire.  

As I'm sure Benjamin Franklin must have said so I'll make up the quote: "Money fixes everything and, if that doesn't work, print more money."  Trump's Covid Incompetence has now killed more Americans than Hitler did on purpose in World War II (405,000) so we can't get that guy out the door soon enough but Biden is getting hit by a very big wave with more daily infections and more daily deaths than ever before and it's likely to get worse before it gets better.  

Speaking of worse, December Retail Sales were down 0.7% from November and, shockingly, on-line sales were down more than 5% – this is BAD!   So $1,400 per person is a good start and there's a $400 weekly unemployment supplement through September 

“We have to act and we have to act now,” Mr. Biden said.  Biden made both a moral and an economic pitch, arguing that it was essential to use the government’s borrowing power to support struggling families and arguing that the resulting consumer spending would spur growth.  “Even our debt situation will be more stable, not less stable, if we seize this moment with vision and purpose,” he said.

In a poverty-fighting move long sought by many Democrats, the child tax credit would rise from $2,000 to $3,000 for this year under Mr. Biden’s plan, with an additional $600 for children under 6 years old and new rules that would let the poorest households get the full benefit. The plan also includes money to help households with the costs of rent and child care, plus a desperately needed $350 billion for state and local governments.

Excluding motor vehicles and gasoline, Retail Spending fell by 2.1% during the month so, as we expected, Christmas was cancelled and we are going to get some horrific reports from the Retail Sector in this upcoming earnings period.  Since Retail Sales are 60% of our GDP – I'd be concerned!  

We're still finishing up our Portfolio Reviews (see yesterday's Report) and I'd pay special attention to our hedges, which will hopefully get us through an adjustment in case anyone finally notices that, whether it's Biden's or Trump's – a $30Tn deficit is nothing to laugh about and it's very likely Biden will look to impose new taxes, which will hurt Corporate Profits and Corporate Profits are already being squeezed by rising input costs and an inablity to pass along price increases – possibly because they just laid off the people who they are trying to sell to (1M new unemployed last week).  

Our Index Hedges are doing well again (you're welcome!) from the lines we set up on Wednesday morning and you can see a more in-depth discussion of our Futures shorting strategy from Wednesday's Live Trading Webinar.  

Meanwhile, it's Friday and we're all gettting another $1,400 so why worry about anything?  The markets are closed on Monday in honor of Martin Luther King so it's a long weekend to contemplate the nature of Finance and how much the things we hold are truly worth – in and outside of our portfolios.

Have a great weekend, 

- Phil


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  1. Good Morning.

  2. Same policy with a twist – Higher taxes to help pay for it.


    I'm good with that.  :)

  3. Comment content omitted because it is too long.

  4. Good morning!

    Wow, down we go.  Thank goodness for those index shorts…..  Consumer Sentiment was not good:

    • January University of Michigan Consumer Sentiment 79.2 vs. 80.0 expected and 80.7 prior.
    • Current conditions 87.7 vs. 90.0 prior.
    • Expectations index 73.8 vs. 74.6 prior.
    • Two offsetting shifts helped narrow the January loss in sentiment: the COVID-19 vaccines and a partisan shift in expectations due to the anticipated impact of Biden's economic policies, UMich said.
    • November Business Inventories+0.5% M/M to $1,948.7B vs. +0.5% consensus and +0.8% prior (revised from +0.7%).
    • Sales -0.1% to $1,480.8B (M/M).
    • Inventory/Sales ratio 1.32 vs. 1.31 in October.
    • The S&P (SP500) -0.3% is retreating as cyclicals reverse course yet again this week and technology isn't seeing enough buying interest to pick up the slack.
    • The Nasdaq (COMP) +0.2% is faring better. The Dow (DJI) -0.6% and Russell 2000 (NYSEARCA:IWM) -1.2% are also struggling.
    • The reflation trade enthusiasm may also be seeing a sell-the-news reaction to President-Elect Biden's relief plan, which had the stimulus-sensitive sectors rallying yesterday in anticipation.
    • Financials (NYSEARCA:XLF) are weighing after big bank earnings premarket came in mixed, a disappointment after a big run that's added more than 12% this year alone.
    • Nine of the 11 S&P sectors are down, with Communications Services (NYSEARCA:XLC) and Info Tech (NYSEARCA:XLK) rising.
    • December's retail sales numbers also dented some of the recovery trade spirit, declining more than expected, with downward revisions to the previous month.
    • The 10-year Treasury yield is down 3 basis points to 1.1%
    • December Industrial Production+1.6% M/M vs. +0.5% consensus and +0.4% prior.
    • Production increases 1.6% for mining and 6.2% for utilities.
    • The increase for utilities resulted from a rebound in demand for heating after unseasonably warm weather in November.
    • Capacity Utilization 74.5% vs. 73.6% consensus and 73.3% prior.
    • Manufacturing Output: +0.9% M/M vs. +0.5% consensus and +0.8% prior.
    • Marks eighth straight monthly gain for manufacturing output.
    • January Empire State Manufacturing+3.5 vs. +6 consensus and +4.9 prior.
    • New Orders index: +6.6 vs. +3.4 prior.
    • Shipments index: +7.3 vs. +12.1 prior.
    • Number of employees index: +11.2 vs. +14.2 prior.
    • December Producer Price Index+0.3% vs. +0.4% consensus and +0.1% prior.
    • +0.8% Y/Y vs. +0.8% consensus and +0.8% prior.
    • Core PPI: +0.1% vs. +0.2% consensus and +0.1% prior.
    • +1.2% Y/Y vs +1.3% consensus and +1.4% prior.
    • The index for final demand goods advanced 1.1% in December, the largest increase since moving up 1.5% in May. Over 70% of the December rise can be traced to prices for final demand energy, which climbed 5.5%.
    • The index for final demand goods less foods and energy advanced 0.5%. In contrast, prices for final demand foods ticked down 0.1%.
    • December Retail Sales-0.7% M/M vs. -0.1% consensus and -1.4% prior (revised).
    • Core Retail Sales: -1.4% M/M vs. -0.1% consensus and -1.3% prior (revised).
    • Control: -2.0% M/M vs. +0.2% expected and -1.1% prior.

    $1.9Tn is not enough to hold up the market for a day.  What's it going to take?  

    Speaking of inflation:

    • FedEx (FDX -1.6%) announces new surcharges on its website.
    • The changes include a $0.30 per package surcharge for the company's largest customers.
    • Underpinning the decision, higher costs from extra workers dented FedEx's FQ2 results.
    • The update comes a day after overall freight shipments in the U.S. for December were reported to be strong.

    Things have simply gone too far up:

    • CFRA analyst Kenneth Leon downgrades JPMorgan Chase (JPM -1.4%) to Hold from Buy, mostly related to valuation.
    • Share price has appreciated 52% since September 2020 lows and 12% YTD.
    • Lifts target to $150 from $130.
    • Raises 2021 EPS estimate by $1.25 to $10.30 and introduces 2022 EPS estimate of $11.20.
    • Previously: Bank stocks sink as earnings disappoint after recent run-up: At the Open (Jan. 15)
    • Oppenheimer analyst Owen Lau tactically downgrades CME Group (CME -0.6%) to Perform from Outperform as he expects catalysts in his Q3 preview in October have mostly played out.
    • "While we believe CME has strong network effects, deep liquidity pools and an attractive dividend policy, it appears that too much rate-hike optimism has been baked in," Lau writes in a note to clients.
    • Since the October note, CME has risen 15.9% vs. 8.1% for the S&P 500.
    • With Lau's view that a significant amount of CME's interest rate revenue comes from short rate products and the Fed saying short rates will stay low until 2023, "CME could face headwinds in further multiple expansion and accelerating earnings growth," he said.
    • His top pick in exchanges is Nasdaq (NDAQ -0.3%) as it shifts to a SaaS provider. Also continues to recommend Cboe Markets Group (CBOE -0.2%) and Focus Financial Partners (FOCS -1.4%) in this space.
    • SA contributor Closed End Fund Tracker says a commodities bull market would drive CME's overall volume higher.
    • CME essentially catches up to the S&P 500 over the past six  months:
    • Walmart (NYSE:WMT) fell 1.8% after the company disclosed in an  an 8-k filing that Marc Lore he will retire from his job as CEO of U.S. ecommerce effective Jan. 31.
    • Lore will continue to serve in a consulting role as a strategic advisor through September.
    • Lore joined Walmart in September 2016 in connection with the company's acquisition of, where Lore was formerly the founder and CEO.
    • After Lore leaves at month's end all aspects of U.S. retail ecommerce will continue to report to John Furner, CEO of Walmart U.S.
    • Recall Jan. 12, Walmart's new fintech play expected to add to e-commerce momentum.

    JPMorgan Chase (JPM-2.6%) was a bit of a false dawn for bank earnings as weaker numbers from Wells Fargo (WFC-5%) and Citi (C-2.5%) pushed the group down premarket.

    JPMorgan posted quarterly numbers that analysts said was impressive across the board. Investment banking and equity markets were particularly strong.

    Wells Fargo missed on the top line and net interest margin was light, combined with weak guidance. But profit topped forecasts.

    Citi stumbled, with FICC (fixed income, commodities and currencies) sales and trading revenue falling short of the Street estimate.

    Higher spending from the big banks also raised some outlooks.

    The SPDR S&P Bank ETF (KBE-1.2%) and the SPDR Financial Sector ETF (XLF-1.3%) are down before the bell.

    KBE is up more than 40% since the start of November and 12.5% so far this year. XLF is up more than 30% since November started and has risen nearly 7% in 2021.

    But technical setups for both ETFs show that there’s room for a near-term pullback that will retain support.

    KBE sits 41% above its 200-day simple moving average, 30% above its 100-day and 16% above its 50-day. All are sloping upward slightly.

    With a relative strength index 75.17, it’s in overbought territory and has been for seven days.

    XLF sits 26.5% above its 200-day, nearly 19% above the 100-day and nearly 11% above the 50-day SMAs.

    It’s also been overbought for seven session, with an RSI of 77.50.

    For the next leg up on the group, investors may have be patient on net interest income, but a good deal of the yield curve steepening of late wasn’t captured in the Q4 results.

    If the yield curve remains relatively steep, rates can go “from something that can actually drive earnings rather than suppress earnings,” Patrick Armstron, CIO at Plurimi Wealth Management, told Bloomberg.

    Yesterday, Goldman Sachs said the Democratic wins in the Georgia senate runoffs mean a greater fiscal boost and support “the revived reflationary themes” for rates. Goldman boosted its year-end target for the 10-year Treasury yield to 1.5% from 1.3%.

    The 10-year yield is now at 1.10%.

    “The low interest rate regime has seen the net interest income of U.S. banks decline for four successive quarters,” Seeking Alpha contributor Michael Gayed wrote this week. “Regardless, banks with more diversified revenue streams and fee-based income could fare relatively better than their peers. KBE is a good bet whose holdings fit this criterion.”

    • Exxon Mobil (NYSE:XOM) -2.5% pre-market following a WSJ report that the SEC has launched an investigation after an employee filed a whistleblower complaint last fall alleging the company overvalued its Permian Basin properties.
    • According to the report, several people involved in valuing a key asset in the Permian Basin complained during an internal assessment in 2019 that employees were being forced to use unrealistic assumptions about how quickly the company could drill wells there to arrive at a higher value, and at least one of the employees who complained was fired.
    • Some Exxon managers in 2018 initially pegged the net present value of the company's assets in the Delaware Basin – considered the most promising area of the Permian – at ~$60B, but some employees involved in Exxon's annual development planning reportedly estimated during summer 2019 that the area's net present value was closer to $40B.
    • In November, Exxon pulled back from an ambitious plan by CEO Darren Woods to boost its overall oil and gas production by 1M bbl/day by 2025, but has maintained that the Permian Basin is essential to its plans.
    • Wells Fargo (WFC-3.5%) shares are sliding after the company reported mixed Q4 headlines numbers and net interest income results and guidance raised concerns.
    • The company missed on the top line, with Q4 revenue of $17.93B vs. consensus of $18.0B and $18.9B in Q3.
    • Q4 EPS of 64 cents vs. average analyst estimate of 63 cents vs. Q3 EPS of 42 cents and cents in Q4 2019.
    • Q4 net interest income ("FTE") of $9.28B vs. Visible Alpha estimate of $9.42B.
    • And in its slide presentation, the bank said it expects it FY21 net interest income to be flat or down 4%.
    • Average loans of $899.7B vs. $931.7B in Q3 and average deposits of $1.4T vs. $1.4T in Q3.
    • Credit loss provision to $179M from $769M in Q3, mainly due to a reserve release from the announced sale of the student loan portfolio.
    • Conference call at 10:00 AM ET.
    • The bank is reportedly in talks to sell its asset management unit
    • For the comparative periods from the beginning of the ski season through Jan. 3, 2021, Vail Resorts (NYSE:MTN) reported ski season metrics for its North American destination mountain resorts and regional ski areas, and exclude the results of Australian ski areas in both periods.
    • Season-to-date total skier visits dropped 16.6% vs. the year ago period.
    • Season-to-date total lift ticket revenue, including an allocated portion of season pass revenue for each applicable period, was down 20.9% Y/Y.
    • Season-to-date ski school revenue was down 52.6% and dining revenue was down 66.2%; retail/rental revenue for North American resort and ski area store locations slumped 39.2%.
    • The reported ski season metrics include growth for season pass revenue based on estimated FY21 North American season pass revenue.
    • Credit Suisse believed that Vail Resorts ski season metrics trends could be reported better than anticipated.
    • There is no reaction from Whirlpool (NYSE:WHR) yet after President Donald Trump extended tariffs on large residential washing machines for another two years. The tariffs were first imposed in 2018 under Section 201 of the Trade Act of 1974 and were set to expire on February 8.
    • The company applauded the move by the government. The tariff rate quota safeguards on washers impose levies of 20% to 40%, depending on volume for all imports other than machines made in Canada.
    • Shares of Whirlpool are flat in premarket trading at $192.90.
    • 3D printer companies 3D Systems (NYSE:DDD) and Stratasys (NASDAQ:SSYS) cut to to underweight from from neutral a JPMorgan due to valuation. DDD down 8.2% in premarket trading, SSYS fell 5.1%.
    • DDD gained 200% YTD and SSYS is up 36% in same period and although the stocks don't look expensive relative to recent IPO of Desktop Metal (NYSE:DM), the risk/reward "tilts unfavorable here," according to JPMorgan analyst Paul Coster.
    • Still don't believe that 3D printing/additive manufacturing has "suddenly hit an inflection point" and expects demand to improve in post-pandemic recovery; raises DDD PT to $18 from $14 and SSYS to $23 from $18.
    • Recall las week 3D Systems gained nearly 30% after strong preliminary Q4 numbers.

    • Vertical Research Partners takes a constructive view on airlines for 2021 as it expects early outperformance from the group in the post-pandemic recovery period
    • "Our base case has airline stocks ~2.5x higher over five years, equivalent to ~20% compound annual stock return. It might take a few years, but it might not and we’d rather be early," sums up the firm on the sector.
    • The names Vertical slots with a Buy rating are below.
    • Allegiant Travel (NASDAQ:ALGT): "We like ALGT for its used fleet strategy, which we think drives better returns vs. new aircraft purchases, along with its pure-play domestic leisure exposure, mainly in non-competitive markets that aren’t absorbing incremental capacity that legacy carriers have re-deployed from business-centric routes. Additionally, ALK’s point-to-point model to small cities seems likely to be a share-gainer in this environment as the alternative, connecting on somebody else involves twice as many person-to-person interactions."
    • Alaska Air Group (NYSE:ALK): "ALK has managed costs and its balance sheet well through the pandemic, has an attractive geographic mix that should benefit it during the recovery, along with a budding relationship with AAL to provide connecting opportunities into its network, and would be among the more obvious takeout candidates if another round of consolidation were to take shape early on in the recovery. It also has a new structural cost program that should benefit margins coming out of the pandemic. Despite the unprecedented demand fall-off, ALK hasn’t accumulated any incremental net debt so far while also avoiding dilutive equity capital raises."
    • Delta Air Lines (NYSE:DAL): "We think DAL’s non-union workforce provides it with cost flexibility through the pandemic that others lack while restructuring programs that are already well underway are likely to drive additional cost-saving post-pandemic. DAL’s enterprise value has deteriorated more than most others’, and we attribute this to concerns about its group-high exposure to business travel, which is down more than leisure, along with value-destructive investments that DAL made in foreign airlines during the upcycle, which were subsequently written off. Business travel won’t be a zero forever, and we expect the stock to work as it comes back, potentially as soon as 2H’21 as COVID-19 vaccine rolls out in scale."
    • JetBlue (NASDAQ:JBLU): "JBLU has managed costs and its balance sheet well through the pandemic, has an attractive geographic mix that should benefit it during the recovery, along with a budding relationship with AAL to provide connecting opportunities into its network, and would be among the more obvious takeout candidates if another round of consolidation were to take shape early on in the recovery."
    • Airlines stock had a solid day yesterday after Delta hinted at being cash flow positive this spring.

  5. Money Talk Portfolio Review:  Yet another untouched portfolio that made nice gains without any fuss.  We did our last review on Dec 8th and the portfolio was up 51.9% at $151,928 after our first year and all we did was our our official Trade of the Year (INTC) which has already contributed nicely and now we're at 63.2% at $163,210 – not bad for a month's worth of "work".  Nothing much to do here as we only touch this portfolio on show days (quarterly) and I am a little concerned as we can't cash this one out or hedge it if we feel things are breaking down but the stocks are strong (all LTP plays as well) and all with covers.  

    There were $60,000 of potential gains left so we don't need to do anything and we're good for another year of excellent profits but I'm sure something will come up by the next show.

    Future is Now Portfolio Review:   Yet another barely-touched portfolio doing very well.  Only 4 positions and we still managed to gain 94.3% in our first year.  

    • CIEN – Way over our target on this $15,000 spread.  Already net $7,900 but almost a double ahead of us.
    • JETS – Almost at goal already on the $15,000 spread and only net $3,817 so plenty of room to run and great for a new trade.  
    • SPWR – The first $20,000 spread is 3x in the money and net $16,490 so not that much left to gain but we don't need the cash or margin for anything else.  Our second spread is $28,000 and only 250% in the money currently net $22,580 so, essentially, the same deal.   With $143,540 (75%) cash in the portfolio, there's no reason not to let these spreads finish out for now.

    Let's keep an eye out for some solid trends to invest in for this portfolio.

  6. My play of today MMM buy the Jan 23 130 call @ 40.00 my offer and sell half of Jan 23 150 put @ 19.85. I wait with selling short monthly calls. Have offered to sell the Mar 21 170 call for 5.20 GTC

  7. Bought 130 call MMM for 38.70

  8. Disneyland Ends Annual Passes

  9. The post-Trump GOP, gutted

  10. I'm playing the game. Entered 1/22 TSLA 505p for 0.18. See ya next week when I do it again….

  11. BDC – For $0.18? What's the exit plan???

  12. Bio,

    If TSLA has to fall 50%, wouldn't the fall be spread across a few weeks rather than in a week? Would it better to bet on monthly puts than weekly?

  13. yodi/MMM – Are you selling half the Mar 21 calls or the same number of calls as the Jan 23 130 call? Thanks

  14. I'm guessing BDC is planning on selling after a smaller drop.  Looking at my broker, they are forecasting a double if it drops down to $570 by the 19th so I'm curious about the exit strategy.  That requires a 33% drop in 3 trading days.  If any stock can do it, it is TSLA, but that is a hell of a lotto ticket.

  15. vkat_mn MMM you buy 2 130 calls you can sell 2 Mar 21 calls, however I am holding back with the sale of the short calls as I expect the stock will go up and than you can get more for the call sale. Just to put the foot in I therefore offer to sell only one Mar 21 call for a much higher price. 

  16. JPH – pure lotto ticket. I'm looking for an ass-kicking. I mean, like 400. So that's $60 in options is $31500. I posted earlier this week the play is to pick something close to 0.15 week after week until it hits. You can be wrong 500+ times (10 years), and right once, and still break even. Sometimes stocks lose 50% in a week. So that's the play.

  17. and better odds than playing the Power Ball 

  18. Powerball/Stock – No, that's a sure thing!  

    There are 69 possible numbers for the white balls and 26 possible results for the Powerball. Thus, the odds of picking that perfect combination with a single ticket are one in 292,201,338. Each Powerball ticket costs $2. That means you could buy all the possible combinations of tickets for $584,402,676!   If you win, it's $640M at the moment, plus you'd clear another $100M by winning all the lessor prizes so, if you are the only winner, you'll do very well but if you split the big prize – well keep the receipts so at least you get a good tax deduction….

    I wonder what it would cost to have Lloyd's insure you against someone else winning the Grand Prize?  In theory, they should be thrilled if you paid them $64M (10%) to insure against that happening.

  19. Powerball – seems worth the risk.  Now where did I leave that $584M

  20. Phil/USO – I have some long USO 3 Call expiring today. This is from before their 8-1 reverse split. Do you know what the broker will allocate me after expiration today, will i get 100 shares of USO @24$ each?

  21. Thanks Hwt!

    Powerball/Tangled – There is, of course, the issue of filling out 29M cards and then waiting for the guy at the 7-11 to process them.  Probably you'll get a lot of nasty stares from the other people in line…  cool

    GIF 20x03 episode 3 season 20 - animated GIF on GIFER

    USO/Ravi – I'm not long oil.  I don't know what your broker will do, you have to check with them.  

    Down a bit into the close with a long weekend to contemplate it.

    Have a great weekend, folks! 

    - Phil

  22. In February 1992, an Australian consortium tried to corner a $24 million Virginia Lotto jackpot. But the group was only able to purchase 2.4 million of the 7 million combinations before time ran out.

  23. powerball – you can't start buying tickets before the end of the previous draw because the jackpot might reset. So you get 4 days maximum (specifically, from the Saturday draw to the Wednesday draw). Assuming businesses are open and selling tickets 24/7 you get 345,600 seconds. It'll be less than this but that's the theoretical maximum for calculation's sake. Let's say you've pre-printed all 292.2M combinations on those slips that have 5 different sets of numbers, or 58.4M slips, probably using some automated fashion. You have 345,600 seconds to buy process all 58.4 million slips so 169 per second. If the process rate is 20 seconds per slip, you'd need 3,380 people doing it at separate locations. Imagine the logistics on that. And lotto is cash only. 

    The published jackpot is only 60% of the money actually available and then a very important calculation is the probability of 1 or more other winners, that drops the jackpot proportionally, and the math never even comes close to making it worth it (with powerball and mega).

  24. interestingly the published jackpot $4640 and the real jackpot (money actually available) is $478.7 or 74.7%. So this % has been increasing over time.

    Phil, really what we need to do is start a cadillac lottery. $10 per ticket. But give the player 80% back instead of the pathetic 50%.

  25. Pharm, would you have a moment to take a look at SAVA (ex Pain Therapeutics), if you have not followed it so far? It is highly speculative but it seems to have an advanced candidate sumifilam for Alzheimer's with compelling Phase 2 data and news triggers coming up soon. TIA

  26. Pharm, HGEN ?