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What’s Next Wednesday – Powell Keeps it Easy but States are Raising Taxes

How does Money Printer Go Brrr: Part 1 — Bonds or Bondage? | by  Thoughtmosphere | MediumMORE FREE MONEY!!!

That was the message from Fed Chair Jerome Powell yesterday as he told the Senate the the Fed would hold interest rates near zero pretty much no matter what and the Fed would keep buying as many TBills as they want to print to allow Infinite Stimulus to keep going well into 2022.  “The economy is a long way from our employment and inflation goals,” Mr. Powell said, just days after the PPI Report showed the highest inflation in 20 years.  Powell will deliver the same message to the House this morning.

Consumer confidence in the U.S. rose in February for the second consecutive month as Americans grew more upbeat about current business and labor market conditions, the Conference Board reported Tuesday. Still, nearly a year after the crisis erupted in the U.S., the nation has about 10 million fewer payroll jobs than in February 2020.  Of course, 1M of those jobs were cleaning offices – they're not coming back…

The Fed’s semiannual report delivered Tuesday said that business leverage “now stands near historical highs” and that insolvency risks at small and midsize firms remain considerable.  Noting that asset bubbles triggered recessions in 2001 and 2007-09, Powell was asked if he sees a link between elevated asset prices and the Fed’s easy-money policies.

“There’s certainly a link,” Mr. Powell said. “I would say, though, that if you look at what markets are looking at, it’s a reopening economy with vaccination, it’s fiscal stimulus, it’s highly accommodative monetary policy, it’s savings accumulated on people’s balance sheets, it’s expectations of much higher corporate profits…. So there are many factors that are contributing.”

While the markets recovered on Powell's testimony, they didn't go any higher because, as I said yesterday – what more can this guy say?  He's telling you that the Government can spend as much as they want for as long as they want and the Fed will back them up by buying every note they issue and the Fed will continue to lend money at 0% – even though no one in the private sector will do anything close.  That's nothing more than perpetuating an artificial environment.

Our economy is like an orchid growing on Mars.  It certainly couldn't survive out on the surface but as long as it stays inside it's glass bubble and we give it just the right amount of water and nutrients and sunlight – it will do just fine.  Stop giving it any of those things and it can't possibly survive on it's own but that doesn't stop investors from running out and buying Martian Orchid Futures (/MO).

Meanwhile, on another planet we like to call State Governments – where they don't print their own money and budgets have to be balanced – it is now time to tax the rich.  In New York this week, Governer Cuomo has proposed raiing taxes on people who make more than $5M/year.  California has already done it and boosted state revenue collections by 1.2%.  In New York, the State's top tax rate is 8.82% for people making over $100M per year and the new proposal will take it to 10.82% but New York City Taxes may take that all the way to 14.7% – those New York City Condos  are looking a lot more expensive now, aren't they?  

Death and the Taxman: 8 Killer Tax Day DesignsLawmakers in New York state are also considering revenue proposals such as a mark-to-market tax on Billionaires, which would require them to pay capital-gains taxes as assets appreciate, even if they don’t sell.  In Minnesota, where no one make $100M, Gov. Tim Walz has called for creating a new top income-tax rate of 10.85% for income above $1 million for married couples filing jointly and above $500,000 for single filers. Currently, the state’s highest income-tax rate is 9.85%. Mr. Walz also has proposed adding a tax at a 1.5% rate on long-term capital gains and qualified dividends between $500,000 and $1 million and at a 4% rate for such income of more than $1 million.

In Washington state, which doesn’t have an income tax, Gov. Jay Inslee has called for a new 9% tax on long-term capital gains above $25,000 for individuals or $50,000 for taxpayers filing joint returns.  In Pennsylvania, Gov. Tom Wolf asked legislators to raise the 3.07% personal income-tax rate to 4.49% while expanding a tax-forgiveness credit. His administration says this combination would result in higher payments for the top one-third of taxpayers. The Pennsylvania proposal would raise taxes further down the income spectrum than would the plans in some other states: A single taxpayer without dependents who earns $49,001 or higher would pay more under the plan.

See the trend here?  When you elect a Federal Government that "lowers your taxes", they do so by cutting back their aid to the states, who still have to fix your potholes and put out fires, etc.  The states also have to balance their budgets so they HAVE to raise taxes – all you do when you cut Federal Spending is shift the burden to local governments and local governments do things like not improve the power grid – and then you sit in the dark and freeze for a week AND pay $28Bn more for your electricity.  

All these subsidies do not result in a healthier economy – they result in being able to grow an orchid where orchids can't really grow but the moment you take away the subsidies – things start to collapse.  That's why the Fed is making every possible excuse to keep the free money train rolling – they have no idea what will happen when it stops or, even worse, maybe they do….

 


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  1. Good morning everyone!

    Here is the link to today's webinar….

    https://attendee.gotowebinar.com/register/4758234838959028752


  2. Good Morning.





  3. BioChris Lithium Miners – I came up with these. ABML, ALB , LAC, LTHM, PWRMF, SQM. Maybe Phil has some insight on ranking. They are flying though.  Related to battery tech, KULR looks very interesting 

     


  4. Lithium/Jeddah – ALB and SQM are the best ones, I think, but you are getting on the back of a very long train.  We were playing ALB at $20 back in 2009, when I had to explain to people what lithium was for.  At $155, it's probably not all that expensive but it's $18Bn and pre-virus earnings were $600M so 30x but it's not like they will bounce back a lot as they made $376 in 2020 anyway so back to $600 and slow, steady growth is OK but not thrilling when you're paying 30x.  

    Fortunately, it's priced for a lot of volatility so, if you REALLY want to own it for $100, you can sell the 2023 $100 puts for $17 and consider that free money and apply it to something conservative like the 2023 $115 ($62)/140 ($49) bull call spread at $13.  So let's say we sold 5 puts ($8,500) and bought 10 of the spread ($13,000), that would be net $4,500 on the $25,000 spread that's 100% in the money to start with $20,500 (455%) upside potential if ALB can grow into their current valuation over the next two years.  If not, RAWHIDE!  

    • "There's a lot of slack in the labor market" and there's a "long way to go to full employment," Federal Reserve Chairman Jerome Powell said in testimony before the House Financial Services Committee today.
    • On a broader view, the unemployment rate may be closer to 10%, he said, than the 6.3% headline number in the January jobs report.
    • That bolsters the Fed's stance that its policy-making officials aren't even "thinking about thinking about" raising rates. See comments from his Tuesday testimony in the Senate.
    • Markets are perking up with the S&P 500 (+0.1%) and the Dow (+0.3%) climbing into positive territory and the Nasdaq (-0.6%) paring its decline.
    • The best way to get people back to work is "bringing the pandemic to a decisive end as soon as possible,' he added. While the U.S. is making progress, "we're not there yet."
    • See Powell's prepared statement for his testimony.
    • He also spoke about the Fed's consideration of issuing a digital dollar. "This is going to be an important year," he said, adding that "we're going to be engaged with the public" through events to discuss tradeoffs and other issues.
    • The central bank is currently working on the technical challenges related to issuing a central bank digital currency.
    • ArcLight Clean Transition (ACTC +6.4%) and Blue Bird Corporation (BLBD +6.2%) trade higher after the Montgomery County public school district in Maryland decided to switch its bus fleet over to electric models at no additional cost. The first-of-its-kind move is seen as a potential model for the Biden Administration in its electric vehicle push.
    • A "huge cost differential" between existing diesel buses and electric models was cited by the school district that sits right outside of D.C.
    • Blue Bird was tipped yesterday by Seeking Alpha author White Diamond as a sleeper EV pick.
    • EIA Petroleum Inventories: Crude +1.3M barrels vs. -5.2M consensus, -7.3M last week.
    • EIA Gasoline Unchanged vs. barrels vs. -3.1M consensus, +0.7M last week.
    • EIA Distillates -5.0M vs. -3.7M consensus, -3.4M last week.
    • Futures (CL1:COM +1.6%)
    • Overstock.com (NASDAQ:OSTK) slumps despite reporting Q4 revenue, EPS and adjusted EBITDA ahead of expectations.
    • During the earnings call, execs highlighted that the retail business is strong. Overstock growth in the home furnishing online market was 2.3X the sector average and the brand was ranked in the top five by revenue.
    • Shares of Overstock are down 10.81% in morning trading to cut slightly into the sizable 52-week rally of over 900%.
    • Iron Mountain (NYSE:IRM) stock gains 2.2% after issuing better-than expected 2021 guidance.
    • Evercore ISI analyst Sheila McGrath credits the strong guidance to IRM's diversified business mix and cost-savings from its Project Summit initiative.
    • Separately, IRM agrees to form a joint venture with India colocation data center provider Web Werks and invest $150M in the JV over the next two years.
    • IRM sees 2021 adjusted FFO per share of $3.25-$3.42, far higher than the $2.59 consensus, and total revenue of $4.325B-$4.475B, better than the $4.28B average analyst estimate.
    • Sees year adjusted EBITDA $1.575B-$1.625B, up 7%-10% from 2020.
    • The REIT continues to expect Project Summit to generate $375M of adjusted EBITDA benefits exiting 2021.
    • Q4 adjusted FFO per share of 66 cents beats consensus of 53 cents and increased from 81 cents in the year-ago quarter.
    • Q4 total revenue of $1.06B, vs. $1.04B consensus, slipped from $1.08B a year ago; storage revenue of $697M increased 3% Y/Y while service revenue of $362M fell 10%.
    • Q4 adjusted EBITDA of $374M fell 5% Y/Y, driven in part by a decline in service revenue, partially offset by the benefits of Project Summit and the flow through from revenue management.
    • Overall, Evercore's McGrath says the results show that the company "continues to execute in this economic uncertainty."
    • Previously (Feb. 24): Iron Mountain FFO beats by $0.07, beats on revenue
    • The electric vehicle sector is seeing one of the biggest safety test of its history with Hyundai (OTCPK:HYMLF) replacing battery systems in about 82K EVs globally due to the risk of fires from LG Chem (OTCPK:LGCLF) batteries.
    • The recall is estimated to cost the South Korean automaker about $900M.
    • "It's very significant for both Hyundai and LG as we are in the early stages of the electric vehicle era. How Hyundai handles this will set a precedent not just in South Korea but also for other countries," notes said Lee Hang-koo of the Korea Institute for Industrial Economics & Trade.
    • The recall applies to nearly 76K Kona EVs built between 2018 and 2020, including about 25K sold in South Korea. Some Ioniq EV models and Elec City buses are also part of the recall action. Kona and Ioniq owners are advised to limit battery charging to 90% of capacity until the battery has been replaced.
    • Hyundai fell 3.9% today in Seoul trading on a week that some investors were expecting news on the Apple partnership front
    • Visa (NYSE:V) and Mastercard (NYSE:MA) plan to boost swipe fees for some types of credit-card purchases in April, adding to pressure already felt by restaurants, retailers, and other merchants hurt by the pandemic, the Wall Street Journal reports.
    • And while consumers' shift to online shopping has helped keep retailers afloat during the pandemic, it's also adding to their costs. The swipe fees that merchants pay when a customer pays with a card are often higher for online purchases.
    • Card networks, such as Visa and Mastercard, set the fees that the merchants pay to the banks that issue the cards; while consumers may be unaware of the fees being charged, merchants end up paying ~2% of their customers' credit-card purchases.
    • Card-industry executives explain that the interchange fees help cover the cost of innovation and preventing fraud. And the increased potential for fraud on online purchases partly justifies the higher swipe fees for such transactions.
    • Visa shares rise 0.2% and Mastercard gains 0.5% in premarket trading.
    • Even with the boost in credit card use during the pandemic, Mastercard and Visa stocks' total return lags the S&P  500 during the past year.
    • Telsey Advisory Group turns more constructive on Macy's (NYSE:M) with a price target boost to $16 from $14.
    • Analyst Dana Telsey: "Fourth quarter results were better than expected with topline and gross margin performance delivering earnings upside. The company ended the quarter in a clean inventory position (down 27.3%) and on more solid financial footing with incremental deleveraging of the balance sheet. Digital sales continue to grow, up 21% year over year in the quarter, reaching 44% of total sales."
    • Telsey the company has managed through the challenges of the pandemic, but will enter 2021 continuing to face what the firm sees as structural traffic headwinds in the channel.
    • A Market Perform rating is kept in place.
    • Shares of Macy's perked up yesterday after the department store operator's earnings beat and guidance update.
    • Argus keeps a Buy rating on Goodyear Tire & Rubber (NASDAQ:GT) after taking in the company's announcement of a merger with Cooper Tire & Rubber.
    • Analyst David Coleman: "We view the transaction favorably as it will strengthen Goodyear's position in the U.S. and substantially expand its presence in China."
    • Coleman and team remind that Goodyear has also become a play on the growth of the electric vehicle industry given its global footprint and R&D capabilities. Based on the company's improving prospects, they believe that GT is favorably valued at 16X the 2021 EPS estimate.
    • Argus assigns a new price target on Goodyear of $20 to rep 20% upside from current levels.
    • KeyBanc was also favorable on the Goodyear deal earlier this week.
    • Six Flags Entertainment (NYSE:SIX) topped Q4 revenue estimates, but it is the update on cash flow that may be more crucial for investors.
    • The company says it had cash on hand of $158M and $460M available under its revolving credit facility at the end of the quarter, net of $21M of letters of credit, for total liquidity of $618M. That mark compares to the $673M of liquidity at the end of Q3.
    • The company's net cash outflow was an average of $19M per month, which was an improvement from guidance range of $25M to $30M per month.
    • Six Flags is striving to become cash flow positive for the last nine months of 2021 after seeing an outflow of $53M to $58M per month in Q1.
    • Six Flags is up 1.20% in premarket trading after the Q4 earnings release.

  5. jed/phil – thanks for the lithium suggestions


  6. Another way to participate in lithium batteries is LIT ETF.

    ALB is about 11% of holdings and SQM is 127% in last year & it does have options.


  7. Should read- SQM is 4%. Performance was up 127% trailing year. 


  8. EVs sort of reminds me of fusion: it's the future, and stays there. I mean I know there's a whole line-up coming, but I thought that was the case in 2015. For awhile there were Nissan Leaf's and some Bolt's and a few plug-in Priuses around, but really, except for TSLA there's no electric cars (and I feel like I saw a lot more TSLA's a few years ago than now). I never see the Leaf anymore.

    If the line-up finally materializes, FINALLY, lithium demand will go through the roof. Through the first half of 2010's the average was about 35k tonnes per year and then went into the 80-90's later in the decade but has actually dropped off a little. Adequate grid-level energy storage would requires 100X the amount of lithium in the EV market so not realistic given the amount in the Earth's crust, but some people may still try to use lithium for this purpose (until the cost makes it a non-starter).

    So Im into lithium IF we actually start to see these cars appear, and which oddly we kind of haven't seen yet.



  9. Interesting CHL my Mar 21 short 30 call was assigned to me obviously for 30$ 2.5 more than the frozen price. Looks like something is happening ????


  10. watch XSPA go to 200


  11. CHL/Yodi – What did you sell them for?

    Everything is pinned at the top into the close.  Short month and we're window-dressing already.

    Copper is crazy! 

    Now that's a commodity squeeze.


  12. Phil I hold CHL stock @ 27 however you can not sell anything but I did hold the Mar 21 30 short call 2 off and it was assigned and they paid me 30 dollar so 3 more than I paid. I have no explanation why the option was assigned at the first place but something is in the bush. Also hold short Jan 23 25 short put which shows @ 50.92 each. Here again they can not assign this as the stock is OTM so God only knows what`s going on


  13. P.S originally sold the 30 call for 1.25


  14. I have CHL stock in my account it was showing 27.50  now it is 0 for the value. I close my puts and calls back when this  all started for about even  but not the stock. 


  15. I still have CHL stock as well.  Waiting patiently…..


  16. VIAC – Solid Quarter… 

    ViacomCBS Reports Q4 and Full Year 2020 Earnings Results

    https://seekingalpha.com/pr/18206658-viacomcbs-reports-q4-and-full-year-2020-earnings-results

     

     

    Grew Global Streaming Subscribers to Nearly 30M and Pluto TV Global MAUs to 43M; Domestic Streaming Subscribers Rose to 19.2M, up 71% Year-Over-Year, and Pluto TV Domestic MAUs Increased to 30.1M

    Accelerated Domestic Streaming & Digital Video Revenue Growth to 72% Year-Over-Year in Q4, Driven by Strong Streaming Subscription and Streaming Advertising Revenue

    Increased Q4 Affiliate Revenue 13% Year-Over-Year and Advertising Revenue 4% Year-Over-Year, Driving a 3% Year-Over-Year Increase in Total Revenue 

    Delivered Year-Over-Year Improvements in Q4 Operating Income, Adjusted OIBDA, Operating Cash Flow From Continuing Operations and Free Cash Flow 

    Hosting Virtual Investor Event Today, Detailing Paramount+ – a Differentiated Streaming Offering Spanning Live Sports, Breaking News and a Mountain of Entertainment – Ahead of March 4 Launch

    NEW YORK--(BUSINESS WIRE)-- ViacomCBS Inc. (NASDAQ: VIAC; VIACA) today reported financial results for the quarter ended December 31, 2020.

    Statement from Bob Bakish, President & CEO

    “We started 2020 with clear goals: unlock the power of our combination, build robust operating momentum and accelerate our streaming strategy – and we delivered. In Q4, despite the ongoing impacts of COVID-19, we finished the year with strong advertising and affiliate results that demonstrate the strength of our core businesses and achieved incredible growth across our linked streaming ecosystem, reaching nearly 30 million global subscribers and over 43 million Pluto TV global MAUs. At today’s streaming investor event, we look forward to showcasing our opportunity to expand our position and bring ViacomCBS (VIAC) content and brands to streaming audiences around the world.”

     


  17. CHL/Yodi – Brain mentioned they are $35.35 on the Hong Kong Exchange so a bargain for the guy who took them.  

    CHL/Bert, Pharm - As noted above, it's just not trading in the US but the stock exists and is trading in other countries. 


  18. 54.8 HKD is $7.07 USD but an ADR share of CHL is worth 5 Common Shares.  This clears with Bank of NY Mellon, who are the depository for China Mobile ADRs.  You can get the ADR shares from your broker, then get the ordinary shares from BK and then go to China to cash them in.  cheeky

    https://www.bloomberg.com/news/articles/2021-01-27/u-s-extends-period-for-investors-coping-with-china-stock-ban


  19. Interesting day for the Dollar


  20. I just read that SKT is one of the most heavily shorted stocks at 40% of the float.  Why?  


  21. Occupancy was down and loans are due.  If things get worse it can get ugly for them but obviously it's been an especially bad year and should get better.  Trend looks bad so people extrapolate and short:

    Q3 2018

    96.40%

    -0.50%

    Q4 2018

    96.80%

    -0.50%

    Q1 2019

    95.40%

    -0.50%

    Q2 2019

    96.00%

    0.40%

    Q3 2019

    95.90%

    -0.50%

    Q4 2019

    97.00%

    0.20%

    Q1 2020

    94.30%

    -1.10%

    Q2 2020

    93.80%

    -2.20%

    Q3 2020

    92.90%

    -3.00%

    Q4 2020

    91.90%

    -5.10%


  22. Here is the link to the replay of this week's webinar…

    https://youtu.be/07zLAlDZnps