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Faltering Thursday – 744,000 People Lost their Jobs last Week

744,000! 

That's AFTER another round of $1,400 checks went out AFTER passing another $2Tn Stimulus Bill and AFTER another round of Business Loans have been handed out specifically to help companies maintain employees.  Prior to Covid, we averaged 220,000 unemployment claims per week – that is "normal" turnover for our 165M-person labor force.   Labor demand will have to bounce back much more before employment returns to pre-pandemic levels. Labor Department data show that although job openings neared a record high in February, the 7.4 Million openings were still fewer than the number of unemployed Americans, which totaled nearly 10 Million that month.

All these people ooing and ahing over the economy remind me of when your Grandpa is terminally ill and you go to visit him in the hospital and he can't talk and he can barely not his head and your relatives say "he's doing so much better today!"  That's our economy now – any sign of life gets people so excited but we are nowhere near where we are and, without constant life support, we'd probably be dead.

Long-Term Unemployment Has Quadrupled, and That's a Problem for the EconomyMore than 4.2M people had been unemployed for six months or more in March, the most since 2013. Total continuing claims, a proxy for the number of people receiving benefits, hit 18.2 million in the week ended March 13th. The majority of these received aid through two federal pandemic programs that were recently extended, what happens if we cut them off?  

We are still a long way from better and that was what the Fed was indicating in their minutes yesterday.  Knowing the Unemployment number would be bad is probably why the Fed scheduled Powell to speak at noon today – in case the markets get into a panic again – especially into the start of Q1 Earnings Reports next week.    

Ontario, Canada is back on lockdown for 4 weeks as they deal with a resurgence of the virus. "The situation is extremely serious. We need to hunker down right now," Ford said at a briefing in Toronto.  "What we do until we start achieving mass immunisation will be the difference between life and death for thousands of people," he said.  The order requires people in Canada's most populous province (14M of 38M total in Canada) to stay in their residences except for essential reasons, including exercise, vaccination appointments or grocery trips.  

Last week, Ontario shuttered all indoor and outdoor dining, a move that fell short of what the government's expert advisory panel said was necessary to avoid catastrophically high COVID-19 case numbers.  On Tuesday, Canada reported 6,520 cases of covid.  On Tuesday, the US reported 73,200 new cases – more than 10 times more than Canada and no, we do not have 10x their population so things are worse in the US than they are in a place where they are going back to emergency lockdowns.

On the bright side, "only" 2,564 people died on Tuesday – that's an improvement but, on the dark side, one in three people who contract covid are left with "Brain Disease or Psychiatric Disorders" – so it still might be something you should try to avoid!  20% of our population is now fully vaccinated and 1/3 have had at least one shot (including me!) but this country is acting like the crisis is over and 2,564 newly dead people might disagree with that assessment – and 2,500 more today and 2,500 more tomorrow, etc.  

We WANT the crisis to be over but by acting like it's over too early – we may be prolonging it.  Ontario recognize that fact based on numbers we are completely ignoring.  Prime Minister Trudeau looked very foolish having to close the schools the day after he made a speech saying the re-opening had been a great success.  Liberals don't bury science to score political points and if Biden has to shut things down again he will – but that scenario isn't priced into the market AT ALL!  

Be careful out there!  

 


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  1. Good Morning.


  2. Good foggy am.


  3. Well after Phil’s  ‚‘‘ Hiobsbotschaft ‚‘‘ Lets us the unemployment check to let at least the money work for us. 
    T  has div day today and the stock will drop a bit. So I buy the stock and sell the Jan22 28/35 strangle for 2.41. Combined monthly return 1.4%, not the greatest, we here just doubling the interest rate. 
    NLY I buy the stock and sell the Jan23 7/10 strangle for 3.05. Comb. Monthly  return 2.46%.
    MPW buy the stock and sell Jan22 22/20 strangle for 2.55. comb. Monthly return 1.65%.
    PFE Buy the stock and sell Jan22 33/37 strangle for 3.31. comb. Monthly return 1.32 %


  4. yodi/nly, good morning, where do you find 7/10 strange for 3.05? looks more like a dollar?


  5. Stuart NLY in my tool kid, sorry it was the staddle 10/10 not the stangle!!!!


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

    https://www.youtube.com/watch?v=XrH-vCQ-F0s


  7. Good morning!  

    XLF taking a dive at the open – let's keep our eyes open for banking news.

    This is where NewWatch is so valuable:

    Bank of America (NYSE: BAC), Other Large Banks Decline as U.S. Yields FallBank
    of America -2%JPMorgan (NYSE: JPM) -1.5%Goldman Sachs (NYSE: GS) -0.7%Morgan
    Stanley (NYSE: MS) -0.8%Citigroup (NYSE: C) -2%Wells Fargo (NYSE: WFC)
    -1.4%Financial Select Sector SPDR ETF (NYSE: XLF) -0.85%

    09:22 AM EDT, 04/08/2021 (MT Newswires) — Financial stocks were slipping in
    Thursday's premarket trading, with the Select Financial Sector SPDR (XLF)
    recently declining by 0.20%. The Direxion Daily Financial Bull 3X shares (FAS)
    were 0.17% lower and its bearish counterpart Direxion Daily Financial Bear 3X
    shares (FAZ) were up 0.08%.

    Financial Select Sector: Pivot points – The following are the pivot points
    for the Financial Select Sector (XLF). Pivot High: $35.038, Pivot Low:
    $34.72. These were calculated using the DeMark method. It is generally
    believed to be bullish when price breaks out above the pivot high or bearish
    when price breaks down below the pivot low.
    S.FO  TECA.FLY .TANALYSIS .ANALYSIS .REC XLF

    I imagine that will lead to a little selling but Powell is coming on at noon.

    Nice trades Yodi, thanks.


  8. C our discussions of yesterday. I thought it was to high!!!


  9. GSK an other one low in the chanel, Buy the stock and sell the Jan22 strangle for 3.75. Comb. monthly return 1.67%


  10. Yodi, how does the dividend work? If ex-div date is 4/8 so you have to buy the stock before today to get the dividend?



  11. swampfox to get the div you have to buy the stock before div date. Like T you will notice the stock was trading yesterday at 30.98, however today the stock trades at 30.14, so the div is already discounted. This is the normal, but not always.



  12. Marine life is fleeing the equator to cooler waters. History tells us this could trigger a mass extinction event



  13. Filled T at 30.12 and the strangle at 2.42


  14. Is any body on this board? 


  15. We are here just watching this low volume melt up I already have T and PFE  GILD and a few other positions everything pretty over priced in my mind


  16. I like this '' low volume melt UP ''''


  17. It's an odd time, Yodi. Don't know whether to hop or jump. Tempted to start quoting Dickens or someone.


  18. Banks are bouncing back already – dip buying on anything kicks in after 30 mins these days.

    Yes Yodi, very quiet this week.  People out enjoying the Spring weather.

    • The major averages are about where they started the day after some choppy action, with tech still a big winner and cyclicals weaker as rates dip.
    • The Nasdaq (COMP) +0.9% remains in the lead, with the S&P (SP500) +0.4% also gaining and the Dow (DJI) struggling for gains.
    • Federal Reserve Chairman Jay Powell had little new to say at an IMF seminar, sticking to the dovish script. While the March payrolls report was strong, he said he would like to see a series of those.
    • The 10-year Treasury yield dipped 2 basis points to 1.63%.
    • Five of 11 S&P sectors are higher, with Information Technology (NYSEARCA:XLK) gaining more than 1% and having an outsize impact.
    • Five of the six megacaps are higher, with Tesla rebounding and Facebook the only decliner.
    • Energy (NYSEARCA:XLE) is still the weakest, although crude futures -0.5% have pared losses.
    • Visa is up slightly, but has pared gains after a probe into incentives paid to banks.
    • Federal Reserve Chairman Jerome Powell said "a number of factors are coming together to support a brighter economic outlook."
    • Part of that brighter outlook is due to the quick rate of vaccinations in the U.S.
    • However, the slower vaccine rollout in other parts of the world is one of the risks to the U.S. outlook, he said during an online International Monetary Fund seminar.
    • As he has said before: "the recovery is still uneven and incomplete and the unevenness is a very serious issue."
    • While the March jobs report provided a "taste" of the recovery that is expected to increase as vaccinations continue to be administered, "we want to see a string of months like that," he said.
    • Seminar ends at 12:55 PM ET.
    • 12:54 PM ET: Powell said he thinks people spend too much time focusing on "short term, palliative measures" regarding the economy and not enough time on inclusive and long-term investments that will support growth down the road.
    • 12:50 PM ET: He doesn't spend any time in thinking about whether he'll get another term as Fed chair after his current term expires in February 2022.
    • 12:40 PM ET: Powell repeats his view that any upward pressure on prices is "transitory" and isn't likely to require a change in monetary policy. However, if inflation expectations become "de-anchored, we would act — that's our job," he said.
    • He's careful to explain that a one-time increase in prices isn't persistent inflation. Price increases resulting from supply-chain bottlenecks should eventually resolve themselves, he said.
    • 12:30 PM ET: He believes the worst-case scenario was avoided due to accommodative monetary policy and the large fiscal aid programs. "The really bad outcomes we were concerned about haven't materialized," Powell said.
    • Update at 12:29 PM ET: The pandemic recession has hurt service sector and lower wage workers the most. Powell said he's particularly concerned about the longer-term unemployed, who may lose skills and will have a harder time re-entering the labor force.
    • In addition, the pandemic accelerated changes in business, he added.
    • "We're not going back to the same economy," Powell said. Businesses are adopting more efficient technologies and that may lead to hiring "perhaps fewer people."
    • "It would be appropriate for us to continue to support those people," Powell said, indicating the central bank won't be tightening monetary policy any time soon.
    • "The Fed won't forget those people," he said.
    • The Roaring 20s enthusiasm may be obscuring a pitfall in the second half of the year, Societe Generale Global Strategist, and noted bear, Albert Edwards says.
    • Extraordinarily strong economic economic data, especially ISM numbers, have the market behaving with "heavy abandon," Edwards writes in a note today.
    • The market "believes we are going to see blockbuster, gangbuster, and perhaps even ghostbuster, GDP data for the next couple of quarters" and that's baked into expectations, Edwards says.
    • But the cyclical wave could be cresting.
    • The ISM numbers should be treated with caution because if "after an economy has been shut down every respondent thought things were getting even a little better, then the ISMs would register the 100% maximum," he writes.
    • A better gauge is the Chicago Fed National Activity Index, which collates 85 economic indicators, and shows economic activity in February falling back to trend around 2% (chart below).
    • Edwards is also skeptical about how much the recent COVID relief packages will stimulate the economy, saying it's "not the level of the fiscal deficit that stimulates GDP growth, but the CHANGE in the level of the underlying cyclically adjusted deficit."
    • Despite "the huge Biden stimulus packages a surprising fiscal cliff may yet await in the second half of this year."
    • In Q3, "the expected pop-up in YoY US core inflation will be back in sharp reverse, leaving the inflation breakevens totally detached from the Q3 inflation rate and GDP growth reality," Alberts adds.
    • "And to the extent that the recent slump in US 10y T-Note prices is large but not unusual in recent history, a dramatic reversal of cyclical sentiment may yet await us in the second half of this year."
    • (NYSEARCA:TBT) -1.1% (NASDAQ:TLT) +0.6%
    • Citi strategists said yesterday they see a 1999 dot-com vibe to the market.

    • Data from the Centers for Disease Control and Prevention indicates that beginning April 12, the federal government will distribute ~86% fewer doses of Johnson and Johnson's (NYSE:JNJ) COVID-19 vaccine compared to the prior week.
    • Just 700K J&J vaccine doses will go out next week compared to 4,947,500 this week.
    • California is receiving 572,000 doses this week but is getting only 67,600 next week.
    • The drastic reduction in dose availability is the result of a manufacturing mishap last month at an Emergent BioSolutions (NYSE:EBS) facility that is contracted to produce the J&J vaccine that led to the loss of 15M doses.
    • J&J shares are down a dime to $163.51 in afternoon trading.
    • President Joe Biden speech on gun restrictions went largely as expected.
    • The Administration is taking executive action on so-called "ghost guns" without serial numbers and is proposing a rule clarifying that when a stabilizing brace that it turns a pistol into a short-barreled rifle and is subject to the requirements of the National Firearms Act.
    • Biden also wants to close some of the loopholes on background checks, including those covering gun shows. Biden also wants to eliminate the immunity that gun makers receive from being sued.
    • The President asked the DOJ to publish model "red flag" laws for states to use as guides in allowing family members or law enforcement agencies to petition state courts to temporarily block people from obtaining firearms if they present a danger to themselves or others. He noted that states with red flag laws saw a reduction in the number of suicides following enactment.
    • On watch: Smith & Wesson (SWBI -1.6%), Sturm Ruger (RGR -0.6%), Vista Outdoor (VSTO +0.6%), Sportsman's Warehouse (SPWH +0.3%), Ammo (POWW +1.8%) and Olin Corporation (OLN -0.9%).
    • Previously: Biden set to announce highly-anticipated executive action on firearms
    • President Biden plans to have his administration draw up a strategy on climate-related risks for public and private financial assets, Bloomberg reports, citing a draft document that is has reviewed.
    • The strategy would be developed by National Economic Council director Brian Deese and National Climate Advisor Gina McCarthy in coordination with Treasury Secretary Janet Yellen and the Office of Management and Budget.
    • Regulators, corporate executives, and governments have been discussing what actions the financial industry should take in response to environmental threats and whether companies should communicate more information to investors about such risks.
    • Under Biden's approach, the OMB director, consulting with other agencies, would identify major drivers of federal climate-risk exposure and develop metrics to quantify climate risk for his long-term budget projections.
    • An executive order that's nearing completion would describe the plan to develop the government-wide strategy within 120 days.
    • Last week, Yellen named climate change risks as an area of focus for the Financial Stability Oversight Council.
    • Bed Bath & Beyond (BBBY +6.0%) is an outperformer in the mall sector on the day.
    • The volatile stock still trades with a high level of short interest outstanding on it.
    • Although BBBY was wrapped up in the Reddit-GameStop saga earlier this year, the retailer looks good on a fundamental basis to Seeking Alpha author Daniel Schönberger.
    • 'Although Bed Bath & Beyond is still reporting mixed results, the company is still able to generate free cash flow and is also expecting free cash flow to increase in the next few years. And aside from positive signs that Bed Bath & Beyond is managing the turnaround, free cash flow is what counts. And based on the expected free cash flow, the stock still seems undervalued at this point," he wrote recently.
    • The amount of natural gas flowing to U.S. liquefied natural gas export plants is set to drop to a six-week low today due to planned work at Cheniere Energy's (LNG -1.5%) Corpus Christi LNG plant in Texas, Reuters reports, citing data from Refinitiv.
    • LNG feedgas is on track to fall to 9.1B cf/day, its lowest since Feb. 26 when U.S. exports were recovering after several Gulf Coast LNG plants shut due to a shortage of gas and power during the Texas freeze.
    • But so far this month, the amount of gas flowing to U.S. LNG plants averaged 11.1B cf/day, which would top March's monthly record of 10.8B cf/day.
    • Traders tell Reuters that feedgas in April likely would not exceed March's record due to the Corpus reduction and other maintenance later this month, including expected work at Sempra Energy's (SRE +0.4%) Cameron LNG in Louisiana.
    • Cheniere recently announced substantial completion of the third liquefaction train at the Corpus Christi liquefaction project.

    So it seems like this might be a good bottom to play /NG.  I'd say long over the $2.50 line with tight stops below.


  19. Yodi – Thanks for your comments and potential trades;

    T – how about this variant of your suggestion; 

    Buy T at $30.03, Sell Oct 29/31 strangle for $2.50 (Put for $1.50 and Call for $1.00) and collect 2 ($1.04) in dividends for a total $3.50 cash collected.


  20. Phil,

    I have  NIO short puts (5/21 sold @ $5.89), now 7.75. Because of the chip shortage, the auto industry world-wide is on hold or at least until new capacity comes on-line (2022?). As I understand the situation, NIO contracts with other manufacturing companies so in theory no fixed costs from idle plants but no revenue either. Would you roll out to '22 or '23 ? 

    Thanks in advance


  21. vkat_mn, Yes this goes aswell, you just a bit closer to the firering line. You give your self 1.00 of capital gain. Nothing wrong with it.


  22. 8800 NIO I do not see your strike price. Looks like May 21 strike 45. Stock at present is trading at 38.88 but still has 1.55 premium, so I would wait. 


  23. Phil / yodi / T

    I have uncovered 105 T Jan 2023 25 calls and sold 40 T Jan 2023 puts for a net debit of $14,172. 

    I was waiting for T to go up so I can cover the calls. 

    I can sell the T May 2021 30 calls for $0.78 for $8,190 as an armchair trade or do the T Jan 2023 30 calls for $2.68 for $28,140. 

    What do you think?


  24. Phil/Yodi,

    Right you are!  The NIO 5/21 strike was 45. Thanks for catching my omission and the suggestion to find the patience to wait. 


  25. sk2020

    The backbone of an Armchair trade is always having a long call to cover the short caller. Due to the high div, T does not show high premiums. You have 105 jan23 long calls strike 25. selling short month calls against the leap call especially at the money is for me not a good idea, as you only will land up with short stocks, when assigned, and if not rolled in time. Selling a leap caller against the long leap calls, you always set the limit of your profit depending on the spread. At strike 30 your limit is 5$ plus the credit of the ATM call.

    I would close the leap calls and set up a proper armchair trade, as suggested above. 


  26. Sorry correction for the armchair you need always a long stock not a call, some typing problems today.


  27. Does anyone have any thoughts on RIO? Trying to find something that is fairly priced so digging pretty deep into the pile at this point. 


  28. dawgydaddy / RIO: I don't mind them. However, given the price of GLD and the recent uptick in the miners, I still like adding to the diversified large gold miners at this point for a shorter term trade (KL, NEM, GOLD). I also personally still like XOM as we head into summer driving season for a seasonal trade. Playing them with short puts and call spreads. 


  29. Also added to my VIAC position today – just added to the long $40 calls, and will complete call spread sales later after slight price bump….. 


  30. I'm sorry guys I just realized I never hit send on the last thing I wrote. I had to leave and now I'm out and it must still be on my computer.   


  31. NIO/8800 – Nothing wrong with being a Fabless Semi but this one doesn't make money at the best of times.  They lost $800M last year and were expecting to lose $500M this year but now worse with the chip shortage and MAYBE they were going to make money in 2023 but it's all projections.  People who have a leading chip now may not have a chip that's in the running in 3 years.  $38.50 is $56Bn for the company and yes, they forecast going $2Bn in sales (real) to $8Bn in sales (hoped for) in two years so you are buying a story, not a company.  That's why they get hit so hard when there's anything that might disrupt their projections.  Bottom line – you can roll but be very careful with this..

    T/SK – T did go up, it hit $30 and now it's retracing:

    You have 105? 2023 $25s ($5.50) and 40 short 2023 mystery puts for net $14,172 so you paid about net $1.40 per long call and that's fantastic.  If you sell 75 of the 2023 $32 calls for $2 ($15,000) you have a net free $70,000 spread (I'm ignoring the extra 5) and then you can sell 30 of the July $30s for $1.10 ($3,300) which is a 5%(ish) return on your $70,000 spread for the quarter while you wait.  You have 5 more of those sales ahead of you for another $15,000 and, if T is over $32 – a $70,000 bonus.  The nice thing is you are only 2/3 covered on the long-term so you can roll higher and higher if things go well to widen the spread.

    RIO/Dawg – They make very nice money, $10Bn last year and supposedly $18Bn this year but that's unusual and they project $13Bn in 2022 against a $127Bn market cap – what's not to love.  This needs to be a Top Trade Alert in the morning!   And they pay a 5.8% dividend – so many ways to win!  

    RIO/Rick – They don't do gold.  75% Iron Ore, 10% Aluminum and 10% Copper.  Very good basic materials play – always in demand and a good inflation hedge too.  

    VIAC/Rick – Time to go back to that well.


  32. Phil,

    Thanks for the cautionary note on NIO, the Chinese EV marketer. I stuck my toe in that particular pond because they don't own manufacturing facilities – - hence no fixed overhead costs while nothing (or at least much less) is being produced – but bit of a dark cloud over all the auto industry until the chip shortage is resolved. Wonder how the chip situation will be affected if China invades Taiwan and TSM becomes a Red Chinese subsidiary and the PROC uses chips as leverage with the rest of the developed world. Make for a good movie story line.