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Non-Farm Friday – Is America Working?

It's payroll time again.

We added 916,000 jobs in March (adjustments pending) and under 1M added will actually be a disappointment for April but I think the pace of hiring may have slowed somewhat.  Normal job growth is roughly 300,000 but we're adding back the 22M people who were laid off during the shutdown and, so far, we're still about 4M short and that's not including the normal growth we should have had

I know the ever-rising market makes us think the economy must be fantastic but it's not really.  Even with the endless stimulus, a lot of sectors are hurting and they are sectors that employ a lot of people like restaurants, movies, clubs.  We're getting back to normal but we're not normal yet and half the year has already gone by.   Fortunately, we've had $6Tn in stimulus measures in the first 4 months which is pretty much our entire GDP for 4 months – so who's going to notice a few holes in our economic ship?  

In fact, labor shortages now threaten to restrain what is otherwise shaping up to be a robust post-pandemic economic recovery. Some businesses are forgoing work, such as not bidding on a project, delivering parts more slowly or keeping a section of the restaurant closed. That reduces the pace of the economy’s expansion. Other companies are raising wages to attract employees, which could inflate prices for customers or reduce profit margins for owners.  Analysts say the labor shortages should ease over time as more potential workers are vaccinated, schools fully reopen and federal benefits expire, though the process could take months and the impacts are already being felt.

Companies are scrambling for workers.  Notice this McDonalds is offering a $500 sign-on bonus but still sells value menu items for $1.  Even if they make a 20% profit on those items, a new hire has to serve 2,500 of them before the restaurant just makes back the signing bonus and those of us who have worked in McDonalds know know that's about a month's worth of french fries or coffee as serving over  just over 100 per shift is as good as it gets

8:30 Update:  Oopsie!  Looks like I was right and the Economorons were wrong as we only added 266,000 jobs in April – 75% less than expected AND it turns out March was actually +770,000, 146,000 (16%) less than they said it was last month.  That's not necessarily bad news for the market because it means… yes, you guessed it:  MORE FREE MONEY!!!  That's right, more free money fixes everything that ails your economy.  Remember, when you aren't happy with an economic number – just throw money at it until it looks better!  What are consequences – we have no idea?

Less jobs also means less need for money to pay workers and less money being spent by less workers so the Dollar will drop and that will give us a boost in stocks and commodities this morning – making us think all is well when it's clearly not.  Keep in mind we all got big, fat stimulus checks in March and if you're telling me Biden's $2.1Tn March stimulus package wasn't enough to give our $20Tn economy a 2-month boost – then I'd have to say those holes in our boat are a lot bigger than we thought!  

In fact, the Unemployment Rate is back to 6.1% and that's not good either.  

On the whole, it's a good time to check our Short-Term Portfolio (STP) and see how our protection is holding up.  Our last review was on 4/15 and we were at $177,376 and now we've bounced back to $245,485 for a nice $68,109 gain in 3 weeks, benefitting largely from our side bets on CMG and W as well as our primary SQQQ hedges coming back a bit on the recent Nasdaq dip:

  • XRT – Retail is stronger than we expected but the weakness in Non-Farm Payrolls makes me think earnings for smaller retailers won't be that great.  Let's imagine XRT falls back $5 – that would make the June $80 puts, now 0.53, worth about what the $85s are ($1).  So we can double our money on a $5 drop so we can put $2,500 to work on 50 more puts and give it two weeks.  I doubt we lose more than 1/2 so risking $1,250 more to make $2,500 or much more if there's a real catastrophe – it's a good additional hedge for now.

  • DIA – This was kind of a joke bet as I was exasperated with the market never going down and I said we could double our money every month with spreads like this.  Well, the spread was net $700 and now it's net $1,625 so let's take it off the table and next month we'll see if we can turn $1,400 into $2,800 (notice I'm keeping the bonus $225 in my pocket so now we're only in for net $475).

  • SCO – We're betting oil is below $60 in January.  I'm still good with that.  

  • W – Took a nice dive for us an now net $10,625 but the short April $320s expired near worthless already and made us about $7,500 on what was originally a net $1,400 spread.  It's potentially a $20,000 spread at $260 and they already reported earnings so I think we're just on track and, of course, if it does spike higher – we get to sell short calls again.

  • FXP – China is taking longer to collapse than we thought but it's progressing and we have a few more months to go.

  • TQQQ – I love shorting the ultra-bullish ETF because it gets so stupidly high and then it decays over time as well – two ways to win!  We're at our June target already and worst case is we'll have to roll the short puts.  If TQQQ goes higher, the short puts expire worthless and we make $8,250.  Don't you just love options?  

  • CMG – Another one with earnings as we expected.  This is where most of our profit came from this month and that's why we carry a variety of hedges in the STP – it gives us more ways to win.  In this case, it was simply a fundamental short so, even if the market went higher (it did) I still didn't think CMG could justify $1,500.  We still have $7,420 left to gain on the short $1,500 calls and we're right in the sweet spot for the short puts too – a perfect spread!  

  • SQQQ #1 – We sold another set of $25 calls to pay to roll to the $5 calls on the long side and we're double-exposed but SQQQ is a 3x ETF at $11.52 so $25 is more than 120% up and the Nasdaq would have to fall 40% for us to hit that and, even if it did, our $5 calls would be $200,000 in the money at $25 before we had to pay back a dime and we'd adjust long before then.  
  • SQQQ #2 – We left these calls at $10 and they are 50% over-covered but also with unreachable calls.  So, by the time SQQQ hits $20, we have $350,000 from our longs to make adjustments with and the net of the two positions is currently $53,450 so 7x protection on the spreads.  

  • TZA – Much more straightforward.  We paid net $4.50(ish) for the spread and we can salvage $3.60 from the short calls so let's do that and roll the 50 June $32 calls ($18,000) to 100 Jan 2022 $30 ($9)/2023 $50 ($9.25) bull call spread for an 0.25 credit.  TZA also decays over time and we're much lower in strike so I think we have great protection for the rest of the year and decay should take care of the rest (the Jan $50s are $5).  

So we have plenty of protection and we've taken almost $20,000 off the table while improving our positions.  Great adjustments into the weekend's uncertainty.

Have a great weekend,

- Phil


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  1. GM! Up up up and away.  Goldman Sachs and MS are the market. If they go up, market goes up.  Just remember that.

  2. Note: GS = Fed…they are one in the same.

  3. Morening all! Following up on a question from yesterday: GLD / Gold Miners: Would you add any new positions in gold miners (in addition to GOLD) given the break above 1800/ounce in gold? If we think free money will continue and asset prices will inflate the miners look cheap. And the options premiums are quite low in some of them, even GDX. Although they are up strong pre market. Had looked at call spreads in GDX and KL and NEM. 

  4. They dropped the dollar half a cent at same second as jobs report

  5. Good Morning.

  6. Tommyt – Yeah, when the weaker jobs number came out the yeilds tanked and the dollar dropped faster then anyone but a computer could trade… but it makes sense from a global perspective. Seems it will take longer for the USA to get to higher rates. 

  7. IBM – Got a overnight notification that my short IBM 07/16/2021 135.00 calls got assigned.

  8. I got a good fill on CCIV (Lucid): Jan 2023 options: $20 to $50 call spread for $3 (buy $20 calls for $8, sell $50 calls for $5). Will finish by selling the $10 2023 puts for net 0 on the $30 spread. I'm doing 25 calls and 10 for the puts. So worst case, own CCIV at <$10. Best case, the $4500 spread is worth $75000. 

    I know the company is in its infancy – but I saw the product in a sales gallery in Miami and its a stunning car, and the interest seems real…. but this is obviously a super risky trade.   

  9. Good morning!

    Hey Pharm!  Yes, with all this free money flying around, they are the gatekeepers.  

    Miners/Rick – When GOLD is this cheap, I have no reason to stray.  HMY and NAK are my other favorites in small and micro mining.  WPM is still an offset way to play as well.


    Dollar/Tommy – Well less payroll, less demand for Dollars so it's the Dollar reacting to the low headline number – algos jump all over that stuff.

    And what Rick said:

    IBM/JiJ – Well IBM is at $145 and the July $135 calls are $11.85 so they did you a huge favor cancelling your $11.85 obligation to pay and putting $135 in your account leaving you short IBM at $135 (-$10).   You should write them a thank-you note…

    CCIV/Rick – Somehow, this doesn't give me the warm fuzzies:

    Churchill Capital Corp IV

    640 Fifth Avenue
    12th Floor
    New York, NY 10019
    United States
    212 380 7500

    Sector(s): Financial Services
    Industry: Shell Companies
    Full Time Employees: 

    We should start a SHEL ETF – I bet people would flock to it.  "Our strategy is to put money into companies that don't actually have a business but have raised capital to buy dead public companies to skirt the vetting process most companies have to go through.  They will take that money and spend it acquiring private companies in hopes of justifying their market caps from overly-enthusiastic investors."

    Blank check companies (SPACs): An illustrated explainer

  10. Phil/SPG Have 500 SPG ($69) with -5 '22 $75calls. With SPG around $124, should I roll out the short calls .. are they likely to be exercised?


  11. Saw this this morning … Kind of funny (or is it?)


    Quote: "Just imagine traveling 10 years back in time and trying to explain this to someone; just imagine what an idiot you'd feel like. 'There's going to be this online currency that people think is a form of digital gold, and then there's going to be a different online currency that is a parody of the first one based on a meme about a talking Shiba Inu, and that one will have a market capitalization bigger than 80% of the companies in the S&P 500, and its value will fluctuate based on things like who is hosting Saturday Night Live and whether people tweet a hashtag about it on the pot-joke holiday, and Bloomberg will write articles and banks will write research notes about those sorts of catalysts, and it will remain a perfectly ridiculous content-free parody even as people properly take it completely seriously because there are billions of dollars at stake.'"

    Bloomberg columnist Matt Levine writing about, you guessed it, dogecoin. 


  12. Dogecoin ($80B) is worth half of MS ($160B).

    Morgan Stanley: 85 years and 100's of thousands of people and 10's of millions of man-hours building a financial empire

    Dogecoin: a couple of kids did some stuff over a weekend

  13. SPG/Wing – Crazy how they took off.  Very likely to be exercised into dividends.  The Jan $75 calls are $50 and the Jan $120 calls are $17 I'd roll the 5 short $75s ($25,000) to 15 short $120s ($25,500) and buy 15 2023 $125 calls at $20 ($30,000) to cover.  You could pay for that by taking 200 longs off the table at $124 ($24,800) and I'd keep a tight stop on the rest as it's way over our target anyway. 

    Good summary Jeff.  No stranger than the booming market during a Global pandemic, I guess.

    MS/BDC – Yes but both were started as a joke.  

  14. CCIV / Phil – Lol, yes, totally agree. The SPAC thing is crazy, and they are absurdly overvalued now. You're definitely buying a promise of future earnings, not current earnings. All that being said, the Miami showroom has crazy interest (you have to book an appointment to get in). Everyone I saw there put down $1000 (refundable) deposit, as did I. Their engineer is amazing, and the product is killer. I guess with TSLA at 800B or whatever it is, I could imagine Lucid selling well too…. and for $4500 it seems like a good risk/reward play. Knowing of course, that I could end up owning 1000 shares at $8 or so and have my call spread wiped out. 

  15. Our 24 year old nanny invested in Dogecoin two months ago via Robinhood… and quit last week…

  16. CCIV/Rick – Sure, it's worth a toss – as are a lot of things if you can afford to gamble.  

    So how many actual cars do they have in the showroom?

  17. there's no reason crypto ($2.4T) can't be $20T. But it won't be on this run. I can't wait until these Dogecoin noobs get crushed by the power of the knowledge of us OG crypto warriors! Ha HA!

  18. Phil / CCIV: They have one car in the showroom. And a super cool VR machine where you sit in the car chair and then can customize a car to your specs/colors and "experience it" in real time. They have 3 models you can select from, all variations on the same car, with different specs/ranges. What's really incredible is that the range on the higher models are around 500+ miles, which is crazy for an electric car. That being said, these cars are generally around 65-90k. The do have some models ("The Dream") which is at 120k and some lower models that you can get for 50k or so. The do of course say that they will come out with lower end models as well in 2023 or something… will wait and see. 

  19. imagine if the robinhood zoomers and Wallstreetbets guys get into gold. I mean, unlike DOGE and GME, you can actually hold something in your hand.

    Gold $5000?

  20. Phil…You feeling better ?  Vaccine hangovers are rough:)

  21. Yes, better Willsons but still scratchy throat.  

    CCIV/Rick – I guess it's good that these electric companies all get funded so fast.  Hopefully we'll get some real innovation.

    • Making a rare appearance at a White House press briefing, the Treasury Secretary continues to try to make good after straying out of her lane into monetary policy on Tuesday. Those remarks about the possible need for higher rates sent the Nasdaq down 2.5%, and after the market close she quickly reversed course.
    • Today, she says the road to recover remains a "long-haul climb," "somewhat bumpy," and doesn't expect full employment to be hit until sometime in 2022.
    • Yellen is speaking after this morning's employment report came in far softer than expectations, with April jobs higher by just 261K vs. nearly 1M expected.
    • U.S. active drilling rigs climbed by 8 to 448, the count's 21st increase in the past 24 weeks, Baker Hughes reports in its latest weekly survey.
    • U.S. drilling rigs targeting crude oil added 2 to 344, while gas rigs surged by 7 to 103 and one rig was classified as miscellaneous.
    • Rigs targeting oil in the Permian Basin gained 5 to 227.
    • A leaked Walmart (WMT -0.9%) document is giving an inside look at some of the challenges the retail giant is facing in competing with Amazon, Instacart, Publix, Albertsons, Target and others in the grocery store market.
    • "Grocery, the growth engine of the business, is losing share rapidly," reads the internal document. Walmart shoppers are said to be choosing the competition as a call is made to elevate assortment and value.
    • The memo from February also pushes for improved renewal rates for the Walmart+ subscription service.
    • The memo is not a total shocker as Walmart has noted before in its investor presentations the intense competition for grocery market share.
    • Walmart nudged a bit lower after Recode broke the story.
    • Sector watch: Grocery stores run up against tough pantry-loading comparable.
    • Beyond Meat (BYND -5.0%) attracts a new bull with CFRA Research moving to a Buy rating after having the alternative meat producer set at Hold.
    • Analyst Arun Sundaram: "Although the next few quarters could be choppy, particularly on margins due to an aggressive investment agenda, we're raising our opinion as we see a good entry point with the shares near its 52-week lows. Foodservice will recover with time. In the meantime, BYND is slowly developing a stronghold in key international markets and rapidly improving the taste, nutrition, and cost structure of its products. The shares can be viewed as a 'reopening play' as foodservice was once 50% of sales (currently 25%) or an 'ESG play' given consumer habits are shifting to healthier, sustainable, plant-based alternatives."
    • Beyond Meat trades below its 10-day, 50-day 100-day and 200-day moving averages.
    • CFRA assigns a price target of $140 to Beyond Meat.
    • Earlier today: Beyond Meat sees more selling pressure as analysts dig in on Q1 miss.
    • Wheaton Precious Metals (WPM +0.3%) edges higher after Q1 adjusted earnings jump from a year ago but come in slightly short of estimates, while revenues rise 27% Y/Y to a quarterly record $324M.
    • Wheaton says its Q1 average realized price on a gold equiv. basis gained 27% Y/Y to $1,848/oz.
    • Q1 average cash costs rose to $449/oz. on a gold equiv. basis from $382 in Q1 2020, resulting in a 30% Y/Y increase in cash operating margin to $1,399/gold equiv. oz. sold.
    • The company generated $232M in operating cash flow during the quarter.
    • Wheaton maintains guidance for full-year attributable production at 370K-400K oz. of gold and 22.5M-24M oz. of silver, resulting in total production of 720K-780K gold equiv. oz.

  22. W/Pstas – Damn, that flipped on us.  

    Another amazing day in the markets, what could possibly go wrong?

  23. Well a massive mess on the jobs numbers and we are up 200 points.

    Have a great weekend everyone,

    - Phil