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Mid May Market Movement – Still Churning at the Same Levels

Here we are again.

Back on May 3rd, our self-explanatory headline for the Morning Report was: "Monday Market Movement – Dow 34,000, S&P 4,200, Nasdaq 13,900 – Again" and, this morning, we're at 34,346, 4,169 and 13,385 respectively.  The Dow is up 1%, S&P flat and the Nasdaq is down 3.7% respectively.  The Dollars those indexes are priced in, however, have lost 1.5% of their buying power during the same two weeks as our currency is teetering on the cliff of the May lows.  

This is the stealthy way the market can take your money when you don't realize it – especially in an inflationary environment - so we need to keep on our toes.  For example, I could have traded a $32 shares of AT&T (T) for 10 gallons of Gasoline (/RB) on May 3rd but now I'd be lucky to get 9 gallons for the same share.  I would have needed 55 shares of T to trade for an ounce of gold at $1,760 but now I need 58.33 shares at $1,867.   

You can delude yourself that your portfolio hasn't lost any money but losing buying power is the same thing.

Interest Rates and High Debt - CME GroupJapan's unstimulated (in Q1) GDP fell 5.1% and that's very likely where we'd be without $2Tn being added to ours in March.  Japan is the World's 3rd largest economy at $5Tn but they are the king of debt at $13.5Tn, which is 270% of their GDP after adding 20% last year alone.  As long as people are still willing to lend Japan money, I'm not too worried about the US as our own $28,000,000,0000,000 in debt, which is "only" 140% of our own GDP.  Japan will be our canary in the Debt coal mine but take that warning seriously when it does come. 

Of course, the reality Japan does have to face is that they can't really afford to add more stimulus as they get dangerously close to the 300% mark in debt to GDP (and already past it in Total Debt) and only the fact that they are getting away with paying 0% on their bonds is keeping that island nation afloat on their sea of debt.  Imagine if they paid 5% interest on $22Tn in total debt – that would be over $1Tn in Debt Payments – which would be 20% of the GDP just going to pay interest on the debt.  

The US GDP is $20Tn and our debt is $28Tn so 5% would be $1.4Tn but don't forget taxes are only $3.5Tn, or 17.5% of GDP so, at 5%, 1/2 of all US Taxes collected would just go towards interest payments on our debt.  What are the choices at that point?  The Government can cut spending, but Discretionary Spending is less than $1Tn so that still wouldn't be enough, which brings us to:  Raise Taxes.

Since taxes are now $3.5Tn and we currently spend $400Bn servicing our debt, an increase of $1Tn would require a 33% increase in taxes.  Joe Biden is trying to address this problem now – before we get into the situation where we're paying 5% on our debt while the Republicans, of course, want to ignore the problem and continue not paying taxes until the crisis is so terrible that it won't be possible to deal with so we'll just give up and not try – like Climate Change!  

Meanwhile, how screwed are US Families going to be of rates start ticking higher?  Low interest rates have also sent Household Debt flying to the moon, just under $15Tn now and 5% of that would be $750Bn, enought to reverse ALL of the stimulus checks handed out in 2020.  How do you think the economy would do with a reverse-stimulus in place?    

Equity Purchases by the Bank of Japan Reach a New Milestone

As I said though, we can ignore this until Japan and Italy begin to explode – then I'd get concerned.  For now, it's just best to keep this in the back of your mind – like a pilot light – so you remember not to over-commit to things you can't unwind in your portfolio and general investing because Greece was fine, with an A-level credit rating, paying 5% on 10-year bonds – until suddenly it wasn't – and then things fell apart very rapidly and rates went as high as 45% until the bondholders agreed to take cuts to resolve the crisis.  

Timeline: Greek debt crisis

Fortunately for the US, we haven't dealt with a 5% interest rate on our 10-year note since 2007 since, unlike Greece, we have our own Central Bank who can control our interest rates (until they can't – see "Armageddon") but the price we pay for controling rates is inflation – which is simply another way of taxing away your money – it just doesn't seem like a tax, so people don't complain as much or, more importantly, vote you out of office for it.

Of course, once inflation is no longer "transitory", the bondholders do demand a rate of return that matches inflation and that's where things begin to fall apart – especially when our plan for 2021 is to be about $2Tn more in debt – getting to that $30Tn mark early next year.  The Fed is already buying 50% of our debt and we like to pretend that the Fed's $10.3Tn balance sheet is not just more debt but the "asset" on that balance sheet is mainly US notes and what happens to the value of notes when rates rise?   

If you have a 10-year note that pays 2% you are going to get $120 back on your note over 10 years and you can sell that note for $100 BUT, if you are holding that 2% note and inflation is 5%, then you are actually losing 3% per year and the value of your note if you have, for example, 7 years left, will drop by 3% x 7 years or 21%.  The Fed is not exempt from that math problem and, if their $10.3Tn in notes take a 20% hit – that's a $2Tn hit to Treasury which means more debt for US and it will make it more difficult for us to borrow more money – right when we need another $2Tn!  

So let's watch our canaries and keep one hand firmly on the exit as we review our Member Portfolios this week.  We need to make sure we love our stocks enough to ride out a 20% correction and we already bumped up our Short-Term Portfolio (STP) hedges in Friday Morning's Report ("TGIF – Hedging for Disaster with our Short-Term Portfolio Review") to make sure we don't get caught.  This morning we have nice earnings from WalMart (WMT), Home Depot (HD), Macy's (M) and Bidu (BIDU) also knocked it out of the park as people spent those stimulus checks in Q1.  

We can start this morning with our Earnings Portfolio Review, which we last looked at on April 16th at $287,486 (no changes since) and now stands at $303,661 which is up $16,175 for the month – that's the way to keep up with inflation!  We cashed out some positions last time and now have $230,071, more than 2/3 of the portfolio in CASH!!!, so we are very comfortable here and ready to buy if we see some notable bargains this earnings season.

  • SBUX – As noted last time, if the earnings were great, we'd add a bull call spread to protect ourselves but SBUX actually missed on revenues despite the stimulus and the re-opening and $110 is still unrealistic as that's $130Bn for a company that will be lucky to make $3.5Bn this year and made $4.5Bn in it's best year (2018), so this is a RIDICULOUS 28.8x best possible earnings – and not one is projecting those again this year or next.  So this is a bet on reality with $9,800 in potential gains

  • PETS – May as well take advantage of the dip and sell 10 of the 2023 $30 puts for $8 ($8,000) as that's net $22 and puts more cash in our pockets.  That leaves us with a net $2,650 credit on the $20,000 spread so $22,650 upside potential if we can get back over $35 in 18 months.   Obviously good for a new trade (I hope!). 

  • GILD – This one is right on track for our full $15,000 and currently net $5,242 so $9,758 (186%) left to gain would be the trade of the year for most newsletters but, at PSW – it's just the leftovers from our $2,000 net entry, which is already up $3,242 (162%) in our first 9 months.  

  • HBI – Here we have a $10,000 spread that's already net $8,800 but, if we don't buy back the puts and close the bull spread at $9,200, we have that cash and another $400 left to gain, so let's do that!  

  • INTC – Our Trade of the Year pulled back to our goal but that goal is for January, so no worries.  It's a $25,000 spread currently at net $12,450 so $12,550 (101%) left to gain

  • SQQQ – This is a self-balancing portfolio with it's own private hedge and this one is a $120,000 spread at net $26,800 AND half in the money. so pretty cheap protection – very good for a new hedge.  Just be warned we're using a trick of selling 2023 calls against 2022 longs – but look how well it's working so far!  

  • WBA – I can't believe how hard I used to work to convince people to buy this thing!  Very strong now and miles over our target.  It's a $25,000 spread at net $24,747 so let's take the bull call spread off the table and leave the short puts with $1,190 left to gain.  

So we've raised another $42,200 in CASH!!! and we still have $56,348 left to gain on our longs using less than 15% of our cash and about 20% of our buying power.  We're also very well protected with our $100,000 (upside) hedge so we'll be looking for things to add in this portfolio like VIAC, who we may as well add now:

  • Sell 10 VIAC 2023 $30 puts for $5 ($5,000) 
  • Buy 20 VIAC 2023 $35 calls for $10.70 ($21,400) 
  • Sell 20 VIAC 2023 $50 calls for $5.60 ($11,200) 

That's net $5,200 on the $30,000 spread so $14,800 (285%) of upside potential gives the whole portfolio 25% more upside for just $5,200 in cash along with the promise to buy 1,000 shares of VIAC for $30, which is 25% below the current price.  

This is how you build a portfolio that outperforms the market.  NOT by chasing after momentum stocks but by taking sensible positions in blue chip companies that are undervalued and using our options to hege and leverage the position, minimizing our cash exposure, increasing our diversity and keeping ourselves flexible for changing market conditions.  

By knowing exactly how much money we expect to make from each position, we always know at a glance whether our portfolio on the whole is on or off track.  That's a nice, relaxing way to play the market – and stay ahead of inflation.

 


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  1. Good Morning.


  2. JUst a note on ABNB. It has heavy short interest of almost 15% so watch out as this bump may be transitory. They are in deep trouble as housing is so hot that they are losing participants. 2. Their double dipping and raising prices is not substantiated by any support.  3. There reporting system and vetting of prospective renters is not reliable and more property owners are being left with hefty damage/repair/ and replacement costs. 4. Their demands as far cleanliness are totally unrealistic. 4.One nasty report is posted against the owners BUT you can not read all the reports on the prospective renters. In other words not much to go on when vetting prospective guests. 5. If you turn down a guest request you calendar is locked for those dates! Way too much hassle and control by this company to make it workable and their earnings are showing this.


  3. I have had 5 years of experience with them so not just making things up. Am not using their services again. They want you to lower your prices and all kinds of things to make more bookings, but all they are doing is giving digital reservations while you do all the work. Just plan not worth it.


  4. Oh I do have a nice BPS against them at the moment.


  5. pirateinvestor Thanks for the info just cancelled a ironcondor play on them


  6. Pirate/ABNB    you forgot to mention their lockup period is over and early investors are exiting.  At some point that will subside and then its price might stabilize


  7. California will stay masked for another month


  8. Good morning!  

    ABNB/Pirate – $84Bn is insanely valued for them.  MAR is at $46Bn with $20Bn in sales in a normal year and about $2Bn in profit (lost $267M last year) – and they own the properties!  ABNB did $5Bn in revenues in 2019 and lost $674M and lost $4.5Bn last year and expects to lose $1.2Bn this year and MAYBE break even in 2022 on $7Bn in projected sales.  So ridiculous!  

    And, by the way, Travelocity and I'm sure other travel sites now list people's homes as well as hotels.  Not good for ABNB if they have preferable terms and catch on.

    I tried to book Key West last night for Memorial Day Weekend – forget it!  $700+/night for hotels that are left and mostly sold out.  Looks like people are dying to get out of the house.



  9. Hi Phil. The price for the VIAC positions has changed since you gave the position. Is it ok to take them? If so then at what price?

    Sell 10 VIAC 2023 $30 puts for $5 ($5,000) 

    Buy 20 VIAC 2023 $35 calls for $10.70 ($21,400) 

    Sell 20 VIAC 2023 $50 calls for $5.60 ($11,200) 


  10. VIAC/Nir – Wow, they popped $1.95 (5%), no wonder.  $30 puts are now $4.50, $35 calls are $12 and $50 calls are $6.30 so not as attractive.  That's a problem when I mention stocks on the main page.  The net is now $9,400 so I'd wait for it to calm down a bit.

    Mixed signals from the indexes:

       

    Shorting oil at $66.50 still works:

    Oil is a very tempting short into inventories at $66.25.  $66.50 I would certainly short at that's $70 for Brent, which should be rejected.

     

    That's why you always need to watch Brent as well.


  11. ABNB   someone bought 300 June22 $125/$175 call spreads for about $17.50

    COP  someone bought 11,000 August $65/$75 call spreads. Another trader sold 2000 of the August $47 puts and bought the $65 calls


  12.       2021  
    Company Ticker Type April March Feb. 3-month average
    Capital One COF delinquency 1.92% 2.24% 2.45% 2.20%
        charge-off 2.40% 2.41% 2.66% 2.49%
    American Express AXP delinquency 0.80% 0.90% 1.00% 0.90%
        charge-off 1.00% 1.10% 1.40% 1.17%
    JPMorgan JPM delinquency 0.78% 0.89% 0.97% 0.88%
        charge-off 1.97% 2.03% 2.11% 2.04%
    Synchrony SYF core delinquency 2.40% 2.80% 3.10% 2.77%
        adjusted charge-off 3.70% 3.80% 4.00% 3.83%
    Discover DFS delinquency 1.69% 1.85% 2.01% 1.85%
        charge-off 2.55% 2.71% 3.15% 2.80%
    Alliance Data Systems ADS delinquency 3.40% 3.80% 4.30% 3.83%
        charge-off 5.20% 5.30% 5.20% 5.23%
    Citigroup C delinquency 1.12% 1.26% 1.31% 1.23%
        charge-off 2.07% 2.49% 2.76% 2.44%
    Bank of America BAC delinquency 1.17% 1.31% 1.50% 1.33%
        charge-off 2.33% 3.17% 2.67% 2.72%
        Avg. delinquency 1.66% 1.89% 2.09% 1.88%
        Avg. charge-off 2.65% 2.90% 2.97% 2.84%
    • Overall, the average delinquency rate and the average charge-off rate continued to fall in April as stimulus and tax refunds help consumers keep current on credit card payments.
    • In fact, none of the eight credit card issuers covered here, none reported a March-to-April increase in either metric.
    • The three-month average for delinquency rate fell to 1.88% from 2.04% in March; three-month average charge-off rate, though, increased to 2.97% in April from 2.78% in the prior month.
    • Morgan Stanley's Betsy Graseck notes that consumers are paying their bills at a record pace, with 30+ day delinquencies now just 1.4% of outstanding balances and down ~40% from a year ago.
    • "The flip side of this coin is payment rates remain elevated, after jumping 400 bps on average in conjunction with the recent round of stimulus," she wrote in a note to clients.
    • This month, though, there was less loan contraction than previous months with payment rates poised to decline in the next few months. She sees an "inflection point in loan growth around late 2Q/early 3Q."
    • That follows a $49B decline in credit card balances in Q1 2021, according to the Federal Reserve Bank of New York.
    • Oppenheimer analysts Chris Kotowski, Owen Lau, and Kevin Tripp also note that bank loan volumes, especially in the card segment, have stabilized and credit quality trends remain "outstanding."
    • Jefferies analyst John Hecht, however, continues to expect that credit trends will be irregular in coming months, "given the cross-currents of economic recession, high but declining unemployment, stimulus, and forbearances."
    • Jefferies recommends Ally Financial (NYSE:ALLY) and SYF due to good end-market activity and "stickier" revenue streams.
    • SA contributor Andrew Cournoyer says Synchrony is trading at solid multiples and should have some momentum behind it.
    • Updated 2:55 p.m.: Pichai highlights a few advanced research areas: "Project Starline" offers a sort of three-dimensional videoconferencing, using multiple camera angles to establish the shape of participants. The result is conversing with a holographic image in space rather than an image on a screen. And the company is working on intelligent carbon load-shifting between its data centers, and pushing more into geothermal energy.
    • That's a wrap on I/O. Most of the much-awaited hardware news (including even any further details on the upcoming Pixel 5A) will wait for other events. Google shares that were up for the day when the event started are lower now: GOOG -0.4%GOOGL -0.7%.
    • Updated 2:32 p.m.: Turning to smartwatches, Google says it's partnering with Samsung (OTC:SSNLF)combining their Wear OS and Tizen operating systems. Google's apps will be easily accessible on Samsung watches.
    • Updated 2:29 p.m.: "Phones have become the center of our digital lives." Google is tightening integration between phones and Chromebooks, and (while some stand-alone apps have tried before) bringing TV remote functionality into the phone. A "Digital Car Key" (on Google's Pixels and Samsung phones) will allow locking, unlocking and starting cars.
    • The Android 12 Beta 1 is available today, it says.
    • Updated 2:22 p.m.: Turning to Android 12: There are 3 billion active Android devices around the world, the company says. Its mission is that the OS is deeply personal; private and secure; and that devices work "better together, with your phone at the center." The fall's new Pixel phone will be the first to see design changes.
    • Along with a new visual look, the company is keeping up adding features to the device power button: Along with integrations like Google Pay and smart device controls, launching the Google Assistant can now come via the power button.
    • Updated 2:06 p.m.: Improvements to the shopping graph mean more transactions that can be launched from Google Lens, either from the live camera or from screenshots (for example, to locate a pair of shoes seen in an image online). There's also improved communication of retail promotions and shopping cart tracking.
    • Making shops free has paid off as there's been an 80% increase in merchants on Google. An integration with Shopify (NYSE:SHOP) means bringing in more than 1.7M Shopify merchants, the company says, by including the shopping card in the Chrome browser. Shopify is ticking up, +2%.
    • A privacy note: Google has made auto-deleting user data after 18 months the default setting for new accounts. And it's announcing several new password management updates, as well as doing more user-assisted processing on devices such as smartphones rather than shipping the data to a server for number crunching.
    • Updated 1:19 p.m.: Machine learning is continuing to shape Google search, Pichai says; billions are now using Google Translate, as well as Google Lens capabilities to draw useful information from photos and smartphone cameras. The company's advances in natural language understanding continue to improve its voice assistant as well, he says, and the new breakthrough there is LaMDA (language model for dialogue applications), an open-domain model designed to converse on any topic.
    • Original item: Google's (GOOG +0.4%GOOGL +0.1%) I/O developer conference is back after taking a 2020 hiatus due to the COVID-19 pandemic, with the keynote kicking off now from CEO Sundar Pichai.
    • Expectations vary, though the company is sure to give its usual update on the newest version of Android (Android 12).
    • Meanwhile, the company may offer more information about its budget-targeted Pixel 5A phone and a possible affordable version of its Pixel Buds product.
    • And observers are watching for any information about the company's "Whitechapel" chip, rumored to be powering Google devices as a rival to Apple A-series chips.
    • Stay tuned here for live updates of import.
    • Live Nation Entertainment (NYSE:LYV) is legging higher on high volume, +4.3%, as Ritholtz Wealth Management's Josh Brown talks the stock up on CNBC.
    • Brown (long the stock) largely agrees with recent analyst consensus, saying sold-out concerts are ahead after a year of pent-up demand for live entertainment.
    • Analysts are singing from the same lead sheet this month after the company's Q1 earnings: Berenberg says demand is enough to soak up compressed concert supply, and Cowen notes 46 festivals scheduled between June and November, a modest return to normal.
    • Jefferies urged buying the dip on the outlook for concerts, and Wolfe sees a "multiyear cycle of strong growth" for a company with a structurally stronger margin profile post-pandemic.
    • Amid some ups and downs in recent days, LYV is up 17% over the past couple of weeks overall.
    • A containment hold in place at the Tesla (TSLA +1.7%) Fremont factory is causing about 10K cars to be placed on hold before delivery, according to Electrek.
    • While Tesla has not commented on the containment hold, sources tell Electrek that the issue is due to a missing part. The number of cars on hold could move higher with the problem still ongoing.
    • It is too early to tell if some Tesla deliveries planned for Q2 will be pushed into Q3. Tesla delivered just under 183K vehicles in Q1 and some Wall Street forecasts are for the electric vehicle maker to deliver as many as 900K vehicles this year.
    • Tesla is still up for the day, but off its session high. Many electric vehicle stocks are now trading without any relation to the direction of the EV Mother Ship.
    • Robinhood (RBNHD), the popular stock-trading app, is expected to disclose its IPO filing as soon as next week with an eye to go public toward the end of June, Bloomberg reports, citing people familiar with the matter.
    • IPO prospectuses give potential investors their first detailed look at the company's financial performance and its assessment of the business risks it faces. The timing of Robinhood's plans could change, the Bloomberg report said.
    • The company was reported to file confidentially for the IPO in March.
    • Reuters had reported in March that the company wants to allow its users to buy some of its IPO shares, and Bloomberg has reported that the fintech's valuation could range from $13B to as high as $40B.
    • In its recent 13F filing, Sacerdote’s Whale Rock Capital Management reported 49 positions with a total portfolio value of $12.16B.
    • As per Bloomberg data, the hedge fund trimmed its overall exposure to tech stocks by ~5%; quarter exits included Square (NYSE:SQ), NXPI Semiconductors (NASDAQ:NXPI), Zoom Video Communications (NASDAQ:ZM), Uber Technologies (NYSE:UBER), Zscaler (NASDAQ:ZS).
    • Among the reduction in stakes, Taiwan Semiconductor (NYSE:TSM), Sea (NYSE:SE), Penn National Gaming (NASDAQ:PENN), Tesla (NASDAQ:TSLA), Walt Disney (NYSE:DIS), CrowdStrike (NASDAQ:CRWD).
    • New positions were acquired in – Twitter (NYSE:TWTR), Workday (NASDAQ:WDAY), Wayfair (NYSE:W), Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL).
    • Stakes were increased significantly in Facebook (NASDAQ:FB), Zendesk (NYSE:ZEN), Twilio (NYSE:TWLO), Amazon.com (NASDAQ:AMZN), Bill.com (NYSE:BILL).

    • CEO Mason Morfit led ValueAct in its recent 13F filing reported total 13 positions with a total portfolio value of $8.57B.
    • The fund exited Morgan Stanley (NYSE:MS) and CDW (NASDAQ:CDW).
    • New positions were acquired in Outfront Media (NYSE:OUT), Insight Enterprises (NASDAQ:NSIT), TopBuild (NYSE:BLD); TopBuild has lost 11% in past one month while Insight eroded 1.7%.
    • Fiserv (NASDAQ:FISV) was the only position increased significantly; Quant and Wall Street Analysts (PT $140.48) rating is Bullish on the stock; in the past one year, the stock has generated 12.8% returns.
    • Among reduction in stakes, Seagate Technologies (NASDAQ:STX), Citigroup (NYSE:C), SLM (NASDAQ:SLM), KKR (NYSE:KKR) and Trinity Industries (NYSE:TRN)
    • Lumber futures (LB1:COM -4.7%) and homebuilder stocks continue to drop after housing starts fell more than expected in April.
    • Tight supplies and soaring prices for lumber and other materials likely play a major part in the disappointing housing starts and building permits report.
    • Lumber futures, recently at $1,264, reached as high as $1,711.20 on May 10; a year ago, their highest trading price was $351.
    • The fewer housing starts and supply shortages ding the iShares U.S. Home Construction ETF's (ITB -1.0%) upward path over the past year — the ETF rose as much as 112% from May 18, 2020 to May 10, 2021; at Monday's close the total return cooled to a 98% gain.
    • Homebuilders declining include D.R. Horton (DHI -1.7%), PulteGroup (PHM -1.5%), Toll Brothers (TOL -1.6%), Lennar (LEN -1.0%), Beazer Homes USA (BZH -2.1%), and KB Home (KBH -1.0%).
    • Home Depot (HD -0.8%) reverses its premarket gain after Q1 sales beat expectations; rival Lowe's (LOW -0.5%) also loses ground.
    • LB1:COM rises more than three-fold in the past year, while homebuilder D.R. Horton's stock doubles but home improvement retailer Home Depot's total return of 37% lags the S&P 500's 48% rise as seen in chart below.
    • Recent commentary indicates lumber bottlenecks may be beginning to ease, good news for the broader housing industry, Hoya Capital Real Estate says.
    • WeWork (WE) Chairman Marcelo Claure says demand for the company's workspace is higher today "than it was prior to the pandemic."
    • Claure, who is also the COO of SoftBank (OTCPK:SFTBF,OTCPK:SFTBY), made the comment during the Bloomberg Businessweek virtual summit.
    • A WeWork spokeswoman later told Bloomberg that "Sales are back to pre-pandemic levels."
    • In March, WeWork agreed to go public through a reverse merger with SPAC BowX Acquisition in a deal valued at $9B.
    • Major investor SoftBank stepped in to bail out WeWork after its first IPO attempt failed, which started a period of choppy waters for the Japanese tech giant.
    • Last week, SoftBank reported annual profits that set a new record for a Japanese company. But SoftBank's CEO admitted that his WeWork investment was a "mistake." 
    • Express (EXPR +4.4%) and Chico's FAS (CHS +6.5%) are leading the mall sector after Macy's (M +0.3%) reported earnings earlier today.
    • Notably, Macy's reported a surprise profit and boosted its full-year guidance.
    • Other mall chain gainers include J Jill (JILL +3.2%), G-III Apparel Group (GIII +1.2%) and Children's Place (PLCE +3.1%) off the general good vibe from the department store operator. On that note, Macy's CEO Jeff Ganette pointed directly to the burst of vaccinations in Q1 as supportive of store traffic.
    • Macy's has pulled back from its earlier pop as investors factor in what was a pretty brisk pre-earnings rally (+70% YTD).
    • See a breakdown on Macy's Q1 earnings report.
    • T-Mobile (TMUS -2.4%) has pared its worst declines of the day following a report that parent Deutsche Telekom (DTEGY -0.5%) is looking to boost its stake to a majority.
    • Handelsblatt is pointing to plans that Tim Hoettges will present on Deutsche Telekom's Capital Markets Day Thursday – plans that saw reservations from Germany's government as well as labor representatives who are concerned about Europe being neglected as the U.S. business becomes dominant.
    • There's also concern about Deutsche Telekom's debt levels. But Hoettges is winning over skeptics and the Supervisory Board with promises to deliver against both objections, according to the report.
    • Abbvie (NYSE:ABBV) is accused in a new House Oversight Committee report of engaging in abusive prescription drug pricing and anticompetitive practices.
    • The report's release comes on the same day that company CEO Richard Gonzalez is testifying before the committee.
    • According to the report, Abbvie intentionally raised prices in the U.S. to compensate for drug price reductions in other countries.
    • The report also points out that AbbVie charges $77,586 for Humira, the world's best selling drug, nearly 470% more than when the drug launched in 2003 and $181,529 annually for  Imbruvica 82% more than when the drug was launched in 2013.
    • Humira revenues were $16B last year.
    • Because it feared it would face generic competition for Humira in 2017, Abbvie allegedly entered into patent settlement agreement to delay a biosimilar until 2023.
    • The report says this delay cost the U.S. healthcare system $19B.
    • The document says the company has built a patent thicket around the two drugs as another way to delay generic competition.
    • Gonzalez did not commit to lower prices on Humira or Imbruvica in response to questions from lawmakers, Bloomberg reported.
    • Also today, three top House Democrats asked the Federal Trade Commission to launch an investigation into Abbvie's alleged actions to delay Humira biosimilars.
    • Abbvie shares are down 0.7% to $116.08 in morning trading.

    • A joint statement from Beijing's National Internet Finance Association of China, the China Banking Association, and the Payment and Clearing Association of China: "Recently, crypto currency prices have skyrocketed and plummeted, and speculative trading of cryptocurrency has rebounded, seriously infringing on the safety of people's property and disrupting the normal economic and financial order."
    • According to Reuters, the three regulators – in addition to the above warning about trading in cryptos – have teamed to ban financial institutions from facilitating cryptocurrency transactions.
    • The news appears to have ended a modest bounce today in bitcoin (BTC-USD), and sent the popular crypto back close to the lows of yesterday, currently trading a few dollars above $43K.
    • The Grayscale Bitcoin Trust (OTC:GBTC) is off 2.7% today.
    • Recall the quick dive for bitcoin in March on news of a proposed India ban.
    • Customers can pick up Apple's (NASDAQ:AAPL) new M-1 powered iMac and iPad Pro and the next-generation Apple TV 4K at the tech giant's retail stores starting Friday, May 21. Preorders will start being delivered the same day.
    • Apple says that 99% of its global retail stores will be open as of Friday after a year that saw a wave of COVID-19 related closures around the world.
    • Bloomberg sources say Apple is now planning a broad revamp with a lower-end MacBook Pro, updated MacBook Air and MacPro workstation, a high-end Mac mini and a larger iMac.
    • The new MacBook Pros could arrive as early as this summer. All of the revamped models will include faster processors with in-house silicon that outpaces the current M1 silicon and continues Apple's supplier breakup with Intel.
    • The antitrust trial between Fortnite publisher Epic Games and Apple continues. Yesterday, App Store boss and former marketing head Phil Schiller testified that the store generated over $400 billion in physical good sales, like Uber rides and Amazon purchases, in 2019 and didn't take a cut of that money. Schiller said Apple doesn't take a commission because the company can't guarantee the goods (or driver) will arrive.
    • Schiller also testified that 84% of App Store apps are free and 75% of games are free. Of the remaining games, 17% are freemium with in-app purchases and 6% are paid. That leaves 2% for subscriptions.
    • Apple has spent $100 billion on R&D over the past 15 years with $18 billion spent last year.
    • Recent news: Yesterday, an extensive NYT report detailed Apple's concessions to the Chinese government.
    • AT&T (T -6.2%) is sliding anew in second day of declines off its blockbuster deal to spin off and combine WarnerMedia with Discovery (DISCA -2.4%).
    • That's adding up to a 9.5% decline since Friday's close for AT&T stock. Discovery A shares have fallen 8.4% from Friday's close.
    • Citi is positive on the deal from AT&T's perspective, maintaining a Buy rating and a $34 price target, vs. AT&T's current $29.09 quote. It puts the company in a better position to grow the core communications business (especially with wireless performance on the upswing), Michael Rollins and Jason Bazinet write – though the guided post-deal dividend cut is an "obvious disappointment."
    • The chance to meet a new pro forma free cash flow target of $20B will be a subject of investor debate, it says, while "we believe AT&T has sufficient financial flexibility to support the new dividend level and reduce net debt leverage" even on a more moderate scenario at $16B.
    • The big-picture strategy makes sense, BofA says, even if details are limited today on pro forma direct-to-consumer revenues in the deal. (Current implied consensus of about $9.5B includes legacy HBO subscribers, the firm notes.) And several questions remain over the combined entity's go-to-market DTC strategy, and content spending (management says current content spend is $20B).
    • BofA estimates the combination is worth about $148B in enterprise value; correspondingly, it's staying Neutral on DISCA with a price target of $40 (now 22% upside from current price).
    • Deutsche Bank calls the deal a "clear positive" for Discovery, and says it helps AT&T get back to core distribution. From Discovery's perspective, this is "the deal we hoped they could get done" and it should be highly effective in driving DTC subscriber and revenue growth at home and abroad.
    • As for Discovery share classes, the spread is narrowing (between nonvoting DISCK to DISCA, to 7% from 15%) but it continues to think DISCK (DISCK -1.9%) is a better value.
    • From AT&T's perspective, spinning off WarnerMedia should provide "important benefits, including (1) greater financial flexibility, enabling the company to (2) accelerate key network infrastructure deployments in the coming years, leading to (3) higher levels of growth in both revenue and profits."
    • Q1 E-Commerce Retail Sales+7.7% Q/Q vs. -0.9% in Q4.
    • Total retail sales for the Q1'21 were estimated at $1,581.4B, an increase of 7.8% (±0.4%) from the Q4'20.
    • Q1 e-commerce sales in the accounted for 13.6% of total sales
    • In a statement today, the Biden administration details the cybersecurity spending included in the $2.3 trillion American Jobs Plan, which includes $20 billion in energy infrastructure investments for state, local, and tribal governments that's contingent on cybersecurity modernization.
    • "Specifically, these modernization block grants will be tied to the use of and compliance with 21st century energy, technology, and security standards. Eligibility for these grants will also be contingent on policies requiring installation of technology that detects and blocks malicious cyber activity on information and operational technology networks, consistent with privacy protections," says the White House.
    • The infrastructure plan also includes the $200 billion broadband investment making the service more affordable, reliable, and secure for Americans.
    • The Biden administration previously secured more than $1 billion in funding through the American Rescue Plan to modernize the federal government's cybersecurity infrastructure.
    • Related stocks: FireEye (NASDAQ:FEYE), CyberArk (NASDAQ:CYBR), CrowdStrike (NASDAQ:CRWD).
    • Last week, Biden signed a cybersecurity-related executive order to modernize the nation's defenses. The announcement came in the wake of the Colonial Pipeline breach by ransomware-as-a-service group DarkSide.
    • G20, a global forum representing the world’s largest economies has stopped short of endorsing a patent waiver for COVID-19 vaccines.
    • G20 leaders have stressed "voluntary licensing, technology and knowledge transfer, and patent-pooling" in their conclusion in a draft document seen by Reuters.
    • The purpose of "patent-pooling" is to encourage the sharing of patents. It is still considered to be detrimental to the pharma industry, but far less aggressive than a patent waiver which was previously criticized by executives of major pharmaceutical companies.
    • The document which is subject to changes lists the commitments to be adopted on Friday at a Global Health Summit.
    • To boost manufacturing and ease supply constraints, the U.S. government previously backed a relaxation of rules governing the patents related to COVID-19 vaccines.
    • The news pressured shares of COVID-19 vaccine developers especially those using novel vaccine technologies such as Pfizer (PFE -0.2%)/BioNTech (BNTX -2.3%) and Moderna (MRNA -0.5%).
    • Pivotal Research Group increases its price target on Foot Locker (NYSE:FL) to $76 from $61 ahead of the retailer's earnings report on May 21.
    • The firm thinks its sales and EPS forecast for Foot Locker now appear conservative for several few key reasons.
    • Analyst Mitch Kummetz:"First, since we last updated our model, the American Rescue Plan was signed, and we believe stimulus was a big tailwind in the quarter. Second, channel inventory remains lean and likely drove robust full-price selling in the quarter. Third, athletic shoes remain in favor, and we believe that athletic demand was more broad-based than recent quarters."
    • Pivotal Research relied on data, feedback from other companies, Google Trends search volume and its own Footwear Survey results in making its determination.
    • Pivotal's price target of $76 reps 15% upside potential and stands well above the average Wall Street PT of $61.44.
    • Shares of Foot Locker are up 1.79% premarket to $67.00.
    • See consensus estimates on Foot Locker.

    • The broader market looks set for a rebound at the start of trading, with S&P (SPX) (NYSEARCA:SPY), Nasdaq 100 (NDX.IND) (NASDAQ:QQQ) and Dow (INDU) (NYSEARCA:DIA) futures climbing.
    • A rebound in tech is helping, with the Information Technology (NYSEARCA:XLK) sector near the top of the premarket gainers. But it's been under pressure in the recent selloff, off nearly 7% from its late-April high.
    • The ETF is facing a test of its 100-day simple moving average around $134.
    • XLK's performance "illustrates the risks inherent with stretched valuation, especially in unprofitable software stocks," Citi says, also noting the drawdown in semiconductor and semiconductor equipment stocks.
    • In "several cases, stock prices were zooming higher on pure price momentum begetting new buyers who thought others would take them out at even higher levels," strategists led by Tobias Levkovich wrote in a note. "In our minds, that is not really investing but rather chasing the tape and hoping for greater profits."
    • But even with many names down 30-40% from highs, Levkovich says they're not buyers on weakness yet, although they do have a larger-cap bias given those companies can limit expenses by cutting costs and buy back stock.
    • "One can look at the shelter-in-place/remote work winners of 2020 and then similarly watch their descent from extreme highs as everyone got overly excited," they add. "In our late March client survey, we showed how the attitude about IT outperformance in 2020 had shifted to economic recovery sectors for 2021."

    • "IT is generally a perennial favorite but investors were telling us even in late December that their expectations had changed."
    • Citi also sees political risk to tech.
    • Changes "to corporate taxation later this year also could be an issue including minimum book taxes and higher GILTI rate which would affect technology firms most," Levkovich says. "Antitrust may step up under President Biden too and, most crucially, we could see changes to risk tolerance if bond yields edge up further."
    • In the Info Tech sector, Cathie Wood's ARK Invest is selling more Apple shares as weekly outflows climb. See all ARK's trades for Monday.
    • Macy's (NYSE:M) races higher after the department store operator boosted its full-year revenue and profit forecast.
    • Macy's sees revenue of $21.73B-22.23B for the full year vs. $20.75B consensus and EPS of $1.71-2.12 vs. $0.82 consensus.
    • The department store operator says it outperformed sales expectations across all three of its brands as sales trends continued to improve throughout the quarter. Some of the momentum was in the digital business that saw 34% sales growth in Q1 and a penetration rate of 37% vs. 43% a year ago when stores were partially closed. The digital penetration rate was 24% in 2019.
    • CEO Jeff Gennette: "These results were driven by the positive effects of the government stimulus program and expanding vaccine rollout, coupled with the accelerated execution of our Polaris strategy, including investments in our digital platforms. Macy's remains a fashion and style source for customers as a digitally led omnichannel retailer."
    • Notably, Macy's thinks it is well positioned to deliver sustainable, profitable growth in 2021 and beyond.
    • Shares of Macy's are up 5.74% premarket to $20.26 after the Q1 earnings report.
    • Home Depot (NYSE:HD) impresses investors and analysts with comparable sales growth of 31% in Q1 off a 19% gain in transactions and 10% jump in average ticket price. Adjusted operating margin surprises by coming in at 15.4% of sales during a noisy quarter.
    • Bank of America is positive on Home Depot (HD) in its first look at the Q1 earnings report.
    • The report is noted to build upon a strong foundation and the margin strength is called encouraging given the unfavorable mix.
    • Even though Home Depot held back on guidance, BofA is confident on the path ahead.
    • Analyst Elizabeth Suzuki: "We remain encouraged on the medium-term outlook for HD as the dominant retailer in a strong category of retail. We reiterate our Buy rating on HD and price objective of $375."
    • BofA keeps a Buy rating and price objective of $375.
    • Shares of Home Depot are up 2.41% in premarket action. Peer Lowe's (NYSE:LOW) is 1.44% higher in the early session.
    • See more details on the Q1 earnings report.

  13. FF    someone sold 1500 November $15 puts to open for $1.70

    nice, I'm going to do that trade


  14. is missed this last week

    CLAYTON, Mo., May 10, 2021 (GLOBE NEWSWIRE) -- – FutureFuel Corp. (NYSE: FF) (“FutureFuel”), a manufacturer of custom and performance chemicals and biofuels, today announced that it had declared a special cash dividend of $2.50 per share on its common stock, with a record date of May 21, 2021 and a payment date of June 4, 2021.


  15. another 1000 of those FF puts traded, now 2500 x


  16. Stockbern……….with there $2.50 special dividend to be paid to shareholder's as of May 20th, i think that will impact stock price and option strikes


  17.  weird, additional 1000 was there then disappeared

    ulty   for sure 


  18. I bought the 35/50 spread for 5.5 but already had 40 put I sold for 10.20 a few weeks ago on initial drop 


  19. That on Viacom 


  20. Oops, close turned ugly. 

    FF/Stock – Nice move on them since we picked them up.  Too bad we don't get the dividend but looks like we'll be in fine shape for a 10-bagger.  

    Submitted on 2021/04/27 at 12:05 pm

    Speaking of gasoline though, I was looking at good Biden plays and Future Fuel (FF) has to go in our Future is Now Portfolio.  It's just a little Biodiesel company that also makes specialty chemicals and solvents for the alt energy industry and their market cap is just $560M but, to me, that means they can hugely benefit from just a small Government incentive program.  Also, their margins are insane, making $46.6M on $205M in sales last year, about $1 per $13 share.  

    Earnings are May 7th and options are short-term but, in the Future is Now Portfolio, let's promise to buy 1,000 shares at $12.50 by selling 10 of the Nov $12.50 puts for $1.60 ($1,600) and that would be a net $10.90 entry and, since that's saving us $2,100 from the current price, we may as well spend that on 15 of the Nov $10 ($3.60)/12.50 ($2.20) bull call spreads at $1.60 ($2,400) so the whole thing is net $300 on the $3,750 spread and we'll see how that goes on earnings.  

    I guess they were making too much money….


  21. Speaking of fast gains – NAK over 0.60 already.

    NAK lottery tickets back at 0.50.  Let's add 5,000 shares to the Future is Now Portfolio for $2,500 and plan to spend $2,000 more at 0.40 and $4,000 more at 0.25.  

    That portfolio is charmed.