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Triple-Toppy Tuesday – Nasdaq Heads Back to 14,000, Oil Shorts Gain $4,000

Wheee, this is fun!  

We've been shorting Oil (/CL) Futures at the $69.50 line since last week and we featured that play during last week's Live Trading Webinar.  On Friday morning, in our PSW Report, I made the following call for our Members:

With all the heaving and hoing the market has done this week, we haven't actually gone anywhere – even with this morning's pop.  We're clearly consolidating at S&P 4,200 but whether it's for a move up or down remains to be seen.  Oil (/CL) is popping to $69.50 into the weekend and we are going to short into the weekend.  We started shorting (again) at $68.50, so another round here will give us an average of $69 and then we take 1/2 off when we get back to $69 and we're left with our original short at a higher strike over the weekend – so that's the plan.

So at $68.50, we are happy with $1,000 gains per contract and we take 1/2 (2 in this case) off the table and set a stop at $69 on the last two (trailing 0.25 once we get below $68.50) to lock in at least $750 per contract as an average gain – which is still pretty good for a couple of days' "work."  We don't want to play with oil shorts for too long as the July 4th weekend is coming and that should be another excuse to jack up prices and THEN we will go back to shorting.

Oil is not the only commodity that's been flying higher: Lumber, iron ore and copper have hit records. Corn, soybeans and wheat have jumped to their highest levels in eight years. Oil, for it's part, just reached a two-year high.  China’s producer-price index, a gauge of factory-gate prices, could climb to its highest level since August, 2008 on Wednesday amid rising commodity prices.  All these commodities are competing for the same money – that's why we don't see oil particularly taking off.  More likely, these high prices will lead to a slowdown of activity in the near future.

Manufacturers’ profit margins are shrinking because of higher costs for raw materials. Households are paying more for gas, groceries and some restaurant bills, curbing their ability to spend elsewhere. In poorer countries, some are going without basic needs entirely.

“We are being hit from every possible angle,” said Franz Hofmeister, chief executive of Quaker Bakery Brands Inc. in Appleton, Wis. He says his costs for items including wheat, energy and new aluminum equipment have shot up at least 25% to 35% this year.  Customers protested when his firm lifted prices for pizza crusts, burger buns and other goods by as much as 8%, but more increases might be needed.  “The scary thing is, we don’t really see an end in sight to these cost pressures,” he said.

And prices are not climbing for no reason – there are actual shortages of materials.  Languishing commodity prices led producers to slash capital spending on major resources by nearly half over the last decade, shrinking stocks of industrial metals to two-decade lows and reducing supplies across commodities. The crunch is now converging with a buying spree in key markets via Infrastructure Spending aimed at stimulating economies and that is supercharging prices – there is no quick fix for this.  

Bottlenecks in the shipping industry are giving some commodity prices a leg up.  The pandemic, and the surge in demand for goods sparked by stay-at-home orders, threw supply chains into disarray. In the container shipping industry, the disruption remains acute.  Traders face weeks-long delays to move materials from Asia to the U.S. and Europe. The result is localized shortages in the West, just as demand is climbing. Plus, traders are paying several times more for a berth on container ships than on the eve of the pandemic. They pass that cost on to customers in the form of higher commodity prices.

The consequences of underdeveloped global resources now stoke worries among regulators and companies that producer price inflation—buoyed by demand projections that in key materials stretch decades ahead—is becoming sufficiently broad and prolonged that it spills onto consumer prices. Raw-material shortages sometimes morph into broader market dysfunction that force companies to cut or shut production, as some car makers have done in recent months because of limited semiconductor supply.

“It’s not how much it will cost, it’s whether or not you can get it,” said Tai Wong, analyst at BMO Capital Markets. “It’s like chips—without it, you can’t sell cars.”

As our NAK players know, it can take years to get a new mine up and running and the Fed and others calling these spikes "transitory" scare off long-term investors so it can be a long time or never before supply imbalances are corrected.  That means prices will keep going higher until we hit the point of unaffordability, which causes demand to drop.  BUT, if the Government is printing money and greenlighting projects which require them to buy commodities AT ANY PRICE – when will it all end and how much damage will consumers suffer on the sidelines?  

 


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  1. thats some crazy oil price action almost like they wanted to get rid of the shorts.


  2. Good Morning.


  3. Good morning!  

    Yes, oil is all over the place.

        

    /NG quietly flying higher.


  4. To all who own CHL and have wondered about the dividend payout. We just got the dividend in ThinkorSwim last night. 


  5. Schwab paid the CHL dividend too.


  6. IB not a word on CHL


  7. CHL: Fidelity paid my dividend yesterday.



  8. WWDC 2021: Everything Announced


  9. Crazy Dow action.  

    Time to short oil again at $69.50 (/CL).

    Lumber is calming down but you can't celebrate with a glass of OJ:

    Remember when I used to bang the table on Coffee at 100?

    And Sugar was 11 last time we played it.

    Commodities Have Soared, but Miners Aren’t Investing

    Millions of J&J Vaccines Are at Risk of Expiring in June

    Spate of Mass Shootings Is Among Worst in U.S. History 4 min

     

    A string of mass shootings over the past three months as the U.S. re-opened from the pandemic was one of the worst on record, and law-enforcement officials are fearful of more to come.

    There were five attacks in which four or more people were killed in public places from March through May, matching the highest three-month total going back to 1966, according to the Violence Project, a mass-shooting database run by two criminology professors.

    I like how we have much bigger things to worry about now. 

    And the Dow is already bouncing back. Insane.


    • Matthew Murphy, CEO of semiconductor maker Marvell Technology, Inc. (NASDAQ:MRVL), said Tuesday that he sees the global shortage of computer chips starting to ease later this year, though some parts of the industry will take longer than others to reach a sustainable supply-demand balance.
    • Speaking to CNBC, Murphy, whose company revealed better-than-expected earnings the previous evening, underlined the severity of supply problems.
    • "The chip shortage is very persistent right now," he said.
    • Murphy noted that the problem will likely carry on for at least a few more months, with a possible improvement coming only in the second half of this year.
    • Moreover, the Marvell CEO predicted an uneven recovery for the industry. He expects some pockets of the market would get sufficient supplies online faster than others.
    • Murphy supported some government action to solve the supply problem but warned against overcommitting resources in some areas.
    • Specifically, he noted that the automotive sector has received a lot of attention related to the chip shortage. However, he cautioned that becoming overly aggressive with solutions could have unintended consequences.
    • Asked about proposed legislation that would help fund increased U.S. chip production, Murphy supported the action. Still, he noted that officials should understand the global nature of the shortage as they enact policy.
    • The current shortage, Murphy noted, was the result of a global supply and demand imbalance, not related to where production takes place. That said, he acknowledged that there were issues of national and economic security that argued for the idea of boosting chip manufacturing specifically in the U.S.
    • After the close on Monday, Marvell announced quarterly earnings that topped expectations, with revenues that jumped 20% to $832 million.

     

     

    • The World Bank expects the U.S. economy to grow 6.8% and China's to climb 8.5% this year, outpacing the expected global growth of 5.6%, which in itself is the fastest post-recession recovery in 80 years, according to its June 2021 Global Economic Prospects report.
    • Meanwhile, many emerging market and developing economies continue to struggle with the COVID-19 pandemic and its aftermath.
    • "While there are welcome signs of global recovery, the pandemic continues to inflict poverty and and inequality on people in developing countries around the world, said David Malpass, president of World Bank Group.
    • And while the speed of the recovery appear impressive, global output is still expected to be ~20% below pre-pandemic projections by the end of 2021.
    • "Per capita income losses will not be unwound by 2022 for about two-thirds of emerging market and developing economies," the World Bank said in its statement.
    • As a group, emerging market and developing economies are expected to expand 6% this year, due to higher demand and elevated commodity prices. Excluding China, the growth is expected to be 4.4%.
    • Recovery in many EM and developing countries is being restrained by the resurgence of COVID-19 cases, slow progress in vaccinations, and the withdrawal of policy support in some cases, the report said.
    • Some China-related ETFs to watch: YINNTDFGXCYANGCXSE
    • In April, the International Monetary Fund raised its 2021 global GDP growth forecast to 6% from 5.5% in its January outlook.

     

     

    • Boeing (BA -0.6%reports 73 gross new orders in May, including 61 for its MAX aircraft as well as widebody passenger and freighter aircraft, to prepare for a rebound in air travel.
    • Net of 53 order cancellations and conversions, Boeing booked 20 aircraft orders last month, the company's fourth straight month of net positive orders.
    • YTD, Boeing has now totaled 380 airplane orders on a gross basis, with 177 sales net of cancellations, expanding its lead over Airbus (OTCPK:EADSY -0.9%), which has 31 more cancellations than gross sales so far.
    • But deliveries are a different matters, with Airbus shipping 50 aircraft vs. Boeing's 17 last month, bringing the YTD delivery total to 111, as Boeing copes with quality problems in its factories and heightened scrutiny from U.S. regulators.
    • Boeing has 4,121 planes on back order as of the end of May, up from 4,045 a month earlier.
    • Southwest Airlines said it is upsizing its order to take an additional 34 MAX 7 planes, the smallest 737 MAX model.
    • Sen. Ron Wyden (D-Ore.) is criticizing Biogen (NASDAQ:BIIB) for its estimated $56K annual price tag for its newly approved Alzheimer's treatment Aduhelm (aducanumab).
    • "It's unconscionable to ask seniors and taxpayers to pay $56,000 a year for a drug that has yet to be proven effective," Wyden wrote in a tweet. "Medicare must be able to negotiate a fair price for prescription drugs."
    • Biogen shares are down 0.7% to $393.22 in afternoon trading

     

     

    • Internal Revenue Service Commissioner Charles P. Rettig asked Congress for more authority to get cryptocurrency data, Bloomberg reports.
    • During a U.S. Senate Finance Committee hearing, the head of the IRS said that Congress should provide clear authority to require that large crypto transfers be reported to the tax collection agency.
    • Cryptocurrencies, which had already been sliding, continue their decline. Bitcoin (BTC-USD) falls 9.9% over the past 24 hours to $32.4K; ethereum (ETH-USD) slides 12% to $2,428; Binance Coin (BNB-USD) -13% to $340; Cardano (ADA-USD) -12% to $1.49; and dogecoin (DOGE-USD) -11% to 32 cents.
    • Last month, the Biden administration proposed that all crypto transfers over $10K be reported to the IRS.
    • But Marc Lasry, owner of the Milwaukee Bucks and founder of Avenue Capital Management, in a CNBC interview, said bitcoin rose faster than he expected.
    • "I think the probability, as more and more people start using bitcoin, is that it's going to keep going up," he said, adding that "I should have bought a lot more."
    • Today's plunge in bitcoin was helped by news that the FBI was able to recoup much of the ransom Colonial Pipeline had paid.

     

     

    • The head of Colonial Pipeline said Tuesday that he was proud of how his company responded to its recent well-publicized ransomware attack. He also called for collaboration between private industry and the government to reduce the risk of these cyber crimes in the future.
    • Speaking before the Senate Committee on Homeland Security and Governmental Affairs, Joseph Blount, Colonial Pipeline's president and CEO, asked lawmakers to designate a single agency to target ransomware attacks and to provide adequate funding for these law-enforcement efforts.
    • "One recommendation I have is to designate a single point of contact to coordinate the federal response to these types of events," Blount said in prepared remarks.
    • He added that whatever organization becomes the pivot point of these investigations, it should be given the resources needed to effectively combat the rising danger of cybercrime.
    • "Whichever organization may be designated as the single point of contact, Congress must ensure it is adequately staffed and resourced to support industry, facilitate information sharing, and respond appropriately," Blount stated.
    • In terms of an overall response to the recent spate of ransomware attacks, Blount stressed the need for close collaboration between business and government.
    • "Private industry alone can't do everything," Blount said, responding to a question from one of the senators. "The partnership between private and government is very important this ongoing onslaught of cyberattacks around the world."
    • Blount also noted that private companies have a responsibility to guard against attacks as well.
    • "As a private entity, we know we have a responsibility to as well," he told the committee. "We are accountable for our defenses and our reaction to attacks like this."
    • Colonial Pipeline received criticism for its handling of the ransomware attack on May 7, in which it decided to pay $4.4 million in ransom to get its operations back online.
    • In response to this, Blount underlined the company's status as a victim and offered praise to his organization for how it responded in a difficult situation.
    • "I want to reiterate that we were the victims of a ransomware attack by criminals," the Colonial Pipeline CEO said. "I am proud of the way we were able to react and respond."
    • Offering advice to other business leaders facing a ransomware attack, Blount argued for the value of preparation and planning. He also stressed his theme of cooperation with authorities.
    • "If you wind up in a situation like we found ourselves on May 7th, have an emergency response process that allows you to respond quickly," he said. "And most importantly, to be extremely transparent and to contact the authorities."
    • On Monday, Justice Department officials revealed that they had seized a large portion of the ransom paid by Colonial Pipeline. The DOJ said it had recovered 63.7 Bitcoins (BTC-USD), valued at about $2.3 million.
    • Colonial Pipeline is a private company, but stakes in the firm are owned by public companies KKR (NYSE:KKR) and Royal Dutch Shell (NYSE:RDS.A)


    • The major averages are all little changed, with the Nasdaq (COMP.IND) wiping out all its early gains, even as yields stayed low.
    • The S&P (SP500) and Dow (DJI) are also flat.
    • The 10-year Treasury yield is still down 4 basis points to 1.53%.
    • Shortly after the opening bell, the government reported record-high job openings, but accompanied by an all-time high in the quits rate.
    • The megacap stocks are now mostly lower, with Tesla erasing its opening gains. But Amazon is up after announcing it would offer six-month prescriptions.
    • The S&P sectors are split, with six of 11 higher. Energy (NYSEARCA:XLE) is at the top. Defensives are lower, with Utilities (NYSEARCA:XLU) at the bottom. Info Tech (NYSEARCA:XLK) is fighting the flatline.
    • Among the meme stocks, Wendy's is still up nearly 20% and Clover Health is up more than 60%.
    • CMS Energy is the biggest S&P decliner in wake of its deal to sell EnerBank USA.

     

     

    • Cinemark (NYSE:CNK) has pulled off a midday spike, jumping 3.4%, after announcing it's expanding its presence in esports both online and in theaters.
    • Its customers will be able to join drop-in games in some theaters this summer, and it's getting into online leagues through a partnership with Mission Control.
    • For drop-ins, customers at the select theaters will be able to arrive with their Nintendo Switch console (OTCPK:NTDOY) to go head-to-head with others using Cinemark's big screens. Admission will be $10, which includes a $5 concessions coupon.
    • Meanwhile through Cinemark Esports, gamers can download the Mission Control App and take on rivals in games including FIFA21, NBA 2K21, Call of Duty: Black Ops Cold War, Rocket League, Mortal Kombat 11 and more.
    • The drop-in gaming will begin June 20, with esports league play beginning the next day.
    • “Our immersive environment lends itself particularly well to the gaming community, putting players in the universes in which they are competing," says Cinemark's Justin McDaniel.

     

     

    • Jobs are plentiful as the U.S. economy recovers, with the latest Job Openings and Labor Turnover Survey, or JOLTS, showing a series high of 9.3M openings in April.
    • That was about 1M more than economists predicted.
    • The 10-year Treasury yield is still down, but off the lows of day, falling 3 basis points to 1.54%. (NYSEARCA:TBT) (NASDAQ:TLT)
    • Accommodation and food services saw the biggest jump in openings, rising 349K. Only mining and logging and educational services saw declines.
    • "Job openings are now almost a third above their Feb 2020 level," tweets Nick Bunker, economist at Indeed. "That's, uh, a LOT of demand."
    • But at the same time employers are looking to fill positions, workers are leaving.
    • The April quits level came in at 4M, with the quits rate at 2.7%, both also records for the series.
    • Quits rose the most in retail, up 106K, with professional and business services up 94K and transportation, warehousing and utilities up 49K.
    • The quits rate fell in construction, information and real estate and rental and leasing.
    • Total separations, which include layoffs, discharges and other separations, rose 324K to 5.8M, with the separations rate staying about steady at 4%.
    • The "quits rate is "remarkable," says Julia Pollak, Labor Economist at ZipRecruiter, and "a sign that workers who were sheltering in place in their old jobs during the Covid turmoil are now feeling confident enough to make the leap to better opportunities."
    • Workers could be waiting for better gigs, relying on historically high openings as a backstop, but that could change as more states phase out additional jobless benefits. Relocation during lockdown or a reluctance to return to the office could also account for a number of separations.
    • Daniel Zhao, senior economist and data scientist at Glassdoor tweets that the quits rate "loosely jibes with the Apr #jobsreport which showed decelerating job gains bc of *outflows* from employment."
    • "Unclear if these quits are churn to other jobs or out of the labor force."
    • Dig into May's full employment report, which was well received by the stock and bond markets.

     

     

    • In a recent note by BlackRock, Russ Koesterich, Managing Director and Portfolio Manager for BlackRock’s Global Allocation Fund, discussed the real risks of rapidly rising rates on the financial market.
    • The rise in rates is still a focus point to market participants in 2021, but in less than six months, the tone of market investors has flipped. Previously investors were worried about the collapse of the growth space, and are now seeming to be geared toward the idea of how treasury bonds have transformed from a traditional and reliable hedge to a source of risk.
    • In the report, Koesterich mentioned: “equities can live with higher rates. History demonstrates that stocks and interest rates often rise together, particularly when both nominal and real, i.e. rates after inflation, rise from unusually low levels, as is the case today. That said, a rapid rise presents a problem. For this reason, investors should pay attention to not only the level of rates but also their volatility.
    • The question to then ask is if rate volume represents a growing risk, how can someone protect their investment portfolio?
    • Russ Koesterich answered that question in the note by stating: “I would highlight three: cyclical equity expressions, volatility as an asset class, and cash.”
    • Koesterich continued with: “industrials, materials, financials, and other cyclicals are likely to hold up best if rates spike. At the same time, investors can take advantage of lower volatility to use equity options to limit the downside. Finally, cash, while boring, may prove the best risk mitigant.”
    • Investors interested in examining this space in greater detail should consider analyzing the following financial and industrial based exchange traded funds: (NYSEARCA:XLF)(NASDAQ:KBWR)(NYSEARCA:IAT)(NYSEARCA:XHB), and (BATS:PAVE).
    • See the complete report posted by BlackRock’s Russ Koesterich.

  10. Fidelity National is a Title Insurance Company and they do well when real estate does well AND when rates go up because they sit on a huge amount of insurance reserves that have to be invested in very boring bonds and such.   When prices go higher, their fees go higher too – it's a winning combination.  $47.50 is $13.5Bn and they made $1.4Bn last year and project $1.6Bn this year so a nice solid stock to play in the LTP as such:  

    • Sell 10 FNF Dec $43 puts for $2 ($2,000) 
    • Buy 20 FNF Dec $40 calls for $8 ($16,000)
    • Sell 20 FNF Dec $ 46 calls for $4 ($8,000) 

    That's net $6,000 on the $12,000 spread so 100% upside if they hold $46 for 6 months.  Spring and summer quarters should be busy for them.


  11. Oil finishing at $70.  We'll see how API goes.  


  12. CHL – I received my dividend on 06/01 and have subsequently closed my position yesterday.  IB allowed me to convert my shares to HK exchange from which I was able to sell my position.  It cost $500 one time fee.  


  13. CHL- I received my dividend on June 7th from fidelity see if it goes up a little tonight  then I Will sell it


  14. Any idea what happened with WTRH today?


  15. WTRH/JPH – As I said when we took it, it's very undervalued compared to it's peers – all it takes is for someone to notice or an ETF to start buying in that space and they were bound to be caught up.  Even $2.37 is only $275M in market cap and these guys are actually starting to report profits.