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Weightless Wednesday – Why Worry?

Pretty Little Liars Logo FontIf you tell a lie big enough and keep repeating it, people will eventually come to believe it." – Goebbels.  

Sadly, we've had a major demonstration of Joeseph Goebbels axiom on propaganda during the prior four years but it's an incomplete thought as the rest of what Goebbels said was: "The lie can be maintained only for such time as the State can shield the people from the political, economic and/or military consequences of the lie. It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie, and thus by extension, the truth is the greatest enemy of the State.”  That's from the only book Trump used to keep by his bed.

While we all miss President Trump, the "Big Lie" is still with us and, in Economics, it's the Fed's constant insistence that the inflation we are all very clearly experiencing is "transitory" and that prices will all come back down very soon and long-term rates are realistically low.  They have to say that – our Government needs to borrow $180Bn every month and there are proposals for stimulus programs that will increase that amount.  The payment on our $28.5Tn Debt is staggering now – at 1.5% interest – imagine what would happen at the historically normal 4-5% interest rate.  

We're not going to stop borrowing money, we're not going to pay down the debt and we're not going to raise taxes to balance the budget and we're not going to cut spending, so what else is there to do but LIE?

The summer of inflation: will central banks and investors hold their nerve?  | Financial TimesWhile the Fed now claims they anticipated that the end of the pandemic would temporarily push up inflation this year, Chairman Powell said Tuesday on Capitol Hill that the increases in prices have been larger than Central Bankers had expected and may prove more persistent.  But he underscored his view that shortages – including of used cars, computer chips and workers – will fade over time, bringing inflation closer to the Fed’s 2% long-run target.

“If you look behind the headline and look at the categories where these prices are really going up, you’ll see that it tends to be areas that are directly affected by the reopening,” Mr. Powell said in a hearing before a House subcommittee. “That’s something that we’ll go through over a period. It will then be over. And it should not leave much of a mark on the ongoing inflation process.”

This statement is coming less than a week after the Fed released their own DATA and forecasts for inflation, which now shows it hitting 3.4% in Q4 – up from their previous forecast of 2.4%.  Ignore the facts, repeat the lie is clearly the strategy the Fed is going for.  Meanwhile, the 12-month CPI DATA last week showed inflation running at 5% – the highest it's been since May of 2008 – right before the last major market crash.  Fed officials voted last week to keep short-term rates near zero, where they have been set since March 2020, and to continue buying at least $120Bn (40%) of Treasury and Mortgage Bonds each month "until the economy heals further".

Pin on humorousHeals from what?  6.4% GDP and 5% Inflation?  Record high stock prices?  Record job openings?  Is it that hard to realize that what the Fed is saying doesn't even make sense?   That's because it's all BS and they can't even keep their BS straight from one speech to the next….

The Fed said it plans to continue buying bonds at the current pace until the economy makes “substantial further progress,” measured from December, toward its goals of full employment and sustained 2% inflation. The officials haven’t set clear benchmarks for either of those criteria, but many private economists believe they could begin tapering later this year.

“We’re digging out of a very deep hole,” Mr. Powell said. “We’ve made a lot of progress but…we have a long way to go.”

WTF?   I don't even know what he means by that but he said it under oath to Congress – so it must be true, right?  

Speaking of no inflation, Existing Home Prices are up 23% since last year to a record median (half above, half below) $350,000.  With all the very, very rich people we share this great nation with, the AVERAGE home price is now $689,945 so good luck getting yourself an above-average home these days…  

Our POLICY MAKERS are lying to us about something that is having and will continue to have a lasting impact on our lives.  Pretending that inflation is not a problem allows inflation to grow unchecked and get out of control.  It is CLEARLY the Fed's job to control inflation and, since they don't want to do their job – they lie about the inflation that's right in front of all of our noses.  And they repeat it over and over again and the rest of the Government and the Corporate Media pick up the chant and they repeat the lie and supress the truth until something like what I'm writing right here seems radical – even though we just got DATA REPORTS showing 5% inflation and 23% housing price increases.

When you are constantly lied to the truth sounds wrong and that was Goebbels' point – you don't have to be strapped in a chair, drugged and tortured to be brain-washed – your brain can be conditioned through repetition to believe almost anything – or at least to make you doubt the truth – even when it's staring you right in the face.  

As long as the Government "officially" pegs inflation at 2%, they don't have to raise Grandma's Social Security checks (even though her rent went up 10% and food is 12% more than it was last year, etc.) or the unemployment and disability benefits.  But, most especially, they don't have to raise the rates they offer (to the Fed) for the $100Bn worth of Treasury Bills they are selling each week.

Well, not until the lie fails.  Then, as Goebbels notes, it all comes crashing down so, for now, the truth is indeed the greatest enemy of the state.  

T.?ain P? ?P on Twitter: "Dr. Seuss cartooned critically about currency  creation & inflation, coincidence that #CancelCulture has came for him?…  https://t.co/JZs50aQvjL"

 


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  1. Good sunny, cool morning. The campground meter is still pretty empty up here with very few cars on the road. Your above article is very sobering Phil. You don't have to be an economist to know how expensive everything has risen although with gas prices so high it only makes sense that food and anything transported is going to be higher. Everywhere you go there are help wanted signs with bonus being offered, or extra pay for weekends. Haven't seen that for awhile. (or ever!) Fight the war on Covid and then enter another challenge; surviving the latest governmental spin.


  2. Good morning!  

    Wildwood NJ is packed, according to Jackie.  Still can't get a room in Key West below $500 – that's a pretty good local indicator.  I think these hotels are making up for last year…

    The police also arrested an editorial writer as part of an expanding national security investigation into the newspaper that has raised concerns about free speech.

    This is cool – a look at propaganda "news" in China

    • BlackRock put out its third-quarter outlook report in a recent note, covering its viewpoints on the equity markets. BlackRock (NYSE:BLK) continues to have an optimistic view on U.S.based equities as the economy builds strength in the re-opening phase.
    • The primary concern that BlackRock is monitoring moving forward into Q3 is the concern around inflation. The worry around inflation is if it's transitory in nature, as the Federal Reserve continues to express or if it's part of a more significant concern and the signs of an enduring new regime. One prediction around inflation that BlackRock is making is that markets will see an increase in volatility as many market participants have differing viewpoints on the topic.
    • Where should investors look to invest their capital moving forward in a time where inflation concerns are circling the air, and the economy seems to be poised for an explosive open? BlackRock mentioned the following:
    • "The inclination may be to buy the most economically sensitive cyclical stocks. It was a tack we took early, when news of effective vaccines in November laid the foundation for a strong recovery. But markets are forward looking. While we still see upside in deep value and cyclicals, we think it is prudent to start rotating to higher quality in both the value and growth arenas."
    • Furthermore, the note when on to state: "Investors can typically expect to pay up for quality. But our research shows quality stocks have underperformed since vaccine announcements in November, sending their valuations lower." "This put higher-quality stocks at their largest discount to the broad market since the dot-com bubble of the early 2000s."

    The above chart is per BlackRock's Q3 outlook report.

     

    • June U.S. PMI Composite Flash:  63.9  vs. 67.9 consensus, 68.7 prior
    • Manufacturing PMI: 62.6 vs. 61.5 consensus and 62.1 prior
    • Services PMI: 64.8 vs. 69.8 consensus and 70.4 prior.
    • U.S. private sector businesses registered a further marked expansion in activity during June, as further easings of COVID-19 restrictions boosted new orders. The rate of expansion softened slightly from the high seen in May, but remained substantial overall.

     

     

     

    • May New Home Sales: -5.9% M/M to 769K vs. 868K expected and 817K prior (revised from 863K).
    • +9.2% Y/Y.
    • Median sales price of new houses sold was $374.4K in May, up from $372.4K in April.
    • The seasonally-adjusted estimate of new houses for sale at the end of May was 330K, representing a supply of 5.1 months at the current sales rate. That increased from 4.4 months' supply at the end of April.

     

    • The stock marking is edging, but like yesterday's early session conviction is hard to come by.
    • The Nasdaq (COMP.IND) +0.2% is doing the best among the major averages, with the S&P 500 (SP500) +0.1% and Dow (DJI) +0.1% edging up.
    • The 10-year Treasury yield moved higher going into the equity open, now up 2 basis points to 1.49%. More Fed speakers are on tap today after Chairman Jay Powell put in another dovish performance yesterday afternoon.
    • "The belly of the curve remains most vulnerable to inflation surprises," Althea Spinozzi, senior fixed income trader for Saxo Bank tweets. "Demand at today and tomorrow's 5- and 7- year UST auctions might be choppy ahead of personal consumption expenditures data (Friday). 7-year notes are most likely to underperform."

    • Carnival (CCL +1.2%) continues to make announcements on cruise restarts.
    • Today, the company says cruise line brands AIDA Cruises, Carnival Cruise Line, Costa Cruises, Cunard, Holland America Line, Princess Cruises, P&O Cruises and Seabourn are all sailing in the United States, the Caribbean and Europe.
    • North American brands will start Alaska sailings as soon as July.
    • The brands are resuming operations using a gradual, phased-in approach, with sailings announced through the end of the fiscal year (November 30) for 42 ships out of a total of 91 ships. As previously announced, the initial cruises will take place with enhanced health protocols developed in conjunction with government and health authorities.
    • Fleet adjustments are also part of the plan. Carnival Cruise Line is adding two additional ships from sister lines to its fleet by 2023, which will bring its total capacity to 27.
    • Read more specific on the brand cruise restarts.

  3. Good Morning.


    • UBS lifts estimates on a number of retail stocks after channel checks indicate sales are tracking higher than anticipated. Analyst Jay Sole and team take the view that the magnitude of the Q2 and Q3 beats will elevate the market's overall FY22 view to push retail stocks higher overall.
    • Factoring the recent data, UBS boosts EPS marks on Carter's (NYSE:CRI), Columbia Sportswear (NASDAQ:COLM), Crocs (NASDAQ:CROX), Deckers Outdoor (NYSE:DECK), Kontoor Brands (NYSE:KTB), Skechers (NYSE:SKX), Steven Madden (NASDAQ:SHOO) and Wolverine World Wide (NYSE:WWW).
    • UBS calls SKX, DECK and KTB its sector favorites: "SKX has multiple factors working in its favor: a likely strong Q2, high leverage to Back-to-School which we think will be very strong, and continuing China momentum… DECK remains one of Softlines' best growth stocks. Our checks indicate consumer demand for DECK's Hoka and UGG brands remain vigorous… KTB's stock price has pulled back since the beginning of June, but not for fundamental reasons, in our view. We expect a solid EPS beat and think LEVI's upcoming print should be a good read-through."
    • Mall stocks have been breaking higher over the last week, with Express (NYSE:EXPR) +14%, Boot Barn (NYSE:BOOT) +10%, Lululemon (NASDAQ:LULU) +7%, L Brands (NYSE:LB) +7%, Shoe Carnival (NASDAQ:SCVL) +5.5% and American Eagle Outfitters (NYSE:AEO) +5.2% some of the notable gainers. American Eagle got a nice little boost when Brooke Shields posted an Instagram picture of her daughters wearing Aerie outfits.
    • Chico's FAS (NYSE:CHS), Abercrombie & Fitch (NYSE:ANF) and L Brands have some of the highest Seeking Alpha Quant Ratings in the consumer discretionary sector.
    • Warren Buffett, the billionaire who heads Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B), resigns as a trustee from the Bill and Melinda Gates Foundation, in the months after the couple announced their divorce.
    • In a statement, Buffett says he has resigned from all corporate boards other than Berkshire's. But he notes that his resignation does not indicate any disagreement with the foundation.
    • "My goals are 100% in sync with those of the foundation, and my physical participation is in no way needed to achieve these goals," he said.
    • Buffett also marks a milestone in that he has distributed half of his wealth. "In 2006, I pledged to distribute all of my Berkshire Hathaway shares – more than 99% of my net worth – to philanthropy. With today’s $4.1B distribution, I’m halfway there."
    • He now owns 238,624 Berkshire shares, worth ~$100B, down from the 474,998 shares he held in June 2006.
    • Recall in February 2020, Buffett outlined in his annual letter to shareholders plans for his Berkshire stake after he's gone.
    • Stock index futures are moving cautiously around the flatline this morning after another dovish performance from Fed Chairman Jay Powell helped the major averages close higher.
    • S&P futures (SPX) (NYSEARCA:SPY), Dow futures (INDU) (NYSEARCA:DIA) and Nasdaq 100 futures (NDX.IND) (NASDAQ:QQQ) are up slightly. The Nasdaq Composite (COMP.IND) hit another record yesterday.
    • And Treasury yields, which had little reaction to Powell's Q&A with the House Select Subcommittee on the Coronavirus Crisis, are drifting again. The 10-year is flat at 1.47% (NYSEARCA:TBT) (NASDAQ:TLT).
    • Last week the reflation trade was hit hard after the FOMC dot plot moved rate hike expectations up to 2023 and the market followed by pricing in a first move in the middle of 2022.
    • But cyclical stocks rebounded sharply on Monday, which was good news to many of BofA Securities' clients who bought last week's dip, according to its latest client survey.
    • As the S&P dropped 1.9%, BofA clients were net buyers of stocks to the tune of $1B.
    • That was a two-week high as retail investors, institutional investors and hedge funds all bought equities.
    • Beaten-down cyclical sectors Industrials (NYSEARCA:XLI), Financials (NYSEARCA:XLF) and Energy (NYSEARCA:XLE) all saw strong inflows, while clients sold the homes of the megacaps, with the biggest outflows in Info Tech (NYSEARCA:XLK), Consumer Discretionary (NYSEARCA:XLY) and Communications Services (NYSEARCA:XLC).
    • "Outflows out of Cons. Disc. (fifth straight week) and Tech (fourth straight week) were both the seventh largest on record (and follows record Tech outflows last week)," strategists led by Jill Carey Hall write in a note. "In contrast, Industrials saw the seventh largest inflow on record."

    • But while the traditional cyclicals benefits, the biggest inflow came in Real Estate (NYSEARCA:XLRE), the largest on record for the sector and positive for the third-straight week.
    • A drop in long-term bond yields and the positive tone at NAREIT two weeks ago were possible drivers, BofA says.
    • This week Citi argued that growth stocks are poised to make a comeback in the second half of the year.

    • The new corporate wellness offering announced by Peloton Interactive (NASDAQ:PTON) looks attractive to Bank of America.
    • Analyst Justin Post assumes a 4% to 5% savings on corporate insurance costs for more healthy employees means that companies could be in a financial position to offer employees a 20% to 30% savings on new bike/lower priced tread or fully cover a connected fitness annual subscription costs for a year.
    • "Peloton could also subsidize (increase) the discount offered, offset by savings on marketing costs. We see a potential partnership opportunity among Peloton, employers, and insurance providers, with Peloton's program offering more data availability (which would likely be anonymous and reported on a group level) than existing subsidized gym memberships," writes Post on the upside.
    • BofA thinks the corporate wellness program adds to potential demand drivers for Peloton in FY22 that include tread launch, international expansion, marketing spending and new products.
    • Shares of Peloton are down 0.37% premarket to $116.74 after a 8.38% gain yesterday off the corporate wellness announcement.


  4. Phil / AAPL – I'm looking for a short term caller on the following poison.  can you please suggest price and date of caller?   thanks 

    Long 150 X Jan '22 100 Call ( (28)

    Short  150 X Jan '22 135 Call ( (28)

    Short 40X Jan '22 Jan '22 110 Put (7.7) 


  5. Phil / AAPL – I'm looking for a short term caller on the following poison.  can you please suggest price and date of caller?   thanks 

    Position updated below 

    Long 150 X Jan '22 100 Call ( (28)

    Short  150 X Jan '22 135 Call ( (11.).  <—

    Short 40X Jan '22 Jan '22 110 Put (7.7) 


  6. My TTE got called away.


  7. Phil / AAPL short caller – I was looking at the September 140 Caller – currently at 3.6, really wanted 5 for this but not sure it will get there, although the stock has been moving up well….  I think there Quarter will be strong, as AVGO had indicated pull ins from Phone, Apple share of market in China is still rising in April….


  8. VZ - 

    VZ : Verizon added to Citi catalyst watch list on potential EPS upside • 7:41 AM

     

    Seeing the company poised for a better calendar second quarter, Citi adds Verizon (NYSE:VZ) to the firm's positive catalyst watch list.

    Analyst Michael Rollins raises the Q2 postpaid phone net add outlook from 125K to 215K, above the 152K consensus.

    Rollins expects service revenue to catch a tailwind from "customer up-tiering and a return of transactional/late fees."

    The Q2 EPS forecast is upwardly revised to $1.33 or about 4% above consensus.

    The outperformance on postpaid net adds and EPS should drive Verizon upside in the near-term, says Rollins.

    Citi maintains a Neutral rating, largely on valuation, and a $61 price target.

    Verizon shares are up slightly pre-market to $56.53.

    Recent news: Verizon launches a private 5G network for enterprise & public sector


  9. NYC-any comments about the election for mayor? Not over yet but appears Adams is in leading the race after the first round. Crime/homeless the big issues. Will the winner establish a template for the upcoming midterms or is this  strictly local?


  10. Another economic indicator- or supply chain. People in the Midwest have enough funds to buy boats now. 

    https://minnesota.cbslocal.com/2021/06/22/you-cant-find-a-new-one-high-demand-low-inventory-leave-boat-buyers-adrift/


  11. AAPL/Batman – I'd sell 50 (1/3) of the Sept $135s for $5.60 ($16,800).  It's not too risky as you can easily roll and DD and it's 100% premium.  If AAPL slips below $130, you could then sell 50 $130s (now $8.30) and put a stop on the other 50 to lock in gains and then (if they bounce back), you can still roll out and DD down the line.  

    I would also roll the 150 Jan $100s at $35.35 ($530,250) to the 2023 $120s at $26.30 ($394,500) as that takes $135,000 off the table and lowers your delta from .88 to .67 and the short Jan $135s are $10.15 and all premium which decays 3x as fast as the 2023s and the 2023 $145s are $10.45 so you can roll to that spread if AAPL goes higher or be very happy if it doesn't.  For extra safety, you can set a stop on 1/3 the short Jan at $12.50 and 1/3 at $15, at which point you'd look to see which 2023s you want to sell.

    Keep in mind AAPL is at $2.25Tn at $134 – that's a little insane.

    GSK/Rn – I think it's a plus overall and GSK is fairly priced at $99Bn ($40) with $5Bn in profits but there's been very little revenue growth since 2017 ($30Bn to $33Bn) so it seems to me they are still trying to get something going.  With PFE still trading at 11x and MRK 12.5x and GILD 10x – GSK never makes the cut when I'm looking at Pharma.  Certainly no reason I'd jump in at the top of the channel.

    NYC/Pstas – Seems over with Adams at 31.7%.  Yang conceded.   How about the Socialist candidate winning in Buffalo?   And the Republicans put up Curtis Sliwa – they would have been better of with Trump – or any Trump….  That's just a publicity thing, Sliwa's boss (on the radio) is backing his campaign.  

    TTE/Tangled – Dividend day, that's why. 0.80!

    VZ/Batman – We have T but I like VZ too.


  12. TTE dividend call – when that happens do you remove it from the PSW portfolio?


  13. TTE/Tangled – No because not everyone gets called away.  If you do – just buy it back.  TTE will probably drop 0.80 tomorrow when the dividend pays out and you buy more shares and sell more calls and you didn't miss much.  We bought it for $42.25 and sold the Aug $40 calls for $4.80 so net $37.45 and we just got called away at $40 ($2.55 profit) and we rebuy at $47.03 and sell 2023 $40s for $8.50 puts us back in for net $($47.03 – $8.5 – $2.55) = $35.98 and now we collect more dividends until we're called away again

    Webinar time!


  14. Well I'm exhausted.  

    2 hours of talking will do that do you.

    Volume dropping off fast and likely to keep doing so into next week.  I predict by next Friday, no one will be here at all.  Monday is the day off (officially) but try telling that to the 40% of the people who are working at home.


  15. Phill / AAPL – thanks for the short putter as well as the role idea….  I sold 1/2 short calls today and well sell rest in the next day or so….  Looks like you feel AAPL is toppy now at $2.2T I tend to agree….  with the roll on the 100 to 120 and short callers…  I think this one makes sense sold all of the long 100s and looking to pick up the long callers at 25 if possible,  I have shares that can cover the short callers and so I won't rush, but will put get out of the short caller if they pop…  


  16. Good strategy – always better to wait for a good price.


  17. Phil, with home prices up, curious your thoughts on home builders? LEN and DHI in particular.


  18. Good morning!

    Prices are up because costs are up.  We need to look closely at a few earnings reports to see how the builders are riding out that wave.  Home builders make very little on the house sale, they make their  money on the upgrades and if people are forced to economize by sticking to the basic house – that's actually not good for the builders.  


  19. @Pharmboy

    Any updates on or thoughts on KPTI, TRIL, ABUS?  Holding a small amount and hoping.

    Thanks