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Wound-Up Wednesday – June Ends on a High Note

homeless cartoon - Metro Voice NewsThings are looking good

The markets are holding up and Brett Kavanaugh sided with the Liberal judges on the Supreme Court and gave 4.2M homeowners another month before they are evicted from their homes.  In a hot real estate market, it was the National Association of Realtors that brought the suit to the Supreme Court, trying to evict all the people who are behind on their mortgages so they can collect commissions selling and renting the houses – what could be more American than that?  Justice Kavanaugh issued a one-paragraph concurrence explaining his views, saying he believed the moratorium was unlawful but was willing to leave it in place for July.  

After that, it's open season on distressed families and we can happily add about 10M people to the ranks of the homeless.  But how about those open houses!  "One man's suffering is another man's commissions" – as Jesus used to say…  The four other Conservative justices - Clarence Thomas, Samuel Alito, Neil Gorsuch and Amy Coney Barrett – indicated they would have lifted the moratorium.  They also insisted that women in those poor familes be forced to have babies, so that they too could be thrown out onto the streets.  "Love them until the day they are born – and then let them suffer their whole lives" – as Jesus used to say….     

Granlund cartoon: Layoffs and evictionsThe moratorium is based on public-health concerns. The CDC found that mass evictions could accelerate the spread of Covid-19 because displaced tenants would likely move in with friends and family if not into shelters or settings in proximity with others.  The moratorium was originally set to expire Dec. 31, 2020, but Congress extended it until late January, and the CDC has extended the order three times.  .

Local governments across the U.S. have struggled to quickly distribute approximately $47 Billion of rental assistance authorized by Congress, with some complaining that their staffs are being deluged by a flood of aid requests. Numerous renters are being disqualified for failing to correctly complete their applications, local officials say.

The problem is, of course, that $47Bn won't do anything but catch people up on their back rent – it doesn't help with their current rent so the tenant still has to go and they don't have money to put down on a new home or apartment either.  Also, moving is expensive.  This isn't just about Covid – a 23% rise in housing prices since the crisis started along with 10% inflation has, logically, made 4.2M out of 110M us homes unaffordable. Probably more than that as lots of people are struggling to pay their rents but haven't yet fallen far enough behind to get evicted.

Nearly 1 in 5 Renters Not Caught Up on Rent During Pandemic, With Renters of Color Facing Greatest HardshipAs of March, 1 in 5 renters in the US, 13.5M families, were behind on their rents.  4 out of 10 children in rental housing in the United States of America are exeperiencing either housing or food hardship as families are forced to choose between the two.  These are the early VICTIMS of inflation and it's inflation caused by Government policy that has kept property prices unnaturally high, driven by low-rate mortgages that are never offered to the kind of people we are looking to evict.  

Another factor making housing much more expensive – especially on the rental side – is the influx of Investment Capital.  The Corporate takeover of the rental market has driven rents relentlessly higher in search of more and more profits:

"This is one of the biggest sectors of the economy and it’s so remarkably inefficient. Real-estate agents are great people, but can they run a big data algorithm to figure out how much you should charge for your house? The principle behind all the investments we’ve made is in the future you’re going to be buying and selling your house from a company." – Andreessen Horowitz's Alex Rampell

59% of Black Renters Behind on Rent Fear Eviction Due to Continued Effects  of Pandemic - California Housing PartnershipYes, God forbid we don't charge people as much as they can possibly pay for their homes.  Who leaves that kind of money on the table?  Certainly not Jesus, right?  What's another 10M more or less homeless people going to do, you might wonder?  Well, actually the homeless "crisis" we now have is being caused by 552,830 people who are homeless in the US, not 10M so allowing 10M people to fall through the cracks on July 31st is going to be everyone's problem.  

The shelters are full now and that's with 358,363 total residents – and those people are "used to" being homeless – what happens when they are joined by your unlucky neighbor and the their family, who load up the car with what they can carry and show up for the first night needing assistance?  If you live in California, you know what it looks like as 1/2 of all Americans living on the streets live in CA (why not, at least the weather is great).  

Just another problem to sweep under the rug but what happens to the real estate market when 4.2M homes are added to the inventory?  It's not like 4.2M people are lined up waiting for them.  Many of those homes will remain unaffordably empty and landlords/banks will have to stop pretending those homes are still worth their last appraised value (based on the rents/mortgages they've been collecting) and MARK THEM TO MARKET.  Remember what happened the last time banks were forced to mark homes to market?  That was not pretty at all.

Subprime crisis - Foreclosures & Bank Instability.png

So, while it may seem "unfair" that people who are less fortunate qualify for housing assistance (sorry Rick Santelli), it's very necessary – we need the landlords and even the banks, who acted in good faith to be made whole and we need the people who face displacement to be given a solution – not an extension… 

What rich assholes on Wall Street don't understand is that we are all connected and, sadly, 13 years after the last crash, they still don't get it.  So let's be a bit cautious with our Banking and Housing investments until we see how this situation plays out.  4.2M homeowners and their families behind on their payments is a ticking time bomb and the Republicans just forced the Democrats to drop additional housing assistance from the proposed Infrastructure Bill so it will continue to tick along in the heart of America – until Brett Kavanaugh changes his mind.  

So far, he's given us 30 days – have a great July!

 


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  1. Good morning. Here is the link to today's webinar.

    https://attendee.gotowebinar.com/register/5908384477544090128


  2. Good Morning.


  3. Phil/CIM I had this on CIM:

    1000 CIM ($10.8)

    -10 '23 $12c ($1.8)

    -5 '23 $10p ($2.8)

    Just had 700sh called away, have 300 left with the 3 short calls. Is it worth 'adjusting' them?

    Thx!


  4. Good morning! 

    /CL topped out at $74, /RB at $2.265 (so far).   We'll see how inventories look.  API showed another 8Mb draw in /CL

    Image

    Russian and Saudis disagreements ended with a delay in OPEC and its allies, known as the OPEC+ meeting. Therese two major world Oil producers, after the outbreak of the Delta virus in many countries around the world, have disagreements on the scale of production. Therefore, the official representative said that the meeting would be postponed until tomorrow to allow more time to resolve differences over production policy.

    According to the general plan, the OPEC+ members, including Russia, have considered supporting increased production. However, given the high spread and latest lockdowns in many countries caused by the Delta virus, demand in the oil market can be hit and decrease once again. In the current situation, even countries with high vaccination rates, Like the US, UK, and Israel, recently had a sharp increase in new infected numbers. In the Asia-Pacific region, Sydney in Australia started the lockdown from June 26 until July 9.

    In Indonesia, new virus infections exceeded 20,000 for the first time on June 26, reaching a maximum of 21,342; Malaysia announced the extension of the general lockdown. Bangkok in Thailand also announced the implementation of 30-day restrictions from June 28. In Japan, the Japanese government may consider extending the state of emergency for up to 2 to 4 weeks.

     

    Considering the current situation, Saudi Arabia and some other members maintain a cautious attitude towards the oil market and worry that a new oversupply will be triggered after the summer. On the other hand, Russia is relatively optimistic. Given that there is less budget pressure to maintain high oil prices prefer to maintain a high level of production rather than decrease the production. 

    Besides that, Moderna’s announcement about the effectiveness of its vaccine on multiple mutant viruses has also provided some support for the bulls while Americans are still holding the sanctions against Iran. 

    After tomorrow’s OPEC+ meeting, we also need to follow the US labor market report. A positive report will be supportive for the Oil market. 

        

    June 28th, 2021 at 2:11 pm | (Unlocked) | Permalink

    This is one of the few times I'd go long on oil (but staying out of it):

    CIM/Wing – Well, you were in for net $9, not counting the short puts and you got called away at $12 so $3 profit is very nice.  The stock is now $14.84 and the 2023 $15 calls are $1.35 so net $13.50ish means I'd rather wait for a pullback or move on to something else.

    CIM is not overpriced at about 10x earnings but not a crazy bargain anymore.  The dividend is $1.32 so, if you want that, you can just sell the 2023 $12 puts for $1.25 to approximate it and then your worst case is getting more stock at net $10.75 and THEN you can sell calls, etc.  Still, I'd wait for a dip and/or 2024s to come out.


  5. Apparently the word has not spread far enough east, but now here in CA it in no longer "homeless" but "unhoused" . Makes living in the squalor of tent camps a bit more dignified don't you think? 


  6. EIA not quite as good as API but too dangerous to short into the holiday:  


  7. There is nothing 'dignified' about either, pstas…..


  8. Pstas/euphemisms – this sort of thing drives me nuts – it's dishonest. I remember in the late 70s when "venereal disease" became "sexually transmitted disease" – because VD carried a stigma. So how'd that work out?

    It's not the word that's the problem (or to use another damn euphemism, the "issue"), but the condition.


  9. And don't get me started on how "global warming" was supplanted by "climate change" – https://www.theguardian.com/environment/2003/mar/04/usnews.climatechange


  10. You're right snow, the pinheads can have fun with words and faux news will have a new controversy, while others are focused on getting shit done…

     

    I'm agnostic when it comes to what 'it' is called.


  11. Phil, what did you mean by "rawhide" on your WU trade yesterday?



  12. MU earnings today… They are probably still getting premium pricing especially on the Mobile side… I have them at a 1.85 EPS, and Rev of 7.3B ish… Will be interesting to hear how they see the end of year playing out in terms of pricing and demand….  AVGO indicated a strong quarter at their closing on antenna and mobile ( phone device) as well as AAPL phone on track for a Sept ish launch……  will be interesting to hear MUs outlook on second half pricing and demand…….  


  13. LOL Snow, very true.  Why are we downplaying that?  

    Rawhide/Swamp – Here's the strategy:

    And what Pstas said!  

    MU/Batman – $93Bn at $84 with $6bm coming in is very reasonable – especially since they tend to go between $6Bn and $12Bn depending on where they are in the cycle – so this is low.  We don't have MU in the LTP for some reason (I think we had it and cashed out) so let's add it with a watch trade – a small allocation we're happy to DD on if they crash for some reason.  $40 held even in the  crash (briefly below) and we can offer to be long 1,000 at $60 selling the 2023 $60 puts for $5.10:

    So, for the LTP, let's:

    • Sell 10 MU 2023 $60 puts for $5.10 ($5,100) 
    • Buy 15 MU 2023 $75 calls for $21 ($31,500) 
    • Sell 15 MU 2023 $90 calls for $14.20 ($21,300) 

    That's net $5,100 on the $22,500 spread so $17,400 (341%) upside potential at $90 but we'd hate it if that happens.  Ideally, MU drops 20% to $70 and we sell 10 $50 puts for more than $5 and then we're in a net $0 spread where our worst case is owning 2,000 shares at an average of $55 and THEN we sell more calls and stuff.  

    Meanwhile, with 15 longs, we can sell 5 short calls when they get toppy (not now).  At the moment, the Sept $90s are $3.60 so 5 of those would generate $1,800 selling 79 of our 569 days.  6 more sales like that would be $10,800 of bonus income while we wait.  


  14. Phil Along the lines of your Bank situation, they are also resuming buybacks and increasing their dividend payouts. probably not their savings account rates though.

    Wall Street banks hike shareholder payouts after Fed gives the green light | Reuters


  15. Phil,

    Any thoughts on the 10% pullback in FNF? Fundamentals suggest stock should be higher: Div >3.2%,P/E 6. Not seeing any negative news about sector (other than negative press effect from eviction issue) and or stock. If $43 support breaks would you roll down to 36 support? Small position in short Dec 43 puts (in @$1.87 now $3.00 ). 

    TIA


  16. Phil

    Question regarding updates to your daily trade recommendations.  Take for example, your MU LTP trade today.  When you modify/update the trade in the future, when and where will those trade updates be found?  Will you send out an email update on the day your modify the trade, or will it be found only in the Wednesday webinar. Thanks.  DanB.


  17. FNF/8800 – No news that I see but a 50% run from $30 in November to $45+ in June is certainly going to get some pullback.  

    Yes, if it crashes we'd be happy to take a bigger stake.  $12.7Bn at $43.50 and they make $1.5Bn a year – who cares if they are boring?  3.34% dividend too.  

    Modifications/Dan – We do those usually in the portfolio reviews – unless something drastic happens in between.  Things are found here, in the chat room – that's where everything originates. 

    Seriously though, Dan, the idea of this site is for you to LEARN how and when to adjust things – if you only adjust things waiting for me to say something – then you aren't learning how to trade for yourself.   

    Speaking of which – it's Webinar time!  


  18. Phil

     FNF. Yep, one would expect at least a 10% correction after a 50% move. Thanks for the handholding.


  19. Sorry, there were sound issues on the Webinar so we shut down early.

    I was giving such a good lecture on the macro changes in the economy that led to the rise of the Nasdaq and the subjugation of the lower classes too!  


  20. Phil – WTRH
    The stock keeps getting cheaper, would you suggest doing anything at this point? TIA


  21. Phil – Thanks for input regarding updates. Another question -  do you have any thoughts regarding SWAV.  I am Long term owner.   DanB


  22. Comment content omitted because it is too long.


  23. WTRH/Hwtd – Zachs put them on a strong sell list last week and they are too thinly traded to fight that off so nothing to do but wait if you want to stick with it.  Our trade on them was a $1,500 credit on the 2023 $2/4 bull call spread obligating us to buy 2,000 shares at $3.50 so less $1,500/2000 = .75 so $2.75 is our entry on 2,000 shares ($5,500).  The intent, of course, is if we get down to about $1.25, we can double down and then we have 4,000 shares at avg of $2 and then we can sell calls to reduce that (the 2023 $2 calls are currently 0.90).  Other than that, there's not much to do but wait.  

    If you don't like the stock enough to follow through with the plan – get out now!  

    Submitted on 2021/04/22 at 10:17 am

    WTRH is interesting as they are well-backed but have a far, far lower valuation than DASH or GRUB:

    And they have options so a fun play for our Future Is Now Portfolio:  

    • Buy 50 WTRH 2023 $2 calls for $1.50 ($7,500) 
    • Sell 50 WTRH 2023 $4 calls for $1 ($5,000) 
    • Sell 20 WTRH 2023 $3.50 puts for $2 ($4,000) 

    That's a net $1,500 credit on the $10,000 spread so $11,500 (766%) upside potential at $4 and worst case is we own 2,000 shares of the stock at $2.75 ($5,500) so great potential reward vs risk.  

    Waitr Holdings: Worthy Of Investment

    Waitr Holdings: Cheap, Growing, And Profitable, Unlike Its Peers

    Record Revenue And Profitability – Waitr Holdings Is A Strong Buy

    Waitr Holdings: A Compelling M&A Target In The Consolidating Meal Delivery Market

    WTRH Long Call 2023 20-JAN 2.00 CALL [WTRH @ $1.79 $-0.12] 50 4/22/2021 (569) $7,500 $1.50 $-0.63 $1.50     $0.88 $-0.08 $-3,125 -41.7% $4,375
    WTRH Short Call 2023 20-JAN 4.00 CALL [WTRH @ $1.79 $-0.12] -50 4/22/2021 (569) $-5,000 $1.00 $-0.50     $0.50 - $2,500 50.0% $-2,500
    WTRH Short Put 2023 20-JAN 3.50 PUT [WTRH @ $1.79 $-0.12] -20 4/22/2021 (569) $-4,000 $2.00 $0.28     $2.28 - $-550 -13.8% $-4,550

    It's down about $1,000 so 20% of the potential loss if they go BK is where you want to pull the plug if you don't have the conviction to stick with it.

    Cheap Stocks to Buy: Waitr (WTRH)

    Photo of Waitr (WTRH) logo in a mobile app store browser.

    Source: PREMIO STOCK / Shutterstock.com

    Last up on this list of cheap stocks is Waitr, an online ordering technology platform that connects drivers, restaurants and diners. This company has listings on its platform in some 700 cities across the United States. What’s more, CEO Carl Grimstad recently engineered a mighty turnaround for the company, saving it from the brink of bankruptcy. Waitr has since posted healthy revenue gains in the past few quarters and continues to expand its partnerships.

    Under new management, Waitr has effectively streamlined its expenses and become profitable. In Q1 of this year, it generated revenue of $50.9 million, with a 15.1% increase on a YOY basis. Additionally, the company’s adjusted EBITDA was at $8.3 million compared to $3.7 million in the previous year.

    Despite its turnaround, though, WTRH stock trades at just 1.09 times forward price to sales (P/S), furthering cementing its place on this bargain list.


  24. SWAV/Dan – Too specialized for me.  I'm not qualified to know whether their thing is good or bad or profitable.  So far, it has not been but early stages, of course and clearly they are growing sales and finally making a profit (projected) next year but $6.7Bn is a lot to pay for that at $190 so it's just a stay-away for me.

    Year End 31st Dec 2015 2016 2017 2018 2019 2020 TTM 2021E 2022E CAGR / Avg
    Total Revenue
    $m

        1.72 12.3 42.9 67.8 84.5 201 323 240%
    Operating Profit
    $m

        -30.9 -41.2 -51.8 -65.7 -64.2      
    Net Profit
    $m

        -30.6 -41.1 -51.1 -65.7 -70.5 -53.3 5.53  
    EPS Reported
    $

    0.000 0.000 -1.14 -1.53 -2.14 -1.99 -2.08      
    EPS Normalised
    $

    0.000 0.000 -1.14 -1.53 -2.14 -1.99 -2.08 -1.52 0.144  
    EPS Growth
    %

                       
    PE Ratio
    x

                    1,336  
    PEG
     

                    1.79  
     

  25. Phil – thx for SWAV input.  DanB


  26. Phil / WTRH – thank you for your thoughts



  27. Phil / MU – Great Quarter beating on Top and Bottom w/ 47% GM….  10 to 20 % price increase / ASP increase.   Witht an EPS outlook of 2.4 forFY Q4 and 47% GM … so pricing holds 

    Key is they see supply demand imbalance to end of year and into '22. In addition they noted that they see DRAM CAGR of Mid to high teens LT and NAND At 30%…  this is up from earlier outlook by  I've got them pegged at 6 EPS this year – given pricing tailwind and constraints   into next year..  

    So 6 ish EPS in FY '21  and I haven't analyzing next year but 11.5 to 12 EPS looks doable…  with a 11 to 12 EPS this is a 100+ stock….  They will ramp up new wafer tech ( EUV ) in 24…. 

    If we get any pull back – my new Target on this has gone from 90 to 100 – 105 – does this make sense and would you add more to the new position and take up high end to 95 or 100??


  28. MU/Batman – I wouldn't have started a position if I didn't think they were going higher but I'm being conservative in the target as I expect an overall market correction which they would not be exempt from (this morning will be a nice test to see if they pull back with the Nas).  As with any position, we prefer not to over-commit at the outset and, if we're wrong and it goes straight up, then we've committed $65,100 out of a $200,000 allocation block to make $17,400 (26.7%) in 18 months.  So, if we pull back, but it has nothing to do with MU's prospects – of course I want more, but I'll be maintaining the conservative target ($90) and either rolling down the $75 long calls to widen the spread or simply buying more spreads.  I never try to push the limit of valuation – always assume the market will drop 10-20% and take your position with it.


  29. PHIL./RE: NAK. PERHAPS  SELL THE $2.00 01/23 PUT FOR $1.70. IF DELIVERED YOU HAVE .30 IN IT AND USE OF THE MONEY FOR 1.5 YRS. POTENTIALLY A SHARP TRADER COULD MAKE ANOTHER 300% ON THAT MONEY AND HAVE ZIP PLUS PROFIT IN THE STOCK.  ODDS ARE YOU WOULD KEEP SOME PORTION OF THE TRADE I.E.THE STOCK GOES TO A BUCK AND YOU MAKE .70 ON A ZERO CASH OUTLAY PLUS WHAT EVER ELSE YOU ARE CAPABLE OF.

    DT


  30. That's a great idea!


  31. Phil / MU – thanks….