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Monday Market Movement – Testing the Highs

Still lookin' good.  

     

Only the Russell is dragging on the all-time high chase at about 5% off the mark.  We're well into the last half of earnings season now and it's less likely we'll be derailed by Corporate Reports and no one seems to mind another wave of Covid – it's amazing what people get used to.  Where I live in Florida (Palm Beach County) there are still no official mask mandates although, this weekend, we hit an all-time high for both new cases and hospitalizations.  I just got back from Disney and my report to our Members was:

Well I'm back now and I'd love to tell you Disney is doing a bang-up job but really, how could they?  You walk into various rooms or caves with hundreds of people that thousands more people have recently been in and there's almost always a rail that is touched by most.  DIS has put up a lot of plastic walls to separate the lines as they wind around but they reach maybe 7 feet at most.

More Changes at Star Wars: Rise of the Resistance at Disney's Hollywood  Studios with Even Earlier Openings and the Return of Evening Extra Magic  Hours - easyWDW 

As of Thursday, masks are once again required indoors but not in the crowded restaurants (no distancing) and I do not see people wiping down the bars on the rides – so why bother at all if you're not going to do that? 

DIS is a good company to watch as they care more than most about avoiding the kind of negative publicity that comes from killing your customers so we expect that, if things get really bad – they will be one of the early ones to react.  Of course DIS is not shy about killing their customer's wallets.  When they kids were younger we used to stay at the resort and generally took the Disney Transportation everywhere, which is free but this time we came in a car and it's $30 to park at the resort AND the hotels!  Balloons are now $25!  

Then I come home and read about how no one is worried about inflation?  Do these people ever leave the house???  

Investors Bet Price Pressures Will Ease

That's today's headline in the Wall Street Journal and yes, it's basically a propaganda rag for Conservative Capitalism but holy cow, what factless drivel!  They can't write an article claiming that inflation is easing as it's getting worse and worse but they can write an article featuring idiots who are betting that inflation will magically go away – even though there are no signs of that at all.

Consumer Prices were up 5.4% in June, the biggest rise since August of 2008 – right before the economy collapsed.  Used cars and trucks play a major part in investors’ thinking. In June, their prices rose 10.5% from the previous month, driving 1/3 of the rise in overall CPI.  Even if used-car prices decline, other categories such as housing could push in the other direction with household balance sheets in their strongest position in decades

Why do we have inflation?  Very simply, people did not work making (as many) things for about a year and, usually, when that happens, people have less money so they buy less things and it tends to even out.  This time, however, the Government paid you whether you worked or not – and so did many employers (also propped up by the Government) so the people still have money and still buy things – the things we failed to make.  

Rising Walt Disney World ticket prices, 1971-2013 | BlogsSo, as demand picks up faster than supplies are replenished, people bid up the prices on the goods that are available to sastify their needs and desires.  Spend a week at Disney and you'll see that in action!  In this very unique situation of massively subsidized demand – companies can do very well raising their prices AHEAD of their costs and that leads to more profits but what it also does is set us up for a whopper of a recession because, if the consumers are unable to keep spending at this pace – we now have a machine that needs to be fed 10% more money to produce the same amount of goods.  

As you can see from the chart on the left, when Disney first opened, a ticket was $3.50 but that didn't include the rides.  $17 in 1983 and they went up to $95 in 2012.  Now, 8 years later, it's $169 for a one-day ticket (no one does that).  At this pace, in 2031, tickets will be over $300.  Even if you get 1/2 price 3-day tickets for a family of 4, that's $1,800 in tickets alone for your vacation.

Like many companies in America, Disney has given up on even pretending they are going to service the Bottom 80% – they simply can't afford what is currently about $1,000 in tickets and $2,000 in hotels and $1,000 in food for a week vacation (and that's without any balloons!).  That's because the top of the Bottom 80% make $70-100,000 a year and the bottom 60% make an average of less than $60,000 per household – they can't possibly afford to go to Disneyland.  

The Top 20%, fortunately, are still 66.6M of our fellow citizens and only 21M people a year come to the Magic Kingdom in Florida and 18.6M in California so there's no room for the other 270M people in this country anway – even if they did have money and wouldn't drive away the rich people (see SIX – if you dare!).  So between rich Americans and the Top Billion (12.5%) people of the rest of the planet who visit – DIS is not looking for any more park customers, thank you.

By the way, I love this new thing at hotels where you pay to be at a nice hotel but, if you want to sit in a "good" chair by the pool, it costs extra.  Cabanas are the hot new(ish) things and they go for $500/day in most places and, amazingly, they fill up because the Top 1% have, effectively, infinite amounts of money to spend so the Bottom 9% (of the Top 10%) have to use the thin, striped towels and chase after pool waiters while the cabana crowd has food platters delivered and a bartender on standby and pillows on their chairs.

I did get a cabana for my daughter's birthday in Maimi last year – worth it!  

Anyway, the point is that, aside from the people who got paid whether or not they worked during the pandemic, demand is also being driven by the Top 1%, who buy 3 homes and 5 cars, etc.  That drives up the price for everyone else and those people are getting richer and richer by the day.  Joe Biden's plan to tax them seems to have gone out the window and inflation is like a non-stop party for rich people – who make a fortune renting out their money.

It's not a big data week and not much Fed speak either.  We do have PMI and ISM and Non-Farm Payrolls on Friday but, other than that – pretty dull.

No shortage of earnings to chew over:

Image

After months of struggle, the U.N.-backed Covax alliance will soon have many more doses, promising relief for vaccine shortages in poorer countries. But it faces a deepening crisis: difficulties getting shots into arms as the Delta variant spreads.

 


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  1. Good Morning.


  2. Ten years ago, Vegas got the fee machine going after our last economic disaster with the daily "Resort Fee" 

    Stuff like free drinks and fun at the pool came with the room. Now nearly every resort and nice hotels have fees on amenities and you have to pay for parking!

     

    I miss the good old days when you asked for something and you got it…..

     https://www.youtube.com/watch?v=HpOKpfCND80


  3. Ironically, the artists in the youtube are from Vegas…. :)


  4. Good morning!  

    It's very hard to write on less than 3 screens….

    I sneezed on the way home yesterday – that was scary.  If it wasn't for the kids, I would not have gone to those parks given the situation with Delta – even though I have my shots.  It's just not worth the risk.   It was strange that they announced on Tuesday that, as of Thursday, they would go back to requiring masks – why wait?  Clearly the conditions that warranted the decision were already there so why wait two days?   This is how fast we are spiking in Palm Beach County:

    Orange County, where Disney is, has 1/2 of our infection rate.  Miami is 3x worse than we are!   Overall Florida is up to 2.6M cases (12% of the state) and 40,000 deaths.   Overall, the US has had 35M infections (10% of the population) and 613,000 deaths – still ahead of India, which is considered a Global Catastrophe.  Brazil is catching us on the death count, however, with 556,000 dead on only 20M infections (211M people).  So also 10% of the population is infected but less robust medical responses means 2.5 out of 100 infected end up dying.  

    4Bn doses of vaccines have been administered so 1Bn(ish) people are fully vaccinated out of 8Bn (see article above) and this Delta variant seems a lot more contagious than the one last summer.  Very much like last summer – the Governments simply don't want to shut things down again and re-kill the economy but it's only going to make things worse and harder to stop, I think.

    Of course, no one listened to me last summer – so why should they now?  

    May 22nd, 2020:  Friday Follies – America Heads to the Beaches

     

    It is, as noted by Linette Lopez "The Perfect Storm of Stupid" in which, for purely economic reasons, we are risking the lives of Millions of Americans to get business back up and running for Memorial Day Weekend.  She notes that China's economic rebound has been led by manufacturing and industrial sectors while the country's service sector, especially when it comes to transportation and leisure, is still pretty dormant.  That is bad news for the US.  Most of our economy is made up of small and midsize businesses in the service sector.  Consumption is what we do.

    Manufacturing will not lead America out of this economic malaise; it simply isn't big enough.  The coronavirus pandemic has hit our economy exactly where it counts: in services.  we have in the market is an unholy mess. We have bored, unseasoned, emotionally conflicted investors playing around in a murky pool where one of the most opaque sectors has the ability to make the biggest waves. It's very stupid — people are going to drown.

    Meanwhile, I've been discussing my own experiences in Florida this week as you are hard-pressed to find people wearing masks down here and the hotel my daughter is staying at (she drove down) is now about 1/3 full and the restaurant we ate at last night (I know!) was half full with the staff wearing masks but none of the customers doing so.    

    This has been going on since last weekend and every day people get braver and braver but, meanwhile, do you see that spike in new infections.  Well, spike is an understatement because it's a 100% increase in new cases over the prior few days.  I don't want to jump to conclusions so we'll check back on Tuesday but let's say we add 1,200 a day for the next 3 days – that would be 4,800 in 4 days or a 10% increase in cases just a week after we open up.  How would that be going?

    Texas is also back in the 1,000 case per day club after opening back up as is Georgia (a much smaller state).  Wisconsin only has 6M people yet they've managed to jump from 100 back to 300 infections a day in just a week since opening – and they are one of Trump's main success stories!

    North Carolina and North Dakota are both states with inferiority complexes to their southern sister states and both of them rushed to re-open and both of them are on disastrous tracks.  It's very, very clear that reopening leads to more cases – just how many cases remains to be seen and then we'll get to see how many people do have to die for the economy – if it even ends up being enough to help.

    38,000 people died in Florida since May of 2020 – that's 10 9/11s.  To this day, you have to be triple-checked to get on a plane but you are allowed to sneeze all over a buffet line any time you feel like it….


  5. By the way, for perspective.  58,220 Americans died in the entire Vietnam War and 38,000 people died so Florida could sell more refrigerator magnets.  


  6. Vegas/1020 – Another fee machine.  That's why I like cruises (though not now), you pay a price and you're done – other than tours, which I mostly don't bother with.  It doesn't feel very vacationy when you are spending $4.50 for a bottle of water.  

    And speaking of subsidies – these kids have no clue what things cost.  I feel so bad for the parents.  I gave the girls a $250 gift card and said they could keep the change and suddenly they go to the supermarket and buy snacks to take to the park!  When they were younger I used to give them $20 and Jackie would spend hers in 5 minutes and Maddie would walk around all day with $20 and, at the end of the day – would announce what she had decided to buy.   They are still about the same though Jackie's gotten better after learning to work for a living driving DoorDash.  Maddie's frugal ways have allowed her to live a generally job-free life (still in college).


  7. Chris and Jennifer are great savers….they both put the pinch on Mom or Dad when they need something…. :)




  8. Very cool to watch while sitting on a beach….

    https://www.youtube.com/watch?v=EEIk7gwjgIM


  9. Phil / SQQQ
    What is the current SQQQ position in STP after Friday’s trade.


  10. us ten year has dropped to 1.16





  11. Comment content omitted because it is too long.


  12. Indexes taking a little dip.  

    Oil crashed hard.

       

         

     

    Don't blame the Dollar:

       


  13. SQQQ/Jij – Hasn't been enough volume to fill 300 of the 2023 $5/15 spread at net $2 so waiting on the rest.  

    SQQQ Short Call 2023 20-JAN 25.00 CALL [SQQQ @ $8.29 $-0.05] -50 3/15/2021 (536) $-23,500 $4.70 $-2.58 $1.00     $2.12 - $12,900 54.9% $-10,600
    SQQQ Short Put 2022 21-JAN 15.00 PUT [SQQQ @ $8.29 $-0.05] -20 3/19/2021 (172) $-10,500 $5.25 $2.20     $7.45 - $-4,400 -41.9% $-14,900
    SQQQ Short Call 2022 21-JAN 25.00 CALL [SQQQ @ $8.29 $-0.05] -100 4/19/2021 (172) $-12,000 $1.20 $-0.79     $0.41 $-0.03 $7,900 65.8% $-4,100
    SQQQ Long Call 2023 20-JAN 5.00 CALL [SQQQ @ $8.29 $-0.05] 100 8/2/2021 (536) $41,000 $4.10 $-0.05     $4.05 $-0.10 $-500 -1.2% $40,500
    SQQQ Short Call 2023 20-JAN 15.00 CALL [SQQQ @ $8.29 $-0.05] -100 7/30/2021 (536) $-21,000 $2.10 $-0.06     $2.04 $0.02 $600 2.9% $-20,400

    CMG still killing us in the STP.  

    I think they are excited about going back to quarantine. 


  14. Not a very impressive finish. 

    Oil hit $70.55 before finally bouncing.  /RB $2.2535 was an 0.10 drop for the day at $420 per penny.  

    I think people are starting to take the delta numbers more seriously and, of course, the infrastructure compromise is a huge disappointment.


  15. Seven Bay Area counties will require people to wear masks indoors while New York City officials are strongly recommending that residents wear face coverings indoors.9 min ago 3 min read

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    Sen. Lindsey Graham Tests Positive for Covid-19

    Progressives Press Pelosi Over Eviction Moratorium

    Some progressive Democrats say Jerome Powell’s Federal Reserve hasn’t been tough enough on large financial firms, arguing that the central bank’s tweaks to rules adopted after the 2008-09 financial crisis significantly softened the impact of the 2010 Dodd-Frank law.

    The Wall Street firm is increasing base pay for its entry-level employees—first-year analysts—to $110,000, a nearly 30% increase from the previous starting salary