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$1Tn Thursday – Infrastructure Bill Keeps Markets at their Highs

Visualize How Enormous U.S. Corporate Profits AreWhat else could matter?  

$1,000,000,000,000 is 20% of our quarterly GDP and, in Q1 and Q2 of this year, the Government went $2.5Tn into debt already (25% of the first half GDP) along with the Fed's $720Bn in the first hald and now it's Q3 so it's time for another Trillion, right?  After all, US Comapnies only made $6.8Tn last year and they paid $212Bn in taxes so it's only fair that we give them at least $1Tn per quarter in assistance because, after all – who could possibly be more deserving?  

In fact, thanks to the Fed-induced inflation (and notice on this chart that the Fed itself is a Corporation – NOT a Government entitiy, that made $322Bn in profits during last year's crisis), Corporate Profit Margins are at record-highs.  Never before in history have Corporations made a larger profit selling things to people.  In fact, 12.5% net profit margins for the S&P 500 are a fantastic 25% higher than the normal highs – no wonder those profits are so excellent!  

America is truly unique, even among Capitalist Nations, as we pretty much let Big Business do whatever they want with pretty much no conserquences.  We call it "Free Market Capitalism" but in college it was called an Corporatocracy, a term used to refer to an economic, political and judicial system controlled by corporations or corporate interests.  In a Corporatocracy you would find "Bank Bailouts, Excessive Pay for CEOs along with the Exploitation of National Treasuries, People & Natural Resources."  Sound like any countries you know?   

Look at the burden that is placed on the people of the US to pay taxes compared to the rest of the developed world (and our inclusion in the average makes it look better than it is):

US Tax Revenue: Government Revenue in the US | Tax Foundation

This is MADNESS people we pay almost double the Individual Taxes, more than double the Property Taxes while our Corporations pay about half the consumption taxes and far less than half of the taxes on their income which, as you can see from the first chart – is already 4 TIMES larger than the entire rest of the World combined!  

Capitalism Quote | Quote Number 671451 | Picture QuotesThe problem for Americans is our Corporate Citizens don't live in the rest of the World and they are not draining the money and resources away from 8Bn people – they are, in fact, laser-focused on ruining the lives of the 330M people in this country.  That's our money they are spending and our debts we, the people, are taking on to support their very profitable "lifestyles".  Those are our roads and bridges and electrical grids that they don't pay their fair share of and those 25% higher profit margins is money they suck out of our pockets in this "free market." 

And, of course, even within our Corporate World, there are uneven distributions of profits.  While the profit margins for S&P 500 companies jumped 25% in the past 4 quarters thanks to TRILLIONS of Dollars of bailout money (that you and I borrowed to give them), individual businesses, which used to make up 60% of the Corporate Sector by Revenues and employed 60% of the people – have been getting killed.  Low interest rates for the Top 1% Individuals and Corporation and massive bailouts have engineered the greatest transfer of wealth from the poor to the rich in human history.

The combined wealth of all households in the United States added up to $129.5Tn in the first quarter of this year. The wealthiest 1% held 32.1% of that total, up from 23.4% in 1989. The top 10% of households owned $70 of every $100 in household wealth, up from $61 in 1989. The bottom half, whose share never exceeded 5 percent, now holds just 2 percent of household wealth in the United States.

First they came for the minimum wage workers, and I did not speak out—because I was not a minimum wage worker.

Then they came for the Bottom 50%, and I did not speak out— because I was not in the Bottom 50%.

Then they came for the Middle Class, and I did not speak out—because I was not in the Middle Class.

Then they came for me—and there was no one left to speak for me.

Wake up people!  How do you think the Top 1% will get richer?  They have to take money from someone and now the bottom 50% and the Middle Class have been squeezed like the grapes they buy for $500 a bottle – where will the Top 1% turn to in order to extract their next $20Tn in the coming decade.  Maybe they've got enough and will no longer attempt to make more money, right?  

30 Karl Marx Quotes On Economics, Religion, and Leadership - InspirationfeedThe Global GDP in 2010 was $66Tn and last year it was $87Tn.  The wealth of the Top 1% in 2010 was $19Tn and now it's $41.5Tn so over 100% of the growth in the Global Economy went to the Top 1% but it's not just that they took ALL the money – the expansion of wealth still leads to an expansion of prices (sometimes called inflation if you are not a Government or Fed official) which means, even if the Top 1% didn't specifically confiscate your wealth – you still have 15% less buying power than you had in 2010.  

There are also 500M more people on the planet than there were in 2010, when we were just crossing 7Bn – that's another way your wealth is being diluted faster than you think as the Top 1% only has 5M more people (75M total) to share $20Tn additional dollars with while the other 7.5Bn of us have to make due with the same money 7Bn of us had 10 years ago.  

Though wealth inequality has grown in other industrialized democracies too, the U.S. figures mark this country as an outlier. A 2018 study of 28 countries in the Organization of Economic Cooperation and Development found that, on average, the top 10 percent of households owns 52 percent of wealth, while the bottom 60 percent owns 12 percent. But in the United States the top 10 percent held 79.5 percent and the bottom 60 percent held 2.4 percent.

Our bottom 60% – 200M people, have 1/5th as much wealth as other countries and, again, we are included in the average – so it's even worse than that!  

Despite what the US Corporate Media likes to tell you – economies cannot thrive with such levels of inequality.  

 


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  1. The Irish Potato Famine was a direct result of this kind of capitalism.  Back then it was called laissez faire capitalism.  Unchecked, unregulated.  Most of the owners of Irish farmlands were wealthy men living in England, often never visiting the land. Middle men came into existence, dividing land up into un farmable portions and price gouging,    Without proper farming practices or equipment, tenants fell into abject poverty.  Single crop farming with an unlucky disease led to 30% of the population starving to death. 

    These days we cram into tiny apartments in major cities, pay exorbitant amounts for rent, food and medicine.  We line the pockets of the top 1% who retreat to safer pastures.  We are left to cope with decaying, inferior infrastructure as we fend for ourselves through our own health crisis.

    We live in this faux safe haven.  We feel looked after in this country, with social programs, welfare and state aid. But truth is, it's just another system to scam.  1 in 6 kids in the US classed as living in a 'food insecure' environment.  People indebted for life with medical bills.

    As you said, Phil, the safe space directly below the top 1% is growing more narrow by the day. 




  2. It's such a shame we find ourselves in such massive debt where the latest infrastructure bill feels like we're piling on. Stupid wars, tax cuts and the 2008 economic collapse are taking their toll. Our infrastructure looks pathetic compared to Europe and Asia. This bill will at least give something good back to society at large .. albeit the debt included 


  3. Phil/WTRH – I'm in the following position and it keeps taking a beating. Hold the course or do you have any suggestions for managing it?

    Bought 50 Jan 23 $2 Calls $1.54

    Sold 50 Jan 23 $4 Calls $1.01

    sold 20 Jan 23 $3.5 Puts $2.00


  4. Good Morning!


  5. Tesla’s Elon Musk warns on problematic chip supply


  6. Back-to-back 1% price hike; wholesale prices rise in July




  7. OGN (Organon) beat significantly. Barrons with a bull piece out today; some extracts below:

    "… posting adjusted earnings of  $1.72  a share, above the consensus of  $1.42  a share…. 

    Organon trades cheaply because of concerns about lower sales of off-patent drugs and Organon's sizable debt load. The company's market value is $7.6 billion and it ended the second quarter with $8.6 billion in net debt, or nearly four times annualized earnings before Ebitda… Organon is valued at around seven times its 2021 guidance for Ebitda of about $2.3 billion based on an enterprise value of $16.2 billion. That is a low valuation for a healthcare company but not supercheap — enterprise value to cash flow ratios of below five signal cheapness… Organon delivered a 19% revenue gain in its women's health business, to $417 million in the period; biosimilars saw a 43% increase, to $86 million, and established brands had a 4% drop in sales, to $1.045 billion. Overall sales increased 5%, to $1.6 billion, in the period… The company reaffirmed guidance of $6.1 billion to $6.4 billion of 2021 sales and an Ebitda margin of 36% to 38%."


  8. Oh, and 28 cents a quarter dividned, 3.5% annualized


  9. Good morning!

    Another crazy dive and recover day.  

       

    Safe Space/Monk – I think that chart says it all.  With the top 1% growing their wealth 100% ($20Tn) in the past 10 years, who do they have to gouge to get their next $40Tn?   When wealth of that size is created, it is like a black hole that sucks up all the surrounding capital in order to sustain itself and yes, that "safe space" is the event horizon the Top 20% are circling but, as the black hole keeps expanding, nothing is "safe" anymore.  

    Potato Famine GIFs - Get the best GIF on GIPHY

    Infrastructure/Jeddah – I'm all for that, debt or no.  Had we not built all those roads and highways after the great depression, this country never would have expanded like it did in the 50s and 60s.  Same goes for the grid, the internet, rails – those are INVESTMENTS more so than expenditures.  The reason 80% of the World's Corporate Income is generated in the US is because, a long time ago, we spent the money to make the backbone all these companies rely on – and that includes schools, medical care, police, etc.     We already have a completely unpayable $30Tn debt so I have no problem at all spending $3Tn now on infrastructure - as long as you can show me $300Bn of benefits annually from it.    Avoiding another $10Tn viral outbreak might be a good thing to do – off the top of my head…

    WTRH – Not getting any better, is it.  I think they've failed to execute and we may need to take the loss.  I'm giving it until next week to see.

    OGN/Rn – I think they have diminishing sales as key drugs cycle out (they were spun out of MRK) and I'm not sure their pipeline is adequately replacing what they are losing (MRK kept the good stuff, this is their trash bin).  2019 sales were $9.5Bn, 2017 were $10.5Bn and 2021 looks like $6.5Bn – that's not a good trend.  Let's say they make $1.5Bn, that's good against a $7.50Bn market cap, of course but just make sure it's not $1Bn next year and $500M the next – then it starts looking expensive.  

    Chart

    See what MRK did?  They stopped themselves from being dragged down by OGN's performance.  Also, MRK saddled them with 10,000 employees generating $6.5Bn vs MRK's 63,500 employees generating $48Bn so OGN will likely have to cut 10-15% and that will be expensive over the next year or so – even if they do keep this sales pace.  


  10. The safe space is right in the middle of the black hole. And preferably somewhere out of the reach of the IRS. 



  11. What is the McClellan Oscillator?



  12. Overheated, Underprotected: Climate Change Is Killing U.S. Farmworkers



  13. anyone have some good ideas for Sept or October covered calls or short term buy -writes


  14. Short-Term/Stock – GOLD is $20.  Not sure why you want short-term but you can buy the 2023 $18 calls for $3.75 and sell the Oct $20 calls for 0.92 to net in for $2.83 and you can pair that with Jan $17 puts at 0.60 for net $2.23 on the $2 spread and, of course, the plan would be to roll the short calls and collect regular premiums.  You could do the same with the stock and just get called away but why tie up the cash?

    Still, why short-term?  Instead you can:

    • Buy 20 GOLD 2023 $15 calls for $5.55 ($11,100) 
    • Sell 20 GOLD 2023 $20 calls for $2.90 ($5,800) 
    • Sell 10 GOLD 2023 $20 puts for $3.40 ($3,400)

    That's net $1,900 on the $10,000 spread so $8,100 (426%) upside if GOLD holds $20 for 18 months.  If you usually make 426% every 18 months screwing around with short-term plays – go for it but I prefer the "set and forget" trades that make 20% per month without constantly churning fees and shifting positions. 

     


  15. PHil, thanks for the GOLD suggestion.  For those of us that like dividends, the stated rate of 4.59 ( .92 ) on Finviz appears wrong, unless it includes a special that I didn't see. Yahoo shows 1.77%    Since we use options instead of owning the stock, its not an issue. 

    Also Phil, i was looking at DOW.  Put sales have been popular in the name. They have an investor day scheduled for Oct 6 for a short term catalyst. The last earnings report was great and DOW should benefit from infrastructure spending and a recovering economy. Plus it has a 4.4% dividend. 


  16. I like DOW, we talked about them a little while ago – it's a great bargain at $64, which is $48Bn and they are good for $5Bn a year so fairly valued and a great long-term play.  They pay a $2.80 (4.5%) dividend, so worth owning in the Dividend Portfolio as:  

    • Buy 500 shares of DOW for $63.90 ($31,950)
    • Sell 5 DOW 2023 $62.50 calls for $8.50 ($4,250) 
    • Sell 5 DOW 2023 $57.50 puts for $8 ($4,000) 

    That's going to be net $23,700 on our first 500 shares so $47.50 each is a 25% discount off the current price and, if assigned 500 more at $57.50, our net goes up to $52.50, still 17.8% cheaper than it is now.  

    In the LTP, we can be a bit more aggressive with:

    • Sell 10 DOW 2023 $60 puts for $9.25 ($9,250) 
    • Buy 20 DOW 2023 $55 calls for $12.50 ($25,000) 
    • Sell 20 DOW 2023 $70 calls for $5.55 ($11,100) 

    That's net $4,650 on the $30,000 spread so we have $25,350 (545%) upside potential at $70 and we're about $17,000 in the money to start.  Aren't options fun?   Very happy to DD on that if it goes lower, of course.  


  17. Phil/WTRH – with 500+ days left to experiation, you'd rather cut the loss than let it ride?


  18. WTRH/Swamp – At $1.10, letting a $2/4 spread ride is not smart.  If we're not willing to roll down – we shouldn't be in it. Our 2023 $2 calls are 0.45 and the $1 calls are 0.65 so, in the very least, we have to be willing to pay 0.20 ($1,000) to stay in it and really we should buy back the $4 short calls at 0.25 ($1,250) to allow us to sell better calls in the future.  So that's committing $2,250 more and getting more bullish at $1.10 but I don't see enough evidence to make that call.  Whatever they were trying to do hasn't been working and now they are "pivoting" to owning a payment service – this does not bode well.  

    $1.10 is $275M in market cap and they have $60M in the bank and they are burning $6M/qtr so they can last 10 quarters but what if they are spending $200M to acquire the payment platform?  What if it's that plus half the stock?  That's why people are bailing.  Don't forget, below $1 they face delisting as well.

    https://swark.today/local-restaurants-waitr-food-delivery-app-bring-more-business/


  19. "We recently launched a comprehensive strategic initiative to change our corporate name, brand and visual identity, reflecting our ongoing commitment to innovation, continued expansion into new delivery verticals, and anticipated expansion into other related sectors. We are excited to begin the process and ultimately identify a corporate name that unifies our current and future service offerings, as well as reflects our long-term business strategy of servicing our ecosystem of diners, restaurants and independent contractor drivers," continued Mr. Grimstad.

    In other words "Nothing is working and we have no clue what to do yet." 

    "We recently executed definitive purchase agreements to purchase payment processing companies ProMerchant LLC, Cape Cod Merchant Services LLC and Flow Payments LLC, three players in the merchant processing solutions space. These acquisitions in the fintech sector will further supplement our offerings as we continue to diversify the Company beyond third-party food delivery."

    "We invested in the recent Series-D preferred round of Figure Technologies Inc. and are working on an agreement expected to facilitate the use of the Figure Technologies’ mobile banking blockchain application as a real-time payment option for our diners and independent contractor drivers, as well as providing additional disbursement solutions for our restaurant partners. Figure Technology operates in a sector that is transforming payment options, lending and other financial transactions, and we continue to view fintech solutions as a growth opportunity," concluded Mr. Grimstad.

    In other words "Loads of Bullshit to keep the wolves at bay."