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Monday Market Movement – Back to Up Again

Road Sign Roadsign One Way Street - Free vector graphic on PixabayAnd up we go – again.

What Covid?  What Afghanistan?  What declining Consumer Confidence?  None of this matters to the market yet the healine in today's WSJ is:  "Stock Futures Edge Up Ahead of Economic Data".  How does that make sense?  Why would the market go up on good Economic Data when it doesn't go down on bad Economic Data?  

There is a reaso for it, actually.  Money keeps pouring into the market via 401Ks and IRAs, etc.  The reason our Corporate Masters like to keep the population employed is because the workers then put their money back into the market in the dumbest way possible – through ETF investing. 

That guarantees a constant flow of funds into stocks and, of course, even the investing class is stuck with the markets at the moment as Real Estate and Bonds are not very attractive at the moment and putting money in the bank at near-zero percent rates while inflation is 10% is also a very bad idea.  

Gold has lost it's luster and fewer and fewer people have the means to start their own business these days – so it's the markets that are getting all the attention – and all the inflows.  Then we have the Fed buying assets from the banks, which are mostly MBS but that allows them to push money around as well.  The Government steps up and provides stimulus once in a while and then, of course, we have all those companies buying back their own stock – heading towards $1Tn this year for the S&P 500, out of $31.6Tn total that's over 3%!

Asteroid vs. Volcanoes: New Modeling Shows What Made the Earth  Uninhabitable for DinosaursThe resting position for the market is to go up and, at this point, it's hard to spook investors into selling as we're already worried about everyone on Earth dying from disease before they get a chance to roast to death on the planet's surface.  Oh yes, there's also an asteriod that may hit the Earth on September 24th, 2182 – if we're still around…

So what do you think is going to scare investors who have already been scared by everything?  Let's hope we don't find out….

We are busy, busy this week with data starting with the Chicage Fed this morning, PMI and Existing Home Sales.  New Home Sales and the Richmond Fed tomorrow with Morgage Applications, Investor Confidence and Business Uncertainty on Wednesday followed by GDP, Corporate Profits and the Kansas Fed Thursday and we finish the week with Jerome Powell speaking right after a probably terrible Consumer Sentiment Report with Personal Income and Retail Inventories earlier that morning.

And you might think Earnngs are over but they never are these days.  There are still a lot of interesting companies reporting and, now that we've put a lot of cash on the side, we'll be sincerely doing some bargain-hunting this week.

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  1. Good Morning.



  2. TRIL….BOOM! Link.


  3. I still lurk….just trying to be coy! :P   Yes, 1020.  Oh, and how about GLUE!??


  4. KPTI….BOOM!??  Good Morning Pharm!  :)




  5. TRIL – thx Pharm!!  Qn.. PFE bought it for $18.5 per share, why is it settling in @ $17.5?  





  6. TRIL

    I had options that expired on Friday, took some profits last week. Should have rolled them :(


  7. Want to Pay 0% in Taxes? Here’s How | Kiplinger


  8. KPTI/1020….time.  Always takes time.


  9. Just busting chops, Pharm… you did notice KPTI was mentioned as well and I could not resist…. :)

     

    I hope you and the family are doing well!




  10. Sweet!  One or more companies in your portfolios are part of an announced takeover/merger as detailed below. – PFE acquiring TRIL ( https://www.clientam.com/news/c546b634bea297c4/SI!SI.18849063.html ) for 0 shares and 18.5 cash on TBD


  11. Good morning!

    TRIL/Pharm – Congrats on that one.

    The question is, is KPTI still a good idea under $5?  

    Supply Chains/Seer – Getting worse and worse.  

    Oops, forgot to hit Submit before! 


  12.    

        

    August 20th, 2021 at 11:10 am | (Unlocked) | Permalink | 

    Still liking /CL long over the $63 line and /RB at $2 – both with tight stops below.


  13. Phil:  Below is a question from last week.  I don't think DIDI made it into a Portfolio Review.  Apologies if I am wrong.  

    JohnC1 
    August 20th, 2021 at 12:20 pm | Permalink | Tweet thisIgnore this user

    Phil:  Is DIDI a keeper these days?  You suggested a play not too long ago.  I purchased the December 2022 5/10 spread.  DIDI is now $7.45.  Is this a keeper?  Thank you.


  14. Giving back a little into the close but not much.  

    DIDI/John – They got nailed by Chinese regulators 

    DiDi falls on report of potential 'unprecedented' penalty in China

     

    • Chinese regulators are considering some serious penalties for the ride-sharing firm after its IPO, according to a Bloomberg report. Regulators are considering a fine, possible suspension of certain operations and/or a forced delisting or withdrawal of DiDi's U.S. shares.
    • China's Cyberspace Administration earlier this month ordered DiDi's app removed from app storesnoting serious issues with DiDi's usage of customers' personal information.
    • Last week, Beijing announced that seven of the Asian nation’s regulatory agencies had “stationed” personnel at the DiDi's offices to conduct “cybersecurity reviews.”
    • DIDI, which is known as the “Uber of China,” last month staged what had seemed like a successful U.S. IPO.

    We thought they were done going down on July 29th and we took a poke at $8.87 and it's down $1 since as China is keeping them in limbo.  It was for the Future is Now Portfolio, not the LTP:

    While it's very dangerous to take China at it's word, I'm liking DIDI, who have fallen below their IPO price of $14 to $8.87, which is a $10.5Bn market cap for a company with $30Bn in quickly growing sales (no profits so far but manageable losses).  They are likely to be up 20% at the open, though.  Amazon owns a piece of them and I think they are worth a toss down here so let's add them to our Future Is Now Portfolio as such (I'm estimating the opening prices):

    • Sell 20 DIDI Feb $10 puts for $2.50 ($5,000) 
    • Buy 50 DIDI Feb $10 calls for $3 ($15,000)
    • Sell 50 DIDI Feb $15 calls for $2 ($10,000)

    That's a net $0 cost on the $25,000 spread and our only obligation is owning 2,000 shares of DIDI for $10 so, as long as we REALLY want to invest in DIDI over the long-haul, the risk of assignment should not bother us.  The upside potential is a clean $25,000 if they get back to $15 and, of course, we intend to roll the Feb $10 calls out to longer strikes when they are published.  

    The $2.50 puts are now $3.70 but we can only get assigned $2,000 shares at $10 for $20,000.

    The rest of the spread is net $0 and the $10 calls are $1.40 and the $15 calls are 0.65 so net 0.75 is $3,750 so, if we shut it down here, there would be a $3,750 credit and our net cost of 2,000 shares would be $8.125 and it's now $7.68, so no reason to panic yet.  If the stock goes to $4 and we get out – we'll be down around $8,000 but if the stock goes to $2 and we spend $8,000 for 4,000 shares – our average cost would be $4.04 and we'd be down $12,000 on 6,000 shares (not including more put and call selling).  AMZN owns part of DIDI and they don't only operate in China 

    Didi is chasing Uber around the world - Vox

    So it's possible this goes bust and hurts us but it's also possible China and Didi come to some sort of agreement.

    China's cybersecurity watchdog, the Cyberspace Administration of China (CAC), hadn't played a prominent role in the spring crackdown. But in the weeks before the IPO, according to the Wall Street Journal and Financial Times, officials from the CAC raised questions about the security of Didi’s network, expressed concern about the sensitivity of information displayed on its mapping function, and cautioned the company to delay its listing until it could conduct a thorough internal security review.

    Didi says it never received an explicit warning from the agency—and that it didn't divulge customer data to U.S. officials. And in any case, the CAC had never derailed the overseas listing of a Chinese company, and technically didn't have the power to do so. China adopted a new cybersecurity law in June, but the measure was vaguely worded, and it remained unclear how it would be implemented.

    And so Didi officials pressed ahead with plans to go public in New York, eventually settling on Wednesday, June 30—three days before U.S. investors were to decamp for the long July 4 weekend and one day before China would celebrate the 100th anniversary of the nation's communist party.

    The day was a triumph. Executives kept low profiles, declining to ring the opening bell or even celebrate the event on Didi's Weibo social media channel. Didi Global, the name under which the stock is listed, raised $4.4 billion and debuted at $16 a share, making it one of the year's biggest public offerings and the largest overseas listing of a Chinese company since Alibaba Group's $25 billion debut in 2014.

    Two days later, China's cyber watchdog bared its fangs.

     

    On Friday, before trading opened in New York, the CAC announced it had launched an investigation into Didi on suspicion the company had violated data privacy and national security laws. It ordered the company to stop registering new users. On Sunday, the CAC instructed all Chinese app stores to remove Didi's app. On Monday, the agency said it had broadened its investigation to include two more U.S.-listed Chinese companies.

    Didi's shares dropped 5% on Friday, then a further 25% when trading reopened on Tuesday.

    Didi vice president Li Min said in a Weibo post that “Didi stores all domestic user data at servers in China. It is absolutely not possible to pass data to the United States.” But by Tuesday, it was clear the agency's regulatory blitz was part of a larger government effort to revamp procedures governing all Chinese companies seeking to raise capital on foreign exchanges.

    The State Council, China's top executive body, issued a brief but sweeping statement vowing new rules for overseas listings and stricter supervision of cross-border data transfers. On Wednesday, Bloomberg reported that the China Securities Regulatory Commission plans to let regulators block Chinese companies from listing overseas even if they sell shares through an offshore affiliate. Since 2000, hundreds of Chinese companies have used that strategy—the so-called variable interest entity model—to raise capital on foreign bourses even if they operate businesses in sensitive sectors, such as the Internet, in which Beijing forbids foreign ownership.

    Details of those changes remain forthcoming. But the prospect of China creating a new layer of regulatory review for foreign IPOs and Beijing's willingness to torpedo the value of Didi, one of its brightest homegrown tech stars, has cast a cloud of uncertainty over companies seeking to sell shares on U.S. exchanges as well as those already listed. Beijing’s crackdown on Didi, and Wall Street’s swift recoil from Chinese stocks in response to it, raises the question of whether the world's two largest economies will remain financially integrated or 'decouple' in this realm too.

     

    "The Didi experience definitely signifies that the Chinese government is starting to look closely at the various possible implications of Chinese companies listed in the U.S. market," says Clement Chan, a managing director at professional services firm BDO. "In my view, they are preparing for further deterioration in the relationship with the U.S.”