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Toppy Tuesday (Again) – S&P 500 Tests 4,500 (Again)

Zacks Investment ResearchHere come those tears again

An endless series of low-volume rallies is not enough to get you over a major level on the S&P 500 so, once again, we are being rejected at the 4,500 level.  On the surface, things look good with a projected $1.8Tn in earnings for the S&P 500 and that's up 28% from $1.4Tn in 2019 but our Government (money borrowed by you and I on their behalf) has spent over $10Tn so our Corporate Masters could make that extra $400Bn – which will be the ANNUAL interest on what we borrowed at 4% (which will be more profits for the banks).

This is like playing Monopoly when the Banker is cheating – there's no way you can win….  Meanwhile, in 2019, the S&P 500 was topping out at 3,000 so 4,500 is 50% higher than we were, not 28%, which would be 3,750.  So, EVEN IF there were no stimulus and this were an honest 28% increase in earnings – we are still 20% too high at 4,500.  This is not sustainable – especially if the Government isn't going to throw in another few Trillion Dollars to keep things humming next year.  

As you can see, it took the S&P 4 years to get from 2,000 to 3,000 (up 50%) and that 1,000 point rally had two 500-point pullbacks along the way.  This is our first attempt at 4,500, less than 2 years after crossing 3,000 and that's a 1,500-point rally and the pullback we'll be looking for is 3,750 at some point, which is only down 16.66% – so not too big a deal if it happens (and we hold it).

Again, I'm a bit skeptical because of all the stimulus but stimulus there is so 4,500 we have – for the momemt.  Now it's up to the Fed and the Government to decide how much they want to spend to keep Corporate America making this kind of money (while not taxing them) at the expense of the American people.  In situations like this – you know better than to expect our Government to be there for the people….

Of course, people will not be a problem in the near future as we have infected another 266,147 of them yesterday with Covid.  Only 1,359 people died but that's a lagging indicator as it's only been a month since we started this new cycle but thank goodness we live in this modern civilization with all these great tools at our disposal to fight the spread of a disease, right?  

Unfortunately, you can have the greatest tools in the World at your disposal (and we do) but they aren't worth a damn if people aren't willing to use them, are they?  China had 46 cases yesterday.  The difference between China (1.4Bn people) and the US (0.3Bn people) is that China actually uses science to fight the disease.  Their people cooperate and wash their hands before entering a building and they wear masks wherever they go and, guess what – it works!  

1,359 people died YESTERDAY because we didn't do those simple things.  China has had 94,687 TOTAL cases of Covid and 4,636 deaths (yes, they are way better than us at curing it too) yet we don't just refuse to learn from them – we refuse to let others learn from them.  What is wrong with our society?  How do we just go about our daily lives and LET this happen.  How do we LET another 1,359 people die today without trying to do ANYTHING about it?  

This is a completely preventable tragedy that is happening every day, yet we sit here and let it happen and we'll let it happen tomorrow and the day after that.  Somehow it's become "un-American" to stop a disease from spreading?  WTF people?  

And WTF Investors as they are also ignoring the very thing that tanked the market last year and here we are, back near last year's peak infection levels yet somehow everyone believes this time is different and what?  We won't have to lock down to stop it?  We won't have to borrow Trillions more to fix it or is the borrowing Trillions of Dollars and giving it to Corporate America exactly what they are counting on?  Go virus!  

Now, we can either join the Covid deniers and the market bulls and assume that rising infection rates are going to be great for the market or we can protect the gains we made from the first $10Tn in stimulus and pull back a little.  We did the latter last week, bringing all of our Member Portfolios to mainly CASH!!! positions while maintaining bearish hedges in our Short-Term Portfolio.  It's enough to withstand a 20% market correction that is long overdue.  

Dry bulk rates have surged during 2021Meanwhile, all this money sloshing around is overheating segments of the economy. Check out this chart for Bulk Dry Shipping Rates that are rising even faster than Covid cases.  That's up 30% since July and up almost 200% since the start of the year.  This is not "transitory inflation" – the Fed is LYING to you.  The Government is LYING to you.  How are the prices of goods going to come back down when the cost of shipping them triples?  

Again, this is something Traders are pretending isn't really a thing.  How many things can we ignore at one time?  Won't a 200% increase in the cost of shipping impact Corporate Profits down the road?  They are paying more money for the same delivery – where does that money come from?   The price increases we have been seeing are based on April, May, June shipping prices – the next round of data will have July, Aug, Sept with another major increase.  Will the market keep taking this in stride?

 


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  1. KPTI – so, let's look under the hood.  1. Insiders are buying. 2. Drug is approved for MM (after 1 treatment failure). 3. Lots of trials ongoing, with several readouts coming up.  I think they are beating up the stock b'c someone wants in (?).  They are larger than my TRIL holding, and I will continue to add. Obviously, not more than 10% of a portfolio! – Pharm


  2. Good Morning.


  3. Good Morning Pharmboy – It's a cool 58 in NCSD with an expected high of 77… :)


  4. Okay, here comes a public health rant by me. We do not have the greatest tools in the world to handle this. What the US thinks of as public health is clinical medicine applied to a whole bunch of people. A public health program that is based on individual behavior change is doomed! The US' covid outbreak is not the fault of the anti-vaxxers; it's the fault of those who destroyed our not-very-good public health system over decades (https://www.npr.org/sections/health-shots/2021/08/06/1024933341/detroit-public-health-privatize-covid-bankruptcy). Thank you, Uncles Miltie and Friedrich!

    So what would prevent the next pandemic in the US! 1. Repair the CDC so it can do proper surveillance again. Early on in the epidemic in 2020, the CDC couldn't get the covid-19 case definition right – mixing symptomatics with test positives, then unmixing them. We need competent people who won't do that to return to the CDC. The CDC collects its data from the state health departments, who collect it from the local governmments. If the local public health department is a mess (see Detroit, above), bad data. Or, if you look at the current county-wide maps of the outbreak and notice how good Nebraska looks – Nebraska has 93 counties, of which 5 have health departments, of which 2 function. The rest of the state simply isn't reporting, as there is no state epidemiologist and a bunch of overworked bureaucrats running the health dept.

    2. Medicare for all or something comparable. If people are worried about the ridiculous cost of medical care, they'll avoid it.

    3. Reinstate airwave regulation. If people are scared that the vaccine will eat their brains, they'll avoid it.

    4. Paid sick leave. If people are afraid the vaccine side-effects will knock them down so they can't go to work, they'll avoid it.

    5. Stipends for small businesses so they can keep afloat.

    6. Stipends for everyone, no means testing, to reduce the conflict between the "save the economy" and "save the people" .

    7. Some sort of national tracking system like Korea uses, so people can know when they've been exposed to get out of circulation. This is an anonymous, individual intervention that won't work as well in the US as it does in Korea – plus in Korea 98% of people own smart phone, whereas in the US it's in the low 80s. But this helps, along with the rest

    8. Stop thinking in terms of a single magic bullet – "if everyone would just mask like they do in Asia" --> "If everyone would just get vaccinated….."

    Neither of those worked because we don't have a public health program.


  5. I am ignoring you, 1020. 


  6. Can't agree more with your opening comments Phil. Now seeing the national guard being dispatched to help out where the morons refuse to be responsible. Governor's of these state (Abbot, Deathsantis) should get the bill and be held accountable. This is truly a bizarre place we're in. 


  7. Snow… all great ideas. #7 will not go over well with the freedom crowd. Also the head of the snake that feeds misinformation (Fox, etc) does not respond well to logic or reason.


  8. Good morning!

    Oil back to $77 – congrats to the longs.  /RB back to $2.17 too.  

        

    Fixing the system/Snow – I'd vote for you!  It's so funny in retrospect that they said we couldn't afford to spend $100Bn a year for universal health care and then we have to spend $10Tn dealing with a single viral outbreak, which still does nothing at all to address our long-term issues.  As to airwaves, they used to be a "public trust" – WTF happened?   

    Lumber making a nice bottom – with all that upside, it's worth a toss above the 500 line.

    Let's see if the Nikkei breaks over 28,000 – that would signal the S&P can get over 4,500.

        

    Nikkei is retracing off 30,000 at the moment.

    Same rule as above – 20,000 to 30,000 is 10,000 and weak retrace is 20% of the rally so 2,000 points back to 28,000 is the line we're testing and failing to get back over that leads to strong retrace at 26,000 – which I suspect is more likely than breaking over 30,000.

    Japan P/E ratio

    Bizarre/Jeddah – Yeah but at this point you have to hold citizens accountable.  The silent majority is simply baffling here.  

    Covid Optimists See U.S. Nearing Delta Peak, But Risks Abound

    Aviation Rebound Stalls; U.S. Mandates Multiply: Virus Update

    Fed Chairman Powell Navigates the Inflation Debate

    Iron-Ore Prices Tank as China’s Steel Output Slows

    Office building prices tumble in heart of big American cities.

    Employers face a dilemma: keeping workers safe with vaccine mandates — and holding onto their employees.

    What, us worry?

    That's OK – MORE FREE MONEY fixes everything!

    Wall Street is telling investors to prepare for the two big spending bills Congress is set to pass


  9. One segment eerily silent are the insurance companies. Either they're being silenty subsidized or just taking it on the chin.. hard to believe


  10. hi phil could you tell me symbol for lumber futures i cant find one on ibrokers.

    thanks


  11. I can not understand that T is trading that cheap 27.44


  12. T – might be pending dividend cut and the spin out of HBO ?





  13. Insurance/Jeddah – Yes, we've stayed away from them as the risks are hard to quantify.  Global warming (floods, fires) and disease can't be that great for health, life and property insurers.  Although I assume auto insurers are doing well with people driving less and drinking out less so not as many accidents yet people still pay the same premiums.

    Lumber/Tommy – /LB but not many on-line brokers trade it.  CUT and WOOD are timber ETFs 

    If Lumber trends back up – these guys should break higher too.

    T/Bert – Could be a stock of the Future at this point.

    General Motors, AT&T Partner For 5G Connectivity To Vehicles

    Makes sense to cut the dividend at 7.5% is too much to pay out.  

    Q2 was recently reported and analysts covering the company were targeting a consensus of $42.7 billion. We expected revenue to be closer to $42.0-$42.5 billion range but the top line came in at a solid $44.0 billion, much better than expected. This was a beat of nearly $1.3 billion vs. consensus.

    There was a lot of strength in the telecommunications side of the business. There was nice growth in wireless postpaid customers. Wireless postpaid saw 1.156 million adds, boosted by 5G availability and compelling marketing strategies. We think it is worth pointing out that the company also reported 246,000 Fiber net adds. There is a ton of room for growth in the legacy business as well. AT&T has penetrated 36% of available markets, meaning there is a lot of room for expansion.

    Of course, the most interesting side of the business is the media assets. These are driving new growth and interest in the company and are set to be spun. That said, the media assets are a key business line. Total domestic HBO and HBO Max subscribers topped 67 million globally. There is also room for the company in the future to charge a nominal amount for content on the steaming app such as for new release movies. HBO Max also launched an ad-supported version and additional international offerings in the quarter and these are paying off. We expect subscribers to grow to over 100 million within a year or so while AT&T sees year-end subscribers hitting over 70 million this year. This is solid growth.

     

    In terms of the actual earnings, the strong revenue growth helped fuel a bottom line to a beat versus consensus. Analysts had a target consensus estimate of $0.80 per share, and this was surpassed by $0.09 with the company bringing in $0.89 per share. The one thing we would like to see is better control over operating expenses. Operating expenses were $40.8 billion versus $37.4 billion in the year-ago quarter. Improving on these costs could drive earnings higher.

    I have no idea why people hate them so much.  Great opportunity to own them for the next 100 years. 


  14. Selling HBO after hitting peak subscribers during Covid may not be a bad idea (if true at all).  


  15. Good am from smoky hazy drippy No Wisc. Fires in BWC and over the border makes it hard to breathe and Covid is going gangbusters here with vaccinated people. It is cool too 57 degrees and we can only hope the rain will help get these fires out. First rain in 3 weeks, drought conditions with hay and feed being in high demand. We are pretty much in lockdown though many do not wear masks. Such a contentious and stupid thing to get your knickers in a twist about. Yet we know that it works along with sanitizing hands at every opportunity and obviously staying away from those who have been exposed to the new variant. We do it by word of mouth here since the government is useless.


  16. Pharm, I have been buying ADIL. Not sure if you know them or not but seemed interesting to me. Hope all is well! 


  17. Wisconsin/Pirate – Wow, sounds like a report from the Apocalypse!  


  18. Phil/SPWR

    20 SPWR '23 $25c ($7)

    -20 SPWR '23 $40c ($3.4)

    - 10 SPWR '23 $30p ($11.3)

    Would you roll the long $25 calls down to $20 for $1.6 or even to $15 for $4.1? Would you roll the puts also?

    Thx!


  19. wingwalker I rolled mine to 15 and my puts to 20


  20. loaded more T at 27.40 hope I am right


  21. BABA making a nice come back


  22. Any thoughts on BTI?  Attractive down here – or more return elsewhere?


  23. SPWR/Wing – I would PATIENTLY wait for 2024 to come out.  Sure I'd do the roll but this seems like a very small position for you so what's the rush?  Absolutely not on the puts until 2024 is out.

    BABA/Yodi – Maybe a good sign for DIDI.

    China’s Antigraft Watchdog Probes Party Officials in Alibaba, Ant’s Backyard

    China Delays Anti-Sanctions Law for Hong Kong 

    Other news:

    U.S. Crops Wither Under Scorching Heat

    Behind the Florida Condo Collapse: Rampant Corner-Cutting


  24. Phil / T – I'm not sure how much of a bargain this is ….  They will be cutting the dividend to 40 to 45% payout ratio…  so this would make it at best a 5% dividend player probably loser t 4.3%…  I think the spinoff will have a negative impact on their subscriber growth ( since they've been bundling )  unless the tie this bundling up prior to the sale, and even then I don't believe it will last for more than a few years.   Finally the management team it can't manage it's excess cash very well ( actually terribly )….  If you have a good understanding of  the puts and takes post spinoff I'm all ears.   I have a small ish position on T ( I cut it back considerable after the sale announcement above 30)….  My whole position if fully covered with short calls ( going on my 3 sale now trying to get my purchase price down.  


  25. T/Batman – They are a cyclical company and they take on debt and pay down debt and, right now, I don't think they're worried about +/- 10% subscribers when they are about to triple their subscriber base with robots and autos.  Money has already been spent ($60Bn) building out 5G, now they will be reaping rewards for many years to come.  T is cutting their dividend (will end up at no less than 5%) because they are spinning off revenues (and profits) with Time Warner – how can they pay the same amount if they aren't the same company anymore?  

    TimeWarner and DirectTV  will get $7.1Bn in cash and we STILL own 71% of the TW/Discovery company.  It's actually a pretty low valuation overall, considering the company will have about $12Bn in revenues, maybe $2.5Bn in profit.

    Bottom line on T is that, pre-spin off, they are a $196Bn company at $27.50 that makes $23Bn a year BEFORE the 5G rollout.  

    I like this one:

    Alibaba: A Dip-Buying Opportunity Of A Lifetime


  26. ADIL – thanks bd.  Not really into AUD, and ondansetron is a drug for morning sickness or chemotherapy induced nausea (ie, Zofran).  Repurposing to me is futile, as generics could walk in at that dose and be prescribed.  Maybe I am reading it wrong, but I see a pop if they are approved (or positive in trials), but capitalizing on the sales part, no go to me.  


  27. Really, for very little risk, why not do an arbitrage play on TRIL?  PFE buys them for $18.5, calls and puts in Nov are $$ to sell against. I am sure Phil can get creative.


  28. No, not armageddon yet here. Not near the 150K you have in So Fla for the week? day? But the high temperatures are frying the grass and gardens so it is truly unusual for here. When I talk to people it is true distrust of the government that is causing the hesitancy. Then some friends coming down with other diseases after getting the shots. So as usual its anecdotal but the questions remain what isn't the government telling us? And how did they get these miraculous vaccines out so fast? And why are people still getting sick after the shots? Total breakdown of trust with medical professionals too. It all adds up to the pill, or shot for every ill. It wasn't that long ago that vaccines were mandatory to be in school. No choice. Why is everything so wish-washy now? 


  29. Well the theory is Russia, etc are purposely using social media to sow discord and weaken our society with nonsense like QAnon, Anti-Vax, etc.  All that "fake news" is being generated out of Russian farms and they were proud of the fact they got Trump elected.  I think what the Government isn't telling us is that we're all going to get Covid – just hopefully a mild case but it transmits like the flu and, unless we change our way of life – there's no way to stop it.  That means people like DeSantis, rather than being sinister – just want to get it over with faster.  

    It may seem simple but lockdowns do kill people with less doctor visits, even less emergency room visits because people avoid hospitals – even when they need them.  Fewer people screened for cancer in time, isolation resulting in a drastic uptick in Alzheimer's and then the slow deaths that occur for people who slip away economically.  Drug overdoses spike during lockdowns and, for some reason, last year was a 10-year high in car accidents, even though we drove 50% less.  It would not be outrageous to say over 1M people, long-term, will die from the 2020 lockdown.  

    So an elected official needs to balance that out with how many people will die if we don't lock down and there's a huge economic benefit to the latter and that's hopefully when some are choosing to back the "act normally" play.  This would be more likely if they were forbidden to give the true reason for their actions (we will all get Covid), mandated by the Federal Government to prevent wide-spread panic.  

    To me, that's the more likely scenario than we have these politicians who are simply psychopaths who like to see people suffer and die under their watch…

    Hopefully.


  30. Phil / BABA – I uncovered my shorts on this one yesterday ( held my breath and pulled the bandaid) Also bought more of the 200 '23 calls – as well as some putters….  I'm goin to partial cover at 180 *( if it gets there ) and then more at 200….   will also sell some short Dec 180 or 190 callers if I can get +10….  


  31. Good timing, Batman.


  32. Phil-Sounds very plausible your dissection of the possible rationale for what is happening. Food for thought for sure. Thanks.


  33. SPWR/Phil/Yodi

    Thanks for the suggestions, Yodi & Phil. Guess we had the right idea but good to get the Master's touch .. the devil's in the details.


  34. https://newrepublic.com/article/163186/youll-probably-get-covid-eventually-avoid-long-can

    The longer the virus continues spreading, the more likely we are to catch it, even if we’re vaccinated. The good news is, the vaccines are excellent at protecting against severe illness and death. But in my darker moments, I find myself wondering: Am I going to catch this virus eventually? And if so, should I abandon precautions now because I’m not going to be able to escape it anyway?

    The experts I’ve talked to in the past few months are divided on the first question. Some experts believe that we will all catch the coronavirus at some point in our lives, while others believe it’s avoidable if we take action. But they all agree on one point: The longer we can wait to catch the virus, the better it will be for everyone. In other words, the precautions are important.

    Until all children are eligible for the shot and the immune-suppressed are eligible for their additional dose—and until the spike from the delta variant subsides—timing matters. Everything we can do to protect the vulnerable from getting sick and dying, and keep health systems from collapsing, and keep ourselves from the risk of long-term symptoms and disability, we must do. And even if the virus becomes endemic, that doesn’t mean we can’t control it.

    Here’s what they do know: This virus has surprised us before, and it will surprise us again. People and governments should plan to stay flexible and understand that the situation will change, in ways we can’t always predict. There can be no premature declarations of victory. There are no cheat days in a pandemic; working hard and being careful some of the time doesn’t mean you can disregard the virus the rest of the time.

    But it’s likely we’ll see other spikes as the virus continues to evolve. “I’m not saying it’s going be in the fall or winter, but it definitely will come back again,” Osterholm said. We’ll continue seeing these surges, he added, “for a while, at least until we get a higher level of protection.” We will eventually reach some level of immunity, whether it’s because people choose to be vaccinated or survive the virus itself. “You can’t run out the game clock here,” Osterholm said. “If you think, ‘I haven’t gotten it yet, I’ll just wait another six months and this whole thing will be over with, I don’t have to get vaccinated’—this virus will eventually find you. It will find you.

     

    That timing—waiting for more people to become protected—is everything in the next few months. And while delta may make it harder to achieve herd immunity, herd immunity has never been an all-or-nothing proposition. Every vaccination helps slow the spread of the virus. “Your vaccination indeed is absolutely protecting your community,” Bergstrom said. Even if your community doesn’t have widespread protection, each vaccinated person is an opportunity to break the chain of transmission. “Your vaccine may not even make you 100 percent sure of not being a link in a chain, but it reduces the chances of your being a link in the chain tenfold or more,” Bergstrom said.

    “It is our societal responsibility for the next number of months to keep transmission as low as we can, because there are still those people at risk,” Lavine said. “It’s not to anybody’s benefit to have overwhelmed hospital systems and mass deaths and the grief that accompanies huge proportions of the population dying in a short period of time.”


  35. Making Small Farms More Sustainable — and Profitable


  36. Don’t Force People to Come Back to the Office Full Time





  37. The Coronavirus Could Get Worse


  38. Hi Phil, we look at covid data at work a lot and do a lot of different calls with healthcare and epidemiologists etc and I think that was our general conclusion, that at this point getting covid is just a matter of time so hopefully everyone who can gets a vaccine and we deal with covid as best as possible…ie don't be reckless but also we can't just close things indefinitely as the horse has left the barn, it's not going away. 


  39. Good morning!! Here is the link to today's webinar. Enjoy

    https://attendee.gotowebinar.com/register/1943154122881665808