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4,400 Friday – Can Powell Add 100 Points?

Not too impressive.  

Since we crashed the market last week by closing out some of our longs (in these low-volume markets – it doesn't take much), the S&P 500 has bounced back, but basically only on three sudden surges, on Thursday and Friday morningings and pre-market Monday.  Other than that, the vast bulk of the action has been sideways now that earnings season is mostly behind us.

You can see why we took advantage to cash out at the top – it's hard to find buyers when you are selling more than a few shares and the S&P dropped 5% in two days last week – it doesn't take much to send these dominioes tumbling over.  That's why Powell has a tricky job today (10 am).  He has to mke his keynote speach for the Jackson Hole Conference which is being held on-line because Covid has made it too dangerous to hold a conference – even for a few hundred rich people in a luxury mountain hotel.

Jesse Cohen on Twitter: "Happy Sunday! *Here Are My  #Top5ThingsToKnowThisWeek: - Fed Jackson Hole Symposium - Fed Chair Powell  Speech - U.S. Q2 GDP, Housing Data - $BBY $JWN $EXPR $DKS $DG $It's hard to say the virus is behind us as an economic factor when your audience just had to cancell a trip to Wyoming because the disease you are pretending is gone just spiked up again – past last year's levels (when the conference was also cancelled).  

Meanwhile, the Fed minions are floating trial balloons about scaling back their monthly stimulus (tapering) from the current $120Bn a month because it has been jacking consumer prices up 10% – and that has been hammering down consumer confidence at a rapid level.

This week we've heard quite a few businesses begin to talk about inflation hitting their margins and giving more downbeat guidance moving forward.  We've also heard new about shipping costs and chip prices increasing – the kinds of things that are not at all transitory and can have a cascading effect on the costs of other goods and services.  

Wages have been increasing – up 1.1% in July but Personal Spending fell off significantly, up only 0.3%, down from 1% in the prior report.  The slower spending growth suggests the recovery has lost momentum amid Delta variant uncertainty.  According to the WSJ:

Americans have been shelling out more this summer to travel, dine out, and attend concerts, museums and conferences—activities they had put off for most of the pandemic. But there are signs that such spending is taking a hit and affecting businesses, undermined by consumer fears tied to the Delta variant, staffing shortages and persistent bottlenecks in global shipping networks.

Oxford Economics earlier this summer projected that Consumer Spending would rise at an annual rate of nearly 8% in July through September. But recently they cut that projection by more than half, to 3.5% yet, of course, this has done nothing to make people re-think the record-high prices they are paying for stocks – even though Consumer Spending is 60% of the economy and they missed it by a mile….

U.S. retail sales fell 1.1% in July from June and, as I pointed out earlier in the week – you have to beware of these lagging reports that people hve been using to paint a false picture of how well the economy has been doing this summer. So Powell is in a tricky place this morning, as he has to tell investors to remain calm while he begins to take away $1.44Tn in stimulus (7.2% of our entire economy, which is "growing" at 6.6%) because "all is well" despite the fact that he's giving the speech from his bedroom because the virus is raging out of control – again.  

Last August, in Wyoming, there were 14 cases per day and the Fed decided to cancel a major economic conference and for good reason as Wyoming, with just 575,000 people in the entire state, was getting 800 cases a day in November.  As of yesterday, Wyoming is averaging 400 cases per day and risiing rapidly and the daily spikes are already beginning to rival last November, with 891 cases on the Monday.  

The big guns at the Fed can afford to cancel their vacations, because they are rich but the average folk who made summer plans are essentially being forced to take them due to cancellation poliicies that are back in place this year.  That's forcing middle-class families to risk their children's lives to travel to now-unsafe locations in conditions that are 10 times worse than when we shut everything down last year to attempt to contain the disease – and that barely worked.

Now we've thrown caution to the wind and the bottom 80% have been thrown under the bus and if Delta spike 10 times into this November – they will say "who could have seen that coming".  

"While Mona Lisas and Mad Hatters
Sons of bankers, sons of lawyers
Turn around and say good morning to the night
For unless they see the sky
But they can't and that is why

They know not if it's dark outside or light "- Elton John

Have a great weekend, 

- Phil

 


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  1. Good Morning.


  2. Powell doing well – nice pop on his comments so far.

       

        

  3. Hundreds of Afghans picked their way through the carnage left behind by the previous day’s deadly suicide bombings outside Kabul airport in a last-ditch effort to flee the country.

    The president said the U.S. would respond to the deadly attacks in Afghanistan that killed dozens and promised to continue evacuation efforts.

    With what troops?

    Since the Fed’s meeting last month, the economy has seen more progress but also the further spread of the Delta variant of the Covid-19 virus, Jerome Powell said in remarks for a symposium hosted by the Kansas City Fed.

    Federal Reserve Chairman Jerome Powell reaffirmed the central bank’s emerging plan to begin reversing its easy-money policies later this year while explaining in greater detail why he expects a recent surge in inflation to fade over time.

    The Fed’s next meeting will be Sept. 21-22, and several Fed officials have said they would argue in favor of beginning to taper bond purchases shortly after that meeting if the recent run of strong hiring continues. Mr. Powell’s remarks didn’t provide a strong signal of when the process is likely to begin, suggesting any tapering isn’t likely to occur before the meeting that follows in early November.

     

    The Delta variant threatens to delay a rebound in travel and leisure spending. The Kansas City Fed last week scrapped plans for Friday’s conference, normally conducted in Wyoming’s Grand Teton National Park, to be held in person. The event is being held virtually for the second straight year.

    Still, Mr. Powell didn’t signal major concern in his remarks on Friday. “While the Delta variant presents a near-term risk, the prospects are good for continued progress toward maximum employment,” he said.

    Reality has dealt the Fed a different and unexpected challenge: the biggest inflation surge in decades, largely reflecting disrupted supply chains, temporary shortages and a rebound in travel. Core inflation, which excludes volatile food and energy prices, rose 3.6% in July from a year earlier, according to the Fed’s preferred gauge.

    Mr. Powell used the bulk of his widely anticipated speech Friday to explain why he is still confident in his view that this year’s inflation surge would prove temporary and why it is so important for the Fed to get this call right.

    Mr. Powell cited a historical record dating to the 1950s that “taught monetary policy makers not to attempt to offset what are likely to be temporary fluctuations in inflation,” he said. “Indeed, responding may do more harm than good, particularly in an era” where interest rates are more likely to be pinned near zero.

    MORE FREE MONEY it is….


  4. We have a family member that has lived on Lake Tahoe for years. She said the AQI is off the charts and they are waiting for the orders to evacuate I know they have extra fortifications in the Tahoe area trying to save the area around the lake. I told her to come here if she has to evacuate. She has a friend in Nevada that has offered a stay. She mentioned our fires in the BWC area, but we have rain for 3 days. We can only hope that some of that rain will help here, at least. What heartbreak for so many.


  5. Yeah, it's my favorite place on Earth.  I had a place there for many years – used to ski every winter there.  Would be a tragedy on the scale of Notre Dame burning down if we lose that forest.  Also, it's not easy to get out of Tahoe.  If the roads get blocked – the people there are screwed.

    Notre Dame

    The Caldor Fire Rapidly Grows Near Lake Tahoe : NPR

    Lake Tahoe blaze prompts more evacuations as wildfires burn across western  US

    Update: Cal Fire begins lifting some evacuation orders in Napa County |  Local News | napavalleyregister.com


  6. 4,499!


  7. Crews struggle to stop fire bearing down on Lake Tahoe | The Seattle Times


  8. That's surprising.  I would have thought we''d be lower:

    • University of Michigan August Consumer Sentiment 70.3 vs. 70.9 consensus and 70.2 prior.
    • There was no lessening in late August in the extent of the collapse in consumer sentiment recorded in the first half of the month. The Consumer Sentiment Index fell by 13.4% from July, recording the least favorable economic prospects in more than a decade.
    • Current Economic Conditions: 78.5 vs. 77.9 prior.
    • Index of Consumer Expectations: 65.1 vs. 65.2 prior.
    • Stoks are rallying and bonds are selling off slightly as Federal Reserve Jerome Powell kept a delicate balance of concern about inflation with enough patience not to spooke investors.
    • In his Jackson Hole speech, Powell pretty much kept to the same timetable seen in the last Fed minutes, which indicated an appetite to start trimming asset prices.
    • The Nasdaq (COMP.IND) +0.9% is leading the major averages, with the S&P 500 (SP500) +0.7% and Dow (DJI) +0.6% also higher.
    • The 10-year Treasury yield is down 2 basis points to 1.32%.
    • "At the FOMC's recent July meeting, I was of the view, as were most participants, that if the economy evolved broadly as anticipated, it could be appropriate to start reducing the pace of asset purchases this year," Powell said. "The intervening month has brought more progress in the form of a strong employment report for July, but also the further spread of the Delta variant."
    • He noted "central banks cannot take for granted that inflation due to transitory factors will fade."
    • Read more on the details of Powell's speech.
    • The U.S. economy is making progress toward the Federal Reserve's twin goals of full employment and price stability, meaning the central bank is considering reducing its purchases of Treasury bonds and mortgage-backed securities, Federal Reserve Chair Jerome Powell said in an online speech at the Jackson Hole Economic Policy Symposium.
    • Specifically, he said, "substantial further progress" test has been met for inflation. And there has been "clear progress" toward maximum employment, he said.
    • "At the FOMC's recent July meeting, I was of the view, as were most participants, that if the economy evolved broadly as anticipated, it could be appropriate to start reducing the pace of asset purchases this year," he said in the prepared text of his speech.
    • Since that meeting, the July employment report showed more progress, but there's also further spread of the Delta variant, he noted (added 10:19 AM ET).
    • "We will be carefully assessing incoming data and the evolving risks. Even after our asset purchases end, our elevated holdings of longer-term securities will continue to support accommodative financial conditions."
    • Update at 10:15 AM ET: Powell continues to make the case that inflationary pressures are "transitory." Long-term inflation expectation measures "today are at levels broadly consistent with our 2 percent objective," he said That suggest that "that households, businesses, and market participants also believe that current high inflation readings are likely to prove transitory."
    • 10:19 AM ET: For now policy is well positioned, he said.
    • The timing and the pace of the coming reduction in asset purchases won't be a direct signal for the timing of an interest rate liftoff, he said. That will require a more stringent test.
    • 10:21 AM ET: "We have much ground to cover to reach maximum employment, and inflation has reached 2% and is on track to reach maximum employment, and time will tell whether we have reached 2% inflation on a sustainable basis."
    • Speech ends at 10:22 AM; there is no Q&A period.
    • Earlier today, Atlanta Fed's Raphael Bostic urges to do the taper quickly
    • Cleveland Federal Reserve President Loretta Mester said Friday that she expects the central bank to begin tapering sometime this year, with the process completed by the middle of next year.
    • In an interview with CNBC, Mester also contended that liquidity pumped into the system by the Fed's asset purchases has led to "frothy" conditions in the housing market.
    • "I don't think there's a bubble necessarily, but I do think that the liquidity that our asset purchases are adding is not helping that situation," she said.
    • On Fed policy, Mester said the central bank was "basically there" with its goal of "substantial further progress" in reaching full employment.
    • She pointed to "very good progress on the employment side," noting only that the number of jobs still sat below levels seen in the pre-pandemic days of early 2020.
    • As a result, Mester said the Fed should begin talking about tapering at its September meeting, with its main goal at this point to communicate the process the cut-back in asset purchases will take.
    • "We just don't need the same kind of accommodation that we needed at the height of the crisis," she said of the decision to remove stimulus.
    • Mester predicted that inflation pressures will ease as the post-COVID supply bottlenecks disappear but she said the timing of that is "up in the air."
    • On interest rates, Mester said that once the taper was completed, Fed officials could review incoming data to determine when a rate hike might be necessary.
    • Mester's remarks were part of a flood of Fed commentary this week, as the central bank spotlighted its high-profile Jackson Hole Economic Symposium.
    • Dallas Federal Reserve President Robert Kaplan, Kansas City Fed President Esther George, St. Louis Federal Reserve Bank James Bullard and Atlanta Federal Reserve Bank President Raphael Bostic have all discussed their views of monetary policy this week.
    • The Jackson Hole event is headlined by Fed Chair Jerome Powell, who is slated to give the key address at the conference.
    • Philadelphia Federal Reserve Bank President Patrick Harker said Friday that the current challenges facing the economy largely come from the supply side rather than the demand side, suggesting that the Fed can begin to remove its stimulus.
    • Speaking to CNBC, Harker acknowledged that it was "not possible" for the Fed to impact supply, supporting his belief that the central bank should begin tapering its asset-purchase program "sooner rather than later."
    • Still, the Philly Fed president pointed to the Delta variant, and other COVID variants, as a "significant downside risk."
    • "I'm still supportive of moving the taper along," he said.
    • "Why? I don't think it's doing a whole lot right now," he added.
    • Meanwhile, on the inflation front, Harker warned that rising prices "may not be so transitory."
    • On interest rates, Harker advocated finishing the taper before raising interest rates.
    • The Philly Fed president pointed to late 2022 or early 2023 as a likely timeframe for the Fed's next rate hike.
    • However, he said the final determination would depend on incoming economic data.
    • Harker followed a host of other Fed officials making commentary this week, as part of the lead-up to the Jackson Hole Economic Symposium hosted by the Kansas City Federal Reserve.
    • Dallas Federal Reserve President Robert Kaplan, Kansas City Fed President Esther George, St. Louis Federal Reserve Bank James Bullard and Atlanta Federal Reserve Bank President Raphael Bostic have all delivered remarks during the week.
    • The Jackson Hole event is headlined by Fed Chair Jerome Powell, who is slated to give the key address at the conference.

    • GrubHub owner Just Eat Takeaway.com (GRUB -6.0%) and DoorDash (DASH -2.4%) are down today after the New York City Council approved a bill to license third-party food delivery companies and permanently cap the fees they can charge restaurants.
    • Mayor Bill de Blasio has 30 days to sign off on the regulations that limit commissions charged to restaurants for delivery services at 15% and for advertising and nondelivery services at 5%.
    • New York City capped commissions during the pandemic after restaurants were hurt by fees of up to 30% for their primary source of revenue during closures. "We are not here to enable billion-dollar companies and their investors to get richer at the expense of restaurants,” said council member Francisco Moya.
    • Wedbush analyst Dan Ives expects commission caps to "become a major trend heading into 2022" and predicts it to result in a 10% headwind on growth for food delivery companies. San Francisco voted to keep a 15% cap in place in June.
    • The 3 major food delivery companies share NYC's market almost equally. DoorDash holds 36% of July sales, GrubHub 34%, and Uber Eats and Postmates (UBER +0.8%) a combined 30%.
    • The companies believe the price controls are unconstitutional and will fight the legislation. Just Eat Takeaway.com mentioned fee caps 43 times during its earnings call this month and said it would have been profitable in the U.S. and Canada if not for a €110M negative effect from the rule.
    • Telsey lowers its rating on Dollar Tree (DLTR +0.5%) to Market Perform from Outperform citing significantly higher near-term costs.
    • Rising supply chain, labor, and product costs are expected to continue into the back half of 2021 and 2022.
    • Passing higher costs onto consumers could be an issue for Dollar Tree given the company's namesake price point of $1.00, making up 52% of sales.
    • Wells Fargo expects that shortages of products and labor will decrease revenue and inflationary pressures will hurt profit margins.
    • The firm does see potential in the rollout of Dollar Tree Plus! and Family Dollar H2 remodels, but not enough to offset counter the headwinds the Dollar Tree faces.
    • Wells Fargo lowers its price target to $102 from $125 and gives an FY22 EPS estimate of $6.00. The average Wall Street price target for Dollar Tree currently stands at ~$112.
    • As Wall Street awaits Fed Chairman Jay Powell's speech, and any mentions of tapering asset purchases, BofA points out with $22T of global quantitative easing, the gap between Wall Street and Main Street has never been greater.
    • The Fed's response to COVID has "accelerated" that inequality, BofA strategists led by Michael Hartnett write in their weekly Flow Show note.
    • Between "1950 and the late-90s tech bubble, the ratio of US private sector financials assets (Wall Street proxy) vs the GDP of the US (Main Street proxy) oscillated between 2.5x and 3.5x," Hartnett says. The "radical interventionist policy of Quantitative Easing since the GFC has seen global central banks buy $22.4tn of financial assets, boosting the valuation of financial assets in the US to 6.4x the size of GDP."

    • Megacaps are now the third-largest economy. BofA also notes the Fed's "determination to stoke Wall St exuberance & Main St inequality has been particularly positive to the US tech sector."
    • Looking at the market caps of the megacaps (Facebook (NASDAQ:FB), Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL), Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL), Netflix (NASDAQ:NFLX), Microsoft (NASDAQ:MSFT) and Tesla (NASDAQ:TSLA)) combined, that would be the third-largest country in the world in terms of GDP.
    • "The Fed has been tech’s best friend for the past 10 years," Hartnett says. "It’s no coincidence that since the outbreak of COVID19 global central banks have bought $834mn of financial assets every 60 minutes … and every 60 minutes the market cap of global tech stocks has risen $780mn."
    • Info Tech (NYSEARCA:XLK) saw its ninth-straight week of inflows at $1B, while cyclicals struggle as Energy (NYSEARCA:XLE) had the largest amount of outflows since February 2018 at $1.8B.
    • This morning, Atlanta Fed President Raphael Bostic argued the Fed should taper quickly once it starts.

    • A bankruptcy is allowing Johnson & Johnson (NYSE:JNJ) to split claims related to its talc powder into a separate unit that would then file for bankruptcy.
    • U.S. Bankruptcy Judge Laurie Selber Silverstein on Thursday denied a motion from plaintiffs to stop the move.
    • J&J is seeking to move thousands of claims related to alleged asbestos in its talc products, including baby powder, into a separate unit as part of a plan to seek bankruptcy protection. Plaintiffs claim the asbestos caused cancer.
    • By forming a separate unit that would then file for bankruptcy, J&J could potentially stem litigation.
    • J&J has hired law firm Jones Day to potentially handle the bankruptcy plan.

     

     

    • Concerns about the outlook for the personal computer market, and a stock rating downgrade from Morgan Stanley, conspired to send HP (NYSE:HPQ) shares down as much as 4% Friday.
    • HP  (HPQ) fell to $28.25 as analysts and investors sussed out the company's fiscal third-quarter results in which the company reported that PC sales flattened out compared to a year ago. Late Thursday, HP (HPQ) said that for the quarter ending July 31, personal systems revenue came in at $10.4 billion, with consumer sales up just 3%, and commercial revenue slipping 1% from the same period last year. Overall unit sales were also flat, as a 2% gain in notebooks was countered with a 7% decline in desktop shipments.
    • At Morgan Stanley, analyst Katy Huberty cut her rating on HP's (HPQ) stock to equal weight from overweight, and took down her price target on the company's stock to $31 a share from $40. Huberty said there are "several reasons to be more cautious" about HP (HPQ) over the coming months, including the effects of an ongoing component shortage that is impact multiple areas of the tech sector.
    • "HP's inability to secure components was due to a more-complex product portfolio, outsourced relationships, and an ERP [enterprise resource planning] upgrade that delayed the roll out of tools to improve demand forecasting," Huberty said, in a research note. Huberty added that the company is working to resolve such issues, but it will probably take "multiple quarters" to iron out the the component situation.
    • Along with its PC results, HP (HPQ) reported earnings excluding one-time items of $1 a share, on revenue of $15.3 billion. While the company topped its own earnings estimates of 81 cents to 85 cents a share, it fell short of expectations for sales of $15.9 billion.
    • Huberty said she prefers HP (HPQ) rival Dell (NYSE:DELL), and reiterated her outperform rating on the company's stock. Huberty said Dell (DELL) is "executing on share gains as commercial PC demand recovers."
    • Dell also reported earnings on Thursday, topping Wall Street expectations on revenue and profit. Sales for the client solutions group, which includes PCs and notebooks, decelerated for consumers but continued to recovery for commercial clients. 
    • Atlanta Federal Reserve Bank President Raphael Bostic said Friday that once the central bank begins winding down its asset-purchase program, it should do so quickly because the economy is strong enough to withstand the withdrawal of stimulus.
    • "Let's not have this linger," he told CNBC.
    • Bostic argued that the last time the Fed had to taper an asset-purchase program, the economy was much weaker than it is now. He does not expect the tapering process to upset markets.
    • As to when the taper should begin, Bostic contended that "a lot will depend on the next couple of months."
    • He wanted to see at least one more jobs report to confirm that employment gains supported the Fed's goal of "substantial further progress" towards full employment.
    • On inflation, Bostic pointed to evidence that this "episode" of rising prices "is going to last longer than people expect it."
    • He worried that an extended period of inflation would eventually impact people's expectations about price movement, making it more difficult to return to normal.
    • Bostic said the high inflation could last into 2022 or beyond.
    • The Atlanta Fed president gave assurances that if inflation persisted, the central bank would take steps to deal with it.
    • On interest rates, Bostic predicted a rate hike at the end of 2022, a view that he said he has submitted to the Fed's so-called "dot-plot."
    • He clarified that he "was not in a hurry to get to interest rate hikes" and that his outlook on potential rate hikes would be determined by incoming economic data.
    • A long list of Fed officials has been speaking this week ahead of the Jackson Hole conference sponsored by the Kansas City Federal Reserve.
    • Dallas Federal Reserve President Robert Kaplan, Kansas City Fed President Esther George and St. Louis Federal Reserve Bank James Bullard all supported starting a taper relatively soon.
    • The commentary all leads up to Friday's speech from Fed Chair Jerome Powell.

    Apple Store Nikada/iStock Unreleased via Getty Images

    • Apple (NASDAQ:AAPL) will make a $100 million payment and roll out a number of App Store changes to settle a class-action lawsuit from U.S. developers.
    • Developers will be able to share purchase options with users outside of their iOS app, meaning through email or other materials a user opts to receive. Apple doesn't collect a commission on payments made through outside routes.
    • The iPhone maker has agreed to extend its App Store Small Business program for at least the next three years. Launched in response to the pandemic's economic toll, the Small Business program cuts the standard 30% commission in half for developers who make up to $1 million per year and apps that are new to the App Store. 
    • Apple also agrees to keep the current App Store search system, based on objective characteristics like downloads and text relevance, for at least three years.
    • The new policies would settle the Cameron et al v. Apple antitrust suit from U.S. developers, pending court approval.
    • Yesterday, Apple announced the News Partner Program, which cuts the standard 30% commission in half for publishers participating in Apple News. 
    • The changes come as Apple faces increasing antitrust scrutiny around the world. Earlier this month, bipartisan bills in the U.S. Senate and House put the app store policies of Apple and Google in the crosshairs. 

     

     

    • Peloton Interactive (NASDAQ:PTON) has pared its post-earnings drop with several Wall Street analysts saying the long-term growth story still looks strong for the company.
    • Credit Suisse (Outperform, price target drop to $148) warns on the tough comparables for PTON just ahead but also thinks the bike price reductions broaden the appeal and expand the addressable market.
    • Barclays (Outperform) notes the miss in gross margins was mainly due to higher than expected refunds from the Tread recall along with continued increase in shipping costs. Looking ahead, the firm thinks the aggressive investments made now by PTON will pay off significantly in the future.
    • Needham (Buy rating): "The main positive to us is PTON continues to focus on affordability, with the Bike price cut making its high-quality Connected Fitness subscription more accessible to more people. Helped by this price cut, PTON expects bike sales to be higher in FY'22. With the benefit of the launch of the Tread, we forecast net adds +5% YoY in FY'22E. This will likely move consensus revenue estimates higher, but it comes with greater investment in 1H'22E before our estimates move back to adj. EBITDA positive in 2H'22E and FY'23E."
    • Bank of America (Neutral): "We turned more cautious on the stock in May following early tread data points that suggested a potentially smaller impact from the tread launch than we had previously forecasted. We are encouraged by the announcement of Tread launch in Peloton’s existing markets in time for F1Q."
    • Shares of Peloton Interactive (PTON) are down 8.44% premarket. In another development, Peloton disclosed that DOJ and DHS have subpoenaed the company for documents and other information related to its reporting of the injuries.
    • Read details on Peloton's rare earnings miss.
    • Ending protections for millions of people who have fallen behind on their rent, the U.S. Supreme Court has dissolved the pandemic-related federal moratorium on residential evictions in a 6-3 vote (it was set to run until Oct. 3). A coalition of landlords and real estate associations has brought the case against the Biden administration, which had acknowledged that the legal odds of the ban were on shaky ground earlier this month, but said it was worth pursuing as it would allow more time to distribute more than $45B in rental assistance. The White House said it was disappointed by the Supreme Court decision, and urged states, local governments, landlords and cabinet agencies to "urgently act" to help stop evictions.
    • Quote: "It would be one thing if Congress had specifically authorized the action that the CDC has taken. But that has not happened," the court said in an unsigned opinion. "It strains credulity to believe that this statute grants the CDC the sweeping authority that it asserts. If a federally imposed eviction moratorium is to continue, Congress must specifically authorize it."
    • The eviction moratorium was put in place under the Trump administration during the onset of the pandemic and aimed to shield tenants who missed monthly rent payments from being forced out of their homes (they still owe back rent). It was originally set to expire on Dec. 31, 2020, but Congress stretched the order until late January, and it was then extended several more times under the Biden administration. While the moratorium has protected tenants nationwide, it has also resulted in financial hardships for landlords. Property owners, which say they are losing $13B a month in unpaid rent, are still liable for taxes, insurance and maintenance costs tied to their real estate.
    • Homebuying has also gotten expensive: Housing prices have only continued to escalate in 2021, driven by historically low interest rates, savings accumulated during lockdowns and a desire for more space as people work from home. That has triggered increased demand, while supply has lagged due to material prices and labor shortages. In fact, the price of the typical U.S. home rose 13.2% over the past year, per Zillow, marking a record rise since the firm started collecting data in 1996. More supply may help put a lid on a prolonged period of price growth, which if left alone might eventually turn into an unsustainable boom that could push activity into reverse.
    • Tesla (NASDAQ:TSLA) plans to sell electricity directly to customers in Texas, source MarketWatch.
    • As Texas Monthly reported Thursday, Tesla filed an application earlier this month with the Public Utility Commission of Texas to sell power on the retail market through a new subsidiary dubbed Tesla Energy Ventures.
    • Also, the company told the state’s grid operator that it wants to build two giant, 250-megawatt batteries, one at its factory under construction near Austin, and the other outside Houston.
    • Tesla could sell kilowatts that are either drawn from the grid or pulled from Tesla-made home batteries. Importantly, Tesla could also let individual Texans with solar panels earn money by sharing their excess power with the grid.
    • More details about the plan are not yet available, but if the filing is approved this November, it is believed that the new Tesla Energy Ventures could stand out in a crowd where 120 other companies are already hawking kilowatts.
    • A cold snap hit Texas in February this year that left many residents without power or water for days.
    • Earlier, Tesla aims to plug in gigantic battery to Texas grid

  9. Happy Friday Phil !  I am wondering what you think of Polaris (PII) and whether you would consider it as an opportunity for the LTP?  Backlogs are ongoing and we can't even think of getting delivery of a jet ski, new snowmobile or ATV if we do not order a year in advance here in Canada.  PE is under 12, margin requirement seems low?  Thanks in advance!

    TH


  10. Phil / FED – I was not expecting he market to move up on this news….. tarping starting late this year and may finish by ????, and keeping himself open on interest rate….  what do you think about the announcement ?


  11. PII/Hicket – I'm not sure off-road vehicles is where I want to be putting money right now.  They aren't going to be able to go electric very easily so they may be subject to punitive taxes down the road.  Meanwhile, net income was not exciting until this year's projections which are, so far, holding up to make $600M against a $7.5Bn market cap at $123.  Still, before this they were good for $300M in profits and I get the impression they are benefitting from low rates, stimulus checks and boredom that may not last.  Probably $100-120 is fair value so, of you like them, then you can offer to buy them for net $100, selling the 2023 $100 puts for $11 and consider that free money to buy the 2023 $100 ($31.50)/$130 ($16.50) bull call spread for $15 and then that's net $5 on the $30 spread that's $20 in the money and the worst case is owning the stock at net $105, which is fine.  

    Fed/Batman – It's the very slow pace of the tapering they like.  Still, it's nothing we didn't already know would happen so a silly reason to have a rally – just a good excuse to push to end the month on a high note.


  12. Phil,

    Do you think companies like CHPT is a good buy at these levels?

    Thanks


  13. CHPT/Harip – Not really for $6.5Bn.  How much profit is in an EV charging station?  So far, in year 3 of being public, they have 140M in revenues and are losing $200M.  Let's say they double to $280, then $560  in 2022 and 2023 and let's say that's ALL profit – THEN they'd be at $360M in profits and barely justifying $6.5Bn, so why would I pay it now?   Are they unique?  No.  Do they have a moat?  No.  Do they have a huge first-mover advantage?  No.   They did a reverse-merger into a worthless SPAC to get the valuation and they haven't done well since:

    They seem to have $610M in cash – that's their best feature but it will only last them 3 years at the current burn rate and no, they are not going to double up next year and 2023 at 100% profits on the new revenue – so more likely they dilute you at some point as well.  TSLA is going to open up their charging network to other vehicles and you've got BLNK, DHCA, EVGO as well as WallBox and others – all with the identical business plan.  

    Essentially, you are paying $6.5Bn for a few gas stations in the 1930s because "soon they will be all over the place" – you are right, they will – but none of them will ever make the kind of money you're expecting to justify that kind of investment.  

    Just imagine better batteries and easier home charging and where is your business then?  Let's say your electric car has a 500-mile range and can be charged overnight on ordinary house current.  Sure, you might use a charging station when you make a long trip but, 99% of the time – you just go home and charge up.  Chargepoint should be about as popular as those mobile-phone charging stations are now – they seemed like a great idea back when phone batteries didn't last but that was a really small window.  

    Speaking of insane valuations, check out PLL (Piedmont Lithium), who are trading at $74Bn ($56.75) with essentially no sales at all.  Totally insane – just because they have lithium in the name.   ALB is only valued at $27Bn ($237) and they actually MAKE $500M on $3.5Bn in sales – like a real company.  

    LAC is the way to go at $2.13Bn ($19) – they also have no sales and no profits but a bargain compared to PLL and Lithium is in their name too so just wait for Reddit to notice and you're good….


  14. WTRH/Phil Showing basic signs of life here .. would you roll calls/puts down?

    50 '23 $2c ($1.5)

    -20 '23 $50p ($1.9)

    (I know .. never got a fill on the short calls .. )

    THX


  15. WTRH/Wing – Still not until 2024 comes out.  Why incur friction costs for no reason?  If you do intend to stay with the play, I'd PLAN to roll down from the $2s (0.60) to the $1s (0.90) for 0.30 – but in 2024 and then DD so, in 2023, that would be 100 at (($1.50 + 0.30) + (0.90))/2 = $1.35 for 100 $1 calls plus whatever 2024 costs above it and then, hopefully, you can sell 2023 $3 calls (or higher, now 0.50) to cover any net cost over $1 and then you'd be in the 2024 $1/2023 $3 bull call spread for under $1 with at least 100% upside potential at $3+.

    Good move today.  They closed their acquisition yesterday and the terms were pretty much what they said (people feared they would overpay).  

    Waitr Closes ProMerchant, Flow Payments and Cape Cod Merchant Services Acquisitions

    4,509.75!  

    Have a great weekend, folks!

    - Phil