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TGIF – Ending the Week We Went Nowhere

Well, that was fun

On the whole, we went nowhere this week but what an exciting time getting there.  First we were down, now we are up but, in the end – we're nowhere and the longer-term trend is still down from 4,550 for the month on the S&P 500 while the Nasdaq is 500 points off the September high of 15,700.

Still, it's not much of a pullback and Q3 earnings are just around the corner and next week is a BIG data week with Durable Goods, Retail Inventories, Consumer Confidence, Q2 GDP (3rd Estimate), PMI,  Personal Income & Spending and Consumer Sentiment.  Non-Farm Payroll won't be out until the following Friday and the UK just had a big drop in Consumer Confidence which, of course, leading Economorons failed to project – so it's likely we get more of the same over here.  

We also have the very wide divergence of GDP expectations from the Atlanta Fed, who see Q3 around 3.5% while Leading Economorons are forecasting an AVERAGE of 8.5% (so some are higher than that).   And those estimates have pretty much doubled in the past two weeks in what can only be explained by blatant manipulation in order to keep Consumers consuming and to keep Investors investing until the Banksters are able to fully cash out.

What data have you seen in the past two weeks that added 3.5% to our GDP?  Certainly the Fed hasn't seen it yet the usual assortment of crooked, lying and just plain incompetent "analysts" they consult with seem to think manna is faling from heaven all of a sudden.  

Will Biden's stimulus package fuel global inflation – and how can you  protect your wealth? | MoneyWeekAnd maybe it is as Joe and Janet are working to give us another $3.5Tn and THAT would be a GDP booster, wouldn't it?  Speaking of Janet Yellen – haven't we gone like a whole year without the Treasury Secretary making news?  Isn't that kind of weird after 4 years of Mnuchin causing chaos every other day?  In fact, you barely hear about Biden compared to Trump – probably still more about Trump, in fact…   

Of course, it's only $3.5Tn over 10 years, which is a drop in the bucket compared to what we really need to build green energy infrastructure and most of this money is going towards Child Care, Health Care and College Cost issues, anyway.  We need a whole other bill to address Climate Change and then a bill to address our voting system (before it's too late) AND a bill to address our crumbling Infrastructure.  So $3,500,000,000,000 is only a drop in the bucket on the list of things we need to do before the Social Security System goes bankrupt (2036) or the Earth becomes uninhabitalbe (about the same time).   No hurry….

While our Fed continues to pour money on our economic fire, the Bank of India has reversed their QE, Norway raised their rates yesterday, Taiwan tighened lending rules and even the BOE said they may hike as soon as the next meeting in November.  So cracks are starting to appear in the Global QE party…

While the US may WISH to continue it's easy money policy, it's not necessarily possible to do so – even if you ignore the massive debts we are piling up.  For example, there are now over 100 container ships waiting to enter US ports and the economy is not at all up to the speed at which optimistic orders have been placed – especially our transportation infrastructure.  Higer fuel costs, lack of employees and supply shortages have made it impossible for the docks to catch up and now our rail system has become over-taxed as well.  

You can't grow the economy if you can't transport goods.  We just took a stab at FDX yesterday as they have sold off quite a bit but we're seeing a lot of shipping capacity switching to air and that benefits FDX, who have also had a major pullback to a level we find them very attractive and, using option strategies, our net entry is down at $160, 30% below where they are now – so we're very comfortable with them down here

There's always something to buy – you just need to accurately assess the situation.  

Speaking of the supply chain disaster:  Nike (NKE) is off their highs as the company says that "global supply chain congestion is hurting the business more than it previously anticipated" and they've lowered their guidnce to account for longer transit times, labor shortages and prolonged production shutdowns in Vietnam.  The problem is they use the same Economorons to forecast their earnings as the Fed consults to forecast GDP.  The company already missed Q1 revenues but that didn't stop traders from running it up to record highs off their recent forecast (which has now been reversed).

“We’ve already lost 10 weeks of Vietnam (where close to 50% of their products are made) production, and that gap will continue. … It’s going to take several months to ramp back to full production,” Nike's CFO told analysts.

Once its products are produced, Nike is also running into shipping delays.  Transit times in North America are double pre-pandemic levels, taking an average of 80 days to move goods from Asia to Nike’s home turf and container shipping costs are up 300% since last year.  The Delta Lockdowns are also impacting a number of other retailers, ranging from athleisure rival LULU to the high-end furniture chain RH.

“Over the past 18 months, we’ve demonstrated our ability to manage through turbulence,” Chief Executive Officer John Donahoe said Thursday. “And that’s what we’ll continue to do as we navigate through these current supply chain issues. We’ll focus on what we can control.”

Only focus on what we can control…  Good advice – but not what you want to hear in a record-high market, is it?  

Have a great weekend,

- Phil

 


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  1. Phil,

    Would you short again CL on that level? 73? Or not before weekend?

    Thanks


  2. Good Morning.


  3. GM Phil,

      What are your thoughts on SPH?  They have a pretty good dividend.  Thanks.


  4. hi phil would you think china making crypto illegal is causing people to cash out and buy us dollars that is the cause of dollar up and gold and silver down this morning?







  5. Good morning!

    Oil/Kgab – Well $73.75 is a good shorting spot as we topped out at $75, so a $1,250 loss before doubling down and tight stops over $75 to keep the loss under $1,500 with a much bigger upside (downside) potential is certainly worth playing.

    SPH/Rookie – Wow, 8.5% ($1.30)!  I don't know much about them, they are small (under $1Bn in valuation) but $1.5Bn in sales (at elevated prices) and maybe $100M in profits (elevated) but I think you can count on $50M so fairly priced and it's a nice niche industry without much competition (or growth).  Not much for options – so another reason they haven't been noticed by us) – only out to May but you can buy them for $15.10 and sell the May $15s for $1 and not even sell the puts and you'd be collecting $1.65 into May which is 11% and if you do that every 6 months, you have a free stock in 5 years.

    China/Tommy – Of course that's happening but to what extent?  To some extent, this legitimizes crypto as China is not outlawing crypto – just the ones they don't control.  IF (and it's a big IF), they can avoid this spreading to Western Governments, then Bitcoin could fly higher but this risk is always hanging over their shoulders – in every country.  Also, anybody who didn't take the money and run at $60,000 is an idiot anyway – so who can predict their actions?  

    Speaking of metals.  /SI is disappointing so far as we're in at $22.50 but /GC is back down to $1,750 so 2 of those with tight stops below.  

     

    Indexes are bouncing back already:

       


  6. rookie   with SPH you will have to get a K-1 on the income.   UGI is in a similar business and pays a regular dividend and they a have been growing it on a regular basis   ie they have a propensity for increasing the dividend on a regular basis 


  7. BABA really gets hammered again


  8. Bonds getting crushed (rates moving higher):

      

    I'm starting to like ReWalk (RWLK) and they are only at $100M with $75M on the balance sheet and no debt so I think they are a very fun penny stock ($2.42) to put into the Future Is Now Portfolio.  

    This is great stuff and they have enough patents where I don't think they'll be buried by competition – more likely bought out by MDT or someone.  They've been held down by a court case in Germany (their biggest market) deciding whether or not the suit should be covered by insurance – that case should go in their favor.  Also, Sarcos (muscle augmentation suits) is going public via SPAC with ROT and that's going to be around $2Bn so it should be the catalyst RWLK needs to get back to $4.  As to the court case:

    This case was advanced by one of the larger insurers in Germany. . . ruling as a direct compensation basically would eliminate any of the other challenges to the use of this product. Direct compensation is meaning does a ReWalk or an exoskeleton in general provide an ability to walk that you cannot otherwise get. If it were considered indirect compensation, it would suggest you could go back to a wheelchair. 

    RWLK does not have long-term options but it's cheap and it does have options so let's buy 10,000 shares at $2.44 ($24,400) and sell 75 of the Jan $2.50 calls at $1 ($7,500) so we have some room to run and let's sell 50 Jan $2.50 puts for $1 ($5,000) so we get 5,000 more shares at net $1.50.  That puts us in 10,000 shares for net $11,900 ($1.19/share) and if mostly called away at $2.50, that's $25,000 so up $13,100 (and more) is a 110% gain in 119 days – not bad for the upside.  To the downside, if we're below $2.50 the short calls go worthless and we have the same $1.19 net and we have to buy 5,000 more for $2.50 ($12,500) and then we'd be in 15,000 shares for $24,400 or $1.62/share.  So our worst case is an 0.82 (33%) discount!  


  9. EXPE- any news on what  is behind this run? Had a profitable bear spread on now a negative. Ugh. 

    If they make the estimated 2022 numbers it will still be at a 27 p/e. Short squeeze?


  10. EXPE/Pstas – I don't see anything that happened recently.  Just bets being made Covid will end soon.  They did have a good sell-off but ripping right back up.

    Much as I used to like them, now too rich for my blood.

    BKNG also back to highs and around 50x earnings.  

    RWLK plunged after we started buying.  Someone was waiting for a chance to unload.  


  11. I have to think there was a negative rumor on the German court case. 


  12. EXPE- I am pretty sure the bear play was in one of the portfolios fwiw.


  13. I filled at 2.00 and 2.01 on 2000 shares  puts and calls didn't fill   Looks like there average price for last 6 months around 1.40


  14. EXPE/Pstas – We shorted BKNG last year, I don’t remember EXPE.  We used to play them long

    RWLK/Bert – The puts certainly pay well. You will have to settle on the calls though…

    Have a great weekend, folks!

    - Phil



  15. pstas/EXPE – I too have the same position. I guess I got greedy. I should have gotten out on Monday.