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Which Way Wednesday – CPI, Inflation, 30-Year Auctions and Fed Minutes

Lots of interesting things today.  

BlackRock (BLK), Delta (DAL), First Republic (FRC), JP Morgan (JPM) and SAP (SAP) all bet their earnings expectations this morning and tomorrow we'll hear from AA, BAC, C, CMC, DPZ, MS, PGR, TSM, USB, UNH, WAFD, WBA and WFC, so a good start to earnings but we'll pay particular attention to guidance that is given.  CPI is expected to be at 0.3% this morning pub probably higher and then we have a 30-year note auction at 1pm and that will only matter if it goes poorly – indicating investors are not willing to lend us money below 3% against what is likely 6% inflation.  

Fortunately the biggest buyer of notes is the Fed and the Fed will publish the minutes of their last meeting at 2pm and traders will anxiously read the tea leaves to see how long this taper/QE program will continue.  It's been a whole lot of nothing since we first tested 4,350 on the S&P 500 in September and we're still there this morning.  Congress finally approved lifting the debt cieling but that's hardly news and it's only good for two months – not a lot of impact there.  

Looking closely at earnings, Delta is facing fuel inflation pressures and JPM made all their income gains by adjusting their loan loss reserves down by $2.1Bn – overall revenues were flat and income would have been as well, otherwise.  

8:30 Update:  CPI came in hotter than expected (of course) at 0.4% for the month, running at a 5.4% annualized pace but it's likely to pick up even more into the holidays.  

Other than that, there's not much else going on so let's get back to our Portfolio Reviews:

Money Talk Portfolio Review:  This one is easy as we can't touch it between shows and I was last on TV on September 1st, when we added BYD and HPQ while cashing out of IBM.  At the time, the porfolio was up 95.9% at $195,906 and, at last month's review, we had made no progress at $194,944 but this month we're up 100.5% at $200,491 so congratulations to all who played along at home.

We have $167,589 (83.5%) in CASH!!!, so we're not too worried about the market dropping.  I should be on the show again around Thanksgiving, where we'll be picking our 2022 Trade of the Year, which is likely SPWR, which we already have, though T is becoming a contender as it gets cheaper and cheaper.  

  • BYD – Great gains already as we sold plenty of premium and the stock popped already.  It's a $40,000 spread we paid just $6,760 for and it's already at net $11,950 for a $5,190 (76.7%) gain on cash in 6 weeks.  There's still $28,050 (234%) left to gain so still good for a new trade and it's designed to make even more money by selling more short calls along the way.  

  • GOLD – Another potential candidate for stock of next year having slipped back below $20.  This is a $30,000 spread at net $3,550 and we may need to buy more time down the road but I'm confident in the target.  Earnings are November 4th and we'll be very interested in what they have to say.  Upside potential is $26,450 (745%) so great for a new trade.  

  • HPQ – Another new trade but this one took a bad turn to start.  It's a $20,000 spread and currently a net $4,740 credit so the upside potential is $24,750 (522%) from here – very nice if it works out.  

  • PFE – They had a big pullback but, fortunately, we bought them ages ago for a very good price and set conservative targets so we expect to collect the full $7,000 on this spread, currently net $4,905 so $2,095 (42%) left to gain over the next 16 months.  

  • SPWR – Should have doubled down on this one!  It's a $15,000 spread that's in the money at net $7,088 so all SPWR has to do is not fall below $25 and we make $7,912 (111%).  Aren't options fun?  

  • VIAC – Maybe this will be our Stock of 2022!  This portfolio is full of amazing bargains.  Here we have a $30,000 spread that's $18,000 in the money at net $10,150 so we have $19,850 (195%) upside potential if VIAC ever wakes up.  If they are just going to give money away, you should take it!  

Here we have 6 option spreads using very little cash ($32,903) in a portfolio we only adjust live on TV once per quarter and we're already up over 100% and the trades we have open have the potential to make another $109,107 (109%) over the next 16 months.  

That means, right now, you could initiate this portfolio for a cash outlay of $32,903 and make $109,107 (331%) if all goes well so, PLEASE, don't tell me there's nothing good to trade!  

 


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  1. Good morning everyone. Here is the link to today's webinar. 

    https://attendee.gotowebinar.com/register/7734539153182894095


  2. Good morning!

    I'm going to put the above out as a Top Trade Alert as all 6 are good for a new trade.


  3. Good Morning.


  4. Telecoms have gotten very silly


  5. Interesting MRNA going up PFE going down.


  6. Phil/WTRH Would you suggest any adjustments after the pop today? Does the Morgan Stanley 10% stake bode well for their future?

    WTRH 50 '23 $2c ($1.50)

    WTRH -20 '23 $3.50p ($1.88)


  7. Phil,

    Would appreciate your thoughts on a small Micron position (short 5 Oct 72.5 puts @ 2.92, now 5.67). Analyst feelings seem to be mixed to bullish depending on view of chip shortages. Thinking of rolling initially to10 June '22 @ $2.85s. Next price chart support looks to be around 43. Thanks


  8. News posts still aren't working.

    Just watched Shatner take his space flight – so cool.

    Telcoms/RN – It's funny how sectors just go out of favor but, then again, that's how we get to build our portfolios.  Nobody wanted WBA or PFE last year – despite what we considered obvious catalysts.  SKT, M, SPG – were being given away and no one believed us when we said they were bargains.  You can't let low prices throw you off a good investing premise.  

    MRNA/Yodi – And interesting that FDA just said there's no need for MRNA booster shot – it's too effective to bother, apparently.  

    WTRH/Wing – Well about time, right?  Did you buy back the short calls or you never sold them?  In our Future is Now Portfolio, we sold 50 2023 $4 calls so there's not much for us to do but watch and wait.  You might want to consider covering at some point – we sold our $4s for $1 so our basis is very low on the spread – a net credit, in fact. 

    WTRH Long Call 2023 20-JAN 2.00 CALL [WTRH @ $1.25 $0.45] 50 4/22/2021 (464) $7,500 $1.50 $-0.88 $1.50     $0.63 $0.28 $-4,375 -58.3% $3,125
    WTRH Short Call 2023 20-JAN 4.00 CALL [WTRH @ $1.25 $0.45] -50 4/22/2021 (464) $-5,000 $1.00 $-0.55     $0.45 - $2,750 55.0% $-2,250
    WTRH Short Put 2023 20-JAN 3.50 PUT [WTRH @ $1.25 $0.45] -20 4/22/2021 (464) $-4,000 $2.00 $0.83     $2.83 - $-1,650 -41.3% $-5,650

    Waitr Holdings soars after Morgan Stanley takes a 10% stake

    Waitr: Deep Value In A Frothy Market

    Keep in mind MS's 12M shares were about $10M, not even a rounding error to them but it's nice to get a stamp of approval.

    MU/8800 – Who knows when the shortages and bottlenecks will be fixed but the answer is "eventually" and not "never" so if people want to panic out of MU – don't stop them.  Yes to simply buying time, silly to sell short-term puts in the first place but you know that.   If you want to roll your 5 Oct $72.50 puts to 10 June $55 puts – sure, that works.   Since MU is at $74Bn at $67 and made $2.7Bn last year, I certainly think under $50 would be silly (making $10Bn this year) so I'd roll to 5 or 10 2024 $55 puts at $8 and let's say you just do the 5 then your commitment doesn't change, you collected $3 + $2 more on the roll (ish) nets you in for $50 as a worst case on 500.  Sell 5 more at $8 and your average sale goes to $6.50 and net $48.50.  Just a question of how many shares of MU you REALLY want to own.  If you think they can go to $43, then just sell the 5 and you're net $50(ish) and, if they go to $43, you sell 5 $40 puts for $10 (current price of the $60s) and then you'd have an average entry of $40 on 1,000 shares as your worst case.

    If you don't REALLY want to own 1,000 shares of MU at $40 – then it should be obvious that you should take the $1,500 loss you have and move on to a stock you do actually believe in.


  9. Phil,

    Thanks for the detailed MU guidance


  10. speaking of….. there have been 2364 MU Jan24 $55 puts traded. Looks to be sold at $7.60 -7.65  



  11. Future is Now Portfolio Review: $212,943 is up a lovely $18,471 since our last review and we didn't change a thing in that one.  We did add KRBN and RWLK but RWLK not helping so far.  Overall we're up 112.9% and we've had great success in this portfolio using the very simple premise of finding good trends and figuring out which companies are likely to rise to the top of those trends.  

    • NAK – Just a little lottery ticket.  We're supposed to get 1/2 out if they hit $1 so we're in the rest net free.  
    • KRBN – I have long-term faith in this.  We'll eventually add a bull call spread.  

    • RWLK – They got hit when they raised capital (right after we entered) but no worries as we sold short calls so we'll be net $1.7275 on our stock and I'm confident the short puts will work out eventually so $1.44 is nothing to worry about and we will sell more calls along the way and keep lowering our basis.

    • CIEN – Down with the Telcos but we bought them so cheap it doesn't matter.  It's a $15,000 spread at net $11,000(ish) but it's not like we need the money or margin for anything else so we'll leave it.  Also, if it does get really cheap – we'd want more – not less.  

    • COWN – Underperforming but $35 is just $1Bn in market cap and they made $216M last year and should do better this year so the pricing is stupidly low.  Earnings are on the 29th and it's a small position so let's invest a bit more and DD on the June $35 calls at $4.75 ($4,750) and we may as well buy back the short Jan $40s at 0.98 ($980), which turns this into a pretty bullish bet.  

    • F – Love these guys.

    • FF – We already did DD on these calls and there's no reason to buy back the short calls as they expire in 37 days so we'll just sit tight and wait for people to notice how cheap they are.  

    • IGT – Our play on sports betting along with BYD.  Already blasted over our target.   It's a $14,000 spread at net $6,000 so $8,000 (133%) upside potential in 16 months for most people would be the best trade they ever made…

    • SPWR – Yes, if we had a Farming portfolio, I'd still find a way to include SPWR.  You have an entire planet pushing for solar solutions and budgeting Trillions of Dollars to get there and SPWR is a major player with a $4.7Bn market cap at $27.85 and they just closed out their year with a $475M profit but, going forward, they are in a new investment cycle and more like 100M/yr so it's an investment in growth but total sales are under $2Bn so they are just one $1Bn contract away from massive gains.   This train is finally leaving the station after languishing for most of the year.   It's a $75,000 spread at net $22,750.

    • WTRH – Just talked about them above.  We'll see how it goes.  






  12. Social Security COLA largest in decades as inflation jumps





  13. Our Brains Were Not Built for This Much Uncertainty


  14. Carbon Might Be Your Company’s Biggest Financial Liability


  15. From the Webinar:

    • Let's keep an eye on LEVI in the LTP by selling 10 of the 2024 $27 puts for $7.50 ($7,500) 

    ?

    Our premise on LEVI is that cotton prices will calm down and they'll do well.

     In the STP, let's see if NFLX is a good short:

    • Sell 5 Jan $800 calls for $4.30 ($2,150)
    • Buy 10 2023 $300 puts for $7.50 ($7,500) 

    We'll sell more calls when those expire.  I super-doubt NFLX is going up 30% between now and Jan but a 20% drop should give us almost a double on the puts (the $400 puts are $19).  If we keep a stop on our puts at $4,000, we risk $3,500 to gain potentially more than $7,500 – and it's a nice hedge if there's a proper crash.


  16. Phil's targets look good

    NFLX    here is a little color:  

    Jeffries - We’re out with our 3Q preview. We point out that shares have risen ~22% in less than 2mo despite little movement in estimates and NFLX is now trading at 8.5x 2022 revenue estimates, the top of its 3Y range.  Jefferies Maintains Buy on Netflix, Raises Price Target to $737  (10-12-21)

    NFLX target raised to $680 from $650 at Baird,  ( 10-12-21)

    NFLX target raised to $670 at Keybanc,  (10-11-21)

    side note if you have a NFLX subscription- they say Squid Games is good and accounting for a recent growth in subscribers 


  17. Some strange <humor> there, pstas…. 

    https://babylonbee.com/news/aides-quickly-drag-president-away-as-he-tries-to-join-in-f-joe-biden-chant

     

    So funny, I forgot to laugh… :/


  18. A conservative, Christian, <humor> magazine…

    https://slate.com/news-and-politics/2021/06/babylon-bee-satire-from-right.html

    https://en.wikipedia.org/wiki/The_Babylon_Bee

     

    People actually believe this crap.  Not Funny.