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Terrific Tuesday

4,577! 

That's a new all-time high on the S&P 500 and it came on an exceptionally low-volume day but let's not quibble – people are buying whatever Corporate America is selling, whether it's a coin they just made up last week or a SPAC they made up yesterday – form eschews substance these days and the less you offer – the more they will pay.

Does that no make sense?  Well, then you are playing the markets incorrectly, my friend!  Aside from a few companies that have gotten trashed – earnings don't seem to matter, nor does guidance.  Having a pulse seems to be enough to get investors excited and lifting stocks higher.  Tesla (TSLA) sold 100,000 cars to Hertz (Bankrupt) for $420M and the stock jumped $120Bn in value.  Even if each car was sold at a 250% profit – it would still have gained 100 times more than they could earn selling the cars — in a day.

Tesla | Barron'sAnd, of course, logically, these are the same 100,000 cars that would have been sold to someone else had Hertz not bought them – or were we worried that TSLA wasn't going to sell out their production prior to this?  No, that wasn't the case at Tesla's entire production for 2022 is projected to be 1.3M cars and it was going to be 1.3M before and after this deal.  

This chart is from Barron's way back on October 21st, when TSLA was only trading at $865.80, which was roughly $860Bn in market cap.  Since then, it has gained almost $200Bn – the entire market cap of Toyota Motors (TM) – without any of the fundamentals actually changing (it's only been a week!).  Toyota makes 1.2M cars PER MONTH and they also make $1.6Bn PER MONTH – also as much as TSLA makes in a year.  

Where is the logic to these valuations?  There isn't any.  The total global auto market is 80M cars per year – even if TSLA sold them all it would be a hell of a stretch to get to $1Tn but, currently, TSLA has 2% of the market yet their Market Cap is equal to the entire rest of the industry COMBINED.  This is madness, folks!   And TSLA is just an example – there are runaway valuations like this, as there are in all bubble markets.

Hussman MarketCap/GDP

MarketCap/GDP (Hussman) vs subsequent 12-year S&P 500 total returns

Durable and transient S&P 500 fluctuations

The above charts from Hussman Funds show how out of control things are getting.  We are nearly 100% over the Dot Com level valuations and, from a historical perspective, the aniticipated annual returns are now firmly negative based on historical returns since the 1920s.  This kind of thing is only important to long-term investors because, in the short run – there doesn't seem to be any rationale at all to the numbers people are willing to pay for stocks.

Today, if you take the U.S. equity market, the combination of the debt and the equity and say, ‘Well, how long would it take to pay off all the asset owners for their draw on future income?’ You’d have to work the family business for 25 years before you get a paycheck, right? And that is one of the four peaks in history. You had that peak in 1999/2000. You have that peak in 1929. You have that peak in 1965. You have that peak in 1905 in terms of the years of future income that are dedicated to paying back the wealth. That’s where you have the huge wealth divide problems and one way or the other, the cash flows, the willingness for people in the future to work to pay off old wealth holders is bounded in a democracy. And now, you’ve got to look at everybody that were losers in that whole game, and how do they benefit in society – or you risk the loss of society. So that’s this huge cycle, and when you look at the options, given where we’ve now pushed asset prices to, how do you reconcile asset prices with cash flows?  – Greg Jensen, Co-CIO, Bridgewater Associates / The End Game with Grant Williams, 7/29/21

At valuations that presently stand at 3.4 times historical norms, the arithmetic here is daunting. Assuming the same 4% growth rate in S&P 500 revenues and nominal GDP that we’ve observed in the past two decades, a return to run-of-the-mill valuation norms would leave the S&P 500 index unchanged even [ln(3.4)/ln(1.04)=] 31 years from now, although the modest dividend yield of the S&P 500 would add something in the area of 2% annually. At a nominal growth rate of 10% annually, a return to historical valuation norms would still leave the S&P 500 index unchanged nearly 13 years from today – that's how far ahead of a reasonable valuation the market has gotten!  

Even at all-time highs – be careful out there…

 


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  1. Phil / INTC —-  Good Morning.  Do you think there willl be big hedge fund exiting this still working on selling shares?….  I had a smallish position that I was able to lighten up considerably while taking a small profit ( in addition to the larger profit based on the earlier exit in the 60s)…   I'm looking for this to approach 47.5 to 45 before stepping back in,   Meanwhile hold small position  which would be fine as long as this stays in the 45 to 52 range….    

    What range do you t think this may trade in in the next year ?  


  2. Good Morning.


  3. Phil / LMT – under 340 …

    Lockheed Martin (NYSE:LMT) -8.1% pre-market after Q3 earnings and sales fell from the year-ago quarter, while the company cut revenue expectations for this year and next and said it will reassess its five-year business plan.

    Lockheed's Q3 net income fell by nearly two-thirds to $614M from $1.8B in the year-earlier period, while sales slipped to $16B from $16.5B; earnings included non-cash pension settlement charges of $1.7B, or $4.72/share after tax.

    For FY 2021, the company now sees adjusted EPS of ~$27.17, above $26.62 analyst consensus estimate and $26.70-$27.00 prior guidance, but it guides for revenues of ~$67B vs. $68.33B consensus and prior guidance of $67.3B-$68.7B.

    For FY 2022, Lockheed forecasts revenues of ~$66M, well below the $70.46B consensus.

    The surprisingly gloomy outlook comes as the company said it has "recently undertaken a reassessment of our five-year business plan given recent external and programmatic events."

    "Our conclusions, which are reflected in our updated 2021 guidance and subsequent trend information, reflect continuing strong cash flow generation, but a slight reduction in revenue in 2022 and roughly flat to low-single-digit growth rates in both revenue and segment operating profit over the next few years, with increasing growth opportunities in the years that follow," Chairman, President and CEO James Taiclet said.

    Q3 revenues by segment: Aeronautics fell 1.7% Y/Y to $6.57B; Rotary and Mission Systems were roughly flat at $3.98B; Missiles and Fire Control fell 6.4% to $2.78B; Space slid 5.1% to $2.7B.



  4. Magnetic material 3D-printed from nonmagnetic powder





  5. Plastic will destroy us in nine years


  6. Comment content omitted because it is too long.


  7. Good morning!

    Nasdaq is flying higher – up 1% already.

       

    Oil still hanging around $83.50

        

    Consumer Confidence rebounded to 113.8% – just what they want to see into holiday season and New Home Sales Picked up - even at 19.8% more than last year's prices.

    PhoenixSan Diego, and Tampa reported the highest year-over-year gains among the 20 cities in August. Phoenix led the way with a 33.3% year-over-year price increase, followed by San Diego with a 26.2% increase and Tampa with a 25.9% increase. 

     

    Oct. 26, 2021 10:15 AM ET

    • October Consumer Confidence: 113.8 vs. 114.8 consensus and 109.8 prior (revised from 109.3).
    • Present situation index: 147.4 vs. 143.4 prior.
    • Expectations index: 91.3 vs. 86.6 prior.
    • "Consumer confidence improved in October, reversing a three-month downward trend as concerns about the spread of the Delta variant eased," said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. "While short-term inflation concerns rose to a 13-year high, the impact on confidence was muted."



  8. Oct. 26, 2021 10:02 AM ET

    GME +0.48%Oct. 26, 2021 10:09 AM ET1 Comment

    • GameStop (NYSE:GME) appears to be looking to build an Ethereum-based Web3 arm, according to job listing spotted by CoinDesk.
    • The retailer indicates that it is looking to build a blockchain-based gaming platform and NFT business from scratch.
    • "An ideal candidate will have experience across several domains in gaming, content creation, partnerships, game design/development/mechanics, and a general understanding and experience with Ethereum, NFTs, and blockchain based gaming platforms."
    • Shares of GameStop (GME) are up 1.50% in early trading and are showing a gentle 15% rise over the last six weeks, but still trade below the 100-day moving average.

    KBH -0.42%Oct. 26, 2021 10:00 AM ET

    • September New Home Sales: +14.0% M/M to 800K vs. 760K expected and 702K prior (revised from 740K).
    • The median sales price of new houses sold in September increase to $408.8K, up from $390K in August.
    • The seasonally?adjusted estimate of new houses for sale at the end of September was 379K, representing a supply of 5.7 months at the current sales rate. That's down from the 6.1 months' supply in August.
    • Homebuilder stocks are mixed in morning trading — D.R. Horton (DHI +0.1%), KB Home (KBH -0.1%), Toll Brothers (TOL -0.1%), Lennar (LEN +0.1%), Beazer Homes (BZH -0.5%). PulteGroup (PHM -1.7%) drops after the homebuilder's Q3 EPS missed consensus.
    • According to the Case-Shiller house price index, home price growth in August slowed slightly from July's record pace

    GLW -5.22%Oct. 26, 2021 9:49 AM ET5 Comments

    • Corning (GLW -5.7%) stock slumps 5% premarket after lower Q3 production levels in the automotive industry due to the semiconductor chip shortage reduced sales by ~$40M.
    • Core sales grew 4% to $3.6B, driven by strong growth in Optical Communications.
    • Optical Communications sales were $1.13B, up 5% sequentially and 24%Y/Y. 5G, broadband, and cloud computing continue to drive strong growth across this segment.
    • In Specialty Materials, sales were $556M, up 15% sequentially.
    • Environmental Technologies, sales were $385M, up 2% Y/Y, driven by diesel product sales.
    • Life Sciences Q3 sales were $305M, up 37% Y/Y.
    • Gross margin expanded 50 basis points sequentially and 70 basis points year over year to 38.3% despite a net impact of 150 basis points from supply chain challenges and inflationary headwinds.
    • Non-GAAP EPS of $0.56 misses consensus by $0.02; GAAP EPS of $0.43 misses consensus by $0.12.
    • Company expects core sales to be in the range of $3.5B-$3.7B vs. consensus of $3.62B with core EPS in the range of $0.50 to $0.55 vs. consensus of $0.57.
    • Q4 profitability is expected to decline slightly on a sequential basis due to further reductions in automotive industry-related sales and lower Corning Gorilla Glass sales following large product launches by customers.
    • Wendell P. Weeks, chairman and CEO, “As we approach 2022, we remain focused on driving top-line growth and expanding our margins. We are well positioned to address growing customer demand, deepen our innovation portfolio, and reward shareholders.”
    • Competitive price study of the stock against its peers.

    CSCO +1.60%Oct. 26, 2021 9:41 AM ET1 Comment

    • Charles Robbins, the chairman and CEO of Cisco Systems (NASDAQ:CSCO), said Tuesday that the computer chip shortage will "start to see improvement" in the second half of 2022, when supply will finally come up to meet demand.
    • Speaking to CNBC, Robbins advocated the expansion of semiconductor manufacturing capacity in the U.S. and Europe.
    • "We need geographic diversity for issues of climate and emergency situations so that we can manage our way through those," he said.
    • Robbins said that the industry should move faster to build out chip manufacturing capacity. He pointed to the public-private partnerships that brought COVID vaccines to market as examples of how new facilities could be built quickly in the U.S.
    • Explaining the roots of the chip shortage, the Cisco CEO reported that the post-pandemic surge in demand took most business leaders by surprise, as the economy recovered much faster than people expected.
    • "Every industry signaled a perceived decline in demand and almost every industry saw an increase in demand," he explained.
    • Beyond the pandemic surge, the Cisco CEO also noted a longer-term increase in the desire for semiconductors, as more products have become dependent on computers. He pointed to the auto industry as an example of this phenomenon.
    • Turning to the company's products, Robbins highlighted new additions to the firm's WebEx platform, as CSCO looks to take advantage of the new hybrid work environment.
    • "[The hybrid work future] is about more than just video meetings. It is about understanding return to office safety, understanding where your employees are, giving them the flexibility, … being able to troubleshoot and have the same capabilities into that home office as you have for a small branch," he said.
    • As to the company's own hybrid plans, Robbins reported that CSCO was letting front-line managers determine schedules for their team members.
    • CSCO rose steadily in late 2020 and through much of 2021, reaching a 52-week high of $60.27 in early September.
    • Shares have been trading in a range off that level over the past few weeks. On Tuesday, the stock edged up in early trading, rising about 1% to $55.76 at around 9:45 AM ET.
    • Even with the recent consolidation, CSCO has been able to outperform the S&P 500 for most of the past year. The stock is up about 42% since late October of 2020, compared to a rise of about 34% for the S&P 500:



  9. INTC/Batman – We'll see what effect downgrades have but $47.50 should hold and, as I said yesterday, it's an excellent long-term value anyway.  There should be some repositioning as they are clearly not going to be a growth stock again for a while.  I think they are rangebound to $45-55 until the new chips come out in 2024 but then they'll get some buzz again.

    LMT/Batman – Another company in an investing cycle and also hurt by lack of Republican control of congress.  Unfortunately, you can't bribe everyone and their side lost this round.  They project political gains in 2024 forward but I think they'll be disappointed and they'll have to continue to make money by actually earning it – as opposed to sucking on the Government teat in our Corporate Welfare state.  

    Revenues

    They are still the ones that will be building stuff in space.  

    Their off years are a buying opportunity:

    From our LTP:

    LMT Long Call 2024 19-JAN 300.00 CALL [LMT @ $336.50 $-39.83] 10 9/14/2021 (815) $64,800 $64.80 $-3.45 $64.80     $61.35 $-27.90 $-3,450 -5.3% $61,350
    LMT Short Call 2024 19-JAN 370.00 CALL [LMT @ $336.50 $-39.83] -10 9/15/2021 (815) $-32,000 $32.00 $-3.60     $28.40 - $3,600 11.3% $-28,400
    LMT Short Put 2024 19-JAN 300.00 PUT [LMT @ $336.50 $-39.83] -5 9/14/2021 (815) $-18,360 $36.72 $-0.72     $36.00 - $360 2.0% $-18,000

    This is where we came in – last time they dipped.  

    Submitted on 2021/09/14 at 1:27 pm

    LMT/Batman – Biden not giving much love to contractors so people are bailing:

    $320 is a pretty solid long-term floor so nothing wrong with your puts.   LMT is $96Bn at $343 and they should be good for $7Bn in profit so fairly priced and a great long-term hold.  Just because 2024s are out, doesn't mean anyone is trading them so you have to make your wishes and see if they get filled.

    We can add an LMT play to the LTP as it is our Stock of the Century – we just sold it when it was near $400 and now we can get back in after the 20% correction we expected:

    • Sell 5 LMT 2024 $300 puts for $36 ($18,000) 
    • Buy 10 LMT 2024 $300 calls for $65 ($65,000) 
    • Sell 10 LMT 2024 $370 calls for $33 ($33,000) 

    That's net $14,000 on the $70,000 spread that's $42,000 in the money to start and we're THRILLED if it goes lower so we can sell more puts and spend that money rolling the $300s down to the $270s (now $84) for hopefully less than $15 ($15,000) and then we'd have a $100,000 spread for net $29,000 less whatever we sell 5 more puts for.  

    https://thefusionblog.quora.com/An-Analysis-of-Lockheed-Martins-Fusion-Effort

    One month into a 28-month trade and nothing has changed so far.


  10. Perhaps someone can explain the motive for this?: 

    EPD-covered call play bought stock @ 23.16; sold Nov 23 call @ .75; (anticipating collecting dividend of .45 per ex-date 10/28).

    Was assigned over night with stock trading at 24.66; Nov 23 call at 1.66. 

    Now, I have been assigned in the past when not paying attention where the short call price is below the anticipated dividend but I don't get the above scenario? 


  11. pstas/EPD – That 23 call only has about 1 cent of extrinsic value left in it. So, if I understand correctly, the buyer of your call paid a couple of cents of premium to get $0.45 of dividend.

    I usually look at the corresponding Put, which is currently about $0.15, and if the dividend is higher than the put then chances are you will get called away.


  12. Daveo- still not sure I get the logic. If someone buys the call (say @ 1.66; exercises same to acquire stock @ 23 ) their cost basis is 23 + 1.66+ 24.66.

    Stock trades at 24.66 this morning so why go through the call exercise to get the dividend when you can buy the stock for the same net? I must be missing something.


  13. IBM/Phil (IBM 127)

    40 ’24 $125c     ($21.4)

    32 ’23 $115calls ($26)

    - 30 ’23 $140c   ($12)

    -  8 ’22 $140c     ($11.5)

    -  34 ’24 $150c   ($14)

    -  10 ’23 $120p  ($10.28)

     

    Thinking of selling 10 '24 $115puts for $16 to roll my current '23 $120s (now $12.50) down and forward.

    Any thoughts/suggestions?

     

    Thx!


  14. PStas simple call 23 + 1.66 = 24.66 less stock price 24.66 = 0 you will get assignment.


  15. Yodi- I understand the arithmetic but not the logic. Why jump through the hoops of buying the call then exercising the call thus paying some fee when you could just skip that step and buy the stock to get the dividend. No big deal but It just bugs me as I don't understand the motive.


  16. That was a fun reversal of fortune – saved my ass on those /ES shorts (4,561 avg).

       

    ./EPD/Pstas – The $23 puts were $1.50 at close so $24.50 is the net price to the caller and owning the call they risk the stock dropping 0.45 and not getting the dividend so they call the stock from you at net $24.50 and get their 0.45 dividend to net in at $24.05 and then they can sell calls or just cash in.   A lot of hedge funds play this game to make pennies – billions of them but pennies.

    And what Dave said.

    And you don't know what price they bought the calls for.   It's not a direct thing, there's a pool of short calls and some of them get exercised and your broker randomly (not so random – if you don't complain they assign you more often) distributes the pain among people who sold short calls.  It's not like someone did it specifically against your longs. 

    IBM/Wing – We cashed that out a while ago.  IBM is another company in an investing cycle so I wouldn't be too aggressive and, as usual, your position is a mess but at least you sold some calls.  Your asset is the 2024 $125 calls, now $15.50 ($62,000) and the 2023 $115 calls, now $17 ($54,400).   You can roll those ($116,400) into 100 of the 2024 $110 ($21.50)/140 ($10) bull call spreads at $11.50 ($110,500)  and then you can roll your 34 short 2024 $150 calls at $7 ($23,800), which have a nice profit, to 30 Jan $130 calls at $2.80 ($8,400) and you'll catch up after a few sales with not much pressure (or you can sell more puts) but now you have a $300,000 spread that's $160,000 in the money that's only 2/3 covered with plenty of room to roll. 


    • Shorting /CL at $85, of course:


  17. Phil / INTC – thanks for the feedback on this….  the range makes sense, and I agree this is a long haul…..   I'll keep my 20X short '23 $55 Calls ( 7) and $47.5 Puts ( 9.5).   They are left over from the BCS I closed out……  see how it goes.


  18. INTC/Batman – They are pretty easy to predict as their chips roll out on schedules.

    WTRH +16.43%Oct. 26, 2021 1:56 PM ET

    • Waitr Holdings (WTRH +16.1%) shares continue to surge as retail investors take note of the online food delivery platform. Trading volume for the stock has reached 61M, up from an average of 11M.
    • The stock is up 67% over the past month driven by news of a partnership with digital restaurant interface developer Olo and a 10% stake acquired by Morgan Stanley.
    • The stock was a favorite at the start of the pandemic, but fell as the company was unable to keep up with the larger food delivery giants. Seeking Alpha's Quant Rating has remained bearish on the stock since the beginning of March.

    TREX -0.69%Oct. 26, 2021 1:43 PM ET

    • Trex (TREX -0.6%) announced plans to develop a new multi-faceted production site in Little Rock, Ark amid broad-based demand driven by increasing consumer interest in outdoor living.
    • This will enable the company to provide customers significantly better access to Trex Residential products where and when they need them, and position the company for future growth.
    • The company expects to invest an estimated $400M over the next five years in the development of the new Arkansas site, funded primarily through ongoing cash generation.
    • Construction is scheduled to commence in early 2022; development approach will be modular and calibrated to demand trends with the first production output anticipated in 2024.

    I like TREX.

    FB -4.86%Oct. 26, 2021 1:34 PM ET5 Comments

    NCLH +0.89%Oct. 26, 2021 1:03 PM ET18 Comments

    • Carnival Corporation (CCL -1.1%), Royal Caribbean Cruises (RCL -0.1%), and Norwegian Cruise Line Holdings (NCLH +0.7%) trend downwards as the CDC extends COVID-19 cruise restrictions until January 15.
    • The agency had planned to lift the order, which requires cruise-goers to wear masks and be vaccinated or undergo testing, on Nov. 1, but extended it Monday due to "the continued spread of the Delta variant.” In January, the CDC plans to move to a voluntary program that gives cruise lines more freedom in their COVID guidelines.
    • The original order was applied approximately one year ago and has worked so far, according to Capt. Aimee Treffiletti, who heads the CDC's maritime unit. "We've never expected that there would be zero risk of transmission," he told USA TODAY. "But one thing that's really important is that we haven't seen medical resources overwhelmed on ships – we haven't seen high rates of hospitalizations or deaths that we saw early on in the pandemic related to cruise ships. So, I think we can consider that a success."
    • Analysts continue to have mixed opinions on cruise stocks, with Citi rating Norwegian Cruise Line above Carnival.


  19. BTC-USD -0.97%Oct. 26, 2021 12:24 PM ET11 Comments

    • U.S. officials are working to provide a roadmap for banks and clients that want to hold cryptocurrencies as regulators seek to keep control over the fast-developing sector, Jelena McWilliams, chair of the Federal Deposit Insurance Corp., told Reuters in an interview.
    • "I think that we need to allow banks in this space, while appropriately managing and mitigating risk," she told Reuters.
    • The effort could include clearer rules about holding crypto in custody to facilitate client trading, using them as collateral for loans, or holding them on balance sheets more like traditional assets.
    • "If we don't bring this activity inside the banks, it is going to develop outside of the banks…The federal regulators won't be able to regulate it," she said in the interview.
    • The formation of a crypto "sprint" team, announced in May, is intended to coordinate crypto policy among the FDIC, Federal Reserve, and the Office of the Comptroller of the Currency.
    • Bitcoin slips 2% over the past 24 hours to ~$62.3K; Financial Select Sector SPDR ETF (NYSEARCA:XLF) is up 0.4% in midday trading on Tuesday.
    • Big bank stocks are in the green — Citigroup (C +0.4%), Bank of America (BAC +1.5%), JPMorgan Chase (JPM +0.2%), Wells Fargo (WFC +0.3%), Goldman Sachs (GS +1.1%), and Morgan Stanley (MS +1.2%).
    • Earlier this month, cryptocurrency exchange Coinbase proposed creating a single federal crypto market regulator. Last month, the company ended plans for its lending product after the SEC threatened to sue.

    Oct. 26, 2021 12:33 PM ET

    • After five months, regulated Spanish banks receive instructions from the Bank of Spain on how to register to enable crypto services for clients.
    • Entities will apply through an electric registry, after which the central bank will take up to three months to consider the application.
    • Recall earlier this month, large institutions' compliance departments were trying top figure out whether they need to be registered to offer crypto services.
    • "The obligation to register in this registry applies to all natural or legal persons who are in any of the above cases and provide virtual currency exchange services for fiduciary currency and custody of electronic purses, regardless of whether they are also registered in other administrative records in the Bank of Spain or in other competent authorities," Spain's central bank said in a statement.
    • Earlier, U.S. regulators explore how banks could hold cryptos.

    TSLA +0.79%Oct. 26, 2021 11:39 AM ET92 Comments

    • Craig Irwin, managing director and senior research analyst at Roth Capital Partners, argued Tuesday that the $1T market valuation for Elon Musk's Tesla (NASDAQ:TSLA) is "a distortion" that will contract as more competition appears in the electric vehicle market.
    • Speaking to CNBC, Irwin pointed out that TSLA's new $1T market cap equals the valuation for much the rest of the industry put together. Meanwhile, the company will produce less than 1M vehicles in the next year vs. 75M for the rest of the auto sector.
    • "Does Tesla deserve a 75x premium to the rest of the industry? My answer is categorically 'no,'" he said.
    • "It's hard for me to be bullish on Tesla here," he added, largely pointing to valuation as the reason for his skepticism.
    • Giving an example of how the market tends to overvalue TSLA, Irwin spotlighted the stock's movement on Monday, when it first broke above the $1T market-cap barrier.
    • He noted that the catalyst for Monday's rally came from the announcement of a supply deal with Hertz (OTCPK:HTZZ)which will deliver $4.2B in revenue to TSLA.
    • However, TSLA responded with a nearly 13% rise in its stock price, setting an all-time high and adding $114B in market cap.
    • Irwin noted that this single-day increase was larger than the current market caps of either Ford (NYSE:F) or General Motors (NYSE:GM).
    • "Tesla right now is having its heyday. It's executing impeccably. But the competition is real," he said.
    • TSLA continued its rally in Tuesday's intraday trading. The stock rose almost another 7%, extending its high and reaching $1,093.54 at about 11 a.m. ET.
    • TSLA has underperformed F and GM for most of 2021. The recent rally has allowed Elon Musk's EV maker to surge past GM. However, F remains the best performer of the three over the course of the year so far.
    • TSLA has risen about 45% for the year. This outpaces the nearly 39% seen from GM but pales in comparison to F's 82% advance:

    MS +1.70%Oct. 26, 2021 11:23 AM ET7 Comments

    • It seems counterproductive that while U.S. banks are awash in cash, they're also loading up on debt. The six largest U.S. lenders issued ~$314B of bonds so far this year, the most for any year since 2008, the Wall Street Journal reports, citing Dealogic data.
    • Morgan Stanley (MS +0.8%), Goldman Sachs (GS +0.4%), Bank of America (BAC +1.7%), and JPMorgan Chase (JPM +0.8%) have all completed multibillion-dollar bond sales in the past several months.
    • That's helping to offset other corporations' retreat from the bond market. Financial institutions are behind more than a third of U.S. investment-grade debt so far this year, according to Dealogic.
    • With consumer and commercial banks getting trillions of dollars of deposits since the pandemic started, one would think raising cash through debt is unnecessary. But banks are required to keep a certain ratio of their liabilities in long-term debt. So when deposits rise strongly, as they have during the pandemic, the ratio of debt to other liabilities can get skewed.
    • The requirement for banks to hold a certain amount of their liabilities in long-term debt was put in place after the 2008-'09 financial crisis and is intended to reduce banks' vulnerability to panic in short-term funding markets, the WSJ said.
    • Besides the requirement aspect, issuing new debt also allows banks to lock in low, long-term borrowing costs, which could support profits in the future if short-term rates rise and lending increases.
    • And while Goldman Sachs (GS +0.4%) and Morgan Stanley (MS +0.8%) are large financial institutions, they don't have big deposit bases. So Goldman, for instance, is using proceeds from its debt issues to grow its equity and fixed-income financing businesses, the WSJ said.
    • With Q3 earnings continuing to stay robust, bank stocks have been rising. In the past year, the KBW Nasdaq Bank Index (BKX) has increased 76% in the past year vs. the S&P 500's 34% rise during the same period as seen inthe graph below.
    • Bank of America's (NYSE:BAC) $15B bond offering topped JPMorgan's (NYSE:JPM) $13B in bond sales in April.

    What could possibly go wrong?


  20. PHM -3.21%Oct. 26, 2021 11:03 AM ET3 Comments

    • PulteGroup (NYSE:PHM) shares dip 1.7% after its Q3 results reflect continued supply chain bottlenecks.
    • Still, Q3 reflects " the strong demand environment as higher prices across all buyer segments helped drive a year-over-year increase in home sale revenues of 18%, said President and CEO Ryan Marshall.
    • Q3 home sale revenues increased 18% over the prior year to $3.3B, driven by a 9% increase in closings to 7,007 homes, combined with an 8% rise in the average price of homes closed to $474K.
    • Q3 adjusted EPS of $1.82 beats the consensus estimate of $1.79, up from $1.34 in the year ago quarter; revenues of $3.48M exceed the estimate by $50M.
    • Home sales gross margin of 26.5% in Q3 increases from 24.5% in Q2.
    • Net new orders in Q3 fell 17% from the prior year to 6,796 homes due to a 14% reduction in community count, as well as company actions to manage the pace of sales to better align with current production levels, the company said.
    • Unit backlog 33% Y/Y to 19,845 homes; backlog value grows 56% Y/Y to $10.3B.
    • "The housing industry continues to experience robust demand, but significant disruptions in the manufacture and supply of many building products are extending overall build cycles," Marshall said.
    • Most homebuilder stocks slip intra-day including: D R Horton (DHI +0.0%), KB Home (KBH -0.3%), Toll Brothers (TOL -0.4%), Lennar (LEN -0.3%), Beazer Homes USA <BZH>> and Meritage Homes (MTH -0.2%).
    • Earlier, PulteGroup beats on EPS, beats on revenue.

    XRX -11.57%Oct. 26, 2021 11:01 AM ET5 Comments

    • Xerox (XRX -7.2%) down after reporting mixed Q3 results and FY2021 revenue guidance cut, as a result of global-supply chain issues, created in part by the COVID-19 pandemic.
    • Revenue dropped 0.5% to $1.76b or -1.6% on a constant currency basis.
    • The company reduced its FY2021 revenue guidance to $7.1B vs. prior outlook of $7.2B and consensus of $7.26B.
    • The company is maintaining a free cash flow guidance of at least $500M for the fiscal year.
    • The company expects the ongoing effects of the COVID-19 pandemic, including the potential emergence of new variants, as well as the global supply chain disruption, to delay economic recovery and continue to affect revenues and margins into 2022.
    • Adjusted operating margin rate slipped 320 bps Y/Y to 4.2%.
    • The company has completed its $500M 2021 stock-repurchase program, and approved a new $500M-buyback plan.

    EGRNY -4.52%Oct. 26, 2021 10:37 AM ET

    • China Evergrande (OTCPK:EGRNF -2.6%) (OTCPK:EGRNY -6.1%) resumes construction on 40 projects in the Pearl River Delta region and expects to finish 32 of them by the end of 2021, Reuters says, citing local media reports.
    • In the midst of a liquidity crisis, the big Chinese real estate developer has been struggling to keep up with its bond coupon payments and paused projects to conserve cash.
    • Meanwhile, another property developer, Modern Land missed repaying principal and interest on a $250M bond, another indication of the country's overleveraged real estate sector, MarketWatch reports.
    • On Monday, the Wall Street Journal reported that Evergrande (OTCPK:EGRNF) had restarted work at 10 projects in and around the Shenzhen area.
    • Last week, Evergrande (OTCPK:EGRNF) averted defaulting when it paid an $83.5M coupon payment before Saturday, but it still faces $573M of payments on another four dollar notes this year.


  21. KMB    nice rebound off of earnings 


  22. FB / LTP / Phil

    Given the recent drop in FB from $375 to $315, is there any adjustment you would be looking to perform for the position we have in LTP?


  23. Sorry, had to run, will be back later 


  24. INTC     5 insiders buy for a total on $2.5 M


  25. FB/Jij – Our FB position was pretty neutral, like our Butterflies, selling 3 (of 5) Jan $400s for $4,050 against a net $690 position so don't confuse our longs as being bullish – we've simply been using the 2023 $260/300 spread to cover our short-call selling all year.  That's why our short puts are the 2023 $230s – we didn't have a lot of faith in FB going much higher but it got overpriced with everything else.  With many countries taking a closer look at their activities – it's not a stock I'd be putting a lot of money into.

    FB Long Call 2023 20-JAN 260.00 CALL [FB @ $322.57 $-6.12] 5 3/17/2021 (451) $32,500 $65.00 $20.93 $48.30     $85.93 $-5.07 $10,463 32.2% $42,963
    FB Short Call 2023 20-JAN 300.00 CALL [FB @ $322.57 $-6.12] -5 3/17/2021 (451) $-23,500 $47.00 $13.73     $60.73 $-4.75 $-6,863 -29.2% $-30,363
    FB Short Put 2023 20-JAN 230.00 PUT [FB @ $322.57 $-6.12] -3 3/17/2021 (451) $-8,310 $27.70 $-14.75     $12.95 $-0.05 $4,425 53.2% $-3,885
    FB Short Call 2022 21-JAN 400.00 CALL [FB @ $322.57 $-6.12] -3 9/16/2021 (87) $-4,050 $13.50 $-11.52     $1.98 $-0.77 $3,456 85.3% $-594