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Fantastic Thursday – Low Rates Forever!

Richard Drew/Associated PressHigher and higher.

Jerome Powell came out if his hole and saw no inflation, so now we have 6 more months of 0% interest rates (at least) for the Banksters.  The markets loved Powell sticking to his story that the inflation that is obvious to every sentient being on this planet is only "transitory" and will go away when the virus goes away so yeah, viruses cause inflation, not the Fed - that's the ticket….  

As noted by the NY Times:  

"Powell repeated his longstanding belief that high inflation was mostly caused by disruptions in global supply networks and other ripple effects of the pandemic — problems that the Fed can’t do much about.

"On interest rates, Mr. Powell rejected the thinking of leaders at several other leading central banks and of a handful of his own colleagues. They think that excess demand in the economy is a big part of the inflation problem and that rate increases would help address it — and that current high inflation could become ingrained in economic decision-making, with long-lasting consequences."

It is a delicate moment. President Biden must decide whether to reappoint Mr. Powell to a second term leading the Fed. High inflation is causing economic discontent for Americans, according to surveys, and helping to drag down the president’s approval ratings. Global bond markets have been gyrating amid uncertainty about whether the era of ultralow interest rates may be coming to an end.

The Bank of Canada, the Reserve Bank of Australia and the Bank of England have all indicated they will be raising rates and several Eastern European Central Banks have already raised rates, with Poland moving to 0.75% on Wednesday – 3 TIMES the rate offered by the Fed.  

Here's an interesting chart from NY Mag which shows the correlation between inflation and concerns about inflation and you'll notice that, unusually, the people are way behind the curve in worrying about inflation, which is unusual.  Now Powell is a people so you could say he's in that crowd but more likely its the endless media messaging from people like Powell that is causing the rest of the people to believe that this is some sort of persistent illusion that will vanish in the spring.  If not, then those people are investing in all the wrong places, arent they? 

That's putting Barrick Gold (GOLD) back in contention for our Trade of the Year for 2022 because it's a very good company that's making $2.2Bn/year with gold around $1,750 yet, at $18.62, the market cap of GOLD is just $33Bn so you are only paying 15 times earnings for them but, as a bonus, Barrick also has 68M ounces of proven gold reserves worth $119Bn.  It's hardly worth mentioning their $10Bn worth of copper…

Of course, there's a cost to extract the gold and that's about $1,250 per ounce so those 68M ounces actually represent $34Bn in potential profits (at $1,750) but, if gold goes to $2,000 per ounce, the potential profits jump to $51Bn.  It could go down as well if Powell is right and inflation is an illusion but I think Barrick is a great stock to hold for the long-term in any case.  

We already have GOLD in our Member Portfolios and our May trade idea in our Money Talk Portfolio is even better than our entry was at the time:

GOLD Short Call 2023 20-JAN 27.00 CALL [GOLD @ $18.62 $0.00] -25 5/13/2021 (442) $-7,000 $2.80 $-2.04 $-0.17     $0.77 $0.00 $5,088 72.7% $-1,913
GOLD Short Put 2023 20-JAN 23.00 PUT [GOLD @ $18.62 $0.00] -10 5/13/2021 (442) $-3,800 $3.80 $2.08     $5.88 $0.00 $-2,075 -54.6% $-5,875
GOLD Long Call 2023 20-JAN 15.00 CALL [GOLD @ $18.62 $0.00] 25 9/17/2021 (442) $14,125 $5.65 $-1.35     $4.30 $0.00 $-3,375 -23.9% $10,750

The current net is $2,962 on the $30,000 spread so the upside potential is $27,038 (912%) if GOLD is over $27 at the end of next year.  Even at $18.62, this trade is $9,050 in the money to start (but we would owe $4,380 on the short puts at this price) – aren't options fun?  Stil, we can be more conservative with a new trade using the 2024 options as such:

  • Sell 10 GOLD 2024 $20 puts for $4.50 ($4,500) 
  • Buy 30 GOLD 2024 $15 calls for $5 ($15,000) 
  • Sell 30 GOLD 2024 $20 calls for $3 ($9,000) 

That's net $1,500 on the $15,000 spread so we have $13,500 (900%) upside potential if GOLD gains less than 10% over 2 years.  The trade is starting out $10,860 in the money and we would owe $1,380 for the short puts at the current price.  The risk on the trade is that GOLD finishes below our break-even at about $16.50 and we are assigned 1,000 shares of GOLD at $20 ($20,000), which is more than the current price.  

Of course, should that happen we would then sell 2026 $15 calls for maybe $3 and $15 puts for at least $3 and our net would be down to $14 and, since I'd love to own 2,000 shares of GOLD at $14 ($28,000), I have no fear of the assignment which makes this a fairly bullet-proof trade.   

Still, it it good enough to be our Trade of the Year for 2022?  Probably not because we don't see that obvious catalyst with the timing that will return at least 300% over the course of the year.  Powell MIGHT be right and inflation MIGHT be transitory and gold may fall back in price and GOLD will make less money (but I'd still like them for the long-term).  We prefer our Trade of the Year ideas to be more certain than that – even though I'm 90% certain Powell is a fool (or maybe just lying to us).

Either way, I love this hedge against inflation.

Oh look, the Productivity Report is out:


-5%?  Oopsie!  Well at least Unit Labor Costs must be easing so inflation will soon be under control, right?  


+8.3%?  Oopsie again!  And last month was revised up from -1.3% to +1.1%.  So labor costs are rising and productivity is slowing and the markets are at record highs because… IT JUST DOESN'T MATTER!  


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  1. batman 
    November 3rd, 2021 at 10:51 pm | Permalink | Tweet thisIgnore this user

    Phil / QCOM – blow out quarter and outlooked 20% growth for next year….. puts them at an EPS of 10.3 ish for nest year….  Plus they are growing the non headset business at a high rate….   Do you think they could get to a multiple expansion?

    November 3rd, 2021 at 11:30 pm | Permalink | Tweet thisIgnore this user

    Phil /. QCOM - the transition to the internal based is expected to start in calendar 2023 iPhone models.   This may be a transition on an iPad for then on iPhone so maybe a 24 full transition …   either way it will hold these shares back

    November 3rd, 2021 at 11:38 pm | Permalink | Tweet thisIgnore this user

    Phil / SPWR –  Earnings was mixed at best…..   and outlook was weak on addition they are taking down next years outlook by about 20 %  - although you need a cipher key to detect it.  I'm surprised they are not down more….. I listened to the concalll…  they new guy running this is taking the company more to financing and possibly lower end product / pricing…  I think this may be a significant change for them.  would this change your thesis on them?

    ….  Also they own about 6.5 Million enphase shares from the '18 inverter sale….  this is arbout $1.4B….  

  2. i cant believe oil up over 3 dollars since 3am from 80. thats a big bounce.

  3. VIAC adds T-Mobile customer base, stock down with an opportunity to adjust.

  4. Good Morning.

  5. VIAC – Earnings looked decent, growth in all areas and seem to be executing well and yet still down 2%.  I think the market is bored with them.. not exciting enough. 

  6. Germany reports record number of new coronavirus cases

  7. Good morning!

    This market reminds me of the end of Alice in Wonderland when things get crazier and crazier and then she wakes up and says "WTF was that?"

    Wake Up Alice, Wake Up! wallaper (: ? Omri Koresh  

    QCOM/Batman – Wow!  

    I guess we backed the right horse.


    You are correct- On 10/15;


    Here's a fun play for Batman we can put in the STP for fun:

    Sell 5 QCOM 2024 $100 puts for $10 ($5,000) 

    Buy 5 QCOM 2024 $130 calls for $22 ($11,000) 

    Sell 2 AVGO Jan $500 calls for $25.30 ($5,600) 

    Buy 5 AVGO March $300 puts for $2 ($1,000)

    That's net $1,400 and we're betting AVGO goes down and QCOM goes up.  Won't take much to make us a winner.  

    Those $130 calls are $40!  

    As to multiple expansion – of course, that's why I said it was stupidly cheap.  

    SPWR not a surprise – as I said in the Webinar, my worry was that they would pop and we wouldn't be able to buy more.  It's a long-term play, not a tomorrow play.  

    • For the full year, "revenue and adjusted EBITDA guidance for SunPower, including CIS and Legacy business, is below the prior guidance of $1.41B-$1.49B and $110M-$130M, respectively, primarily due to CIS project schedule delays."

    Here's the slide show.

    That's where the growth spurt will come from.  No change to thesis as that's exactly what I said about them yesterday, they will make their chips cheaper to widen their base and they are currently in an investment cycle for new designs.

    Oil/Tommy – Crazy stuff, right?  Almost another chance to short at $83.50

    Nasdaq just as crazy:

    VIAC/Pman – Another Trade of the Year contender for 2022.  

    • ViacomCBS (NASDAQ:VIAC): Q3 Non-GAAP EPS of $0.76 in-line; GAAP EPS of $0.69 misses by $0.11.
    • Revenue of $6.61B (+13.2% Y/Y) beats by $40M.
    • Shares -0.2% PM.
    • Press Release
    • CEO comment: "ViacomCBS (VIAC) continued to show tremendous momentum across the business as we executed against our strategy. We added 4.3M global streaming subscribers, raising our total to nearly 47M, driven by the scaling of the diverse content offering on Paramount+. Looking forward, we're thrilled about the fresh array of content coming to Paramount+ in the next few months and can't wait to share it with our global audience. Our strategy is clearly working and we'll continue to use the power of global content, distribution and market expansion to drive scale."

    OK, they only made 0.69 per $36.65 share for the quarter?  That's about 13x annualized earnings.  I really don't know what's wrong with people.  

    Revenue of VIAC

    Free cash flow

    On track for $2.5Bn this year – maybe 10% more next year.  

    Monty Python Run Away GIFs - Get the best GIF on GIPHY

    Not exciting/Jeddah – I find this baffling.  They'll pay 100x for NFLX, AMZN, TSLA but won't pay 13x for VIAC.

    I think people are getting this "world is ending" so F it vibe lately…

  8. Totally agree Phil. On Reddit, it's amazing how many young folks are playing options with pure directionional bets and hoping for 1000% gains. Some even post how they've lost their life saving 100K+ betting on next month OTM options. It's insane

  9. NRG /Phil – any adjustments here?  They seem on target, upped divvy, bit narrowed 2022 guidance.

  10. jeddah62 / Think about young folks experience with cryptocurrency. Our 24 year old nanny lasted 3 months, had bought DOGECOIN late last year and quit in the Spring….

    This is a COVID influenced stay at home YOLO generation. There should be a trading opportunity in there somewhere… Phil has kids in this generation but they got his wisdom… 

  11. US trade deficit hits record of $80.9 billion in September

  12. BoE Holds Interest Rate Despite Soaring Inflation

  13. Allbirds Stock Surges 91% in IPO

  14. Betting/Jeddah – It's like 2000 never happened.  Or 2008.  I guess a lot of the Reddit set were too young but I was born 23 years after WWII and I still  knew not to appease Hitler – people just don't learn from the past at all anymore.  

    SPWR with a nice recovery already.  

    SPWR -2.34%Nov. 04, 2021 11:56 AM ET

    • SunPower (SPWR -3.7%) sinks as much as 11% after posting a larger than forecast Q3 loss and weaker than expected revenues, but analysts continue to like the company's "residential story."
    • SunPower also lowered full-year guidance for revenue and EBITDA due to delays in CIS project schedules.
    • The company bought residential solar provider Blue Raven last month for $165M and seeks to sell its commercial and industrial business.
    • Raymond James analyst Pavel Molchanov tells MarketWatch that a sale of the C&I unit "would simplify the business – the stock is a residential story anyway," noting all of the company's growth came from the residential segment.
    • SunPower said it added more than 14K residential customers in Q3, up 29% from a year ago, and gross margin for the residential division jumped 600 bps Y/Y to 24%.
    • The C&I unit "would be attractive to infrastructure funds seeking exposure to commercial assets," Cowen analysts say.
    • SunPower would be "singularly centered" on residential growth opportunities after a C&I sale, "bringing long-needed concentration" for the company, Baird analyst Ben Kallo says.
    • "SunPower's residential solar business is highly profitable, while its commercial solar PV business is marginal," Keith Williams writes in a bullish analysis posted recently on Seeking Alpha.

    NRG/Jeddah – We don't have them anymore, they got purged back in August.  Top of the Market Tuesday – Cashing Out While We Can

    NRG – $22,000 out of $34,000 potential but we started with $4,000 so it's a "bird in the hand" situation.  Kill it. 

    This is WHY we take the money and run.  You have to be aware of when you are ahead of expectations and re-weigh your risk/reward to decide if something is worth keeping.  

    "The LTP is already over 50% in CASH!!! so cutting 1/2 of our positions should bring us to about 75% CASH!!! and then the CASH!!! is our hedge – as we've got tons of money to go bargain-hunting if there is a sell-off and, if there's not – well clearly we know a lot of ways to win.

    "Still, the question here is whether or not to cash out the LTP and today is one of those days when you do feel like it's silly not to participate in this market as it does seem to bounce back from anything.  Also, I don't have a great alternative to put the money – that's another issue.  What would we do with $1.5M if we cashed in and started from scratch.  I guess I'd buy a lot of T and VZ and GOLD and SPWR – but those are positions in the LTP already and the LTP is already over 50% in CASH – so perhaps what we need to do is just cut back our downside risk? "

    Despite all the cashing out – we're still up $150,000 since August in the LTP – and sleeping soundly!

    NRG was $43.42 the day we killed it.  Now $35.78 but not exciting enough yet that I'd want to get back in.  We started the trade selling 10 2023 $28 puts for $4.20 on March 17th.   The 2024 $28 puts are about $3.25 – that's an easy way to see if something is worth getting back into.

    YOLO/Pman – Yep, going to be hard to get this generation to save their money for retirement.  Sadly, a lot of them are going to have to support their parents as that safety net falls apart.

    SPACENov. 04, 2021 11:55 AM ET2 Comments

    • Jeff Bezo's Blue Origin (BORGN) loses its lawsuit regarding the Artemis missions contract as the U.S. Court of Federal Claims sides with NASA and Elon Musk's SpaceX (SPACE).
    • Blue Origin sued NASA in August after the space agency awarded SpaceX the sole contract for its Human Landing System program, choosing Musk's company over Blue Origin and Dynetics. Blue Origin argued that NASA "disregarded key flight safety requirements" when awarding the contract to SpaceX.
    • The ruling dismissed Blue Origin's claims and will allow NASA's work with SpaceX to continue Monday after being paused during the lawsuit. Under the $2.9B contract, SpaceX will fly astronauts to the moon in its Starship rocket for NASA's upcoming Artemis operations.
    • SpaceX was valued at over $100B in its latest funding round, while Morgan Stanley thinks it could be worth up to $200B due to its Starlink LEO satellite communications business.

    USO +1.08%Nov. 04, 2021 11:33 AM ET8 Comments

    • The OPEC+ oil producers say they have agreed to maintain their plan to gradually raise production by 400K bbl/day next month, rebuffing pressure from the U.S. to boost output and ease prices.
    • Crude prices have shed earlier gains, with December WTI (CL1:COM) now -0.6% to $80.34/bbl and January Brent -0.1% to $81.92/bbl.
    • The decision to hold steady was "no surprise to the markets," and the group's strategy, as demand has recovered from COVID-19, "has been quite successful and there was no compelling reason for them to change course," professional services network EY's Andy Brogan tells MarketWatch.
    • Upside for oil prices could be limited by the prospect that the U.S. could tap its strategic oil reserve.
    • "There is speculation that major oil consumer nations will open their strategic petroleum reserves if OPEC+ does not play nice on Thursday," Mizuho's Robert Yawger says.
    • WTI crude oil sank to three-week lows yesterday after the weekly EIA report showed bearish increases in U.S. inventories and production.

    SNY -1.18%Nov. 04, 2021 11:29 AM ET6 Comments

    • Dodge & Cox Fund said in a letter to investors that it feels the U.S. stock market is "fully valued" at this point.
    • As a result, the fund is focusing on low-valuation stocks positioned to take advantage of accelerating economic growth. In particular, the firm has targeted the healthcare sector, adding to its positions in Sanofi (NASDAQ:SNY) and Cigna (NYSE:CI).
    • Dodge & Cox has also taken an overweight position in financials, betting that interest rates will rise in the next few years.
    • "Even if interest rates don’t rise, the fund could still benefit from wide valuation spreads returning to more historically normal levels," Dodge & Cox said in a fund letter released this week.
    • Financial stocks made up about 26% of Dodge & Cox's holdings as of the end of the third quarter. This basket included the fund's top two holdings, Wells Fargo (NYSE:WFC) and Capital One (NYSE:COF).
    • At the same time, Dodge & Cox has downplayed its investments in growth stocks, arguing that high valuations and "lofty expectations" create increased risks.
    • That said, Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL) represents the fund's third-largest holding, the only megacap among Dodge & Cox's top 10.
    • Looking at some of Dodge & Cox's top picks since the start of Q4, all have performed well except for COF.
    • GOOGL and CI tracked within a percentage point of the S&P 500's 7% rise since the start of October. SNY and WF have outperformed a bit, rising by about 9% and nearly 11%, respectively.
    • Meanwhile, COF has significantly underperformed the broader market, falling nearly 8% since the start of Q4:

    Nov. 04, 2021 11:26 AM ET9 Comments

    • The House version of President Biden's social spending bill will bring in almost $1.48T in new tax revenue, Bloomberg reports, citing Congress's Joint Committee on Taxation.
    • That's less than the $1.75T that Democrats seek to spend on the program that includes universal pre-K, clean energy initiatives, increased grants for post-high school education, and expanding Medicare to include hearing benefits.
    • The bill also includes giving the Internal Revenue Service $80B more in funding to strengthen enforcement, which the White House estimates can raise an additional $400B over 10 years. That amount isn't included in the committee's estimate on the bill's tax-generating ability.
    • The estimate also doesn't incorporate additional savings from a drug pricing deal that would allow Medicare to negotiate on some prescription prices, Bloomberg said.
    • Update at 12:19 PM ET: The U.S. Treasury's preliminary estimate calculates that the legislation can generate $2.15T in savings. It estimates the prescription drug cost negotiations would save ~$250B and the $400B from increased IRS enforcement.
    • Other big items bringing in revenue are $371B for international and other tax reforms and $319B from the 15% minimum tax on the largest corporations.
    • The administration emphasizes that the provisions wouldn't raise taxes on any taxpayer making less than $400K.
    • As Democrats appeared poised to plow through the impasse over the bill, Democrat Joe Manchin on Tuesday again expressed concerns with the package.
    COST +3.20%Nov. 04, 2021 11:08 AM ET9 Comments

    • Costco Wholesale Corporation (COST +2.8%) rallies after recording its fourth consecutive month of accelerating comparable sales growth with a mark of +11.7% (ex-fuel). That trend is enough to keep COST slated as a top pick at Oppenheimer.
    • "We believe higher levels of inflation, a strong consumer backdrop, market share gains from foodservice distributor challenges, and relative advantages on the supply chain front are contributing to the robust performance. COST’s valuation is now consistent with peak levels on a relative basis, but we believe the premium is warranted," updates analyst Rupesh Parikh.
    • Oppenheimer lifts its price target to $550 from $500 and points again to the potential for a special dividend and membership fee increase next year.
    • Dig into the Costco October sales report.

    W is right where we want them to be after earnings:

    W Short Put 2022 21-JAN 260.00 PUT [W @ $258.98 $-9.92] -5 3/15/2021 (78) $-21,000 $42.00 $-14.60 $-76.37     $27.40 - $7,300 34.8% $-13,700
    W Short Call 2021 19-NOV 340.00 CALL [W @ $258.98 $-9.92] -3 6/17/2021 (15) $-9,450 $31.50 $-31.18     $0.33 $-1.73 $9,353 99.0% $-98

    From the STP.

  15. SBUX -0.34%Nov. 04, 2021 9:55 AM ET2 Comments

    • Argus lowers its rating on Starbucks Corporation (SBUX -1.1%) to a Hold rating from Buy.
    • Analyst John Staszak: "Our downgrade reflects the impact of rising labor costs, supply-chain challenges, and increased competition. We also see weaker comp sales in China (down 7% in 4Q21) as a potential near-term headwind, particularly given China's continued use of lockdowns to control the pandemic. On the positive side, we have a favorable view of the company's loyalty program, which saw 28% membership growth in fiscal 4Q."
    • Staszak and team believe that Starbucks (NASDAQ:SBUX) will be able to reduce the impact of inflation through price hikes, but lower the FY22 EPS estimate to $3.60 vs. $3.70 prior estimate and $3.44 consensus. A FY23 estimate of $4.01 is set vs. $4.00 consensus. Of the last 30 EPS revisions, 97% have been downward slides on the SBUX profit line.

    TTWO +3.28%Nov. 04, 2021 9:28 AM ET17 Comments

    • Take-Two Interactive CEO Strauss Zelnick took aim at the company formerly known as Facebook (NASDAQ:FB) on Thursday, claiming the video game maker already represents a top player in the metaverse.
    • "We're probably the biggest metaverse company on Earth," the head of Take-Two (NASDAQ:TTWO) told CNBC.
    • Zelnick also reported that demand for video games is currently higher than the company saw during the pandemic, at least in certain instances, a fact that contributed to the rise in bookings it reported in its latest quarterly results.
    • After the closing bell Wednesday, Take-Two Interactive (TTWOissued a mixed earnings report, with a profit that missed expectations but revenue that topped projections. The maker of NBA 2K and the Grand Theft Auto series also reported a rise in its quarterly bookings.
    • On the metaverse, Zelnick clarified that he doesn't buy into the vision put forward by FB's Mark Zuckerberg, which would have people spending most of their days interacting in digital environments.
    • Rather, the Take-Two CEO sees the metaverse as a way to connect and to enjoy a heightened reality, as through video games.
    • "I'm skeptical that we're going to wake up in the morning and intentionally sit at home, strap on headsets and conduct all of our daily activities that way," he said.
    • Looking at another burgeoning technology, Zelnick backed the use of NFTs, calling the technology "digital collectibles."
    • The Take-Two CEO argued that the key to creating valuable NFTs comes from developing quality collectibles that people want to buy. He noted that the blockchain technology would guarantee the rarity of an NFT, but it would take quality to drive demand.
    • Bolstered by the earnings news, TTWO climbed nearly 4% in Thursday's pre-market trading.
    • TTWO surged to a 52-week high of $214.91 early this year but came off that level in February and March. Shares have generally traded in a range since then.
    • Since coming off its highs in late February, TTWO has dramatically underperformed the major averages. The stock is down about 1% since then, while the S&P 500 has experienced an upswing of 21%:

    QCOM +13.48%Nov. 04, 2021 9:22 AM ET14 Comments

    • Qualcomm (NASDAQ:QCOM) shares rocketed up more than 12% in pre-market trading, Thursday, on enthusiasm for the communications chipmaker's latest results and outlook, and a ratings upgrade from Goldman Sachs.
    • Goldman analyst Rod Hall lifted his view on Qualcomm (QCOM) to buy from neutral, and also raised his price target on the company's stock to $194 a share. Hall cited Qualcomm (QCOM) calling out "high end Android momentum as well as broader based positive expectations in other business lines" among the reasons for his upgrade.
    • Hall's upgrade comes after Qualcomm (QCOM) said that for its fiscal first quarter, which includes the Christmas and holiday shopping season, it expects to earn between $2.90 and $3.10 a share on revenue in a range of $10 billion to $10.8 billion. Analyst has previously forecast Qualcomm (QCOM) to earn $2.60 a share on $9.7 billion in revenue for the period ending in December.
    • Qualcomm also reported a fourth-quarter profit of $2.55 a share, excluding one-time items, on revenue of $9.26 billion, compared to analysts' estimates for a profit of $2.26 a share on $8.86 billion in revenue.
    • Qualcomm (QCOM) Chief Executive Cristiano Amon said Wednesday that the company's outlook is evidence of how its "technology roadmap and revenue diversification strategy" into areas such as cars and the Internet of Things is succeeding.

    NKLA +18.02%Nov. 04, 2021 9:19 AM ET11 Comments

    • Nikola (NASDAQ:NKLA) says validation of the Nikola Tre BEV is progressing with trucks now being test driven on public roads. Footage of the Nikola Tre FCV is available for viewing.
    • The zero emission vehicle maker plans says it has begun to build pre-series trucks in Coolidge, Arizona and continue to work "steadfastly" towards a commitment to deliver up to 25 trucks to dealers and customers by December. "The trucks will haul customer loads, gain real-world mileage accumulation, and in turn we expect to secure additional orders for 2022 volume and beyond," notes the company.
    • Nikola's (NKLA) Q3 adjusted EBITDA loss of $87.4M was better than the $101.4M loss anticipated by analysts. Nikola (NKLA) also says it is engaged with the SEC on resolving the ongoing probe and will look to get reimbursement from founder Trevor Milton.

    MRNA -19.05%Nov. 04, 2021 9:00 AM ET28 Comments

    • Leading COVID-19 vaccine developers are trading lower in the pre-market after Moderna (NASDAQ:MRNA) slashed its 2021 outlook for product sales to $15B – $18B from $20B estimated three months ago.
    • BioNTech (NASDAQ:BNTX) and Novavax (NASDAQ:NVAX) have lost ~4.9% and ~7.0%, respectively, while Pfizer (NYSE:PFE) has dropped ~1.1%. AstraZeneca (NASDAQ:AZN) and Johnson & Johnson (NYSE:JNJ) are trading flat.

      Meanwhile, Ocugen (NASDAQ:OCGN) has lost ~14.5% despite the Emergency Use Listing (EUL) granted by the World Health Organization (WHO) for its partner Bharat Biotech’s COVID-19 vaccine on Wednesday. Ocugen (OCGN) co-develops the vaccine for commercialization in the U.S.

    • The first regulatory nod, won by Merck (NYSE:MRK) and Ridgeback Biotherapeutics for their COVID-19 pill molnupiravir in the U.K., appears to have further pressured shares.
    • When the two companies demonstrated that the drug in a late-stage trial cut the risk of hospitalization or death by about 50% in mild-to-moderate COVID-19 patients, the former FDA commissioner Scott Gottlieb identified the result as a game-changer.
    • An FDA expert panel is scheduled to meet later this month to decide on the emergency use authorization (EUA) for molnupiravir.

    CF +1.47%Nov. 04, 2021 12:55 PM ET4 Comments

    • The worsening shortage of nitrogen fertilizer will force U.S. farmers to scale back fertilizer applications for their fields, CF Industries (CF +1.2%) executives reportedly said on today's earnings conference call.
    • CF management "believes that global nitrogen supply will remain constrained with production in key regions affected by high energy prices."
    • U.S. spot prices for potash and urea have more than doubled this year, according to Bloomberg, and the worry is that farmers eventually could stop buying the products at the elevated prices.
    • But for now, CF expects farmers will continue to plant nitrogen-consuming crops – corn, wheat, cotton and canola – at high levels given their relatively high front month and futures prices.
    • "High crop prices and the need to replenish global grains stocks are expected to underpin global fertilizer demand in the near term," CF said.
    • Also on the call, CF said it plans to bring the fertilizer operations at its closed Ince plant in the U.K. back online in the next few weeks.
    • CF reported a Q3 GAAP net loss of $185M and EBITDA loss of $10M, including the impact of $495M of preliminary impairment charges related to the U.K. operations, while Q3 revenues rose 61% Y/Y to $1.36B.
    • CF shares have gained 50% YTD and more than doubled over the past year.

    F +3.92%Nov. 04, 2021 12:17 PM ET21 Comments

    • Ford (F +2.5%) intends to repurchase up to $5B of its high-yield junk bonds as the company works to pay off the debt that the company took on during the pandemic.
    • The vast majority of the bonds were part of the $8B that Ford (NYSE:F) issued at the beginning of the pandemic which provided yields between 6.375% and 9.625%. Ford (F) hopes that the restructuring will raise its credit rating after it went below investment-grade status in March 2020.
    • The automaker plans to use cash on hand, which was about $31B as of the end of Q3, to fund the repurchases. The company is looking to replace some of the debt with 10-year bonds that yield between 3.5% and 4.5%.
    • “We think it’s the time to aggressively restructure the balance sheet, lower our interest costs, and really clear the decks for 2022 and beyond. That’s really what we’re looking to accomplish here," said Ford Treasurer David Webb. “The actions that we’re taking here on the balance sheet further support that effort and intent. We think they, certainly, should be viewed as a credit positive."
    • Ford (F) held $13.6B of long-term debt in December 2019. That number ballooned to $37.9B over the next two quarters before settling at $23.8B in September.

  16. I personally know a senior at WSU that stated with $2k (from mowing lawns), got it up to ~$30k in crypto and went all in on TSLA January calls and now has $2m. Cash. Sold it out. There's a lot of those stories out there right now.

  17. And to think, I just bought next week TQQQ puts…. still chasing the old dream for this old-timer…

  18. Yeah, good luck with that.  

    They don't even let a down day happen.

    Dow down 100 at the moment though.

    Nas up 1.3% at the same time – strange days.

  19. Phil – I'm getting a little concerned about of F Butterfly play. The short Jan $13 Calls are now about $6.50 in the money. And they only have about $0.06 of premium left in them. Is this a "wait and see" or should we do something about them?

  20. Phil:

    I have 30 contracts of the Jan. 2023 $30/$55 BCS Net $7.00, now say $6.75.  Plus I sold 5 Jan. 2023 $40 Puts for $11.40, now say $8.50.  Looking to perhaps roll to 2024….would you suggest a better option than what I have here?  Thanks.

  21. BTW… is VIAC !

  22. Hi Phil,

    Your thoughts on Zillow. Do you think there is hope or this company done?


  23. Oil falling off a cliff not, $78.25:

    Brent testing $80.

    Good weekend to fill up the tank.

    F/Daveo – Earnings just get better and better for them.  We thought they'd have supply issues that would hurt outlook but:

    Ford Motor U.S. sales rose 12.3% M/M in October led by SUVs; EV sales up 195% Y/Y

    And they are paying off debt and dividends are coming back…  

    In the Butterfly Portfolio, our Ford position is:

    F Long Call 2023 20-JAN 10.00 CALL [F @ $19.32 $0.69] 75 1/14/2021 (442) $20,250 $2.70 $6.83 $3.57     $9.53 $0.73 $51,188 252.8% $71,438
    F Short Call 2023 20-JAN 15.00 CALL [F @ $19.32 $0.69] -75 1/14/2021 (442) $-9,750 $1.30 $4.43     $5.73 $0.62 $-33,188 -340.4% $-42,938
    F Short Call 2022 21-JAN 13.00 CALL [F @ $19.32 $0.69] -30 8/20/2021 (78) $-3,600 $1.20 $5.18     $6.38 $0.77 $-15,525 -431.3% $-19,125
    F Short Put 2022 21-JAN 12.00 PUT [F @ $19.32 $0.69] -20 8/20/2021 (78) $-2,000 $1.00 $-0.91     $0.10 $-0.01 $1,810 90.5% $-190

    This is how we end up with very big trades in the butterfly portfolio.  It's not a net loss but not much profit as the stock hasn't dipped since we sold the short calls in August.  The $10/15 spread is $28,500 out of $37,500 so, if F stays over $15, we have $9,000 more coming plus some more put and call selling and we'll be fine.  

    The short $13 calls are $6.38 with no premium and the 2023 $20 calls are $3.40 so there's a 2x roll or we could do a 1x roll and sell 30 of the 2024 $15 puts for $3 and that would be an even roll so I think we'll do that.

    The $75 long calls at $9.50 ($71,250) can be rolled to 150 of the 2024 $12 calls at $8.65 ($129,750) and we'll help pay for that by selling 50 of the 2024 $22 calls for $4 ($20,000) while rolling the 75 short 2023 $15s at $5.73 ($42,938) to 100 of the 2024 $20 calls at $4 ($40,000), so we widen the spread for net $41,438.

    So, we're spending net $41,438 on the adjustment and we end up with 125 of the 2024 $12/22 bull call spreads which will pay up to $125,000 (up from $37,500) and we will have 30 short 2023 $20 puts and calls and plenty of room to sell more – including 2024 puts if F ever does take a dip.  

    We're not really spending $41,438 to make the extra $90,000, we're INVESTING $41,438 so we can keep selling puts and calls.  When F stops going up, we can easily sell 30 more calls for another $9,000 and 30 2024 $15 puts are just under $3 so, if we sell them for $4 – there's $21,000 recovered already.  That's how the butterfly portfolio works – we rent out space against our long positions so, if a short-term call goes up on us – we just expand the long position (that's obviously very strong over time or we wouldn't be capitulating) and collect even more rents.  

    If the stock never has a serious pullback and keeps going up – then we end up with a $500,000 long spread, like we have with AAPL (there's not actually any other stocks I'd be willing to be THAT exposed to).  AAPL started out as a 20 unit bull call spread with 10 short puts for about net $5,000 and now it's net $228,200 on the $480,000 spread that's 100% in the money.  All the short calls do now is lock in our gains but, if they pop on us, maybe we'll end up in a $1M spread – from our original $5,000….

    Sides/1020 – I think the problem is which side is going to win?  

    A man hold his hand to his heart as a Proud Boys organizer recites the Pledge of Allegiance during a Proud Boys rally at Delta Park in Portland, Oregon on September 26, 2020. (MARANIE R. STAAB/AFP via Getty Images)


    The chances of a contested convention in the Democratic primary are low.  Here's why. - Vox

    That's a nice thing about Florida, you can leave the country on a small boat at a moment's notice.  cool

    Of course, in a Civil War, the East and West Coasts could simply stop supplying TV shows for a week or two and they'd surrender.  

    Either that or we stop sending food and they all die of heart attacks or diabetes:  

    VIAC/Hicket – Aw, you took the fun away from playing "Mystery Stock".  Well, they are at $35.80 and your 2023 $30s are $8.35, which is more than you paid for them so, If you can leave the $55s short, I'd roll that $8.35 into a new 2024 spread, like the 2024 $30 ($10.45)/45 ($4.50) bull call spreads at $5.95.  You can afford 40 of those if you do that or you buy back the short calls for $1.65 and make the small investment in the better spread.  I don't see the point of rolling the puts as the target is fine and the premiums are huge (so why pay them?).  They can be 2x rolled to the 2024 $35 puts at $7 ($7,000) and you'd collect net $2,750 in exchange for promising to buy $35,000 worth of VIAC vs your previous promise to buy $20,000.  

    Zillow/Harip – I told them that was a mistake. I used to own a real estate data firm and their algos are crap and using them to buy actual houses was clearly insane – but they did it anyway.  Valuation ($16.5Bn) is still way too high for c company that hasn't actually made a profit yet and is about to book a massive loss on this housing experiment.

  24. On F in the Butterfly Portfolio, we are rolling the 30 short Jan $13 calls at $6.40 ($19,200) to 30 of the 2023 $20 calls ($3.30) and 30 of the 2023 $20 puts $4.30 for net $22,800.  Not sure where the other numbers came from.  

    The 75 long 2023 $10s roll to 150 of the 2024 $12s

    The $75 short 2023 $15s roll to 100 of the 2024 $22s and we sell 50 more 2024 $22s to help pay for the roll.  I said $20s at some point but they are $4.50, not $4.

    The 20 short Jan $12 puts will expire worthless and, if F ever dips, then we will sell more short puts.

  25. Nice stick save on the Dow into the close:

    Gotta love that dumb money flowing in.

    Payrolls tomorrow.  Not that data matters…

  26. Thanks for the adjustment on the Ford Butterfly. I think I'm actually understanding this. Only took 20 years ;)

  27. For those of you who think you are too old to start a business:

    Congrats Daveo!  enlightenedenlightenedenlightened?

  28. RWLK up big after hours??

  29. Nice, that's why we picked them:

    Top Trades for Fri, 24 Sep 2021 13:34 – RWLK

    "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."

    FDA Awards Breakthrough Device Designation to the ReWalk ReBoot Soft Exo-Suit

    Just the first big step on a long road for these guys:

    RWLK ReWalk Robotics Ltd. 10000 9/24/2021 41 $24,400 $2.44 $-1.15 $2.44     $1.29 $-0.02 $-11,500 -47.1% $12,900
    RWLK Short Call 2022 21-JAN 2.50 CALL [RWLK @ $1.29 $-0.02] -75 9/24/2021 (78) $-7,125 $0.95 $-0.83     $0.13 $0.05 $6,188 86.8% $-938
    RWLK Short Put 2022 21-JAN 2.50 PUT [RWLK @ $1.29 $-0.02] -50 9/24/2021 (78) $-5,750 $1.15 $0.15     $1.30 - $-750 -13.0% $-6,500

    Our net entry is $1.1525 but that only works if they are over $2.50, otherwise we'll be assigned 5,000 more shares and average $1.185 on 15,000 shares.  They are back to $2 after hours.  Still, it's a stock I want to be in for a long time, they just didn't have long-term options so this is how we are establishing a position.  It's nice that we're not fully covered though we should have sold more puts on this dip. 

  30. See, when you REALLY want to own the stock, you have a huge advantage.  We bought 10,000 shares for net $11,525 ($1.1525/share) and these are $40,000 allocation blocks in a $200,000 portfolio so we have $30,000 left to play with.  We commit to spending $12,500 more for 500 more shares but that would only happen if the stock were below $2.50 and we get assigned, so we'd be clean of options with 15,000 shares at $1.602.

    So what do we do?  Well, if the stock is languishing down at $1.60ish – maybe we call it quits or scale back – if the stock is at 0.50, we'd have $7,500 back on our $24,025 total attempt so a $16,525 loss if we quit or we DD for $7,500 more and then we'd be in for $31,525 on 30,000 shares (1,05/share) but let's say we could sell $1 calls for 0.50 – then we'd be just fine, and back to only $16,525 invested on 30,000 shares.  

    Again, since we REALLY want to own this stock long-term, these little setbacks are just opportunities to increase our stake.  So we're happy with going to 0.50 and anything over $1.50 is break-even (ish) and the key thing here is we sold $12,875 worth of puts and calls on 10,000 shares (not even a full cover) JUST TWO MONTHS AGO – that's a quarterly sale!  So worst case doesn't suck and flat case means we're still in for $1.602, we can sell more puts and calls and drop the basis lower and if the stock is over $2.50 – we're 75% covered but we can just buy more shares and roll the short calls (can't do a LEAP to cover as the options are short-term).  So lots of ways to win and we don't mind losing.

    This kind of reminds me of ISRG when I couldn't get people on board with the concept years ago.  

  31. ISRG went from 1 to 363.

    terrible pick…. ;)

  32. Z

    Yowser. Ugly 1-year chart. They really stepped in it with this flipping nonsense. Maybe worth 30 puts. In a hot market they might rebound, but if the market turns it'll be hunting for tombstones and Z may just be one of those.