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Non-Farm Friday – Is America Working?

Jobs report today.

In September we added an anemic 194,000 jobs and October is projected to rebound to 450,000  but does it matter?  The S&P 500 is up 100 points (2%) this week and up almost 10% since we got that crappy payroll report last month.  The economic numbers haven't been good and earnings have not been great but, in 19 out of 23 market days since the last NFP Report, the market has gone up and up and up and up.

We're investors, we should be happy.  Our Long-Term Portfolio, which we last reviewed on October 15th, is up $50,000 (10%) for the month – and we only made 3 changes in the last review.  Just sit back and make money is what the market is teaching us but, do you know what that's called?  Complacency!  And complacency is a very dangerous disease for a trade to catch.  The SPY ETF hasn't cracked 100M in volume since October 6th and it's been closer to 50M most days – 50M is the kind of volume we used to see on half day holidays.

When there's very little trading, there is a larger percentage of computer trading as a certain amount of money flows into ETFs every day from payrolls and retirement accounts, which all run on algorithms.  And, of course, if money is coming in and people aren't selling, the algos that run other trading platforms interpret that as a strong market and maintain their own positive bias and, more importantly, they never see a sell signal.  The Fed has pumped another 10% into the money supply this year, pushing us up $2Tn – $2Tn was HALF of the total money supply in 2019 – that's what they added this year – and they wonder where the inflation is coming from:

Wednesday Ramblings – Things that Make You go Hmmmm… | Phil's Stock WorldWhere does this money go?  Well mostly to the Banksters but then they get to multiply that money by 10 and play with it as they see fit.  Some of those Banksters are JPM and GS and they buy a lot of stock with it and they lend money (margin, etc) to their clients, who also buy a lot of stocks – and every other asset on the planet that isn't nailed down.  All these rich people buying all these assets with all this money MIGHT cause inflation – but the Fed doesn't see it…

If you think about it, a system like that is ripe for manipulation and that's why you see the Banksters talking up the markets whenever there is bad economic news.  All they have to do is stop people from selling and the market bias is to go higher.  As long as the volume stays low, the indexes keep climbing.  This is all well and good UNLESS sentiment changes and people try to sell – there aren't enough natural buyers so the sellers will find no one to sell to and prices can plunge very rapidly.  We've seen it before twice in the last twenty years – yet no one seems to think it can happen again.

Until that sentiment does change, however, the market can continue to go higher because people can't do math.  For example, I'm sure we all have friends who have told us how great their Shiba Inu investment is going and yes, everyone who bought them early made a lot of money but people who are holding them thinking they are going to be worth $1 one day simply don't understand what they are trading.  There are 1 QUADRILLION Shiba Inu coins, that is 1,000 Trillion which is, I think, 500M TIMES more Shiba Inu than BitCoin (21M).  Even if Shiba Inu were as popular as BitCoin and had the same market cap, $60,000/500M is only 0.00012.  Currently, Shiba Inus is trading at 0.000056 – 4 times more projected capitalization than BitCoin.

Very simply, people who are now buying Shiba Inu are idiots but that's OK because we seem to have an endless supply of idiots and those idiots also buy stock – and also don't understand the math of the stocks they are buying.  Most of them probably don't even do the math – they just look at the pretty pictures (charts) for signs of where the stock is going and there is no top – there is no maximum value.  A stock with a "strong chart" that has been going up should keep going up because it doesn't matter if the price it goes up to reflects $1Tn or $2Tn or $3Tn – what does it matter what you pay for a company if the chart is pretty?  

Oddly enough, in all the decades I've been involved in buying and selling businesses – not one small business deal has ever closed because they had a strong chart.  There are no charts in real companies – only in the public world (or those who aspire) are we ruled by pictures instead of numbers.  If Tom's Deli makes $1,000 on opening week  and $2,000 a week later and $3,000 a week after that, do I project that, by the end of  the year they will make $52,000 a week?  No, it's not possible due to the number of seats the total potential customers etc.  There is a number that things will top out at so, when Tom asks me to value him based on making $104,000 a week next year – I say no – even though the chart clearly shows that's which way we are going.

That's valuation.  It uses FACTS to establish VALUE.  It takes REALITY into consideration.  This market is doing none of those things – and that's why it bothers me.  

8:30 Update:  Forget my doubts, all is well.  531,000 jobs were added in October and the Unemployment Rate is down to 4.6% and, even better if you are a Capitalist, Hourly Earnings calmed down to 0.4% from 0.6% last month so businesses are getting more workers for not much more money – which means the Billionaires get to keep more for themselves – YAY!!!

My question is, if things are so great, why is Visa (V) down for the year?  They are borrowing at record-low rates and still charging monstrous interest.  They didn't lose money last year – they made $10.8Bn and they are making close to $13Bn this year and project $15Bn next year yet the price of the stock is slipping.  VZ is in the Dow's dog house too, along with DIS – who at least I can understand as parks and movies have not really come back yet.  

Overall, the Dow chart is worth contemplating as we line up investments for next year:

Image

See, there's always something to buy!

Have a great weekend, 

- Phil

 


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  1. Phil/IBM

    Good morning Phil.  Looks like IBM just completed the spinoff of its infrastructure division, Kyndryl (KD).  What are your thoughts on it?  Is your valuation thesis unchanged (or perhaps even improved?)


  2. Good Morning.


  3. Good morning




  4. Yes I noticed the options are now IBM1, I'm not sure how that affects the prices? Does anyone know? TIA



  5. How To Capture The Opportunity in Pet Meds


  6. Phil/WBA At 2023 i have +25 50C at 9.23 with -25 55C at 2.34 funded by -10 45P at 5.21. Hardly ideal but I am thinking of adjusting along the lines of the RIO discussion last week. Any advice? TIA





  7. Drug violence sparks chaos at popular tourist resort in Mexico


  8. Good morning! 

    Holy Crap, I just tried the Wagyu steak from Crowd Cow and it's fantastic!  I got it yesterday and I couldn't wait so I'm having steak and eggs but the eggs are a distraction – the steak is amazing!  Not sure if I'll keep ordering after the discount runs out but, with the discount it's totally worth it ($100 off over the first 3 orders):  https://www.crowdcow.com/l/u5d26a11d

    Also a big plus, the beef came with dry ice – I still love playing with dry ice!  

    Since that worked out, I guess I'll give their regular steaks a chance but I just put a little butter in the pan and cooked the small wagyu filet in 5 mins – perfect!  

    IBM/Kinki – I hate these spin-offs, now we have to figure out how much KD we own, etc.  While they are still trading actively I guess we'll need to roll to the new shares.  I like the KD segment but I'm not clear on how much business they are taking with them so we'll have to figure that out before adjusting.  IBM didn't get paid for KD, it's just free to grow on its own now.  Making them more flexible was a good idea as infrastructure is going to drive the rest of this decade.  

    IBM/Stuart – We have the old, complicated options now.  I'm not comfortable holding them as we won't be able to adjust them so easily over time as less and less people trade the old options so we're going to roll to the new ones but need to keep in mind that the new, stand-alone IBM, will now have a bit less profits and revenues going forward without KD's business.

    WBA/Stuart – Just starting to take off.  PFE and MRNA are going to sell $80Bn worth of vaccines in 2022 and a lot of them will be sold at WBA so I'm very bullish on them still.  I'm not sure why you paid $7 for a $5 spread – seems extreme.  The 2023 $50s are $5.30 and the 2023 $55s are $3.50, so losing on both ends, it seems but, given the structure, that was bound to happen.  Your puts are $4,750 plus the spread at $4,500 is $10,250 to liquidate for a loss of $1,765 so now horrific.   2024s are thinly traded but I'd go for 20 of the $45 ($9.50)/55 ($4.50) bull call spread at $5 ($10,000) and sell 10 of the 2024 $42.50 puts for $6.50 ($6,500) puts you in the new $20,000 spread for net $5,000 plus your loss of $1,765 but now it's a $20,000 spread that's $10,000 in the money so not a bad re-investment.  


  9. WBA HA HA 


  10. My account has always shown 10 Jan 22 CHL calls  — they are naked — I always just left them in case CHL came back

     

    So I got this email this morning from TDAmeritrade…

     

    We are writing to inform you of a change to the deliverable requirement on options positions you currently hold in your account ending in 7341. This change is the result of a Merger – Cash Only.

    Your CHINA MOBILE LTD option contract(s) have been adjusted to reflect the following deliverable terms:

     

     

    Cash $3,020.45

    All equity stock options that convert to 100% cash as a result of a corporate action will be subject to early expiration.

    If you have any questions, please log in to your account and go to the Message Center to write us. Or call a Client Services representative at 800-669-3900. We're available 24 hours a day, seven days a week.

    We appreciate your business and look forward to serving your account.

     Did anyone get the same email?  What does it mean because my account still looks the same and my options are still listed with a 0.50 ($500) value.

     

    I was hoping they were giving me $3000 for my worthless options


  11. IBM 

    I am now showing the new position of options. This exclude my stock holdings 

    Guess I just let them run. What does Phil think?

    IBM1211217C150 17-Dec-21 150 -2 CALL 2.15 0.62 71%

    IBM1220121P110 21-Jan-22 110 -2 PUT 9.475 1.02 89%

    IBM1220121P130 21-Jan-22 130 -3 PUT 16.35 7.70 53%

    IBM1220121C150 21-Jan-22 150 -4 CALL 13.56 0.37 97%

    IBM1230120P100 20-Jan-23 100 -7 PUT 12.47 5.15 59%

    IBM1240119P100 19-Jan-24 100 -2 PUT 8.59 8.80 -2%

    IBM1240119C110 19-Jan-24 110 2 CALL 22.49 21.50 -4%


  12. Jefl,

    Yes got the same letter, do not know what they mean with the 3,020.45, funny the same amout that you have. I did convert all my stock, however still hold the following options. I would be happy if the short puts would be assigned to me. 

    CHL230120C30 20-Jan-23 30 -5 CALL 3.62 0.5 86.19%

    CHL230120P25 20-Jan-23 25 -5 PUT 3.73 50.925 -1265.28%


  13. Yodi/Jeff/CHL – short the Jan 23 30 Puts in Fidelity and got no messages. 


  14. Stock is trading today at 27.51 so both my put and call is OTM, not sure what they want.


  15. Regarding VISA and MC, need to account for the new BNPL (buy now pay later) stocks that are trading for crazy! multiples.  Look at AFRM as an example.  Every time you buy on Amazon or any on-line store, anything over $50 is offered in payments.  Most millenials are averse to credit card debt, but see this as something else (even  though it is not).  No interest (in their mind) but hefty late fees. In about one year, BNPL has taken up almost 7% of payments.  Square bought Afterpay.  Paypal bought Paidy ($2.7B). There is a reason Visa and MC are going down .. 


  16. Well, I ordered a new iPad and a laptop from Apple and was offered to pay in installments @0% on Apple credit card. I did the maths to confirm it, and yes, no fees whatsoever, just straight amount of the purchase over 12 months. With automatic cc payments what is not to like?)


  17. You are a responsible, financially  sound person.  But, this  is crack for the young adult!  You are right, no interest.  But they get you somewhere! and the somewhere is when payments are missed.  Just pisses me off that they are addicting the bottom 80% to buying more stuff!  Sorry for my high horse .. this is just one of my pet peeves as I see more and more young adults, especially those without financial literacy being sucked into this. 


  18. Phil:

    I have a question.  There was an article in the WSJ recently about the rise of passive ETFs. Approximately 40-50% of all  trading is being done  through these passive index ETFs.  Very little fundamental "analysis" is being done.  As a money manager, it really does not  make sense for the analysts to focus on stock picks when they could be marketing to bring in more AUM.  With so much money going into the ETFs, that drives the price for the stocks that are included in the index. The question I have is what happens to the stocks that are not in an index .. Would love your thoughts .. possibly even one of your daily writeups.  


  19. CHL

    I received the same email from TD Ameritrade ( and $3,020.45 amount). I have a debit Call Spread and am long a put. That is affecting my YTD calculation ;(


  20. Yodi/Jeff/seer/randers1/CHL – On Wednesday (11/3) my shares of CHL were sold at $30.2045 with the message: "SOLD -100 CHL UPON MANDATORY – CASH MERGER"

    My short Put and Call are still sitting there though.


  21. PYPL has been getting hammered, Phil justified in your opinion?


  22. CHL again, my question how does every one gets the same amount in cash?????


  23. MRNA an other drop like today and our puts are ITM, are they have stopped selling vacines?


  24. forget SHIB coin, go for ETHM


  25. Hi Phil,

    Is MRNA/BNTX buy at these levels? Your thoughts on MRK/PFE given that both of them have anti-viral almost ready


  26. Yodi,

    pandemic is scheduled to be over in January so no need for any more vaccine. ????????????

    https://www.cnbc.com/2021/11/05/pfizer-board-member-gottlieb-says-the-covid-pandemic-could-be-over-in-the-us-by-january-.html


  27. All the question marks was suppose to be emojis laughing. So, LOL.


  28. Phil/WBA Must have been asleep at the wheel that day! IBM will roll. Thanks


  29. Phil / BABA

    Considering that the stock price has fallen down since you recommended rolling the $200 calls, if I were to rollout now should I roll to 40 2024 $180 – $230 bull call spread or maybe look at rolling to 30 2024 $160 – $230 bull call spread?

    "BABA – We're agressively long on these and I think we're safely bottoming so let's roll the 20 2023 $200 calls at $20.50 ($41,000) to 40 2024 $180 ($39)/230 ($23.50) bull call spreads at net $15.50 ($62,000) and that puts us in a fairly conservative $200,000 spread for an additional $21,000."


  30. CHL/Jeff – That would be nice if we can salvage something out of it.  

    IBM/Yodi – Oh, they stripped it out?  Interesting.   If those are coming up as ordinary options (without a KD subtracton), they'll be fine as those are the trading instruments going forward.  Just be sure those are the liquid ones as the old ones will get untradeable after a while and then you're stuck until expiration.  

    CHL/Yodi – As far as I understand, they can only liquidate as assigning you stock is not legal which hopefully means short puts do expire worthless (the stock can't be put to you either).   

    V/Nom – All it's doing is expanding the payment world and inflation will accelerate that.  Check out Visa's annual revenues:

    Year End 30th Sep 2015 2016 2017 2018 2019 2020 TTM 2021E 2022E CAGR / Avg
    Total Revenue
    $m

    13,880 15,082 18,358 20,609 22,977 21,846 22,647 24,059 28,209 9.50%

    MA too:

    Year End 31st Dec 2015 2016 2017 2018 2019 2020 TTM 2021E 2022E CAGR / Avg
    Total Revenue
    $m

    9,667 10,776 12,497 14,950 16,883 15,301 17,788 18,839 22,516 9.62%

    It's nice to hear these investing stories and the may seem to make sense but if the FACTS don't drop to the bottom line – it's the story you should question, not the continuing trends.  

    UnionPay stays on top as the world's largest card scheme | MK Smart – Smart  Digital Security

    Union Pay (Chinese) rocks!  

    AAPL/Hwtdr – What's not to like is about 7 months from now you're looking at your statement and think "what the hell is that for?"  At least, that's what happens to me…

    Stuff/Nom – I don't think young people are total idiots.  A kid in school with a job that pays $300 a week can't possibly buy a $2,000 laptop but they can budget themselves to pay $150/month for 2 years or whatever.  Making it possible to buy something in installments is what built this country and yes, it can be abused on both sides, but there wouldn't be an auto or home industry without it – I'm not even sure everyone would have smartphones if they had to plunk down $1,000 every 2 or 3 years in a lump sum.  

    I think a certain percentage of those profits should go into financial education in grades 6-12 – that's the way to address the issue.  

    ETFs/Nom – That's my pet peeve!  Non-indexed stocks tend to trade more on merits, which makes me happy.  ETFs are the tide that lifts (or sinks) all ships, regardless of merit.  Look at the Nasdaq with AAPL around 20% of the index – what's the point of the other 99 stocks?  The reduced it to 10% a few years ago but, at $2Tn, it took over again.   Hard to find a stock that's not in some kind of index or ETF, of course. 

    $3,020.45/CHL Crowd – Looks to me like there's a calculation error in the letter they sent out.

    PYPL/Kustomz – Haven't seen you in a while!   $268Bn for PYPL is 50x current earnings and 40x fantasy forward earnings so yeah, if they are not firing on all cylinders, the sell-off is justified (and overdue).  As I was saying above – stocks bought by idiots who don't grasp simple math.

    MRNA/Yodi – They stopped DELIVERING vaccines (supply chain issues) but there are orders for every dose they make into 2023.  People don't understand logistics either.

    Coins/BDC – Still staying away.

    MRNA/Harip – See above, PFE still my favorite so no reason to own MRK for me.  BNTX we just talked about:

    BNTX/Yodi – Hard to say whether or not they are a one-trick pony but one trick is all they need as we'll be getting Covid vaccines every year, it looks like.  They are not wasting this opportunity and are developing 20 more vaccines with potential to launch over the next 5 years.  They are also working on cancer therapies – obviously huge money IF they can get a winner.   Overall, BNTX is as likely as MRNA to succeed over the long haul and MRNA has a $136Bn valuation on $20Bn in sales with $12Bn in profit while BNTX gets less respect with a $66Bn valuation, $16Bn in sales and $9Bn in profits.  Since their burn rate in 2019 was only $279M, their cash ($8.5Bn) with another $18Bn coming means they will be able to work on whatever they want for quite a long time.   

    So I think Yodi has found a worthwhile investment but, unfortunately, it's a pricey stock so it only fits in our LTP at $283.50.  In the LTP, let's:

    • Sell 5 BNTX 2024 $200 puts for $35 ($17,500) 
    • Buy 10 BNTX 2024 $300 calls at $80 ($80,000)
    • Sell 10 BNTX 2024 $400 calls at $54 ($54,000) 

    That's net $8,500 on the $100,000 spread so you have to love the upside potential of $91,500 (1,076%) but we're not in the money – it's a speculative bet that they do find something else to sell over the next 12 months, otherwise our investing premise is dead.  So let's remember to keep an eye on these and hopefully Pharm will have some color commentary on the subject when he checks in.  

    Pandemic/Gard – That's interesting as you'd think he knows something but he's a somewhat-biased Trumpy but we would have been better off with him still there (left after 2 years) when the virus hit as he had advocated preparedness and a strong reaction early on.  I think his statement to CNBC is more of an anti-mandate thing than any kind of fact (1,125 died yesterday, 83,229 infected).  That's why I ignored it earlier in my news feed.  

    BABA/Jij – Sure, that's valid.  Same concept with better strikes.  If you are going to $160 though – why not be happy with short $210s and keep your cash on the sides?  You are trying to have it both ways, that doesn't always work.  


  31. Pandemic/Phil,

    I was trying to be sarcastic. Guess sarcasm doesn't always work online. LOL


  32. Gardling – heh – sarcasm almost never works online (I almost never catch it even in person, so there is that). And funny characters don't work here, either – I tried once or twice to post something with Korean font in it. Nope.


  33. Phil,

    any thoughts about a MU trade ? I only see the Jan23 $60 put in the LTP.


  34. Hi Phil:  In terms of translating my existing IBM position into the new options, if the mid-points are to be believed I can sell my Jan 2023 115/140 spread for 10.90, and buy the Jan 2023 110/135 spread for 10.40.  Does this seem like a reasonable move or would you do something different?


  35. Yea Phil, the valuations are nuts. Im here, I read your morning posts everyday, part of my daily routine. I've been carnivore on and off, on now and I live on ribeye. Im going to check out the link for wagyu beef you posted. 


  36. VIAC – hoping it bottomed at $35.80. 


  37. Sarcasm/Gard – I got it after I read the next comment but that was after I answered the first.  I hope people get sarcasm on-line or I have no idea what they must think of me!  

    MU/Gard – Great price down here.  We sold 10 2023 $60 puts for $5.15 back in June in the LTP and they are still about the same price.  So that's $5,150 we got paid and we can pick up 20 of the MU 2024 $60 ($21.86)/80 ($13.40) bull call spreads for net $7.46 ($14,920) so that's net $9,770 on the $40,000 spread that's more than $20,000 in the money to start and, when they get back over $80, we can sell some short calls for income.

    IBM/John – I'd go for 2024 but I'd also wait for a bit more clarity on the spin off, so we can understand what the new target for IBM should be.  On the other hand, I'd offer a low price for the 2024 calls and offer a low price for the short 2023 calls and ask for a high price for the 2023 long $110s and see if you get any nibbles while you wait.

    Canivorous/Kustomz – I try to be good but, if I'm going to be bad, I want the best possible steaks and burgers – not just any old meat.  Definitely try it – on the one hand, it's a bad addiction but, on the other hand – it's much easier for me to say no to normal steaks these days as they don't really do it for me anymore.  

    VIAC/Jeddah – Another one I don't mind owning a whole lot of if people keep selling it cheaply.   This TMobile deal is for their 105M customers (also Sprint) so great exposure for Paramount+ (VIAC), which has about 50M subscribers currently (probably less than 25% overlap).  

    Essentials is Paramount’s base membership package. The ad-supported tier normally sells for $4.99 per month, or $49.99 annually if you agree to pay for a full year up front (a savings of roughly 16 percent). Essentials includes everything you’d get with the Premium (ad-free) bundle, with the exception of your local live CBS station.

    T-Mobile’s offer extends to customers on any postpaid or Internet plan, and is even available to existing Paramount+ subscribers. Eligible customers can visit T-Mobile’s website starting November 9 to redeem the offer. Note that after 12 months, the subscription will automatically renew at the standard $4.99 rate. You’ll need to cancel before the promo expires in order to avoid being billed for the subscription.

    ViacomCBS added 4.3 million global streaming subscribers in its third quarter ended in September, driven by the Paramount+ service, to reach nearly 47 million global paid users, the entertainment company reported on Thursday.

    It had ended the second quarter with more than 42 million global paid streaming customers after adding about 6.5 million in the April-June period. For the third quarter, analysts had on average forecast 3.9 million additions. In the first quarter, running from January through March, the company had added 6.0 million.

    I don't see any indication of what TMUS paid VIAC – probably not much.  

     


  38. By the way, that's another lesson in valuing the news.  So let's say VIAC adds 10M subscribers at $50/year – that's $500M which is not a big deal on $28Bn in revenues but what is the cost of adding 10M streaming subscribers?  Well it cost Cardi B about $0 and maybe a bit more for VIAC but not much so figure a good $350M of that would be profit and profits are only $2.5Bn a year so we're talking about a potential 10% pop in profits but they won't show up until Q4 next year, when the first wave of free subscriptions run out.   Still, it means we should be happy holding VIAC into 2023 as these numbers begin to kick into the bottom line and "surprise" the analysts.  


  39. Any ideas for what to do with a big position in  NVDA?  I  am long the shares, with a big cap gain.  Thought about selling  the Jan 300's for about 30.  Any better ideas?  


  40. NVDA/Nom – Taking $300 and running is not an option?  I would absolutely get out and take the 2024 $300/380 bull call spread for $25 so $275 off the table and you still have another $55 upside if it keeps going.  If it's for tax reasons, I'd sell the 2024 $300s for $86 as that's well-covered (and you can always sell short-term calls too) and, when you are able to take your gains, you can roll up the short $300s to $380s ($60) and buy the $300s to cover so only net $20 and you cash in your stock clean as a whistle.  

    Have a great weekend, folks!

    - Phil