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Just Another Manic Monday

DOW 36,000!Dow 36,000!  

We're finally here.  Just a little late as this book was published in November of 2000 arguing that stocks in 1999 were signigicantly undervalued and traders did not understand the "new paradigm" and that the Dow would go up 4 TIMES in the next 4 years.  Well, 22 years later they are finally "right" and the Dow closed last week at 36,327.  

If we consider inflation to average 3% over 22 years, the Dow SHOULD be around 16,000 with inflation alone.  Inflation, however, has an interesting effect on the market as it also inflates earnings – even though the earnings, in real-dollar terms, as no more than they were before the inflation.  

In other words, if I sell you a hamburger I make for $1 for $1.50, I make 0.50 in profits but, if I price it in Pesos, which are 2 for a Dollar, then I sell you a hamburger for 3 Pesos that cost me 2 Pesos to make and I make 1 Peso.  It's the same thing, we're just measuring it differently.  That's where people get confused because we're comparing Dollars to Dollars and people can't get their head around the fact that a 2021 Dollar is not the same as a 1999 Dollar – but they are different as Pesos and Dollars are today!    

So the stock making a profit of 0.50 selling hamburgers and getting a 20x multiple would be valued at $10 while the stock making a profit of 1 Peso and getting the same 20x multiple would be valued at 20 Pesos – much more, right?  No, it's the exact same thing and so is a stock that was making 0.50 in 1999 but is now making $1 – the stock price may have gone from $10 to $20 but it's the exact same real value as it was back then – the "growth" is an illusion.  

Then we take into account the declining purchasing power of those dollars, which also relates to inflation and that's down 35% since 2000.  That means you need $1.6 today to buy whatever you could back in 2000 – including stocks.  Now, look at the P/E Ratio of stocks over the past 10 years – it has DOUBLED!   The average stock on the Dow and S&P 500 is trading at 38 TIMES their earnings – meaning it will take them 38 years to make back the money you invest, an interest rate of less than 2% taking inflation into account but think of what the buying power of your returned Dollars will be by then.   

Of course interest rates are near zero so 2% is better than 0% you get for savings and that explains Dow 36,000 but, when you are starving on a deserted island you might eat bugs to survive – but that doesn't mean you are going to be craving bugs once the crisis has passed, does it?  What will happen to investors and the decisions they make once this crisis is past?  Will they still want to buy stocks at 38 times earnings?  

Chinese Cockroach Photos - Free & Royalty-Free Stock Photos from DreamstimeJust because someone will pay you $5 for a roasted cockroach today, doesn't mean they'll pay you even $1 tomorrow if the situation changes so picking the "best" of a bad batch of stocks is not the optimal strategy.  At PSW, we have been sticking to stocks with much better P/E rations – generally below 20 – in the hopes that the companies who are actually making money will be able to withstand a correction better than those with runaway aspirations.  

Speaking of the best of the worst, Chinese Junk Bond Rates popped to 25% this weekend as that Evergrande thing never did  go away just because we stopped focusing on it.  When the current rate of bonds goes to 25%, the old bonds, which pay less interest, lose value and the average Chinese bondholder has now lost 1/3 of their value on bonds held.  That can lead to more panic and more selling and even higher rates 

What began early this summer as a confidence crisis around industry giant China Evergrande Group has spread to numerous real-estate firms that are now at much higher risk of reneging on their debt. At least four developers have defaulted on dollar bonds since September with rates already climbing near the peak they hit during the last financial crisis – when we also ignored the warning signs from China just before the whole World went off a cliff.  

That last peak was March of 2009, when we were well into the crisis, which had been obvious to everyone since October.  Oblivious is more the word I'd use to describe the current investor mindset.  

The surging yields imply very high default risks, and are themselves adding to developers’ problems, by making it hard or impossible for companies to refinance by issuing new debt.  “It is a surprise how much even high-quality companies are being impacted,” said Jim Veneau, head of fixed income for Asia at AXA Investment Managers. “There’s no doubt that market distress is starting to become a factor in and of itself for companies,” he added.

For example, Shunaio Group Holdings wrote in a note to clients, cutting targets to about 290 billion yuan, the equivalent of about $45.3 billion, from an earlier target of 330 billion yuan.  Shimao’s $1 billion, 5.6% bond due 2026 was quickly quoted at less than 65 cents on the dollar on Monday afternoon in Hong Kong, according to Tradeweb, down from about 88 cents a week earlier.  Recent company data has shown that a brutal downturn in sales, already evident in September, extended into October for many developers. 

But fear not as Jerome Powell is speadking at 10:30 this morning but it's a conference on Gender and the Economy, so we don't expect anything shocking there.  Clarida goes at 9, Montgomery at 10 on a timely titled "The Implications of High Leverage for Financial Instability Risk, Real Economic Activity, and Appropriate Policy Responses" and then Harker give Economic Outlook at noon with Evans speaking at 1:50.  Only 4 more speeches the rest of the week and very little data with Thursday being a sort-of holiday (Veterans Day):

And, of course, the earningspalooza continues:

Image

With 400 of the 500 S&P companies reporting so far, results are generally up about 40% from last year but those are easy comps when, in fact, we're barely back to the earnings we had in 2019, but the market is PRICED 30% higher than it was at the time.  Like all inflation – we are simply paying more money for the same or less earnings and you'd better make sure that is one tasty-looking cockroach you are buying because, eventually – you are going to have to convince someone else to take it off your hands…

Line chart of leading US stock indices, year to date (rebased) showing stock markets have surged during third-quarter earnings season

 


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  1. Good Morning.


  2. Good morning!


  3. A handful of GOP lawmakers at COP26 are showing support for climate measures and highlighting the role U.S. businesses can play in the transition to clean energy.834 min ago 3 min read

    How a $1 Trillion Infrastructure Bill Survived an Intraparty Brawl



  4. Rich Millennials Would Rather Manage Their Own Money, Thank You


  5. XLY -0.30%Nov. 08, 2021 9:34 AM ET6 Comments

    • A large portion of ETFs that hold Tesla (NASDAQ:TSLA) can be affected as investors measure the impact of Elon Musk potentially selling a significant stake of the company if he follows through on a Twitter poll.
    • Tesla opens Monday's session and dips down 7%, and jeopardizes many funds, but the top ten ETFs that hold Tesla are listed in the below chart. Data is per etfdb.com.
    • Consumer Discretionary Select Sector SPDR ETF (NYSEARCA:XLY) is the top holder of Tesla, weighted at 21.53%. Cathie Wood's innovative ETFs represent three of the top ten ETFs that hold Tesla led by ARK Autonomous Technology & Robotics ETF (BATS:ARKQ), ARK Next Generation Internet ETF (NYSEARCA:ARKW), and ARK Innovation ETF (NYSEARCA:ARKK).
    • Tesla remains on watch after Elon Musk indicates he might sell up to 10% of his shares.
     


    IMAX -0.63%Nov. 08, 2021 9:29 AM ET

    • IMAX is up 1.2% premarket alongside news that Disney (NYSE:DIS) will release 13 of its Marvel films next weekend on Disney+ in "IMAX Enhanced" mode – a theater-style ratio that will squeeze more action on the screen.
    • The news is part of a string of announcements coming this week as part of Friday's Disney+ Day, set to reveal a cornucopia of fresh content to set up the holidays and coming months on the streamer.
    • The IMAX Enhanced films will include Shang-Chi and the Legend of the Ten Rings - the year's top-grossing film, which is hitting Disney+ for no added charge after a shortened theatrical window.
    • But IMAX Enhanced will also feature Iron Man, Guardians of the Galaxy, Guardians of the Galaxy Vol. 2, Captain America: Civil War, Doctor Strange, Thor: Ragnarok, Black Panther, Avengers: Infinity War, Ant-Man and The Wasp, Captain Marvel, Avengers: Endgame and Black Widow.
    • It's a non-exclusive deal, so IMAX Enhanced could hit other streamers as well. And CEO Rich Gelfond says he thinks seeing IMAX Enhanced at home might spur more viewers to seek out IMAX theaters for the full experience.
    • Disney is promoting Disney+ for $1.99 for the first month as part of its festivities.

    GOOS -1.87%Nov. 08, 2021 9:13 AM ET1 Comment

    • Canada Goose Holdings Inc. (NYSE:GOOS) is downgraded to Neutral from Outperform at CIBC after an almost 20% price jump following a FQ2 profit last week.
    • Analyst Mark Petrie believes that the clothing company's recovery is underway and adequately priced in now. "F2022 still represents a recovery year given limited tourism but we remain comfortable with an outlook for F2023 that will bring continued revenue growth and a return to 20%+ EBIT margins," he writes in an analyst note.
    • Shares are essentially flat pre-market.
    • CIBC assigns a price target of $67 to the stock. The average price target for GOOS is $46.29. For analysts covering the stock, 8 are bullish, 4 are neutral, and 3 are bearish.

    BTC-USD +5.97%Nov. 08, 2021 8:43 AM ET15 Comments

    • As crypto markets gain more upside momentum, Bitcoin (BTC-USD) topped $65K over the weekend before climbing as high as $66.9K on Monday, while Ethereum (ETH-USD) pushes to a new all-time high at $4.8K per token.
    • After BTC reached its intra-day high, it has since pulled back somewhat to $65.6K, and ETH retraces a bit to $4.7K, though both tokens are still elevated.
    • A $70K price tag for Bitcoin (BTC-USD) now "seems imminent," Mikkel Morch, executive director at crypto hedge fund ARK36 said in a note via email, CNBC reports.
    • "Importantly, the uptick doesn't seem to be leverage-driven but rather results from the increased demand on the spot market where there's currently very little sell-side liquidity," according to the note.
    • The largest crypto by market cap is trading just under its record high as $66.7K from October, though Ether (ETH-USD) outpaces BTC as more coins get taken out of circulation, a rather simple supply/demand dynamic that contributes to higher prices.
    • The crypto universe also surpassed a $3T market cap on Monday for the first time, President of Bianco Research, Jim Bianco, highlights in a tweet.
    • As seen in the chart below, Ether (ETH-USD) (+938%) has outperformed BTC (+322%) every day since the beginning of this year. 
    • It's not surprising that most crypto-related stocks including Marathon Digital (NASDAQ:MARA), Bitfarms (NASDAQ:BITF) and Riot Blockchain (NASDAQ:RIOT) are gapping up at least 9% in pre-market trading.
    • The Grayscale Ethereum Trust (OTCQX:ETHE) (+6%) and Grayscale Bitcoin Trust (OTC:GBTC) (+7%) post solid gains as well.
    • The first-ever Bitcoin (BTC-USD) futures exchange-traded fund, ProShares Bitcoin Strategy ETF (NYSEARCA:BITO), also climbs more than 8%.
    • Recall last week that crypto stocks outshined the financial sector even as BTC stalled a bit

    SPY +0.23%Nov. 08, 2021 8:29 AM ET3 Comments

    • A third of all consumers and more than half of high-income consumers plan to spend more on holiday gifts this year, Morgan Stanley says.
    • "A quarter of consumers would not buy fewer goods if prices rise while approximately half would buy a few less goods," chief equity strategist Mike Wilson writes in a note. "Only roughly a quarter would plan to scale back purchasing significantly because of price increases. Price sensitivity decreases as income increases."
    • "Consumers are willing to dip into savings or utilize credit cards should stores increase pricing; 36% of consumers would spend more on existing cards or open new cards while 22% would spend savings," Wilson says.
    • With supply chain disruptions widely reported, two-thirds of shoppers are worried about stores running out of holiday gifts, while nearly half plan to start shopping earlier than usual.
    • But a big-spending holiday season could quickly take a thrifty turn, with demand dropping in the new year, Wilson says.
    • Consumers "are reporting weaker household finances (24% reporting that their financial situation will get worse over the next 6 months vs 19% one quarter ago) and have a weakening outlook on the economy (45% expecting the US economy to get worse over the next 6 months vs 41% one quarter ago)," he adds. "Consumer concern around inflation reached an all-time high with 52% of respondents citing it as their top concern in 2022."
    • All S&P sectors are seeing year-over-year earnings growth, but Consumer Discretionary (NYSEARCA:XLY) and Consumer Staples (NYSEARCA:XLP) are the only ones not seeing double-digit growth.
    • S&P nears target. Morgan Stanley also looks at the broader market as the S&P 500 (SP500) (NYSEARCA:SPY) approaches its bull case target of 4,800.
    • "Bottom line, the equity market is making a run at our bull case targets even faster than we expected as both retail and institutional participation follows the seasonal trends and fears of tax hikes and the oncoming Fed taper recede," Wilson says. "We think this dynamic is very close to completing on price but acknowledge the seasonals remain supportive through Thanksgiving/early December."
    • "With prices now approaching our bull case of 4800, the risk/reward is getting worse, not better, given our still high conviction view in the 'ice' scenario (lower growth) playing out by 1Q."
    • Leuthold's Jim Paulsen says cyclical stocks may be about to take a "manic" turn higher.
     


  6. WMT -0.59%Nov. 08, 2021 7:51 AM ET4 Comments

    • Walmart (NYSE:WMT) now has about 14.1M members in its Walmart+ delivery subscription service, according to the latest tracking by Morgan Stanley.
    • The retail giant is estimated to have reached a penetration rate of 11.1% of U.S. households, which marks a high in the MS survey.
    • While the program is noted to be still adding new members, it is at a slower pace since the summer. On the positive side, the membership total addressable market defined as "very likely" to subscribe to Walmart+ is now estimated at 23.7M members.
    • Morgan Stanley analyst Simeon Gutman says Walmart+ is offering ancillary perks with little capital investment that could be making a difference on membership at the margin. Looking ahead, Walmart (WMT) is expected to see leveraging benefits with costs.
    • Morgan Stanley keeps an Overweight rating on Walmart (WMT) and price target of $170.
    • Read Seeking Alpha author The Value Pendulum's breakdown on the upside of Walmart+.

    FDX +2.11%Nov. 08, 2021 6:48 AM ET

    • Evercore ISI updates on FedEx Corporation (NYSE:FDX) after meeting with management last week.
    • FedEx (FDX) is said to be making good progress on hiring for peak season and have an improved overall tone on the labor situation.
    • "While it still has some work to do to fully prepare for next month, the company sees a different hiring environment than the one it was in in late September. While the company was hopeful that hiring challenges would subside by the end of CY21, the tone was previously cautious and it now appears visibility and confidence in this improvement have increased."
    • Evercore ISI also notes that the earlier shopping push by consumers this year could impact the spread of profitability between F2Q and F3Q for FDX. The firm keeps an Outperform rating on FDX and price target of $300.
    • Shares of FedEx (FDX) trade below their 100-day and 200-day moving averages.

    TSLA -2.59%Nov. 08, 2021 5:19 AM ET136 Comments

    • Shares of Tesla (NASDAQ:TSLA) are down 6.5% to $1,142 in premarket trade after Elon Musk took to Twitter with a poll about selling 10% of his stake in the EV maker. Before the tumble, a tenth of his holdings were valued at $21B, a substantial sum, even for the world's richest person. "Much is made lately of unrealized gains being a means of tax avoidance," Musk wrote in the tweet, adding that he would "abide by the results of this poll, whichever way it goes."
    • What happened? About 58% of 3.5M voters backed the move, putting Musk on the hook to follow through on his pledge. However, many expressed concern that such a sale would hurt the stock, especially after a new high of $1,229.91 reached last week and a 43% surge in October. Last month, Musk also slammed a Democratic proposal to tax billionaires' annual unrealized capital gains, saying, "eventually, they run out of other people's money and then they come for you." Check out Musk's history of commenting on Tesla's share price.
    • Meanwhile, the current top tax rate on long-term capital gains is 23.8%, but Congress has also considered raising it (changes often take place immediately to prevent gamesmanship). Many have also pointed out that Musk would have anyways needed to sell millions of shares this quarter due to a looming tax payment of around $15B. He was awarded TSLA options in 2012 as part of a compensation plan and CNBC noted this could have been the real reason for the sale.
    • Commentary: "Elon still can't talk the stock down for long. And remember the people voted for him to sell. So what, he sells 1-2 mil shares. It’s peanuts on a $1.5 tril company," tweeted Ross Gerber, CEO of Gerber Kawasaki Wealth & Investment Management. "It’s extremely rare in fact to have a founder with so much of their worth in their public company. Many like Zuck and Bezos have been extracting billions in cash for years from stock sales."

    UAL +2.18%Nov. 08, 2021 4:22 AM ET35 Comments

    • The U.S. today is finally lifting pandemic travel restrictions that have barred many international visitors from visiting America. The measures were first instated by the Trump administration in March 2020 to limit the spread of COVID-19, but were later upheld by President Biden to include more than 30 countries like Brazil, South Africa, the U.K. and much of Europe. The reopening of the border comes with a new set of rules, but is being looked upon as aiding in the economic recovery.
    • Fine print: International visitors will have to show proof of vaccination by a jab approved by the FDA or listed by the World Health Organization (including Pfizer/BioNTech, Moderna, J&J, AstraZeneca, Covishield, Sinopharm and Sinovac). The U.S. will also require proof of a negative COVID test from within the past three days (rapid antigen and PCR are both accepted). Exceptions include travelers under age 18 and those traveling from countries with low vaccine availability.
    • Airlines are celebrating the news, with United Airlines (NASDAQ:UAL) saying it expects 50% more international inbound passengers on Monday from a week earlier (when it carried 20K people). Delta (NYSE:DAL) also anticipates strong demand over the next few weeks, while American Airlines (NASDAQ:AAL) forecasts international capacity for November and December to be more than double that of a year ago and down only 28% from 2019. According to airfare-tracking site Hopper, international flight searches to the U.S. have more than quadrupled since the Biden administration announced it would lift the restrictions in September (compare returns of the airlines here).
     

    • Go deeper: The border opening is also likely to drive up revenue for hotels, restaurants and retailers. Global visitors contributed more than $43.4B of shopping in 2019 – or 27% of the total shopping driven by travel and tourism. "The return to the service and the experience economy is going to be positive and beneficial for retail and it's going to be enhanced furthermore by these international visitors returning to the U.S.," said CEO Matt Shay of the National Retail Federation.
    • Related: Macy's (NYSE:M), Nordstrom (NYSE:JWN), Capri Holdings (NYSE:CPRI), Simon Property Group (NYSE:SPG), LVMH (OTCPK:LVMHF).

    XLI +0.53%Nov. 07, 2021 6:40 PM ET50 Comments

    • "Versus the overall stock market, they are currently being priced lower than 91% of the time since 1945," Leuthold Group strategist Jim Paulsen says.
    • Cyclical stocks trailed growth last week overall, as long-term yields (NYSEARCA:TBT) (NASDAQ:TLT) fell. But the performance was mixed.
    • Materials (NYSEARCA:XLB) gained 3.2%, compared with the S&P 500 (SP500) (NYSEARCA:SPY) rise of 2%.
    • Industrials (NYSEARCA:XLI) rose 1.8%, Energy (NYSEARCA:XLE) gained 1.4% and Financials (NYSEARCA:XLF) fell 0.6%.
    • Top-performing sector Consumer Discretionary (NYSEARCA:XLY), up 5%, is normally considered a cyclical sector, but the weighting of Tesla (NASDAQ:TSLA) and Amazon (NASDAQ:AMZN) has moved it further to growth from cyclical.
    • Although cyclicals were a big part of the early bull market they look like a bargain and are priced more to a recessionary low, Paulsen says.
    • "Compared to the overall stock market, cyclicals are in a position similar to where they were at the start of several past major bull-market runs: the early 1960s, early 1980s, early 1990s, and early 2000s," he writes in a note.
    • Also underowned. The weighting of cyclical stocks on the broader market has dropped recently and portfolio managers have cut their target weightings.
    • "And, because of the raging performance of growth stocks, for so long and by so much, most managers are probably underweight these lowered targets," Paulsen says. "This creates a situation in which cyclicals could start leading again, and many managers may have to add cyclicality just to lessen their underweights."
    • "And, of course, if cyclicals outpace and growth fades, the S&P 500 cyclical weighting would rise quickly, forcing even more cyclical buying by investors."
    • With cyclicals underperforming since March of this year, when Treasury yields hit their highs, "investors have the opportunity to buy cyclicals priced similarly to where they were priced, historically, in the midst of many post-war recessions," Paulsen adds.
    • "As this analysis demonstrates, the excessive cheapness of cyclical stocks, currently, may be the most compelling gauge of future performance."
     


  7. Comment content omitted because it is too long.


  8. FB -0.04%Nov. 07, 2021 12:02 PM ET121 Comments

    • Buzzword or breakthrough, the word "metaverse" has spread like wildfire through media discussions, boardrooms and earnings conference calls since Facebook (NASDAQ:FB) CEO Mark Zuckerberg said this summer that his vision was to become the "metaverse company" - and doubled down just over a week ago by renaming the parent company Meta Platforms. But what is the metaverse? And why are so many companies quick to cite the buzzword as they talk about their future plans?

    Metaverse as a search trend on Google

    A Google Trends depiction of the interest in the term "metaverse"; the spike coincides with the second half of October.

    • The term isn't new. It arose from early-'90s science fiction. In Neal Stephenson's novel Snow Crash, it represented virtual urban "real estate" that people could own and virtually travel through, encountering other users and otherwise engaging in life activities – and fantasies.
    • At its essence the term represents a shared virtual space, existing continuously on the Internet, and rendering information and interactions in a three-dimensional immersive virtual reality, rather than simply watching a screen. Imagine VR (virtual reality), but rather than moving through your own private world, it's in a huge shared space, the same way the Internet originally connected discrete networks into one, super-interconnected space.
    • There's no one definition that everyone accepts for a concept this new – which means that the ultimate boundaries will be shaped by the players investing the most.
    • Facebook's corporate name change to Meta Platforms indicates its seriousness about taking virtual ownership of the concept. In the company's July earnings call, CEO Mark Zuckerberg described the metaverse as "a virtual environment where you can be present with people in digital spaces. You can kind of think of this as an embodied Internet that you're inside of, rather than just looking at."
    • Meta is putting its early product-demonstration focus behind Oculus (which it bought in 2014), particularly its well-received Oculus Quest 2 virtual reality headset. In August it introduced Horizon Workrooms, a remote meeting solution that relied on the Quest 2 to pursue more natural virtual meetings than video calling, using mixed-reality desk/keyboard tracking, hand tracking, spatial audio and "Oculus Avatars."

    Facebook

     

    Avatars gather in a virtual meeting space in Meta Platforms' Horizon Workrooms.

    • Now "Horizon" will be the brand under which Meta produces immersive social experiences that used to fall under Oculus. "Horizon is the social platform we are building" in order for people to relate in the metaverse, Zuckerberg says: The house that serves as a starting point when Quest 2 users enter the space will change from Home to Horizon Home, while Horizon Worlds will expand beyond home and office to offer applications including virtual concerts and afterparties.
    • Skeptical investors, however, are coalescing around the school of thought that this "revolutionary" move to a metaverse has been in progress for some time – particularly in video games.
    • Virtual spaces where real users could congregate using iconic representations called avatars are as old as the mid-1990s World Wide Web, when "places" like AlphaWorld and, later, Second Life allowed users to bump into each other and chat (but using then-low-powered computers and their lower-resolution displays).
    • A constantly iterating videogame industry has been bringing ever more lifelike representations of 3D physics into games seemingly every few months. And along the way, it has carved out a sizable premium chunk of the entertainment market.
    • "We're probably the biggest metaverse company on earth," Take-Two Interactive Software (NASDAQ:TTWO) CEO Strauss Zelnick said this week. He doesn't necessarily subscribe to Zuckerberg's vision: "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." But he does see it as useful for enjoying a heightened reality, such as through video games. (Just the same, Take-Two's stock jumped in late October as Zuckerberg highlighted the company during his Facebook Connect keynote, saying Grand Theft Auto: San Andreas would be coming to the Quest.)
    • Videogame companies are no slouch when it comes to matching technological might with other metaverse developers. Before it went public this spring, Roblox's (NYSE:RBLX) founder David Baszucki said, "We're shepherds of the metaverse." The company has its own digital currency for users inside ("Robux"); it's drawn fans to virtual events; and recently Chipotle Mexican Grill (NYSE:CMG) said it would become the first restaurant brand to open a virtual location in Roblox's world.
    • Epic Games, the makers of battle-royale game hit Fortnite, has raised $1 billion to pursue development toward metaverse goals. And Fortnite has already used its tech to draw millions to virtual concerts featuring artists including Ariana Grande and Lil Nas X. So it's already moved beyond games to use its virtual 3D space for non-gaming applications. (Epic is majority-owned by CEO Tim Sweeney, and Tencent Holdings (OTCPK:TCEHY) has a 40% stake.)
    • That's where things get quite metaverse-y: Meta and Mark Zuckerberg envision a world where you'll meet others to work, play – as well as attend entertainment, get fit, and (perhaps most important) shop. (Nike (NYSE:NKE) is looking to hire designers for virtual wear, and has filed for trademark applications for its brands on such things as virtual branded sneakers and apparel.)
    • In a week where everyone was planting their flag on the metaverse concept, Microsoft (NASDAQ:MSFT) CEO Satya Nadella used his Ignite conference talk to say "The Microsoft cloud was built for this era," adding that part of its approach will include a version of its Teams conferencing platform that includes digital avatars for users, rivaling Meta's Horizon Workrooms.
    • Aside from the claims to company thought leadership in the space, though, what about potential suppliers who could benefit from a variety of potential outcomes? An "embodied" Internet will need a metric ton of graphical fidelity – and that means a surplus of processing power from companies like Nvidia (NASDAQ:NVDA), AMD (NASDAQ:AMD) and Unity (NYSE:U).
    • Nvidia (NVDA) stock rose by double digits last week when Wells Fargo said the upcoming arrival of Nvidia's Omniverse Enterprise was the next step in its strategy for development of the metaverse – a $10 billion incremental market opportunity in the coming five years.
    • Unity's (U) CEO John Riccitiello says "I'd argue the metaverse is already here; it's just another word for the Internet," adding that it's not about competition or whether Roblox or Fortnite wins: "There'll be millions of endpoints in the metaverse and these will include shopping sites, games, social networks, messaging apps, 3D conferencing, and job sites and constructions augmented by real-time 3D in the form of Unity Reflect."
    • Companies like Snap (NYSE:SNAP) continue to draw metaverse chatter not because of virtual reality but because of augmented reality, still seen as a window into the metaverse. Snap announced yet another iteration of its Spectacles smart glasses in May at its Partner Summit.
    • One thing's for sure: With tens of billions of investment dollars flowing its way, some concept of the metaverse will be hard to avoid – and it looks like author Stephenson's 1992 satirical take on it may be coming to bloom: a fascinating shared space not so much run by people but dominated by powerful corporations. (Just saying: In Snow Crash, the metaverse's conceptual ground zero, the country has undergone an economic collapse following hyperinflation that coincided with the masses shifting toward digital currency for untaxable transactions.)
    • One fund happy to see Facebook/Meta boosting the metaverse into the center of discussion: The Roundhill Ball Metaverse ETF (NYSEARCA:META), which seeks investment in "companies that engage in activities or provide products, services, technologies, or technological capabilities to enable the metaverse, and benefit from its generated revenue sectors." Seeking Alpha contributor BOOX Research has a bullish stance and recently dug into the ETF's holdings.

    Nov. 07, 2021 6:35 PM ET8 Comments

    • The President's Working Group on Financial Markets, along with the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency wants Congress to enact legislation to ensure that payment stablecoins and payment stablecoin arrangements are subject to a regulatory framework, the report says.
    • Stablecoins, a digital fiat currency, such as Tether (USDT-USD) and USDC (USDC-USD) have exploded 500% to exceed a $127B market cap over the past year, according to the report.
    • "Failure to act risks growth of payment stablecoins without adequate protection for users, the financial system, and the broader economy."
    • Just like traditional banks, payment stablecoins face credit risk, liquidity risk, operational risk and settlement risk.
    • "When not managed comprehensively, these risks can make payment systems less available and less reliable for users, and they can create financial shocks or operate as a channel through which financial shocks spread."
    • In October, Fitch Ratings warned that the volatile growth in stablecoins, along with increased regulation, will potentially weigh on the short-term securities market.
    • The U.S. Treasury Department's regulatory arm believes legislation should require custodial wallet providers, a wallet provider that users can rely on to hold stablecoins on their behalf, to be subject to federal oversight.
    • In addition, digital asset trading platforms and decentralized finance (DeFi) arrangements also pose risks to market integrity and investor protection, the report says. The Securities and Commission Exchange and Commodity Futures Trading Commission have broad enforcement, rulemaking, and oversight authorities that may be able to address those concerns.
    • Some of these risks include fraud, misappropriation, conflicts of interest, money laundering and terrorist financing.
    • Recall earlier in October, the Biden Administration wants stablecoin issuers to be regulated as banks.
    • In June, Boston Fed President Eric Rosengren likens stablecoins to a "prime money market fund by maybe riskier."
    • In July, Treasury Secretary Janet Yellen made plans to hold a meeting with the President's Working Group to discuss the risks and benefits of stablecoins.

    GOOG +0.43%Nov. 07, 2021 11:58 AM ET79 Comments

    • Big Tech companies are the focus of U.S. lawmakers again as Senators Amy Klobuchar (D-MN) and Tom Cotton introduced a bill on Friday aimed at curtailing big acquisitions by "dominant" online platforms.
    • “Big tech firms have bought up rivals to crush their competition, expand their monopolistic market share, and to harm working Americans," Cotton (R-AR) said in a statement. "That’s bad for America. Under this bill, the largest tech monopolies will have the burden of proving that further acquisitions are lawful and good for the American people."
    • Big tech companies like Facebook (NASDAQ:FB), Amazon (NASDAQ:AMZN), and Google (NASDAQ:GOOGL) have been the targets of Congress in the past year as legislators see the companies wielding too much power and influence. Just last month, Sens. Klobuchar and Charles Grassley introduced a different bill aimed at reining in some of the activities of the likes of Amazon (AMZN) and Google (GOOGL).
    • The bill, introduced by the two senators on Friday, aims to give antitrust enforcers more authority to stop acquisition of direct competitors or potential competitors and to shift the burden in merger enforcement to dominant platforms to demonstrate the merger is not anticompetitive.
    • Klobuchar also introduced a bill in February aimed at making it more difficult for large corporations to get mergers approved and gives agencies such as the FTC and the Justice Department "sharper teeth."
    • Also see, Key lawmakers urge FTC to keep up antitrust pressure on Facebook.

    EQC 0.00%Nov. 07, 2021 10:00 AM ET14 Comments

    • Billionaire real estate investor Sam Zell expects that 80% of recent sponsors of SPACS will disappear.
    • "I think that 80% of people who have sponsored SPACs in the last year and a half will disappears and will go do something else," Zell, the chairman of Equity Commonwealth (NYSE:EQC), said at Invest for Kids charity conference on Thursday.  "I think SPACS will jus become another tool in the toolkit of the capital markets."
    • Zell's own SPAC, Equity Distribution Acquisition Corp. (NYSE:EQD), last September raised $360M in an initial public offering, though it has yet to find its target company.
    • "Like everything else when people do things to excess the margins decrease and clearly that's occurred," Zell said. "I think we'll still find the right answer for the investment for us."
    • SPACs, which have had a rough since months since the U.S. Securities and Exchange began to regulate more, may be gaining some traction again. A total of 57 SPACs had their IPOs in October, the highest since March when a record 109 SPACs were issued, according to SPACInsider and CNBC calculation.
    • Zell said that he's less concerned about the SEC's focus on SPACs and their efforts to curb some of their practices this year.
    • "I think what they've done so far is trying to get the excesses out of it," Zell added. "I think that's healthy for everybody."
    • Neil Bluhm, chairman of Rush Street Interactive Inc. (NYSE:RSI), the Internet gaming and sports betting company that went public through a SPAC deal about 10 months ago, believes that SPACs are here to stay.
    • "I think SPACs will be around," said Bluhm, who spoke alongside Zell at the virtual Invest for Kids event. "They've been around a long time. I think they'll survive, but it just won't be the frenzy that we saw six, eight months ago."
    • Bluhm said its become much harder to raise money through PIPEs than it was 10 months ago.
    • "It's very hard to raise money for PIPEs now," Bluhm said. "Now SPACs are somewhat out of style. I think that will turn around. But also the economics are changing, so if you are going to invest in a PIPE you are going to get a better deal today than you were than when we took our company public."
    • Also see on Tuesday Northern Genesis Acquisition Corp. II (NYSE:NGAB) shareholders meet to vote on the SPAC deal with Embark Trucks. Shares of Embark Trucks are likely to begin trading by the end of the week. 


  9. GOOG +0.43%Nov. 07, 2021 8:30 AM ET14 Comments

    • By now, everyone has heard of the FAANG companies: Facebook (NASDAQ:FB), Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN), Netflix (NASDAQ:NFLX) and Google (GOOG, GOOGL). These are companies that pretty much every person, from those companies' chief executives to the average middle school kid has some kind of interaction with on almost a regular basis.
    • Of course, that FAANG acronym might change, as Facebook (FB) has taken on the corporate name Meta, and will soon change its stock ticker symbol to MVRS, to reflect CEO Mark Zuckerberg's dedication to what he calls the "Metaverse". Whether FAANG remains in the public mindset remains to be seen, but there are many, many creative options being bandied about.
    • However, there is another group of companies that are also elite, but don't have an acronym as quite as memorable as FAANG. In fact, there are only three members so far in what might be called the SAM group of companies that each have a market capitalization of at least $2 trillion dollar--Saudi Aramco (ARMCO), Apple and Microsoft.
    • That may soon change, as SAM will likely have to make room for Google parent company Alphabet (GOOG, GOOGL).
    • Depending on how investors feel, Alphabet could join the $2 trillion market cap club as early as Monday. The company's shares have been on tear of late, and on Friday, climbed past $3,000 for the first time before hitting an all-time high of $3.011.41. That put Alphabet's market cap on the brink of $2 trillion, at $1,998 billion, before the shares retreated and ended the week at $2,984.82.
    • Still, Alphabet (GOOG, GOOGL) shares have surged more than 70% this year, and have shown few signs of slowing down. The company recently added to investors' enthusiasm for its shares as it reported strong third-quarter results that included net income jumping 68% from a year ago, to $18.94 billion, and a 41% increase in sales, to $65.12 billion--or almost $2 billion more than had been expected. Analysts said there is little going wrong with Alphabet at the present time.
    • "Google services continue to benefit from the company's significant investments in data analytics, AI [artificial intelligence] and machine learning, which remain key competitive differentiators versus many other platform companies," said Baird analyst Colin Sebastian about Alphabet's strong performance. "Looking ahead, we continue to see YouTube and Google Cloud as key drivers of growth and revenue diversification."
    • As the week ended, Microsoft remained on top of most-valuable companies club, with a market cap of $2.5 trillion. Apple, which Microsoft recently surpassed in value, was still close behind at $2.48 trillion, and Saudi Aramco was just remaining in the group with a market cap of $2.02 trillion.
    • Based on Alphabet's shares outstanding, its stock price would need to get to $3,013.14 to get the company into the SAM club. If, or when that happens, SAM will have to expand to add either the Alphabet "A", or the Google "G". Could MAGS be on the way? Maybe "GAMS" will claim the name? There's always a chance that with another "A", AMAS [pronounced, "amass"] might just make cut as those companies amass even more market value.
    • In the meantime, Google itself is keeping busy, as the company is said to be working on getting big cloud services contract from the U.S. Department of Defense.

    USO +0.52%Nov. 07, 2021 1:00 AM ET114 Comments

    • President Joe Biden conceded Saturday that OPEC+ would not be able to raise oil production enough to meet U.S. demands while also lowering prices, and said he was weighing various options including whether to tap the Strategic Petroleum Reserve.
    • This week, OPEC+ rejected Biden's request for a larger boost in production and stuck to its plan for gradual monthly increases.
    • A release from U.S. oil reserves likely would have little affect on prices, according to a Bloomberg analysis.
    • Since sweet crudes comprise only ~40% of U.S. reserves, a release might consist mainly of sour crudes that have fallen out of favor with refiners because they require additional processing, which requires expensive natural gas.
    • Because of certain mandatory sales and a minimum level required at the storage sites, Bloomberg says the U.S. may have the ability to release a maximum of just 60M barrels, barely more than three days' worth of average consumption.
    • Even if the U.S. taps the SPR, such a move would be of only "modest and temporary help and could in fact backfire given the structural nature of the oil market deficits starting in 2023," Goldman Sachs analysts say.
    • WTI (Cl1:COM) prices posted their second straight weekly loss, -2.8% to $81.27/bbl, following a nine-week streak of gains, while Brent (CO1:COM) closed -1.2% on the week to $82.74/bbl.
    • ETFs: USOUCOSCOBNODBOUSLUSOI
    • The S&P energy sector (NYSEARCA:XLE) finished in the middle of the pack in the weekly standings, +1.4%.
    • The week's five biggest gainers in energy and natural resources: CNEY +35.4%EGY +34.5%DNOW +31.7%UUUU +31.1%UEC +23.1%.
    • The week's five biggest decliners in energy and natural resources: NRT -19.6%METC -17.2%NFGC -17.1%TRQ -17%DQ -15.2%.
    • Source: Barchart.com


  10. As Nasdaq 100 extends big winning streak, getting selective on tech can pay: Alpha Tactics

    AAPL -0.31%Nov. 06, 2021 6:25 PM ET6 Comments

    • Investors should focus on stock picking in technology more than most other sectors, BMO Capital Markets maintains.
    • The Nasdaq 100 (NDX) (NASDAQ:QQQ) notched its 10th winning session in a row on Friday, easily outperforming the broader market for the week, up 3.2% compared with a 2% gain for the S&P 500 (SP500) (NYSEARCA:SPY).
    • Info Tech (NYSEARCA:XLK) was the second-best-performing sector, up 3.4% behind a 5% gain in Consumer Discretionary (NYSEARCA:XLY).
    • "From our lens, Technology continues to be a sector in which investors should focus on stock selection as indicated by our selection vs. allocation model," BMO Chief Market Strategist Brian Belski writes in a note. (See BMO model below.)
    • "Indeed, NTM P/E dispersion among Tech stocks has increased to its highest level since October 2020, while the 126-day intra-stock performance correlation has dropped to a three-year low, both of which are attributes conducive for stock-picking," Belski says.
     

    • BMO is Market Weight on the group, but still says "there are opportunities to generate alpha in the group" looking at companies with stable and consistent earnings.
    • Looking at XLK, Qorvo (NASDAQ:QRVO) Paychex (NASDAQ:PAYX) and Cadence Design Systems (NASDAQ:CDNS) all get an A+ for earnings revisions from Quant Rating.
    • In BMO's Disciplined Value Portfolio, where Info Tech has a 14% weighting, it holds Apple (NASDAQ:AAPL), Cisco Systems (NASDAQ:CSCO), Hewlett Packard Enterprise (NYSE:HPE), Microsoft (NASDAQ:MSFT), Oracle (NYSE:ORCL) and Texas Instruments (NASDAQ:TXN).
    • "If yields (NYSEARCA:TBT) (NASDAQ:TLT) start to rise again and investors immediately default to selling all of Tech as a result … we think there could be buy-the-dip opportunities for those consistent earnings growers," Belski says.
    • Despite its 10-day surge, the Nasdaq 100 is still just a whisker below oversold territory, with its relative strength index at 68.
    • Looking at a Seeking Alpha portfolio of NDX there are some buy-the-dip candidates that are close to their 50-day simple moving averages, but above the 100-day and 200-day SMAs.
    • Those include Cisco,  Texas Instruments, Regeneron (NASDAQ:REGN) and Okta (NASDAQ:OKTA).
    • Screen for the best tech stocks for earnings revisions, momentum and more with Seeking Alpha's advanced screener.

    SI +2.39%Nov. 06, 2021 12:15 PM ET4 Comments

    • Morgan Stanley analyst Ken Zerbe creates a list of crypto-related banks, including Signature Bank (NASDAQ:SBNY), New York Community Bank (NYSE:NYCB) and Silvergate (NYSE:SI), with some focused on providing real-time payments to crypto participants, while others plan to use the blockchain ecosystem to help reduce expenses.
    • Starting off with Signature Bank (SBNY), the largest bank on the list by deposits and market cap, operates Signet, a blockchain-based digital payments platform that enables real-time 24/7 payments between customers. Digital deposits at the bank climbed by 229% year-to-date to approximately $23B, as of the second quarter, Zerbe writes in a note to clients.
    • The bank also launched its first bitcoin (BTC-USD)-backed loan in Q3, offering customers loans collateralized by their BTC holdings.
    • Recall SBNY's Q3 deposits were boosted by "notable contributions from our Digital Asset Banking Team."
    • In February, JPMorgan Chase also added SBNY to its Focus List as the bank is in "prime position" to add new customers to its digital asset platform and boost volumes.
    • Next is New York Community Bancorp (NYCB), which expects to be able to securitize mortgage loans on Figure Technologies' Provenance blockchain at a cost of 100 basis points less than traditional securitization methods, the analyst notes.
    • Customers Bank (NYSE:CUBI) recently introduced a soft-launch of its 24/7 blockchain-enabled payments platform, which enables customers of the bank to transact intra-bank with instant settlement, to more than 20 customers.
    • According to SA's screener for top financial stocks, CUBI ranks as the second best rated stock out of a wide group of 547 financial stocks, edging out Blackstone, and lagging only Atlanticus Holdings.
    • A rather well-known "crypto bank," Silvergate (SI), which typically performs well in times of a crypto bull market, operates SEN, a real-time payments platform that facilitates the transfer of U.S. dollars between its digital currency customers.
    • The analyst notes that Silvergate's (SI) deposits grew a whopping 411% Y/Y, thanks to the fact that customers must hold their deposits with the bank in order to use SEN.
    • Metropolitan Bank (NYSE:MCB), one of the highest percentage gainers in Q3, administers domestic and international payment settlements for its FinTech clients.
    • The banks' average crypto deposits of $572M accounts for 10.6% of total deposits, which is substantially higher than average crypto deposits of $79M during last year.
    • In January 2018, MCB halted international cypto wire transfers.
    • Some of the stocks mentioned in the analyst's coverage list have gained at least 5% in Q3, with MCB outpacing its peers, as per the chart below.
    • The other "crypto banks" that were covered in the report include, National Bank (NYSE:NBHC), Triumph (NASDAQ:TBK), Blue Ridge Bancshares (NYSE:BRBS), and BankProv (NASDAQ:PVBC).

    BRK.B +0.84%Nov. 06, 2021 8:10 AM ET198 Comments

    • Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) bought back about $7.6B in Q3, adding to the $12.6B it bought in the first half of the year.
    • That's more than the $6.0B of stock that Warren Buffett's company bought in Q2 2021.
    • Berkshire had $149.2B of cash, cash equivalents, and short-term investments on its balance sheet at Sept. 30, 2021, a record level vs. $144.1B at June 30.
    • Since Sept. 30, the company appears to have bought back more stock. As of Oct. 27,  Berkshire (BRK.B) had 619,938 Class A shares outstanding vs. 620,797 shares at Sept. 30, or 859 fewer shares; class B shares outstanding declined by 4.97M shares to 1.303B shares vs. 1.308B. Note that each class B share is equivalent to 1/1,500th of a class A share. On Oct. 27, class A shares closed at $433,050 per share. Based on the Oct. 27 closing prices of its shares, that would amount to ~$1.8B more in stock buybacks (Updated at 9:12 AM ET).
    • During the quarter, operating earnings rose 18% as strong gains at its railroad, utilities, energy; and "other businesses" helped to offset a larger insurance underwriting loss.
    • Berkshire's businesses span a wide range of industries such as Geico insurance, Lubrizol chemical products, Precision Castparts aerospace parts, BNSF railroads, real estate brokers, See's Candies, and Nebraska Furniture Mart.
    • Q3 operating earnings of $6.47B increased from $5.48B a year ago. Revenue of operating businesses rose 12% Y/Y to $70.7B driven by gains at its service and manufacturing businesses and Berkshire Hathaway Energy, as the economy recovered from prepandemic levels.
    • Service & retailing revenue jumped 19% Y/Y to $8.68B; manufacturing revenue increased 15% to $17.5B, and Berkshire Hathaway Energy revenue gained 13% to $7.01B;
    • Total insurance revenue of $19.1B rose 11% Y/Y.
    • Insurance float was $~$145B at Sept. 30, 2021, vs. ~$142B at June 30.
    • Operating earnings by segment:
    • Insurance underwriting — -$784M vs. -$213M a year ago; underwriting results were hurt by $2.7B in catastrophe losses, earned premium reductions from Geico's giveback program, higher private passenger auto claims frequencies, and higher losses in the life reinsurance business.
    • Insurance – investment income — $1.16B vs. $1.02B.
    • Railroad, utilities, and energy — $3.03B vs. $2.74B. After-tax earnings in the railroad unit rose 14%, reflecting higher freight volumes  and lower costs on improved productivity, partly offset by higher than average fuel costs. After-tax earnings of the utilities and energy business increased 7.2% in Q3.
    • Other businesses — $2.71B vs. $2.35B. Earnings from the manufacturing service, and retailing businesses jumped 15% Y/Y ; while customer demand for products stayed elevated, earnings in Q3 were sequentially lower than Q2, with several businesses experiencing higher material, freight and other input costs cue to supply chain disruptions.
    • Other — $349M vs. -$412M.
    • Investments and derivatives gains of $3.88B vs. $21.4B in Q2 and $24.7B a year ago.
    • Q3 net earnings of $10.3B or, $4.59 per class B share, fell from $28.1B, or $12.33 per class B share, in Q2.
    • Berkshire Hathaway's (BRK.B) cash and short-term investment holdings have grown from ~$112B at year-end 2018 to ~$145B in the 11 quarters ended June 30, 2021 as seen in chart below.

    Nov. 05, 2021 5:28 PM ET5 Comments

    • Federal Reserve Chairman Jerome Powell and Governor Lael Brainard were both seen at the White House on Thursday, as President Biden considers whether he'll reappoint Powell to the head of the central bank, Reuters reports, citing a person close to the process.
    • Biden hasn't yet decided on who will be Fed chair when Powell's first term is set to expire in early February 2022, but expects to soon, the person said.
    • Many investors expect Biden to name Powell to a second term, but progressives have been reportedly pushing for Brainard, who may lean harder into bank regulation and addressing the risk to the financial system from climate change.
    • U.S. Treasury Secretary Janet Yellen, Powell's predecessor, has supported Powell, while Senator Elizabeth Warren called him a "dangerous man" during his Congressional testimony in September.
    • In August, progressives urged Biden to replace Powell as Fed chair.

    LMT -0.20%Nov. 05, 2021 5:20 PM ET14 Comments

    • Lockheed Martin Sippican (NYSE:LMT) awarded a $105.67M firm-fixed-price modification to previously-awarded contract N00024-16-C-6412 to exercise options for the production of MK 48 Mod 7 guidance and control sections and MK 48 Mod 7 Common Broadband Advanced Sonar System kits.
    • This modification is in support of the MK54 MOD 7 heavyweight torpedo program.
    • Work  is expected to be completed by December 2025.
    • The Naval Sea Systems Command is the contracting activity.
    • Company has also been awarded a $10.86B ID/IQ for Advanced Raptor Enhancement & Sustainment (or ARES) for the F-22 Program Office.
    • This contract vehicle provides support for the necessary supplies and services to sustain and modernize the F-22 Raptor, including modernization hardware kit procurement and services such as upgrades, enhancements and fixes, as well as performance-based logistics services.
    • Work is expected to be completed by Oct. 31, 2031.



  11. Not a good day for the indexes:

       

        

     

     


  12. It's nice that we passed the Infrastucture Bill but it's only $120Bn/yr for 10 years – not going to change much.  Meanwhile, the debt ceiling will be a thing again on Dec 3rd and Congress ends on the 10th so they have one week to resolve everything 3 weeks from now.

    While the Fed should be tapering monetary policy and hiking rates to prepare for the next recessionary downturn, they will opt to keep asset prices inflating. However, just as in the past, opting to keep monetary policy too loose for too long eventually triggers a more significant crisis.

    Stock Market, Did The Fed Just Set The Stock Market Up For A Crash? 11-05-21

    That is not sustainable.

    "While anything is possible in the near term, complacency has returned to the market very quickly. However, there are numerous reasons to remain mindful of the risks.

    • Earnings and profit growth estimates are too high

    • Stagflation is becoming more prevalent (weak economic growth and rising inflation)

    • Inflation indexes are continuing to rise

    • Economic data is surprising to the downside

    • Supply chain issues are more persistent than originally believed.

    • Inventory problems continue unabated

    • Valuations are high by all measures

    • Interest rates are rising"

    "Furthermore, as noted above, there is limited upside as the annual rate of change in the market declines."


  13. What would be a good replacement stock  for T  ?

    EDP maybe 

    Thanks


  14. Closed out the TROX call spread (Feb'22 $15 – Dec $20) for $4.9 – lost out 0.1, but the stock goes ex-div this week, and the short Dec calls will likely get assigned. Chose to close out the trade rather than exercise the Feb calls. 


  15. Hi Phil,

    What would be a good biotech to invest? Is AMGN a reasonable buy at these levels? (I have read about PFE/BNTX/MRNA/MRK discussions from last week)


  16. TROX/Phil Is it worth rolling out the short calls or better to close it out?

    25 TROX Feb '22 $15c ($4.3)

    -25 TROX Dec $20c ($1.6)

    -15 TROX Feb '22 $17puts ($3.4)

    Thx!


  17. T/QC – Well you might not want to hear it but VZ, who seem to be testing a floor.

    EPD is a completely different business but I do like them.  VZ pays 5% (0.62/qtr) and you can buy it for $52.25 and sell the 2024 $45 calls for $8.50 and the $50 puts for $6 and that nets you in for $37.75/43.875 which is a 16% discount if assigned.  Called away at $52.50 + $5 more in dividends is 52% over two years – not too bad.  

    TROX/RN – With the buyout on the table, I would stick with it regardless.

    AMGN/Harip – Enbrel is their main drug, about 20% of revenues, and it's gone off patent recently.   They do $2.3Bn in Enbrel, next  is Prolia at $1.3Bn and next is Otezla at $1.Bn so yes, they have a bench, but that's going to hurt.  

    Amgen drugs

    At $120Bn with $10Bn in profits, we don't need everything to be perfect but I'd be careful getting into this one until we see the effect of losing the patent has on them.

    TROX/Wing – As noted above, they are likely to get bought so not much sense in doing anything other than letting it get called away.  Only 40 days until the Dec calls expire and then you can sell some Feb calls or just be done with it.