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Still Toppy Tuesday – Grinding Away Our Gains

This is not good.

The Russell has fallen 5%, from 2,450 to 2,327.50 (spiking even lower yesterday) and is still weak this morning.  Overall, we're back to the pre-spike end of October, which was also the beginning of September (when we called the market toppy and went back to mainly CASH!!!) and that was lower than the June and July highs which were both lower than the top of the Russell we hit in March.

So our broadest index, the one that measures 2,000 companies that are more Main Street than Wall Street, is struggling because, while Coca-Cola (KO) may have pricing power because you are thirsty and don't care about a nickle, the 7-11 you buy it from still gets the same $5 from you for your visit – you just leave with less stuff.  We've all experienced that at the grocery store.  This is especially true for consumers who are being robbed at the gas pump every week for twice what they paid in 2020.   


As you can see, the Dow has also given up the November gains and the S&P and the Nasdaq are curling over – perhaps these levels are the top – it's hard to tell on a holiday week but they are all going to be holiday(ish) weeks from now until January 3rd (and I bet we won't be in the mood to work then either). 

Oil has given up two months worth of gains as well (but still expensive):


Bonds are collapsing:


Even gold and silver have given up their November gains and are both down for the year now.  A large part of that reason is that, despite the best efforts of the Fed to debase our currency, the Dollar is up 7% for the year.  Why, because the rest of the World is still very worried about their own economies and currency.  DESPITE the 7% rise in the Dollar, the US is experiencing 6% (admitted) inflation, which is more like 10% in the real world.  Imagine how bad it is in other countries, where their currency buying power is diminishing while prices rise (especially on commodities).  

If we lived in reality, I'd say we're on the cusp of a major Global Recession – all the signs are pointing to it EXCEPT stock prices.  Even with this month's pullback – we're still generally hovering around the all-time highs so investor sentiment hasn't turned too much – yet, we get that report tomorrow.  

Speaking of reality, the official inflation numbers are in and the price of a Thankgiving Dinner for 10 people has gone up 14% since last yearaccording to the American Farm Bureau Federation's annual survey.  Factors affecting the feast include:

“Dramatic disruptions to the U.S. economy and supply chains over the last 20 months; inflationary pressure throughout the economy; difficulty in predicting demand during the COVID-19 pandemic and high global demand for food, particularly meat.” 

Ranking the data this way lets us see that the increase in the cost of turkey is responsible for most of the year-over-year increase. Rising by $4.60 from 2020's $19.39 to 2021's $23.99 for a 16-pound bird, turkey alone accounts for nearly 72% of the year-over-year increase in the total cost for the meal.  Shipping costs are mostly to blame but also that, like everything, less turkeys were produced in 2020 due to the lockdowns but the same number of families are ordering them for thier table this year – supply and demand imbalance.  

Of course, that's just your food cost – whether you are driving to your Mom's house or turning on the gas to cook for your relatives – everything is more expensive this year.  Even ESPN has had two price hikes in 2021!  

Speaking of Disney greed, they just stopped selling annual passes into the holidays as they don't generate enough revenue compared to forcing people to buy short-term park options.  Isn't Capitalism great?  

Walt Disney World Ticket Prices for 2021: Full Breakdown | Observer

Oh Man, Now You Can Dive Into a Pile of Scrooge McDuck's Money - RELEVANTFROM $194/day?!?  Wow, just wow….   That's $800 for a family of 4 to walk in the door.  And, once you are inside the park – just a turkey leg will set you back $15!  Balloons are $25 – that's what killed me last time I was there (this summer) – $25 for a balloon.   

Needless to say, not many kids were walking around with balloons.  And this has nothing to do with inflation – this is GREED.   DIS is making $7.3Bn this year – let the kids who paid $189 to be sold more stuff in the park while being brainwashed to become lifetime Disney consumers at least  have a friggin' balloon you greedy bastards!  



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  1. Good morning 


    Phil/T how would you adjust this 2023 position? +20 25C at 5.82 and -20 30C at 2.76 funded by -15 25P at 3.1? TIA

  3. A Warning for Investors Chasing High-Flying Tech Stocks

  4. UK workforce shrinks after sharp rise in people choosing to leave work

  5. Good Morning.

  6. Good morning! 

    So let's say there are 60M visitors to DIS and 30M are children who might want balloons.  Say the balloons cost $5 (being generous) and you sold them for $10 instead of $25, that's $15 less per balloon x 30M is $450M less profit but, since no one is buying the balloons, it's not really less profit – it's more profit than you make having a cart full of $25 balloons and no customers, isn't it?  Plus, it makes the kids happy – doesn't anyone value that anymore?  

    I don't know, that whole thing just pisses me off.  

    Anyway, oil is bouncing back this morning (gotta ramp up /RB into the holiday weekend).


    T/Stuart – So you paid net $3 for the 2023 $25s and now they are $2 – you should have rolled when they were closer to $3 but same thing otherwise, the 2024 $23 ($3.50)/27 ($2.05) bull call spreads are $1.45 so you can roll to 30 of those ($4,350) for $350 more than long calls and that's a $12,000 spread that's half in the money for about the same as the original spread – just taking a year longer than planned.  You might want to put rolling stops on 1/3 of the short 2023 $30s – just in case it pops.  

    New thing to worry about – rising crime:

    • Best Buy (NYSE:BBY) opens trading with a drop of 15.88% as investors focus on the gross margin decline and concerns that pandemic-related sales could slow.
    • Best Buy said factors that impacted margins included higher promotional activity, costs tied to the retailer's new TotalTech membership program and organized theft at some stores. Best Buy CEO Corie Barry said on the earnings call that organized retail crime has been "traumatizing" for associates at the stores impacted.
    • Shares of Best Buy had run up 17% in the six weeks before earnings, so today's decline puts shares back to where they stood in the middle part of October.
    • Dig into more of the Best Buy numbers.

    Hidden costs of inflation – more security guards.  

    More than 80 people stormed Nordstrom on Saturday and made off with merchandise.

    New security measures are in place a day after a brazen crime which can only be described as a flash mob robbery at a California department store. More than 80 people stormed Nordstrom on Saturday and made off with merchandise.

    "There was a mob of people and police coming in, it was like something out of the movies, it was insane," said witness Brett Barrett.

    Witnesses couldn't believe the chaos outside the Walnut creek Nordstrom store Saturday night. A flash mob robbery was unfolding, 80 to 100 people rushed into the store, minutes before closing. Police say two store employees were assaulted, one was pepper sprayed.

    "We received reports of people dressed in masks and dark clothing, running into Nordstrom blocking streets with their cars, using crowbars running out with property," said Walnut Creek Police Lieutenant Holley Conners.

  7. That was from the 70s – nothing has changed, has it?  

  8. Nov. 23, 2021 9:46 AM ET

    • November U.S. PMI Composite Flash56.5 vs. 57.8 consensus and 57.6 prior (revised from 57.3).
    • Manufacturing PMI: 59.1 vs. 58.6 consensus and 58.4 prior (revised from 59.2).
    • Service PMI: 57.0 vs. 59.0 consensus and 58.7 prior (revised from 58.2).
    • The U.S. private sector's business activity turned up in November, but the rate of expansion slowed from October.
    • "Although stronger than the lows seen in August and September, rising prices, poor input availability and challenges finding suitable candidates for vacancies reportedly held back the overall expansion," IHS Markit said.
    • Earlier, Biden set to speak on the economy, lowering prices to combat inflation

    COWN -0.16%Nov. 23, 2021 9:57 AM ET

    • Cowen (NASDAQ:COWN) agrees to buy privately-held Portico Capital Advisors, a mergers & acquisitions advisory firm focused on the verticalized software, data and analytics sector.
    • Founded in 2000, Portico, with a sell-side focus, has a team of over 20 industry professionals in both the U.S. and U.K.
    • The deal will further escalate Cowen's (COWN) investment banking business, and will enable Portico to provide the full breadth of Cowen's capital markets, advisory and research capabilities to clients.
    • The deal has been approved by Cowen's (COWN) board of directors, as well as Portico's shareholders and governing bodies.
    • All consideration is to be comprised of 75% cash and 25% stock, though other terms of the transaction were not disclosed, the company says.
    • The deal is expected to close in Q4 of this year, and to increase Cowen's M&A advisory revenues by approximately 20% in fiscal 2022.
    • "By combining Cowen's broad advisory and capital markets capabilities with Portico's deep sector domain experience and M&A skill set, we are delivering on our stated strategy of building a world-class, diversified banking platform that will be even better positioned to help our collective clients outperform in sectors that have strong tailwinds," said Cowen Co-President Larry Wieseneck.
    • Still, shares of COWN slip 0.3% out of the gate.
    • Previously, (Sep. 15, 2020) Cowen agreed to acquire MHT Partners.

    PZZA +0.31%Nov. 23, 2021 9:49 AM ET

    • Papa John's International (PZZA +0.4%) expands into Sub-Saharan Africa with its newest franchise partner Kitchen Express.
    • Kitchen Express is a subsidiary of AAH Limited, the majority shareholder of Hass Petroleum Group, which holds a significant retail footprint in Africa.
    • Kitchen Express LTD plans to open 60 restaurants in Kenya and Uganda, with four of these restaurants planned to open in 2022, beginning in Nairobi.
    • The partnership will enable Hass Petroleum to leverage its significant retail footprint as it introduces new customers to the Papa Johns brand.

    VIAC -1.49%Nov. 23, 2021 9:35 AM ET2 Comments

    • ViacomCBS (VIAC +0.1%VIACA +0.7%) has closed its deal to take a majority interest in Fox TeleColombia & Estudios TeleMexico, from the founding family and from Walt Disney (NYSE:DIS). Terms weren't disclosed.
    • Its unit ViacomCBS Networks International closed on the holding, and its VIS studio will operate Fox TeleColombia & Estudios TeleMexico in collaboration with the family, with Samuel Duque Duque leading the business.
    • The deal pairs the new acquisitions with an existing Spanish-language portfolio including Telefe and Chilevisión.
    • It garners ViacomCBS access to studio operations and hours of library content for its global streaming platforms as well as worldwide linear television.
    • In Nielsen's most recent look at market share of TV time, broadcast television has pulled even with streaming (though they both trail cable in share of time).

    FLNC +3.77%Nov. 23, 2021 9:35 AM ET

    • Citing "undeniable fundamentals" and a sector ripe for disruption, Evercore ISI is launching coverage on the energy storage ecosystem, set to solve the problems of intermittent power generation as the energy industry pivots to renewables.
    • "The outlook for energy storage demand growth these next three decades is strong as the globe pivots towards decarbonization amid continued cost declines in battery prices," the firm says, taking a deep dive into the pros and cons of "many forms and flavors" of storage.
    • Storage is a critical enabler of energy transition, it says, thanks to novel technologies combined with "significant" policy tailwinds.
    • Energy storage is the next "mega theme" of transition, joining electric vehicle charging, carbon capture, and hydrogen, it adds.
    • Today, storage technologies collect energy from the grid or a nearby power plant and release it to the grid when energy is later needed. "While simple in theory, the complex regulations and compensation frameworks battery storage providers currently contend with prohibits technologies from being fully utilized across the wide gamut of applications" for which it could be deployed, Evercore says.
    • The total addressable market is large, and likely requires a trillion dollars of spending between now and 2050, the firm says, with rapid growth ahead for both hardware and software energy storage providers.
    • It should still be dominated going forward by "utility-scale/grid-scale" storage efforts powered by electrochemical technologies, particularly the dominant lithium-ion battery standard, it says. But the sector is set up for disruption from a number of niche solutions – from chemical means (hydrogen production, fuel cells) to electrical (supercapacitors or superconducting magnetic energy storage) to thermal energy storage to more mechanical means (pumped storage hydro, compressed air, flywheels and even gravity-based energy storage).
    • It's chosen two companies to benefit from the mega theme, and initiated both at Outperform: One is a "macro" bet on energy storage as a trend/concept, while the other is more of a "niche" investment coupled with a rapidly growing backlog.
    • The macro play is Fluence Energy (NASDAQ:FLNC), which it calls a "must-own" in the space. The company provided the grid's first ever Li-Ion battery energy storage system, and has worked through several generations of that technology since.
    • It's backed by industrial and utility market leadership via Siemens and AES (both of which formally established Fluence as a joint venture) and has grown quickly to become one of the top storage providers. And it faces some competitive threats and supply-chain risk, but Evercore says the best way to value it is by a focus on the fundamentals.
    • Working on a multiple of its 2024 revenue revenue of $2.8 billion, Evercore has set Fluence's price target at $47, implying 29% upside from yesterday's close.
    • As for the niche play, a "higher risk, higher reward" approach settles on Eos Energy Enterprises (NASDAQ:EOSE).
    • "This is a revenue growth story through the medium-term as the company focuses on commercialization while a ramp in manufacturing capacity should provide meaningful revenue realization from 2023-2025," the firm says.
    • The stock is the genesis of a recent de-SPAC – and it's been penalized by project and execution delays as well as the general cooling environment on special-purpose acquisition companies as a mechanism, but that provides a favorable risk-reward skew, Evercore says. And Eos' long-duration storage tech is competitively advantaged, "given its performance profile and lower exposure to lithium-ion supply chain risks."
    • Also working from a multiple of its 2024 revenue estimate of $539 million, it's set a Street-high price target of $21, implying 115% upside from yesterday's close.
    • Fluence jumped 25% on its debut following an initial public offering a few weeks back.

  9. NIO /  YODI    they are having an investor day Dec 18th.  I think that might be a good short term catalyst.  Perhaps uncover if you have cherry calls or place a small Jan bcs

  10. The House of Mouse is ridiculou$ - and has been for a while – The next time I go is with Grandkids in tow and I hope that won't be for a long time… :)

  11. Good Morning Phil:  I did not get my fill on the MO adjustment and therefore I am still sitting on 30 contracts of the 2023 $45/55 BCS which I paid $3.70 for.  I was adjusting to 40 contracts of the 2024 $40/50 BCS at $3.50 but it is now showing a mid of $3.95. I got a partial fill of 1 contract only!  Can you recommend where to go from here thank you!!  TH

  12. 1020/grandkids – Take them up in the hills to the apple orchards instead. Maybe go a little further and take the turning cable car in Palm Springs up to the mountain-top. So many better alternatives! Blue whale watching out of Oxnard!

  13. The price of recreation is pricey and too damned high !

    Ski lift tickets at Big Sky MT are $ 225 near the Holidays. I can remember going to a smaller resort for $ 50 in the early 2000's and buying kid's Season passes for $200. I have started doing human powered skiing and enjoy it more. I don't want to be near those entitled people anyways and I am earning my turns. 

  14. snow – Our twins are busy working on completing their first four years of college and frankly, have big doubts about becoming parents in the future.

    I've told them it's good to travel 'light'  ;)

  15. stockbern,

    You remember well!!!!  AS you can see I am well in to NIO. From April 7k to today 11k. I am not complaining.

    7-Aug-20 NIO Initial Stock Purchase strike trade market $0.00 

    Current Price $41.49 Chinese Electric Car

    2-Dec-20 $45.36 NIO220121P25 21-Jan-22 25 -2 PUT 5.5 0.25 95%

    10-Dec-20 $44.03 NIO230120C30 20-Jan-23 30 10 CALL 26.7344 16.6 -35%

    NIO230120C45 20-Jan-23 45 -10 CALL 22.7122 9.825 56%

    11-Dec-20 $44.02 NIO230120P30 20-Jan-23 30 -1 PUT 11.4 4.2 62%

    NIO230120P25 20-Jan-23 25 -3 PUT 8.3 2.57 69%

    5-Mar-21 $39.28 NIO230120C30 20-Jan-23 30 2 CALL 21.45 16.6 -35%

    c NIO230120P30 20-Jan-23 30 -2 PUT 10.75 4.2 62%

    15-Sep-21 $37.89 c NIO211119C45 19-Nov-21 45 -2 CALL 1.6 0 e

    24-Sep-21 $36.03 NIO211119C40 19-Nov-21 40 -1 CALL 1.65 0 e

    23-Nov-21 $41.49 NIO221216C50 16-Dec-22 50 -2 CALL 8.1 8 1%

    0 0%

    0 0%

    Cash in Hand #DIV/0! p/l stk $0.00 $7,505.30 Net debit $11,525.80 $11,525.80 

  16. ….They also know that having kids is the best 'job' we've ever had… :)

  17. MO/Hicket – It's certainly not an emergency, just a roll.  I'd buy some of the 2024 $40s and wait for better prices to sell the short $50s and long 2023 $45s as that's our bet – that MO should bottom here ($42.50) and If we consider $50 the big line on MO (see 5-year chart) then $42.50 is a 15% drop and that's $7.50 so $1.50 bounces to $44 and $45.50 is what we'll look for.  Bad news is $45.50 failed on the last bounce two weeks ago so will be very bad technical news if they fail it again but I do think we'll at least test it.  

    So that's our "TA" but then we have to go to Fundamentals and say "What news is driving this?"

    Will Altria Q3 Earnings be supported by rising global cigarette sales?

    Altria EPS misses by $0.04, misses on revenue, expands buyback program

    Earnings were find, buybacks are good.

    Cigarette sales grew in 2020 for the first time in 20 years

    Altria Group, Inc. 2021 Q3 – Results – Earnings Call Presentation

    Altria slips after Morgan Stanley says near-term catalysts are lacking

    Altria: New U.S. Tax Proposal Would Protect Cigarettes, Buy

    Altria: Meet The New Business Model, Same As The Old Business Model

    Altria Group: Be Rational When Others Are Fearful

    So mainly it's MS chasing people out of MO on 10/29.

    • Analyst Pamela Kaufman thinks cigarette volume declines should continue at a normalized mid single-digit rate in 2022 as smokers face greater macro pressures from rising gas prices/inflation as well as increased mobility post pandemic as a headwind.

    Now, we look up Pamela Kaufman and see the headline is actually misleading as she called it a hold at $47, not a sell.  She's only a 50/50 analyst anyway and doesn't even specialize in the space – more of a consumer goods analyst.  

    That brings us back to the numbers and $44 for MO is $81Bn and they made $4.5Bn in 2020 and they are making $8.5Bn this year, which is $4.61 per share or maybe $4.57 if we take off the 1% miss that dropped the stock 20%.  Given those factors – I'm super-comfortable being more aggressive down here.  

    Grandkids/1020 – I agree, experiences are the best things to give them.

    Ski tickets/Randers – Yeah, once they got over $100 a day, I kind of lost interest though season passes are great if you live near the slopes.  I had a place in Killington, VT but we sold it as Florida is just too damned far.  I'll go back when I'm 70 – then the passes are free!  

  18. A lot of companies getting trashed as they try to juggle the inflation transitions:

    JACK -6.40%Nov. 23, 2021 9:02 AM ET3 Comments

    • Jack In The Box (NASDAQ:JACK) is down sharply in early trading after FQ4 revenue arrived short of expectations.
    • Systemwide sales growth was up 8.6% in FQ4 and same-store sales growth of 0.1% was recorded. Company-operated same-store sales declined 4.4% with decreases in traffic only partially offset by increases in average check. Franchise same-store sales were up 0.6%, with increases in average check partially offset by a decrease in traffic.
    • Restaurant-level margin fell to 20.1%. The restaurant operator says the decrease was primarily driven by the take back of lower-volume franchise restaurants, increases in food and packaging costs, wage inflation of 9.8% and increases in utilities, and maintenance and repair costs. Commodity costs increased in the quarter by approximately 11.8%, primarily due to increases in pork, beef and beverages.
    • Jack in the Box reiterated its prior guidance issued at its Investor Day event.
    • Shares of JACK are down 7.11% premarket to $89.00. The Seeking Alpha Quant Rating on JACK fell 5% in the week in front of the earnings release.

    BURL +7.51%Nov. 23, 2021 8:32 AM ET

    • Bank of America defends Burlington Stores (NYSE:BURL) with shares spinning lower following the Q3 earnings report.
    • Analyst Lorraine Hutchinson sees it as significant that the retailer altered its tone on pricing from skeptical in Q2, when it said lean inventories and elevated supply chain costs were only temporary, to a more open stance now.
    • "If the higher prices across the industry are sustained, management said it could raise retails in addition to gaining unit share with the value customer. We think this makes sense as a way to mitigate ongoing costs pressures."
    • BofA reiterate its Buy rating on BURL and calls it well positioned to continue gaining market share as the recovery progresses.
    • Shares of BURL are down 4.56% in premarket action to $251.00 after the Q3 earnings beat was not enough to satisfy investors.

    DLTR +5.40%Nov. 23, 2021 8:08 AM ET3 Comments

    • Dollar Tree (NASDAQ:DLTR) is lower after posting in-line marks with its FQ3 earnings report and guidance update.
    • Enterprise comparable sales of rose 1.6% during the quarter vs. +1.5% consensus and were up 6.7% on a two-year comparison. Gross margin plunged to 27.5% of sales from 31.2% last year. The decrease in gross margin was driven primarily by higher freight costs, partially offset by improved shrink results.
    • Of note, DLTR says its pricing tests have demonstrated broad consumer acceptance of the new price point previously announced. The chain has begun rolling out the $1.25 price point and sees adding the new pricing at all stores by the end of FQ1.
    • Looking ahead, Dollar Tree (DLTR) sees FY22 revenue of $26.25B to $26.41B vs. $26.3B consensus and EPS of $5.48 to $5.58 vs. $5.40 to $5.60 prior view and $5.56 consensus.
    • Shares of Dollar Tree (DLTR) are down 1.94% premarket to $129.99.
    • See all the stocks to watch this week for big events or volatility.

    Watch Sanderson Farms as Sen. Warren calls for DOJ probe into rising poultry prices, industry consolidation

    SAFM +0.65%Nov. 23, 2021 8:52 AM ET5 Comments

    • Sen. Elizabeth Warren (D-MA) wants the Dept. of Justice to investigate how alleged "anticompetitive practices" in the poultry industry are causing price increases and to further look at industry consolidation.
    • Warren is urging the DOJ to "consider the extensive history of price fixing" in the poultry industry in evaluating the recently announced sale of Sanderson Farms (NASDAQ:SAFM) to Continental Grain and Cargill.
    • "In light of the multiple lawsuits and settlements involving the major poultry producers, it is clear that any additional mega mergers in this sector should be reviewed with suspicion," Warren wrote in a letter to Jonthan Kanter, who holds the top spot in the DOJ's antitrust division.
    • Recall in September, Biden Administration looks to rein in spiraling meat price.
    • Also see Sanderson Farms buyout is expected to attract the scrutiny of regulators.

    Speaking of Turkey:

    TUR -7.04%Nov. 23, 2021 8:49 AM ET2 Comments

    • The iShares MSCI Turkey ETF (NASDAQ:TUR) closed Monday -1.16% and has slid 8.48% in pre-market trading for Tuesday morning. TUR has dropped like a stone because the Turkish Lira fell 8.8% to a record 12.49 against the U.S. dollar.
    • Turkish President Erdogan fueled the selloff of the Lira as he defended the Turkish Central Bank decision to cut interest rates even though the emerging market country is facing double-digit inflation. Inflation in Turkey is now approaching 20%, placing tremendous pressure on the country’s working class.
    • TUR, which is a balanced sector ETF has fallen to the wayside along with the Turkish Lira. With its 55 holdings, $408.7M assets under management, and expense ratio of 0.59%, the fund is now trading at a one-year low, touching $18.99.
    • TUR has been suffering of late as the ETF is down 15.32%, dating back to last week, Nov. 16, and also the ETF is now -30.17% YTD.
    • Below is a one-year chart of the U.S. Dollar/Turkish Lira. Market participants can see how the dollar gained 58% over the Lira during that period. Additionally, Erdogan has fired three central bank chiefs due to discrepancies in monetary policy over a two-year period.

    Somebody is finally catching up on their PSW Reports:

    SPY -0.56%Nov. 23, 2021 8:34 AM ET28 Comments

    • Central banks could drive stocks higher all the way through to the middle of 2023, but that would create a serious economic risk when the bubble bursts, according to Stifel.
    • "We calculate that a bubble driven by current central bank real yield repression may take the S&P 500 (SP500) (NYSEARCA:SPY) to 5,500 mid-2022 and 6,750 mid-2023, creating a systemic risk when it bursts," Stifel says.
    • Real rates saw a jump higher yesterday, but are still historically low. The 10-year inflation-protected Treasury yield (NYSEARCA:TIP) is at -0.98%.
    • There have been just two equity bubbles in Wall Street's history: 1928-1928 and 1998-1999 and "neither ended well for stock or economic conditions," Stifel says.
    • Now, a third bubble is "percolating," the team adds.
    • The question is whether the Federal Reserve will lean against the risk of a bubble or just let asset prices rip, "magnifying financial risk when it bursts."
    • What can the Fed do? Watching the 10-year real yield is key to assessing market risk and the possibility of an S&P correction, Stifel says.
    • Stifel says that to forestall risk, the Fed may "tilt more hawkish while at the same time the Biden/Yellen duo may support the stronger dollar (USDOLLAR) that accompanies such a Fed shift (a strong dollar subdues energy & food inflation in a supply-constrained inflation environment and improves the chances that BBB overcomes inflation concerns among Senate moderates, while also affecting the timing of a reconciliation bill to lift the U.S. debt ceiling)."
    • "This combination of factors may raise U.S. real yields and lower the S&P 500 P/E."
    • Watch Cyclicals and Defensives. Cyclical stocks have led the market rebound from the pandemic low on an equal-weight basis.
    • Actions like the above by the Fed and administration would cut into the reflation that favors Cyclicals over Defensives.
    • Stifel recommends going overweight some defensive stocks in sectors like Utilities (NYSEARCA:XLU), Consumer Staples (NYSEARCA:XLP) and Health Care (NYSEARCA:XLV) for the current quarter and Q1 2022.
    • They underweight some cyclical subsectors in Financials (NYSEARCA:XLF), Energy (NYSEARCA:XLE) and Materials (NYSEARCA:XLB).
    • BMO says that the still-hot tech sector can outperform next year, even with rising rates.

    This won't be good for their Q4 earnings:

    GS +0.80%Nov. 23, 2021 7:51 AM ET2 Comments

    • The Financial Stability Board, a global body of financial regulators, increased capital buffer requirements for JPMorgan Chase (NYSE:JPM), Goldman Sachs (NYSE:GS) and BNP Paribas (OTCQX:BNPQF).
    • Under the move the FSB moved each of the three banks to buckets that require them to set more capital aside to cover losses in the event of an economic downturn.
    • The three banks are all in the 2021 list of 30 banks considered global systematically important banks.
    • JPMorgan (JPM) was moved from bucket 3 to bucket 4; BNP Paribas was put in bucket 3 from bucket 2. And Goldman Sachs (GS) moved to bucket 2 from bucket 1. The move from one bucket to the next requires each of them to boost their buffers by 0.5%.
    • JPMorgan's (JPM) required capital buffer gets increased to 2.50%, BNP Paribas' (OTCQX:BNPQF) buffer requirement rises to 2.00%, and Goldman Sachs' (GS) increases to 1.50%.
    • The new requirements will apply to each G-SIB starting Jan. 1, 2023.
    • Bucket 1, which has a capital buffer requirement of 1.00%, the lowest requirement, includes such banks as Bank of New York Mellon (NYSE:BK), Morgan Stanley (NYSE:MS), State Street (NYSE:STT), and Wells Fargo (NYSE:WFC).
    • In June, Capital One (NYSE:COF) stood out in the Federal Reserve's annual stress test of banks.

    You know how I complain it's BS when they reduce their loan loss provisions to create false profits?  This is it going the other way.  

  19. CHL - Looks like the CHL saga is over. TOS "expired" my Jan CHL Calls and Puts at $0 on Friday. It took a while, but that was a pretty good investment. ;)

  20. CHL/Dave – Yes, finally cleared from the system.  We still got ripped off. 

  21. CHL ripped off is saying it gentle, cost me a lot to convert my stock to cash. The little man always gets ripped off.

  22. Natural Disasters

  23. VIAC is grinding it's way down. I'm adding small amounts in the mean time but pretty relentless. 

  24. VIAC's chart is simply too sad to make it the Stock of the Year – though my heart says it should be.  There's just no firm catalyst to grab onto.  

    SPWR, on the other hand, is down because of a poor Q2 but it wasn't really that bad:

    In SunPower's second quarter earnings conference call, management cited two reasons for the slightly lower revenue expectation. The first is a slower than expected roll-out of the company's new SunVault residential battery storage solution. Late last year, SunVault was expected to contribute roughly $100 million in annual revenues. The current expectation is for $70 million. It is important to note that the slower roll-out is deliberate in order to properly update the firmware to give customers the best experience. Management did stress that the demand is strong and the company is on track to hit the $100 million annual run-rate for SunVault revenues by the end of the third quarter.

    The second reason for the slightly lower than previously expected revenues is a delay in commercial installations. Historically for the solar industry, larger solar installations have always resulted in lumpy revenues from quarter to quarter due to the timing of revenue recognition. Some of SunPower's commercial projects may now be pushed forward to 2022. The company did provide further insight by stating new dynamics linked to the company's recently released Helix commercial storage is resulting in additional permitting delays compared to stand-alone systems without storage.

    While SunPower's lackluster first half results and lowered annual guidance is clearly disappointing, it does not change the company's fundamental prospects. It is possible more than half of the potential revenue miss this year is linked to the company's new battery storage line as kinks in both operation and delivery get worked out. As with many cases in the pandemic era, constraints have been more on the supply than the demand side. Industry competitors such as Tesla (NASDAQ:TSLA) restricted its Powerwall sales to new customers buying complete systems due to a lack of supply. Enphase Energy (NASDAQ:ENPH) who is both a supplier for micro-inverters and competitor in battery storage has cited a large gap between available supply and demand. Although management did not mention it, supply chain disruptions as well as inflation may have impacted the company's core solar installation business to some degree as well. The good news is business has not been lost but merely pushed forward by a quarter or two.

    SunPower's rollout of its new battery storage products has been slower than expected. Once the company works out all the issues related to new product launches, battery storage sales will greatly augment the bottom line. As a companion product, very little incremental expense would be required to lock in storage sales on top of system installation. Initial attach rates near 20% have a lot of room for improvement since the initial bottleneck has been on the delivery side. Once supply conditions normalize, increased storage attach rates should improve gross margin at minimal additional operating expense.

    This strategy will leverage the company's large existing customer base to its advantages as companion products such as battery storage and EV charging are added to SunPower's product portfolio. Customers who have had to deal with multiple vendors for service or warranty issues know the value of owning a system under a single well known and bankable brand. This is especially the case for the higher end customer base SunPower has targeted in the past. The most important aspect of this strategy is that it will allow SunPower to incrementally grow revenues at gross margin parity without having the added expense of customer acquisition.

    One of the most exciting announcements this year was Maxeon's announcement to provide SunPower with lower cost mainstream mono-PERC modules for U.S. residential and commercial sales. The ability to downsell to price sensitive customers will allow SunPower to grow its base much more rapidly and increase its chances of companion product sales. The ability to match the mid-tier pricing for commercial installations will allow SunPower to recapture lost market share in both corporate and government sectors. These key markets could result in multi-fold shipment volume increases in the coming years after the extension of ITC solar tax credits as well as President Biden's commitment to solar energy expansion.

    The only problem for SPWR is that $29.33 is $5.2Bn and we're looking at $1.5Bn in sales and $50M in profits so 100x earnings is just too much of a hump to climb in 12 months.  Let's say they hit $2Bn and profits are $150M due to Build Back Better funding - we're still more than 30x away from the market cap.

    So, while I LOVE SPWR as a Stock of the Decade, I think 2022 may be a bit early for Stock of the Year.  

    As a new long-term play on SPWR, I'd go for:

    • Sell 10 2024 $25 puts for $6.50 ($6,500) 
    • Buy 25 2024 $25 calls for $10 ($25,000)
    • Sell 25 2024 $35 calls for $7.50 ($18,750) 

    That is a net $250 credit on a $25,000 spread that is $10,000 in the money to start.  Worst case is owning 1,000 shares of SPWR for net $24.75 and the upside potential is $25,250 (10,100%).  See, on that basis, it should still be the trade of the year but I can't say I'm 80% confident they'll pop in 2022 but – eventually – I have no doubt.  

    GOLD – Back below $20.  I don't see the dollar over 100 so I don't see Gold (/GC) below $1,600 (I'm not expecting other conditions to change much)

    Very key note from the CC:

    Mark Bristow

    I'd add to that too in that is, if you take Hemlo out of our numbers, and you except the other impacts already embedded in our numbers, our numbers are below $1,000, all-in sustaining costs. 

    As to the current Q:

    This week, Barrick Gold released its Q3 results, reporting quarterly attributable gold production of ~1.09 million ounces, a more than 5% decline over the year-ago period. The lower production and resulting sharp decline in ounces sold led to a double-digit decline in revenue, with Barrick's revenue slipping to just ~$2.83 million in Q3, down 20% year-over-year. However, it's important to note that Barrick was coming up against record gold prices on a year-over-year basis which impacted revenue.

    It also dealt (relatively gracefully) with a mechanical mill failure at the Goldstrike roaster, and COVID-19 restrictions impacted operations at Hemlo. Adjusting for these one-time items, it was not a bad quarter by any means, and Barrick has now exited one of its most difficult quarters on a comp basis in the past several years, having to lap financial results compared to a record average realized gold price of $1,926/oz last year.

    Moving over to Barrick's financial results, the quarter left a lot to be desired, with revenue down 20% year-over-year to ~$2.83 billion. However, as noted previously, the 20% decline was up against a massive quarter in Q3 2020, benefiting from higher gold sales and an average realized gold price above $1,920/oz. During Q3 2021, Barrick's average realized gold price came in at just $1,771/oz due to the correction in precious metals we've seen, and while Barrick's average realized copper price was higher, it was not enough to offset the weakness. On a two-year basis, it's worth noting that Barrick's revenue was up ~6%, despite the divestment of two assets (Super Pit & Lagunas Norte) and Porgera being under care & maintenance currently.

    Given the lower gold sales in the period combined with slight inflationary pressures, Barrick's AISC climbed on a year-over-year basis, from $966/oz to $1,034/oz. Given the sharp decline in the gold price from a record in Q3 2020, all-in sustaining cost margins dipped to just $737/oz, down from $960/oz in the year-ago period. However, adjusting for the record quarter last year, Barrick's margins remain up sharply on a two-year basis, up more than 49% from $492/oz to $737/oz. We also saw free cash flow decline sharply to $481 million, down from $1.86 billion in the year-ago period. However, despite the lower free cash flow on a quarterly and trailing-twelve-month basis, Barrick's balance sheet is stronger than ever, with less than $150 million in net debt, and ~$5.04 billion in cash.

    $19.37 is $35.2Bn and they are making $2Bn this year so 17.6x earning but they made $2.3Bn last year and almost $4Bn in 2019 so I think anything below $20 is a good, conservative valuation for GOLD.  I don't think gold itself is going much lower and the company is undervalued so now the question is, can we make an exciting play out of it at these prices?  

    The 2024 $17 puts are $2.50 and the $20 puts are $4.35 so $2 more for $3 in strike and, since I think $20 is a very fair price, I'd rather get paid more so:  

    • Sell 15 2024 GOLD $20 puts for $4.35 ($6,525) 
    • Buy 30 2024 $15 calls for $5.75 ($17,250) 
    • Sell 30 2024 $22 calls for $2.85 ($8,550)

    Here we're coming in at net $2,175 on the $21,000 spread that's $12,000 in the money to start.  Upside potential is $18,825 (865%) but we only need to hold $18 to end up at net $6,000, which would still be a nice $3,825 (175%) profit.  

    That's a really tough one as I do love this play but am I more than 80% confident we'll get through 2022 without a dip and/or fully recover if we do?  I think I'm more like 65% – well worth the risk as I REALLY would love to own 1,500 shares of GOLD at net $21.50ish for the long haul.  Let's say they go back to $10, we'd be forced into 1,500 at $21.50 but then we buy 1,500 more at $10 so our average goes to $15.75 and we sell maybe $5 worth of puts and calls for 2025 or 2026 and drop our basis to $10.75 on 3,000 shares or maybe 6,000 if it continues lower.  Yes – I like that plan!  

    As long as you are comfortable with the 50% down scenario – then it's kind of a no-brainer to get started here.  Just make sure you keep things proportional to what would fit in your portfolio should it all be assigned to you (6,000 at $10.75, in this case).