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Wobbly Wednesday – Markets Weaken as Dollar Strenghens

What a quarter the Dollar is having.  

We're 5% stronger since October 1st and that increased buying power is helping to keep inflation under control (seemingly) as the unit we measure inflation with (Dollars) is not a steady instrument.  That's one of the big games the Government is able to play to get the outcome they desire.  Of course, Dollar strength is playing out on the World stage as most investors are moving money back to CASH as Covid resurges into the holiday season.  

I know it was a long time ago but some people remember the bad old days of early 2020, when the Dow was at 29,500 and Covid was a "China Problem".  Even after China declared a state of emergency, we decided we were immune and just kept doing what we were doing and it wasn't until late February that the markets began to take notice.  By March, the Dow was down to 18,000 – a 38% drop in just over a month.  I always find it interesting that traders don't believe history repeats itself – and then they go looking for "patterns" on their charts…

Chart of COVID-19 and markets

Here we are, 2 years and $6Tn (of Government Debt) and $5Tn (Fed Balance Sheet) later (not counting the $3Tn Biden just spent) and the Dow is up it's typical 20% over the past two years – as if nothing ever happened and traders are trading like nothing ever will happen again or, if it does, that we'll toss another $10-15Tn in to make sure the Top 1% don't take any losses.  

And that's all great for the US because we can go $32Tn into debt and still have a strong (looking) currency and our Central Bank can buy $5Tn worth of worthless assets, using he people's money to take bad debt off their member bank's balance sheets because we live in a land of no consequences – EVER! – I hope….

US monetary policy in GIFS! Where we are and how we got here | Financial  TimesSo, to sum it up into the holidays:  Just because Covid happened 2 years ago and still hasn't gone away doesn't mean we should be worried about it now and there are no detriments to running up 160% of our GDP in debt and the Fed can just keep buying bad assets with the checks they write that are backed by the bad assets they are about to buy (not even Dr Who can explain that one!).  God bless us, everyone!  

Of course we are hoping to ride this free money train until the last stop but just remember that there WILL BE a last stop – we just don't know where it is yet.  Powell has been reinstated by Biden as the last thing he wants to do is pull the plug on this party, not with his approval rating (42.8%) already almost as low as Trump's (38.4%) at the same point in their Presidencies.  

To be fair to Trump, George Bush 1st had an approval rating of 27.6% 6 months before the end of his term – yet his party still ran him for re-election!  Jimmy Carter's bottom was 28.3% and inflation was also his downfall.  Obama (with Biden) bottomed out in his first term (year 2) at 42.5% – that's the mark Biden is trying to avoil but he's not too worried about it so far – as he's been through this before.    

Of course, if you are a Fox watcher, you probably think Biden's approval rating is more like 22% than 42% – which is why you'll think he must have stolen the next election – being so unpopular.  42.8% is about where Trump was during the last election – and multiple recounts have shown that he got his ass kicked by Biden.  Go ahead – check the numbers again….

Why does this matter?  Well, as we have seen, one President can completely reverse the policies of the previous President and, while all these revenge politics are fun – the country ends up making no progress at all for decades at a time.  This, of course, suits the anti-progressives very well – if they can't get us back to  the stone age, they will damned certain make sure we don't make any further progress, right?  

To give Trump credit, he did try to buy Greenland – that's pretty progressive.   Biden's version of being progressive is trying to save the planet – fortunately, he's way down in the polls so his policies aren't likely to stick long enough to have any effect but it does make for a tricky investment climate.  Do we buy solar stocks or will coal make a comeback like Trump promised it would in 2016?   Peabody Energy (BTU) went from $24 to $47.50 in Trump's first two years – before collapsing back to $11.57 today – because nothing Trump promised the coal industry ever actually happened.  

There's another lesson we need to learn – just because your leaders say they are going to do something – doesn't mean they are actually going to do it.  As we're looking ahead to our Trade of the Year for 2022 (sounds like the future, doesn't it?) we have to think about what policies will stick over the next year and that, sadly, brings us all the way to the next election, whcih can turn Biden into a lame duck after just 2 years in office.  

presidents gifs, educational gifs, xpost gifs, us gifsSo, for planning sake, we're better off looking at countries with more stable governments to see what they are doing.  Putin has been in power for 20 years.  China's Communist Party is always in power.  Ali Khamenei has been Iran's Supreme Leader for 38 years.  Assad is still the guy in charge of Syria (19 years) – remember when we were mad at him for a while?  Erdogan has been running Turkey forr 16 years and Lee Hsien Loong has been Prime Minister of Singapore for 15 years and Merkel is retiring in Germany after 14 years.   These are the people who are running the World – we are just visiting when the current President stops by because – if you don't like him – just wait a few years.   

We're still thinking about what we want to be trading in 2022 but, in order to do that effectively, we have to think about what's likely to happen in 2022 and that's a tough nut to crack this year.  

Have a very happy holiday, 

- Phil


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  1. Good Morning.

  2. US sues to halt sugar merger, says it would harm competition

  3. US GDP slowed sharply in Q3 but big rebound expected in Q4

  4. Good morning!

    2nd estimate of Q3 GDP is 2.1%, no improvement.

    Durable goods -0.5% is a big miss.  +0.4% generally expected. 

    Personal Income up huge at 0.5% (for a month) and Personal Spending up a whopping 1.3% in October – that's some serious inflation.

    That's backed up by PCE Prices up 0.6%.

    Consumer Sentiment, however, pretty high at 67.4, up from 66.8 last month.  

    Fed minutes at 2pm.

    No Webinar today.

  5. /ES shorts not worth the risk as we're up a lot so going flat into the weekend before all the gains bounce away.

  6. rittenhouse visits trump in florida.

    i have a hard time believing trumps claim that and 18 year old just up and called him and asked if he could drop by for a visit? lol

    i wonder who paid for the plane ticket.

  7. MTTR +6.71%Nov. 24, 2021 10:08 AM ET

    • State Street Investor Confidence Index: 110.5 in November vs. 114.1 in October (revised from 114.4).
    • North American ICI to 108.7, down 5.3 points.
    • Asia ICI to 108.1, up 4.8 points.
    • European ICI to 95.3, down 1.4 points.
    • Marvin Loh, global macro strategist, State Street Global Markets said, “The overall positive tone in risk assets pushed global equity bourses to multi-year highs, led by North America, with U.S. equity investors looking past the start of Fed tapering, higher inflation readings and more aggressive rate hike expectations. Investor’s willingness to look through surging inflation will be key to maintaining the overall investor confidence that has emerged globally this year.”

    HPQ +9.01%Nov. 24, 2021 10:03 AM ET

    • HP (NYSE:HPQ) has come out of today's market open up 11.3% after its fiscal Q4 earnings easily topped expectations with double-digit income gains and a surprising 9.3% gain in revenues.
    • The personal computer mix was in focus as the company's Personal Systems unit was the double-digit revenue gainer, and that was driven by commercial PC sales that rose 25%, more than offsetting a 3% drop in consumer PCs.
    • In analyst reaction, Citi was bullish, noting "computing + printing + cash flow = Buy."
    • The bank's Jim Suva highlighted the cash flow and strong current-quarter guidance. "We recognize the investor skepticism about both PC and printing demand as yes, many did purchase laptops and home printers during COVID but we believe the handoff to enterprise strength as workers return to the office in a hybrid manner will boost commercial PC demands for multiple quarters."
    • Citi's expecting HP will "walk up" its 2022 EPS and cash flow guidance as the year unfolds. It's sticking with its Buy rating and $40 price target, now implying 12% upside.
    • Jefferies has a Hold and observes that volumes of PC and printers fell year-over-year, but sales sustained growth on a value basis amid a mix shift to the high end (graphics, industrial applications).
    • Cowen is at Market Perform and noted a strong backlog driving some sustainable sales in PCs. It's expecting component shortage through at least the first half of 2022. Its neutrality comes from the "perspective that current work-from-home demand for PCs may have peaked, with a risk of deceleration in CY21, macro uncertainty, and a shift to return-to-office that may lead to underperformance relative to enterprise-focused peers." The firm has a $34 price target.
    • Barclays is Underweight, a little more bearish on end market growth. And BofA reiterated its Underperform rating noting some risks to the current-quarter guidance.
    • "We remain cautious on a bounce-back in PC unit sales, given tougher comps linked to WFH-related purchasing seen since the start of the pandemic," BofA says. It also expects supplies in Printing to continue to decline and the consumer printer business to face tougher year-over-year comparisons. It's staying Underperform on a view that HP is cyclically over-earning, but raises its price target to $33.
    • Earnings call transcript.

    Damn, they were one of our Stock of the Year candidates.

    Rittenhouse/Tommy – Killed 2 people, wounded another, transported assault weapons across state lines and used them and he's not even on the "No Fly" list???  Trump rolling out the welcome mat for this kid is the very definition of pandering to his base.  

  8. HPQ is another good example of how you don't miss much by taking a nice, conservative spread on a stock that rockets higher.

    HPQ Long Call 2023 20-JAN 22.00 CALL [HPQ @ $35.66 $3.47] 25 7/28/2021 (422) $18,750 $7.50 $6.20 $7.50     $13.70 $3.20 $15,500 82.7% $34,250
    HPQ Short Call 2023 20-JAN 30.00 CALL [HPQ @ $35.66 $3.47] -25 7/28/2021 (422) $-8,000 $3.20 $4.25     $7.45 $2.38 $-10,625 -132.8% $-18,625
    HPQ Short Put 2023 20-JAN 25.00 PUT [HPQ @ $35.66 $3.47] -15 7/28/2021 (422) $-4,200 $2.80 $-1.51     $1.29 - $2,265 53.9% $-1,93

    We committed $6,550 on the $20,000 spread and we're already at net $13,690.   Still another $6,310 left to gain – even though it's deep in the money now.  

  9. Oh yeah, we also added HPQ to the Money Talk Portfolio on 9/1 – that was good timing!  

    HPQ Long Call 2023 20-JAN 30.00 CALL [HPQ @ $35.41 $3.22] 40 9/1/2021 (422) $14,640 $3.66 $3.74 $3.66     $7.40 $2.33 $14,960 102.2% $29,600
    HPQ Short Call 2023 20-JAN 35.00 CALL [HPQ @ $35.41 $3.22] -40 9/1/2021 (422) $-8,280 $2.07 $2.81     $4.88 $1.99 $-11,220 -135.5% $-19,500
    HPQ Short Put 2023 20-JAN 27.00 PUT [HPQ @ $35.41 $3.22] -20 9/2/2021 (422) $-6,600 $3.30 $-1.39     $1.92 $-0.67 $2,770 42.0% $-3,83

    We had gotten more aggressive on the put sale and the target so this one is just now 100% in the money for a potential $20,000 and still only net $6,270 from our original $240 credit on the spread.  These are nice gains for our first quarter!  

  10. That's what I was talking about yesterday with the high-reward trades – when you can make that kind of return, it makes it really easy to have a successful trade.  And that was still a pretty conservative spread – we promised to buy 2,000 shares of HPQ 10% below the current price.

  11. BABA for the first time up again, could possible be a candidat.

  12. BABA/Yodi – Too much unknown political risk for Stock of the Year but love them for long-term trade.

    • BABA – Back to $150 this morning after missing on earnings and cutting guidance.  Depends what we come up with when we analyze the results but most likely we'll buy back the short calls and roll the long calls lower as I have long-term faith in them.

    Submitted on 2021/11/18 at 2:37 pm

    BABA/Batman – Revenue was up 29% from last year.  It may have missed expectations but that's pretty good growth.  To me, last year had lockdowns so boosted business more than the current Q, so I would not treat them harshly.  Also, they took control of Sun Art late last year and that consolidation hit their earnings (though boosted revenues).  They added 60M new users to 1.24Bn, so 5% more users in one quarter is very nice,  NFLX adds 3M users and people go into a buying frenzy….    Supposedly, the 27% decline in earnings (to $.5.4Bn for the Q) is due to investments in operations – but good luck figuring that out.  More likely, expenses outpaced price increases (labor, especially) and will take some time to catch up – hence the poor guidance.  

    Bottom line for me is BABA is trading at 14x earnings and AMZN is trading at 66x earnings and it's mostly racism that's undervaluing BABA vs AMZN – there's little difference between what the two companies are offering.  Regulatory issues in China seem to have calmed down but they are the same issues that keep AMZN out of BABA's markets.  

  13. I drove through Aberdeen recently stopping at the Walmart there. It's almost shocking. We live in two different Americas.

    taking a look at KlimaDAO (polygon chain) and Snowbank (Avalanche chain) today. The latter is rebasing to the tune of 385,000% per year (2.29% per day). Seems legit LOL.

  14. Phil/presidents – reminds me of this: "The difference between treason and patriotism is only a matter of dates." – Alexandre Dumas

  15. Did anyone make a call on LGVN?

  16. this is such a sad story to read. Everything we need to decarbonize not just the US, but the entire world, exists right in the heartland. GreenCoin was my idea to match useful, productive decarbonization with the financial tech world that has marginalized and left 90% of this country behind. 

    Maybe someone comes up with an idea like this. I'm ready to invest in it. But it's just sitting right there to be had. 

  17. Aberdeen/BDC – Isn't that Death Valley?  

    Dumas is right, as is whoever said "History is written by the winners" which, sadly, brings us to Orwell being right since there are no more books and history is written by whoever has the password this morning.

    I think that would be a fun thing to study – a look at how the Wikipedia or other "historical" records change over time on famous people.  Like Epstein or Weinstein pre and post-scandals or Trump pre and post Presidency.  Would make a nice master's thesis for a history major.  I bet even the coverage of historical events changes as attitudes change.  

    Columbus made three further voyages to the Americas, exploring the Lesser Antilles in 1493, Trinidad and the northern coast of South America in 1498, and the eastern coast of Central America in 1502. Many of the names he gave to geographical features—particularly islands—are still in use. He also gave the name indios ("Indians") to the indigenous peoples he encountered. The extent to which he was aware that the Americas were a wholly separate landmass is uncertain; he never clearly renounced his belief that he had reached the Far East. As a colonial governor, Columbus was accused by his contemporaries of significant brutality and was soon removed from the post. Columbus's strained relationship with the Crown of Castile and its appointed colonial administrators in America led to his arrest and removal from Hispaniola in 1500, and later to protracted litigation over the benefits that he and his heirs claimed were owed to them by the crown. Columbus's expeditions inaugurated a period of exploration, conquest, and colonization that lasted for centuries, helping create the modern Western world. The transfers between the Old World and New World that followed his first voyage are known as the Columbian exchange.

    That's right at the top of Wikipedia on Columbus but, using the wayback machine, in February 2005, it said this:

    Unlike the voyage of the Vikings, Columbus's voyages led to a relatively quick, general and lasting recognition of the existence of the New World by the Old World, the Columbian Exchange of species (both those harmful to humans, such as virusesbacteria, and parasites, and beneficial to humans, such as tomatoespotatoescorn, and horses) and the first large-scale colonization of the Americas by Europeans. The voyages also inaugurated ongoing commerce between the Old and New Worlds, thus providing the basis for globalization.

    Columbus remains a controversial figure. Some – including many Native Americans – view him as responsible, directly and indirectly, for the deaths of tens, if not hundreds, of millions of indigenous peoples, exploitation of the Americas by Europe, and slavery in the West Indies. Others honour him for the massive boost his discoveries gave to Western expansion and culture. Italian Americans hail Columbus as an icon of their heritage.

    Interesting, right?  In 100 years, who will know anything different than what they read on the Web – whatever that may be….

    LGVN/BDC – Does that work?

    Shame about farms.  That's why inflation isn't transitory – people don't understand how much cheap labor drives ag prices and we kicked all the immigrants out and all the citizens are moving to the cities.  

  18. I just wanted to wish everyone here at PSW a very Happy Thanksgiving.  We have a great little community here and appreciate all thought, ideas , trades and discussions.  Luckily we will be hosting 15 adults and 4 kids at our house this year. 

  19. BABA/Phil – Not as much political risk as something like CHL, but still there. Seems like we are going to have to exclude a lot of foreign stocks depending upon who is in power (similar to your history lesson above).

  20. Thanks Stock and a very Happy Thanksgiving to everyone, hopefully surrounded by friends and family as we are ALMOST back to normal this year.

    I'll post our Stock of the Year (still haven't decided) tomorrow – next week we officially announce it on Money Talk (Weds, 7pm).

    Friday is a half day, I think so probably a morning post but, historically, not much goes on Friday after Thanksgiving.

    Have a wonderful weekend,

    - Phil

  21. BABA/Seer – It's the same BS though – the US can suddenly decide BABA is a threat (how is CHL a threat) and toss them off the exchanges too.  China can decide they don't like them anymore also.  As a portfolio stock – I don't mind but as ONE TRADE for 2023 – too many unknowns.

  22. Have a safe and happy Thanksgiving everyone. Best plan I heard today from friend who is going to a family dinner In Mpls tomorrow. Everyone had a covid test in advance and got the all clear to attend. It will be adults and children. That's what call using your smarts! Too bad more in Minn aren't doing the same.

  23. Farms/Phil – automation is going to do away with a lot here as well. Automation was going to take out a lot of jobs regardless of where wages went.


    Happy Thanksgiving to all.

  24. Phil / Happy Thanksgiving!


    ….. I hope your day is a  wonderful one spent with family and friends 

  25. Happy Thanksgiving everyone. Pirateinvestor are you coming to my families MN Thanksgiving? We did that as well. Hit 6 drugstores to try find the Abbot BinaxNow Covid test (home test) came home empty handed. Bummed that Thanksgiving was not going to happen for me as a last shot checked my Sam's Club, they had 3 cases in stock and a third less in price! Win Win!

  26. Happy Thanksgiving!