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Manic Monday – Omicron Seems Mild, Markets Relieved

DOOM Eternal Delayed, Switch Version Delayed Further - YouTubeLet's not get carried away.

It SEEMS like Omicron is giving people a mild case of Covid that does not often lead to hospitalization and that's a good thing – like the way we now live with Influenza, which used to kill millions (still kills 10s of thousands) so markets are a bit relieved this morning though the World is still ending and stuff – but we can worry about that some other time…  

China's Central Bank reduced bank reserve requirements by 0.5%, pusing $188Bn into the system.  This is because they are "not worried" about Evergrande, which has another round of note payments due this week.  Another Chinese developer, Sunshine 100, defaulted on $170M in bonds over the weekend.  Chinese stocks listed in the US have lost $1Tn since February.  We should have stuck with all those Chinese Ultra-Short (FXP) longs we had at the time (we cashed in early).  

Bitcoin bounced big this weekend, coming back to $48,600 from $42,000 on Saturday but still down 9% from Friday.  Here's a converstation you can have when you use Bitcoin - Friend:  "So how much money do you have for retirement?"  You: "I have no F'ing idea."  See – FUN!!!  There's something truly thrilling about leaving the house with $100 worth of BitCoin to go on a date and not being actually sure you can afford dinner and a movie by the time you get there….  

Of course, with inflation, I don't see how people can afford dinner and movies at all.  I had a simple dinner with my mom at a normal restaurant last night and it was still $80 ($67 + tip).  Still, people seem to be going out so they must be finding money somewhere.  I feel bad for my kids though – I was wondering why their bank accounts are constantly melting down in college but EVERYTHING is so expensive.  And employers are wondering why no one wants to work for $20 an hour – what are you going to do with that – taking home $100 a day?    

How much does it cost to live in Bogotá?

Yes, moving to Columbia is always an option but, sadly, my kids go to college in the US and I don't know the planet where clothes for young women are $73/month, but I'd like to send them there – at least for a vaction…  And, while Colombia may have serious cost of living advantages over the US, not even my college kids would be willing to crash in this bario (and notice the advertisement for expensive lingerie as people drive by):

How much does it cost to live in Bogotá?

There's a lot of international data out this week and inflation is very much in the spotlight:

  • China and Taiwan will both report export figures on Tuesday
  • China’s producer-price index due Thursday is in focus as it reflects the impact of commodity-driven costs. PPI is rising at the fastest pace in 26 years. CPI is due the same day
  • The Reserve Bank of India’s policy decision Wednesday will the first among major Asian central banks following the emergence of omicron. Traders will be watching for any signs of a more dovish tilt, particularly as India was the epicenter of the delta strain
  • November inflation data from the Philippines will give a sense on whether the slide in oil prices and tightened travel restrictions have weighed on price growth
  • Russia releases November CPI data on Wednesday. The previous month’s 8.1% rate was at the highest since January 2016
  • Polish central bankers will decide on the scale of tightening on Wednesday after raising the benchmark rate by a bigger-than-expected 75 basis points last month
  • Brazil’s central bank will have to choose whether to raise its policy rate on Wednesday as inflation remains elevated after an increases of 575 basis points since March
  • Peru’s central bank is also set to determine whether to extend monetary tightening for a fifth month on Thursday
  • Hungary will deliberate on its one-week deposit rate on Thursday, which had already been raised in the last three weeks.

Inflation, China and Virus: What to Watch in Stocks in 2022.

U.S. Winds of Inflation Are Blowing Winter Gale: Eco Week Ahead

Biden’s big social-spending bill probably will pass Senate this month without many cuts to it, analysts say

Hedge Fund CIO: No One On Earth Has Any Idea How Monetary Policy Can Alleviate Supply Chain Constraints

COVID Outbreak On US Cruise Ship Despite Fully Vaxxed Passengers

Watch: Paris Police Check Proof Of Vaccination While Diners Eat

Opinion: The Nasdaq and the Dow are now trading in a way that was evident just before the internet bubble burst

Now Or Never: The Great 'Transition' Must Be Imposed

And, of course, we're still watching our bounce lines.  Even with this morning's bounce, the S&P's Strong Bounce Box turned from green to black (too close to call), both of the Nasdaq levels turned red and the Russell's Strong Bounce Box turned red as well.  That's a lot of ground lost from Friday morning to this morning – nothing to be bullish about:

  • Dow  36,000 to 34,200 has bounce lines of 34,560 (weak) and 34,920 (strong) 
  • S&P 4,700 to 4,465 has bounce lines of 4,512 (weak) and 4,559 (strong) 
  • Nasdaq 16,500 to 15,675 has bounce lines of 15,840 (weak) and 16,005 (strong) 
  • Russell 2,400 to 2,080 has bounce lines of 2,144 (weak) and 2,208 (strong)

It's a slow week for data and no Fed speak either as the Fed has their final meeting of the year next Wednesday.  Productivity tomorrow, Mortgage Applications Wednesday (something we wouldn't mention if anything else were happening), nothing at all worth mentioning Thursday and CPI and Consumer Credit give us SOMETHING on Friday, at least.  

Earnings are still trickling in and look at AVGO, COST and ORCL on Thursday – that will keep things a little bit interesting.

Image

On the whole though, it looks like a good week to take a vacation – probably a good month for it.  

 


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  1. Good morning! 

    Lucid (LCID) got a subpoena to start their day, down 15%.   "SEC may be probing elements of the company's SPAC deal."

    • "The investigation appears to concern the business combination between the Company (f/k/a Churchill Capital Corp. IV) and Atieva, Inc. and certain projections and statements," reads the new SEC filing.

    Yet Musk walks around a free man…

    Jay Leno: Tesla is ‘probably 8-10 years ahead in battery technology’ compared to competitors

    Nissan to invest $18 billion in electric vehicle push


  2. Good Morning.


  3. Oh my!  Good morning. Good day.  Good night! :)

    Image







  4. Pharmboy – Seems like a lot of that money will be pulled out if interests rise or the market pulls back. I also wonder about what the effect of the 'great resignation' and retirements will have on withdrawals over the coming years. 


  5. BABA some one smelled my trade damm


  6. Is there anyone who can advise on whether Florida (Miami, Keys) is safe to travel to later this month? A family trip is being planned, and while I would prefer staying home and isolated in NJ, others want to be in warmer climes. I guess there is no masking in restaurants and in crowds in Florida, and no vaccine mandates? Case data suggests that cases are rising rapidly here in NJ, and not so rapidly in Florida, so I am very uncertain. 


  7. Inflows/Pharm – Great chart.  Shows what happens when the Fed prints $6Tn.

    BABA/Yodi – People have trouble panicking for more than a few days.  

    Florida/Rn – It's not as crowded as less cruise ships are docking, so that's nice but NO ONE wears a mask so, if that's going to freak you out – avoid Florida in general.  We had our big surge in the summer and now I think pretty much everyone has either had it or is immune at this point.  We only had 600,000 people all year at the Marlins games – less than 10,000 people per game so not much data there but I have not heard of any major outbreaks and Disney/Universal is packed without incident (300,000/day).  If you guys are healthy and vaccinated – I don't see why not but still be sensible about where you eat and go.  Southernmost is a nice hotel.  The Marriott is nice but in a bad spot, Southernmost you can walk to almost everything.  Pier House is at the other end of the street.  If you want to be mellower, Naples is great on the other side.  If the kids are young, they Hyatt Coconut Point has a waterpark, nice pools, private beach – the town is lovely and way less crowded than Key West.  You can also go to Roys, in Bonita – one of my favorite restaurants.  

    As to Miami – If you guys just want to be somewhere nice – I love the Nobu Hotel in Miami – it's in a great area and not a crowded place but it's the kind of hotel you could spend a week at (it's attached to Eden Roc Spa) without leaving.


  8. rn273, It just amazes me how people think. Corona is out stronger than ever. Even fully vaccinated, you can get the virus. So if you still think you untouchable take a dive in to the shark pool. It is not what the law says, it is who corona fancies.


  9. Interesting view

    https://seekingalpha.com/news/3777129-bargain-stocks-tax-loss-selling-season?lctg=60abaef7c919f072df7e86c8&mailingid=25941434&messageid=wall_street_breakfast&serial=25941434.53106&userid=351097&utm_medium=email&utm_source=seeking_alpha

    Top stocks that may be tax loss selling bargains

    Raymond James looks at stocks that may have been unfairly punished by investors looking to realize capital losses.

    "We have sorted Raymond James coverage universe, and included stocks that have underperformed the S&P 500 (SP500) (NYSEARCA:SPY) by 10% or more in the past two months, and are down 30% or more from their highs, but have maintained Outperform or Strong Buy ratings by Raymond James analysts," strategist Tavis McCourt writes in a note.

    Given "the uncertainties around virus variants, for many of these names it is difficult to ascertain how much of the underperformance is attributable to tax loss selling vs. a rapid change in investor perception around economic re-openings in 2022," McCourt adds.

    Among large caps they highlight Global Payments (NYSE:GPN), PayPal (NASDAQ:PYPL), Activision Blizzard (NASDAQ:ATVI), Delta Air Lines (NYSE:DAL) and Qualtrics International (NASDAQ:XM).

    For mid caps there is Doximity (NYSE:DOCS), DISH Network (NASDAQ:DISH), Teleflex (NYSE:TFX), Encompass Health (NYSE:EHC), Perrigo (NYSE:PRGO), Bumble (NASDAQ:BMBL), Alaska Air (NYSE:ALK), Avalara (NYSE:AVLR), Oak Street Health (NYSE:OSH) and BridgeBio Pharma (NASDAQ:BBIO).


  10. Florida/RN
    We came to Sandestin (north west of Florida) yesterday for our December vacation and was surprised to see that almost noone wears a mask out here. But as Phil pointed out, life seems to be back to normal here and the cases seem to have reduced. Weather is nice out here and if you stay outdoors, Florida Keys would be nice.


  11. rn273/florida – don't know – I'd stay away, but Phil seems sanguine about it and he lives there. However, the numbers are unreliable/faked.


  12. Wow, /NG with the big collapse:

    Indexes looking good except the Nas:

       

    Numbers/Snow – I'm also not hearing about a lot of incidents either.  I think there is something to be said for herd immunity – we haven't worn masks since last fall, when people started getting vaccinated and vaccination rates among old folks (most vulnerable) is actually very good – more the mid-state crowd that is anti-vax.  

    • Florida has had 3.7M (17%) cases for 22M people and 61,700 (0.28%) deaths.  
    • NY has 2.8M cases for 19.3M (14.5%) people and 57,800  (0.29%) deaths.
    • NJ has 1.3M cases for 8.8M (14.7%) people and 28,500 (0.32%) deaths.
    • CA has 5.1M cases for 39M (13%) people and 74,800 (0.19%) deaths 

    So, not very scientific but CA has been the strictest and yes, it does help.  That level of caution saved about 30,000 lives but at what economic cost and does the economic cost lead to lives lost as well?  As I've said before, I can see the Governor's point of letting people get Covid as long as we're not off the charts – and we're not.  I would argue that many cases go unreported in anti-vax areas since people fight off a "bad cold" and never go to the doctor – so the real numbers are elusive without widespread testing – which we absolutely don't do.  

    I have had 3 shots, I still won't go to an airport but I go to the supermarket (whole foods, not Publix – we get a better class of germs there) but not the mall.  I went to one movie (was not at all crowded) in two years but my Mom and I go out every Sunday for dinner but that's about the only time I go to restaurants and we usually pick a place that's either not crowded or has outdoor seating.  I do walk around town without a mask but not on weekends when it's crazy crowded here.  When the kids are down (resumed last November) we eat out every day and go places – including Naples, Key West and Disney (I guess I should count Miami too) and that's my quarterly risk-taking activity.   I do not go to the casino but I have played poker with friends a few times – couldn't imagine doing it with strangers touching the chips…


  13. RN- I'm trying to get to Fla too but as Snow relates there is no reliable source of health reporting there. Reminds me of Mpls area when I was down there in the fall. Extremely lose requirements and noone in masks, no social distancing and in two months they were the worst in the nation. If you stay outside, it might be OK, but having seen first hand the deaths of friends  FULLY vaccinated from covid and the continuing long haul problems from having it, I would be cautious. I intend to get there once we know more about Omnicron variant. Hesitant about planes too.


  14. That is a good idea.  We used to play CAT at $100 but lost interest as they blasted over $200 but $200 isn't really that bad as it's $108Bn and they are good for $6Bn a year so call it 18x BUT they do have Infrastructure catalysts – BUT can they get parts?  I think going carefully is the answer so, in the LTP, let's sell 5 CAT 2024 $150 puts for $15 ($7,500) just to remind ourselves to watch them (and to put $7,500 in our pockets for promising to buy CAT for net $135 – 1/3 off!).  

    Let's also take a poke at ERJ in our Future is Now Portfolio as I like that electric taxi service and ERJ is just $2.5Bn and should turn a profit next year.  They are basically like a start-up but they do have a base and $25Bn in sales growing strong – they just need to get profits to the bottom line so worth a toss:

    • Sell 5 ERJ 2024 $15 puts for $5 ($2,500) 
    • Buy 20 ERJ 2024 $15 calls for $4.50 ($9,000)
    • Sell 20 ERJ 2024 $20 calls for $3 ($6,000)

    Just net $500 on the $10,000 spread that's out of the money.  We won't mind rolling the short puts to 2x something lower (the $10 calls are $2.50) and we won't mind spending money to roll to the $10 calls, which are now $7.40 but, since the spread from the $15s to $20s is so much lower, we can do better if the stock goes lower and, if it doesn't, we make $9,500 at $20.  


  15. Thoughts on RH .. Stock is  down from $750ish .. I own shares.  Earnings out this week.  Has  taken a massive hit.  Should I just sell? 


  16. Hi Pharm, familiar with RETA? Big drop caught my eye.


  17. By the way folks, this is why we use the balanced portfolio concept.  We went to CASH!!! in early September and we've been waiting "patiently" for a nice dip.  Because we have our hedges – we didn't feel pressure to sell in the downturn and now we've bounced back so we're glad about that.  We also had plenty of cash to add new positions that finally went on sale and we were able to improve some of our older positions as well.  That's the value of being balanced – these times to act don't happen too often but, when they do – they can make your entire year.  

    RH/Nom – They got stupidly expensive but not terrible now.  $557 is $11.5Bn and the company only has $3.8Bn in sales.  Profits are nice at $760M but I'm not sure they are sustainable or just coming off a year of pent-up demand.  In 2019, they were doing $2.8Bn and 2016 $2.1Bn so went from 8% growth to 20% growth.  I do love them but the last time we bought them was $100 – and that wasn't too long ago.  So, personally, I just can't bring myself to own them over $300 though they could well be worth $550.  

    MIDD is another old favorite that got too expensive.


  18. JACK is another old favorite and boy did they get cheap at $81, which is only $1.7Bn and they made $90M even in 2020 and $150M is more normal.  I like the TACO deal though they may have overpaid but it's only $275M and they lost money last year ($90M) but should make $20M+ going forward, which is fine and good synergy to combine locations and such.  So, for the Earnings Portfolio, let's:

    • Sell 5 JACK 2024 $70 puts for $12 ($6,000)
    • Buy 10 JACK 2024 $70 calls for $21 ($21,000) 
    • Sell 10 JACK 2024 $100 calls for $10.50 ($10,500) 

    That's net $4,500 on the $30,000 spread that's $11,000 in the money to start and lots of room to adjust.  If they can get back to $100 in 2 years, we have $25,500 (566%) profit potential, which is 10% of that portfolio!  


  19. These comebacks are mental:

    It's like people have no idea what stocks are worth and just rush in and out of them whenever someone tells them to.  

    Working out for us on DAL though – the one I told you to buy last Monday…  wink  It's OK when I do it!   

     

    Moderating Monday – Markets Bounce Back from Initial Omicron Panic

    Also, I don't know if you noticed it but people have been flying all year without any major incidents yet you can buy Delta Airlines (DAL) for $24Bn at $37.50 and Delta made almost $5Bn in 2019.  They lost $12.4Bn in 2020 and they are losing $3Bn this year but next year should be back to profits and, long-term, we're not going to stop flying – even if we all have to wear space suits on the plane.  

    Let's take a poke at DAL in our Future is Now Portfolio:

    • Sell 5 DAL 2024 $40 puts for $10 ($5,000) 
    • Buy 20 DAL 2024 $40 calls for $8.40 ($16,800)
    • Sell 20 DAL 2024 $55 calls for $5 ($10,000) 

    I'm being aggressive with the short puts because this trade will either begin working by Q1 or we're out anyway.  It's a $30,000 spread at net $1,800 so there's a $28,200 (1,566%) upside potential at $55.  Worst case is we're forced to own 500 shares of DAL at net $43.60 but we'll pull the plug long before that happens.


  20. RETA — looks like the FDA did not like their data for a kidney failure.  Not confident in their data as I look at it either, but I have to apologize as I have not done a thorough scrub.


  21. Pharm-

    ABUS spiked on great results/data last week but now even lower…  Any insights?


  22. Good enough for me Pharm, one I will play conservatively. Thank you. 


  23. ABUS/jeff – all has to do with the lawsuit against Moderna.  But the real question is…how much will they get.  You could probably sell calls against it and make $$ to pay for the stock. If it gets called away…then you are a happy camper.

    Kust – the Nerf2 pathway is being explored by several companies, but I am not sure how the one you note is looking at it (disease focus setting). If it was a broad swipe, it makes sense that it would fail.  CKD is a very heterogenous disease, and thus focusing on a subset would be wise….? is, which subset!


  24. LOL.  That's the Nrf2….not 

    Amazon.com: NERF CS-18 N-Strike Elite Rapidstrike : Toys & Games


  25. ABUS/Pharm – Great point as they should get something and you can buy the whole company for $561M at $3.73 but they are essentially pre-revenue.  A fun way to play would be buying the 2024 $3 ($3)/$5 ($2.35) bull call spread for 0.65 and you can leave it at that or sell some $2.50 puts for $2.15 so let's say we sold 10 puts for $2,150 and bought 40 of the spreads for 0.65 ($2,600).   That's net $450 on the $8,000 spread so $7,550 (1,677%) upside potential and the worst case is owning 1,000 shares at net $3.50ish.  

    • A federal appeals court has upheld a ruling by the U.S. Patent and Trademark Office to not invalidate patents held by Arbutus Biopharma (ABUS +42.8%), dealing a blow to Moderna (MRNA -7.0%).
    • The court ruled that Moderna had no standing to appeal.
    • The patents in question cover a novel lipid formulation for nucleic acid delivery. These lipid nanoparticles are essential to protect mRNA therapies as they travel through the body to cells.
    • As a result, Arbutus may be eligible for royalties from Moderna from sales of its COVID-19 vaccine.
    • Moderna had argued that the claims in the patents were obvious and upholding them would open the company to patent infringement lawsuits.
    • Check out additional background about the Arbutus patents.

     

     


  26. Pharm,  Nerf2 very interesting. They are using drugs now that help reduce inflammation in covid patients. I had very high D Dimer #s when I was infected and I took a cocktail of supplements that I believe helped. 


  27. -TROX/Phil  Are you still advising we buy back the short calls for the spread you suggested?

    -15 TROX Feb'22 $17p ($2.23)

    25 Feb '22  $15calls ($4.3)

    -25 Dec'21 $20 calls ($1.6

    Thx.


  28. TROX/Wing – Aren't they getting bought out?   I'm not sure when I would have said to buy back the short calls given they are getting bought.   Ah, found it:

    November 8th, 2021 at 3:11 pm | (Unlocked) | Permalink

    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.

    So when the Dec $20 calls expire (now $3 with 11 days to go) you can roll them to 2023 $20 calls at $4.90 and pick up $1.90 more and still have great protection if they don't get bought.  


  29. TROX/Phil Did you mean to roll the Dec $20 calls to $20 calls in Feb 2022 as we only have the longs in '22, not '23 or do you mean to sell naked shorts for '23?

    Thx.


  30. TROX/Wing – Oops, you are right:

    TROX Short Put 2021 17-DEC 20.00 PUT [TROX @ $22.66 $0.46] -10 3/2/2021 (11) $-5,400 $5.40 $-5.13 $-5.40     $0.28 - $5,125 94.9% $-275
    TROX Long Call 2022 18-FEB 15.00 CALL [TROX @ $22.66 $0.46] 25 8/4/2021 (74) $10,875 $4.35 $3.45     $7.80 - $8,625 79.3% $19,500
    TROX Short Call 2021 17-DEC 20.00 CALL [TROX @ $22.66 $0.46] -25 8/6/2021 (11) $-3,500 $1.40 $1.50     $2.90 $0.25 $-3,750 -107.1% $-7,250

    I didn't realize we had the Feb long calls.  Well then we have to cash the current spread and make a new one in 2023.  We can't leave the shorts open naked as we might get killed if they get bought for a high price.  So net $5 is about our max anyway and the 2023 $18 ($5.30)/25 ($2.15) bull call spread is $3.15 and it's $4.66 in the money so that's a good way to go with a potential $7 and hopefully we collect it early.  We're cashing out $12,000 so we could buy 30 for $9,450 and take the rest off the table and, if all goes well, we get $21,000 back.   Not bad for a trade we started with net $1,975.


  31. TROX/Phil  I see that TROX does have options in ’24 .. are you saying it’s better to stay with the ‘23s in this case because of the possible buyout? Would it make sense to have long '24 $18s and short '23 $25s with possible roll outs if it's still around?


  32. TROX/Wing – They are too thinly traded and don't offer enough additional premium (probably because of the buyout) to commit to another year.