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Fed Fueled Thursday – Putin Puts Powell on Pause

Oil hit $116.57 overnight.

Now it's "down" to $112.50 as Russian troops contine to march and bombard their way to Kyiv and one million out of 40M people in Ukraine have been driven out – becomming the kind of refugees Republicans would build a wall to keep from safety and sanctuary.  I mean, look at these two kids, exactly the kind of people our ex-President warned us about when he said:

"When Mexico sends its people, they're not sending their best.  They're not sending you.  They're not sending you.  They're sending people that have lots of problems, and they're bringing those problems with us. They're bringing drugs. They're bringing crime. They're rapists." – Trump

THIS is how people become refugees, Governments change, homes are destroyed, people find themselves on the wrong side of wars they had nothing to do with and they have nowhere to go in their home country (and yes, there are economic refugees also, just looking for opportunity in a country that used to call itself "The Land of Opportunity"), so they end up being "refugees" and what they need is help – not scorn.  

Could you imagine if President Biden said he'd be happy to take 100,000 Ukranian refugees?  Even though the US could sure use 100,000 new workers – you KNOW what the reaction would be.  Air BnB (ABNB), on the other hand, put up a page asking their rental partners to host some refugees, charging nothing and providing insurance for people willing to lend their unused housing to refugees.  They expect to be able to house 100,000 refugees for up to 14 days – a huge help in the crisis – kudos to them!

Meanwhile, all this is great for the market (apparently) as it has made Powell tip his hand and assure Congress that there will only be a 0.25% rate hike in March – not the 0.5% expected and that was all the markets needed to hear yesterday to set off a very nice rally because, in the end, the markets don't care about a war in Ukraine any more than they care about 2,000 people a day still dying of Covid in the US or the latest Intergovernmental Pannel on Climate Change report that essentially says we are all going to die.  If we are going to die – then we'll do it at 40 times earnings, I guess…

Unit Labor Costs this morning were up 0.9% in Q4 vs 0.3% expected by our finest Economorons – off by 200% is right in their wheel-house.  Tomorrow we get Non-Farm Payrolls with about 400,000 new jobs expected but if hourly earnings (0.5% expected) are as bad as Unit Labor Costs – the market is not going to like that at all.

Meanwhile, enjoy the rally.

 


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  1. Good Morning.





  2. Good Morning 

    YETI   Buy rating from Jeffries.   $120 price target .   I'l take that and the $39,500 from our spread :

    Yesterday, we hosted meetings with mgmt, which were upbeat in our view. We continue to see innovation in new and existing product categories, geographic expansion, and customization as key go-forward growth drivers with substantial whitespace oppty. We note that mgmt remains committed to the wholesale channel, as it introduces the brand to new and diverse buying occasions, citing that customers are commonly multi-channel shoppers. Pricing consistency remains a key pillar of the go-to-market strategy and we believe that more broad pricing action is a potential lever to mitigate inflationary impacts if they prove to be longer-lasting than what’s currently being contemplated. And in terms of capital allocation, while the company views current trading levels as a tactical oppty for a buyback, mgmt emphasized that investment in organic growth remains the top priority. We remain Buy-rated and see an extremely attractive entry point for shares.


  3. interactive brokers sent me multiple messages yesterday that they were increasing margin requirements for all oil derivatives products by `15 percent .

    you would almost think they were aware in advance of how volitile it was to become this morning.


  4. the futures indexes appear to be moving inversely with price of oil this morning.


  5. Good morning!

    YETI/Stock – That's funny.  I'll be happy with $80.

    YETI Short Put 2023 20-JAN 65.00 PUT [YETI @ $63.17 $-0.40] -10 7/9/2021 (323) $-7,000 $7.00 $5.05 $-7.00     $12.05 - $-5,050 -72.1% $-12,050
    YETI Short Put 2024 19-JAN 70.00 PUT [YETI @ $63.17 $-0.40] -10 1/26/2022 (687) $-18,000 $18.00 $0.80     $18.80 - $-800 -4.4% $-18,800
    YETI Long Call 2024 19-JAN 60.00 CALL [YETI @ $63.17 $-0.40] 20 1/26/2022 (687) $41,440 $20.72 $-1.92     $18.80 - $-3,840 -9.3% $37,600
    YETI Short Call 2024 19-JAN 80.00 CALL [YETI @ $63.17 $-0.40] -20 1/26/2022 (687) $-25,300 $12.65 $-1.55     $11.10 - $3,100 12.3% $-22,200

     

    YETI/Rn – Guidance was off but silly reaction, revenue drop to $1.665 from $1.693 and EPS down from $2.95 to $2.84 – I kid you not.   And it's over supply chain issues, nothing that's going wrong in the company.  Overall, they are expected to hit $250M in profits this year, up from $213M last year and, at $62, you can buy the whole company for $5.4Bn so call it 22x earnings but the earnings are growing fast.

    Oil/Tommy – Imagine the carnage if peace were to break out.  

        
       

    VIX is still 30 so no one is calm:

    Germany is having a bad day so far (and almost over):

      

     


  6. Wow – big, ugly turnaround this morning. 

    ISM Services sucked: 56.6% vs 62% expected.  

    GIANTMONSTER

    Powell not helping on day 2:

    Now!

    Federal Reserve Chair Jerome Powell said Thursday that fighting inflation is the best thing the central bank could do to ensure long-term economic growth, although Russia's invasion of Ukraine has given the Fed added reason to be "careful" about its approach.

    "The problem really that we're facing is one of high inflation," Powell told U.S. lawmakers in his second day of testimony about the current state of the country's economy and monetary policy.

    "The biggest risk to being able to sustain a long expansion … is to sustain, or really to restore, price stability. That is the single most important thing we can do to really try to have the kind of long expansion we saw in the last cycle," the Fed chief contended.

    Powell's comments came as part of an appearance before the Senate Committee on Banking, Housing and Urban Affairs. It followed a similar appearance before a committee in the House of Representatives the previous day.

    In Wednesday's testimony, Powell signaled that he favored a quarter-point rate increase at the Fed's next meeting, scheduled to end on March 16. However, he noted that policymakers are "never on auto-pilot" as they consider potential moves.

    Speaking before the Senate on Thursday, Powell reiterated his basic stance, saying the Fed would proceed with its plan to raise interest rates and remove stimulus, even while keeping an eye on the "highly uncertain" impact of the conflict in Europe.

    Commenting specifically on Russia's invasion of Ukraine, Powell acknowledged that the conflict added significant uncertainty to the economic situation, highlighting geopolitical risk and forcing a spike in energy prices.

    In light of this, he repeated his call for the Fed to remain "alert and nimble" in the face of a fast-changing situation. However, the Fed chair argued that, under the current circumstances, he expects to push ahead with the central bank's rate-tightening plan.

    "I do think it's going to be appropriate for us to continue to proceed along the lines that we had in mind before the Ukraine invasion happens," he said.

    Powell specified that those plans included a rate increase at its meeting later this month, with the pace of further rate hikes determined by incoming economic data.

    For another perspective on Fed policy, James Bullard, the president of the St. Louis Federal Reserve Bank, has pushed for the central bank to get aggressive about rate hikes. He underlined this view in comments delivered earlier this week, saying the Fed needed to follow through on its rate-hike promise or "risk squandering policy creditability."

    Following significantly tighter financial sanctions announced over the weekend, and an exodus of majors from Russia, crude traders and refiners have paused purchases of Russian oil and oil products. This according to an assessment of shipping data and conversations with traders shared by Energy Intelligence.

    Following sanctions, price discounts for Russian crude appeared immediately, with Platts quoting Urals crude ~$20 below dated Brent. As the week rolled on, crude tenders for Russian volumes simply dried up. Energy Intelligence estimates that "self sanctioning" has reduced Russian exports by ~2.5mb/d.

    In response to tightening crude markets, Western governments coordinated a 60mb release of strategic reserves. OPEC+ stuck to a previous production agreement, likely hoping to retain spare capacity for when and if Russian exports are weaponized. The US and Canada announced plans to cease Russian oil imports, though both countries are net exporters of oil and oil products.

    (NYSEARCA:USO) (NYSE:XOM) (NYSE:CVX) (NYSE:SHEL) (NYSE:BP) (NYSE:PXD) (NYSE:CNQ)

    If the 2.5mb/d of self sanctioning proves accurate, it's likely to be viewed as temporary. Majors, traders, refiners and banks alike are scrambling to understand post-sanction protocols, and preferring to step out of the market rather than risk running afoul of the new rules. However, if the 2.5mb/d is kept off of global markets for an extended period (weeks or months) it is sure to have a dramatic impact on prices. Tacking 2.5mb/d onto existing deficits would overwhelm global spare production capacity and require prices to rise to a point where demand falls.

    MT -1.58%Mar. 03, 2022 10:52 AM ET

    ArcelorMittal (MT -1.6%) turns lower after the company said it will halt its Kryvyi Rih steelmaking operations in Ukraine to ensure the safety and security of its people and assets; the company says it has started the process to idle all blast furnaces, which will take 7-10 days.

    Kryvyi Rih is one of Europe's biggest steel mills, and ArcelorMittal has ~29K employees and contractors in Ukraine.

    The steelmaker already had slowed production at its major steel plant in Ukraine to a "technical minimum" and stopped production at underground mines in the country while maintaining open-pit mining.

    ArcelorMittal recently reported Q4 EBITDA of $5.05B, nearly triple from $1.73B in the year-earlier quarter but well below $6.06B posted in Q3.

    AAPL -0.20%Mar. 03, 2022 10:47 AM ET1 Comment

    For a growing number of tech bellwethers, Russia's brutal invasion of Ukraine is providing a watershed moment whereby companies are putting humanity ahead of their business needs.

    Already, the likes of Microsoft (NASDAQ:MSFT), Facebook's (NASDAQ:FB) Meta Platforms, Google (NASDAQ:GOOG) and Intel (NASDAQ:INTC) have either suspended or cancelled business operations and sales in Russia due to the ongoing war in Ukraine. And Apple's (NASDAQ:AAPL) move this week to ban the sales of its products in Russia is expected to only push the tech boycott tide even further.

    That's the opinion of Wedbush analysts Dan Ives and John Katsingris, who on Thursday said to expect "more tech stalwarts to head down the same path and pull the plug on Russia" in the weeks ahead.

    Apple (AAPL) doesn't break out how much business it does in Russia, but earlier this week, the company said it would cut off all online sales in, and product shipments to the country. And while it doesn't have any of its own retail stores in Russia, it does sell products in the country through third-party sites, partners and vendors.

    But the public display of a company that's worth almost $3 trillion saying it won't do business in a country that is quickly becoming an international pariah will have an ongoing impact on how the tech industry decides to work with Russia in the future.

    According to Ives and Katsingris, "Our estimates that if the US tech world pulled the plug on Russia it would have a 1% to 2% revenue impact in a worst case scenario." The analysts said that Wall Street "would gladly applaud" such a move "given the heartbreaking Ukraine invasion by Russia that is playing out in front of the world's eyes."

    Because of the ongoing situation, and Russia's notoriety for cyber warfare, Ives and Katsingris said the cyber security sector is "poised to surge".

    "There is a growing concern that massive cyber warfare could be on the near-term horizon," Ives and Katsingris said, adding that this "would certainly catalyze an increase in spending around preventing sophisticated Russian-based cyber attacks going after datacenters, networks, vulnerability points, and other highly sensitive data.

    The Wedbush analysts said that the likes of Palo Alto Networks (NASDAQ:PANW), Mandiant (NASDAQ:MNDT), Fortinet (NASDAQ:FTNT) and CrowdStrike Holdings (NASDAQ:CRWD) stand to benefit for an expected increase in enterprise spending on network security.

    Adding to that sentiment was a recent assessment by Morgan Stanley analyst Hamza Fodderwala, who ranked Palo Alto Networks (PANW) as his top cybersecurity pick due to what he said were its "rock solid" fundamentals.

    If only we could have taken away Hitler's IPhone!  

    Jonathan Rush on Twitter: "Hitler iPhone self-shot. Seems legit!  http://t.co/NRtb18IX" / Twitter


  7. adolph – Hell ain't a bad place to be….

    https://www.dailymotion.com/video/xephz0




  8. Russia’s war in Ukraine: complete guide in maps, video and pictures


  9. Biden was spot on: The meat monopoly is real….. article from above

    TSN is about $95    you could do an October $95 covered call for $8.80   That is below the gap from the last  earnings.  over 9% return plus a couple of dividends.  Biden is not going to be able to do anything to TSN, one of the only domestic meat producers and in republican Arkansas    Other option activity recently -

    on 3-2- 22 there were 900 June $95 calls were bought for $6.50

    3-1-22    1000 June $95 calls bought

    2.22-22   3000 June $80 puts were sold for 


  10. TSN/Stock – Always good to bet on a monopoly.  Hard to imagine they aren't making money at $2/wing these days.  I went to Popeye's the other day and got sticker shock.  Despite doubling off the lows, TSN is still "just" $34Bn and they made $3Bn last year and $2Bn in 2020 – so pandemic-proof is nice.  $3Bn seems about right and not much growth so I wouldn't bet it to go a lot higher but there's no reason not to promise to buy the stock for $80 by selling the 2024 $80 puts for $9 – that nets you in for $71, which would be a great price.

    Mar. 03, 2022 1:00 PM ET

    The tight labor market has been partly to blame for pushing inflation to an almost-40 year high, but the dynamics driving labor market woes aren't the same across all industries, Richmond Fed President Tom Barkin said in prepared speech.

    He categorized the labor market into three buckets — low-paying personal services, in-demand skilled trades, and remote-friendly professionals.

    The personal services segment, hit the worst by the pandemic, still hasn't fully recovered. Revenue for many of these businesses are still lagging prepandemic levels, he said. The issue appears to be labor supply. "Workers have left the segment — perhaps because it now seems less stable, perhaps because of concern about COVID-19, perhaps because of working conditions (including the need to wear masks), or perhaps because of child care responsibilities," Barkin said.

    As a result, many workers have shifted to industries that increased during the pandemic, such as transportation or warehousing. In this segment, employers will need to think about working conditions "that could attract people from the sidelines.

    In the skilled trades, such as nursing, trucking and manufacturing, the labor supply isn't as flexible, as many of the jobs require certification or licenses. In this segment, labor supply hasn't been able to keep up with the increased demand during the pandemic. It's a "pipeline problem, and it may be getting worse." He suggested that "employers and localities" need to take ownership of their education, training and credentialing pipelines.

    The remote-friendly professions had less trauma that in other downturns. "Layoffs were rarer in the pandemic. Demand stayed robust. Work got done," Barkin said. And while the labor market was tight during the pandemic, it didn't reach peak levels of the 1990s. He pointed out that the most elevated quits rates for information and financial activities during the pandemic were still more than half a percentage point below their record high rates in 2001.

    The narrative is still playing out in the remote-friendly professional segment as employers decide upon the business model that optimizes business performance and talent retention. As that happens, "it is likely a number of workers will find themselves mismatched against their employer’s intended operating model and emboldened to explore alternatives by the strong labor market," Barkin said.

    The degree of success in balancing labor supply and demand will help to determine whether inflationary pressures subside.

    In December, the quits rate eased to 2.9% from 3% in November, while job openings increased.

    On Tuesday, Atlanta Fed President Raphael Bostic said the U.S. will be hard-pressed to keep inflation below 3% this year.

    So much for SPCE:

    Can't afford the fuel, I guess:

    CNQ +3.61%Mar. 03, 2022 12:46 PM ET25 Comments

    • Energy Intelligence reported Thursday that self sanctioning reduced Russian crude oil exports by ~2.5mb/d; were the restrictions to persist, JPMorgan estimates oil prices would rise to $185 by year end.
    • Morgan Stanley wrote Tuesday that a geopolitical risk premium should be tacked onto current prices, and called for $125 Brent in the bank's "bull case."
    • Famed oil trader Pierre Andurand recently tweeted that all-time high oil prices from 2008 would equate to ~$222/b today, when adjusted for inflation.
    • Higher oil prices would be likely to benefit producers like Exxon (NYSE:XOM), Chevron (NYSE:CVX), Shell (NYSE:SHEL), BP (NYSE:BP), Pioneer (NYSE:PXD) Canadian Natural (NYSE:CNQ) and others.
    • For much of the past decade, energy price forecasters have focused on the cost of supply when predicting future prices; however, with the prospect of shortages, the focus turns to demand, and determining at what price oil will trade before demand falls to balance the market.


  11. Still nothing to get excited 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)

    20% Correction Chart is waiting for the Nasdaq to confirm we're out of danger:

    • Dow 36,000 to 28,800 would be a 7,200-point drop with 1,440 bounces to 30,240 (weak) and 31,680 (strong).   
    • S&P 4,800 is 20% above 4,000 and that makes it an 800-point drop with 160-point bounces so 4,160 (weak) and 4,320 (strong) is where we are this morning (again).
    • Nasdaq is using 13,500 as the base and we bottomed yesterday at 13,580.  14,100 is the weak bounce and 14,700 is strong.  
    • Russell 1,600, would be about an 800-point drop with 160-point bounces to 1,780 (weak) and 1,960 (strong)

  12.  TSN can be my food inflation hedge, so unless you are a vegetarian, who doesn't eat a lot of chicken now-a-days?  This got me to thinking, what ever happened to Santa's Secret Inflation hedges.  Those usually worked out nicely 


  13. Well two years ago I was in Thailand around Christmas when I usually did it and last year we were in the middle of the inflation and we already have a ton of inflation picks, so there wasn’t anything we weren’t already doing.    Of course her traded the year for 2020 was GOLD because of inflation, so we had things covered.   


  14. Big Lots (BIG) reported earnings today for Q4- EPS of $1.75 missed by $0.14, revenue of 1.73B beat by 10M. Their Q4 is Nov – Jan (not Oct-Dec).

    In the earnings call, things got interesting. The EPS drop was attributed to high Jan shrink rates, especially in California, where they said the high crime wave had resulted in a $0.3 (!) decrease in EPS – so they should have beat if not for people shoplifting? They have implemented new processes to decrease shrink rates, so lets see if that works out. 

    Q1 2022 guidance is $1.1-1.2 against expected $1.58. Supply chain, inflation related uncertainties means they cannot issue a full year guidance.

    Phil – I didn't hear anything that makes me sell out of my longs. Your thoughts? I currently hold naked long $30 2024 calls, waiting to cover when it goes back to $40+


  15. WEAT is my food hedge. I have a bread subscription with my local Bakery. Every Thursday, I go pick up a loaf of Artisan bread of a rotating type. It is $7.50 well spent. The $2k in profits should sustain my subscription (assuming we can get enough wheat and inflation is not like the Weimar hyperinflation) 


  16. BIG/RN – $37.25 is down to $1.2Bn for the company and here's what they've done since 2016:

    Year End 30th Jan 2016 2017 2018 2019 2020 2021 TTM 2022E 2023E CAGR / Avg
    Total Revenue
    $m

    5,191 5,194 5,264 5,238 5,323 6,199 6,156 6,148 6,137 3.62%
    Operating Profit
    $m

    236 248 301 219 335 857 303     29.4%
    Net Profit
    $m

    143 153 190 157 242 629 226 186 149

    The key thing is there are 30M shares so they are guiding $35M for the Q vs $47M expected – it's not going to break their year and those are pretty good and addressable excuses.  

    WEAT/Randers – As long as the war is on, I agree.  Looks like Weimar already:

    Very scary that Nasdaq can't get it together to hold 14,100.

    F -2.24%Mar. 03, 2022 2:16 PM ET15 Comments

    • Tesla (TSLA -2.7%) CEO Elon Musk has invited the United Auto Workers union to hold an organizing vote at the company's factory in Fremont, California.
    • "Tesla will do nothing to stop them," tweeted Musk on the prospect of a union vote. He also said the real challenge for Tesla in the Bay Area is that it has negative unemployment, noting if the company does not treat and compensate its "awesome" they will have plenty of other offers.
    • The UAW has not issued a comment on any union push at Tesla (NASDAQ:TSLA), although spokesman Brian Rothenberg pointed out that Tesla is fighting a U.S. National Labor Relations Board ruling from last year that determined it engaged in unfair labor practices in 2018.
    • The union vote development comes against the backdrop of Musk expressing frustration with President Biden highlighting the EV investments of union-heavy General Motors (GM -2.2%) and Ford (F -2.2%).
    • Yesterday: Tesla secures lithium supply through Core Lithium deal

    Wow, Elon Musk says TSLA won't commit a crime – get the Pope ready to canonize him!

    It's funny to hear the Financial Media wring their hands over Biden not liking Musk while Trump had an actual enemies list that included Bezos and Gates and they never said a word about it.

    Poor Elon!


  17. I'm not seeing anything I really want to change in the STP.  We have about $1M in protection here and a good amount of cash:

    LTP is still hanging around $2.2M – also loaded with CASH!!!

     
    Security Value:  $428,663
    Cash on Hand:  $1,802,253
    Total Value:  $2,230,915
    Portfolio Ret.:  346.2%

    $2.65M is just under our combined ATH two weeks after the last reviews so not much to do here but wait to see which Bounce Chart becomes our range for Q2.


  18. ( I would hate to have to make the choice between currency or kindling ).

     

    The 1921--1924 hyperinflation happened mainly because of three things: the ongoing internal political instability in the country, the occupation of the Ruhr district by foreign troops, and when the Weimar (modern-day Germany) government printed too much banknotes to pay reparations after the 1923 French invasion. Because the banknotes were not matched by Germany's production, their value fell.

    In 1922, a loaf of bread cost 163 marks. By September 1923, during hyperinflation, the price crawled up to 1,500,000 marks and at the peak of hyperinflation, in November 1923, a loaf of bread costs 200,000,000,000 marks. 

     


  19. Superman #1 went up a lot more than that…