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Monday Market Mania Continues

It's a rumor-driven market.  

Early this morning, the Futures were up because, SUPPOSEDLY, another round of "peace talks" have been scheduled and, why not, they've done nothing so far?  Meanwhile, in reality, China is back to lockdowns as Covid is once again spreading over there and that, by itself, would be enough to knock down the markets (ding to the global economy, more supply chain issues, etc.) and oil is still around $104, which again, by itself would be enough to take down the market but I guess it's better than $128 last week so YAY! – I guess.  

This is why we use our Bounce Charts during a crash – they keep us grounded and remind us that all this short-term movement is meaningless in the big picture and, in the big picture, we're not making any progress.  That's why on Thursday I can write a Morning Report titled "/ES 4,320)">Thursday Failure – Rally Fails at the Strong Bounce Line (/ES 4,320)" and you can see above that we EXACTLY failed on Friday at 4,320.  When you see us make predictions over and over again that get hit ON THE BUTTON – you have to think there may be something to our 5% Rule™ – right?  

Remember, these are the same levels we've been using  since we topped out in December and predicted a 20% correction in the markets and that was before the war:

  • 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).
  • Nasdaq is using 13,500 as the base and we bottomed yesterday at 13,103.  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).

We're still where we were last Tuesday, with the Russell on the cusp (1,979) but the S&P is now dangerously close to 4,160 and, if that goes, then expect the Dow to begin catching up.  That make the Dow the best downside hedge at the moment and, at 33,025 this morning, we can play a cross below 33,000 short with tight stops above the line – risking some small losses against a potential gain of $7,500 per contract if we fall back to 31,500 (a bit below the strong bounce line).  

In our Short-Term Portfolio, we have a  mattress play shorting the Dow ETF (DIA) which we initiated back in January:

DIA Long Put 2022 16-SEP 350.00 PUT [DIA @ $330.02 $0.00] 50 1/28/2022 (186) $125,750 $25.15 $6.73 $23.74     $31.88 $0.00 $33,625 26.7% $159,375
DIA Short Put 2022 16-SEP 320.00 PUT [DIA @ $330.02 $0.00] -50 1/28/2022 (186) $-75,750 $15.15 $3.43     $18.58 $0.00 $-17,125 -22.6% $-92,875
DIA Short Put 2022 18-MAR 335.00 PUT [DIA @ $330.02 $0.00] -10 2/15/2022 (4) $-4,400 $4.40 $3.33     $7.73 $0.00 $-3,325 -75.6% $-7,725

At the time, our target for March was $335 and we're a bit ahead of schedule with those short puts expiring on Friday.  Of course, we will just roll them to April or May whatevers as we're 5:1 covered and the real trick to a Mattress Play is that, if the market drops faster than you think, then we are triggered to double down with another long spread as we roll down to 2x something lower – which then increases our coverage and provides us cover to take profits on our original long puts (the Sept $350s in this case).  

Note the $350 puts are now $31.88 – more than the $30 max payout for the spead.  If we were to buy, for example, 50 Jan $325 ($26)/295 ($17) bear put spreads for net $9, then we could take some of those Sept $350 puts off the table using $30 for a stop.  Since we only paid net $10 for the first set and were in for net $19 total – it won't take long before we have a free spread and we can start the cycle again if we have to.

There are a lot of moving parts to a Mattress Play and the best way to learn is through practice but, unfortunately, it's been about 10 years since we've had a flat to down market to practice in – that's where these hedges are appropriate.  We can also do them with companies we feel have topped out, like Chevron (CVX), which rose a ridiculous 70% since October and that's $100 BILLION in market cap to $332Bn for a company that madee $15.6Bn last year.  Not terrible but they lost $5.5Bn in 2020 and oil is going to crash hard if this war ever ends.  Also, they are talking about windfall profit taxes on oil companies and that would also spook investors.  

So, in the Short-Term Portfolio (STP), we can:  

  • Buy 15 CVX Jan $200 puts for $40 ($60,000) 
  • Sell 15 CVX Jan $170 puts for $21 ($31,500) 
  • Sell 5 CVX April $160 puts for $5 ($2,500) 

This is a $45,000 spread we are buying for net $29,000 so we have $16,000 (55%) upside potential if CVX simply finishes below $170 (where it is now) – in January.  We'd have to lose over $30 per short put to be hurt on that side and the June $150 puts are $5 and the Sept $140 puts are $5, so we can probably roll along to $130 or $120 and still have our $30 edge and, of course, if things are going that well – we can buy more long puts...

Should CVX move higher, the April puts go worthless and then we sell $2,500 more for the next 45 days and we have 312 days to sell so let's say 5 more chances at $2,500 could lower the cost basis to almost $15,000 on the $45,000 spread if all goes well.  

It's a good, educational play, the kind I like to have in our hedging portfolio for our Members.  Since we do believe CVX will come back below $150 eventually, we'll also take any chance we can get to roll the $170 puts to the $160 puts and then the $150 puts when and if it can be done for $5 or less – widening the spread by $10 each time. 

And don't forget we have the Fed this week on Wednesday at 2pm, followed by a statement from Powell at 2:30.  We'll be covering that in our Live Trading Webinar, Wednesday at 1pm – 3pm.  We should always be nervous when the Fed shedules a dove (Evans) at the end of a week – it means they expect trouble.  After Powell, we have the Philly Fed, Industrial Production, Housing Starts, Home Sales and Leading Economic Indicators – the last of which could be very ugly.  

And speaking of the Fed Meeting – here's how ridiculous things are at the moment:

Image

And look at all these earnings reports still coming in:

Image

And, of course, as my fellow soothsayer, Spurinna said: "Beware the ides of March."

 


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  1. US view of Putin: Angry, frustrated, likely to escalate war


  2. Good Morning

    John Mauldin said the "R" word in Saturdays newsletter    Not what I wanted to hear


  3. Phil, 

    On the DIA mentioned today, Do you mean the  50 Jan $325 ($26)/295 ($17) bear put spreads for net $9?


  4. Good morning!

    Nasdaq red is not a good start but the other indexes are positive at the moment.  

    VIX still over 30 so there's nothing to relax about.

       

    Our /NG longs are doing well – again:

        

    Maybe we'll get a chance to play /SI at $25.  /YM doesn't have great support at $1,900 but $1,850 is a great floor.

     

    If the Fed goes +0.5, the Dollar will pop 100

    Imagine how bad our inflation would be if the Dollar wasn't up 4% for the year.

    Recession/Stock – I think that's why the Fed is so worried about leading indicators on Friday. 


  5. Good Morning.


  6. DIA/Randers – Yes, thanks, it's $325/295 of course.



  7. No Ark Can Save These Cash-Burning “Innovators”






    • Talks between Russia and Ukraine continue, but on the ground Russia continues to shell Kyiv. An airstrike on a base in Yavoriv, less than 10 miles from the Polish border, killed at least 35 people.
    • The Kremlin said today its "Ukraine operation" will be completed "on schedule," according to Bloomberg, although it's unclear what the schedule is.
    • Oil prices (CL1:COM) are falling, with WTI down more than 7%, below $102 per barrel. Prices came under pressure after some hope of diplomatic progress over the weekend.
    • McDonald's (NYSE:MCD) was recommended at Oppenheimer, which says the Ukraine-Russia risk is priced in.
    • ArcelorMittal (NYSE:MT) says $4.1B in sales in Ukraine are at stake.

    XOM -3.21%Mar. 14, 2022 10:23 AM ET10 Comments

    • Following news over the weekend that Russia and Ukraine were nearing a diplomatic agreement, the broader energy complex sold off Monday morning.
    • WTI (NYSEARCA:USO) was lower by ~$8, while the sector (NYSEARCA:XLE) sold off ~4% in early trading.
    • Tellurian (NYSE:TELL) led the way lower, followed by strong year-to-date performers Devon (NYSE:DVN), Kosmos (NYSE:KOS) and Occidental (NYSE:OXY).
    • Oil refiners like Marathon (NYSE:MPC) and Philips (NYSE:PSX), companies that would benefit from lower prices and greater feedstock availability, held in relatively well, down 2-3%.
    • Chevron (NYSE:CVX) outperformed Exxon (NYSE:XOM) around the open, despite catching a downgrade from Morgan Stanley.

    DCFC +2.79%Mar. 14, 2022 10:18 AM ET1 Comment

    Electric vehicle stocks started off the week mostly in reverse as the Russia-Ukraine war headlines and COVID concerns in China continue to impact sentiment.

    Electric Last Mile Solutions (ELMS -35.5%) is the biggest decliner in the EV sector after the company withdrew financial guidance and disclosed a SEC probe.

    Chinese automakers Li Auto (LI -10.2%), XPeng (XPEV -6.7%) and Nio (NIO -4.5%) were also sharply lower on concerns that rising COVID cases in China could create more slowdowns in the supply chain.

    Other EV stocks in reverse include Faraday Future Intelligent Electric (FFIE -9.7%), Rivian Automotive (RIVN -4.9%), FuelCell Energy (FCEL -4.9%), Lightning eMotors (ZEV -7.0%), Workhorse Group (WKHS -4.7%), REE Automotive (REE -5.8%) and TuSimple Holdings (TSP -5.5%). Meanwhile, Tesla (NASDAQ:TSLA) was flat in early trading after CEO Elon Musk warned again over the weekend on raw materials inflation.

    It was not all red in the sector with Mullen Automotive (MULN +34.8%) rallying again amid the stock being one of the most mentioned on Stocktwits over the last week,

    AEye (LIDR +8.9%), Wallbox (WBX +7.5%) and Tritium DCFC Limited (DCFC +1.5%) were other notable outperformers in early Monday trading.

    FuelCell Energy (NASDAQ:FCEL) is on Seeking Alpha's Catalyst Watch this week with an investor event on the calendar.

    C +1.72%Mar. 14, 2022 10:15 AM ET1 Comment

    Citigroup (C +1.2%) is expanding the scope of its exit from Russia beyond its consumer business to encompass all other lines of business and to continue reducing its remaining operations and exposure, the bank said in a blog post.

    In April 2021, the company had announced a plan for its consumer banking business to exit 13 markets, including Russia, to focus on four international wealth centers.

    The move comes as other big banks, including Deutsche Bank (NYSE:DB), JPMorgan Chase (NYSE:JPM) and Goldman Sachs (NYSE:GS), pull out of Russia over the country's invasion of Ukraine.

    "Due to the nature of banking and financial services operations, this decision will take time to execute," said Edward Skyler Citi (NYSE:C) EVP of Global Public Affairs said in the post. "We have also decided to stop soliciting any new business or clients."

    The company will continue to manage its regulatory commitments and obligations to depositors, "as well as support all of our employees during this very difficult time."

    Last week, Bloomberg reported that Citi's (C) efforts to sell its consumer banking business in Russia has stalled in the wake of Russia's military actions in Ukraine.

    Earlier this month, the bank was reportedly expecting to write down $100M on Russian FICC exposure. Soon after the invasion, Citi (C) disclosed total exposure of $5.4B in Russia.

    OXY -4.08%Mar. 14, 2022 10:11 AM ET9 Comments

    • Morgan Stanley cut Chevron (NYSE:CVX) and Occidental (NYSE:OXY) to hold from buy Monday, citing relative outperformance and valuation.
    • The bank continues to see value across the E&P landscape, indicating that the sector trades at a ~60% discount to the market.
    • The note follows JPMorgan's downgrade of Chevron (CVX) to sell.
    • Last week, Bank of America also advised clients to reduce risk to the sector, downgrading Occidental (OXY) to hold, amongst others.
    • In the note, Morgan Stanly reaffirmed the bank's preference for Canadian large-cap oil companies, including buy-rated Canadian Natural (NYSE:CNQ), Cenovus (NYSE:CVE), Imperial (NYSE:IMO) and Suncor (NYSE:SU).

    TSN -2.10%Mar. 14, 2022 8:37 AM ET

    BMO Capital Markets downgraded Tyson Foods (NYSE:TSN) to a Market Perform rating.

    The firm said the downgrade does not reflect a change in its long-term view of Tyson's ability to affect internal change through its actions, operational improvements or capacity expansions, but is tied in part to the potential reduction to underlying fundamentals outside chicken, particularly beef.

    "We reduced our F2023 outlook as we expect lower beef packer margins to offset the chicken improvement. Additionally, TSN's stock materially outperformed the S&P 500 YTD and over the last year."

    The case for aggressively investing in Tyson Foods (TSN) is said to be less persuasive at current valuations due to the more tempered outlook on beef and pork margins beyond 2022, as well as potential input inflation in prepared foods.

    BMO set a price target of $99 on Tyson Foods (TSN) based on a 12X to 13X multiple on the new FY23 outlook.

    Shares of Tyson Foods (TSN) fell 1.49% in premarket trading on Monday to $86.33 after shedding 2.57% on Friday. Tyson Foods is still ahead of the S&P 500 Index for 2022 with a 0.55% gain.




  8. Exclusive poll: Where college students want to move


  9. YUMC -4.24%Mar. 14, 2022 10:39 AM ET

    Yum China (YUMC -4.7%) stock slid to its lowest since Jan. 2019 after the restaurant chain operator said its Q1 sales were hit by a resurgence in COVID-19 cases and tighter public health measures in China due to the Omicron variant.

    Same-store sales fell ~4% Y/Y in Jan. and Feb. combined. Same-store sales decreased ~20% Y/Y for the first 2 weeks of Mar. and is still trending down in recent days.

    Operating profit fell ~20% Y/Y in Jan. and Feb. combined due to significant sales deleveraging and cost inflation. Based on the latest trend, YUMC expects Q1 operating profit of $165M-200M.

    Over 500 stores were temporarily closed or offered only takeaway and delivery services at the peak in Jan. That number reached over 1.1K as of Mar. 13.

    "Our robust supply chain management shielded us from material business disruptions. We will continue to drive sales especially in delivery and takeaway occasions. We will also manage costs diligently, and adjust operations as well as promotion offers as the situation evolves," said YUMC CEO Joey Wat.

    The Omicron variant caused outbreaks across China in Mar., including economically important regions of Guangdong, Shanghai, Shandong and Jilin. Daily cases hit a 2-year high, with the quarter-to-date caseload for 2022 surpassing that of 2021.

    Stricter health measures have been observed nationwide, including city-wide testing and partial/complete city lockdowns.

    YUMC's same-store sales in Q4 fell 11% Y/Y, owing to Delta variant outbreaks and resulting preventive measures.

    The firm's stock has been in the red over the past week after the U.S. SEC said YUMC and 4 other Chinese companies could be de-listed for failing to abide by U.S. accounting rules.

    YUMC stock declined ~42% in the last 6 months.

    GNW +1.35%Mar. 14, 2022 8:28 AM ET1 Comment

    • S&P Global on Monday upgraded insurance provider Genworth Financial's (NYSE:GNW) credit rating to B+ from B, along with a positive outlook.
    • Shares of GNW rise 1.4% in premarket trading.
    • “This upgrade from S&P reflects the substantial improvements we’ve made in our leverage and liquidity profile, including through the retirement of over $2 billion of debt in 2021,” said Genworth CFO and Chief investment Officer Daniel Sheehan. "We plan to retire the remainder of our 2024 debt this year. This would bring total holding company debt to below our target of $1 billion," he added.
    • Meanwhile, Seeking Alpha's Quant Rating screens GNW stock at Strong Buy, with the best factor grade in Valuation.
    • Previously, (Feb. 8) Genworth Financial director bought shares.

    SPY +0.66%Mar. 14, 2022 8:03 AM ET9 Comments

    Higher commodities prices and lower expectations for U.S. GDP have Goldman Sachs' equity team cutting its broader market forecast.

    Strategist David Kostin and team now expect the S&P 500 (SP500) (NYSEARCA:SPY) to end the year at 4,700, down from a previous forecast of 4,900 and about 12% from current levels.

    They now see S&P EPS rising 5% in 2022, down from an earlier forecast for 8% earnings growth. The 2023 EPS forecast remains at 6%.

    "Our 4700 target embeds an expectation that the forward P/E multiple will rebound from 19x today to 20x by year-end as the Equity Risk Premium (ERP) compresses," Kostin said in a note. "Our year-end 2022 implied absolute valuation represents a 5% P/E decline from the 21x multiple at the start of 2022."

    "In our base case, real yields climb from recent lows but remain negative through 2022 despite Fed tightening. At the same time, decelerating growth and inflation and reduced political uncertainty should compress the ERP from today’s elevated level," he added. "The current 620 bp gap between the S&P 500 earnings yield and the real 10-year US Treasury yield (NYSEARCA:TBT) (NASDAQ:TLT) is the widest since March 2020 and matches levels in 4Q 2018, underscoring the potential value opportunity in US stocks if the growth outlook improves."

    High commodity prices are a greater threat to the S&P 500 than the situation in Ukraine, Kostin said.

    "Our commodity strategists recently raised their forecasts for crude oil prices. They outlined three potential scenarios, ranging from a resumption in exports in the coming months to a sustained reduction of Russian seaborne exports. These scenarios point to oil prices ranging from $115/bbl to $175/bbl in 2022. On a probability-weighted basis, their Brent crude spot price forecasts equal $135/bbl in 2022 and $115/bbl in 2023."

    SA contributor Brian Gilmartin looked at S&P earnings and the worst multiple compression since the 1990s.

    LVS -8.31%Mar. 14, 2022 7:36 AM ET6 Comments

    Macau casino stocks fell after the Chinese government placed 17.5M residents in Shenzhen in lockdown for at least a week due to rising COVID cases.

    That has raised concerns that new COVID restrictions could impact travel to Macau and Hong Kong.

    "China's COVID outbreak is still largely under control, but the largest feeder market, Guangdong, is reporting rising cases which could lead to further spread in China and greater travel impediments in the near term," noted Bernstein analyst Vitaly Umansky.

    Over the weekend, Macau already imposed quarantine restrictions for inbound travelers from some places in Guangdong province and elsewhere in mainland China.

    Macau casino names fell in Hong Kong early on Monday. Las Vegas Sands (NYSE:LVS) shed 2.36% in premarket trading in the U.S. and Melco Resorts & Entertainment (NASDAQ:MLCO) fell off 2.38%.

    TZOO -0.75%Mar. 14, 2022 7:28 AM ET1 Comment

    • Travelzoo (NASDAQ:TZOO) announces creation of its new Metaverse division and plans to commence the launch of its Travelzoo META service in April.
    • Travelzoo META is a paid subscription-based service that provides members with exclusive access to the latest and best Metaverse travel experiences.
    • The company will work with hundreds of creators to make experiences exclusively available to Travelzoo META members.
    • The build-up of the new business is expected to be funded from annual membership fees to be paid by Travelzoo META members.
    • It will host an investor conference call at the end of April, 2022 to provide an update.

    Mar. 14, 2022 7:00 AM ET14 Comments

    Russia is due to make a key interest rate payment on its foreign debt on Wednesday, but with sanctions strangling its economy, Moscow is threatening to repay international bondholders in rubles. Finance Minister Anton Siluanov pointed to measures that have frozen nearly half of Russia's $643B in foreign reserves, as well as the heavy strain on its financial system. Moscow is specifically set to make a combined $117M in interest payments on two dollar-denominated bonds – which are currently trading at $0.20 on the dollar – though neither of them are allowed to be repaid in rubles.

    Snapshot: It will be up to the ratings agencies to consider if this will be deemed a default, given the numerous technical factors that go into that classification. Russia also has a 30-day grace period after the coupon payments come due, so it will be at least another few weeks before a formal default could be declared. The ruble has already collapsed by more than 40% since the Ukraine invasion on Feb. 24, and this time around there won't be any help from the West.

    "In terms of servicing debt obligations, I can say that no longer we think of Russian default as improbable event," said IMF Director Kristalina Georgieva. "Russia has the money to service its debt, but cannot access it." A "deep recession" is in store for the country, she added, though it's unlikely to trigger a global financial crisis as banks' global exposure to Russia is "definitely not systemically relevant."

    On the ground: A Russian airstrike on a Ukrainian military training center just 10 miles from the Polish border killed 35 people early Sunday. Following the attack, the U.S. warned of full NATO response if Poland is hit, while American journalist Brent Renaud was shot dead in a northwest suburb of Kyiv. Fighting has intensified around the capital over the past week, while Russian forces continue to bombard cities across the country.

     

     


  10. TBT +3.56%Mar. 14, 2022 6:05 AM ET16 Comments

    The rout in Treasuries is picking up speed as inflationary fears spur forecasts for an abrupt shift towards aggressive monetary tightening. The 10-year yield climbed 9 basis points overnight to 2.09%, touching a level last seen in July 2019, ahead of start of the FOMC's March meeting on Tuesday. Interest rates are expected to rise by a quarter of a percentage point, while Jay Powell will be drilled on the scale and pace of the coming tightening cycle after releasing the latest 'dot plot.'

    Bigger picture: After Russia's invasion of Ukraine in late February, traders poured into safe-haven assets like Treasuries, but that didn't last long. Markets are now pricing in rate hikes at each of the Fed's subsequent meetings for 2022, meaning another six increases this year. Government bonds in Europe were also stung last week after the ECB cut its growth forecasts and raised inflation predictions against the backdrop of the war in Ukraine.

    "It's a mixture of positioning and illiquidity," Eugene Leow, rates strategist at DBS Bank in Singapore. "It makes sense to turn bearish on Treasuries based on fundamentals and what the Fed is communicating."

    Go deeper: Hedge funds are expanding bearish wagers on the Treasury market, according to the Commodity Futures Trading Commission, with net short bets across the curve hitting the highest level since April 2020.

    See the divergence of the ProShares UltraShort 20+ Year Treasury ETF (NYSEARCA:TBT) and iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT) over the past five sessions:

       
    MSFT +1.44%Mar. 13, 2022 2:56 PM ET28 Comments

    Videogame sales fell year-over-year for a fourth straight month in February – now with broad drops across categories keeping up the slump vs. the prior year (and against some tough pandemic comparisons).

    Overall sales fell 6% from February 2021, to $4.384 billion, according to NPD Group.

    January's sales had fallen just 2% from the prior year. And December's had dipped 1%.

    February's sales weren't lifted by hardware, as had been the case recently: Hardware dollar sales fell 27% to $295 million (and new-generation consoles were still hard to come by amid ongoing supply issues). Accessory sales dropped 7% to $180 million. And the biggest category, software/games, saw a 4% drop to $3.91 billion.

    In hardware, the best-selling platform for the month in unit and dollar terms was the Nintendo Switch (OTCPK:NTDOY), followed on both counts by the Xbox Series S/X machines (NASDAQ:MSFT). PlayStation 5 (NYSE:SONY), meanwhile, leans on a strong January to keep reigning as 2022's top dollar-sales platform so far.

    The drop in accessory spending deepened a slide that's now down 11% year-over-year. The best-selling accessory was again the Xbox Elite Series 2 Wireless Controller (MSFT).

    LLY +1.03%Mar. 13, 2022 9:24 AM ET21 Comments

    Patient advocacy groups in the U.S. have stepped up their efforts for a favorable decision on the coverage for Aduhelm and similar Alzheimer’s drugs as the developers await a final decision next month.

    Backed by millions of dollars in ad spending, local adverts have already come up during the Sunday morning political shows, and a public protest is scheduled for this week, Reuters reported Sunday.

    In January, the Centers for Medicare & Medicaid Services (CMS) proposed to severely restrict access to a group of Alzheimer’s medications, designed to target the amyloid plaques of patients’ brains, only for those undergoing clinical studies. A final determination on coverage is scheduled for April 11.

    The decision applies to not only Aduhelm but also other Alzheimer’s drugs currently being developed by Eli Lilly (NYSE:LLY) and Roche (OTCQX:RHHBY).

    The proposal followed the U.S. approval of Aduhelm developed by Biogen (NASDAQ:BIIB) and Eisai (OTCPK:ESALY) (OTCPK:ESALF), which led to widespread criticism last year.

    USAgainstAlzheimer's, one of the biggest patient advocacy groups for Alzheimer’s in the U.S., has said it is funding adverts in the Washington D.C. and Baltimore areas targeting the CMS, the Department of Health and Human Services (HHS), the White House, and Congress.

    "We want to put a face on the individuals that are affected by this Medicare decision," USAgainstAlzheimer's Chairman George Vradenburg said, adding that the group plans to spend millions in the campaign.

    The program, featuring Alzheimer's patients, is set to run on social media, print ads on bus stops, and other transportation in the Washington area, with many having the tagline, "Alzheimer's patients can't wait."

    Meanwhile, the Alliance for Aging Research has organized a protest where patients, caregivers, and others will gather near HHS headquarters in Washington on Tuesday to pressure Medicare to reconsider the decision.

    Soon after the proposal in January, Biogen (BIIB) sought the support of doctors and patient advocates to send public submissions in support of a less restrictive coverage decision.


  11. I like BIIB down at $200 as it's $29Bn and they are good for $2.2Bn in profits so 13x earnings is fine by me.  Consider the Alzheimer's drug a bonus – even though it could be a blockbuster that doubles the company.  For our Future is Now Portfolio, let's:

    • Sell 5 BIIB 2024 $200 puts for $40 ($20,000)
    • Buy 20 BIIB 2024 $250 calls for $28 ($56,000) 
    • Sell 20 BIIB 2024 $300 calls for $20 ($40,000) 

    That's a net credit of $4,00 on the $100,000 spread and yes, it's out of the money but we can always spend some money to roll down the longs or sell some short calls if we get a pop.  Our commitment is to buy $100,000 worth of BIIB at the current price, so we won't be too tolerant if $200 doesn't hold.  


  12. Phil any opinion on DOC as an armchair trade. Buy the stock and sell strangles. Options only go up to Oct but a great div payer.


  13. Phil / BIIB – I struggle to understand what you are seeing here….  It's highly unlikely that the Alzheimer drug get Medicare approval, –   The EU rejected it, and 10 of 11 dr. on the FDA panel rejected this as well…..   


  14. At what point do we give up on BABA? Or is it a forget position hoping for something to work out? This is getting painful. 


  15. …and WTRH


  16. DOC/Yodi – Everyone is worried about how the REITs will deal with the rate hikes.  My issue with DOC is that even $16.50 is $3.75Bn and their best year was $64M so we're talking 50x.  It's a nice idea of a specialty but they are miles from executing vale and, in this environment, I would not bet on rapid growth.

    BIIB/Batman – I don't agree.  They cut their ask 50% on the price and, even if medicare doesn't approve it, it will still be bought privately for the 80M people on the planet in the Top 1%.  I doubt they can make more than that in the foreseeable future so their pricing strategy is probably a good one.  Currently in the US, 6M people have AD and there's no real competition for treatment.  Let's say the treatment is $30,000/yr and, by the way, it is covered as an infused therapy under Medicare Part B.  So we have 60,000 people who can afford $30,000/yr in the top 1% and that's $1.8Bn in the US alone.  Are the ultra-rich going to choose Maui over their cognizance?   It's a trick question because they can easily afford both!  

    Potential ADUHELM liabilities are a major component of Medicare's outsized Part B premiums increase for 2022. One acerbic column was captioned, "How the FDA's lousy judgment and a greedy drug company combined to hit Medicare members hard".

    https://www.fiercepharma.com/pharma/doctors-survey-suggests-biogens-aduhelm-still-has-8-billion-peak-sales-potential-if

    Amid a torrent of negative press for Biogen’s troubled Alzheimer's disease treatment Aduhelm, there remains a significant community of patients and doctors who are hoping to use and prescribe the drug, a team of analysts found.

     

    Meanwhile, with the Centers for Medicare and Medicaid Services considering restricting Aduhelm’s use and an April 11 decision date looming, there is renewed support for the antibodies which target amyloid plaque.

    Senators Shelley Moore Capito (R-West Virginia) and Susan Collins (R-Maine) have sent a letter (PDF) to the CMS urging it not to follow through with its plan to restrict the use of Aduhelm to clinical trials.

     
     

    Many doctors hope to be able to employ the drug, as well. A recent survey conducted by RBC Capital Markets, polling 88 physicians who service more than 10,000 patients, showed a strong market exists for Aduhelm or similar beta-amyloid antibodies.

    The Alzheimer’s Association and UsAgainstAlzheimer’s have joined Capito and Collins' push.

    As for the push in Congress, Sens. Capito and Collins have joined a group of 78 House Republicans who pushed back last month after the CMS proposed national coverage determination (NCD) on the drug.4

    It will take time but they'll get there and, like I said, that's all bonus money to a company trading at 13x on their current portfolio of drugs.

    BABA/Rn – Well if China is going to start going after them, they are screwed.  Our 10 Jan $200 short puts in the LTP are down $88.950 and have $78 left to 0 and there's no premium left to burn.  So let's say we risk $25,000 (down to $50) against the possibility of making back $88,000 if things do wash over rather than panicking out?  

    WTRH/Hwtd – They are blaming a poor Q on resurgent covid but that should have been good for them, not bad – so I am starting to lose faith.  I'd like to give them one more Q to see if their processing business is catching on.


  17. Thanks Phil, times are questionable all over, hart to say what happens tomorrow.


  18. Phil / BABA – another view –    I assume you are thinking the drug not getting approved ( By Medicare)  is already baked in?  I think it's pretty risky taking a position just prior to the Medicare announce…..  But your crystal ball is probably better than mine….  I'll sit on the sidelines for now and cheer for you.

    FDA advisory panel of 11 doctors and scientists voted 10 to one to reject Aduhelm (since they were con- vinced it had no efficacy and had severe side effects), the FDA passed it anyway. Pursuant to clearance, there has been highly vocal public criticism of the FDA from the medical community. This has re- sulted in insurance companies refusing to pay for the drug, particularly since Biogen is charging patients $28,000 for a course of treatment. It has also outraged physicians, who are refusing to prescribe it, stating its dangers. Patients in clinical trials have suffered brain swelling and bleeding, and one has died. Furthermore, the advisory board to the European Medicines Agency (EMA) known as CHMP (Committee for Medicinal Products for human use), also voted down Aduhelm, meaning it probably. 

    won’t get approved in Europe. Sales of the drug were only $300,000 in the third quarter, down from $1.6 million in the sec- ond quarter, when it was launched.


  19. BIIB/Batman – As I said, it seems to be OK as infused therapy but wider use is in question and, as you can see, there's a lot of push behind this thing with that override.  I think not getting approved is baked in and we'll now see what actually happens.  

    Yuch, by the way:

       

    Good money already on the /YM shorts so I'd protect $1,000 per contract on 1/2 and $750 on the rest.


  20. BIIB/Batman – I wonder to what extent this attack on Aduhelm is all related to the impact it would have on our Medicare system if approved?  This would be a game-changer if it works but, if it does, good luck keeping it out of the hands of the people who need it.  BIIB is getting old people's lobbies to back them up.

      Biogen to Present New Research at the International Conference on
    Alzheimer's and Parkinson's Diseases (AD/PD 2022)
      CAMBRIDGE, Mass., March 11, 2022 (GLOBE NEWSWIRE) — Biogen Inc. (Nasdaq:
    BIIB) announced the company will present new Alzheimer's disease research,
    as well as data for ADUHELM(R) (aducanumab-avwa) injection 100 mg/mL for
    intravenous use, at the upcoming International Conference on Alzheimer's and
    Parkinson's Diseases (AD/PD 2022), taking place March 15-20 in Barcelona,
    Spain and virtually. These data include analyses of treatment effect on
    biomarkers of Alzheimer's disease in the long-term extension studies, with
    over two years of Phase 3 data.
      An invited plenary lecture, "Key Milestones in Alzheimer's Disease" on March
    16, will include an examination of the ability of ADUHELM to reduce amyloid
    beta plaque and plasma p-tau181, and the relationship between these
    biomarkers and clinical endpoints during the long-term extension phase of
    the ADUHELM clinical program.
      An oral presentation on March 18, "Effect of Reduction in Brain
    <BETA>-Amyloid Levels on Cognitive Decline in Randomized Clinical Trials: An
    Updated Instrumental Variable Meta-Analysis," will discuss the details of a
    meta-analysis on the causality between reduction of amyloid beta levels and
    reduction of cognitive decline in randomized clinical trials.


  21. WTRH -33.06%Mar. 14, 2022 2:24 PM ET

    • Benchmark halves Waitr (NASDAQ:WTRH) target to $2 from $4 and maintains buy rating on the stock after the company released Q4 earnings on March 11.
    • The shares currently trades at $0.31, indicating the target price to be more than 6 times the current price.
    • Shares -33%.

    DASH -13.78%Mar. 14, 2022 2:21 PM ET1 Comment

    DoorDash (NYSE:DASH) fell 13.06% on Monday afternoon on volume of over 6M shares. Shares fell to a new 52-week low of $74.32 earlier in the session.

    The decline in DASH coincides with weakness across the tech and e-commerce sectors as investors dial back on high-growth, high-valuation names. Some analysts have also pointed to inflation worries for DASH on both the demand and cost side of the equation.

    Sentiment on DoorDash (DASH) might also be taking a hit from a weekend TikTok posted by a DASH driver that went viral. The TikTok highlighted the negative impact on higher gas prices and lack of tips for DoorDash (DASH) drivers.

    INTC -2.99%Mar. 14, 2022 1:41 PM ET42 Comments

    Investors looking at the semiconductor companies as a source of opportunity may want to think again, according to a new assessment of the sector by Citi analyst Christopher Danely.

    On Monday, Danely said the market for semiconductor stocks is looking increasingly grim. The ongoing war between Russia and Ukraine is front and center on many investors' minds, and Danely said the situation isn't helped at all due to growing sentiment about the possibility of an economic recession and fears about China invading Taiwan.

    "It's a den of bears out there," Danely said, who added that build ups in semiconductor inventor are creating higher risks and an environment for poor rewards "if you believe a recession is coming."

    Danely said that after meeting with "several investors", the sentiment toward companies that rely heavily on chip foundry Taiwan Semiconductor (NYSE:TSM), such as Advanced Micro Devices (NASDAQ:AMD) and Nvidia (NASDAQ:NVDA) is turning "bearish" due to the chances that China might set its sights on invading Taiwan, which Beijing considering to be a "renegade province." Danely added that a large amount of chip sector negative surrounds companies big in the automotive industry such as NXP Semi (NASDAQ:NXPI), Texas Instruments (NASDAQ:TXN), On Semiconductor (NASDAQ:ON), Microchip Technology (NASDAQ:MCHP) and Analog Devices (NASDAQ:ADI).

    "[There is] a huge disparity between auto semi revenues and auto production levels," said Danely, who estimates that while semiconductor automotive units should rise 41% this year from a year ago, auto production is expected to decline from its previous peak levels.

    Danely also said there are "more yellow flags" of caution emerging from the PC market, such as notebook shipments in February coming in below expectations amid rising product inventories at PC manufacturers. Danely said that he still believes the first half of this year will be strong for PCs, but on the whole, the likelihood of a slowdown in PC sales in the second half of the year "is increasing, and would be negative" due to the fact that PCs represent about 30% of total demand for semiconductors.

    Despite what seems like a gloomy take on the chip market, Danely said he was "surprised" to hear that many investors are positive about chip giants Qualcomm (NASDAQ:QCOM) and Intel (NASDAQ:INTC).

    According to Danely, Qualcomm (QCOM) is getting attention as it has gained share in the market for mobile phone chips, while Intel (INTC) has an attractive valuation, and is seen as "a hedge against [a] Chinese takeover of Taiwan." Danely also left his neutral rating on Intel (INTC) unchanged.

    SARK +5.99%Mar. 14, 2022 1:40 PM ET26 Comments

    For the first time, the Tuttle Capital Short Innovation ETF (NASDAQ:SARK) has closed higher than Cathie Wood's flagship ARK Innovation ETF (NYSEARCA:ARKK). It took SARK a little over four months to lap ARKK but it now trades at 60.78 a share, whereas ARKK sits at 52.17.

    On the day, SARK is +6.1% and ARKK is -6.1%.

    The crossover now outlines that it costs more for market participants to invest in an ETF that takes short-term positions against ARKK than buying the underlying ARKK ETF itself.

    Moreover, since the launch of SARK on Nov. 9, 2021, the fund is up 101.4%. At the same time, since SARK's unveiling, Wood's ARKK has plunged 57.1%.

    See a chart below that outlines the two funds' price moves.

    Matt Maley, chief market strategist at Miller Tabak + Co. told Bloomberg: “I do think it makes sense that ARKK is down so much this year. Too many of the stocks in the ARKK portfolio were dependent on central-bank liquidity to fuel their outsize gains,” he continued to state: “Now that this liquidity is being reversed, the stocks are going down in a meaningful way.”

    Moreover, both ARKK and SARK have the same 0.75% expense ratio, but ARKK still has the upper hand in AUM even since SARK launched. From Nov. 9, 2021, ARKK has accumulated $619M, whereas SARK has taken in $250M. Data is per etfdb.com.

    Recently, Cathie Wood has doubled down and calls a top in oil as electric vehicles are set to “destroy” demand.

    DWAC -13.91%Mar. 14, 2022 1:35 PM ET25 Comments

    Trump SPAC Digital World Acquisition (NASDAQ:DWAC), which is taking Trump's social media company public, fell 15% and has now fallen 38% just in the past week after hitting a high of $97.25.

    Trump's new social media platform Truth Social officially launched last month at the end of President's Day weekend, which sent the SPAC's shares up 10% on the platform's first full day on Feb. 21. DWAC shares have dropped 32% this month through through today.

    Truth Social was the No. 1 most downloaded app in the App Store less than 48 hours after its launch last month. Trump, who has been banned from Twitter (NYSE:TWTR), Facebook (NASDAQ:FB) and Google (NASDAQ:GOOGL), is marketing Truth Social as an alternative outlet to those social-media giants. As of Monday , Truth Social is listed as the No. 141 on the top free apps in the App store.

    Earlier this month Axios posted a story that highlighted that the "vast majority" of the people who have downloaded the app are still on a waitlist after it launched last month. In addition, Trump's Truth Social account had less than 80,000 followers at the time vs the 88M followers he had on Twitter.

    Digital World Acquisition (DWAC) saw a massive rally in wake of news that it will take Trump's new media company public via a SPAC merger. The stock gained more than 350% when the news was announced Oct. 21. DWAC shares have gained almost 90% this year.

    Digital World Acquisition (DWAC), like Trump, is not without controversy..DWAC disclosed in late October that it was being investigated by the Securities and Exchange Commission and FINRA. The disclosure about the regulatory probes came after Sen. Elizabeth Warren (D-MA) sent a letter to SEC Chairman Gary Gensler requesting that the agency investigate the transaction.

    The Warren request followed a New York Times report that Trump's deal with DWAC may have skirted securities laws. The former president began discussing a potential deal with Patrick Orlando, the founder of the Digital World SPAC, at least in March, according to the report, well before DWAC went public in September.

    CL1:COM -8.20%Mar. 14, 2022 1:19 PM ET98 Comments

    • Update 1:16 p.m. ET: The U.S. has told its allies that China has signaled a willingness to provide military assistance to Russia to support its invasion of Ukraine, the FT reported, citing officials familiar with diplomatic cables.
    • Update 12:08 p.m. ET: "The war in Ukraine has already caused a terrible human toll," the BlackRock Investment Institute said in a note. "We see it extracting a heavy economic price as well, mostly via higher energy costs. This is a major supply shock layered onto an existing one, and we see it resulting in higher inflation and lower growth, especially in the euro area."
    • "This puts central banks in a bind: Trying to contain inflation will be more costly, and they can’t cushion the growth shock. We prefer developed equities in this inflationary environment."
    • "What does this mean for investment? We prefer to take risk in DM equities against the inflationary backdrop of negative real bond yields. We expect the global energy shock to hurt corporate earnings, especially in Europe. Recent market declines reflected this, we believe, and the region’s stocks are highly geared toward global growth. We stay underweight government bonds. They are losing their diversification benefits, and we see investors demanding greater compensation for holding them amid higher inflation and larger debt loads. Within the asset class, we prefer short dated and inflation-linked bonds."
    • Update 11:56 a.m. ET: A Ukrainian negotiator says that peace talks with Russia have been paused until Tuesday.
    • Update 11:51 a.m. ET: Eiger (NASDAQ:EIGR) extends gains with no impact to trials in Russia and Ukraine.
    • Update 10:48 a.m. ET: Commodity ETFs moderate after spikes.
    • Talks between Russia and Ukraine continue, but on the ground Russia continues to shell Kyiv. An airstrike on a base in Yavoriv, less than 10 miles from the Polish border, killed at least 35 people.
    • The Kremlin said today its "Ukraine operation" will be completed "on schedule," according to Bloomberg, although it's unclear what the schedule is.
    • Oil prices (CL1:COM) are falling, with WTI down more than 7%, below $102 per barrel. Prices came under pressure after some hope of diplomatic progress over the weekend.
    • McDonald's (NYSE:MCD) was recommended at Oppenheimer, which says the Ukraine-Russia risk is priced in.
    • ArcelorMittal (NYSE:MT) says $4.1B in sales in Ukraine are at stake.


  22. The Cafficon variant:

    LKNCY -12.79%Mar. 14, 2022 1:15 PM ET9 Comments

    Starbucks Corporation (SBUX -3.8%), Yum China (YUMC -2.5%) and Luckin Coffee (OTCPK:LKNCY -12.4%) fell on Monday in mid-day trading after China reported its worst jump in COVID cases since the Wuhan outbreak late in 2019.

    Chinese health officials reported 2,125 cases on Sunday spread across 58 cities in 19 of 31 mainland provinces. Shenzhen suspended all non-essential business due to the jump in local cases. China has not officially moved off a zero-tolerance COVID policy, meaning that retail traffic could decline.

    China coffee watch: Luckin Coffee (OTCPK:LKNCY) said last month that it is moving forward from a position of financial strength and remains focused on the continued execution of the company's growth strategy, while Starbucks (NASDAQ:SBUX) faced an unexpected public relations battle with a store fined for using expired ingredients. Startups like Manner, Seesaw Coffee, Algebraist and M Stand are also trying to break into the Chinese coffee shop market.


  23. Phil,

    Factoring in recession, is it a good idea to buy puts on DASH/TWLO/CRWD/ZS and other high flyers? Maybe calls on SARK?

    Thanks


  24. Recession/Harip – I think they'll break the glass on another stimulus before letting the markets crash.  As I said this morning, the Dow has about 10% catching up to do if you want to make a bearish wager – why try to pick a specific loser.  Originally, we thought Tech was the most overvalued sector – so our primary hedge was SQQQ.  After the Nas had their drop, we switched to TZA and now we're looking at the Dow to catch up in the race to the bottom.  In these days of Trillion Dollar valuations – you never know who is going to get bought so there aren't too many companies I like to short.  

    SARK has doubled this year, I guess it can go further but there's a lot of good companies they are betting against.  

    ZS and CRWD certainly seem to have futures, just got bid up too much, too early.  TWLO pretty much the same and DASH is definitely suffering – I'm not sure human delivery is a viable business model and the drone future isn't getting here fast enough but, of course, people put up with Bezos losing money to build market share for 20 years and he also was running at 100s of times his earnings.  It seems to have worked out in the end – certainly not for the people who bet against him. 

    All red at the close.  Nas down about 2% – so sad…


  25. The 18 Minutes of Trading Chaos That Broke the Nickel Market






  26. Gas Taxes Get Rolled Back Across U.S. as Pump Prices Soar



  27. China crashing, down 5% across the board.  


  28. lookig back, which is the only thing I'm good at, DASH is just wow. I mean WOW. Imagine having puts in Nov when it was 240, now 80. That's just a dream come true. And it follows the obvious mega-trend: Un-covid = people going back out now. So simple. Focus on simple! ZOOM. whatever.

    AMC is buying a non-producing gold mine. AMC is (was?) a movie theater right? That makes sense. People tell make don't make sense. In te context of a movie theater buying a (defunct) gold mine, everything I say makes sense.

    NEE? Are they the mega-trend decarbonization darling of 2022? Jan23 130 calls at 0.25 say "worth a shot." Right? Maybe NEE starts selling NFTs or buys a metal mine? I mean, that would make more sense for them to do it than a movie theater? If they become a meme stock, they can reach 800 per share? ($1.7T val)? Doubt it. But $1000 of those calls at a quarter is worth $3M if it happens.

    Mega trends. It's my new catch phrase (since, you know, I was sick of bitcoin bashing by 2015).


  29. drones/eVTOL need a better battery than Li-ion and that's going to be aluminum ion so that's the play there.