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Faltering Thursday – Fed’s Hawkish Minutes do not Help the Market

Everything is proceeding as I have foreseen. - Sith Master Emperor  Palpatine | Meme Generator2%.

That's the target rate for the end of the year so 1.5% to go is a lot of rate hiking and many members of the FOMC would like to go with a 0.5% hike at the next meeting on May 3rd and they kind of have to – because there's only 5 meetings after that.  We had a long discussion about it in yesterday's Live Trading Webinar ("Deep Dive into Rates and FOMC Minutes"), so I'm not going to get into it again this morning but, to sume it up – "Everything is proceeding as I have foreseen" which, unfortunately, is not a great thing.

What remains to be seen is how the Bond Market will react to the Fed fixing their balance sheet reduction at $95Bn per month and it makes us wonder who is going to be buying Treasuries if the Fed is going to stop?  At the moment, we have Russian Oiligarchs clamoring for liquid US Funds so we have no problem selling notes to their proxies (oh grow up if you think that's not happening!) but what happens when we have to have real auctions – how much will the US have to pay to borrow the next $3.5Tn that's budgeted over the next 12 months. 

And that deficit is WITHOUT addressing Climate Change which, according to the UN's Intergovernmental Panel on Climate Change (IPCC), the US alone will need to commit $2Tn per year between now and 2030 in order to meet our goals of halving emissions by then.  That's 10% of our GDP and most countries need to do the same and, so far, none are.   

According to the report, we have passed the window where we can hold Global Warming down to 1.5 degrees Celcius – which is where we needed to be to avoid catastrophic consequences that will cost us more than $2Tn per year to deal with – like the partial or complete loss (in 25 years) of Miami, New Orleans, New York, Atlantic City, Key West, Galveston, Seattle, Los Angeles, Charleston, San Diego, Fort Lauderdale, Hoboken, Honolulu…

This IS happening people and they are talking 2050 – so maybe not so smart to take a 30-year mortgage on new homes near the coast and now we're not being future smart financially since not spending $2Tn now for 10 years is going to cost us $2Tn forever after as we will have to wall up our coastal cities to try to keep the sea out while our crops fail and our waterways dry up and they'll have to start using Category 6 and 7 to describe hurricanes, etc.

Ultimately, the money WILL be spent, it's just a question of when and doesn't it make more sense to spent it now to avert a catastrope than spend it later to clean up the catastrophe we could have prevented?  Logic says yes but the GOP, unfortunately, says no and so, our children will suffer – badly.

There's not much news to move the markets today but they'd better get moving as our retracement (from the top) chart looks like this:

  • 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)

Those "to" lines aren't supposed to turn red and they are ALL about to be red.  Those "to" lines were the original drops we had off the top in January – BEFORE the bigger collapse.  So, in January, when those lines failed – this is where we went:

  • 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.  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).

So the Nasdaq is telling us we should be looking back down at the 20% corrections and if ANY of the other indexes fail their strong bounce lines (Russell is 2,010, S&P is 4,463) – then we are going to have to start expecting a big gap down – again.


Be very careful out there….


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  1. Good Morning.

  2. Good morning! 

    See how that weakness sneaks up on you – that's why those bounce charts are so important.  

    If we don't start seeing some green into the weekend – we'll have to hedge a bit more.  

  3. The Final Blow to Hong Kong

  4. COVID cases rise again in half the states

  5. Last week it was reported that Russia's largest midstream business planned to cap oil production volumes into its pipeline system. Thursday, it was reported that refineries are planning to cut runs, as a drop in European buying has led to overstocking. Reuters reported that the four largest refiners in Russia raised the issue of run cuts with government officials.

    Attempts to measure the impact of self sanctioning on Russian exports have seen mixed results, with estimates rising as high as 3.0mb/d, while others indicate exports have largely continued to flow. Thus far, the only measurable impact to exports has come from a terminal outage; a terminal that primarily carries Kazakhstani crude to market.

    Russia is a key source of distillate fuel for Europe and the world. Shortly after the war began, BP (BP) and Shell (SHEL) stopped selling spot diesel in Germany. Last week, YPF (YPF) cited diesel "scarcity" in the seaborne market. Jet fuel margins in New York harbor (DAL) rose to $200/b earlier in the week, a ten-fold increase from historic averages. And Goldman has called for rising distillate fuel margins for the remainder of the year. China has compounded problems in the west, by dramatically reducing oil product export quotas in 2022.

    Shell's (SHELQ1 earnings preview flagged improving refining margins, with indicators nearly doubling quarter over quarter. Diesel and jet heavy refiners around the world should benefit from reduced Russian supplies and higher margins. In Europe, Saras (OTCPK:SAAFY) is most exposed. While US refiners like Par Pacific (PARR) and Valero (VLO) stand to benefit from improved distillate margins.

    NYT -1.63%Apr. 07, 2022 10:42 AM ET3 Comments

    The New York Times (NYT -0.9%) is changing up its newsroom approach to Twitter (TWTR -2.5%), with a memo from Executive Editor Dean Baquet setting up a "reset" for editorial staffers, according to media reports.

    Baquet cites several reasons, including relying too much on Twitter as a reporting/feedback tool; broad focus on Twitter reaction "to the detriment of our mission and independence"; and damaging off-the-cuff responses on the short-response platform. "And for too many of you, your experience of Twitter is shaped by harassment and attacks," he writes.

    Baquet says maintaining a Twitter presence is "now purely optional for Times journalists" and the newspaper will support anyone who steps away from the platform. It had previously counted on its journalists to maintain an online presence.

    For those staying on, the paper is encouraging them to "meaningfully reduce how much time you're spending on the platform, tweeting or scrolling, in relation to other parts of your job." Meanwhile, as for sourcing, Twitter should be "only one input out of many."

    Twitter's key news lately is the arrival of its new biggest shareholder, Tesla chief Elon Musk, who has agitated for changing Twitter policy - and, connected or not, Twitter is testing a Musk-favorite feature in an edit button.

    HPQ +16.36%Apr. 07, 2022 10:08 AM ET3 Comments

    HP Inc. (NYSE:HPQ) shares jumped sharply on Thursday after Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.Bdisclosed that it had purchased a $4.2 billion stake in the PC maker, owning 11.4% of the company, something that received praise from Wall Street.

    Evercore ISI tech analyst Amit Daryanani said the move from Berkshire and its leader, Warren Buffett was a "positive," as it "validates HPQ's strategy/deep value."

    HP (HPQ) shares rose more than 17% to $40.97 in early trading on Thursday.

    More than 29.5 million shares changed hands 30 minutes into trading, more than twice its average daily volume.

    HP (HPQ) applauded the move, saying in a statement that "Berkshire Hathaway is one of the world's most respected investors and we welcome them as an investor."

    Daryanani also noted that HP is "attractively" valued at current levels, trading at roughly 7 to 8 times earnings and it has a 13% to 14% free cash flow yield. The Enrique Lores-led company also has one of the largest share buyback programs of companies that Daryanani covers, so Berkshire's involvement "makes sense."

    Last month, Morgan Stanley downgraded HP (HPQ) and Dell Technologies (DELL), in addition to cutting their price targets, citing a cut to the firm's forecast for PC sales.

    HPQ Long Call 2023 20-JAN 22.00 CALL [HPQ @ $39.92 $5.01] 25 7/28/2021 (288) $18,750 $7.50 $10.50 $7.50     $18.00 - $26,250 140.0% $45,000
    HPQ Short Call 2023 20-JAN 30.00 CALL [HPQ @ $39.92 $5.01] -25 7/28/2021 (288) $-8,000 $3.20 $7.85     $11.05 - $-19,625 -245.3% $-27,625
    HPQ Short Put 2023 20-JAN 25.00 PUT [HPQ @ $39.92 $5.01] -15 7/28/2021 (288) $-4,200 $2.80 $-2.03     $0.78 - $3,038 72.3% $-1,163
    Apr. 07, 2022 9:54 AM ET19 Comments

    The Federal Reserve clearly needs to raise its key interest rate to slow inflation, St. Louis Fed President James Bullard said at a speech at the University of Missouri on Thursday. How much the central bank needs to hike its policy rate will depend on how policymakers calculate what the preferred rate should be, he added.

    Like other Fed officials, Bullard also said the policymakers are set to start reducing the size of its almost $9T balance sheet at an upcoming meeting.

    "Even being generous in interpretation, we're still behind the curve," he said. Note that the Federal Reserve boosted its policy rate from near zero to 0.25-0.5% in March, its first hike since 2018.

    The policy rate is only at about a third of one percent, and using a Taylor-type rule, the policy rate should be at about 3.5%, he calculated. "One concludes that the current policy rate is too low by about 300 basis points," Bullard said. That interpretation, though doesn't take into account the credibility of the Fed and its forward guidance.

    "The difference between today and the 1970s is that central banks have a lot more credibility," Bullard said. After Paul Volcker came in and raised rates to tame inflation, the Federal Reserve gained more credibility, he said.

    "In light of the forward guidance that has been given by the Fed since the fourth quarter 2021, the 2-year Treasury yield may provide a better representation of where Fed policy is likely to be in the near future," he said.

    The value of the 2-year Treasury yield as of April 4 was 2.43%, about 100 bps shy of the recommended rate, Bullard calculated.

    One risk is that higher inflation expectations get embedded in the economy.

    10-year Treasury yield may be somewhat depressed due to several factors, including the Ukraine-Russia war.

    Bullard observed that the yield curve has un-inverted in the last couple of days. Running off the balance sheet should ease pressure on the long-end of the curve, he added.

    On Tuesday, the FOMC minutes showed that the policymakers expect to reduce the Fed's balance sheet by $95B per month, which could start as soon as the May meeting.

  6. SP500 -0.41%Apr. 07, 2022 9:32 AM ET11 Comments

    The stock market is slightly lower Thursday but could easily turn around as Wall Street contends with the most hawkish Fed in recent memory.

    The S&P (SP500-0.1%, Nasdaq (COMP.IND-0.2% and Dow (DJI-0.3% start the day in the red.

    The yield curve is steepening. The 10-year Treasury yield is up 2 basis points to 2.63% and the 2-year is down 4 basis points to 2.46%.

    St. Louis Fed President James Bullard, noted for destabilizing trading with his hawkish views, said before the bell that Fed policy is too low by about 300 basis points. But he also said that the Fed isn't as far behind the curve as some models show.

    Futures took those comments in stride, perhaps because the market is so used to hawkish rhetoric now.

    "Our base case remains for four consecutive 50bp hikes in May, June, July, and September followed by 25bp hikes to reach 2.75-3% policy rates by the end of 2022," Citi said.

    Jobless claims fell to the lowest level in decades at 166K. There were large annual upwards revisions, though. Low claims could also cause market jitters as the Fed will feel even more pressure to tighten and add some slack to the labor market.

    "The new data show that the downward trend has been steadier since the fading of the Covid Delta wave, but it is now slowing," Pantheon Macro said. "Claims cannot fall to zero; some firms struggle even at the peak of booms. Still, the clear message here is that the bar for layoffs is very high, given the extreme tightness of the labor market."

    The latest numbers on the Fed's balance sheet will be released after trading today, usually a non-event but it might have more people clicking on the link this time around.

    "The Fed is already tightening organically (balance sheet falling relative to the economy)," UBS chief economist Paul Donovan wrote. "It proposes tightening passively (not reinvesting maturing holdings), and may tighten aggressively for mortgage bonds (selling bonds outright)."

    Looking to stocks, Wedbush's Dan Ives says the rate hikes have already been baked in for tech stocks, which haven't been this oversold since 2015.

    Among active issues, HP is up after Warren Buffett's Berkshire Hathaway disclosed an 11.4% stake.

    See more stocks making the biggest moves this morning.

    AAPL -0.17%Apr. 07, 2022 9:12 AM ET4 Comments

    Apple (NASDAQ:AAPL) is slightly lower on Thursday, as investment firm J.P. Morgan trimmed its estimates for the iPhone, citing "limited upside" from the latest iPhone SE.

    Analyst Samik Chatterjee, who has an overweight rating and a $210 price target, cut iPhone volume for 2022 to 245 million, down from 250 million, with iPhone SE volumes falling to 24 million from a prior outlook of 30 million.

    Apple announced the new iPhone SE, along with several other products and services, last month.

    The analyst left iPhone 13 estimates largely unchanged, but the decline in iPhone SE volumes, combined with slower App Store revenue, resulted in Chatterjee cutting overall earnings estimates.

    "Thus, we are trimming our earnings forecasts for Apple, led by a modest haircut to our revenue growth estimates for iPhone (primarily iPhone SE) and Services, although the overall reduction in estimates is fairly modest given the resilience of high-end smartphones, tablets and laptops to the broader slowdown in consumer spending," Chatterjee wrote in a note to clients.

    Apple (AAPL) shares fell slightly less than 0.5% to $171.53 in premarket trading on Thursday.

    Although Chatterjee cut earnings estimates for 2022, he noted that the firm is above Wall Street estimates for both 2023 and 2024, due to "better than expected growth in Products as well as margin and earnings trajectory on the back of robust growth in Services."

    The analyst noted that although there are some headwinds on consumer spending, Apple (AAPL) is likely offset any concerns by increasing its market share.

    "[W]e continue to see Apple well positioned to deliver resilient performance in Product revenue growth, led by share gains across the different categories of hardware products as both Enterprises and Consumers increasingly adopt higher-performance devices."

    Separately on Thursday, Wedbush Securities analyst Dan Ives said Apple (AAPL) and several other tech stocks should be bought "aggressively" as interest rate hikes from the Federal Reserve are "baked in."

    TSLA +0.68%Apr. 07, 2022 8:18 AM ET33 Comments

    • China's market regulator indicated that Tesla (NASDAQ:TSLA) will recall a total of 127,785 units of Model 3 cars in China due to potential faults in semiconductor components that might lead to collisions.
    • The cars manufactured between January 2019 and January 2022, with 34,207 units imported and 93,578 units made in China, will be recalled, reports Reuters as cited by the State Administration for Market Regulation website.
    • The Beijing and Shanghai branches of Tesla will upgrade the motor control software for vehicles within the scope of recall free of charge through OTA technology.
    • It was known this week that its Shanghai factory will remain in lockdown until at least Apr. 8 amid rising COVID cases.
    • As of February 2022, the firm has launched a total of 16 recalls in the past six months, including 11 recall cases in the U.S., three in China and one in Canada; all of its mass-produced models are involved in the recalls.
    • Earlier in the day, Tesla announced that it has raised the price of the Model 3 Long Range and Performance variants.
    • Shares trading 1.3% higher premarket.

    RBLX -2.14%Apr. 07, 2022 7:59 AM ET7 Comments

    Roblox (NYSE:RBLX) shares rose in premarket trading on Thursday, as Citi started coverage on the gaming platform with a buy rating, noting that earnings estimates are now "reasonable."

    Analyst Jason Bazinet put a $59 price target on Roblox as part of initiating coverage on the name, noting that the company's valuation is justified by its "strategic position, rapid growth and healthy pipeline of product enhancements."

    "Like many stocks, Roblox benefitted from COVID," Bazinet wrote in a note to clients, adding that 2023 bookings estimates fell to $3.6 billion from $4 billion following the fourth-quarter miss.

    "We believe these lower estimates are now achievable even without the benefit of product enhancements."

    Roblox (RBLX) shares rose slightly more than 1.5% to $46.64 in premarket trading.

    Bazinet also noted that Roblox (RBLX) has gone after three "noteworthy" acquisitions in the past six quarters, including, which does facial animation; Bash Video for video conferencing; and Guilded, for voice and text communications, similar to Discord.

    The company is also testing an accessory fitting tool for clothing and accessories, customized material software and volumetric sound and spatial voice, all of which leads the analyst to believe the company's pipeline is "robust."

    Bazinet believes that one of Roblox's (RBLX) daily active users is worth roughly $200, which would be well below the $515 that Wall Street is valuing them at and well above the ratio of other subscription services such as Netflix (NFLX), Spotify (SPOT) or SiriusXM (SIRI), which have a ratio of about 1, compared to 2.5.

    "As such, investors are underwriting more than a doubling of Roblox user base or a doubling of the economic value per sub," Bazinet wrote, adding that the premium is "justified" due to Roblox's two-sided marketplace, its revenue growth and recent user and booking trends.

    On Friday, Roblox (RBLX) said it was supporting Apple (AAPL) in the tech giant's antitrust fight against "Fortnitemaker Epic Games, noting that the App Store is beneficial to users.

    Pretty dull news day so far.

  7. STP:  

    Security Value:  $348,248
    Cash on Hand:  $165,481
    Total Value:  $513,728
    Portfolio Ret.:  156.9%


    Security Value:  $609,695
    Cash on Hand:  $1,777,503
    Total Value:  $2,387,197
    Portfolio Ret.:  377.4%

    Still $2.9M – money just moving from LTP to STP – as we'd expect.  STP was $490,353 yesterday morning.

    We added the TSLA hedge but that's more of a bet.  So, for the STP, let's:

    SQQQ Short Call 2022 17-JUN 37.00 CALL [SQQQ @ $36.26 $0.28] -14 1/7/2022 (71) $-12,754 $9.11 $-3.94 $67.93     $5.18 $0.23 $5,509 43.2% $-7,245
    SQQQ Short Call 2023 20-JAN 60.00 CALL [SQQQ @ $36.26 $0.28] -150 1/25/2022 (288) $-197,400 $13.16 $-5.81     $7.35 $-0.15 $87,150 44.1% $-110,250
    SQQQ Long Call 2023 20-JAN 25.00 CALL [SQQQ @ $36.26 $0.28] 150 3/24/2022 (288) $216,750 $14.45 $0.65     $15.10 $-0.15 $9,750 4.5% $226,500
    • Buy back 14 short SQQQ June $37 calls at $5.18 ($7,245).
    • Roll 50 Jan $25 calls at $15.10 ($75,500) to 200 2024 $30 ($17.25)/50 ($13.25) bull call spreads at net $4 ($80,000) 

    We're ahead on the short June calls and this is complicated enough so I'm killing them for now.  We've taken 1/3 of our 2024 longs and rolled them to 4x the 2024 $20 spread so what was a $175,000 $25/60 spread is now a $400,000 $30/50 spread that is 1/4 covered with the short Jan $50s.  Assuming we don't get in trouble with the short $60s, we've added $225,000 more protection for just net $4,500 – that's a good deal! 

  8. 37 Things That Make The U.S. Appear Weird To The Rest Of The World

  9. Phil, I like you to have a look at ABBV, Holding this stock since 2019 @ 90.00 I have been rolling and rolling my calls, and hardly any went worthless.

    Still holding May 155 Jun 160 and up to Nov 165. Just asking myself, when will this stock ever stop going up? sometimes wonder if I shall just take assignment. Obviously have built up a nice nest egg, but how high will it go? Trading at present at 171.66 with a div. of 3.28. I know this is no stock entering trades with just  now.

  10. The Science of Choking Under Pressure

  11. Phil – TROX down to 17.9 now. At what point do we re-enter?

  12. Same problem as the others who got huge boosts from Covid – the earnings may not stay at these levels.  Pre-covid, this was a $5Bn earnings company and last year $11.5Bn and this year they project $20Bn so up and up the price goes.  PFE happens to have the exact same market cap ($300Bn) but with double the earnings ($20Bn last year, $40 projected this year) but at least PFE made $10-15Bn pre-Covid and are probably good for $20Bn with all those extra Covid profits funding growth going forward.  So not so much that I don't like ABBV but I think PFE is a much, much better buy so I wouldn't consider them for that reason.

    GILD also a better buy and really low in the channel at $61.28, which is $76Bn and they project $8Bn this year and next without any Covid boost.

    On ABBV, if you have the stock, I'd roll short calls out to the 2024 $130s at $48 and use that money to buy PFE and GILD spreads.

    Actually, the June $160s are $15 so let's say that's your average – you can cash ABV at $173 and buy 2x the 2024 $130s at $47 and sell 1x the 2024 $170s at $22 and roll the rest of your short calls to the $170s and then you have 2x the 2024 $130/170 bull call spreads with about $100 off the table and you can use that money to buy PFE and GILD!  

    If you think you are going to miss ABV, you can sell the 2024 $140 puts for $10 so you net back in for $130 or you effectively sell for $183 if it keeps going up.

    TROX/Rn – 80% of their sales are Titanium Oxide for paints and coatings.  Since they are globally diversified – I don't worry too much about slowdowns in housing or building and they make $500M and are vertically integrated so not too hit by inflation and, supposedly, are driving their mining costs significantly lower.   I don't see a huge growth curve from here but, since you can buy the whole company for $3Bn at $18 – it's still a good value.  $15 would be too compelling to turn down.

    Options go to 2024 and you can sell the 2024 $18 puts for $4.25 and net in for $13.75 – nothing wrong with that so keep an eye on those and then something like the 2024 $15 ($5.25)/$25 ($2.10) bull call spread at $3.15 would be a good 2x pairing and you'd be in for net $2.05 on the $10 spreads and worst case is owning 1x of them for $20.05.

  13. Thanks Phil good ideas on ABBV

  14. Look at that, we are kind of green.  

    ABBV/Yodi – You are welcome!

  15. TROX  someone sold 2000 August $16 puts for $1.33     ( bid $1.05 ask $1.33 , so leans to sale )     Obviously someone lurking on PSW

  16. I put in an offer to sell the TROX puts above and the mid jumped to $1.25 

  17. Phil, would appreciate your thoughts on Goodyear (GT).  They've been hammered over the past couple of months.  Thinking of selling some puts as it's the kind of business that will never go away.  


  18. Big moves up now.  On the whole, it may end up being the nothing week we expected.  I think there's a logic that if Buffett is willing to put more cash to work – he can't be all that worried about the war or recession.  I'm not sure I agree – the guy is 92 in August – he doesn't really have much time left to sit out.  Munger is 98!  

    SP500 +0.79%Apr. 07, 2022 2:06 PM ET29 Comments

    After showing losses for much of the session, stocks staged a rebound in afternoon trading on Thursday, turning mixed in the final couple of hours of the session. The Dow and S&P 500 ticked comfortably into positive territory, while the Nasdaq has just edged above the flat line.

    The S&P (SP500+0.4%, Dow (DJI+0.2% and the Nasdaq (COMP.IND) fractionally positive.

    Five of 11 S&P sectors are lower, with Real Estate the biggest decliner. Defensive sectors Healthcare and Consumer Staples are the biggest winners.

    The yield curve is steepening, with traders pointing to profit-taking on the short end, Bloomberg reported. The 10-year Treasury yield is up 4 basis points to 2.65% and the 2-year is down 4 basis points to 2.46%.

    St. Louis Fed President James Bullard said that Fed policy is too low by about 300 basis points, but that it had to watch out for the yield curve inverting. He also said that the Fed isn't as far behind the curve as some models show.

    "Our base case remains for four consecutive 50bp hikes in May, June, July, and September followed by 25bp hikes to reach 2.75-3% policy rates by the end of 2022," Citi said.

    Jobless claims fell to the lowest level in decades at 166K. There were large annual upwards revisions, though. Low claims could also cause market jitters as the Fed will feel even more pressure to tighten and add some slack to the labor market.

    "The new data show that the downward trend has been steadier since the fading of the Covid Delta wave, but it is now slowing," Pantheon Macro said. "Claims cannot fall to zero; some firms struggle even at the peak of booms. Still, the clear message here is that the bar for layoffs is very high, given the extreme tightness of the labor market."

    The latest numbers on the Fed's balance sheet will be released after trading today, usually a non-event but it might have more people clicking on the link this time around.

    "The Fed is already tightening organically (balance sheet falling relative to the economy)," UBS chief economist Paul Donovan wrote. "It proposes tightening passively (not reinvesting maturing holdings), and may tighten aggressively for mortgage bonds (selling bonds outright)."

    Looking to stocks, Wedbush's Dan Ives says the rate hikes have already been baked in for tech stocks, which haven't been this oversold since 2015.

    Among active issues, HP is up after Warren Buffett's Berkshire Hathaway disclosed an 11.4% stake.

    Is this a good or bad thing?

    Apr. 07, 2022 3:03 PM ET1 Comment

    • February Consumer Credit expanded by $41.82B M/M vs. $16.65B expected and $8.93B in January (revised from $6.84B).
    • Total outstanding consumer credit of $4.48T in February gained from $4.44T in January.
    • Revolving credit, which includes credit card debt, rose at a seasonally adjusted annual rate of 20.7% to $1.06T in February. Nonrevolving credit, which includes auto and student loans, drifted higher at an annual rate of 8.4% to $3.41T.
    • Earlier, weekly jobless claims fell 5K to 166K.

    CCL -0.24%Apr. 07, 2022 2:54 PM ET1 Comment

    Carnival Cruise Line’s (CCL) stock has been picking up steam in recent weeks, fueled by a surge in passenger bookings. Even with the recent rebound, business for the cruise ship operator is still trading dramatically below pre-COVID levels. Is now the time to buy?

    Bouncing back from COVID

    Over the past 30 days, Carnival’s stock has climbed 10%, part of a general recovery in the cruise space. Shares of peers Royal Caribbean (RCL) have jumped 15% and Norwegian Cruise Line (NCLH) have shot up 19%. In comparison, the S&P 500 Index has risen 4%.

    But the stock has a long way to go before it reaches pre-COVID prices. Carnival shares are still down 64% from where they were three years ago. Again, this tracks an overall industry trend. Norwegian shares have sunk 64% since pre-pandemic levels and Royal Caribbean shares have dropped 32%.

    The S&P 500, meanwhile, has shot up 55%.

    Bookings are up, but headwinds are strong

    After spending nearly two years largely docked due to the pandemic, Carnival’s fleet is once again sailing the seven seas. But the company is still facing significant headwinds from escalating fuel costs, the ongoing pandemic, and economic fallout from Russia’s invasion of Ukraine.

    Carnival’s stock was pushed lower on March 21 when it released a Q1 earnings report that fell short of expectations. The company also said that while it expects to post a profit in Q3, it will likely report a loss for the year due expenses associated with restarting its fleet and soaring fuel costs.

    But Carnival is also seeing a strong resurgence in bookings. On Tuesday, the cruise line reported the highest booking week in the company’s history. It also plans to have all of its ships back in service by May 2.

    In addition to its eponymous cruise line, Carnival also owns Holland America, Princess Cruises, Cunard, Costa, AIDA, Seabourn and P&O Cruises.

    Wall Street analysts have a wait-and-see attitude towards the company's recovery. On average, they rate the stock a Hold. Of the 21 analysts tracked by SA over the past 90 days, five rated it a Strong Buy, two a Buy and 10 a Hold. Four have deemed shares a Strong Sell.

    SA authors, meanwhile, rate the stock a Buy, on average.

    SA’s Quant Rating for Carnival also signal a Hold. The company received a B- for momentum, a C+ for growth, a C for valuation, a C- for revisions, and an F for profitability.

    Is Carnival a Buy?

    Analysts have expressed mixed opinions about the stock. Some feel the company still faces significant challenges, which might force significant corporate changes. However, others take a longer view, arguing that the current stock price offers a good entry point for the firm's long-term recovery.

    In a noted dated April 4, Truist Securities pointed out that Carnival’s cash on hand and equivalents have fallen by $2.5B quarter-over-quarter, slipping to a total of $6.5B. Meanwhile, its debt increased by $2B, leading to speculation that it might try to raise more capital.

    Truist analysts said they believe Carnival might sell off some of its brands to raise cash and pay down debt. In particular, they see a private equity or sovereign wealth fund being potentially interested in buying a brand such as Holland America or Seabourn. Truist has a Sell rating on the stock, with a price target of $17.

    In another pessimistic note, Jefferies analysts said in a note dated March 29 that they still see rough sailing ahead for the cruise line as it faces higher costs and possible weaker-than-expected consumer demand.

    “Our recent consumer survey suggests near-term Covid and geopolitical trepidation among avid cruisers, which align with the reported declines in FY Q1 2022 occupancy trends and could flatten the recovery,” wrote the Jefferies analysts, who have a Hold rating on the stock with a price target of $19.

    Stifel analysts were more upbeat, rating the stock a Buy with a price target of $30.

    “Based on the changes necessitated by COVID-related financial challenges, we expect CCL to emerge a leaner and more efficient entity, an outcome that should enhance the organization’s ability to generate consistent EP and FCF growth for years to come,” they said in a noted dated March 22.

    “The recent trading weakness has presented an incredible buying opportunity heading into 2H 2022, in our opinion,” the Stifel analysts added. “As the Omicron variant/fuel/Ukraine noise eventually dwindles, we believe booking levels will only accelerate from the strong levels they’re currently running at.”

    For a more in-depth look at Carnival, check out SA contributor InvestOh Trader’s “Carnival Ready to Set Sail” or SA contributor Stone Fox Capital’s “Carnival: Multitude of Challenges Ending”.

    XME +2.39%Apr. 07, 2022 2:52 PM ET5 Comments

    Bank of America is bullish on the outlook of metals and mining exchange traded funds, as the firm labeled the space as "favorable" due in part to increased policy focus, geopolitical catalysts, and scarcity amid a global energy transition.

    In a Bank of America research note, the institution stated: “We think metals & mining ETFs are vulnerable to a near-term pull-back as prices have moved sharply higher in the past two months. That said, structural forces bolster our constructive outlook. Dollar-cost averaging strategies and buying on dips makes sense for investors looking to build exposure, in our view.”

    From an ETF vantage point, BofA placed their most favorable fund to be SPDR S&P Metals & Mining ETF (NYSEARCA:XME), as it had the best efficiency score in an analysis the institution conducted. Moreover, they also support Global X Uranium ETF (NYSEARCA:URA), the VanEck Rare Earth/Strategic Metals ETF (NYSEARCA:REMX), and the iShares MSCI Global Metals & Mining Producers ETF (BATS:PICK).

    Retracements equal opportunities in the eyes of BofA. With regards to their top choice XME, the institution stated:

    “XME is 32% above its 200 day moving average, suggesting that consolidation is likely in the near-term. XME was this extended in 2009, 2016, and 2020. In each case, pull-backs provided compelling opportunities with an average return of 32% a year after extremes were hit.”

    While the investment bank remains bullish on the case of metals and mining, they did elaborate that one material risk is around a “sharp growth deceleration that derails mineral demand.” History has shown that when slower growth is in place it can mean diminished returns for metal and mining names.

    The projected growth of the industry is enormous as global growth takes off. BofA expects the addressable market for strategic metals including steel to hit $3.5T by 2030. To put that figure into context annual crude oil production hovers around $2.9T.

    For a greater in-depth analysis on all four ETFs, see what Seeking Alpha’s quantitative metrics has to say about each specific fund.

    CURLF -3.32%Apr. 07, 2022 2:31 PM ET11 Comments

    Treasury Secretary Janet Yellen indicated during a House committee hearing on Wednesday that her department is "supportive of" legislation that would allow cannabis companies to do business with U.S. financial institutions.

    Responding to a question from Rep. Ed Perlmutter (D-Colo.), sponsor of the SAFE Banking Act, Yellen said, "We've worked with you on this bill. We're supportive of it."

    Yellen told members of the House Financial Services Committee that she shared Perlmutter's frustration that progress on the bill hasn't been made, Marijuana Moment reported.

    Perlmutter also asked Yellen to tell the Biden administration of the need to pass the SAFE Banking Act either on its own or as part of the America COMPETES Act.

    The congressman and state officials have said that the banking legislation addresses a public safety issue also as marijuana dispensaries are cash-only businesses and are often targeted by robbers.

    Multi-state operators: Cresco Labs (OTCQX:CRLBF); Columbia Care (OTCQX:CCHWF); Trulieve Cannabis (OTCQX:TCNNF); Green Thumb Industries (OTCQX:GTBIF); Curaleaf Holdings (OTCPK:CURLF); MedMen Enterprises (MMNFFG); Acreage Holdings (OTCQX:ACRHF); Ayr Wellness (OTCQX:AYRWF); Verano Holdings (OTCQX:VRNOF); and Jushi Holdings (OTCQX:JUSHF).

    A recent report found that in 2021, adult-use marijuana sales added $3.7B in state tax revenues.

    TGT +5.80%Apr. 07, 2022 1:21 PM ET3 Comments

    Target Corporation (TGT +5.0%) was named a top pick in the retail sector by Barclays on Thursday.

    Analyst Karen Short and team think investors are being presented an attractive opportunity to own a best-in-class retailer at a sizable discount at the current share price to other best-in-class peers. There was also some confidence expressed about the implications of Target's (NYSE:TGT) strong foot traffic trends.

    "~45% of customers buy more than originally planned when visiting a TGT store. So footsteps matter, and TGT has clearly gained footstep/mindshare/market share during the pandemic and this will prove to be sticky in our view."

    Barclays has Target (TGT) slotted with an Overweight rating and assigned a price target of $280 to the retailer to rep more than 25% upside for shares.

    Shares of Target Corporation (TGT) rallied to a three-week high on Thursday following the Barclays update.

    We used to play TGT and $230 is still a good price ($100Bn) with $106Bn in sales and $7Bn in profits that are pretty steady.

    For the LTP, let's sell 5 TGT 2024 $200 puts for $20 ($10,000) as we certainly don't mind a net $180 entry.

  19. MPC +0.01%Apr. 07, 2022 12:56 PM ET9 Comments

    • Brent oil (CO1:COM) prices fell ~2% Thursday, to trade below $100/b and approach levels last seen prior to Russia's invasion of Ukraine.
    • Pandemic-related lockdowns in Shanghai, an historic strategic petroleum reserve release (USO), and slowing US oil demand growth (MPC) have all contributed to the selloff.
    • Interestingly, as near-term oil prices have fallen by over 20%, medium-term prices have not.
    • The price for a barrel of Brent (CO1:COM) to be delivered in June 2022 has fallen from $127/b one month ago, to $99/b today; the price for a barrel delivered in June 2024 was $85 one month ago, and today it is still $85.
    • It appears concerns of a supply shortage in the very near term have been reduced; however, expectations for sustained higher prices remain — as a result, oil stocks (XLE) haven't really moved over the past month, despite the 20%+ selloff in "front month" oil prices.

    UNG +4.38%Apr. 07, 2022 12:55 PM ET20 Comments

    U.S. shale gas executives from Chesapeake Energy (CHK), Coterra Energy (CTRA), EOG Resources (EOG), EQT (EQT) and others held discussions with European energy officials in Houston on Wednesday with the aim of increasing fuel supplies to Europe to help replace Russian imports, Reuters reports.

    Delegations from Latvia and Estonia, diplomats from Bulgaria, Estonia, France, Germany, Hungary, Latvia and the U.K. toured the Golden Pass LNG export project and later met with shale gas producers, according to the report.

    The meeting, coordinated by the American Exploration and Production Council with trade group LNG Allies, reportedly focused on ways to move Europe off Russian gas, including the need for more infrastructure in the U.S. and Europe.

    "Capacity challenges in 2022 are great," LNG Allies' Fred Hutchison told Reuters, noting that building LNG capacity takes years and ample new supplies will not be available until mid-decade, but "the opportunities in a few years are really terrific."


    Helped by the possibility that additional sanctions on Russian gas supplies will keep U.S. LNG exports near record highs, U.S. natural gas prices have been trading near YTD highs.

    SHEL -0.11%Apr. 07, 2022 12:50 PM ET59 Comments

    Here are the latest headlines in the Russia-Ukraine crisis:

    More cracks in Russian energy complex

    Last week it was reported that Russia's largest midstream business planned to cap oil production volumes into its pipeline system. Thursday, it was reported that refineries are planning to cut runs, as a drop in European buying has led to overstocking.

    Exports to Russian airlines

    The Biden administration moved Thursday to choke off U.S. exports to three Russian airlines. The Commerce Department said the move would prevent the airlines – Russian national flag carrier Aeroflot, Utair and Azur Air – from receiving items from the U.S., including parts to service their aircraft.

    Financial hit

    "For the first quarter 2022 results, the post-tax impact from impairment of non-current assets and additional charges (e.g. write-downs of receivable, expected credit losses, and onerous contracts) relating to Russia activities are expected to be $4B to $5B," Shell (SHEL) said in an update early Thursday. "These charges are expected to be identified and therefore will not impact adjusted earnings. Details of the accounting treatment and impact of ongoing developments will be provided at the first quarter 2022 results announcement."

    Trade status

    The U.S. Senate will take up legislation on Thursday to end normal trade relations with Russia and ban the importation of its oil. "It's a big, big deal that we are finally getting them done," Senate Majority Leader Chuck Schumer announced. "Now, I wish this could have happened sooner, but after weeks of talks with the other side, it's important that we have found a path forward." The United Nations General Assembly will also vote on Thursday on suspending Russia from the U.N. Human Rights Council. Here is a full list of U.S. sanctions leveled against Russia.

    Ruble rebound

    The Russian currency lost nearly half its value – tumbling from 80 per dollar to 150 – following the invasion of Ukraine on Feb. 24, but has officially recovered all of its losses after closing at 79.7 in Moscow on Wednesday. It follows severe capital controls imposed by the Kremlin, while banks have been temporarily banned from operating cash-based foreign exchanges for dollars and euros. Foreign traders are also not allowed to exit their investments, while the central bank doubled interest rates to 20% to encourage citizens to save their rubles. "For the politicians, it is a good PR tool by saying that sanctions don't have any impact," said Guillaume Tresca, emerging market strategist at Generali Insurance Asset Management. "It will [also] help to limit the inflation impact."

    Renewed offensive

    Ukraine is urging civilians to leave the eastern Donetsk, Luhansk and parts of the Kharkiv regions as it prepares for a major new offensive following Russia's withdrawal from Kyiv and the north of the country. "You need to evacuate now, while this possibility still exists," declared Iryna Vereshchuk, Deputy Prime Minister of Ukraine. "Later, people will be under fire and under threat of death. We won’t be able to help because it will be practically impossible to cease fire."

    PFE +4.50%Apr. 07, 2022 12:41 PM ET50 Comments

    A leading health official in the U.S. said that asking people to get frequent COVID-19 booster shots was not sustainable due to vaccine fatigue as he highlighted the need for a long-term strategy for protection against the evolving virus.

    Dr. Peter Marks, who heads the Food and Drug Administration’s vaccine unit, made the remarks just days after the U.S. regulators cleared a second booster shot for older Americans.

    At a meeting of an FDA expert panel on Wednesday, Dr. Marks said that the decision to clear the fourth shot of Pfizer (NYSE:PFE)/BioNTech (NASDAQ:BNTX) and Moderna (NASDAQ:MRNA) COVID-19 vaccines was a “stopgap” measure, according to The Wall Street Journal.

    “This is really trying to do the best we can with the knowledge we have at hand, which is something that we’ve had to do a fair amount of over the past two years as a public-health agency,” he noted.

    According to Dr. Marks, the FDA plans to devise a long-term strategy for COVID-19 immunizations, which can include identifying the new strains for the retooled vaccine, and the data required to support its authorization.

    However, Dr. Marks and other experts have highlighted the challenges for a timely update of the vaccines ahead of a potential winter surge in cases.

    “It’s going to be hard to generate all the data we want in short order when a new variant emerges,” said Dr. Ofer Levy, one of the panelists, who is also director of the Precision Vaccines Program at Boston Children’s Hospital.

    Robert Johnson, director of medical countermeasure programs at the Biomedical Advanced Research and Development Authority, pointed out that if a variant-specific vaccine is required, clinical trials should start by early May to ensure that enough doses are available for a fall booster campaign.

    Meanwhile, several other advisors said that a future COVID-19 shot should target multiple strains of the virus for protection against current variants as well as those that are yet to emerge.

    In March, Moderna (MRNA) announced that the first person was dosed in its Phase 2 study for an Omicron-specific booster candidate. The company plans to share data with authorities ahead of the fall booster season.

    In January, rival vaccine makers, Pfizer (PFE) and BioNTech (BNTX), announced that the first participant was enrolled in a trial for an Omicron-based vaccine candidate.

    Following the emergence of Omicron last year, Johnson & Johnson (NYSE:JNJ), the third COVID-19 vaccine maker to receive FDA authorization for its vector-based shot, pledged to develop a vaccine specifically targeted at the variant.

  20. LUV -3.21%Apr. 07, 2022 12:41 PM ET4 Comments

    • Southwest (LUV -4.3%) dips after Barclays analyst Brandon Oglenski lowered PT on stock to $55 from $59 as a result of higher expenses.
    • Oglenski maintains overweight rating on the shares and expects capacity reductions and a solid pricing environment to partly offset higher prices, but in the near term there is a lot of uncertainty hanging over the sector.
    • Higher fuel and labor costs are likely to weigh on Q1 earnings.
    • A shortage of pilots have impacted full schedules and Russia's invasion of Ukraine led to spike in oil prices.
    • The company announced on Wednesday to reduce hiring of pilot due to shortfall of flight instructors and expects to bring on more than 1,200 first officers this year, down 148 from its earlier projection.
    • The airline’s flying capacity this quarter will decline 7% from 2019 levels due in part to staffing challenges.
    • Over the period of one year, shares declined 34%.
    • Wall Street Analysts rates LUV stock as a Buy whereas SA's Quant Rating screens the stock with a Hold.

    UUUU +8.68%Apr. 07, 2022 12:34 PM ET8 Comments

    The UK announced plans Thursday to triple nuclear power generation capacity by 2050. The plan calls for eight more nuclear reactors, which could be approved on existing sites. If implemented, the UK would generate ~25% of electricity from the carbon free energy source, helping the country meet Paris goals.

    Favorable policy steps leading up to, and following, Russia's invasion of Ukraine have provided a tailwind to the nuclear industry and shares of uranium miners. Additionally, the Sprott Uranium Trust (OTCPK:SRUUF) has removed significant spot-market supply from the market. All told, uranium prices have risen ~50% year to date.

    On the back of Thursday's update from the UK, shares of Cameco (CCJ) and Denison (DNN) rose ~6%, while the broader uranium ETF (URA) moved higher by ~3%. Energy Fuels (UUUU) announced an agreement that could see the company acquire 7 claims in Utah; shares rose ~3% Thursday.

    With Cameco (CCJ) indicating the contracting cycle has inflected, policy support from Europe increasing, and record physical uranium purchases from financial institutions ongoing, the future looks bright for the sector.


    SoFi Technologies (SOFI) showed substantial midday weakness after cutting its 2022 guidance in the wake of another extension of the moratorium on student loan payments. Shares plunged nearly 13% on the news.

    The fintech said that it now expects 2022 adjusted net revenue of $1.47B, below the $1.57B that it had previously predicted. Analysts were projecting a figure of around $1.55B.

    We sold SOFI 2024 $10 puts in the Future is Now Portfolio for $3.20 so our net is $6.80.  I don't think the above is a reason to bail – it's an artificial delay caused by the Government – nothing wrong with their model or their growth.  I think we have to take advantage and buy a bull spread here – starting with 20 2024 $10 calls at $2.75 ($5,500).  Not a huge investment but a nice bonus if they pop back up and, if they don't – then we'll sell 20 of the 2024 $10 calls to some other sucker and roll the $10s to the $5s (now $4.50) and double down for maybe $3.50 ($7,000) and then we'd have 40 of the 2024 $5 calls half covered by 20 of the $10 calls at about net $12,000 on the $20,000 spread (not counting the $9,600 we already collected on the short puts). 

  21. Phil, listening to yesterdays webinar.  Regarding Fed tightening in interest rates increasing, you cite AT&T debt and the increase in interest payments that could hit earnings by n%. 

    My question: Isn't T's existing debt fixed at a lower rate and increasing interest rates would only affect new debt?  Or is theirs and most corporate debt tied to "current" interest rates?  Something akin to a HELOC for the average homeowner?

  22. BTC-USD -0.74%Apr. 07, 2022 12:06 PM ET5 Comments

    • As countries around the globe attempt to form a regulatory framework for digital assets, the Slovenian government has laid out a proposal that would impose a flat-rate tax on cryptocurrency transactions, according to a release Thursday.
    • Specifically, the tax would come into effect when digital tokens like Bitcoin (BTC-USD) and Ethereum (ETH-USD) are sold or exchanged, the release read. The effective tax rate, which is part of the government's post-COVID recovery initiative, would be sub 5%.
    • Meanwhile, bitcoin (BTC-USD -1.1%) is slipping to $43.3K in midday trading and ethereum (ETH-USD -0.5%) is edging down to $3.2K.
    • At the beginning of February, India wanted to tax cryptos and non-fungible tokens at a rate of 30%.

    Ouch!  That would make crypto a lot less fun to transact with.  Although we already put up with CC companies taking 1.5% every time we transact.

    SOFI -6.91%Apr. 07, 2022 12:05 PM ET43 Comments

    • SoFi Technologies (NASDAQ:SOFI) stock is sliding 12% in midday trading on Thursday after the personal finance app company cut its 2022 revenue and EBITDA guidance when the U.S. government extended the pause on student loan payments.
    • As a result, Wall Street analysts are trimming their price targets as well as revenue and EBITDA estimates. Morgan Stanley's Betsy Graseck trimmed her EBITDA estimate for SoFi (SOFI) by $42M to $100M.
    • Oppenheimer analyst Dominick Gabriele reduced his price target to $13 from $18. "We don't think this moratorium will be extended indefinitely; this thesis could be largely played out," he wrote in a note to clients after Wednesday's close. Still, the company has executed its strategy well and accelerated other lines of businesses to help offset some of the drag from their student loan refinancing business, he added.
    • Wedbush analyst David Chiaverini cut his target on SoFi (SOFI) to $15 from $20 and maintained an Outperform rating.
    • Note that the Quant rating for SoFi (SOFI) is Sell, while the average SA Authors and Wall Street analysts ratings are Buy.
    • SA contributor Business Quant maps out some concerns about SoFi Technologies

    T -1.17%Apr. 07, 2022 11:46 AM ET50 Comments

    WBD logo

    Discovery (DISCA -4.7%) has announced its leadership team for Warner Bros. Discovery (WBDWV) ahead of the imminent close of the $43 billion media merger with WarnerMedia (T -1.4%), confirming that much of the legacy leadership is changing out.

    The announcements come from Discovery CEO (and upcoming WBD CEO) David Zaslav, who notes "Today’s announcement combines a strong team of professional managers in a simpler organizational structure, with fewer layers, more accountability and a singular strategic focus as a global pure-play content company."

    Zaslav, notably not a fan of heavily layered management, has listed several executives who report directly to him.

    Discovery's Bruce Campbell takes on a new role as WBD's chief revenue and strategy officer, with oversight of a wide portfolio including U.S. advertising sales, distribution revenue and content licensing, global corporate development and strategy, global streaming platform agreements, and legal affairs.

    As previously reported, JB Perrette (formerly CEO of Discovery Streaming and International) will take charge of the new company's streaming, as CEO/President of Global Streaming and Interactive Entertainment. David Haddad, president of Warner Bros. Games, will report to Perrette.

    Gunnar Wiedenfels will continue as chief financial officer. And Adria Alpert Romm will keep a role as chief people and culture officer.

    Kathleen Finch takes over as chairman/chief content officer, U.S. Networks Group, rolling up the company's more than 40 American networks. Chris Licht was recently named to take over CNN Global after the departure of Jeff Zucker.

    There are some key retentions from WarnerMedia. Casey Bloys, key to HBO programming, will continue to be chief content officer of HBO and HBO Max. Channing Dungey will stay as chairman of the Warner Bros. Television Group. Toby Emmerich will remain chairman of Warner Bros. Pictures Group. And Gerhard Zeiler stays on to serve as president, International (taking on a big new global portfolio from Discovery).

    Notably, one important vacancy the company is looking to fill is CEO for Warner Bros. Discovery Sports, a key post that will report to Zaslav.

    AT&T and Discovery are on the record as expecting the deal to be completed by mid-April, but buzz that had centered on a Monday close is now amping up for wrapping it before Friday's close of business.

    On Tuesday, telecom analyst Craig Moffett adopted a Neutral stance in valuing what will be left behind at AT&T after its media exit.

  23. T/Jeddah – Well that goes for all companies.  It's not like their debt immediately shoots up but, unless you're going to do forensics on everyone – we have to work within the worst-case and, if we can be comfortable with that, then we can be pretty sure it's not that bad anyway.  Surely the reason so many companies went bat-shit crazy on debt is BECAUSE they could fix it – they aren't completely irresponsible.  Smaller caps should be more worrying – they are more likely to have variable LOCs etc but a large-cap like T can simply issue their own 10 or 20-year bonds to borrow at 3% and people are thrilled to give them long-term money for an extra point.

  24. Still, it's like our own National Debt – a ticking time bomb that you can only ignore for so long before you do have to roll it over at higher rates.  

    Remember SKT – that was the knock on them that kept them down – all those analysts were predicting Debt Armageddon when they had to roll over but then they refinanced for longer-terms at lower rates and the stock exploded.  M too.  Those are stocks we did take deep looks at and determined their debt could be restructured favorably but that's going to be harder moving forward in a rising rate environment.  

    Wowl, SKT came down again – we many need to get back in!   Unfortunately, that means I have to run some very tedious financials again…

  25. M I don't have as much confidence in – too much chaos in the cities.

  26. Woops, we still have SKT in the LTP – we already went back in when they dipped.  

    SKT Short Call 2023 20-JAN 15.00 CALL [SKT @ $16.99 $0.20] -60 5/21/2021 (288) $-24,000 $4.00 $-0.75 $-7.47     $3.25 - $4,500 18.8% $-19,500
    SKT Short Put 2024 19-JAN 20.00 PUT [SKT @ $16.99 $0.20] -20 1/6/2022 (652) $-10,400 $5.20 $0.65     $5.85 $-0.35 $-1,300 -12.5% $-11,700
    SKT Long Call 2024 19-JAN 15.00 CALL [SKT @ $16.99 $0.20] 180 2/16/2022 (652) $72,000 $4.00 $0.10     $4.10 - $1,800 2.5% $73,800

    Nothing wrong with that trade – if they get back to $20 it's $80,000 vs current net $42,600 and we have another year to sell calls too.

  27. From SKT's Q4:

    That's the key, only about $400M to resolve through 2025 but then it's $1Bn rolling over and costing them, I would guess, 4% more at least so $40M/year and they only make $80M so that's pretty significant, isn't it?  That's why you can buy the whole company for $1.75Bn but they have $2.2Bn in assets that are inflating fast and, of course, they get to raise rents, which are currently $430M so 10% more over 3 years will cover the interest while their assets appreciate.  

    It's just a nice, boring real estate play in the end….

  28. No poop for you: Manure supplies run short as fertilizer prices soar

  29. How Marine Le Pen Threatens to Upend French Elections

  30. Phil/Cake

    curious to get your thoughts on CAKE? I went to one near Atlanta Saturday night and there was a 2 hr wait!