Down 1%.
That's a huge move for the Dollar and it's only 7am. The 2022 World Economic Forum kicked off this morning in Davos, Switzerland for the first time in 2 years as the World's rich and powerful took a pass on getting together at the height of Covid. With nothing else to do, the World's Top 10 richest people got 100% richer and, Globally, Billionaires gained $5,000,000,000,000 during the pandemic – in case you are wondering what happened to all that stimulus money the Government borrowed on your behalf.
Now the rich and powerful are back at Davos with a sense of urgency – as people are starting to talk about taxing them as tens of millions of people have fallen into EXTREME Poverty in order for the Wolrd's 2,668 Billionaries to get $1.874Bn richer – EACH!
"The last two years have dramatized and clarified what has been true for some time now, which is an elite plutocratic class is not just leaving the rest of the world behind, but is thriving precisely by stepping on the necks of everybody else," said Anand Giridharadas, author of the book "Winners Take All: The Elite Charade of Changing the World."
There's a notable absence of Russian Oiligarchs at this year's convention. At last year's virtual event, Putin was a featured speaker… Putin and everyone with an oil well is certainly getting their $1.8Bn with oil over $110 this morning and Gasoline (/RB) at $3.70 wholesalre (just under $5 at the pump, USA average). I'm starting to hear more and more people say "that's an expensive drive" when talking about vacation plans.
Kristalina Georgieva, IMF managing director, said Russia’s invasion was “devastating lives, dragging down growth and pushing up inflation”, and urged countries not to “surrender to the forces of geoeconomic fragmentation that will make our world poorer and more dangerous”.
European nations are still debating whether or not to go ahead and boycott Russian Oil, which could send prices as high as $8-10 at the pump this Summer in the US (Europe is already there). Meanwhile, there is a call to keep all frozen Russian assets to pay for damages done to Ukraine – estimated to be about $600Bn so far. Forced reparations like that are how we moved Germany along from WWI to WWWII – so why not try that trick again?
Of course, Russians are better at suffering than Germans are – they've been trained for it for 100 years. Also, the wealth that's being taken is from so few Russians that it will have very little effect on the average citizen – unless the Oligarchs put the squeeze on them in order to rebuild their fortunes – then it could get ugly.
What's really going on in Davos though, is the rich people that ARE there are telling the Governments that they should fix Ukraine with money from the peole who aren't there (Russians) and not from the Top 2,668 as part of a massive global effort to rebuild – like we did after WWII because THAT might lead to taxes – like 10% of what our Oiligarchs made in the past 24 months. THAT would be a tragedy, right?
What they've accomplished so far though, is weakening the Dollar and that's popping our indexes this morning but not even 1% and, as our Members know – if the inexes don't move at least with the Dollar – it's not a real move at all.
Things that might move the market this week are PMI tomorrow, followed by Powell speaking at lunch. Durable Goods, Investor Confidence (or lack thereof) and a 5-year auction on Wednesday will be followed by the Fed Minutes and Thursday is GDP, but it's just a revision of Q1's -1.4% disaster and the 7-year auction can be a nasty surprise if it's weak. We finish the weak with Personal Income & Outlays as well as Consumer Sentiment – it will be a surprise if the Consumer is not indicated to be out of gas at this point:
We should also keep an eye on those Regional Fed Reports as NY and Philly were a disaster last week and you know that old saying: "Ignore on distaster – shame on you. Ignore two disasters – shame on me. Ignore three disasters and we're F'd." – at least that's what my Grandma used to say…
By the way, speaking of Bush (in the link) – hows this for a Freudian slip?
And, for some crazy reason, companies are still insisting on reporting their earnings – as if they matter any more. They do matter to us as we've been adding and adding to a lot of positions in our Member Portfolios but babies are being thrown out with the bathwater so acftual earnings are only a small point of reference at this stage of the sell-off (we also added a lot more hedges).
Be careful out there!
Per the last EIA report, we are still not being affected by gas prices enough to change our habits. Of course, it takes a while for people to be able to switch cars, etc.
Of course those exports are a war crime at this point! 3.85Mb/d is 26.95Mb/week – that's almost 1.5 days (20%) of our total consumption is refineries turning oil around for export. It's MORE than our total imports of oil. That means we would have a huge domestic SURPLUS if we simply stopped sending refined products to other countries!
5Mb was released from the SPR, so we're draining that to send product to other countries – MADNESS!!! Notice also that Other Oils built by 4Mb, that's off the books stuff they do to make other things look in shorter supply.
So weird that the gas cost table includes Hong Kong but not Korea…..
And Malawi.
Now it's a party on the indexes.
Phil/ TZA – looking for a new hedge and wondering if you still think your 25/45 BCS from Friday is still a good thought? I have 20 short TZA '23 $45 calls that are a little scary every time we have a drop.
Thanks Phil. So, this is my first time shorting TZA. Clearly, the risk is the market continues to decline and I'm assigned on my 20 Jan '23 $45 Calls. It's a gamble I'm willing to take but at what point would you start getting nervous?
AAPL/Phil Thanks for the good ideas .. TD won't let me sell the 60 JUNE '24 $160s until I buy the June '24 $130s but I COULD sell 60 JAN '24 $160s @ $19 which would help finance the rolls. Not enough mgn to buy the 200 Jun '24 $130s ($690k) and THEN sell the $150s, would have to do it as a multi-leg strategy or maybe do it in dribs and drabs. You say to watch the July $15s, do you mean the July 15th '22 $150s ($4.35)?
Thx
Nervous/Swamp – You have them covered with the $25s so you can, in turn, force an assignment on those and then you simply pocket the net of the two – not much different than if you close them yourself. As a rule of thumb, as long as there is 0.10 of premium, it's unlikely you'll get assigned as it simply isn't worth it to the holder of the short calls – you have a long way to go.
Functionally, let's say TZA goes up 30% on a 10% drop in the RUT. That's $43.34 x 1.3 = $56.34. So that's $13 more than we are now and we look at the 2024 $32s and those are $20, so your short $45 caller would be about $20 and that's net $65 with the stock at $56.34 so no way you get assigned there. And, if you are going to be assigned because the short calls have no premium then your $25s won't have less than no premium so you are going to cash out for very close to the max value and, if that's the case – it's time to get a more productive spread anyway.
AAPL/Wing – Yes this July but if you are tight on margin – I'd seriously consider reducing anyway as that's a dangerous position to have if you can't react when you need to. You have to have sideline money/margin to play with in these volatile markets.
Chicago Fed squeaked it out with a slight positive:
Beats the alternative:
Doesn't look like a Recession so far.
Far be it for us to be inconvenienced in order to save the planet…
When they say "Broadcast" – do they actually mean 24.7% of the people are actually still using antennas? It must mean watching the channels that ARE broadcasted – no matter how people actually view them. I don't think I've SEEN an antenna this decade…
That reminds me I wanted to add RH.
Yep, still cheap.
$261.30 is under $6Bn and they made $689M last year and expect $736 this year and $802 next so 10% profit growth and about the same in sales catering to rich people who don't believe in recessions. $643M net debt is manageable as 2% of that is just $13M taken off earnings so it's simply a good chance to get in. They have proposed a 3:1 stock split, which is up in the air.
Phil/PETS – Curious about your thoughts on this one.
UL/Phil: I have the following position and would appreciate your advice on a roll:
Short 10 Jan '24 45 puts @ 5.9 (3.6 credit)
Long 20 Jan '24 50 Calls @ 2.87 (cost 6.55)
Short 15 Jan '24 60 calls @ .87 (2.6 credit)
PETS/Swamp – They got over-pumped a couple of times and people are scared to get back in. Revenue popped during the pandemic as people wanted meds delivered but now going back out to vets so their customer acquisition costs are much higher than last two years – so people are freaking out. So, at the moment, they are spending a lot of money and no results yet (not supposed to be). We won't know until the end of the year if that pivot is working BUT $20.23 is $418M and they were making $37M in 2018 and 2019 ion $280M in sales and now they are back to $280M and making $22M this year so I think they should get back to growth later this year.
UL/Tully – We have them in the Butterfly Portfolio and we bought back the short calls and now we're in the $45 calls (20) with the $45 puts ($10) and we're waiting for them to turn up before re-covering. $44.50 is $112Bn and they make $6.2bn so 18x is a fair bottom as their earnings are rock-steady. Are things worse than Jan 2020? No. So I expect we see $50 again and then maybe I'll want to sell short calls again.
Holding up well into the close.
Thank you!
How about a War portfolio? It seems like every NATO country is moving very expensive gear to Ukraine. They all need to be replaced. Poland announced a 5 billion deal to buy tanks from GD right after the start. Plus all the ammo? Seems like a gold mine for BA, LMT, GD, RTNB and all the defense (or is offense?) contractors.