Happy Juneteenth!
The US markets are closed on Monday and that could be a good thing because they certainly suck when they are open. On June 3rd we finished at 4,100 on the S&P 500 (/ES) and June 10th found us at 3,900, which was down 4.87%, but close enough and now, on June 17th, we're down another 200 points to 3,700 and that's now pretty much 5% on the nose. Usually we're happy with a 1% bounce off a 5% drop but really this is a 10% drop so we need a 2% (of the index) bounce, which would be 80 points (20% of the 400 we lost) on the S&P 500.
That would take us to 3,780 and that would be a massive one-day move in /ES (not that we haven't had them on the way down) so let's not count on it. That means we can't be cute with our hedges and need to stay well-covered into the weekend – even if today does look LIKE a recovery.
We've been going through our Member Portfolios this week and, generally, we've been making bullish adjustments as this still has the smell of a forced bottom. The untouched Money Talk Portfolio, which we reviewed on Tuesday at $200,566 (up 100.6%) has slipped to $192,786 (up 92.8%)as of yesterday's close – as I said at the time, as long as we pick solid stocks with sound, Fundamental Values – we can ride out these little corrections.
A good measure of market panic is how many stocks are "underwater", which is what M&A people call stocks that are trading below their cash levels (ie. great takeover targets). At the moment, there are 167 stocks on the Russell 3000 that are underwater, beating the previous record of 165 in February of 2009. They represent $55Bn worth of valuations – another clear record.
Trading platform Robin Hood (HOOD) is one example of a company trading below cash as their market cap has fallen below $6Bn at $6.89 but they have $6.2Bn in the bank. HOOD lost $3.6Bn last year and expects to lose $1.3Bn this year – so I'm not saying they are a good one – just pointing out an example. You still have to pay attention to the Fundamentals and, in the case of HOOD, they simply had generous investors and raised a ton of cash in their IPO – and now they are burning through it.
MUFG is more interesting as they have $150Bn and a market cap of $69.5Bn at $5.59. This happens with foreign stocks because their Cash Balance is priced in Yen and the Market Cap is priced in Dollars and a lot of programs don't convert well so they don't show up on screens. As with many banks, a large portion of that money may be investor deposits – you have to dig deeper but this bank is a huge value at this price.
MFG, BCS, DB, NWG, SAN, BK, ING, HBSC, UBS… all are starting to get attractive – it's been ages since we invested in Financials but, now that panic has set in and things are on sale – we may do a bit of shopping in that sector.
Outbrain (OB) is an interesting one. They are a sort of ad provider on the Web and they IPO'd in 2021 and have gone straight to Hell ever since but they still have $171M in cash, which is more than half their $269M valuation (at $4.66) – even though they have been executing their plan and made $11M last year and expect to make $33M this year.
You can give yourself a discount selling OB Nov $5 puts for $1, which nets you in at $4 for a 14% discount if it drops or a 100% (25% of your risk in 6 months) profit if it pops – I like those odds!
OPTT are old friends from Jersey sitting on $63M yet valued at $30M I love their technology (wave power generation) but it's still in development, so risky to own – even at 0.53. RWLK is another speculative penny stock and this one is in our Future Is Now Portfolio. At 0.88, it's $55M in market cap and RWLK has $82M in the bank and burned $12M last year so it should last them and I love their technology.
ITOS is working on cancer cures and investor impatience has taken them down to $658M but they have a nice $824M in the bank and they just made $1.82 per share in the last quarter. It's the kind of Biotech I like to give a chance to. The Jan $15 ($6)/20 ($4.25) bull call spread at $1.75 is 100% in the money and pays up to $5 at $20 for a $3.25 (185%) potential gain in 6 months.
That's why I like those kind of plays.
Have a great weekend,
– Phil
Good Morning.
I own RWLK, but I find their pricing a little obnoxious. One exoskeleton costs more than a Tesla, and this excludes the annual subscription.
Good morning!
I finally got people to start talking about our ridiculous Petroleum Exports and it's already spooking the bulls!
Even Biden is now paying attention…
Nas and Rut are up 1.5% but Dow and S&P less than 1%. VIX still 31.35.
Dollar has, at least, stopped rampaging:
BOJ not raising rates:
Poor Canada:
We knew the EU would do something to avoid parity:
We are going to have a severe Global Food Shortage starting this fall.
I love that logic: They tell you there is going to be a recession and they spook the market – then they tell you the spooked market indicates a strong chance of recession. BRILLIANT!
RWLK/RN – Still in development – it is like paying $200,000 for an original Tesla at the moment. I do believe their goal is to make them affordable. Price is what's keeping them from being accepted in most insurance plans. They will hopefully get approval in Germany soon. In the US, they have been approved for Veterans and, as units become seen in use in America, there will be more and more demand for them to be provided to the general population. It's a slow process – not helped by the two-year shutdown/slowdown of pretty much everything that has delayed all their approval-seeking efforts.
ReWalk is $70-85,000, an electric wheelchair is $3-10,000 so they have a lot of work to do before it's easy to get approved but it's very sad we have to put a price on something like this, isn't it?
Arrgh, rally failing already.
Industrial Production up 0.2% vs 0.7% expected by Leading Economorons and that's down from 1.4% so sucking hard. Cap utilization is flat.
Leading Economic Indicators down 0.4% – same as last month and worse than expected by the kind of people who expected improvements despite all the very strong evidence to the contrary.
If not for an uptick in mining – these reports would have been way worse.
there is an issue being investigated concerning us consolidated options market data i received a bulletin from interactive brokers.
ReWalk/Phil – some years ago my friend Galen Buckwalter, whose movie "Rolling" you've seen Phil, developed sore shoulders from wheeling his chair around. His hands don't work very well, either, so he was getting some bad calluses. We both worked for Kaiser Permanente at the time, Galen was in my department, and he applied for a new, improved non-powered chair – and got turned down, too expensive. A powered chair, which he really needed, was apparently out of the question, Kaiser wouldn't fork over for it, even for a punk rock band front man like Galen. Then the eHarmony thing, to which Galen owned the patent as it was his PhD dissertation, took off, and he took off, too – left Kaiser, joined eHarmony, and bought himself a really nice chair with literal bells and whistle.
Quad Witching today. Should make things odd as dealers try to gamma hedge into the close
Thanks for the trigger Snow !
Brought back memories of when I was on a Kaiser Health plan in the 90's, the long waits in cinder block offices with 5 year old magazines before cell phones, invasive and painful treatments, patients come second mentality. That gave me chills.
This is what it was like 😉 !
Marathon Man (5/8) Movie CLIP – I'm Not Going Into That Cavity (1976) HD – YouTube
And the follow up treatment
Is It Safe? – Marathon Man (4/8) Movie CLIP (1976) HD – YouTube
Options/Tommy – I wonder what that is?
Bells and whistles/Snow – I'm glad it worked out for him but it's sickening how a health care system that collects $1,000/month from you for life "in case you need medical care" gets to decide that a device that lets you walk again for that same $1,000/month is "unaffordable".
Quads/Tully – Maybe a big stick at the close?
Kaiser/Randers – "All the incentives are towards less medical care":
This is why I'm not an Atheist – I need to believe there is a Hell for these people to burn in….
Phil/BA – I have a few puts. Any thoughts on a new BCS here? Hard to see this getting much cheaper.
Dividend Portfolio Review: $390,893 is down $30,044 from our last review and we were saved by a special dividend of $6.31, paid out by LYB or it would have been double that loss. Still, this is why we love dividend stocks – they may be boring but they keep putting money in your pocket – even in a down market.
We only have $103,333 in CASH!!!, which is about 25% and that's because we buy stock in this portfolio – so it's cash-intensive. We are well ahead of our 30-40% annual goal and we made only 2 changes last month – so I'd say this portfolio is in pretty good shape overall. At this point, we don't like to use our cash other than for adjustments.
Well this is certainly the 2-month champion for barely touching a portfolio!
Phil
Thanks for doing all these reviews , its reassuring to still have reasons to own.
Agreed that Nixon is evil, No wonder only about 20% of people trust Government now. These Health Insurance are difficult in may ways. My Brother in Law and Sister owned a small family practice, getting paid by Insurance was quite a feat. Meanwhile, UNH is one of the top earning companies at about 20BB a year.
A $1m mortgage is $4800 at 2.75%. That same monthly payment buys $680k at 6%. My parents mortgage I think was 18.5% (??) in 1981. That's a $263k house for the same payment.
BA/Swamp – They have two catalysts coming, the official re-certification of the 737-Max and the 787 Dreamliner deliveries begin. The delay has really bothered me though – what is going wrong with BA lately? Still, there are two airplane companies and they both have 7 years worth of backlogged orders and BA makes $10Bn in a good year and they should have good years for the rest of the decade yet $135 is $79Bn – far too cheap. They do have $45Bn in debt and 3% of that is $1.35Bn of additional interest going forward so let's say they are good for $8Bn a year in earnings and they are cyclical so 15x $8Bn is only $120Bn ($210/share) but they lost $16Bn during the pandemic which means they won't be paying tax again until 2026 so yes, I'd play them up but not looking for over $200.
In the LTP, we have:
My comment in the LTP review was:
Our spread is actually a bit upside aggressive but it's a net $3,275 credit on the $210,000 spread but I'm only counting on $160,000 (at $200), which is still fine.
Health Care/Randers – They bill us $824Bn to provide $674Bn in medical care – it's a ridiculous, wasteful industry.
Note they've been getting 2% back on $278Bn in assets so profits are going to explode down the road – but they will still raise your rates, of course.
Mortgages/BDC – House prices have to fall – there's no other way.
BA, terrible leadership. Mullaly was the peak in BA management.
Pharm , Curious if youre still positive on KPTI taking into account the BIIB news?
Phil symbol RC, let me know what you think.
BA/Kustomz – Calhoun is yet another example of why it's so stupid to hire CEOs who don't come up through the ranks. He was a GE guy then worked for a company that got bought by Blackstone, who stuck him on several boards as a yes man for them and then when BA had 737 crisis and that CEO got fired, they picked him to replace.
RC/Kustomz – The trick with these lenders is to figure out how their managing their own loans. If they have a ton of paper written at a fixed 3 or 4% and they are borrowing rollovers at prime+ – they could go underwater as the Fed raises rates. That's why people panic out of the REITs – there COULD be a hidden bomb and it's very hard to know how they manage their fund flows. That's why I tend to stick with management companies I have come to trust over DECADES – so I'm very slow to pick up a new REIT. Also, you have to know if property value declines, which are likely to come, are going to break their covenants. They grew fast, so they probably have a lot of floating loans – which can turn fatal. It looks like they have $8.7Bn in debt so 3% of that is $261M in additional interest and they only made $158M last year. Very dangerous.
Also, by the way, if you see a 2nd candle that is double the first candle – DO NOT call a bottom. At best you'll be lucky if the next candle slows to the rate of the first and then it peters out.