Which Way Wednesday – Pepsi Pops as Shanghai Shuts Down (again)

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An entrance is blocked by bicycles from a bike-sharing service at a sealed area following the coronavirus disease (COVID-19) outbreak, in Shanghai, China, October 11, 2022. REUTERS/Aly Song (REUTERS)First the bad news. 

In just under 3 years since Covid-19 first spread in China, Shanghai is once again closing Cinemas, Bars and Gyms in the wake of yet another outbreak throughout the city.  This is coming just a week ahead of the October 16th Communist Party Congress meeting to be held in that very city.  

Shanghai was shut down for 2 months early in the summer and the residents there are in no mood for a repeat as they came close to running out of food and medical supplies in the last one.  President Xi has made Covid Zero a cornerstone of his leadership, despite its growing social and economic cost, and China’s propaganda machine has ramped up its defense of the policy this week as he has no choice other than doubling down on this disaster just one week before he is seeking to be re-appointed by the party.   

Meanwhile, Pepsi (PEP) has shown how companies can come through the other side of inflation with $22Bn in revenues vs $21.8Bn expected a 5.5% beat, in-line with their price increases and earnings per share were $1.97 for the quarter vs $1.85 expected – a 6.4% beat – also overcoming the strong Dollar on their international sales.  This is also despite the company taking a $1.4Bn charge relating to its withdrawal from the Russian market.  

This is why we’ve still been buying stocks.  Inflation can cause a lot of fluctuations in earnings but, in the end, things go back to “normal” but the prices are higher and the earnings are higher – and the stock prices are higher.  This has been happening our whole lives – why act surprised about it now?

Is There a Correlation Between Inflation and the Stock Market

This is a process that can take YEARS, not days to work itself out.  The problem is investors are not patient and the Banksters and their media hounds take full advantage of that to drive people out of their holdings at the bottom of the cycle with non-stop fear-mongering – pushing you to lose faith in your companies, just because they announce a bad quarter or two.  

We’re finally here – at the start of Earnings Season for Q3 earnings and it will be interesting to see how various companies are navigating these very choppy waters.  Tomorrow morning we hear from DAL (got ’em), BLK (got ’em), DPZ, FAST, PGR, TSM and WBA (got ’em) and Friday it’s C, FRC, JPM (got ’em), MS, PNC, USB, UNH and WFC – so we’ll have plenty to chew on into next week, when things heat up quickly with hundreds of major reports coming in. 

Companies that have confirmed earnings releases over the next month include Netflix #NFLX, Chipotle #CMG, Nike #NKE, Micron #MU, Comcast #CMCSA, Domino's #DPZ, UnitedHelath #UNH, Teck Resources #TECK, Union Pacific #UNP, Verizon #VZ, AT&T #T, Dow Chemical #DOW, US Bancorp #USB, Bristol-Myers Squibb #BMY, Kimco Realty #KIM, JPMorgan #JPM, Johnson & Johnson #JNJ, Ford #F, Wells Fargo #WFC, Caterpillar #CAT, Synchrony #SYF, M&T Bank #MTB, Truist #TFC, Comerica #CMA, and Zions Bancorporation #ZION.  http://eps.sh/wrs

We get the Fed Minutes today at 2pm and we’ll be doing our Live Trading Webinar at the time so we’ll see what happens live.  This morning the PPI came in hot at 0.4% vs 0.2% expected but it’s up from 0.1% last month – so not too terrible.  The indexes think any sign of inflation is yet another reason to fear the Fed – as if they could do anything worse to us than they are doing now.  

 

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Good Morning.

Good morning everyone. Here is the link to today’s webinar.
https://attendee.gotowebinar.com/register/613991908594517262

I haven’t got a text alert to buy in awhile, are those still going out?

Last edited 1 month ago by wiseradvisor

Greetings from Sorrento. Speaking of restaurants ( DRI ). To an American, restaurant meals seem to be about the same as the USA. Most locals eat pasta almost everyday.
Some things we take for granted: air conditioning everywhere, cheap energy and cost of transportation, parking, Mexican, Greek, Asian, BBQ food. Abundant protein , chicken, steak ( especially tender cuts like rib eye) , pork etc. Costco & Sam’s . Big cars and pick up trucks

PHIL / SEDG – I have the following spread and am looking to roll down / out 

Long 15X Jan ’24 $250 Calls  (118)
Short 20X Jan ’24 $350 Calls (70)

Short 2X Jan ’24 $330 Calls (32)

Short 10X Jan ’24 $250 Puts ( 55)

I’m not sure this has stopped going down but am looking at the following and would like your input  – Thanks.

Long 15X Jan ’25 $250 Calls  (100)
Short 15X Jan ’25 $350 Calls (65)

Short 5X Jan ’23 $260 Calls (12)

Leave the shorts as they are… 

Phil / SQQQ – you indicated earlier that you did not think SQQQ would not brach 70 …. ie the ’24 short 70 callers would be ok?

Thoughts on what to do with cash. I am looking at TPVG (Tripe Point Venture Group) which lends to late stage venture companies. Loans are secured (but frequently by patents or IP). Currently paying a 12% dividend .. Lots of opportunity as 1) late stage companies are reluctant to raise now if they will have to do a down round, 2) VC firms have tons of capital! looking for opportunities. Other suggestions?

One other thought that I would like to share from my recent jaunts … The difference in the price of gas. CA, NV and West are still paying $6+/gallon for gas while the national average is $3.85. It is going to be hard to control inflation when so much comes from or through CA.

Bay Area startups are quietly laying off MANY people. The people being laid off are generally marketing/customer satisfaction type people with $150k+ salaries. Many of the people being laid off are 35+ with families and obligations. These are not the jobs that are available. There is a huge mismatch between jobs available (restaurants and other low paying) and the people looking for jobs!

Phil / SEDG – you asked for a reminder later….. its later 🙂

PHIL / SEDG – I have the following spread and am looking to roll down / out 

Long 15X Jan ’24 $250 Calls  (118)
Short 20X Jan ’24 $350 Calls (70)

Short 2X Jan ’24 $330 Calls (32)

Short 10X Jan ’24 $250 Puts ( 55)

I’m not sure this has stopped going down but am looking at the following and would like your input  – Thanks.

Long 15X Jan ’25 $250 Calls  (100)
Short 15X Jan ’25 $350 Calls (65)

Short 5X Jan ’23 $260 Calls (12)

Leave the shorts as they are… 

Phil / SEDG. – thanks….. I had looked at leaving the long callers with the 250 rolls, but the 300’s gives less out of pocket $$$ and a change to roll down later… This stock is super volatile and I imagine going into midterms it may have pressure on it. I think I’ll go with the 240 callers at 15 ish hopefully no need to roll out…. and not close out all the 350s….

Thank this is actually a bit more aggressive than I was looking at, not sure it will hold 200 but I think it may hold 190 / 180….. we’ll see..

Hey Everyone, it’s WTF Wednesday! Waters are choppy.

Screenshot 2022-10-12 130332.png

CA gas prices- bumping $7/gallon now- Here is VLRO’s answer to Newsom’s accusation of price gouging:
Link to the WSJ aricle:https://www.wsj.com/articles/dear-california-11665516807

Valero Energy vice president Scott Folwarkow recently wrote to the commission:

As demanded and with one business day to respond, Valero is providing the following response…

As the Commission knows, and as countless investigations have demonstrated, market drivers of supply and demand, together with government-imposed costs and specifications, determine market price.

Ironically, on the same day we received the Commission’s letter, a federal judge in a 103-page reasoned order, following review of thousands of pages of documents and hours of depositions and discovery, yet again threw out another case alleging price conspiracies by the fuel industry finding no basis for the allegations…

We have been endeavoring to keep our refineries at full production and no one has produced more low carbon renewable fuel for the California market than Valero. Nevertheless, the market has been very tight. With a very short supply market, inventories are pulled down to satisfy the demand. In fact, the Commission would not want to see refiners holding inventories in a tight market. Also, as noted below, the closure of California refineries has necessarily eliminated their working inventories which will lower overall state inventories levels.

As to separation between California prices and the prices in the rest of the United States, we can offer the following information. For Valero, California is the most expensive operating environment in the country and a very hostile regulatory environment for refining. California policy makers have knowingly adopted policies with the expressed intent of eliminating the refinery sector. California requires refiners to pay very high carbon cap and trade fees and burdened gasoline with cost of the low carbon fuel standards.

With the backdrop of these policies, not surprisingly, California has seen refineries completely close or shut down major units. When you shut down refinery operations, you limit the resilience of the supply chain.

From the perspective of a refiner and fuel supplier, California is the most challenging market to serve in the United States for several additional reasons. California regulators have mandated a unique blend of gasoline that is not readily available outside of the West Coast. California is largely isolated from fuel markets of the central and eastern United States. California has imposed some the most aggressive, and thus expensive and limiting, environmental regulatory requirements in the world. California polices have made it difficult to increase refining capacity and have prevented supply projects to lower operating costs of refineries.