It’s possible that today’s Non-Farm Payroll number may be down a lot from last month. Certainly we’ve been hearing a lot more about cut-backs and layoffs from Corporations recently and imagine all the Construction Workers and Mortgage Brokers and Movers and Cable Installers who aren’t needed with Home Sales down 24% and Pending Home Sales down 36.7% from last year as rates relentlessly rise.
Inflation isn’t dead – we just got that data – but Housing is certainly on its last legs and Housing is 16.5% of our entire GDP. Let’s do that math: If 16.5% of your GDP is off by 36.7%, then your ENTIRE GDP is down 6% – that is NOT GOOD!
Expectations are for 200,000 Jobs created in November vs 261,000 in October but ADP came in just 7% below last month, so it may be that jobs are still running too hot for the Fed’s tastes. We shall see. Either way, compared to the 2.9M net jobs LOST during Trump’s 4 years – we’re in the Renaissance. Wages are up 5.7% this year vs 8.7% total in Trump’s 4 years but Corporate Profits were up 67.8% under Trump as the combination of not taxing them and giving them Trillions of Dollars seemed to do the trick…
You can see why Corporations are willing to funnel Billions of Dollars into Dark Money Super-Pacs to insure the GOP stays in power – they get Trillions back on the bargain.
And if Biden takes away the tax breaks from the Ultra-Wealthy and the even-wealthier Corporate Citizens, then he’ll be the bad guy – just like your parents are the bad guys when they tell you every day can’t be Halloween or Christmas and you are too young to grasp the reality of the situation.
We can’t keep running the economy without collecting taxes – that causes deficits and we’re already $32Tn in debt and the last 3-Year Note Auction went off at 4.5% on 11/15. 2-Year Notes were also 4.5% on 11/30 and we are currently paying $483.5 BILLION in interest on what is officially $31.3Tn in debt at the moment (but we have a $1Tn deficit too) but even $483.5Bn is ONLY a 1.5% interest rate. That means, in 3 years or less, we’ll be paying 4.5% on what is likely to be $35Tn in debt or $1.575 TRILLION in debt service alone.
That’s $1.1Tn more than in our current budget, which would then add to the deficit and, before you know it, we’re Japan, who are 266% of their GDP in debt (we are at 133%) at $10.7Tn, which is 1.25 QUADRILLION Yen! Japan, however, only spends $194Bn for debt service, which is 1.8%, at 4.5% it would be $481Bn – 10% of their GDP added to debt each year!
You can see on the chart that Debt Service in Japan is over 20% of the Government’s budget, another $287Bn per year (4.5%) will bring debt service to 49.6% of the Government’s budget so Japan, over the next 36 months, has to raise taxes by 30% or cut services by 37.5% and neither one bodes well for the country or its people.
We’re not far behind them but we’ll be seeing a preview of what will happen to us when it starts to happen to them, much like the great Japanese bust of 1991 was a preview of our own Dot Com Crash of 2000. Of course we’re all a lot more interconnected now – so it won’t take 9 years for the collapse of the Japanese Economy to affect us – 9 months would be a stretch these days…
8:30 Update: Speaking of economic disasters – Oh nooooooooooo!!!! Non-Farm Payrolls came in way hot at 263,000 jobs and last month’s jobs were revised up to 284,000 – you just can’t kill this economy! That means the Fed is much less likely to take their foot off the brakes any time soon. Look how wrong the Banksters were – no one was even close on wages:
In bad news for our Corporate Masters, Average Hourly Earnings blasted up 0.6% (7.2% pace), which was DOUBLE the 0.3% expected by our Leading Economorons AND last month was revised up from 0.4% to 0.5% – all very bad news for people who want more free money…
If the Banksters are this wrong about this very critical report, how does that then affect every other thing they are trying to predict for their clients and their own investing? I smell a rotten Q4 for GS, who were badly wrong along with MS, JPM and BCS – all of whom were drinking the same under 200,000/0.3% punch.
We at PSW, on the other hand, are positively THRILLED with the $5M hedge we have in our Short-Term Portfolio (STP) and all the CASH!!! we have on the sidelines from our recent Members’ Portfolio Reviews, where I said:
“…Since then we’ve blasted back to our mid-point at 4,000 and this is where we predicted the S&P would finish 2022 and, as you can see, the 200-day moving average is still declining and, catalyst-wise, I don’t see any reason we should be breaking higher unless the War ends or the Fed decides to pause – neither of which are likely until Q2 – so SHOULD we keep our money in the market when we KNOW this is the top of the range?
Well, we can never KNOW for sure but, valuation-wise, we’re fairly sure of where things should be and that’s why we were buying 4 weeks ago and that’s why we are selling now. If you are not going to sell when you make profits – when will you be selling?
So, with that in mind, we’ll take a close look at every position and we’re going to need very strong reasons NOT to cash them out here. If we’re going to stick with something, we should be ready, willing AND able to put more money into the position if the market drops 20%, which is pretty much what it did from our September to October reviews.
There are many positions we did put more money into but, if we’re not going to take that money off the table when it makes a big, quick profit – what on Earth was the point of adding the money in the first place?“
Whether 4,000 holds or not, it’s a hell of a lot more relaxing going into the weekend with lots of CASH!!! and lots of hedges. That doesn’t stop us from making money, of course. Our first trade idea in yesterday’s Live Member Chat Room was:
“As noted above, markets got a bit over-excited and now Oil (/CL) is touching $83 and that’s a good spot to short with tight stops above. The Dollar is likely to bounce off 105 and that alone will send /CL back to $82.50 or lower.”
As you can see, that worked out very nicely for our Members, who made $1,500 PER CONTRACT in just the one session and you are all very welcome!
Next week we can look forward to Factory Orders, ISM Services, Productivity (which has been awful), Consumer Credit (scary), PPI and Michigan Sentiment and we’ll have earnings from SIG, PLAY, TOL, CPB, THO, GME, MANU, AVGO, COST, DOCU, LULU, RH, MNTN and ORCL – so not too slouchy either.
Have a great weekend,
– Phil
Good Morning.
this must be the violent version of bounce off 105 dx
Good morning!
Not too much damage as the Recession story fades into the background off that report. More people making working making more money than before – where’s the Recession in that?
Phil/This chart about SPX and 4 year election cycles: In theory this chart makes me feel good, but I feel it’s way more complicated, how can these companies profit, and function at the same level with interest rates (cost of capital) 5x higher…. Over time, Yes-but I think it will take time at least a year or two to reset…. Am I missing something?
Oh it’s just a curiosity thing. Of course this is a fairly unique situation so why should we conform to the average cycle. To me, it’s kind of like those charts that say October is the worst month for the market or Fridays always end up – it’s good to note a tendency but certainly it’s nothing to base your investing on.
2018 was a down year all year, as was 2014. 2010 looked like the chart, 2006 was a good year….
Half the people are happy after an election and half the people think the country is going to Hell – so money moves around after an election. Not a hard leap of logic there.
Thank you! It’s like red hitting 15 times at the roulette table…. The next spin has to be black right? LOL
Oh, man, as a statistician it warms the cockles of my heart to see people understand probability and random processes.
ABNB is something I’d usually object to at $65Bn ($102), which is 36x but they have $7.6Bn net of debt so call it $57.4Bn over $1.8Bn in Income is 32x but they’ve doubled up in revenues and 2022 was their first profit so figure operations is $6.5Bn and then mostly profits means they can double up to $3Bn by adding no more than $5Bn in revenues (40%), which I think they’ll hit in 3 years.
BUT, they are getting into apartment renting and let’s say they rent 300,000 apartments for $1,000 per month – that’s $300M x 12 is $3.6Bn and let’s say they get 10% (same as a rental agent) and that’s $360M – very impactful (20%). They have 150M active users who booked 350M nights in 2021, which was up from 250M in 2020 so I think the potential for apartments that rent a month at a time can double their business if just 1% of their customers use them for it regularly.
And you know I love my Revenue/Employee number this year:
https://charts2.finviz.com/chart.ashx?t=abnb%20%20&ty=c&ta=1&p=d&s=l
Pretty good recovery overall.
Is that the same Citi that expected 225,000 jobs and 0.3% wage increases this morning? At least they’ll be able to buy cheap lumber (due to ultra-low demand for housing)
More irrational behavior.
So Android will put 109M phones in the hands of new subscribers while AAPL will only find 14M? Even if we pretended iOS wasn’t gaining ground (20% in 2018, 28% in Q3) and Android wasn’t losing it (75.5% to 71.1%) that would still imply that 123M new users would be split more like 83M/40 – not that any of those numbers seem right.
That’s bad for luxury goods.
But it won’t stop them from picking up a $40 thermos!
I gave a couple of holiday gifts this week to a secretary ( not mine ) and a receptionist. I could have purchased a cheap hardware store thermos but went for the Yeti instead. Their response was over the top saying ” I love Yeti.” and ” They always make the best stuff” So, it was money well spent, and the name recognition is up there with the best…. like Apple or even Louis Vuitton
To me, that’s a perfect gift – the kind of thing people want but wouldn’t buy for themselves – and it’s within the normal gift amount range.
Agreed and good job, stockbern.
Did anyone get the fill on the YETI yesterday at the price mentioned by Phil? Thanks.
I got a partial fill at 18 on the day Phil was looking to get 16.5. I would say it’s time The 18 did not hit on the day phill moved it to 18 and 12 on the short. that day I was looking to an 18.5 fill that never executed …. I think Phil needs to relook at this the targets he has are not reasonable
I think the stock Was at 44 when he was on the TD show. now at almost 47.. there may be a pull back but I’m not sure 18 will ever hit….
Well I’m not going to change targets daily. We’ll see if there’s a pullback and, if not, you can always re-target. The puts filled at $9, no problem and, as I said yesterday, I wouldn’t chase the calls up. The last big sale of short $50s was yesterday at 3:30 and it was $13.55 for 100 but those calls had been $14 for a more patient seller earlier.
The long $35s were $18 Wednesday morning and $19 in the afternoon but, even yesterday afternoon at $20.32, with $13.55 short calls the net is $6.67 – you are acting like it’s miles off. 15 x $6.67 is $10,005 less $9,000 for the puts is net $1,005 – not terrible but surely you can do a bit better by intelligently offering a lower bid for the long calls and a higher ask for the short calls?
There’s no reason the $35s should have such a high premium, the premium of the $50s should be relatively greater. I’d offer to sell the $50s for $14 and offer to buy the $35s for $20 and see how that goes with 2 or 3 contracts and then see about filling the rest.
I bought 2 yesterday for $6.40, but this afternoon, current net is $7.20-7.40. I’m only buying 1 more, so could average to $6.67 if it still makes sense.
As noted above, if you do 15 x $7 on the $35/50 spreads, that’s $10,500 and then if you sell the $40 puts for $9 (no longer $9 after another up day), that’s $1,500 and it’s a $22,500 spread – so not terrible. I’d rather sell 15 if the $35 puts for $6+ ($6.48 was last) than sell 10 of the $45 puts as the obligation would be $52,500 for 1,500 shares vs $45,000 for 1,000 shares – so there’s no sense in selling less of the higher puts and I have the same high level of confidence that $35 is a good floor.
But again, if you fill the bull call spread at $7 the best thing you can do is hope for a pullback and sell if you get one as THEN you can get $9 for the $35 puts and use some of that money to roll the $35s to the $30s.
If there’s no pullback over the next 2 years and you don’t sell puts at all, then you are cruising to $50 (we’re almost there now) and getting back $15 (114%) for each $7 spread – not terrible.
Phil – I’m not sure where you looking at on fills… I was about to call my broker cause I’ve had an open order for the 40 puts at 9 for 2 days now…. my order did not fill. I don’t see any orders filing today yesterday 5 orders filled – must have been early in the day.
The Bid/Ask on the $40s right now is $7.80/8.80 and the last sale was $9, yesterday. Of course if the stock keeps going up $1 per day, you won’t get a fill (see my note below).
On the on the ’25 putter I have 10X open order at 9 / sh….. no sure why its not showing up…. just moved it down to 8.7 and it popped up…. so k KNOW its open the market maker can choose not to show it but it is open.
Catalyst watch: Eyes on Lululemon, GameStop, Disney and Exxon Mobil
SPY -0.61%
Dec. 02, 2022 1:00 PM ET
Welcome to Seeking Alpha’s Catalyst Watch – a breakdown of some of next week’s actionable events that stand out. Check out Saturday morning’s regular Stocks to Watch article for a full list of events planned for the week or the Seeking Alpha earnings calendar for companies due to report.
Monday – December 5
Tuesday – December 6
Wednesday – December 7
Thursday – December 8
Friday – December 9
Earnings week ahead: Costco, Broadcom, Chewy and more
COST -1.68%
Dec. 02, 2022 12:23 PM ET
1 Comment
The first full week of December will see a relatively light earnings schedule. Still, a number of high-profile reports are due out, including financial figures from players in the software, semiconductor, e-commerce and retail sectors.
Toll Brothers (TOL), Campbell Soup (CPB), AutoZone (AZO), Costco (NASDAQ:COST), Lululemon (NASDAQ:LULU), Broadcom (NASDAQ:AVGO) and Chewy (NYSE:CHWY) are among the names set to report.
Below is a curated list of reports anticipated for the week of December 5 through 9:
Monday, December 5
GitLab Inc. (GTLB)
GitLab Inc. (GTLB) is due to post its third quarter earnings results after the market close on Monday. Shares of the San Francisco-based software company have plunged over 60% in the past year, nearing a 52-week low in early November. Both EPS and revenue expectations have been hiked a number of times ahead of the quarterly report, aided by an earnings beat in Q2 that sent shares surging to a double-digit gain. In other news, Tiger Global disclosed that it exited its position in the stock in November as well.
Also reporting: Science Applications International Corporation (SAIC)
Tuesday, December 6
Toll Brothers (TOL)
Homebuilder Toll Brothers (TOL) is set to post its third quarter earnings results after the market close on Tuesday. Housing demand has fallen sharply amid rising interest rates, falling 30% in Q3 according to real estate brokerage Redfin. Raymond James recently downgraded the name to Hold, citing worries of a housing recession due to a lack of affordability amid higher mortgage rates. Nonetheless, the consensus rating on the stock remains a Buy.
Also reporting: AutoZone (AZO), Casey’s General Stores (CASY), Signet Jewelers (SIG), Dave & Buster’s (PLAY) and Stitch Fix (SFIX)
Wednesday, December 7
Campbell Soup (CPB)
Campbell Soup (CPB) is due to report its third quarter earnings result prior to the bell on Wednesday. The stock has significantly outperformed the broader market in 2022, rising over 20% in contrast to a double-digit decline for the S&P. After the sharp rise, Wall Street sell-side analysts advocate a Hold rating on the name.
Also reporting: Ollie’s Bargain Outlet Holdings (OLLI), THOR Industries (THO), and Brown-Forman (BF.A) (BF.B)
Thursday, December 8
Broadcom (AVGO)
Broadcom will post its fiscal fourth quarter earnings results after the close on Thursday. Analysts have raised expectations on revenue and EPS numerous times in the 90 days ahead of earnings, per Seeking Alpha surveys. Shares of the California-based semiconductor company have surged nearly 20% in the month ahead of the earnings report. The consensus rating among sell-side analysts remains a Strong Buy.
Ahead of the report, the chipmaker’s merger with VMWare (VMW) is under scrutiny. The company requested European antitrust approval in mid-November.
Chewy Inc. (CHWY)
Chewy will report its fiscal third quarter earnings results in post-market hours on Thursday. According to Wells Fargo analysis, the pet-focused e-commerce company enjoyed robust Black Friday sales and is expected to continue strength into the year-end. By contrast, MoffettNathanson said that stock is “cheap for a reason” after declining about 35% in the past year. The company deepened its investment in insurance offerings during the third quarter, partnering with Lemonade (LMND).
Costco Wholesale Corporation (COST)
Costco (COST) will report its earnings results for the fiscal first quarter of 2023 after the market close on Thursday. The big box retailer’s stock fell sharply a week ahead of the earnings presentation, dragged down by monthly sales figures that missed estimates. Nonetheless, a 10% decline for the stock in 2022 remains shallower than the declines for the S&P. Analysts remain bullish on the name, with a Buy rating representing the consensus on Wall Street.
“We expect high food inflation to drive continued share gains for the warehouse club channel (including Costco) given the strong value proposition and price positioning on overlapping SKUs vs. mass and traditional grocery,” Bank of America analysts said in a note to clients ahead of the results.
Lululemon Athletica (LULU)
Lululemon (LULU) is due to post its fiscal third quarter earnings after the bell on Thursday. The apparel retailer has seen EPS and revenue expectations revised upward 24 and 22 times, respectively, ahead of the report.
Per Morgan Stanley, Lululemon’s (LULU) traffic was “a clear standout across the mall” on Black Friday with long lines apparent at locations visited by the bank’s analysts, even as it offered few discounts. Similarly, J.P. Morgan analyst Matthew Boss told clients he expects strong inventory management to buoy the retailer.
“In what we view as a tougher and more uncertain consumer environment, we want to point investors to quality,” Piper Sandler said ahead of the results. “We continue to believe LULU has best-in-class product innovation which should drive demand, and we do not believe LULU will have to react as much as peers to the more intense promotional environment.”
Also reporting: DocuSign (DOCU), Vail Resorts (MTN), and Ciena Corporation (CIEN)
Friday, December 9
Johnson Outdoors (JOUT)
Johnson Outdoors (JOUT) is due to report its fiscal fourth quarter results before the bell on Friday. The producer of equipment for fishing, camping, and other outdoor activities has seen its shares slide over 40% in 2022, more than doubling the decline for the S&P. Seeking Alpha’s Quant ratings shifted to a Sell opinion on the stock ahead of the results due to concerns on profitability, growth, and valuation.
This is typical – they just appeal and appeal until the other side is exhausted.
Shell gets Nigerian Supreme Court OK to appeal $1.8B judgment
SHEL -0.69%
Dec. 02, 2022 12:56 PM ET
Nigeria’s Supreme Court said Friday it would allow Shell’s (NYSE:SHEL) local subsidiary to appeal a judgment that directed the company to pay $1.8B in compensation over alleged pollution, in a legal dispute that has stymied Shell’s efforts to sell its onshore assets in the country.
The highest court allowed an application made by the Shell (SHEL) subsidiary and its joint venture partner, state-owned Nigerian National Petroleum Co., that challenges a 2020 ruling ordering the payment of 800B naira (~$1.8B) to Niger Delta residents over an alleged oil spill.
A Nigerian appeals court ruled earlier this year that Shell (SHEL) could not sell onshore and shallow water oil blocks it is trying to offload until its appeal against the compensation order is determined, and the company said in June it was pausing the divestment process pending the outcome of the Supreme Court case.
Boeing rises to 8-month high on report of 787 sales to United Airlines
BA +3.24%
Dec. 02, 2022 12:41 PM ET
4 Comments
Boeing (NYSE:BA) on Friday rose about 3% to an eight-month high after a news report said the airplane maker is about to receive an order for dozens of 787 Dreamliners from United Airlines (NASDAQ:UAL).
The carrier and Boeing (BA) may reach an agreement valued at billions of dollars as soon as this month, The Wall Street Journal reported, citing people familiar with the matter.
Boeing in August delivered its first 787 since May 2021, when it had halted output to fix manufacturing flaws. The 787, a hit product because of its fuel efficiency, makes long-haul flights more profitable for airlines.
The wide-body jet has a list price of about $300 million before discounts, the Journal reported, citing Boeing’s (BA) publicly available prices.
United (UAL), Boeing (BA) and rival planemaker Airbus (OTCPK:EADSF) declined to comment to the newspaper, which said deals for new aircraft can fall through.
Activision ticks higher amid positive `Call of Duty’ data points
Indexes green other than Nas.
Just looking back at last year’s Trade of the Year:
2021/11/22 at 11:28 am
2021/11/30 at 2:43 pm
I think, as an overall trade (with great spread dynamics), INTC is the winner but it’s really a two-year play due to their current investment cycle and profits will be off 1/3 this year so Q/Q comps will suck and traders are stupid so there’s still a chance they trade lower – even if undeserved.
IBM, I think, is going to show positive trends in 2022 so the catalyst is better earnings off a stupidly cheap floor. IBM hasn’t spend more than a few weeks below $110 since 2010 as that’s about their 11x line. Generally IBM is more like $120-140 and we can make a conservative spread there I can be very happy with.
In the MTP, we already have GOLD, SPWR and VIAC. I’d go with T if not for the split (too complicated) so MO and WBA I guess are the other runner-ups. WBA made $457M last year and MO made $4.5Bn (people gotta smoke) and let’s not forget their earnings were depressed due to that JUUL disaster ($12.8Bn down the drain) they stepped into. If pot is fully legalized, they will take over that industry too and they already own 45% of CRON, which they bought for $1.8Bn and they are down about 50% on that.
I guess WBA is not as safe as MO but they only just started doing vaccinations and that will be a huge business in 2022 and was our original reason for liking them long-term, as is their 10x valuation.
So I guess all 4 will be additions, just in varying degrees but IBM will end up being the Trade of the Year as it’s the safest bet with the best chance of success.
And we had the same issues with filling in the first week:
2021/11/30 at 4:10 pm
IBM/Batman – The new (final) one is the $100/115 with the $105 short puts. The other spread was the one I posted over the weekend – prices have changed.
T/Swamp – Just cash it out and go with a sensible 2024 like 20 of the 2024 $23 puts at $4.50 ($9,000) and 50 of the 2024 $20 ($4.15)/27 ($1.70) bull call spreads at net $2.45 ($12,250) and that’s net $3,250 on the $35,000 spread that’s $15,000 in the money. That should make your money back.
Barron’s/Pstas – Only 2 years behind our original pick but at leas they are catching up.
IBM/Pstas – Last on the $100 calls is $22.60 and last on the $115s is $14.40, which is net $8.20 but, since we’re bullish – the idea would be to offer $22 and see if those fill and then ask for $16 on the short calls, say 5 out of 50 and see which side fills first and then work on the other. You have to use your head when your execute these. Whoever jumped on the short $115s at 3:15 took way too little, the last sale before that was $16.15. On the $100s, at 3:05 they went for $22.25 but then someone paid $23.50 – if you can’t lean to be patient getting your fills, you are just throwing money out the window.
If I’m trying to fill 50 IBM long $100s at $22.33 and 50 short $115s at $16 then I’m going to offer less on the long calls and ask for more on the short calls 5 at a time and, whichever side fills first, then I work on getting a $6 spread for the other side. Of course, since I’m overall bullish on IBM, if I get 5 calls at $22 and don’t get 5 short calls at $16 but IBM goes lower – it’s just like any trade I want to DD on so I offer to buy 5 more at $21, which would give me a $21 avg and, if those fill before I get my $16 on the short calls, I will only need $15 on the 10 short calls to fill that part of the spread.
Since I’m bullish on IBM, I don’t mind being naked long 10 calls at what I consider a floor and I’d even buy 10 more at $19 to average $20 and then I’d only need $15 for the short calls or, at that point, I may want to roll lower since it’s dropped $3 since I came in so spending $2.50 more to move to 20 of the $95 calls at an average of $22.50 would make me very, very patient for IBM to pop or, if the $95 calls drop to $17.50, I’d add 20 more so my average on 40 $95s is $20 (currently about $25) and I’d be very pleased to hold those naked long for a very long time.
Etc – the point is, use your head and think about your actual goal on the trade – you don’t need to fill everything in one day. In fact, that’s almost never a good idea.
2021/11/30 at 4:14 pm
See, same thing every year…
Back in the red but not too much damage.
BABA – December is when the PCAOB is supposed to update on the audit …..