China “eased” their Covid policy.
That’s the narrative we’re hearing this morning but is it true? Not at all. China has eased RESTRICTIONS in two cities that were locked down – but that’s what they’ve been doing for 3 years: Cases spike, they lock down the area, cases ease off and they unlock it. That IS their policy – it’s not a change. China’s capricious moves are just another lever “THEY” use not to send Retail Investors scurrying in and out of stocks – pair them up with unsubstantiated AAPL rumors and we can get some serious manipulation going almost any day we like!
More contagious Covid variants have made maintaining China’s low tolerance approach to infections nearly impossible without devastating the country’s already-weak economy. The expense of near-continuous mass testing has also seriously strained the finances of local governments. Chinese stocks are still underperforming other major markets this year. The MSCI China’s value is only around half what it was in early 2021.
A full re-opening of China – if it goes smoothly, would take months to roll out – so Q1 is shot already. China is only just now starting a program to vaccinate their high-risk elders but, being China, that’s 173M people! That is only step one towards re-opening.
The propaganda needs to shift as well: A party-run newspaper in Beijing, for example, published interviews with recovered Covid patients who said their symptoms were mild and they had no long-term effects, a shift from previous media coverage highlighting the dangers of the virus. Yes there are protests, but they are scattered and small with blank papers – since they are not allowed to say anything against Government Policy (which is kind of clever).
In other totalitarian news: OPEC has kept their oil production levels unchanged but oil is up 2.5% this morning despite the fact that it had been rallying on BS rumors of OPEC production cuts. The excuse to manipulate Oil higher has now shifted to China’s re-opening (which is more BS) and the EU tightening sanctions against Russia – effectively banning seaborne Russian Oil unless it is sold for less than $60 – kind of a reverse-tariff.
Russian Crude currently trades at $50 and Putin has threatened to unilaterally cut production if the caps are enforced but first Brent Crude, now $87.50, would have to be back over $100 and that’s not very likely so it’s all a lot of hot air and is no reason for WTIC (/CL) to be at $82.50 this morning. Still, it’s a dangerous short (last week was obvious) and I’d be very careful playing it – with very tight stops above $82.50.
It’s a pretty boring week on the data front. We have PMI, Factory Orders and ISM Services this morning, Productivity Wednesday along with Consumer Credit, the Services Survey on Thursday and PPI and Consumer Sentiment Friday with NO Fed Speakers as they have to be quiet ahead of next Wednesday’s Policy Meeting (shhhhh!).
And there are still WAY more earnings reports than you would think still to come:
We love LoveSac (LOVE), so we’ll see how they are doing. GME is the proverbial meme and COST gives us a clue as to what Consumers are up to and HOV, RH, SIG, TOL, PLAY, MTN, THO, LULU, DOCU and AVGO are all stocks we like to watch.
Hello Group (MOMO) reports on Thursday and that’s a fun Chinese stock to play. Sales were over $2Bn pre-pandemic and profits were $285M and now they are down to 1.5Bn and $200M but you can buy the whole company for $1.1Bn at $5.75 and they have about $1Bn in the bank – so free company!
MOMO is a Chinese Social-Media company for Social Networking which works a lot like Tinder but more of a friends thing. They have 115M users on live streaming and another 27M on their dating app (Tantan).
They beat earnings and expectations in Q2 (Sept 1 report) and gave great guidance for Q3 but the CEO resigned for health reasons on Oct 28th but the stock has already recovered quite a bit.
They should do well if China does ease their Covid policies. It does seem Biden and China are working out the accounting issues to keep Chinese companies on the US exchanges. A nice way to play is with the 2024 $3 ($2.80)/5 ($1.80) bull call spread at net $1, which pays $2 (100% gain in 13 months) if MOMO simply stays above $5. So, if you have $1,000 now and you want to have $2,000 to start off 2024, then buying 10 of those spreads would do the trick if all goes well.
If not, the net Delta of the two is just 0.16, so MOMO would have to drop $1.50 for you to lose $250 – which makes it a good stop if the $5 line fails. Risk $250 to make $1,000 on an undervalued stock with almost it’s entire market cap in the bank? Sounds good to me!
Phil/Boil/UNG
/NG down nearly 7%. I don’t see news about why. Do you see an opportunity here?
I don’t think anything has changed enough not to expect it to bounce off $5.50 but we never get there so $5.75 is good too but tight stops, of course.
Big sell-off so better off letting it show us the bottom before jumping in but I don’t see it staying this low unless the war ends and Russia starts selling more /NG.
Good morning, from a rainy Altadena!
(everything okay, 1020?)
Nothing but blue skies here, snow…. 🙂
https://youtu.be/nyD6g47DHQk
Actually….
https://www.youtube.com/watch?v=sGZDwxnjG1g
The rain came down heavily on Altadena on this dreary Monday morning, the droplets pelting against the windows and the pavement. The sky was dark and gray, matching the mood of the people who were forced to venture outside in the wet weather.
As they trudged through the puddles and dodged the raindrops, the people of Altadena grumbled and complained about the miserable start to their week. The wet weather seemed to dampen their spirits and make everything just a little bit harder.
But despite the rain and the gloom, a few brave souls managed to find some joy in the midst of the storm. A young girl twirled in the rain, laughing as she splashed in the puddles. An old man smiled as he watched the raindrops dance on the leaves of the trees.
And as the rain continued to fall, the people of Altadena found that, even on a rainy Monday morning, there was still beauty and wonder to be found in the world.
Very uplifting for a computer. I find it’s often looking for beauty and strength but I guess it gets that from the underlying themes of the majority of literature it’s fed.
LOL! We usually dance in the streets when it rains here, but this is not completely inaccurate.
See the Blue Sky link below. I don’t think we’re too far away from AI simply writing, producing and directing TV content. Once the actors are digitized, it can just take a few seasons of existing scripts and endlessly extrapolate new shows. Probably it will be able to customize shows or movies based on your input – like the stories. Cool and scary…
It is a bit scary, but way too cool!
Someday, I’ll be able to write as well as you, Phil! 😉
Now I know how Maddie feels – she’s practiced art her whole life and now these computers just churn it out. Now they’re coming after my writing. Not sure what is going to be safe. I still have the edge on analysis but that’s because most people are terrible analysts so the computer is being fed inferior product but, one day – I’ll be screwed.
Good Morning.
Good morning!
Getting a bit of a sell-off today but all good if /ES 4,000 holds though 12,000 on /NQ has failed – so not all great… 1,850 is to watch on the RUT and who cares on the Dow but 34,000 is the line there.
Remember Europ Stoxx had to confirm at 4,000 and that never really held – except when they were closed.
The Dollar has been down due to improvements in HK Dollar and Yuan over re-opening rumors but it’s not real so we’ll bounce at least a bit.
114 to 104 is 10 points but that’s just what we can see. I’d call it 115 to 103.5, which is a nice 10% drop and then we’d look for 2.3 bounces to 105.8 and 108.1 but call it 106 (weak) and 108 (strong) which is what the bounce lines would be from the recent 10-point drop anyway.
I’ve been playing with OpenAI (https://chat.openai.com/chat) and it’s fun coming up with things for it to do. Here’s “A story about the US Dollar as a superhero fighting the Chinese Yuan as a super villain”:
The US Dollar, a mighty and powerful superhero, soared through the sky, ready to defend the American economy from all threats. With its unmatched strength and resilience, the Dollar was a force to be reckoned with.
Suddenly, the Dollar was confronted by its arch-nemesis, the Chinese Yuan. The Yuan, a devious and cunning super villain, had long sought to challenge the Dollar’s dominance in the global economy.
The two powerful currencies clashed, exchanging blows with all their might. The Dollar’s strength and determination proved to be no match for the Yuan’s cunning and guile.
But just when it seemed that the Yuan was about to triumph, the Dollar summoned all of its power and unleashed a mighty blow, sending the Yuan crashing to the ground.
It wrote that in 2 seconds – humans are doomed.
The origin of spider man written in the style of the bible
In the beginning, a great and powerful force, known as the spider, was created. It was a being of immense strength and agility, capable of spinning webs of incredible strength.
One day, the spider came upon a young man named Peter Parker, who was struggling to survive in a harsh and unforgiving world. The spider saw great potential in Peter, and chose to bestow upon him its powers.
With the spider’s powers, Peter was able to swing through the city with great speed and grace, using his webs to protect the innocent and fight against evil. He became known as Spider-Man, a hero for the people.
And the people rejoiced, for they had a champion to defend them from the darkness that threatened to engulf their world. And Spider-Man continued to fight for justice and righteousness, always striving to be a beacon of hope in the face of adversity.
There’s a ton of stuff that can make things more professional too but I can see the literal writing on the wall for human endeavor here – this is already better than 90% of the crap I had to sit through in creative writing classes…
This free version can’t do financial reviews but I see them out there all the time that are clearly written by bots but very soon it won’t be clear at all.
Is THO still in any of the portfolios? Or did it get cut?
From: https://www.philstockworld.com/2022/11/15/philstockworld-november-portfolio-review-4/
I told DallE to draw me worried about losing my job in the style of Lichtenstein. I don’t know why it screws up words so badly but this is crazy good for the early stages we’re at.
MoneyTalk – phenomenal appearance on MoneyTalk, Phil I thoroughly enjoyed watching all of that. And to see some of the live audience nodding their heads in agreement as you spoke was kind of cool.
Thanks. I had hours of Q&A after too as they arranged a dinner party but it was fun meeting all the rich Canadians. They had a Kobe Beef carving station so I was happy!
phil
it doesnt matter if some computer could provide the exact information you provide.
i would never trust the computer.
tom
You say that now and thanks but 20 years from now they’ll wonder why anyone would trust a human to give financial advice. My skills are looking forward at trends and, like any good Oracle – I see my fate written on the winds…
See what I mean:
I just wrote “Robot Stock Market Advisor” and it spat those out in 30 seconds.
Reminds me of those trader bot videos you made a few years ago. Those were a hoot!
Can you believe that tech is no longer available? It was so much fun!
I’ve never seen anything better but, for some reason, it shut down and was never picked back up.
Someone made a great analogy about AI this weekend (can’t remember who):
They said the danger of AI isn’t that it will actively seek to destroy humans but that it simply won’t care about the humans much the way we don’t care about a colony of ants when our intention is to build a highway. We simply bulldoze right over them and wipe out their civilization because it’s the most efficient way to build a highway and the ants don’t figure into the equation at all – even though we know they are there.
That’s also essentially the plot to the Hitchhiker’s Guide to the Galaxy in which the Vogons destroy the Earth to build a hyper-space bypass through our sector of the galaxy. It’s not even the plot of the book – it’s the incidental first thing that happens…
It’s a big deal to the ants – but just a day’s work for the Vogons.
That’s why Asimov’s 3 laws of robotics are:
In his stories, this is the base operation of a positronic brain but, in reality, no such laws exists in an Intel Chip or any other design to date yet here we are barreling forward and creating AI without morals…
Everything holding up so far.
Here’s our old PSW Wrap-Up Show:
https://www.youtube.com/watch?v=DCY4FXZqfHQ
I used to love making those!
-5 BA Jan 20 ’23 $150 Calls
+10 BA Jan 19 ’24 $130 Calls
-3 BA Jan 19 ’24 $200 Puts
-10 BA Jan 19 ’24 $225 Calls
Phil/BA Have the following positions. Would you roll the 130’s up, getting burned on the 150’s a bit. Please advise-and Thank you!
Any idea why TTE options are now NS?
NS?
ns – I think it non-standard?
Oh, OK. That’s because they paid out a special $1.036/share dividend that was not included in the options prices. Not a big deal, just a pain in the ass.
BA/Tully – Boy, somebody always wants to work!
Well the 2024 spread is $95 so $95,000 coming to you if things go well but you sold 50% short calls so deep in the money you negate the gains and that’s not so good.
All there is to do at the moment is play through. The Jan $150 calls are $38 ($19,000) and the June $185 calls are $24.50 ($12,250) so that’s the roll I would make and it will cost $6,750 but pushes them $35,000 out of the money – so worthwhile.
There’s not much sense in the 2024 $130 calls at $71.50 ($71,500) and you could roll them to 15 of the 2025 $160 calls at $63 ($94,500) and sell 5 of the 2025 $160 puts for $23 ($11,500) so the net of the whole thing would be $18,250 and you end up with 15 2025 $160 calls covering the 5 short June $185 calls ($12,500 spread) and the 10 2024 $225 calls ($65,000 spread) so the spread is now $77,500 but, of course, you will roll the Junes over time and now you don’t have that issue with margin or getting burned.
I’d just start with the $6,750 on the roll of the short calls and see how that goes, you can always move the spread around and you might get lucky and catch a pullback of BA.
Thank you! Greatly appreciated… What a move by BA- We knew they were cheap, but didn’t expect this parabolic move….
Our LTP position was more aggressive and we took it off the table. I was hoping for a pullback to get in again. 😠
What Recession?
Phil,
sorry to have to ask but I tried to find it myself but it’s taking forever to go back in your posts.
Why do you like SOFI ?
Is there a plan to get “search” to work ?
Thanks
I have no idea when they’ll get to search. They are still fixing billing!
As to SOFI, mainly it’s because they got their bank charter, which gives them a competitive advantage and also because they do a lot of student loans and people think “loan forgiveness” means the lender doesn’t get paid – which is nonsense.
When people sell stocks for stupid reasons – I like to buy them.
Phil… I am seeing SOFI getting involved with Crypto currencies.. but not finding all the details on how they deal with Cryptos. Taking that into consideration, I am wondering if this is safe? What are your thoughts?
They have a platform that lets you securely trade crypto – they collect fees, they don’t gamble with it.
Phil I am looking at a META play Jan25 110/135 or 140 10.20 or 11.85 and a Jan25 short 90 put @ 13.85 your comments TIA
Well, according to my friend, OpenAI:
According to Phil:
That’s a Top Trade!
Oops, META was our Top Trade Alert when they dropped on 10/27. Now who would have guessed that would work out? 😎
Keep in mind, as soon as we sell 15 of the short $160s, we’re in the clear on margin. At $16, we can roll 5 of them to 10 of the March $120s at $7 but I want to see if META has bounce in it before selling short-term calls that close to the current price.
As a new position for META, I’d go with:
Sell 10 META 2025 $100 puts for $24 ($24,000)
Buy 15 META 2025 $80 calls for $43 ($64,500)
Sell 10 META 2025 $130 calls for $23 ($23,000)
See, it was the same logic at the time – I went low rather than take a chance and now would be a great time to sell those short calls!
Phil,
For the Top Trade alert META play, would you sell the March 130s instead of the 120s mentioned above? How often might you roll them and how many months at a time?
It’s the same concept, it’s up to you. I’m not very bullish between now and March and my goal is to sell as much premium as possible. Of course if they get in the money, we simply roll them along to July whatevers and Sept whatevers and Jan whatevers…
The 2024 $195 calls are $7.50 so, when I look at selling the March $120s for $7, I’m thinking I don’t believe META will be over $195 a year from now – more than 66% over the current price.
As a rule of thumb, you want to roll around the time your short call is over 2/3 in the money (less than 1/3 premium remains). So, at the moment, if you had the short March $105s, which are $25 for net $130, that would be $8 of premium remaining out of $25 and the June $115s are $23.25 and the Sept $120s are $25 and the 2024 $130s are $25 so those are your current roll targets but you can just roll the loss, not the whole $25 to get to higher strikes or you could sell some 2024 $100 puts for $12 to offset and also roll to a higher strike.
Let’s say you sold half as many 2024 $100 puts for $12, that knocks your net on the short calls to $19 and the 2024 $145 calls are $19 so then you’ve rolled up from short March $105s to the short 2024 $145s with 1/2 as many short $100 puts.
That’s how you look ahead to manage your rolls.
Phil/TUP
I’m curious to get your thoughts on TUP at this $4.51 price point? I have 40 2024 $5/$10 spread and wondering if it’s a good time to sell some puts?
Open AI says:
Damn, that should be a commercial for them!
TUP has been around since the 40s and has THOUSANDS of patents. They are in 80 countries with most of the revenue coming from overseas, which has been hurting them with the strong Dollar. They were making $150M pre-covid, now $45M but at $4.48, you are buying the whole company for $207M, which is 5x earnings.
They do have $600M in debt though so take $30M off $45M in earnings and that looks kind of grim so it’s going to be up to management to get back over $100M in profits (less $30M would be $70M). They do have $1.2Bn in sales and have been squeezed on margin but a 10% increase in prices is not going to shock consumers but it would drop $120M to the bottom line.
The new CEO (April 2020) came in during a disaster but he’s the guy who turned Avon around and got them bought out. TUP has a lot of cookware brands he can sell off and the patents and it won’t take much cash to buy back all the shares and say FU to Wall Street for not believing.
So I like them as a value play and a potential turnaround but not for a 100% improvement in 12 months – that’s a bit of a stretch.
Your 2024 $5 calls are $1.50 ($6,000) and so are the 2025 $5/10 spreads so I’d roll the long calls to those and maybe go 20 more ($3,000) to keep a good cover on the short 2024 $10 calls at 0.65 but I’d roll half of them to the April $6s at about the same price – since they expire sooner.
The 2025 $5 puts last sold for $2.30 so yes to selling some of those but don’t go crazy – this company is very unloved – down 3% today for no reason.
Phil/TZA
I’m had 50 2024 $24/$50 BCS in TZA, would you consider closing half of the 50 shorts to take some cash off the table with the plan to sell more if it goes up?
Thanks Phil META
Depressing index action – aside from all the puts we have!
Again – who could have seen that coming? 😎
So the key is the net Security Value is $32,913 which means the positions are essentially worthless at the moment (nice CASH!!! pile though).
So call it, overall, $2.67M of protection against a 20% drop and another $1.8M at about a 30% drop for a total of $4.67M in protection.
Once the SQQQ Jan $70 short calls expire, we’ll look to make some more cash on the next dip and we can sell some DIA and TZA shorts too so lot’s and lots of money to be made on the dark side!