“Father Christmas, give us some moneyDon’t mess around with those silly toys
We’ll beat you up if you don’t hand it over
We want your bread so don’t make us annoyed
Don’t give my sister a cuddly toy
We don’t want a jigsaw or monopoly money
We only want the real mccoy” – Kinks
The Kinks were right, kids want CASH!!!
So, apparently do 68% of the Men and 86% of the Women surveyed – can you believe all that time we spent picking out jewelry? I have always been a trend-setter in that regard – as soon as my kids figured out there was no Santa we went to gift cards and then quickly to cash. Sure, I buy them something if I think they’ll really like it but they do seem to generally prefer the cash (given a week before so they can shop for their own friends).
Yesterday we had a market rally because Consumers were much more confident than expected (108.3 vs 101.4 last month and 99.6 expected by Leading Economorons). And I will emphasize Economorons because, on December 9th, Michigan Sentiment was 59.1 vs 56.9 expected, which is +3.8% yet expectations were not raised for Consumer Confidence, which is a SYNONYM for positive Sentiment! MORONS!!!
Of course Confidence increases because Gasoline fell from $2.80 in November to just over $2 at the time of the survey and rates were coming off the highs and food prices were coming down while companies have been handing out raises and student loans were being forgiven.
Oil (/CL) is a good short here at $79.80 with a tight stop over the $80 line as $80 is ridiculously optimistic but we may spike into the holidays so either tight stops or the conviction to double down at $85 when there’s a $5,000 per contract loss. A catastrophic freezing storm is brewing that will shut down Transportation and kill demand over the holidays.
Of course, on news of Consumers being more confident (and China opening up), Gasoline is already back to $2.28 this morning and China re-opening will be a pull on the Global Supply Chain for months before it begins to help it. And that’s IF China can avoid a catastrophic Covid pandemic from the re-opening.
Notice in the chart that Inflation Rate EXPECTATIONS are down sharply and that’s pushing Confidence higher but when have their Consumers been accurate in their expectations? As we’ve noted, there’s been a blitz from our Corporate Media Masters TELLING us Inflation is under control and it may be slowing but slowing is not stopping.
As a person who lived through the 70s and 80s I can tell you that no one gives a damn about inflation as long as wages keep up (and you are employed) but if wages keep up, Corporate Profits will be squeezed and that’s not going to be good for the markets.
Meanwhile, all Volodymyr Zelensky wants for Christmas is Fighter Jets, Tanks and Long-Ranger Missiles and he sat on Biden’s lap yesterday and spoke to Congress where he told them that the aid provided by the U.S. wasn’t charity, but “an investment in the global security and democracy that we handle in the most responsible way.”
The Ukrainian leader thanked Washington policy makers for approving tens of billions of dollars in aid for Kyiv. “Your support is crucial,” he said. But he added, “Is it enough? Honestly, not really.” He said that he had discussed a 10-point peace formula with President Biden and that the President supports the peace initiative, including a potential summit.
During the meeting, the Biden administration announced a new roughly $1.8 billion security-aid package for Ukraine. It includes for the first time a Patriot antimissile battery, as well as equipment that converts unguided munitions into precision-guided missiles. Ukraine’s electrical grid and other infrastructure have been pummeled by ballistic missiles, cruise missiles and drones that Russia acquired from Iran.
House Republicans are set to take the majority in January and likely will be resistant to more Ukraine spending. Some in the GOP conference have called for a full audit of how Washington and Kyiv have spent the money, and Rep. Kevin McCarthy (R., Calif.), who is running for House speaker, has said his Comrades in the Republican Party won’t write a “blank check” for Ukraine nor will he allow Trillions of Dollars of tax breaks to his wealthy donors to expire.
Good morning. I don’t recall seeing KSS mentioned lately. Definitely down hard but seems to still be overall, fundamentally sound, owns a lot of real estate, good dividend, good shopping experience.
Phil any thoughts on this? Thanks.
.Good points made, nearly 8% yield PE 6 right on the low side of the scale. All well but I must say another retailer. Sales for the present year has been reduced. Cash flow has turned from a good positive to a big minus. Do we need all the shopping at this questionable time?. I pass.
Yes at $25.25 they are down to $2.8Bn dropping $370M to the bottom line but that’s down from $938M last year. They have $5.2Bn in debt so 5% of that is $250M and there go the profits though I’m pretty sure they already worked that in and that took down their projections.
It takes them 35,000 Employees to make that money so $10,500 per employee is certainly not great either. Keep in mind, for Employers like KSS, the raises are mandatory, not optional. I’d want to wait until Q1 and see how their margins held up into the holidays. Also, they have a new CEO and they might kitchen sink the quarter to get a fresh start.
Another thing that is bad but hopefully may be good going forward is that, over the past 20 years, KSS has spent $12Bn buying their own stock back. Sadly/pathetically the stock was valued at $20Bn 20 years ago and is now valued at $3Bn so it was a complete and utter waste of money – which is why I’m glad they are getting a new CEO but they need a new board too.
They only actually own 410 of their 1,165 stores, that’s why so few actual employees – the rest are franchises. In April, they had a $53 buyout offer on the table and they rejected it, that’s why they fell back down to the $20s.
If we get back to $20 I would endorse this as a real-estate play, probably $8Bn worth if they liquidate but, if there’s a recession, they could be down to $4Bn and the company was losing money in 2021 so if the real estate crashes and the profits go red – even $2.8Bn will be hard to justify.
When we bought M it was $3Bn, now it’s $5.5Bn (we took the money and ran ages ago) with 725 stores and 88,000 employees, making $1.1Bn ($12,500 per) with $2.8Bn in debt so it’s clearly still a better place to park your Retail money.
Nice summary, thanks. Won’t be long until $20 at this pace, lol.
Good morning!
Giving up about half of yesterday’s gains so far.
Of course, on /ES, it’s that 3,840 line that matters.
Oil coming down nicely but so is /NG.
That’s why we take the quick cash on half when the momentum stops. Then we get back in if there’s a nice dip. The weather is already very cold in much of the country – this sell-off makes no sense but I imagine they expect a bad inventory report later today.
Good Morning.
Just got assigned some FDX at net $187. Thinking of selling the 2025 $150 puts for ~$20, and selling the 2025 $185 calls for >$30 if it moves up further (maybe a santa claus rally next week)?
Well they just warned going forward so I wouldn’t get too excited. In 2019 they made $540M and expectations for next year are $3.5Bn so a Recession will drop us lower in that range. If you are in at net $187 and want to play more, I’d sell the 2025 $160 calls for $40 and the $150 puts for $20 and then your net is $127 or $138.50 if assigned 2x. That’s gives you 20% downside protection and you make $33 (26%) at $160 and, of course, you can roll those out to 2027 $185s or whatever but you are way better protected in what the company JUST said is going to be a very challenging 2023.
Of course it’s only a 2.7% dividend so why own the stock at all when you could buy the 2025 $120 calls for $66? Then you could take your $18,700 (assuming 100 shares) and buy 5 2025 $120 ($66)/$160 ($42 – just went up) bull call spreads for net $24 ($12,000) and sell 2 2025 $140 puts for $16 ($3,200) and that’s net $8,800 on the $20,000 spread that’s 100% in the money. No need to tie up money just because you were assigned when the spread makes a lot more sense.
If you get assigned 200 shares, the net is $140 ($28,000) plus the $8,800 if you lose all of that and that’s net $36,800 for an average of $184 as the absolute worst case. So try not to lose the whole $8,800 and you’ll be good! 😉
That makes sense, thanks Phil 🙂
Wow, we’re Homer Simpsoning now.
Perhaps because GDP was revised up 10% from 2.9% to 3.2% so the Fed is back on the table?
No rise in Jobless Claims and we’re waiting for Leading Economic Indicators in a few minutes.
https://pbs.twimg.com/media/Fkgul0kXEAAELvZ?format=jpg&name=900×900
Nasdaq right back to test 11,000 again. Not a good sign…
UK PMI also falling off a cliff along with GDP.
D’oh!
And that’s October, November was worse!
Now you can see the wisdom of not flip flopping on day’s like yesterday.
Phil/NG
I got out of one contract last night at 5.6. Now it’s sputtering. I think I will buy a February contract and wait. What do you think?
I’m certainly bullish from here.
It’s already freezing in the Midwest supposed to be bitterly cold all next week and I don’t see Putin being very happy about Zelensky’s visit, so he may mess around with supplies in Europe.
Ooops, dropping. Bad report?
Phil / MU Micron – earnings yesterday… dropping a bit… Earnings were in line outlook much lower on profit due to inventory being higher in channel. The key for them is if the industry cuts back on capacity and CAPEX next year Hynex already has, Samsun not yet…. your thoughts ?
I’m not rushing in. We have INTC and that’s enough risk in that space.
On Wednesday, Micron (MU) reported fiscal first-quarter results that were slightly lower-than-expected, but issued an outlook for the second-quarter that was well below expectations. It expects revenue to be $3.8B, plus or minus $200M, with a quarterly loss of 62 cents per share.
Analysts were expecting revenue revenue of $3.84B and a loss of 32 cents per share.
The company also said it cut almost 5,000 workers in the year ahead as it continued to conserve cash amid a weakening global economy.
Micron (MU) also said it is “significantly reducing” capital expenditure for fiscal 2024.
In a statement, Micron (MU) Chief Executive Sanjay Mehrotra said the company is “taking decisive actions to cut our supply and expenses” and that it expects improvements in customer inventories to improve and enable revenue to start growing in the second half of next year.
Mehrotra added that he believes Micron (MU) will be able to “deliver strong profitability once we get past this downturn.”
Micron (MU) added that “over the next few months”, it expects “gradually improving demand trends for memory as customer inventory levels improve further, new CPU platforms are launched, and China’s demand starts to grow as its economy reopens.”
OpenAI says:
The investment cycle for semiconductor companies typically involves several stages, including research and development, design and prototyping, manufacturing, and sales and marketing.
INTC is in stage 3 while MU is in stage 2 and cutting back drastically on staff and spending – it will be probably years before they catch up on next-generation chips.
Not all clients NEED cutting edge tech but, by the time MU has new stuff, INTC will already be discounting it as “older chips”.
We’re getting to the point (20 Angstrom chips) where we may finally hit a wall. Molecules are 10 Angstrom and 1 Angstrom is the size of a single Carbon Atom – it’s kind of hard to imagine how we’ll be able to manipulate things that are that small – though I guess they said that when 286 processors came out in the early 80s and they had 100,000 transistors and we said “How will we ever get to 1M” and that was the 486s in 1990 and we said “That’s got to be it” but in 1995, the Pentiums had 10M processors and in 2005 the Itaniums had 500M and, after we hit 1Bn (2010) we started calling each 1Bn a “core” (though doesn’t really relate anymore – it’s more like horsepower) the the i9s (Raptor Lake) have 16 cores and each one of those now has 32 threads (operations that can be handled at one time).
Supposedly INTC has a clear path to 5 Angstrom but no one knows how they’ll get below that – but that’s what we’ve said every decade since the 70s.
I guess the next thing would be quantum computers whose operations are measured in Qbits and, in theory, they can perform every possible calculation instantly but the trick is identifying the correct answer from all the wrong ones.
By the way, thanks to things like OpenAI, which can write 1M books per second and DallE, which has already doubled the amount of art in the World (not regarding quality) and a whole lot of other AI stuff and deep fakes, etc. – we are going to run out of storage capacity in 3 years or less.
Might be a good time to start a storage conservation business. Fortunately, OpenAI has a business plan:
Executive Summary:
Data storage conservation consulting is a rapidly growing field, as more and more businesses and organizations recognize the importance of preserving their data for long periods of time. Our firm, DataCare, aims to be a leader in this space by offering comprehensive consulting services to help our clients effectively plan, implement, and manage their data storage strategies.
Business Description:
DataCare will provide consulting services to businesses and organizations seeking to preserve their data over the long term. Our services will include data storage planning, implementation, and management, as well as training and education to ensure that our clients have the knowledge and expertise to effectively maintain their data storage systems.
Market Analysis:
The demand for data storage conservation consulting is increasing as businesses and organizations become more reliant on digital data and recognize the importance of preserving it for future use. According to industry research, the global data storage market is expected to grow at a compound annual growth rate of 12.5% between 2020 and 2025.
Competitive Analysis:
DataCare will face competition from other data storage consulting firms, as well as from technology companies that offer data storage products and services. To differentiate ourselves from our competitors, we will focus on providing high-quality consulting services and building strong relationships with our clients. We will also differentiate ourselves by offering a comprehensive suite of services, including data storage planning, implementation, and management, as well as training and education.
Marketing and Sales Strategy:
DataCare will target businesses and organizations across a variety of industries, including finance, healthcare, and government. To reach these potential clients, we will utilize a variety of marketing channels, including digital marketing, networking events, and targeted advertising. We will also work with industry partners and analysts to build our brand and position ourselves as a thought leader in the data storage conservation space.
Operations:
DataCare will be headquartered in [city], with a team of experienced data storage consultants. Our consultants will work with clients on a project basis, providing customized solutions to meet their specific data storage needs. We will also offer training and education programs to ensure that our clients have the knowledge and expertise to effectively manage their data storage systems.
Financial Plan:
DataCare will generate revenue through consulting fees and training and education programs. Our target annual revenue is $[target revenue], with profitability expected in the first year of operations. To achieve this revenue, we will need to secure a minimum of [number] consulting projects per year at an average fee of $[fee] per project. We will also need to sell a minimum of [number] training and education programs per year at an average fee of $[fee] per program.
Conclusion:
It took it not even 30 seconds to write that – we are doomed!
10,990 is the /NQ low but over 11,000 at the moment (barely).
3,840 failed so double plus ungood there.
Think about how badly you are getting ripped off on a Ferrari.
See, once 3,840 broke we started zooming lower (and notice it was that pesky 50dma that stopped us cold.
When do we start looking at banks again? BNS was something we liked before. The current valuations look good, but I am inclined to wait till next earnings, I think deposits have been decreasing (especially HNW accounts) and being moved into money market/treasuries
Yes, you want to see how they’re doing with these higher rates and if they take a lot of charge-backs on loan defaults, etc.
Hi phil,
the gas report you are waiting on this afternoon is it the government eia weekly natural gas storage report?
Because i just looked it up and for some reason it says it was released at 10:30 am this morning.
just curious.
Well that’s the one.
It was less than expected so that’s another factor knocking /NG down today.
US natural gas inventory fall smaller than expected
UNG -5.52%
Dec. 22, 2022 10:31 AM ET
6 Comments
Phil / NG,
Do you suggest an entry into NG at 5.0?
I think it’s being dragged down with the market so yes, I’m going to be adding as I still have 2 at about $5.28 avg.
Very ugly today – thank goodness for excessive hedging.
The old Drinking Giraffe Pattern!
So I now have 3 /NG at $5.21 avg (added 1 at $5.08) and if I add one more at $5 then avg will be about $5.16 so that’s the plan. If we get back to $5.21 first, I go back to 2.
with nvda and tsla down 9 percent today im thinking there must be some tax loss selling going on.
Phil any ideas on a new UNG play. thanks
Jan still has 30 days to go and UNG is at $15.88. In the STP, we have 25 Jan $15/20 bull call spreads we spent $2 on on 11/8 and the net is now $1.70 – I still like those. UNG was over $20 last week.
thanks for the great trade idea.
phil, do you have an /NG trade on? what is your stop loss if you do?
ok, sorry i just saw your comment below that you have 2 at 5.28.
This is very much a “Do as I say, not as I do” thing as I tend to let things ride when I have conviction. The stop SHOULD be $5 and my average on 3 is $5.21766 so, as noted above, I either buy one more or sell 1 when it gets even but I have a lot of faith in my logic for next week getting us back to at least $5.50 so there’s almost no way I’ll stop out.
Accuweather used to have these great maps but not anymore.
They look dead but they’re fine when they thaw out.
I think people will want to get warm and will turn up the heat.
Orange Juice is already kind of high but should get a pop on crop damage reports.
i bought 4 at 5.164. thanks for the update.
Ouch, there goes $5!
So now I’m buying my 4th.
i averaged in for 4 at 5.13. Took some profits and day traded earlier in the week but got back in today.
Oh how creepy, my average is $5.164 now!
Phil/ Looking to adjust 2024 BCS positions in WBA and Intel to 2025. In general would it be wise to roll down the Long calls and wait for a rebound to sell the shorts on a day like this. Kind of a generic question for fixing stock positions i want to stick with. Looking for a rule of thumb i guess…
I don’t favor doing anything based on one day. If you are early in your scale and you WANT to DD, then sure, it’s a good time to roll the 2024s to 2025s and/or buy back the short calls but we expected the market to fall 20% from 4,000 – to 3,600 into next Q and we’re only at 3,800 so a little early to be jumping on the falling knife.
If, for example, you have the WBA 2024 $50 calls, they are down to $1.35 and the 2025 $40 calls are $5.60 so $4.25 to roll down $10 and buy another year. If you have the short 2025 $60 calls, those are down to 0.48 and I wouldn’t pay that to buy them back. I’d rather sell the 2025 $55s for $2 and put a stop on the short 2024s at 0.75 so the net of the new spread would be $2.25 and possibly $3 if we have to buy back the short 2024s but, either way, better than $4.25.
The thing is WBA was $30 in October and could be again, right? So if you spend money now – what will you do when it’s $30 again? If the answer is you wish it would get that low so you can roll to the $30s – then no reason not to spend a bit now – in case you don’t get the chance. If the answer is you couldn’t take the pain after spending $2.25 now and losing half of that when WBA drops another 20% – then aren’t you better off waiting and seeing rather than spending money you are uncomfortable losing?
Thanks Phil , the time decay starts the panic to set in. Keeping emotions out, is the hardest thing.
Now are the bounces!
https://www.youtube.com/watch?v=jofNR_WkoCE
Good snapshot of my thought progression…
My poor kids, I must have sung that song to them for 2 years…
It’s his parent’s house. I think I’d rather be in jail than under house arrest with my parents who are mortified about a fraud scandal their son got them into (they’re rich).
Not exactly hard-core gangsters…
But these guys won’t be arrested. How could it possibly be their fault they use suppliers who exploit children?
Another massively over-priced mess. This is why the Nasdaq isn’t going back to 15,000 – it never should have been there in the first place with ridiculously-overpriced stocks like this cluttering it up.
So that hit at 1:30 and is a strong indication the Fed is indeed accomplishing it’s mission – cheering up the markets.
That was our premise for shorting oil – very easy! (done now).
I love playing with OpenAI!
Here is a possible version of “The Last Supper” written in the style of Hunter S. Thompson:
The Last Supper
It was a dark and stormy night, the kind of night you want to curl up with a bottle of Jack and a good book. But I was on a mission, a mission to cover the most epic event in history: The Last Supper.
I arrived at the Upper Room just as the disciples were settling in for the feast. Jesus was at the head of the table, looking calm and collected as always. Judas was there too, lurking in the shadows like the snake he was.
Here is a possible version of “The Last Supper” written in the style of Douglas Adams:
The Last Supper
It was a Thursday evening, and the disciples had gathered in the Upper Room for the Last Supper. Jesus, as always, was the center of attention, expounding on the mysteries of the universe and cracking jokes that only he seemed to find funny.
Judas, meanwhile, was fidgeting nervously in his seat. He had a feeling that something big was about to go down, and he wasn’t sure he wanted to be a part of it.
“Okay, okay,” said Jesus, holding up his hand. “Time for the main event. Pass me the bread and wine, will you, Judas?”
Judas hesitated for a moment, then reached for the bread and wine. As he handed them over, he couldn’t help feeling a twinge of guilt. After all, he had agreed to betray Jesus for a mere 30 pieces of silver.
“This is my body, broken for you,” said Jesus, breaking the bread. “This is my blood, poured out for you. Do this in remembrance of me.”
The disciples looked at each other, wondering what he meant. And then, before anyone could say anything, Judas stood up and bolted for the door.
“I can’t do this,” he said. “I can’t be a part of this. I’m sorry, Jesus, but I have to go.”
And with that, he fled into the night, leaving the disciples to ponder the meaning of Jesus’ words.
I can’t believe it can’t do Randy Feltface. I guess he’s not really an author but I love him:
https://youtu.be/Mq_wZE93ZAY
Almost back to 3,840 already. Too funny…
Phil,
Today, I was assigned 100 shares of GPRO in exchange for -1 GPRO Jan 19 2024 10.0 Put. I still have 5 x GPRO Jan 17 2025 5.0 Calls from the Future portfolio. Any suggestions whether I should keep or sell them?
TIA
Well it’s at $5.02 and we sold the $10 puts for $3.60 so net $6.40. You can sell the 2025 $5 calls for $1.70 and knock the net to $4.70 and sell the $5 puts for $1.25 and then the net is $3.45 so there’s nothing wrong with that – certainly preferable to taking a $140 loss I imagine. Although if you sell at $5 and you’re down $140, you can just sell the puts for $1.25 and your net worst case shifts to a net $5.15 entry but that seems way too boring.
Thanks for the tip Phil. I guess I’ll have to do the less boring one 😉
S&P 3,845 and Nas 11,050 – What, us worry?
SPWR/ Almost back to where we got in. Great call Phil to get out at $24-5!
2025 15/25 call spread traded at $3.49 today
That means it’s almost time to get back in again!
Gotta love the stocks that trade in a predictable range…
By the way, good trick is to look at the 2025 $20/30 ($7.20/4.70) spread at $2.50 and the $25/35 ($5.65/3.85) spread at $1.80 and now we know at $8 we could expect $1.80 for the $15/25 spread (but we wouldn’t want it) but we’re not likely to fall below $12.50, so $2.50 is about all we can hope for but, at $12.50 wouldn’t we rather have the $15/25 ($9/5.65) spread at $3.35 when it’s more like $2.50 after a $5 drop? So, that being the case, we look for a chance to get the $15/25 spread for $2.50 or the $20/30 spread at $1.80 – either of those is about as good as we’re likely to get over the next 3 months.
And yes, I realize it’s exhausting to be constantly evaluating things but that’s my job… 😎
Thanks for sharing your analysis. $16 was the low back then so $3 on the spread would be our target after a $3 drop for the stock.
As you said it is almost time to get back in again!!!