Madness!
This how we’re starting the year with the S&P 500 up almost 100 points from Friday’s low at 6 am but already (7:30) half of it has been given back as the Dollar pops 1% and poops the party – especially for Oil (/CL), which has fallen from $81.50 back to $79.30 (2.7%) already.
Even Natural Gas (/NG) has nose-dived back to $4 and our plan was to buy more longs at $4 with tight stops below. Mild weather in Europe and a lot of incoming LNG have caused traders to unwind their heavy positions but, long-term, I do expect to see $4.50 again.
“German Chancellor Olaf Scholz said the energy crisis triggered by Vladimir Putin’s invasion of Ukraine was a “tough test” for the continent’s biggest economy and urged citizens to continue saving energy in the months ahead. Germany’s gas storage levels rose to 90% over the past week, compared with a five-year average of 73% for this time of year, according to Gas Infrastructure Europe.
“New LNG import terminals “are making our country and Europe independent of Russian gas for the long term,” Scholz said in his New Year’s address to the nation.”
Having fallen from $7 to $4 (42%) during December, we can expect an 0.60 bounce to $4.60 (weak) in the very least. A stronger bounce would take us to $5.20, where the rally off of $5 was rejected just last week.
This is another example of prices causing demand destruction as habits quickly changed and now Europe has several new LNG terminals so they are far less dependent on Russian Natural Gas and that won’t stop after the war ends – he has permanently destroyed a reliable source of income for Russia.
Speaking of reliable, the US is still averaging 60,000 cases of Covid per day and “only” 317 deaths per day so there has not been a resurgence of the virus over the holidays and that’s great news – as it was one of the big wild-cards into the start of the year.
Now we’re waiting for Retail Data from last Quarter along with Earnings Reports for Q4, which begin in earnest on Friday, the 13th (as if that isn’t ominous) with half a dozen Big Banks reporting that morning. We already know the IBanks cut back on bonuses last year so it’s not that likely the earnings will be great.
This week we’re hearing from Walgreens (WBA) on Thursday, along with BBBY, STZ and SCHN – a nice mix of sectors to pay attention to.
We have Fed Minutes this week on Wednesday and then we have 5 Fed speeches on Thursday and Friday along with Non-Farm Payrolls capping an otherwise fairly dull data week.
Nothing really matters this week (I really should have taken that cruise!) as people tend to be slow to get back to work and, don’t forget, Chinese New Year (Rabbit) starts on the 22nd and they party for 16 days – talk about a super-spreader event!
So we’ll see how that goes and we’ll see how earnings go and THEN we’ll be ready to place our bets for 2023 but I don’t have any half-assed predictions to make just because we’re starting a new year – I like to have enough information to be at least 3/4-assed before picking targets but, on the whole, I don’t see 2023 finishing in a much different range than the one we already have.
If you wanted to go long on Tesla (TSLA), you will have another chance today as they stock is back at $118 (down 4%) because deliveries were not up 50% from last year, but only up 40% with all the supply chain issues and Covid issues the company faced. So of course the stock is down 70% from it’s highs last November, right?
In fact, TSLA may only make $4.6 per $118 share (25x) vs $4.84 expected (24x) so it’s understandable that traders are panicking out of the stock. What if they only grow 30% next year? Then they’ll be making $6 per $118 share (20x). See how idiotic traders are? They simply don’t understand math, or physics, or how companies grow and make money…
See 2020 over there on the left of the chart? That was the first year TSLA made money and they made $690M. In 2021 they made $5.5Bn and the stock flew up to $400 but in 2022 they made $13.7Bn and the stock is now back to where it was when they made $690M and last week, for the first time in many years, I called a Top Trade Alert on TSLA.
My theory is, at this point, Musk can’t screw up any worse without the board removing him. If anything, this Twitter idiocy has proven TSLA can run just fine without him.
In other news to start our year:
- The Final “Tale Of The Tape”: The 13 Most Striking Market Facts Of 2022
- Investors Brace for More Market Tumult as Rates Keep Rising
- Retailers are bracing for tougher times and more frugal customers in 2023
- IMF Chief Georgieva Warns of ‘Tough Year’ for World Economy.
- China’s Economy Ends Year in Slump as Covid Infections Surge
- China Health Official Raises Covid Alarm Ahead of Lunar New Year Holiday
- Five Things to Watch in Asia Stocks After $5 Trillion Wipeout.
- Brazil Markets Sink as Traders Mull Lula’s Plan to Beef Up State.
- Singapore’s Economy Beats 2022 Forecast With Year-End Boost.
- Oil Steadies as Demand Concerns Dominate at Start of the Year.
- US Faces Another Inflation Spike, Michael Burry Warns
- US Inflation: How Much Have Prices Increased In 2022?
- Companies Offer Big Raises to Retain Workers
- These states will raise their minimum wages. Chart shows where workers can expect higher pay
- Huge Death Toll After US-Supplied Himars Leveled Russian Barracks In Donetsk, Possibly Hundreds Killed
Let’s be careful out there!
Good morning!
What inflation?
Did you buy more longs of /ng? Or are you waiting until it actually goes down to 4?
I got 2 more at $4.02 so may avg is $4.26 on 4 now (down $8,000).
Anything close to $4.20 and I will be THRILLED to get 2 off the table.
My logic is, when I buy 2 more at $4.02, as long as I keep a very tight stop on the 2 new ones – there’s little harm in going for it at the next support line.
The articles above on Minimum Wage Increases (with good links) and Wage Increases along with the above chart is why I don’t see much market improvement in 2023.
Workers who stay put in their jobs are getting their heftiest pay raises in decades, a factor putting pressure on inflation.
You KNOW 5.5% doesn’t cut it so they HAVE to have another 5.5% or more this year. West Coast Minimum Wages are now $15/hr and that will spread to the rest of the country eventually (DC is $16!) and that will keep pressure on Corporate Profits until they first capitulate and then raise prices to achieve a balance – and that could take years, not quarters…
Terrible thing to watch last night in the football game. Apparently Hamlin had a heart attack after being hit and stopped breathing – I think it’s still critical.
It was funny how they talked about the “class” of the NFL for not continuing the game – before going to loud commercial breaks that were entirely inappropriate. Even after the game was called, DIS (ESPN, ABC) kept the announcers on, saying the same thing over and over again for almost 2 hours, so they could run all the commercials they had sold for the game – yet no one is calling them out for that.
And the sponsors can’t ask for their money back or they’ll look like dicks too.
One nice thing, and I pray he wakes up to hear about it, is Hamlin had a GoFundMe holiday toy drive going that was trying to raise $250,000 and now it’s over $3M. The NFL should make it $5M and DIS should make it $10M…
No real updates on his condition.
I absolutely was calling them out on it immediately. If I had paid for an ad I would be furious they played it after he went down. I want to get noticed while people are having fun at a game, but I don’t want to profit off the high ratings when someone has a tragedy!!!
Good Morning.
Happy New Year!
And Happy New Year to all!
Wow, what a dip at the open.
It’s going to be a fun year.
And we are back to good old 3,840.
Phil – I just got assigned a bunch of AGNC, and now hold 2,000 shares for a net of 13.85. After dividends, this drops to $12.52. I could sell 20 of the 2025 $10 straddle for ~$3.7, to drop the net further down to $8.82. dividends over 2 years would be another $2.88, so if I get assigned in Jan 2025, my average would be 4,000 shares at $7.97. But this assumes no dividend cuts, which would drop the stock by 20-30% and increase my net price. What would you suggest? I also own NLY and TWO (about the same amounts) – so perhaps I should try to get out at even (by selling shorter term options) and only hold NLY and TWO as the MREITs?
I think stick with the strategy that drops you to $8.82 with the stock at $10.45 and, if no dividends and the stock does drop to $8ish – then you have to re-evaluate but, if they hold the dividends, should be right back on track. If you think you have too many REITs – of course cut back but AGNC is trading at 5x earnings and I have not seen any indication they intend to cut dividends, nor have they warned on earnings.
As it stands now, they are paying over 1% per month in dividends. Even if they cut that in half – it’s still 7.5% per year. The only time you won’t want that is when you can buy a 10-year note at 7.5%.
Sounds good. Thanks!
This stuff is such a distraction as we emit 35,000 Million Tons per year and the “world’s largest” capture project will be 3.3MT – this is how the Energy Industry attempts to distract people from the actual problem and it gives their propagandists and paid political mouthpieces a lot of BS to point to to justify their planet-killing positions.
Nasdaq, S&P, and Dow slide to start the 2023 trading year
SP500 -0.13%
Jan. 03, 2023 10:00 AM ET
14 Comments
The major market averages opened up Tuesday’s session to the topside but have since moved to the downside with rates lower to start a new year of trading.
Early on and the Nasdaq Composite (COMP.IND) lost 0.1%, while the S&P 500 (SP500) gave up 0.2% and the Dow (DJI) was lower by 0.3%.
The 10-year Treasury yield (US10Y) fell 10 basis points to 3.73% and the 2-year yield (US2Y) fell 4 basis points to 4.36%.
Oil was down, while the greenback moved higher.
Commodities “were among the few assets that ended (2022) in positive territory,” Deutsche Bank said. “But elsewhere, the picture was far less rosy, and just 9 of the 38 non-currency assets in our sample made gains over 2022 as a whole, whilst in USD terms it was just 6 out of 38.”
The economic calendar is light today before gearing up with a jobs numbers, starting with JOLTS on Wednesday and culminating with nonfarm payrolls on Friday.
The S&P/Markit PMI for December came in in-line with the consensus at 46.2 but lower when compared to November’s read of 47.7
PMI Manufacturing Index falls at steeper rate in December
Jan. 03, 2023 9:46 AM ET
2 Comments
4 stocks to watch on Tuesday: Tesla, Mattel and more
TSLA -9.98%
Jan. 03, 2023 8:27 AM ET
1 Comment
The futures pointed to a higher open at the start of Tuesday’s trading, as Wall Street kicks off 2023 after a three-day holiday weekend. Here are some stocks to watch for Tuesday:
Sadly, I think the whole climate change debate is a distraction. I imagine this may not be very popular here, but I don’t know why environmental groups don’t lobby for legislation to standardize packaging and packaging sizes to be recyclable/compostable and require business to pay for the disposal of the products they sell instead of mostly government and individuals given the responsibility to recycle/compost and pay for it and garbage, too.
The problem is lobbying doesn’t really work anymore. It’s just a money equation and big corporations are willing to put up a lot more money than individual people, even when the individuals greatly outnumber the corporations.
it’s not about you signing your name on a petition anymore as nobody really cares what the people think, it’s about what the donors think.
You have industries that make hundreds of billions of dollars per year destroying the environment and petroleum production with the leading sector of the S&P last year. Those companies spend billions of dollars buying the GOP and even buying Democrats like Manchin.
They pack the courts and play the long game with legislation from the top to the bottom of the government. This is why, it’s Jefferson said, you need a Revolution every once in a while to clean house – elections just don’t cut it.
phil, do you have any thoughts on CS? too hot to handle, or value stock? or better expressed with BCS or DB?
i thought i should say I am aware the bank is a mess, with a long history of screw ups.
We have to wait for earnings to see what’s happening with these guys. Hard to say if CS has really turned things around. BCS is probably the best of that bunch.
Phil// Any news on Apple? It is down $5+ today. Any suggestion for a new trade? Thanks.
There are a lot of rumors that they have cut production, etc. but that is typical with Apple because they do not react to rumors or issue statements so they are always ripe for attacks by people who want to bring the stock down between reports.
• 52 things I learned in 2022: This year I worked on fascinating projects in energy, media and health* at Magnetic, and learned many learnings. (Medium) see also The 100 greatest innovations of 2022: The 35th annual Best of What’s New awards: Every year since 1988, Popular Science has highlighted the innovations that make living on Earth even a tiny bit better. And this year—our 35th—has been remarkable, thanks to the successful deployment of the JWST, which earned our highest honor as the Innovation of the Year. But it’s just one item out of the 100 stellar technological accomplishments our editors have selected to recognize. (Popular Science)
• 22 Things That Made the World a Better Place in 2022: From spinal implants that allow paralyzed people to walk to smashing an asteroid off course with a rocket, this wasn’t just a year of negative headlines. (Wired)
• We’re in the second biggest home price correction of the post-WWII era—here’s the latest data: For 124 consecutive months, spanning the bottom of the previous bust in February 2012 to the top of the Pandemic Housing Boom in June 2022, the seasonally adjusted Case-Shiller National Home Price Index reported positive home price growth. Now we’re in a new streak: Four consecutive months of U.S. home price declines. (Fortune)
• What Would It Take to Turn More Offices Into Housing? Vast amounts of empty real estate are a crisis for building owners. But some politicians and business leaders hope they can be converted into something new — and transform downtown neighborhoods. (New York Times)
• All The Ways That Crypto Broke in 2022: Fast forward a year, and the primary topics of conversation among even the most devout of the crypto faithful were more likely to be about Sam Bankman-Fried, the disgraced crypto co-founder of the fallen FTX empire, or whether they’d ever retrieve the coins trapped on bankrupt exchanges and lending platforms after a series of big digital-asset collapses. (Bloomberg)
The Mysterious Bah Humbug Toward Christmas Shopping: No matter how you measure it, US holiday spending has fallen since the 1990s. Are we burned out on giving gifts? (Bloomberg)
• The Superiority Illusion: where everyone is above average: Much as we all like to think we’re modest, most of us really aren’t. We might try to be humble and say “we’re just some guy, you know?”, but most often, we actually think we’re better than average. Maybe we think we’re smarter, or better looking, or nicer, or maybe even all of the above. And it turns out that thinking we’re above average (even though, statistically, only half of us CAN be above average) is actually good for us. (Scientific American)
Hi Phil,
What do you think of BX at these levels? Will they have a huge liquidity event going forward?
Thanks
Generally I like them but, as with everything else, I would much rather see earnings before deciding who the back and what is already looking like a very iffy year.
Could today be a day to buy back short call if the market looks like it’s going to continue going down or would it be too risky?
Are there other strategies for down days or do I just need more hedges from the portfolios, but which would you recommend?
It depends how your balance is. I don’t see how we can really make any kind of decision based on a single day of very low volume movement. If you think you’re too bullish, then sure, do something to balance out.
As I have said for the last month, we have $5 million worth of hedges and we do not have $5 million worth of Longs, we are pretty well balanced in the short run and I don’t see any reason to mess around with it until we get a better sense of which way things are going to go.