GDPhursday – Testing Nasdaq 12,000 Again


GDP Jan 26 2023Which way will things go?  

For 2022, so far, we have -1.6%, -0.6% and + 3.2% for the first 3 quarters and that’s +1% overall.  To have a Recession, we need two consecutive quarters of negative growth but there are other factors, so Q1 and Q2 did not qualify.  Any positive  number (and +2.8% is expected) means we won’t actually be in a declared Recession until Q4 – that is already further out than people were predicting just a month ago.  

Recent surveys of U.S. purchasing managers found that higher interest rates and persistent inflation weighed on demand in January in the manufacturing and service sectors. Parts of the economy also showed signs of cooling at the end of last year. Retail sales fell last month at the sharpest pace of 2022, existing-home sales fell for the 11th straight month, and hiring and wage growth eased.

The trajectory of the economy largely depends on how consumers fare in the coming months. There are signs consumers are starting to stumble. Shoppers have reined in spending on home electronics, furniture and clothing after stocking up on those goods earlier in the pandemic

Earnings 2 Jan 26 2023Energy Stocks and Financials have contributed outsized proportions to the GDP with Energy Profits alone over $500Bn.  That’s on roughly $4Tn in sales so about 16% of our entire GDP is Energy but, in 2021, that number was 8% so our entire GDP growth is due to higher Oil and Gas prices – that is NOT the sign of a healthy economy.

The Real GDP is adjusted for inflation but it’s an average adjustment and can’t account for a single major sector of the economy having that kind of impact but the numbers are very, very real so lower energy prices alone will plunge us into a technical Recession – even though that will actually be a good thing for the overall Economy.  

ImageFinancials can do well without doing you harm but not Health Care (which is ironic considering the Hippocratic Oath), because your health is an absolute that should always be as close to 100% as possible so a higher cost of maintaining it (same goes for food costs) does you no benefit as it drains your recourses.   Same goes for transportation costs – you NEED to get from Point A to Point B and doing it for more money does nothing to improve the necessary function.  

8:30 Update:   GDP came in just a bit better than expected, at 2.9% and that’s because the Deflator (which accounts for inflation) came down from 4.4% to 3.5%.  Durable goods was a huge upside surprise at 5.6% vs 2.5% expected but don’t get excited as, ex-transportation, it was down 0.1%.

This is not actually good news for the markets with the Fed looking to cool things down.  Despite all the headline news about layoffs, Initial Jobless Claims came in at 186,000, down from 190,000 in the previous report and the country still has 9.4M unfilled jobs – we are miles and miles away from bringing things into balance.  

Earnings are still all over the place – look at this morning’s resultsLast night, it was easier to talk about the misses (AZPM, BOOT, CACI, CALX, CATY, CNS, CCI, CVB, IBM, LVS, LC, SLG, URI, WOLF) and the guide-downs (TER, XM, PLX, LEVI, LRCX, FLEX, CLS, AXTA, AZPM) than the clean beats (AMP, AXS, CSX, ETD, HXL, LBRT, PKG, CASH, RJF, RLI, STX, NOW, TSLA).  That’s 23 to 13 on the negative side!  


You also have to pay attention to what the CEOs are saying on the Conference calls and, so far, the 2023 conversations have switched from Inflation to Recession – but we still have both and that is called STAGFLATION!   


Here’s a good chart.  As we discussed yesterday in our Live Member Chat Room,  the S&P 500 is currently trading at 22.37 x 2022 earnings and we SHOULD be trading at 16x, which would be 2,861 though we can allow for inflation and growth and hopefully closer to 3,200 at a normal multiple.  Well, here’s an illustration of what normal multiples do look like under various rate environments:


The Fed (rate decision next week) believes that, by knocking inflation back down, they will benefit the stock market to offset the pain they will cause with higher interest rates.  I say that’s BS because the data they rely on, which goes back to 1960, doesn’t account for the MASSIVE amount of Corporate Debt we have today – apples and oranges…

Infographic: Corporate Debt on the Rise | Statista

Non-Financial Corporate Debt in the US is $14Tn, which is 56% of our GDP.  In 2010 it was $6Tn so more than doubled in a decade, which renders the P/E to Inflation Chart relatively meaningless.  What’s even worse (how can it get worse?) is how Corporate Debt has STUPIDLY jumped into short-term maturities – to take full advantage of the recent low interest rates.  Had they been smart enough to lock down the rates, this would not be such a problem:


Unfortunately, Economorons are not generally flexible thinkers and, if they didn’t learn it in college, they are not likely to understand the underlying changes that invalidate their assumptions now.  Heck, I wouldn’t have even guessed 66%, I was closer to 33% in my assumptions – now I’m depressed…

So are the British, who are often the canaries in our coal mine:  

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Good Morning.

Phil – I am still confused on what you are suggesting the Fed should do (with the limitations placed on what they are allowed to do when the financial system is not at risk). Should they not increase interest rates?

In the absence of Immigration reform, we will have low jobless claims for quite a bit, IMO – and the Fed cannot fix immigration.

Given their only knob seems to be the fed funds rate, they cannot *not* increase it – from their perspective, messing up the debt burden of high debt companies (high funds rate and QT) and slowing them, resulting in more middle and upper middle class folks lose jobs, and miraculously hope that reduce inflation seems their only option.

TLDR – if you were Jerome Powell, what would you do?

phil where is your /cl stop?

Anyone no why PBR halted?


Phil/LABU- a while back I was assigned shares of LABU at $12 . I have been selling some covered short calls about 3month out every time the price jumps to around 8 or 9 and have got the ACB to $10. I understand there is a natural time decay on a 3X ETF like this one and therefore not the best for a long term position. Should I just sell my position or keep selling calls (maybe further out)? Would like your thoughts on what I should do with this stock.TIA

phil, i am confused. you posted an image of your trade that showed you went 2 contracts short on Tuesday or before at $80.6450. did you close that trade at some point and then go short again at $82.50?


Hi Phil,
Is there a way to take some profit out of the TSLA top trade or should I just try to be patient?


Anyone see the PFE employee, Jordan T Walker video ?

So Amazon offered $18/share for ONEM (awaiting Fed approval) but the stock price sits around $16. Does that mean big guns expect the sale to be denied?

ONEM there are 11,000 Jan24 $15 puts still in open interest. If you want to wait it out, those puts can probably still be sold for about $1.20 or so

I have to wonder why they are still available?

Phil – at what price would you be interested in KMB (Kimberly-Clark)? Would the 110-130 or 110-140 BCS with short 2025 puts and shorter term calls be a good candidate for the butterfly portfolio? Seems a long term 20-25% range.

INTC misses again. Hopefully when the cycle changes they will do well. Another couple of years I guess of missing till they hit the numbers.

Phil- Great calls on TSLA and META. Analysis was spot on. Looking at the different membership levels to stay on the site. Appreciate your work.