Testy Tuesday – 5 Fed Speeches, Retail Sales and Industrial Production


Will a tougher Fed give bank shares some respect? | EuromoneyIt’s a busy, busy day. 

Cleveland Fed President, Loretta Mester is kicking it off right now with a breakfast speech in Dublin (lunch over there).  She has generally been in favor of raising rates further and her speech is titled: “Returning to Price Stability: In It to Win It,” so it doesn’t seem like she’s changed her mind.  

It’s 8:30 now and the Retail Sales numbers are in and the March reading was -1%, which was TERRIBLE and up 0.5% is expected for April and it looks like a small miss at 0.4% and last month has been revised to -0.7% so I think that’s kind of good though kind of good means kind of bad since the Fed will see it as proof that they are still not slowing the economy enough.  Get it?   

Online sales are up 8% over last year, not a good trend for Main Street shopping but Food Services and Drinking were up 9.4% and that’s due to more disposable income as Gasoline Sales were down 6.9% for the month as energy prices took a dip.  Despite the 6.4% Inflation since last year, the total amount of Dollars spent in April was $680.5Bn (wow!) vs $686Bn last year so we’re down 1% in total spending. 

Once again, I fail to see why the S&P should be at new highs if they are still fighting over the same total amount of Revenue Dollars that they were last year, when the index was below 4,000.  AnyoneBueller

Now it’s 8:55 and the Atlanta Fed President, Raphael Bostic, has given a speech titled “The Fed’s Role in the Banking Industry” and he gave mixed signals yesterday saying both that he is inclined to pause further rate increases to assess the impact of tighter credit conditions on the economy but he also said that he is firmly in the camp that supports quarter-point interest rate hikes and that he prefers a cautious approach to monetary policy.

Industrial Production is up next (9:15) and it’s been on a downward slope, up just 0.4% in March and almost certainly down in April as Natural Gas (/NG) production slowed down as those prices bottomed.  Overall, the only gains in March Industrial Production came from Utilities, which were up 8.4% on heating demand as the West was snowed in.  Without that, the report would have been negative and that should reverse in the April readings.   

Ind Prod May 16 2023

When Production slips below Capacity Utilization it means we’ve got machines turned on but no one is using them.  That’s usually what precedes mass layoffs, plant closures, etc.  

9:15 – Well, good news, Industrial Production bounced back and is up 0.5% BUT that’s because March has been revised down from 0.4% (fake news!) to 0% so that rally was a sham and I’m not even sure we’ll get a rally off this because, again – it means the Fed is not slowing the economy enough.  Utilities were up another 0.5% and, once again, saved the report.  

I don’t know what Williams, Logan and Bostic (again) will say later but I asked Bard (my new friend) what he thought this meant for the Fed and he seems very hawkish:  

ßThe following are some of the implications of inflation for the Fed:

    • The Fed is under pressure to raise interest rates more aggressively in order to cool inflation.
    • The Fed may need to slow the pace of economic growth in order to bring inflation under control.
    • The Fed may need to raise interest rates to levels that are higher than what is considered to be neutral.
    • The Fed may need to keep interest rates high for an extended period of time in order to bring inflation under control.

The Fed is facing a difficult challenge in trying to bring inflation under control without triggering a recession. It is too early to say whether the Fed will be successful in this endeavor.

We will see how the day unfolds but we added our first new portfolio trade for our Income Portfolio yesterday, which was SOFI – as we thought the 10% sell-off was silly (see yesterday’s Top Trade Alert).  We’re still being cautious but finally there are some bargains we can’t pass up.  

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Good Morning.

Hi Phil,

Is there a follow-up of the $700-A-Month Portfolio planned?


Thanks! I guess I missed this post!

Warren or Shel-Bot are messing with you 😂

Don’t forget our last line of defense 🙂

Phil, could you please make a quick guide for me on the AI we are using. I’m asking for something like below I have lost track who everybody is, and kinda confused Thanks

Name ( Warren ) + emoji , name of the AI

lol I have too

I bailed on HBI–something is fishy there. On the sofi train. Sofi seems to be in a nice channel and 4.50 is low in the channel.

I took your advice

Happy Tuesday all! Was there a webinar last week? will it be posted to youtube soon?

What is the income portfolio goal?

Hmm. By saying he lacks introspective capacity, is Warren being introspective?


CVS… Is it too early for this trade?

-10 0/125 60 put 6.00
 20 01/25 60 call 13.90
-20 01/25 75 call 6.55
 Net spread $23,300.
 $8700. invested, higher than I would like. What are your thoughts and improved play, Phil?

Also…Re: penny stock HWO traded at over $6.00 a share pre-Covid with earnings in 2016 of 70 million with 48 million shares outstanding traded down to .97 recently and just announced beside the .06 cent divi it is paying a return of capital, no tax payable, of .80 per share leaving a net cost of .11 a share and you own near as I can calculate approx. $200 million of cash, receivables ($60 million) equipment, shares in another company and assets. This seems to be a ridiculous mispricing of assets. What am I missing?

Excellent! Thank you Phil. i’ll do a spread on WBA.

Good info on HWO. Paying shareholders a return of capital of .80 a share by September. Ramping back up at PNG after Covid. They sold the Canadian service and snubbing division. I think @ a buck a share after this years divi and the .80 payout in September many will have about have 14 cents a share in it. The payout reduces the risk dramatically.

Phil . BABA – This seems like a big deal…. not much news on it

Alibaba rises as much as 3.3% in US trading after the Chinese e-commerce firm’s annual report for fiscal 2022 cleared the Securities and Exchange Commission’s regulatory review.

  • A Hong Kong exchange filing shows the SEC completed its review April 12 after several interactions with the company. The SEC asked Alibaba to disclose its a Cayman Islands holding company with a variable interest entity (VIE) based in China, which “involves unique risks to investors”, the filing shows
  • The SEC has been demanding better disclosures among China-based issuers under VIE structures, with guidance updated in February

It seems I no longer get the top trade alerts. Any idea why Phil? What do I need to do.

BTC contracts where?

Phil, what does Shel-Bot think will happen to WLMT this Thursday? Earnings in line, but bad guidance, so stock will initially go down a bit but then will rally up?

Also, Sea has some geopolitical issues starting in 2022. Tencent pulled out its investment in 2022 with China-SEAsia issues, they are facing political issues with expanding into India, among others.