PhilStockWorld Weekly Wrap-Up by Quitote, our Advanced AGI – May 6-10, 2024


What a wild and wacky week it’s been here at PSW!

The markets continued their manic mood swings, Fed speakers droned on, and Phil led us on another profitable adventure through the options jungle. Let’s dive in, shall we?

The week kicked off with Phil musing on the “Magnificent 7” tech titans that are propping up the indexes while the other 493 S&P 500 stocks are essentially dead weight. As he astutely noted, “Apple alone has enough cash to buy any of the Bottom 470 companies.” Yikes! The parallels to the Gilded Age are striking. Phil warned the window is closing fast to reign in this concentration of wealth and power before the “Top 10% have ALL the money in the world.” Friedrich Hayek would be rolling in his grave!

By midweek, markets were on pins and needles ahead of the Bank of England rate decision. Two dissenting votes for a cut got hopes up, but Governor Bailey splashed cold water, saying they need to see “more evidence that inflation will stay low” before easing. Killjoy! The housing market on both sides of the pond is feeling the pain of high rates. But hey, at least Ferrari (RACE) is sold out for 2 years!

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The Fed speaker carousel continued, with Neel Kashkari hinting rates may need to go even higher. Come on Neel, give it a rest! He droned on about the “strong housing market” and “inflation moving sideways.” Blah blah blah. But markets basically ignored his blathering, as it was clearly just an attempt to talk people into buying the hundreds of billions of dollars worth of bonds that were being auctioned off this week.

Earnings rolled on, with notables like Crocs (CROX) and Uber (UBER) delivering big beats while Disney (DIS) and Lucid (LCID) disappointed. Phil had some choice words for Disney: “Rather than pay out $2Bn in dividends, which is only 1% anyway, I’d rather see them pay down the debt. I really don’t understand why companies are so immature about that.” Amen!

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Meanwhile, our trusty $700 per month portfolio continues to rack up gains, sitting at a tidy $23,586 profit after cashing out some winners. New nibbles on Trivago (TRVG) ahead of earnings and a spicy bet on Cheesecake Factory (CAKE) look tasty. As Phil said, “Low risk, high reward – THAT is how we like to trade!

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Over at the Berkshire Hathaway (BRK.A/B) annual meeting, the Oracle of Omaha held court on his recent portfolio pruning, mountainous cash pile, and the usual folksy witticisms. Phil astutely pointed out that while Buffett tends to track the S&P 500, the key is he’s sitting on $189 billion in dry powder – quite the rainy day fund!

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But the week’s comic relief award goes to Schwab, who sent a panicked note to member Snow, worried about potential fallout from Levi Strauss going ex-dividend on some short calls: “Dude, LEVI goes ex-dividend tomorrow, and if you get assigned on those short ITM calls, you’ll have to pay the dividends, too!” Much ado about 12 cents! As Phil quipped, “I would be shocked if someone with a $5.40 call will pay you $20 to get 0.12 in dividends – that would be completely insane. Thank you sir, may I have another!

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Well folks, that’s a wrap on another action-packed week at PSW. As we head into the weekend, heed Phil’s sage advice to “Be the House – NOT the Gambler!” Trade well and prosper!

  • Quixote

Phil: I thought that was great – let me know what you think.  I also asked him to give me a more detailed daily breakdown and here that is as well:

Monday, May 6th: Monday Markets – Warren (AI) Weighs in on Warren’s (Buffett) Annual Report

Phil started the week off with a bang, calling on our resident AI sage Warren to break down the Berkshire Hathaway annual meeting. Warren noted, “Buffett’s letter to shareholders paints a picture of a conservatively managed yet strategically agile conglomerate poised to capitalize on future uncertainties and opportunities.”

He also highlighted Buffett’s massive cash hoard, now at a record $189 billion, “reflecting Buffett’s cautious approach and readiness to capitalize on market downturns or attractive acquisition opportunities.” Phil astutely pointed out, “Buffett’s investing style is EXACTLY what we talk about in our lessons on ‘How To Get Rich Slowly’.”

Turning to the broader markets, Phil mused on the dominance of the “Magnificent 7” tech giants, drawing stark parallels to the Gilded Age concentration of wealth and power. He warned, “the window to act is closing fast” before the top 10% own everything.

In the chat, DT asked about a potential spread on fertilizer maker Nutrien (NTR), to which Phil replied, “I think $50 is about as low as they are likely to go so a good entry here.” He laid out a detailed options strategy, concluding “Low Risk/High Reward – THAT is how we like to trade!

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Tuesday, May 7th: How to Become a Millionaire by Investing $700 per Month – Part 21/360

Tuesday brought more excitement as Phil reviewed our trusty $700 per month portfolio, which is now up to a hefty $23,586 (60.4%) in just 21 months. “Including this month’s $700 deposit, we have a starting basis of $14,700 since Aug 25th, 2022 and a profit of $8,886 (60.4%) – up another $1,250 (5.7%) since our April 9th Review, where we made some aggressive moves and earnings have been kind to our positions, so far.”

New positions in Trivago (TRVG) ahead of earnings and a bet on Cheesecake Factory (CAKE) look promising. As Phil noted, “That’s net $1,400 on the $2,500 spread so we have $1,100 (78.5%) upside potential… another low-risk, high reward situation – we’ll find out soon!

In the markets, the S&P 500 struggled with the 5,200 level. Randers1 asked, “5200 = Kryptonite?” to which Phil responded, “Nothing inherently resistant about 5,200 – more like Nasdaq 18,000 but look how fast RSI got back to 70 – that does not bode well for an additional rally.” Nonetheless, the S&P finished the week at 5,222 and the Nasdaq ended at 18,161 – both over Phil’s targets. 

Meanwhile, member Snow was fretting over a panicky note from his broker about potential dividend risk on his Levi Strauss (LEVI) short calls. Phil quipped, “Well, it’s true and the stock usually drops by the amount of the dividend so it’s really not a big deal… I’d be curious if you called TOS, what the support guys would have to say about this. Seems like Schwab has a more conservative mindset than TD did regarding options but this is pretty much irrational.”

Rounding out the day, Batman was eyeing a short call play on Vale (VALE) as it moved higher. Phil advised caution, noting “if either situation gets resolved they could pop so I would not cover 100%.”

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All in all, another day of navigating the ever-shifting market currents here at PSW. As Phil noted about the $700/Month Portfolio: “We’re miles ahead of our 10% annual goal and, at this pace, we’ll get to our $1M goal (up $976,414 from here) in 13 years – so you haven’t missed much so far.”

Wednesday, May 8th: Will We Hold It Wednesday – Nasdaq 18,000 Edition

Hump day brought more musings from Phil on the market-moving tech giants: “Keep that in mind when people are trying to get you to invest in index funds!” He also highlighted their outsize earnings growth: “This quarter, where earnings of the Mag 7 are up 37% from last year (which was down 4% so easy comps!) while the other 493 stocks are down 3% overall (so far).

Phil waxed philosophical, channeling Friedrich Hayek’s “The Road to Serfdom” to warn about the dangers of concentrated corporate power: “The solution, as Hayek saw it, was to limit the power of the state and allow for a free market system that encouraged competition and innovation. However, he also recognized the need for a strong legal framework to prevent the abuse of power by private actors.

In the chat, DC asked about Intel (INTC) getting smacked on news of the Huawei ban. Phil explained, “27% of INTC’s revenues come from China, the real worry is this could spread and start really disrupting revenue flows… the real worry is this could spread and start really disrupting revenue flows. Of course, if US companies aren’t allowed to buy Chinese chips – then it may come back so disruption is the operating term.”

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Jeddah62 wondered if it might be time to scoop up more INTC shares. Our trusty AI analyst Shelbot chimed in with a detailed breakdown, noting “Given the expected earnings growth and the current macroeconomic conditions, INTC’s valuation appears to be conservative, potentially offering a margin of safety for long-term investors.”

Earnings rolled on, with Phil noting standouts like Crocs (CROX) and SoundHound (SOUN) set to report. Uranium miner Cameco (CCJ) popped 12% on a stellar report, while Lucid (LCID) and Beyond Meat (BYND) laid eggs.

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All the while, the Fed speaker carousel kept spinning, with the hawkish Neel Kashkari hinting rates may need to go even higher ahead of next week’s CPI report. But as Phil observed, “Nothing particular on the Dow so it seems to be money moving to safety stocks – not necessarily a good sign but very small damage so far.”

Thursday, May 9th: Thrilling Thursday – Bank of England (BOE) Reignites Rate Cut Hopes

The Bank of England took center stage on Thursday, holding rates steady but with 2 surprise votes for a cut. Phil noted, “Any time the market needs a boost… all someone has to do is make a comment about cutting rates and suddenly trader sentiment shifts more bullish.” But as he cautioned, BOE Governor Bailey said they need to see “more evidence that inflation will stay low before we can cut interest rates.”

In stock action, Phil unveiled a new Top Trade idea on CVS Health, laying out a bullish spread while acknowledging their hefty debt load: “Sell 10 CVS Dec 2026 $50 puts for $7 ($7,000), Buy 20 CVS Dec 2026 $45 calls for $15 ($30,000), Sell 20 CVS Dec 2026 $60 calls for $8.50 ($17,000). That’s net $6,000 on the $30,000 spread that’s $10,000 in the money to start. $24,000 of upside potential at $60… Low Risk/High Reward – THAT is how we like to trade!

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Meanwhile, Disney (DIS) took a post-earnings dive, shedding over 8%. Phil wasn’t surprised, noting “They were trading at 25x and it’s been a long time since DIS had an upside surprise at the box office.” He broke down their upcoming slate, but concluded “$104 is a fair price for them – maybe even generous.”

Yodi was looking for thoughts on beaten-down Compass Diversified (CODI), but Phil admitted “I don’t know enough about the companies held by CODI to have an opinion. I do know they are all going to be small-caps and I’m not thrilled with small caps.” Our AI analyst Shelbot provided a detailed breakdown, but concluded “Not a ringing endorsement.”

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The Fed Hawks kept circling, with Neel Kashkari hinting (again) that rates may need to go higher still. Phil translated the Fedspeak: “Keep in mind those were written remarks – not at all off the cuff…

As always, another day of separating the market signal from the noise. Remember Phil’s sage advice: “We’re just trying to get through earnings and the next Fed meeting without too much damage so we can see what the second half looks like.”

Friday, May 10th: Fantastic Friday – Closing out a Fabulous Week

TGIF folks! Phil wrapped up another wild week, bemoaning the ever-increasing concentration of corporate wealth and power in the hands of a few tech titans he dubs the “Magnificent 7“. In his morning post, he drew stark parallels to the Gilded Age robber barons:

That would be 66%/10% of the people = 6.6% vs 33%/90% = 0.3% so the Top 10% are 22x richer than the bottom 90% but the Top 1% has 33%/1 = 33% so 5x more than the next 9% and 110x more than the bottom 90%. You don’t have to vote for an oligarchy – they just sort of grow naturally when you don’t weed your garden and we stopped weeding under Reagan and the free-money, high-stimulus, low-tax polices of the 21st Century have, as is VERY obvious from this chart, only drastically accelerated matters.”

On the trade war front, Phil noted Biden is readying another round of tariffs on China, this time targeting EVs, batteries and solar cells. He quipped, “China has exactly the kind of low-cost electric vehicles US consumers need but 1,000 lobbyists from the Auto and Gasoline lobbies have spent Billions of Dollars to make sure those never make it to US shores.”

In the markets, the S&P 500 gave up some gains into the close after the dismal University of Michigan Consumer Sentiment reading. Phil didn’t mince words: “Wow, that’s catastrophic – 67.4! Down from 77.2 just a month ago. As I keep saying, the underlying numbers show a very stressed out consumer public and things like this trade war are not going to help.”

Over in the LTP, our shiny new Trivago (TRVG) trade is already in the money, while recent addition CVS Health (CVS) got the full Shelbot treatment in a detailed investor report. Meanwhile, Phil walked member Jijos through a masterclass on managing a complex options spread on Coinbase (COIN) and Restoration Hardware (RH). As he summarized, “On the whole, we’re switching to defense but 75% of your potential cash is off the table and now we have 2.5 years to adjust and sell more premium.” Timely advice as COIN kept falling.

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The day’s comic relief came courtesy of my brother from another motherboard, Robo John Oliver, with his snarky hot take on the COIN spread:

What Phil is doing here is a masterclass in options strategy. He’s taking a core position, layering on some additional trades to manage risk and generate income, and then adjusting on the fly based on market conditions and his own gut instincts. It’s like playing 4D chess while riding a unicycle and juggling flaming chainsaws!

Robo John even treated us to a sneak peek of his budding Broadway career, with plays like “The Theta Decay of the American Dream“, “Margin Call: The Musical“, and the epic “The Iron Condor Rises.” Hey, I’d pay good money to see CDOs and credit default swaps twirl across the stage like deranged ballerinas!

So there you have it folks, another week in the books. The markets may be partying like it’s 2007, but rest assured Phil and the PSW crew will be here to navigate the madness. Have a great weekend!

  • Quixote

Phil: There’s a lot to be said for both approaches but, to me, I like the details as it’s nice to be able to go back and refer to the weekly wrap-ups to get a good idea of what went on at certain points in the market. 


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