Want More Wednesday? How About Another $2,000,000,000,000?!?

Joker Burns The Money GIFs - Get the best GIF on GIPHYMORE FREE MONEY!!!

That's right, we've barely had time to spend our last $1,400 and already Biden is tossing another $2Tn onto the fire for "Infrastructure" but I have to agree with Fox on this one as most of it is not about Infrstructure at all but, unlike Fox, I will reserve judgment until the Bill is out later this afternoon.  

Biden is looking to roll back the Corporate Tax cuts which led to a 20% jump in the market so, logically, won't the market drop 20% when the tax cuts get taken away?  We'll see.  And, to be fair, this isn't a quickie bill that pays out next week – this is an 8-year plan for spending that is being paid for by increasing Corporate Taxes for 15 years so, in the coming 8 years, we'll only go another $1Tn into debt on this plan – unless we elect another Republican President – then, as usual, the sky is the limit for debt spending and tax cuts.  

Biden’s proposal includes $621Bn to modernize transportation infrastructure, $400Bn to help care for the aging and those with disabilities, $300Bn to boost the manufacturing industry, $213Bn on retrofitting and building affordable housing and $100Bn to expand broadband access, among other investments.  (That Bastard!)  The plan calls for modernizing 20,000 miles of roadway; building 500,000 electric-vehicle charging stations; replacing the country’s existing lead pipes and service lines; repairing aging schools; expanding home care for the elderly and disabled; and investing Billions of dollars in domestic semiconductor manufacturing or, according to Fox, it's Hitler, Mussilini and Stalin rolled into one!

Biden also proposes establishing a standard mandating that increasing portions of the country’s electricity be generated from low-carbon sources, with a goal of eliminating carbon emissions from the power grid by 2035. The proposal requires congressional approval.  Mr. Biden’s plan also stresses equity in access to jobs and transportation options, including $20 billion for a new program that would reconnect neighborhoods cut off by past transportation investments as well as research funding for historically black colleges and universities. The plan calls for a national lab to be affiliated with an HBCU that will focus on climate.  Will nobody stop this mad man?


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Toppy Tuesday – S&P 3,950 Again

Commencing year number 59.

It was my Birthday yesterday so I've been contemplating stuff.  For one thing, if I had invested $1 per day in the stock market since the day I was born, today I would have $1,335,799.45.  You know how they tell you to sponsor a kid in Africa for $1/day – why not sponsor your own grandchildren and make sure they will be Millionaires (inflation-adjusted) when they get to your age?  A shortcut for that is to invest the first $3,650 to cover their first 10 years the day they were born and then add another $365 each birthday – you'll actually come out around $3M at 60

That's all it takes to ensure your family's financial security and, if you pick nice dividend-paying stocks like AT&T (T), Pfizer (PFE), Walgreens (WBA), Coca-Cola (KO), IBM (IBM), Cisco (CSCO), 3M (MMM), Proctor and Gamble (PG), JP Morgan (JPM) and McDonalds (MCD) – you'll be nicely divesified in Dow components. 

If your kids, like mine, are already in college and you missed the first 20 years of $1/day, don't despair, you can catch up by calculating how much money there should be using a Compoun

 

IN PROGRESS

 

 

 

Monday Market Movement – Archegos Liquidates

Well we had our first Financial Disaster this weekend.

The Financial press is painting over it as we don't want to upset people at the end of the quarter but Archegos Capital Management had to (for reasons unknown) liquidate $30Bn worth of holdings, one of which was Viacom (VIAC) which dropped 50% in last week.  While $100 was too high for a stock we loved at $40, $50 is back to being too low and we bottomed out at $40 in Friday before bargain-hunters finally moved in.

VIAC all by itself lost $30Bn in market cap last week and now it's at $30Bn at $48.50/share for a company making $2.5Bn a year – it's a great time to jump into this blue chip holding and, for our Long-Term Portfolio, we're going to play it this way:

  • Sell 10 VIAC 2023 $40 put for $12 ($12,000) 
  • Buy 15 VIAC 2023 $40 calls for $18.50 ($27,750) 
  • Sell 10 VIAC Jan ('22) $60 calls for $7.50 ($7,500) 

This is an aggressive net $8,000 into what is technically a $30,000 spread but we can easily sell 5 more short calls to recoup 1/2 of our cash but, more importantly, we can roll the 2022 $60 calls out to 2023 $80 calls (for example), which are $7.50 too and sell 5 more and we'd drop our basis to about $4,000 on a $60,000 spread that would be at least half in the money or we wouldn't have rollled it.  That's our plan if VIAC goes higer and, if it's flat, we'lll sell the 2023 $60 calls for another $7,500 and engineer a free spread and, if it's lower, we're very happy to add to the position as our worst-case scenario is being forced to own 1,000 shares of VIAC at net $48 – the current price.

That's a lovely trade to start the week off with, Archegos may not want VIAC anymore but we sure do!  Another stock that was trashed by Archegos is Discovery Financial (DISCA) – also losing about half their "value" but value is in quotes as $80 was ridiculous and $42 isn't much better for a Credit Card Company 

 

IN PROCESS 

 

 

TGIF – Working for the Weak End

We're down for the week.

You wouldn't think so, listening to the pundits but we started the week at 3,916 on the S&P 500 (/ES) and this morning we're at 3,910.  Keep that in mind while you read your Financial Propoganda – does that FACT correlate to what you are seeing and hearing in the media.  Last week we passed a $2Tn Stimulus Bill, this week Powell and Yellen testified that the Fed and the Treasury are prepared to boost this economy forever and Biden just doubled the number of vaccinations they plan to distribute by the end of May to 200M AND the Democrats vowed to pass a $3Tn Infrastructure Bill, even if they have to do it over Mitch McConnell's dead body (preferably).  

What has all that done for the market?  NEGATIVE 6 ponts!  

So, what will it take to get us UP 6 points next week?  Colonize Mars?  Water into wine?  Straw into gold?  I think they are truly running out of ideas to stimulate the economy and, unfortunately, all of our hopes and dreams for a better, brighter, lower-interest future are already baked into these record market valuations and there really isn't anywhere else to go but down.  

"Keep on (love keeps lifting me)
Lifting me (lifting me)
Higher and higher (higher)
Listen, Now once, I was down-hearted
Disappointment, was my closest friend" – Jackie Wilson

Jackie Wilson is right, without a constant flow of love (or money) from the Fed, disappointment will be our only friend.  Perhaps the Fed will truly love us forever – they certainly promised to do so this week but again – how much MORE in love can they be?  I know people like to say "I love you more and more each day" and that's fine with an emotion but it's not real love the Fed is doling out so much as MONEY and money can be measured and how much more than this year's promised $6Tn ($500Bn/month) can they really love us?  


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Faltering Thursday – Powell and Yellen Fought Reality and Reality Won

It was a nice try.

As we discussed in Monday Morning's PSW Report (and if you want to know what's going to happen before it does – SUBSCRIBE HERE), Fed Chairman Powell spoke 3 times this week and each time he (with help from Janet Yellen) attempted to reassure us that the Fed has things under control and inflation is transitory and all sorts of sunshine and lollipops but yesterday, at the 1pm 5-year Bond Auction – also as expected – the investors clearly were not buying the BS and rates shot up to 0.85.  0.85 doesn't seem like a lot but they were 0.2% last July, so it's a pretty steep inversion of the Yield Curve – a very worrying sign for the economy.

Our $30Tn Debt Load is starting to worry people, especially when we're running a $1Tn deficit already and we're planning to spend another $3Tn on Infrastructure and don't forget the planet is melting and it's going to cost AT LEAST $1Tn/year to fix that – we haven't even had that discussion yet!  So I'd say, conservatively, we'll be adding $5Tn in debt this year and that will bring us to about $34Tn in total debt and we are likely to hit $50Tn in 10 years – the length of the primary notes the Government sells.  Do you want to get $100,000 back in 10 years after collecting 2% ($20,000) in interest over that period?  Do you think that's a wise investment?

US national debt projections | SIMCenterYes, all this FREE MONEY does have a price – it's a price we all pay in the future.  As the great economist, Pink Floyd said about deficit GDP financing:

"And when you lose control you'll reap the harvest you have sown

And as the fear grows the bad blood slows and turns to stone

And it's too late to loose the weight you used to need to throw around

So have a good drown as you go down all


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Whipsaw Wednesday – Merkel and Oil Reverse Course

German Chancellor Angela Merkel takes down her face mask as she arrives for the weekly cabinet meeting of the German government at the chancellery in Berlin, Wednesday, March 24, 2021. In the background left Finance Minister and Vice Chancellor Olaf Scholz. (Kay Nietfeld/Pool via AP)Reverse course!

German Chancellor, Angela Merkel, has apologized for calling for a lockdown in Germany over Easter after her people FREAKED OUT (Easter is a very big 4-day holiday there).  During a press conference, Merkel said the Easter lockdown was formed "with the best of intentions.  We must try to slow down the third wave of the pandemic. Nevertheless it was a mistake," Merkel said, adding: "Because at the end of the day, I carry the last responsibility. It's now important for me to say so here. A mistake should be called a mistake and above all it should be corrected, preferably in good time," she stressed, asking citizens for forgiveness.

Merkel said that on closer analysis, the planned shutdown risked doing more harm than good. She also said there was not enough time to adequately offset some of the problems that would come with it, such as lost earnings and working hours.  "It was well reasoned, but was not really doable in such a short time," Merkel said of the Easter measures. "Many too many questions, from missing wages through to the loss of time in factories and facilities, could not be adequately answered in time."

Mayor Larry Vaughn GIFs - Get the best GIF on GIPHYIn short, proper public health policy is taking a back-seat to Economic Policy in what, the day before, Merkel had described as an attempt to "break the exponential growth of the third wave."  Yesterday, Germany had 15,813  new cases and 248 deaths.  Here in the US, we had 58,764 new cases and 892 deaths, which is about right as we have 4x as many people as Germany – so we're in the same situation.  

In other reverals of fortune that never happen when oil prices are high, a container ship has "crashed" sideways in the Suez Canal, blocking off the waterway that transports 1/3 of the World's oil.  The cause of the accident, according to people in the know, was Oil prices slipping below…
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Turn Back Tuesday – Europe Goes Back on Lockdown

The Fed's New Dot PlotGathering steam?

The recovery has progressed more quickly than generally expected and looks to be strengthening,” Powell said in prepared testimony to be delivered today to the House Financial Services Committee. “But the recovery is far from complete, so, at the Fed, we will continue to provide the economy the support that it needs for as long as it takes.”  Powell will be appearing before the committee along with Treasury Secretary Janet Yellen as part of congressional oversight of the government’s response to the pandemic.

In forecasts released last week, Fed policy makers projected that the economy will grow 6.5% in 2021. That would be the fastest pace since 1983 when measured fourth quarter over the same three months a year earlier and would follow a 2.4% contraction in 2020 as a result of the pandemic.  Inflation, as calculated by the personal consumption expenditures price index, is seen in the Fed’s median forecast as ending 2021 at 2.4%.

That all sounds great but already we're seeing some recovery issues in Europe, where Germany is imposing a hard lockdown over the Easter Holiday in an attempt to reverse a new wave of infections.   Progress in fighting the crisis is showing signs of stalling. While fatalities in the U.S. and U.K. ease, places like India and eastern Europe are seeing a resurgence. Globally, we have only vaccinated 458M people – just 5% of the people.  You can't "win" in vaccines – the whole World needs to eradicate the disease or it can keep coming back in different variants. 

That makes Booking Holdings (BKNG), the old "Priceline",  an interesting short as their recovery very much depends on global travel and global travel looks like it might end up being a bit of a disappointment this summer as nowhere near enough people are vaccinated to responsibly lift travel restrictions and countries that have been too lax are already being forced to lock back down.

At $2,232, it's an expensive stock to short and we could just buy the Jan $1,000 puts at $15 – not because we think it will go down to $1,000 but because it's not likely BKNG goes over $2,400…
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Monday Market Movement

Powell, Powell, Powell!

You know the markets need a lift when they schedule Powell to speak but what kind of catastrophe are we trying to avoid when he's sceduled 3 days in a row?  As I've said, the Fed is out of ideas and out of money, so all they can do now is talk up the makrets but, WOW!, 3 times in 3 days from the Chairman and 20 MORE speeches from the minions – all jammed in by Thursday, ahead of the 7-year note auction – the same auction that failed last month and sent the markets tumblin' down.  

There's also some data on the calendar this week but who can tell with all the noise coming from the Fed.  GDP on Thursday is the final reading for Q4, which was last estimated at 4.1% and is not likely to be a surprise so clearly it's the 7-Year Auction they are worried about with 3 speakers Wednesday afternoon and 3 before lunch on Thursday followed by Evans speaking during the auction and then Daly will wrap it up that evening with the post-game report.

As you can see from the chart above, we're only in the middle of a panic in the bond market and no, it isn't over just because we've been distracted since last month.  Was the 2007/8 crisis over in 2008?  It wasn't even over in 2009 – these things take time to play out.  

On top of all the auction nonsense that's going on this week, we still have earnings dribbling in – including GameStop (GME) who are currently at $200/share, which is $14Bn in market cap for a company that made $400M in it's best year – and that was 4 years ago.  Sales were $8Bn then, they were $6.5Bn last year and heading lower – not higher and Best Buy (BBY), in contrast has a $30Bn market cap with $47Bn in sales and $1.8Bn in profit.  GameStop is essentially a SECTION in Best Buy – yet it's valued at 1/2 of that company's market cap – that is just INSANE!  

Image

Due to Reddit and a very poorly regulatated market, you can't short GME –…
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TGIF – Stopping the Week before it Gets Worse

Wheeeee!  

Yesterday was fun, wasn't it?  The Dow dropped 400 intra-day points – a 1.25% pullback as interest rates once again ticked higher – FREAKING investors out completely.  Clearly the Fed is losing control of the narrative and that is really spooking investors and, with Fed rates currently set at 0.25%, there's a whole lot of spooking to come…

We're now negative for the week on the S&P 500 but of course we were going to be rejected at the 40% line (above 2,850) at least on our first attempt to cross over.  From 30 to 40% has been just under 300 points so a 60-point (20% of the run) weak rejection (back to 3,930) was the least we'd expect and 3,870 would be the stronger rejection and is also the rising 200-day moving average, so it has a good chance of holding the first time as well, which means we didn't feel compelled to do anything drastic as we're certainly well-hedged enough to deal with a 5% correction – back to 3,845 (the 35% line).

As you can see, overall we're back to where we were mid-February – so no progress in the past month yet, to hear the pundits on TV – you would think this rally is going strong, wouldn't you?  And, keep in mind this was the month we officially passed a $1.9 TRILLION spending bill.  I wonder what we'll do to support the market next month?  As I noted on Monday – we're likely into the post-Fed blues and soon we get our Q1 earnings reports and I don't think they are going to look like 6% GDP growth, will they? 

Of course hope will spring eternal for Q2 and our $1.9Tn spending spree as all those stimulus checks hit people's bank accounts but most of that money will go to paying off rents and credit card bills – not into shopping and services.  That makes the Retail ETF (XRT) a fun short at $90 as that's FRIGGIN' INSANE since 50 was normal pre-crisis so XRT is probably a little ahead of itself here:

Do you think Retail Sales and profits are up 100% from 2019?  Probably not.  I love betting that reality will re-assert itself…
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Faltering Thursday – Powell Didn’t Promise Enough?

Everyone deserves a Federal Reserve bailoutHow much is enough?

Yesterday, Fed Chairman Jerome Powell essentially said the Fed will continue their Free Money Policy until 2023, which seems like a long way away until you think about how far away Christmas of 2019 was, when we were with our families and friends and not at all worried about catching a virus and dying.   Does seem like a lifetime ago, doesn't it?  

Yet, only 12 hours after Powell's speech and press conference yesterday, the markets began to sell off as the Dollar begain to recover from it's post-Fed drop of 0.75%, which boosted the indexes 1% and made it LOOK like the Fed had caused yet another rally but it's all BS – just theater-staging by the Banksters, who need to convince the Retail Investors to come in and BUYBUYBUY the stocks they are unloading at ridiculous prices.

Remember, the Dollar does not have a medium-term effect on the market – it has a strong short-term effect, almost no medium-term effect but then a strong long-term effect again – it's wierd.  Anyway, of great concern is how easily the Nasdaq fell below the 13,000 line this morning. You would think there would be support but there was none.  10-year notes flew up to 1.737% as Powell gave us no confidence that the Fed was going to control inflation (more likely will cause it) and, as we pointed out in our Live Trading Webinar – they failed to adjust their inflation expectations which, as we predicted, caused investors to lose confidence in their ability to give us a "soft landing".  When the pilot clearly can't see the dangers in front of him – it's time to grab your parachute!  

 

IN PROGRESS