China markets rally: Analysts warn of margin trading among

China margin trading balance passes 2 trillion rmb

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The dollar standard and how the Fed itself created the perfect setup for a stock market crash

Disclaimer: This is neither financial nor trading advice and everyone should trade based on their own risk tolerance. Please leverage yourself accordingly. When you're done, ask yourself: "Am I jacked to the tits?". If the answer is "yes", you're good to go.
We're probably experiencing the wildest markets in our lifetime. After doing some research and listening to opinions by several people, I wanted to share my own view on what happened in the market and what could happen in the future. There's no guarantee that the future plays out as I describe it or otherwise I'd become very rich.
If you just want tickers and strikes...I don't know if this is going to help you. But anyways, scroll way down to the end. My current position is TLT 171c 8/21, opened on Friday 7/31 when TLT was at 170.50.
This is a post trying to describe what it means that we've entered the "dollar standard" decades ago after leaving the gold standard. Furthermore I'll try to explain how the "dollar standard" is the biggest reason behind the 2008 and 2020 financial crisis, stock market crashes and how the Coronavirus pandemic was probably the best catalyst for the global dollar system to blow up.

Tackling the Dollar problem

Throughout the month of July we've seen the "death of the Dollar". At least that's what WSB thinks. It's easy to think that especially since it gets reiterated in most media outlets. I will take the contrarian view. This is a short-term "downturn" in the Dollar and very soon the Dollar will rise a lot against the Euro - supported by the Federal Reserve itself.US dollar Index (DXY)If you zoom out to the 3Y chart you'll see what everyone is being hysterical about. The dollar is dying! It was that low in 2018! This is the end! The Fed has done too much money printing! Zimbabwe and Weimar are coming to the US.
There is more to it though. The DXY is dominated by two currency rates and the most important one by far is EURUSD.EURUSD makes up 57.6% of the DXY
And we've seen EURUSD rise from 1.14 to 1.18 since July 21st, 2020. Why that date? On that date the European Commission (basically the "government" of the EU) announced that there was an agreement for the historical rescue package for the EU. That showed the markets that the EU seems to be strong and resilient, it seemed to be united (we're not really united, trust me as an European) and therefore there are more chances in the EU, the Euro and more chances taking risks in the EU.Meanwhile the US continued to struggle with the Coronavirus and some states like California went back to restricting public life. The US economy looked weaker and therefore the Euro rose a lot against the USD.
From a technical point of view the DXY failed to break the 97.5 resistance in June three times - DXY bulls became exhausted and sellers gained control resulting in a pretty big selloff in the DXY.

Why the DXY is pretty useless

Considering that EURUSD is the dominant force in the DXY I have to say it's pretty useless as a measurement of the US dollar. Why? Well, the economy is a global economy. Global trade is not dominated by trade between the EU and the USA. There are a lot of big exporting nations besides Germany, many of them in Asia. We know about China, Japan, South Korea etc. Depending on the business sector there are a lot of big exporters in so-called "emerging markets". For example, Brazil and India are two of the biggest exporters of beef.
Now, what does that mean? It means that we need to look at the US dollar from a broader perspective. Thankfully, the Fed itself provides a more accurate Dollar index. It's called the "Trade Weighted U.S. Dollar Index: Broad, Goods and Services".
When you look at that index you will see that it didn't really collapse like the DXY. In fact, it still is as high as it was on March 10, 2020! You know, only two weeks before the stock market bottomed out. How can that be explained?

Global trade, emerging markets and global dollar shortage

Emerging markets are found in countries which have been shifting away from their traditional way of living towards being an industrial nation. Of course, Americans and most of the Europeans don't know how life was 300 years ago.China already completed that transition. Countries like Brazil and India are on its way. The MSCI Emerging Market Index lists 26 countries. Even South Korea is included.
However there is a big problem for Emerging Markets: the Coronavirus and US Imports.The good thing about import and export data is that you can't fake it. Those numbers speak the truth. You can see that imports into the US haven't recovered to pre-Corona levels yet. It will be interesting to see the July data coming out on August 5th.Also you can look at exports from Emerging Market economies. Let's take South Korean exports YoY. You can see that South Korean exports are still heavily depressed compared to a year ago. Global trade hasn't really recovered.For July the data still has to be updated that's why you see a "0.0%" change right now.Less US imports mean less US dollars going into foreign countries including Emerging Markets.Those currency pairs are pretty unimpressed by the rising Euro. Let's look at a few examples. Use the 1Y chart to see what I mean.
Indian Rupee to USDBrazilian Real to USDSouth Korean Won to USD
What do you see if you look at the 1Y chart of those currency pairs? There's no recovery to pre-COVID levels. And this is pretty bad for the global financial system. Why? According to the Bank of International Settlements there is $12.6 trillion of dollar-denominated debt outside of the United States. Now the Coronavirus comes into play where economies around the world are struggling to go back to their previous levels while the currencies of Emerging Markets continue to be WEAK against the US dollar.
This is very bad. We've already seen the IMF receiving requests for emergency loans from 80 countries on March 23th. What are we going to see? We know Argentina has defaulted on their debt more than once and make jokes about it. But what happens if we see 5 Argentinas? 10? 20? Even 80?
Add to that that global travel is still depressed, especially for US citizens going anywhere. US citizens traveling to other countries is also a situation in which the precious US dollars would enter Emerging Market economies. But it's not happening right now and it won't happen unless we actually get a miracle treatment or the virus simply disappears.
This is where the treasury market comes into play. But before that, let's quickly look at what QE (rising Fed balance sheet) does to the USD.
Take a look at the Trade-Weighted US dollar Index. Look at it at max timeframe - you'll see what happened in 2008. The dollar went up (shocker).Now let's look at the Fed balance sheet at max timeframe. You will see: as soon as the Fed starts the QE engine, the USD goes UP, not down! September 2008 (Fed first buys MBS), March 2009, March 2020. Is it just a coincidence? No, as I'll explain below. They're correlated and probably even in causation.Oh and in all of those scenarios the stock market crashed...compared to February 2020, the Fed balance sheet grew by ONE TRILLION until March 25th, but the stock market had just finished crashing...can you please prove to me that QE makes stock prices go up? I think I've just proven the opposite correlation.

Bonds, bills, Gold and "inflation"

People laugh at bond bulls or at people buying bonds due to the dropping yields. "Haha you're stupid you're buying an asset which matures in 10 years and yields 5.3% STONKS go up way more!".Let me stop you right there.
Why do you buy stocks? Will you hold those stocks until you die so that you regain your initial investment through dividends? No. You buy them because you expect them to go up based on fundamental analysis, news like earnings or other things. Then you sell them when you see your price target reached. The assets appreciated.Why do you buy options? You don't want to hold them until expiration unless they're -90% (what happens most of the time in WSB). You wait until the underlying asset does what you expect it does and then you sell the options to collect the premium. Again, the assets appreciated.
It's the exact same thing with treasury securities. The people who've been buying bonds for the past years or even decades didn't want to wait until they mature. Those people want to sell the bonds as they appreciate. Bond prices have an inverse relationship with their yields which is logical when you think about it. Someone who desperately wants and needs the bonds for various reasons will accept to pay a higher price (supply and demand, ya know) and therefore accept a lower yield.
By the way, both JP Morgan and Goldmans Sachs posted an unexpected profit this quarter, why? They made a killing trading bonds.
US treasury securities are the most liquid asset in the world and they're also the safest asset you can hold. After all, if the US default on their debt you know that the world is doomed. So if US treasuries become worthless anything else has already become worthless.
Now why is there so much demand for the safest and most liquid asset in the world? That demand isn't new but it's caused by the situation the global economy is in. Trade and travel are down and probably won't recover anytime soon, emerging markets are struggling both with the virus and their dollar-denominated debt and central banks around the world struggle to find solutions for the problems in the financial markets.
How do we now that the markets aren't trusting central banks? Well, bonds tell us that and actually Gold tells us the same!
TLT chartGold spot price chart
TLT is an ETF which reflects the price of US treasuries with 20 or more years left until maturity. Basically the inverse of the 30 year treasury yield.
As you can see from the 5Y chart bonds haven't been doing much from 2016 to mid-2019. Then the repo crisis of September 2019took place and TLT actually rallied in August 2019 before the repo crisis finally occurred!So the bond market signaled that something is wrong in the financial markets and that "something" manifested itself in the repo crisis.
After the repo market crisis ended (the Fed didn't really do much to help it, before you ask), bonds again were quiet for three months and started rallying in January (!) while most of the world was sitting on their asses and downplaying the Coronavirus threat.
But wait, how does Gold come into play? The Gold chart basically follows the same pattern as the TLT chart. Doing basically nothing from 2016 to mid-2019. From June until August Gold rose a staggering 200 dollars and then again stayed flat until December 2019. After that, Gold had another rally until March when it finally collapsed.
Many people think rising Gold prices are a sign of inflation. But where is the inflation? We saw PCE price indices on Friday July 31st and they're at roughly 1%. We've seen CPIs from European countries and the EU itself. France and the EU (July 31st) as a whole had a very slight uptick in CPI while Germany (July 30th), Italy (July 31st) and Spain (July 30th) saw deflationary prints.There is no inflation, nowhere in the world. I'm sorry to burst that bubble.
Yet, Gold prices still go up even when the Dollar rallies through the DXY (sadly I have to measure it that way now since the trade-weighted index isn't updated daily) and we know that there is no inflation from a monetary perspective. In fact, Fed chairman JPow, apparently the final boss for all bears, said on Wednesday July 29th that the Coronavirus pandemic is a deflationary disinflationary event. Someone correct me there, thank you. But deflationary forces are still in place even if JPow wouldn't admit it.
To conclude this rather long section: Both bonds and Gold are indicators for an upcoming financial crisis. Bond prices should fall and yields should go up to signal an economic recovery. But the opposite is happening. in that regard heavily rising Gold prices are a very bad signal for the future. Both bonds and Gold are screaming: "The central banks haven't solved the problems".
By the way, Gold is also a very liquid asset if you want quick cash, that's why we saw it sell off in March because people needed dollars thanks to repo problems and margin calls.When the deflationary shock happens and another liquidity event occurs there will be another big price drop in precious metals and that's the dip which you could use to load up on metals by the way.

Dismantling the money printer

But the Fed! The M2 money stock is SHOOTING THROUGH THE ROOF! The printers are real!By the way, velocity of M2 was updated on July 30th and saw another sharp decline. If you take a closer look at the M2 stock you see three parts absolutely skyrocketing: savings, demand deposits and institutional money funds. Inflationary? No.
So, the printers aren't real. I'm sorry.Quantitative easing (QE) is the biggest part of the Fed's operations to help the economy get back on its feet. What is QE?Upon doing QE the Fed "purchases" treasury and mortgage-backed securities from the commercial banks. The Fed forces the commercial banks to hand over those securities and in return the commercial banks reserve additional bank reserves at an account in the Federal Reserve.
This may sound very confusing to everyone so let's make it simple by an analogy.I want to borrow a camera from you, I need it for my road trip. You agree but only if I give you some kind of security - for example 100 bucks as collateral.You keep the 100 bucks safe in your house and wait for me to return safely. You just wait and wait. You can't do anything else in this situation. Maybe my road trip takes a year. Maybe I come back earlier. But as long as I have your camera, the 100 bucks need to stay with you.
In this analogy, I am the Fed. You = commercial banks. Camera = treasuries/MBS. 100 bucks = additional bank reserves held at the Fed.

Revisiting 2008 briefly: the true money printers

The true money printers are the commercial banks, not the central banks. The commercial banks give out loans and demand interest payments. Through those interest payments they create money out of thin air! At the end they'll have more money than before giving out the loan.
That additional money can be used to give out more loans, buy more treasury/MBS Securities or gain more money through investing and trading.
Before the global financial crisis commercial banks were really loose with their policy. You know, the whole "Big Short" story, housing bubble, NINJA loans and so on. The reckless handling of money by the commercial banks led to actual money printing and inflation, until the music suddenly stopped. Bear Stearns went tits up. Lehman went tits up.
The banks learned from those years and completely changed, forever. They became very strict with their lending resulting in the Fed and the ECB not being able to raise their rates. By keeping the Fed funds rate low the Federal Reserve wants to encourage commercial banks to give out loans to stimulate the economy. But commercial banks are not playing along. They even accept negative rates in Europe rather than taking risks in the actual economy.
The GFC of 2008 completely changed the financial landscape and the central banks have struggled to understand that. The system wasn't working anymore because the main players (the commercial banks) stopped playing with each other. That's also the reason why we see repeated problems in the repo market.

How QE actually decreases liquidity before it's effective

The funny thing about QE is that it achieves the complete opposite of what it's supposed to achieve before actually leading to an economic recovery.
What does that mean? Let's go back to my analogy with the camera.
Before I take away your camera, you can do several things with it. If you need cash, you can sell it or go to a pawn shop. You can even lend your camera to someone for a daily fee and collect money through that.But then I come along and just take away your camera for a road trip for 100 bucks in collateral.
What can you do with those 100 bucks? Basically nothing. You can't buy something else with those. You can't lend the money to someone else. It's basically dead capital. You can just look at it and wait until I come back.
And this is what is happening with QE.
Commercial banks buy treasuries and MBS due to many reasons, of course they're legally obliged to hold some treasuries, but they also need them to make business.When a commercial bank has a treasury security, they can do the following things with it:- Sell it to get cash- Give out loans against the treasury security- Lend the security to a short seller who wants to short bonds
Now the commercial banks received a cash reserve account at the Fed in exchange for their treasury security. What can they do with that?- Give out loans against the reserve account
That's it. The bank had to give away a very liquid and flexible asset and received an illiquid asset for it. Well done, Fed.
The goal of the Fed is to encourage lending and borrowing through suppressing yields via QE. But it's not happening and we can see that in the H.8 data (assets and liabilities of the commercial banks).There is no recovery to be seen in the credit sector while the commercial banks continue to collect treasury securities and MBS. On one hand, they need to sell a portion of them to the Fed on the other hand they profit off those securities by trading them - remember JPM's earnings.
So we see that while the Fed is actually decreasing liquidity in the markets by collecting all the treasuries it has collected in the past, interest rates are still too high. People are scared, and commercial banks don't want to give out loans. This means that as the economic recovery is stalling (another whopping 1.4M jobless claims on Thursday July 30th) the Fed needs to suppress interest rates even more. That means: more QE. that means: the liquidity dries up even more, thanks to the Fed.
We heard JPow saying on Wednesday that the Fed will keep their minimum of 120 billion QE per month, but, and this is important, they can increase that amount anytime they see an emergency.And that's exactly what he will do. He will ramp up the QE machine again, removing more bond supply from the market and therefore decreasing the liquidity in financial markets even more. That's his Hail Mary play to force Americans back to taking on debt again.All of that while the government is taking on record debt due to "stimulus" (which is apparently only going to Apple, Amazon and Robinhood). Who pays for the government debt? The taxpayers. The wealthy people. The people who create jobs and opportunities. But in the future they have to pay more taxes to pay down the government debt (or at least pay for the interest). This means that they can't create opportunities right now due to the government going insane with their debt - and of course, there's still the Coronavirus.

"Without the Fed, yields would skyrocket"

This is wrong. The Fed has been keeping their basic level QE of 120 billion per month for months now. But ignoring the fake breakout in the beginning of June (thanks to reopening hopes), yields have been on a steady decline.
Let's take a look at the Fed's balance sheet.
The Fed has thankfully stayed away from purchasing more treasury bills (short term treasury securities). Bills are important for the repo market as collateral. They're the best collateral you can have and the Fed has already done enough damage by buying those treasury bills in March, destroying even more liquidity than usual.
More interesting is the point "notes and bonds, nominal". The Fed added 13.691 billion worth of US treasury notes and bonds to their balance sheet. Luckily for us, the US Department of Treasury releases the results of treasury auctions when they occur. On July 28th there was an auction for the 7 year treasury note. You can find the results under "Note -> Term: 7-year -> Auction Date 07/28/2020 -> Competitive Results PDF". Or here's a link.
What do we see? Indirect bidders, which are foreigners by the way, took 28 billion out of the total 44 billion. That's roughly 64% of the entire auction. Primary dealers are the ones which sell the securities to the commercial banks. Direct bidders are domestic buyers of treasuries.
The conclusion is: There's insane demand for US treasury notes and bonds by foreigners. Those US treasuries are basically equivalent to US dollars. Now dollar bears should ask themselves this question: If the dollar is close to a collapse and the world wants to get rid fo the US dollar, why do foreigners (i.e. foreign central banks) continue to take 60-70% of every bond auction? They do it because they desperately need dollars and hope to drive prices up, supported by the Federal Reserve itself, in an attempt to have the dollar reserves when the next liquidity event occurs.
So foreigners are buying way more treasuries than the Fed does. Final conclusion: the bond market has adjusted to the Fed being a player long time ago. It isn't the first time the Fed has messed around in the bond market.

How market participants are positioned

We know that commercial banks made good money trading bonds and stocks in the past quarter. Besides big tech the stock market is being stagnant, plain and simple. All the stimulus, stimulus#2, vaccinetalksgoingwell.exe, public appearances by Trump, Powell and their friends, the "money printing" (which isn't money printing) by the Fed couldn't push SPY back to ATH which is 339.08 btw.
Who can we look at? Several people but let's take Bill Ackman. The one who made a killing with Credit Default Swaps in March and then went LONG (he said it live on TV). Well, there's an update about him:Bill Ackman saying he's effectively 100% longHe says that around the 2 minute mark.
Of course, we shouldn't just believe what he says. After all he is a hedge fund manager and wants to make money. But we have to assume that he's long at a significant percentage - it doesn't even make sense to get rid of positions like Hilton when they haven't even recovered yet.
Then again, there are sources to get a peek into the positions of hedge funds, let's take Hedgopia.We see: Hedge funds are starting to go long on the 10 year bond. They are very short the 30 year bond. They are very long the Euro, very short on VIX futures and short on the Dollar.

Endgame

This is the perfect setup for a market meltdown. If hedge funds are really positioned like Ackman and Hedgopia describes, the situation could unwind after a liquidity event:The Fed increases QE to bring down the 30 year yield because the economy isn't recovering yet. We've already seen the correlation of QE and USD and QE and bond prices.That causes a giant short squeeze of hedge funds who are very short the 30 year bond. They need to cover their short positions. But Ackman said they're basically 100% long the stock market and nothing else. So what do they do? They need to sell stocks. Quickly. And what happens when there is a rapid sell-off in stocks? People start to hedge via put options. The VIX rises. But wait, hedge funds are short VIX futures, long Euro and short DXY. To cover their short positions on VIX futures, they need to go long there. VIX continues to go up and the prices of options go suborbital (as far as I can see).Also they need to get rid of Euro futures and cover their short DXY positions. That causes the USD to go up even more.
And the Fed will sit there and do their things again: more QE, infinity QE^2, dollar swap lines, repo operations, TARP and whatever. The Fed will be helpless against the forces of the market and have to watch the stock market burn down and they won't even realize that they created the circumstances for it to happen - by their programs to "help the economy" and their talking on TV. Do you remember JPow on 60minutes talking about how they flooded the world with dollars and print it digitally? He wanted us poor people to believe that the Fed is causing hyperinflation and we should take on debt and invest into the stock market. After all, the Fed has it covered.
But the Fed hasn't got it covered. And Powell knows it. That's why he's being a bear in the FOMC statements. He knows what's going on. But he can't do anything about it except what's apparently proven to be correct - QE, QE and more QE.

A final note about "stock market is not the economy"

It's true. The stock market doesn't reflect the current state of the economy. The current economy is in complete shambles.
But a wise man told me that the stock market is the reflection of the first and second derivatives of the economy. That means: velocity and acceleration of the economy. In retrospect this makes sense.
The economy was basically halted all around the world in March. Of course it's easy to have an insane acceleration of the economy when the economy is at 0 and the stock market reflected that. The peak of that accelerating economy ("max velocity" if you want to look at it like that) was in the beginning of June. All countries were reopening, vaccine hopes, JPow injecting confidence into the markets. Since then, SPY is stagnant, IWM/RUT, which is probably the most accurate reflection of the actual economy, has slightly gone down and people have bid up tech stocks in absolute panic mode.
Even JPow admitted it. The economic recovery has slowed down and if we look at economic data, the recovery has already stopped completely. The economy is rolling over as we can see in the continued high initial unemployment claims. Another fact to factor into the stock market.

TLDR and positions or ban?

TLDR: global economy bad and dollar shortage. economy not recovering, JPow back to doing QE Infinity. QE Infinity will cause the final squeeze in both the bond and stock market and will force the unwinding of the whole system.
Positions: idk. I'll throw in TLT 190c 12/18, SPY 220p 12/18, UUP 26c 12/18.That UUP call had 12.5k volume on Friday 7/31 btw.

Edit about positions and hedge funds

My current positions. You can laugh at my ZEN calls I completely failed with those.I personally will be entering one of the positions mentioned in the end - or similar ones. My personal opinion is that the SPY puts are the weakest try because you have to pay a lot of premium.
Also I forgot talking about why hedge funds are shorting the 30 year bond. Someone asked me in the comments and here's my reply:
"If you look at treasury yields and stock prices they're pretty much positively correlated. Yields go up, then stocks go up. Yields go down (like in March), then stocks go down.
What hedge funds are doing is extremely risky but then again, "hedge funds" is just a name and the hedgies are known for doing extremely risky stuff. They're shorting the 30 year bond because they needs 30y yields to go UP to validate their long positions in the equity market. 30y yields going up means that people are welcoming risk again, taking on debt, spending in the economy.
Milton Friedman labeled this the "interest rate fallacy". People usually think that low interest rates mean "easy money" but it's the opposite. Low interest rates mean that money is really tight and hard to get. Rising interest rates on the other hand signal an economic recovery, an increase in economic activity.
So hedge funds try to fight the Fed - the Fed is buying the 30 year bonds! - to try to validate their stock market positions. They also short VIX futures to do the same thing. Equity bulls don't want to see VIX higher than 15. They're also short the dollar because it would also validate their position: if the economic recovery happens and the global US dollar cycle gets restored then it will be easy to get dollars and the USD will continue to go down.
Then again, they're also fighting against the Fed in this situation because QE and the USD are correlated in my opinion.
Another Redditor told me that people who shorted Japanese government bonds completely blew up because the Japanese central bank bought the bonds and the "widow maker trade" was born:https://www.investopedia.com/terms/w/widow-maker.asp"

Edit #2

Since I've mentioned him a lot in the comments, I recommend you check out Steven van Metre's YouTube channel. Especially the bottom passages of my post are based on the knowledge I received from watching his videos. Even if didn't agree with him on the fundamental issues (there are some things like Gold which I view differently than him) I took it as an inspiration to dig deeper. I think he's a great person and even if you're bullish on stocks you can learn something from Steven!

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Earning Plays for Dummies: $UA is Under Water (Basic TA & Obvious Catalysts)

Earning Plays for Dummies: $UA is Under Water (Basic TA & Obvious Catalysts)
TL;DR: $UA is taking on a lot of debt because of historically low retail sales causing near bankruptcy cash flow. Largest athletic apparel retailer or not, when the business isn't making money it's losing it. Taking on LARGE amount of debt, to raise cash, to keep the doors open is not the nail in the coffin, but it is damn near close. ER this Friday 7/31 could be a historic miss and future projections, margins, growth and competition will cause a sell off.
Super BEAR: 7/31 $8.50-$9 Puts
Conservative BEAR: 8/14 $7.50-$8 Puts

To Bearish Autists,

Alright retards, this DD is not done by a professional CFA, CPA or single employee LLC day trading firm. I'm a college grad, with a BS in Chemistry, and i'm 100% self taught on trading for the last 5 years. It's a hobby that pays for other hobbies, not a job and definitely not a thing i do without being informed. That being said heres my hypothesis.

$UA Has Struggled

This is no secret as many of us have brand name recognition of $UA and many of us own it. We know its not Nike and it's a step above Champions and other retail store brands, but it is simply the cost efficient/value brand for people that want quality and but aren't willing to pay Nike prices or get chafed nipples from the $WMT brand. It's become the largest athletic apparel brand in the US, with growth potential in China, signing one of the NBAs biggest star Steph Curry.
Heres the problem, the company is facing increased competition and Covid may of burned down the house when they closed retailers. $UA helped prove there is a middle ground between $NKE and $WMT in quality and price, but they failed to build beyond that, and now $AMZN and other other brands have saturated the market. When i need workout clothes, i look online, a small part of $UA business model. I look for value, and although i'm not buying Nike i'm not buying $UA either. There are tons of other brands that provide the same quality cheaper, and i don't care about brand at they gym, just comfort. $UA failed to build a signature style, they got Steph Curry, but i never hear a 24 year old sneaker head dying over their new pair of shoes. They failed to push online channels of distribution, "have you been to their website?", and some compare their pandemic model to $LULU but they are completely different brands by quality, price and consumer segment.
The companies lack of success could be bad marketing, they have the largest athletic apparel market share, but they can't turn a decent YOY earnings report. So it comes down to poor financial management and high levels of competition driving lower margins. In 2016 $UA was nearly $50/share and its lost billions YOY. Now it's facing an unpredictable pandemic, and record low revenue on a house of debt.

Important Factors for ER


  • Covid
The pandemic closed retailers and one of the largest retailers of $UA is Kohl's ($KSS). Because nearly 80% of the companies worth is in their merchandise revenue, this is a major hit. The other 20% is a licensee program that they get from selling the right to 3rd party manufacturers to make and sell the brand. They get revenue from licenses, but i'm not sure about royalties. This means that wholesale manufacturers could sell to other online retailers at a lower competitive rate than $UA if they are crafty enough, and their is supposedly low oversight on this. You can buy $UA on $AMZN but that doesn't mean you will be buying directly from $UA, and this could be true in open retail stores now. from 2017 to Q1 2020 online sales on $UA website have only grown 4%. $UA has had a tough time to have a direct to consumer channel over the past two quarters. The pandemic has lead to huge losses in retail sales, and the brands themselves. This leads us to our next subject.

  • DEBT DEBT & More DEBT
$UA Market Cap: $4.837 Billion
Liabilities: $3.387 Billion (Q1 2020)
Assets: $1.550 Billion (Q1 2020)
Cash is KING and $UA is in desperate need of it with a recent convertible note offering that raised over $400 million dollars. I'm not a finance expert, but here's a snippet that explains the liquidity crunch.

As of March 31, Under Armour had just $959 million in cash. Now, it recently raised another $460 million or so in a convertible note, so its total liquidity is about $1.41 billion. But if it burns through $400 million over the next two quarters, the balance would fall to $600 million or so.
At that point, the company would likely have to raise permanent equity and/or a mixture of equity and debt. Right now the company’s tangible book value per share (TBVPS) is just $1.02 billion, or $2.26 per share, according to data compiled by Seeking Alpha.>So, here is the problem: By the end of Q3, with another $800 million in FCF loses, the tangible book value will fall to $224 million or so, and the TBVPS will be just 49 cents per share. If that’s the case, there is no way that UA stock would still be trading at $9.28 per share, where it was earlier this week.-InvestorsPlace (Mark Hake)
Simply put they need to be frugal and cut cost to prevent bankruptcy. this is shown further in the last two weeks when $UA announced they will sell their running/social app, MyFitnessPal. They also sought to break a sponsorship deal with UCLA to conserve cash (nearly $20mil/year).
The price tag for MyFitnessPal in 2015 was $425million, i don’t think $UA will have a easy time getting anyone to buy it, much less gain on the investment. Also the sponsorship deal isn’t broken, yet, and if they do it may come with a huge monetary penalty....exactly what they want to avoid.
This weeks earnings report will announce a huge amount of new liabilities along with massive reductions in revenue expectations. This is the most important part of the ER this week.

  • China
Good news this week for $UA is that they won a branding lawsuit in China this week...against a competitor that you nor I have and will never hear of.
China is a very interesting component in the American economic and political world. They are a huge market, but politically they are neither our ally nor our foe. India will give us the same problem in 10-15 years. With increased tensions between DC and Beijing the risk of tariffs and american companies suffering are on the rise, especially retail and manufacturing.
However, China presents a huge growth opportunity to whichever lucky retailers and brands can bribe the right officials and not get caught. $UA is one of those lucky companies, but they are competing in a tough sector. Nike, Adidas, New Balance, a zillion new brands that nobody has heard of and of course knock offs. I lived in Shanghai for a year in college, and theirs “Fake mall” everywhere selling the new Jorban’s and Rolex’s and of course $UA and the Chinese government will never stop it because they don’t practice fair trade practices, at least correctly.
30% of revenue for $UA is international business including several asian and european countries and Australia. China could eventually be more of a cash cow than the US for $UA.
The international opportunity is real, but $UA may never see the light at the end of the tunnel due to this dark period of financial ruins and a competitive marketplace.

  • Upside?
The ER for $UA is going to be devastating as it has been in quarters past. you’d be insane to think any differently as the company has only seen worse and worse circumstances with little navigational correction. The only thing that could prevent a total 15-25% downside is some sort of good news. What possible good news could they have, i personally can’t think of any if they are being honest and don’t give BS projections like $TSLA. IF you think of any, or i’m missing any honest upside to this ER please comment.

  • Expectations
EPS: -0.4$ (Big miss)
Revenue: $536mil (Near miss)
Revenue is key, but the Cash flow and added liabilities will be the dagger.

A LITTLE TA & CHART PRICE ACTION

6 month Daily candle
The price of $UA has been hovering around $6.40 & $10.60 for nearly 5 months. $UA has found a solid support at $8.25 and has an upward channel trend, and this has been a very slow recovery relative to other retail brands.
RSI is inching toward overbought. MACD is unsure of the last two months progression and is looking to swing one way or the other after the ER, my bet is down. i expect that $UA will continue on trend nearing $10.60, if the stock price does not fall below the three day trend line(Lilac) then i will wait until thursday afternoon to buy the Puts for the morning ER Call. IF it falls below the lilac line before thursday afternoon i expect my downward channel to be correct and i purchase puts immediately.
Still pondering my strategy for entry and optimizing the return, between there two option ideas.
Super BEAR: 7/31 $9-$9.50
Conservative BEAR: 8/14 $7.50-$8 Puts
$UA has a great value product. It has not done a good job financially due to massive oversight in fiscal management, not creating a better direct to consumer interface, and not being competitive enough in a market with stagnant margins and retail competition that can undercut and or be more popular than the other with celebrities and fashion. $UA is not $LULU, and its drowning in debt with no end in sight. Their model has failed, and their leadership has failed. I suspect retail traders who know $UA by name recognition are propping this up, not understanding their in trouble. As soon as institutional money abandons so will the pocket investors, not to poke fun at you retards.

But hey, i may just be a fucking retard.
P.S. - IF $UA goes under, or is bought out, which athletic apparel company gains the most? My guess is $NKE (long) or $AMZN.
Edit: 7/27 today the SEC notified $UA that they will enforce action against the company for accounting practices seen as fraudulent in 2016 and 2017. It keeps getting worse.
Edit: 7/30 today will most likely be the best opportunity to get cheap 10-20% OTM puts for Friday’s earning call. The stock is shrugged off SEC notices to top executives and a gloomy prediction for earnings. But the market isn’t rational right now, if it ever is, and the stock is looking to squeeze out of its channel past $10.60, and people will take profit before the crash after ER.
Edit: 7/30 AH. 2500 shares pushed the stock up nearly 4%...still expecting big downward projection come morning. Bought 8/14 $8.50 puts this AM.
Edit: 7/30 AH. 10,000 volume pushed the stock up 10% when it moves 1-2% on 5-7 million volume days. I smell stock manipulation by an insider who want to distract from the ER.
Result: AH high of $12.80 and down to $10.25 pre market, I didn’t expect price action to play such a large role in this ER.
Final: watching for 8/14 $8 put, won’t hold till expire most likely. AH/PM on 7/31 was wild and ruined the lotto for 7/31. I’m convinced it was manipulated, why else would a stock increase 25% AH before earnings and drop 27% thereafter from the AH high...in the first hour of trading...they wanted the stock to have buffer and show a new price action target/action...should of dropped below $9 but $9.49 from $12.80 high at least validates my opinion to some degree. $9.31 new support for monday, may blow past support channel at $8.90 and then drop to $8.20 soon after. OR there could be a retracement to the idiotic $12.81. All in all Lost 1% of my account on a yolo, truly retarded.


Daily Candles

1min candles - Note AH pump...
submitted by Miccodaddy to wallstreetbets [link] [comments]

Bullish Options Plays [2-4 Month Horizon]

Bullish Options Plays [2-4 Month Horizon]
This post covers 4 Bullish Option Plays across various industries.
Criteria for selecting Bullish Options Plays:
  • 500MM + Market Cap
  • Average Daily Volume 5MM +
  • Uptrend detected
Using these criteria, I have curated a basket of plays. The time frame of these options are 3-6 months out, to avoid Theta burn and maximize ITM potential. The beauty of these plays is that the stock only needs to move up a few % to be profitable, with a long time horizon as a hedge. Close the position within 2-4 months to minimize theta and maximize delta opportunity.
1) Wells Fargo $WFC [BANKING]
Wells just got hammered after an expected poor earnings. This makes it a prime candidate for upward movement.
Bullish Wells Fargo Case:
Wells has a history of prudent underwriting, and we are probably closer than not to a turn in the credit cycle.
Wells Fargo's retail branch structure, advisory network, product offerings, and share in small and medium-size enterprises is difficult to duplicate, ensuring that the company's competitive advantage is maintained.
Wells offers the scale advantages of a money center bank without the risks and volatility associated with extensive capital markets operations.
Wells Fargo Profile, from my personal research platform
Meets Criteria?

  • 500MM + Market Cap [99B]
  • Average Daily Volume 5MM + [46M]
  • Uptrend detected [Bounced off 52Wk Low as support]
  • **Within 10% of 52 Week Low [52 Week Low was $22, WFC is trading at $24.14]
$WFC Overlay with $JPM - The charts are nearly identical
As a big 4 bank, it is impossible for the Fed to allow WFC to go down. They have a good balance sheet, with a P/E ratio of 8.9, down from 11. The lower P/E ratio alone will bring in more long-term investors. If that isn't enough to make you comfortable, WFC offers a whopping 8% dividend yield, making it even more attractive.
This is an attractive investment for both options and stocks.
Let's take a look at options on $WFC, which I found using my unusual options scanner:
Big Bullish bets for October 16 2020, 2 days after their next earnings.
More Bullish Bets on WFC for October 16 2020
These huge bets range from $25 to $30, 3 months down the line. This averages to a $2.5, or 11% increase over the next 3 months. With this information, I propose:
WFC $27.50c Oct 16 2020, trading at $1.30 at time of writing. 24% Probability ITM.
WFC $30c Oct 16 2020, trading $0.79 at time of writing. 16% Probability ITM.
I am currently invested in $WFC stock, and hold the $30 Oct 16 Calls.
2) Twitter $TWTR [Technology]
Twitter is poised to dominate with its huge reach and rumored subscription platform for content creators. Source:
https://www.theverge.com/2020/7/8/21317266/twitter-subscription-platform-codename-gryphon-job-listing
This is a buy the rumor, sell the news play. I anticipate Twitter announcing this platform in the next 3 months.
Bullish Twitter Case:
Investments in product enhancements and video content could return the monthly active user growth rate to the double digits.
The deal with the NFL to live-stream Thursday night games and provide a platform for interaction and conversation about the games may attract more premium content providers to use the Twitter platform.
Growth in ad revenue per user remains strong at Twitter, more than offsetting the deceleration in user growth.
Twitter Profile, from my personal research platform
Meets Criteria?
  • 500MM + Market Cap [27B]
  • Average Daily Volume 5MM + [30M]
  • Uptrend detected [Strong upward trend since March]
$TWTR Overlay with $FB - the charts are nearly identical
The value that $TWTR and $FB lost due to lack of advertiser revenue has been recouped. The arrival of a subscription service is very bullish, because more and more people are looking to make money online since being laid off by COVID - Twitter's reach makes it incredibly well positioned to solve this problem. Subscriptions made $MSFT and $AAPL cash cows, expect the same for $TWTR.
This is an attractive investment for both options and stocks.
Let's take a look at options on $TWTR, which I found using my unusual options scanner:
Huge Bullish $TWTR bets for Jan 15, 2021
Huge Bullish $TWTR bets for Jan 15, 2021
Huge Bullish $TWTR bets for Jan 15, 2021
These bets were placed BEFORE COVID, and $TWTR is trading at the same price as when these were placed. The strikes range from $40 to $60, 6 months down the line. Taking a Strike of $40, that is 15% OTM of the current price. If they announce the platform within the next 6 months (I predict they will), the stock will explode.
With this information, I propose:
TWTR $40c Dec 18 2020, trading at $3.25 at time of writing. 28% Probability ITM.
TWTR $40c Jan 15 2020, trading $3.45 at time of writing. 29% Probability ITM.
Buying $40 Jan 15 2020 Calls are only $20 more for an extra month. Look to close these after their earnings next quarter, when they will likely announce the subscription platform.
I am currently invested in $TWTR stock, and hold the $40 Dec 18 Calls.
3) Southwest Airlines $LUV [AIRLINES]
Warren Buffet and COVID have caused investors to turn a nose up at airline stocks. I don't blame them - the uncertainty will affect airlines more than most other industries. That said, don't miss this opportunity to profit off Southwest Airlines, as they have the best balance sheet in the industry.
Bullish Southwest Airlines Case:
Southwest enjoys the strongest brand in the industry thanks to its simple fare prices, free checked bags, and solid customer service. This brand equity will enable it to continue growing faster than peers and support unit revenue.
Mergers among Southwest's competitors will engender pricing power for the airlines, and oil prices will remain low for longer, boosting Southwest's top and bottom lines.
Southwest's aggressive expansion will continue, driving growth at the carrier.
Southwest Airlines Profile, from my personal research platform
Meets Criteria?
  • 500MM + Market Cap [20B]
  • Average Daily Volume 5MM + [15M]
  • Uptrend detected [Strong upward trend since June]
$LUV Overlay with $AAL and $DAL - Delta and American have been hit worse than Southwest for a reason.
$LUV is performing better than its competitors, with higher lows and higher highs when comparing the charts. With the best balance sheet, its exposure to oil has been proven to be overcome since the whole oil futures fiasco. They have been prepped for the second wave and are most likely to weather the storm out of all the airlines.
My options scanner did not find any significant options data for $LUV.
I propose:
LUV $40c Dec 18 2020, trading at $3.05 at time of writing. 25% Probability ITM.
LUV $40c Jan 15 2020, trading $3.40 at time of writing. 26% Probability ITM.
I am currently invested in $LUV stock.
4) Ericsson $ERIC [Telecommunications Equipment]
With growing tensions between the US and China, it is unlikely Huawei will be allowed to provide 5G infrastructure. The UK just announced that Huawei will NOT be providing 5G infrastructure, so Ericsson is poised to seize a huge market share.
Bullish Ericsson case:
Income sources could diversify as licensing revenue from 5G patents may grow through applications outside of Ericsson's handset manufacturer agreements.
5G may afford Ericsson a longer spending cycle and higher equipment demand than previous wireless generations. Additionally, 5G should create more use cases for Ericsson's software and services within Internet of Things device networks.
Ericsson's turnaround measures are happening at an opportune time. Management's focused strategy should expand operating margins while 5G infrastructure spending increases top-line results.
Ericsson Profile, from my personal research platform
Meets Criteria?
  • 500MM + Market Cap [29B]
  • Average Daily Volume 5MM + [13M]
  • Uptrend detected [Strong upward trend since March, even stronger after UK Huawei announcement]
$ERIC Overlay with $NOK - Both stocks are strongly trending upward, with almost 100% gains since march.
$ERIC is poised to bank on 5G since Huawei is being punished in retaliation to Chinese handling of Hong Kong. Expect more growth as infrastructure expands and Apple announces their 5G line this fall. Source: https://www.businessinsider.com/apple-iphone-12-rumors-5g-release-camera-specs-2019-6
My options scanner did not find any significant options data for $ERIC.
I propose:
ERIC $11 Nov 20 2020, trading at $0.50 at time of writing. 25% Probability ITM.
I am no longer invested in $ERIC stock - truly kicking myself for selling, because I had a great cost basis a year ago. Regardless, I am picking up these calls.
Conclusion
Based on my research, $WFC, $TWTR, $LUV, and $ERIC are poised for big gains over the next 2 quarters. All the plays have a 25% chance of being ITM, but do not need to be ITM to be extremely profitable.
TL,DR:
WFC $27.50c Oct 16 2020, trading at $1.30 at time of writing. 24% Probability ITM.
WFC $30c Oct 16 2020, trading $0.79 at time of writing. 16% Probability ITM.
TWTR $40c Dec 18 2020, trading at $3.25 at time of writing. 28% Probability ITM.
TWTR $40c Jan 15 2020, trading $3.45 at time of writing. 29% Probability ITM.
LUV $40c Dec 18 2020, trading at $3.05 at time of writing. 25% Probability ITM.
LUV $40c Jan 15 2020, trading $3.40 at time of writing. 26% Probability ITM.
ERIC $11 Nov 20 2020, trading at $0.50 at time of writing. 25% Probability ITM.
submitted by iKalculated to options [link] [comments]

Bullish Option Plays for you [Various Industries]

Bullish Option Plays for you [Various Industries]
This post covers 4 Bullish Option Plays across various industries.
Criteria for selecting Bullish Options Plays:
  • 500MM + Market Cap
  • Average Daily Volume 5MM +
  • Uptrend detected
Using these criteria, I have curated a basket of plays. The time frame of these options are 3-6 months out, to avoid Theta burn and maximize ITM potential. The beauty of these plays is that the stock only needs to move up a few % to be profitable, with a long time horizon as a hedge. Close the position within 2-4 months to minimize theta and maximize delta opportunity.
1) Wells Fargo $WFC [BANKING]
Wells just got hammered after an expected poor earnings. This makes it a prime candidate for upward movement.
Bullish Wells Fargo Case:
Wells has a history of prudent underwriting, and we are probably closer than not to a turn in the credit cycle.
Wells Fargo's retail branch structure, advisory network, product offerings, and share in small and medium-size enterprises is difficult to duplicate, ensuring that the company's competitive advantage is maintained.
Wells offers the scale advantages of a money center bank without the risks and volatility associated with extensive capital markets operations.
Wells Fargo Profile, from my personal research platform
Meets Criteria?
  • 500MM + Market Cap [99B]
  • Average Daily Volume 5MM + [46M]
  • Uptrend detected [Bounced off 52Wk Low as support]
  • **Within 10% of 52 Week Low [52 Week Low was $22, WFC is trading at $24.14]
$WFC Overlay with $JPM - The charts are nearly identical
As a big 4 bank, it is impossible for the Fed to allow WFC to go down. They have a good balance sheet, with a P/E ratio of 8.9, down from 11. The lower P/E ratio alone will bring in more long-term investors. If that isn't enough to make you comfortable, WFC offers a whopping 8% dividend yield, making it even more attractive.
This is an attractive investment for both options and stocks.
Let's take a look at options on $WFC, which I found using my unusual options scanner:
Big Bullish bets for October 16 2020, 2 days after their next earnings.
More Bullish Bets on WFC for October 16 2020
These huge bets range from $25 to $30, 3 months down the line. This averages to a $2.5, or 11% increase over the next 3 months. With this information, I propose:
WFC $27.50c Oct 16 2020, trading at $1.30 at time of writing. 24% Probability ITM.
WFC $30c Oct 16 2020, trading $0.79 at time of writing. 16% Probability ITM.
I am currently invested in $WFC stock, and hold the $30 Oct 16 Calls.
2) Twitter $TWTR [Technology]
Twitter is poised to dominate with its huge reach and rumored subscription platform for content creators. Source:
https://www.theverge.com/2020/7/8/21317266/twitter-subscription-platform-codename-gryphon-job-listing
This is a buy the rumor, sell the news play. I anticipate Twitter announcing this platform in the next 3 months.
Bullish Twitter Case:
Investments in product enhancements and video content could return the monthly active user growth rate to the double digits.
The deal with the NFL to live-stream Thursday night games and provide a platform for interaction and conversation about the games may attract more premium content providers to use the Twitter platform.
Growth in ad revenue per user remains strong at Twitter, more than offsetting the deceleration in user growth.
Twitter Profile, from my personal research platform
Meets Criteria?
  • 500MM + Market Cap [27B]
  • Average Daily Volume 5MM + [30M]
  • Uptrend detected [Strong upward trend since March]
$TWTR Overlay with $FB - the charts are nearly identical
The value that $TWTR and $FB lost due to lack of advertiser revenue has been recouped. The arrival of a subscription service is very bullish, because more and more people are looking to make money online since being laid off by COVID - Twitter's reach makes it incredibly well positioned to solve this problem. Subscriptions made $MSFT and $AAPL cash cows, expect the same for $TWTR.
This is an attractive investment for both options and stocks.
Let's take a look at options on $TWTR, which I found using my unusual options scanner:
Huge Bullish $TWTR bets for Jan 15, 2021
Huge Bullish $TWTR bets for Jan 15, 2021
Huge Bullish $TWTR bets for Jan 15, 2021
These bets were placed BEFORE COVID, and $TWTR is trading at the same price as when these were placed. The strikes range from $40 to $60, 6 months down the line. Taking a Strike of $40, that is 15% OTM of the current price. If they announce the platform within the next 6 months (I predict they will), the stock will explode.
With this information, I propose:
TWTR $40c Dec 18 2020, trading at $3.25 at time of writing. 28% Probability ITM.
TWTR $40c Jan 15 2020, trading $3.45 at time of writing. 29% Probability ITM.
Buying $40 Jan 15 2020 Calls are only $20 more for an extra month. Look to close these after their earnings next quarter, when they will likely announce the subscription platform.
I am currently invested in $TWTR stock, and hold the $40 Dec 18 Calls.
3) Southwest Airlines $LUV [AIRLINES]
Warren Buffet and COVID have caused investors to turn a nose up at airline stocks. I don't blame them - the uncertainty will affect airlines more than most other industries. That said, don't miss this opportunity to profit off Southwest Airlines, as they have the best balance sheet in the industry.
Bullish Southwest Airlines Case:
Southwest enjoys the strongest brand in the industry thanks to its simple fare prices, free checked bags, and solid customer service. This brand equity will enable it to continue growing faster than peers and support unit revenue.
Mergers among Southwest's competitors will engender pricing power for the airlines, and oil prices will remain low for longer, boosting Southwest's top and bottom lines.
Southwest's aggressive expansion will continue, driving growth at the carrier.
Southwest Airlines Profile, from my personal research platform
Meets Criteria?
  • 500MM + Market Cap [20B]
  • Average Daily Volume 5MM + [15M]
  • Uptrend detected [Strong upward trend since June]
$LUV Overlay with $AAL and $DAL - Delta and American have been hit worse than Southwest for a reason.
$LUV is performing better than its competitors, with higher lows and higher highs when comparing the charts. With the best balance sheet, its exposure to oil has been proven to be overcome since the whole oil futures fiasco. They have been prepped for the second wave and are most likely to weather the storm out of all the airlines.
My options scanner did not find any significant options data for $LUV.
I propose:
LUV $40c Dec 18 2020, trading at $3.05 at time of writing. 25% Probability ITM.
LUV $40c Jan 15 2020, trading $3.40 at time of writing. 26% Probability ITM.
I am currently invested in $LUV stock.
4) Ericsson $ERIC [Telecommunications Equipment]
With growing tensions between the US and China, it is unlikely Huawei will be allowed to provide 5G infrastructure. The UK just announced that Huawei will NOT be providing 5G infrastructure, so Ericsson is poised to seize a huge market share.
Bullish Ericsson case:
Income sources could diversify as licensing revenue from 5G patents may grow through applications outside of Ericsson's handset manufacturer agreements.
5G may afford Ericsson a longer spending cycle and higher equipment demand than previous wireless generations. Additionally, 5G should create more use cases for Ericsson's software and services within Internet of Things device networks.
Ericsson's turnaround measures are happening at an opportune time. Management's focused strategy should expand operating margins while 5G infrastructure spending increases top-line results.
Ericsson Profile, from my personal research platform
Meets Criteria?
  • 500MM + Market Cap [29B]
  • Average Daily Volume 5MM + [13M]
  • Uptrend detected [Strong upward trend since March, even stronger after UK Huawei announcement]
$ERIC Overlay with $NOK - Both stocks are strongly trending upward, with almost 100% gains since march.
$ERIC is poised to bank on 5G since Huawei is being punished in retaliation to Chinese handling of Hong Kong. Expect more growth as infrastructure expands and Apple announces their 5G line this fall. Source: https://www.businessinsider.com/apple-iphone-12-rumors-5g-release-camera-specs-2019-6
My options scanner did not find any significant options data for $ERIC.
I propose:
ERIC $11 Nov 20 2020, trading at $0.50 at time of writing. 25% Probability ITM.
I am no longer invested in $ERIC stock - truly kicking myself for selling, because I had a great cost basis a year ago. Regardless, I am picking up these calls.
Conclusion
Based on my research, $WFC, $TWTR, $LUV, and $ERIC are poised for big gains over the next 2 quarters. All the plays have a 25% chance of being ITM, but do not need to be ITM to be extremely profitable.
TL,DR:
WFC $27.50c Oct 16 2020, trading at $1.30 at time of writing. 24% Probability ITM.
WFC $30c Oct 16 2020, trading $0.79 at time of writing. 16% Probability ITM.
TWTR $40c Dec 18 2020, trading at $3.25 at time of writing. 28% Probability ITM.
TWTR $40c Jan 15 2020, trading $3.45 at time of writing. 29% Probability ITM.
LUV $40c Dec 18 2020, trading at $3.05 at time of writing. 25% Probability ITM.
LUV $40c Jan 15 2020, trading $3.40 at time of writing. 26% Probability ITM.
ERIC $11 Nov 20 2020, trading at $0.50 at time of writing. 25% Probability ITM.
submitted by iKalculated to wallstreetbets [link] [comments]

Anti bioterror play for huge long term gains

Thesis: SIGA Technologies, an anti-bioterror pharmaceutical company, will double their stock price in a year and triple or quadruple it in two years. They are in an incredibly strong financial position: zero debt, future US government purchases that may be greater than their market cap, and low expenses for operations and forward research. They also have amazing future growth prospects as foreign governments will buy their meds to prepare for future pandemics. Their drugs treat smallpox which is both more contagious and deadly (IFR ~30%!) than the Wuhan plague.
Do you think absolutely no political or military leader will learn their lesson about pandemic preparedness? Do you think business leaders are going to put the pressure down since the cost of unpreparedness is orders of magnitude greater than preparedness? That’s what this play is all about.
The play: Buy $SIGA stocks and hold for 2 years.

Quick facts

Market cap: $560 million
Style: Value, when compared to other biotechs
Products: Their primary product is an FDA approved oral antiviral (TPOXX) that treats all orthopox viruses (e.g. the dreaded smallpox). They are currently developing additional products for IV and pediatric treatment, another small molecule drug for treating orthopox viruses, and are developing therapeutics that use orthopox viruses for delivery of anticancer antigens.
How SIGA makes money: 1) US government contracts to supply the Strategic National Stockpile, 2) US government contracts for research, 3) sales to foreign governments and potentially private parties. Note that their business doesn't care about prevailing market conditions and all of these are multi-year contracts.
Debt: $0. They paid off an $86 MM loan in March.
Cash holdings: $77.4 MM
Total assets: $118.6 MM
Net cash flow 2019: -$18.2 MM, as discussed below, 2019 was a transition year between govt contracts hence the low income. They made $400MM from closing contracts in 2018.
Net cash flow 2020, my estimate: +$53 MM, see cash flow section below for how I got this figure

How this play can win

- The US govt through BARDA accelerates their purchasing of TPOXX to be and look more prepared for future pandemics.
- Foreign governments purchase TPOXX for their own pandemic preparedness. Canada announced an intent to purchase in December. Others are likely to follow. IMO, the stock will hit $10 when 3 additional countries announce purchasing and $20 when they have a network of 10 purchasing countries plus additional research. The US gets a discount on TPOXX because they funded the initial research, others will likely pay three times as much per dose.
- The US govt offers much more research funding to SIGA to design antivirals for other possible pandemic viruses. 10 years ago they had a small BARDA contract to look into antivirals for Lassa fever, a nasty rat flu boogaloo. They might renew or add to this type of research.
- TPOXX gets additional approvals for IV use and prophylactic use (i.e. give to people in contact with infected, first responders or first city) and US buys more. They recently received a new $23 MM contract for developing this use.
- A larger pharmaceutical company announces that they will purchase SIGA for $10-$15 share in a year. SIGA already has connections with Pfizer.
- Large amounts of additional income help them pump with stock buybacks or fat dividends. I am totally convinced they are going to buyback or spit dividends in a year from now.

Risks

- Foreign governments don’t purchase TPOXX or don’t approve its safety/efficacy and rely on the vaccine for smallpox (but 1 in 5 people can’t take the vax and lots of deaths in first wave without TPOXX).
- US govt does not add to stockpile, only keeps refreshing expired TPOXX.
- US govt does not invest in additional pandemic preparedness research/invests only in competitors.
- TPOXX may later be discovered to have a severe side-effect. (Oral formula is already FDA approved though).
- There’s more risks listed in their 10-K, but I do not think they are significant enough to list here.

Resources for your own DD

Do your own research. Always.
Latest 10-K: https://investor.siga.com/node/13196/html
Latest 10-Q: https://investor.siga.com/node/13251/html
2020 Q1 earnings call: https://www DOT fool DOT com/earnings/call-transcripts/2020/05/07/siga-technologies-inc-siga-q1-2020-earnings-call-t.aspx
2019 Q4 earnings call: https://www DOT seeking NO SPACE alpha DOT com/article/4330138-siga-technologies-inc-siga-ceo-phil-gomez-on-q4-2019-results-earnings-call-transcript
Reddit doesn't like the above websites. Sorry for the garbled links
Press releases: https://investor.siga.com/press-releases
Smallpox wiki: https://en.wikipedia.org/wiki/Smallpox

Detailed DD

I’m going to start off this section by answering the arguments you’ve already thought of.
Who gives a shit about some old timey disease?
The world militaries. Smallpox is a nasty disease. It's basic reproduction number, R0, is between 3-6, like the Wuhan coronavirus. It similarly has a 7-14 day lag time before symptoms show, although it is not known to be infectious for the first several days.
Smallpox is also exceptionally deadly, ranging from 15-30% fatality rate depending upon the strain and in children and the elderly can reach a 75% mortality rate. Survivors are usually permanently scarred and may have life-long complications from the disease. A smallpox epidemic would actually make corona look like "just the flu."
Infection around day 20 mark. Bangladesh, 1973.
Bioterrorism or biowarfare with smallpox is a massive threat to the military and people and an obvious first choice of weapon for a bioterrorist. Careful governments will plan for it.
Isn't smallpox eradicated?
Yes. But. 1) There are still many samples across the world in government labs across the world. 2) The genome exists on computers in said labs. 3) Many other orthopox viruses exist such as cowpox and monkeypox. Monkeypox in particular has had more cases in subsaharan Africa in the last few years. There have even been small outbreaks in the US, UK, and Singapore within the last 20 years.
What about vaccines?
  1. Maybe you recall that in the 1790’s Edward Jenner discovered the first vaccine by giving people the milder cowpox to prevent smallpox. The state of the smallpox vaccine has not evolved significantly since then. The modern vaccine uses a two-prong poker to deliver a live smallpox virus that has been engineered to be very weak. However, it is still a real virus that can causes symptoms or spread the disease to others. One in five Americans have underlying conditions that prevent them from receiving this vaccine due to the symptoms it causes.
  2. What do you do when smallpox starts spreading rapidly? You need to be able to treat the potentially 100s of thousands of people who will be infected before the immunization takes effect. The US is well-prepared with the vaccine having 300 million doses, nearly enough for every American. But you need a treatment as part of the defense strategy.
  3. TPOXX is in the process of being approved as a prophylactic. I.e. if smallpox were to spread then people could be given both the vaccine and TPOXX at the same time to make sure they don’t get sick if they were exposed prior to vaccination. Prophylactic treatment could be extremely important to first-responders, military, and people in the most badly affected zones.

Fundamentals

I am no expert in reading 10-K filings, but SIGA's 10-K is not too complicated. I encourage you to do your own DD before making this play and if you've never read a 10-K filing before this is a great one to cut your teeth on. SIGA only has one key product line and their debt is uncomplicated (nonexistent); the only tricky parts is following the government money.

Balance sheet from most recent 10-Q
Balance sheet
So the things to look at here are:
  1. SIGA has plenty of cash. Enough for two years operating expenses without any sort of austerity. Even if the economic downturn affected their business model, they would weather it easily.
  2. They have $16 MM in inventory. That’s mostly TPOXX they’ve already manufactured. This is great because it means they will have low costs for meeting the current BARDA contract supply request for this year and that if they get more orders they can dedicate their supply chain to filling them.
  3. No debt. There’s no risk of them going tits up soon. Unlike your other favorite plays against highly-leveraged trash companies (looking at you Zillow), SIGA can ride out a credit crunch with ease.
  4. Stockholders’ equity aka book value. At a price to book of 5:1 this is a cheap biotech company, one of the reasons I see them as a value buy. Also of note, their property includes patents on TPOXX in virtually every country.

Cash flow
In 2019, SIGA took a $7 million loss while in 2018 they punched a $422 million gain. How did that happen? Their entire business runs on multi-year govt contracts. 2018 saw an older BARDA contract end with the orders completely filled to stuff the strategic stockpile. 2019 was a transition year.They have a new contract with BARDA to replenish expiring TPOXX and research then purchase new formulations for IV and pediatric use. So, looking at their 201910-K their earnings look abysmal, but their forward looking earnings are much better given their recent news releases.
Let’s look more at that contract since it is a principal revenue source. SIGA’s most recent 19C contract gives BARDA (Biomedical Advanced Research and Development Authority) the ability to purchase up to $602.5MM worth of product. The base contract guarantees $51.7 MM and BARDA announced the exercise of an additional $127.1 MM in purchasing for the next year as of a few weeks ago. Due to drug expiration and future preparedness, my opinion is that BARDA will exercise all of the purchasing options over the next 10 years.
Here’s my 2020 cash flow estimate, I am inexperienced at this sort of analysis. Pro 10-K readers, please give me some criticism.
-$24 MM from expenses for sales, admin, research, services ,patents. Average of last 2 years -10% because research activity is shut down
-$7 MM from additional costs of terminating loan. 10-Q
+$2 MM from part 1 of Canadian order. Press release
+$75 MM from three quarters of $101 MM exercise of BARDA contract. Estimated because they will supply TPOXX the next three quarters of 2020 and Q1 2021, press release
-$3 MM additional costs to fulfill orders. Estimate from BARDA contract’s allocation for supply costs
+$10 MM from contracts for research. Estimate by Q1 research revenue x 4
? a new $23 MM research contract with the department of defense was announced in June, unclear when they will receive the money at this time
$0 from stock buybacks and dividends, they have never had a dividend, but did do $800k in buybacks last year. They might have paid down their debt to put them in a position to do a lot more buybacks, so this is subject to change.
Total: +$53 MM
I expect the next few years to be cash flow positive now that they are out of the development phase and into the deployment phase. As they get additional international buyers they will also need to service their expiring stockpiles. This puts them at a forward price to earnings estimate of 10:1, still a value play in the current environment.
The high future cash flow is why I expect them to start pumping dividends or buybacks in a year. Since their research activities are primarily supported by the US government, they won't have other useful activities for the cash other than to return it to shareholders. Also, the guys who founded SIGA in the 90's probably want to retire on a fat dividend pretty soon. Dividends and buybacks are a big factor in how many analysts calculate stock prices so either development will push the share price up a lot.

International Sales
This is where SIGA make us gigatendies. The US sales are the bread and butter that will keep them afloat for years to come. International sales are where they grow. Their contracts with the US government let them sell TPOXX at about $350 per course because they funded the initial research, whereas Canada is paying about $950 per course giving SIGA a massive estimated 95% margin.
Let's see who might be interested in buying TPOXX as the China flu crisis unwinds: we've got most of western Europe/NATO--UK, France,Italy, Austria, Sweden, Switzerland, Germany, Spain; Pacific countries wary of being in the China sphere--Taiwan, South Korea, Japan, Singapore, Australia,Malaysia, Vietnam, Indonesia; and wealthy Middle Eastern countries that need to hedge against instability--Israel, Turkey, Saudi Arabia, UAE, Qatar; a smattering of other countries getting wise to viral threats--Russia, India,Brazil, South Africa, Mexico. That's a lot of potential buyers and it will only take a few for SIGA's price to shoot up. Also note that SIGA does not market internationally themselves, they are partnered with Meridian, a Pfizer subsidiary, for international sales.
SIGA also has an excellent moat internationally. They have patents for TPOXX and its analogs almost everywhere but China. Of course, there are still risks associated with international expansion, but the upside potential is yuuge. Let's hear it from the horse's mouth and see what SIGA had to say on their 2019 Q4 conference call:
Now let's discuss the international markets. The pursuit of international sales for oral TPOXX is a key focus for us at SIGA. Our partnership with Meridian Medical Technologies that we announced last June has been excellent. However as I've said many times the sales cycle is long for international government procurement of these types of products and each country has its own set of internal dynamics. ... I have been asked why we do not provide a country-by-country update on sales progress. We do not comment on specific progress with countries for two main reasons. First, we respect the confidentiality of our customers who would not want their deliberations to become public. And second, we would not want to signal to competitors which countries may be undergoing an expansion in their spending for biodefense. With that context in mind, we are pleased to share a progress report regarding the Canadian military, who announced in December and intend to issue contracts to support a Health Canada, regulatory filing and thep urchase of up to 15,825 courses of oral TPOXX for the Canadian military. A procurement order of this size would represent about 25%of the active military forces in Canada. Although this is a relatively modest number of courses it is precedent for military preparedness by a U.S. NATO ally.
What can we gather from that? They've got multiple sales in the works, but are keeping mum about it. Also, that it takes time to cut through government tape and announce these sales. Here's the single largest risk for this play: that it takes too long for international contracts to be announced. For this reason, I recommend buying stocks and not calls. The near term future is too unpredictable.

Research Activities
SIGA's main drug, oral TPOXX, is already completely FDA approved as safe in humans and effective in animals. A quirk of their niche is that since smallpox is eradicated, they can't ethically test the drug for effectiveness in humans. This helps their bottom line because they basically get to skip some of the trials of a typical drug development cycle.
SIGA's most important upcoming products are TPOXX for IV, liquid pediatric, and prophylactic use. Due to the current pandemic, all human trials are postponed, but the barriers for these trials are quite low. They only need to demonstrate human safety for the alternate ROA drugs. For prophylactic TPOXX, SIGA needs to demonstrate that TPOXX does not interfere with immunity acquisition from the smallpox vaccine. That way a potentially exposed person can both be treated and vaccinated at the same time. If they fail to meet these research goals, then I doubt the BARDA contract will be exercised for full value. Because of the delay in these results due to corona, I doubt that they threaten the trade that I'm proposing.
Orthopox viruses to deliver cancer therapeutics and older Lassa fever antivirals. I honestly don't know enough about their activities in these areas to make a comment. I think they are irrelevant to the base play, but could provide some surprise upside if there was a development.

Insider trading
The execs did more selling than buying last year which is perhaps bearish, but their most recent move was to buy a lot of stock in December after announcing the Canada deal. They sold stock at ~$5.80 in early 2019. Now, they're holding even though it is past $6. I think the COVID pandemic has massively increased SIGA’s value and their key people are holding at a price where they previously sold knowing that a lot more cash is coming in. I think there's also some possibility of acquisition at higher share price, being debt free makes them attractive to a buyer--just pick up all the shares, no liabilities to clean up.

Positions
I have 5% of my IRA in SIGA and a couple of long dated $10 calls (volume is shit FYI) in my funny money account.
Thank you for reading my novel.
Disclaimer: Just because I can write two coherent paragraphs on a play does not mean I know what I'm doing. Do your own due diligence.
submitted by hdigga to pennystocks [link] [comments]

Western Digital, Micron, and the Immense Promise of Edge Computing

Summary
Background
Since at least 2018, it seems like analysts have postulated how next-generation technologies and widespread cloud adoption would help reduce the cyclical volatility for companies like Micron and Western Digital. Indeed, there has been a steady rise in enterprise data center spend over the past five to seven years. Investors who have followed these names over that same period, though, will likely be more than familiar with the boom-bust nature of the memory and storage markets during that stretch. And neither stock has revisited its previous 2018 highs or come close to a sustained breakout. Between ongoing trade tensions with China, soft guidance for FY21 Q1 from Western Digital and Micron, and industry projections for several quarters of demand weakness, it seems like these two remain subject to cycle-induced share price ceilings.
Calls for Western Digital and Micron to experience shorter upgrade cycles and longer boom periods may have been early, but that does not mean they were wrong. Data center expansions by major cloud vendors and the nationwide build-out of 5G networks have been underway for years. However, increased demand for server-related products occurred against a backdrop of declining or plateauing demand in PC and mobile. And while 5G networks will play an important role in providing internet connectivity to an impending wave of IoT devices, further improvements to internet infrastructure are required to truly achieve the potential of these technologies. Luckily that internet technology is here, and it is called edge computing.
With the potential of edge networks to form the backbone of next-generation computing and the Internet-of-Things, Western Digital and Micron may finally achieve the sustained up-cycles and shorter downturns to push both stocks to new all-time highs.
What is the edge and why is it so important?
According to Gartner, edge computing is “a part of a distributed computing topology in which information processing is located close to the edge – where things and people produce or consume that information.” Whereas previously computation and data transfers were largely processed at centralized locations like internet exchange points or mass-scale public cloud data centers, edge computing utilizes servers that are placed at a geographical proximity closer to the end-user or device.
By cutting down on the physical distance that data must travel, edge platforms greatly reduce application latency (the delay before data transfer begins), increase bandwidth availability, and save money for companies providing digital services. In short, the edge enables more real-time collection and provision of data.
Unlike public cloud adoption – namely Amazon AWS, Microsoft Azure, and Google Cloud – over the past ten years, the development of edge networks will not simply lead to demand for server storage. What is different about the edge is that it will likewise enable a magnitude of associated technologies to finally become economical and operational – technologies that will require significantly greater storage.
The major value proposition of IoT is that by distributing a vast array of internet-connected machines and sensors, companies will be able to collect zettabytes of data and manage their assets more efficiently. In fact, Cisco believes that by 2025 the number of IoT devices will reach 75 billion. As a result, the size of the global datasphere is expected to increase by roughly 300% over the next five years alone.
When you think of how much data is being generated in 2020, that is a staggering figure. And the edge networks that will process and transit these data are projected to grow at an even faster rate. In 2019, the size of the entire edge market amounted to only $3.5bn. It is projected to hit nearly $45bn by 2027. There have even been recent studies that suggest the rise in the edge computing market over the next ten years could rival the growth in public cloud over the previous decade, a level that would have it surpass $100bn by 2030.
The role of flash storage in edge computing
As large as the hardware and data opportunity presented by edge computing and IoT is, how will this lead to specific demand for flash storage solutions offered by Western Digital and Micron? Flash array, or more specifically NAND solid-state drives (SSDs), offer numerous advantages both to IoT device manufacturers but also edge network providers.
Because IoT devices will collect and process huge amounts of data at the edge, these applications require faster retrieval and higher capacity flash memory solutions. For companies producing IoT devices, NAND SSD can deliver those speeds while also integrating built-in module-level security features, remote management, and more power configurations. Collectively, these features will result in better performance at a lower cost with greater reliability.
For edge network providers, edge servers require high performance for startup operations and extremely reliable storage. This is because edge applications, like a content delivery network (CDN), are very heavy on data reads. And rapid startup times are critical for edge providers to quickly launch computing instances and deliver the lowest possible latency for their customers. Beyond this, improvements in flash technology can greatly shrink the physical storage footprint, reduce power and cooling costs, all the while improving the overall speed, flexibility, and failure rates.
These factors are a large reason why edge network providers are increasingly leveraging flash storage that utilizes the NVMe protocol. NVMe (Non-Volatile Memory Express) is a method of moving stored data that differs from the previous default standard called SATA. NVMe allows CPUs to talk directly to storage drives and attain significantly faster data transfer speeds relative to SATA SSDs. These drives also integrate system startup, caching, and storing. In addition, NVMe SSDs come available in a much smaller form factor called M.2. NVMe SSDs in the M.2 form factor can be plugged directly into the motherboard, saving considerable space, and making it easier to upgrade in the future.
Both the Western Digital CL SN720 NVMe SSD and the Micron 7300 NVMe™ SSD can deliver up to six times greater performance relative to SATA SSDs. Although Western Digital and Micron currently sell SATA SSDs, NVMe technology is much better suited for edge applications and provides a strong runway for demand growth over the next five or more years. The performance per dollar (measured in requests per second) between NVMe and SATA SSDs has more or less converged after years of a noticeable price premium for NVMe, making it a more viable replacement in today’s pricing environment.
Western Digital and Micron: a side-by-side comparison
While Western Digital and Micron should both benefit from growing flash demand from edge computing customers, Micron presently offers potential investors a stronger financial position through its higher gross margins (33% versus 29% for Western Digital), lower debt levels ($6.6bn versus $9.7bn), and superior liquidity ($11.8bn versus $5.3bn). Although Micron guided up for Q4, CFO David Zinsner noted on 13 August that the company’s revenue for FY21 Q1 will likely fall short of previous guidance of $5.4 to $5.6bn.
Western Digital also provided downbeat guidance for FY21 Q1 ($3.70 to $3.90bn on revenue versus consensus of $4.36bn). Importantly, the company forecast GAAP gross margins between 21% to 23%. With the company needing to lower leverage and pay down debt associated with its SanDisk acquisition, ongoing margin pressure may leave the stock more susceptible near-term to continued memory demand weakness or a deteriorating pricing environment. When comparing the two companies’ competitive positioning in the current economic climate, it seems reasonable that Micron would trade at more than 2x the P/S and EV/Revenue multiples relative to Western Digital.
Market Cap P/S EV/Revenue Forward P/E
Micron $50.36bn 2.58 2.46 8.83
Western Digital $11.20bn 0.64 1.03 8.33
In addition to its financial position, some may point to Micron’s 3D XPoint technology as a major advantage in the flash memory market. With up to 1000x lower latency than some NAND offerings, the potential of the technology is substantial. Last year, HPE’s 3PAR storage unit predicted that storage-class memory – the class of memory that encompasses 3D XPoint – will eventually take over NAND. However, HPE also stated that due to the high cost of storage-class memory (roughly four times more expensive on a per-byte basis) it may take ten years before that occurs (for its part, Western Digital does not believe storage-class memory will fully replace NAND).
As nice as speed is, it is far from the only consideration when selecting an enterprise SSD solution. Customers look at form factor, power configurations, error handling, remote management, and other specifications to assess total cost of ownership or potential hardware upgrades required in the future. For edge network providers who avoided purchasing NVMe SSDs when they were considerably more expensive on a performance basis compared to SATA SSDs, it is hard to imagine why the calculus would change relative to storage-class memory.
If anything, edge providers have demonstrated a strong preference for cost-savings and flexibility in favoring white box versus OEM servers for example. Therefore, further performance and cost improvements for NVMe SSD are likely to strike the right balance for the foreseeable future. And while Micron and Intel were the first to establish a commercially viable storage-class memory product, Western Digital has been working on their rival product for at least a few years, and they even hold the original patents on XPoint and 3D XPoint. With the end market for storage-class memory years away from taking shape, the Micron technology advantage may never actually materialize.
With 66% of Micron’s revenue coming from DRAM and Western Digital’s other major revenue segment coming from hard drives (48% of revenues), Micron may have more favorable near-term trends. Taken with a long view, though, Western Digital offers greater upside for investors willing to ride out some current challenges. Although Micron and Western Digital have roughly the same market share in SSD (13% as of 2019), Western Digital’s greater revenue mix towards SSD gives the company better relative exposure to the edge computing end market.
In Western Digital’s Q4 earnings call, CEO Dave Goeckeler noted “…we believe flash is the greatest long-term growth opportunity for Western Digital…” And the company is already showing momentum with enterprise SSD revenue increasing nearly 70% on a sequential basis this past quarter. With the potential for NVMe SSD to result in shorter upgrade cycles, in combination with the rapid proliferation of IoT devices and enterprise data over the next five years, Western Digital will have an opportunity to pay down debt, enhance its capital structure, and expand its multiples to align more closely with those of Micron.
Risks
An overview of the DRAM and HDD end markets was beyond the scope of the above analysis. Should Micron lose significant market share in DRAM, or Western Digital in HDD, growth in NAND products could be offset.
Currently, Seagate has an immaterial market share in SSD having only recently entered the space. Should Seagate dedicate more significant resources to capturing market share, this could become another competitive pressure for Micron and Western Digital.
Micron has significant exposure to the Chinese market at over 50% of revenues. Although Western Digital derives fewer than 20% of sales from China, trade tensions or future technology bans from either the United States or China could create a major headwind for both companies.
Disclosure
I hold January 2022 WDC calls.
submitted by bumblebear3012 to stocks [link] [comments]

This rally is a mirage, we are only in the beginning stages of this recession

TL;DR at the bottom
Hi guys, with the market rallying 20% from its "bottom", many people are expressing the sentiment that we should buy back into the market again because the "fed" or the "government" won't allow stocks to crash.
We will for sure see unprecedented actions taken by the fed and the government because they have both the motive and the political capital to enact such policies. However, I think this is a misguided reason to believe the market is currently making its "real" rally.
I am not not a permabear nor am I a permabull. I just try to objectively analyze the facts, apply a healthy dose of margin of safety, and then see if my conclusions are actionable.
For example, I posted my thesis on why we will enter a serious global economic downturn on Feb 9th 10 days before it happened. At the time we were at the height of the biggest bull market in our history, and I had gotten a lot of attacks on my thesis leading up to me consolidating my thoughts:
https://www.reddit.com/China_Flu/comments/f1fm6y/the_world_economy_will_enter_a_serious_downturn/
I continued adding more thoughts on things like the potential efficacy of Chloroquine 2 weeks before Trump announced it in a press conference and the media picked up on it, the potential collapse of American oil producers before the price war happened, casinos going under, helicopter money, bailouts, etc all before they were announced or the markets priced them in here:
https://www.reddit.com/China_Flu/comments/fede69/continued_thoughts_on_the_global_economic_impact/
And finally I talked about an upcoming inflection point coincidentally moments before Trump first announced Chloroquine/Hydroxychloroquine and 2 trading days before the "bottom" of the market:
https://www.reddit.com/stocks/comments/fleh7e/incoming_inflection_point_for_general_market/
So I'm perfectly happy to make bearish calls or bullish calls, they are dependent variables of independent and unbiased analysis. I hope I made a reasonable case for why I am not personally biased (although, for the sake of humanity, I do wish for progress and prosperity of course).
I think the market rally is largely a mirage, and we are not getting correct pricings. The rally is probably driven by two main sources:
So the capital displacement is relatively simple: If you're seeking shelter in "risk free" investments that has some yields, you're now competing with a buyer (federal reserve) that prints hundreds of billions up to whatever it wants. They're literally squeezing out capital from the finite treasuries.
If you want riskier high quality corporate bonds, the fed will be there.
If you want even equities, you're going to face competition for them in the future. At least that's what former chairwoman Jenet Yellen recently said about the possibility of expanding their powers to buy equities.
So money is getting squeezed into a smaller and smaller relative portion of the financial markets, and the artificial demand is driving yields down and prices up. I could write a whole thread about this, but let's stick with the explanation of price movement.
The second main reason for the recent rally is from institutional investors who are incorrectly modeling earnings/yield of equities. So the logic here is: trillions are injected into the economy (fiscal injections), those trillions will become earnings for companies at some multiplier of the original stimulus over x amount of time, and if we add this number to the unstimulated estimated earnings, we can model future earnings.
My issue with this model, is on two main assumptions:
The first assumption is the length of disruption caused by the threat of this virus.
This virus is not going to stop its serious disruption of behavior from economic actors. Especially not in a country like the US where the majority of people have a massive financial disincentive to seek out healthcare. Here's my logic:
For months I've been praising the governments and response of South Korea, Singapore, and Taiwan. With Taiwan being the absolute best at handling the virus. However, I have also been using them as my leading indicators for how the virus will progress and affect economic actors. What I have seen developing lately is not good.
Singapore is now calling for a shutdown, after they initially did a herculean job of containing their outbreak. I had hoped that they would develop procedures (that we can copy) needed to run an open economy while the threat of the virus looms in the background. But that is not what has happened. Instead, we are seeing growing numbers of new clusters forming, and quickly getting out of control. They are tightening and shutting down their economy rather than opening up more. This is our leading indicator. A government far more responsible and effective than us is resorting to shutting down.
Taiwan is faring better, but only because of their prohibitive ban on almost all foreign travelers (this is obviously devastating to their tourism sector and broader economy). Their economy and society remains open, with many if not most people having hardly any interruptions to their lives (aside from mask wearing). They are one of only 3 countries where all children are still going to school. However, even their economy is faltering as they try to balance the prohibitive actions needed to contain the virus and the economic need to keep things open. They are proposing an unprecedented stimulus/rescue package to bolster their economy. And I think it's a safe assumption that if they ever do open up to foreign travelers again, especially with covid19 having proliferated as it already has, then they will have to deal with massive outbreak clusters all over their island.
South Korea, which has probably the relatable and relevant model for us to copy, has recently extended its social distance campaign. South Korea is a far larger nation than Singapore or Taiwan. They have a climate similar to Seattle/New York. They had a major outbreak in Deagu but didn't shut their country down. They never even banned Chinese travelers, yes, they had Chinese tourists in their country while the outbreak was happening. They were among the first to widely use Hydroxychloroquine/chloroquine as a treatment for Covid19. They had among the lowest fatality rates. They contained their outbreak without shutting the whole country down.
Even South Korea can't truly return to normal and open their economy up.
So why, in our incredible American exceptionalism hubris, and far less competent leaders, do we believe we're going to come anywhere close to normalcy in the near future?
Let's look at the next assumption, that fiscal stimulus would end up as earnings for companies. There's no doubt some will end up as earnings, but only a small fraction of what is being modeled by those on Wall Street.
The average American don't even have $1000 in emergency funds, do we expect them to return to their normal consumption habits when they risk having hospital bills multiples of $1000 just from walking past the wrong person? Do you think Americans, as much as they love to spend, aren't going to put some of that stimulus check in their emergency funds rather than contribute it to the earning of some companies? Sure, there will be some "forced" spending of the money (food and necessities), but if anyone is modeling the multiplier effect from previous data, then they really don't appreciate how different this virus makes things. Even in the GFC, laid off people didn't really worry about the heightened threat of being hospitalized.
Finally, some investors believe the Fed and the government literally will do anything to keep the numbers up. If this is true, you should be buying silver (or gold), not stocks.
Monetary actions can be reversed relatively easily. They are far more dynamic tools. Fiscal actions are not. You put money in the hands of spenders, that money is gonna circulate. And you really don't have an easy way of reversing that. If we think the government is going to keep handing out stimulus checks, grants to businesses, and other fiscal stimulus, then the inflation predicted from the GFC will come true for this crisis.
The fall out of inflation will be difficult to truly understand. But I do think inflation will be disruptive enough to the economy that inflation hedge assets will outperform other assets at least in the short term. For example, if inflation goes to 5%, who's going to lend to companies for less than inflation? With costlier debt, equity yield goes down, and again, what investor wants yields less than inflation? Inflation is going to cause all kinds of disruptions. I think the disruptions will come down to less liquidity (credit will vanish with uncertain inflation) and higher economic friction (less efficiency).
So if the response to why the market has to go up is continuous fiscal (and some monetary) actions to prop up spending and earnings, then the question is how will fiscal actions be reversed? How do we get that money out after things go back to "normal"?
I think if we see equities rise from here, it'll be reflective of inflation rather than inflation-adjusted earnings. Silver would be the play here.
I have a lot more thoughts on this, especially on the time it takes to turn the gears of the financial system and why the inertia is moving us deeper into global recession, not out of it, but I'm running out of time and must end here.
TL;DR this is a fake rally, and if anyone really expects prices to continue rallying, buy silver instead
submitted by Starcraftduder to StockMarket [link] [comments]

World's Largest Drug Cartel: THe British Empire; Details on 2 opium wars fought in China, FORCING DRUGS into China, creating tens of millions of addicts. Forcing China to CEDE 6 cities after losing the opium war. By Jeffrey St. Clair and Alexander Cockburn

This is one of the better articles I have found on the Opium Wars:
-Hong Kong remained under British control until 1997 because of the opium wars and the Opium trade.
-2,000 tonnes of Opium per year imported into China by 1840, 6,500 tonnes imported by 1880 +20,000 tonnes of domestic production
-Hundreds of thousands killed by British soldiers to protect the opium trade
-Starvation in India caused by opium production taking all of the farm land.
(Excerpt) For the full article click the link
https://www.counterpunch.org/2017/12/01/the-us-opium-wars-china-burma-and-the-cia/

(....)
The opium poppy was not native to Southeast Asia but was introduced by Arab traders in the seventh century AD. The habit of opium smoking didn’t take hold till the seventeenth century, when it was spread by the Spanish and Dutch, who used opium as a treatment for malaria. The Portuguese became the first to profit from the importing of opium into China from the poppy fields in its colonies in India. After the Battle of Plassey in 1757, the British East India Company took over the opium monopoly and soon found it to be an irresistible source of profit. By 1772 the new British governor, Warren Hastings, was auctioning off opium-trading concessions and encouraging opium exports to China. Such exports were already generating £500,000 a year despite the strenuous objections of the Chinese imperial government. As early as 1729 the Chinese emperor Yung Cheng had issued an edict outlawing opium smoking. The sanctions for repeat offenders were stern: many had their lips slit. In 1789 the Chinese outlawed both the import and domestic cultivation of opium, and invoked the death penalty for violators. It did little good.
Inside China these prohibitions merely drove the opium trade underground, making it a target of opportunity for Chinese secret societies such as the powerful Green Circles Gang, from whose ranks Chiang Kai-shek was later to emerge. These bans did not deter the British, who continued shipping opium by the ton into the ports of Canton and Shanghai, using what was to become a well-worn rationale: “It is evident that the Chinese could not exist without the use of opium, and if we do not supply their necessary wants, foreigners will.”
Between 1800 and 1840 British opium exports to China increased from 350 tons to more than 2,000 tons a year. In 1839 the Chinese Emperor Tao Kwang sent his trade commissioner Lin Tze-su to Canton to close the port to British opium ships. Lin took his assignment seriously, destroying tons of British opium on the docks in Canton, thus igniting the Opium Wars of 1839–42 and 1856. In these bloody 📷campaigns the British forced China open to the opium trade, meanwhile slaughtering hundreds of thousands of Chinese, a slaughter assisted by the fact by 1840 there were 15 million opium addicts in China, 27 percent of the adult male population, including much of the Chinese military. After the first Opium War, as part of the treaty of Nanking China had to pay the British government £6 million in compensation for the opium destroyed by Lin in Canton. In all essential respects Shanghai thereafter became a western colony. In 1858 China officially legalized sales and consumption of opium. The British hiked their Indian opium exports to China, which by 1880 reached 6,500 tons, an immensely profitable business that established the fortunes of such famous Hong Kong trading houses as Jardine, Matheson.
Meanwhile, the Chinese gangs embarked on a program of import substitution, growing their poppy crops particularly in Szechwan and Hunan provinces. Labor was plentiful and the poppies were easy to grow and cheap to transport – and the flowers were also three times more valuable as a cash crop than rice or wheat. The British did not take kindly to this homegrown challenge to their Indian shipments, and after the crushing of the Boxer Rebellion in 1900 they forced the Chinese government to start a program to eradicate the domestic crop, a program that by 1906 had finished off opium cultivation in the whole of Hunan province.
It was at this point that the Chinese gangs shifted their opium cultivation southward into the Shan States of Burma and into Indochina, making the necessary arrangements with the French colonial administration, which held the monopoly on opium growing there. Hill tribes in Indochina and Burma were conscripted to the task of cultivation, with the gangs handling trafficking and distribution.
The suppression campaign run by the Chinese government had the effect of increasing the demand for processed opium products such as morphine and heroin. Morphine had recently been introduced to the Chinese mainland by Christian missionaries, who used the drug to win converts and gratefully referred to their morphine as Jesus opium. There was also a distinct economic advantage to be realized from the sale of heroin and morphine, which were cheap to produce and thus had much higher profit margins than opium.
Despite mounting international outrage, the British government continued to dump opium into China well into the first two decades of the twentieth century. Defenders of the traffic argued that opium smoking was “less deleterious” to the health of Chinese addicts than morphine, which was being pressed on China, the officials noted pointedly, by German and Japanese drug firms. The British opium magnates also recruited scientific studies to back up their claims. One paper, written by Dr. H. Moissan and Dr. F. Browne, purported to show that opium smoking produced “only a trifling amount of morphia” and was no more injurious than the inhalation of tobacco smoke.
After the opium wars reached their bloody conclusion and China was pried fully open to European trade, the coastal city of Shanghai rapidly became the import/export capital of China and its most westernized city. A municipal opium monopoly had been established in 1842, allowing the city’s dozens of opium-smoking dens to be leased out to British merchants. This situation prevailed until 1918, when the British finally bowed to pressure from the government of Sun Yat-sen and relinquished their leases.
This concession did little to quell the Shanghai drug market, which duly fell into the hands of Chinese secret societies such as the notorious Green Circles Gang, which, under the leadership of Tu Yueh-shing, came to dominate the narcotics trade in Shanghai for the next thirty years, earning the gang lord the title of King of Opium. Tu acquired a taste for the appurtenances of American gangsters, eventually purchasing Al Capone’s limousine, which he proudly drove around the streets of Nanking and Hong Kong.
Tu was extraordinarily skilled both as a muscle man and an entrepreneur. When the authorities made one of their periodic crackdowns on opium smoking in Shanghai, Tu responded by mass-marketing “anti-opium pills,” red tablets laced with heroin. When the government took action to restrict the import of heroin, Tu seized the opportunity to build his own heroin factories. By 1934, heroin use in Shanghai had outpaced opium smoking as the most popular form of narcotics use. Tu’s labs were so efficient and so productive that he began exporting his Green Circles Gang heroin to Chinese users in San Francisco and Seattle.
Tu’s climb to the top of the Chinese underworld was closely linked to the rise to political power of the Chinese nationalist warlord General Chiang Kai-shek. Indeed, both men were initiates into the so-called “21st Generation” of the Green Circles Gang. These ties proved useful in 1926, when Chiang’s northern expeditionary forces were attempting to sweep across central and northern China. As Chiang’s troops approached Shanghai, the city’s labor unions and Communist organizers rose up in a series of strikes and demonstrations designed to make it easier for Chiang to take control of the city. But Chiang stopped his march outside Shanghai, where he conferred with envoys from the city’s business leaders and from Tu’s gang. This coalition asked the Generalissimo to keep his forces stationed outside Shanghai until the city’s criminal gangs, acting in concert with the police force maintained by foreign businesses, could crush the left.
When Chiang finally entered Shanghai, he stepped over the bodies of Communist workers. He soon solemnized his alliance with Tu by making him a general in the KMT. As the Chinese historian Y. C. Wang concludes, Tu’s promotion to general was testimony to the gangsterism endemic to Chiang Kai-shek and his KMT: “Perhaps for the first time in Chinese history, the underworld gained formal recognition in national politics.” The Green Circles Gang became the KMT’s internal security force, known officially as the Statistical and Investigation Office. This unit was headed by one of Tu’s sidekicks, Tai Li.
Under the guidance of Tu and Tai Li, opium sales soon became a major source of revenue for the KMT. In that same year of 1926 Chiang Kai-shek legalized the opium trade for a period of twelve months; taxes on the trade netted the KMT enormous sums of money. After the year was over Chiang pretended to acknowledge the protests against legalization and set up the Opium Suppression Bureau, which duly went about the business of shutting down all competitors to the KMT in the drug trade.
In 1933 the Japanese invaded China’s northern provinces and soon forged an accord with the KMT, buying large amounts of opium from Generals Tu and Tai Li, refining it into heroin and dispensing it to the Chinese through 2,000 pharmacies across northern China, exercising imperial supervision by the addiction of the Chinese population. General Tu’s opium partnership with the occupying Japanese enjoyed the official sanction of Chiang Kai-shek, according to a contemporary report by US Army Intelligence, which also noted that it had the backing of five major Chinese banks “to the tune of $150 million Chinese dollars.” The leadership of the KMT justified this relationship as an excellent opportunity for espionage, since Tu’s men were able to move freely through the northern provinces on their opium runs.
In 1937 the Generalissimo’s wife, Madam Chiang, went to Washington, where she recruited a US Army Air Corps general named Claire Chennault to assume control of the KMT’s makeshift air force, then overseen by a group of Italian pilots on loan from Mussolini. Chennault was a Louisiana Cajun with unconventional ideas about air combat that had been soundly rejected by the top army brass, but his fanatic anti-Communism had won him friends among the far right in Congress and in US intelligence circles.
(....) article continues
More articles by:JEFFREY ST. CLAIR - ALEXANDER COCKBURN
Jeffrey St. Clair is editor of CounterPunch

For more info:
China lost Hong kong and 5 other cities for 150 years, until 1997 because of the Opium wars. The forced importation into china of tens of millions of pounds of opium a month: This created tens of millions of addicts and caused the partial collapse of the government. It went on for hundreds of years. The chinese emperor wanted to know why they were selling opium in China, but not in England where it was illegal!
OPIUM WARS - The Original NARCO-COLONIALISM - The Original State Sponsored Drug Traffic…Starting in in the mid-1700s, the British began trading opium grown in India in exchange for silver from Chinese merchants. Opium — an addictive drug that today is refined into heroin — was illegal in England, but was used in Chinese traditional medicine.
1
https://en.wikipedia.org/wiki/Opium_Wars
https://en.wikipedia.org/wiki/First_Opium_War
https://en.wikipedia.org/wiki/Second_Opium_War
2
This war with China . . . really seems to me so wicked as to be a national sin of the greatest possible magnitude, and it distresses me very deeply. Cannot any thing be done by petition or otherwise to awaken men's minds to the dreadful guilt we are incurring? I really do not remember, in any history, of a war undertaken with such combined injustice and baseness. Ordinary wars of conquest are to me far less wicked, than to go to war in order to maintain smuggling, and that smuggling consisting in the introduction of a demoralizing drug, which the government of China wishes to keep out, and which we, for the lucre of gain, want to introduce by force; and in this quarrel are going to burn and slay in the pride of our supposed superiority. — Thomas Arnold to W. W. Hull, March 18, 1840
http://www.victorianweb.org/history/empire/opiumwars/opiumwars1.html
3
https://web.archive.org/web/20180311121505/https://sacu.org/opium2.html
See also Opium in China
In 1997 the colony of Hong Kong was returned to China. Hong Kong Island became a British possession as a direct result of the Opium War, the opening shots of which were fired 150 years ago. All Chinese, regardless of political ideology, have condemned this armed confrontation as an unjust and immoral contest. As far as they are concerned, Britian's waging a war for the sake of selling a poisonous drug constitutes the most shameful leaf of human history. In the hindsight provided by subsequent events in China, it is, perhaps, easy to condemn this act of British aggression, but it is less certain that the event was seen in the same condemnatory light by Chinese and foreign observers a century and a half ago.
4
Article on opium trade in 1920s Shanghai http://streetsofshanghai.pbworks.com/w/page/18638691/Opium
Opium (yapian 鸦片)
Shanghai was built on the opium trade. Before the 1850s, Shanghai was the terminal port for coastal opium traffic. Shanghai was opened to foreign trade on November 11th 1843 and very soon afterwards, Jardine’s (the biggest British company in China at the time) set up a branch there and hired Chinese compradors, one of whom was solely concerned with the supervision of opium. By 1845, the opium moving through Shanghai constituted almost half of all the opium imported into China.
In 1880, nearly 13,000,000 pounds of opium came into China, mainly from India. By 1900, imports declined, because China was now producing an average of 45,000,000 pounds of opium per annum itself. There were at least 15,000,000 Chinese opium addicts – in Chengdu, there was one opium den for every 67 inhabitants of the city. In Shanghai, some foreign missionaries began to complain that their homes were almost entirely surrounded by opium dens behind bamboo fences. The city had more than eighty shops where the drug was sold openly in its crude form, and there were over 1,500 opium houses.The owners of these establishments bought their supplies from three major opium firms in the International Settlement – the Zhengxia, Guoyu and Liwei. All three were owned by Swatow (Chaozhou) merchants who formed a consortium. This consortium obtained its opium from four foreign merchant houses: David Sassoon & Co., E.D. Sassoon, S.J. David, and Edward Ezra.
5'
Opium financed British rule in India'
http://news.bbc.co.uk/2/hi/south_asia/7460682.stm
What did you discover in the course of your research? How big was the trade?
Opium steadily accounted for about 17-20% of Indian revenues. If you think in those terms, [the fact that] one single commodity accounted for such an enormous part of your economy is unbelievable, extraordinary.
How and when did opium exports out of India to China begin?
The idea of exporting opium to China started with Warren Hastings (the first governor general of British India) in 1780.
The situation was eerily similar to [what is happening] today. There was a huge balance of payments problem in relation to China. China was exporting enormous amounts, but wasn't interested in importing any European goods. That was when Hastings came up with idea that the only way of balancing trade was to export opium to China.
submitted by shylock92008 to narcos [link] [comments]

The Pandemic Stock Market, Bullish or Bearish on Oil, and CPE stock

There have been many bulls and bears going back and forth on the battered oil company CPE so I decided to take a deep dive into the data by exploring the 3 points below. Starting off with my take on the current stock market, followed by an analysis of oil, and finally CPE performance. Be warned this will be a long read but hopefully insightful for everyone. Let’s keep the dialogue constructive.
  1. The stock market is heavily out of balance and disconnected from reality.
  2. Whether you are bullish or bearish on CPE and other oil companies, should be reflective of whether you are bullish or bearish on oil prices.
  3. CPE performance, stock split, and some investors talks of bankruptcy. Comparing to the likes of CHK and Hertz.
  4. The stock market is heavily out of balance and disconnected from reality.
- The basis of how the stock market functions is a derivative of past performance and management insight into future expected earnings … in a “normal” economy.
- Now let’s throw in the pandemic. How can a retail investor or anyone for that matter truly value a company? Leading to the stock market being in disarray, in the ST. That disarray means, stocks can be pushed in one direction or another based on their weight.
- Don’t buy into the MSM and Wall Street trying to sell this as Robinhood and retail investors. While they factor in, take Apple for instance. Apple alone has gone from $1.29T (end of calendar ’19) to $2.13T (as of writing this) in market cap. That near $1T increase, in <6 months, is laughable that Robinhood users were even a mentionable portion of that.
- It’s clear that the large institutions, especially banks will not lose like they did during the Great Recession. How do they offset any potential losses from defaults and other unfavorable financial outcomes during the pandemic? Trading. For example, Q2 was Goldman’s best equities trading quarter in 11 yrs. at $2.94B. FICC and trading at $4.93B was the highest in 9 yrs. But how can they know which sector to invest in?
- After the dust from the initial sell off and minor rebound, the institutions start making their bets in the companies that would perform “favorable” in the current environment. That being largely tech and some medical companies. Then came pushing the narrative. But assuming that be the case, that would mean that the effects would have to be favorable in the LT and not just an increase in the ST. Narrative is critical here. On one hand, you have analysts saying things like tech companies will perform well during the pandemic in the ST but don’t look too far to the future. Then some others arguing that the pandemic has changed the world and these companies will continue to do well in the LT and the ST improved performance isn’t just pent up demand. While there is some validity to believing that companies like Amazon should be traded at a higher multiple than the start of ’20, we will again focus on the highest market cap Apple. Looking at the financial statements, cash, equv, and mrkt sec are down ~18% ($237B to $194B) from end of fiscal ’18 (Sep ’18) to Jun ’20. Debt to Equity has more than doubled from end FY ’15 at 1.4 to Jun ’20 at 3.4. EPS is trending towards as an improvement YoY but certainly doesn’t justify market cap nearly doubling. What has doubled is R&D spend at $8B in ’15 to $16B in ’19 and on pace to be $18B in ’20. Dividend payout has shrunk from 1.7% at end of ’15 to 0.7% in Jun ’20. While Apple’s services mix is improving though, there is little risk factored in for the lower margins realized in China, regulations to come for big tech in the US, trade relations between the US and China, and the App store tensions with gaming companies. Quickly valuations have spiked to unthinkable multiples.
- Look at Tesla, as of writing this, P/E is at 1,055. Meaning every dollar the company generated in profits, the investor is paying $1,055. Are consumers really flocking to buy a Tesla? Is the US really in a position to shift from gas to electric? Greencarreports has EV surpassing ICE in 2037 (link below). Then there is the question grid capacity. Using EV cars requires a sizable demand on the grid. Certainly renewables will not make that up. Natural gas and coal will do the heavy lifting. According to the EIA (link below), renewables made up 17.5% of the total electric generation, while fossil fuels made up 62.7%. Personally, I hope the investment in renewables increases and battery technology improves exponentially but remaining realistic, fossil fuels will be around for some time, especially in emerging markets.
- Now focusing back on the stock market, how are earnings multiples so out of whack? First you have stock analysts touting how these tech stocks can run on forever. This reminds me of 2007 and the housing market. Well we all know how that ended. Instead of doing their due diligence and stating, this stock is way overvalued, they quickly raise their price target. Forget about fundamentals, less keep chasing. Not all analysts are doing this though, especially with the controversial stock Tesla, but this reminds me of the Barron’s article (link below) on Netflix. The author almost shames the analyst for downgrading his rating on the stock by saying some things like this. “Remarkably, he opted to cut his rating” and “It is unclear whether that was the right move, but it certainly is interesting.” Props to him though, for doing he his job correctly.
- The second reason driving these bizarre PE ratios is really driven by Wall Street knowing the companies damaged by the pandemic in the ST cannot use their most powerful tool to correct prices … share buybacks. Knowing a large portion of cyclical companies don’t have the ability to do buybacks, the stock market cannot correct in the ST. Again, that’s not the case for all stocks, such as Berkshire purchasing a record number of buybacks in 2Q (link below). The “Oracle of Omaha” knows very well how the market functions and we all know his investing record.
- Closing thoughts on point 1. If valuations were truly being treated as future looking, then oil, bank, and airline companies would be traded at much higher valuations. Realistically, in a year it’s safe to assume there will be a vaccine and travel will improve. Oil will rebound, maybe even higher than it was at the start of the year because of much lower supply and investment, and banks have already built in reserves for an increased size of loan defaults. Keep this in mind as an investor. Gains and losses are only realized at selling. Until that point, these are unrealized. As Mark Cuban and others have once said, “Pigs get fat, hogs get slaughtered.” And now on to the second point …
- https://www.greencarreports.com/news/1124428_report-ev-sales-will-surpass-gas-powered-models-in-2037
- https://www.eia.gov/tools/faqs/faq.php?id=427&t=3
- https://www.barrons.com/articles/the-disturbing-reality-fueling-this-bull-market-51598004009
- https://www.bloomberg.com/news/articles/2020-08-09/buffett-shows-faith-in-berkshire-portfolio-with-record-buybacks
  1. Whether you are bullish or bearish on CPE and other oil companies, should be reflective of whether you are bullish or bearish on oil prices.
- According to the EIA (EIA link below), the forecast on WTI and Brent oil prices for ’20 are $38.50 and $41.42 on avg. respectively. Their anticipation is Brent at $43/bbl in second half of ’20. Down from $57.02 and $64.37 respectively in ’19. Forecast for ’21 is $45.53 and $49.53 respectively. anticipating Brent. As of writing, oil prices are at $42.39 and $44.38, respectively.
- The EIA also forecasts (EIA link below) total world consumption for global petro and other liquids at 93.14B bbl/d in ’20, which is down from 101.25M bbl/d in ’19. Interestingly enough, their forecast of 100.16M bbl/d in ’21 is almost equal to ’18 at 100.49M bbl/d when WTI was at $65.06.
- Looking at oil rigs in the US (Y Charts link below), the total went from 670 at beg of ’20 to a remarkable 176 as of Aug 7.
- Knowing this, oil bulls make a strong case really on the basic economics of supply and demand.
- Some of the counter arguments for decreased demand are COVID uncertainty, EV and renewables, and supply reserves. For COVID, my anticipation is, based off early clinical trials (Medical Express and UPI links below) and the huge investment in developing a vaccine (QZ link below), there will be a vaccine by early next year. There is even an upside possibility of sooner. A lot of the doubt again, being touted by the MSM for political purposes.
- EV and renewables, my case has been made in my first point on the stock market out of balance, but mainly is due to the grid limitations, technology, and investment requirements. While I truly hope this happens before some of the models I have seen predict, this is still decades away no matter what renewable energy bulls say.
- The final point being the current oil reserves. The EIA has US total stocks at 1.44B bbl as of Aug 14 compared to 1.31B a year ago (EIA link below), which is ~10% increase. The counterpoint here would be the drastic decline in US oil rigs mentioned earlier, down by 74% just from the start of the year. Also, on investment side there is not only a cut in many oil companies’ CAPEX forecasts, but also there is an indication from some major banks they will no longer finance some fossil fuel investments (Sierra Club link below). This will increase barriers to entry for financing and make it harder for supply to increase should prices go up substantially.
- Closing points on number 2. Betting against an oil company, should be reflective of your position on oil prices. With treatments and a vaccine for COVID in the works, a near demand recovery forecasted by the EIA in ’21, and a limited reduction in oil supply and financing, I certainly wouldn’t bet against oil in the coming 3-5 years. And finally on to point 3 …
https://www.eia.gov/outlooks/steo/report/prices.php
https://www.eia.gov/outlooks/steo/report/global_oil.php
https://ycharts.com/indicators/us_oil_rotary_rigs
https://medicalxpress.com/news/2020-08-pfizer-covid-vaccine-robust-results.html
https://www.upi.com/Top_News/US/2020/08/21/Pfizer-BioNTech-COVID-19-vaccine-on-track-for-review-in-Octobe5181598024833/
https://qz.com/1877928/the-us-has-invested-over-5-billion-in-covid-19-medical-rd/
https://www.eia.gov/petroleum/supply/weekly/pdf/wpsrall.pdf
https://www.sierraclub.org/sierra/2020-2-march-april/club-news/goldman-sachs-refuses-finance-drilling-arctic
  1. CPE performance, stock split, and some investors talks of bankruptcy. Comparing to the likes of CHK and Hertz.
- Let’s first explore the point of bankruptcy, since the comparisons being made are like the Communist News Network saying there really isn’t much going on in Portland right now. This is really just propaganda meant to sway opinions and is simple minded. Do research.
- Fundamentally, a company goes bankrupt by not being able to pay interest on debt or refinance (in some cases, both).
- We will look at CHK first. Based on their latest quarterly filing with the SEC, assets were $6.6B, liabilities $10.7B, meaning Equity was ($4.1B). NI for Q2 was ($276M) and there were no impairments in the quarter. Looking at Q2 ’19, NI was 75MM. Given the negative SE and low NI in a year where prices were more stable, there is no surprise why this company went bankrupt.
- Looking at some of the other larger O&G companies to go bankrupt on page 7 of the Haynes and Boone report (link below), XOG, CRC, and UPL all had negative SE with weak earnings, based on the latest quarterly SEC filings.
- While HTZ did have a positive SE, debt to equity sat at a staggering 33.4, based on the June quarter ending SEC filing. Earnings through the 1H ’20 were ($1.2B) and in 1H ’19 were ($108M).
- For the companies that have declared bankruptcy that are mentioned here, it’s clear they were struggling well before the pandemic and it made the inevitable, reality.
- Now let’s take a look at the stock split. Lots of heartburn for everyone holding CPE on this topic point … rightfully so though considering CPE stock has largely tanked since this happened. Fundamentally, this does nothing to a shareholder’s value in a company. You come out, owning the same portion of the company as you went in. This is much like Apple and Tesla doing a traditional split but oddly enough, their stocks have soared. There have been some Wall Street analysts, who already know it’s a moot point with fractional share trading today, that state that retail investors are more likely to invest because of the lower point, but this is really just another reason for point 1 that I have already made. But why has CPE suffered?
- There is one theory that I have come up with but have not had the time to investigate. Big money drives a narrative of shorting oil and other companies that will be most impacted by the pandemic to win both on the increase in tech stocks and downward slide of oil and others. Again, this is just theory, but holds some merit due to the sizable short positions on oil that I have seen, since it’s too large for retail investors.
- If large institutions are shorting on a massive scale, price will almost certainly go down. And which better, than one of the worst performing oil company stocks that bought attention to itself with the reverse split. It’s just as Apple and Tesla going up doesn’t really make sense, CPE going down doesn’t either with a stock split or reverse split. Just another reason to pile on.
- There has been a point made that delisting has been taken off the table by doing the RS but a counter to that would be it’s unlikely that during the pandemic any changes like this would be made. A company could argue that government intervention put them in this position in the fist place with the mandated shutdowns.
- Finally, let’s look at the performance of CPE. Based on the latest quarterly SEC filings, assets were at $5.8B, liabilities $3.9B, and SE $1.9B. And that’s after taking a staggering $1.28B impairment on evaluated O&G properties (for the non-financial investors, that impairment decreased total assets and SE). CPE had to decrease the value of these assets from $54.63/bbl to $45.87/bbl based on a realized 12-month avg price … ~16% drop in value. What that means is if oil prices stay below $45.87/bbl, this is lost value for investors. If prices improve, there will be upside on the value of O&G properties, leading to higher profits. It’s important to note though, CPE has already indicated in their financial statements that they expect to incur another impairment, based on 12-month avg expected realized price of $43.45. The impairment on that assumption would be much smaller though.
- Someone asked on here hasn’t CPE been through worse. The answer really is yes. Although prices didn’t drop in the negative, in ’15 realized prices went down by 47%. From $94.99/bbl to $42.75/bbl, leading to an impairment of $208MM for CPE. The reason this impairment was so much lower is because total assets were only $789M in ’15. While this doesn’t seem like a good thing, it’s worth noting that CPE has grown total assets to $7.3B at the end of Mar ’20, prior to the second quarter impairment.
- CFOA for the first half of ’20 was $298M on a NI of ($1.35B), excl impairment ($72M). Q2 NI was ($1.56B), excluding impairment ($288M). Q2 ‘19 NI was $54M. Given the healthy CFOA, CPE was able to pay interest, which was $88M (prior to any capitalized interest) for the first half of ‘20.
- Closing thoughts on the final point. CPE management has its work cut out for them, especially considering their current debt load. Assuming WTI stays on par to avg ~$43/bbl in ’20 and given that the EIA is forecasting oil at ~$45/bbl in ’21, bankruptcy seems unlikely. With that said, management could do something really stupid and change that (for those of you wondering, a reverse split would not cause bankruptcy). The company has some debt restructuring that needs to be done and needs to keep CAPEX spending under wraps, even if oil prices start to come back. In my opinion, this would be their best chance to pay back debt and right size the business. On the upside, oil prices could get squeezed to $60+/bbl. There are some even forecasting ~$100/bbl. This does seem very bullish but $60/bbl is not unreasonable, considering the WTI has already recovered to $42/bbl and the EIA is forecasting ’21 consumption to be close to par with ’18. The way I view buying oil companies today is like buying a house in ’09 and buying a tech company is like buying a house in ’07. There is a lot more upside to oil than downside and way more downside to tech than upside. Whether you believe oil is done for or going on another boom, you should make a risk adjusted assessment before you buy any stock and above all else do your research. Don’t rely on someone, even so called “experts”, as they are trying to sway you one way or another to fit their agenda and not what’s best for you. Thanks for reading.
https://www.haynesboone.com/-/media/Files/Energy_Bankruptcy_Reports/Oil_Patch_Bankruptcy_Monitor
submitted by JustAnAccountant1 to u/JustAnAccountant1 [link] [comments]

This Weeks News & Events 07/06 - 07/10

China & The Tesla Factory - China kicked off the trading week with a rally after a state owned media company released an article titled, I shit you not, “Hahahahaha! The signs of a bull market are more and more clear.” The article encouraged investors to invest into stocks for the new bull market so they could reap the financial benefits. The result was the best rally China had in over a year, with many bank stocks gaining the maximum allowed of 10% in a day, while the CSI index jumped almost 6%. Margin loans in China are now at their highest level in 5 years, because there’s no way this is going tits up. The chinese bond market is reflecting a risk off approach as investors sell their bonds to dive back into equities, driving the chinese 10 year yield up 15 basis points to 3.06%. Meanwhile the US bond market continues to show extremely bearish sentiment despite the on again off again rally in US equities. Demand for the 3 & 10year bonds surged, as states experienced huge increases of rising covid cases. The 10 year note hit a low on friday of .56% while the 5 year went as low as .26%.
President Trump met with Andres Manuel Lopez Obrador this week to sign a joint declaration celebrating the USMCA trade deal between the US, Mexico, & Canada. The USMCA trade deal will replace NAFTA which was put in place by the Clinton administration. The agreement includes new provisions for agricultural produce, manufactured products, labor conditions, digital trade, and manufactured products. Although since the Corona Virus, US imports from Mexico have dropped 59%, with the automotive industry seeing the biggest decline of imports/exports.
A 2nd stimulus bill is almost certain at this point although there is extreme uncertainty about what that would look like. Mitch McConnel has a price target of 1.3Trillion for the next stimulus bill, which is significantly lower than the 3Trillion Democrats were willing to spend in their HEROS act bill. Donald Trump actually lies in the middle and wants to spend 2 trillion on the next stimulus bill and increase stimulus check payments, despite Larry Kudlow & Mitch McConnels comments that another round of stimulus checks would be less than $1200 and target people with an income of less than $40,000 or are unemployed. Feel free to decipher that however you see fit. Whatever they end up deciding, it is expected to be passed by the end of July, with checks possibly being sent out as early as August. McConnel and Kudlow may get their way if US spending is taken into consideration, in July the US budget deficit hit 2.7 Trillion dollars. Roughly half of the government's spending last month (511Billion) went towards the payment protection program. If the spending continues on its current course, the deficit is expected to be nearly 4 Trillion for 2020. (During the 2009 Financial crisis the budge deficit was 1.9Trillion) This does not include the 3 Trillion so far that has been added to the Fed's balance sheet. Overall it is predicted by the ANU that the Global economy can lose as much as 21Trillion dollars by the end of 2020 if the Corona Virus is not contained.
Despite efforts to reopen the economy, layoffs are still feared throughout the country. United Airlines(UAL) sent out a notice to workers warning that up to 36,000 workers could be furloughed, reports are surfacing that Wells Fargo also plans on cutting thousands of jobs later this year. If true, this could be a big hit for the banking industry that rallied this week going into its earnings for next week. If Borrowing is an indicator to how banks will fair during Q2 earnings, it is not looking good. In may it was reported that credit card purchases decreased for a 3rd straight. May saw borrowing decrease 5.3% (18.3billion), which is less than the 20% decline seen in April but still contributing to the downtrend that started in March(-4.5%). Even though spending had upticked in May as economies slowly reopened, a large part of spending came from people's individual savings accounts, rather than being put on credit card purchases.
It was also reported that 32% of Americans were unable to make the full payment on their mortgage or rent as of the first week of this July. This is a slight increase from previous months where in May(30%) and June (31%) about a third of households were unable to make their mortgage payments on time. Although the statistic is a bit misleading because at the end of the month 90% of the payments had been made in full, but one could imagine the devastating effects this will have down the road to the individuals credit and interest rates from missed/late payment penalties.
Though it hasn’t been officially announced, any household seeking financial relief need only to invest their life savings into $TSLA. The anticipation of $TSLA being added into the S&P 500 due to a leaked email started a catalyst that was further fueled by a better than expected quarter driving the price from the $950 range all the way past $1500 by EOD on Friday.
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Here is comrade Xi Jinping's article on Marxist political economy in contemporary China

http://www.xinhuanet.com/politics/leaders/2020-08/15/c_1126371720.htm
This is actually a speech given at the 28th collective study session of the Political Bureau of the 18th Central Committee of the CPC on November 23, 2015. It is in Mandarin. If anyone is able to find the official English translation, do link it here.
I am pasting the English translation by Google translate:
Constantly open up new realms of contemporary Chinese Marxist political economy
Xi Jinping
Today, the Political Bureau of the Central Committee conducts the 28th collective study. The content of the study is the basic principles and methodology of Marxist political economy. The purpose of arranging this study is to strengthen the study and understanding of the basic principles of Marxism. Before, we have arranged to study the topics of historical materialism and dialectical materialism. This time, we will deepen our understanding and grasp of the laws of economic development by reviewing Marxist political economy, and improve our ability and level of leading our country's economic development.
Next, let me talk about a few experiences.
Marxist political economy is an important part of Marxism, and it is also a compulsory course for us to uphold and develop Marxism. Based on the world outlook and methodology of dialectical materialism and historical materialism, Marx and Engels criticized and inherited the ideological achievements of historical economics, especially British classical political economy, and established Marxist political economy through in-depth research on human economic activities. It reveals the laws of economic movement in human society, especially capitalist society. Engels said that "all theories of proletarian parties come from the study of political economy." Lenin regarded political economy as the "most profound, most comprehensive, and detailed proof and application" of Marxist theory. Nowadays, there are various kinds of economic theories, but the foundation of our political economy can only be Marxist political economy, not other economic theories.
Some people believe that Marxist political economy is outdated and Capital is outdated. This conclusion is arbitrary and wrong. To put it aside, from the perspective of the international financial crisis, many capitalist countries have continued to suffer economic downturns, serious unemployment problems, increased polarization, and deepening social conflicts. The facts show that the inherent contradiction between the socialization of production and the private possession of the means of production still exists in capitalism, but the manifestations and characteristics of existence are different. After the international financial crisis, many Western scholars are also re-studying Marxist political economy and "Das Kapital" to reflect on the drawbacks of capitalism. Last year, "The Capital in the 21st Century" written by French scholar Thomas Piketty sparked extensive discussion in the international academic community. He used detailed data to prove that the degree of inequality in the United States and other Western countries has reached or exceeded the highest level in history. He believes that unchecked capitalism has exacerbated wealth inequality and will continue to deteriorate. His analysis was mainly carried out from the field of distribution, and did not involve much more fundamental ownership issues, but the conclusions he reached are worthy of our deep consideration.
Our party has always attached great importance to the study, research, and application of Marxist political economy. Comrade Mao Zedong intensively studied "Das Kapital" four times, and hosted several seminars on the Soviet "Textbook of Political Economy", emphasizing that "the study of political economy issues has great theoretical and practical significance." Comrade Mao Zedong creatively put forward the new democratic economic program during the period of new democracy. In the process of exploring the road of socialist construction, he put forward original views on the development of China's economy, such as proposing the basic contradiction theory of socialist society, and putting forward overall planning, Pay attention to the important viewpoints of comprehensive balance, agriculture as the foundation, industry as the leading factor, and coordinated development of agriculture, light and heavy. These are our party’s creative development of Marxist political economy.
Since the Third Plenary Session of the Eleventh Central Committee of the Party, our party has combined the basic principles of Marxist political economy with the new practice of reform and opening up to continuously enrich and develop Marxist political economy. After the "Decision of the Central Committee of the Communist Party of China on Economic System Reform" was passed in October 1984, Comrade Deng Xiaoping commented: "I wrote a first draft of political economy, which is a political economy that combines the basic principles of Marxism and the practice of Chinese socialism." . For more than 30 years, with the continuous deepening of reform and opening up, we have formed many important theoretical results of contemporary Chinese Marxist political economy, such as theories about the essence of socialism, theories about the basic economic system in the primary stage of socialism, and the establishment of and Implement the theory of innovative, coordinated, green, open, and shared development concepts, theories about developing a socialist market economy, enabling the market to play a decisive role in the allocation of resources and better giving play to the role of the government, and theories about China's economic development entering a new normal , Theories about promoting the coordination of new industrialization, informatization, urbanization, and agricultural modernization, theories about the properties of ownership, contracting rights, and management rights on the land contracted by farmers, and theories about making good use of both international and domestic markets and two resources , Theories about promoting social fairness and justice and gradually realizing common prosperity for all people, etc. These theoretical results have not been discussed by classic Marxist writers, and we did not have practice and knowledge in this area before the reform and opening up. They are political economics adapted to the national conditions and characteristics of the times in contemporary China. They not only powerfully guide China’s economic development practice, but also open up The new realm of Marxist political economy.
Now, in the changing tide of the world economy, whether we can steer the big ship of our country's economy well is a major test for our party. Facing the extremely complex domestic and international economic situation and the diverse economic phenomena, learning the basic principles and methodology of Marxist political economy will help us master scientific economic analysis methods, understand the process of economic movement, and grasp the laws of social and economic development. Improve the ability to control the socialist market economy and better answer the theoretical and practical questions of China's economic development.
The purpose of studying Marxist political economy is to better guide the practice of economic development in our country. We must not only adhere to its basic principles and methodology, but also integrate with our country's actual economic development to continuously form new theoretical results.
First, adhere to the people-centered development thinking. To develop for the people is the fundamental position of Marxist political economy. Marx and Engels pointed out: "The movement of the proletariat is an independent movement for the overwhelming majority of people and for the benefit of the overwhelming majority." In the future, "production will aim at the prosperity of all people." Comrade Deng Xiaoping pointed out that the essence of socialism is to liberate productive forces, develop productive forces, eliminate exploitation, eliminate polarization, and ultimately achieve common prosperity. The Fifth Plenary Session of the Eighteenth Central Committee of the Communist Party of China clearly stated that it is necessary to adhere to the people-centered development concept, and to promote the well-being of the people, promote the all-round development of people, and make steady progress toward common prosperity as the starting point and end of economic development. We must never forget this point. We must firmly adhere to this fundamental position when deploying economic work, formulating economic policies, and promoting economic development.
Second, adhere to the new development concept. In response to the new changes in my country's economic development environment, conditions, tasks, requirements, etc., the Fifth Plenary Session of the 18th CPC Central Committee proposed to establish and adhere to the development concept of innovation, coordination, green, openness, and sharing. These five development concepts are based on a profound summary of domestic and foreign development experiences and lessons, and an in-depth analysis of the general development trend at home and abroad. They collectively reflect our party’s new understanding of the laws of China’s economic development, and are similar to many aspects of Marxist political economy. The views are the same. For example, Marx and Engels envisioned that in the future society, "all people share the welfare created by everyone", "people are directly natural existences", and "natural history and human history restrict each other." At the same time, these five development concepts are also a sublimation of the perceptual knowledge we have gained in promoting economic development and a theoretical summary of our practice of promoting economic development. We must persist in using new development concepts to guide and promote my country's economic development, continuously solve economic development problems, and create a new situation in economic development.
Third, uphold and improve the basic socialist economic system. Marxist political economy believes that the ownership of the means of production is the core of the relations of production and determines the basic nature and development direction of society. Since the reform and opening up, our party has summarized both positive and negative experiences, established the basic economic system for the primary stage of socialism, emphasized the adherence to public ownership as the mainstay and the common development of multiple ownership economies, and made it clear that both public and non-public ownership economies are socialist market economies. An important part of China's economic and social development is an important foundation. We must unswervingly consolidate and develop the public sector of the economy, encourage, support, and guide the development of the non-public sector of the economy, and promote various ownership systems to complement each other's strengths, promote each other, and develop together. At the same time, we must be very clear that my country's basic economic system is an important pillar of the socialist system with Chinese characteristics and the foundation of the socialist market economic system. The dominant position of public ownership cannot be shaken, and the leading role of the state-owned economy cannot be shaken. This is an institutional guarantee to ensure that the people of all ethnic groups in our country share the fruits of development. It is also an important guarantee for consolidating the party's ruling position and adhering to my country's socialist system.
Fourth, uphold and improve the socialist basic distribution system. Marxist political economy believes that distribution is determined by production, and it is counterproductive. "And what can best promote production is the way of distribution that enables all members of society to develop, maintain and exercise their abilities as comprehensively as possible." Starting from the reality of our country, we have established a distribution system in which distribution according to work is the main body and multiple distribution methods coexist. Practice has proved that this institutional arrangement is conducive to mobilizing the polarities of all parties and is conducive to the realization of an organic unity of efficiency and fairness. Due to various reasons, there are still some outstanding problems in the income distribution of our country, mainly the widening income gap, the low proportion of labor remuneration in the primary distribution, and the low proportion of residents' income in the national income distribution. In this regard, we must attach great importance to efforts to promote the synchronization of residents’ income growth with economic growth, increase in labor remuneration and increase in labor productivity, continue to improve systems, mechanisms and specific policies, adjust the national income distribution pattern, continue to increase the income of urban and rural residents, and continue to reduce income gap.
Fifth, adhere to the direction of socialist market economy reform. Developing a market economy under socialist conditions is a great pioneering work of our party. A key factor in the great success of my country's economic development is that we have not only brought into play the strengths of the market economy, but also the advantages of the socialist system. We are developing a market economy under the major premise of the leadership of the Communist Party of China and the socialist system. We must never forget the attributive "socialism". The reason for saying that it is a socialist market economy is to uphold the superiority of our system and effectively prevent the drawbacks of the capitalist market economy. We must adhere to the dialectics and the two-point theory, continue to work hard on the combination of the basic socialist system and the market economy, and give full play to the advantages in both aspects. We must not only "effective market", but also "promising government", and strive to practice Solve this worldwide problem in economics.
Sixth, adhere to the basic national policy of opening up. Marxist political economy believes that human society will eventually move from the history of all nations to world history. At present, our country has unprecedented close ties with the world. The influence of our economy on the world economy and the influence of the world economy on our economy are unprecedented. Under the conditions of the in-depth development of economic globalization, we cannot engage in construction behind closed doors. Instead, we must be good at coordinating the overall domestic and international situations and make good use of the two international and domestic markets and two resources. It is necessary to follow the trend of my country's economy deeply integrating into the world economy, develop a higher level of open economy, actively participate in global economic governance, and promote the development of the international economic order in the direction of equality, justice, and win-win cooperation. At the same time, we must resolutely safeguard our country’s development interests, actively guard against various risks, and ensure national economic security. There are many theoretical and practical issues that require in-depth study.
In short, we adhere to the basic principles and methodology of Marxist political economy and do not exclude the reasonable elements of foreign economic theories. Western economics' knowledge about finance, prices, currency, markets, competition, trade, exchange rates, industries, enterprises, growth, management, etc., reflects the general laws of socialized mass production and market economy, and should be used for reference. At the same time, for foreign economics, especially Western economics, we must insist on removing the rough and the essence, removing the false and keeping the truth, insisting on taking me as the main and using it for me. For the content that reflects the attributes and values ​​of the capitalist system, and for the content that has the color of Western ideology, Can't copy it. Although economics is the study of economic issues, it cannot be separated from social politics, pure and pure. In our economics teaching, we must talk about Marxist political economy. We must talk about the political economy of socialism in contemporary China, and we must not be marginalized.
For Marxist political economy to have vitality, it must advance with the times. Practice is the source of theory. We have spent several decades to complete the development process that developed countries have traversed for hundreds of years. my country's economic development process is magnificent and its achievements have attracted worldwide attention. It contains great motivation, vitality and potential for theoretical creation. At present, both the world economy and my country's economy are facing many new major issues, and scientific theoretical answers are needed. Based on China’s national conditions and our development practices, we must thoroughly study the world economy and the new conditions and problems facing China’s economy, reveal new characteristics and new laws, refine and summarize the regular results of China’s economic development practice, and upgrade practical experience to systematization The theory of economics in China continues to open up new realms in contemporary Chinese Marxist political economy and contributes Chinese wisdom to the innovation and development of Marxist political economy.
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The margin trading balance has doubled in just six months. It surged above 1 trillion yuan on December 19 last year for the first time since March 31, 2010, when China’s market regulator first allowed the practice. The outstanding balance of margin trading on the mainland’s stock exchanges rose to 1.3 trillion yuan (US$185.9 billion), the most since August 2015. Analysts say they are monitoring levels of margin trading, or the practice of borrowing money from brokerages to trade. the margin balance outstanding in China there was a similar boom and The China Securities Regulatory Commission (CSRC), China’s top watchdog, on Wednesday warned investors about financial institutions that are illegally financing margin trading, a major culprit With the introduction of margin trading and short selling, China's stock market officially entered the short selling era on March 31, 2010. As a necessity to improve market completeness and efficiency, margin trading and short selling is expected to play a very important role in the stability of capital markets.

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