FX Trading on Execute | J.P. Morgan

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!

submitted by 1terrortoast to wallstreetbets [link] [comments]

Cornering Silver Market

Cornering Silver Market
Would you like to entertain yourself with a story about one of the greatest schemes in the history and, maybe, learn a few plays? This story is about three brave autistic brothers, who almost cornered the entire commodity and how one (not so brave, but shrewd) bank did it without anyone noticing. As in any good fable – there’s a moral and a strategy that you could draw from it.
The year is 1971. Nixon temporarily abolishes gold standard. And every temporary government program is never reversed, as you know. Trading price of gold went sky high: from 270s to 800s in two years or so. Enter Hunt brothers, sons of H. L. Hunt, oil tycoon, one of, if not the, richest man in the world at that time. Hunt family was, what one might describe as, right-wing libertarian and anti-globalist. They believed that Keynesian economics and the US shift to the left in the 60s will lead to the debasement of the US dollar and monetary collapse. Thus, return to the gold or silver standard was the way, as they thought. Allegedly, Hunts also had a feud with Rothschild family and other financial speculators, and were resentful towards the US government for doing nothing to protect their oil assets in Libya, confiscated by Gaddafi. So they started their move against America, alpha-silver bug style.
In 1973 Hunts began buying all the silver they could. And, instead of just speculating futures contracts, they actually took delivery. Initial price was $1.5/oz. Silver was shipped to Switzerland in secretive and costly operations and stored in vaults (brothers feared confiscations – remember, private citizens were still prohibited from owning gold in the US).
The following events are quite vivid and include the efforts to create a cartel similar to OPEC, talks with Iran and Saudi monarchs, pump and dump publicity and large scale purchases of miners. But we will spare the details, except one: Hunts even tried to corner the soy market at the same time. Reminds you how WSB slv gang quickly switched to corn gang. But the soy scheme didn't fly and they focused on silver only. Their efforts pumped the price to almost $50/oz by early 1980. At some point Hunts controlled around 230 million oz of silver and the majority of what was traded.

Hunt brothers laughing at your pump&dump effort

Of course, when you are such a smart ass, you become a target. Chicago exchange officials became very concerned citizens by 1979. They started issuing numerous regulations limiting the amount of market share one can accumulate in one hands. As all American concerned citizens, they had financial incentive to do so: Hunts managed to prove that Chicago exchange board members had short positions against silver. Finally, CFTC (Commodity Futures Trading Commission) issued a ruling that basically forced Hunts to liquidate part of their portfolio by February 1980. This sent silver prices down dramatically and brothers started to get margin calls which they could not cover. And so their story ended with bankruptcies and heavy fines for the family. Shortly after, Reagan and Volcker raised interest rates and silver price never recovered to $50/oz ever since.
We skip to the year 2008. Global financial crisis is in full swing. Bear Stearns is royally fucked, as due to all bears. Before the music was over, they mastered paper speculation of futures contracts like no one else. Bear Stearns accumulated world biggest naked short position on silver. What could go wrong? Stonks go up, silver goes down. Until it reversed and silver skyrocketed from $11 to $21. This became one of the margin calls to screw Bear Stearns. JP Morgan is asked by the FED and co. to buy out BS and to save the entire market. Since BS's shorts are now deeply down - JPM gets the whole bank with pennies on a dollar.
But the problem is that JPM themselves have massive naked short position on silver. Combined with BS it will exceed anything permitted by the CFTC. Since Obama administration was in a rush, they push CFTC to grant JPM basically a carte blanche to accumulate any position over the limit for a period of time. Period of time comes due and turns out that JPM not only didn’t trim the shorts significantly – they even bought more shorts at some point. Even with all the fines, it went very much their way, because in 2009 silver dropped. So they pocketed hundreds of millions of dollars.
But come 2011 and silver spiked again, dramatically. JPM, now bleeding cash on shorts, could close short positions, like any of us would do, right? Nope, fuckyall says JPM and starts hedging short futures positions with… physical silver. 'But wouldn’t that be even more control over the commodity?' - you might ask. See, nothing in the rules of CFTC says you can’t do that, because to help cronies speculate with paper futures contracts, made of thin air, CFTC basically started treating physical silver and futures as two different instruments (it’s, actually, even more complicated than that: google difference between physical, eligible, registered and so on).
In the next 9 years JPM becomes the world biggest holder of both short contracts and physical silver. The later they 'loaned' to SLV trust, of which they are custodian. This way upkeep of physical silver, which otherwise would be a liability for hedging, becomes an asset, because we, retards, who own SLV pay the maintenance. People are often confused here, because SLV is issued by Black Rock, not JPM. Well, there is a difference between being an operator of a financial instrument and being a custodian providing backing. Now, to confuse you even more – JPM is one of the major holders of Black Rock itself with 1.6% or sth like that.
By estimates of Theodore Butler, JPM acquired 900 million oz of physical silver since 2011. That’s 4 times more than what Hunts owned. Just shows you, that banks can get a pass with something that even the richest individuals can not. And you have to give it to JPM - their play was very clever. Instead of risking it all on a margin call, they make money on every turn.
As of 2020, JPM still holds both shitton of physical silver and short COMEX contracts. You can call this the most epic straddle of all time. With such mass they can swing prices in any directions and profit from this on any given day. Latest example you’ve seen on the August 11th.
Why am I bothering your poor gambling soul with this wall of text, you might ask? Market makers manipulate the market as they please, what’s new about that? Well, here we come to the conclusions and a strategy. How can a small retard replicate what the big boys are doing?
Conclusions:
  1. There will not be a linear up or down with silver and the swings might be dramatic. The reason being not only the sentiment of investors, but the ease of manipulation that is eligible to big players.
  2. If we believe that speculation will throw the price of silver in all directions – it is unwise to go only long or short on silver, especially on a short term;
What shall we do?
a) Only long expiration dates and calls; no weekly expiration, not even monthly. Ideally – at least half year options;
b) Go long on certain silver stocks. Maybe I’ll do a write up on good silver stocks to buy;
c) Sell covered calls on long positions;
d) Buy 1-3 month puts on your long positions as a hedge;
Now, day trade with those positions: on red days sell your puts and buy back covered calls. On green days – reload puts and sell calls. Repeat until lambo.
P. S.: I gathered these facts from the open sources, since these events were of interest to me. Some facts are intentionally oversimplified, google for more details, there are good reads. And feel free to correct me if you know contradictory facts.
P. P. S.: JPM, plz don’t whack me.
submitted by negovany to wallstreetbets [link] [comments]

The Great Unwinding: Why WSB Will Keep Losing Their Tendies

The Great Unwinding: Why WSB Will Keep Losing Their Tendies
I. The Death of Modern Portfolio Theory, The Loss of Risk Parity, & The Liquidity Crunch
SPY 1 Y1 Day
Modern portfolio theory has been based on the foundational idea for the past 3 decades that both equities and bonds are inversely correlated. However, as some people have realized, both stocks and bonds are both increasing in value and decreasing in value at the same time.[1] This approach to investing is used pretty much in everyone's 401K, target date retirement plans, or other forms of passive investing. If both bonds and equities are losing value, what will happen to firms implementing these strategies on a more generalized basis known as risk-parity? Firms such as Bridgewater, Bluecrest, and H2O assets have been blowing up. [2,3]
Liquidity has been drying up in the markets for the past two weeks.[4] The liquidity crisis has been in the making since the 2008 financial crisis, after the passage of Dodd-Frank and Basel III. Regulations intended to regulate the financial industry have instead created the one of the largest backstops to Fed intervention as the Fed tried to pump liquidity into the market through repo operations. What is a repo?
A repo is a secured loan contract that is collateralized by a security. A repo transaction facilitates the sale and future repurchase of the security that serves as collateral between the two parties: (1) the borrower who owns a security and seeks cash and (2) the lender who receives the security as collateral when lending the cash. The cash borrower sells securities to the cash lender with the agreement to repurchase them at the maturity date. Over the course of the transaction, the cash borrower retains the ownership of the security. On the maturity date, the borrower returns the cash with interest to the lender and the collateral is returned from the lender to the borrower.[5]
Banks like Bank of New York Mellon and JP Morgan Chase act as a clearing bank to provide this liquidity to other lenders through a triparty agreement.[6] In short, existing regulations make it unfavorable to take on additional repos due to capital reserve requirement ratios, creating a liquidity crunch.[7,8,9] What has the Fed done to address this in light of these facts?
In light of the shift to an ample reserves regime, the Board has reduced reserve requirement ratios to zero percent effective on March 26, the beginning of the next reserve maintenance period.[10]
II. Signs of Exhaustion & The Upcoming Bounce is a Trap, We Have Far More to Go
A simple indicator to use is the relative strength index (RSI) that a lot of WSB is familiar with. RSI is not the be all and end all. There's tons of indicators that also are indicating we are at a very oversold point.
SPY 1 Y1 Day RSI
Given selling waves, there are areas of key support and resistance. For reference, I have not changed key lines since my original charts except for the colors. You can check in my previous posts. 247.94 has been critically an area that has been contested many times, as seen in the figure below. For those that bought calls during the witching day, RIP my fellow autists. The rejection of 247.94 and the continued selling below 233.86 signals to me more downside, albeit, it's getting exhausted. Thus, I expect the next area in which we start rallying is 213.
SPY 10 Day/30 min
Another contrarian indicator for buying calls is that notable people in finance have also closed their shorts. These include Jeffery Gundlach, Kevin Muir, and Raoul Pal.[11,12,13]
III. The Dollar, Gold, and Oil
As previously stated, cash is being hoarded by not only primary banks, but central banks around the world. This in turn has created a boom in the dollar's strength, despite limitless injections of cash (if you think 1 trillion of Repo is the ceiling, think again) by the Fed.
DXY
Despite being in a deflationary environment, the DXY has not achieved such levels since 2003. Given the dollar shortage around the world, it is not inconceivable that we reach levels of around 105-107. For disclosure, I have taken a long position in UUP. However, with all parabolic moves, they end in a large drop. To summarize, the Fed needs to take action on its own currency due to the havoc it's causing globally, and will need to crush the value of the dollar, which will likely coincide with the time that we near 180.
If we are indeed headed towards 180, then gold will keep selling off. WSB literally screams bloody guhhhhhh when gold sells off. However, gold has been having an amazing run and has broken out of its long term channel. In times of distress and with margin calls, heavy selling of equities selling off of gold in order to raise cash. As previously noted, in this deflationary environment, everything is selling off from stocks, to bonds, to gold.
/GC Futures Contracts 5 Y1 Wk
What about oil? Given the fall out of the risk parity structure, I'm no longer using TLT inflows/outflows as an indicator. I've realized that energy is the economy. Closely following commodities such as light crude which follow supply and demand more closely have provided a much better leading indicator as to what will happen in equities. Given that, oil will also most likely hit a relief rally. But ultimately, we have seen it reach as low $19/barrel during intraday trading.
/CL Futures Contracts 1 Y1 D
IV. The Next 5 Years
In short, the recovery from this deflationary environment will take years to recover from. The trend down will not be without large bumps. We cannot compare this on the scale of the 2008 financial crisis. This is on the order of 1929. Once we hit near 180, the Fed crushes the dollar, we are in a high likelihood of hitting increased inflation, or stagflation. At this point the Fed will be backed into a corner and forced to raise rates. My targets for gold are around 1250-1300. It may possibly go near to 1000. Oil could conceivably go as low as $15-17/barrel, so don't go all in on the recovery bounce. No matter what, the current rise in gold will be a trap. The continued selling in the S&P is a trap, will bounce, forming another trap, before continuing our painful downtrend.
I haven't even mentioned coronavirus and unemployment until now. I've stated previously we are on track to hit around at least 10,000 coronavirus cases by the end of this month. It's looking closer to now 20-30,000. Next month we are looking to at least 100,000 by the end of the April. We might hit 1,000,000 by May or June.
Comparison of the 2020 Decline to 1929
------------------------------------------------------------------------------------------------------------------------------------------------
Chart courtesy of Moon_buzz
tl;dr We're going to have a major reflexive rally starting around 213, all the way back to at least to 250, and possibly 270. WSB is going to lose their minds holding their puts, and then load up on calls, declaring we've reached a bottom in the stock market. The next move will be put in place for the next leg down to 182, where certain actors will steal all your tendies on the way down. Also Monday might be another circuit breaker.
tl;dr of tl;dr Big bounce incoming. Bear trap starting 213. Then bull trap up around 250-270. We're going down to around 182.
tl;dr of tl;dr of tl;dr WSB will be screwed both left and right before they can say guh.
Hint: If you want to get a Bloomberg article for free, hit esc repeatedly before the popup appears. If it doesn't work, refresh the article, and keep hitting esc.
Remember, do not dance. We are on the cusp of a generational change. Use the money you earn to protect yourselves and others. Financial literacy and knowledge is the key to empowerment and self-change.
Some good DD posts:
u/bigd0g111 -https://www.reddit.com/wallstreetbets/comments/fmshcv/when_market_bounce_inevitably_comesdont_scream/
u/scarvesandsuspenders - https://www.reddit.com/wallstreetbets/comments/fmzu51/incoming_bounce_vix_puts/

Update 1 3/22/2020 - Limit down 3 minutes of futures. Likely hit -7% circuit breaker on the cash open on Monday at 213 as stated previously.
Do not think we will hit the 2nd circuit breaker at 199.06. Thinking we bounce, not too much, but stabilize at least around 202.97.
Update 2 3/23/20 9:08 - Watching the vote before making any moves.
9:40 - sold 25% of my SPY puts and 50% of my VXX calls
9:45 - sold another 50% of SPY puts
9:50 - just holding 25% SPY puts now and waiting for the vote/other developments
11:50 - Selling all puts.
Starting my long position.
11:55 - Sold USO puts.
12:00 - Purchased VXX puts to vega hedge.
2:45 - Might sell calls EOD. Looks like a lot of positioning for another leg down before going back up.
It's pretty common to shake things out in order to make people to sell positions. Just FYI, I do intraday trading. If you can't, just wait for EOD for the next positioning.
3:05 - Seeing a massive short on gold. Large amounts of calls on treasuries. And extremely large positioning for more shorts on SPY/SPX.
Will flip into puts.
Lot of people keep DM'ing me. I'm only going to do this once.

https://preview.redd.it/uvs5tkje1ho41.png?width=2470&format=png&auto=webp&s=c6b632556ca04a26e4e08fb2c9223bfcb84e0901
That said, I'm going back into puts. Just goes to show how tricky the game is.
3:45 - As more shorts cover, going to sell the calls and then flip into puts around the last few min of close.
Hope you guys made some money on the cover and got some puts. I'll write a short update later explaining how they set up tomorrow, especially with the VIX dropping so much.
3/24/20 - So the rally begins. Unfortunately misread the options volume. The clearest signal was the VIX dropping the past few days even though we kept swinging lower, which suggested that large gap downs were mostly over and the rally is getting started.
Going to hold my puts since they are longer dated. Going to get a few short term calls to ride this wave.
10:20 - VIX still falling, possibility of a major short squeeze coming in if SPY breaks out over 238-239.
10:45 - Opened a small GLD short, late April expiration.
10:50 - Sold calls, just waiting, not sure if we break 238.
If we go above 240, going back into calls. See room going to 247 or 269. Otherwise, going to start adding to my puts.
https://preview.redd.it/ag5s0hccxmo41.png?width=2032&format=png&auto=webp&s=aad730db4164720483a8b60056243d6e4a8a0cab
11:10 - Averaging a little on my puts here. Again, difficult to time the entries. Do not recommend going all in at a single time. Still watching around 240 closely.
11:50 - Looks like it's closing. Still going to wait a little bit.
12:10 - Averaged down more puts. Have a little powder left, we'll see what happens for the rest of today and tomorrow.
2:40 - Closed positions, sitting on cash. Waiting to see what EOD holds. Really hard trading days.
3:00 - Last update. What I'm trying to do here posting some thoughts is for you guys to take a look at things and make some hypotheses before trading. Getting a lot of comments and replies complaining. If you're tailing, yes there is risk involved. I've mentioned sizing appropriately, and locking in profits. Those will help you get consistent gains.
https://preview.redd.it/yktrcoazjpo41.png?width=1210&format=png&auto=webp&s=2d6f0272712a2d17d45e033273a369bc164e2477
Bounced off 10 year trendline at around 246, pretty close to 247. Unless we break through that the rally is over. Given that, could still see us going to 270.
3/25/20 - I wouldn't read too much into the early moves. Be careful of the shakeouts.
Still long. Price target, 269. When does the month end? Why is that important?
12:45 - out calls.
12:50 - adding a tranche of SPY puts. Adding GLD puts.
1:00 est - saving rest of my dry powder to average if we still continue to 270. Think we drop off a cliff after the end of the quarter.
Just a little humor... hedge funds and other market makers right now.
2:00pm - Keep an eye on TLT and VXX...
3:50pm - Retrace to the 10 yr trend line. Question is if we continue going down or bounce. So I'm going to explain again, haven't changed these lines. Check the charts from earlier.
https://preview.redd.it/9qiqyndtivo41.png?width=1210&format=png&auto=webp&s=55cf84f2b9f5a8099adf8368d9f3034b0e3c4ae4
3/26/20 - Another retest of the 10 yr trendline. If it can go over and hold, can see us moving higher.
9:30 - Probably going to buy calls close to the open. Not too sure, seems like another trap setting up. Might instead load up on more puts later today.
In terms of unemployment, was expecting close to double. Data doesn't seem to line up. That's why we're bouncing. California reported 1 million yesterday alone, and unemployment estimates were 1.6 million? Sure.
Waiting a little to see the price action first.
Treasuries increasing and oil going down?
9:47 - Added more to GLD puts.
10:11 - Adding more SPY puts and IWM puts.
10:21 - Adding more puts.
11:37 - Relax guys, this move has been expected. Take care of yourselves. Eat something, take a walk. Play some video games. Don't stare at a chart all day.
If you have some family or close friends, advise them not to buy into this rally. I've had my immediate family cash out or switch today into Treasury bonds/TIPS.
2:55pm - https://youtu.be/S74rvpc6W60?t=9
3:12pm - Hedge funds and their algos right now https://www.youtube.com/watch?v=ZF_nUm982vI
4:00pm - Don't doubt your vibe.
For those that keep asking about my vibe... yes, we could hit 270. I literally said we could hit 270 when we were at 218. There was a lot of doubt. Just sort by best and look at the comments. Can we go to 180 from 270? Yes. I mentioned that EOM is important.
Here's another prediction. VIX will hit ATH again.
2:55pm EST - For DM's chat is not working now. Will try to get back later tonight.

Stream today for those who missed it, 2:20-4:25 - https://www.twitch.tv/videos/576598992
Thanks again to WallStreetBooyah and all the others for making this possible.

9:10pm EST Twitter handles (updated) https://www.reddit.com/wallstreetbets/comments/fmhz1p/the_great_unwinding_why_wsb_will_keep_losing/floyrbf/?context=3, thanks blind_guy
Not an exhaustive list. Just to get started. Follow the people they follow.
Dark pool and gamma exposure - https://squeezemetrics.com/monitodix
Wyckoff - https://school.stockcharts.com/doku.php?id=market_analysis:the_wyckoff_method
MacroVoices
Investopedia for a lot. Also links above in my post.

lol... love you guys. Please be super respectful on FinTwit. These guys are incredibly helpful and intelligent, and could easily just stop posting content.
submitted by Variation-Separate to wallstreetbets [link] [comments]

What if I told you OPERATION 10 BAGS is actually OPERATION 20 BAGS - Courtesy of Albertsons (ACI)

Edit 1: I wouldn't rush to get in immediately with how poor SPY/QQQ look at open. Waiting until later in the day when they've maybe bottomed out is likely a better move
Edit 2: Broader market looks to have stabilized. Congrats if you bought the dip. But now is time to get balls deep - I'm in the process of tripling my position
u/trumpdiego 's post from a few days ago on ACI inspired me to do some research of my own, and it seems operation 10 bags may actually be a 20 bagger
Post for reference: https://new.reddit.com/wallstreetbets/comments/huq9eq/operation\10_bags_brought_to_you_by_albertsons/)
TL;DR: ACI is a leader in multiple sub-sectors that the market has been pumping lately. Their stock hasn’t increased as much as competitors in the last month, and it is cheaper than all of them on a P/E basis. Grocery prices have been rising faster than ever before. ACI is driving customers to their stores at a rate higher than anyone else in the industry. Online grocery sales were likely close to a record $19B in Q2. ACI’s online grocery sales were up +243% in April, and close to +220% this last quarter. Both of those last two facts suggest over $36B in quarterly revenue, compared to a street consensus of ~$23B.
TL;DR for the TL;DR: Albertons Companies (ACI) 8/21 $20C’s are going to the moon when they report earnings before market open on Monday 7/27, but potentially sooner if any other online grocers report what you’re about to read below. And I'll show you exactly why referencing the data that the big bois use to evaluate investments.
Primer for the type of autist who likes to know what he’s YOLOing options on:
ACI is a food and drug retailer that offers grocery products, general merchandise, health and beauty care products, pharmacy, and fuel in the United States, with local presence and national scale. They also own Safeway, Tom Thumb , Acme, Shaw’s, Star Market, United Supermarkets, Vons, Jewel-Osco, Randalls, Market Street, Pavilions, Carrs, and Haggen as well as meal kit company Plated based in New York City. Additionally, ACI is the #1 or #2 grocer by market share in 68% of the 121 MSAs (Metropolitan Statistical Area) they operate in.
And here’s the good part:
ACI is a leader in the online grocery shopping/delivery marketplace. They offer home delivery services in ~65% of their 2,200 stores, and have partnerships with Instacart, Uber Eats, and Grubhub to facilitate 1-2 hour delivery in 90% of their locations. Guess whose stock is up 75% this quarter? Grubhub. Think the market likes food delivery?
Besides online grocery shopping, what else is surging due to COVID-19? Meal kits. And guess what, ACI is one of the only grocers with a meal kit offering. Demand is surging so much that Blue Apron (APRN) decided to go public on June 24th, and is already up 22.47% since then. Think the market likes meal kits?
Now back to your regularly scheduled programming:
Before I get into the industry and ACI specific numbers that make me TSLA levels of bullish on ACI – let me tell you what the market thinks.
Q: “Why do I care what the market thinks? I’m smarter than it!” – Probably most of you.
A: “Because it doesn’t matter how right you are if the market doesn’t agree, especially when YOLOing short term options.
Market Trends:
Over the last 30 days, ACI shares are up a meager 3.43%, currently trading at a 7.3x P/E multiple of consensus 2020 earnings. Check out what the most comparable companies to ACI have done over the last 30 days, and associated 2020 expected earnings P/E they are trading at:
Grocery Outlet (GO): +11.30% (39.7x)
Kroger (KR): +9.16% (11.9x)
Sprouts Farmers Market (SFM): +15.71% (15.1x)
So what does that tell you?
The market loves grocery stores right now in corona times (no shit), and ACI is relatively the cheapest stock out of all of them. The performance of Grubhub (+75% in Q2), Blue Apron (+22.47% since 6/24/20 IPO), and literally every single online retailer tell you the market’s opinion on online shopping, food delivery, and meal kits as well. If ACI were to trade at KR’s 11.9x P/E, that would make the stock worth $26.15, +63% from close today. Wonder what that means for option tendies…
Oh what’s that? You’re asking why ACI could start trading on par with KR at a 11.9x P/E? Great question! Let me get into why this sexy boi will print:
Starting from a macro perspective, CPI: Food at Home (NSA) is the consumer price metric that tracks inflation in food prices as grocery stores and related establishments. After deflating -.16% in 2018 and inflating just .03% in 2019, CPI: Food at Home (NSA) is +4.74% thus far in 2020. Why is this? Food prices are historically correlated with Disposable Personal Income, which also increased at its highest rate ever through Q2’2020. So as long as big daddy Powell has the money printer going brrrrrr, Albertsons will be making more and more money on each sale.
Now, this food price inflation does benefit every grocer. However, let’s take a look at the ID Sales (which is the grocer equivalent of same-store-sales) trends recently for ACI and its main competitors that I was able to find data on:

ACI KR SFM
Q1 +23.5% +19% +10%
March +47% +30% +26%
April +21% +20% +7%

So through at least April, ACI has been in a class of their own when it comes to generating repeated traffic at their locations. Courtesy of the fine people at Morgan Stanley, we also know ID Sales were +16% in June (so you can deduce they were in the +17% to +20% range in May), and still up “double-digit percentage” thus far in July.
So far we’re established that ACI is selling their products for the most they ever have, and generating more traffic at identical stores than all their competitors. This data is affirmed by JP Morgan’s foot traffic index which shows ACI taking customer from Kroger.
But wait – here’s the sexy part:
Time to forecast ACI’s online sales this quarter using published industry data:
According to new research released 7/6/20 by Brick Meets Click and Mercatus, U.S. online grocery sales hit a record $7.2 billion in June, up 9% over May. Let’s do some quick maths and deduce that online grocery sales were $6.61B in May. Now let’s be super conservative and say May was a 20% increase over April (realistically I would guess closer to +5-10%), and that gives us $5.51B in online grocery sales in April. This means we likely had ~$19B in online grocery sales in Q2.
As ACI represented 1.60% of the online grocery marketplace in 2019, that would imply $304M in online revenue this past quarter. This is very conservative though, as even after assuming a 20% drop in April relative to May, we also assumed their market share stayed at 1.60%. Remember those nice people at JPM who’s foot traffic tracker told us that ACI was stealing customers from KR? Well they also estimate ACI’s 1.60% market share in online groceries to reach 2.50%-2.80% in 2025, with a CAGR (cumulative average growth rate) of ~9% in market share per year. That means their 1.60% market share is likely 1.744% now. Take 1.744% of $19B, and:

!!!!That means $331.36M of online sales!!!!

Remember this number
Now that we have an estimate for ACI’s online sales based on the broader industry trends, lets come up with an estimate using only company data:
On their last earnings call, management noted that online sales had grown 83% in 2018, 39% in 2019, +278% in the first 12-weeks of 2020, and +243% in April (Remember this number too!). Can you hear your Robinhood account balance going brrrrr? If not, the oven is about to get turned up faster Jerome can print a milli:
Math time!
· ACI did ~$265.4M in online sales in 2018.
Source: https://www.digitalcommerce360.com/2019/11/04/albertsons-embraces-omnichannel-retail/#:~:text=Albertsons%20does%20not%20break%20out,%2461%20billion%20in%20total%20revenue.
· That means they did ~370M in online sales in 2019.
· ACI had $62.455B in 2019 revenue.
· Which means 0.59% of their sales were online.
· Working backwards off their Q2’19 revenue of $18.738B, we arrive at $111M in online revenue.
· Let’s be conservative and assume some sequential decline from their April online sales growth (the second number you should have remembered) and put Q2 online sales at +220%.

!!!!That means $355M in online sales!!!!

Remember that first number I told you to keep in mind? $331.36M. Considering entirely different data sets were used to find each number, it may not be so crazy to think it could be a pretty accurate forecast of the online sales when they report earnings.
But since you’re so smart I know you’re on the edge of your seat wondering what that would mean for their total revenue
Let’s take the average of both forecasts, and use $343.18M as our forecast for online revenue. Given online sales were 0.59% of 2019 revenue, it would imply $58.166B in revenue this quarter, compared to the $22.78B street consensus estimate.
Admittedly, online sales staying at .59% is unrealistic due to how many consumers would shop online instead of in the store. Here’s some more math to deduce the new percentage:
· In 2018, 0.44% of their sales were online
· When online sales rose 39% in 2019, the proportion went up to 0.59%
· So a 39% increase in online sales led to a 0.15% greater contribution of online sales to total revenue
· Therefore a 220% increase would mean a 0.345% increase in proportion of online sales, putting them at .935% of total sales

!!!!!That gives us $36.704B in revenue for this past quarter vs a consensus of just under $22.78B. A beat by over 60%!!!!!

If you’re one of the rare autists to realize that revenue is only one half of the earnings equation, and your costs are the equally as important second half:
Let’s go back to our friends at JPM, in a recent research note, after mentioning the foot traffic ACI was taking from KR, they also noted that ACI has superior gross margins to KR, as their stores are strategically located further from aggressively low priced competitors such as Aldi and WalMart. Additionally, they praised ACI’s recent cost savings initiatives that have been underway for some time now, and believe they would lead to some of the best margins in the industry.
So you’re telling me ACI is going to make way more money than anyone expects this quarter, while also having lower costs? That must mean call options are crazy expensive, right?? Wrong. The aforementioned option is trading at just $0.50. That means after earnings when the stock rips to $30, they could be worth $11, does a 2,100% return sound good to you too? And for you especially literate autists, the IV is only 91.61%.

ACI 8/21 $20C

Let’s ride this fucker to the moon

Happy to respond to any questions/comments on sources for some of the data I presented or anything else your autistic brain comes up with regarding ACI
submitted by HumanHorseshoe to wallstreetbets [link] [comments]

Amazon Will Be The Next $2T Company – Why it’s Undervalued

Forget the hype about Tesla, Amazon is undervalued and is the safest place to park your money. I breakdown the reasons why below. Excuse the long post, but I like helping people make $. TLDR at the end.
The only way to look at Amazon's business is to separate it out into three very large businesses, I will break down each and why I believe the company as a whole is undervalued:
A/ Retail & Marketplace - this is the consumer facing portion of their business where Amazon buys at wholesale and then sells to shoppers. The latter (Marketplace), is the faster growing and more profitable business unit, now accounting for over 55% of all orders. Sellers use FBA and sell their products to shoppers directly where Amazon takes a ~7%-~15% fee depending on the category.
B/ AWS – fast growing cloud business operating at 26% gross margins with a $50B run-rate growing 30% YoY (do you know how crazy it was typing that out?)
C/ Amazon Media Group - this includes their fast growing advertising business, Twitch, Amazon Music, and Amazon Prime Video. This is the least-known portion of their business, but is the fastest growing with highest margins.
Retail & Marketplace
There’s not much to say here, other than Amazon does roughly ~$250B in sales and growing 30% YoY on average here. For reference, Walmart does ~$500B. Even if you gave the retail/marketplace portion of Amazon’s business a conservative valuation of $500B (2x revenue), it’s a very large business. Now, take into consideration how much they are emphasizing 3P sellers and private label products, Amazon’s profitability metrics will greatly improve in this business as it lowers its overhead so the business in value will continue to grow. This also fails to mention their breadth of their FBA business and how many sellers use the product offering. If anyone has sold anything on Amazon or knows someone that does, 99% of sellers use FBA because of how easy, convenient, and cost-effective it is. With the tailwinds associated with COVID, this business will likely surpass 30% YoY growth, which is just incredible growth #s for a business this large. In comparison, Walmart is usually <10% YoY growth when it comes to their revenue metrics.
My valuation of the business = ~$500B - $750B
AWS
AWS is projected to do around $50B-$60B in sales for 2020. Latest public analyst valuations peg it around ~$500B, which I believe is unfair. For reference, MongoDB is trading at 20x revenue, Crowdstrike, DOCU, Datadog, all SAAS/cloud providers are trading at 20x or even more!
Valuing AWS as a standalone business for anything less than $500B would be under-representing just how large and fast-growing this business is. Growing at 30% YoY at a $50B run-rate is just unfathomable. If we were looking at this at a 20x revenue multiple (which I believe it would be valued at a 20x multiple if it was a standalone company), AWS would be at a $1 trillion market cap alone. It's the de-facto choice for start-ups, even as Azure continues to take customers away, AWS is the leader for all new tech/start-up companies and will continue to see massive tailwinds as the entire economy shifts to cloud-based offerings. COVID has also accelerated this business as usage is undoubtedly up for their core segment of customers, while customers that are most affected (restaurants) are not really AWS-like customers.
My valuation of this business unit = $650B
Amazon Media Group
Advertising – Many people don’t know much about this business, but you know the products you click on while you’re shopping around on Amazon? It’s safe to say a bunch of those products are paying Amazon significant dollars on a PPC basis (pay-per-click) to surface higher in the search results. This business generated $14 billion in revenue in 2019. Google, the leader in advertising, is valued at 10x revenue, so this business alone is probably worth close to $16B after 2020 alone. $FB did $73B in revenue trailing 12 months, this would mean FB is about 4.5x the size of Amazon's Advertising business ALONE. I just compared FB as a whole to Amazon's "side-business" in Advertising.
Twitch – this is a tough business to value, but Needham and others have pegged it at ~$15 billion alone. It’s the clear leader in online streaming and Microsoft recently shutdown Mixer (their Twitch competitor). The possibilities here are endless, look for Amazon Advertising to plug in their data capabilities to target viewers of live streaming events with products soon. Twitch will soon be merged into the advertising ecosystem to begin serving targeted ads to viewers. Think ad-supported streams where there is some sort of revenue share back to the streamers. This feeds into the ecosystem where content creators make more $ (won't leave), advertisers get access to a valuable niche audience, and Amazon reaps the benefits of high-value/profitable advertising at 65% gross margins.
Prime Video – the most surprising stat for Prime Video is that 20% of Prime members sign up primarily for Amazon Prime Video. With over 150M subscribers, analysts peg the value of Prime Video alone at $200b. Amazon has also entered the OTT ad-supported streaming market with IMDB TV (ad-supported free television). This is exclusive inventory that Amazon can offer to brands to advertise on, and compete directly with ROKU, which is valued at 15X revenue.
Lastly, Amazon Music has 30M subscribers. Apple has 60M, and Spotify 100M. Amazon Music (Who the fuck uses it, is already half the size of Apple Music and about a 3rd of Spotify...)
Because all the businesses aren’t broken out, it’s tough valuing the entire Media Group business, but it honestly could be in the range of anywhere b/w $300B-$600B off the synergies and potential for expansion. Again, as a standalone business, this suite of products would have public market investors salivating over the growth potential.
Hidden Value (Areas of Opportunity)
I went this entire DD without mentioning the huge competitive MOATs around voice (Echo = the leader), as well as their entire logistics/ground fulfillment network, Amazon GO stores, and their venture in the medical health space. Because it's nearly impossible to value these things as a whole, you can basically pencil w/e you want here from a valuation perspective.
Amazon Retail/Marketplace Business - $650B
AWS - $650B
Amazon Media Group - $400B
Hidden Value - Go stores, Fulfillment Network, Self-driving, Echo (voice), Whole Foods, Medical Venture with JP Morgan & Berkshire = $300B
Total = $2B
TLDR: Amazon is undervalued at a $1.6B market cap, and the stock will be up to $3500 in the next year. Business units valued as stand-alone companies would be valued way more, growth potential is endless, and COVID has accelerated trends in favor of Amazon for the next 5 yrs.
- Longterm bag holder
submitted by sharkbat3 to investing [link] [comments]

Amazon Will Be The Next $2T Company – Why it’s Undervalued

Forget the hype about Tesla, Amazon is undervalued and is the safest place to park your money. I breakdown the reasons why below. Excuse the long post, but I like helping people make $. TLDR at the end.
The only way to look at Amazon's business is to separate it out into three very large businesses, I will break down each and why I believe the company as a whole is undervalued:
A/ Retail & Marketplace - this is the consumer facing portion of their business where Amazon buys at wholesale and then sells to shoppers. The latter (Marketplace), is the faster growing and more profitable business unit, now accounting for over 55% of all orders. Sellers use FBA and sell their products to shoppers directly where Amazon takes a ~7%-~15% fee depending on the category.
B/ AWS – fast growing cloud business operating at 26% gross margins with a $50B run-rate growing 30% YoY (do you know how crazy it was typing that out?)
C/ Amazon Media Group - this includes their fast growing advertising business, Twitch, Amazon Music, and Amazon Prime Video. This is the least-known portion of their business, but is the fastest growing with highest margins.
Retail & Marketplace
There’s not much to say here, other than Amazon does roughly ~$250B in sales and growing 30% YoY on average here. For reference, Walmart does ~$500B. Even if you gave the retail/marketplace portion of Amazon’s business a conservative valuation of $500B (2x revenue), it’s a very large business. Now, take into consideration how much they are emphasizing 3P sellers and private label products, Amazon’s profitability metrics will greatly improve in this business as it lowers its overhead so the business in value will continue to grow. This also fails to mention their breadth of their FBA business and how many sellers use the product offering. If anyone has sold anything on Amazon or knows someone that does, 99% of sellers use FBA because of how easy, convenient, and cost-effective it is. With the tailwinds associated with COVID, this business will likely surpass 30% YoY growth, which is just incredible growth #s for a business this large. In comparison, Walmart is usually <10% YoY growth when it comes to their revenue metrics.
My valuation of the business = ~$500B - $750B
AWS
AWS is projected to do around $50B-$60B in sales for 2020. Latest public analyst valuations peg it around ~$500B, which I believe is unfair. For reference, MongoDB is trading at 20x revenue, Crowdstrike, DOCU, Datadog, all SAAS/cloud providers are trading at 20x or even more!
Valuing AWS as a standalone business for anything less than $500B would be under-representing just how large and fast-growing this business is. Growing at 30% YoY at a $50B run-rate is just unfathomable. If we were looking at this at a 20x revenue multiple (which I believe it would be valued at a 20x multiple if it was a standalone company), AWS would be at a $1 trillion market cap alone. It's the de-facto choice for start-ups, even as Azure continues to take customers away, AWS is the leader for all new tech/start-up companies and will continue to see massive tailwinds as the entire economy shifts to cloud-based offerings. COVID has also accelerated this business as usage is undoubtedly up for their core segment of customers, while customers that are most affected (restaurants) are not really AWS-like customers.
My valuation of this business unit = $650B
Amazon Media Group
Advertising – Many people don’t know much about this business, but you know the products you click on while you’re shopping around on Amazon? It’s safe to say a bunch of those products are paying Amazon significant dollars on a PPC basis (pay-per-click) to surface higher in the search results. This business generated $14 billion in revenue in 2019. Google, the leader in advertising, is valued at 10x revenue, so this business alone is probably worth close to $16B after 2020 alone. $FB did $73B in revenue trailing 12 months, this would mean FB is about 4.5x the size of Amazon's Advertising business ALONE. I just compared FB as a whole to Amazon's "side-business" in Advertising.
Twitch – this is a tough business to value, but Needham and others have pegged it at ~$15 billion alone. It’s the clear leader in online streaming and Microsoft recently shutdown Mixer (their Twitch competitor). The possibilities here are endless, look for Amazon Advertising to plug in their data capabilities to target viewers of live streaming events with products soon. Twitch will soon be merged into the advertising ecosystem to begin serving targeted ads to viewers. Think ad-supported streams where there is some sort of revenue share back to the streamers. This feeds into the ecosystem where content creators make more $ (won't leave), advertisers get access to a valuable niche audience, and Amazon reaps the benefits of high-value/profitable advertising at 65% gross margins.
Prime Video – the most surprising stat for Prime Video is that 20% of Prime members sign up primarily for Amazon Prime Video. With over 150M subscribers, analysts peg the value of Prime Video alone at $200b. Amazon has also entered the OTT ad-supported streaming market with IMDB TV (ad-supported free television). This is exclusive inventory that Amazon can offer to brands to advertise on, and compete directly with ROKU, which is valued at 15X revenue.
Lastly, Amazon Music has 30M subscribers. Apple has 60M, and Spotify 100M. Amazon Music (Who the fuck uses it, is already half the size of Apple Music and about a 3rd of Spotify...)
Because all the businesses aren’t broken out, it’s tough valuing the entire Media Group business, but it honestly could be in the range of anywhere b/w $300B-$600B off the synergies and potential for expansion. Again, as a standalone business, this suite of products would have public market investors salivating over the growth potential.
Hidden Value (Areas of Opportunity)
I went this entire DD without mentioning the huge competitive MOATs around voice (Echo = the leader), as well as their entire logistics/ground fulfillment network, Amazon GO stores, and their venture in the medical health space. Because it's nearly impossible to value these things as a whole, you can basically pencil w/e you want here from a valuation perspective.
Amazon Retail/Marketplace Business - $650B
AWS - $650B
Amazon Media Group - $400B
Hidden Value - Go stores, Fulfillment Network, Self-driving, Echo (voice), Whole Foods, Medical Venture with JP Morgan & Berkshire = $300B
Total = $2B
TLDR: Amazon is undervalued at a $1.6B market cap, and the stock will be up to $3500 in the next year. Business units valued as stand-alone companies would be valued way more, growth potential is endless, and COVID has accelerated trends in favor of Amazon for the next 5 yrs.
- Longterm bag holder
submitted by sharkbat3 to wallstreetbets [link] [comments]

Trade responsibly,

Good luck today guys, hope everyone makes some tendies
Edit 8:30PM Thanks for the love and awards guys, hope everyone ended the week off positive, enjoy your weekend.
Of note for Airlines (LUV, DAL, AAL, UAL), the Airlines for Americas trade association says the industry needs “immediate financial assistance” to protect the 11mln jobs it represents.
Of note for Banks (JPM, C, MS, BAC, GS), the Fed is encouraged by a notable increase in discount window borrowing as banks show a willingness to use the window as a funding source to support the flow of credit to households and businesses.
Of note for Car Rental Services (HTZ, CAR), both Hertz and Avis Budget Corp have requested aid from the US government.

Dow Jones

Apple Inc. (AAPL) supply chain is reportedly still facing supply disruptions even as China recovers due to factory closures of suppliers in Malaysia. Elsewhere, it has limited the number of purchases on its iPhones to two per customer in the US and China, according to Canalys.
Boeing Company (BA) is reportedly leaning towards a temporary halt of operations at its twin-aisle jetliner factories due to the spread of the coronavirus, according to people familiar with the matter, in a similar move to Airbus (AIR FP).
Johnson & Johnson (JNJ) Global Supply Chain Officer Wengel announced its supply chain is currently holding steady and meeting patient needs.
Walmart (WMT) announced it is planning to give special cash bonuses for hourly associates for their work during the current conditions with full-time associates receiving USD 300 and part-time associates receiving USD 150, which will equate to USD 365mln. WMT is to also accelerate its next bonus for store, club and supply chain associates which will equate to USD 180mln, overall it will equate to USD 550mln, the co. says. WMT is to also hire over 150k hourly employees as the number of shoppers increases.

Nasdaq 100

Amazon.com Inc. (AMZN)– Some sellers state its decision to stop receiving non-essential inventory in response to the coronavirus pandemic could limit sales they need to make payments on its loans from Amazon.
Tesla (TSLA) announced it decided to temporarily suspend production at its Fremont, California factory and NY Factory after March 23rd. Elsewhere, CEO Musk announced his factories are working on ventilators to address a potential shortage.
United Continental Holdings (UAL)Apollo Global Management (APO) has reportedly purchased part of the airlines USD 2bln loan from a group of banks, according to people familiar with the matter.

S&P 500

Accenture plc (ACN) had its PT cut at a number of brokers, however, they were positive on its ability to continue through the coronavirus crisis.
AFLAC Inc (AFL) American Family Life Assurance of Columbus and New York agreed to acquire Zurich North America's US corporate Life and Pensions. AFL expects the acquisition to be dilutive to 2020 adj. EPS by USD 0.02 to 0.03.
Altria Group Inc (MO) announced it is temporarily suspending operations at its Richmond manufacturing center.
Anthem Inc. (ANTM) announced it is offering up to 80 hours of paid emergency leave for qualifying needs, including if associates are experiencing coronavirus symptoms or for caring for young children whose school has been closed.
AT&T Inc. (T) announced it has cancelled is accelerates share repurchase programme of USD 4bln worth of stock, noting the impact of the coronavirus could be material although it cannot currently estimate the impact onto its financial or operational results.
Bank of America Corp (BAC) announced it is offering additional support for its consumer and small business clients in response to the coronavirus, where clients can request funds including overdraft fees, non-sufficient funds fees, and monthly maintenance fees through deposit accounts. Many customers can also request to defer any payments.
Carnival Corp. (CCL) preliminary Q1 20 (USD): EPS 0.22 (exp. 0.27), revenue 4.8bln (exp. 4.66bln); coronavirus resulted in a net loss of 0.23/shr.
Cintas Corporation (CTAS) Q3 20 (USD): Adj. EPS 2.16 (exp. 2.02), revenue 1.81bln (exp. 1.8bln), gross margin 45.5% (exp. 45.7%, prev. 44.9% Y/Y); announced it is not providing guidance for Q4 20 and it is suspending FY20 guidance due to uncertainty surrounding the coronavirus.
Coty, Inc (COTY) provided an update on the current situation: Expects Q3 20 revenue to fall approximately 20% like for like, with a meaningful impact on profit, it has also withdrawn FY20 guidance. It is recommending to the board that shareholders be given the option to receive up to 100% of their quarterly dividend in kind for the coming two quarters. Its largest shareholder JAB decided to fully repay the loan it used to finance the tender offer in 2019. It is taking initiatives to manufacture hand sanitizer. Notes activations on Amazon have seen US sales nearly double in recent weeks, as well as launching the Kylie skin-care Europe in upcoming weeks; it is also preparing for increased demand post coronavirus.
Danaher Corp. (DHR) announced the US FTC is on board with the acquisition of General Electric’s (GE) Life Sciences Biopharma Business. The closing of the deal is still subject to customary closing conditions as announced in the agreement, but DHR expects the deal to close on March 31st, 2020.
Ford Motor (F) announced it has plans to suspend production in Argentina and Brazil starting next week due to the coronavirus.
Kohl's Corp. (KSS) announced it is to close its stores nationwide through to at least April 1st, although customers will still be able to shop on its App. It also withdrew guidance for Q1 and FY20.
Mylan N.V. (MYL) announced it is increasing production of its malaria drug for potential use to combat the coronavirus.
Occidental Petroleum (OXY) is reportedly planning on naming its former CEO Stephen Chazen as its new chairman as it tries to improve amid weak demand and activism from Carl Icahn, according to WSJ citing people familiar with the matter.
Sysco Corp. (SYY) announced it will donate 2.5mln meals over the next four weeks as part of its response strategy to help against COVID-19. Elsewhere, it has withdrawn its three-year plan guidance due to the impact from the coronavirus.
Tiffany & Co. (TIF) Q4 19 (USD): Adj. EPS 1.80 (exp. 1.77), revenue 1.4bln (exp. 1.36bln); SSS +3%, SSS Ex-Hong Kong +5%, Gross Margin 63.3% (Prev. Y/Y 63.8%). Announced it will not be issuing FY20 guidance due to the pending merger with LVMH

Other

Crowdstrike (CRWD) Q4 19 (USD): Adj. EPS -0.02 (exp. -0.08), Revenue 152mln (exp. 137mln); FY21 Adj. EPS view -0.14 to -0.10 (exp. -0.18), revenue view 723-733mln (exp. 685mln)
Samsung (SSNLF) has reportedly been hit hard by Vietnam’s travel restrictions from South Korea, fueling concerns its Galaxy Note smartphones will fall behind schedule in its largest manufacturing hub outside South Korea
Teva (TEVA) announced it will be donating over 6mln doses of hydroxychloroquine sulfate tablets across the US to meet the urgent demand for the medicine as an investigational target to treat the coronavirus.

Additional US Equity Stories

Of note for casino names (MGM, CZR, WYNN, MLCO); Macau has halved its 2020 gaming revenue forecast due to the coronavirus and predicts a 56% fall from previous year to USD 16bln.
US Steel (X) Q1 20 (USD): Adj. EPS view -0.80 (exp. -0.84), EBITDA 30mln.
Coca Cola (KO) does not expect to meet its FY20 guidance, although does not foresee any near-term interruptions to its concentrate or beverage-based production. Meanwhile, it had its PT lowered at Deutsche Bank to USD 53/shr from USD 64/shr, although the desk reiterated its long-term buy rating.
Ross Stores (ROST) announced it is to temporarilty close all of its stores throughout the US due to the coronavirus.
Dollar Tree (DLTR) announced it is hiring 25,000 associates (both full and part time) to help across its stores in the US.
Synaptics Inc. (SYNA) downgraded to Underweight from Neutral at JP Morgan
Colgate Palmolive (CL) upgraded to Buy from Neutral at BofA
Accenture (CAN) upgraded to Buy from Neutral at MoffettNathansonMonster Beverage
submitted by WSBConsensus to wallstreetbets [link] [comments]

Portfolio Review: Destined for Greatness

For the past few weeks I have been reviewing portfolios people have posted on this subreddit. A few days ago, u/ikey2013 messaged me and asked for me to review his portfolio, linked here. Today I will metaphorically rip apart his portfolio, performing a deep dive on every company. But first, the disclaimer:
(Inserting my copy-pasted disclaimer about how this is just my opinion and while I do have a degree in Business Administration and Management, I am not giving you professional advice. I use a broker called M1 Finance and here is the link to my personal portfolio for disclosure sake/proof I'm not just blowing smoke, since my portfolio is beating the S&P 500 over the past 5 years. If I am recommending a stock, it is because I actually own it and believe in the company for the long haul. Remember, these are my researched opinions, and you should treat them as such. My primary research platform is Seeking Alpha.)
For the sake of brevity, I will not be analyzing companies that are already in my portfolio, as I do not want to sound like a broken record.

Bristol Myers Squibb Co. ($BMY)
On paper, this company is doing well. Solid revenue growth. Unfortunately, this is dramatically overshadowed by the faults in the dividend. Healthcare is a very fragile industry. This is reflected in $BMY's net income, which fluctuates massively from year to year. Profits can evaporate on a dime, which is why companies need to keep a very close eye on their dividends and payout ratios, lest they take on debt they cannot afford. $BMY does not seem to understand this principle. In 2015, their payout ratio was 158.27%. In 2017 their payout ratio was 255.91%. As of Q2 2020, their trailing twelve month payout ratio is a whopping 317.30%. Considering that revenue and the gross profit margin have grown every single year since 2015, a picture begins to paint itself of what is happening.
I understand trying to maintain one's dividend, but it has to be done sustainably. This company is listing itself as having around $50 billion in debt. With a debt to equity ratio of 96%, this company has a higher ratio than AT&T! This is incredibly dangerous, and the board does not seem to care. A 40% D/E ratio is considered high. 96% is stratospheric and growing.
From my outsider perspective, it looks like a hard dividend cut is in this company's future. The dividend is rising faster than profits, executive compensation is way higher than industry averages for a company of this size, shareholders are being diluted. This company is setting course for either bankruptcy court or a dividend cut. Considering the underlying revenue and gross profit margins of the company are strong, the latter option seems more likely.
Recommended replacement: Amgen

AmerisourceBergen Corporation ($ABC)
There are many facets of the healthcare industry. Among them, drug distribution is not the place you want to be right now. AmerisourceBergen is currently being sued by every state and their mother right now due to the company's role in the opioid epidemic currently plaguing rural America. I could sit here all day and explain the horrible actions this company took, but if people care about that, they can read the lawsuits. Let's talk about the numbers.
Over the past five years, revenue has grown by around $40 billion, but the company's profit has remained stagnant at around $1billion. In 2019, the company generated around $180 billion in revenue. The company turned that $180 billion into 855 million in profit. To put that in perspective, $ABC has a net profit margin of 0.47%. That margin is not small, it is not tiny, it could barely even be called razor thin. The most accurate term would be microscopic.
Recommended Replacement: Medtronic

National Retail Properties and Federal Realty Investment Trust
Fine investments. The only problem is FRT's payout ratio is too high for me personally. Retail is being hammered by this pandemic, but if these guys survive, they will be excellent investments.

LTC Properties
I hate stagnant dividends with a burning passion. As long as inflation exists, stagnant dividends will be something I despise.
Recommended replacement: Essex Property Trust

Bank OZK
While I am typically a big fan of regional banks, I do not hold the highest opinion of those who like stock splits. OZK has done two in the past ten years alone. With the advent of fractional share purchases, stock splits are effectively obsolete. I would not advise against this stock, but I personally am hesitant. I like how insiders hold a very sizable portion of the company, but the amount of shareholder dilution is concerning.
Recommended replacement: Stock Yards Bancorp

Discover Financial Services
This company seems more focused on its dividend than actually growing its business. If we were talking about a utility, that would be fine. Unfortunately, this is a company with two massive competitors (Visa and Mastercard) who would prefer their industry to remain a duopoly. When you are a small player challenging not one, but two fin-tech giants, growth should be a priority, especially since V and MA still consider themselves growth companies, hence why their payout ratios are so low.
Recommended replacement: An equal portion of V and MA.

Wells Fargo
I've made the case against Wells Fargo before, so I won't make myself out to be a broken record on the subject, but long story short, I would not consider buying into this stock until the entire board has been replaced. This company has been mismanaged for years at this point and has nothing to show for it. Interest revenue has grown by over $15 billion in the past five years, but the company has shed about $3 billion in net interest profits over the same time. Based upon the data, it seems that Wells Fargo was taking on higher risk revenue streams. This is reflected in the soaring interest revenue on loans and borrowings the company collected, but the decline in non-interest revenue. These and other data points paint a picture that suggests clients who are in a less financially secure position were getting larger loans at higher interest rates. It works only as long as your clients are employed.
Then we have the lawsuits and the fraud, which brought down consumer interest in the bank. New customer signups dropped off a cliff. To cover up this shortfall and prevent the dividend from coming under pressure, the company ramped up its share buybacks. This is why the company's stock price stagnated. Not because they were doing anything innovative to make the stock worth holding, they simply just began buying back shares.
In the part of the country where I live, Wells Fargo used to be seen as the definitive place to get your mortgage. The local branch was willing to match any other bank's offer. Looking at mortgage revenue today, we see it cut by 2/3rds over the past five years. All of this can be combined and you can see why the dividend was forced to be cut. All of this was entirely preventable.
Is the company in a better state now than in 2009? Honestly hard to say. The damage is that bad. You could be a billionaire on paper, but if you are only a billionaire because you own 1 billion $1 coffee mugs, then your wealth doesn't really mean anything. If all your clients will declare bankruptcy the second the stimulus money runs out, you will be in for a wild ride.
Recommended replacement: JP Morgan
Walgreens Boots Alliance
I used to be very pessimistic about this company. As a retail manager, every instinct in me says this company is on the wrong path. However, management seems like they are trying to clean the place up. If they succeed, this will be a great holding to have. If not, I would get out while you can.
If you sell, recommended replacement: CVS

McDonald's
In my personal opinion, speaking as a manager at Cracker Barrel, franchising is a horrible and outdated business model. To sum up the problem with franchises in one word, it would be "loyalty," more specifically the lack of it. Everyone involved in a franchise operation is out to make money, end of story. Any manager on Earth will tell you that when employees do not care about their job, the entire business suffers. I have yet to meet an individual who works at a franchise who actually cares about their job.
In contrast, my employer Cracker Barrel refuses to franchise. It is the second largest publicly traded restaurant company in the United States that does not franchise (second only to Chipotle). The only thing stopping this company is the number of stores. Cracker Barrel isn't even in all fifty states yet. The company chooses to expand slowly and methodically. There is a dedicated team of employees whose sole purpose is to open stores. These employees (called 'red shirts') are hand picked from stores around the country and work collectively to make sure every new store opening is as smooth as possible. Each and every one of them cares deeply about this company. The vast majority of our employees care about this company.
I cannot tell you how many people start out working for us just as a summer or part time job, but then simply fall in love with this company and end up working here for their entire careers. This company is legendary in the restaurant and retail industries for its retention rates. We have employees and managers that have been with this company for decades. Of course, most employees come and go. College students who wait tables to pay for their degrees, hosts who simply need a summer job before their senior year of high school. But every single store has its core. The PAR IVs who are in this for the long haul. They are the cornerstone of every store, and they work together like a well oiled machine. The best servers in my store make over $50,000 a year, when the average check size is around $11.
This loyalty goes both ways. When the pandemic hit, corporate refused to lay anyone off and instead took out debt to give every employee two weeks of retention pay and to maintain manger's salaries. The only people who got laid off were 22 District managers and 2 Regional Vice Presidents. They were offered severance in exchange for early retirement. Cracker Barrel took advantage of the pandemic to clean up its corporate structure and internal logistics network, and it paid off. Last week, my store (restaurant+retail) made $90,000 in sales, because all our experienced employees never left.
Speaking of corporate structure, another disadvantage of the franchise model. Internal promotion is impossible. No company would promote a franchise owner to be an executive. However, when everyone already works for the company, internal promotion can become the default. When a company internally promotes its best and brightest, you keep that talent inside the company. It is physically impossible for someone who works outside Cracker Barrel to be hired as a District manager or Regional Vice President. This company has found that external hires simply cannot compare to those internally promoted. Managers undergo weeks of training at the company's headquarters in Lebanon, Tennessee, and the majority of external hires just can't handle it and drop out. In fact, pretty much everyone at Home Office was internally promoted and used to work in a store. It all comes back to actually caring about your job and the company you work for.
I could go on all day, but the numbers speak for themselves. The average McDonald's generates roughly $1.1 million in revenue. The average Cracker Barrel generates over $4.5 million per year. I often get asked sarcastically if people actually buy the products we sell in retail. The answer is yes. If people do not want it, we do not sell it. Retail makes up 20% of Cracker Barrel's total revenue. In my store alone, my 20 employees (2 full time shift leaders, 3 full time, 13 part time, and 2 seasonal) we alone generate more revenue than the average McDonald's, and we are not even the largest store in our district (though granted we are an above average store). I'm not allowed to give exact figures, but let's just say my manager bonus last year was very nice, and I reward my people.
To get back to McDonald's, its franchising is a hindrance to its own success. Stores compete with each other, instead of working together. This brings down the entire company, and we see falling revenue year over year. This company has no real room to grow. McDonald's has built a reputation for being dirty, unhealthy, and greedy. Unless the company can fix itself, it will be nothing but downhill.
Recommended Replacement: Cracker Barrel. Sadaar Biglari's idiotic war against the board has kept this company's share price stagnant for the past few years. He ran steak n shake into the ground, and has been trying to force himself on CBRLs board since 2012. In the process, he's nearly bankrupted his own company, while Cracker Barrel has continued to grow and thrive. Once Biglari bankrupts himself into irrelevance, the stock price will begin growing again.

Best Buy
I think Best Buy needs to make some significant course corrections to prevent going the way of other retailers. This pandemic is likely to single-handedly kill the concept of Black Friday and holiday shopping in person, which is where Best Buy makes about half of their net income for the year. The business model of making all your profit in Q4 is not going to work in the 21st century. Retailers like Target are successful because they make decent money year round, with the holidays simply being a bonus. The company does not need the holidays to make a profit for the year.
This is what the people who forecast the death of retail do not realize. The kind of retail where you do all your business between October and December is going to die. The kind of retail where all revenue is dispersed evenly, with smaller spikes in Q2 or Q4, that is what will generate the most returns.
Recommended replacement: Target

In conclusion, on your pie allocation:
Healthcare should not be the cornerstone of your portfolio. The industry is fragile, and your exposure should be kept low.
Telecoms: Disney and Comcast are not Telecoms
Real Estate: Be careful not to chase dividend yield
Miscellaneous: There is no such thing as a miscellaneous stock.

Overall, your portfolio is an excellent start to a reliable stream of passive income. Some minor tweaks and you could be golden for the next 20 years.
submitted by Firstclass30 to dividends [link] [comments]

11 potential value long-term growth stocks > 25% under 52w Highs

A lot of people act like the market has left everyone behind but there are still great companies on extreme discounts in a variety of sectors, including tech. Here are some stocks from my watchlist that are still well below highs:
Brookfield Asset Management - BAM (26.17% down from 52w high) - a diversified asset manager company involved in real estate, renewable power, infrastructure and private equity assets. As safe a real estate play as you can make because of the wide moat. COVID-19 was the first snag they hit since 2008.
Workday - WDAY (26.56% down from 52w high) - provides enterprise cloud applications to help its customers to manage critical business functions and optimize their financial and human capital resources. Beat Q1 earnings by a big margin and are still down.
Bruker Corp - BRKR (28.32% down from 52w high) - makes scientific instruments and analytical/diagnostic instruments for a wide array of fields. Missed earnings this quarter, but this was a stock that grew 1200% from 2008 til pre-COVID.
Disney - DIS (29.75% down from 52w high) - yes their parks are in limbo and many of their stores worldwide are shut down and their movies are suspended. But Disney has the resources to weather this storm, and Disney+ has been a lifesaver. If looking long-term, this price may never be seen again once they announce reopenings.
Exact Sciences Corp - EXAS (32.29% down from 52w high) - Makes cancer screening tests. COVID-19 has temporarily slowed cancer screenings, but this could bounce back and has grown immensely the past 5 years. Additionally they acquired Genomic Health last year, which focused on genomic based genetic research for cancer detection.
Hewlett Packard - HPQ (35.6% down from 52w high) - Strikes me as one of the most underrated large caps right now. They make great products, and it's highly likely an increase in remote work led to increased sales of laptops and printers.
JP Morgan - JPM (36.26% down from 52w high) - The best run of the investment banks imo, as they are highly diversified. For a company hammered this hard, they are bound to come out of this even better positioned for the future.
Conoco Phillips - COP (37% down from 52w high) - Has already shot way up the past month (I regret selling more than half my shares), but still far below it's highs so plenty more room to rebound. They struck me as one of the better positioned oil companies to make it through this and bounce back given their rock solid financials.
Raytheon - RTX (38.64% down from 52w high) - whoever is President, it's hard to bet against the military-industrial complex. Pre-COVID, up 400% from the 2008 trough. Commercial and business aviation connections have definitely hurt them in the short term, but their military applications give them a broader moat, and they seem to be much better run than Boeing, for example.
StoneCo - STNE (41.89% down from 52w high) - basically the Square of Brazil, from what I understand, and traded on Nasdaq. Develops fintech solutions for electronic commerce across in-store, online, and mobile channels for small and medium sized businesses. Unlike Square, it is apparently still accurately valued in a time of concern for small and medium size businesses. The added long-term benefit of being in a developing economy also seems to be a good selling point.
Pinterest - PINS (49.42% down from 52w high) - has been considered a loser financially for a while, but it seems with the arrangement with SHOP they are finally figuring out how to better monetize their platform -- which has an extremely loyal following among women especially. The potential for future growth for a stock that has surpassed Snapchat as the #3 social media site in domestic users (47% of internet users in the US, 2/3rds of those female) is enormous.
What are your thoughts on these and their future potential for growth? How soon do you think they bounce back to ATHs?
submitted by devilmaskrascal to stocks [link] [comments]

My favorite dividend stocks right now

Since pretty much everything's been crushed in the past months its led to many dividends looking much more attractive so here are some of my picks. I typically try to look at good free cash flow/growth, a yield that's high but not too high (so usually 2.5%-5%), payout ratio below 50%, companies with diversified revenue streams, and whether or not the company is a dividend aristocrat. I'm open to all input or criticism! Anyways, here goes:
CMI (Cummins) - 4.5% yield. As a cyclical industrial company, it had already been trading down since October or November so it's at an even further discount to companies which were setting ATHs in February. Rock solid management with a shit ton of cash flow and a low payout ratio.
HON (Honeywell) - 3.2% yield. Widely diversified company in many sustainable/critical markets like defense which has taken an absolute nosedive from $183 to below $110.
ABBV (AbbVie) - 6.8% yield. One of the riskier options as it's still working through the massive Allergan acquisition. However it's received most of the approvals it needs and acquiring Allergan (who's biggest product is Botox) will help it diversify once the patent on Humira, by far its biggest revenue generator, expires in the next few years.
RTN/UTX (Raytheon/United Technologies) - both above 3% yield. I list both because they're currently in the process of merging with each other, but both have become good dividend choices with the current panic. I also mention both because it's a merger of equals which will create a new company under the ticker RTX. Raytheon has always had good management and was a great growth stock while United always was a better stock in down times, but both have been hammered. While there are some risks and the actual process will take forever since they're both huge, the businesses seem to have a lot of synergistic opportunities and as a result would probably be able to deliver a stable dividend down the road.
JPM (JP Morgan) - 4.3% yield. I see them as the most conservative bank as during the recession they didn't even want bailout money because the business was fine, but were forced to take it. over the past few years JPM outperformed the market by a relatively sizable margin and has vastly improved at a structural level since the recession. I think this will be a similar outcome and see their dividend as safe.
ADP (ADP) - 3.2% yield. Has increased the dividend for 47 years straight and in my opinion is a consumer staple, but for businesses - so many businesses use their services for payroll that it seems relatively reliable in the current scenario. Nevertheless the market doesn't give a shit and the stock's been hit hard.
PLD (Prologis) - 3.6% yield. This one is an industrial REIT with great performance over the last few years.
Honorable mentions: LRCX, WEC/a thousand utility stocks, MCD, NEE.
Hope this helps someone looking for dividend picks!
submitted by p_giggles to stocks [link] [comments]

My Market Outlook

Hi guys, just want to share with you my current market outlook. Hope this can help spur a discussion for everybody's benefit. This is not a an investment advice. You are not my client and I am not your fiduciary. That said, the views below are just for discussion purposes.
At the risk of being cliche and obviously wrong, here I go:
Short term-medium term:
  1. We are in a bear market, and recession is already underway.
  2. Occasionally, there will be "bear market rallies)". For long term investors, these are not a time to buy yet, use it to sell instead. For traders, bear market rallies and the volatility that they bring, are great opportunities to make money. Dow Theory suggest there could be at least three bear market rallies within the overall bear market trend.
  3. Reason why I think the downturn will continue for short-medium term: The USA is still early in the coronavirus infection blow out. Look at updated chart by JP Morgan and FT here and here. The Fed is doing everything they can to keep liquidity/market functioning. The fiscal stimulus that the government is trying to pass, should dampen the blow to the economy. But, as long as the coronavirus situation i.e, the public healthcare crisis, the real crisis, is not tackled immediately through decisive action like other countries, then it will only prolong the infection period. See Bill Gate and WHO's opinions here and here. IMO, the market is still underestimating the coronavirus infection and the blow to the economy that it could bring given ineffective measures by the government.
  4. The market could at least fall for another 15% before it starts to find a bottom based on previous bear markets.
Longer term:
  1. Stocks would eventually go into bull market again.
  2. Among the indicators that signal bottoming/reversal would be volatility (VIX) returning to normal level.
  3. High quality companies, I would imagine mega-tech with pristine balance sheet, would rally first and perhaps perform the best in the upcoming bull market.
Asset Allocation
Short term: Short equity via inverse ETF, short emerging market stock/currency - especially countries with twin deficits (fiscal and trade), long gold, long treasury. Or just stay in cash.
Risks: As what happened previously, gold and treasury did not provide the hedging characteristics. They went down together with stocks, while in normal condition, it they should go up. One possible explanation is that funds are liquidating any positions that they could, to satisfy redemption and margin call.
Things to avoid: 1) Options, because options are currently trading at premium in general due to high implied volatility. Also remember that with options, you have to nail three variables to make money - direction, magnitude, and time horizon. Also, avoid 2) triple leveraged ETF/ETN. The volatility and leveraged used in the ETFs will cause a "decay" in your return if the market trade sideways. As for ETN, their prices could fall to certain level that trigger "acceleration event" in which case, the investment banks issuing the ETNs will redeem the ETNs from you, usually at a steeply discounted price.
Long term: Long equity, with overweight on mid-mega cap tech stocks.
submitted by sellside_sandy to StockMarket [link] [comments]

Crypto-Powered - The Most Promising Use-Cases of Decentralized Finance (DeFi)

Crypto-Powered - The Most Promising Use-Cases of Decentralized Finance (DeFi)
A whirlwind tour of Defi, paying close attention to protocols that we’re leveraging at Genesis Block.
https://reddit.com/link/hrrt21/video/cvjh5rrh12b51/player
This is the third post of Crypto-Powered — a new series that examines what it means for Genesis Block to be a digital bank that’s powered by crypto, blockchain, and decentralized protocols.
Last week we explored how building on legacy finance is a fool’s errand. The future of money belongs to those who build with crypto and blockchain at their core. We also started down the crypto rabbit hole, introducing Bitcoin, Ethereum, and DeFi (decentralized finance). That post is required reading if you hope to glean any value from the rest of this series.
97% of all activity on Ethereum in the last quarter has been DeFi-related. The total value sitting inside DeFi protocols is roughly $2B — double what it was a month ago. The explosive growth cannot be ignored. All signs suggest that Ethereum & DeFi are a Match Made in Heaven, and both on their way to finding strong product/market fit.
So in this post, we’re doing a whirlwind tour of DeFi. We look at specific examples and use-cases already in the wild and seeing strong growth. And we pay close attention to protocols that Genesis Block is integrating with. Alright, let’s dive in.

Stablecoins

Stablecoins are exactly what they sound like: cryptocurrencies that are stable. They are not meant to be volatile (like Bitcoin). These assets attempt to peg their price to some external reference (eg. USD or Gold). A non-volatile crypto asset can be incredibly useful for things like merchant payments, cross-border transfers, or storing wealth — becoming your own bank but without the stress of constant price volatility.
There are major governments and central banks that are experimenting with or soon launching their own stablecoins like China with their digital yuan and the US Federal Reserve with their digital dollar. There are also major corporations working in this area like JP Morgan with their JPM Coin, and of course Facebook with their Libra Project.
Stablecoin activity has grown 800% in the last year, with $290B of transaction volume (funds moving on-chain).
The most popular USD-pegged stablecoins include:
  1. Tether ($10B): It’s especially popular in Asia. It’s backed by USD in a bank account. But given their lack of transparency and past controversies, they generally aren’t trusted as much in the West.
  2. USDC ($1B): This is the most reputable USD-backed stablecoin, at least in the West. It was created by Coinbase & Circle, both well-regarded crypto companies. They’ve been very open and transparent with their audits and bank records.
  3. DAI ($189M): This is backed by other crypto assets — not USD in a bank account. This was arguably the first true DeFi protocol. The big benefit is that it’s more decentralized — it’s not controlled by any single organization. The downside is that the assets backing it can be volatile crypto assets (though it has mechanisms in place to mitigate that risk).
Other notable USD-backed stablecoins include PAX, TrueUSD, Binance USD, and Gemini Dollar.
tablecoins are playing an increasingly important role in the world of DeFi. In a way, they serve as common pipes & bridges between the various protocols.
https://preview.redd.it/v9ki2qro12b51.png?width=700&format=png&auto=webp&s=dbf591b122fc4b3d83b381389145b88e2505b51d

Lending & Borrowing

Three of the top five DeFi protocols relate to lending & borrowing. These popular lending protocols look very similar to traditional money markets. Users who want to earn interest/yield can deposit (lend) their funds into a pool of liquidity. Because it behaves similarly to traditional money markets, their funds are not locked, they can withdraw at any time. It’s highly liquid.
Borrowers can tap into this pool of liquidity and take out loans. Interest rates depend on the utilization rate of the pool — how much of the deposits in the pool have already been borrowed. Supply & demand. Thus, interest rates are variable and borrowers can pay their loans back at any time.
So, who decides how much a borrower can take? What’s the process like? Are there credit checks? How is credit-worthiness determined?
These protocols are decentralized, borderless, permissionless. The people participating in these markets are from all over the world. There is no simple way to verify identity or check credit history. So none of that happens.
Credit-worthiness is determined simply by how much crypto collateral the borrower puts into the protocol. For example, if a user wants to borrow $5k of USDC, then they’ll need to deposit $10k of BTC or ETH. The exact amount of collateral depends on the rules of the protocol — usually the more liquid the collateral asset, the more borrowing power the user can receive.
The most prominent lending protocols include Compound, Aave, Maker, and Atomic Loans. Recently, Compound has seen meteoric growth with the introduction of their COMP token — a token used to incentivize and reward participants of the protocol. There’s almost $1B in outstanding debt in the Compound protocol. Mainframe is also working on an exciting protocol in this area and the latest iteration of their white paper should be coming out soon.
There is very little economic risk to these protocols because all loans are overcollateralized.
I repeat, all loans are overcollateralized. If the value of the collateral depreciates significantly due to price volatility, there are sophisticated liquidation systems to ensure the loan always gets paid back.
https://preview.redd.it/rru5fykv12b51.png?width=700&format=png&auto=webp&s=620679dd84fca098a042051c7e7e1697be8dd259

Investments

Buying, selling, and trading crypto assets is certainly one form of investing (though not for the faint of heart). But there are now DeFi protocols to facilitate making and managing traditional-style investments.
Through DeFi, you can invest in Gold. You can invest in stocks like Amazon and Apple. You can short Tesla. You can access the S&P 500. This is done through crypto-based synthetics — which gives users exposure to assets without needing to hold or own the underlying asset. This is all possible with protocols like UMA, Synthetix, or Market protocol.
Maybe your style of investing is more passive. With PoolTogether , you can participate in a no-loss lottery.
Maybe you’re an advanced trader and want to trade options or futures. You can do that with DeFi protocols like Convexity, Futureswap, and dYdX. Maybe you live on the wild side and trade on margin or leverage, you can do that with protocols like Fulcrum, Nuo, and DDEX. Or maybe you’re a degenerate gambler and want to bet against Trump in the upcoming election, you can do that on Augur.
And there are plenty of DeFi protocols to help with crypto investing. You could use Set Protocol if you need automated trading strategies. You could use Melonport if you’re an asset manager. You could use Balancer to automatically rebalance your portfolio.
With as little as $1, people all over the world can have access to the same investment opportunities and tools that used to be reserved for only the wealthy, or those lucky enough to be born in the right country.
You can start to imagine how services like Etrade, TD Ameritrade, Schwab, and even Robinhood could be massively disrupted by a crypto-native company that builds with these types of protocols at their foundation.
https://preview.redd.it/agco8msx12b51.png?width=700&format=png&auto=webp&s=3bbb595f9ecc84758d276dbf82bc5ddd9e329ff8

Insurance

As mentioned in our previous post, there are near-infinite applications one can build on Ethereum. As a result, sometimes the code doesn’t work as expected. Bugs get through, it breaks. We’re still early in our industry. The tools, frameworks, and best practices are all still being established. Things can go wrong.
Sometimes the application just gets in a weird or bad state where funds can’t be recovered — like with what happened with Parity where $280M got frozen (yes, I lost some money in that). Sometimes, there are hackers who discover a vulnerability in the code and maliciously steal funds — like how dForce lost $25M a few months ago, or how The DAO lost $50M a few years ago. And sometimes the system works as designed, but the economic model behind it is flawed, so a clever user takes advantage of the system— like what recently happened with Balancer where they lost $500k.
There are a lot of risks when interacting with smart contracts and decentralized applications — especially for ones that haven’t stood the test of time. This is why insurance is such an important development in DeFi.
Insurance will be an essential component in helping this technology reach the masses.
Two protocols that are leading the way on DeFi insurance are Nexus Mutual and Opyn. Though they are both still just getting started, many people are already using them. And we’re excited to start working with them at Genesis Block.
https://preview.redd.it/wf1xvq3z12b51.png?width=700&format=png&auto=webp&s=70db1e9587f57d0c470a4f9f4523c216929e1876

Exchanges & Liquidity

Decentralized Exchanges (DEX) were one of the first and most developed categories in DeFi. A DEX allows a user to easily exchange one crypto asset for another crypto asset — but without needing to sign up for an account, verify identity, etc. It’s all via decentralized protocols.
Within the first 5 months of 2020, the top 7 DEX already achieved the 2019 trading volume. That was $2.5B. DeFi is fueling a lot of this growth.
https://preview.redd.it/1dwvq4e022b51.png?width=700&format=png&auto=webp&s=97a3d756f60239cd147031eb95fc2a981db55943
There are many different flavors of DEX. Some of the early ones included 0x, IDEX, and EtherDelta — all of which had a traditional order book model where buyers are matched with sellers.
Another flavor is the pooled liquidity approach where the price is determined algorithmically based on how much liquidity there is and how much the user wants to buy. This is known as an AMM (Automated Market Maker) — Uniswap and Bancor were early leaders here. Though lately, Balancer has seen incredible growth due mostly to their strong incentives for participation — similar to Compound.
There are some DEXs that are more specialized — for example, Curve and mStable focus mostly only stablecoins. Because of the proliferation of these decentralized exchanges, there are now aggregators that combine and connect the liquidity of many sources. Those include Kyber, Totle, 1Inch, and Dex.ag.
These decentralized exchanges are becoming more and more connected to DeFi because they provide an opportunity for yield and earning interest.
Users can earn passive income by supplying liquidity to these markets. It usually comes in the form of sharing transaction fee revenue (Uniswap) or token rewards (Balancer).
https://preview.redd.it/wrug6lg222b51.png?width=700&format=png&auto=webp&s=9c47a3f2e01426ca87d84b92c1e914db39ff773f

Payments

As it relates to making payments, much of the world is still stuck on plastic cards. We’re grateful to partner with Visa and launch the Genesis Block debit card… but we still don’t believe that's the future of payments. We see that as an important bridge between the past (legacy finance) and the future (crypto).
Our first post in this series shared more on why legacy finance is broken. We talked about the countless unnecessary middle-men on every card swipe (merchant, acquiring bank, processor, card network, issuing bank). We talked about the slow settlement times.
The future of payments will be much better. Yes, it’ll be from a mobile phone and the user experience will be similar to ApplePay (NFC) or WePay (QR Code).
But more importantly, the underlying assets being moved/exchanged will all be crypto — digital, permissionless, and open source.
Someone making a payment at the grocery store check-out line will be able to open up Genesis Block, use contactless tech or scan a QR code, and instantly pay for their goods. All using crypto. Likely a stablecoin. Settlement will be instant. All the middlemen getting their pound of flesh will be disintermediated. The merchant can make more and the user can spend less. Blockchain FTW!
Now let’s talk about a few projects working in this area. The xDai Burner Wallet experience was incredible at the ETHDenver event a few years ago, but that speed came at the expense of full decentralization (can it be censored or shut down?). Of course, Facebook’s Libra wants to become the new standard for global payments, but many are afraid to give Facebook that much control (newsflash: it isn’t very decentralized).
Bitcoin is decentralized… but it’s slow and volatile. There are strong projects like Lightning Network (Zap example) that are still trying to make it happen. Projects like Connext and OmiseGo are trying to help bring payments to Ethereum. The Flexa project is leveraging the gift card rails, which is a nice hack to leverage existing pipes. And if ETH 2.0 is as fast as they say it will be, then the future of payments could just be a stablecoin like DAI (a token on Ethereum).
In a way, being able to spend crypto on daily expenses is the holy grail of use-cases. It’s still early. It hasn’t yet been solved. But once we achieve this, then we can ultimately and finally say goodbye to the legacy banking & finance world. Employees can be paid in crypto. Employees can spend in crypto. It changes everything.
Legacy finance is hanging on by a thread, and it’s this use-case that they are still clinging to. Once solved, DeFi domination will be complete.
https://preview.redd.it/svft1ce422b51.png?width=700&format=png&auto=webp&s=9a6afc9e9339a3fec29ee2ae743c07c3042ea4ce

Impact on Genesis Block

At Genesis Block, we’re excited to leverage these protocols and take this incredible technology to the world. Many of these protocols are already deeply integrated with our product. In fact, many are essential. The masses won’t know (or care about) what Tether, USDC, or DAI is. They think in dollars, euros, pounds and pesos. So while the user sees their local currency in the app, the underlying technology is all leveraging stablecoins. It’s all on “crypto rails.”
https://preview.redd.it/jajzttr622b51.png?width=700&format=png&auto=webp&s=fcf55cea1216a1d2fcc3bf327858b009965f9bf8
When users deposit assets into their Genesis Block account, they expect to earn interest. They expect that money to grow. We leverage many of these low-risk lending/exchange DeFi protocols. We lend into decentralized money markets like Compound — where all loans are overcollateralized. Or we supply liquidity to AMM exchanges like Balancer. This allows us to earn interest and generate yield for our depositors. We’re the experts so our users don’t need to be.
We haven’t yet integrated with any of the insurance or investment protocols — but we certainly plan on it. Our infrastructure is built with blockchain technology at the heart and our system is extensible — we’re ready to add assets and protocols when we feel they are ready, safe, secure, and stable. Many of these protocols are still in the experimental phase. It’s still early.
At Genesis Block we’re excited to continue to be at the frontlines of this incredible, innovative, technological revolution called DeFi.
---
None of these powerful DeFi protocols will be replacing Robinhood, SoFi, or Venmo anytime soon. They never will. They aren’t meant to! We’ve discussed this before, these are low-level protocols that need killer applications, like Genesis Block.
So now that we’ve gone a little deeper down the rabbit hole and we’ve done this whirlwind tour of DeFi, the natural next question is: why?
Why does any of it matter?
Most of these financial services that DeFi offers already exist in the real world. So why does it need to be on a blockchain? Why does it need to be decentralized? What new value is unlocked? Next post, we answer these important questions.
To look at more projects in DeFi, check out DeFi Prime, DeFi Pulse, or Consensys.
------
Other Ways to Consume Today's Episode:
Follow our social channels:https://genesisblock.com/follow/
Download the app. We're a digital bank that's powered by crypto:https://genesisblock.com/download
submitted by mickhagen to genesisblockhq [link] [comments]

Market Outlook - March 2020

Hi guys, just want to share with you my current market outlook. Hope this can help spur a discussion for everybody's benefit. This is not a an investment advice. You are not my client and I am not your fiduciary. That said, the views below are just for discussion purposes.
At the risk of being cliche and obviously wrong, here I go:
Short term-medium term:
  1. We are in a bear market, and recession is already underway.
  2. Occasionally, there will be "bear market rallies)". For long term investors, these are not a time to buy yet, use it to sell instead. For traders, bear market rallies and the volatility that they bring, are great opportunities to make money. Dow Theory suggest there could be at least three bear market rallies within the overall bear market trend.
  3. Reason why I think the downturn will continue for short-medium term: The USA is still early in the coronavirus infection blow out. Look at updated chart by JP Morgan and FT here and here. The Fed is doing everything they can to keep liquidity/market functioning. The fiscal stimulus that the government is trying to pass, should dampen the blow to the economy. But, as long as the coronavirus situation i.e, the public healthcare crisis, the real crisis, is not tackled immediately through decisive action like other countries, then it will only prolong the infection period. See Bill Gate and WHO's opinions here and here. IMO, the market is still underestimating the coronavirus infection and the blow to the economy that it could bring given ineffective measures by the government.
  4. The market could at least fall for another 15% before it starts to find a bottom based on previous bear markets.
Longer term:
  1. Stocks would eventually go into bull market again.
  2. Among the indicators that signal bottoming/reversal would be volatility (VIX) returning to normal level.
  3. High quality companies, I would imagine mega-tech with pristine balance sheet, would rally first and perhaps perform the best in the upcoming bull market.
Asset Allocation
Short term: Short equity via inverse ETF, short emerging market stock/currency - especially countries with twin deficits (fiscal and trade), long gold, long treasury. Or just stay in cash.
Risks: As what happened previously, gold and treasury did not provide the hedging characteristics. They went down together with stocks, while in normal condition, it they should go up. One possible explanation is that funds are liquidating any positions that they could, to satisfy redemption and margin call.
Things to avoid: 1) Options, because options are currently trading at premium in general due to high implied volatility. Also remember that with options, you have to nail three variables to make money - direction, magnitude, and time horizon. Also, avoid 2) triple leveraged ETF/ETN. The volatility and leveraged used in the ETFs will cause a "decay" in your return if the market trade sideways. As for ETN, their prices could fall to certain level that trigger "acceleration event" in which case, the investment banks issuing the ETNs will redeem the ETNs from you, usually at a steeply discounted price.
Long term: Long equity, with overweight on mid-mega cap tech stocks.
submitted by sellside_sandy to investing [link] [comments]

They banned me for breaking a rule that hadnt been created yet. So heres another DD I got from there today. Find your traitor

I think sell off is not over yet.
Hi guys, just want to share my thoughts on current market outlook with you all. I posted this in a couple of subs before I was accepted into this sub. If anything, this is more of me thinking out loud. Definitely not an investment advice. I'm here to lose money together with you all and have fun at it. And maybe make some money occasionally.
TL;DR; Sell off not over yet. Err to the safe side. But hey what do I know.
-/-
Short term-medium term:
  1. We are still in a bear market (however arbitrary it is defined), and recession is already underway.
  2. Occasionally, there will be "bear market rallies)". For long term investors, these are not a time to buy yet, use it to sell instead. For traders, bear market rallies and the volatility that they bring, are great opportunities to make money. Dow Theory suggest there could be at least three bear market rallies within the overall bear market trend.
  3. Reason why I think the downturn will continue for short-medium term: The USA is still early in the coronavirus infection blow out. Look at updated chart by JP Morgan and FT here ( this was on 23rd march) and here (this is updated daily). The Fed is doing everything they can to keep liquidity/market functioning. The fiscal stimulus that the government is trying to pass, should dampen the blow to the economy. But, as long as the coronavirus situation i.e, the public healthcare crisis, the real crisis, is not tackled immediately through decisive action like other countries, then it will only prolong the infection period. See Bill Gate and WHO's opinions here and here. IMO, the market is still underestimating the coronavirus infection and the blow to the economy that it could bring given ineffective measures by the government. Me living in Asia now,its like having a preview of what is going to happen to the US.
  4. The market could at least fall for another 15% before it starts to find a bottom based on previous bear markets.
Longer term:
  1. Stocks would eventually go into bull market again.
  2. Among the indicators that signal bottoming/reversal would be volatility (VIX) returning to normal level.
  3. High quality companies, I would imagine mega-tech with pristine balance sheet, would rally first and perhaps perform the best in the upcoming bull market.
Asset Allocation
Short term: Short equity via inverse ETF, short emerging market stock/currency - especially countries with twin deficits (fiscal and trade), long gold, long treasury. Or just stay in cash.
Risks: As what happened previously, gold and treasury did not provide the hedging characteristics. They went down together with stocks, while in normal condition, it they should go up. One possible explanation is that funds are liquidating any positions that they could, to satisfy redemption and margin call.
Things to avoid:
1) Options, because options are currently trading at premium in general due to high implied volatility. Also remember that with options, you have to nail three variables to make money - direction, magnitude, and time horizon. But if you know how to take advantage of selling options and have the money for the collateral, by all means. Should be fun.
Also, avoid 2) triple leveraged ETF/ETN. The volatility and leveraged used in the ETFs will cause a "decay" in your return if the market trade sideways. As for ETN, their prices could fall to certain level that trigger "acceleration event" in which case, the investment banks issuing the ETNs will redeem the ETNs from you, usually at a steeply discounted price.
Long term: Long equity, with overweight on mid-mega cap tech stocks.
submitted by Ardesic53 to Winkerpack [link] [comments]

Wells Fargo stock Analysis

Source: Bireme Report
Wells Fargo
We added two positions in the quarter. One of them was megabank Wells Fargo. The COVID-19 crisis caused a lot of pain for bank investors during the first quarter, and Wells Fargo was no exception. In fact, the stock was dropping even before the virus reached NYC, down about 13% in January while the broader market was flat. WFC then proceeded to fall 47% to its lows on the year around $25. We invested towards the end of the quarter, with an average price of ~$27.50. What we saw in Wells Fargo was a bank with a long history of solid, growing earnings that is facing a number of short- to medium-term problems:
Business-practice issues of its own making.
Potential COVID-19 related loan losses.
Falling interest rates. We could fill many pages with discussion of the firm’s client relations and HR scandals -- opening accounts for clients without their permission, putting wealth management clients in unsuitable investment products, failing to respond to HR complaints, gender bias in hiring and promotion, illegally repossessing borrower motor vehicles, etc. The market has punished the stock since these
The market has punished the stock since these issues came to light, with WFC underperforming peers by 50% since 2015. Wells Fargo today reminds us of Facebook in Q4 2018 (which we wrote about here). In both cases, investors unduly shunned a fundamentally sound company that made mistakes involving breaches of customer trust. While admittedly reprehensible, the scandals at both FB and WFC are more impactful to social media sentiment than to long-term free cash flows.
Availability bias causes human beings to place disproportionate weight on this type of story. Breaches of customer trust rightfully disgust the public, and investors find it distasteful to be long a company whose CEO is chastised by Congress. Our investment strategy is predicated on identifying and exploiting these investor biases; we thrive on situations where short-term issues obfuscate the underlying health and long-term earnings power of a business.
The vast majority of revenue for Wells Fargo is generated by interest on loans, and we don’t see much evidence that the long-term volume or credit quality of these loans have been a!ected by the scandals of the past three years.
In fact, Wells Fargo’s relationship with consumers and businesses appears to be healthy. All of the following key metrics are flat-to-up since 2016: loans (flat), deposits (flat), customer checking accounts (+3%), debit card purchase volume (+21%), consumer card purchase volume (+17%), commercial card purchase volume (+28%), and branch visit satisfaction score (+3%). But even these figures understate the health of WFC’s business: the lack of growth in the loan book is due entirely to an asset cap put in place by regulators to punish the company for its transgressions. If not for that cap, loans and deposits would almost certainly have grown.
For this 168-year-old franchise, we paid less than 7 times trailing earnings. We do expect those earnings to fall in the short term as COVID-19-related loan loss provisions hit the income statement. However, WFC’s balance sheet and core profitability provides plenty of margin to absorb these losses. Wells Fargo’s net charge-o!s peaked at 2.2% of average loans outstanding during the financial crisis. While this level of net charge-o!s would’ve been enough to wipe out last year’s earnings, it would not have impaired the firm’s book equity (assuming that dividends and buybacks were suspended temporarily).
Our base case is that the current crisis will be extremely sharp in the short term, but not worse than the financial crisis in the long term unemployment, home prices, and loan defaults. For one, consumers are in a better position. In 2008, debt service payments (mostly due to high mortgage payments) were over 13% of disposable income. Today, that number is below 10%. US households’ equity in their homes has doubled since year-end 2008, to almost $20 trillion today. Second, the banking sector -- whose meltdown exacerbated if not caused the 2008 crisis -- is much better capitalized, with Tier 1 common equity ratios up from about 8% in 2007 to 12% today.2 Interest rates have fallen substantially -- mortgage rates, for example, have fallen by about half a percent in the last year -- and thus Wells Fargo will generate less net interest income. Current Street estimates are for $43.9b in net interest income, a decline of $3.3b versus 2019. Given that lower interest rates are prevalent across the yield curve, we expect this to continue for the foreseeable future.
However, we believe Wells Fargo has a significant opportunity to o!set much of that lost income by cutting costs. The firm’s efficiency ratio,” the ratio of non-interest expenses to revenue, has become one of the worst in the industry in recent years. Partly this is due to the firm’s regulatory problems, which we estimate have cost $5b per year in legal fees, settlements, and compliance costs. As they put these issues behind them, we think they should be able to achieve an efficiency ratio similar to their peers at JP Morgan and Bank of America. This implies they may be able to shed $8-10b of total costs, which would more than o!set the lost interest income from lower rates. Management has stated that they are focused on this task.
Over time, we estimate that WFC will be able to generate about $15-18b of profits per year, only slightly lower than the $18-20b they generated between 2017 and 2019. The stock trades at 6-7.5x the new earnings level, which we find quite cheap given the long-term stability of the business and the stickiness of client accounts.
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JP Morgan's You Invest Brokerage Offers 100 Free Trades - What's The Catch? [Episode 379] JP Morgan launches 'You Invest' trading app JPMorgan Traders Charged With Rigging Metals Deals Trading JPMorgan (JPM) Earnings JP Morgan .US Sell TP $ 90 SL $ 100

JPMorgan Chase & Co beat Wall Street profit estimates in the second quarter due to a surge in trading revenue while setting aside a record $10.5 billion to cover future defaults, as the bank REUTERS/Brendan McDermid. There's a race to the bottom in stock trading fees right now, and JPMorgan is the latest entrant.; You Invest, the bank's new zero-fee brokerage platform, offers 100 free Before trading stocks in a margin account, you should carefully review the Margin Disclosure Statement. J.P. Morgan’s website and/or mobile terms, privacy and security policies don’t apply to the site or app you're about to visit. Please review its terms, privacy and security policies to see how they apply to you. J.P. Morgan isn’t J.P. Morgan’s FX, Commodities and Rates Trading Platform As a leading liquidity provider, you can trade a breadth of orders across 300* currency pairs, leveraging our diverse order flows and intelligent order routing across multiple ECNS. 2020 current JP Morgan Chase margin account rates: interest fees charged on brokerage trading with margin loan. JP Morgan Chase base lending rate (BLR - broker loan cost). Chase You Invest Margin Rates At this time margin investing accounts are not offered at JP Morgan Chase. As an alternative, you can use one of the lowest margin rates brokers

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JP Morgan's You Invest Brokerage Offers 100 Free Trades - What's The Catch? [Episode 379]

JPMorgan is set to release earnings before the bell tomorrow. Here we discuss trading opportunities ahead of the report and what details to look for during t... Sep.16 -- U.S. prosecutors took an unusually aggressive turn in their investigation of price fixing at JPMorgan Chase & Co., describing its precious metals trading desk as a criminal enterprise ... During the season of the quarterly reports, we recommend paying attention to the shares of the US banking giant - JPMorgan Chase & Co. The largest US bank in... #TedButler: #JPMorgan #Silver and #Gold Traders Charged By #DOJ - (part 1) Last week the Department of Justice not only charged several JP Morgan traders with manipulating the market, but even ... Careful With YouInvest Trading Platform (JP Morgan Chase) - Fee's! - Duration: 11:57. Financial Investor 6,880 views. 11:57. Investing For Beginners Advice On How To Get Started - Duration: 23:03.

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