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DAILY DIARY

Stephen Guilfoyle

I Guess I'd Better Go Now

Well, the clock says it's time to close now

I guess I'd better go now

I'd really like to stay here all night

The cars crawl past all stuffed with eyes

Street lights share their hollow glow

Your brain seems bruised with numb surprise

--"Soul Kitchen" Morrison, Densmore, Manzarek, Kreiger (The Doors), 1967

Out and About

The "ugly stick" was out and about on Friday. The beatings were indiscriminate. Morale did not improve. It was the last day of the worst week since March 2020. Uglee.

The Nasdaq Composite gave up 2.72% for the day, and 7.55% for the week. The S&P 500 surrendered 1.89% for the day and 5.68% for the week. The Russell 2000? Down 1.5% on Friday, down 7.81% for the week. Otherwise, no big deal. The Dow Transports were the out-performers for the holiday shortened four-day workweek, down "only" 4.14%.

Concerning sectors, the Staples closed in the green on Friday by this >< much. Ten sectors closed below sea level. Seven of them gave up more than 1%, five of them more than 2%, and the Communications Services split up 3.42%, largely due to a 21.8% post earnings drubbing taken by Netflix (NFLX) as risk managers forced portfolio managers to abandon the name. Disney (DIS) was down in sympathy, and was the dog of the Dow for the session.

The route could not be blamed on rising interest rates, or the Fed. Bond traders brought up (or down, you know what I mean) the entire Treasury curve. Cryptocurrencies were beaten severely, while most commodities sold off as well.

It feels more to me, like markets are pricing in either military conflict in Europe or just a much tougher economic environment going forward. Maybe both.

Notes

1) I did get out of my poorly thought out trade in NFLX. By day trading the stock into the close, I was able to turn a rather nasty loss into something manageable.

2) The answer to the baseball question was Diego Segui.

With that all said, it has once again been a pleasure to write for you and interact with you today. Sorry I was on TV so much today, I try not to do TV on days I sub for Doug, but this came up late.

I hope you all have a fantastic and safe weekend. Rock on.

Position: Long DIS equity

Late Day Adds

Amazon  (AMZN)

Netflix (NFLX)

Berkshire Hathaway (BRK.B)

SPDR Gold Shares (GLD)

Note: Day trading NFLX into the close.

Position: Long AMZN, NFLX, BRK.B, GLD

Baseball Trivia

Without using the internet... I was the starting pitcher for the Seattle Mariners on opening day, 1977, the first game in franchise history.

I also pitched in relief for the Seattle Pilots on opening day, 1969. That was he first game in franchise history for that team (later the Milwaukee Brewers).

Who am I?

Position: None

Tweet of The Day

Position: None

Sarge Alert

Your best pal will appear on the Fox Business Network with Liz Claman at 3 pm ET.
We're talking about stocks.
I'm thinking Netflix (NFLX) , Disney (DIS) , Berkshire Hathaway (BRK.B) , Livent (LTHM) , Matson (MATX) , Apple (AAPL) , Union Pacific (UNP) , Ford Motor (F) , and Marvell Technology (MRVL) .
I am long all except MRVL. Positions sizes have shifted though.

Position: Long NFLX, DIS, BRK.B, LTHM, MATX, AAPL, UNP, F equity.

Matson Inc

Matson Inc. (MATX) earnings are expected February 17th

- Pre-announced Q4 EPS of $8.70 to $9.10

- Wall Street had been at $5.35 to $5.40

- At consensus, that's earnings growth of 174%

- At the midpoint of new guidance, that growth is 354%

- Revenue expected to print at $1.08B, +55%

CEO Matt Cox acknowledges intense demand for U.S./China routes and expects this demand to persist through 2022. 

The firm had been troubled. Balance sheet is tough, sub 1 current ratio. A high debt load.

Sudden pricing power afforded the business is exactly what the doctor ordered. 

Not sure if I see a double bottom (orange) or a cup with handle (blue). Both are bullish.

Image placeholder title

The Trade:

Target Price: Either $112 or $104 (cwh vs db)

Pivot: Either $93 or $87 (cwh vs db)

Add: $86 (50 day SMA)

Panic: $83 (break of the 50 day line)

Position: Long MATX equity

Lockheed Martin

Lockheed Martin (LMT)  , a long time Sarge name... down $1.63 or 0.44% today. 

- Earnings Expected 1/25

- Looking for EPS of $7.14 on revenue of $17.67B (+10.5%, +3.7%)

- Trades 12 times forward PE

- Trades 1.45 times trailing sales

- Solid Balance Sheet, current ratio of 1.45

- Free Cash Flow (Q3) of $5.87 per share

- Dividend: $11.20, yields 3.0%



The Trade:

Image placeholder title

Target Price: $414

Pivot: $345 (created by double bottom)

Add: $359 (200 day SMA)

Panic: $355 (break of 200 day line)

Position: Long LMT equity

Crypto-Fiat?

On Thursday, the Federal Reserve launched a period of debate and asked for public comments concerning the introduction of a central bank digital currency (CBDC). Thought it would never happen? Maybe it still won't, but at least the Fed is thinking about defending U.S. currency dominance as the planet moves forward. As a number of independent cryptocurrencies or crypto-assets such as Bitcoin, Ethereum and a number of others have taken a significant share of the "store of value" market, and other central banks have experimented with creating crypto versions of their fiats (think China), it was time, or even past time for the U.S. to get to this place.

The Fed has now released a paper that will serve as the framework for what is to be expected in coming months as folks argue for and against. The Fed points out that a CBDC might provide a safer, faster environment for digital payments for households and businesses. Then again, someone benefiting from participation in the cash or underground economy or pursuing illegal activities might not welcome a digital, trackable currency as the nation's only legal tender.

The Fed also warns that there could be negative impacts. How would such a dramatic evolution impact monetary or fiscal stability, especially during a period of transition? How does one reconcile transactions with personal privacy? There's a lot to consider. Probably more than you know. I think it's probably a positive from 10,000 feet out, but if you pay the neighbor kid $20 to mow the lawn, that kid is going to be taxed. Plus, some people like to stash cash in their homes or in a box at their bank. That goes out the window. What if once everyone is forced to keep savings in an account, those accounts, instead of offering interest payments, tax wealth instead? 

Food for thought.

Position: None

Sarge Alert

Your best pal will appear this morning on the TD Ameritrade Network with Nicole Petallides at 11 am ET.

We're talking about Lockheed Martin (LMT) , Matson (MATX) and Planet Labs (PL) .

I am long all three.

Position: Long LMT, MATX, PL equity

You Don't Say

On Thursday, Treasury Secretary Janet Yellen interviewed at CNBC. She stated, "I expect inflation throughout much of the year - 12 month changes - to remain above 2%." She added, "But if we're successful in controlling the pandemic I expect inflation to diminish over the course of the year and hopefully to revert to normal levels by the end of the year, around 2%.

Well, that's just the rub, isn't it? This whole bout with rampant inflation has been driven by scarcity. A scarcity of available goods. A scarcity of available labor. A scarcity of available services due to a scarcity of available labor. Solve Covid, you solve all of the kinks in the supply chain, and you stock the shelves at your local grocery store.

Which makes me wonder... just how much good tightening monetary policy can do. The Fed cannot correct for scarcity. They can make money flow easier, or not. This is not that problem though. There is no doubt that interest rates were kept low for too long and that the Fed's balance sheet is way too large. That said, maybe moving too soon will leave the economy with all of the already mentioned scarcities, but with reduced economic activity to less loose policy.

All of those available jobs will disappear in a rising rate environment as will wage increases that have not kept up with inflation anyway. Perhaps the best thing the Fed could do would be to slow walk the rate hikes... while using the balance sheet to maintain the slope of the yield curve as the economy goes through a necessary slowdown. Just sayin'.

Position: None

Netflix

Yes, you read that correctly. Benchmark analyst Matthew Harrigan upgraded Netflix (NFLX) from "sell" to "hold" with no price target. I guess that's as good as it gets this morning for the streaming entertainment giant that Harrigan referred to as now being "first among equals rather than a dominant player commanding overwhelming network effects." Harrigan is right on the spot, as far as I'm concerned.

Position: Long NFLX equity

Early Line

S&P Futures....... -19 (fair value: -18)

Nasdaq Futures... -115 (fair value: -107)

Gold.................... $1834

Silver.................... $24.44

Bitcoin.................. $38,600

Ethereum.............. $2,815

US 10 Year Yield... 1.78%

US Dollar Index..... 95.6

WTI Crude............. $84.21

Position: None

Now at the Plate, Your Pinch Hitter, Stephen Guilfoyle!

Dougie is out today. Your old pal, Sarge here, pinch hitter, sixth man off the bench. Everybody stop what you're doing... pray, or meditate, then do something physical that you are capable of. I'll wait here.

Now, we rock. Happy Friday, I think. As if Thursday wasn't enough. Shake out those cobwebs. The time to shine is right now. Excellence will be our expectation. Why? Because we're a bunch of rompin', stompin', can't get enough warrior types, that's why. "They" want what's ours, so we fight. Now, bring it.

Europe opened in the hole, following an Asian wobble that followed that absurdity that has been the U.S. marketplace over the past 24 hours (really all week).

I took out a small (long) overnight rental in Netflix (NFLX) overnight. Net basis... $407+. Yes, I understand that this was more gambling than anything else. Also added to an existing long in Disney (DIS) in the overnight session amid the streaming service carnage (pin action). That was more like self defense, as well as what I would like to think of as actual investing. I see that Doug has already published his overnight purchases. I am also long Nvidia (NVDA) , Microsoft (MSFT) and JPMorgan Chase (JPM) in addition to my overnight moves.

Now, prepare thyself. The day is upon us, and we have arisen. Already one and oh. Undefeated.

Position: Long NFLX, DIS, NVDA, MSFT, JPM equity

Dougie's Busy Night of Buying

Here is a list of ETFs/stocks I purchased last evening: SPDR S&P 500 ETF (SPY) , Invesco QQQ Trust (QQQ) , iShares Russell 2000 ETF (IWM) , SPDR S&P Biotech ETF (XBI) , PayPal (PYPL) , DraftKings (DKNG) , Penn National Gaming (PENN) , Disney (DIS) , Netflix (NFLX) ($402), Upland Software (UPLD) (new, software name), Facebook FB , Nvidia (NVDA) , ARK Innovation ETF (ARKK) (!), Microsoft (MSFT) , Sonos (SONO) , Elanco Animal Health (ELAN) , Boeing (BA) and JPMorgan Chase (JPM) . Oh, and Goldman Sachs (GS) .

See you all on Monday morning bright and early.

You have a treat today, The Sarge!

Be safe, everyone!

-- Dougie

Position: Long all stocks mentioned in the post
Doug Kass - Watchlist (Longs)
ContributorSymbolInitial DateReturn
Doug KassVKTX4/2/24-32.96%
Doug KassOXY12/6/23-16.60%
Doug KassCVX12/6/23+9.52%
Doug KassXOM12/6/23+13.70%
Doug KassMSOS11/1/23-22.80%
Doug KassJOE9/19/23-15.13%
Doug KassOXY9/19/23-27.76%
Doug KassELAN3/22/23+32.98%
Doug KassVTV10/20/20+65.61%
Doug KassVBR10/20/20+77.63%