Freight waves had an article on zerohedge a few days ago. I’m not at all familiar with the trucking industry and haven’t looked into it yet but maybe we should start digging.
And here’s another article posted today.
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This is a very valid thought process. We are currently just entering the first full quarter of significant diesel increases. Now almost double what they were a few short months ago. Trucker shortage leads to increased wages. Everyone knows about increased regular vehicle prices I can imagine semi prices have undergone the same.
So you have increased fuel cost higher wages to attract employees and increased machinery cost if freight prices only increased very minimally as the cost of doing business has you in turn see a major setback in profit margin. As the attempts try to stagnate inflation continue it will ultimately result in lesser demand. Simple rule of the land prices go up so high people just stop with the demand. If they can’t pay for it they borrow to get it. If prices are high and rates are high consumer spending ceases. Which results in a burst bubble with one of the major players being the freight industry.
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I appreciate the feedback, I was looking at Old Dominion Freight #ODFL
Pre Covid high Feb/March 2020 $150
52week high 373
Currently 263. dropped some when Zim dropped
07/15 250 Puts at 14.20 with 372 OI
I picked this time frame because it’s far out and some are predicting a recession coming , but we all know no one can time it. This was one of the few PUTs that had any OI over 5 people with 372. To me it looks like low risk to high reward with all the negative catalyst and headwinds we have. Prob a terrible idea and I just don’t see it. I will look into it more and follow up. it’s late and I gotta get these TPS reports done before the weekend.
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CNBC Pro article came out today titled: Bank of America downgrades 9 transport stocks, citing ‘deteriorating demand’
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Port update and thesis thoughts.
I didnt know what to expect today and it looks like the market felt the same. Huge swings both directions. Overall a good day. I was happy to realize some gains from CCL, PTON, and ARKK puts. Also sold large portions of my 4/14 index puts during an early dip and re bought same date with closer strikes while the indexes were doing their weird intraday pump. Positions are below and accurate, just keep in mind most of them were swapped today so % look a little strange.
Sitting at +119% on the week.
As far as the thesis goes. There are 3 things that came out in the last 24 hours that should be mentioned.
#1 - Consumer debt crossed 40 billion in February vs 18 billion expected. Highest single month EVER reported. If you want any indication on how people are getting by with inflation, here is a sign. But what happens when the credit card bills start to come due? This ofcourse is short term demand and not sustainable.
#2 - Mortgage rates ran through 5% and are currently sitting near 5.6%. Im a broken record here but this is just creating less demand in housing because affordability continues to price out the middle class. Prices have to come down and lets not forget that real estate represents about half of the worlds assets and thus collateral for new credit.
#3 - Wholesale Inventories spiked by 2.5% in Feb vs 1.2% in January. This is important because it suggests that demand for the majority of the economy is going down. Every month more household dollars are being spent on the essentials that are highly inflated leaving less money to purchase other goods. This is not a good sign for 95% of companies out there and will be reflected in future ER.
Im looking forward to more discussion on plays, going to read more about the transportation industry this weekend as I have seen some headlines about potential cracks. Next week gets interesting as the market needs to decide what direction we are going. I anticipate a hot CPI report early Tue morning may play into that.
I hope everyone has a great weekend.
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Pretty bearish article for the market heading into next week: https://www.cnbc.com/2022/04/08/big-banks-earnings-and-a-hot-inflation-report-could-sway-markets-in-short-holiday-week.html
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BofA is the latest large institution to raise recession concerns.
I dont have alot of trust with these institutions, I dont believe they make descisions based on what is best for the economy or American people. This lack of utilitarian decision making makes these announcements huge red flags. I dont believe that wall street has just now realized the significant challenges our economy and american people face. I think it is far more likely they have known since late last year or earlier and have now completed hedging their premium assets while selling their risk assets to smaller institutions and uninformed retail traders. Just my opinion, because the alternative would be much more scary.
Also, I thought this graph was interesting regarding the transportation discussion.
This is outbound freight. Couple this with rising Inventories and it would appear economic activity has dramatically slowed down recently.
Along with CPI Tuesday morning we also have some financial institutions reporting earnings next week. I think comps are interesting but will be paying close attention to guidance.
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This article re: BOFA Stock Market Outlook: S&P 500 to Fall 11% As Inflation Sparks Recession notes that they see SPX below 4000 by year end. And they also note a 100-year bear market indicator being the fall of transportation stocks.
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Wall Street Millennial just put out a new video today: Have Sanctions Gone Too Far? - YouTube
It adds a whole new angle to the recessionary argument that I haven’t seen yet in this thread I think. From what I gathered from the video, it’s not something to worry about right now but is something to keep at the back of your mind in the mid-term.
The video starts with a quick history summary on how the USD became the global reserve currency. Then at about 7:00 onwards, Wall Streets Millennial describes a scenario in which the USD can depreciate in value as more foreign investors become wary of investing in the US and the US Dollar, as the world now sees the power that US has with being able to suddenly freeze your USD reserves and your assets when they don’t like you (e.g. Russian oligarchs).
For example, since the Russian invasion, the Kingdom of Saudi Arabia has been negotiating with China to accept the Chinese Yuan for payment in their oil and gas transactions. Many countries will be keen to reducing their exposure to US Dollars.
Countries may start selling their US Dollars and buying Chinese Yuan and diversifying, and foreign billionaires may be hesitant of making any significant investments in a US asset, leading to a reduced demand in US Dollars. This could mean for the first time in 30 years the US may have to start living within its means, importing only as much as it exports. This can mean higher prices for imported goods. A piece of imported clothing that used to cost $20 may cost $40.
To protect the value of the US Dollar, “US could be forced to raise interest rates sharply, dramatically increasing the government’s interest expense and forcing them to raise taxes”. (I didn’t really understand this part). When and if this happens, American living standards could decrease dramatically in a very short period of time.
Devaluation of the USD would be gradual and take many years, but the more aggressive the US weaponizes their dollar, the more likely it becomes.
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I dont have much to add here, but a lot of that is covered in this blog as Energy Cancelled. (Any views expressed in the below are… | by Arthur Hayes | Medium.
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Wednesday morning is JP Morgan earnings. Gonna be a big one. Earnings will tell us everything about the consumer:
- How are credit cards transactions going?
- How are bank balances going?
- Are people still cash heavy?
- About 2 months ago, JPM suggested a 20% chance at recession. Right now economists are at 25%. Will JPM exceed or underestimate the 25% area?
Hey, im following with up in the Trans-logistics discussions. I could not get any fills last friday for old dominion, they are expensive and little no no volume.
Analyst are looking for a drop by 6% on average in 2023 and many are being downgraded to underperform.
Hoexter lowered his rating on Schneider (NYSE: SNDR) from “buy” to “underperform” and for Werner Enterprises (NASDAQ: WERN) from “neutral” to “underperform.”
He also moved to the sidelines on less-than-truckload providers ArcBest (NASDAQ: ARCB), Saia (NASDAQ: SAIA) and TFI International (NYSE: TFII), issuing “neutral” recommendations. Less-than-truckload earnings estimates were left mostly unchanged.
Ratings were also lowered to “neutral” for UPS (NYSE: UPS) and railroads Canadian Pacific (NYSE: CP) and Union Pacific (NYSE: UNP).
Hoexter downgraded a total of nine transportation-related stocks, including UPS (UPS), Union Pacific
Union Pacific Corp.
(UNP), Canadian Pacific (CP), and TFI International (TFII)—all from Buy to Neutral. Schneider National (SNDR) and Triton both got relatively rare double downgrades, from Buy to Underperform.
Symbol Equity Rating
HUBG HUB GROUP INC A-
UPS UNITED PARCEL SERVICE INC B
FDX FEDEX CORP B
EXPD EXPEDITORS INTL WASH INC B
RLGT RADIANT LOGISTICS INC B
AIRT AIR T INC D+
BEST BEST INC ADS D-
NAICS Industry Groups including:
werner
jbhunt
usatrucking
--------------------------------------------------------------------------------I started looking through option chains to see if any OI was building up on any of the stocks. I BOLDED date and strikes that stood out.
USAK
Key statistics
Market cap
133.43M
Price-Earnings ratio
5.66
Dividend yield
—
Average volume
237.20K
High today
$15.68
Low today
$14.82
Open price
$15.60
Volume
192.57K
52 Week high
$29.09
52 Week low
$13.01
12.5 5 put 5/20 -661 OI
--------------------------
JBHT
Market cap
18.16B
Price-Earnings ratio
24.26
Dividend yield
0.75
Average volume
1.53M
High today
$174.73
Low today
$167.40
Open price
$170.02
Volume
1.68M
52 Week high
$218.18
52 Week low
$155.11
4/14 Put 165 2042 OI
05/20 160 Put 763 OI
150 Put 231 OI
**JAN 2,23 LEAPS 150 PUT 470 OI
WERN
Market cap
2.49B
Price-Earnings ratio
9.91
Dividend yield
1.21
Average volume
1.39M
High today
$38.30
Low today
$36.32
Open price
$36.72
Volume
2.36M
52 Week high
$49.76
52 Week low
$36.29
NOT MANY PUTS ONLY
9/16 30Put FOR 40CENTS 691OI
OLD DOMINION #ODFL
14APR 230P 375 OI
20MAY 28TOI
JULY 15 250P 382 OI
230P 711OI
------------------------------------from this morning all of the postions i started watching last thursday/friday are down except … old dominion and usa trucking
ODFL 23O PUT UP 16.15% 7/15
USAK 12.5 PUT UP 85% 5/20
Might be and indicator of where the money is flowing as the other options have lost value.
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Thanks for working through this further, I love the Old Dominion play but as you mentioned little OI is by itself a challenge, so maybe something to watch to see if money starts flowing that direction. Again, appreciate the work, Im sure we can find a solid play in the Trans-Logistics sector.
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Port update and thoughts on tomorrow.
The disclaimer is I initiated a transfer of 13k to webull over the weekend. I did this because PDT rules have made me less agile than id like to be and trading is hard enough without them, also over the weekend I found a longer dated trade that I am feeling very good about and would like to start deploying some money at starting this week. Ill make another comment after work tonight on it.
Its also worth mentioning, any money that I trade in this account is money I dont need to live on and ultimately willing to lose. I say that because it can seem like im taking on alot of risk, and I am, but from my perspective ive dedicated realistically over 200 hours of research over the course of 8 months to this thesis. If i dont have the balls to actually trade when things move as anticipated, then im not sure it was worth it. I just dont want to see anyone make trades and lose money that they need, in some ways that hurts worse for me than losing my own money. I believe the fundamentals of this community are the best ive seen, so, set SL, cut cost basis, and take profits.
Took profits on my PTON and IWM 197p today. Opened CCL puts again as it was up 2%+ when the rest of the market was deep red. Ive made money on airlines and ccl puts, but I think I may be early here. Lower crude and strong bookings are effecting the prices more than the significant headwinds I see for the sector. PTON and ARKK are the gifts that keeps on giving, true “retard” strength here, will continue to swing trade these so long as the wsb crowd stays excited about them.
Current Positions
Thoughts on tomorrow.
As I mentioned on TF, last CPI pulled data before russia invaded Ukraine, so i believe it comes in pretty high with all things considered. If CPI comes in below, I think the market rips. If it comes in as expected, i think we see high volatility similar to the FOMC minutes last week then retreat to red (@Conqueror played that brilliantly, might be the play tomorrow if numbers come in as expected ) If we are higher, with indexes sitting at key support, i think we gap down and potentially capitulate.
Just watch out for press conferences after, equities love any signs of relief and as I have stated before J Pow has a gift of easing fear short term, especially after key data comes out.
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Great analysis! Happy to set you making more call-outs. I scalped IWM today and did alright, should’ve gone into ARKK, but I’m going to wait and see which direction we go tomorrow.
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Came across this Reddit post on r/stocks about ETSY, and noticed this comment that reflects a decrease in consumer sentiment.
Also … puts on ETSY?
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Alright, this is a longer term trade im pretty excited about. It also looks like there is some big money that is using this as a hedge.
HYG - May 20th and June 17th strikes.
First, HYG is US Junk bonds. I have been playing HYG since January and ive noticed although it doesnt have significant movement, over time its been nice and steady, not as reactionary as the rest of the market.
This is where we are at on the Daily.
It has been curling over pretty consistently since late december.
Zooming in we are at a significant support line. Could possibly break tomorrow, but im betting we break and gap down by next FOMC meeting in May.
Open interest is significant on the puts side at both dates.
Here is May 20th
And June 17th
Unusual Whales flow data is well, unusual.
Filtering 1 million +, everything is on the puts side (99.1%) with big trades. These are just from today, but last week looked the same.
And I know this isnt the best calculator, but here is a chart for both strikes im looking at.
May 20th 78p
June 17th 77p
Would appreciate any thoughts, thanks in advanced
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Feb2022 CPI data in google sheets since tmr is new CPI: CPI Feb 2022 - Google Sheets
Of interest, MoM last col:
Looking at USOIL graph, oil price has fluctuated a lot in March, probably due to the war in Ukraine, economy coming off COVID restrictions, etc. Good news is that oil price has been downtrending near the end of March, but CPI numbers will have picked up price at some points during the fluctuations.
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I don’t really get it but I think this Tweet is supposed to say something useful about HYG haha https://twitter.com/ResearchQf/status/1513581930016649219
Is it saying that yields inverse S&P and now there is divergence, meaning S&P should be going much more down?
That seems pretty clear from the tweet, but how does HYG play into it?
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JPM bull is suggesting to take profits on stocks: https://twitter.com/SpecialSitsNews/status/1513556386512261126/photo/1
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