Hey Influence Traders,
It’s time for the Weekly Roundup.
But this is no ordinary weekend …
It’s Memorial Day.
We are going to keep this short and sweet to allow everyone time to remember those who sacrificed everything to make this the greatest country on earth – yeah, I’m that guy!
Enjoy your friends, family, hot dogs, mom, apple pie and watching the Indy 500.
My Power Mover of the Week … is the U.S. and its people.
So please, Remember.
And to all of those who have served or are currently serving – THANK YOU!
DC Action
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- TSA Reports Travel Is Up: TSA reported over 1.9 million travelers on the Friday before Memorial Day weekend, the most reported since March 2020.
- Origins: The Senate passed a resolution calling for a probe into the origins of COVID-19.
- Counter to the Counter to the Counter: Republican leadership put a $928 billion infrastructure counteroffer on the table, which the White House signaled it welcomed despite falling far short of its current $1.7 trillion proposal.
- The Budget: The big news of the week was Biden’s proposed $6 trillion budget, which was immediately skewered by republicans.
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Power Moves Portfolio Roundup
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- Ford (Ticker: F) pulled back a bit and we will take the money if we don’t see a rally next week. The strangle was up around 20% as of the close.
- General Electric Company (Ticker: GE) is a play on green energy and getting stronger with some recent windmill innovation announcements. We own 2 GE Sept. 17 14-strike calls for a credit.
- Cleveland-Cliffs (Ticker: CLF) broke out and way above the strike in my spread, so I took the $100 gain and bought a midterm call, one CLF July 16 21-strike call for $1.61. Looking for a double in this call to close.
- Our Vale S.A. (Ticker: VALE) position is down a bit in the five VALE June 18 22-strike calls we own, but it is closing again on even. We sold all the puts in here for a 100% return per put. The loss in this position has closed and we would squeak out for a $1 close on the calls for a break-even and move on. We’re in repair mode on this position, so even is fine and I will move on.
- We own four Taiwan Semiconductor (Ticker: TSM) June 18 120-strike calls for $3.10 and one TSM June 18 100-strike put for $1.95. We’ve taken in $470 against them via TSM calls we sold and QQQ put spreads we closed. The calls are back to $1.75, but time is ticking. At this point, the position is broken as TSM has made three moves up and down from $108 to $117. The 120-strike calls need a breakout and we’re not getting one, so that’s why we’ll hit the exit for even.
- Palantir (Ticker: PLTR) stock briefly hit $24.75 on Friday as the meme stocks got hot again. We are back to even on the position, and if we get a move above $25, we will take the win and move on since this one is in repair mode. Our initial strangle lost small and we tried to generate some income via put ratio spreads, but PLTR went from $24 to $18 in about 2 days. With the long stock and puts, we have time to let things work out but still want to exit and redeploy the dollars.
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The Budget
The president proposed a fiscal year 2022 budget of $6 trillion.
This is the opening salvo for negotiations, so it is early to make too many predictions on outcomes.
What we do know is that the budget calls for some of the heaviest and most sustained periods of spending since WWII, and supports Biden’s priority areas such as infrastructure, education, research, public health, paid family leave and childcare.
Some of the highlights include:
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- $4 trillion for the American Jobs Plan and American Families Plan, which are currently being negotiated with congress. This covers infrastructure spending.
- $932 billion for discretionary, non-defense programs.
- $756 billion in defense funding.
- $50 billion on domestic and global health initiatives.
- $36.5 billion for Title I schools, in which children from low-income families make up at least 40% of enrollment.
- $36 billion for climate initiatives.
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The budget calls for spending to increase to more than $8 trillion by 2031.
Biden stated that his spending increase will be “more than covered” by proposed tax increases on wealthy Americans and corporations.
The budget assumes economic growth of 5.2% per year this year and 4.3% next year, which the administration described as “conservative estimates.”
To enact the budget, the U.S. will have to borrow 50 cents for every $1 it spends, and it is expected to push the public debt to $24 trillion.
Republican Reactions …
In short, they didn’t like it.
House Minority Leader Kevin McCarthy called it “the most reckless and irresponsible budget proposal in my lifetime” and Senate Minority Leader Mitch McConnell claimed that it would “drown American families in debt, deficits and inflation.”
While the devils are in the details, given the rosy growth estimates I’m going to have to side with the Republicans on their critique of the proposal.
Travel
The major airlines reported that ticket prices in Q2 are up almost 18% over Q1 — and are continuing to climb.
Meanwhile, a consortium of travel agents reported that they are expecting a record summer travel season as a result of pent-up demand and as the U.S. and world reopen.
I’ve been looking into European travel and it ain’t cheap! From planes, to cars to hotels, prices and inventory are at a premium.
Option Pit guru Mark Sebastian has been touting American Airlines (Ticker: AAL). While heightened gas prices will dampen profits somewhat, there is a good chance that demand and rising ticket prices will solidly offset that variable.
Andrew and I are going to start looking at some trades around AAL in the Power Moves portfolio. So standby …
Cutting Through the Noise for You.
Frank