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 2019
took 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% long
He 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.
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
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!
In the past couple of weeks I have been diving a little bit more into the fundamentals of Lordstown Motors and their merging company Diamond Peak Holdings Corp. There has been a lot of bullish and bearish talk about this SPAC and I have found some interesting information about LM. I managed to get in touch with one of the CEOs of their partner subcomponent companies (can't tell which one).
NOTE: I do own some stocks of DPHC which unfortunately makes my opinion more biased, but that is only because the barriers and cons of this stock that I found are not severe and can be overreached with small changes (will tell you in the CON section of the DD). Feel free to write your own opinion in the comments and if you have some more information, please tell me. I, along with everyone else, don’t want to lose money on this one.
PS: do your own research before buying! I am not a stock analyst nor is this my primary profession.
INTRODUCTION: Lordstown Motors primary product that will hit the market in 2021 is their pickup Endurance which is made in America at their headquarters in Lordstown, Ohio. In addition to their experienced executive team made up of automotive leaders from Tesla, Toyota, GM, VW, Hyundai, and more, they already own an ex-GM manufacturing factory which is being remodelled as we speak for the acambalence of their new pickup. The combined company will take the name Lordstown Motors and trade on the Nasdaq under the ticker symbol RIDE.
REASONS FOR EV MARKET TO GROW: The electric vehicle market has witnessed rapid evolution with the ongoing developments in the automotive sector. Favorable government policies and support in terms of subsidies and grants, tax rebates and other non-financial benefits in form of carpool lane access, and new car registration, the increasing vehicle range, better availability of charging infrastructure and proactive participation by automotive OEMs would drive the global electric vehicle sales. Developing electric infrastructure and rising emission concerns and rising government concerns are likely to propel the overall market. The electric vehicle market is estimated to grow from 3,269,671 units in 2019 to 26,952,318 units in 2030.
INVESTORS: The deal includes $500 million private investment in public equity, with General Motors (GM) investing $75 million and institutional investors Fidelity, Wellington and BlackRock (BLK) also investing in the electric vehicle startup, the companies said.The transaction implies a $1.6 billion equity value for Lordstown. The companies expect the deal to close in the beginning of October, based on the preliminary proxy statement (PREM14A) that they filed a couple of days ago.
TRUCK: Revealed in June, the Endurance is a full-size electric pickup truck with about 250 miles of range. One of the truck’s standout features is that it is powered by four electric hub motors, with one in each wheel (as opposed to placing them on the axle). This makes it possible to precisely deliver differing amounts of torque to each wheel, which helps in tough driving conditions. The truck will start at $52,500. A four wheel pickup truck has 4 HUB in-wheel electric motors that generate a pick output of 600hp and it has a towing capacity of 7,500 pounds. Top speed is limited through a PC software to 80mph (128km/h) and it can be charged in 10h from a level 2 charger and in just half an hour at a level 3 DC charger. It seats 5 people and will offer over-the-year updates and real time online fold monitoring such as power outputs for tools and accessories. It is directed toward a commercial fleet, touting its low operating costs, compared with its gasoline-powered F150.
ADVANTAGES: My contact at ____ tells me a major part of their advantage has to do with LMs fast organization and engagement, as well as their well structured business model. When it comes to a vehicle itself, the endurance truck is a first HUB in-wheel powered vehicle, therefore fighting a major space problem other EVs have. This setup features multiple advantages, including superior traction in low-friction surfaces (muddy or slippery conditions). Obviously, that’s a crucial component for a commercially used pickup truck. They are also lighter than other electric motors and are created out of less parts where drivers and operators won't have to deal with the recurring, almost incessant maintenance typical for combustion-engine trucks. Over time, the cost-savings, especially for fleet operators, will be incredibly significant. Other companies like Lamborghini, Toyota, Nissan, Lexus (LF-30) and Kia (Foturon) are announcing their own OEM in-wheel cars. Price-performance is in some ways “better” than their competitors. Subjectively speaking, however, it is not necessarily better at all specifications compared to their biggest rivals Tesla and Riviana. Political background behind this stock is extremely important. In their introduction video, Mike Pence gave a 30 minute speech, and both Trump and Biden have mentioned the vehicle when trying to persuade their Ohio voters. Now even the Ohio governor’s grandson works for LM. Because of the presidential campaigns, we could see more of LM in the major news.
DISADVANTAGES: By moving the motor to the wheels, the Endurance has an unsprung weight dilemma. In a practical view, unsprung components absorb the forces of the road independently to the rest of the vehicle. Thus, this creates potential reliability issues. What is more, the wheels represent rotational mass, meaning they also absorb torque. However, specialists in this field are now uniformed that the problem can be fixed with correctly tuned suspension. There is a lot of competition out there and the product is not jet consumer tested. One californian company did get it for a test ride, but has so far only posted pictures of the product and has not released any additional information.
POTENTIAL GROWTH: we are all familiar with some other stocks in this field like TSLA, NIO, SHLL, SPAQ, NKLA(RIP)... that gained up to 550% just in the last year. It is no secret that EV are one of the biggest trends right now. Last November, Lordstown purchased GM's Lordstown assembly plant, a 6.2 million square foot facility capable of producing 600,000 electric vehicles annually. In June, Lordstown unveiled a prototype Endurance pickup truck and has received more than 38,000 preorders representing more than $2billion of potential revenue from commercial fleet customers, the company said. Although you have to take into account that the pre-order will cost you 100$ and is completely refundable. That being said, if they manage to keep at least 15% of the pre-orders until 2021 that translates to a 300million revenue just at the beginning of January. In the official report they are forecasting to produce 107,000 EV by 2024. Electric vehicles have proven to have ridiculass P/S ratios meaning DPHC has plenty of room to grow. My optimistic opinion would aim toward ~$40 before merger puting the market cap at 1,4B. In 2021, if the vehicle proves itself, it could spike to a much higher number. Beware!! this is my personal opinion. It can stay $22 or it can skyrocket like we have seen with SHLL ($54 high) and NKLA ($80 high). Would love to see your prediction in the comments.
RISK: if the merge will not go through the price will for sure drop back to $10, but this is the risk with all SPACs and is not likely to happen with this one. There was also one discussion on this sub claiming that some insiders are in it for the short run and will sell their stocks when the stock reaches its “high”. However, the comments containing such claims have since been deleted and could be misleading; in an attempt to bring the current price down a bit. If you have some information on this, please leave a comment below. Either way, I think this stock will get a nice pump before the merge. Especially due to DPHC management teams political connections and heavy institutionsholding shares such as Deutsche Bank, Glazer Capital, HSBC holdings,JP Morgan Chase&Co...
That is my DD on LM and DPHC. I hope you like it and that the motherators won't remove it for some reason!
Good luck today guys, hope everyone makes some tendies submitted by
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
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