drchelsea1

AMD UPDATE - BEAR MARKET ? - SERIOUS UPDATE / INNER THOUGHTS

NASDAQ:AMD   Advanced Micro Devices Inc
0. Notes to follow as always. Going to be a moderate read, but not going to go on forever;

1. This is our first ever Neutral rating posting we have ever given on AMD (we are long, not neutral - but this is about Market perspective and the future in the next 12 to 18 months), and I am going to share my thoughts on a few things and leave the rest up to you;
Comment: 2. This post ends with "END OF POST";
Comment: 3. THE AMD CORRECTION YESTERDAY $57.50 to $51.50 / 2 Hours

Today was the first day in a long time that I was away from the screen most of the day. I had important family and community work to do; to provide food and necessities to the elderly and vulnerable under lock-down. I did however get messages from about 9:30am to about 11:30am as AMD dropped from $57.50 to $51.75 in about 120 minutes, from our software and neural network. I am not surprised. We posted a couple of days ago once again, about selling the $55 Call, and maybe protecting profits once again here (this is not a I told you so anything, we only make suggestions, and we follow our own advice - right or wrong):

Here is a quote from it on April 14 2020:

"
Comment: MILD CONCLUSION - $50 Retest or Run to $60 - 50 / 50 SHOT?

AMD has rallied hard and fast off of $37.75. We are at $55, and within striking distance of $60.

This was predicated on

1. The re-opening of the economy SOON;
2. The work at home play;
3. The strength of the balance sheet - They paid off 1 Billion at the Last Earnings report leaving only .5B debt;
4. The product portfolio, and many other factors.
Apr 14
Comment: Suggestions

Taking profits at $55

1. If you are a day or swing traders, there is nothing wrong with taking money off the table now, if you are in much lower, and you are not a "long term investor".

2. If you are a long term investor, you hold this baby, and maybe think about taking some off the table at $100. You must be prepared for ups and downs, the volatility on AMD is SKY HIGH.

3. If you have a 1 to 5 year horizon, like we do, you might think about selling some CALLS at this point, if you have the ability to sell options.

$55 Strike or higher? ATM / ITM / OTM?
Apr 14
Comment: SELLING COVERED CALLS

1. If you have some PROFIT in your AMD stock, and have at least 100 shares, you can sell some calls against your stock. Be aware of EARNINGS on May5th? and don't sell options over earnings, we can discuss that later. You can do weeklies, or bi-weeklies, but April 17 (very short high theta), or April 24, or May 1, makes sense.

OTM

$60 Call - You can sell this, and you can go out BEYOND earnings, but IF AMD retraces to $47.50, you will be in a difficult spot as you keep the premium, but it will only protect you maybe $5 on the downside.

ATM

$55 Call - You can sell this, and probably get $5, look at the dates, and that would cover you until $50 on the downside.

ITM

$50 Call or Less - You can sell this, and you can go out wherever you like, less than 2 months not into next earnings, and you would have some major downside protection, especially if your price is say $45. You would get say $7 for this depending on the dates, and that is $2 of UPSIDE, and massive downside protection.

BEAR MARKET RALLY

If we are in a Bear Market Rally, you need downside protection. Here is more info about covered calls and Bear Markets:
Apr 14
Comment: https://optionalpha.com/writing-covered-...
Apr 14
Comment: AMD - RUN to $60? or retest of $52.50 or $50?

We are not a betting team. We can't even give you the probability on this, but I have a "feeling", we may make a run at $60 like tomorrow, or a retest of $52.50 and possible in the next few days.

We truly believe the $50 level would hold, based on our analysis.

I think the Virus data, the re-opening of the economy, re-infection, vaccines, therapeutics, and so forth, will decide if we continue to new highs, or tank hard.

This is a Stock Pickers Market. You should not be loading up on the indexes or ETFs. You need to find Strong stocks, with Strong balance Sheets, and can do well in this environment.

AMD is such a stock, and one of the strongest."

Comment: JUST A CORRECTION - OR SOMETHING IS QUIETLY BREWING UNDERNEATH

AMD - $100 STOCK
Comment: Let me start by saying that in the next 2 to 5 years AMD is clearly a $100 stock. Maybe $250 5 years from now. So we are bullish on the stock, and I see $75 in the next 12 to 18 months, as a sustainable price.

We know that AMD is a strong recession choice and I have posted many times the article from Seeking Alpha about how:

AMD, A BETTER RECESSION CHOICE THAN ITS PEERS

https://seekingalpha.com/article/4307560...

AMD is a multi-faceted play with:

- Semi Custom (XBox / PS5)
- GPU (Graphic Processing Units - Gaming / AI / Data Center)
- CPU (Desktop and Cloud Compute / AI / Data Center)
- Gaming
- Work from Home Play
- Strong Balance Sheet
- Strong Leadership
- Strong Road Map
- Strong Product Portfolio
Comment: SELF FULFILLING PROPHESY - THE DEPRESSION

Robert Shiller: Self-fulfilling prophecy of recession could ruin bull run—not a specific event

https://1businessworld.com/2019/03/busin...

"Nobel laureate Robert Shiller suggests a self-fulfilling is prophecy unfolding on Wall Street that could ultimately derail the longest bull market in history.

Trading Nation.”

Shiller, who’s known for his behavioral finance research, estimates there’s about a 50 percent chance the economy will tip into a recession within 18 months.

He’s not sure what how long it could last or the magnitude. However, he isn’t ruling out a Trump-related event — even though the president has been an integral part of the economic narrative behind the bull run.

“People who are good storytellers — like Donald J. Trump is a brilliant storyteller — they tend to rise in our economy,” Shiller said. “He models a general public support for business, cuts profits taxes — what more can you ask?”

But if Trump loses his base because of his legal woes, Shiller believes that could usher in trouble.

He also refers to the growing budget deficit as an ominous economic issue. It grew to $913 billion for the fiscal year ending in January. That’s 77 percent higher than the previous year.

And it’s expected to get worse. The Congressional Budget Office projects yearly budget shortfalls will surpass $1 trillion beginning in 2022.

“That attention to public debt has waxed and waned throughout history,” Shiller said. “It seems like the public is OK with it for now. But I think in the back of their minds they’re not so sure.”
Comment: YOU HAVE SCARED EVERYONE TO DEATH / THE VIRUS

So I can tell you being based near Toronto, we have our share of Covid-19 cases, as this has happened to me:

1. I had Covid-19
2. Partner had Covid-19
3. Father died from Covid-19

Long story short, I come from a lower income family, partner and I grew up in public housing, and we have worked hard our whole life. We are affluent now, but don't act it. We are just average people, and always try to help others, and give most of it back.

I run a company that employs those that can't get jobs anywhere else, who are trying to put their lives back together from all manner of tragedy, but there is no other options for them. This company has been smashed.

This is a Depression of the Have Nots. There is no doubt in my mind. The people that I know whom work for big tech:

- Adobe, AMD, Amazon, Boeing, Costco, Sales Force, Google, Intel, Intuit, Microsoft, Nvidia, Qualcomm, Shopify, IBM / Redhat, and so forth;

Are not hurting one bit. They are not getting those "free mortgages" that we were promised, and lenders don't want to give anybody new mortgages as they are terrified of all the defaults coming down the pipe, but they will get there paychecks, and there quotas for sales will be reduced, or "guaranteed" for the rest of the year. They have 1,000,000+ diversified global portfolios, and have probably lost 5 percent so far during this Market downturn since February 21st.
Comment: They own expensive properties, but have low amounts of debt, cash in the bank, and our working from home, in there beautiful basements, on brand new computer equipment and office furniture that they cleaned out from the local stores over the past month. That is why you can't buy a desk, office chair, laptop, or most work from home parts right now, shipping times are horrid, and don't even think about toilet paper, paper towel or hand sanitizer.

The WELL OFF are sitting and home, watching their portfolios, doing their ZOOM conference calls, talking about "head counts", when "capital expenditures
" will resume, and which "companies to target" that have gotten smashed the most from this, like Canadian Tire.
Comment: THE HAVE NOT - GUARANTEED INCOME - WELFARE STATE - GENERAL LAZINESS - FEAR?

CERB (Canadian Emergency Response Benefit)

My Employees Don't Want to Work!

https://www.canada.ca/en/services/benefi...
Comment: So the Canadian Government like the U.S. Government, has given every person who can click the "Apply" button, or "Dial" the phone number, and has a bank account, or an address, and a Social Insurance Number and filed a tax return for 2018, $4000 in the last 2 weeks.

I have an teenage child, who made only $9000 as a part-time student, and gets $8000 in a 4 week period and already has $4000 in the bank.

"Dad, I don't really want to go back to work at the stupid coffee shop until at least July". This cash is awesome, and Netflix has some amazing shows on it.
Comment: So we are giving people $500 a week, tax free (taxable later), to sit at home, or you can go out and actually work, and make $14 an hour, for a $40 work week ($640), and pay taxes on that, use your gas, get out of bed, leave the house, actually have a shower, maybe use deodorant, put up with your stupid boss, pay for a baby-sitter, take public transit, and MAKE LESS MONEY?

THE GOVERNMENT PROGRAM SCHEDULE LOOKS LIKE THIS:

4-week period cycle


Period dates

1 March 15, 2020 to April 11, 2020 - $2000
2 April 12, 2020 to May 9, 2020 - $2000
3 May 10, 2020 to June 6, 2020 - $2000
4 June 7, 2020 to July 4, 2020 - $2000
5 July 5, 2020 to August 1, 2020 - $2000
6 August 2, 2020 to August 29, 2020 - $2000
7 August 30, 2020 to September 26, 2020 - $2000
Comment: Oh and you have to go out during what Donald Trump calls "The Plague":

Donald Trump says the Virus is the Plague:

https://www.youtube.com/watch?v=iESeXhL4...
Comment: GETTING PEOPLE TO GO BACK TO WORK - AND OFF WELFARE / HELICOPTER MONEY

So now nobody wants to go back to work. Why should they? Socialism is a great thing. The United States is about to experience what happens when you use "helicopter money" to help out everybody. This is called welfare. This can easily incentivize laziness, and I know lots of people that will work right now, but they want "cash under the table" so they can keep the money from the Government, and work at the same time.
Comment: THE COLLAPSE OF HOUSEHOLD DEBT

This is a big concern at this point. Especially in Canada:

December 2019 - You can find tons of articles about Debt in Canada and the U.S. It is bad.

Canadians' mountain of household debt is rising again

https://business.financialpost.com/perso...
Comment: I run a finance company, a renovation company, and also work for Big Corporate. I can tell you listening to the radio yesterday delivering meals, and on the job site with a few of my workers, the radio ads every 30 minutes were for:

"Bankruptcy Lawyers and Trustees".

Yes, they are not advertisements for Lowes, Home Depot or Walmart.
Comment: BANKRUPTCIES / MORTGAGES / CAR INSURANCE / LANDLORDS / CREDIT CARD DEBT / UTILITIES

Now I have my ear close to the ground, I know what the rich are doing, the middle class, and the disadvantaged whom I hire all the time. The rich people are sitting at home, just like everybody else doing the following:

RICH AND DEBT

1. Call call insurance company, you get a 3 month reduced payment mileage rate

2. Call leasing and finance companies whom you owe (usually just mortgage and car lease), and get a better rate, as you are the lowest risk;

3. Call your utility companies, like cable, and so forth, and "negotiate" a better package on those TV shows and Netflix and such.

4. Sit around all day look at your budget and scheme of ways to save money, fleece the government, and pay your creditors back less then they were expecting with a smile on your face;
Comment: MIDDLE CLASS

1. They are doing everything the Rich are doing and more:

2. Looking at their bills and monthly expenditures;

3. Deciding if they "might lose" their job;

4. If they lost their job, then of course they are tightening;

5. Thinking about the housing market, how BIG their mortgage is, and whether if the Market goes down 20 percent in Toronto, they will actually be underwater with the mortgage vs equity;

6. Thinking about the "high amount" of debt they have, and the "lavish lifestyle" they have been living, and how they can't afford it anymore.

7. How can they keep what they have, and maybe make their house a little more livable if they have a job and are working from home;

8. Preparing for a Great Depression in all manner of ways;
Comment: POOR

Well these people have been getting screwed over since the dawn of time. They are the ones hoping for:

1. Low and new Mortgages (no way);

2. Lower credit card rates and deferments, if they even have one;

3. Calling all creditors with the following line "I HAVE NO MONEY I CAN'T PAY".

You know that the struggle workforce counts for most of the economy. The rich 1 percent account for 99 percent of the wealth, but the poor and middle class count for 99 percent of the GDP and labour. The Rich are that way due to the other classes that support the system. This divide will get worse.

Coronavirus has created a market of ‘haves and have-nots,’ with the Dow posting its best 2-week run in 82 years amid 22 million job losses

https://www.ibenews.com/coronavirus-has-...
Comment: “It was the best of times, it was the worst of times…it was the spring of hope, it was the winter of despair,” to borrow from the opening lines of Charles Dickens’s “A Tale of Two Cities.”

In this case, the epoch of coronavirus that has infected some 2.2 million people has essentially created a tale of two markets: one of Wall St. and the other of Main St.

On Wall St., hope of reopening plans and unvetted therapeutics for the deadly illness has propelled the Dow Jones Industrial Average
DJIA,
+2.99%
to its best two-week run since 1938, according to Dow Jones Market Data.

On Main St., the market for jobs has been decimated, with forced-shutdown protocols, meant to limit the spread of the pathogen, wiping out nearly all of the 23 million jobs created in the aftermath of the 2007-09 recession, in a manner of four, incredibly short weeks.
Comment: CONCLUSION
Comment: We may well be in a Bear Market here. Re-starting the economy is going to be more challenging then we ever imagined.

AMD is a multi-faceted play with:

- Semi Custom (XBox / PS5)
- GPU (Graphic Processing Units - Gaming / AI / Data Center)
- CPU (Desktop and Cloud Compute / AI / Data Center)
- Gaming
- Work from Home Play
- Strong Balance Sheet
- Strong Leadership
- Strong Road Map
- Strong Product Portfolio

We need to get things re-opened, and I mean yesterday. That includes the schools and we need to put an end to "free money" and get people back to work as soon as possible. I am working, volunteer work as well, there is no excuse to sit around and collect IF you don't have to.

This mentality is the "mindset shift" that I am worried about. This is the "New Normal" that Mark Cuban talks about. Our fear of the virus, can easily turn into fear of working, paying our bills, and actually achieving anything.

AMD may go to $75 in the next week but we think we oscillate work months in the

$41.75 to $62.50 range.

I hope I am wrong here. I hope we are heading back up. The work at home play only goes so far, for so many quarters. We need to re-start the WORLD ECONOMY, and get going, and stimulus is just turning out to be a disaster.

We are selling DEEP IN THE MONEY WEEKLY / BI-WEEKLY / MONTHLY CALLS against a lot of our AMD and Large Cap stock holdings. We don't want to sell the equities, we don't want to pay for expensive hedges either and we need to make profit, so we need to be prepared, and AMD doing a 15 percent swing in 2 hours is not in the cards for most investors.

If your timeline is 2+ years, you can "set it and forget it". Otherwise, we suggest the following:



https://www.fullyinformed.com/deep-in-th...
Comment: Deep In The Money Calls – Teach The Bear New Tricks

Deep in the money calls can be an exceptional strategy to consider in a bear market. Whipsaw days and high volatility can make it tough for any investor. Wouldn’t it be great to put aside all the wild swings, volatility and fear of the bear market and get back to what is really important, investing. That’s what deep in the money calls can provide.

There is a difference between trading and investing. Traders are often in the market for short periods, sometimes even minutes as they try to make quick profits. Investors on the other hand are trying to look for value in a stock and turn a profit but not overnight.

The problem for a lot of investors is that buying stocks in a bear market can be down right terrifying. Again this is where deep in the money calls as a strategy for bear markets can be a winning strategy.

Everyone knows what deep in the money calls means. You buy the stock and sell covered calls that are below the stock valuation at the time of purchasing the stock. Seems simple, but actually there is more to deep in the money calls if you want to end up with profits and protection during bear markets...

https://www.fullyinformed.com/deep-in-th...
Comment: So I like the $47 CALL for the Pivot here. If you get $10 that gives you a range of $37 to $57 for profit and protection, and this appears to the be the oscillating swing area of AMD, until we can get some direction on the Virus, Therapeutics, Vaccines, and getting people back to work, 15 percent movements in 2 hours and ridiculous and is either a CORRECTION, and we go back up above $60, or this is going to keep happening, and we are in a Bear Market for now.

- drchelsea

END OF POST
Comment: NEWS THIS MORNING

April 23 2020 6:24am est

TSMC seeing ramp-up in orders from AMD, Nvidia, DigiTimes reports 06:24 TSM, AMD, NVDA A ramp-up in short lead-time orders placed by AMD (AMD) and Nvidia (NVDA) will allow TSMC (TSM) to post relatively strong results compared to other foundries in the first half of 2020, DigiTimes' Monica Chen and Jessie Shen report, citing industry sources.

Comments

NEWS THIS MORNING

April 23 2020 6:24am est

TSMC seeing ramp-up in orders from AMD, Nvidia, DigiTimes reports 06:24 TSM, AMD, NVDA A ramp-up in short lead-time orders placed by AMD (AMD) and Nvidia (NVDA) will allow TSMC (TSM) to post relatively strong results compared to other foundries in the first half of 2020, DigiTimes' Monica Chen and Jessie Shen report, citing industry sources.
+2 Reply
@drchelsea1 : Hope all is well........ Was wondering if you have any update, now that earnings have been publicized......... TIA
Reply
drchelsea1 EvermorePips
@EvermorePips, Normally like last earnings we post right though live. This earnings report we had family issues, so that endeavour didn't happen. That is unfortunate, as we would have published $52.50 bounce with $53.50 to $54.11 close / or $62.50 run, but didn't get a chance to stun the world this time ;) I will be putting together a post-mortem in the next few days. We liked the in the money calls on the $47 to $50 strike and it looks like that did spectacularly against the May 1st strike, as I think we got $57.50 for those calls and the stock is currently around $54.09 after hours. We also paired that with a June 17th $70 I think in case we rocketed higher, and that small bet got squashed, but was more than offset by our in the money covered calls. Thanks for the ping.
Reply
EvermorePips drchelsea1
@drchelsea1, Thank you for your reply. Hope nothing serious happened to your family............ Will await your analysis. I am invested for the long haul with AMD, so it is quite a ride............. A more general question for you: since so much stimulus money is being printed and pumped into the markets, the US dollar is going to be on a devaluation crash............. Other than gold, what other vehicles will be a better investment to protect your capital............. Are you a crypto believer.......... and if so, would it be a good market to invest in............. not necessarily BTC, but the tokens.............?
Reply
drchelsea1, Well written reality piece. What bothers me is the large amount of money that went out in Stimulus Money. There are millions and millions of people working from home collecting their "fat paychecks" and saving money on dry cleaning, lunch out, traveling to and from work and dare I forget coffee. On the other hand, you have small business owners who received nothing the first go around and I'm still not sure that some big businesses are still not going to get grubby hands on the second go around. Then we have the poor, who did not make enough to file a tax return or have a computer to see if they are even eligible for a Stimulus Check.

I, too have a small business and it never crossed my mind to pay "unemployment insurance" for myself. Why would I? I know why now, but never in a million years did I ever think that something like this was going to happen. I believe many of us have learned valuable lessons from this VIRUS. I wish you the best of luck.
Reply
WHEN i was on unemployment back when , they had the clause 's ,
a] if ur employer calls u back to work and u do not , you do not qualify for unemployment
b] if offered a job paying more then ur last job , and u do not take it , you no longer qualify for unemployment

lets hope those are still enforceable
pleasant thoughts all
Reply
Hey drchelsea. I am sorry to hear about your loss. Thank you for your thoughts.
Reply
Thank you for your insights and this lengthy post. I'm learning so much from you.
I got burnt trading AMD the last week and down a lot. Hope things can improve for everyone out there.
Reply
Good Afternoon,

I took an AMD $52 Call this morning because I think it is headed upward and I am already showing small gains. Although I agree with you that we need to get back to our regular way of living; school, work and play, I believe there is a little more than a handful of States that may have to wait a week or two. I am talking about the States where the death toll is still rising on a daily basis. Forgive me for being blunt, I am also concerned about the "free money"; there is no doubt in my mind that some will stay on unemployment as long as possible until they squeeze every penny out of their unemployment benefits.
Reply
drchelsea1 mthompson45
@mthompson45, I like your style. It takes strength to take a position like this. Don't forget about earnings after the close on Tuesday April 28th. Will be posting over the weekend and through the call, just like last earnings if you are holding or care.... cheers.
Reply
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