By SpotGamma

Summary:

Into the FOMC meeting and minutes Feb 1st, we believe the market is approaching a near term ceiling and downside opportunity exists in individual names which have recently been high performing or speculative (by buying put spreads).

Rationale for ceiling:

• We believe the market has front-run a policy shift by the Fed
• We have near term resistance at 4100 at our Call Wall with peak resistance at 4200
• With current IV levels being low, and also under equivalent measures of realized vol, there is reduced fuel for a squeeze

Full note on implied volatility compression here.

Downside opportunity:

• Specific names like ARKK and TSLA have had very strong recent runs
• The entire QQQ complex is up 10% in January, fueled by short-covering and 0DTE options

Additional Context:

Implied volatility compression (1 month IV

Along with sharp moves higher in tech, we’d also highlight that “value” stocks are back to all time highs.

Last week, IV further compressed as strong treasury auctions led to the MOVE index collapsing, which likely persuaded the VIX to touch 1 year lows of 18 on Friday. Note, too,  the MOVE Index is now at 100 – the same level it was into the August highs. It was then at Jackson Hole wherein a hawkish Powell marked a major interim high.

Linked to this, its clear that put demand is reflecting a much more sanguine environment ahead.

Our conclusion here is that if markets want higher out of FOMC, there may be a fairly limited rally due to the sharp moves already made YTD. At the end of the day, interest rates are ~4% higher than 1 year ago which should reduce equity valuations year over year, making upside over 4300 uncompelling.

We also believe that traders are positioned to expect this bullish impulse out of FOMC, which can drain upside momentum.  We therefore think that the best risk/reward positioning here into FOMC is to own puts/put spreads in the speculative/tech names which have rallied the most YTD. Any neutral to negative sentiment from the FOMC would likely hit those names asymmetrically.

More from Spotgamma here

The Columbia Journalism Review (CJR) has issued a scathing indictment of the New York Times for yellow journalism during the Trump-Russia saga.

In short, the hyper-partisan ‘paper of record’ was operating in bad faith.

It’s wasn’t just the Times either. CJR’s findings accurately reflect what most objective thinkers have known this whole time – they were all operating in bad faith.

The @CJR review of post-2016 reporting is long, but important.

The TL;DR conclusion:

corpo media knowingly suppressed facts that cut against popular narratives,

ignored denials,

eagerly laundered partisan attacks via “anonymous sources,”

and refuses to reflect on mistakes. pic.twitter.com/PW27ztjxfi

— Edward Snowden (@Snowden) January 31, 2023

That said, CJR aimed the majority of criticism towards the NYT.

“No narrative did more to shape Trump’s relations with the press than Russiagate. The story, which included the Steele dossier and the Mueller report among other totemic moments, resulted in Pulitzer Prizes as well as embarrassing retractions and damaged careers,” wrote CJR executive editor Kype Pope in an editor’s note.

The findings were published in a lengthy, four-part series. The first section begins with a story about then-New York Times executive editor Dean Baquet’s reaction when he found out Special Counsel Robert Mueller didn’t plan to pursue Trump’s ousting, telling his staff “Holy s—, Bob Mueller is not going to do it.”  –Fox News

“Baquet, speaking to his colleagues in a town hall meeting soon after the testimony concluded, acknowledged the Times had been caught ‘a little tiny bit flat-footed’ by the outcome of Mueller’s investigation,” according to Jeff Gerth – the author of CJR’s lengthy retrospective.

“That would prove to be more than an understatement,” he continued. “But neither Baquet nor his successor, nor any of the paper’s reporters, would offer anything like a postmortem of the paper’s Trump-Russia saga, unlike the examination the Times did of its coverage before the Iraq War.”

According to Gerth, the Times destroyed its credibility outside of its “own bubble.”

I highlighted a few parts last night from this series – the only real attempt by corporate media, apart from a few @ErikWemple columns, to grapple with their serial Russiagate misconduct and lying. They’ll ignore it even though it’s from @CJR and by Gerthhttps://t.co/TxLItPJrkh

— Glenn Greenwald (@ggreenwald) January 31, 2023

What’s more, the Times appeared to legitimize former British spy, Christopher Steele, who was indirectly paid by the Clinton campaign to fabricate the infamous ‘dossier’ that so much of the Russiagate coverage – and the DOJ’s sham investigation, was based on.

The Times appeared to legitimize Christopher Steele, the ex-British spy who authored the infamous dossier, claiming he had “a credible track record” while Steele’s so-called “primary” source was telling the FBI that Steele “misstated or exaggerated” in his report and that information stemming from Russia was “rumor and speculation.”

Part three offered examples of the Times’ slight-of-hand coverage against Trump in comparison to other hostile outlets. For example, Trump explained his decision to fire FBI Director James Comey, mentioning the “Russia thing” as being a “made-up story” to NBC’s Lester Holt but acknowledged the firing would likely “lengthen out the investigation.”

“The media focused on the ‘Russia thing’ quote; the New York Times did five stories over the next week citing the ‘Russia thing’ remarks but leaving out the fuller context. The Post and CNN, by comparison, included additional language in their first-day story,” Gerth wrote.

In another instance, the Times avoided covering some of the more damning texts from Peter Strzok, who wrote “there’s no big there, there” shortly after the appointment of Special Counsel Robert  Mueller, something Gerth noted was covered by the Wall Street Journal and the Washington Post.  -Fox News

In closing, Gerth concluded that “the erosion of journalistic norms and the media’s own lack of transparency about its work” is responsible for the broad distrust in the media.

No kidding.

“In January 2018, for example, the New York Times ignored a publicly available document showing that the FBI’s lead investigator didn’t think, after ten months of inquiry into possible Trump-Russia ties, that there was much there. This omission disserved Times readers. The paper says its reporting was thorough and ‘in line with our editorial standards,” wrote Gerth. “Another axiom of journalism that was sometimes neglected in the Trump-Russia coverage was the failure to seek and reflect comment from people who are the subject of serious criticism. The Times guidelines call it a ‘special obligation.’ Yet in stories by the Times involving such disparate figures as Joseph Mifsud (the Maltese academic who supposedly started the whole FBI inquiry), Christopher Steele (the former British spy who authored the dossier), and Konstantin Kilimnik (the consultant cited by some as the best evidence of collusion between Russia and Trump), the paper’s reporters failed to include comment from the person being criticized.“

By Rachel Premack of FreightWaves,

Demand and output for cardboard boxes and other packaging material fell sharply in the fourth quarter of 2022, according to data released by the American Forest & Paper Association and Fibre Box Association on Friday.

It’s the latest indicator that consumer demand is eroding following the pandemic. Dwindling savings, inflation, rising interest rates and fears of a recession may all be swaying consumers to spend less. 

Such pressures would show up in the humble box industry, which serves as an excellent barometer for the larger economy. Practically everything we consume and use spends some time in a box, ranging from online orders to food sent to grocery stores.

U.S. box shipments fell by 8.4% in the fourth quarter, according to the Fibre Box Association. KeyBanc’s Adam Josephson, who leads the bank’s analysis of the packaging industry, wrote in a Sunday note that this was “the most severe quarterly decline since the Great Financial Crisis (2Q09).”

U.S. box operating rates fell to 80.9%, the Fibre Box Association said, which was also a low last seen in the first quarter of 2009. This means nearly 20% of the U.S. capacity to produce boxes was stagnant last quarter. Supply of containerboard, which is used to make corrugated boxes, stood at 4.3 weeks, according to the American Forest & Paper Association. That’s down from last quarter, but still historically high. 

The American Forest & Paper Association reported that another type of packaging material called boxboard had its lowest operating rate in its five-year record during 2022’s final quarter. Boxboard is typically thinner than cardboard and lacks air pockets.

Box bloodbath? Cardboard crisis?

Box demand normally sees modest upticks of 1% to 2% each year. But government stimulus and the shift from service to goods demand through 2020 and 2021 shocked box demand into some of its fastest growth in history. Prices rose as much as 55% through this time, Josephson said. 

A hangover after a yearslong cardboard carnival would be in order — and this one looks nasty.

To Josephson, the end of 2022 in the packaging world had “echoes of the Great Financial Crisis everywhere one looks,” he wrote in the Sunday note. What’s more, significant capacity — that is, more facilities that produce packaging materials — is set to enter the market through the next several years. It’s a tricky time for more packaging production to open up, given the shaky outlook for demand and falling consumer spending.

“Inflationary pressures on the consumers have also added to the problem by reducing the consumers’ discretionary spending capabilities,” said Thomas Hassfurther, executive vice president of corrugated products at WestRock, in a Thursday call to investors. WestRock is the No. 2 largest packaging company in the U.S.

“In addition, consumer behavior changed very quickly as we exited the extreme COVID period, resulting in more of a preference towards travel, entertainment and experience versus that of tangible goods,” Hassfurther said. “Containerboard and box demand continues to be negatively impacted from the deterioration in U.S. and global economic conditions, rising interest rates and a cooler housing market.”

However, WestRock executives maintained that demand in 2023 still appeared “healthy” compared to pre-COVID times. On the Thursday call, they forecast shipments to be 6% higher in first-quarter 2023 compared to the same period in 2019, on a per-day basis.

What goes up must come down … and down …

Many of the industries that saw wild demand during the pandemic are now crashing, like container shipping, used cars and home building. 

A downturn after a wild upswing isn’t particularly shocking. What’s troublesome is that executives grew or made plans to grow in response to this unprecedented demand. An increase in supply will further drive down already-plummeting prices.

In the cardboard world, for example, more than 2 million tons per year of additional containerboard output is coming to the North American market. Ocean carriers expect to add a record-breaking number of new container ships through the next two years. And nearly 60 real estate firms, most of which expanded payrolls during the pandemic, have already had to lay off more than 13,000 workers through 2022 and 2023, according to Insider.

It’s not all doom and gloom. Outbound requests for truckload services were slightly up in late January 2023, compared to the same period in 2019 and 2020. That’s a chipper indicator for goods demand. The Fed’s offensive on inflation has appeared to slow the rate of price increases without halting an unusually strong job market. Payrolls across the U.S. remain historically strong, with an unemployment rate of just 3.5%.

Authored by Naveen Anthrapully via The Epoch Times,

The crime rate in Chicago has spiked by 61 percent in the first three weeks of 2023, with almost all crime segments registering an increase, with data coming at a time when the state’s governor insists that crime in the city is decreasing.

In the first 22 days of this year, the Chicago Police Department received 4,844 complaints related to crime, up 61 percent compared to the 3,013 complaints received in 2022, reveals data (pdf) from the department. This is also 97 percent higher than from the same period in 2021 and 81 percent higher than in 2020.

The biggest increase in crime in the past year was in motor vehicle theft, which rose by 165 percent year to date until Jan. 22, 2023, when compared to the year-ago period.

Aggravated battery jumped 31 percent, robbery 26 percent, theft, 24 percent, criminal sexual assault 12 percent, and burglary 11 percent. Murder fell by 9 percent, while shooting incidents declined 1 percent.

The data come as Illinois governor J.B. Pritzker has been trying to paint a positive picture of Chicago’s crime incidents.

“Crime is coming down gradually in the city and across the state. It’s going to take a little while. These things don’t come down immediately. But it’s getting better,” he said in an interview with CNBC this month.

Chicago Mayor Lori Lightfoot recently attracted criticism after a mayoral debate on Jan. 9 during which she suggested that street vendors “not use money, if at all possible, using other forms of transactions to take care of themselves” so as to ensure that their money is safe.

“To combat crime in Chicago, Mayor @LoriLightfoot says ‘not use money, if at all possible, (use) other forms of transactions to carry…’ What’s next? Laws demanding ‘cash control’?” conservative talk radio host Larry Elder said in a tweet on Jan. 23.

Businesses and Citizens Looking to Exit City

The high crime rate in Chicago is affecting businesses operating in the city, with some of them choosing to leave. In October 2022, Tyson Foods, for example, announced plans to relocate staffers from the Chicago area and South Dakota to Arkansas. In May, Boeing had announced plans to shift its headquarters out of Chicago.

In a speech to the Economic Club of Chicago in September, McDonald’s CEO Chris Kempczinski revealed that he has received multiple offers from governors and mayors from other states who want him to shift the company’s headquarters from Chicago.

“While it may wound our civic pride to hear it, there is a general sense out there that our city is in crisis,” Kempczinski said.

“We have violent crime that’s happening in our restaurants … We’re seeing homelessness issues in our restaurants. We’re having drug overdoses that are happening in our restaurants.”

A survey published this month by nonprofit AARP found that 88 percent of Chicago voters over 50 years of age have considered leaving the city in the past year. They wanted to move to a community with a lower crime rate.

Among respondents, 89 percent said that a candidate’s position on violence and crime is “very important” when it comes to deciding the next mayor.

Cashless Bail

One of the main reasons contributing to ongoing crime is a lax approach to enforcing the law while approving measures that cut down severity of punishments related to lawlessness.

A controversial law, the SAFE-T Act, was set to go into effect on Jan. 1, 2023, in Illinois. But on Dec. 31, the state supreme court placed on hold a portion of the bill that would have eliminated cash bail for certain crimes.

Last month, a Kankakee County judge had ruled that cashless bail violated Illinois’ constitution and couldn’t be applied in counties where lawsuits have been filed to block it.

Republican leaders had earlier raised alarm bells about the SAFE-T act, warning that it would result in a rapid rise in crime in Illinois, including Chicago. The city frequently registers over 700 homicides annually.

State Senator John Curran, a Republican, pointed out that SAFE-T’s cashless bail raises the risk of releasing dangerous criminals back into the streets. Multiple law enforcement officials had also warned about the cashless bail provision.

According to real estate platform Property Club, Chicago is ranked number six on the list of most dangerous cities in the United States.

For the fifth quarter in a row, SNAP stock craters after the company reports devastating earnings. But this one really hurts, because by now even the bears expected that all the bad news had been flushed out. Boy, were they wrong.

Having plunged six months ago after projecting its worst revenue growth on record, a shock revelation which took the stock some 25% lower, and tumbling again three months ago ago when the company reported another ugly quarter, SNAP is down double digits once again, tumbling from the mid-$11s to just below $10 after the former “growth” company forecast its first ever revenue decline.

Which is not to say that its historical data was any good. Here is how the company did in yet another catastrophic quarter:

• Revenue $1.30 billion, +0.1% y/y, missing the estimate $1.31 billion

  • North America revenue $880.3 million, -5.6% y/y, estimate $923.5 million

  • Europe revenue $218.6 million, +4.6% y/y, estimate $201.4 million

  • Rest of the world revenue $200.9 million, +28% y/y, estimate $180 million

• Adjusted EPS 14c vs. 22c y/y, beating the estimate 11c

• Adjusted EBITDA $233.3 million, -29% y/y, beating the estimate $207 million

• There was some good news in the daily active users, which at 375 million, or up +18% y/y, actually beat estimate 374.7 million, but not thanks to North America:

  • North America daily active users 100 million, +3.1% y/y, missing estimate 100.9 million

  • Europe daily active users 92 million, +12% y/y, estimate 89.7 million

  • Rest of world daily active users 183 million, +31% y/y, estimate 184.7 million

• Free cash flow $78.4 million, -51% y/y, estimate negative $5.81 million

Tragically, in a time when tech companies are firing everyone, SNAP still uses the same colorblind graphic designer.

Of course, with (just barely) more users than expected yet missing on revenue, it meant just one thing: the monetization disappointed and sure enough, ARPU of $3.47, was not only 15% lower vs 2021, but missed estimates of $3.49

• North America average revenue per user $8.77, -8.5% y/y, estimate $9.16

• Europe average revenue per user $2.38, -6.3% y/y, estimate $2.25

• Rest of world average revenue per user $1.10, -1.8% y/y, estimate 99c

But while historical data was bad, it’s what the company disclosed about the present and, worse, the future that shocked markets: specifically, while the company disappointed  quarter-to-date revenue is already down about 7% Y/Y, the final straw before everyone hit the sell button is that the company’s forecast assumes revenue will decline between -10% to -2% in the first quarter.

Not only is that below the average analyst estimate for growth of 1.48%, but it is Snapchat’s first every quarterly negative revenue guidance.

Knowing that its stock would soon be in the single digits, it barely tried to put lipstick on a pig and instead just gave token lip service to Q1 guidance, saying that “given the work we have completed to reprioritize our cash cost structure, we believe we have a path to adjusted EBITDA breakeven in Q1.”

Whatever. Meanwhile, the company is now a melting ice cube, and the stock reflects it with SNAP plunging back into the single digits after hours.

Oil prices rallied on the day, with WTI rebounding back above $79 as factors ranging from the end of the Fed’s (dovish) rate increases to swelling demand in China give bulls more ammunition.

“The main driver for oil lately has been the potential for a resurgence of oil demand out of China, which may continue into February considering how Chinese economic momentum picked up in the overnight PMI reports,” said Colin Cieszynski, chief market strategist at SIA Wealth Management.

The nationwide ‘deep freeze’ has clearly been impacting the inventory data over the last few weeks. We suspect today could be the first ‘clean’ indication…

API

• Crude +6.33mm (-1mm exp)

• Cushing +2.72mm

• Gasoline +2.73mm

• Distillates +1.53mm

Crude inventories built for a 5th straight week (despite expectations for a small draw) with Cushing stocks soaring once again. On the product side, we also saw notable builds (with Distillates biggest rise since the first week of December)…

Source: Bloomberg

Additionally, AlphaBBL data suggests that crude inventories at Cushing climbed 2.1 million barrels in the last week.

WTI was trading around $79 ahead of the API print and managed to hold those gains despite the builds…

The OPEC-plus group including Russia meets tomorrow and while most analysts don’t expect major policy shifts, energy investors are always slightly on edge ahead of OPEC gatherings. 

Freeport LNG, the second largest US liquefied natural gas exporter, reported Tuesday afternoon to the Federal Energy Regulatory Commission (FERC) that it has “successfully and safely progressed the cooldown of the Loop 1 transfer piping and reinstatement of BOG management.” 

Freeport LNG asked FERC for approval to begin “(1) the nitrogen cooldown of the LNG rundown piping system and (2) the introduction of hydrocarbons to Unit 13 (Train 3) for LNG train commissioning and cooldown.” They also asked for a response from the federal energy agency by tomorrow. 

Combing through Freeport’s letter to FERC, Houston-based energy firm Criterion Research told clients, “the key part of this request is that it would allow Freeport to begin flowing natural gas into the pretreatment facility and then permit the initial production of LNG to flow into LNG Tanks 1 and 2 onsite.”

Freeport also said that “subsequent approvals will be necessary to commence Loop 1 LNG circulation and ship loading to Dock 1, as well as the transition of Unit 13 into full, commercial operations.”

The next steps for Freeport LNG will be to (1) secure approval from the FERC to begin feed gas flow & initial liquefaction operations, (2) complete that startup, and (3) request subsequent approval to commence LNG circulation and ship loading to Dock 1 #natgas #ongt #LNG #enelyst pic.twitter.com/SShFMhfSMw

— Criterion Research (@PipelineFlows) January 31, 2023

Natural gas flows to the LNG terminal increased today, much larger than in the previous weeks. 

Even with the prospects of a partial restart at the second largest US terminal, NatGas prices have slid to 20-month lows due to unseasonably warm weather, increased production, and an abundance of supply. 

As of Tuesday afternoon, NatGas prices have yet to bounce even on this news and reports of colder air pouring into the Lower 48.

Authored by Steve Watson via Summit News,

Cosmetics company NYX Professional Makeup has received backlash on social media after featuring ads for a lipstick with bearded men.

The company appears to be finding out that going woke eventually equates to going broke, as respondents accused them of “erasing women” with the ads for Smooth Whip lip cream.

In an Instagram post, the company wrote the caption “[itsmechrxs] making us whip out our Smooth Whip in Pom Pom REAL quick. #nyxcosmetics #nyxprofessionalmakeup #crueltyfree.”

 

 

 

 

View this post on Instagram

 

 

 

 

 

 

 

 

 

 

 

A post shared by NYX Professional Makeup (@nyxcosmetics)

And this prompted a number of responses on social media…

NYX Cosmetics used a bearded man to advertise their lipstick and women are pissed.

Get woke, go broke. pic.twitter.com/IUIyGzRWvq

— Sara Gonzales (@SaraGonzalesTX) January 30, 2023

“Apparently you don’t need us as your customer base any longer. I’ll leave [your] product like you left me Tired of being marginalized!!!!!!” one women replied.

Another responded “Not attractive at all… Doesn’t make me want to run out and buy your products EVER.”

“…DOESNT matter what year it is dude. Men are men and women are women stop trying to erase us,” another women asserted.

“You need to wake up. Stand up for your right as a woman,” another added, claiming “This is another example of men wanting to still be in control.”

“I’m so turned off by these ads with men wearing lipstick,” another person wrote.

“Not good for your company using a man what are you thinking boycotting,” another commented, while someone else bluntly responded “men should not wear makeup. This is gross.”

Another woman responded “I’m not so much disgusted but confused, why just put a picture with a man wearing lipstick and not a woman too? How does this ad make me want to buy [your] product when I can’t relate to it … I get makeup is for everyone so why not?”

*  *  *

Brand new merch now available! Get it at https://www.pjwshop.com/

In the age of mass Silicon Valley censorship It is crucial that we stay in touch. We need you to sign up for our free newsletter here. Support our sponsor – Turbo Force – a supercharged boost of clean energy without the comedown. Also, we urgently need your financial support here.

Authored by Jonathan Turley via jonathanturley.org,

Mark Houck, 48, was acquitted yesterday in a high-profile prosecution by the Biden Administration under the Freedom of Access to Clinic Entrances (FACE) Act.  Houck was accused of pushing a Planned Parenthood escort during a clash outside an abortion clinic. It is a rare victory for Houck and the Thomas More Society (which represented Houck) under the act. Houck insisted that he was trying to protect his twelve-year-old son in the encounters with Love. There is also an interesting wrinkle in the jury deliberations.

The FACE Act prohibits “violent, threatening, damaging, and obstructive conduct intended to injure, intimidate, or interfere with the right to seek, obtain, or provide reproductive health services.”

The Biden Administration alleged that Houck “forcefully shoved” Bruce Love, a 72-year-old volunteer at a Philadelphia Planned Parenthood on Oct. 13, 2021. The trial explored two different encounters with Love.

In the first encounter, Houck was across the street on a sidewalk counseling two women who had left the Planned Parenthood clinic. Love followed the women. The Justice Department says that Houck elbowed Love because he was a clinic escort. Houck testified that Love startled him and made contact with him, causing him to say “What are you doing?” and hip-check him out of reflex.

Houck testified that he told Love to “Stay away from my son” and “Don’t come near us” when Love approached them on the sidewalk after the first incident.

His son, Houck Jr. also testified and said that Love stood close to him as he taunted his father saying “You’re hurting women. You don’t care about women.” He then said Love said the same to him and added “Your dad’s a bad person. Your dad’s harassing women.” He said that he moved away from Love out of fear.

It was a highly contested account, but the Biden Administration decided to prosecute and later went to Houck’s home to arrest him. The arrest drew criticism after a large number of FBI agents descended on the home.

What was interesting is that the jury previously declared itself deadlocked and was sent home on Friday. However, a juror was then reportedly replaced by an alternate juror on Monday afternoon. They then quickly reached an acquittal. It is not clear if the deadlock was due to that one juror, but a consensus that formed during that day.

It is not uncommon for jurors to overcome a deadlock, particularly after an Allen charge. Named after the United States Supreme Court case Allen v. United States (1896) where it was first used, it is called the “dynamite charge” to break deadlocks. It is unpopular with most defense attorneys because it encourages the majority to work to convince the minority — often breaking down the resistance of holdouts.

It is not clear if the jury simply overcame its divisions after a weekend break or whether the replaced juror was a holdout.

The acquittal in a FACE Act case is relatively rare given the “cut-and-dry” language of the law.

We recently discussed an English case that showed its own efforts against pro-life protesters when a woman was arrested for praying near a clinic.