Good News Is Bad News
It’s been a rough week so far as investors are severely disappointed over the good economic news.
Strong jobs growth and continuing strength in pockets of the economy is spoiling recent investor optimism. Economic strength is not what the Fed wants to see in its battle against inflation. Strength in the economy indicates that perhaps the Fed will have to remain aggressive for longer to slow down the economy and snuff out inflation.
Good news is bad news. It indicates that the Fed has not gone far enough and will have to ultimately raise the Fed Funds rate above the currently anticipated 5% next year. It may also have to leave rates higher for longer. That scenario pushes out the timeline of a true market turnaround that leads out of the bear market into the next recovery and bull market.
But much of this might be just short-term noise. Higher rates take a while to work through the economy. This steep rate hiking cycle may have already done a lot more damage than recent numbers indicate. The economy could fall fast in the months ahead. We’ll see.
But this is the sort of muck we’ll have to get through before the market recovers sometime next year. The recently added defensive positions should be ideal to endure what is likely ahead in the next several months. Meanwhile, we were able to exploit the recent market uptick by selling high-priced covered calls on stocks that may have been near a short-term high.
Trades Past Month
November 9
Purchased Brookfield Infrastructure Corp. (BIPC) - $42.43
November 23
Sell O January 20 $65 calls at $2.35 or better – Pending
November 25
SOLD OKE January 20 $65 calls at $3.70
SOLD XEL January 20 $65 calls at $5.00
December 7
Sell O January 20 $65 calls at $2.35 or better – Remove
Portfolio Recap
Brookfield Infrastructure Corporation (BIPC)
Yield 3.2%
This infrastructure company stock had been trending sharply higher since the second week of October but has pulled back so far this month. It’s likely because of turbulence in China and/or a stronger dollar. But it should be a temporary blip as the company’s crucial assets will continue to deliver steady earnings through a recession, it has inflation adjustments built into its contracts, the dividend is solid, and the stock is cheap now. Hopefully, it moves higher in the next couple of weeks and we can sell a call for a nice income. BUY
Global Ship Lease, Inc. (GSL)
Yield: 8.9%
Global had been trending nicely higher since late September but has regressed in the last couple of weeks as worries persist about the global economy and China in particular. But GSL does have some technical support at this level and the stock may well have already bottomed out. The intermediate- and long-term look solid for the company as shipping has a very favorable supply/demand dynamic and the industry is likely in a cyclical bull market. HOLD
Intel Corp. (INTC)
Yield: 5.0%
The environment has been improving for technology. It has been the best performing S&P 500 sector over the last month as inflation looks to have peaked and longer-term interest rates have moved lower. The situation will surely improve for technology. Hopefully, the big turnaround isn’t that far off. Intel’s individual prospects should significantly improve as growth investments come to fruition. It’s been a painful slog. But it could prove to be worth the pain over time, BUY
ONEOK Inc. (OKE)
Yield: 5.6%
This midstream energy stock has pulled back along with just about everything else over the last few days. But don’t let than fool you. It is still trending sharply higher since late September. The stock got creamed in the late-summer selloff as interest rates spiked. But the situation is changing and many of these defensive dividend stocks have been roaring back. It is possible that OKE is near a short-term peak as the recent rally is sputtering. I don’t trust this market in the weeks and months ahead and highlighted a covered call when OKE hit a near-term high. BUY
Realty Income Corp. (O)
Yield: 4.6%
The legendary income REIT hit a near-term high just around the time the calls were highlighted. Unfortunately, the stock moved lower before we could get the targeted price. The calls were removed today as the time has passed and the price has declined. But there should be more chances in the future. O is low priced ahead of a likely recession, which is historically a time of market outperformance for the stock. BUY
Star Bulk Carriers Corp. (SBLK)
Yield: 34.6%
The third-quarter earnings were significantly lower than last year’s quarter as shipping volumes and rates have decreased in the slower economy. The stock is also facing headwinds from the China Covid situation. But slowing business has already been factored into the price as the stock is down 40% from the high. It is well worth noting that Star Bulk declared a $1.20 quarterly dividend and traded ex-dividend on November 29. The dividend changes almost every quarter, according to profits. Although lower than last quarter’s $1.65 payout, the next dividend will be paid on December 12 and is still 6% of the current stock price. HOLD
Qualcomm Corp. (QCOM)
Yield: 2.4%
As I mentioned above with Intel, technology stocks have had seriously improved relative performance recently as inflation and interest rates have come down. Even if the worst still isn’t over for the sector, QCOM is showing you how fast it can move higher when the tech sector environment improves, and it surely will. Remember, the market anticipates. Qualcomm just announced a profit slowdown for the quarters ahead. But the market has been pricing that in all year, even when current profits were still booming. Before long, the market may start sniffing out a recovery. HOLD
Visa Inc. (V)
Yield: 0.8%
V made a nice move off the low as the market improved and the company once again killed it on earnings. The payments processing giant continues to benefit from the end of Covid restrictions despite the slower economy. But the earnings growth should slow next year as earnings comparisons get tougher. The is a cyclical stock that is dependent on the market and economy. It’s one of the first stocks to rally when things improve but things could be worse before they get better. At some point in the quarters ahead the market may sniff out the recovery and V will likely take off and make up for lost time. HOLD
The Williams Companies, Inc. (WMB)
Yield: 4.9%
This midstream energy company stock is a similar recent story to OKE. It has moved up strongly since late September. However, WMB tends to be more resilient in choppy markets. It’s moved lower in the past few days, but not by much. The stock is still very much in an uptrend. The company posted strong earnings because of resilient natural gas demand, something that is likely to endure through the recession based on shortages overseas. BUY
Xcel Energy Inc. (XEL)
Yield: 2.8%
This clean energy utility was oversold in the September market plunge. It was added to the portfolio because it was timely after a huge selloff that should is proving to be unjustified. Interest rates have been plunging and XEL has rallied strongly off the recent low. The near term is shaping up well and the longer-term prognosis is also excellent. It should also benefit from new legislation from Washington that will reduce costs on its considerable clean energy production. The stock should be solid in a recession, and we got in at a good price. BUY
Active Covered Call Trades
Sell O January 20 $65 calls at $2.35 or better – Remove
Unfortunately, this call was timed a few days too late. The stock pulled back from the recent high and will likely not recover until enough time has expired to change the dynamic of the call. That’s OK. There should be another opportunity before long. Besides, being picky about the call price paid off with the next two calls.
Sell OKE January 20 $65 calls at $3.70 or better
I do like this stock going forward. Earnings should be resilient in an environment of inflation and recession. But it makes sense to target stocks for calls after a rally and get the high premium and possible high total return. I don’t trust the market here and even if OKE gets called we still have WMB.
Sell XEL January 20 $65 calls at $5.00 or better
This stock has been strong, and we were able to get the targeted call price. The calls are well in the money with a 65-strike price and a current 69 share price. But that’s necessary to get a high income in markets like this. If the market heads south again after the recent upturn proves to be a bear market rally, XEL could get pulled down with everything else.
CIA STOCK PORTFOLIO | |||||||
| Open Recommendations | Ticker Symbol | Entry Date | Entry Price | Recent Price | Buy at or Under Price | Yield | Total Return |
| Qualcomm Inc. | QCOM | 5/5/21 | $134.65 | $123.30 | NA | 2.39% | -5.22% |
| Visa Inc. | V | 12/22/21 | $217.96 | $213.68 | NA | 0.83% | -1.21% |
| Global Ship Lease, Inc. | GSL | 2/23/22 | $24.96 | $16.46 | NA | 8.90% | -30.07% |
| ONEOK, Inc. | OKE | 5/25/22 | $65.14 | $65.31 | $67.00 | 5.57% | 3.44% |
| Star Buld Carriers Corp. | SBLK | 6/1/22 | $33.30 | $19.12 | NA | 34.65% | -31.26% |
| Intel Corporation | INTC | 7/27/22 | $40.18 | $29.17 | NA | 4.96% | -25.71% |
| The Williams Companies | WMB | 8/24/22 | $35.58 | $34.17 | $38.00 | 4.86% | -2.69% |
| Realty Income Corporaton | O | 9/28/22 | $60.37 | $62.24 | $63.00 | 4.73% | 4.36% |
| Xcel Energy Inc. | XEL | 10/26/22 | $62.57 | $68.68 | $65.00 | 2.82% | 9.77% |
| Brookfield Infrastructure corp. | BIPC | 11/9/22 | $42.43 | $44.12 | $46.00 | 3.24% | 4.80% |
EXISTING CALL TRADES | |||||||
| Open Recommendations | Ticker Symbol | Intial Action | Entry Date | Entry Price | Recent Price | Sell To Price or better | Total Return |
| OKE Jan 20 $65 call | OKE230120C00065000 | Sell | 11/25/22 | $3.70 | $2.90 | $3.70 | 5.68% |
| XEL Jan 20 $65 call | XEL230120C00065000 | Sell | 11/25/22 | $5.00 | $4.21 | $5.00 | 7.99% |
| as of close on 12/05/2022 | |||||||
SOLD STOCKS | |||||||
| Security | Ticker Symbol | Action | Entry Date | Entry Price | Sale Date | Sale Price | Total Return |
| Innovative Industrial Props. | IIPR | Called | 6/2/20 | $87.82 | 9/18/20 | $100.00 | 15.08% |
| Qualcomm | QCOM | Called | 6/24/20 | $89.14 | 9/18/20 | $95.00 | 7.30% |
| U.S. Bancorp | USB | Called | 7/22/20 | $36.26 | 9/18/20 | $38 | 3.42% |
| Brookfield Infras. Ptnrs. | BIP | Called | 6/24/20 | $41.92 | 10/16/20 | $45 | 8.49% |
| Starbucks Corp. | SBUX | Called | 8/26/20 | $82.41 | 10/16/20 | $88 | 6.18% |
| Visa Corporation | V | Called | 9/22/20 | $200.56 | 11/20/20 | $200 | 0.00% |
| AbbVie Inc. | ABBV | Called | 6/2/20 | $91.04 | 12/31/20 | $100 | 12.43% |
| Enterprise Prod. Prtnrs. | EPD | Called | 6/24/20 | $18.14 | 1/15/21 | $20 | 15.16% |
| Altria Group | MO | Called | 6/2/20 | $39.66 | 1/15/21 | $40 | 7.31% |
| U.S. Bancorp | USB | Called | 11/25/20 | $44.68 | 1/15/21 | $45 | 1.66% |
| B&G Foods Inc, | BGS | Called | 10/28/20 | $26.79 | 2/19/21 | $28 | 4.42% |
| Valero Energy Inc. | VLO | Called | 8/26/20 | $53.70 | 3/26/21 | $60 | 11.73% |
| Chevron Corp. | CVX | Called | 12/23/20 | $85.69 | 4/1/21 | $96 | 12.95% |
| KKR & Co. | KKR | Called | 3/24/21 | $47.98 | 6/18/21 | $55 | 14.92% |
| Digital Realty Trust | DLR | Called | 1/27/21 | $149.17 | 7/16/21 | $155 | 5.50% |
| NextEra Energy, Inc. | NEE | Called | 2/24/21 | $73.76 | 9/17/21 | $80 | 10.00% |
| Brookfield Infras. Ptnrs. | BIP | Called | 1/13/21 | $50.63 | 10/15/21 | $55 | 11.65% |
| AGNC Investment Corp | AGNC | Sold | 1/13/21 | $15.52 | 1/19/22 | $15 | 5.92% |
| ONEOK, Inc. | OKE | Called | 5/26/21 | $52.51 | 2/18/22 | $60 | 19.62% |
| KKR & Co. | KKR | Sold | 8/25/21 | $64.52 | 2/23/22 | $58 | -9.73% |
| Valero Energy Inc. | VLO | Called | 11/17/21 | $73.45 | 2/25/22 | $83 | 15.53% |
| U.S Bancorp | USB | Sold | 3/24/21 | $53.47 | 4/13/22 | $51 | -1.59% |
| Enterprise Product Ptnrs | EPD | Called | 3/17/21 | $23.21 | 4/14.2022 | $24 | 11.25% |
| FS KKR Capital Corp. | FSK | Called | 10/27/21 | $22.01 | 4/14/22 | $23 | 13.58% |
| Xcel Energy Inc. | XEL | Called | 10/12/21 | $63.00 | 5/20/22 | $70 | 12.66% |
| Innovative Industrial Props. | IIPR | Sold | 3/23/22 | $196.31 | 7/20/22 | $93 | -51.23% |
| One Liberty Properties | OLP | Sold | 7/28/21 | $30.37 | 8/24/22 | $25 | -12.94% |
EXPIRED OPTIONS | |||||||
| Security | In/out money | Sell Date | Sell Price | Exp. Date | $ return | Total % Return | |
| IIPR Jul 17 $95 call | out-of money | 6/3/20 | $3.00 | 7/17/20 | $3.00 | 3.40% | |
| MO Jul 31 $42 call | out-of-money | 6/17/20 | $1.60 | 7/31/20 | $1.60 | 4.03% | |
| ABBV Sep 18 $100 call | out-of-money | 7/15/20 | $4.60 | 9/18/20 | $4.60 | 5.05% | |
| IIPR Sep 18 $100 call | in-the-money | 7/22/20 | $5.00 | 9/18/20 | $5.00 | 5.69% | |
| QCOM Sep 18 $95 call | in-the-money | 6/24/20 | $4.30 | 9/18/20 | $4.30 | 4.82% | |
| USB Sep 18 $37.50 call | in-the-money | 7/22/20 | $2.00 | 9/18/20 | $2.00 | 5.52% | |
| BIP Oct 16 $45 call | in-the-money | 9/2/20 | $1.95 | 10/16/20 | $1.95 | 4.65% | |
| SBUX Oct 16 $87.50 call | in-the-money | 10/16/20 | $3.30 | 10/16/20 | $3.30 | 4.00% | |
| V Nov 20 $200 call | in-the-money | 9/22/20 | $10.00 | 11/20/20 | $10.00 | 4.99% | |
| ABBV Dec 31 $100 call | in-the-money | 11/18/20 | $3.30 | 12/31/20 | $3.30 | 3.62% | |
| EPD Jan 15 $20 call | in-the-money | 11/23/20 | $0.80 | 1/15/21 | $0.80 | 4.41% | |
| MO Jan 15 $40 call | in-the-money | 11/25/20 | $1.90 | 1/15/21 | $1.90 | 4.79% | |
| USB Jan 15 $45 call | in-the-money | 11/25/20 | $2.00 | 1/15/21 | $2.00 | 4.48% | |
| BGS Feb 19 $27.50 call | in-the-money | 12/11/20 | $2.40 | 2/19/21 | $2.40 | 8.96% | |
| VLO Mar 26 $60 call | in-the-money | 2/10/21 | $6.50 | 3/26/21 | $6.50 | 12.10% | |
| CVX Apr 1 $95.50 call | in-the-money | 2/19/21 | $4.30 | 4/1/21 | $4.30 | 5.02% | |
| AGNC Jun 18 $17 call | out-of-money | 4/13/21 | $0.50 | 6/18/21 | $0.50 | 3.21% | |
| KKR Jun 18 $55 call | in-the-money | 4/28/21 | $3.00 | 6/18/21 | $3.00 | 6.25% | |
| USB Jun 16 $57.50 call | out-of-money | 4/28/21 | $2.80 | 6/18/21 | $2.80 | 5.24% | |
| DLR Jul 16 $155 call | in-the-money | 6/16/21 | $8.00 | 7/16/21 | $8.00 | 5.36% | |
| AGNC Aug 20 $17 call | out-of-money | 6/23/21 | $0.50 | 8/20/21 | $0.50 | 3.00% | |
| OKE Aug 20 $57.50 call | out-of-money | 6/23/21 | $3.50 | 8/20/21 | $3.50 | 6.67% | |
| NEE Sep 17 $80 call | in-the-money | 8/11/21 | $3.50 | 9/17/21 | $3.50 | 4.75% | |
| BIP Oct 15 $55 call | in-the-money | 9./01/2021 | $2.00 | 10/15/21 | $2.00 | 3.95% | |
| USB Nov 19 $60 call | out-of-money | 9/24.2021 | $2.30 | 11/19.2021 | $2.30 | 4.30% | |
| OKE Nov 26 $65 call | out-of-money | 10/20/21 | $2.25 | 11/26/21 | $2.25 | 4.28% | |
| KKR Dec 17 $75 call | out-of-money | 10/26/21 | $3.50 | 12/17/21 | $3.50 | 5.42% | |
| QCOM Jan 21 $185 Call | out-of-money | 11/30/21 | $9.65 | 1/21/22 | $9.65 | 7.17% | |
| OLP Feb 18 $35 Call | out-of-money | 11/19/21 | $1.50 | 2/18/22 | $1.50 | 4.94% | |
| OKE Feb 18 $60 Call | in-the-money | 1/5/22 | $2.75 | 2/18/22 | $2.75 | 5.24% | |
| USB Feb 25 $61 call | out-of-money | 1/13/22 | $2.50 | 2/25/22 | $2.50 | 4.68% | |
| VLO Feb 25 $83 call | in-the-money | 1/18/22 | $4.20 | 2/25/22 | $4.20 | 6.13% | |
| EPD Apr 14th $24 call | in-the-money | 3/2/22 | $1.25 | 4/14/22 | $1.25 | 5.69% | |
| FSK Apr 14th $22.50 call | in-the-money | 3/10/22 | $0.90 | 4/14/22 | $0.90 | 4.09% | |
| XEL May 20th $70 call | in-the-money | 3/30/22 | $3.00 | 5/20/22 | $3.00 | 4.76% | |
| SBLK July 15th $134 call | out-of-money | 6/1/22 | $1.60 | 7/15/22 | $1.60 | 4.80% | |
| OKE Oct 21st $65 call | out-of-money | 8/24/22 | $3.40 | 10/21/22 | $3.40 | 5.22% | |