A Better Year, So Far
It been a good start to the year, with the S&P 500 up over 4%. There is optimism that the Fed will lose its hawkish nerve as inflation falls and the economy turns south.
Inflation was lower again in December, with CPI of 6.6% versus 7.1% in November and 9.1% in June. At the same time the economy is weakening, and most economists are predicting recession this year. Since markets tend to anticipate six to nine months into the future, it might not be that long until investors start sniffing out the end of the inflation/Fed conundrum and past the recession into a recovery.
At least that’s the hope. But it might be a rocky road to that Promised Land. Much can go wrong with the optimistic scenario. Inflation could linger at these still high levels and the Fed may have to be aggressive for longer. Plus, the market seems to be pricing in a mild recession, but it could be worse.
There is a good chance that the big rally that leads out of the bear market occurs sometime this year. But this probably isn’t it. We will likely encounter another dose or two of 2022 before the market turns. That’s why safety still rules.
Two existing covered call positions in ONEOK (OKE) and Xcel Energy (OKE) face options expiration on Friday. And both stocks are currently well above the call price and will likely be called. That’s OK. We will secure a great income and sell the stock near the high point of the recent range into a market that’s likely to worsen.
Trades in the last month
December 28
SOLD O February 17 $62.50 calls at $3.00
Portfolio Recap
Brookfield Infrastructure Corporation (BIPC)
Yield: 3.4%
The infrastructure juggernaut has made a nice move off the low and is up more than 11% already this month. BIPC had been a laggard for a defensive stock, largely because of the strong dollar and its negative effect on overseas revenues. But a recession is likely in 2023. And Brookfield has crucial assets likely to perform very well in a recession as well as growth projects coming online. A strong dollar is already reflected in the price and BIPC’s recession and inflation resilience should rub off on the stock in the months ahead. BUY
Global Ship Lease, Inc. (GSL)
Yield: 8.6%
Last year was rough for a cyclical international stock like GSL. But the worst may be over. The stock is still well off the September bottom and may permanently eclipse that level. It’s also up over 7% in just the last week. The longer-term supply/demand dynamic is positive for container shipping and the stocks may be in a longer-term bull market. Plus, the opening up of China could also be a positive catalyst for shipping activity and rates in the near term. HOLD
Intel Corp. (INTC)
Yield: 4.8%
INTC has had a nice move of the low and is up 14% so far this month. It’s also close to price levels not seen since late summer. It may be early to declare that the bottom is in but it’s certainly possible. The situation will surely improve for technology at some point. Hopefully the big turnaround isn’t that far off. Intel’s individual prospects should significantly improve as growth investments come to fruition. HOLD
ONEOK Inc. (OKE)
Yield: 5.3%
This midstream energy stock has made a huge 38% move higher from the September low. The stock has broken out to the highest level since the spring and within 6% of the 52-week high. It’s worth noting that OKE is still farther below the pre-pandemic high, which was achieved with significantly lower earnings than the company has now. OKE and other midstream energy companies have the right stuff going into 2023. Revenues are both recession and inflation resistant. The high dividend is safe. And the stock is still reasonably valued. BUY
Realty Income Corp. (O)
Yield: 4.5%
The legendary income REIT had struggled to get above the 65 per share level for a couple of months. But O broke out beyond that last week. Hopefully it means the stock can run for a bit. But a down market could spoil the party. Still, this is a popular and defensive income stock that should hold its own in the event of a recession next year. Investors should find their way to O and the stock should be buoyant over the course of the year. BUY
Star Bulk Carriers Corp. (SBLK)
Yield: 30.9%
SBLK is still bouncing around the sideways range it has been in since the end of August, although currently it’s near the highest point of the range. It appears at this point that there may not be much downside in the stock. But there is still no evidence of a sustained or breakout recovery. But slowing business has already been factored into the price of the stock. This is likely still the early innings of multiyear positive cycle for shipping. Plus, the likely opening of China should be a positive catalyst. HOLD
Qualcomm Corp. (QCOM)
Yield: 2.5%
Yeah, the stock is up well over 10% so far this year after a terrible year 2022. Is this market rally for real and sustainable? I have my doubts. That said, there’s a great chance that 2023 will be a strong year for QCOM. Technology will likely recover at some point during the year and QCOM should have strong leverage to the upside when that happens. The bear market rallies give you a preview of how fast QCOM can move higher when the situation improves. Before long, the market, which tends to anticipate six to nine months ahead, may start pricing in a real recovery in the sector. HOLD
Visa Inc. (V)
Yield: 0.8%
Look at V! The stock is now over 220 per share and at the highest level since last April. V is also up over 25% from the low made in the fall. Last year’s bear market was terrible for cyclical and financial stocks. But V held up remarkably well under the circumstances, returning -3.4% for 2022. And circumstances in the market are likely to get a whole lot better later in 2023. V is typically one of the first stocks to recover when the market eventually turns. We’re seeing the evidence of that already. HOLD
The Williams Companies, Inc. (WMB)
Yield: 5.2%
WMB has been a bit of a dud lately. It held up much better than its midstream energy peers when the sector took a hit in the fall. But it has been a laggard since the sector performance improved. The market seems to like its defensive characteristics best and it tends to rally with the more defensive plays. That could be a great thing if the current rally rolls over. It pays a big income and thrives amid inflation and recession. Prospects for this year remain excellent. The company posted strong earnings because of resilient natural gas demand. BUY
Xcel Energy Inc. (XEL)
Yield: 2.7%
This clean energy utility stock keeps going, albeit slowly. XEL is still in an uptrend that began in October. It is up over 22% since the October low and posted a positive 6.44% return for 2022. That may not sound like much, but XEL outperformed the market by better than 25% last year. It’s a great stock to own anytime. But heading toward a likely recession, it’s one of the very best. BUY
Active Covered Call Trades
Sell OKE January 20 $65 calls at $3.70 or better
It’s down to it. These options expire on Friday and OKE is currently well above the strike price at 70.83 per share. Unless it turns out to be an awful week, this stock will be called. That’s OK. We got a strong income from the call premiums and will be selling the stock at the high end of the recent range in a market that looks ominous. Plus, we still have WMB in case midstream energy stocks run higher.
Sell XEL January 20 $65 calls at $5.00 or better
This one is even a little bit further above the strike price at 71.17 with options expiring on Friday. It is also likely to be called. But selling a defensive stock after a huge move off the low into a highly uncertain market isn’t necessarily a bad thing. We will have locked in high income and total return in a bear market.
Sell O February 17 $62.50 calls at $3.00 or better
The stock finally got above the 65 level after topping there for the past two months. As I mentioned above, O could continue to break out further unless the market turns south. We’ll see what happens. There’s still a month to go before expiration.
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 | $120.24 | NA | 2.47% | -7.57% |
| Visa Inc. | V | 12/22/21 | $217.96 | $223.06 | NA | 0.80% | 3.13% |
| Global Ship Lease, Inc. | GSL | 2/23/22 | $24.96 | $17.70 | NA | 8.59% | -24.81% |
| ONEOK, Inc. | OKE | 5/25/22 | $65.14 | $70.83 | $67.00 | 5.28% | 12.18% |
| Star Buld Carriers Corp. | SBLK | 6/1/22 | $33.30 | $20.80 | NA | 30.92% | -25.22% |
| Intel Corporation | INTC | 7/27/22 | $40.18 | $30.11 | NA | 4.82% | -23.32% |
| The Williams Companies | WMB | 8/24/22 | $35.58 | $32.81 | $38.00 | 5.16% | -5.35% |
| Realty Income Corporaton | O | 9/28/22 | $60.37 | $66.19 | $63.00 | 4.51% | 11.42% |
| Xcel Energy Inc. | XEL | 10/26/22 | $62.57 | $71.17 | $65.00 | 2.74% | 14.53% |
| Brookfield Infrastructure corp. | BIPC | 11/9/22 | $42.43 | $43.31 | $46.00 | 3.36% | 2.88% |
| 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 | $5.90 | $2.34 | 5.68% |
| XEL Jan 20 $65 call | XEL230120C00065000 | Sell | 11/25/22 | $5.00 | $7.00 | $5.60 | 7.99% |
| O Feb 17 $62.50 call | O230217C00062500 | Sell | 12/28/22 | $3.00 | $4.00 | $3.00 | 4.97% |
| as of close on 1/13/2023 | |||||||
| 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% | |
| QCOM Sep 16th $145 call | out-of-money | 7/20.2022 | $11.75 | 9/16/22 | 11.75 | 8.73% | |