The Fed Spoils the Party
The market has turned south again. And things could be worse in September.
Blame the Fed. Blame inflation. Blame recession. Investors can’t look past them anymore. The market had rallied on hopes that inflation peaked, and the Fed will be all done hiking rates by the beginning of next year. But the Fed poured cold water on those hopes.
The end of this Fed hiking cycle is no longer in view after the recent hawkish statements by the Central Bank. The Fed indicated again last week that it is willing to induce a deeper recession to conquer this inflation. Rates may continue to rise well into next year and investors can’t see the light at the end of this tunnel anymore.
The market has sold lower for the past two weeks, and this week is having a very ugly start. In addition, September is the worst-performing month in the market as cranky investors refocus after the summer. They won’t see a pretty picture this year and the selling could get worse in the weeks ahead.
This portfolio continues to trim the cyclical positions and generate income from better-performing positions at the same time.
Trades This Past Month
August 3rd
Intel (INTC) – Rating change “BUY” to “HOLD”
August 24th
SOLD One Liberty Properties (OLP) - $24.89
Purchased Williams Companies Inc. (WMB) - $35.58
SOLD OKE October 21st $65 calls at $3.40 or better
August 30th
Star Bulk Carriers Corp. (SBLK) – Rating change “HOLD” to “SELL 1/2"
Qualcomm Corp. (QCOM) – Rating change “BUY” to “HOLD”
Portfolio Recap
Global Ship Lease, Inc. (GSL)
Yield: 8.9%
The container shipping company stock had a rough couple of weeks as the rally petered, and cyclical stocks took it on the chin. It had looked like another rough patch for GSL as the market continued to fall after the Fed’s hawkish declarations. But GSL has rallied 10% so far today after the company announced new forward charter agreements for six large ships. These are long-term agreements at still-high rates that will juice earnings for the next several years.
Shipping stocks may also be in a secular bull market as supply, especially for container ships, won’t keep up with growing demand in the years ahead. This ornery market may knock around shipping stocks in the near term. But the longer-term trajectory should be higher. The good news gives GSL a reprieve for now despite the fact that market storm clouds are gathering. HOLD
Intel Corp. (INTC)
Yield: 4.4%
The chipmaker just made a massive investment in chip production. It partnered with BIP for a $30 billion investment in a semiconductor fabrication plant where Intel will maintain majority control by providing 51% of the capital. It’s a big and bold move. But that may be just what Intel needs.
The company needs to be bold to get out of its funk. And the U.S. government is desperate to bolster chip production in this country and will likely provide generous subsidies. It’s a long-term endeavor that could pay off big down the road. But the stock has done nothing since the announcement. We’ll see how this news shakes out in the weeks ahead. HOLD
ONEOK, Inc. (OKE)
Yield: 5.7%
This usually better-performing midstream energy company has been moving higher this month after having a lackluster year prior. In fact, OKE moved more than 20% above the June low and has significantly outperformed the overall market over the past month. As investors get more defensive, they realize the midstream energy stocks offer cheap valuations, safe dividends, and a favorable industry dynamic. Plus, it is one of the few sectors that can endure both recession and inflation. BUY
Rating change “HOLD” to “SELL 1/2"
Star Bulk Carriers Corp. (SBLK)
Yield: 31.0%
The shipping company continues to be under heavy selling pressure in the recent market weakness. Despite the fact that the intermediate-term prognosis remains excellent for dry bulk shipping, the market is struggling with newfound worries about the U.S. and global economies. Unlike GSL, there hasn’t been unexpected, good news to counter the market narrative. We were able to lock in the next $1.65 dividend, payable September 16th with an ex-date of August 24th, which is 5.3% of the original purchase price. But there is a risk of further downside after Labor Day. SELL ½
Rating change “BUY” to “HOLD”
Qualcomm Corp. (QCOM)
Yield: 2.0%
Technology is getting slapped around again recently on renewed fears of higher than anticipated interest rates and inflation. But, despite the recent selloff, technology has been the second-best performing market sector over the last three months after being the worst performer in the earlier part of the year. That behavior insinuates a good likelihood that technology will recover before the overall market after leading it lower.
Earnings were again spectacular, but the company warned of lower smartphone sales in the second half of the year. The likelihood of slowing phone sales has pressured this stock lower for most of the year. That’s why QCOM is still well off the high. But those slower sales haven’t even materialized yet, and the company still expects 23% year-over-year revenue growth for the rest of the year. The stock sells at 11 times forward earnings, which is cheap for this level of growth. But a high chance of continued weakness in the near term prompts a lower rating. HOLD
Visa Inc. (V)
Yield: 0.7%
Visa’s earnings knocked it out of the park. It beat expectations on both earnings and revenues, which were up 33% and 19% respectively. The company continues to benefit from increased global business from the ending of covid restrictions despite slower global growth. The stock is normally very quick to recover with the overall market, but it has been more sluggish this time around because of a pending bill in the Senate that will limit credit card fees. We’ll see what the bill looks like and gauge the chances of passage. In the meantime, business is still booming despite inflation and recession. HOLD
The Williams Companies, Inc. (WMB)
Yield: 4.9%
The stock is behaving like OKE. It had a strong year in 2021 and a steeper correction than most of its peers this year. Like OKE, WMB has also been trending higher since the June low. Natural gas demand is resilient, and the company is growing. Earnings per share shot up 29% in the first half of 2022 versus the same period last year. The recently reported quarter featured a whopping 48% earnings per share spike over last year’s quarter. Williams also increased 2022 earnings guidance. BUY
Existing Covered Call Trades
Sold QCOM Sep 16th $145 calls at $11.75 or better
QCOM had a convincing rally off the lows until it leveled off late last month. QCOM was surging in a highly uncertain market when the in-the-money calls were sold at a high premium. The market has grown ominous over the past several weeks and technology stocks have been in the crosshairs. QCOM is now more than 10 per share below the strike price. But we’ll see which direction the market chooses when the rubber hits the road after Labor Day.
Sold OKE October 21st $65 calls at $3.40 or better
Although OKE, along with the midstream energy sector, should be an excellent place to be in the market over the rest of the year, just about all sectors have been weaker during this market turn. And things might get worse after Labor Day. But we locked in a solid income from the call premium and OKE should hold up relatively well.
| 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 | $152.13 | $137.71 | NA | 2.13% | 4.16% |
| Visa Inc. | V | 12/22/21 | $217.96 | $204.10 | NA | 0.74% | -6.67% |
| Global Ship Lease, Inc. | GSL | 2/23/22 | $24.96 | $17.58 | NA | 8.93% | -30.18% |
| ONEOK, Inc. | OKE | 5/25/22 | $65.14 | $63.45 | $67.00 | 5.77% | 0.57% |
| Star Buld Carriers Corp. | SBLK | 6/1/22 | $33.30 | $20.08 | NA | 31.04% | -28.62% |
| Intel Corporation | INTC | 7/27/22 | $40.18 | $32.94 | $42.00 | 4.43% | -17.18% |
| The Williams Companies | WMB | 8/24/22 | $35.58 | $34.79 | $38.00 | 3.84% | -0.96% |
| EXISTING CALL TRADES | |||||||
| Open Recommendations | Ticker Symbol | Intial Action | Entry Date | Entry Price | Recent Price | Sell To Price or better | Total Return |
| QCOM Sep 16th $145 call | QCOM220916c00145000 | Sell | 7/20/22 | $11.75 | $1.63 | $11.75 | 8.73% |
| OKE Oct 21st $65 call | OKE221021C00065000 | Sell | 8/24/22 | $3.40 | $3.05 | $3.40 | 5.22% |
| as of close on 8/29/2022 | |||||||
| 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% | |