WeWork Going Bankrupt AGAIN and Inflation Heats Up!

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Market News and Short-Term Predictions

CPI data came out today and the results are something we haven't seen in 12 months. An increase in the YoY inflation rate.

In July, the Consumer Price Index increased 0.2 percent, seasonally adjusted, and rose 3.2 percent over the last 12 months. The expectation was 3.3%, so technically a beat but it is still a data point of acceleration of inflation. I'll admit though, using one data point is not really a trend and even if inflation stays in this 3% range, I think most consumers will not notice it as much as when it was hitting close to 10% back in June-22.

I do know the days of Chipotle burritos under $10 are over though sadly.

With this news, I don't think the Fed will be continuing to raise rates at its next meeting. As of now, the market is predicting there is an 89% chance rates stay flat and the other 11% thinks there will be a 25 bps rate increase. I don't think they pivot (to lower rates) any time soon.

In stock market news that isn't necessarily relevant, but I find it hilarious...WeWork is in the midst of "substantial doubt they can continue to run".

WeWork’s stock has plunged 98% since the company went public in October 2021, wiping out nearly $9 billion in market value. The stock was trading at 16 cents early Wednesday (a beautiful chart).

If you are thinking how much has this company lost investors money over the years?

The company has amassed cumulative losses of at least $16 billion over its 13-year existence, burning $22 billion of investor funding (including debt).

I don't feel bad for anyone that continued to give this company any capital after watching the Hulu documentary (if you haven't watched it, you should definitely give it a watch). I honestly don't know how after all of this, Adam Neumann walked away with billions in cash while running the company into the ground multiple times. I guess I'm just jealous :)

Going back to the general market, over the past couple of weeks, we have seen a pullback after we hit frothy levels on the S&P 500 (RSI over 70). Now that RSI is back in the middle of its range I think the 50 DMA will serve as a decent support level for SPY at $442.

Lessons to Be Learned

Cash can be a position too!

I currently am sitting on around 6% of my account in my public portfolio after adjusting some positions through winding down losers and trimming profits from winners.

You may be thinking, but with inflation isn't cash trash?

With my Fidelity accounts, cash is automatically pooled into the money market fund which is currently yielding around 4.5% on an annual basis (after expense ratios) with essentially 0% risk as the majority of the fund is invested in treasuries/government bonds.

So when you invest in a stock right now, you have to remember that the current risk-free rate is around 4-5%. With the current YTD returns, I have to admit that the days of looking across stocks and seeing a majority of larger discounts are behind us.

Therefore, I need to be even more selective with the stocks I am picking as lots of growth stocks have rebounded heavily YTD on the assumption that the economy will do alright and we will get a soft landing. Those same stocks could be due for a minor valuation correction if that assumption falls short.

One sign that the recent AI craze has settled, is that names like PLTR/AI/UPST/MSFT/NVDA have cooled off over the past month (even with good earnings). This is healthy market action as there is rotation into other sectors, but piling into growth names on a small pullback may have more risk than investors are thinking about and therefore I am a little cautious at the current valuations in growth names.

Portfolio Update

Stock/Option Watchlist

Stocks: TSLA, LLY, CHDN, ROK, ADSK, PTLO

Options: SPLG, PLTR, BAC, MPW, F, AAL, T, DISH

See premium membership for details on interested entry points/strike prices/current wheel positions.

Options Trading Portfolio

Closing Trades

I was able to close 1 CSP (cash-secured put) in DISH to secure a $21 gain (sold for $23 and bought back for $2).

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