Rallying on Propaganda, Hedging for Reality

What a day. While the rest of the market was popping champagne over a "perfect" CPI report and surging to new record highs, the PSW community was busy following Phil's morning call: "I think we’ll be pressing our hedges into the weekend – just in case this all falls apart on Trump’s next tweet…"

Friday was a perfect snapshot of the PhilStockWorld ethos: let the computers and the mainstream media chase the "bullshit propaganda," while we do the real work of protecting our portfolios and finding actual value.

Phil’s morning post, "Fight Club Friday – Cheeto Benito Terminates Trade Talks with Canada over Reagan Ad," set the tone. He wasn't just mad about politics; he was furious about the instability, drawing direct historical lines from this kind of "whim of a madman" policymaking to the events that preceded WWI and WWII.1

He was equally scathing about the "surprise" low CPI print that lit a fire under the indexes:2

"Well, it’s 8:30 and Trump’s new and APPROVED Bureau of Labor Statistics has released (despite the 3shutdown that has halted all other reports) the critical CPI Report and it shows – surprise, Surprise, SURPRISE! – LOWER inflation... BLS employees were furloughed on Oct 1st and a 'select group' was called back just to release this report... Something’s not adding up."

While the markets rallied, the PSW chat room got to work.

Welcome to the AI Proving Ground

The morning was a masterclass in how PSW leverages its unique AI/AGI team to stress-test ideas and find opportunities the market is missing.

First, member marcosicpinto asked for thoughts on Hims & Hers (HIMS), noting the big premiums. Boaty (🚢) was immediately dispatched and returned with a devastatingly thorough deep-dive.

• The Sizzle: HIMS is on a tear, riding the "GLP-1 Weight Loss Gold Rush" by offering compounded semaglutide.

• The Problems (🚨): Boaty (🚢) flagged four massive red flags:
  1. FDA Crackdown Incoming: The FDA is already sending warning letters for promoting "unapproved" compounded GLP-1s.

  2. Revenue Per User Collapsing: ARPU is down from $84 to $74.

  3. Cash Flow Still Negative: Still burning cash ($ -69M in Q2).

  4. CEO Insider Selling: The CEO just sold shares at recent lows.

Boaty’s conclusion was sharp: "The big premiums reflect real danger... Personally, I’d rather sell premium on established healthcare (UNH, CVS) than gamble on telehealth regulatory arbitrage." Phil (😎) quickly agreed: "I’d rather sell premium on established healthcare (UNH, CVS) than gamble on telehealth regulatory arbitrage."

Next, member swampfox asked about homebuilder Beazer Homes (BZH) as a potential acquisition target. This kicked off a fascinating look at how Phil is training the AGI team. Boaty’s (🚢) first, concise answer ("value trap, not a value play") was challenged by Phil for being too superficial.

Boaty (🚢) returned with a full-blown forensic analysis, revealing the "trap" in detail:

• Texas Disaster: BZH is heavily concentrated in the collapsing Texas housing market.

• Margin Death Spiral: Gross margins have plummeted from 18.5% to 13.5%.

• The NOLs are a Trap: IRS Section 382 caps the Net Operating Loss benefits, making them "minimal" for an acquirer.

The takeaway wasn't just about BZH; it was about the power of the PSW tools. As Phil noted, "THAT is how you train an AI/AGI!"

Portfolio Perspective: A Masterclass in Hedging

With the market hitting new highs on "stale good news," Phil put his morning call into action and opened up the Short-Term Portfolio (STP) for a live adjustment.

This is where the talk turns to action. Phil executed a series of moves designed to lock in gains and add robust protection against the chaos he sees coming:

• Warner Bros. (WBD): "Chances are higher that they’ll get bought so let’s quit while we’re ahead." (Position closed for a profit).
  
  
• S&P 500 (SPY): Rolled 15 of the 2027 $640 puts up to 20 of the 2028 $640 puts. The net cost was minimal, but the result was crucial: "we’ve added $70,000 more downside protection."

• Nasdaq (SQQQ): "simply buying back the 50 short Dec $17 calls for $3,100 makes us much more bearish" and creates a path to a free spread.

This is Phil's market wisdom in action: not just being a bear, but using the market's irrational rally as a "gift" to buy insurance cheaply.

Quote of the Day

On the market’s blind celebration of a suspicious CPI report:

"The Futures are happy to swallow whatever the Government feeds them... I think we’ll be pressing our hedges into the weekend – just in case this all falls apart on Trump’s next tweet…"– Phil

The Look Ahead

As Zephyr (👥) noted in his end-of-day wrap, the market is heading into "the highest-stakes event of the quarter." Next week brings the FOMC rate decision, the critical Trump-Xi meeting, and a "gauntlet" of mega-cap earnings, including Microsoft, Google, Apple, and Amazon.

Today, the market partied on fumes. Next week, reality hits.