This Week in Barrons –
6-25-2017:
“Draghi,
Carney, and Yellen will be the sacrificial lambs thrown to the wolves”… Societe
Generale’s Albert Edwards.
This week Albert Edwards of Société Générale
said what has been on a lot of people’s minds: “How long will it be before
angry citizens tire of blaming a political system for their ills, and turn on
the main culprits — the unelected and virtually unaccountable central
bankers? There’s no recognition at all by central bankers that it may be their own
easy money and zero-interest-rate policies that caused the stagnation in growth
and pushed wealth inequality to intolerable heights. When people finally wake up to what’s
happening, the central bankers will be the next sacrificial lambs to be thrown
to the wolves as politicians seek redemption.”
But this week, the real ‘lamb thrown to the wolves’ was Travis Kalanick as he stepped down
from his CEO post at Uber.
Travis
Kalanick was embroiled in so much controversy, I'm surprised it took the board
this long to remove him. The following
condensed chronology of 2017 events reads like a: ‘Business for Dummies’
handbook:
-
1.19.2017 – FTC
charges Uber with a $20m fine for recruiting drivers by using exaggerated
earnings claims.
-
2.19.2017 –
Susan Fowler (former Uber engineer) details sexism within Uber via blog post.
-
2.20.2017 – Eric
Holder (former U.S. Attorney General) agrees to head an Uber internal
investigation.
-
2.23.2017 –
Google’s Waymo unit filed a lawsuit against Uber claiming that Anthony
Levandowski (former Waymo employee and then head of Uber’s Autonomous Vehicle
division) stole Waymo’s technology.
-
2.27.2017 – Amit
Singhal (Uber SVP of Engineering) leaves after being threatened with a sexual
harassment lawsuit.
-
3.3.2017 – The
New York Times reveals that Uber has a feature named ‘Greyball’ that shows people (suspected of being government
officials) a fake version of the Uber app that would automatically deny them a
ride.
-
3.3.2017 –
Charlie Miller (Uber VP of Product Growth and Autonomous Vehicle Senior
Engineer) leaves.
-
3.8.2017 – Gary
Marcus (Uber Artificial Intelligence Labs Director) leaves.
-
3.16.2017 –
Raffi Krikorian (Uber Autonomous Vehicle Director) leaves.
-
3.19.2017 – Jeff
Jones (Uber President) leaves.
-
3.20.2017 –
Brian McClendon (Uber VP of Maps and Business Platforms) leaves.
-
5.5.2017 – Judge
blocks Anthony Levandowski from working on any technology related to LIDAR –
which is key to the development of Uber’s autonomous vehicles.
-
5.30.2017 – Uber
fires Anthony Levandowski stating that he failed to fully cooperate with the
court or help Uber prove its case.
-
6.1.2017 – Uber
Board of Directors meets to discuss the findings of the Holder
investigation. During the meeting, David
Bonderman (Board of Directors member) makes blatant sexist remarks.
-
6.6.2017 – Uber
fires over 20 staff members as a result of the Holder investigation.
-
6.8.2017 –
Kalanick discusses a company trip to Miami and lays-out ground rules for
consensual employee sex: “Have a great
f__king time.”
-
6.13.2017 – The
Holder report is released. Kalanick (who
recently lost his mother) decides to step away from the company temporarily.
-
6.13.2017 – Uber
board member David Bonderman resigns due to his previous sexist remarks.
-
6.14.2017 – New
York judge rules that Uber drivers should receive employee benefits. This is the first step toward negating Uber's
claims that its drivers are merely contractors.
-
6.14.2017 – The
FTC begins to look into Uber’s privacy practices, and the company’s ‘God View’
tool.
-
6.15.2017 – An
Uber rape victim filed a lawsuit against Uber after she found out that Uber
executives had stolen her medical records.
[The 26-year-old woman was raped by an Uber driver in 2014, and the
driver was convicted of the crime.]
-
6.21.2017 –
Founder and Uber CEO Travis Kalanick resigns. “I love Uber more than anything in the world and at this difficult
moment in my personal life I have accepted the investors request to step aside
so that Uber can go back to building rather than be distracted with another
fight.”
Finally, workers aged 50+
are being ‘thrown to the wolves’ at
an alarming rate. Here are some
predictions for the current 50+ workforce:
-
American corporations will expand job flexibility options to keep
valuable boomer and Gen X employees –
potentially in part-time roles.
-
In 5 years, the BLS estimates that
double the number of current Americans aged 65 to 74 will be working on
‘encore’ careers.
-
New forms of
unions, organizations and alumni groups will emerge focusing on advocating and
providing services for older workers – including job-matching, marketing and
legal services.
-
Millions 50+
will transition from full-time to part-time jobs, and even more will begin to
look at a career as a series of shorter-term projects.
-
The key word for
50+ workers will be: ‘Alongside’.
-
The traditional
expectation of earning more each successive year of work will be questioned as
people will be paid based upon what they can do.
-
The traditional
linear life of education, work and then retirement will morph to include
multiple sabbaticals, years of learning, retraining and/or travel.
-
Genius clubs will emerge to organize and channel older workers’ talents,
products, and services.
The Market:
“We are drowning in the stuff…”
This week we saw our markets ‘drowning in
oil’. An International Energy Agency
report showed May’s global oil supplies rising by 585,000 barrels/day (1.25m
barrels/day higher than a year ago) — making it the highest annual increase
since February 2016. This rise was
attributed specifically to increased U.S. production. Advances in fracking technology have contributed
to higher production rates in the U.S. – even as world-wide demand suffers from
increased use of alternative energy sources like solar. Judging from the graph above, it seems that
Texas and North Dakota frackers have figured out how to lower their costs, and
are beginning to take their innovations to other production locations. This increased production has caused people
to suggest that rather than limiting production and attempting to prop-up
prices, OPEC should try selling as much of their oil as they can at lower
prices in order to slow the technological innovation that may eventually put
them out of business. After all, Saudi
Arabia, Russia and Iran, should be worried that they are sitting on a commodity
that may be far less valuable in the future – especially with solar power growing
increasingly less expensive.
The price of oil fell sharply this
week. It should be interesting to watch
everyone try to prop-up that price – because oil is a lot like gold in that
it’s price is artificially supported. If
it was being priced simply by supply and demand, oil would be under
$20/barrel. But like gold, it is priced
in the futures market. Of the 3 billion barrels of oil on paper trades,
only about 15 million will ever get delivered. Due to the petro-dollar
and banks being on the hook for so many oil field fracking loans, if oil were
to fall to its rightful price – we’d have another financial melt-down on our
hands. So, propping oil up in the paper
market is the easiest way of keeping our energy companies and our financial
institutions profitable. And besides,
the Saudi-Aramco IPO is coming up, and they are targeting a $60/barrel
price. If oil’s price were to settle
around $28/barrel (as others are suggesting), this would cut the value of this
IPO virtually in half.
Thanks to SF for pointing out that this week
Verizon completed its $4.5B Yahoo acquisition. Yahoo will change its
name to Altaba, a holding company with a 15% stake in Alibaba and a 36%
stake in Yahoo Japan. Verizon plans to
integrate Yahoo with AOL to create a media subsidiary called Oath. Just think, 18 years ago Yahoo was valued at
$140B. So over the past 18 years, Yahoo
management has single-handedly LOST over 97% of the company’s value. Now that is: (a) tough to do, (b) something
you don’t see everyday, and (c) leaves me wondering why anyone on that
management team was ever paid one dime for their services. After all, taking a company downward from
$140B to $4.5B over 18 years is NOT rocket science.
On Friday afternoon, we had the annual
rebalancing of the Russell indices and this brought unusually high volume into
the markets. This market is desperate
for the correction that never comes.
Everyone (algorithms included) has been trained to buy the dip, no
matter what – simply because the central banksters will make sure it doesn't
crash. Forget risk and forget history –
just buy stocks. Then again, this has
been going on much longer than most people could have imagined – so what is to
stop it? I've said many times, this
market will keep rising until either a black swan event (like shooting down a
Russian jet over Syria – which starts a hot war), or ‘they’ pull the plug and
end all global QE. A crash won’t happen
unless ‘they’ want it to, but a 5% or 10% correction is always a
possibility. Unfortunately, a 10% drop
in a 21K market can cause a lot of pain, and that's why you simply can’t throw
caution to the wind.
This coming Friday will be the end of month
and the end of quarter trading – which will lead to some volatility and natural
rebalancing of the FAANG stocks. We will
then proceed directly into earnings season.
If the bulk of the earnings disappoint, that could trigger our first
real market correction in many years.
Tips:
This week:
-
The NASDAQ ended
by having 2 solid closes above the 21-EMA – abruptly silencing any bearish
arguments.
-
The FED came out
and suggested that its own rate increase path could be ‘unnecessarily
aggressive’ – potentially signaling a slowing of their interest rate
hikes. The financial sector (XLF) is in
a dangerous situation right now – especially with bonds rallying.
-
The S&P
showed weakness in the energy and financial sectors, but the healthcare sector
picked up the slack. The S&P
remained within its expected move. For
this coming week, I think that the SPX (2438) should again remain within its
expected move of 2416 to 2460.
-
Crude oil is
trying its best to ‘catch a bid’, but when talking to oil people:
o
$60/barrel oil =
All is good.
o
$53/barrel oil =
We have hope.
o
Current
$43/barrel oil = We are getting nervous.
o
Predictions
showing $28/barrel oil = The world is in trouble.
o
This week low
oil prices could put more downward pressure on the HYG – the junk bond index.
-
Over the next 2
weeks, I’m looking for continued strength in the NASDAQ along with constant
sector rotation and chop.
My recommendations:
-
BOT (Boeing) BA
July 7 – Call Debit Spread: 197.5 / 202.5,
-
SOLD (Boeing) BA
July 7 – Put Credit Spread: 195 / 200,
-
SOLD (Alibaba)
BABA June 20 – Put Credit Spread: 140 / 141,
-
BOT (Facebook)
FB July 7 – Call Debit Spread: 152.5 / 160,
-
SOLD (Facebook)
FB July 7 – Put Credit Spread: 150 / 155,
-
BOT (Google)
GOOGL July 21 – Call B-Fly: 975 / 1000 / 1025,
-
BOT (Regeneron) REGN
July 7 – Call Debit Spread: 500 / 520,
-
SOLD (Regeneron)
REGN July 7 – Put Credit Spread: 490 / 510,
-
BOT (Workday)
WDAY July 21 – Call Debit Spread: 100 /
108,
-
SOLD (Workday)
WDAY July 21 – Put Credit Spread: 100 / 103, and
-
THINKING about Selling
a Put Credit Spread on ADKS (Autodesk).
To follow me on Twitter.com
and on StockTwits.com to get my daily thoughts and trades – my handle is:
taylorpamm.
Please be safe out there!
Disclaimer:
Expressed thoughts proffered
within the BARRONS REPORT, a Private and free weekly economic newsletter, are
those of noted entrepreneur, professor and author, R.F. Culbertson,
contributing sources and those he interviews. You can learn more and
get your free subscription by visiting:
Please write to Mr.
Culbertson at: <rfc@culbertsons.com>
to inform him of any reproductions, including when and where copy will be
reproduced. You may use in complete form or, if quoting in brief, reference
<http://rfcfinancialnews.blogspot.com/>.
If you'd like to view RF's
actual stock trades - and see more of his thoughts - please feel free to sign
up as a Twitter follower - "taylorpamm" is the handle.
If you'd like to see RF in
action - teaching people about investing - please feel free to view the TED
talk that he gave on Fearless Investing:
Creativity = https://youtu.be/n2QiPSe_dKk
Investing = https://youtu.be/zIIlk6DlSOM
Marketing = https://youtu.be/p0wWGdOfYXI
Sales = https://youtu.be/blKw0zb6SZk
Startup Incinerator = https://youtu.be/ieR6vzCFldI
To unsubscribe please refer
to the bottom of the email.
Views expressed are provided
for information purposes only and should not be construed in any way as an
offer, an endorsement, or inducement to invest and is not in any way a
testimony of, or associated with Mr. Culbertson's other firms or
associations. Mr. Culbertson and related parties are not registered
and licensed brokers. This message may contain information that is
confidential or privileged and is intended only for the individual or entity
named above and does not constitute an offer for or advice about any
alternative investment product. Such advice can only be made when accompanied
by a prospectus or similar offering document. Past performance is
not indicative of future performance. Please make sure to review important
disclosures at the end of each article.
Note: Joining BARRONS REPORT
is not an offering for any investment. It represents only the opinions of RF
Culbertson and Associates.
PAST RESULTS ARE NOT
INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY
FOR GAIN WHEN INVESTING IN MANAGED FUNDS. WHEN CONSIDERING ALTERNATIVE
INVESTMENTS (INCLUDING HEDGE FUNDS) AN INVESTOR SHOULD CONSIDER VARIOUS RISKS
INCLUDING THE FACT THAT SOME PRODUCTS AND OTHER SPECULATIVE INVESTMENT
PRACTICES MAY INCREASE RISK OF INVESTMENT LOSS; MAY NOT BE SUBJECT TO THE SAME
REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY
CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE
INVESTMENT MANAGER.
Alternative investment
performance can be volatile. An investor could lose all or a substantial amount
of his or her investment. Often, alternative investment fund and account
managers have total trading authority over their funds or accounts; the use of
a single advisor applying generally similar trading programs could mean lack of
diversification and, consequently, higher risk. There is often no secondary
market for an investor's interest in alternative investments, and none is
expected to develop.
All material presented
herein is believed to be reliable but we cannot attest to its accuracy.
Opinions expressed in these reports may change without prior notice. Culbertson
and/or the staff may or may not have investments in any funds cited above.
R.F. Culbertson
