RF's Financial News

RF's Financial News

Sunday, June 25, 2017

This Week in Barrons - 6-25-2017

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:

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.

Remember the Blog: <http://rfcfinancialnews.blogspot.com/>  Until next week – be safe.
R.F. Culbertson



Sunday, June 18, 2017

This Week in Barrons - 6-18-2017

This Week in Barrons – 6-18-2017:



Speed multiplies the distribution of information that we know to be untrue”… Edward R. Murrow

Thoughts:
   In 2018, all or pieces of 23 U.S. states will have one or no Obamacare insurers (see Obamacare vacancies map below).  The number of states without healthcare will continue to rise in coming weeks as insurers announce their intentions.  But what can you do if you cannot get healthcare?  Could this trigger the next Civil War?
  


   Only this time, we will all be holding the ‘weapon of mass destruction’ right in the palm of our hand.  Just 10 years ago we used a phone – as a phone.  In 2007, the world changed with the introduction of the iPhone, and changed again in 2008 when the HTC-1 Android smartphone was introduced.  This past Thursday, CNN reported: “Since 2007, the rate of suicide deaths among children ages 10 thru 14 has doubled.”  The influence that one person has with 1,500 Facebook ‘friends’ and their respective 500 ‘followers’ is staggering.  Surveys tell us that young people trust their cellphones more than their parents and clergy.  An entire generation is growing up with their cellphone as their best friend.  In the first Civil War, we only had to deal with the propaganda that flowed face-to-face, but now the pressure is coming from everywhere.  It’s virtually impossible to tell real news from fake news anymore, and it’s happening on both sides of the aisle.
   Politically and economically we are being held witness to one of the largest power struggles of all time.  Trump supporters have their own set of issues – from Trump to Comey to Sessions to Kushner to who knows who will be next.  On the Democratic side, they’re also dropping like flies:
-       Seth Rich (linked to the DNC e-mail leaks) was shot.
-       Shawn Lucas (the attorney working to expose the DNC) died in his bathroom just days after serving papers to them.
-       Victor Thorn (the author that accessed secret Clinton emails) died from a bullet to the head.
-       John Ashe (the former U.N. President) ‘accidentally’ crushed his own throat while lifting weights.  He was scheduled to testify against the Clintons and the DNC the following week.
-       Beranton Whisenant (the Federal prosecutor) died from a head trauma caused by a gunshot wound.  He had direct links to Imran Awan and to Debbie Wasserman Shultz’s iPad that was used to exploit the DNC leaks.  Mr. Awan (a high-level governmental IT supplier) could provide evidence to 20m U.S. cell phones that were being used for massive, data-collection efforts by the FBI and CIA.

   A legal suit was filed on Monday by Dennis Montgomery saying that he has evidence (previously given to the FBI) surrounding the collection of phone, financial, and personal data via cell phone on 20m Americans.  This information shows co-operation on the part of the FBI and CIA, and is in direct violation of the U.S. Constitution’s Fourth Amendment. 
   We are in the midst of a devastating civil war, and whether it is being fueled by invasion of privacy, healthcare or a crazy gunman attempting to take the lives of Congressmen during a softball practice – we need to recognize that the weapon of mass destruction is our very own cellphone.  The only way to win this war is to turn off our cellphone, and spend time without it.  Yes, I know what I’m saying is high treason, but as long as the cellphone is on – it can listen, transmit, and record.  Believe me when I tell you, NOBODY wins a civil war.


The Markets:



   There’s another Civil War brewing this summer, and this one is between Bitcoin and Ethereum.  Just as Wall Street started to pay more attention to Bitcoin, a rival is increasingly threatening to become the top dog among cryptocurrencies.  Ethereum’s market capitalization is nearing Bitcoin’s, as shown in the chart above (courtesy of CoinMarketCap).  As of Wednesday, Bitcoin (shown in orange) accounted for 39% of the combined market capitalization for all cryptocurrencies – down sharply from 87% on Feb. 25.  You can blame the erosion on Ethereum (shown in purple), which now makes up 31% of the total market cap – up from just 5% less than four months ago.  If Ethereum’s market cap overtakes that of Bitcoin, then “The Flippening” will have occurred.  That is the term that many people are using to refer to the shift in power and influence.  Bitcoin’s market cap as of Wednesday was around $45B, and its price was $2,655.  Ethereum’s market cap recently stood at $36B, and its price was $366.

Factually last week:
-       The latest Bank of America Fund Manager’s Survey said: “Equity overvaluation has hit a record high, surpassing the all-time high set during the 1999 bubble.”
-       Barrons Roundtable retiree Felix Zulauf said: "Today seems like late 1999. We haven't seen the peak yet.  I expect the FAANG stocks and the Nasdaq to have a big selloff – easily falling 30% or 40%."
-       Jim Rogers has been calling for a crash of epic proportions for 5 years now, and says: “The next crisis will be the biggest in my lifetime.  Institutions that have been around for a long time – museums, hospitals, universities, and financial firms – will be wiped out."
-       David Stockman said: “This market environment is the calm before a gigantic storm that I don't think is too far down the road."
-       Marc Faber says: “The Fed’s policies have actually created a two-class system around the world. This gigantic financial asset bubble (according to the Baltic Dry Index) is about to collapse."

   What if you told your best friend: “Hey, the DOW hit an all-time high today” – and all they did was yawn?  First off, it amuses me that markets continue to set all-time-highs within the confines of rather ugly fundamental news.  But secondly, nobody cares.  Unfortunately, in the Central Bankster arena – we need to constantly feed the beast otherwise all ‘heck’ will break loose.  Why?  Because zero interest rates forced people along with institutions, pension plans, and insurance reserves – that would normally not buy stocks – into the stock market in search of yield.  Their choice was to buy stocks or lose money due to inflation.  With all of these elements being forced into the market, it’s clear that a whole lot is riding on the idea of the market moving higher.
   The market’s effects are global in scope.  If this market were to fall 45%, entire industries would cease to exist.  Multi-billion-dollar pension funds would collapse.  Banks would fail because most stock holdings have been used as collateral for other billion dollar loans.  Our FED knew that they couldn’t rescue our economy.  But (with coordination from the Swiss, ECB, and BOJ) felt that they could keep the wheels turning using an ever-rising market as a backdrop.  Even with all of the trillions injected into our economy to date, we are finding that the absolute best we can grow is somewhere between 0 and 1.5% per year.  So, just imagine all of the economic nightmares that would emerge if the Central Banksters stop their support of the markets.  Yet, if they continue their market support we’re going to see a 50K DOW, and the people that can’t afford to be in the market are going to be on soup lines.
   Normally the period from here into Labor Day is characterized by a sideways drift.  I’ll continue to lean long, nibble on stocks with nice setups, and sell for quick gains.  I’ll continue to keep my position sizes small until I see a reason to change.


Tips:



   Quantitative trading now accounts for over 90% of all trading.  Quantitative trading does NOT focus on a company’s fundamentals, but rather on technical patterns.  This is producing some very strange movement within some of the S&P companies such as Caterpillar (CAT) and Boeing (BA).  Both CAT and BA have recently exploded to the upside – while Apple (AAPL) has completely imploded and is currently in ‘correction’ territory.
   The above chart shows a marketplace in chaos.  Standard correlations have broken down.  For example: bonds are rallying which means interest rates are falling – while at the same time our FED (just this week) continues to raise rates.  The NASDAQ is dramatically selling off while the S&P finishes the week where it started.  Normally during periods of NASDAQ and S&P convergence we would see extreme bouts of volatility – but the VIX (the volatility measure) is barely moving.
   Yes, this past week Amazon purchased Whole Foods for about $14B.  And yes, after the acquisition was announced Amazon rallied slightly more than $14B – making the entire transaction (at least on paper) cost Amazon virtually $0. 
   This coming week I’m watching:
-       Apple (AAPL): as one of my keys to the entire market place.  Apple has quickly faded from 155 to 142 and is in correction territory, but it’s volatility is not very high.  If AAPL bounces this coming week, it will trigger a NASDAQ rally, but my advice would be to short that rally.
-       Caterpillar (CAT) and Boeing (BA) have come a long way in a very short time, and I wouldn’t be surprised to see them roll-over and give back a large percentage of their gains from the past several weeks.
-       I’m looking for the S&P Index (SPY) to move sideways to down over the next week or so.  The SPX ended the week at 2433, and has a weekly expected move of 21 points – giving it a range of between 2412 to 2454.

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:

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.

Remember the Blog: <http://rfcfinancialnews.blogspot.com/>  Until next week – be safe.
R.F. Culbertson