This Week in Barrons – 5-13-2018:
"Most entrepreneurial ideas will sound crazy, stupid and uneconomic, until they turn out to be right."― Reed Hastings – Founder of Netflix
Where have all the good teachers gone?
If you believe that the backbone of any society and economy is education – then it’s not too far of a stretch to say that the most important people in that backbone should be the highest paid and respected – yes? Alas this is the plight of the teacher. Good teaching is both an art and a science. It’s long-term benefits are: boosting students’ performance on tests, increasing their chances of going to college, and even raising lifetime earnings. In the long term, whether a country prospers or dwindles depends upon the quality of its teachers. Often this means paying our teachers more, but at minimum it means attracting and developing new talent.
In the U.S. anybody can be admitted to a teacher preparation program. In Singapore and Finland (where students consistently score near the global top) teachers are drawn from only the top 30% of university students, and must first pass a series of exams, then demonstrate math and language proficiency, and finally sit for interviews with teaching professionals. In Finland, only 10% of applicants for primary-school teaching positions make it through a similar process. And even then, they are required to earn a master’s degree and complete coursework in their specific academic subjects along with drama, music, and physical education.
Teachers in higher performing countries earn as much as their academic peers, but in the U.S. a teacher earns significantly less than their college graduate counterpart. It has been proven that merit-pay policies attract the best teachers, but alas, the U.S. teacher’s union has consistently voted against merit pay.
What about on-the-job training? Teachers in Shanghai (a global high performing area) spend their first year being supervised by a more experienced colleague. In Toronto, where new educators receive up to 2 years of mentoring, only 1% of teachers switch jobs after their 1styear versus the U.S. where attrition rates are over 10% and climbing. Unlike the U.S., other governments mandate bonuses to teachers who earn advanced degrees. In the U.S. over half the work-week is spent by teachers teaching alone versus teachers in Shanghai and Singapore who spend most of their time working with other teachers. Studies show that collaborative teaching substantially boosts student achievement.
There is no great mystery as to what works: competitive selection, higher salaries, incentives, and opportunities for professional development. The only mystery is why isn’t the U.S. doing anything about it? We should start by: (a) spending more on teachers and less on administrators, (b) starting early teachers as apprentices working under an expert professional, and (c) by allowing our teachers to take their credentials across state lines.
It’s beyond me, how we continue to pay administrators absurd wages, and NOT pay teachers who stand in front of our children 8 hours a day. Factually:
- Most districts with less than 1,000 students have superintendent salaries over $125k (twice that of the average teacher in that district).
- Superintendents get annual bonuses between $7,500 and $15,000.
- Most districts pay for the superintendent to take graduate level courses.
- Districts often provide the superintendent with his own personal chauffeur.
It doesn’t take a rocket scientist to see how close we are to the educational pyramid collapsing. When it does, the good news is that we’ll get to rebuild it from the bottom up – one teacher at a time.
The Market:
“You’ve never played Banking? It’s easy. First, you give me the ball, and then I charge you every time you want to play with the ball. I’ll also charge you if you want to give the ball to someone else. And I’ll charge you a small monthly fee for holding onto your ball.”… @Blockchainlife
Crypto-Bytes:
- "We're not in the beer vending business,"is what Civic CEO said last Friday. At Consensus 2018, Civic will unveil the world's first crypto beer vending machine. Civic sees the prototype (built and branded in partnership with Anheuser-Busch) as a way to demonstrate the utility of blockchain-based identity verification schemes. Any conference attendee will be able to walk up to the machine with their Civic app and make a purchase. Buzz aside, the demo illustrates how blockchain technology could one day enable the makers of all kinds of age-restricted products to move into the vending machine market.
- $1.2B in Ethereum has been SPENT by the EOS team in the last 30 days.
- Digital gold is worth 7 TIMES as much as the Venezuelan bolivar. I’m NOT referring to Bitcoin gold, but rather World of Warcraft’s (online gaming) currency. It seems Venezuelan inflation has spiraled out of control. The country’s inflation rate for March and April was 17,968% - compared to February’s 4,966%. Bitcoin might be a hard sell for people living in stable economies, but for people living in areas of hyperinflation – it’s already a much better alternative.
- Iran pushed an estimated $2.5B into the crypto market following the collapse of the Iran nuclear deal.
- A crypto YouTube-r is bringing his talents to national television in 13 installments of: ‘The Crypto Show’.
- Telegram 2.0 – you might as well ‘mail it in’, because Facebook is moving into blockchain. The reveal came from David Marcus (previously in charge of FB Messenger) who will pioneer the project. Facebook was never going to roll over and let blockchain flatten its revenue model. It’s more likely that the social media behemoth would introduce its own token and follow Telegram’s route to a private ICO. While Telegram raised $1.7B with its 200,000 monthly active users, Facebook is over 5 times their size. Tokenizing Messenger in a similar fashion makes perfect sense. Messenger increased their advertising budget, and since it’s separate from FB – the work needed for a blockchain revamp will be less.
Info-Bits:
- Apple and Goldman Sachs will be teaming up on a new credit card that will launch next year. This will be Goldman's first credit card. It will help the bank expand into consumer products, and help Apple grow its Apple Pay brand.
- Your new Android phone can now: (a) stop you from spending too much time on Instagram, (b) go into Do Not Disturb mode when you place it face down, (c) make reservations for you in John Legend’s voice, and (d) finish your g-mail sentences.
- Marvel’s “Avengers: Infinity War” has (according to Forbes) become the fastest movie to surpass $1B in box-office revenue in history – taking less than 2 weeks to hit that number. Disney’s Black Panther created over $376m in profits – accounting for over 10% of Disney’s total profit.
- Warren Buffet said: “If you buy Bitcoin or any cryptocurrency, you don’t really have anything – you’re just hoping the next guy pays more.” In tandem Charlie Munger said: “Bitcoin to me is just dementia. It’s like somebody else is trading turds, and you decide you can’t be left out. To me Bitcoin is rat poison squared.”
And what would a weekend be without hearing from John McAfee:
John, is the business idea dead? “Even in the old world, an idea is worth exactly what you put into it – nothing. It’s the implementation, the organization, and the work towards that idea that builds value. Even then – what you come out with often is nothing close to what you originally intended.”
John, will blockchain eliminate existing corporate structures? “In the new blockchain world, nobody makes the rules, but everything evolves from the process of distributed interaction. Blockchain is taking the existing corporate structure, and distributing it throughout the world. I’ve never met most of my full-time employees. Day-to-day operations give the title of ‘boss’ to the most appropriate person for that process.”
John, what will blockchain do to social media? “Facebook will quickly announce that Mark Zuckerberg is no longer CEO. Do you think he will accept that demotion? Of course not. So Facebook will disappear. There are very few companies that can manage this change, and the rate of change is accelerating.”
John, what will banks look like in 5 years? “5 years from now there will be no banks. Governments will have to figure out how to collect taxes because they will not know where the money is, who has it, or where it has been. You will simply open your wallet to do virtually any ‘banking task’ you can think of.”
Last week the tone on Wall Street was bullish. The DOW marked its 7thstraight positive session, and posted its best run since February. Apple’s strong earnings, and Warren Buffet’s purchase of 75m additional Apple shares injected fresh confidence into the market. Apple is now valued at more than $950B, and is within striking distance of becoming the first stock with a market cap of $1T. The S&P Index was boosted by the telecom companies as they produced the best returns (+2.1%) among all 11 sectors of the market. The NASDAQ finished a week advancing 2.7%. In other news:
- NAFTA trade talks are entering a make-or-break situation. All three ministers from Canada, Mexico, and the U.S. are seeking to resolve an impasse in key areas ahead of elections.
- Facebook (FB) had its largest executive shakeup in history. New heads were appointed to Messenger, WhatsApp, and FB’s core app.
- Oil prices rose and notched a second weekly advance after the U.S. quit the Iran nuclear deal.
- The healthcare sector, is underperforming the broader market by over 2% due to concerns about drug pricing. However, keep an eye on the biotech space as both XBI (the biotech ETF) and several individual biotech names are forming an upward trend.
- A pharma stock worth watching is Eli Lilly (LLY). It is set to acquire immuno-oncology biotech ARMO Biosciences in an all-cash deal worth $1.6B. The deal will benefit Lilly’s earnings considerably beyond 2018.
- As Canadian ‘weed’ legalization draws closer, the following are the stocks with the most to win (and lose): (a) Aurora Cannabis (ACBFF) has been the most aggressive when it comes to expansion. They’ve expanded by purchasing CanniMed Therapeutics, and are intending to build again in Alberta. (b) Canopy Growth Corp. (TWMJF) is pre-occupied with obtaining licensed production capacity of 5.7m. sq. ft. (c) MedReleaf (MEDFF) is using its capital to retrofit its 1m sq. ft. facility. And (d) Aphria (APHQF) will soon complete its four-phase Aphria One facility that is capable of producing 100,000 kg annually.
In terms of the overall market, I tend to think that we're going to go higher. I think this move will hold up and the market will rise. But I don't think we're going to see any new all-time highs. I think that we move into 2,750 or even 2,800 and then this bounce runs out of gas. From there, I think we could enter a pretty long decline. The only thing gumming up my feelings here is the volume. Most of this week the volume was far below average. One would think that on a breakout of last week’s magnitude, we would have gotten all of the algorithms fired up and have seen some monster SPY volume. We didn’t, so that raises my eyebrow. That said, maybe the players are just waiting to see if this ends up being just another head fake, and we work our way lower.
Right now it looks like tech, energy, and financials are holding up the best, with some industrials trying to make a statement. So, why don't I think we're going to make new highs? There are a million reasons, but mostly because of: rising interest rates, rising inflation, the length of this run, and Central Banks cutting back on their money printing. Yes, the insane buy backs are going to help stocks, but if rates keep rising – most of these companies will have used borrowed money to buy their stock back. Rising interest payments on those borrowings will begin to put a dent into corporate earnings.
Top Equity Recommendations:
Marijuana stocks (HODL):
- Aurora (ACBFF),
- Cannabis Wheaton (CBWTF), and
- Canntrust Holdings (CNTTF).
Options (Metals & the Miners):
- SLV: Buy January 2020, $15 calls,
- GDXJ: Buy January 2020 $34 calls, and
- GDX: Buy January 2020 $23 calls.
Top Crypto Recommendations:
Past rallies post-Consensus Conference:
- 2015: 500 attendees / 56% rally post-Consensus,
- 2016: 1,500 attendees / 78% rally post-Consensus,
- 2017: 2,750 attendees / 552% rally post-Consensus, and
- 2018: 7,000+ attendees / TBD.
BTC/USD ($8,487): Bitcoin failed to find buying support at higher levels, and on May 10thbroke below both the 20-day EMA and trendline support. On the downside, the 50-day SMA at $8,423 is strong support, below which the fall can move to $7,900. If that level breaks, then BTC can sink back into $7,000. The flattening of the moving averages point to the formation of a range. The supports and resistances of the probable range have still not been established, and therefore I am not recommending any trades.
ETH/USD ($682): Ethereum broke below the $745 level on May 10th, and this resulted in a failing of the 20-day EMA. With this fall, the ‘V’ shaped bottom formation has been invalidated. ETH has support at $656.55, which is the 38.2% Fibonacci retracement level. If this level breaks, $600.50 should act as strong support, which is the 50% retracement level. Please wait for buying to emerge at lower levels before entering any long positions.
BCH/USD ($1,453): Bitcoin Cash failed to hold the $1,600 level and has broken out of its ascending channel. Currently, prices have recovered from the lows, and the bulls are trying to climb back above the 20-day EMA. If the levels hold, Bitcoin Cash will again attempt to scale above $1,600. The critical support on the downside is $1,221.
XRP/USD ($0.68): Ripple has broken down and out of its ascending range – giving it a lower target of $0.58. Currently, the bulls are attempting to defend the 50-day SMA. Even if they succeed, any rebound will face stiff resistance at $0.76 and the 20-day EMA. If Ripple breaks below the 50-day SMA, the fall can extend to the next support zone of $0.56-$0.58. I’m waiting for some semblance of support prior to initiating any new purchases.
LTC/USD ($141): Litecoin has broken below its ascending channel, the 20-day EMA, and the 50-day SMA. It is currently struggling to hold support at $141. If LTC sinks below $141, it will become negative and could decline to $127 and below that to $115. If this level holds, LTC should continue to trade inside the small range of $141-$167. Due to the overall weakness, it is better to wait for the decline to end before buying.
To follow me on StockTwits.com to get my daily thoughts and trades – my handle is: taylorpamm.
Please be safe out there!
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