This Week in Barrons: 12-29-2019:
Thoughts:
I am Gumby, DAMMIT! This line has many meanings, one of which is: “I’m here to blow away the competition." What kind of crazy world do we live in where SNL has its best show in decades when Eddie Murphy (after 35 years) revisits his roots. It seems like such a long time ago that one of my comedy heroes came home to roost. Then Chris Rock joined him - which brought back memories of George Carlin. Then Dave Chappelle stepped on stage. Dave, who had the audacity to walk away from his own TV show, only to come back as the highest paid performer on Netflix. These are all guys that ‘made it’ when a pre-requisite for ‘making it’ was paying your dues. Seeing Eddie Murphy made me realize that we’ve created a world in which everybody believes they can ‘make it’ on the Internet. The Internet gives way too much credit to those who don’t deserve it, because they never paid their dues. By teaching the philosophy that anyone can do anything as long as they put their mind to it, we’re finding out that what most people do best is self-promotion. Eddie taught us that you actually need 35 years of paying your dues, in order to utter the words: “I am Gumby”correctly.
I am Gumby, DAMMIT! Another meaning of this line is: “I’m here to get s%$t done”. But ‘getting s&*t done’ is NOT the same thing as being popular. There are hundreds of thousands of people from all backgrounds and genders trying to be popular on Instagram. Facebook is filled with anonymous bots creating popularity. Billions of hours are being spent believing that the social media pyramid scheme of attention gathering – will somehow pay off. It won’t and can’t because the MATH doesn’t work. But the even bigger problem is that the things people are doing to become popular – are NOT the things that they will be proud of later in life. When we use a single success metric of ‘likes’, we focus on the rear-view mirror rather than the road ahead. Behaving weirdly to create a certain social media outcome – is different than ‘leading by example’. Gumby is telling us that by ‘getting s&*t done’ – the remainder will take care of itself.
I am Gumby, DAMMIT! Gumby’s message is simple, easy to understand, and trustworthy. It’s like someone asking you to come with them to visit a new ice-cream shop down the street. Every word is self-explanatory. We have a real frame of reference, and we know exactly what to expect. It’s very different when asking someone about a particular crypto-currency or cbd. When you ask a question about a new entry that’s also in a new category, you’re challenging yourself to do 3 things: (1) explain both the category and the entry, (2) instill trust, and (3) ask them to buy. That’s why competition is such a gift. Others help to explain the category. When there’s competition, you can say: “We’re like Uber, only but without the scandals.”
The Market:
What a difference a year makes. One year ago, the S&P 500 bottomed out at 2,351. The index had lost nearly one-sixth of its value over the preceding 14 trading sessions. It was the worst December for stocks since the Great Depression. Since then, the S&P 500 has rallied almost 40%.
This week we crossed Nasdaq 9,000 which means the Nasdaq is just 11% from Nasdaq 10,000. Technically, there is still a lot of pent up energy in the Nasdaq given it took 16 years to regain the 5k level. I imagine CNBC and Fox Business will start a countdown to Nasdaq 10,000 any day now. After all, this current uptrend has survived: (a) Impeachment, (b) a stalled Amazon, Netflix and Facebook for the last few years, and (c) many ‘unicorn’ startup / IPO’s that were focused on growth instead of profitability. But let’s remember: the iPhone, AWS, Facebook, and Google will all keep printing money. The wildcard is the U.S. Government, but the GOP is too busy with an election to try and slow tech down. And Charlie Bilello did remind us: “The following economies are easing: U.S. = FED, ECB, BOE, BOJ, SNB, Denmark, Australia, Brazil, Russia, India, China, Korea, Indonesia, Turkey, Mexico, Chile and the Philippines.” The real question could be: Will this bull cycle carry us to Nasdaq 20,000?
Info Bits:
- Don’t be feeling alone: 12m of our cellphones are being actively tracked by the U.S. Gov’t. Last week’s data leak revealed over 50B location pings from the cellphones of over 12m ‘tracked’ Americans. Hey Alexa, tell the NSA to…
- “Where the Crawdads Sing”… is a book about a lonely girl’s coming of age in the marshes of North Carolina. It has sold more than 4.5m print copies, and has outsold every other adult title in 2019.
- It’s been 35 years… since Eddie Murphy put away his Gumby costume and bid farewell to the cast of Saturday Night Live. Last Saturday he told SNL viewers: “This is the last episode of 2019, but if you’re black – this is the first episode since I left back in 1984.”
- $420/share was only a dream for Elon... Tesla stock soared 12% last week to close above $430 – more than double its price in June. Investors are going gaga for the new Gigafactory to start creating Tesla’s in China. That is strategically important for 2 reasons: (a) China is the biggest market for electric cars (by far) and producing there could help avoid a tariff war. (b) Lower costs would help Tesla cut the price of its Model 3 in China by 20%, which could help it achieve mainstream status.
- That's a hard "Nein": Last week, a German court banned Uber because it's not following all of Germany's many rules. And we received news that ex-CEO/co-founder Travis Kalanick has sold all of his stock in the company ($2.7B), resigned from the board, and said for the near future he will be: “calling a cab”.
- CFO = Chief Freak-out Officer: FedEx’s 40% profit drop last quarter was horrific according to its own CFO. It seems 7-day shipping will require a lot more spending on an updated ground game. The stock is down 39% since Amazon launched 3rd party shipping. FedEx thinks it will “start lapping” Amazon in 2021. Ho-Ho-Ho – “I’ll have what they’re having.
- Tesla raised another $1.4B… from Chinese banks to finance its Shanghai Gigafactory. Buyers came flooding in, bidding the stock up above the famous “funding secured” $420 level. TSLA is up 72% this quarter.
- Boeing’s CEO is ‘fully baked’… Dennis Muhlenberg is now the x-CEO of Boeing as he was fired last week for his handling of the 737 Max disaster.
- Who’s long Palladium? It’s the metal of the decade. This beast has done nothing but base and rally for the past ten years.
- Nasdaq’s wild ride: The past 20 years of the Nasdaq (QQQ) have been a wild ride to say the least. From the dot com bubble top in March of 2000 above 5k to the low of 1100 in October 2002. The index then took 15 years to close above its 2000 high, fully resolving to the upside in 2016. Tech giants, Facebook, Amazon, Apple, Netflix and Google have led the way. Next stop 10K.
- Shopify hits ATHs! Shopify closed at all-time highs, bringing its YTD performance to over 200%. This is the best kind of capitalism – a company everyone can root for as they assist the entrepreneurial endeavor.
- WSJ exposes how China funded tech giant Huawei to the tune of $75B: It gave figures for 4 different ways the Chinese state helped Huawei become the largest telecom-equipment firm vying to build 5G networks around the world. $46B in loans, lines of credit, and other financing from state lenders. $25B in tax breaks, $2B in discounts on land purchases, and $1.6B in grants. Huawei said the information was false, but did not provide any details.
- Japan’s population is declining … by at least half a million people per year. Two reasons: (a) a large older population that is dying, and (b) their already low birth rate is falling even lower. A lower birth rate means fewer young people entering the workforce – which could make it harder for Japan to support the elderly. The same problem the U.S., U,K,, and France will face by 2030.
- Automation’s a b*tch: Over 50 banking lenders have announced their biggest job cuts since 2015. Rationale: a slowing economy and new technology.
- $500m … is the “Star Wars: The Rise of Skywalker” 1st week’s gross sales.
Last Week:
The market is giving us a very low volume creep higher. No one's on the floor because they’re all in the Hamptons. I'm not complaining, everything is in the "up" mode that I have. The question is, do I want to add anything here? I would suggest the silver miners, but maybe they should put in a pause day or two – they’ve run a long way. That said EXK over $2.50 could be interesting. Also, watch Twitter (TWTR) over $33, it has a shot at closing that huge gap all the way up to $39.
Weed: Predictions for 2020:
- #20: Canadian cannabis companies (after getting rid of all of their ‘home-grown’ upper managers) will realize that need to put their ‘big boy pants on’ and manage toward profitability.
- #19: More and more good beverages will begin to filter down from the north. Tilray’s joint venture with A-B just launched Everie – a line of CBD-infused tea bags. Acreage Holdings just launched its Botanist and Tweed brands in Oregon.
- #18: States will continue their run toward recreational marijuana legalization. Illinois is expecting long lines as access to their $2B MJ market opens at 6 a.m. CT New Year’s Day. Even Ohio’s medical marijuana program is growing from 46 MMJ dispensaries to 58 shortly.
- #17: Brenda Verghese, Stratos sees… 2020 starting with even more smaller players. When the FDA comes out with regulations, many of these companies will not be able to withstand the cost compliance. In turn, the cost of product and hemp will go back up – with a lot fewer players.
- #16: Ted Haney, Canadian Hemp Trade Alliance sees… increased hemp acreage in Canada, and whole-plant utilization. He sees an increase in the sale of hemp protein concentrate and isolate to large food processors.
- #15: James McCoy, Farmer and Retailer sees. 8 TIMES more hemp than necessary (in the short-term) out there.
- #14: Ray Mazzie, Hemp Industries Association: The hemp industry will surely experience explosive growth in 2020 as the USDA and FDA begin to release rules, take comments and eventually implement said regulations.
- #13: Marysia Morawska, Horticulture Educator: We will see a movement toward a trifecta or even quad-usage plant – that’s utilized for the hurd, the fiber, the flower, and for the grain.
- #12: Ross Burtness, ReGrow: We will start to see more specific lines of products aimed at new and existing consumers. Stricter regulations will push the market toward adopting proper genetics, DNA markers and compliant resin varieties. Soon, there will be more variety available to the public at lower costs.
- #11: Jillian Hishaw, F.A.R.M.S.: 2020 will bring more stabilization to hemp farmers as they enter the planting season. Many farmers that suffered an unrecoverable loss will not plant next year, but will wait until 2021 to ensure the regulatory kinks have been ironed out.
- #10: Scott Propheter, Criticality: There will be an overall decline in planted acreage for 2020 caused by the oversupply from 2019. 2020 will be the catalyst year that begins a widespread consolidation in the processing community as margins continue to compress.
- #9: Priyanka Sharma, Kazmira: We will see investment into genetics and harvesting technology in order to adhere to the USDA final rule. I foresee more consumer awareness on traceability of product from farm to shelf.
- #8: Michael Bronstein, Amer. Trade Assn. for Cannabis and Hemp: The hemp industry will have its best year of growth since 1941, but not everyone is going to win. Complexity of the business and supply issues in the market will favor early adopters who can produce quality and consistent product at scale. The CBD market will find increasing competition and additional regulatory scrutiny before the dust settles.
- #7: Brent Williams, Highwater Financial: The hemp industry will have a large focus on expanding infrastructure in 2020. With many farmers getting burned on production contracts in 2019, we also believe there will be a slower growth rate in the number of acres grown until there is a tangible increase in demand.
- #6: Adrienne Snow, Western States Hemp: Extraction capacity will increase by another 20%. Grow licenses will possibly double, however, actual harvested product will increase only by 50%. There will still be a lot of confusion between the states and USDA. The big players will continue to watch from the sidelines through 2020, awaiting calmer seas before jumping in and truly merging Wall Street and Main Street Hemp.
- #5: Russ Cersosimo, Hemp Synergistics: With increased regulatory compliance, I expect to see many of the first-wave farmers, extractors and product manufacturers exit the business. The second wave is coming in 2020, and then the market will level out.
- #4: Patrick McCarthy (PM), ValidCare sees: Safety product assurance: Consumers will care about where the products they put in, and on, their bodies come from. This trend will hit the hemp industry next, as consumers demand information on plant origin, farming practices, product composition and sustainability.
- #3: PM sees: More minor supplements: CBD was this decade’s craze, but minor cannabinoids like CBN and CBG, are already being touted as having functional benefits tied to sleep and appetite. Expect the FDA to voice concerns about these ‘cannabis derived compounds’ and expect product companies to market them nonetheless.
- #2: PM sees: Hemp as a mental health aid: One in five Americans use hemp-derived CBD for ‘mental health reasons’ such as anxiety. In 2020, we’ll see even more people ditch Prozac prescriptions for non-impairing hemp-derived CBD to support their mental health goals. Expect brands targeting this audience to commission research on hemp-derived CBD’s functional benefits for mental health.
- #1: PM sees: Boomer Consumption – BOOMING: The AARP crowd is one of the largest demographics using hemp-derived CBD for chronic joint pain and sleep. This trend will increase as Boomers replace prescription and OTC drugs with hemp-derived products — and lobby for coverage and reimbursement through FSAs, HSAs and supplemental Medicare policies.
Next Week:
The market is doing what I expected, and that is stair stepping higher. During the past 10 days we’ve seen big uptakes followed by pause days. I expect that behavior to continue until Powell’s $500B runs out in mid-January. After all, FED Chairman Powell told us that he was doing $500B in short term / overnight Repo's. With all of that money, it allows banks to give "X" amount to their fund managers to help manipulate the markets. The fund managers deploy that money into ETFs, and the ETF algorithms buy the corresponding basket of stocks. Repo money is why we're hitting new records, and we will continue to do so until it runs out – in early January. Fund managers will do their biggest allotments in the first 2 weeks of the new year pushing us into the middle of the month. But after that – what’s there to prop up the market?
Remember, whether it's QE or Repo, just like a junkie – the market needs more and more juice to keep it going. If the FED isn’t willing to continue with its insane money printing and pushing policies – what will keep things moving higher? NOTHING. Certainly not earnings or organic growth. Maybe we’ll see some jawboning about a China deal, but that won’t be enough to drive the markets.
Enjoy the free money, but don't bet the ranch because I don’t know what moves past mid-January. In the short-term watch: Amazon (AMZN), Microsoft (MSFT), Apple (AAPL), Nvidia (NVDA), Goldman Sachs (GS), the S&Ps (SPY), the Nasdaq (QQQ), and the DOW (DIA) move higher as FED Repos continue to push this market.
Tips:
Top Equity Recommendations:
HODL’s:
- Aurora (ACB = $1.91 / in @ $3.07),
- First Majestic Silver (AG = $11.89 / in @ 10.50),
- Canopy Growth Corp (CGC = $19.21 / in @ $22.17),
- DRD Gold (DRD = $5.17 / in @ $4.20),
- GBTC Bitcoin (GBTC = $8.58 / in @ $10.01),
- Microsoft (MSFT = $158.96 / in @ $145),
- Pan American Silver (PAAS = $23.14 / in @ 18.00),
Crypto:
- Bitcoin (BTC = $7,400),
- Ethereum (ETH = $130),
- Bitcoin Cash (BCH = $210)
Options:
- RIOT ($1.22):
- Bot Jan 17, Sold $3 Call / Sold $3 Put / Bot $4 Call for $1.85 CR,
- Bot Jan 17, Sold $2 Call / Sold $2 Put / Bot $3 Call for $1.45 CR,
(can only lose money if RIOT falls below $0.70).
Watching:
- EXK over $2.50,
- Twitter (TWTR) over $33, and
- Amazon (AMZN), Microsoft (MSFT), Apple (AAPL), Nvidia (NVDA), Goldman Sachs (GS), the S&Ps (SPY), the Nasdaq (QQQ), and the DOW (DIA).
Thoughts: (courtesy of Tasty Trade):
It’s the day after Christmas and Santa’s back trading,
After spending all Tuesday on his present crusading.
The elves got bored – making all of the toys,
And are back to the markets like good girls and boys.
Mrs. Claus too, is sick of the baking,
Scans overnight markets while the North Pole’s just waking.
It’s crossed their minds, how can people afford all this stuff?
The population is growing, and maybe just enough.
They’re all raring to trade, since it’s past Christmas night.
But they have to be careful of making all their dough in one bite.
Don’t become a gambler, channel your inner frenzy,
Keep those occurrences high, fight for fills to the penny.
Elves need to be patient, and wait for the data,
While they’re on top of their deltas, and their portfolio’s beta.
Today they’ll be watching, all of the other trades,
Getting some tips, on how real wealth is made.
So, it’s up to us and Team Claus – to avoid the noise,
And to stick with our plan, for all of our trading joys!
After spending all Tuesday on his present crusading.
The elves got bored – making all of the toys,
And are back to the markets like good girls and boys.
Mrs. Claus too, is sick of the baking,
Scans overnight markets while the North Pole’s just waking.
It’s crossed their minds, how can people afford all this stuff?
The population is growing, and maybe just enough.
They’re all raring to trade, since it’s past Christmas night.
But they have to be careful of making all their dough in one bite.
Don’t become a gambler, channel your inner frenzy,
Keep those occurrences high, fight for fills to the penny.
Elves need to be patient, and wait for the data,
While they’re on top of their deltas, and their portfolio’s beta.
Today they’ll be watching, all of the other trades,
Getting some tips, on how real wealth is made.
So, it’s up to us and Team Claus – to avoid the noise,
And to stick with our plan, for all of our trading joys!
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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Until next week – be safe.
R.F. Culbertson
Until next week – be safe.
R.F. Culbertson
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