RF's Financial News: August 2020

Sunday, August 30, 2020

This Week in Barrons: August 30, 2020

This Week in Barrons: 8-30-2020:

Entrepreneurial Thinking 101…

Oh please, education is the hustle that exchanges our compliance for a certificate of completion. That’s ALL it is. Any institution can educate, but learning is a choice that requires active participation – not just attendance. Learning is a skill that isn’t dependent upon a location, in fact – most of the learning moments in our lives are accidental. That’s why people say: “80% of life – is just showing-up”. To make any real changes, we need to consistently show-up. And constantly committing to something doesn’t lower its urgency, but rather acknowledges its importance. Bobby Fisher (one of the greatest chess players of all time) learned the game at the age of 6, was the U.S. champion by the age of 14, and grand master by 16.

Entrepreneurs (including athletes, entertainers, and politicians) make choices every day about the level of risk they’re willing to absorb. Those choices create a journey which finally lands at a destination. It is the risks that we take that define our entrepreneurial lives, and NOT the destination. Bobby Fisher defeated the Soviet Union’s Boris Spassky in Reykjavik, Iceland when he was 29. Three years later Bobby was stripped of his title because he refused to defend it. So, it’s not uncommon for people not to like where they’ve landed. Most of the time it’s because they didn’t want to suffer the discomfort and indignities that it would have taken to overcome tougher obstacles to get to a different destination.

People often blame their career choice for their lack of wealth. Honestly, “Don’t blame the horse – blame the jockey.” It’s the entrepreneur in all of us that is often unwilling to put in the time necessary and/or take the risks required. If you’re currently a teacher (for example), you couldn’t ask for a better time to branch out and develop a hybrid learning curriculum that would marry on-premise learning with WFH compliance. Yes, it’s a risky path, that will undoubtedly produce a much rockier journey. It’s NOT the destination that dictates the journey, but rather the risks that you take.

In 2020, we have combined: the 1918 pandemic, with the Depression of 1933, adding in the race riots of 1968, along with the stock market bubble of 1999. The ONLY way to navigate all of these nuances is to think entrepreneurially – 6 moves in advance – just like Bobby Fisher. On the surface, Walmart throwing its hat into the ring to acquire TikTok may seem like a really crazy idea. But ask yourself: Who is Walmart’s biggest competitor in the retail and ecommerce space, and where do they accel? The answer is Amazon with their data, behavioral, and digital dominance. By Walmart combining with Microsoft on a bid for TikTok, it allows Walmart to shore-up it’s digital weakness while gaining a massive ecommerce and advertising reach to help sell ads to its suppliers and its own products to its prospects and customers. This is Bobby Fisher and Entrepreneurial Thinking wrapped up in one. They’re thinking 6 moves ahead – and the world may never catch up!

The Market:

Here are some disturbing facts that are almost too difficult to write:

San Francisco: over half of the storefronts are no longer in business.
New York City: has an unemployment rate of almost 20%.
New York City: 83% of all restaurants are unable to pay their full rent.
Louisiana: in 2020 has lost twice as many jobs as it did after Hurricane Katrina.
South Carolina: 52% of all renters/owners are at risk of eviction.
27% of all Americans did not make their rent / mortgage payment last month.
Mortgage Bankers Association: the delinquency rate on residential mortgages increased by almost 4% last quarter – the most ever recorded.
U.S. bankruptcies are at their highest level in 10 years and are continuing to rise.
World trade is at its lowest levels on record.
31% of U.S. workers that were brought back to work after being laid off – have been laid off a 2^nd time, and another 26% have been told that layoffs are coming.
Half of all U.S. workers that have been laid off during this pandemic believe that their jobs losses are permanent.
The IRS is projecting that it will receive 37m FEWER W-2 forms than planned.
Over the last 22 weeks, more than 57m Americans have filed new claims for unemployment benefits.

Just this week our FED Chair Jerome Powell announced that he’s going to let inflation rise above its traditional 2% target. Powell didn’t rule out expanding the balance sheet to keep markets from tumbling if the economy worsens and bankruptcies increase. The implication is that our FED will likely let inflation run hot for a few years, which could theoretically weaken the dollar and boost prices for bitcoin and precious metals. I’m reminded of just how dramatically once-slow-moving forces have accelerated due to the pandemic. The national debt now stands at $27T. Digital currencies are now being pursued by central banks everywhere. And Goldman warned that the U.S. dollar is on the verge of losing its reserve currency status. Got anything stronger?

InfoBits:

A cure to hangovers… was found by researchers in Finland who discovered that amino acid L-cysteine relieved alcohol-reduced ailments such as nausea, headache and stress and anxiety.

Sorry – sent ya the wrong amount… Citibank accidentally wired $175m to a hedge fund where it only meant to send $1.75m. So far, the fund is ignoring their "pay us back" Venmo request.

Target’s stock hit an all-time high… the secret is to make sure you’re in the grocery business (serving milk and hummus) so that you’re allowed to remain open during a global pandemic.

IPO-palooza:

DoorDash… delivery company … IPO with a $16B valuation.
Unity Software… video game developer = IPO post reporting revenue growth exceeding 40%.
Snowflake… cloud data storage & mgmt.. - IPO will raise > $100m.
Asana… Facebook cofounder Dustin Moskovitz – direct listing.
Bentley Systems… construction proj. software – IPO will raise > $100m.
Corsair Gaming… gaming software developer – IPO will raise > $100m.
JFrog… manages software update – IPO will garner a $2B valuation.
Luminar… auto lidar sensor developer – SPAC headed by Gores Metropoulos worth $3.4B.
Outset Medical… portable dialysis machine mfr. – IPO
Sumo Logic… pinpoints operational and security issues – IPO
Xpeng… electric luxury car maker – IPO w/ $1B valuation
Palantir… data analytics company w/ U.S. government – IPO. CEO Alex Karp = $12m salary. Pres. Stephen Cohen = $16m salary. CTO Shyam Sankar = $25m salary. No wonder the company is so secretive.
Ant Group… Chinese fintech giant controlled by Alibaba’s Jack Ma will break-the-valuation-record on IPO’s this year.
Gary Cohn… former Goldman COO & Trump advisor = SPAC IPO.

Ticked-Off… TikTok sued the US government over Trump's ban, saying it didn't get a fair shot to prove that it's not a national security threat.

Empowered… Salesforce, Honeywell, and Amgen will be added to the Dow index in a major shakeup (saying goodbye to: Exxon, Raytheon, and Pfizer).

Delta isn’t happy… because it is preparing to furlough almost 2K pilots in October when the bailout ban on airline job cuts ends.

American Airlines isn’t happy… and is expected to cut 28% of its workforce once the additional federal aid expires in October. A memo to employees read: “It was assumed that by Sept. 30, the virus would be under control and demand for air travel would have returned. Obviously, that’s not the case.”

Mortgage Applications fell 6.5% last week… that’s not so hot.

Papa John’s continues its pandemic growth… with a 24% quarterly increase in sales growth. It's hiring 30K workers to meet corona cravings.

Amazon is opening a grocery store filled with smart devices… The good news is you don't need to talk to other people. The bad news is a bunch of ALEXA’s are always listening and talking to you.

Urban Outfitters showed a surprise profit… It owns Free People (where a floral tank top costs $60) and Anthropologie where a candle costs more than your car insurance.

Zuckit Facebook: Apple is giving us back our privacy. Apple's new iOS update will lead to a massive 50% drop in FB’s ability to steal our personal info – and therefore cause a 50% drop in revenue from targeted mobile ads.

Dick’s Sporting Goods hit it outta da’ park… nearly tripling profits due to WFH conditions. We’re loving our hiking and workout attire.

Nordstroms is The Biggest Loser… as sales plunged 53%, after falling 40% in the previous quarter.

Pinterest terminated a massive 490,000-square-foot lease… in an unbuilt project in San Francisco, citing a shift toward WFH. The company will lease its existing offices, and will pay a one-time fee of $89.5m to back out of the deal.

Abbott Labs just got FDA approval… for its $5 / 15-min. at-home COVID test.

Coca Cola and MGM announced lay-offs.

Watch Sunrun (RUN)… it’s a provider of solar panels and storage systems. It recently hit all-time highs and has closed green 17 out of the last 23 weeks.

Bill Ackman was right, and Herbalife is shady: Herbalife will pay $123m to resolve foreign bribery charges because Herbalife was bribing Chinese officials. Ackman was right, but he still lost $1B. The markets can remain irrational longer than you can remain solvent.

Crypto-Bytes:

Digital dollars: The FED is evaluating more than 30 different blockchain networks to determine if they would support a digital dollar. This follows news of our FED testing a tokenized version of the U.S. dollar with the M.I.T. Digital Currency Initiative.

The Bitcoin Rich List… or the number of wallets containing over 1,000 BTC ($11.5m) is at a record high of 2,190. This reflects increased interest in bitcoin from institutions and high-net-worth investors.

FTX acquires Blockfolio… in a $150m cash, crypto and equity deal. FTX’s vision is to become a retail and mobile-friendly exchange. Blockfolio has 6m cumulative downloads, and gets 150m impressions on its news / portfolio tools.

Peter Jubber, Fidelity Investments’ Chief Strategist… is launching a new bitcoin index fund. "Wise Origin Bitcoin Index Fund" has a $100k minimum buy-in and is the latest example of Wall Street veterans warming up to bitcoin.

Venezuela’s crypto economy… now ranks 3^rd in the world for crypto adoption – behind the Ukraine and Russia. Venezuela has adopted a crypto-friendly attitude amid crippling sanctions and hyperinflation.

Wild predictions Tyler and Cameron Winklevoss, early crypto investors and founders of Gemini, believe weakness in the U.S. financial system and other factors mean that bitcoin could one day reach $500,000 per coin. They said: "Even before COVID-19, and despite the longest bull run in U.S. economic history, the government was spending money like a drunken sailor, cutting taxes like Crazy Eddie, and printing money like a banana republic."

Last Week:

Monday: Last week, the S&P made new all-time highs only with a very narrow support band. In fact, 70% of the stocks in the S&P actually ended the week lower. That's proof as to how much the monster names pull their weight. This morning I expect more of the same: AAPL, BABA, MSFT, AMZN, and TSLA will all rise – because that’s where the bankers are ploughing their FED dollars. One to watch will be SQ. A few days back it ran into some resistance, but if it can get over $159 – I’ll take a shot. Another interesting chart caught my eye. EMQQ is an ETF for emerging market technology and Internet use. It's got a nice looking chart, and a move over $54.25 will bring me in for a trade. Someone just purchased $73m worth of Nov 20, 2020 AMZN call options at the $3,300 strike price. Ya think a stock-split is coming?

Tuesday: The DOW is making a move because it needs to keep moving higher. The DOW committee has decided that Exxon, Pfizer and Raytheon are OUT and Salesforce, Amgen, and Honeywell are IN. The move is designed to mitigate the damage from AAPL's stock split. The DOW is price weighted, and when AAPL does its 4 for 1 split – its weighting in the DOW will be reduced, pulling the index lower. So by adding CRM and AMGN, they can mitigate that drop. The metals are down slightly this AM, catching their breath until Chairperson Powell tells us all about ‘Necessary Inflation’ on Thursday. Today was a pop ‘n drop day, but they have rescued the S&P and the NASDAQ getting both of them green. I'm having a hard time finding anything I feel really good about.

Wednesday: The NASDAQ is moving on the heels of CRM who beat the estimates. Yes, it’s the same CRM that's going to replace Exxon in the DOW. Tomorrow’s speech from Chairperson Powell is where he announces how our FED is going to let inflation run going forward. Today money is tossed around like water. One of the stocks with a pretty good story, that simply hasn't been caught up in the mania is AKAM. For the whole month of July, AKAM was banging its head at the $115 level but couldn't get through. Then it pulled back and is now heading back toward that level. I will take a shot at them if they exceed today’s high of $112.60. The action today is nuts. This isn't the kind of action one would expect ahead of a major announcement, unless they knew what that announcement was in advance. I think the most enjoyable thing about this market melt up is watching the talking heads on CNBC try and justify these prices without saying that it’s 100% FED money acting as a backstop. Without a doubt the most profitable plays in this madness have been playing call options on the WEEKLY QQQ options chains. It’s the only real way to use leverage, considering the prices of some of these assets. I continue to lean long, but understand that this market is bat-crap crazy in a way I haven’t seen since 1999.

Thursday: The NASDAQ closed up 1.73%, but there were 586 more decliners than advancers. The S&P closed up 1%, but with 54 more decliners than advancers. Only in the most bizarre of markets, could an index rise when inside it, more stocks fell than went higher. Peter Schiff said: “Powell's speech is BS. The only reason the Fed is allowing more inflation is that no one has the guts to fight it. The economic bubble the Fed inflated is so large that pricking it to fight inflation will be catastrophic. So, the Fed is surrendering without a fight.” Powell basically told everyone that they are trapped. These ‘junkie’ markets need ever increasing amounts of QE to maintain their high. I see DOW 40k – not kidding. Our FED just told us that inflation will rip, and the dollar will be devalued even more. I’m still leaning on gold, silver and crypto.

Friday: Retailer Lord and Taylor couldn't figure any way out of debt so they rolled over and went belly up. This economy is in freefall. The only thing that the FED is proving is that if they give Wall Street money – Wall Street’s going to invest it. They’re not buying bonds at 0.5% interest. They're buying Amazon, Tesla or Apple and making 4% a day. I still see a pullback in the cards, but they haven't allowed one to materialize yet.

Gold:

Precious metals (PMs) are being supported by near zero or below zero interest rates around the globe. Bond yields are making owning gold and silver more attractive, since investors give up less potential income than they might by owning interest-bearing assets. This point is starker when factoring in inflation because the real yields of many global bonds (including the U.S. 10-year) are in fact negative. A 2^nd source of demand for the PMs is a weaker U.S. dollar. The U.S. dollar has slumped 10% since March as investors assess which economies will rebound most quickly from the pandemic. Finally, the potential for higher inflation down the road is stoking interest in the PMs. Our government’s macroeconomic policy in response to the coronavirus has been unprecedented in its size and speed.

Silver is widely used on the factory floor, including in the production of electronics and solar equipment. Industrial fabrication accounted for 52% of silver demand in 2019. That means that silver investments are more clearly linked than gold to any pickup in global economic demand. And in 2020, buyers have paid more for gold relative to silver than has been typical over the past 50 years. That means in a reversion to the mean scenario, silver prices would rise at a faster pace than gold. In August, it took 72 ozs. of silver to purchase 1 oz. of gold – higher than the average of 69 since 1960.

Next Week: The trade that’s driving markets higher…

Trader Geek Speak: The markets are in ‘perpetual motion’ to the upside. Why are they doing this, and what’s forcing this condition?

-- SKEW is Extreme: The SKEW measures the cost of the out-of-the-money Puts against that of the out-of-the-money Calls. A high SKEW means that the out-of-the-money Puts will costs much more than the corresponding out-of-the-money Calls. In fact currently, the out-of-the-money Calls are downright cheap. A high SKEW moves the normal distribution curve downward – saying that the experts view this market as being expensive and the less risky trade is to the downside. For example:

- With the SPY @ $350 let’s go to the November monthly options chain, and go $50 out of the money in both directions.

- A $300 Put will cost you $4.75.

- The equidistant Call ($400) will only cost you $0.77.

- This should NOT give you a warm-n-fuzzy feeling, because (in fact) we are seeing one the highest levels of the SKEW ever recorded.

Now that you know that the SKEW is ‘jacked’ – this should influence the way you short-term trade. A high SKEW tells me to use back-spreads as the trading vehicle. That is to say: (a) sell an at-the-money call and with that money, (b) purchase multiple out-of-the money calls. This trade carries with it very little risk.

--Bonds Fall = Rates go Higher: Although our FED is telling us that interest will be low forever – the BOND market is disagreeing. In the last 3 weeks, bonds have gotten crushed, and 10-Year Treasury Rates have moved from 0.51 to 0.72. Bonds have not broken-down as of yet, but when the /ZB gets below $170 the fireworks will begin to go off. Now, our FED will ferociously defend that level, because of the spike in short term rates. Interest rates moving from 0.51 to 0.72 caused the financials to move higher – and last week they exploded outside of their expected move.

--SPX Rips through Upper Expected Move: Last week the S&Ps (SPX) closed outside their expected move while the NASDAQ (QQQ) did NOT. That means that the market expected the S&Ps to remain within a certain range. However, when the S&Ps moved outside their expected move, it triggered market makers to dynamically hedge – buying S&P futures and driving the S&Ps even higher.

--Gamma Risk is Driving this Perpetual Motion Upside Trade: An overwhelming majority of the professional trading world believes that this market is going to move to the downside. This is reflected in the out-of-the-money Puts being 7 TIMES more expensive than the out-of-the-money Calls. Trading firms have obviously loaded up on Puts, and the slightest movement of the financials, and/or Tesla, and/or the S&Ps above their expected move – will trigger an impressive ‘short-covering’ type of rally higher.

--Influential Products = SPX, SPY, VIX, TSLA, and AAPL: On Friday: the SPX ($3,500) traded 1.2m options contracts = $4.2B and the SPY ($350) traded 4.3m options contracts = $1.5B. Therefore, S&P related products control over 50% of the market’s volume. On the other hand, Tesla (TSLA) owns the NASDAQ. Tesla is a $2,200 stock that did $1m option contracts on Friday. That’s more volume than the SPYs, and that ‘notional value’ is moving the entire NASDAQ market place. When you compare that to Goldman ($200 w/ 55,000 contracts) = $11m or to the XLF ($25 w/ 325,000 contracts) = $9m – they pale in comparison to TSLA or AAPL ($500 w/ 1.2m contracts traded). But notice, even AAPL’s notional trading volume is much smaller than TSLA’s. Fair warning: trading TSLA is becoming a scary proposition.

--SPX Expected Move – Currently, there are NO correlations. Markets are fragile, and liquidity is below average. If we get a hint of retail sell-side activity – every sell-side server in the world will kick on and “sell the elevator down” in most of these products.

Tips:

HODL’s: (Hold On for Dear Life)

Yamaha Gold (AUY = $6.09 / in @ $4.60 = up 32%),

Selling Sept. $7 covered calls for $0.15

Canopy Growth Corp (CGC = $16.90 / in @ $22.17 = down 24%),
CTI BioPharma (CTIC = $1.13 / in @ $1 = up 13% ),

Selling Sept. $2 covered calls for $0.15

EXK Gold (EXK = $4.10 / in @ $1.53 = up 167%),

Selling Sept. $5 covered calls for $0.20

GBTC Bitcoin (GBTC = $13.20 / in @ $9.41 = up 40%),
Hecla Mining (HL = $5.90 / in @ $2.36 = up 150%),

Selling Sept. $7 covered calls for $0.25

KL Gold (KL = $53.45 / in @ 26.85 = up 100%),
MUX Mining (MUX = $1.26 / in @ $1.14 = up 11%),
NovaVax (NVAX = SOLD OUT AT $135) = up 1,800%),
New Gold (NGD = $1.61 / in @ $0.82 = up 96%),

Selling Sept. $2 covered calls for $0.20

Pan American Silver (PAAS = $35.72 / in @ $13.07 = up 173%),
Tortoise Acquisition Corp (SHLL = $38.00 / in @ $0.32 = 11,775%).

Crypto:

Bitcoin (BTC = $11,600),
Ethereum (ETH = $400),
Bitcoin Cash (BCH = $270)

#1 Take advantage of Silver’s High Implied Volatility (IV):

SLV = BUY a Strangle with the +$21 Put and +$29 Call in October for $1.08.
GLD = BUY a Strangle with the $163 Put and the $197 Call in October for $2.03. These trades count on their respective ETFs moving outside of those limits.

#2 Monday: AAPL Splits 4:1, and TSLA Splits 5:1: In loose general terms, stock splits ‘normally’ cause a price drop for a bit – before the stocks starts to move higher again. Most of the time this dip lasts between 2 and 4 weeks. But with unlimited money from our FED, TSLA and AAPL may split, and just continue roaring higher. I plan on buying longer dated call options on both TSLA and AAPL. It would be nice if both split and then went into the doldrums for a bit – helping the entire market put in a corrective fade. Then we could all buy the longer dated call options cheaper, and enjoy the ride back up – which we have to guess is coming considering how much money our FED is prepared to print.

Follow me 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 subscription by visiting: <http://rfcfinancialnews.blogspot.com/>.

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PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING. 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.

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Until next week – be safe.

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Sunday, August 23, 2020

This Week in Barrons: August 23, 2020

This Week in Barrons: 8-23-2020:

E-mail Bag: It’s time to drop the mic…

Are good, great and perfect – all just words-words-words? Not to me. Good and great are not the same as each other, and definitely NOT the same as perfect. In terms of availability: good is almost always available, great significantly less so, and perfect = almost never. If you care enough to get started, contribute, and work hard – that means you care enough NOT to wait for perfect.

Were meetings different BEFORE cell phones? Absolutely. Meetings used to be things that you ‘wanted to be invited to’ rather than ‘forced to attend’. Meetings were never designed to fill a slot on a Google calendar, but rather to communicate an idea and the emotions that surround it. A meeting involved preparation by the moderator, and ‘doing homework’ on the part of the other attendees. If either of those criteria were not met – the meeting was cancelled. Meetings involved zero multi-tasking because that was viewed as: nonproductive, disrespectful, and unhealthy. People were required to look others in the eye to better absorb the meeting’s content. If people brought their own enthusiasm to the meeting, it caused others to ‘lean in’ and contribute even more.

When do you continue working on an idea versus dumping it and moving on? I look at a couple points:

- Can the pains the customer has – be solved by THIS team? All of us are excellent rationalizers. Ask yourself, if your car broke down on the way to a big meeting: (a) How many of your team would help you fix it, (b) How many would ride the bus with you to the meeting, and (c) How many would rather Uber it back to the office under the guise of getting some work done?

- Does the opportunity conform to the Laws of Physics?

o Does it obey the Law of Gravity? NO – it better not. During innovation, gravity works against you.

o When your idea is hit with an action – does it respond with an ‘equal and opposite’ reaction? Your opportunity won’t wear a helmet or seatbelt all of the time, so be ready with a back-up plan.

o Is your ‘moving forward’ idea always moving? It needs to be. It’s true you don’t NEED to beat the bear, but you MUST beat the other hunters.

- To paraphrase TR: “Everybody’s idea has a past. But the past doesn’t equal the future unless you live there.” People become excellent storytellers. Most people (unfortunately) have no interest in stories – just results.

The Market: Could our currency be our own kryptonite?

The value of the US dollar is depreciating relative to other currencies like the Euro. A jar of European Nutella cost $1.10 a year ago, and it costs $1.19 today. You need to pay about 8% more (in a year) to nab that same jar of Italian decadence. The value of the dollar has fallen to its lowest level in over 2 years, but our Superman Currency won’t go down without a fight. The USD's stable reputation makes it a hot global commodity – as it has long been the world's reserve currency for international purchases. Currently if Canada wants to buy oil from Mexico – it’s doing it in USD going from Canadian dollars to USD to Mexican Pesos. This creates an ‘artificial’ demand for USD. With digital currencies and other global cash-processing systems, demand for the USD is declining.

The good news is the US government has never missed a debt payment. That has allowed it to borrow trillions at near-zero interest rates. But our FED has been blasting out dollars to inject back into the economy like jelly beans on Halloween. More dollars cause less demand for the dollar, and less demand means a less valuable dollar. Then there’s (a) the out-of-control pandemic, (b) a shrinking GDP, (c) political instability, and oh yeah (d) our massive $27T national debt.

If the US was a store, it would have a discount sign out front. Depreciation makes American goods cheaper for foreigners. That drives up demand for American products and stocks, which drives up stock market prices. A weaker dollar will trigger more inflation, higher interest rates, higher taxes, and less global power for the US. That will be when China snags the dollar's Superman cape.

InfoBits:

- Mortgage delinquencies skyrocket to 8.2% in Q2… and the percent of renters who paid on time went down – again. Delinquencies of 2% used to be a disaster, at 4% entire departments were fired – but 8.2% is truly unthinkable!

- Kabbage is being acquired by AMEX: Kabbage’s platform uses machine learning algorithms to assess and loan out money to small business owners.

- 300 Pizza Huts are closing… after filing for bankruptcy protection.

- Tesla’s Battery Day event is on September 22^nd… Analysts are expecting Elon to unveil a game-changing battery cell capable of 1,000 miles. Batteries are the most expensive part of an EV. If Tesla unveils a cheaper battery pack, it could become a top supplier for other carmakers.

- Home Depot had its best quarter in 20 years: People swapped their red lipsticks for red Adirondack chairs. We shifted our spending from restaurants and clothes to the only place that matters now == home.

- 2 years after becoming the first $1T company… Apple has officially doubled its value to $2T.

- Airbnb has filed… confidentially for an IPO.

- ThredUp, an online marketplace for second hand clothing… is gearing up to go public via an IPO targeted for 2021. It’s looking to raise $250m.

- Impossible Foods is playing catch up... to Beyond Meat by reducing its prices and expanding its distribution. It's also developing new products like pork, steak and milk, which could give it an edge over patty-focused Beyond.

- SpaceX’s Musk-ateers… raised $1.9B in its largest funding round ever. After May’s historic launch, investor interest skyrocketed.

- Uber and Lyft caught a break: Under legal pressure to reclassify their drivers as employees, the companies threatened to halt their rides. An appeals court has allowed them to continue operating while they are considering the appeal.

- Airbnb announced today… a global ban on all parties and events at its listings for health reasons. They also instituted an occupancy cap of 16 people.

- Billionaire Jack Ma’s Ant Group… plans to file for dual listings in Hong Kong and Shanghai in the next few weeks. The Ant Group’s upcoming IPO is targeting a valuation of about $225B – the world’s largest IPO valuation in history.

- Salesforce is giving all employees… the option to work from home until at least August of 2021.

- Palantir is leaving Palo Alto for Denver: This is a big deal because it practically rents all of Palo Alto’s entire downtown area.

- In 23 trading days, the S&P 500 lost 34% of its value… but in the following 97 trading sessions – it gained it all back.

- Tech and Health Care (as a percentage of the S&P)… just surpassed 50%. This is the first time EVER that two sectors have made up more than half.

- Consumer spending is down 8% from January… and the number of open small businesses has fallen 20%.

- Our official (wink-wink) unemployment rate is 10.2%... and that’s higher than at any point during the Great Recession. Realistically we’re over 20%.

- 20% of all working-age adults are unemployed… because the pandemic upended their family’s child care arrangements. That’s why ‘back-to-school’ is important!

- The stock market is drinking rosé on a yacht in the Hamptons… while the economy is eating Safeway frozen pizza and watching reruns of Star Trek in bed. Our GDP is unthinkable. Our unemployment is unbelievable, and we're still mid-pandemic with no vaccine. Yet the market’s at all-time-highs.

- America's five largest companies… Apple, Amazon, Microsoft, Google and Facebook have soared 37% in the first 7 months of 2020. The rest of the S&P FELL a combined 6%.

- Over 50% of new Verizon Fios installs… choose NOT to add cable TV to their home broadband internet package. That spells doom for pay TV.

Crypto-Bytes:

- Crypto trusts Grayscale’s Bitcoin Cash Trust (BCHG) and Litecoin Trust (LTCN) crypto products are set to begin trading publicly on the over-the-counter markets after receiving DTC eligibility Monday. The funds provide institutional and retail investors exposure to their namesake cryptocurrencies: bitcoin cash ($5.8B market cap) and Litecoin ($4.3B market cap).

- INX IPO: INX plans to launch its landmark initial public offering (IPO) as soon as Monday. The cryptocurrency and security token exchange signaled plans to go public in January 2018, aiming to become the first Securities and Exchange Commission compliant security token offering – open to mom-and-pop investors. INX will price 130m tokens at $0.90 each. These tokens will have utility on the company’s exchange and entitle investors to a share of the profits.

Last Week:

Monday: With the S&P just 0.4% below the all-time highs, I have to suspect that they're going to try and take us up-and-over that hump this week. There is some resistance, but they've been working on it for a week now. Everyone’s talking about Buffet putting half a billion dollars in Barrick (GOLD) – resulting in both gold and silver higher this morning. I may begin to double-down on some of my miners like AUY and PAAS. After the first hour of trading, the DOW has started inching it's way higher. GOLD did jump $3 per share on the Buffet news, and that's moved most of the miners higher. Does that mean that the selling in the miners is over? I tend to think so, but I'm a bit shy. One that I like is KGC, and if it gets over $9.42 I'll take some. If AUY gets over $6.24, I will double my stake. Airlines and banks are down 3.8% and 2.4% respectively, while Tesla ramped another 11%. Overstock ripped 25%, and is now up 1,575% YTD. Even Bitcoin (BTC) is making two and a half year highs in here. Remember, after its bubble high of Q4 2017, Bitcoin crashed but never went to zero as the greatest pessimists predicted. It survived the crash, and could this be its Act II?

Tuesday: Home Depot and Lowes are proving that people have been forced to stay home and buy paint, flooring, and kitchens. I suspect they're going to try and get us up-and-over on the S&P today, and that could drag the DOW higher as well. The gold and silver miners are still catching a bid. And yes – we finally did it. The S&P closed at an all-time high of 3,389 today. Big Cap Tech led the way as it has throughout the dazzling ascent. The Nasdaq rallied 1%, as the Dow and Russell fell. Amazon gained 4% to an all-time high. Tesla gained another 3%, Workday +3.5%, Zoom +4%, Adobe +2.6%, Google +2.3%, Netflix +2%, Lululemon +1% == all at all-time-highs. It’s getting silly out there in tech and I’d say it will all end badly but who knows – maybe it’ll all end splendidly with world peace, free immortality pills, and all of us selling at the top in a moment of universal glory. We’ve all gotta thank big cap tech as these stocks have been on crack since the bottom.

Wednesday: Yesterday the S&P hit an all-time-high without any horns or kazoos. The NASDDAQ put in its 34th new all-time-high. My guess, is that they'll try and pull the DOW up, and then all 3 major indexes will be at new highs. Normally, when an index breaks to a new high, it bounces around and tests that level for a bit. So, I think some sideways and lumpy action makes sense. The miners are in the slump that I figured would happen after their massive run. I still like them for a lot more – just not yet. It appears that the S&Ps will remain red by a couple, suggesting to me that there's more work to be done holding onto these levels.

Thursday: China says they're ready to come back to the trade table. Initial jobless claims rose more than expected to 1.1m – which is NOT a great sign. The weakness I’m seeing this morning is because of yesterday's FED minutes that showed no plans to increase stimulus. Until our FED decides to increase QE, we will be headed much lower. Our market junkie needs more stimulus to maintain its high. INTC seems to be building a base after a rude gap down back in July. 99% of all gaps fill back up, so if INTC gets over $50.20 – I’ll take a poke at it. The broader market is green, but that’s only because AAPL is +6, MSFT +5, AMZN +35 and FB is higher. When the crew is up, the market must also be up – it’s just that crazy. All of the FAAMG players ended up over 2% - which is freaking incredible, relentless, and magical. You’re either in this momentum play or you’re not, and now isn’t the time to get brave. Energy continues to be the worst sector – as if I needed to even say it.

Friday: The last several trading days have been an exercise in sideways. Common sense, logic, and reality suggest that we should start heading lower, but our FED could have other ideas. I’m not seeing anything that’s thrilling me. I have a hard time understanding how Deere (DE – a company that sells tractors) posted such good earnings. Aren’t we somewhat locked down due to COVID? I'll probably sit idle until it's clear that the S&P wants to move to new highs, or if we're out-of-bullets for a while and our FED lets us trade sideways and down. AAPL did tack on another 5% today and, while it only passed the $2T market cap earlier this week – it’s already 13% of the way to $3T. Apple is now up 13 of 16 days since it announced its stock split, and TSLA is up 7 of 8 since its announcement. Also, in case you didn’t know – those who can afford it are fleeing cities and moving to areas with less population density.

Gold:

Factually:

- Gold has traced a very long base, and the bigger the base – the more important the move.

- After gold’s most recent breakout, it pulled back. This is normal behavior because gold was overbought going into the breakout.

- The reason for gold’s recent pullback was the rise in interest rates from 0.51% to 0.71%. Interest rates are one of the biggest determinants of gold’s value.

- Gold has developed a bullish pattern on the RSI (relative strength index).

- Because gold is priced in U.S. dollars, whenever the U.S. dollar is weak – gold rises. Recently, the weak dollar has become a crowded trade and is now technically oversold. For this reason, the dollar should move higher in the short term – putting pressure on gold to the downside.

- Our government’s borrow heavy, print more, low interest rate policies are not likely to change any time soon. These policies are the main driver behind gold’s rise and perhaps the reason behind Warren Buffett’s change of heart.

- Gold is a very small (manipulated) market compared with the stock market. Even small inflows into gold from large-cap tech stocks would cause a price spike.

- A move higher in gold should be positive for bitcoin.

- Gold mining stocks are significantly more volatile than gold, but present a more lucrative buying opportunity.

- If interest rates or the dollar rise, gold may fall.

- Central Banks hold large amounts of gold. It’s conceivable that they may start selling their gold in order to manipulate the price lower in order to buy more.

Next Week: The DEATH of Diversification…

- The DEATH of Diversification. This market place is split into 2 different markets. One has 10 stocks in it, and the other has the remaining 3,000. Yes, that’s a slight exaggeration, but part of this market (the IWM) is more representative of the real world, and the other (the QQQ) is on another planet entirely.

- Long is dangerous and hedging is tough… because even a tail has RISK. The QQQ has gone absolutely parabolic and the reasons why don’t matter. You not only need to worry about the substantial move to the upside, but also any downside move is almost impossible to easily hedge right now. Why – because every professional and institutional investor in the world is hedging, and hedging large. The pros are already pricing in tail risk; therefore, to hedge a portfolio right now is virtually impossible by normal means – and that spells danger to me. I still believe that the risk / reward is tilted to the downside, but I continue to play the hand in front of me. This is an extraordinary marketplace – the likes of which most traders have never seen in their lifetimes. It’s causing a wild bifurcation that can (almost) only end badly.

- Expected moves and the great bifurcation… The S&Ps (SPY) did virtually nothing last week. The QQQ (up 30% YTD) cracked through the upper end of their expected move - again. That means not only did they outperform, but they outperformed even what the options market expected them to do – which screams of market inefficiency. At the exact same time the IWM (small caps), the XLF (financials = down 20% YTD), and the XLE (energy = down 40% YTD) are performing miserably and exceeding their expected moves to the downside. There are only a couple sectors that ‘matter’ any more. Apple (for example) at $2T, it’s almost 10 TIMES more important than J.P. Morgan. Tesla is now worth more than Walmart. What this means is that it only takes one or two stocks (in the entire marketplace) to crush the entire market, and that takes me back to the Dot Com era. Congress may ‘seem’ like they care about saving the airlines, but what they ‘really’ care about is hammering out a favorable trade deal for Apple with China.

- Diversification is DEAD… The top 10 NASDAQ companies control about 60% of the wealth in our markets today. Even if you think your 401k is diversified because it’s in an S&P Index fund – that fund basically follows those same 10 stocks. So there is no longer any diversification – unless you’re sophisticated and built it yourself. Fair warning, many of us have seen this movie before in 2000 (the dot com era) and in 2008 (the financial crisis). A handful of tech stocks could easily remove 30% of the wealth of this market in a matter of days due to a lack of liquidity. Even if you move over to the emerging markets (EEM) or junk bonds (HYG) or even utilities (XLU) – you will see that their graphs align and there is virtually NO diversification anymore.

- Where you gonna go… This is difficult because the VVIX (the volatility of the volatility index) remains above 110. This signals that the pros are on edge and are buying the VIX in order to hedge their bets. I can suggest visiting the precious metals like gold and silver, but they’ve had a big run and will need some time to consolidate. Healthcare is going to take until Phase 3 trials begin to come back – which is later in the year. My only move in this market is buying Iron Condors – on the Q’s, AAPL, and TSLA – one standard deviation out of the money and about 30 to 45 days until maturity. The other defensive position I would think about is using Covered Calls on your stock positions to limit your downside exposure.

Tips:

Stock Splits: On August 31^st, both Tesla and Apple will be splitting their stock. With TSLA it’s 5 for 1, and with AAPL it’s 4 for 1. This will actually be fun for a change. Back in the 90’s companies would split their stock a lot – so there’s history here. Wall Street will tell you that there’s nothing special about them, market caps remain the same – to which I say ‘Bulls#@t’. What changes is perception, affordability and a decades long track record of big gains for investors. Factually, what you’ll find is that for solid, profitable companies (AAPL for one) history shows that within 24 months the stock is back to its pre-split price – 83% of the time! Now tell me splits mean nothing. Doing the math: Apple is doing a 4 for 1 split. If you have 10 shares of AAPL at roughly $500 per share, you will have 40 shares at $125. Think of the number of retail investors that will buy AAPL at $125 in hopes that it runs back to $500. This is great for the retail investor, and if this catches on – this market is going to get very busy with volumes exploding higher. So, how do you play it? There’s a couple ways, and you can easily see what’s happened to the price of these two since they announced the split. When the split actually happens, you can: (a) buy the stock on any dips, (b) buy long dated call options, or (c) try and get the stock even cheaper by selling naked puts. Everybody’s a winner on a stock split.

HODL’s: (Hold On for Dear Life)

- Yamaha Gold (AUY = $5.98 / in @ $4.60 = up 30%),

- Canopy Growth Corp (CGC = $16.02 / in @ $22.17 = down 28%),

- CTI BioPharma (CTIC = $1.16 / in @ $1 = up 16% ),

- EXK Gold (EXK = $3.65 / in @ $1.53 = up 156%),

- GBTC Bitcoin (GBTC = $13.58 / in @ $9.41 = up 44%),

- Hecla Mining (HL = $5.81 / in @ $2.36 = up 146%),

- KL Gold (KL = $53.16 / in @ 26.85 = up 98%),

- MUX Mining (MUX = $1.21 / in @ $1.14 = up 6%),

- NovaVax (NVAX = $137.62 / in @ $7.24 = up 1,800%),

- New Gold (NGD = $1.52 / in @ $0.82 = up 85%),

- Pan American Silver (PAAS = $33.22 / in @ $13.07 = up 154%),

- Tortoise Acquisition Corp (SHLL = $29.91 / in @ $0.32)