Thoughts:
It’s crazy to think that when domestic terrorists stormed the capital and tried to blow up our democracy – the S&P 500 moved higher by 3%. But when Robinhood tried to limit traders from buying individual shares of GameStop – the entire financial system revolted and ground to a halt. Is the younger generation telling us that finance is more important than The Constitution? That explains why nobody wants a Robo-advisor, a Challenger Bank, or a PayPal app managing their money. Heck, if I EVER need to call my advisor at Raymond James or Schwab – I might as well just put my money into the fireplace and burn it. Is this a sign that J.Q. Public is becoming more financially literate? As long as greedy politicians don’t get involved, our financial system will police itself and the world will be a better place. As for:
- Robinhood… They are not a monster. They have serious problems managing growth. They butchered a sure thing with weak technology, and now they’re paying the price.
- GameStop… I fear history will not be kind to them. GameStop will (my guess) eventually be delisted.
- Hedge Funds… We witnessed the birth of a new style of HEDGE FUND. One without fees or restrictions, but built upon understanding. It wasn’t easy, but nothing worth building ever is.
The Market:
Innovation & invention are the most difficult parts of leadership. That’s because 10% of the people give us 90% of the productivity. Jeff Bezos (as he stepped down from running Amazon this week) said this: “Amazon is what it is because of invention. We do crazy things, and they become normal. We pioneered: customer reviews, 1-Click buying, personalized recommendations, Prime (insanely-fast) shipping, no check-out shopping, the Kindle, Alexa, the ultimate digital marketplace, infrastructure cloud computing, and much more. Innovation done right, allows the extraordinary to become ordinary. The biggest compliment an inventor can receive is: following the invention – people yawn. Our financial results reflect our long-run accumulation of inventions. Amazon is at its most inventive stage ever, and that’s why it’s time for me to go.”
InfoBits:
- You can call me AL …. Or just call me as Apple brought in a ginormous $111B in sales and $29B in profits last quarter – led by their iPhone 12.
- #WallStreetBets – the movie… is in the works, with the Winklevoss Twins attached.
- Robinhood raised another $2.4B from shareholders… just days after raising $1B to help ride out a trading frenzy in stocks like GameStop.
- Reason for optimism: More Americans have received at least one dose of a Covid-19 vaccine than have tested positive for the virus.
- Democratic Senators vow to advance cannabis reform… within the current Congress. Any legislation is likely to open up the capital markets for U.S. investment – a guaranteed catalyst to a large inflows of institutional money.
- Private jet company Wheels Up… is going public through a SPAC at a +$2B valuation. It'll be the first publicly traded, pure-play, private jet stock.
- Nintendo should pull a Disney... and monetize its characters outside of the console.
- Uber is acquiring alcohol-delivery service Drizly… for $1.1B in stock and cash. Drizly is an on-demand alcohol delivery service available in 1,400 cities.
- SpaceX's Starship prototype once again flew to great heights… and exploded upon landing.
- Tom Brady, (43 years old)… says he's open to playing past 45.
- Ford and Google partner… inked a 6-year deal providing in-car connectivity.
- Rocket ship startup Astra is going public… via SPAC at a $2.1B valuation – following its successful space launch in December.
- With more states going MJ legal… the value of Scott’s (the Miracle Grow company) has nearly doubled over the past year.
- 23AndMe (the DNA-testing company)…. will go public via Richard Branson’s SPAC at a $3.5B valuation.
- Legal Super Bowl gambling will increase… 63% over last year.
- Super Bowl chicken wing consumption… should hit a record 1.4B today.
- Apple is NOT a 1st mover but rather a 2nd shaker: They’re working on a fully autonomous EV. Waymo, Cruise and Tesla will get there first. But Apple was 2nd to Blackberry w/ the phone, Fitbit for the watch, and to Bragi in wireless ear buds.
- CBS is charging… $5.5m for a 30-second Super Bowl ad.
- The Safe Tech Act will be introduced next week… that will hold Facebook / Google more accountable when viral posts and videos result in real-world harm.
- The IPO market had its busiest week yet… with 14 IPOs raising $3.9B and 27 SPACs raising $9.2B. The IPO pipeline remained active as well, with 3 IPOs and 38 SPACs submitting initial filings.
- Day Traders in GME / AMC are… 75% male, in the 18 to 35 age group and about half have less than 1 yr. of self-directed trading – per HZ.
- GameStop (GME) closed January… with a 1,644% increase. It was down 80% this week – still at +$60 and well above its $10 price tag a month ago.
Crypto-Bytes:
- India’s Parliament is considering banning all non-sovereign currencies… including cryptocurrencies. This type of ban was overturned by the country’s supreme court a year ago.
- Switzerland now allows tokenized securities… to trade on a blockchain with the same legal standing as traditional assets.
- Visa is exploring ways to make cryptocurrencies… more “safe, useful and applicable.” CEO Al Kelly said: “Our goal is to work with wallets and exchanges to enable users to buy and cash out of crypto using their Visa credentials.”
- Silver hit $30/ounce … and didn’t go higher because dealers were unable to process all of the orders for unprecedented physical demand.
- More than 15% of the total bitcoin circulating supply… has been moved to wallets that have ‘never spent funds’. That is a 4-year high.
- Ethereum’s moving higher… preceding the Chicago Mercantile Exchange’s launch of Ethereum futures next week.
- PayPal’s cryptocurrency business has beat expectations: PayPal’s crypto services of buying, selling and transacting – were just launched last year but already volumes have exceeded all projections.
- After arresting a man for fraud… German prosecutors think that they found the missing $60m on a crypto-wallet with 1,700 Bitcoin on it. Unfortunately, the man won’t give up his password – and the police can’t crack it. So, it begs the question: How do they know they found the money?
Last Week:
Monday: Rumors surrounding #WallStreetBets suggested that they'd gang together and push silver higher. To some extent that happened, as most major silver dealers ran out of physical inventory. This morning the futures are close to $30/oz. CYDY has a possible breakout forming, and I’ll be watching it. When thinking longer-term, one company that ‘should’ benefit from all these car company's going electric, is WWR. They produce the graphite used in batteries.
Tuesday: Yesterday, the market was given the green light from 2 FED heads. So, our FED’s onboard for creating massive amounts of new debt to keep the charade in place. It’s easy: the more money our FED prints – the more stocks go up. That's why the DOW is looking to open another +240 today. It’s not because of earnings. Heck, Exxon just posted their first yearly loss (–$20B), and their 4th straight quarter in the red. I like CYDY over $7.01, and am also watching FUBU.
Wednesday: I still like playing with some micro, precious metal miners and explorers. While PAAS is the gold standard for a silver stock, stocks like WLBMF will often move before the big guys. If/when we go higher, I think names like THBR, FUBO, CLOV, MSFT should also move higher. On another note, NOK has earnings tomorrow, and someone just purchased 400,000 shares. I wonder what they know?
Friday: The jobs report is out and they say we gained 49k Jobs. That said, December was revised lower – down 227k jobs. THBR is looking pretty good for a breakout at the 12.50 level. It has flirted with it for a few days.
Marijuana:
Latest MJ numbers:
- Annual legal MJ sales are projected to grow… at a compound annual growth rate (CAGR) of 21%, to reach more than $41B by 2025 (up from $13.2B in 2019).
- By 2025, an estimated 39% of total U.S. annual cannabis demand… will be met by legal purchases in regulated marketplaces (up from 17% in 2019).
- Monthly consumer MJ spending increased by $149.
- 72% of MJ consumers have changed… their social consumption behaviors: hint = less alcohol.
- Whole flower continues to be the most popular cannabis category… but edibles are on the rise, due to being more discreet and easier to micro dose. “2mg - 5mg doses allow people to manage their experience throughout the day.”
- Pot stocks popped last week… Tilray rallied 22% and the marijuana ETF (MJ) marched higher by 9.8% to close at its highest price since September 2019.
- Biggest Legal Drug-Deal: Jazz Pharmaceuticals announced their GW Pharmaceuticals acquisition. GW is best known for its production of the first epilepsy drug to utilize marijuana.
- Bipartisan hemp regulations… direct the legislature to regulate hemp-CBD as a dietary supplement.
- Virginia is for stoners… as VA legislative leaders are desperate to bring legal cannabis into the Southeast.
- Cannabis Industry trends could fuel dramatic investment over the next 6 to 12 months: By midsummer, more institutional capital should arrive along with bankers to help mainstream it.
Next Week: Buy the Squeeze … Sell the SKEW
- Last week’s explosive move higher – decimated volatility: Last week we had one of the fastest contractions in implied volatility that I can remember. The previous week’s harsh, sell-side action was met last week by creating all-time-highs. This opens up some interesting trading strategies.
- The SPX has shattered the Expected Move in 2 consecutive weeks: Last week’s SPX expected move was $132.50 (either higher or lower). The actual move (to the upside) was almost $170. That’s the 2nd consecutive week that we’ve demolished the expected move – leading to marketplace inefficiency – which often leads to MORE BREACHES of the expected move.
- Short term inefficiency is in play: The Russell Small Cap Index (IWM) is up 14.5% YTD, while the tech sector ‘only’ up 7%. The IWM was trading 150 in November, and is now trading at 221 – a roughly +45% move in an Index product in the last 90 days. Volatility (VIX) was compressed in the past week – moving from +30 to almost 23, and the VVIX moved under 110 to 107. That means that options within the VIX product have dramatically come down in price.
- Interest Rates continued to Rip Higher: Bonds (/ZB) are selling off and that causes interest rates (TNX) to run higher – which in turns allows the banks to make more money. Hence, the financial ETF (XLF) moved higher last week. Maybe this has to do with the stimulus package coming out, and the threat of inflation; however, the dollar is rallying and that has me concerned. Interest rates in the 10-year were 0.5% in August of 2020 and are now 1.2%. That’s an over 2X move inside of 6-months. If you are the U.S. Treasury and cast with servicing our national debt, the interest costs associated with servicing that debt have more than doubled.
- An Option Premium Strategy:
o Right now, the market is pricing a crash to the upside EQUALLY as a crash to the downside == so BUY a Gamma Iron Condor.
o In the March IWM, purchase the $228 Call and sell the $233 Call, while you purchase the $206 Put and sell the $201 Put.
o This will allow us to take advantage of any explosive move, in either direction – and with lowered volatility the trade is fairly inexpensive.
o So, in the short-term (next 42 days) – you’re BUYING the Iron Condor rather than SELLING the Iron Condor.
- SPX Expected Move
o 2 weeks ago, a $73 expected move was shattered.
o Last week a $132.54 expected move was annihilated when we moved almost $170.
o Next week’s expected move in the SPX is about $63.
o Look for continued volatility because I believe this $63 barrier will be breached.
Tips:
The Covered Call Paradigm for Investing: If you believe that this market is ‘up’ because our FED is printing money like crazy. The paradigm has shifted from earnings and P/E ratios to leaning long because our central banks are buying everything around the world. Stocks are so expensive, that using call options is the only clean ‘n easy way to get in on the action – without breaking the bank. Here’s something to think about.
- FUBO is a $50 stock that potentially has a big future.
- Their August, 2021 / $55 Call Options are selling for $18.
- If you bought 1,000 shares of FUBO, AND sold 10 / August $55 Call Options against them – you’d be doing a buy-write / covered call.
- The Calls are selling for $18/share.
- That means that you would be paying $50/share for the stock, instantly getting $18/share back for selling the call, reducing your cost basis to $32/share, and not sacrificing the stock until it moved over $55 (a +10% gain over the next 6 mos.)
- This protects you against a 36% pullback in the stock, you get to keep the $18/share, but you sacrifice all stock gains over $55.
- In times of high volatility, this type of investing delivers comfortable monthly returns and mitigates a ton of investment risk. Just sayin’.
HODL’s: (Hold On for Dear Life)
- Bitcoin (BTC = $39,000 / in at $4,310),
- Bitcoin Cash (BCH = $450 / in at $170),
- Clover Health (CLOV = $12.93 / in @ $12.51),
o Sold Feb. $12.50 / $15 covered calls for income
- CTI BioPharma (CTIC = $3.75),
o Sold Feb. $3 / $4 covered calls for income
- Desktop Metal (DM = $31.25 / in @ 14.24),
o Sold Feb. $22.50 / $25 covered calls for income
- Ethereum (ETH = $1,620 / in at $310),
- Grayscale Ethereum (ETHE = $19.71 / in @ $13.44),
- Grayscale Bitcoin Trust (GBTC = $37.88 / in @ $9.41),
- Hyliion (HYLN = $15.67 / in @ $0.32).
o Sold Feb. $15 and $17 covered calls for income
- Inovio Pharma (INO = $12.84 / in @ $12.89),
o Sold Feb. $13 covered calls for income
- Opko Health (OPK = $5.30 / in @ $5.15),
o Sold Feb. & Mar. $5 covered calls for income
- New Gold (NGD = $1.84)
o Sold Feb. $2 covered calls for income
- Pan American Silver (PAAS = $32.06 / in @ $13.07),
o Sold Jan. $34 covered calls for income
- **Silver Elephant Mining (SILEF = $0.33 / in @ $0.37),
- SOS Ltd. (SOS = $3.88 / in @ $2.90).
o Sold Feb. & Mar. $2.50 / $5 covered calls for income
Thoughts: Albermarle is the world’s largest producer of lithium, the metal that makes electric vehicles possible. ALB dropped 8.3% in the past two days on news that the company would be issuing $1.3B in stock to pay down debt and fund its growth. The 8% move matches with the increased number of outstanding shares. That should make this sell-off a bullish opportunity. Earnings are on Feb 17. If you are bullish and willing to take a risk through earnings, the long call vertical that’s long the $150 Call and short the $155 Call in the March expiration is a bullish strategy that has a 65% probability of making 50% of its max potential profit before expiring.
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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