What problem are we solving? At the beginning of the Internet, companies grew by focusing on their user’s problems. As a result, people found partners, places to chat, information, books, and even sold their Beanie Babies. The business model for these small companies didn’t always come first, but the successful ones were always relentless in solving a problem for their customer. If it took more than 7 words to explain what your company was doing – you had a problem. It was the single best use of venture money over the past 25 years. Smart investors put solving a customer’s problem ahead of profitability. Many start-ups run into trouble because the problem they have decided to solve first is: How do I get rich – and proceed to put customer issues on the ‘back burner’. Successful entrepreneurs realize that by solving enough customer problems – they will solve their own as well.
Entrepreneurial stress is a real issue. If you’re hungry, you eat. If you’re restless, you get up and walk around. But stress is different. It seems like we became a little confused on the best way to deal with entrepreneurial stress. For hunger or insomnia, ‘pushing through it to get to the other side’ works. The problem with applying that same solution to entrepreneurship – is that there is no ‘other side’. Polishing the logo, doing the pitch, and making the sale – simply lead to implementation and customer support, and not success or even survival. The solution to stress is not: ‘3 at-a-boys and see me in the morning’, but rather accurately understanding the problem and helping someone make the correct choices. We relieve stress by making the correct choices. Heck, what’s the difference between giving a speech to your dog, and giving a TED talk? It’s the same speech. The difference lies in the story, the opportunity and what could happen next. Stories and opportunities tend to both paralyze and/or incapacitate the young entrepreneur. In order to conquer entrepreneurial stress = change the story / opportunity – even a little bit. Change your surroundings or your particular situation to more suit your needs. FYI – even TED allowed Tony Robbins more than 18 minutes to finish his presentation. Concentrate on doing the homework upfront to tilt the scales in your direction – rather than believing that you can just ‘power through it to get to the other side’.
The Market:
‘Inflation is the New Bloated’ Our Fed's easy money policy has helped the S&P 500 nearly double since March 2020. But as the economy recovers and prices rise, our central bank announced on Friday that it’s considering reigning in its policy this year. Inflation is up over 5%, July’s unemployment was 5.4%, but job growth has stalled despite record openings. Since our Fed's last update, COVID cases and hospitalizations have doubled, more companies and governments have re-imposed restrictions, and consumer spending and confidence have dropped. Fed Chair J. Powell indicated on Friday that our Federal Reserve, could start scaling back stimulus this year. The bank would begin to taper its $120B in monthly bond purchases, and put us on the path of raising interest rates. Place your bets.
InfoBits:
- Uber, Lyft and DoorDash… fall after a California state judge declared their workforce to be employees, and NOT the independent contractors that a ballot measure recommended.
- The cost of coffee beans has jumped 43% YoY: An unusual frost in Brazil (#1 coffee producer) is contributing to rising prices. Heck, just swap out popular arabica beans for cheaper (less premium) robusta beans – problem solved!
- Virgin Orbit will get SPAC’d… in a deal valuing the company at $3.2B. Virgin will raise about $483m in new capital after the merge. $100m of that new cash will come from a totally-not-surprising source: Boeing (and friends).
- Elon Musk says… Tesla’s latest self-driving software is “actually not great”.
- Pfizer expects $33.5B in COVID vax sales this year… and that was before it was fully approved. Analysts expect COVID vax sales to remain strong for years.
- The gig economy is at risk... if the CA judge's ruling is upheld. Cali is a critical market for gig companies, and its decision will shape gig laws across the country.
- OpenTable teamed up with… digital ID company Clear to make it easier for diners to prove their vax status — handy for brunching in NYC.
- Dragoneer Investment Group… is expected to lead an investment that would value popular video game chat platform Discord at around $15B.
- Warby Parker the eyewear company will IPO on the NYSE. It revealed a 53% surge in revenue for the first half of 2021.
- Shoppin’ the Tok… TikTok is testing ‘TikTok Shopping’ tabs in North America and the UK through an expanded partnership with ecomm platform Shopify.
- Bought it on Insta… Instagram is launching advertising on its Shop feature globally.
- Racing for the last mile... as same-day delivery triples between 2020 and 2026. Amazon set the standard, but Walmart has invested heavily in its same-day Express Delivery.
- The Delta variant in Vietnam and other Asian countries… with low vaccination rates is causing production shutdowns that affect global trade.
- The future is in activewear… and for companies that offer activewear lines or sports gear, like Urban and Dick’s, that have seen sales surpass pre-pandemic levels. Urban plans to open 20+ new Movement stores this year and next.
- Ulta’s sales soared 60% last quarter… as shoppers rushed to restock their makeup bags – as ‘back-to-work’ face is replacing Zoom face.
- Delta will charge an extra $200 per month… for health insurance to unvaccinated employees if they choose to stay unvaxed.
- J&J says a second dose of its Covid vax… was found to generate a strong immune response thereby justifying a booster shot.
- Taiwan Semiconductor plans to increase the prices… of its most advanced chips by roughly 10%, while less advanced chips used by auto makers will cost about 20% more.
- Forbes Global Media will be SPAC’d… for a $630m valuation.
- Making remote feel close is the key: Salesforce is betting big on Slack, while Microsoft likes Teams, and even Dropbox revamped its virtual workplace to serve remote clients.
- ESPN might cash a big check. ESPN is negotiating a $3B deal with 2 sportsbooks to license its brand for sports betting products.
Crypto-Bytes:
- PayPal is extending its crypto service to the U.S…. allowing customers to buy, sell and hold Bitcoin, Ether, Litecoin and Bitcoin Cash starting this week.
- Circle says that their USDC stablecoin will be 100% backed… by cash and short-term U.S. Treasury’s by September.
- 76% of global executives think that digital assets… will be a “strong alternative to or replacement for” fiat in the next five to 10 years – said Deloitte’s 2021 "Global Blockchain Survey" of 1,200 senior execs (only 1/3 in the U.S.)
- The FTX.US exchange has signed a $17.5m / 10-year… agreement with Univ. of Cal Berkeley’s athletic department for stadium naming rights.
- Microstrategy remains bullish on Bitcoin. It purchased another $177m worth of BTC - 3,907 bitcoins at an average price of $45,294 per coin. The company now holds approximately 109,000 BTC worth $2.9B.
- Cardano is partnering with Confirm… to build up its anti-money laundering capabilities.
- Trials for an India-based CBDC could begin by December… as the central bank is studying security issues and the broader impact a CBDC would have on monetary policy.
- 70% of the top 10 NFT collections… are avatar NFTs – basically headshots of cartoon characters including: CryptoPunks, Bored Ape Yacht Club, and Pudgy Penguins.
- TCG, the Peter Chernin and Jesse Jacobs investment firm… is raising a dedicated crypto fund.
- Early Uber investor Bill Gurley says… that he has taken a "personal position" in Ethereum.
Last Week:
Monday: The market loves the idea that Pfizer got full FDA approval for its vaccine. So, is there anything we can buy up here? I could see taking AMD over this morning's highs if it makes it. I really like the NVDA story, I’d like it to pull back and then load up on some OTM Call options. This market is not afraid of Jay Powell and our FED doing any tapering.
Tuesday: I want to keep an eye on NVDA this morning and see if we get a chance at snagging some – as their technology is everywhere. They've simply gone into a bit of hibernation after their 4 for 1 split. I like the September 24th, $200 call options. If Powell says no taper – I’m on them.
Thursday: Our market’s memory is very short, and it's still about Powell tomorrow. That means while the market "might' be reacting to the bombings in Afghanistan. If Powell dismisses the taper – we should still pop higher. Tomorrow, Powell speaks at 10 am, giving the market all day to react.
Friday: Powell suggested in his statement and on camera, that a significant number of Fed heads and himself thought that progress on the economy was sufficient to begin the process of tapering later this year. Then he buttered that bread by saying the Delta variant, and the employment situation was still something to be watched and could influence policy. He went out of his way to say that tapering asset purchases, is completely separate from hiking rates, something that's not even on the table. So, he did two things: (a) he paved the way for a September or November official tapering statement, but (b) he also gave himself wiggle room with the Delta / un-employment message. I’m betting that come fall, we're going to hear of more and more product shortages for the Holiday buying season. And we're going to have more people coming down with colds and flu; therefore, our FED will be tapering into weakness. Our FED has done this in the past, and usually had to reverse themselves shortly thereafter. One thing is concerning, we could be forming a top with all-time-highs and low volume.
TW3 (That Was - The Week - That Was):
- The FDA approved Pfizer’s COVID-19 vaccine. 92m Americans have already received Pfizer’s vaccine under its Emergency Use Authorization. But Pfizer’s official FDA approval could be a sign of confidence that convinces millions of skeptical Americans to get the shot.
- Rivian, the Amazon-backed EV company… filed for an IPO – seeking an $80B valuation. A successful IPO would make Rivian’s listing one of the largest market debuts this year, and positions it to compete with EV makers like Tesla. The company’s R1T pickup truck will debut this month, and it has contracted with AMZN to deliver 100,000 electric vans over the next 8 years.
- Visa joined the NTF mania. Last week, the payments processor bought CryptoPunk 7610 (one of 10,000) for about $150k in ETH. Cuy Sheffield, Visa’s head of cryptocurrency, blogged that CryptoPunks have become cultural icons within the crypto community. The purchase was intended to learn more about the growing NFT market, and to collect an NFT symbolizing excitement and opportunity. Visa’s purchase went viral and inspired other buyers as over 260 CryptoPunks NFTs have been bought since the press release dropped.
Next Week: A FED ignited Rally – Me Worry?
Market Update:
- Our FED ignited a face-rippin’ rally by their dovish tone on Friday. J. Powell came out, saw his shadow, proclaimed 6 more weeks of winter, and the market took-off to the upside. BUT the market was so efficient that it stopped exactly on the edge of its expected move. So, while this was a FED induced rally, the market controlled itself by stopping exactly where predicted – at SPX = 4509. So, there’s nothing ‘game changing’ about a market place that does exactly what it’s supposed to do.
- The Bonds (/ZB) have continued to play a very small role in the conversation, but that’s because there is a Bond roll (from Sept’s to Dec’s) going on right now. FYI - that Bond roll will be over around the middle of next week.
- The Russell must have put a crown on J. Powell’s head with his talk as it put in a 2-sigma move to the upside, and ended very close to its upper range limit of 230. Tip #1: Look for back-spread trades in the IWM. Back-spreads work extraordinarily well when a product is NOT abiding by a set of ‘norms’.
Volatility Abnormalities:
- The 1-Year Implied Volatility indicator is screaming: risk-on, while the Short-term Implied Volatility indicators say: risk-off by getting crushed. For example: a year from now the volatility is predicting a 1,000 point move in the S&P’s. Now, that’s either making millionaires or paupers out of a ton of people out there who just put their money in a Vanguard SPY Index Fund and let it ride. FYI – that’s 55% higher than normal, which tells me that this market is very much = risk-on.
- Realized volatility is still dead (risk-off), while the SKEW is sky high (risk-on). Tip #2:Trade the VIX (16.39) to the long side when it gets down around 16.
Trading Thoughts:
- Longer-term premium selling continues to dominate trades. Tip #3: Examine the premium selling opportunities in the SPY for December going 100 points out of the money. You can make ‘good money’ selling a December (340 / 350) Put-Spread – 100 points out-of-the-money.
- The Volatility Crush opens up VIX trades which are cheap and will act as a ‘hedge’ against any longs that you may have.
- Or put on a long trade on the VIX: Tip #4: SPY = October = Sell the $17 / $12 Puts / Buy the $25 / $35 Call Spread. This is a premium seller’s perfect storm. (a) The VIX is being ‘crushed’, (b) the SKEW is ‘sky high’, (c) and back-month volatility is ‘jacked’.
- The Chinese Markets are beginning to firm up as of late and I would look toward BABA as a way of capitalizing on this by doing a ‘back-spread’. Tip #5: Sell 1 October $160 Call and Buy 2 October $175 Calls for a $0.90 Credit. It delivers a risk-reward graph that is virtually always positive. So even if BABA continues to crash-n-burn = you keep your $0.90 and move on.
SPX Expected Moves (EM):
- Last week’s EM was $68, and the market delivered exactly a $68 move. Next week’s EM is $57. Next week’s trading will depend (most likely) on the Bonds as they finish their ‘roll’ and come back to life.
Tips:
HODL’s: (Hold On for Dear Life)
- AMC – Holding
- Bitcoin (BTC = $48,800 / in at $4,310)
- B2Gold (BTG = $3.90 / in at $4.16)
o Waiting to sell CCs for income.
- Express Inc (EXPR = $6.45)
o Selling more Sept. $6, $6.5 and $7 CCs for income,
- Ethereum (ETH = $3,200 / in at $310)
- GME – Holding
- Grayscale Ethereum (ETHE = $31.02 / in @ $13.44)
- Grayscale Bitcoin Trust (GBTC = $39.15 / in @ $9.41)
- Grayscale Trust (GDLC = $58.57 / in @ $22.75) & buying
- Hyliion (HYLN = $9.03 / in @ $0.32)
o Selling $9 CCs for income,
- Infinity Pharma (INFI = $3.50)
o Selling more Sept $3 CCs for income,
- Yamana Gold (AUY = $4.47)
o Waiting to sell CCs for income.
Thoughts: Follow me on StockTwits.com to get my daily thoughts and trades – my handle is: taylorpamm.
Please be safe out there!
Disclaimer:
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