Solving problems is hard... All we ever do in life is trade one set of problems for another. Problems are a part of our feature set. They’re the opportunity to show the world our competitive advantage. As an entrepreneur, your goal is NOT to develop a world without problems. Your goal is to learn how to dance with the hard problems, the different ones, the ones that are worth dancing with.
Sorting ‘fact’ from ‘feeling’. Factually, most of the time we have a feeling, and then we invent a rational an. alysis to justify it. The normal order is: (1) we have a feeling, (2) we create a story to support the feeling, and (3) then we find the facts that support the story. If our goal is to help people make better choices – we first need to help them create better feelings.
Huh – I didn’t win? Just when you think you won the Olympic cycling gold – they tell you: “Sorry, you finished 2nd.” Don’t be surprised, because this is how innovation happens. Math Ph.D. turned Olympic cyclist Anna Kiesenhofer wasn't even considered a medal threat, until she crossed the finish line without the top contenders even knowing she was in front. Every market incumbent will tell you that the scariest challengers are the ones that they NEVER see coming.
Just yell LOUDER: If you ever find yourself needing a bigger budget in order to get your voice heard – just realize your audience stopped listening a while ago. A bigger ‘n louder logo won’t get someone to care about your company. Adding more money to a budget to continue a non-performing idea is just lazy. It all comes down to: (a) Are you solving the right problem? (b) Does your product design work for that solution? And (c) Does your story resonate with your prospect? If you’re solving the right problem with the correct design – you can whisper your message and the world will hear you.
The Market:
Wouldn’t you think that between the massive government spending and the money printing from our FEDs – we’d be in hyperinflationary period? We’re not quite there yet. The only reason we haven’t experienced Weimar style hyper-inflation, is because the velocity of money has been throttled by: (a) people hoarding their cash, (b) a lack of products to buy, and (c) it’s tough to spend money when you’re in a lockdown. If things went back to ‘normal’ tomorrow, we would experience an inflation shock like the world has never seen. Our FED & Central Banks know this, and are doing all they can to keep monetary velocity down. Managing the velocity of money via product shortages and lockdowns is Job #1 at the FED. Inflation is just beginning to play out, so be smart about what you need, versus what you think you want.
We’re in a bubble of epic proportions that (at some point) will end badly for both the debt and equities markets. But when the market crashes, and people sell their stock – where does the money go? Cash doesn’t stay static, and it doesn’t disappear. Fair warning, most gurus believe that the money will flow into commodities and crypto.
InfoBits:
- Oil or Caviar? U.S. gas prices are up 45% YoY. The 14 oil-exporting countries have agreed to boost production – let’s see if that brings prices down … or not.
- Tesla reported $1.14B in net income on $11.96B in revenue. That kind of net income is a 10x improvement YoY. 85.3% of Tesla’s revenue stemmed from vehicle sales of 201,250 vehicles with a gross margin of 28.4%.
- Lucid: “Thank you Tesla for the missionary work.” It took Tesla nearly 20 years to gain Wall Street’s respect. Lucid (a new EV maker that just went public via SPAC) just became the fourth-most valuable EV stock with a $42B valuation. That's because Tesla proved that a "start premium, scale down" model can work with EV companies.
- Can't stop, won't stop...
o Microsoft posted its most profitable quarter with cloud services leading.
o Google had its fastest sales growth in 14 years, as cloud soared 54%.
o Apple posted its best third quarter. +36% total sales growth from 2019. +50% iPhone growth making up half of Apple's $81.4B in quarterly sales.
o Shopify earnings blew away estimates and revenue exceeded $1B.
o Facebook beat expectations, but forecast much slower growth.
- Activision Blizzard has a giant f__ing problem. The California Dept. of Fair Employment filed suit saying that the company has allowed rampant sexual harassment and a “frat boy culture’ to run unchecked. This will end in a multi-billion-dollar settlement, relaxed employee contracts, published salary data, diversity and representation policies, and a decimated company.
- Dubai has already… made a ski mountain indoors, put a police force in Lamborghinis, and dropped influencers in the desert. Now, they are using laser drones to make it rain.
- People are meeting for coffee again… and Linda still can't decide if she wants the egg white bite or the cake pop. Starbucks had its best 3rd quarter topping $7.5B in sales, and same-store sales jumped 10% from pre-pandemic levels. Starbucks is focused on milking more $$$ out of premium upgrades.
- Requiring vaccinations to return to work include… Google, Facebook and Uncle Sam.
- Robinhood’s IPO was one of the worst of 2021. The stock plunged and everyone was talking about its controversial practice of: Paying for Order Flow – that will cause regulatory review in the near future.
- Nikola shares plunged 15%... after founder Trevor Milton was indicted for allegedly lying to investors about the e-truck company's progress.
Crypto-Bytes:
- FTX cut from 100X to 20X… the amount of debt a trader is allowed to borrow.
- Uniswap Labs is restricting access to some tokens…. calling it an "evolving regulatory landscape".
- Joining the cast of “Stoner Cats”… is Ethereum co-founder Vitalik Buterin. Stoner Cats is a newly animated NFT show created by actress Mila Kunis that also features Jane Fonda, Chris Rock and Ashton Kutcher. To watch the first five-minute episode, viewers must purchase an NFT that is both a digital artwork of a randomly selected character from the show, and a ticket to unlock all episodes that are made.
- Amazon has denied the bitcoin payments rumor… but a spokesperson said that they are interested in the space and are exploring specific plans for crypto.
- Despite concerns about bitcoin’s environmental impact… Tesla hasn’t sold any more of its $1.3B stockpile since Q1.
- Jordan Belfort, “The Wolf of Wall Street” said: “The sooner massive regulation comes into the market, the better it is for bitcoin, stablecoins, etc.”
- Goldman Sachs has applied to list an ETF with “DeFi” in its anagram... but the ETF has little to do with ‘decentralized finance’. You know, that’s pretty low even for you GS.
- Binance is looking for a new CEO… with a strong regulatory background.
- Mastercard is adding a cryptocurrency and blockchain track… to its incubator program for later-stage startups.
- Genesis Digital Assets has raised $125m in equity funding… to fuel its expansion plans in the U.S. and the Nordic region.
- Sen. Elizabeth Warren (D-Mass.) is urging the government… to form a regulatory strategy to “mitigate the growing risks that cryptocurrencies pose to the financial system.”
- A significant short squeeze… was the biggest factor in BTC’s current swing in upward price momentum. Almost $1B in BTC short positions were liquidated over 12 hours on Monday.
- VC fund Fabric Ventures has closed a $130m war chest… for investing in early-stage blockchain firms. Included for the first time was $30m from the European Investment Bank, the European Union and other financial institutions – to invest in digital assets.
- Paxos (powering PayPal’s crypto side) has received $300m in funding… at a valuation of $2.4B.
- U.S. crypto users are avoiding measures meant to block derivatives trading… on offshore exchanges like FTX and Binance by using a VPN or old-fashioned lying when signing up.
- A blockchain-based platform developed by Chinese authorities… has helped local companies transfer $580m across international borders as of June.
- MicroStrategy still holds 105,000 BTC… and will continue its “digital asset strategy,” CEO Michael Saylor said.
- Cathie Woods’ ARK Investment… bought 1.3m Robinhood (HOOD) shares on its 1stday of Nasdaq trading.
Last Week:
Monday: Today we’re showing ‘red’. I don't see any reason for it, other than we had a big week last week, and they need to digest it. S.H. said: “This week our Fed will hold a 2-day meeting to decide to do nothing. Then we'll get 50 Fed speeches over the next month explaining why doing nothing or maybe doing something (or nothing) at some unspecified point in time depending on unspecified conditions is the right strategy.”
Thursday: Over in China, the intense selling has abated, and the Chinese leadership are suggesting they're going to help calm things. Yesterday, Powell danced and tip toe'd around the inflation questions. Yet this morning: gold, silver, AA, CLF, FCX and X are all higher. Someone thinks that commodity inflation is real. Without rehashing my 25-year love affair with gold, it seems that because of inflation – they’ve finally decided to look at the metals and miners. Since June 18, the GDX has banged its head at $35 multiple times, and has been kept below that level. This morning it tried once again, hitting $35.19 before getting pushed back down. I will take some over $35.20 if it gets there. Why GDX? It's the ETF of dozens of miners. If you believe that the miners are going to move, instead of trying to pick a winner – just pick GDX (a basket of them) and move on to fight another day. So that's on the radar.
More Crypto Thoughts:
Investment in the crypto industry continues to grow at a record pace. VC firms have poured $17B into crypto companies in 2021. So, if you’re worried that crypto’s brightest days are behind it – nothing could be further from the truth. A recent JPMorgan report concluded that the Ethereum 2.0 upgrade could spur the adoption of “staking”, and could cause “staking rewards” to balloon to $20B in the near term, and $40B by 2025. “Staking” is the action of locking your crypto assets (i.e., your “stake”) to help secure the network. In exchange for locking your assets, you earn a reward. And just like musicians receive a royalty payment every time their songs are played, staking rewards pay investors as the underlying blockchain project or crypto asset grows and expands. The JPMorgan report noted: Not only does staking lower the opportunity cost of holding cryptocurrencies versus other asset classes, but in many cases, cryptocurrencies pay a significant nominal and real yield. This will be a huge opportunity for crypto to not only generate double-digit income streams for the stake-holders, but also create quadruple-digit returns for the project owners.
After weeks of seeing a strong divergence between on-chain investor behavior and price, it looks like price finally took-hold. Last Sunday through Monday we got a short squeeze in BTC that liquidated about $1B in shorts within 12 hours. Here are some high-level takeaways from this past week:
- There were very strong outflows from exchanges.
- We saw continued accumulation from miners and from “strong hands” (entities with little selling history).
- Every major BTC group added to their portfolio – except for the 100 to 1,000 group that moved sideways.
- The profit-taking that took place during the rally was most from young coins – accumulated over the past 1 to 2 weeks.
- On-chain activity (active addresses, transfer volume, etc.) is still overall flat (outside of the short squeeze).
Next Week: Can Risk & Reality rule Markets again?
Market Update: As the S&Ps remained perfectly level on the week, we began to see real downward cracks form in the Nasdaq. The actual stock price movement in the Nasdaq is just too low vs the implied volatility. [FYI = the volatility of the QQQ’s for the next week is 25% higher than that of the S&Ps.]. The Bonds were fairly calm, but still riding their upward trajectory. And the Russell, that’s still “Mr. Toad’s Wild Ride” but remains incredibly range bound.
- Amazon tanked, but our markets survived. Amazon (pre-earnings) was expected to move $105. At one point after its earnings miss – Amazon moved over $300 to the downside = a true 3-Sigma move lower. That’s one reason why you shouldn’t sellshort-term premium – especially around earnings announcements.
- The ‘Monsters of Tech’ sector was down on earnings. Even Google is beginning to fade from its advertising perch. Tip #1: If we see any follow-thru to the downside by the ‘Monsters of Tech’, it will prevent the S&Ps from moving higher. The financials actually hit the upper-end of their expected move, but created a ‘big nothing-burger’ on the week.
- COVID is on the rise, but travel and lockdown stocks are not moving…yet. Whether it’s ZOOM, Disney (DIS), Netflix (NFLX), Carnival (CCL), or Southwest Air (LUV) – our markets have not yet acknowledged the reality of what is transpiring out in the travel, hospitality and leisure arena.
- The FED will taper – maybe, eventually, but ‘nah – probably never.’ There was a FED meeting this week, but you wouldn’t know it by looking at the bond market. Our FED is giving us hints, that they will eventually taper their money printing & market purchases.
- GDP was lower by 2%, and the stimulus trade is running out. The experts were looking for 8.4% GDP growth, and GDP came in at 6.4%. Hey, it’s time for more stimulus disguised as an infrastructure bill. Why? Because, every dime of GDP growth was STIMULUS MONEY.
- Put it all together: COVID is rising. Our FED may never taper. GDP missed estimates by 25% (lower). And the stimulus trade is running out. Tip #2: Our market is not properly accounting for risk & reality in their volatility calculation(s).
- Watch the "Meme" stocks: AMC, GME, BB, CLOV. All of their charts are fading lower, but watch the price action. It would be easy to call the trade over, but you have huge issues (including market-maker Citadel) sitting in the background.
- Robinhood (HOOD) is experiencing a retribution trade. They came out and quickly turned a $40B company into a $29B company after 2 days of trading. They will add options shortly, and when they do: Tip #3: Do NOT buy Call Options in Robinhood – with all of the impending SEC legal action.
- SPX Expected Move: Last week’s expected move in the SPX was $57.25, and markets moved within that range. Next week’s move in the SPX is projected to be $65. This past week of trade we had: (a) a FED announcement, (b) earnings by all of the ‘Monsters of Tech’, and (c) a huge GDP miss. All of that produced a fairly level week of trading. The marketplace is telling us that: “Risk is Expanding”, and make sure you trade with ‘risk-expansion’ in mind.
Tips:
HODL’s: (Hold On for Dear Life)
- AMC – Holding
- Bitcoin (BTC = $41,600 / in at $4,310)
- Bitcoin Cash (BCH = $540 / in at $170)
- Peabody Energy (BTU = $11.71)
o Sold Aug $10 CCs for income
- Electramericcanica Veh (SOLO = $3.57)
o Sold Sept $4 and $5 CCs for income
- Express Inc (EXPR = $4.70)
o Sold August $5 CCs for income,
- Ethereum (ETH = $2,450 / in at $310)
- Franks International (FI = $2.75)
o Sold Oct $5 CCs for income,
- GME – Holding
- Grayscale Ethereum (ETHE = $22.42 / in @ $13.44)
- Grayscale Bitcoin Trust (GBTC = $34.74 / in @ $9.41)
- Grayscale Trust (GDLC = $28.69 / in @ $22.75) & buying
- Hyliion (HYLN = $9.71 / in @ $0.32)
o Sold Aug $9 and $9.50 CCs for income
o Sold Aug $11 CCs for income
- Infinity Pharma (INFI = $2.16)
o Sold Aug $3 CCs for income
- Litecoin (LTC = $140 / in @ $191)
- Tellurian (TELL = $3.77)
o Sold Oct $5.5 CCs for income.
Thoughts: As we go forward, we’re going to have to start thinking about commodities, from individual commodity players (like a gold miner, or Uranium miner) to commodity ETFs. I’m specifically watching: GDX, GDXJ, CRK and NYL, and will keep you posted in the coming weeks.
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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