I doubt that the Chinese government… has conceded global economic domination to the U.S. But why are they pissing off their: equity holders, technologists, entrepreneurs, and digital innovators? That is not a blueprint for sustainable growth or redistribution of wealth. What concerns me is that we live in a world of governmental monkey see – monkey do. Increasing the authority of our governmental regulators and policy makers is not a recipe for success. We need to encourage a massive Chinese brain drain. We should invite their geniuses to come play for us. Simply gaining one invitee would-be reason enough for the global invitation.
I wish we could divide the world into smaller bits. I wish we could separate good restaurants from bad ones, and successful people from failures. Unfortunately, distinctions such as those are always distracting and almost always wrong. We tend to ignore all of the small steps that it took to reach a particular destination. There’s an old saying: “They took 20 years to become an overnight success.” For the entrepreneur, today’s world doesn’t offer discrete steps and definite platforms. The best you can do is find a trending slope into a ‘messy middle’ where you can place a sign post as a reminder of days gone by.
The Market:
Last week, some real market action took place that scared a lot of people. Thursday (for example) was a day of ups and downs, and ultimately the DOW closed down 547 points. That means that the DOW had just fallen 1,218 points in just 3 sessions. In Thursday’s overnight session, the DOW futures fell right to their 200-day moving average, and then the magic happened. It bounced off that level. At the same time, Merck came out and said that their new “COVID pill” was having such good results that they were stopping trials and heading to the FDA for emergency approval. Experts think that it could be a potential breakthrough in how the virus is being treated. That paved the way for a pretty hefty rally. It was already the first day of a new month and quarter, and that’s generally a pretty good start – but this gave the rally even more fuel. So, at the end of the day, we had put in a 482-point bounce. But, that means we did NOT get back all of Thursday’s collapse.
I’m not saying we can’t be embarking on a new move higher. We could, and the end of the year is usually rally time. But, I’m not convinced that we’ve gotten all of the sellers out of the way just yet. I think we’re in for some additional volatility over the next 10 days, and then we see them go for the gold. I still like energy. China’s in an energy crunch, and they’re willing to pay anything for energy – especially oil and coal. I think plays like BTU and oil will remain with us for quite some time. The market may try and rally tomorrow, but I’m suspicious of a “pop and drop” start to the week.
InfoBits:
- FB knows that Insta is harmful for a significant percentage of users… and has done nothing. Factually: (a) 32% of teen girls said that Instagram made them feel worse about their bodies. (b) 6% of Americans having suicidal thoughts trace them to Instagram. And (c) Suicidal deaths in the 10 to 14 age group tripled from 2007 to 2017 – during the time Insta saw mass adoption.
- TikTok has over 1B monthly active users. U.S. users spend 25 hours on TikTok each month, and people now watch TikTok more than YouTube.
- It’s almost autonomous… says Tesla as it launched its “full self-driving” (FSD) update. But Tesla, GM, Volvo and Toyota still require driver supervision.
- The heads of the Boston and Dallas FED… are retiring after it was uncovered they made insider trades – prior to their own FED buys.
- Citadel and Robinhood executives vehemently deny… Citadel’s role in pressuring Robinhood to halt GME buying during January’s Meme-Madness – due to their tremendous short position on GME. A Robinhood insider has said: “It’s a total mess. You wouldn’t believe the convos we had with Citadel.”
- Lego, the world’s largest toy biz… hit record sales and profits in the first half of 2021. Following in Disney’s footsteps, Lego is expanding its toy lines into movies as well as … sneakers.
- Warby Parker, the eyewear company… went public with a $6B valuation. Warby’s growth is built around online sales, engaging stores, and brand values. Other dynamos like: Allbirds, Casper, Blue Apron, and Honest Company followed Warby’s formula and are (like Warby) unprofitable. Since their IPO, Casper’s stock is down 60%, Honest’s is down 45%, and Blue Apron’s is down 95%.
- United Airlines said that 600 US employees face termination… after failing to comply with its vax policy.
- Camber Energy closed positive for the 6th consecutive week… and CEI is now up 252% YTD.
- Gap, Lululemon, and Nike manufacture… 31 to 50% of their products in Vietnam. When Vietnam locked down due to COVID, Nike lost sales on 100m pairs of shoes, and LULU is now using airplanes to ship goods.
- Lordstown Motors (RIDE) will sell its auto factory in Ohio… to contract assembler Foxconn for a purchase price of $230m and a $50m investment.
- Merck announced that its experimental Covid-19 pill… cut the risk of death to 0 and hospitalization by 50%. It’s filing for emergency use authorization.
- PE firm Symphony plans to merge FireEye Products and McAfee… to form a new company with $2 billion in revenues, 40,000 customers and 5,000 employees – all focused on cybersecurity.
Crypto-Bytes:
- One-third of all Salvadorians… are actively using the state-issued Chivo bitcoin wallet. So, less than 1 month after bitcoin became legal tender, MORE people are using crypto – than any bank in El Salvador.
- FTX has officially moved its headquarters… from Hong Kong to the Bahamas, amid increasing worldwide regulatory scrutiny.
- Decentralized exchanges (DEXs)… are seeing growing volumes in the aftermath of China’s crypto crackdown – with value accruing to their tokens.
- Coinbase, the largest U.S. crypto exchange… announced that you can now use all or part of your direct deposit wages to purchase crypto at zero fees.
- Revolut, a fintech company with a $33B valuation… already offers crypto buying as part of its services, is also looking to launch its own token.
- FED Chair Powell told Congress… that it would be ‘ideal’ to work with them on a digital dollar.
- Bitfinex paid $23.7m in transaction fees… to deposit $100,000 on the blockchain. OOPS! This behavior is becoming normal as earlier this year, Bitfinex customers lost nearly 119,756 BTC ($60m) from the crypto exchange.
- Elon Musk says that… the U.S. government should avoid regulating crypto.
- Crypto liquidity is ready to eat cross-border payments’ lunch.
- SEC Commissioner Gary Gensler reiterated his support… for a narrow class of bitcoin ETFs that would invest in crypto futures contracts.
- The Terra blockchain has completed a hotly anticipated upgrade: LUNA, the native asset of the Terra blockchain, has surged in value in 2021 and is currently the 12th-largest cryptocurrency by market cap.
- San Jose, California… plans to fund internet access for low-income families through HNT tokens mined on the Helium network.
- "I do believe that government personnel are trying to gain control over the cryptocurrency industry, and that really isn't conducive to growth, entrepreneurial activity and/or opportunity." – Rep. Tom Emmer (R-Minn.), on the U.S.’s crypto-regulatory efforts.
- Stablecoin issuers like Circle and Tether… could face bank-like regulations. The U.S. would like to create a special-purpose bank charter for stablecoin issuers. The goal is to address regulators’ fear of stablecoins, which some think could usher in financial instability.
Last Week:
Monday: The DOW is being led by energy and financials. We're heading into winter with "not enough" oil, or natural gas. MRO is looking great. Most of the names I'd be interested in, like SLB, VLO JPM, and GS – have all gapped pretty hard. One that's got my attention a little bit is NXPI. For 3 days in a row it's put in a high at the $218-ish level. If it gets over $218.25, I think it might finally break free.
Tuesday: The futures are down – by a lot. The excuses being given are: 1) another Fed head has resigned after getting caught insider trading, and 2) the fight over infrastructure / Government shutdown continues. But aren’t they forgetting: rising interest rates, the impending debt ceiling, and inflation? But that all seems sort of "meh". MMAT is one of those that I’d like to buy, but can it hold up? I'll play chicken and just watch today. We're actually sinking lower, not firming up as the DOW just broke over 600 points down. Until I get a grip on what's really happening, I'm passing.
Thursday: Today happens to be the last day of the month and the last day of the 3rd quarter. Normally, last days and the first couple days of the new month/quarter are pretty good. Managers buy some stocks that had performed well, so they can print statements showing they were smart and owned the right things. Therefore, it won't surprise me to see a green final day of September. But this market is heavy. Initial jobless claims keep rising, but there are thousands of jobs. Consumer sentiment is falling, durable goods are struggling, and supply chains are decimated. More of that will be coming. Is there anywhere safe? I still like commodities and crypto, because this inflation is not stopping. There are people talking about $200/barrel oil.
Friday: Today is the first day of a new quarter, and there’s a new batch of $120B+ in funny (freshly printed) money to take care of. BTU is looking good, and China's energy supply is dire. Yesterday China told their companies to do whatever it takes to secure energy. They're in a deficit, and they need natural gas, oil and coal. So, the demand is certainly there and a nice way to play it could be via BTU. But (shifting gears) something's nagging me about this Merck pill. If the pill is so great, then no need for vaccinations, no vaccine passports, and no more lockdowns? Are governments prepared to give all that up? Nah. The single most "solid" part of today's rally is the action from last night. The DOW futures reached all the way down and hit their 200-day moving average and then bounced. That's a perfectly technical market move, and could keep this moving higher.
TW3 (That Was - The Week - That Was):
- “Full faith and credit” has a reputation to protect... T-bonds are backed by the “full faith and credit” of the US government. If the Treasury can’t repay its bondholders, investors may lose faith. The U.S. can borrow trillions at very low interest rates, since T-bonds are seen as low-risk. If the U.S. defaults for the first time, investors could become skeptical about lending it money. Higher risk would drive up interest rates on the debt – which means less money to spend on social programs and/or higher taxes which would slow economic growth and increase the $29T national debt.
- Friday morning Merck came out with big news. They have been working on a COVID "pill" that you can take up to 5 days after infection. In the trials, it caused a 50% decrease in hospitalizations and 0 deaths. Everyone's calling it a game changer, but something’s nagging at me. Merck invented Ivermectin (IVM). IVM has a 70 - 78% rate of keeping people out of hospitals and 0 deaths in India. I’m betting that Merck’s new "pill" is based on IVM. IVM is sold over the counter for 17 cents a pill. Merck’s new drug will be sold to the gov’t for $700 / prescription. Merck may have found another way to monetize IVM. Place your bets.
- In 2000, 406 companies went public… and raised a record $93B in the process. In 2021, Renaissance Capital is estimating that there will be 875 IPOs this year, including 500 SPACs. These companies will generate $250B in proceeds – almost 3 TIMES that of 2000.
Next Week: Finally, a Volatility Inflection Point.
Market Update:
- Risk has enveloped the markets. The S&Ps got their ‘groove’ back (a little) on Friday, but the Nasdaq is still lagging considerably. The S&Ps are still in a very defined downtrend.
- The U.S. dollar smashed through some highs… that had held for quite some time. The dollar is a measure of volatility. The ‘fear trade’ is moving toward the U.S. dollar and toward cryptocurrencies. European banks can’t ‘go to cash’ due to Europe’s NIRP (negative interest rate policy) – so the U.S. dollar is the next best thing. Tip #1: If traders continue to ‘buy the dollar’ ($DXY), things will get hostile in market-land.
- Bonds have become a double-edged sword, and it’s the Bonds that are driving the action in the S&Ps. Look at the TNX (the 10-year Treasury Index). The equity markets get quite nervous once the 10-year rate crosses above 1.5%. Rising rates destabilize the S&Ps because higher rates impact big tech’s ability to borrow and do stock buybacks. Falling rates negatively impact the financials. Tip #2: I’m looking for bonds to begin to channel in a very tight range in order to stabilize the S&Ps. There aren’t a lot of places to hide, but Bitcoin (BTC) and crypto are one, and they exploded higher last week.
- Where was last week’s implied volatility spike? Our markets have a good short-term financial memory, and they remembered the previous week’s 100-point SPX drop that was bought. The issue here is that when markets are selling off and nobody is feeling the fear – capitulation is not yet upon us.
- To make volatility even more complex… the SKEW softened. That means professional traders are both selling PUTS and buying CALLS – aka looking for a bounce higher going forward.
Sector Analysis is telling me that we should be in the throws of some significant volatility during the month of October.
- Tip #3: The Monsters of Tech (AAPL + AMZN + FB + GOOGL + MSFT + NVDA) will continue to underperform. Google and NVidia were up 75% YTD, and are now up only 58%. FB has fallen from being up 40% to being up 28% YTD. Big tech is being hurt by interest rates moving higher.
- The Financials are beginning to feel the impact of the rate changes. Tip #4: If you’re looking for a short-term trade, think about shorting the financials.
- Energy was the big gainer last week. Tip #5: I’m looking for energy to grab an early weekly bid, and then get sold off mid to later in the week.
- The focus shifts to retail: TGT, WMT, and COST. The WalMart (WMT) chart looks downright ugly, but so do Target (TGT) and CostCo (COST). Retail is getting pummeled and is much more of a market mindset than it is an influencer of the indices. It’s telling the world that nobody is doing well. If you’re looking for a trade in the sector, Tip #6: look for Home Depot (HD) to head lower over the coming month.
SPX Expected Move (EM):
- Last week’s EM was $71. We smashed thru the EM to the downside early in the week, and we finished the week outside the lower end of the EM.
- Next week’s EM is $89. If markets continue to break outside their EMs, you’ll know that market efficiency is in question and to put your hedges on.
Tips:
HODL’s: (Hold On for Dear Life)
- AMC – Holding
- Bitcoin (BTC = $48,100 / in at $4,310)
- B2Gold (BTG = $3.39 / in at $4.16)
o Waiting to sell CCs for income,
- Englobal (ENG = $3.44)
o Sold Dec. $2.50 Calls for income,
- Ethereum (ETH = $3,400 / in at $310)
- Express (EXPR = $4.73)
o Sold Oct $5’s and Nov $5’s
- GME – Holding
- Grayscale Ethereum (ETHE = $31.53 / in @ $13.44)
- Grayscale Bitcoin Trust (GBTC = $37.19 / in @ $9.41)
- Grayscale Trust (GDLC = $27.51 / in @ $22.75)
- Hyliion (HYLN = $8.05 / in @ $0.32)
o Sold Oct. $10 CCs for income,
- Infinity Pharma (INFI = $3.36)
o Sold Oct $3 and Nov $3 Calls for income,
- Transocean (RIG = $3.82)
o Sold Nov. $4 Calls for income,
- Exela Tech (XELA = $1.87)
o Sold Oct $2 and Nov $2 Calls for income,
- Yamana Gold (AUY = $3.91)
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!
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