Where should you focus? Looking back, there were so many missed opportunities, decisions not made, and errors in judgment. We didn’t buy Google at $80, Ethereum at $5, or learn Mandarin in college – when we had the chance. But those are NOT the things we obsess about. We constantly fixate about our small near misses. Instead of correcting our million-dollar errors, we’re consumed by the phone number we left on the counter. Both levels of effort are identical, but one is thousands of times more costly than the other. Our mind chooses to focus on the one that was right in front of us and our responsibility. This type of behavior is habit forming, and even rewards the wrong types of decision-making going forward. Remember: The Roads You Never See – always matter more than the Potholes You Hit along the way.
Why are you wasting time? If you’re feeling creative, then do the errands tomorrow. If you’re fit and healthy, then take a day to go surfing. When inspiration strikes, write it down. The calendar belongs to everyone. Everyone else’s schedule is NOT your schedule – unless it helps you get to where you’re going.
Make things Better… by making Better Things: There’s always something better, nothing’s perfect, and things won’t last forever. There will always be critics, and yes – somebody will probably copy your idea. By the way, it may not work. On the other hand: sooner is better than later, and always act like it’s the beginning – because you’re in the business of: Making things Better… by making Better Things.
The Market:
- In 2021 – What was hot? (a) RobinHood’s Top 100 stocks doubled … again. (b) Oil rose by 145%. (c) Everything biotech benefited from the pandemic. And (d) Mega-Cap tech continued to lead the way. What was not? (a) Travel stocks never got the memo. (b) Hip tech stocks like: TWTR, UBER, PYPL and SQ also never got on board. (c) Most EV names never capitalized on the push. And (d) Betting stocks were down.
- What about 2022?
o 1st: The market cap of Ethereum will surpass that of Bitcoin. Ethereum’s merge in 2022, combined with the understanding that productive assets must be worth more than non-productive ones, make this a fairly obvious prediction. But I got it wrong last year, so I surely can get it wrong again.
o 2nd: We’re moving toward repatriating our production – onshore. This will accelerate our shift toward automation (automated coffee shops) and other production technologies (3-D printing, etc.)
o 3rd: The retail investor will continue to like controlling the market. It was first seen in the Gamestop / Wall Street Bets / Reddit situation, and later in the ConstitutionDAO saga. This only serves to reinforce the digital accumulation of wealth using mainstream crypto = Bitcoin and Ethereum, hot new tokens such as Solana, and the entirely new NFT marketplace.
o 4th: We’re now in a more permanent inflationary environment. This should have been obvious after years of QE and COVID-stimulus money. Welcome to the hangover associated with 10 years of ‘Party on Garth’.
o 5th: The tech sector will be the place to be going forward. It shows up when Warren Buffet puts half of his ‘well-diversified’ portfolio into Apple. Tech firms are IPO’ing at a pace not seen since the dot com era. Crypto funds are restructuring due to unbelievable returns, and venture dollars are rushing into new web3 projects on a scale never seen.
InfoBits:
- M&A volumes globally surged 64% YoY in 2021… shattering records and generating over $157B in fees.
- Miami is the new Silicon Valley… as Silicon Valley falls below 20% in all venture financing.
- Our centralized internet rulers will be heavily involved in ‘Web 3’… no matter where the ‘brain drain’ happens to be. The stakes are too high. They have too much cash and too much to lose – to let this happen without them.
Crypto-Bytes:
- Japanese crypto startups faced with 35% tax rates on unsold assets… are leaving the country in droves.
- Kraken is developing a marketplace for non-fungible tokens (NFTs)… where users can arrange loans using the tokens as collateral.
- The Turkish President will send a crypto law to the country’s parliament… banning the use of cryptocurrency for payments, although it remains legal to hold and invest it.
- U.S. Sen. Cynthia Lummis (R-Wyo.) will pitch Congress… on creating a self-regulatory body for crypto as part of her sweeping digital asset policy bill.
- Marathon Digital is purchasing a record number of bitcoin miners.
- Bahrain has become the first Middle Eastern / North African country… to approve Binance as a crypto asset service provider.
- Luxury marketplace UNXD and Decentraland (MANA) plan to offer… a metaverse fashion week complete with catwalks, pop-up shops and afterparties.
- Iran is banning authorized crypto mining until March 6… in an attempt to save power and avoid blackouts this winter.
- In a remarkable display airdrop community power… a new token OpenDAO reached a peak market cap. of over $250m in just 4 days.
- The hacker who helped Polygon avert a multibillion-dollar disaster… won a $2.2m bug bounty.
- The Central Bank of Mexico (Banxico) plans to join Brazil and Peru… in launching a CBDC by 2024.
- MicroStrategy, the BI software company masquerading as a crypto vault… bought another 1,914 Bitcoin between 12/9 and 12/28 for $94.2m in cash.
- The SEC and Gary Gensler have hired… a senior advisor specializing in cryptocurrency.
- It was destiny that 2 separate Bored Ape Yacht Club projects… were launched last week under accusations of plagiarism – accompanied by trading bans along with a robust supply of ape-themed memes.
- A ‘critical mass’ of the smartest people in the world… have enough confidence (and dollars) in the future of crypto/web 3 that they are willing to bet their professional careers on it.
- Ozzy Osbourne (former lead singer of Black Sabbath – rumored to have bitten the head of a bat during a 1982 concert)… is making his foray into NFTs.
Last Week:
Monday: As I drove around my neighborhood looking for places that were open, I saw crazy long lines outside of the free COVID testing centers. For an instant I thought – whoa this is bad. But, I believe in the efficiency of markets – and the S&P doesn’t lie. Thus far, the market is giving the middle finger to COVID, and the VIX is seconding the motion by closing under 18. 20 months ago this disconnect made no sense, but now we need to respect the money flow. The pandemic is not over, but the market is over it. The question is, where can we look for returns? I think that the big names should keep going. TSLA, AMD, MSFT and LRCX all look poised to run some more. On the cheaper end of the scale: FCEL, NIO, RUN and RIOT all look interesting.
Tuesday: The market (to some extent) is still on fire. I picked up some CDEV at $6.44 and UEC at $3.83. I’m guessing that today’s ‘grab-n-go runners’ will be: UPST, TSLA, and NVDA. One that might try and break free is MU, so keep an eye on that.
Wednesday: There's a lot of running in place going on out there today. While the big names may catch fire, nothing seems to want to be the leader. In the meantime, CAT over $208.52 looks interesting, CLF over $21.15 puts it back over its 200-day, TJX is worth a look over $75.92 and VSTO looks pretty strong over $43.78. Naturally you might want to play the lotto with: NVDA, TSLA, LRCX, and UPST, but right now it would be just taking a chance.
Thursday: Looking around, the risk-on names are moving higher. Names such as: ZM, SNAP, ROKU. DOCU, PINS, and RBLX. Are they going to be one-day-wonders, or catch a wave? I wouldn't get crazy in here, but a few shares of say RBLX over $100.30 might see some more love.
TW3 (That Was - The Week - That Was):
Remember when Retiring was special: In 2021, older Americans retired in droves as stimulus-related gains fueled the growth of their retirement plans. Younger professionals participated in the mass exodus of skilled workers leaving their offices in search of greater flexibility and a more fulfilling employment opportunity. These two factors along with worker coalitions challenging corporations for better pay and working conditions made 2021 a monumental year for the evolution of ‘WORK’ in the U.S.
Remember the line from ‘When Harry Met Sally’ when Meg Ryan was explaining women faking orgasms to Billy Crystal: “It's just that all men are sure it never happened to them, and all women at one time or other have done it. So, you do the math." I’m beginning to feel the same way about crypto. At this point it doesn’t matter what anyone believes – the returns in crypto companies continue to drastically eclipse anything you can make even in the TAANG stocks. At this point - ignore crypto and stocks like the following at your own peril.
- Solana (SOL): With the boom in decentralized finance (DeFi) and non-fungible tokens (NFTs) this year, Solana emerged as the hottest Ethereum killer. Other high points were: (a) the SEC registered a Solana-centric fund for institutional investors. (b) The crypto data network Pyth went live on the Solana blockchain. And (c) the Solana blockchain entered the NFT world. SOL == +11,000% return YTD … so, you would have turned $100 into +$11,000…in a year.
- Axie Infinity (AXS) is a blockchain-based game inspired by Pokémon. It gained attention by embracing rural communities in the Philippines. It rewarded winning players with tokens – which were then traded in for fiat currency to earn a living.
- Decentraland (MANA) is a metaverse platform where users can buy and sell virtual properties, develop their land, and show off digital collectibles. If 2021 was the year of the NFT, then 2022 will be the year of the metaverse – where meta-based tokens will have a lot of room to grow. MANA == +4,100% return YTD … so, you would have turned $100 into $4,100…in a year.
Next Week: A Premium Seller’s Paradise…
The market: Last week, we marched higher on Monday – right up to the expected move, and then did absolutely nothing for the rest of the week.
- This market is currently displaying incredible dynamics for selling option premium. As we look over the past year, we were consistently selling premium (month over month) when the VIX was around 24. This constant level of volatility was virtually unheard of during the previous decade. You could have sold 24% volatility in the SPX every month, without the SPX ever getting near the 24% level.
- The advantage that 2022 has over 20221 – is the FED. The FED is talking about raising rates, and reducing its balance sheet. Maybe they will continue to taper, and maybe they won’t. But it introduces even more risk to the markets.
Enter SKEW-tacular:
- SKEW = the ratio of PUTS to CALLS. So, when SKEW moves higher, it tells us that the out-of-the-money (OTM) PUT options (30-days out) are higher in price than their corresponding OTM CALL options.
- Currently, the SKEW 200-day Moving Average = 147. We started the year around 111 – so it gained 40% on the year.
- The back-month SKEW (the SKEW out in April for example) is even higher than our current readings. Therefore, rather than selling options premium in the current or near term – Tip #1: Sell Options Premium 100-days out – and buy it back – 70 days out. On the above chart, notice how high the implied volatility is - $100 OTM and 100 days moving forward. You do NOT want to sell premium next month – you want to sell it 3 months from now, and buy it back 2 months from now (at a much cheaper price).
- Lower volatility (VIX) has brought-on a higher SKEW. Just because the VIX is going lower does NOT mean that the SKEW is following suit – because it’s not.
- Tip #2: When you SELL premium, do not allow the VIX to be your only indicator. In times like these, the VIX takes a backseat to the SKEW.
Premium Selling Dyamics:
- Realized VOL vs Implied VOL: The movement in the S&Ps over the past year – although significant – paled in comparison to what premium selling (with protection) was paying investors.
- Tip #3: Return 50% in 30 days by: SELLING 40% volatility 100 days out (in the indexes) – and BUYING it back for half – 70 days out.
- Tip #4: In times of low VIX, buy inexpensive protection such as: Xmas-Tree Spreads & VIX volatility hedges.
- Therefore, lower implied volatility (VIX) has brought with it a higher SKEW. That allows us to sell way, OTM PUTS for a ‘jacked-up’ premium.
- In 2022, with the FED not having your back:
o (a) professional traders will BUY OTM PUTS as hedges, and
o (b) that will increase the price of OTM PUTS and the corresponding SKEW.
- In 2022, if the VIX takes off higher:
o (a) then we just sell pure premium straddles and strangles, along with
o (b) using a risk mitigation vehicle like the VIX-volatility spread.
Tips:
HODL’s: (Hold On for Dear Life)
- *BitFarm (BITF = $5.20 / in at $4.12)
o Sold Feb, May, Dec ‘22: $5, $7.50 CCs for income,
- **Bitcoin (BTC = $47,300 / in at $4,310)
- Energy Fuels (UUUU = $7.62 / in at $11.29),
o Sold Apr $11 CCs for income,
- **Ethereum (ETH = $3,700 / in at $310)
- GME – Holding
- **Grayscale Ethereum (ETHE = $32.36 / in @ $13.44)
- **Grayscale Bitcoin Trust (GBTC = $34.25 / in @ $9.41)
- Hyliion (HYLN = $6.10 / in @ $6.01)
o Sold Jan, Feb, April $6 and $7 CCs for income,
- **Loopring (LRC = $2.07 / in at $2.27)
- **Solana (SOL = $175 / in @ $141)
- Uranium Royalty (UROY = $3.65 / in at $4.41)
o Sold Jan $5 Calls for income,
** Denotes a crypto-relationship
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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