Pardon Our Enthusiasm… When someone shares a new idea or describes a dream to you – what if you were enthusiastic about it with them (for a change)? Maybe positive thinking is contagious. Just maybe, it would help them overcome their fears and share that same idea / dream with others. You can always say ‘No’ further down the line. At that moment, it’s your confidence and reinforcement that they’re asking for to make their idea better – and there’s no harm in giving that to anyone.
Every Important Word – is also Confusing… per SG: words like: Trust, Love, Friend, Honesty, Dignity… – all have dozens of meanings. It’s because the words themselves are important. Go ahead, spend the extra minute that it takes to figure out what someone else means when they say those words. It will be worth it in the end.
Is a college degree worth the price tag? Good question. When you look at the data for college graduates over 25 years old:
- 50% don’t work in the same field they studied,
- 25% earn less than $30,000/yr., and
- 14% live below the poverty line.
- Even if you studied business, engineering, biomed and/or comp-sci – only 40% make more than $90,000/yr.
The Market: Our FED == Inflation + Recession
You knew that it would end in Inflation & Recession - yes? You saw:
- Unprecedented FED money printing accompanied by a Balance Sheet explosion,
- Zero & Negative rates allowing C-level wealth creation via stock buy-backs,
- Sovereign Mega-cap and ETF purchases solely designed to inflate asset prices,
- Massive governmental spending,
- Student debt forgiveness,
- Eviction moratoriums,
- Tariffs and sanctions, and
- Endless Free-Money programs.
o At this point, you can’ be surprised!
FOMO vs GTFO…
To paraphrase HL: In 2021, Fred Wilson wrote a post titled How This Ends. “We are in the middle of one of the greatest asset bubbles of modern times. When interest rates are zero or negative, the value of future cash flows is huge – and that is how you get Price to Revenue multiples approaching 100. This ends when the pandemic is over, global economies recover, central banks tighten the money supply, and interest rates start to rise. That is when the air will come out of the asset price bubbles and the go-go markets will hit the brakes. When the one-year Treasury Yield gets back above 2%, then you know we are leaving the easy money era.”
On Friday, the one-year Treasury Yield hit 2.01%, and everyone started to panic. Panicking is fine, as long as you panic FIRST. If you are still selling your tech stocks, the good news is that you’re not the LAST one to panic. Tech IPOs & SPACs are done. Those newly created companies without revenue will go the way of others before them. Our FED is late in doing the ONE job that they promised to focus on during all of those money printing years – to guard against massive inflation. At first, they termed it transient, and now it’s deemed out-of-control. I like buying low and selling high – so seeing Netflix, Zoom, Shopify, Coinbase and Spotify all take price haircuts is not a bad view from where I sit. But, I also do NOT believe that Friday was even close to the bottom in market land. Remember that CASH is a position. And although inflation erodes the value of cash over many years – Netflix taking a 50% haircut in a week hurts a lot more than inflation – by about 10,000%.
InfoBits:
- The tech market has plunged since its peak in November. Netflix is down nearly 68%, and Facebook is down over 50% from its record high.
- Mortgage rates are above 5% for the first time since 2011. Since 90% of U.S. mortgages carry a rate less than 5%, more homeowners are likely to stay put – creating even less supply for buyers.
- You have just 6 seconds to get a job recruiter’s attention.
- Lithium and Cobalt are the new Silver and Gold… as they are essential to EV batteries. Cobalt prices have 3X’d and Lithium prices have 18X’d in 10 yrs. Supplies are so low that Tesla’s considering mining its own metals.
- The comeback of the QR codes. The Univ. of Central Florida’s football team will replace jersey numbers with QR codes to encourage digital engagement.
- Verizon hiked the minimum wage for all its US employees to $20/hr.
- Workers unionizing an Apple store… want a $30/hr. minimum wage.
- Walmart will run its forklifts on hydrogen Plug Power… It’s one of the biggest corporate uses yet for hydrogen, as Walmart pledges to go net-zero by 2040.
- Legal cannabis sales are expected to total $33B in 2022, a 32% jump YoY.
- Netflix lost 200K subscribers last quarter, will lose 2m more this quarter… and has erased over $80B in market value over the past week.
- United and Delta Airlines expect to return to profitability this year… as vacay-hungry travelers shell out more $$ to fly.
- Novavax’s early trial data for its combo Covid-Flu vaccine… shows a triggered immune response. Goal == 1 yearly shot that protects against both.
- CNN+ is shutting down after 1 month… It’s one of the biggest failures for a new media venture in recent history. Guess people won’t pay for news – who knew?
Crypto-Bytes:
- U.S. President Joe Biden has nominated Michael Barr… former Ripple adviser Federal Reserve vice chairman for supervision, arguably the most powerful financial regulatory job in the U.S.
- Crypto in the capitol(s)… while the FEDs debate how to regulate crypto – lobbyists are taking a state-by-state approach.
o This year over 150 crypto-related bills have been proposed in 40 states.
o The Biden admin. thinks stablecoins (pegged to currencies like the USD) could be the real jumping-off point for digital-currency regulation.
- Blackchain.com, is interviewing banks for an initial public offering (IPO).
- A forthcoming stablecoin regulatory package in the U.K…. may provide some regulatory clarity for digital asset companies.
- The FBI, CISA, and the U.S. Treasury… have issued a warning after observing that “Lazarus,” a North Korean state-sponsored group, is targeting a number of popular crypto- and blockchain-based platforms.
- Bitcoin’s share of the total crypto market is nearing an all-time low.
- The surging popularity of DeFi, stablecoins, and NFTs… have helped propel rival cryptocurrencies that offer smart-contract compatibility.
- Solana (SOL), Terra (LUNA), and Avalanche (AVAX)… have all outperformed BTC by more than 300%, 700%, and 280% respectively over the last year.
- STEPN – a move-to-earn cryptocurrency… is a Web3.0 lifestyle app that lets users earn tokens by running and walking.
- Coinbase’s NFT marketplace is now in beta… but with sales on OpenSea down 67% over the past 30 days – it could be: ‘too little – too late’ for COIN.
- Morgan Stanley believes that BTC… can become more widely accepted in physical stores – which still do 85% of the sales in the U.S.
- Goldman might be FTX’s backer… as the crypto exchange plans an IPO and future derivatives products.
- Payments processor Stripe will use Polygon… to allow its clients to make payments using USDC. This is a boom for independent freelancers, content creators, and service providers who want to be paid in crypto.
TW3 (That Was - The Week - That Was):
Wednesday: NetFlix (post earnings) is projectile vomiting. They lost 200k subs and expect to lose 2m more. That smacked their stock for $100 a share. The DOW is up big, but I don't trust this market. We've had a couple huge up days, and they can just barely keep the S&P green.
Thursday: Today Powell is speaking at 1 pm. If he goes off talking about higher and higher rates, he could put the kibosh on all of the good karma. Well Powell was a bit more aggressive than the markets had hoped. He’s all about 50 to 75 bps and even ‘front-loading’their first moves. The market went from the DOW being +300 to -130, the S&Ps were +50 to -30, and the Nasdaq from +230 to -120. Wow!
Friday: Oh, it’s ugly out there. Some are thinking that this is the market's way of threatening the Fed to NOT go crazy with rates. Unfortunately, our FED doesn’t care about the market right now. In ‘normal’ times our FED has no choice but to dance to the market piper, but these are COVID and War-times. They've got a free pass to yank rates higher, showing that they're doing something. If anyone screams, they can respond by saying markets have done very well in history with 6% rates. How low we go is anyone's guess. I think we test the March lows, but we’ll get some insane bounces along the way. We may get a bounce on Monday, or black Monday here we come. I'm not going to try and guess which.
AMA (Ask Me Anything…) … Musk takes us Elong for the ride…
Twitter’s stockholders forget that they own the company… “and are being royally screwed over by these, these bureaucrats, with their steak lunches, their corporate jets, and golden parachutes…” – Gordon Gecko … Wall Street
- FACT == Jack Dorsey (founder) owns less than 2.5% of Twitter.
- FACT == Parag Agrawal (head-man) owns less than 0.065% of TWTR.
- FACT == Omid Kordestani (next highest) owns less than 0.025% of TWTR.
A little goes Elong way… it’s Elon’s simulation and we’re just living in it.
- Tesla’s Q1 sales were up 81% from a year ago, while profits more than 7X’d.
- Tesla’s production numbers are moving closer to Mercedes and BMW, and have already surpassed Volvo and Subaru.
- Tesla plans to bring a dedicated RoboTaxi with no steering wheel or pedals to market by 2024.
- Tesla has done all of this without a marketing budget. In fact, Tesla’s sales increase when the competition runs ads for their own EVs.
Is Elon the greatest Entrepreneur of all time? As wealth creation goes:
- Tesla: $1T+ valuation,
- SpaceX: $100B+ valuation,
- PayPal: $100B+ valuation,
- The Boring Company: $5.6B valuation,
- Solar City: $2.6B valuation, and
- Neuralink: ~ $1B valuation.
Next Week: Dramatic Selling == More Opportunities
Market Update: I believe that we're in a controlled bear market. I think we are headed for the March lows, and then we will witness a struggle. If we lose those lows, we will plunge down by an additional 15 to 20%. The average stock is already off 40%, but because the market mega-caps have such a heavy weighting – it’s not easily felt. This stealth bear market is slowly being exposed. We'll get more wicked blasts higher for sure, but I believe the overall trend will be sideways and down. Try to operate with that in mind.
- SPX Expected Move – it’s getting real out there. It’s been a long time since we touched both ends (higher and lower) of the SPX’s expected move – all within the same 24-hour period.
- Correlation made a comeback: This is the sign that we’ve emerged from a sloppy / mis-guided market into a more correlated one. Unfortunately, we’re virtually 100% correlated to the downside.
- Volatility explodes back on the scene: The VIX is around 28, and the volatility futures are within a stone’s throw of going into a vol-inversion (where May is higher than June). Tip #1: Watch the /VX next week for a duck-n-cover volatility inversion.
- Volume in S&Ps was incredibly light: This tells me that markets remain complacent and orderly. So, we have not yet seen the algo-selling that would precede any sort of capitulation.
- Our FED isn’t worried about the markets… as stated by J. Powell on Friday.
Pricing Pressures Moving Forward:
- Tech earnings will take a back seat to volatility: Nobody cares all-that-much about individual company earnings – as long as our markets are correlated.
- GOOGL (-17% YTD) and NVDA (-35% YTD) serious technical breaks: Any of the mega-techs could easily push the Nasdaq (13,315) down to its March low of: 12,942. Both Google and NVDA have experienced technical breaks and if they’re earnings don’t save them next week == look-out-below.
- MSFT and FB (-45% YTD) on the edge: If mega-tech begins to miss earnings, the screams of recession will become louder. Recession fears feed on themselves and fear alone will cause people not-to-buy. Tip #2: Be careful of any downward pressure on tech following next week’s earnings.
- Can Bonds rally? They rallied a little bit last week. Bonds have been crashing for the last 60 days, and we could see a small rally in the weeks to come. As selling and correlation continue within the S&Ps, bonds could turn into that short-term safe haven. Everyone knew that the rise in longer-term rates would break the back of the markets – it was just a matter of time.
Positions:
- Option premiums and back month skew have exploded: Tip #3: If you’re a premium seller, look at selling SPY $320 Puts for a 40% Implied Volatility.
- Short stronger sectors == XLU, XLP and WMT: Tip #4: Buy In/Out Put Spreads on the: XLU, XLP and Walmart – 45 days out.
- Put your game face on for Monday:
SPX Expected Move (EM):
- Last week = $98 (EM) = and we touched the upper edge on Thursday and broke through the lower edge on Friday.
- Next week = $134 (EM) = Game On! Big boy pants = check. Hands and feet officially inside the vehicle = check. Let’s get ready to….
Tips:
HODL’s: (Hold On for Dear Life)
- CASH == Nexo & Celsius == @ 8 to 12% yield
- PHYSICAL COMMODITIES == Gold @ $1,933 / oz. & Silver @ $24.20 / oz.
- **BitFarm (BITF = $2.86 / in at $4.12)
o Sold May, Dec ‘22: $5 CCs for income,
- **Bitcoin (BTC = $39,600 / in at $4,310)
- CPG (CPG = $7.02 / in at $6.44)
o Sold Jul $7.50 CCs for income,
- Energy Fuels (UUUU = $8.19 / in at $11.29),
o Sold June $8 CCs for income,
- **Ethereum (ETH = $2,950 / in at $310)
- GME – Holding
- **Grayscale Ethereum (ETHE = $21.68 / in @ $13.44)
- **Grayscale Bitcoin Trust (GBTC = $28.04 / in @ $9.41)
- Hyliion (HYLN = $3.38 / in @ $6.01)
o Sold July $4 CCs for income
- Uranium Royalty (UROY = $3.65 / in at $4.41)
o Sold July $5 CCs for income
- XLP – BOT May 27th == +81 / -79 Put Spread ($79.20)
- XLU – BOT May 22nd == +75 / -73 Put Spread ($74.25)
** Denotes a crypto-relationship
Trade of the Week: Short WMT using a Put Spread – 45 days out.
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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