Entrepreneurial Timing Sucks… and the only way to get better at timing – is to re-listen, re-load, and learn from your mistakes. If people contracted a chronic disease an hour after smoking their first cigarette – it’s doubtful that many people would continue smoking. If entrepreneurs discovered freedom, satisfaction, and customer delight a week after starting out on their own – more people would probably start their own business. Unfortunately, most of those outcomes don’t come without a fair amount of short-term pain, blues ‘n agony. And most of us are trained to only respond to short-term feedback loops. Therefore, most people continue smoking, and over 95% of small businesses fail. The real learning opportunity is to get a lot better at managing the longer-term feedback loops. Nobody really cares what’s going to happen in 15 minutes. But if you know what’s going to happen in 15 days, weeks, and/or months – now, that’s a conversation worth having. Entrepreneurs need to get the business model right – so they can concentrate on their long game.
The Entrepreneurial Buck - Stops Here… is an expression that entrepreneurs live by every single day. In larger organizations, the responsibility tag is complicated by the phrase: I’m just doing my job. Therefore, in a large organization, who is responsible for a lousy outcome: workers, investors, or founders? What brilliant, marketing genius behind the cigarette – ever claimed responsibility for killing millions of people? An organization’s size tends to dictate the thickness of their Teflon suit – because nothing sticks to Teflon. For better or worse, everything sticks to the entrepreneur. In corporate environments, your goal is to have a way-out of every decision. In entrepreneurship, the founder often weighs-in on every decision.
The Market:
If it looks like a bear – smells like a bear – and poops like a bear == It’s a bear.
We learned this week that Elon Musk (CEO of Tesla) has ‘super bad feelings’ about our economy. Well, the only asset classes that haven’t crashed this year are energy and commodities, and energy crashed 2 years ago. China, software, and tech stocks have all crashed. Mega-Tech and Crypto are crashing as we speak. Elon’s response in November 2021 to these same ‘bad feelings’ was to sell Tesla stock. Last week he decided to lay-off 10% of Tesla’s workforce. Elon’s actions will cause other founders and CEO’s to do the same. The stock market has been sitting below its 200-day moving averages for over a month now without a significant bounce or rally. Our FED has started QT (Quantitative Tightening). Per HL: Legendary traders have been screaming: ‘Cash is King’ since March of 2021 when Cathie Woods anointed herself Queen, and SPACs were still able to raise $400m over Zoom. Having ‘super bad feelings’ is normal. It’s ok to sell stocks (or anything else that isn’t nailed down) to ease those feelings. But remember to note those feelings so that you can act accordingly when you’re next feeling: ‘super fabulous’.
Factually:
- Market levels of resistance are == 420-430 for SPY (411), 320-330 for QQQ (306), and 190-200 for IWM (187).
- Energy continues to be among the price leaders. Lithium stocks (needed for clean-energy) are on fire: LTHM, ALB, LAC, SQM.
- Our FED started withdrawing market liquidity.
- Higher energy prices kill the consumer, and generally cause a ‘recession’. Doing the math.
o If you were spending $200 / month on gasoline when it was $2.50/gallon
o It’s now $5 / gallon = so you’re spending $400 / month.
o That additional $200 / month you’re spending on gasoline stops the consumer from buying: a TV, a lawn mower, a table… == every single month for every working individual.
InfoBits:
- Benjamin Button is real… as scientists at Harvard Medical have successfully reversed aging in mice. Can humans be far behind?
- Jamie Dimon (CEO of JPMorgan) equated the economy… to a “hurricane” and advised we “brace ourselves due to continued turmoil in commodities.”
- White noise is hot in podcasting… as Spotify is raking in as much as $18,000/mo. for the soothing sounds of vacuum cleaners and waterfalls.
- Yuan/Ruble trading increases as Russia skirts sanctions: With heavy economic sanctions limiting Russia’s access to the U.S. Dollar, they have turned to China for replacements. As a result, trading volumes of the ruble-yuan pair have surged over 1,000% and China looks to expand the Yuan’s presence.
- Fidelity Investments cut valuations on… Reddit, Stripe, TikTok/ByteDance, and Instacart.
- Shanghai’s loosening of COVID lockdowns… will ramp-up oil demand as the world's 2nd largest oil consumer prepares to reopen. More demand = higher oil prices.
- Russia’s still exporting oil… but the UK and EU are cutting off Russia’s ability to insure the tankers carrying the oil. If Moscow can't insure its tankers, it will be cut off from exporting oil by sea. Less oil on the market = higher oil prices.
- Elon isn’t one to mince words… “Everyone at Tesla is required to spend a minimum of 40 hours in the office per week. If you don’t show up, we will assume you have resigned.”,
- 33% of Americans who earn over $250,000 / yr… live paycheck to paycheck.
- The electric-truck startup Rivian… which months ago ranked among the most valuable auto makers – is struggling with production.
- Sheryl Sandberg is stepping down as COO Meta (FB)… but don’t worry – she has sold more than $1.7B worth of FB stock.
Crypto-Bytes:
- Fidelity Digital Assets, a subsidiary of Fidelity Investments… is doubling its staff to meet the growing demand for crypto trading from institutional investors.
- According to JPM… “Bitcoin has significant upside from here and has become the firm’s preferred asset over real estate as an alternative investment as long as rates continue to rise.”
- In Davos, hedge-fund giant Ray Dalio announced his addition of BTC to his portfolio.
- Legendary value investor Bill Miller is committed to Bitcoin… “I consider Bitcoin an insurance policy against financial catastrophe."
- The Binance-supported deal to take Forbes public via SPAC… has been called off.
- For the first time… there are now more than 1,300 Billion-dollar privately-held companies.
- Cryptocurrency exchange and custodian Gemini said… that it will lay off about 10% of its employees.
- Kanye West is preparing to mint his own NFT… according to 17 new trademark applications filed around the rapper’s Yeezus alter ego.
- Sam Bankman-Fried, FTX founder… has pledged to give away the majority of his wealth ($21B) to philanthropic causes.
- Brett Harrison, head of FTX.US… said that stablecoin demand will survive Terra’s collapse. He said fiat-backed stablecoins are still reliable and not risky, and doesn’t see less demand for the use of stablecoins.
TW3 (That Was - The Week - That Was):
Monday: Our FED will start their QT operation this week, and we have the various Jobs Reports coming at us on Thursday and Friday. T here will be no lack of volatility near the end of the week. My opinion is that any rally will die on the vine.
Thursday: The ADP jobs report came in at just +128k jobs created – while the expectations were for 299k. Q1 labor costs were revised to show a +12.6% increase, while GDP / Productivity was down -7.3%. These are all ugly numbers. Oil is down $3 a barrel on rumors that Saudi will urge OPEC to produce more. Frankly, they can't fill the Russian oil void, but it makes good headlines. MSFT is warning about future earnings. We have Fed Vice Chair Lael Brainard saying that it’s hard to see the case for the FED pausing rate hikes. I like the looks of MU over $74.60. I don't trust this market very much – as you can imagine. It's comical that on a day when our FED says that they probably won't pause, where big names are warning about future earnings, where the Q1 numbers continue to stink = that we’re fat, big, and green.
Jobs Friday: The U.S. economy created 390,000 new jobs in May – above Wall Street’s expectation of 325,000. The unemployment rate held steady at 3.6%, with significant job gains in leisure & hospitality, and professional & business services, while retailers shed 61,000 jobs. There are tremendous market cross currents out there. Jamie Dimon (JPM) is saying that there is a hurricane coming at the economy. Elon Musk is laying off 10% of his employees because he has a "super bad feeling" about the economy. The 10-year note gained 30 basis points this week. We have $5 per gallon gasoline, 5.5% mortgages, and an insane amount of food inflation. Today markets will puke up most of yesterday’s gains. What a mess this market is. After a few feeble attempts at getting us higher, the wheels came off and here we are with the S&P down -63. The NASDAQ and DOW both off over -300.
AMA (Ask Me Anything…)
Is Elon right? Yes, Elon is right. Energy prices will kill this market. Our FED will gloat that their policies are helping slow down inflation, when (in reality) it’s high prices themselves that are destroying demand for everything except food, heat and power. There will be bear market rallies that take your breath away – so plan accordingly utilizing the SPYs, DIAs and QQQs. But from where I sit, the overall market direction is down. Therefore, Elon should streamline and conserve cash where possible within TSLA – and that includes reducing headcount. Remember, Elon’s seen this movie before.
Next Week: Fear this Market’s Complacency…
Market Watch: Complacency … in the middle of this much selling?
- I always find it amusing… when Janet Yellen (Sec. of Tres.) proclaims anything – much less that she was WRONG about inflation. Currently, our markets are headed lower, but by all indications (SKEW, VIX, and VVIX) – it’s a yawn. What do the markets know – that we don’t? Why is there a general lack of hedging activity on the professional side of the marketplace?
- The SKEW (a measure of Out-of-the-Money Puts vs OTM Calls) is low. The VIX (Volatility Index = 25) can’t catch a bid. And the VVIX (Volatility of the VIX = 91) is back to 2020 lows. The SPX range is between 4211 and 3931, but below 3931 we will touch 3700 in a heart-beat.
- Why am I worried? If/when the market begins to trickle lower next week, traders will realize that they should put some hedges in place because they’re currently just long stock. The market makers will SELL PUTS to the traders, and in order to maintain their neutral position – will also sell S&P futures. This will cause a ‘snap lower’ in the market as selling will beget more selling.
Which Asset Classes are working?
- Tech (along with financials) – closed on the lower edge of their expected moves.
- Metals – are showing complete complacency.
- Oil / Energy – could easily rip to the upside next week, and that would be a great place to buy a short-term put spread.
- Crypto is hanging on by a thread.
- Bonds, Notes and Rates – the 10-Year is rapidly approaching 3%. Lower bonds and higher rates do not look good for tech. The only redeeming feature is that right now – the world is on the ‘bearish’ side of the trade. We’re seeing a lack of directional bias. So, if you’re going to sell premium, take a very light hand.
- Downside risk is being created by complacency. Tip #1: Keep yourself hedged.
SPX Expected Move:
- Last Week’s EM = $100
- Next Week’s EM = $102. Tip #2: Do NOT SELL short-dated options because the implied volatility is inherently low. Allow the complacency to washout of the marketplace.
Tips:
HODL’s: (Hold On for Dear Life)
- CASH == Nexo & Celsius == @ 8 to 12% yield on USDC
- PHYSICAL COMMODITIES == Gold @ $1,854 / oz. & Silver @ $21.94 / oz.
- **BitFarm (BITF = $1.94 / in at $4.12)
o Sold Dec ‘22: $5 CCs for income,
- **Bitcoin (BTC = $29,600 / in at $4,310)
- CDEV (CDEV = $8.60 / in at $7.83)
- CostCo (COST = $476.25)
o Bot the July, +$465 / -$460 PUT Spread
- CPG (CPG = $9.61 / in at $6.44)
o Sold Jul $7.50 CCs for income,
- Energy Fuels (UUUU = $6.56 / in at $11.29),
o Sold June $8 CCs for income,
- **Ethereum (ETH = $1,7980 / in at $310)
- GME – Holding
- **Grayscale Ethereum (ETHE = $11.50 / in @ $13.44)
- **Grayscale Bitcoin Trust (GBTC = $19.26 / in @ $9.41)
- Hudbay Minerals (HBM = $5.88 / in @ $5.04)
o Bot the October 22, $7.50 CALLs,
- SPY (SPY = $410)
o Bot the June 30, +$397 / -$387 PUT Spread
- Uranium Royalty (UROY = $3.03 / in at $4.41)
o Sold July $5 CCs for income
** Denotes a crypto-relationship
Trade of the Week: CDEV == bought it at $7.83 and I’m hoping for it to power through its 50-day, and run back to the April highs at $9.50. If it gets up, over, and holds its 50-day – then I'll add more, and then sell the $10 Calls.
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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