Should I start at the top or the bottom? People always tell you start at the top – with the power and authority. Unfortunately, the days of power and authority residing at the same place are gone. Real power lives at the ‘grass roots’ level. The power brokers are often choosing between options dictated by the ‘grass roots’ leaders. It seems that those revamping and building out the bottom, are also in charge of changing the top.
Who really cares anyway? It’s rare that no one cares. More often than not – someone cares. And never does everyone care. Therefore, your entire focus is just getting ‘someone’ to care.
Feature creep goes like this: This specific feature is cheap compared to the benefits it offers. Once that feature is added – it’s never removed. And when enough features are added, the system fails. This applies to everything from software to restaurant menus to vehicle dashboards. Yahoo’s home page once had 183 links. Google’s had two and grabbed all of the search traffic. At some point feature creep causes system bankruptcy – and then the cycle resets. It’s not easy to say NO to a feature. It’s often easier to push the reset button, clear the slate, and start over.
The Market:
U.S. Inflation rose to 8.3% YoY: That guarantees our FED will remain aggressive in raising interest rates. Services, shelter, transportation, and medical care rose the most in August. Ask yourself:
- Why does $4/gal. sound cheap? Because electricity and water are up.
- Why are croissants $9? Because food prices rose nearly 1% MoM.
- Why is rent grabbing my entire paycheck? Because rents rose 0.7% MoM.
Things are NOT good out there:
- Mortgage rates crossed 6% for first time since 2008.
- FedEx and others warned of huge, shipping slowdowns.
- Computer chip production is falling on weak demand.
- Housing purchase prices are down 6% in 2 months, and
- Credit card debt is up 30% in the last 4 months.
Inflation causes Less spending power, and Rate Hikes cause More credit card debt; therefore, retailers should be worried about the holidays.
InfoBits:
- Charging my new iPhone to my Apple Card = Seamless… but paying that same iPhone on time – isn’t as easy as it sounds. Goldman (admins of the Apple Card) are seeing card holders missing payments. Goldman’s consumer side could lose over $1.2B if the recession really takes hold.
- The Strategic Petroleum Reserves… are at their lowest levels since 1984.
- Goldman’s cutting hundreds of jobs… as it performs its annual culling of low-performing employees.
- U.S. stocks… posted their worst one-day performance since June 2020 after hotter-than-expected CPI data sparked fears that our FED will need to be even more aggressive to rein in inflation.
- Bank of America’s survey shows… that fund managers are more bearish today than they were during the financial crisis of 2008.
- Companies are finally doing what they need… to retain their necessary workers. Hard Rock is raising employee wages. Starbucks is improving the employee experience. Amazon is adding delivery driver perks.
- Seniors could see a record 8.7% cost-of-living adjustment next year… which would be the largest since the 1980’s.
- Alexa may soon answer your questions… with ads.
- The Seattle Mariners hosted a “Work from the Ballpark” day… with Wi-Fi, lunch, and in-Ballpark café seating. They sold out of all $50 tickets. Is Work from Home now: Work from Ball Park? Who are we kidding?
- Walmart plans to launch checking accounts… and expand into loans and investing.
- Starbucks’ cold coffee drinks… account for 60% of all orders year-round.
- A tentative agreement has been reached… that avoided a rail-strike by +100,000 workers – that would have added to our supply chain issues.
- FedEx pre-announced weaker global shipping… noting that the speed of the global slowdown took them by surprise.
- Adobe agreed to buy Figma for $20B… that is 50 TIMES Figma’s reported year end annual recurring revenues. WOW!
- Apple has overtaken Tesla… as our most-shorted stock.
- The World Bank is seeing its steepest slowdown… since 1970. It expects rate hikes to continue, and the price to beat inflation will be negative growth.
- Other named-investors… expect the U.S. to experience a ‘rolling recession’ as our FED aggressively raises rates to fix its ‘credibility problem.’
Crypto-Bytes:
- The U.S. Office for Science and Technology Policy… released a report on bitcoin mining’s impact on the national electricity grid, and suggested standards to limit the industry’s environmental footprint.
- Starbucks will offer an NFT-based loyalty program… called “Starbucks Odyssey.” Customers will buy-n-earn digital stamps that give rewards and experiences.
- Fidelity is thinking about… letting individual customers trade bitcoin. They currently allow corporate clients to add bitcoin to their managed 401k’s.
- Huobi and HashKey Capital received… a virtual, asset manager’s license in Hong Kong to manage portfolios of 100% crypto investments.
- Schwab, Citadel, Fidelity, and other Wall Street firms… have started a new crypto exchange called EDX Markets. It’s just the latest evidence that Wall Street is forging ahead in digital assets – despite the crypto winter.
- Ethereum’s transition to proof-of-stake was successfully completed… at 6:42 UTC – immediately causing a 99.9% decline in ETH’s energy use.
- FTX is raising capital to fund further retail-focused acquisitions: It’s seeking the same $32B valuation as its last capital raise.
TW3 (That Was - The Week - That Was):
Monday: This week is all about the CPI. If the CPI comes in ugly, we have a good chance to fall out of bed. The CPI comes out tomorrow at 8:30am.
Tuesday: The CPI gained momentum in August, and we’re back to 8.3% YoY. The report was horrid, and inflation is still out-of-control. So, the gains from the last 4 days have evaporated, with the DOW now down +870 points. The debt market is creaking and groaning – due to a lack of liquidity. Why hunt for bargains when today's bargains could be even better bargains later in the week. Tomorrow we get the PPI. Most likely it will also be ugly, and we’ll see a 2nd day of carnage. This week the S&P is doing some roll overs on Thursday, and then Friday is options expiration.
Wednesday: The 2-Year Treasury yield, is more than 40bps above the 10-Year rate – further deepening an inversion. Doubleline’s Jeff Gundlach said he expects the S&P 500 Index to fall to 3,000 or about a 20%-25% drop from its current level. This morning’s PPI (Producer Price Index) showed a +8.7% YoY inflation rate. So, after a 1300-point smackdown yesterday, I would think another day or two of small gains might make sense before another round of selling hits. Next week our FED hikes rates and Powell speaks on Wednesday.
Friday: S&P futures are down after a big profit warning from FedEx (FDX). FedEx was hurt by global volume softness – which also caused them to withdraw their 2023 earnings forecast. The British Pound also moved below the $1.14 mark (vs. the Dollar) for the first time since 1985. Bulls keep telling me that things are getting better. Politicians keep telling me that the market doesn’t reflect the real economy. I wonder who’s right: the Politicians or FedEx?
AMA (Ask Me Anything…)
Will ‘the Merge’ push crypto to new all-time-highs? I’m not anticipating all-time highs anytime soon, but hype from the Merge and also the U.S. midterms could push BTC up into the $35,000 to $40,000 range.
How did Adam Neumann raise $350m for an idea? When Adam Neuman’s’ new rental-apartment startup received a $350m check from Andreessen Horowitz (a16z), it came with an unusual catch. Neumann (in essence) agreed to effectively hand over part of his real-estate holdings as collateral in return for the money. If Neumann’s new company were to fail, he stands to lose a significant part of a real-estate mini-empire that is valued in the hundreds of millions of dollars.
Next Week: A Volatility Shock is Coming:
- This could really get ugly under SPX 3931… because quite a few stars are aligning. The SPX closed Friday at $3,873 – well below its 200-day moving average = $4,286. We could be witnessing a complete re-pricing of the S&Ps due to higher rates, lower growth, lower earnings, and lower sector ratios. GOOGL and META have broken through their lows for the year, while MSFT is almost there. Apple is what’s holding this market up, and it’s currently the most shorted stock. My cause for concern is the SPX itself.
- Will 2-Sigma moves become normal? Given we’ve had 7 breaches of the Expected Move over the past 9 weeks, I can only conclude that the SPX is just inefficient. Last week we were expecting an SPX $97 move and we received a $200 move to the downside. The ‘forward-looking’ risk in this market, is NOT being well-handicapped by the option markets. 2-Sigma moves can NOT become the norm. Tip #1: This is a warning shot – that SPX & SPY options are being priced way too cheaply. Therefore, buying long-term options is far more preferable than selling short-term ones.
- Volatility is Ready to Rock… as one of two things is going to happen: (a) we are in for a ‘shock-n-awe’ type of upcoming move that substantially increases volatility, or (b) markets will rally and bring volatility back into alignment at the lower end.
- What to do when Volatility Spikes? On Friday we traded 8,000 SPX ($3,900) contracts per minute. With a firehose that fully open, it’s difficult to call a specific direction. There’s currently only 0.2 points between October Volatility (/VX) 27.4 and November Vol. of 27.6. If we had a spike in volatility that pushed us into Vol. backwardation (October Vol. over November Vol), this marketplace would be forced to react violently and instantly. Tip #2: If we enter volatility backwardation, institutions will have to sell SPX futures to mitigate their risk and then all charts would immediately collapse to the downside.
- Bonds hit lows, and our 2-Year vs 10-Year inversion is getting wider: Currently, the 2-Year Bond is at 3.8% while the 10-Year is at 3.4%. This is one of the widest inversions since the 1980’s. Bonds could continue to sell-off, until a duck-n-cover type move occurs – causing them to turn and rip to the upside.
- The Dollar (thus far) has not gone parabolic… but is 1 point from the 111 break-out area – that would crush the S&Ps. Tip #3: DANGER because we have all of these risk factors hitting at once: (a) the Dollar, (b) Volatility, (c) Bonds, and (d) an extremely inefficient marketplace (2-Sigma moves).
- SPX Expected Move (EM):
o Last Week = $97EM … and we moved almost $200.
o Next Week = $117EM … Why should I believe them after it just moved $200 last week? And, the FOMC / interest rate announcement is coming on Wednesday.
Tips:
HODL’s: (Hold On for Dear Life)
- CASH = Nexo @ 8% on USDC – waiting for The Merge dust to clear.
- PHYSICAL COMMODITIES = Gold @ $1,683 /oz. & Silver @ $19.57 /oz.
- **BitFarm (BITF = $1.24 / in at $4.12)
o Selling more CCs for income,
- **Bitcoin (BTC = $20,040 / in at $4,310)
- **Ethereum (ETH = $1,450 / in at $310)
- GME – DRS’d and HODL
- **Grayscale Ethereum (ETHE = $10.50 / in @ $13.44)
- Innerscope (INND = $0.017 / in at $0.0052)
- Starbucks (SBUX):
o BOT Oct 31 / +95 / -90 PUT Spread
- SPY:
o BOT Oct 7 / +$385 / - $375 PUT Spread
o BOT Oct 21 / +$378 / - $368 PUT Spread
o BOT Oct 21 / +$380 / -$370 PUT Spread
- Walmart (WMT):
o BOT Oct 21 / +$137 / -$135 PUT Spread
* * Denotes a crypto-relationship
Trading Tips:
Follow me on StockTwits.com to get my daily thoughts and trades – my handle is: taylorpamm.
Please be safe out there!
Disclaimer:
Expressed thoughts proffered within the BARRONS REPORT, a Private and free weekly economic newsletter, are those of noted entrepreneur, professor and author, R.F. Culbertson, contributing sources and those he interviews. You can learn more and get your subscription by visiting: <http://rfcfinancialnews.blogspot.com/>.
Please write to Mr. Culbertson at: <rfc@culbertsons.com> to inform him of any reproductions, including when and where copy will be reproduced. You may use in complete form or, if quoting in brief, reference <http://rfcfinancialnews.blogspot.com/>.
If you'd like to view R.F.'s actual stock trades - and see more of his thoughts - please feel free to sign up as a StockTwits follower - "taylorpamm" is the handle.
If you'd like to see R.F. in action - teaching people about investing - please feel free to view the TED talk that he gave on Fearless Investing:
https://www.youtube.com/watch?v=K2Z9I_6ciH0
Creativity = https://youtu.be/n2QiPSe_dKk
Investing = https://youtu.be/zIIlk6DlSOM
Marketing = https://youtu.be/p0wWGdOfYXI
Sales = https://youtu.be/blKw0zb6SZk
Startup Incinerator = https://youtu.be/ieR6vzCFldI
To unsubscribe please refer to the bottom of the email.
Views expressed are provided for information purposes only and should not be construed in any way as an offer, an endorsement, or inducement to invest and is not in any way a testimony of, or associated with Mr. Culbertson's other firms or associations. Mr. Culbertson and related parties are not registered and licensed brokers. This message may contain information that is confidential or privileged and is intended only for the individual or entity named above and does not constitute an offer for or advice about any alternative investment product. Such advice can only be made when accompanied by a prospectus or similar offering document. Please make sure to review important disclosures at the end of each article.
Note: Joining BARRONS REPORT is not an offering for any investment. It represents only the opinions of RF Culbertson and Associates.
PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING. WHEN CONSIDERING ALTERNATIVE INVESTMENTS (INCLUDING HEDGE FUNDS) AN INVESTOR SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS AND OTHER SPECULATIVE INVESTMENT PRACTICES MAY INCREASE RISK OF INVESTMENT LOSS; MAY NOT BE SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.
Alternative investment performance can be volatile. An investor could lose all or a substantial amount of his or her investment. Often, alternative investment fund and account managers have total trading authority over their funds or accounts; the use of a single advisor applying generally similar trading programs could mean lack of diversification and, consequently, higher risk. There is often no secondary market for an investor's interest in alternative investments, and none is expected to develop.
All material presented herein is believed to be reliable but we cannot attest to its accuracy. Opinions expressed in these reports may change without prior notice. Culbertson and/or the staff may or may not have investments in any funds cited above.
Remember the Blog: <http://rfcfinancialnews.blogspot.com/>
Until next week – be safe.
R.F. Culbertson
No comments:
Post a Comment