My business has NO competition… that’s because there’s never any competition for things that don’t matter. Entrepreneurs should be looking for problems that others are paying good money to solve. Therefore, your goal is NOT to find a non-competitive environment, but rather a cheaper-better-faster solution.
Do you grade on a curve? Yes, the Kepner-Tregoe curve. That is where the student puts the percentage odds that they think their test answer is correct – next to each of their answers on an exam. You then multiply the value of the problem by the student’s probability of success and you get the problem’s final worth. So, if you think there is ‘no chance’ your answer is correct – then put down a 0%. Multiply the credit for the test answer by your probability for success (in this case zero) and you receive 0 credit for that answer. And, if you are positive that your answer is correct – then go ‘all-in’ and put down 100%. If you turn out to be wrong, you pay the ultimate price – you fail the exam. It tends to reinforce that life is just a series of probabilities.
Happy Thanksgiving… As parents we need to remember that parenthood is but a short chapter in our child’s story. Therefore, we should stop, look around, and say: ‘Thank You’ – a lot more often.
The Market:
Today’s Twitter… will not be the same in 3 months. That is the amount of time that George Holtz has been given to re-architect, re-shape, and re-write critical parts of the application. Within 30 days, George has already fixed Twitter’s unusable search tool – a task thousands of others took years to not complete. This is the level of developer that Elon attracts, and the level of productivity they achieve. Elon’s style (lead, follow, or get out of the way) is not for the faint of heart, or for those expecting participation trophies. ‘Break-a-Leg’ Elon and George!
InfoBits:
- Bob Iger returns as CEO of Disney… replacing Bob Chapek. Iger was Disney’s CEO from 2005 to 2020, and was brought back in as a fix-it man.
- US existing home sales… fell for the 9th consecutive month, down 28% YoY while the median price of a home is up over 6%.
- Government owned Amtrak… has not made a profit in 50 years.
- COVID-19 cases in China… are spiraling toward record highs, forcing officials to again lock down large swaths of the country.
- German police have launched an international hunt… for thieves who stole $1.65m worth of ancient gold coins from a museum – within nine minutes and without triggering any alarms.
- Qatar, the 2022 World Cup host… was eliminated from the tournament yesterday and made it the earliest host nation to be knocked out from the World Cup in its 92-year history.
- “Life is like a 10-speed bicycle… most of our gears will never used”… Charles M. Schultz.
Crypto-Bytes:
- Cathie Wood of Ark Investment Management… bought $1.5m of Grayscale’s Bitcoin Trust (GBTC) because it’s trading at a record discount to its underlying net asset value.
- Solana has lost over -93% since January 2022… and over -95% since its all-time high in November 2021.
- Brendan Blumer, the founder and CEO of Block.One… is now the majority owner of crypto bank Silvergate.
- Proof of Reserves - Proof of Liability = Verified Solvency
- The following have completed Proof of Reserves: Kraken, BitMex, Nexo, Gate.io, and HBTC. Where’s Coinbase?
- The following will provide Proof of Reserves in the near future: Binance, Bitfinex, Crypto.com, KuCoin, OKEx, and Huobi. Where’s Coinbase?
- Binance just jumped above Coinbase… as the largest reserve holder of Bitcoin for the first time – ever.
- This is the first time the majority of bitcoin holders… are ‘in-the-red’ since the COVID-crash of 2020.
- Sequoia just made FTX… their biggest single investment write-off in their history.
- Tiger Global Mgmt. marked down their fund by 25%... FTX contributed to their $42B decline.
- Bain Capital/Consulting… was paid +$100m by Tiger Global for their due diligence of FTX. I smell a lawsuit coming.
- Binance has doubled its ‘industry recovery fund’ to $2B… which will be used to buy distressed crypto assets and support the industry.
- Not your keys … Not your coins… Per HL: “I can’t trust the exchanges. God bless the people that use and trust them. I won’t.”
TW3 (That Was - The Week - That Was):
Monday:
- The housing market is falling at its fastest pace since 2008.
- Tech layoffs are above Dot Com (2001) levels.
- Personal credit card debt is near $1T for first time.
- Crypto / FTX losses are over $2T.
- Consumer confidence is at an all-time low.
We're in a recession, and we will be in a bigger one in 2023. The value of Bitcoin is now below its average mining cost. We don’t know just how badly crypto will knock the crap out of our financial system.
Tuesday: Workers at the largest U.S. rail union voted against the latest tentative contract deal. This raises the possibility of a year-end strike that could paralyze vital shipments of food and fuel. Morgan Stanley's Mike Wilson said that inflation has peaked. He also expects the S&Ps to fall to around 3000 in Q1 of 2023.
Wednesday: I believe that energy will become more of a premium product as winter continues. Around Dec. 6th Europe is scheduled to receive its first blast of arctic air. I'm liking: HES, OXY and SLB in the energy space.
Friday: China cut the amount of cash that banks must hold as reserves for the second time this year – which released $70B to prop up their faltering economy. Production of Apple's iPhones could fall by 30% due to disrupted operations at Foxconn's factory in Zhengzhou. The FTC is likely to block Microsoft’s $69B takeover of Activision Blizzard. One reason for the DOW’s out-performance is: European money. When you're in a war-torn area and you wish to shelter your money, the DOW is known as where the ‘value-based’ American companies reside. It’s easy to buy the DIAs and let-it-ride.
AMA (Ask Me Anything…)
SBF did his best to cripple crypto… by causing hundreds of thousands of people to lose a lot of money. The single biggest loser lost $222m instantly. Forbes just published a list of 134 companies FTX caused to file for bankruptcy protection. James Bromley (FTX’s bankruptcy attorney) and John Ray (FTX’s new CEO) told a U.S. bankruptcy court that Sam Bankman-Fried (SBF) ran FTX as his own personal check book. Sam’s parents and senior executives bought at least 19 properties in the Bahamas, for $121m over the past 2 years. Bromley also said that a substantial amount of FTX’s assets are missing and may have been stolen along with SBF’s leadership abilities. “SBF was supposed to be crypto’s future, and instead he may have robbed the industry of one.”
The future of crypto… is DeFi (decentralized finance), and it will get a lot brighter through: integration, regulation, fungible products, centralized clearing, 3rd party market making, and a trusted ecosystem. DeFi is not an asset or a currency play, but rather a technology play. And throughout history, very few people have succeeded by shorting next generation technology at multi year lows. Backing DeFi is NOT like betting on some overpriced SPAC or a crowded cannabis play. DeFi’s innovative technology is being built on a scale that the world has never seen before. Although the price of digital assets could drop lower in the short-term – fading the space right now offers little reward for a ton of risk.
Next Week: When will REALITY sink in?
Is the Santa Claus rally coming? That answer depends upon the upcoming data. Following the lower CPI print on November 9th, this market has wandered between 3931 and 4050. Currently, this market is far too data dependent to guess December’s results. In the next couple of weeks, we have: a JOBS number, CPI, GDP, and a FED meeting. And if the layoffs kick in and the JOBS number is lousy – is that good or bad for markets? I am bearish longer term, but fearful of any holiday-related market moves.
Sector update YTD: SPY (-16% YTD), QQQ (-28%), XLF (-9%), XLE (+60%), XRT (-27%), XLP (-1%), and XLU (0%): Due to the market’s data dependency, here are a couple ‘sector specific’ thoughts.
- If the market goes back into a ‘selling mode’, the XLF and XLE are going to take a hit. The financials and energy are both out-performing the S&Ps. So, if I’m going to short something – it’s going to be something that’s out-performing.
- Energy is +60% YTD. When energy starts to break, that means that a global slowdown is in the cards, and that is when REALITY will meet the markets.
- Retail (XRT) is down -27% YTD, but Consumer Staples (XLP) is only off -1% YTD. Shorting XLP gets my attention prior to shorting the XRT.
- Utilities (XLU) is unchanged (0%) on the year and therefore holds additional risk to the downside – especially with its dividend yield being less than the 10-Year.
Currently, markets are too data dependent to take a purely directional position as it relates to the S&Ps. The range is between 4211 and 3931. If you’re bearish on the overall marketplace, go into a better risk-v-reward ratio such as shorting the: XLF, XLE, and/or XLP.
Volatility is changing: It has been moving lower for the past 60 days. However, both the SKEW and the VVIX caught a bid last week. Traders have returned to hedging because they believe there is downside risk. Watch the 9-day VIX this week as to whether it will follow the SKEW and VVIX higher.
TRADES:
- Tip #1 = NFLX… go lower = BOT Jan. PUT Spread = +$275 / -$265 PUT.
- Tip #2 = SPY… go lower = BOT Dec 30 PUT Spread = +$392 / -$382 PUT.
- Tip #3 = SPY… go lower = SOLD Jan 31 CALL Spread = -$440 / +$450 CALL.
SPX Expected Move (EM):
- Last Week’s EM (3.5-day week) was $72, and we hit it almost exactly.
- Next Week’s EM = $76. We moved $72 in 3.5 sleepy days last week. Next week is pricing the same EM, but we have 5 full-days and a JOBS report. I’m expecting us to ‘smash’ through the EM next week.
Tips:
HODL’s: (Hold On for Dear Life)
- PHYSICAL COMMODITIES = Gold @ $1,769 /oz. & Silver @ $21.66 /oz.
- AGG – BOT more bonds (AGG = $98 / in at $93)
- **BitFarm (BITF = $0.61 / in at $4.12)
o Selling CCs for income,
- **Bitcoin (BTC = $16,475 / in at $4,310)
- **Ethereum (ETH = $1,200 / in at $310)
- EGY ($5.24 / in at $5.30)
- GME – DRS’d and HODL
- GS (Downside PUTS):
o BOT Jan / +$340 / -$330 PUT Spread
- IBM (Downside PUTS):
o BOT Jan / +$130 / -$120 PUT Spread
- Innerscope (INND = $0.010 / in at $0.0052)
- NFLX (Downside PUTS):
o BOT Jan / +$275 / -$265 PUT Spread
- RIG ($4.06 / in at $3.47)
- SBUX (Downside PUTS):
o BOT Jan / +$85 / -$75 PUT Spread
- SPY (Downside PUTS):
o BOT Dec 16 / +$357 / - $347 SPY PUT Spread
o BOT Dec 16 / $285 DIA PUT
- TSLA (Downside PUTS):
o BOT Jan / +$170 / -$160 PUT Spread
- VIX (Upside CALLS):
o BOT Dec 16 / +$30 / -$35 CALL Spread
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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