Son: "Daddy, may I ask you a question?"
Dad: "Yeah sure, what is it?"
Son: "Daddy, how much do you make an hour?"
Dad: "If you must know, I make $100 an hour."
Son: "Oh! Well, daddy – may I please borrow $50?"
Dad: "If you’re asking me to borrow $50 to buy a silly toy or some other nonsense, then march yourself straight to your room, go to bed, and think about why you’re being so selfish."
Son: The little boy quietly went to his room and shut the door while the father continued his anger. After some time, the father calmed down, and started to think: Maybe there was something he really needed to buy with that $50. He went to his son’s bedroom door and opened it.
Dad: "Are you asleep, son?"
Son: "No daddy, I'm awake".
Dad: "I've been thinking, maybe I was too hard on you earlier. It's been a long day. Here's the $50 you asked for."
Son: Sitting up in his bed smiling. "Oh, thank you daddy!" He then reached under his pillow and pulled out some crumpled bills. The little boy slowly counted out his money – all the while the father’s anger started to return. Then the boy looked up at his father and said:
Son: "Daddy, I now have $100. Can I buy an hour of your time? Please come home early tomorrow. I want to play with you."
Dad: The father put his arms around his little son – holding on for dear life.
Youts are Time Billionaires. Fair warning: Don’t let the asset slip through your fingers without spending some of it with those who really matter to you. Thx to JS.
The Market:
Leon Cooperman of Omega Advisors: “I think anybody looking for a new bull market any time soon is looking the wrong way. Our FED is not the problem. The problem is the lack of confidence in the system due to some very foolish policies: SPACs, weekly and daily options, and crazy valuations. It’s true that our FED is not accommodative – so any rallies are just setting the foundation for further weakness."
Precious Metals are making their move:
- Silver was trading around $18 in September, and is now at $24 (up +30%).
- In 2022, London’s silver vaults saw an unprecedented net outflow. This behavior is not possible in 2023 without causing serious silver availability issues.
- Silver’s commitments for: tech, EVs, climate change, and solar – will require at least 85% of the current global silver reserves.
- Silver could be $35 by EOY (up +45%).
InfoBits:
- Microsoft is planning to invest $10B into ChatGPT’s parent… and would value OpenAI at $29B. MSFT is planning to use OpenAI's tech to improve the Bing search engine, as well as its Office products. The investment provides MSFT with a 49% stake in OpenAI.
- Search and Office are ripe for disruption: By incorporating ChatGPT’s chatbot and DALL-E’s image generator into MSFT’s search engine, it could better compete with Google. ChatGPT could help MSFT Outlook write emails, and DALL-E could draw images.
- “Orders are really slowing down… in the OEM sector. Business is slowing and forecasts will decrease by the end of Q1.” – ISM Mfr. Survey
- “Inflation remains far too high… and is therefore of great concern. I am committed to bringing inflation back to our 2% goal” – FED Gov. Lisa Cook
- "Inflation is eroding everything… and the $1.5T buffer will run out mid-2023. That will derail the economy and cause a mild to severe recession." – JPM CEO Jamie Dimon
- NJ plans to upgrade its iconic boardwalks… by selling a liquor license to whomever wants one. If this plan passes, things are gonna be ‘extra lit’ at the Shamrock Café this summer.
- Lawyers have time on their hands… as the average monthly billable time worked per lawyer fell to its lowest level ever recorded. This translated to the average lawyer making almost $100,000 less in 2022 than in 2007.
- Disney’s new CEO has instructed corporate Mousketeers… to return to their pre-COVID desks 4 days per week by March 1.
- Apple reduced CEO Tim Cook’s compensation by 40%... to $49m for 2023
Crypto-Bytes:
- 117 parties have expressed interest… in buying units of FTX ahead of an approaching bankruptcy deadline.
- Nishad Singh (former Dir. of Engineering at FTX)… is working to receive a plea deal in exchange to divulging info about SBF’s political donations.
- Coinbase is planning to reduce its headcount by about 20%.
- FTX has recovered more than $5B in assets.
- Hong Kong's SFC will allow… retail trading in a group of “highly liquid”cryptocurrencies as it attempts to introduce clarity to the market.
- The DOJ will investigate the 2 brothers… behind Solana’s stablecoin exchange for faking almost all of “Solana DeFi’s” liquidity.
- BlockFi executives who remained after declaring bankruptcy… gave themselves pay raises of up to $500,000 each.
- Last year's $20B crypto-crime record… was just 0.24% of all crypto activity.
TW3 (That Was - The Week - That Was):
Tuesday: San Fran. FED Pres. Mary Daly pushed back against market optimism, saying she is paying attention to core services ex-housing and that FED rate hikes above 5% are likely. Atlanta FED Pres. Raphael Bostic emphasized getting rates to 5%-5.25% and holding above 5% for a long time. The 10-year is sitting at 3.55% and the 2-Year at 4.23% - still ridiculously inverted. U.S. Small-Business Optimism fell to its 2nd-weakest level since 2013. If Thursday’s CPI comes in at all soft – we’ll move higher.
Thursday: The CPI is out. They were looking for a YoY number of 6.5%, and it came in at 6.5%. The early market reaction is positive, but the romp isn’t as high as I had thought – however, the precious metals and miners remain moving higher. There are some whispers that tomorrow’s bank earnings are not going to be as great as anticipated.
Friday: Earnings are funny creatures. You can beat the estimates, but then when you drill into the specifics – things go sideways. Take JPM for example as they beat overall estimates but when you drill into some key elements:
- Q4 Fixed Income Sales & Trading Rev = $3.74B / Est. $3.91B (miss)
- Q4 Equity Sales & Trading Rev = $1.93B / Est. $1.98B (miss)
- Q4 Investment Banking Rev = $1.39B vs Est. $1.66 B (Strike 3 – you’re out!).
Bank of America beat estimates, Citi had a -21% decline in Q4 profit, and Wells just plain missed on everything.
AMA (Ask Me Anything…)
“Let’s arrest everyone on the Forbes 30 under 30 list”… Chris Bakke. JPMorgan is suing the founder & leaders of Frank (a financial-aid business it bought for $175m in 2021), because they defrauded the bank when they lied about having 4.25m users when ‘in fact’ they had less than 10% of that. Per MP: “Business analysts spend 99% of their time assessing the merits of the opportunity and 1% questioning its reality. Those committing the fraud spend 100% of their time staying two steps ahead of the analysts. Fraud is a risk you bear in every investment, but let me be clear: Fraud is Fraud.”
I want the Least Risk & the Highest Reward… then you need Bitcoin. 50% of the experts believe Bitcoin is going to be worthless. Nassim Taleb and Jamie Dimon have blasted Bitcoin as a worthless sideshow. Peter Schiff and Jim Cramer reference the greater fool theory. The other 50% of the experts believe that Bitcoin is the global bank of the future. Assuming nobody knows the answer, my single reason to BUY is that it’s an asymmetric opportunity. An asymmetric opportunity is one where the two sides are not equal – and (in this case) the upside is much greater than the downside. In this case, the upside of Bitcoin has the potential to be multiple times the downside. If you believe that Bitcoin can one day go back to $50K or higher, then the trade is a no-brainer with Bitcoin at $19,000. Naturally, Bitcoin has plenty of downside risk but it’s still a fraction of the upside potential. Place your bets in the direction of the largest upside. It took me a long time to learn and accept that lesson.
Next Week: Indecisive Market @ Inflection…
Above SPX=3931 and away we go… If you wondered why the market moved slowly to the upside this past week – look no further than short-covering in the following tech stocks: MSFT, NVDA, TSLA, AAPL and AMZN.
Financials eek out gains – irrespective of earnings… On Friday, JPM had ‘not-so-great’ earnings – and the stock gained 2.5%. Wells Fargo missed earnings completely, and finished the day up 3.25%. Straight line moves (as was the case within the financials on Friday) mean that algorithms started buying stock as a hedge. In the case of Wells, we actually moved 3.25% straight up without even so much as a retracement. I still believe that earnings will matter going forward, and am using the first couple weeks of January as window-dressing for what is to follow.
On the edge of the Expected Move (EM)… In the S&Ps, we ended the week exactly on the edge of the expected move. The edge of the EM was 3993.5, and we closed the day at 3999. That’s a $4,000 product that ended the week within $5 of the options estimate. That tells me that right now the options market is in control.
Market stalling out… Because this rally stopped on the edge of the expected move, it shows an unemotional and extremely efficient market. 1/3 of all market volume was in the S&P Index last week. The rally last week was less about people wanting to buy and get long, and more about resolving the math of the options market.
Volatility… We are at the lowest volatility that we’ve seen since the beginning of 2022. The reason for that is because the market (at these levels) is bored. It’s seen this movie many times before.
Where are we going? Next week we may head higher into SPX = 4211, but it’s much more likely (a higher probability) that we head back into the 3931 level – and wait for some of the big gun tech earnings to show us the way.
Get your trade on:
- Tip #1 == Metals and Miners… dive in the water’s fine – I’m liking it when: HL is over $6, AG is over $10, MAG is over $15, AUY is over $6, AGI is over $12, GDX is over $30, and/or GDXJ is over $37.50.
- Tip #2 == Bond Funds… AGG broke thru $100 and retraced. Next week I’m expecting interest rates to move higher, and bonds to fall back (time to buy).
SPX Expected Move (EM):
- Last Week’s EM = $98 (5-day week)
- Next Week’s EM = $65 (4-day week) We are going into a monthly options expiration in the SPX this coming Friday; therefore, keep your hands and feet inside of the vehicle because you need to be ultra-careful.
Tips:
HODL’s: (Hold On for Dear Life)
- PHYSICAL COMMODITIES = Gold @ $1,923 & Silver @ $24.41 /oz.
- AGG – iShares Bond Fund: (AGG = $99.9 / in at $93)
- BIV – Vanguard Bond Fund (BIV = $76.6 / in at $74.54)
- 30, 60, & 90-Day Treasuries @ 4.2 to 4.6%
- **Bitcoin (BTC = $20,500 / in at $4,310)
- **Ethereum (ETH = $1,525 / in at $310)
- CAT (Downside PUTS):
o BOT Feb: +$200 / -$190 PUT Spread
- GDX – Metals Miners ETF: (GDX = $32.65 / in at $30)
- GDXJ – Metals Jr. Miners ETF: (GDXJ = $40.40 / in at $37.50)
- GLD – Gold ETF: (GLD = $178.75 / in at $176)
- 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 = $0.006 / in at $0.0052)
- SBUX (Downside PUTS):
o BOT Jan: +$85 / -$75 PUT Spread
- SLV – Silver ETF: (SLV = $22.33 / in $20.51)
- SPY (Downside PUTS):
o BOT Feb: +$355 / -$365 PUT Spread
- XLF (Downside PUTS):
o BOT Feb: +$32 / -$30 PUT Spread
o BOT Feb: +37 PUT
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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