Teaching is hard… Explaining atoms, molecules, decision making, or what you do at your job is difficult because in order to explain something – we really need to understand it first. Understanding goes beyond just being able to do the task, or ace the test. Understanding is hard; therefore, teaching is really hard.
Change is hard… Refusing to change is the toughest hurdle in entrepreneurship. If Major League Baseball (a game dominated by purists) can shorten the game by implementing a pitch clock, why can’t e-people admit they’re wrong and move in a different direction? Heck, why can’t we figure out how to regulate crypto – a topic for a different day. I hope we all believe that for the most part – change is good. Here are some additional financial changes that come to mind:
- 24/7/365 markets,
- Instantaneous clearing, and
- A single, non-political, regulatory body.
The Market:
It is funny what people get used to: For more than a decade, startup funding deal sizes only went up – until the second-half of 2022 happened. After that, funding deal sizes have gone down. Entrepreneurial Hint #1: 99% of the deals do not require funding, and would be well served to boot-strap the opportunity.
For example, Texas energy is weird: In Texas, so much capital was allocated to oil, gas, and renewable energy – that Texas created enough energy to power the entire state – one extra day out of every week. Factually, the Electric Reliability Council of Texas (which runs the state’s power grid) is paying consumers to take the excess energy off their hands. Bitcoin miners have also invested heavily in Texas, and have a very interesting relationship with the energy council. Bitcoin miners will pay for and consume as much energy as possible when prices and power usage are low. In exchange, they will consume ALL of the excess power – especially when they are being paid to consume it. Texas is the only state where it truly pays you to mine Bitcoin.
InfoBits:
- "I would welcome signs of moderating demand, but until they appear and I see inflation moving meaningfully and persistently down toward our 2% target, I believe there is still more work to do." …FED Governor Christopher Waller.
- Google paused construction… on their 80-acre San Jose campus amid a slowing economic environment.
- Investors see the dollar sliding even further… with the yen and/or yuan being the primary driver.
- In Q1, the 4 largest US lenders wrote off $3.4B in loans (up 73% YoY)… as consumers struggled to pay down debts.
- Gen Z & Millennials are racking up record debt due to financial avoidance.
- Luxury goods giant LVMH… is the first European company to surpass $500B in market value. Higher-income consumers continue to spend despite economic uncertainty.
- 33% of Americans have more credit card debt than emergency savings… which is the highest on record.
- Proctor & Gamble raised prices by 10%YoY… Pepsi increased prices by 16%, and Nestle went up by 9.8% - all showing sales declines. Does this sound like inflation is slowing down?
- GM and Hyundai plan U.S. battery plant investments. The new facilities will help the automakers meet local sourcing requirements required to qualify for federal electric vehicle tax credits.
- “In this economic climate, some of the best companies will die. They will die not because they have bad products, but because they do not have enough space to execute” … Cat Middleton – GP The Venture Collective.
- Tesla’s Model Y now sells for under $47k… some $759 less than the average U.S. auto price. Last summer, the Model Y cost $20,000 more.
- Q1 GDP rose at an annualized 1.1% rate… much less than expected.
- According to JAMA’s internal medicine doctors… OpenAI's ChatGPT scored better than real doctors at responding to patient queries posted online.
Crypto-Bytes:
- Chamath Palihapitiya said: “Crypto is dead in America.” The U.S. is no longer the best place to start a crypto project. Dubai, Singapore, or various islands are much better.
- Bitcoin has the potential to rally past $50,000 within a year… courtesy of a process known as halving – which cuts in half the amount of tokens miners receive as reward for their work.
- Coinbase sued the SEC… by asking a federal court to compel the agency to respond to its demand for clearer crypto regulations, and said: “the SEC is making up rules on the fly.”
- In 2021, China was the first major economy to launch an e-currency… over 100 countries (including the U.S.) have been playing catch-up ever since.
- China is positioning their Digi-Yuan for international use… which would offer an attractive alternative to the U.S. dollar for sanctioned countries.
- ARK Investment Management and 21Shares… believe that the 3rd time is the charm when trying to get a spot bitcoin ETF approved.
- Binance.US backed out of its $1B deal… to buy the assets of bankrupt crypto lender Voyager citing an "uncertain regulatory climate."
- Speaking of hypocrisy… “Mr. Gary Gensler (SEC Chair), Did you mean what you said at MIT when you said: ’three-fourths of the crypto market are not what would be called securities in the U.S., Canada, and Taiwan – the 3 jurisdictions that follow something similar to the Howey test.’”
TW3 (That Was - The Week - That Was):
Tuesday: Earnings are beating estimates, but it's a con game. For example: let’s assume you're an analyst for the XYZ company. You know that sales and earnings are down YoY – so you lower your estimates to revenues of $500m vs the previous $750m. They report revenues of $550m, and everyone is happy because – XYZ beat their estimates! Yes, but in the big picture – XYZ is selling less and making less. Almost every name that's reported has beaten estimates that are so low, they could beat them by declaring bankruptcy.
Wednesday: Last night GOOGL and MSFT both beat earnings after the bell, with MSFT beating "better" than GOOGL. That’s an indicator that companies that play in the AI arena will probably go up. MSTR comes to mind. Today it seems that even MSFT and GOOGL couldn’t save the market. I expected some weakness in the second half of April, and I think the first stop will be the 50-day moving averages on all three indexes. Keep your powder dry as there will be bounces, but I think that we have lower to go.
Thursday: We're coming off of two pretty hefty down days, and some form of counter bounce is certainly possible. Today, I suspect SNOW is going to get some attention. On the economic front, the Atlanta FED mysteriously slashed its ‘FLASH’ GDP number in half to about 1% annual growth.
Friday: Yesterday’s bounce came out of left field. It certainly wasn't because of stunning earnings growth. With 46% of companies reporting, NASDAQ earnings have slowed to a recessionary -6.9% YoY. So, what we're seeing is that they're loving the mega-cap tech darlings, and they're so heavily weighted that when one of them jumps – the entire index goes up. Okay the PCE (inflation indicator) is out: (a) Employment Cost Index up 1.2% vs est. of 1%, (b) Personal Income up 0.3%, (c) Core PCE 0.3% = est., and (d) PCE YoY +4.6%. The PCE being up 4.6% should bother the markets.
AMA (Ask Me Anything…)
Is the Banking Crisis over? Not yet – watch First Republic Bank. First Republic’s stock is down more than 90% YTD, and is on the brink of collapse. Assuming First Republic fails, it would be yet another of the 5 largest bank failures in U.S. history. That would mean that 3 of the 5 largest bank failures have all happened in the last 4 months. FYI: First Republic is holding hundreds of billions of dollars in debt that is underwater, and those mark-to-market losses would render many of those indebted organizations insolvent.
The only path out of this situation is for the government to step in and save yet another financial institution. Per AP: they can do it in a number of ways: (a) manipulate the accounting rules, (b) print a significant amount of money, or (c) let banks fail while saving the depositors. My expectation is for (b) the government to start printing more money over the next 12 months.
Central Banks (including our FED) are running out of tools to curb inflation – so on will go the money printing presses to provide market liquidity. Everyone knew that our FED would tighten until something broke. It looks like we are watching many of the largest banks around the world buckle under the pressure. I wonder: Has there been enough pain, before they waive the white flag?
Next Week: From: FOMC to ECB to Apple to Jobs…
Range bound market – watching levels: This past week we had a nice ‘fade’ going until something weird happened. On Thursday, the DOW put on a 500-point up day on virtually no news. And on Friday we did it again – on virtually no news. What’s going on?
- (a) The PCE (inflation) numbers weren’t great, nor was the income or the employment cost numbers.
- (b) Earnings out of META and MSFT were good, but a couple companies talking about growing slower YoY shouldn’t move the entire market so high.
- (c) What if it was all on the rumor of this being the last rate hike?
So, this week gets dicey. If Powell hikes and suggests that more may be appropriate, I suspect this market will fall out of bed. Even if he does one more and suggests that he’s willing to take a break and look around, it might end up being a “buy the rumor, sell the news”sort of thing. Unfortunately, the big picture hasn’t changed until we either break significantly above 4211 or fall under 3931. We’re in the sideways chop, with lousy economic numbers, “not so hot” earnings, and a recession staring us in the face.
On tap next week = FED, ECB, APPL, and Jobs:
- Our FED will move interest rates on Tuesday & Wednesday,
- The European Central Bank speaks on Thursday,
- Apple earnings are on Thursday after the bell, and
- The April JOBS Report is on Friday.
Trades:
- Tip #1: BABA: BOT May: +$84 / -$86 CALL Spread
- Tip #2: TGTX > $24 with a $36.50 target…
- Tip #3: Gold: The near-term environment calls for patience. It’s bullish that platinum and palladium have broken to fresh highs. This structural uptrend for precious metals definitely includes the industrial side of the family.
SPX Expected Moves (EM):
- Last Week – EM = $62
- Next Week – EM = $72… it’s higher but not high enough!
TIPS:
HODL’s: (Hold On for Dear Life)
- PHYSICAL COMMODITIES = Gold @ $1,999/oz. & Silver @ $25.3/oz.
- 13 Week Treasuries @ 4.8 to 5.25%
- **Bitcoin (BTC = $29,500 / in at $4,310)
- **Ethereum (ETH = $1,900 / in at $310)
- **Chainlink (LINK = $7.26 / in at $7.17)
- DNN – Denison Mines ($1.10 / in at $1.32)
- GME – DRS’d and HODL
- Innerscope (INND = $0.0025 / in at $0.0052)
- MESO – Mesoblast Ltd. ($2.95 / in at $3.60)
o SOLD July $5 CALLS for $0.85
- MRK – Merck ($115)
o BOT Oct: +$115 / -$125 CALL Spread
- NFGC – Newfound Gold ($4.57 / in at $3.75)
o SOLD some more July & Oct $5.00 CALLS
- AA – ALCOA ($37.14)
o SOLD May 5: -$39 / +$40 CALL Spread
o BOT May -5 / +12: $34 PUT Calendar
- SQ – Block ($60.79)
o SOLD May 5: -$66 / +$67 CALL Spread
o BOT May -5 / +12: $55 PUT Calendar 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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