Vince McMahon’s World Wrestling Entertainment… has agreed to merge with the UFC to form a new publicly traded company controlled by the Endeavor Group. The deal combines two of the biggest sports entertainment brands in the world.
Remember Sean “Diddy” Combs? Well, hip-hop mogul Sean “Diddy” Combs is still paying rock legend Sting $5,000 a day for the privilege of having sampled the Police song “Every Breath You Take” in 1997 – which created the backbeat for Sean’s own hit, “I’ll Be Missing You.” Sting took to fact-checking by telling The Breakfast Club that he thought he was receiving $2,000 a day, but Sean was quick to respond: "Nope. 5K a day. Love to my brother." At $5K a day, that’s a whole lotta love!
What’s your plan for getting the Word In? Most organizations have processes for getting the word out, but what is your plan for getting the word in? Per SG: It can’t be random chance that some ideas get to you and that cultural and technical awareness just happen? If knowing what’s happening is important to you, it probably pays to focus on how (and when) you discover the new stuff. FYI: In 7 years, 21% of the U.S. will be over 65 years old. That’s a HUGE number of intelligent Americans with time on their hands. Time for: pickleball, Par 3 golf, gambling, watching TV, and investing. With AI on the tips of everyone’s tongues in 2023, just imagine the healthcare and longevity possibilities by 2030.
The Market:
The U.S. Dollar continues to lose its global reserve status:
- China and France completed their first LNG gas trade using Chinese Yuan.
- China and Brazil started settling energy trades in their own currencies.
- China and Saudi partnered to build a Chinese oil refinery for 83.7B Yuan.
- Kenya will buy Saudi oil with Kenyan shillings. The President of Kenya told his citizens to get rid of US Dollars.
- India started settling their energy deals in Indian Rupees.
- China, Brazil, Russia, India, and South Africa (BRICS) are finalizing a new currency backed by gold and rare earth metals.
- 33 tons of gold were withdrawn from JP Morgan vaults this past week.
- 4.8 million ounces of silver sold from the COMEX this past week.
- Bottom Line:
o Inflation will be with us for longer (rates going higher), because We can no longer export inflation.
o Gold, Silver, Bitcoin, and other precious metals will continue to rise as long as the world continues to dump (sell) U.S. Dollars (DXY).
The bulls won Q1 of 2023. The Nasdaq (QQQ) gained 21%, with the best performers YTD being three of the worst performers from last year: NVDA (+90%), META (+76%), and TSLA (+68%). This all happened during: mostly weak earnings, our FED raising the benchmark interest rate to 5% and talking about a recession, several big banks going bankrupt, and commercial real estate enduring a massive correction. BUT… the most inverted part of the U.S. yield curve is one that hasn't sent a false signal about a recession in over 50 years. The 155bps spread between the 3-month and 10-year Treasury yields – reflects a 3-month T-bill that's trading well above its 10-year counterpart. This large of a difference in rates points to the likelihood of a "deep recession" according to Duke Professor Campbell Harvey who pioneered the use of the spread as an indicator of future economic growth.
A Recession will really depend upon Layoffs: But before laying people off, we need to stop hiring. Lower job openings pre-announce that much larger layoffs are coming. Remember the cycle: Job Losses à Lower Income à Lower Spending à Lower Corporate Profits à Rinse & Repeat. Because in corporate-land, the solution to lower corporate profits is to lay off more employees. Not helping matters was a surprise output cut from OPEC – just in time for the summer driving season. This has oil back over $80/barrel once again. This only emphasizes our FED’s high inflation concerns, and for the rest of us, if more money is being drained into the gas tank – there is less for everything else. I think the stars are finally aligning for the recession to unfold starting in Q2 – which would bring the bear market back out from its recent hibernation.
InfoBits:
- “Consumer spending isn't slowing that much, the labor market continues to run unsustainably hot, and inflation is not coming down as fast as I had thought." - US Federal Reserve Governor Christopher Waller.
- OPEC+ stunned the oil market… by cutting output by +1.5m barrels / day.
- UBS will lay off 25% of its global workforce… (abiyt 25k people) – after completing the Credit Suisse deal.
- High-end travelers are reining in spending … 69% said that they won’t pay more than $500 a night for a hotel.
- JPMorgan’s Marko Kolanovic said: “The Fed indicated no intention to cut interest rates this year, yet risk assets continue their unprecedented rally. We expect a reversal in risk sentiment and the market retesting last year’s low over the coming months.”
- Paris just voted to ban e-scooter companies by Sept 1st.
- The U.S. Manufacturing PMI… marked it’s 5th consecutive month in contraction.
- The ISM Manufacturing PMI… hit its 4th straight month of contraction.
- Cleveland FED President Loretta Mester said: “We should hold our benchmark rate at restrictive levels for some time to quell inflation. The exact level depends upon how quickly price pressures ease.”
- In Q1, global VC funding fell 53%... despite 2 massive deals with OpenAI and Stripe. Early-stage numbers dropped as investors continue to hoard their record levels of dry powder.
- In 3 years, 65% of Walmart stores will be serviced by automated distribution centers.
- Warren Buffett said: “Interest rates are to asset prices – like gravity is to the apple. When interest rates go higher, there is more of a gravitational pull on asset prices.”
- Costco’s March same-store sales fell for the first time in 3 years.
- Comcast generated more cash last year than… Disney, Discovery, Fox, Charter Communications, Netflix, and Paramount – combined.
- President Bill Clinton said: “Higher Interest Rates mean: a higher mortgage payment, a higher car payment, a higher credit card payment. It means business people will not borrow as much money, invest as much money, create as many new jobs, create as much wealth, or raise as many raises.”
Crypto-Bytes:
- Dogecoin is a cryptocurrency with an uncapped supply… and a Shiba Inu meme for a mascot. Its price soared after Twitter swapped its bird logo for the doge logo, fueling investor hopes that the platform might support doge payments. Coincidentally, Elon Musk asked a judge last week to toss out a $258B lawsuit accusing him of pumping dogecoin's price. Come-on Man!
- Federal prosecutors charged Charlie Javice… the founder of financial-aid startup: Frank – with fraud. Authorities allege she faked user numbers while pursuing her company’s $175m sale to JPM.
- Donald Trump’s official NFT collection increased 463%... after he appeared in court to defend his payment he made to a porn star.
TW3 (That Was - The Week - That Was):
Thursday: This week’s string of weaker-than-expected data releases has put the risk of a recession back into focus for investors who will be watching the JOBS Report closely. Friday’s monthly nonfarm payroll data is expected to add 240K jobs, hold the unemployment rate steady at 3.6% and average hourly earnings to rise +0.3% m/m.
Friday: March’s Non-Farm Payrolls grew by 236,000. The unemployment rate ticked lower to 3.5% amid an increase in labor force participation, and average hourly earnings rose 0.3%, pushing the 12-month increase to 4.2%. Labor increases came in: hospitality and leisure, healthcare, and government. FYI: if you're into the short side, TSLA has lost its 50-day moving average, and could lose $5 quickly.
AMA (Ask Me Anything…)
“Are brokerage firms safe?” It’s a fair question. If a $100B bank can implode, why can’t a brokerage firm? The simple answer is yes – brokerage firms are much safer than banks. How can that be? Brokerage firms specialize in managing risk and they position themselves the equivalent of delta neutral 100% of the time. Banks are dumb, don’t understand delta neutrality, position themselves directionally and try to maintain risk appropriate positions. In fact, the only major brokerages who have gotten in trouble in the last 20 years have allowed their banking arms to take them down: Bear Stearns, Merrill, Lehman and E*TRADE in 2008/2009.
“Is the job market eroding?” Yes, and current data is not encouraging. As businesses and investors see bad data, they will start to brace-for-impact with a financial recession. This will accelerate actions, such as layoffs and/or fewer raises – that will further increase the odds of a recession. It’s not uncommon for recessions to behave like a slow car crash. Watch the job market, it will tell us the cause ‘n effect.
“What is marketing?” Marketing is NOT the act of getting people to buy what you’re paid to sell them. Marketing is the craft of understanding what people want and need – and helping them achieve it. Per SG: Sell something you believe in, to people who are eager to believe in it as well. You do your best work for an audience that deserves you, appreciates you, and applauds you. If it’s just a job, you’ve sacrificed your best energy for a paycheck. Pick your client – then pick your future.
Next Week: Get Ready to Rumble…
- Our FED: FED mtg. on May 3rd – has a 67% probability of raising rates 25%. But what is interesting is that the FED fund futures are pricing in a >50% chance of a RATE CUT before September – even though our FED has said NO to that on numerous occasions. That means this coming summer will be: “Mr. Toad’s Wild Ride”.
- Short interest remains at a record high level… within the S&Ps. Longer term (greater than 60 days) – I can’t find a lot of reasons to be bullish. But shorter term, I do believe we could have multiple short-squeeze rallies. Fair warning!
- Sector expected moves: XLF (financials) = unchanged this week and many financial earnings are next week. XLE (energy) = closed at the upper edge of the expected move. QQQ (tech) = lost some footing on the week, and could that single the ‘shape of things to come’?
- Risk-On vs Risk-Off:
o Tip #1: GLD / SLV / PMs… Gold has reached a closing, quarterly, all-time-high. Fundamentally, everything is setting up for a Gold break-out. We’ve on-boarded half-a-billion new traders who haven’t been around long enough to sort out the noise – so GOLD could leap a lot higher from here – especially given it’s doing that in every other global currency. If the Dollar goes under $100, look for a rally in Gold / Silver.
o Tip #2: MRK… Large-cap Healthcare names are ripping to the upside. Merck is coming out of a 20-year base, and hitting all-time-highs. XLV (a major healthcare ETF) has been going sideways for 2 years, and that break-out could just add wind to the individual stock sails.
o Tip #3: CBOE… If you get a chance to combine an all-time-high, with high relative strength, and social obscurity == it’s a recipe for a large gain.
o Tip #4: LVMH… A shout out to the group that owns the 1-percenter, and hedges themselves with liquor. Warren Buffet hedges with insurance, and LVMH hedges with liquor – both do extraordinarily well in recessions!
- Bonds: Interest rates have come down from 4% on the 10-Year to 3.29%, and could rip dramatically to the upside while bonds move lower. I do not have a good feeling as for the direction in Bonds, but feel that whatever direction they move … they’re going to LOSE.
- Looking at a Risk Twist Spread on HYG: Currently, junk bonds (HYG) are trading around 5.5% and FED funds are trading at 5%. HYG has a ton more risk built into it than our FED funds; therefore, it needs to move lower (aka rates move higher) going forward.
o Opening a HYG Risk Twist Spread: SOLD July: -$74 PUT (8) / +$71PUT (12) / -$69PUT (4).
- SPX Expected Move: Next Week = $76 (5-day week)
TIPS:
Bitcoin, Gold and Bonds – What’s not to like?
HODL’s: (Hold On for Dear Life)
- PHYSICAL COMMODITIES = Gold @ $2,024/oz. & Silver @ $25.1/oz.
- 30, 60, & 90-Day Treasuries @ 4.8 to 5.1%
- **Bitcoin (BTC = $28,000 / in at $4,310)
- **Ethereum (ETH = $1,850 / in at $310)
- DNN – Denison Mines ($1.00 / in at $1.32)
- GLD – Gold ($186.50):
o BOT: Apr 28: +185 CALL / -187 CALL for $0.92 Debit
- GME – DRS’d and HODL
- Innerscope (INND = $0.003 / in at $0.0052)
- MESO – Mesoblast Ltd. ($3.34 / in at $3.60)
o SOLD July $5 CALLS for $0.85
- MRK – Merck ($112)
o BOT Oct: +$115 / -$125 CALL SPREAD
- NFGC – Newfound Gold ($5.26 / in at $3.75)
o SOLD some April $5.00 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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