@jaysongay: “I will watch Barbie and Oppenheimer as their directors intended… on an airplane, three years from now.”
When you’re a part of a cultural tsunami, it’s normal to believe that everyone else is too. Always do your best to differentiate fact from feeling.
1. Most of the inside moments of a tsunami are (a) tiny events that (b) you never saw coming. For example: an episode of the TV show Succession will be seen by 3m people when it airs, compared to an episode of Gilligan’s Island or The Monkees which reached 45m (15X) people – decades ago.
2. The outside size of the tsunami doesn’t change the way it makes you feel when you’re in it. I.e.: if you were one of the 500,000 people at Woodstock, that moment belongs only to you. It is not universal.
3. The individual, cultural milestones set by a generation or two ago are unlikely to be repeated. Why? Now, we have the ability to tune (re-tune) into the-same-channels – back then we had to make an in-the-moment choice! Eg. no Taylor Swift album has outsold the hit albums by Hootie & The Blowfish or Metallica, but she has single-handedly transformed the record business.
4. A cultural tsunami is often described as something that is a little out-of-reach for the average person. Remember: that positioning is not by accident.
The Market:
- Small caps (last week) had their best week in forever. Carvana is up +1,000% from its lows. Celsius (the beverage) has excited Goldman enough for them to ask Liquid Death to go public. And Nikola, the morally and financially bankrupt EV truck company SPAC – has quadrupled in the last few months.
- The current top 6 players building foundational AI models are:
o OpenAI = the #1 LLM and has $10B+ in cash from MSFT.
o Anthropic = the #2 LLM with Claude.
o Google Deepmind could leapfrog to #1 at any time with Gemini, expected to go live in Q4.
o xAI = too early in its life, but never bet against Elon.
o Meta = leading the open-source segment with Llama 2.
o Apple = too early to tell, but never bet against them when it comes to integrating hardware and software.
InfoBits:
- Only 17% of Twitter usage comes from the U.S…. and they remain unprofitable.
- Tesla’s directors will return $735m to the company… to settle claims from shareholders that they excessively overpaid themselves.
- TSMC, the world’s largest chip manufacturer… expects 2023 revenue to fall by +10%. The company has also delayed building its Arizona factory.
- Ford’s slashing prices on their EVs… from $6,000 to $10,000 off across their 2023 Lightning lineup.
- The resumption of student-debt payments this fall… could feel like a 5% pay cut for borrowers.
- COVID lockdowns made the world small… and international ‘revenge travel’ is a way to make it bigger.
- Chipotle plans to build hundreds of stores in smaller markets… because they are seeing 3X the sales of their average stores.
- U.S. retail sales jumped a lot less than anticipated in June. After adjusting for inflation, sales fell 2.5% YoY, marking the eighth consecutive decline.
- U.S. industrial production declined in June… with manufacturing also falling.
- Microsoft Office users will need to pay… $30 / user / mo. for access the AI-powered Copilot service. That’s more than the entire Office suite costs.
- About 1% of U.S. homes have changed owners YTD… marking it the lowest turnover rate in at least a decade,
- The UK believes that smaller is better… when it comes to nuclear reactors.
- Goldman Sachs forgot how to make money… they reported a 58% profit drop.
- Skims, Kim Kardashian’s shapewear brand… raised $270m at $4B valuation. They delivered sales of $500m last year
- That makes SpaceX the second most valuable private company… with a $150B valuation.
- Netflix's revenue only grew 3%… even as subscribers rose by 8%.
- Researchers at Stanford and UC Berkeley believe that… OpenAI’s GPT-4 is getting dumber, and no one seems to know why.
- NFL approved the sale of the Washington Commanders… for $6B – the most ever for a pro sports franchise.
- Blackstone became the first, alternative asset manager… to reach $1T in assets under management.
Crypto-Bytes:
- FedNow allows for instant bank-to-bank transfers: 24/7/365. 51 banks, credit unions, and service providers are participating. The private sector already has had instant transfer alternatives for decades (Paypal / Venmo). FedNow could threaten stablecoins if the service becomes available for international transactions and users – but JPM will put the brakes on that!
- Old habits die hard… as banks may not be quick to adopt (and pay for) FedNow.
- The Nasdaq is bailing on plans to offer… Bitcoin and Ethereum custody to institutional investors.
- Binance cut employee benefits… after laying off +1,000 employees.
TW3 (That Was - The Week - That Was):
Monday: The NASDAQ has announced a special rebalancing prior to the market opening on Monday, July 24, 2023. Special rebalances are conducted to address overconcentration in the index. The companies most effected are: Apple (AAPL), Amazon (AMZN), Alphabet (GOOG), Microsoft (MSFT), Netflix (NFLX), Meta (META), Nvidia (NVDA) and Tesla (TSLA).
Wednesday: Stocks futures are edging higher. The DOW looks to make it an eighth straight day of gains – its longest streak this year as large caps extend YTD gains following a strong start to earnings season thus far.
Thursday: I don’t get it. If AI is the savior our media is making it out to be, how can Taiwan Semi (the world's largest chipmaker, sole chip supplier to NVDA, and the main supplier to AAPL, QCOM and AMD) report its first revenue drop since 2019 and slash its guidance over 10%? Leading economic indicators fell another 0.7% today. That means for the last 15 months our economy has been contracting. Existing home sales for June, were the worst since 2014. A CNBC poll showed that traders expect to see all-time-highs this quarter. Fair warning: when that many people are on one side of the boat – the boat often rolls over. Watch energy: MRO as it has tried to break above $25.30 twice, and VLO has already broken out.
Friday: Yesterday the NASDAQ finally had a meaningful fade. Granted, in the grand scheme of things – 300 points is a rounding error of just 2%. Was this selling just the re-weighting of the big darling stocks ahead of Monday: 7/24? I've heard crazy estimates of tens of billions will have to be sold. Watch ILMN and PBR, as both small-caps look like they’re warming up to move higher.
AMA (Ask Me Anything…)
What stocks should I be watching: When everyone is on one side of the boat / trade … move to the other-side. I’m watching: energy, home builders, and fin tech.
1. Small and mid-cap off-shore drillers = Diamond Offshore (DO) and (MRO).
2. Chevron (CVX) is close to a break out = long over $150 / Buy Jan $170 Calls.
3. Robinhood (HOOD) is bottoming = long over $13.
4. The Russell 2000 (IWM) is making 5-month highs = target is $250.
5. Homebuilders: LGI Homes (LGIH) > $135 and MDC Holdings (MDC) > $47.5.
6. Commodities: Cameco (Canadian Uranium) CCJ > $32.50.
7. Banking: ETF = (KBE) > $38, but HSBC, OZK and UBS > $22 are showing everyone what happens when rates turn lower.
TIP: IF you like any of the above trades, reduce your costs, do small size and give yourself time. Buy CALL/PUT options in January 2024 – one standard deviation out-of-the-money.
Next Week: Is NASDAQ Volatility a Wake-Up Call?
Factually:
1. For the month of June, the average difference between the 2-Year T-bill and the 10-Year was 1.67%. That doesn't sound like much, but it's the biggest negative gap since 1981. It takes 12 to 18-months for that to take effect, and we’re only 8 months into it – but the market presumably looks 6 months out.
2. The Leading Economic Indicators are down 4.2% over the six-month period between December 2022 and June 2023 – a steeper rate of decline than its 3.8% contraction over the previous 6 months
3. The Conference Board is forecasting that the US economy is likely to be in recession from Q3 2023 to Q1 2024 due to: higher prices, tighter monetary policy, harder-to-get credit, and reduced government spending.
Emotionally, the market has only moved higher despite:
1. COVID,
2. A war bordering our NATO allies,
3. The BRICS forming a trading block, and maybe their own gold-backed currency,
4. All of the political goings-on in Washington, D.C.,
5. Our FED bailing out badly run banks,
6. 55 U.S. public companies defaulting on their loans in the first half of 2023 (a 53% increase over last year), and
7. 340 corporate bankruptcy filings YTD, the highest rate since 2010.
Looking forward:
1. This will end badly. When you start to smell a rat, scale out of things.
2. On Tuesday we get earnings from Microsoft.
3. On Wednesday the FOMC will most likely raise rates 25bps.
4. The market knows about both of these events.
a. IF MSFT misses, the FED raises rates and warns of future hikes – things could go south in a hurry.
b. IF MSFT hits a home run, the FED raises rates and says that they're back in pause mode – I suspect a powerful, blow-off-top, surge higher.
5. Those two events will set the tone of the week, and nothing else matters. We will eventually fade the AI/GPT trade – but let that trade come to us.
TIPS:
HODL’s: (Hold On for Dear Life)
- PHYSICAL COMMODITIES = Gold @ $1964/oz. & Silver @ $24.8/oz.
- 13 Week Treasuries @ 5.25%
- **Bitcoin (BTC = $29,900 / in at $4,310)
- **Ethereum (ETH = $1,900 / in at $310)
- Apple (AAPL = $192 / in at $177)
- DNN – Denison Mines ($1.22 / in at $1.32)
- MESO – Mesoblast Ltd. ($4.83 / in at $3.60)
o SOLD Aug & Oct $5 CALLS
- NFGC – Newfound Gold ($4.81 / in at $3.75)
o SOLD Aug, Oct. & Jan. $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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