Get it WRONG the first time… Nobody paints a masterpiece from scratch, writes a novel without revisions, or builds a structure without alterations. Embrace the process of improvement. Allow iteration, revision, and evolution to deliver progress – not necessarily perfection. Sign up for better instead of perfect. Practice: ‘Getting it wrong the first time, and then making it better.’
Old problems need new solutions… Lawmakers have long fought against skyrocketing medical costs, and now end-users are demanding affordable meds. Walmart and Cost Plus have entered the market with cheaper generics, and Amazon has a new $5/month RxPass. Blue Shield of California replaced CVS’s pharmacy benefit services with Amazon and Cost Plus drugs in order to lower costs.
Per Tom P: Launching a new business is just like riding a bike: At some point, your motivation outweighs your hesitation and you go for it. That’s when you start winning.
Per Seth G: Good pizza (like many things) is rare, even though the method to create it is well known. Any efforts to make it cheaper, easier, or more convenient will make it worse.
The Market:
WARS create Inflation:
1. Central Banks link inflation expectations to outcomes. Therefore, anticipated inflation prompts businesses to raise prices and consumers to buy in bulk.
2. During conflicts, nations rely on the U.S. for resources. As the U.S. provides this aid, its own resources deplete – which triggers more conflicts in a recurring cycle.
3. We are forced to increase our national debt in order to pay for all the free resources. We just added $500B to the debt in a matter of weeks, and could soon add another $1T in a single month – for the first time in history.
4. Overextending ourselves in global conflicts risks economic inflationary ruin. China's strategic restraint can secure victory by just letting the U.S. weaken itself and bleed itselfdry.
InfoBits:
- Paramount put the “Mean Girls” movie on TikTok in 23 clips. TikTok’ers were already posting full (pirated) movies. The platform gives studios a workaround to avoid paying writers and actors.
- Jamie Dimon (CEO of JPM) said: “I just tell people, be prepared for higher rates and slower growth. I think the geopolitical situation is the thing that most concerns me, and we don't know the effect of that on the economy.”
- Shipping rates remain depressed… with the largest container carriers facing weaker volume as consumers continue to buy fewer goods.
- Mortgage rates are above 8%.
- The IMF (International Monetary Fund) cut… China’s and the Eurozone’s growth estimates.
- Texas has the highest U.S. office-vacancy rate ~25%.
- Teenagers watch more YouTube videos than Netflix.
- Taylor Swift's - The Eras Tour… was produced and financed by T. Swift. She then sold it directly to the AMC theater chain rather than distributing it through a studio.
- Buying an EV could get easier... as our Treasury proposed a rule that would let EV and plug-in-hybrid buyers get up to $7,500 in tax credits right at the dealership.
- OpenAI revenues are $1.3B in 2023… up from $28m in 2022.
- The CPI (Consumer Price Index)… came in above Sept.’s expectations.
- The UK approved Microsoft's $68.7B purchase of Activision.
- U.S. VCs are on pace for their slowest year since 2019.
Crypto-Bytes:
- CME’s Terry Duffy infamously told SBF… “You’re a fraud. You’re an absolute fraud” – the first time they met … after speaking for 15 minutes.
- Alameda Research CEO Caroline Ellison testified that:
o SBF instructed her to pay a bribe "of ~$100m" to Chinese officials in exchange for the release of ~ $1B of Alameda's money on OKX and Huobi.
o SBF instructed her to prepare 7 ‘fake balance sheets’ to show lenders, and SBF would decide which one would look better.
o SBF “directed” Caroline to use FTX customer deposits to finance venture investments and loan repayments.
- Bitcoin is the best performing asset class of 2023… but it’s struggling to stay above its 200-day.
- Frax Finance (FXS) is set to launch Frax v3… enabling users to access US T-bills on-chain.
- Bitcoin holdings on exchanges hit a new yearly low… suggesting a bullish sentiment as large investors move Bitcoin to private wallets for long-term holding.
- Israel worked with Binance to freeze Hamas’ crypto accounts… as wallets linked to Hamas had received $41m in crypto between mid-2021 and June.
- Paul Tudor Jones finds equities risky, but as for Bitcoin… he’s all in. He appreciates its: volatile nature, limited supply, and resistance to manipulation.
- Jim Cramer recently warned of the impending doom of Bitcoin. “Look, our viewers want to make money, not lose it. Gold? Nah, not feeling it. And Bitcoin? Oh boy, Mr. Bitcoin is about to take a nosedive.”
- Bloomberg thinks that there’s a 90% chance of… a Bitcoin spot ETF in January 2024 as the SEC works through their issues.
- MetaMask & Stripe launched U.S. fiat on-ramps… as they add one-click dollar trading – bringing crypto closer to mainstream adoption.
TW3 (That Was - The Week - That Was):
Monday: Oil surged more than 4% as the surprise attack on Israel threatened to destabilize the Middle East, adding to surging Treasury yields, the Ukrainian / Russia conflict, and volatile commodity prices. After that huge up day on Friday, you may have expected some follow through today, but the war got in the way. As bizarre as it sounds, markets often do pretty well during war times as they print more debt and spend more. Yeah, it's upside down, but then again – what isn't?
Tuesday: The ten year is behaving, and we got earnings this morning from Pepsi that beat expectations. That has them feeling like the financials at the end of the week will also be good. I’m liking: AAPL > $179, OLED > $161, HALO > $38, AMAT > $141, and NEE > $51.
Wednesday: The PPI is out and it is stronger than estimated. We’re seeing a flight to safety via bonds catching a bid, rates going lower, allowing investors to run back to the Magnificent Seven. This feels a bit "desperate" to me. Yesterday, we had eyes on NEE, HALO, AMAT, AAPL, and OLED. I think you can watch the same group today.
Thursday: The newly released CPI details are: (a) it rose 0.4% MoM vs 0.3% est, (b) excluding food and energy, it was up 0.3%, (c) YoY it’s up 3.7%, and (d) YoY core is up 4.1% - all hotter than expected.
AMA (Ask Me Anything…)
Is Inflation really under 2%? On Friday, Paul Krugman gifted us with one of his worst tweets in years. He tweeted a chart of the CPI X-food, energy, shelter, and transportation – while exclaiming that the war on inflation is over. Per Anthony P: this is so ridiculous that it may not be worth responding to, but I honestly can’t help myself. Paul Krugman's recent claim of the end of the war on inflation lacks substance. Neglecting vital costs like food, energy, shelter and transport weakens his argument. His oversight of widening income inequality and financial losses dismisses the toll on many Americans. We saw a 0.6% inflation increase in the month of August, and a 0.4% increase in September. Not many people are arrogant enough to claim victory when inflation is still increasing by half a percent each month. While economists are worried about the rate of price change, consumers are worried about the final price. Prices rising a little less each month is a sign of progress, but prices are still increasing. That’s why consumers remain concerned about inflation, and are turning more pessimistic about the U.S. economy.
Next Week: NASDAQ caves under Geo-Political Risk…
If we're going to get the classic year-end rally, you’ll need to see the U.S. Dollar under the$105 level. If the Dollar loses that, I would expect to see new all-time highs for the indexes.
Risk metrics come Alive… but the S&Ps ended the week slightly higher. Everywhere you look in the marketplace, you will find horrendous risk vs reward scenarios. Specifically, inside of the Nasdaq – the downside risks far outweigh any upside potential.
We are in Backwardation… which means that short-term risks are out-weighing their longer-term counterparts. For example: Risk over the next 33 days – outweighs the risk over the next 66 days. The VIX (a measure of our markets volatility) is becoming ‘a little squirrely.’ We traded over 700% more VIX options on Friday – than in the previous 5 days. Traders are buying VIX Calls as a risk mitigation / hedging instrument.
Bonds and Gold catch a bid… as a hedging activity. What’s unusual about this is that both rallied – while the U.S. Dollar was also moving higher. All of this is pointing toward an upcoming, unstable equity market.
The Magnificent Tech Seven… traded lower last week. Watch, if the S&P futures start being sold – because tech will take the brunt of the selling.
Inflation is making a comeback… and although the PPI and CPI saw a move higher, the worry surrounds oil (/CL) spiking to $150/barrel – and the corresponding global impact.
The Financials faded on strong earnings. Next week we have Tesla’s earnings, and investors are beginning to get nervous for their estimates. If risk comes to fruition, it will hit technology the hardest.
SPX Expected Move (EM):
- Last week’s EM = $77 … and we moved about $20 to the upside.
- Next week’s EM = $90 … that’s an expected big league move, and a warning to manage your upcoming risk.
TIPS:
If you like to trade in high volatility markets, look at 2-sided trades like: SELLing the ADBE June $460 PUT and BUYing the corresponding $700 CALL for a net credit. Make sure you get a credit (get paid) to take the risk. You can reduce the risk of this trade – by selling a PUT Spread instead of the naked PUT. Any ADBE closing price below $500 is my signal to get out of this trade, whatever it costs. And take profits if/when ADBE hits $700 per share. This is a bet on the bull market resuming, and ADBE being one of its leaders. I would only put this trade on if/when the Dollar (DXY) is below $105.
HODL’s: (Hold On for Dear Life)
- PHYSICAL COMMODITIES = Gold @ $1946/oz. & Silver @ $22.9/oz.
- 17-Week Treasuries @ 5.5%
- **Bitcoin (BTC = $27,050 / in at $4,310)
- **Ethereum (ETH = $1,550 / in at $310)
- Apple (AAPL = $179 / in at $177)
- CCJ – Uranium = ($36.5 / in at $33.8)
- DO – Diamond Offshore ($14.1 / in at $15)
- MESO – Mesoblast Ltd. ($1.2 / in at $3.6)
o SOLD Oct $5 CALLS
- NFGC – Newfound Gold ($4.2 / in at $3.8)
o SOLD Oct. & Jan. $5.00 CALLS
- UEC – Uranium Energy Corp ($5.2 / in at $4.8)
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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