“Trust, but Verify” … Click Here
‘Trust me … Here’s how to grow your company’… Per Howard L: Combining a Zero Interest Rate Policy and the Social / Mobile Web era of 2010-2021 simply produced an interesting recipe for entrepreneurial failure. The real growth formula remains product / market fit. In the previous decade, the distraction was free money and an over-abundance of mis-priced social / mobile startups that simply talked-the-talk. Sales and Marketing will be the next set of required skills. Both will be more expensive and time consuming than anticipated, but will grow stronger companies. The right product / market fit (cheaper-faster-better) + the right cap table == the best growth formula for success.
‘Trust me … Watching <> Doing’…
The Art Collector said to the Artist: “I’ve never seen you paint.”
The Artist responded: “Neither have I.” [paused and said] “Look, I can’t do your job, and you sure as heck can’t do mine - because Watching is a lot different than Doing.”
The Market:
Amazon and many other companies went from investing heavily in reliability, trust, and fairness – to taking persistent and deliberate steps in trading those qualities for
Amazon and many other companies went from investing heavily in reliability,, trust, and fairness - to taking persistent and deliberate steps in trading those qualities for quarterly results. Per Seth G: They intentionally decided that their customer’s confidence was not worth as much as the shortcuts they took to increase profits. Two things:
- First: Once you burn trust, it’s almost impossible to earn back.
o Trust is an opportunity of a lifetime.
o Trust means that you’ve finally earned the ‘benefit of the doubt’.
- Second: Nobody is out there fighting to become the: Low-Trust Provider.
InfoBits:
- Super Bowl LVIII reached 123m U.S. viewers… ahead of last year’s 115m. It brought 882 private jets into Las Vegas, and boosted Usher’s streams by ~550%.
- Inflation rose 0.3% MoM and 3.1% YoY… topping the 0.2% and 2.9% Wall Street had expected. Core consumer prices (X-Food and Energy) rose 0.4% MoM and 3.9% YoY. Shelter increased 0.6% MoM and 6% YoY.
- Japan and the UK officially entered into a recession… as Japan slipped into fourth place behind Germany on the list of the world's largest economies.
- 60% of Americans are uncomfortable… with the small amount of emergency savings that they have. 22% have NO savings at all.
- “I remember you…” OpenAI’s ChatGPT now has memory to help personalize its responses. ChatGPT will remember your past conversations, and will now respond differently to different people when they ask the same question. Wow!
- OpenAI just released a new model… that can generate 1080pm videos from text – rendering video games in the blink-of-an-eye.
- Co-Pilot - Microsoft's AI assistant… “Is a mess and not anywhere close to adding value,” said Andreessen Horowitz partner Guido Appenzeller.
- OpenAI is developing a search engine. I remember Google laughing-out-loud after being told that their future competition was a small company that they never heard of.
Crypto-Bytes:
- With this week’s spot Bitcoin ETF inflows… ~90% of bitcoin holders are in the black.
- The importance of crypto and decentralized currencies… is best understood in Argentina – where inflation is ~200% and crypto is the only safe haven.
- Several narratives should bolster crypto this year:
o Wealth managers will start to allocate more funds into the new ETFs,
o Bitcoin’s next halving is set for April 20, 2024, and
o Innovations like Bitcoin Ordinals are boosting on-chain activity.
- Q4 Crypto venture investing… increased 2.5% from the previous quarter. It’s the first time that it has risen in almost two years.
- Coinbase returned to profitability… as revenue grew +50% YoY, and net income produced a +30% margin.
TW3 (That Was - The Week - That Was):
Monday: SLB looks like it wants to bounce from its most recent double bottom. I'll take some over $48.25. With Israel bombing Gaza again, and now Egypt starting to get loud – maybe energy (XLE) will work.
Tuesday: The CPI report hit, and markets turned blood red. The report detailed how:
- MoM: we expected +0.2% inflation – we got +0.3%, and
- YoY: we expected +2.9% - we got +3.1%.
- MoM: we expected Core CPI to be +0.3% - we got +0.4%, and
- YoY: we expected Core CPI to be +3.7% - we got +3.9%.
In essence, this report told the ‘inflation is coming down crowd’ to wake up and batten down the hatches because prices are NOT coming down any time soon. Is this the pin that causes the air to come out of this market bubble? We're overdue for a major pull down, but this market has weaseled its way around other ugly reports.
Thursday: We got a bunch of economic reports.
- Retail sales: estimates were for a decline of -0.2%, but we got -0.8% (x-autos were down -0.6%),
- Initial jobless claims fell to 208k (more hiring),
- Empire State Mfr. Index was expected to be down -15, but it came in down -2.4,
- And the Philly Fed economic activity was estimated to be down -0.5%, and it actually came in at a +0.8%.
Not many of those numbers were friendly for a FED rate cut, and tomorrow we have the wholesaler’s view of inflation – so I’ll wait to put on any new positions.
Friday: We had a lousy CPI on Tuesday and today the PPI confirmed it.
- Housing starts fell 15% along with new permits declining 1.5%.
- The PPI (wholesale inflation) was supposed to be +0.1% MoM, but came in at +0.3%. Remove food and energy and it got even hotter = +0.5%.
The talking heads are talking about seasonal adjustments, which tells me none of them buy groceries or Happy Meals. One element that should bother them is the 10-Year Note that is currently ~4.3% and headed higher.
Morgan’s Moments…
Bitcoin Econ. 101… starts with noticing how many dollars are flowing into the spot Bitcoin ETFs. Why is that important? According to ‘M’ & Anthony P:
1. There are only 900 new bitcoin being created every day. This means there is currently 13X more demand for bitcoin than new supply.
2. Last week, Fidelity announced that it is putting (1 to 3% of) existing assets-under-management (AUM) from their non-bitcoin funds into their bitcoin fund. So, these new bitcoin spot ETFs will also need to handle professional asset allocators adding bitcoin to their non-bitcoin portfolios for diversification purposes.
3. ~80% of the current circulating supply of bitcoin has NOT MOVED in the last 6 months. Spot bitcoin ETFs have sucked up ~5% of all bitcoin available for trading in their first 30 days of existence.
4. Lastly, the daily incoming bitcoin supply will be cut in half (to 450/day) within the next 100 days.
Econ. 101 tells me: when a dramatic demand increase occurs along with a sharp supply decrease – we’re going to experience a price increase (in bitcoin) over the next 3 to 6 months. We saw this setup in 2020 – when bitcoin went up more than 800% to new all-time-highs. I expect a similar outcome within 2024.
Morgan’s Top 3 (or 4):
1. ETH (BUY – BUY – BUY)… Never bet against it!
2. COIN (BUY IT)… It should own on-chain social. Eventually we could see a COIN x META flippenning.
3. APPLE (SHORT IT)… Warren B. is selling more than you think.
4. META (BUY IT)… It has at least another good Quarter of ‘pure profit’ in it.
Next Week: Same Shirt … Different Day
Background: On Tuesday the CPI came in hotter than expected. Markets wanted a weak Consumer Price Index, because they think it will help our FED to start cutting rates sooner. But, despite the hot CPI – the market shrugged it off. On Friday, the PPI also came in hotter than the CPI. The market now had two hotter-than-expected inflation readings, and after the second one – the market closed red across the board. So, will the combo platter of a hot CPI and PPI finally give this market a pause? No market is immune to a correction. Right now, markets have an excuse for a pull back. Two nasty inflation readings just put our FED on hold. A pullback would be HEALTHY. But remember, it’s Nvidia’s (NVDA) market to lose.
Tech (AAPL, AMZN, GOOGL, MSFT) is coming under some sell-side pressure… as they all finished the week to the significant downside, and outside all of their respective expected moves. This is a unique occurrence over the past several weeks. Tip #1: The Mag-7 could soon be the Magnificent 1 = Nvidia.
Inverted SKEWS on NVDA could be a sign… along with increased PUT buying. Nvidia-Watch: NVDA has earnings after the bell next Wednesday, Feb. 21st – making Thursday’s open immediately exciting.
- (a) NVDA has an out-sized $83 (12%) expected move … causing options in both directions to be expensive.
- (b) NVDA is the only stock holding the Tech sector together as all of the other Mag-7 are experiencing significant draw-downs.
NVDA + Capital Rotations into Energy and Financials… are keeping the S&Ps higher. Tip #2: Watch NVDA on Thursday morning as it will be the ‘tell’ for the markets.
SPX Expected Move:
- Last Week = $66
- Next Week = $67 (4-day week) = volatility refuses to retreat.
Trades: The iShares Software Index Fund (IGV) just got back to its former bull market highs of 2021, but the most important stocks within the index are already rolling over. The IGV index will follow, especially after finally reaching its former highs. With software falling, Apple and Microsoft rolling over, and momentum diverging – the Tech Sector Index (XLK) will be close behind. We can use the same strategy on the Nasdaq100 Index (QQQ) because technology represents over 50% of the Nasdaq100. Therefore purchase some inexpensive protection:
- Tip #3: BOT – AAPL Mar, +$175 / -$170 PUT Spread for $0.70,
- Tip #4: BOT – IGV Mar, +$405 / -$400 PUT Spread for $0.50,
- Tip #5: BOT – XLK Mar, +$190 / -$195 PUT Spread for $0.65, and
- Tip #5: BOT – QQQ Mar, +$415 / -$410 PUT Spread for $0.65.
Sell each one when they return you a 30% profit.
TIPS:
If this market goes South:
1. Be prepared for retail traders to move into their favorite non-correlated asset == crypto. Fair warning: crypto could become a crowded trade in a hurry.
2. I will sell out of many of my high-beta holdings below – in an instant in order to preserve gains.
HODL’s: (Hold On for Dear Life)
- 13-Week Treasuries @ 5.3%
- PHYSICAL COMMODITIES = Gold @ $2025/oz. & Silver @ $23.5/oz.
- **Bitcoin (BTC = $50,900 / in at $4,310)
- **Ethereum (ETH = 2,700 / in at $310)
- **ChainLink (LINK = $19.45 / in at $7.78)
- **MARA – Marathon Digital = ($27 / in at $12)
o Sold some Mar. & April $32 Covered Calls
- **COIN – Coinbase = ($180 / in at $125)
- DKFG - DraftKings ($44.5 / in at $41.5)
- DECK – Deckers ($863 / in at $882)
- **HUT – Hut 8 Corp ($10.1 / in at $8.1)
- INDA – India ETF ($51.2 / in at $50)
- MC – LVMH ($55.7 / in at $57)
- META – Meta Platforms ($471 / in at $458)
- **RIOT – Riot Platforms = ($16.4 / in at $12.5)
o Sold some Mar. & April $20 Covered Calls
- UEC – Uranium Energy Corp ($7.7 / in at $4.8)
** Crypto-Currency aware
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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