https://youtu.be/ML3qYHWRIZk?feature=shared
Presidents Day… got me thinking about the job description for the U.S. President. After all, we’re the wealthiest and strongest country in the world; therefore, our leader should be nothing less than: young, smart, articulate, genuine, humble, innovative, compassionate, an objective thinker, and a strong businessperson. The good news is that our country’s foundation is built to survive no matter who is at the helm, but as Will McAvoy will tell you: “I remember an America where…
- We stood up for what was right.
- We sacrificed, cared about our neighbors, and never beat our chest.
- We made ungodly technological advances, explored the universe, cured diseases, and cultivated the world's greatest artists along with the world's greatest economy.
- We aspired to intelligence; we didn't belittle it.
- We didn't identify ourselves by who we voted for in the last election.
- And, we didn't scare so easily”… Aaron Sorkin
When architects show off their work… the public sees tall spires, an innovative use of glass, and that weird hole in the center of the building. Per Seth G: When a car company displays a concept car – it’s the headlights and/or the door handles that catch our attention. Unfortunately, the building functions to serve the people working inside of it, and the driver of the car can’t see the headlights or the door handles. Yes, gimmicks are memorable, but try and remember – they’re just gimmicks.
The Market:
https://youtu.be/4KDSyLT9qKc?feature=shared
“A Greater Fool is someone with the perfect blend of… self-delusion and ego, who thinks that he can succeed where others have failed. This whole country was made by Greater Fools.” Can you imagine being one of the people that advised Jensen Huang (CEO of Nvidia) against pursuing his development of the ‘AI chip’. I humbly say: Thank You to Jensen Huang and to ALL of the other Greater Fools / Entrepreneurs out there.
Our FED has backed themselves into a corner. They told the market that the interest rate hikes are done, and that the fight against inflation was almost won. They told us to be prepared for multiple interest rate cuts in 2024. It would be unfortunate if inflation remained sticky, and our FED had to change their mind. I’m not yet thinking that our FED is going to raise interest rates, but I do believe that there is a chance. Now, that spells both opportunity and disaster – depending upon how you are positioned. Tip #1: Keep your eye on the inflation data, and start thinking about how our FED may respond if/when the real data gets worse.
InfoBits:
- The U.S. Conference Board’s Leading Economic Index… fell for the 22nd consecutive month in January. What me worry?
- Capital One will acquire Discover Financial Services… in a $35B all-stock deal – creating America’s largest credit-card lender.
- Walmart will acquire smart TV maker Vizio… for $2.3B in cash, and will use their distribution (and customer data) to help fuel its advertising opportunity.
- Supreme Court Justice Thomas is complaining… that he’s not making enough money. So, John Oliver offered Justice Thomas $1 million dollars a year to resign – not a joke. Nothing like ‘put up or shut up’ Clarence!
- Nvidia saw record Q4 revenue… that was up +22% from the previous quarter, and +265% YoY. They hit $2T in market cap, marking yet another high data-point in Wall Street's lust for all things AI.
- The FED minutes emphasized that no rate cuts will occur… until they see (with greater confidence) that inflation is receding.
- Russian oil exports… are at pre-Ukrainian invasion levels. It seems that China, India, and Turkey will gladly buy that excess Russian oil – as the rest of the world tries to grab the moral high ground.
- Reddit files for an IPO… showing $804m in revenues, and -$91m in net income losses for 2023. Maybe they shouldn’t have paid their CEO $193m in 2023.
- Google is rolling out small language models (SLMs)… using their Gemma AI engine. So instead of focusing on B2C, Google is building a marketplace that will end up with businesses paying big bucks to use more of the Google Cloud, as developers invent new Gemma applications.
Crypto-Bytes:
- ETH hit $3,000 for the first time since 2022... as optimism over spot ETFs and blockchain upgrades fueled the rally.
- $2.5B moved into spot BTC ETFs last week… setting a new record.
- 27% of Californians own digital assets… and 80% of those – say that they do not trust our existing financial system.
- Bankruptcy Court has ruled that FTX can sell its stake in Anthropic… a hot AI startup developing more rigorous LLMs.
- Per Riley R: Uniswap jumped 60%... on its proposal to reward token holders. UNI’s price shot up like it just got a Red Bull sponsorship, and its leaders could be heard saying: “We’re not just a DEX; we’re a drama worth investing in.”
TW3 (That Was - The Week - That Was):
Tuesday: Today, tech is being sold. So, either we’re seeing the greatest set up for a tech romp higher, OR markets think that NVDA's bar is so high it would have to be the earnings report of a lifetime to move it higher. On the other hand, an old stodgy business like WMT is doing really well today – on good earnings. Also, Capital One plans on buying Discover in an all-stock deal that would marry two of the largest credit-card companies in the U.S.
Wednesday: AMZN will be going into the DOW, replacing Walgreens. One of the ways the markets continue to rise is to fiddle with the indexes. If a company isn't helping take the index higher, they yank that company and replace it with one that can. 58 times they've replaced a DOW stock in favor of another. Under similar logic, UBER is going into the DOW transports index. Today is NVDA earnings after the bell. The slightest hiccup in their report and it will be sold hard. On the other hand, if they do have a stellar number and guide higher – it will take the entire NASDAQ on another wild ride higher.
Thursday: Nvidia hit a home run with their earnings. But isn’t it concerning that the earnings from one company, have the NASDAQ up +360 and the S&P +64. Welcome to 1999 Part Deux. But the volatility swings are getting wider. I’m liking the strength in the industrials – specifically the steel company Nucor (NUE). Per J.C. Parets: Nucor is a $45B steel company that hasn’t rolled over, and has inexpensive volatility. NUE is currently $190 with a $46 expected move. Tip #2: Pick up the NUE Jan, 2025: +$230 / -$240 Call Spread for ~$2 – which should balance risk/reward in your favor. Tip #3: The same concept applies to INDA: Buy the Nov, 2024: +$55 / -$60 Call Spread for ~$1.15.
Friday: Watch HPQ as it’s been trying to get over its 200-day for more than a week. It could be a good trade on Monday.
Morgan’s Moments…
The Odyssey… launched from a SpaceX rocket, is the first commercial, private vehicle to make a lunar landing. It was engineered by Intuitive Machines – a company that just went public just last year. It carried 12 gov’t and commercial science projects, 125 moon-inspired Jeff Koons sculptures, and some insulated clothing from Columbia Sportswear. NASA backed the mission with a $118m contract, and has shifted the burden of getting us back on the moon and beyond – to the private sector.
If you’re looking for AI / Crypto Tokens, stand-in-line for:
- Tip #4: SingularityNet (AGIX)… +135% YTD,
- Render (RNDR)… +67% YTD,
- Fetch.ai (FET)… +59% YTD,
- Akash Network (AKT)… +60% YTD, and
- Ocean Protocol (OCEAN)… +48% YTD.
Morgan’s Top 2:
- ETH (Buy – Buy – Buy)
- MATIC (Buy @ $1 … Sell @ $8)
Next Week: This Market == a 1-Trick Pony
Background: If you’re one of the 499 other stocks in the S&P that are not named Nvidia – you might as well hang it up. Welcome, look around, and please feel free to buy any stock you want – as long as it’s Nvidia. Buyers only – Sellers not allowed.
S&P diversification is severely compromised… and has basically gone the way of your father’s Oldsmobile. The index is more concentrated than ever. The combined weight of the Top 10 stocks is over 32% of the total – which even exceeds the dot com bubble-peak of 25%. Looking below the surface:
- NVDA is a $2T company with 50% March Volatility – trading 3m daily options contracts, and
- MSFT is a $3T company with 20% March Vol. – trading only 300k options/day.
- Markets are predicting over twice the movement in NVDA as MSFT over the next 30 days.
- Investors are drawn toward opportunity and movement, but can you imagine what a $100 to $200 move in an $800 stock like NVDA could do to this marketplace? We are definitely NOT in Kansas anymore!
The Dispersion Trade… produced the real action this week. Hedge Funds:
- SOLD out-of-the-money CALL Spreads in the S&Ps (SPX), and
- BOT out-of-the-money CALLs in NVDA – with the proceeds.
- NVDA CALL buying is what drove the NVDA (and the SPX) stock price(s) higher.
- Now that NVDA’s impact is much greater on the S&Ps,
- Remember: Markets take the STAIRS up, but take the ELEVATOR down.
Our FED delivered fairly hawkish comments… but the S&P 1 (previously the S&P 500) largely shrugged it off, and set the mood by delivering a home-run earnings report. In terms of a rate cut, 30% of economists still believe we will get a rate cut in May, but most aren’t seriously entertaining the notion until at least June. This was no surprise given the hot inflation data we’ve absorbed over the past few weeks.
We’re at All-Time-Highs, but Volatility has not collapsed? The VIX (volatility index) has fallen slightly over the past week to settle at 13.72. This suggests that investors are still sleeping with one-eye-open.
SPX Expected Move (EM)…
- Last Week = $67 (4-day week)… before finishing outside the upper-edge of the EM, we tagged the lower-edge earlier in the week. That’s Mr. Toad’s Wild Ride!
- Next Week = $64 (5-day week)… and I am expecting every dollar of this EM to be used during this coming week.
TIPS:
HODL’s: (Hold On for Dear Life)
- 13-Week Treasuries @ 5.3%
- PHYSICAL COMMODITIES = Gold @ $2045/oz. & Silver @ $23/oz.
- **Bitcoin (BTC = $51,500 / in at $4,310)
- **Ethereum (ETH = 2,950 / in at $310)
- **ChainLink (LINK = $18.45 / in at $7.78)
- **MARA – Marathon Digital = ($24 / in at $12)
o Sold some Mar. & April $32 Covered Calls
- **COIN – Coinbase = ($165 / in at $125)
- DECK – Deckers ($880 / in at $882)
- DKFG - DraftKings ($48.5 / in at $41.5)
- INDA – India ETF ($52 / in at $50)
- MC – LVMH ($54 / in at $57)
- META – Meta ($483 / in at $458)
- **RIOT – Riot Bitcoin Mining ($14.6 / in at $12.5)
o Sold some Mar. & April $20 Covered Calls
- **MATIC – Polygon ($1.03 / in at $0.94)
o Sell it when it gets to $8 / share
- BOT Protection (Just-In-Case):
o BOT the AAPL Mar, +$175 / -$170 PUT Spread,
o BOT the IGV Mar, +$400 / -$395 PUT Spread,
o BOT the QQQ Mar, +$410 / -$405 PUT Spread, and
o BOT the XLK Mar, +$190 / -$185 PUT Spread.
** 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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