This Week in Barrons: April 14th, 2024

Why do we always analyze the LAST move?  When a deal falls apart, or our team loses, or when a partnership hits the rocks – it’s easy to focus on the straw that broke the camel’s back.  Per Seth G: This overlooks the real issue which was probably the third play or the fifth meeting – because losses are NEVER caused by the LAST move.  Just as creating an environment for success – is very different from finding a hero who can Save-the-Day in the eleventh hour.  We can Plan ‘n Execute on the first one.  We can only Hope ‘n Beg for the second.

Why is everyone going to Buffalo, NY?  Short answer: I don’t know.  Call me weird, but I’m probably the only person who doesn’t care about the solar eclipse.  The thought of driving to Buffalo for anything other than visiting friends OR ‘Beef on Weck’ – is mind boggling.

Why do we even debate interest rates?  Short answer: I don’t know.  Rates are determined by a real-time, 24-7, tradable market.  The rate market is a single tick wide with infinite liquidity – so there’s really nothing subjective or open to debate.  Think about actionable items… Like why tech is flat in an otherwise collapsing marketplace? 

The Market:

A Recession could sneak up on us - because:

-       #1. All of March’s job gains were for part-time roles.

-       #2. 1.8m full-time jobs have disappeared YTD – the largest drop since COVID.

-       #3. Soaring prices for gold, oil, and other commodities are reigniting inflation.

-       #4. Treasury yields are moving higher, and Jamie Dimon is warning that rates may remain higher for longer.

-       #5. All of the Above.

Stop putting ‘Perfect’ in the way of ‘Good’…  The Beatles recorded some of their best work in a studio that was a rat’s nest of tangled wires.  Putting every tool back so that it’s easy to find, is very different than color coding, labeling, and aligning each wire.  Shipping and Deadlines will always get in the way, but it’s the making it even more-right (i.e. alphabetizing the pencils) – that falls under the category of Simply Stalling.

Tip #1: (GDXJ) Check out the Junior Gold Miner’s ETF…  as it rips to fresh 52-week highs. Money flowing into smaller gold mining companies over their safer large-cap alternatives is a clear sign of risk appetite.  Gold’s breakout is real, and investors are turning to the companies with the largest potential for growth.  

Tip #2: (SILJ) Silver is moving higher through its 4-yr downtrend… and it’s only a matter of time before the Junior Silver Miner’s ETF (SILJ) starts to move higher.  These secular uptrends tend to last years, even decades.

InfoBits:

-       Target launches a paid membership program…  to compete with Amazon Prime and Walmart+.

-       Coffee-bean prices have soared 68% in the past year…  hitting record highs – due to droughts and heatwaves related to the climate crisis.

-       The women’s Final Four basketball game…  beat an ESPN viewership record set in 2018 during Game 7 of the NBA Eastern Conference finals.  

-       OpenAI and Meta are both on the brink of…  releasing new AI models that will be capable of reasoning and planning.

-       March’s inflation numbers came in hotter than expected…  for the third consecutive month.  Our FED may have to raise rates further, said Larry Summers.  So, where’d that soft-landing go? 

-       Google AI announced Vids…  a text-to-video in 4 seconds engine, and their new DeepMind robots are capable of playing soccer.

-       India is now responsible for 14% of total iPhone production.

-       OpenTable has decided to reveal…  the first names and pictures of people who leave reviews, and will apply the policy retroactively.

-       US credit-card-delinquencies hit all-time-highs…  with 11% of all debtors making only minimum payments. 

-       Turnitin (a plagiarism-detection software company)…  said that students submitted 22m papers in the past year that used generative AI.

-       Harvard now requires standardized test scores…  for candidates seeking admission.

-       Tesla will unveil a robotaxi (no pedals / no steering wheel)…  on August 8, and has its Full Self-Driving price by 50%.

Crypto-Bytes:

-       OpenAI CEO Sam Altman and former Apple designer Jony Ive…  are raising $1B for their secretive AI-powered personal device company that will most-likely integrate with OpenAI’s conversational AI tech.

-       A new Deutsche Bank survey found that…  52% of customers believe that crypto is becoming an “important asset class and method of payment.”  Nobody believes that it’s “a fad that will eventually fade.”

-       Approaching the next bitcoin halving (April 18)…  investors are reluctant to buy the bitcoin miners.  But, in past halvings, the following year saw mining revenues double due to rising bitcoin prices and more efficient hardware.

-       VCs remain committed to crypto...  and keep the amount of their investments the same YoY.  

-       Some of the largest Bitcoin wallets are owned by…  the U.S., U.K., and German governments.  The U.S. tops the list with 212,847 BTC = ~$15B.

TW3 (That Was - The Week - That Was):

Monday: All eyes will be waiting on Wednesday’s CPI reading, as more and more people are coming to grips with the idea of only 2 rate cuts this year – instead of the original 6.  One of the reasons for Gold and Silver moving higher is that the People's Bank of China reported its Gold reserves rose for 17 months and by 27 tons in 2024 alone.

Wednesday:  The Consumer Price Index (CPI) for March is hotter than expected – showing a headline CPI MoM rise of +0.4%, Core (excluding food & energy) rose +0.4% MoM and 3.8% YoY.  Instantly the DOW fell +400, and the June rate cut is down to a 24% probability.  Combine this news with the: “Sell in May and Go Away” adage, and this could this be the pin that the market has been requesting to remove some of the air from its bubble.

Thursday:  This market is temporarily broken.  I say that because the S&Ps moved from -25 to +30 today, AND AAPL gained ~5% in a day.  To quote Joshua: “The only way to win, is not to play.”

Friday:  Gold is now over $2,400/oz. and Silver is making a run @ $30/oz.  We could be on the verge of a year / decade long commodity explosion.  In the same breath, multiple governments, including Russia, India, the UK, the US, and France, have warned their citizens to steer clear of the Middle East, especially Israel, until further notice.  War-mongering rhetoric has been flying from both Iranian and Israeli diplomats and leaders ever since the IDF hit the Iranian embassy in Syria.  U.S Officials warned: "An Iranian attack on Israel could happen as early as today - and is expected to include an attack by more than 100 drones and dozens of missiles on military targets in Israel."

Morgan’s Moments…

-       Tip #3: Remember: BUY when: (A) The VIX is high, and (B) There’s blood-in-the-streets.  Crypto will test the HODL philosophy of its investors.

-       HongKong is going live on Monday … and ‘This too shall pass’.

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Next Week: “Things just got Serious…”

Background:  We had a 1.5% down move in the S&Ps on Friday, and geo-political risk was the catalyst.  There was foreshadowing for this move as recently as last week’s over-sized ‘Expected-Move’ in the SPX, and hotter-than-expected inflation reports (CPI and PPI).  Markets were simply hunting for a catalyst, and even if we bounce +40 points on Monday – this level of volatility trading IS NOT OVER.  

Volatility is bid higher, but watch the VVIX…  because the last time we experienced volatility this high (VIX = 19) was last back in October.  Tip #4: Watch the VVIX (the volatility of the volatility index) for spikes above 110.  That means that VIX Call Options are being bought and sold at-the-ASK.  FYI: We set a YTD VIX contract volume record on Friday.  

Volatility Backwardation…  is a way that traders use to see what timeframes hold the most risk.  Normally, traders view a trade that goes further out in time as holding more risk than one of shorter duration; however, when the reverse is true – it means that we are in: Volatility Backwardation.  FYI: we are NOT quite there yet.  

Dollar, Bonds, Gold and Bitcoin:  As the U.S. Dollar rallies, we globally export our inflation due to the Dollar’s strength and popularity.  This week’s move is one of the most significant for the Dollar in the last 5 years, and is indicative of ‘Duck ‘n Cover’ behavior.  But oil and gold (which often decline when the dollar increases) are basically flat – telling us that the geo-political risk is over-rated.  Bonds are being bought, and are a big reason for stocks being sold.  

Financials have undergone a significant correction:  Financials in general (XLF) have lost half of their YTD gains in the past 2 weeks, and are presently experiencing a 6% correction on very large volume.

Tech has experienced minimal damage thus far…  and Google and Meta have even been hitting all-time-highs.  Markets cannot collapse until TECH collapses, and right now – TECH is holding our marketplace together.  Fair warning: if you don’t like the current market environment, you’re going to really hate it when TECH begins to sell-off.

SPX Expected Move (EM):

-       Last Week’s EM = $89 and we hit it on-the-nose to the downside.

-       Next Week’s EM = $100, so keep your hands and feet inside the vehicle.

-       It was only a 1.5% down move on Friday, but what got SERIOUS was: Volatility, the move in the Dollar, and Bond buying.  Until you see TECH (QQQs) get absolutely annihilated, this marketplace is just fine – and there’s no reason to over-react. 

TIPS:

-       Studies show that Gold equals Bonds for a defensive, portfolio strategy.

-       Correlations are moving toward ‘1’ as investors switch from stock picking to selling everything.  The key is to use the correlation indicator as a buying opportunity.  

-       Play the Gold and Silver ETFs via Options. In about 2 weeks, the Silver Institute will release its industry usage report.  If silver / solar demand has doubled as is suggested, then it’s very possible silver finally punches through the $30/ounce fake ceiling that's been over it for years.  

o   BOT the June Calls in the Silver Junior Miner ETF (SILJ), and 

o   BOT the June $41 Calls in the Gold Junior Miner ETF: GDXJ for $3.60.

HODL’s: (Hold On for Dear Life)

-       13-Week Treasuries @ 5.4%

-       PHYSICAL COMMODITIES = Gold @ $2360/oz. & Silver @ $27.9/oz.

-       **Bitcoin (BTC = $64,600 / in at $4,310)

-       **Ethereum (ETH = 3,060 / in at $310)

-       **ChainLink (LINK = $13.9 / in at $7.78)        

-       **MARA – Marathon Digital = ($16.1 / in at $12)

o   Sold June $40 Covered Calls

-       **IBIT – Blackrock’s BTC ETF ($38.1 / in at $24)

-       INDA – India ETF ($51.6 / in at $50)

o   BOT Nov, +$53 / -$55 CALL Spread

-       LUNR – Intuitive Machines: ($5.1 / in @ $6.40)

o   SOLD: May $7 and June $7.50 Covered Calls

-       **RIOT – Riot Bitcoin Mining ($9.1 / in at $12.5)    

o   Sold June $25 Covered Calls

-       Various Bull Call Spreads:

o   RS – Reliance Steel: Sept = BOT $350 / SOLD $370 

§  Now @ $5.55 – in @ $6.20

o   NUE – Nucor Steel:      Jan. = BOT $220 / SOLD $240

§  Now @ $5.15 – in @ $5.35

o   MARA – Marathon Digital: Jan. = BOT $25 / SOLD $50

§  Now @ $2.24 – in @ $3.50 

o   GLDJ – Gold Junior Miners: June = BOT $41 Calls 

§  Now @ $3.60 – in @ $3.60

o   SILJ – Silver Junior Miners: June = BOT Calls

** Crypto-Currency aware

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Please be safe out there!

 

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