RF's Financial News: July 2024

Sunday, July 28, 2024

This Week in Barrons: July 28, 2024

This Week in Barrons: July 28, 2024:

https://youtu.be/j32Q4fJ67CE?si=UJaOjMqEE43dK6Ko

“Failure is an integral element of success.” Anyone who wants to get something right – should be made aware of the many ways that it could go wrong. Entrepreneurs often fool themselves away from failure by using words like ‘pivot’ or ‘bridge’. They should admit and just tell the truth. “I failed. I f!@#ed-up, and I’m sorry.” Per Seth Jacobshon: “The idea of going thru life and never admitting failure is dangerous.” I’m still looking for that leader that won’t blame someone else or lie to me. I don’t want ‘their version’ of it, or ‘a spin’ put on it. Jon Stewart said it best: “I know what I saw and heard are real. I just want someone not to bullshit me.”

Top Reasons for Entrepreneurial Failures:

Founders who refuse to recognize Failure,
Founders who don’t ‘Tell the Truth’, and
Bad Product-Market fit

Why is everyone so angry and negative? Whether it's social media, politics, news, and/or entertainment – people are mad about something. Instead of anger, why don’t people use kindness, humor and intelligence to solve their problems? Nothing’s that complicated. Do people think that anger sells – because it doesn’t. Nasty is definitely not a feature. And negativity does not make you smarter – just an insecure fool. Contrary to the myth – nice, truthful, and honest people really do finish first.

Most activities get easier when you get good at them... Per Seth G: #1: Don’t believe you can’t be good at something just because it’s hard. #2: Don’t believe that people who are good-at-something – are talented and born with that ability. Anything worth accomplishing requires learning, discipline, and practice. Hard work always beats talent.

The Market:

It’s caution time in the markets. Learn to be selective and nimble – not stubborn and complacent. Do not believe that what ‘worked before’ will eventually bounce. Stop orders should be honored without question. Keep your drawdowns small during choppy markets. The domination of the Mag-7 in the past 18 months has focused everyone’s attention on those few names. Currently, financials are working better than most other sectors. History tells us that when financials are the leaders, markets continued to reward the shareholders, and penalize cash and short sellers.

If I knew THEN what I know NOW about the capital markets… I would know to ADD to my equity holdings whenever the VIX spikes above 20, 30, and hopefully 40. Instead of selling, ask yourself: ‘What would be the lowest cost & smartest way to remain invested?’ Maybe it’s via a cost-constrained options play? Personally, I’ve always chosen technology (QQQ) over the S&Ps (SPY), but the semi’s (SMH) have been the real winner over the past decade. If you are itching to buy any of these ETFs when trading opens in the morning – try out FREC.COM. They partnered with Van Eck to launch a direct index version of these ETFs – which is more tax efficient without any increase in price. Fair warning: I am a customer.

[ Learn about Value Investor Daily here… ]

InfoBits:

Netflix streamed past expectations… with its global paid subscribers growing 16.5% in Q2. Their cheaper ad tier saw 34% subscriber growth.

Southwest was largely unaffected… by Crowdstrike’s software debacle. [I guess decades of hitting ‘ignore’ to those software upgrades finally paid off!]

Wiz (the red-hot security startup)… has walked away from a $23B buy-out offer from Google – in favor of their own IPO.

Llama 3.1 is the best open-source AI model… on par with OpenAI’s GPT-4o and Anthropic’s Claude 3.5. Meta is trying to turn Llama into AI’s Linux where 3^rd party developers will build apps on top of Llama’s LLM.

Google’s quarterly sales grew 14% from last year… fueled by search and cloud, but its ad revenue sales underwhelmed. Google will not ditch tracking-cookies in Chrome. [So much for getting my privacy back.]

Tesla’s quarterly car sales fell 7% YoY… and profit plummeted 45%. TSLA is losing to rivals, who in the first half of the year saw a +33% bump in EV sales.

Coke boosted its annual sales forecast… citing bubbling demand for its drinks in overseas markets.

On July 24, the S&P and Nasdaq experienced… their worst single-day declines in almost 2 years. The S&Ps fell over -2%, and Nasdaq over -3.5%.

New home sales slid to a seven-month low… even with new-home inventory hitting its highest level since 2008.

Durable goods orders plummeted… 6.60% MoM and -10% YoY in June – its sharpest drop since the pandemic.

Q2 GDP estimates came in at 2.80%... topping the initial forecast of 1.90% and doubling the 1.40% logged during Q1.

The CrowdStrike outage cost Co’s over $5.4B… and to apologize for its mistake Crowdstrike is offering some of its corporate partners $10 Uber Eats gift cards. [That should cover a side of fries to cry into – yes?]

Crypto-Bytes:

Following an initial May approval by regulators… spot Ethereum ETFs started trading on Tuesday with issuers like BlackRock, Fidelity, and VanEck all competing to offer the lowest fees.

ETH ETFs (in their first day) made over $1B in trading volume… Coinbase is the custodian for 8 of the 9 approved ETH ETFs.

President Trump spoke at Nashville’s Nat’l Bitcoin Conference, he proclaimed (yawn):

“If elected, the U.S. will never sell its Bitcoin’.
“If elected, I will fire the current SEC Chair Gary Gensler.” [Which he would NOT have the power to do – fyi.]
“If elected, I will create a crypto presidential advisory council.”

OpenAI could lose as much as $5B in 2024… but announced their new search tool called SearchGPT. It gives users fast and timely answers with clear and relevant sources. Click here to sign up for the prototype - (opens in a new window).
Polymarket’s trading volume hit an all-time-high this month… the crypto-based prediction market saw bets soar following President Biden’s decision not to seek re-election.
Michigan's Retirement System invested $6.6m in Bitcoin… via ARK 21Shares' ETF. This makes Michigan the latest pension fund to add Bitcoin – joining Wisconsin and Jersey City.
The latest survey info shows that 20% of Americans own crypto… and 73% will consider a candidates' crypto beliefs in the 2024 Presidential election.

[ Learn about Bullseye Trades here… ]

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

Friday: This market continues to run on the hopium that Mag-7 earnings will propel us even higher, and unfortunately, they're just not stellar enough as of yet. MSFT and META’s earning are coming this week. This week’s common market behavior is that it will start out the day green, peak around 11am, and fade to red by closing.

Morgan Moments…

Tech’s in trouble… as the correction has room to run given extreme readings in: technicals, sentiment, positioning, and valuation.
Growth vs Inflation… even with global growth reaccelerating, disinflation is drying up and inflation resurgence via wage increases is still on the radar.
Rate Cuts… are mixed across countries and their window could be closing.
Commodities… short-term technicals are deteriorating due to demand destruction.

Next Week: Release the Volatility?

Bkgd: The volatility beast is definitely waking up. It's time to tighten up your trading discipline, and get ready for some wild two-sided action.

Volatility… The VIX may not be screaming, but the VVIX is double Tesla’s vol.
Leaders… The NASDAQ is lagging, and that's scary because they got us to these elevated levels.
Who’s on First? … If the financials are market leaders, that means the Titanic is sinking and our lifeboat captain is Jamie Dimon.
News… The market’s (SPX) expected move for next week is $105. That's a 20% increase in risk due to big tech earnings and a FED meeting.

VIX and VVIX are just warming up… If you review the VIX on a 3 or 5-year chart, you’ll see that although elevated @ 16 – the VIX has a way to go if we’re going to make up for lost time. However, the VVIX (the volatility of the volatility index) did touch 110 last week which means that we’re serious in terms of a fear indicator. Tip #1: The VIX itself has a volatility of 95 (twice that of Tesla), and combined with the VVIX @ 110 tells me that the pros are definitely buying their hedges. Also, the volatility futures (/VX) are not quite into backwardation (Aug = 16.2 / Sept = 16.8), but we’re close. Everything is pointing toward increased volatility.

NASDAQ lagging is a concern… because it’s the Mag-7 that propelled this market to where it is today. And even though we bounced higher on Friday, it was only to the lower edge of the expected move. Honestly, only tech can drive this marketplace higher – so earnings out of MSFT, META, and AAPL are critical over the next 2 weeks. Tip #2: If the NASDAQ breaks, this marketplace (cradle) will fall.

Financials are leading - temporarily… but it’s a short-term rotation that’s a long-term distraction. Bonds are rallying slightly; therefore, interest rates are falling. The regional bank index (KRE) has gone hyperbolic in anticipation of a FED rate cut. Regional banks own billions of bonds and rate cuts will boost the value (ever so slightly) of those bonds. However, banks make less money as interest rates go lower.

FED is back in town: Friday’s PCE (inflation) data was more inflationary than anticipated. Currently, this marketplace is assuming that our FED will cut rates by 25bps in September.

Put on your ‘Big Boy’ pants… because if MSFT, META and AAPL don’t hit home-run earnings numbers, we could be in for Mr. Toad’s Wild Ride. Tip #3: Buy QQQ and SPY hedges. Next week’s Expected Move for the SPX is $105, and it’s been a while since we’ve seen a triple-digit expected move. Tip #4: Reduce your Size so you can: Trade when you WANT TO not because you HAVE TO.

TIPS:

HODL’s: (Hold On for Dear Life)

13 to 17-Week Treasuries @ 5.44%
Physical Commodities = Gold @ $2,402/oz. & Silver @ $29.4/oz.
**Bitcoin (BTC = $68,050 / in at $4,310)
**Ethereum (ETH = 3,250 / in at $310)
HROW – Harrow Health == $24.44 / in at $12
**MARA – Marathon Digital = ($21.57 / in at $12) / Sold Sept $30 Cov-Calls
INDA – India ETF ($56.82 / in at $50) / BOT Nov, +$53 / -$55 Call Spread
**IBIT – Blackrock’s Spot Bitcoin ETF ($38.79 / in at $24)
**RIOT – Riot Bitcoin Mining ($11.2 / in at $12.5) / Sold Sept $16 Cov-Calls
**MIGI – Mawson Infrastructure ($1.3 / in at $1.1)
**WULF – TeraWulf ($4.42 / in at $3.75)

** Crypto-Currency aware

Please be safe out there!

Disclaimer:

Expressed thoughts offered within the BARRONS REPORT, a Private and free weekly economic newsletter, are those of noted entrepreneur, professor and author, R.F. Culbertson, contributing sources and those he interviews. You can learn more and get your subscription by visiting: <http://rfcfinancialnews.blogspot.com/>.

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Until next week – be safe.

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http://rfcfinancialnews.blogspot.com

Sunday, July 21, 2024

This Week in Barrons: July 21, 2024

‘Knock-Knock’ – Nobody buys anything on an elevator. Your elevator pitch is not designed to explain what you do or even to make the sale. The elevator only exists so that someone will follow you out-of-it, and ask you more questions. ‘Knock-Knock’ jokes are the best teacher of this. For starters, if you’ve ever heard a ‘Knock-Knock’ joke – you didn’t hear it from the person who made it up. ‘Knock-Knock’ jokes prove that: Ideas that are shared = WIN. Work so that people will appreciate and share what you do as easily as they do ‘Knock-Knock’ jokes.

One complaint about consultants is that… they invent stuff out of thin air, with confidence, without sourcing, and then argue it when challenged. Unfortunately, all we can do is change the level of B.S. we are willing to tolerate. To prevent this behavior, ask 2 questions: (a) Could you please Show-Your-Work? and (b) Could I please have an Itemized Receipt?

Companies can learn from Taylor Swift… “The Tortured Poets Department” album has been #1 for a record-breaking 13 consecutive weeks. She has sold over 2.5 million MORE copies of “TTPD” than the next 9 best-selling albums combined. How does she do it? T-Swift has released over 30 versions of the same album. When ‘TPPD’ dropped, there were four versions fans could buy – each with a different bonus track. T-Swift has continued releasing variants: some with acoustic versions of songs, others with voice memos, and even a phantom clear vinyl version. She’s proving that selling to your existing customers is cheaper-faster-better than acquiring new ones.

The Market:

Crowdstrike (CRWD) caused the largest computer outage in IT history… and that’s saying something. A malfunction in the company’s threat-monitoring software crippled ALL Microsoft Windows systems. Problems ranged from Hospitals to the London Stock Exchange to India’s Government to airlines worldwide. And speaking of airlines, over 4,000 flights were cancelled – stranding hundreds of thousands of passengers. Ultimately, the company was able to deploy a fix, but experts say this outage will linger because the solution needs to be deployed manually on a per-machine basis.

Top 5 Market Themes … per Callum T:

China… needs more stimulus as slower growth, softer consumer confidence, and falling property values have taken hold.
+ Corporate U.S. Tax Cuts… will further widen the U.S. vs global taxation gap.
+ Gold… is higher – supported by China, central banks & retail buying.
+ Silver… is higher due to a high demand vs low supply issue, and illegal/naked shorting by U.S. regulators being brought to light.
+ Miners… due to precious metals strength and cheap valuations.

Top 5 Market Themes… per D.J. Trump:

+ Crypto… support regulations that foster innovation and adoption.
+ On-Shoring… gov’t encouraging U.S. production.
+ Small Companies… lower tax rates, deregulation (fossil fuels & financials), and on-shoring support.
- Renewable Energy… less gov’t regulation and renewable subsidies.
- Healthcare… eliminate efforts toward healthcare-for-all.

[ Learn about Bullseye Trades here… ]

InfoBits:

55 years ago, Neil Armstrong and Buzz Aldrin… became the first people to walk on the moon in Apollo 11.

AT&T hackers obtained all of the call logs and SMS data… from their 110m customers between May - October, 2022.

"We are not seeing the same growth… in consumer spending that we had in prior quarters. There was less traffic in the retail venues, labor market softening and tightening consumer budgets." – Citigroup

Alphabet would like to buy… 4-yr. old cloud cybersecurity company WIZ for $23B. Alphabet lags behind Microsoft and Amazon in that arena, and most genAI tools run on cloud servers where security is a top concern.

We can now predict whether mild cognitive impairment… will progress to Alzheimer’s disease with over 80% accuracy. Dementia cases are expected to triple over the next 50 years, and early detection is key.

Prime Day (the 2-day event for Amazon Prime subscribers)… saw sales increase +12% YoY.

New Balance signed a multiyear deal… to become an official WNBA partner. As b-ball stars like Caitlin Clark attract millions of fans, women's-sports merch has become an estimated $4B market in the U.S.

The EU’s landmark AI Act is due to go live next month… and lucky for the rest of the world the EU doesn’t give-a-damn about keeping their AI startup industry competitive or their AI talent close-by.

YTD U.S. corporate bankruptcy filings… are the highest in 13 years.

T-Mobile ranks as the fastest internet provider… across most U.S. states.

The VIX (Wall Street’s fear gauge)… is now at its highest level since April after U.S. weekly jobless claims jumped to their highest level of the year.

Crypto-Bytes:

Above is the Bitcoin Miners ETF (WGMI)… showing that Bitcoin mining stocks have completed their long-term base breakout, and are poised to outperform BTC going forward. Tip #1: I like: MARA, CLSK, MIGI, and WULF.

OpenAI’s Project Strawberry… is being trained to “navigate the internet” and undertake “deep research” independently. It uses a learning method that (over time) will allow it to reach better-than-human intelligence.

Trump is the keynote speaker at Bitcoin 2024… later this month. He chose Ohio Sen. J.D. Vance as his running mate.

J.D. Vance is a bitcoin holder… and advocate for crypto-friendly legislation. He becomes the first "Bitcoiner" onscd a presidential ticket, and is igniting a surge of excitement in the crypto community.

Elon says that he is donating $45m per month… to a pro-Trump super PAC.

The SEC asked the Ethereum ETF companies… to submit their final paperwork and fees. The start of official ETH ETF trading could be as soon as Tuesday, July 23.

On the verge of Ethereum spot ETFs… Bitcoin’s ETF approvals increased the inflow pipelines markedly allowing Bitcoin to move higher on added demand. Tip #2: Fair warning on Ethereum.

Things I use:

I’m a subscriber and user of TheoTrade. Don Kaufmann and his team are excellent traders and educators. They will make you smarter, by using their trades to make you money. Earn while you learn. Please, try it out for free yourself … R.F. Culbertson.

[ Learn about TheoTrade here… ]

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

Tuesday: Oh, it's just another 600 DOW points. This is actually more insane than some of the tech bubble runs of the late 90's. A huge rotation is going on where investors are taking profits from their Mag-7 stocks and spreading it into the Russell (IWM). So, the NASDAQ and S&P are red, Gold is up $30, CAT is up $15, and HD is up $10. This is pretty crazy.

Thursday: Yesterday the NASDAQ dropped the most in a single day since 2022, but the DOW continued to scream higher. This morning initial jobless claims rose to 243k.

Friday: U.S. futures are recovering after the largest IT outage in history impacted airlines, healthcare, media, and banking industries. The issue appears to have come from CrowdStrike (CRWD). Their ‘Falcon Sensor’ software is causing Microsoft Windows to crash and display ‘the Blue Screen of Death’. Markets are also digesting comments from Donald Trump last night as he concluded the 4-day RNC. Coming into Friday, the S&P and Nasdaq are on track for weekly losses as investors take profits in tech ahead of earnings season.

Morgan Moments…

It’s a masterclass in storytelling… https://youtu.be/0HjDpPnxcP0?feature=shared It’s not written especially well or funny, but raises an issue that most people never think about – in a way they can clearly understand. If you must explain why people should care about your product, you need to do it as simply as possible with a smile on your face. That is what this ad does.

Do you know how bad things got in this crypto correction? The average max. drawdown this year has been 68%. This was NOT just a sideways and consolidating market, but rather one where some serious damage took place. The flipside is that this aggressive bounce that we’re seeing is a testament to how difficult it is for any crypto bear market to sustain itself – when you have a raging bull market directly outside (and often connecting) with the crypto landscape itself.

Next Week: Is that a Bear I hear?

Bkgd: One week does not reverse the large-cap tech outperformance trend. Typically we see volatility pick up around major turning points such as this. Watch to see if small-caps and other neglected market areas have any staying power. Everyone is waiting on confirmation prior to making any larger bets in the space. The risk is that the current selloff shakes previously strong confidence and sets off a number of market dominos.

Tech is choppy and cyclical… Microsoft is down, Nvidia has broken the $120 level, and Apple is 4 days removed from all-time-highs. This is not real ‘sell-side’ activity. Traders are simply cashing in some winners, and buying crap that nobody else has wanted – like Starbucks (SBUX). When the selling becomes ‘real’ – nobody will be spared the pain.

Adv/Decline line is still not displaying correlation… In the S&P100, we had 60’ish products to the downside at any given time. During correlation / capitulation, that number would be closer to 90+. When we see high degrees of correlation (i.e. 90% of stocks moving to the downside) – that’s when we can experience capitulation, and we’re just not there.

Volatility Futures are up, but far from ‘rockin’… We’re starting to hit a patch of volatility, but we haven’t seen any serious selling as of yet. We’re coming into tech earnings weeks, and by early August – we could be off-to-the-races again. Watch the S&P futures (/ES) and look to see if we’re down 2% - 3% - because that is the level where real selling could begin.

Any exits have been small and orderly… With only 7 products driving this market (Mag-7), just watch the Put/Call ratios for those specific stocks to see if any large (un-orderly) amount of PUT contracts are being purchased (none to date).

Volatility could make this market less-orderly… Instead of the VIX, I use Volatility Futures (/VX) to sense trading volatility. Currently, the /VX is not moving dramatically higher – because there’s no elevated degree of correlation. YTD: NVDA is up +140%, META +37%, and the S&Ps +16%. So, although there is selling – this is not a massive portfolio hit.

Expected moves are starting to expand… The last time the S&Ps closed outside their Expected Move to the downside – was mid-April. I suspect that Monday will bring us a bid back under the market and traders will be thinking about buying PUTs on the bounce. Tip #3: If you feel the urge, do NOT BUY Puts, but rather SELL Calls in this marketplace. When options are cheap – buying options was the way to go. Now that options are elevated – let the market pay you those higher prices.

Expected Moves (EM):

Last Week’s (EM): $64 … and we moved ~$105 (almost 2 Std. Dev’s to the downside)
Next Week’s (EM): $85 … should cause you to ‘scale back’ your trading because you’re getting more bang-for-your-buck. Tip #4: With increased volatility must come increased control. Scale back the size of each trade.