This Week in Barrons: July 14, 2024

• The Stripper Index:  Per Steve F: Strippers understand how the economy is doing based on the spending and tipping patterns of their clientele.  When tipping is high and clients are frequent – the economy is good.  When tipping is low and the regulars are infrequent – the economy is in a recession.  Factually, nearly 40% of business leaders are planning layoffs this year.  As a NYC stripper tweeted: “The strip club is sadly a leading indicator, and I can promise y’all – we’re coming into a recession.”
• Giving Up vs Quitting…  Per Seth G: Shrugging your shoulders, caring less, or phoning it in – is one thing.  People that simply stop trying – waste everybody’s time.  Quitting (on the other hand) is fine because it gives everyone their tomorrow back.  It opens the door for the next contribution.  Train yourself to be either IN or OUT – because the top of the fence is no place to hang out.
• I remember sweating through seven shirts…  when my work was defined as physical labor.  But physical labor may no longer be the way that we Add Value, and Adding Value is tough.  So, part of our job is finding the hard parts – not avoiding them.  Because the hard parts are where we can: Add Value.
• How, Why and Hyperbole…  Social media has ushered in 3 writing trends: (a) Paragraphs that start with ‘Why’ – that never explain ‘Why’.  (b) Paragraphs that start with ‘How’ – that don’t teach you ‘How’.  And (c) the ridiculous use of hyperbole that gives your article the look of a supermarket tabloid.  The pressure on writers is real.  If you don’t follow the trend and out-hype everyone else – then you won’t get traffic and you will fail.  But remember, it’s TRUST that’s in short supply – not attention.  You can always get attention, but you can’t hype your way into being TRUSTED.

The Market:

• Somehow our best choice for the future leader of the free world…  continues to be ‘None of the Above’.  But is the stock market directly correlated to leadership incompetence, immaturity, and inaction?  It seems the higher degree of incompetence and governmental inaction that is achieved – the higher the market goes.  Inaction does not require price discovery, and allows for trades to be powered by positive drift – hence a lot of new all-time-highs.  Maybe the market likes these choices for a reason?
• ‘Risk-free Return’ vs ‘Return-free Risk’:  Per Anthony P, U.S. Treasuries have long been considered to be a ‘Risk-free Return’.  You could buy these assets, hold them to maturity, and you were guaranteed a pre-determined return.  There was no risk because the return was paid by the U.S. Government.  But what if U.S. Treasuries are changing from being a ‘Risk-free Return’ asset – to a ‘Return-free Risk’ asset.  It seems that long-term bond-holders are chasing the illusion of a risk-free yield – all-the-while knowing that their capital is being destroyed by the declining value of bond’s underlying value.  It’s like a great dividend – it doesn’t matter how much yield you are earning when the underlying capital is going in-the-tank – just ask the Regional Banks.  The flippening of ‘Risk-free Return’ to ‘Return-free Risk’ in U.S. Treasuries will be a defining moment in finance.  Trillions of dollars are sitting in global 60/40 portfolios – with U.S. Treasuries as a major component of their asset allocation.  At some point, common sense and cash-flow will prevail.

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InfoBits:

• Silver is up 36% YTD and trading at 12-year highs.
• 77% of big money is long on Silver, and institutional long contracts are sitting at 3-year highs.
• There was a shortfall of 663m ounces of silver between 2021 to 2023.  That’s the equivalent of 80% of the global mining output.
• Another 215m ounces are needed this year just to meet demand.
• NASCAR joins the global race to spur EV demand…  by unveiling a new electric SUV with twice as much horsepower as their current gas-powered vehicles, but as quiet as a church-mouse. 
• How does this political storm end?  To quote Ernest Hemingway:  "Gradually, then suddenly.
• Coffee is only getting more expensive…  up 70% YTD.  [We dropped coffee from the inflation reading because it was driving our inflation index to high.  It was politically easier to explain a lower fake number – than a higher real one.
• Non-alcoholic-beer maker Athletic Brewing…   doubled its valuation as more people become sober-curious.
• Boeing is said to be in talks with the DOJ…  over how to keep its contracts after pleading guilty to criminal charges.  After all, 37% of Boeing's revenue comes from gov’t deals.
• “If we loosen interest rate policy too late or too little, we could hurt economic activity.  If we loosen our policy too much or too soon, we could undermine the progress on inflation.” … Jerome Powell
• Saks Fifth Avenue bought rival Neiman Marcus for $2.6B…  to meet luxury’s direct-to-consumer boom head on.  
• Eli Lilly is acquiring drug developer Morphic for $3.2B…  giving it access to oral treatments for inflammatory bowel diseases, ulcerative colitis, and Crohn’s disease.
• Per Steve F:  The Royal Bank of Canada…  took steps to seize 82 San Francisco apartment buildings (1,200 units) – owned by Goldman Sachs. GS had defaulted on their ~$700m loan repayment.  [This could start a real-estate tsunami of immeasurable proportion.]
• “Look Ma – No Hands”…  as Microsoft and Apple both abandon their OpenAI board seats in light of increased antitrust scrutiny.
• The median homebuyer age is now 49…  10 years higher than 20 years ago.
• Gold broke over $2,400 again last week.
• Romantasy book demand has led bookstores…  to devote more shelf space to the titles – driving up sales.  Indie stores report that Romantasy accounts for about 70% of sales.
• The FTC is suing UnitedHealth, CVS, and Cigna…  over their pharmacy-benefit managers.  These price-gauging intermediaries are what is inflating drug prices.

Crypto-Bytes:

• Less efficient Bitcoin miners are now unprofitable…  leading to a shakeout of weaker miners.  Bigger players like Maraton & CleanSpark continue to expand, hitting mid-year hash rate targets despite the turmoil.

• Traders are now pricing in…  a 70% probability that the Fed first cuts rates come in September. They see two quarter-point rate reductions in 2024.

• CFTC Chairman Rostin Behnam declared that…  70%-80% of cryptocurrencies are non-securities, labeling BTC and ETH as commodities.

• President Biden could support comprehensive crypto regulation…  as a move to counter Trump's pro-crypto stance.  

• Facing 276% inflation…  Argentinians are turning to USDT to protect their savings.  This highlights the unique role of stablecoins in hyperinflationary environments - and they’re easier to obtain than going to a bank.

• Per Krisztian S.: “The Crypto Fear & Greed Index…   dropped to its lowest YTD level 10 days ago.  This same gauge sent out a contrarian sell signal this past March when it reached bitcoin's then all-time high of about $73,500.” 

• JPMorgan predicts the crypto markets…   will rebound in August as liquidations from Mt. Gox, Gemini, and the German government subside.

• MicroStrategy announced a 10-for-1 stock split…  aiming to make its shares more accessible to a broader range of investors. 

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):

Thursday:  

• Today brings us the CPI.  It’s out and the MoM failed to increase +0.1% as expected, but rather came in as a negative -0.1%.  Core inflation came in 3.3% YoY.  Markets are loving it and acting like rate cuts are right around the corner. 
• What an odd day.  They got their dreamy CPI reading this morning, but then at 9am the futures rolled over red.  The real winner was the Russell 2000.   Why?  Because the Russell holds a lot of debt-ridden zombie stocks.  They did well when the rates were at 1%, but at 5% they get crushed each time they have to roll that debt over.  A lower CPI gives them hope of rate cuts that they think will save them.  
• This day gets weirder by the minute.  Now the NASDAQ is red by 350.  Aren't the techs supposed to love rate cuts? What an odd session. Even the S&P is red by 52.  Not quite the reaction to the CPI that I would have guessed.  The Russell (IWM) has just been incredible.  I don't think I've ever seen the Russel move over $7 in a day.

Morgan Moments…  

How to run a Board Meeting (opinion piece):  I’ve run my share of Board-of-Directors meetings in my day, and the Board (if used correctly) can provide a leadership team with a perspective on the business that can be very helpful.  Unfortunately, many Board meetings are little more than reporting sessions – and that is a tremendous waste of both time and opportunity.  Per Jack T / Fred W:  

• Send out a pre-read a week prior to the meeting that allows everyone to come into the meeting knowing all of the reporting information.  The pre-read will include:
• A sales update, pipeline, key accounts, and projections for wins in the next 6 mos.
• A technology update, key priorities, and milestones over the next 6 months.
• A manufacturing / support update, key partnerships, and progress timelines.
• A financial update including balance sheet, P&L, and a cash forecast for the next 12 months.
• A people update showing key hires made, planned, and any departures.
• Schedule 60 mins to go over and discuss the pre-read material with the board.
• The remainder of the meeting spend on 2 to 3 key, strategic topics that the management team is spending a lot of time thinking about.  Ask for the BOD’s feedback and input on these topics.
• Bring the key management team members to parts but not all of the meeting.  
• The CEO & founders should start and end the meeting with an executive + Board session.  It’s an opportunity to let the Board know where you most need their help, and to get their feedback at the end of the meeting on how it went and any concerns that they may have.

Next Week: Change is Gradual… then Sudden

• Bkg:  On one hand we’ve got improving breadth, a rebound in the equal-weighted S&P index, and the prospect of bullish rotation.  But, we are entering into a period of higher volatility, with a number of short-term risk indicators quietly mumbling in the shadows.   Momentum remains strong; however, volatility will be moving higher.  Asset managers are heavily net-long U.S. equities which means: (a) they are all on one side of the boat, and (b) there’s not much ‘dry powder’ left in terms of remaining buying power.
• CPI and PPI put Rate Cuts back into the discussion…  but beware, if/when rate cuts re-enter the conversation – it means that the economy is weak and requires a stimulus.  The CPI came in lower than expected and caused a 50-point S&P sell-off.  Then the PPI came in a little hot and caused a 60-point S&P rally.  Each data release is paralyzing this marketplace with fear.  Tip #1: Only BUY short-duration options (aka do not sell them).
• The Rotations were manic last week…  Until Thursday, Starbucks, Nike, and Lulu Lemon have not been purchased (in any volume) since forever.  But be careful, a potentially slowing economy brings out all of the old bedfellows.  The homebuilders (XHB) and Home Depot (HD) are suddenly popular again.      
• Last week the Tech sector took a breather…  as many of the Mag-7 (except Nvidia and Apple) were sold.  Last week buyers re-discovered industrials (XLI), utilities (XLU), retail (XRT), regional banks (KRE), and healthcare (XLV).  The hot sectors were suddenly the stocks that no one has wanted to touch for months. 
• Options Volume has gone wild… In mid-July, we are doing 40% more options volume than anticipated.  But the Dollar, the VIX, and Bonds are not screaming risk. Tip #2: Keep your head on a swivel, because we are trading Top-20 sized options volume – in the middle of an otherwise sleepy-vacation season.  Remember, “Change happens gradually – then suddenly”.  Only when volatility moves (/VX), will this marketplace be ready to move suddenly.   
• Volatility happens Gradually – then Suddenly.  It took many sectors that investors had left for dead – moving 2 and 3 standard deviations higher – to keep this market moving to the upside when technology took a breather.  Without Microsoft, Google, Amazon, Meta, and Tesla – utilities, retail, healthcare, and industrials had to come to the rescue.   
• Expected Move (EM):

• Last Week = $66 … and we moved $70 higher – for the 2^nd consecutive week.
• Next Week = $63 EM … and next week begins Earnings Season.  So, please keep your hands and feet inside the vehicle.  

TIPS:

HODL’s: (Hold On for Dear Life)

• 13 to 17-Week Treasuries @ 5.44%
• Physical Commodities = Gold @ $2,416/oz. & Silver @ $31/oz.
• **Bitcoin (BTC = $60,150 / in at $4,310)
• **Ethereum (ETH = 3,200 / in at $310)
• HROW – Harrow Health == $23.6 / in at $12
• **IBIT – Blackrock’s Spot Bitcoin ETF ($32.8 / in at $24)
• INDA – India ETF ($57.07 / in at $50) / BOT Nov, +$53 / -$55 Call Sp.
• **MARA – Marathon Digital = ($20.77 / in at $12) / Sold Sept $30 Cov-Calls
• **RIOT – Riot Bitcoin Mining ($9.8 / in at $12.5) / Sold Sept $16 Cov-Calls

** 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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