RF's Financial News: September 2024

Sunday, September 29, 2024

This Week in Barrons: 9.29.2024

There is always room for someone… who knows their way around an industry, a technology, and/or is a problem-solver. The hard part isn’t finding people who value those offerings, but rather earning and maintaining that badge-of-courage. As long as there are people and/or organizations who are lost – we will always need guides.

When organizations grow… they hire for specific tasks and the skill-sets that go with them. But when the world changes, organizations are suddenly filled with people who were hired for yesterday’s specific skill sets. Per Seth G: What if we just hired problem solvers who were hungry to learn and embraced change?

Over 60% of all companies fired a recent college grad – because:

They felt overly entitled.
They were offended too easily / didn’t respond well to feedback.
They lacked a strong work ethic, and regularly showed-up unprepared having done no homework.

The Market:

Rep. Tom Emmer’s Q&A for the SEC’s Gary Gensler… called out Gensler for breaking the law and lying to the courts. Emmer accused Gensler of:

Abusing his enforcement powers, baiting companies into compliance, and retaliating against those who didn’t by forcing them to appear before Congress.
Charging crypto-companies with: Crypto Asset Security – a phrase that doesn’t exist in any statute – and then quietly having his lawyers retract the charge in court.
‘Gary Gensler set our SEC back decades, and his leadership and guidance are continually destructive and lawless.’

China jump-started its economy by:

Cutting Short-Term Interest Rates == providing immediate monetary relief.
Reducing Reserve Requirements to 2018 levels – freeing up more money for lending.
Providing Property Support that includes lowering borrowing costs on $5.3T in mortgages, and easing rules for second-home purchases.
Injecting an Equity Market Boost of 800B yuan, and formed a market stabilization fund to support their struggling stock market.

InfoBits:

Microsoft signed a deal with Constellation Energy… to use 100% of the power generated from 3-Mile Island Unit 1 nuclear power plant - to power its AI data centers. The project will create over 3,400 jobs, generate over $3B in taxes, and be active in 2028.

Hollywood unemployment hit 12.5%… triple the national average.

The number of original shows declined by the fastest rate on record.
Studio mergers are eliminating many content buys.
And streamers are focused on buying live-sporting events.

Intel received a takeover bid from Qualcomm… that would be the world’s largest transaction in the chip market.
14 large banks and other major financial institutions… announced that they’re going to support the nuclear power industry.
A looming dockworkers’ strike at 36 ports… could shut down trade hubs that account for 60% of US shipping traffic. If port workers don’t reach a deal by next week, 45,000 members of the Longshoremen’s Union could stage a walkout.
John Cena and Dame Judi Dench are taking on Siri… as they struck a deal to lend their voices to Meta’s AI chatbot.
Apple and Meta will not sign… the European Union's AI safety pledge. This is despite the agreement supported by 115 other companies including OpenAI, Google, and Microsoft.
The DOJ is suing VISA for monopolistic practices… including trying to crush competitors like PayPal and Square.
Real Estate listings are on the rise… (up +36% YoY), but still down -26% from pre-pandemic levels. The best states to buy a home are: Florida, Idaho, Tennessee, and Texas – with Colorado, Washington, Utah, and Arizona close behind.

Crypto-Bytes:

83% of the time… Bitcoin moves in the direction of the global money supply, and recently the printing-presses have been re-started. As capital gets cheaper and more plentiful – people invest in financial assets.

Bitcoin has been the winning asset since our FED’s 50bps rate cut… with Gold coming in second place. It's not just a risk-on impulse following the Fed's cut – it’s a repricing of upside growth and inflation.

The SEC approved the listing of Bitcoin ETF options… on BlackRock’s IBIT. You’ll get more bang for your buck, and more ways to continue hodling your crypto.

Telegram has agreed to supply IP addresses and phone numbers… of users in response to "valid legal requests."

A GameStop customer found a redemption code for one bitcoin… worth ~$65k in a $30 crypto-themed trading-card pack.

Caroline Ellison was sentenced to 2 years in prison… for her involvement in FTX scandal. She also must forfeit her $11B payday.

OpenAI is rolling out their Advanced Voice Mode (AVM)… featuring new voices and improved functionality to make AI interactions feel more natural and personalized.

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

I took some time off last week, but back in the saddle this week.

Morgan’s Moments…

Don’t bet against The Zuck… Mark Zuckerberg (Meta’s CEO) showed off their latest pair of AR-glasses that seamlessly link to Meta’s Llama 3.2 AI language that understands both images and text. Meta also provides for the automatic dubbing of Reels into other languages – preserving the creator's voice and syncing lip movements to match the new audio. This unique combination of AI features should help creators reach broader audiences and create content more efficiently. Meta’s new open-source models + the most advanced AR glasses == ~500m monthly active AI users that are receiving AI Voice chats directly onto their favorite platforms. Meta is proving again why you: ‘Don’t bet against The Zuck’.

OpenAI takes a sabbatical… Mira Murati (OpenAI’s CTO) resigned last week because she’d like ‘more time and space for her own exploration’. Then Bob McGrew (Chief Research Officer) and Barret Zoph (Open AI’s VP of Research) also left the company – just hours after Mira. On a separate note, Sam Altman (OpenAI’s CEO) will soon receive a chunk of equity in the newly restructured company worth ~$150B – as OpenAI moves away from being a non-profit.

Next Week: Buckle-Up … Volatility’s back ...

Bkgd: (a) Volatility’s rising due to seasonality and the election. (b) The PROS are hiding in their hedges – prepping for larger moves. (c) October volatility is out-pacing November for the first time in years – making the first 3 weeks in October time to buckle-up. (d) With Walmart up +50% and utilities up +25%, defensive sectors are the ones catching-a-bid. The retail trader is ~60% invested in equities == an all-time-high.

Tip #1 == Time to Raise some Cash – especially inside the Mag-7

Helmets On – VIX & VVIX: Last week the S&Ps and the QQQ’s were mildly higher, the Financials (XLF) were flat, and Energy (XLE) was at the bottom of its expected move. Oil is falling on demand destruction forecasts. The VVIX (the Volatility of the VIX) is moving higher as ~1m VIX options were traded on Friday alone.

We are in Backwardation – the RISK is NOW: Volatility is the story of the week. October volatility (19 days out) is ~18.9, and November volatility (54 days out) is ~18.30. Which means market risk is greater over the next 19 days that it is over the next 54 days due to: (a) Election and Seasonal uncertainly, (b) the start of Earnings season, and (c) the upcoming Economic data-drops.

Due to High Volatility… markets are broadening and defensive trading is increasing. It’s as if the entire world (since July) has decided to invest in Utilities (XLU +25% YTD) and in Walmart (WMT +50% YTD).

Over the next 3 months, I like:

Tip #2: Basic Materials: (a) DD – Dupont: Jan ’25: +$100 / -$105U CALL-Sp., (b) DOW – DOW Inc: Jan ’25: +$57.5 / -$60 CALL-Sp., and (c) SVM – Silver Miner: Jan ’25 +$5 Calls.
Tip #3: Utilities: (a) XLU – Utilities: Jan ’25: $85 / $89 CALL-Sp., and (b) WEC – Wisconsin Power: Jan ’25: +$100 / -$105 CALL-Sp.
Tip #4: China: (a) JD – JD.COM: Jan ’25: +$50 / -$55 CALL-Sp., and (b) BABA – Alibaba: Jan ’25: +$130 / -$140 CALL-Sp.

SPX Expected Move (EM):

Last Week’s $75EM … and we barely moved $30.
Next Week’s $96EM … a 25% increase due to more economic data to digest.

TIPS:

I separated some of my investments into:

HODL’s that are on somewhat cruise-control,
Risk Reduction Option plays,
Hedging Option plays, and
Income Generation Option plays - due to their high-volatility.

HODL’s: (Hold-On for Dear Life)

13 to 17-Week Treasuries @ 4.75%
Physical Commodities = Gold @ $2,676/oz. & Silver @ $32.5/oz.
**Bitcoin (BTC = $65,700 / in at $4,310)
**Ethereum (ETH = 2,650 / in at $310)
HROW – Harrow Health = $44.2 / in at $12
INDA – India ETF ($59.2 / in at $50)
BRK/B – Berkshire = ($456 / in at $439)
**IBIT – Blackrock’s Spot Bitcoin ETF ($37.3 / in at $24)

Options to Reduce Risk:

Materials / Utilities: Long Call Verticals…
o DD – Dupont: Jan ’25: +$100 / -$105 CALL-Sp.
o DOW – DOW Inc: Jan ’25: +$57.5 / -$60 CALL-Sp.
o XLU – Utilities: Jan ’25: $85 / $89 CALL-Sp.
o WEC – Wisconsin Power: Jan ’25: +$100 / -$105 CALL-Sp.
o SVM – Jan. ’25: +$5 Calls: ( / in at $0.30)
China – Long Call Verticals…
o JD – JD.COM: Jan ’25: +$50 / -$55 CALL-Sp.
o BABA – Alibaba: Jan ’25: +$130 / -$140 CALL-Sp.

Options as Hedges:

TLT – Bonds: Jan ’25: +$105 / -$110 CALL-Sp.
TLT – Bonds: Feb ’25: +$110 / -$120 CALL-Sp.
SPY – S&Ps: Jan ’25: +$520 / -$500 PUT-Sp.
SPY – S&Ps: Jan ’25: +$500 PUT
GLD – Gold ETF: Jan ‘25: +$255 / -$260 CALL-Sp.

Options for Income:

**MARA – Marathon Digital = ($17.5 / in at $12)
o Bi-Weekly:
o BUY Puts 1 Std. Dev. OTM for protection
o SELL Calls ½ Std. Dev. OTM for income
**RIOT – Riot Bitcoin Mining ($7.8 / in at $12.5)
o Bi-Weekly:
o BUY Puts 1 Std. Dev. OTM for protection
o SELL Calls ½ Std. Dev. OTM for income

** Crypto-Currency aware

Please be safe out there!

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Sunday, September 22, 2024

This Week in Barrons: 9.22.2024

Authenticity is for amateurs... professionals practice consistency. Per Seth G: we really want our surgeon, lawyer, and co-worker to show up as the best version of themselves – everyday. We know that you might be tired from an overnight shift, and authentically feel like phoning it in; however, this is the only heart I’ve got … and I’d appreciate the consistency associated with the world-class surgeon that you are. Leave authenticity for friendships, because it’s consistency where the pros separate themselves.

Watch out for:

Fake phone calls from human-sounding bots that pretend to be your friend.
Fake job offers that require you to share confidential information.
Fake security alerts that are actually cyber-security / malware traps.

Increasing numbers of people with skills are creating ever-more elaborate scams.

Interest rates came down by 50bps… all the while our money supply continued to expand. Financial assets received a tailwind that will continue to push asset prices higher in the short-term. Factually:

Born in 1960 = you lived through 6 Bear Markets before you were 40.
Born in 1980 = you lived through 4 Bear Markets your entire life.
Born in 2000 = you lived through 2 Bear Markets your entire life.

The Market:

Investing alongside Warren Buffett (the GOAT): Per Ram A:

Recent Buffet history:

In 2023, he bought homebuilders, and they rallied hard. He bought insurance themes, and they became the second-best performing industry group.
In 2024, he sold Apple near its highs. He sold Bank of America – marking the top in the financials. He bought energy stocks near their lows.

Currently Buffett is:

Building a massive war chest of cash – expecting a market dislocation.

The good news is:

Buffett is usually 1-year early when he ‘goes-to-cash’.
2025 should bring IPOs in the first half, which will mark a near-term-top in the markets – according to Buffett.

Economic pockets of strength ‘n weakness:

+’s == Record US household wealth, stocks hitting record highs, and historically high housing prices.

-‘s == Consumer prices have skyrocketed since 2021, and corporate bankruptcies are surging.

Whether or not you anticipate a recession, our FED’s rate cut marks the start of a new monetary easing cycle.

[ Gain free access to 1440 here… ]

InfoBits:

The FTC sued the 3 largest pharmacy benefit managers (PBMs)… CVS' Caremark Rx, Cigna's Express Scripts, and UnitedHealth's OptumRx of illegally overcharging for insulin used by diabetes patients. The Big-3 control 80% of all prescriptions filled in the US, decide which drugs are covered, and most-often set patient out-of-pocket costs.

Pizza Hut will now custom-print resumes on pizza boxes… and deliver them to your dream employer. Just another indication of how the job market is doing.

HOPE is potentially more effective… at treating professional stress, anxiety, depression, and pain – than any other drug on the market.

When it rains… Boeing’s facing a potential debt downgrade into junk territory. Its $45B in net debt, includes $4B of debt due next year, and $8B due in 2026.

The Federal Court hearing TikTok’s case… did not seem to like the argument that the U.S. is violating the First Amendment by requiring TikTok to sever ties with its Chinese parent.

Amazon employees are now required… to come into the office 5-days a week starting on January 2nd. [Welcome to … Leverage.]

The Tupperware party is over… as the 78-year-old brand is putting a lid on it, and prepping for bankruptcy.

Americans can now… renew their passports online.

When reviewing the 8 monetary easing cycles since 1982… 75% of the time, the S&P 500 was UP in the 12 months after the first cut – with healthcare and consumer staples showing the strongest performance.

US 30-year mortgages dropped to their lowest rate in 2 years.

YouTube is near releasing AI features for video creators… that include: text-to-video generation, AI-powered tools, and automated dubbing.

Meta, Spotify, and 9 other AI firms… warned the EU that they will lose ~10% of GDP growth due to their overly-restrictive regulations surrounding AI.

Walmart’s new: Pay-by-Bank… allows consumers to pay for online orders directly via instant bank account transfers – eliminating credit card fees

New studies show that leisurely travel helps to… alleviate chronic stress, release tension and fatigue in muscles and joints, and boost the functioning body’s immune system. [Bon Voyage.]

Crypto-Bytes:

OpenAI’s $6.5B investment round is oversubscribed by billions… despite the fact that it is being done at a $150B valuation.

Crypto-markets are down from their highest all-time close ($2.9T) -26.5%... but the marketplace is up +28% YTD and +102% YoY.

MicroStrategy (MSTR) wants even more BTC… and will raise $700m to do it. They’re sitting on 244,800 BTC (~$14B), and are not slowing down.

Trump Media (DJT) stock closed at new lows… just before the ‘lockup expiration date’ – when D. Trump is free to sell his shares. DJT is already down ~76% from its high.

An FTC study of: Meta, YouTube, TikTok and 6 others… found: “Vast surveillance of consumers, including minors – without consent. Self-regulation has been a failure.”

[ Learn about Bullseye Trades for free - here… ]

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

Tuesday: Ahead of our FED’s interest rate policy decision, MSFT announced a $60B stock buyback program and raised its dividend by 10%. Intel (INTC) shares rose a second day as the company lined up Amazon’s AWS division as a customer for its manufacturing business. Utilities remain the best gainer on the year - XLU +25%.

Wednesday: Our FED just cut interest rates by 50bps – with only 50-days to go before a Presidential election. Are they worried that the economy is worse than we've been led to believe? Powell then disappointed the room by saying that this isn't a rate cutting schedule, but rather a meeting-by-meeting decision. Stocks with direct ties to interest rates went up: HD, LOWES, solar outfits, homebuilders, and small caps.

Thursday: Never in history has our FED cut rates by 50 bps, with markets at all-time-highs. But it seems that markets like 50bps cut and have put the futures in the stratosphere. For today’s Bank of England (BoE) interest rate policy meeting, most of Wall Street believes that rates will be left unchanged at 5%, and tomorrow’s Bank of Japan (BoJ) decision is also expected to leave rates unchanged. What the heck do we do up here? TSLA is up +$16, META up +$20, and AAPL is up $9. Things are just too extended, so I’m sitting on my hands.

Morgan’s Moments…

How do we SHORT the U.S. K – 12 educational system?

Two-thirds of our fourth and eighth graders are NOT proficient in reading.
School absenteeism has almost doubled from pre-pandemic levels.
Math scores have reached the lowest levels since international comparisons began == 2003.
Eighth graders would need a full year of education in order to catch up to their pre-pandemic performance levels == basically an impossibility.

Colorado, Kentucky, and Nebraska all have school choice on the ballot this November, and in Texas the legislation is poised to pass. Including Texas, it gives ~50 percent of U.S. families the ability to privatize their child’s education using public dollars. Naturally, teachers’ unions oppose transferring resources from under-performing public facilities to private ones, but they also refuse performance reviews and merit-based salary systems. Factually, in recent years our nationwide K – 12 public school systems have received over $190B in additional federal funding, and have very little to show for it.

Next Week: Our FED put Bulls on notice…

Bkgd: Friday’s triple-witching expiration mattered more than this quiet market would let on. Rate cuts and bullish momentum are in play right now, but our economy is still using debt to prop itself up. A system that relies on increasing levels of debt for each incremental unit of productivity – eventually collapses under the weight of its own debt repayment. The only question economists have is WHEN.

The whole world is buying hedges right now… as the SKEW (the ratio of out-of-the-money PUTS to OTM calls) hit an all-time-high on Friday.

We are in volatility ‘backwardation’… where the current & October levels of volatility are higher than the corresponding November levels.

Our FED cutting rates by 50bps is such a ‘gutsy’ move… because as the financials, Apple, & Meta are dreaming of a break-out – FedEx (FDX), Dollar General (DG) and other more down-to-earth businesses are warning us that our economy is ‘not fine’. This is reinforcing a belief that our FED cut 50bps because our economy requires a jump-start.

The next data dump (durable goods orders, GDP, and/or PCE)… just became vital to support our FED’s 50-bps case. If any data reinforces an inflationary and/or recessionary economy, it will raise alarm bells and rock markets.

The SPX Expected Move (EM):

Last Week: EM = $100 and we touched the EM before pulling back on Friday.
Next Week: EM = $78 – which is alarming to me. We just had a $100 point move in one trading session, yet next week we’ll only move $78 all week – really? I believe that the upside rewards in this marketplace are outweighed by current downside risks.