This Week
in Barrons – 9-3-2017:
“We have 3 cats. It’s like having children – without the
tuition.” Ron Reagan
Thoughts:
The two most expensive elements in a person’s
life are college tuition and housing.
Student loan debt has ballooned to an all-time high of $1.4T, and
student loan balances have jumped 150% over the past 10 years and now average
over $34,000. For graduates, student
loans may shape the rest of their lives – from buying a car and a home to getting
married and having children. The
percentage of borrowers who owe more than $50,000 for college has tripled over
the past 10 years. 57% of recent
graduates have expressed buyer’s remorse surrounding the cost of their
education, and 36% said they would
NOT have gone to college if they fully understood the associated costs.
And as far as housing is concerned, for much
of this country’s working class the ‘American dream’ is dead. In the chart below, each bubble represents a
city – with the color corresponding to the amount of money the average family
has remaining after expenses. The darker
the shade of red, the worse off you are.
San Antonio (Tx.) is the only one of the top
10 most popular cities where a working-class family can still enjoy a decent
living. Out of the top 50 most popular
cities, only 12 qualified for that same distinction. Geography plays a major role as: Newark
(N.J.), Chesapeake (Va.), and Jacksonville (Fl.) are the only coastal locations
where a worker can also support a family.
How many of those same coastal locations were on the West Coast? None.
The best location within the top 50 populated cities from a financial
perspective is Fort Worth (Tx.) – which leaves a working family with a $10,447
surplus at the end of the year. On the
flip side, that same family would need an additional $91,184 just to break even
in New York City (N.Y.).
The Kauffman Foundation gave Pittsburgh
(Pa.) a rare distinction this past week when they reported that Pittsburgh is
currently tied for LAST place (with Milwaukee) among the 40 major metro areas –
for entrepreneurship and new business creation.
The U.S. Small Business Administration reports that nationally 20% of
all new businesses fail within the first year.
Kauffman puts that figure closer to 80% in Pittsburgh. There should be ‘Mentorship Wanted’ signs
posted in every coffee shop in the ‘City of Champions.’
The Markets:
“I wonder what comes first, DOW 30,000 or
Bitcoin 30,000?”… Ryan Vlastelica
These targets represent vastly
different growth stories. The Dow Jones Industrial Average is currently
trading around 22,000, and would need to rise about 36.5% to hit 30,000. Bitcoin is around $4,800, and would need
to climb over 500% to make that same goal.
But bitcoin (the world’s largest crypto-currency) has been on a blinding
rally. Over the past 12 months it has
soared more than 700% - gaining 400% year-to-date and doubling in the month of
August. Repeating that performance over
the next 12 months would be enough to put it across that finish line. However, the volatility in bitcoin isn’t for
everyone, and because bitcoin lacks the traditional valuation metrics of stocks
– a target of $3,000 could be just as plausible as one of $30,000.
But the saga surrounding digital currency
isn't slowing down any time soon. The
latest episodes occurred on Friday, when Dalia Blass of the Ropes & Gray
law firm was appointed to lead the SEC’s Division of Investment Management –
which approves and regulates exchange traded funds (ETFs). The twist here is that Dalia Blass
represented the Winkelvoss twins in their efforts to create a bitcoin
ETF. The SEC had rejected two bitcoin
ETF proposals earlier in the year, but in their response left themselves a way
out by indicating that if a regulated futures market for bitcoin were developed
they might reconsider. Recently, the
Commodity Futures Trading Commission (CFTC) gave LedgerX permission to create
such a futures market. Coincidentally, the
SEC has also agreed to hear an appeal from the Winklevoss twins. With Blass at the helm and a regulated
futures market in the ‘wings’ – this entire market space could get turned
upside down in a hurry.
Why does a bitcoin EFT matter? A bitcoin ETF would open-up bitcoin investing
to institutional investors. It is
currently difficult for institutions to invest in bitcoin because most mutual
funds, hedge funds, and pension funds have specific rules about the types of
assets they are allowed to own. Institutions
are typically allowed to own ETFs, but not the underlying asset. Bitcoin is difficult to store, and requires
additional security and backup processes.
Many investors are either unwilling or unable to buy and store Bitcoin,
but would like exposure to the asset itself.
Here is where an ETF matters. A
bitcoin ETF could be bought and sold just like a regular stock, but with all of
the advantages of the underlying asset class.
Those advantages include flawless transactional abilities, and the
potential of building rule-based (smart) block-chain contracts. What’s a smart block-chain contract? Well, imagine that you were fortunate enough
to get delivery and a loan for the latest Tesla Model 3. But you were unfortunate enough to miss a
loan payment. A smart block-chain
contract: (a) would know that you missed the payment, (b) could automatically
refuse to allow you access to your vehicle until you made the payment, and (c)
could autonomously drive the car back to the dealership.
Given this is Labor Day weekend, we learned
on Friday that the U.S. created a measly 156,000 new jobs in August, and
revised downward their job creation numbers for the previous several
months. We fell short of the jobs
estimate, and that 156k even included the 103,000 jobs created by the
fictitious birth/death model. (As an
aside, the monthly household survey found that we actually LOST 73,000 jobs.) The
following ‘jobs’ chart was recently published regarding how automation and
robotics will impact your specific job category over the next 10 years. The dark areas represent the number of jobs LOST in a particular sector.
It seems that the first jobs to fall will be
those working in retail, fast food, driving, and corporate assistants. Henrik Lindberg, chief technology officer at
Zimpler believes that about 50% of today’s jobs will be gone in under 10
years. Occupations that are expected to
remain in demand are those that require compassion, understanding and moral
judgment – such as nurses, teachers and police officers.
In terms of last week’s market action,
Merrill Lynch tells us that mutual funds and ETFs that invest in U.S. stocks
saw $2.6B in net outflows during the week that ended last Wednesday. That marks the 10th straight week (and the
longest stretch in 13 years) where investors have pulled money from the markets
– yet the markets continue to rise. Lord
Jacob Rothschild, founder and chairman of RIT Capital Partners, has minimized
his exposure to the “risky and unstable” U.S.
market. He explains: “We do not believe
this is an appropriate time to add to risk.
Share prices have in many cases risen to unprecedented levels at a time
when economic growth is by no means assured.”
This past week Thomas Hoenig (Vice-Chairman
of the U.S. Federal Deposit Insurance Corp.) published his letter to the U.S.
Senate banking committee in which he proclaimed: “In 2017, U.S. banks used 99%
of their net earnings toward purchases of their own stock and paying dividends
to shareholders (including themselves).
Therefore, they legally manipulated markets in plain sight by pushing
their own share prices up using cheap money availed to them by the very Central
Bank that is supposed to regulate them."
The ‘Big Three’ central banks (the FED, the
European Central Bank, and the Bank of Japan) have collectively held rates at
0% for the past 10 years. They have
purchased $14T worth of assets – worth a staggering 17% of ALL global GDP, and are still collectively buying $200B of assets
per month. Add to that figure the Swiss
National Bank, the Norwegian Sovereign Wealth Fund, and efforts from other
sovereign funds around the globe – and you have to wonder about the end
game. At this rate, Central Banks and
sovereigns are going to OWN EVERYTHING in a relatively short period of
time. They have been given free license
to print money out of thin air, and spend it at their own pleasing. Quickly Central Banksters will be the
majority shareholders in hundreds if not thousands of global companies. What happens then? These are the same Central Banksters that
destroyed the currencies of 17 nations and implemented the ‘Euro’ as a test to
prove that centralized planning out of Brussels is better than sovereign
nations. These are the global elites.
What happens when they own 51% of Apple, Facebook, GM, Exxon, Wal-Mart,
etc.? To me, it’s scary to think that
Central Banksters (that have no ‘skin in the game’ because they have printed
their money out of thin air) are major shareholders (17%) in the largest
corporations in the world. Is
their end game to own everything?
Because if it is, they’re well on their way.
Tips:
"I've
been around a long time, and life still has a whole lot of surprises for
me."… Loretta Lynn
State-backed cryptocurrencies are key
to the adoption of blockchain technology, according to Morgan McKenney an
executive with Citi’s investment banking group.
According to McKenney, every payment method has an environment in
which it's best suited, and in any number of blockchain environments –
cryptocurrency is the most suitable payment method. For example,
ownership records of private market securities and other assets are
currently largely held by lawyers and trusted third parties – requiring the presence
of middlemen to conduct trades (including all IPOs). Blockchain and crypto-currencies can fulfill
all of those requirements – without the middleman. Think about all of those banking and legal
fees that corporations would save.
And this weekend is offering you a buying
opportunity in the crypto market as bitcoin touched the $5,000 mark and
immediately dropped 10%. Use this level
to your advantage to purchase bitcoin (BTC/USC) at a discount. Ethereum (ETH/USD) rallied to my first target
of $390 and was rejected. I’m using this
as a buying opportunity – given ETH remains potentially the best technically
positioned coin investment going forward.
Litecoin (LTC/USC) ran all the way into my $90 target, where it also was
rejected. As long as Litecoin remains
above $70 (the top end of its channel), this depression should be short-lived
and viewed as another buying opportunity.
For the S&Ps and Nasdaq, this next week
should bring another push higher, and potentially see the S&Ps touch 2,500
and the Nasdaq 6,070. However, be wary
of the financials (XLF) as they could be spoilers to this party. The Nasdaq (up 22% YTD) is riding Apple
(AAPL) higher as it’s up 41% this year.
If we wondered where some of that monthly $200+B is flowing, we need to
look no further than Apple. Apple is up
61% over the past 3 years, and 41% this year alone. Apple has a new product launch scheduled for Sept
12th, and if its stock can rally an additional $30 a share – it will
become the first U.S. company to cross the $1T mark in market
capitalization. When that happens, the
market cap of Apple will be slightly less than that of Mexico, and one of the
top 20 global economies.
Recommendations:
Bearish:
-
Amazon (AMZN) – Buy Put Butterfly – Sept 15: +900 / -920 / +940
-
Netflix (NFLX) – Buy Butterfly – Sept 15: +165 / - 170 / +175
-
UVXY – Sell Put Credit Spread – Sept 15: +22 / - 24
-
XLU – Buy a Put Debit Spread – Oct 6th: +55.5 / -53.5
Bullish:
-
Baidu (BIDU) – Sell Put Credit Spread – Sept 8: -225 / +227.5
-
Boeing (BA) – Sell Put Credit Spread – Sept 15: +230 / -232.5
-
Gold Miners (NUGT) – Sell Put Credit Spread – Sept 8: +30 / -32
-
Gold Miners (JNUG) – Sell Put Credit Spread – Sept 8: +16 / -17.5
-
Palo Alto Network (PANW) – Sell Put Credit Spread – Sept 8: -41 /
+42
-
PayPal (PYPL) – Sell Put Credit Spread – Sept 15: +57.5 / -60
-
Sina (SINA) – Sell Put Credit Spread – Sept 15: +97.5 / -100
-
Twilio (TWLO) – Sell Iron Condor – Sept 15: +27 / -30 to -29 / +32
My
Crypto-Currency Holdings Include:
-
Ethereum (ETH), Litecoin (LTC), Bancor (BNT), Dash (DASH), FunFair
(FUN), MaidSafeCoin (MAID), Metal (MTL), OmiseGo (OMG), PIVX (PIVX), Patientory
(PTOY), and NEM (XEM).
To
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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