This Week in Barrons – 3-4-2018:
“I did what everybody does – tell white lies” … Hope
Hicks (about D. Trump)
Thoughts:
‘Welcome to our new FED head’: This week Federal Reserve Chairman Jerome
Powell made his first public remarks. To summarize: (a) He indicated that the FED
(to prevent the U.S. economy from overheating) will do three or more interest
rates hikes during 2018. He also
indicated the FED’s intent to allow the balance sheet to continue shrinking. (b) He downplayed any market volatility as
potentially triggering spillover effects to the economy. (c) He indicated that because
both the low unemployment rate and the labor participation rate are holding
steady; he expects both wage growth and inflation to pick up. Finally, (d) He cautioned against using the
flattening yield curve and history as a marker of an impending recession. To Chairman Powell, I ask Why – because the
yield curve IS flattening, and history tells us that this IS an indicator of an
upcoming recession?
‘Out
of left field’: President Trump
made news last week by unveiling a potential 25% import tariff on steel, and a 10%
import tariff on aluminum. While these
tariffs may provide some short-term relief for domestic steel and aluminum
producers, they could also have far greater repercussions should trading
partners reciprocate in kind. This could
ignite a trade war with higher costs to all – including consumers. Trade works
best with disparate goods. For example:
if you grow apples, and I grow oranges – we’re both happy when I buy your
apples and you buy my oranges. But when
we’re trading like products, and one nation has a higher standard of living,
quality, safety, and regulations – it’s hard to compete fairly.
‘Mobility-As-A-Service’: When Volvo’s new XC40 SUV arrives at
dealerships this spring, it will come with a new ‘Care by Volvo’ subscription program
where the driver will pay a total monthly fee that includes everything except
fuel. It’s a monthly model that
is designed to combat a retail landscape that increasingly being shaped by
ride-hailing services. In 2017, the
industry reported its first decline in new vehicle sales in eight years. The
Volvo subscription service is a first step toward a mobility-as-a-service
model, where people only pay for the transportation they use. After all, why should consumers stick to the same set of wheels when they actually need
an all-wheel-drive SUV for winter, a convertible for summer, and a pickup truck
on moving day?
‘Listen
very carefully’: When Lloyd
Blankfein (head of Goldman Sachs) was asked weeks ago whether Goldman was going
to ‘build out their own crypto-currency trading desk’ he replied: “Absolutely
not.” Well, he was right. Goldman did not ‘build out’ a crypto-trading
desk – they bought one. Goldman (along
with Baidu) paid Circle, Inc. to buy Poloniex – giving them a large stake in a floundering
crypto-trading desk. Goldman’s most
recent Form 10-K filing lists cryptocurrencies, blockchain, and distributed
ledger technology as risk factors –
when they are in fact business opportunities.
On one side, Goldman is playing checkers
– while on the other, it is schooling the world in how to play 3-D chess.
‘Ding
Dong’: A ‘Shark Tank’ reject is calling. Remember when no one on ‘Shark Tank’ wanted
to invest in the Ring Doorbell solution.
Well this week Jeff Bezos and Amazon purchased the company for between
$1B and $1.8B. I’m guessing that ALL of
the sharks can be wrong SOME of the time?
‘Speaking
of Amazon’: Jeff Bezos’ ability
to identify trends helped him reach a net worth
of $126B. So with nearly 52% of Amazon’s customers
indicating that they would be open to
buying items using cryptocurrencies – I think I see an ‘Amazon-coin’ in Mr.
Bezos’ future.
‘Crypto-Slang’: In crypto-circles LOL means: ‘Lots Of
Liquidity’, and WTF means ‘What Time Frame’.
Just sayin’.
‘Making it Public’: Last week Spotify filed to go public – except they’re doing it a little differently. Usually, when a company makes a stock market debut – it hires an investment bank to handle the dirty work. However, Spotify's flying solo on this one with a direct listing – which will save them some serious cash. Companies like Uber and Airbnb are watching to see if they should jump in the express lane as well.
‘Making it Public’: Last week Spotify filed to go public – except they’re doing it a little differently. Usually, when a company makes a stock market debut – it hires an investment bank to handle the dirty work. However, Spotify's flying solo on this one with a direct listing – which will save them some serious cash. Companies like Uber and Airbnb are watching to see if they should jump in the express lane as well.
‘Houston, we have a problem’:
It seems that the new trendy way of proposing marriage is by putting the
engagement ring inside an avocado where the pit normally resides. Yes Houston – we’ve
officially reached peak millennial.
‘Wells
Fargo – How are you still alive?’: Last
week a federal judge denied Wells Fargo’s request to dismiss a class action
shareholder lawsuit that claims the bank’s intentional fraudulent actions
caused the stock to drop. So, why would
anyone put money into that bank, or buy that bank’s stock is beyond me. Heck, even my dog knows to chew up any Wells
mailers before I can see them.
‘Starbucks – Set ‘em up’: Friday, Starbucks put on its fancy pants and opened the first of its new Reserve stores –
complete with a full bar, bakery, and oh yes - coffee. It plans to open 1,000 of these upscale stores
in the next few years. “Here’s lookin’
at you, kids.”
‘Throwin’ a wrench in the works’:
Comcast is shaking things up with its latest $31B offer to buy British broadcaster Sky. Last year, Disney announced that it was buying
a big part of media mogul Rupert Murdoch's 21st Century Fox - which already
owns a minority portion of Sky. Now, with
Comcast offering Sky more cash money than 21st Century Fox – it’s getting awkward. But it’s not the first time a media company is
trying to consolidate power. The
difference here is that this move pits two of the biggest names in the industry
against each other, and it throws a wrench into the Disney – 21st
Century Fox deal.
The Market:
"Who in their right mind buys
a [cryptocurrency] from a government that does not pay its bills, with an
economy in hyperinflation?"– Marialbert Barrios, Venezuelan
National Assembly Member.
The week started strong, as all major
benchmarks surged for the third straight week.
When FED Chairman Jerome Powell highlighted the strengthening economy
during his congressional testimony, investors grew jittery. For them it was an
indication of an upcoming tighter monetary policy. By the time the last trading day of February
came to a close, the DOW had logged its worst monthly performance since January
2016, and the NASDAQ its worst since October 2016. Analysts said that February 2018 will be
remembered as the month where the fear of unbridled inflation met with
valuations well beyond historical norms. However, nobody saw March opening up with threats
of an all-out trade war. President Trump
seemed to be ‘on a mission’ to lift the plight of American steel and aluminum
manufacturers. Trump met with steel and
aluminum executives and assured them a policy is being drawn out. The president said during the meeting, "We'll be signing it next week, and
you'll have protection for a long time. You'll have to regrow your industries –
that’s all I'm asking."
U.S. stocks
tumbled following
Trump’s announcement. The shares of
steel and aluminum makers rallied but shares of automakers and airplane
manufacturers fell due to worries over the would-be impact of higher costs to
pay for these metals. Our trading partners were angered by the tariff
proposal with the EU saying that it will respond accordingly and China will put
import restrictions on U.S. soybeans.
Currently, 16% of U.S. demand for steel is served by Canada, with the
top 5 steel importers being: Canada, Brazil, South Korea, Mexico, and Russia. A challenge to the tariff in an international
court is not far-fetched if the U.S. decision violates World Trade Organization
(WTO) rules. While U.S. corporate profits are on track
to achieve a growth of almost 20% this year, investors are also struggling with
how to value those profits. The issue of valuation resurfaced due rising interest
rates, bond yields, and inflation concerns.
Crypto-Bytes:
-
Nano continues
to gain traction among online retailers with hip-hop artist Craig
Dubz announcing that he will accept the cryptocurrency
as payment for his upcoming album. The titles
and tracks are yet to be released, but I wouldn’t be surprised to see one
titled: Retired Nano Investor.
-
What happens in Vegas, stays in Vegas, but now it
can stay on the blockchain too. Exotic
dancers that work ‘The Legends Room’ are now accepting
cryptocurrency payments via temporary QR tattoos.
-
If Venezuela, Russia
and Iran can do it – why can’t Turkey? Turkish
politicians are
gobbling up the idea of a Turk-coin – a national
digital currency based upon the nation’s wealth fund.
-
Have a friend that wants to invest in ICOs? If so, please explain
that 46% of last year’s ICOs have already
run out of gas, and an additional 13% are running on empty. And that doesn’t even include the 29% of all
pre-ICO listings that failed due to lack of awareness or (surprise surprise)
the project was a scam from the beginning.
-
The State Bank of India had another ‘about face’ this week with their Head
of Innovation predicting that “By 2030, many traditional banking services could
cease to exist because
of the Blockchain.”
-
By the way, if Venezuela’s oil-backed cryptocurrency succeeds,
it will bring in an entirely new use case for crypto-technology: fundraising
for rogue states. After all, we are dealing with completely open
networks. All a public blockchain cares
about is: as long as you control the private keys to a wallet, you control the
funds in it – no passport required. Similarly, as long as you know how to code,
you can build applications on top of Bitcoin or Ethereum – no Ivy League degree
needed. This is ‘permission-less innovation’. It may very well allow Venezuela’s president
to eat more burritos at his desk while his country burns around him.
Make no mistake, from this past Tuesday the
DOW lost more than 1,000 points in 3 sessions.
It could have been due to FED Chairman Powell acting
more hawkish, or because of Trump’s tariffs. Whatever the excuse, the market ‘fell like a
sack of taters’ exceeding the expected move to the downside. What continues to surprise me are the wild moves that ‘low
beta’ stocks like Walmart (-10%), Eli Lily (-9%), and Verizon (-10%) are
having. The term ‘low beta’ refers to
stocks that have traditionally moved LESS than the market, and are now
exceeding those limits. The chart below
shows Walmart’s 20% move (from high to low) in 2018 – while the S&P sits virtually
unchanged for the year.
It’s
the higher beta stocks that are not being affected as much by this negative
market. The risk to this market is if
these high-beta ‘pillars’ like: Amazon, Netflix, Boeing, and Apple – begin to
crack. If Boeing begins to see some
selling – the DOW will go down hard. When
Apple starts to be sold – the NASDAQ will crumble alongside it. And with high volatility – you eventually hit
‘em all.
It wouldn’t surprise me if we start next
week with a wild upside move – indicative of volatility. However, I do not believe that we have
finished testing the February lows. It is true that often ‘retests’ of lows don’t go quite as deep as
the actual low, but this S&P still has over 60 points to drop. As long as the 50-day moving average is above
us, and the February lows are below us – we’re in no-man’s land. When volatility comes back to a market,
investing turns into trading, and 2018 becomes: ‘The year of the trader.’
Tips:
I circled the ‘Strong
Sell’ recommendations above because I think a good strategy this week is to be
patient or be fast. If you're really
nimble, buying the dips and selling the rips will work. If you're more casual, letting the chop work
itself out makes more sense.
Top
Equity Recommendations:
Marijuana stocks (HODL):
-
Aurora (ACBFF),
-
Cannabis Wheaton (CBWTF), and
-
Canntrust Holdings (CNTTF).
Options (I LIKE):
-
LuLuLemon (LULU),
-
Micron Technology (MU),
-
Boeing (BA) – the DOW’s best-performing stock in 2017, and up
16.87% year-to-date – is well positioned to move
higher.
-
Amazon (AMZN) is pushing out rumors that it
may move into
the crypto-currency market and take on the banking system. A recent survey concluded that 59% of shoppers
would welcome an ‘Amazon-coin’, and 45%
would consider making Amazon their primary bank.
Top
Crypto Recommendations:
-
Bitcoin (BTC),
-
Ethereum (ETH),
-
Nano (NANO),
-
Neo (NEO), and
-
OMG
Bitcoin trading volume is
languishing at about half of the average seen during its December peak. Some believe that this is a sign of an
approaching bear market in Bitcoin, I do not agree. During any frenzy (like December of last
year) it’s natural to have surges in volume because traders throw caution to
the wind and invest using leverage. Additionally,
many newbies enter the markets to make a quick buck. This combination leads to a spike in
volume. When prices fall, most newbies
are stuck with their positions because they rarely use a stop loss. The only option they see now is to hold until
the market recovers. So, this portion of
the volume will not return until a price reaches the December highs. Cautious traders also don’t venture out in a
falling market because it is always better to trade in a market that is in a
clear uptrend. Factually Bitcoin rallied
last week and gained 14%, and in the last 30 days has gained over 23%. Also Bitcoin (BTC) seems to shine when extreme
uncertainty engulfs Wall Street, and/or geopolitical concerns are high. Last year BTC rallied as North Korea was
launching missiles over Japan, and while China was charting its own navigation
rules in the South China Sea.
BTC/USD ($11,118) Previously I recommended booking profits on half positions around the $10,700 mark, and trailing the rest because a breakout of the $11,400 to $12,200 resistance zone will complete an inverted head and shoulders pattern. Currently, bulls are attempting to break out of the descending channel and the BTC moving averages are on the verge of a bullish crossover. BTC will continue to gain momentum above $12,200. If the $12,200 level fails, then we will become range bound between $9,500 and $12,200.
ETH/USD ($846) Ethereum is underperforming, and struggling to break free of its 20-day EMA. If it can’t break above the $880 arena, it will be a bearish development, which could sink it back to $780 levels. Therefore, set your stop losses around the $830 mark, and look for sustained growth only after it breaks out and remains above $980.
BCH/USD ($1,235) Bitcoin
Cash continues to trade between $1,150 and $1,355. The longer it trades within this range, the stronger
will be the breakout. Therefore, I’m looking to buy the breakout above $1,355
with a target to $1,560 and potentially $1,800.
Set your stop loss to $1,150.
XRP/USD ($0.906) Buyers seem to have abandoned Ripple because for
the past 8 days, it’s been trading inside the range of $0.85 to $0.98669. If it can breakout of the range, it’s likely
to rally to $1.12 where it will face resistance from the 50-day SMA. On the other hand, a break below the $0.85
level could push it down to $0.72.
XLM/USD ($.345) The trading
in Stellar has been bearish, to say the least.
It currently sits at critical support of $0.32. If this level breaks, it could fall to
$0.21. If bulls can defend the $0.32
levels, then my view will turn bullish above the $0.48 price level.
LTC/USD ($209) Litecoin is one
of the few coins that is trading above all of its moving averages. However, this didn’t seem to help it move
higher at all. Bulls now have an uphill
task as they will face resistance at the $220 and the $240 levels. I will turn slightly positive after LTC can
sustain a move above $220.
NEO/USD ($120) I have been bullish
on NEO since it broke out of its bearish, descending triangle
pattern. However, the price has not
moved according to my expectation. NEO
was rejected from the $140 overhead resistance level, and if it fails to find
support at $120 – it will likely fall to the next immediate support of $110. The moving averages are flattening out, which
suggests a range bound action for a few days.
On the upside, the cryptocurrency will gain momentum only above $140.
To follow me on
StockTwits.com to get my daily thoughts and trades – my handle is:
taylorpamm.
Please be safe out there!
Disclaimer:
Expressed thoughts proffered 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:
Please write to Mr. Culbertson at: <rfc@culbertsons.com> to inform him of any
reproductions, including when and where copy will be reproduced. You may use in
complete form or, if quoting in brief, reference <http://rfcfinancialnews.blogspot.com/>.
If you'd like to view RF's actual stock trades - and see more of his
thoughts - please feel free to sign up as a StockTwits follower - "taylorpamm" is the handle.
If you'd like to see RF in action - teaching people about investing -
please feel free to view the TED talk that he gave on Fearless Investing:
Sales = https://youtu.be/blKw0zb6SZk
To unsubscribe please refer to the bottom of the email.
Views expressed are provided for information purposes only and should
not be construed in any way as an offer, an endorsement, or inducement to
invest and is not in any way a testimony of, or associated with Mr.
Culbertson's other firms or associations. Mr. Culbertson and related parties are
not registered and licensed brokers. This
message may contain information that is confidential or privileged and is
intended only for the individual or entity named above and does not constitute
an offer for or advice about any alternative investment product. Such advice
can only be made when accompanied by a prospectus or similar offering
document. Please make sure
to review important disclosures at the end of each article.
Note: Joining BARRONS REPORT is not an offering for any investment. It
represents only the opinions of RF Culbertson and Associates.
PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS
AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING. WHEN CONSIDERING ALTERNATIVE
INVESTMENTS (INCLUDING HEDGE FUNDS) AN INVESTOR SHOULD CONSIDER VARIOUS RISKS
INCLUDING THE FACT THAT SOME PRODUCTS AND OTHER SPECULATIVE INVESTMENT
PRACTICES MAY INCREASE RISK OF INVESTMENT LOSS; MAY NOT BE SUBJECT TO THE SAME
REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY
CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE
INVESTMENT MANAGER.
Alternative investment performance can be volatile. An investor could
lose all or a substantial amount of his or her investment. Often, alternative
investment fund and account managers have total trading authority over their
funds or accounts; the use of a single advisor applying generally similar
trading programs could mean lack of diversification and, consequently, higher
risk. There is often no secondary market for an investor's interest in
alternative investments, and none is expected to develop.
All material presented herein is believed to be reliable but we cannot
attest to its accuracy. Opinions expressed in these reports may change without
prior notice. Culbertson and/or the staff may or may not have investments in
any funds cited above.
Remember the Blog: <http://rfcfinancialnews.blogspot.com/>
Until next week – be safe.
R.F. Culbertson
