“When you remove a founder, sell the company – before it goes to s#$t.”
On foundation, I agree with that statement – but it ushers in an incredibly important topic about leadership. Leadership comes in two flavors: vision and operations. Founders are almost always visionaries, and hired CEOs are almost always operators. VC’s universally agree that once you replace a visionary leader with an operator, the Company will stop innovating and begin to lose value. I agree with that, but you can build a team that provides both operational and visionary leadership. It’s just harder after the founder leaves.
Leaders who can provide both operational and visionary leadership are rare. When you find one, get on their bus and stay on it for as long as you can – because it will be an incredible ride. Often, the visionary leader (founder) is “in charge” and the operational leader (hired CEO) runs the business “day-to-day”.
Early-stage companies can succeed without operational leadership, but not for long. That is often why you see early stage companies with “good ideas & visionary founders” just burn thru cash: (i.e. WeWork, Uber, etc.). They lack the operational control to prioritize and ‘get ‘er done’. Once a company goes over 100 employees, it needs operational leadership – alongside the right sustainable business model. The work of pairing the right ‘visionary’ with the correct ‘operator’ falls at the feet of the BOD.
While it’s true that visionary leaders alone will not get the job done. It is also true that operational leaders will have a hard time getting “that vision thing” right. Vision comes from the top, and operations start ‘in-the-weeds’. Architecting the ‘join in the middle’ is magic / science.
The Market:
It’s 2021, and instead of: “What’s behind door number 1”, it’s now: “What’s in your blockchain?” That’s interesting because it means that speculation and innovation are alive and well. Our markets are telling us to reward fintech as the most powerful force in disruption, and that it’s better to embrace it than to fight it. Recently, SPAC and NFT markets have seen significant contraction. But the trillion-dollar question remains: “Will digital assets or listed assets be the next to deflate?” Which asset class will be the last one to hold onto today’s bubblicius valuations? Markets love / need speculation – so my vote leans toward digital bubbles remaining afloat longer. If we have learned anything from the massive valuations of Coinbase, Robinhood, Chime, and others – it’s not to underestimate non-traditional finance. Yes, I know that: (a) Coinbase only does crypto, (b) Robinhood doesn’t do futures and/or options, and repositories like (c) PayPal, Chime and Square are just variations of challenger banks with only minimal access to crypto. The shake-up continues, but remember: a market’s irrationality will long outlast any investor’s solvency. That’s why they call it HODL: Hold On for Dear Life.
InfoBits:
- The hybrid movie release model could stick... as last week, Disney said that it would roll out Marvel's “Black Widow” and "Cruella" on Disney+ and in theaters – together. People will pay for both big & small screens – for different reasons.
- Shell's environmental vote... came in time for Earth Day. Shell is the first oil giant to seek investor approval to move away from oil – toward electricity.
- To tell someone they’re wrong… first tell them that they’re right.
- The CPSC just issued a warning for Peloton’s Tread+… after "multiple incidents of small children and a pet being injured beneath the machines."
- Crisis Management Rule #1 = Over-Correct: While Peloton may not be technically at fault, they should have done more to maintain trust and safety with users. They could have shipped protective tread covers, or released a safety-related software update. NOW, it’s facing mounting pressure to recall its Treads.
- Netflix subscriber growth was weak… suggesting that consumers are looking to get outdoors, and there is a ton more streaming competition.
- “Times … they are a changin’”
o 26% of workers will leave their present employers post-pandemic… because they’re concerned about limited career advancement.
o 72% of workers say the pandemic caused them to rethink their skill sets, and over half of those have already learned a new skill.
o 53% of those that are changing jobs, will NOT consider one without a WFH option.
- Apple’s AirTags are the ultimate brand power move... because with AirTags, people can slap expensive Apple labels on non-Apple products. The Find My network will expand beyond your iPhone, to your wallet, suitcase, and $300 Hermès key chain – if you wish. AirTags have a smiley face on one side, and a speaker that rings.
- AirTag’s competitive advantage… isn’t the technology inside the $29 coin-sized stainless-steel gadget , but rather the 1 BILLION iPhones that it uses as an infrastructure on which its competitors are not allowed to compete.
- IPwe and IBM’s blockchain group are partnering to turn patents into NFTs: WOW – that genie is definitely out of the bottle!
- Oatly filed to go public… only nine months after some celebrities (Oprah, Natalie Portman, Howard Schulz (SBUX)) took a stake in the company.
- Clubhouse’s monthly downloads plunged 72% in March.
- Credit Suisse was exposed to $20B of Archegos’ investment losses. They’re in that Wells Fargo banking category = UnTouchable.
- Warby Parker (the DTC glasses company)… has plans to go public this year.
- Spotify’s new podcasting model… will NOT charge podcasters, will NOT take a cut of their subscriptions, and will NOT determine their pricing. BINGO!!
- Travis Kalanick's CloudKitchens is… “All of the bad parts of Uber under a different name.”
Crypto-Bytes:
- Your latest red-flag, topping pattern should have been… the epic run in DOGECOIN (DOGE) – up 14,700% at its peak. At one point it was worth more than Ford (ok maybe that makes sense), and more than the entire MJ industry.
- “U.S. Treasury to charge… several financial institutions for money laundering using crypto-currencies.” Question: Why would anyone be dumb enough to launder money on a blockchain – when they could just use Deutsche Bank?
- Coinbase recently purchased Bison Trails, Routefire and Tagomi: It’s printing money so it can (and will) easily acquire more.
- Kraken bought an Australian exchange… Bit Trade.
- Binance bought an Indonesian exchange… WazirX.
- On top of Coinbase’s success… other exchanges are lining up to test the public markets.
- Assets in GBTC have surpassed assets in GLD. I trust bitcoin over gold because I know that the supply side is fixed at 21m.
- Brother, can you spare a Doge… is the ‘Greater Fool Theory’ at work. In traditional investing, people buy because of earnings and growth. With DOGE, people buy because they believe others will pay more – aka ‘be a greater fool’.
- Brian Brooks (X-top U.S. banking regulator)… will become the CEO of Binance.US, beginning May 1. It’s the company that’s most likely to give Coinbase a run for its money.
- Chris Giancarlo (X-top U.S. commodities regulator)… joined BlockFi’s BOD as the company appears to ready itself for a public listing.
- Crypto Inflows almost tripled last week: Despite the market downturn, large institutional investors are apparently BTFD = ‘buying the dip’.
- PayPal is expanding its crypto offerings to its Venmo payments app: Soon, Venmo’s 70m customers will be able to buy, sell and trade as little as $1 worth of Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC) and Bitcoin Cash (BCH).
- Mike Novogratz’s merchant bank Galaxy Digital is buying crypto custodian BitGo. The deal represents the need for dedicated custodians to handle customer and corporate funds as banks warm to the industry.
- UniSwap hits record… $10B in weekly trading volume.
- Binance’s PancakeSwap tallied over… $4B in daily volume.
- Bitcoin mining accounts for 0.5% of global electricity consumption. A Bitcoin transaction generates the same carbon as 1m Visa transactions and/or 78,000 hours of YouTube watching.
- Bitwise Asset Management is registering its crypto fund… with the SEC – increasing the competitive pressure on Grayscale’s products.
- The SEC is now officially reviewing 3 Bitcoin ETF applications.
- Charles Schwab also wants in on crypto… but is waiting for ‘regulatory clarity.’ Oh Chucky, you really think that your users will wait for you don’t you.
- "My sense is that institutional investors get DeFi, and most of them are buying ETH as an index on DeFi"… Kyle Samani of Multicoin Capital.
Last Week:
- Monday: Maybe this week is going to mirror last week: with Mon. through Wed. being soggy, and Thurs. & Friday going straight up. Materials like VALE and RIO are strong today. In fact, RIO over $86.85 looks inviting. I'm looking at a bottom dweller play. ASTC was sold and left for dead, but it has been trading sideways and slightly upward. It's cheap at $1.20. Two months ago, it was $4 – so maybe it tries to get half that back. I'll take a shot at it over $1.25.
- Wednesday: Goldman Sachs put out a report stating that a powerful short squeeze could be in the offing because so many hedge funds have been selling. That could be what's happening here. So, can we find a trade that won't bite us? How about BBBY? They had a wicked gap down, traded sideways and up for a few days, and now are pushing higher. I could see taking them over $26.56. FYI: I had to shake my head as once again Powell and his lunatics are trying to convince us that: (a) we just don't have enough inflation, (b) inflation is good for us, and (c) if inflation ever got out of hand – he’s got the tools to fix it. That’s just B.S. Prices are sceaming higher YoY: Lumber: +265%, Crude Oil: +210%, Gasoline: +182%, Heating Oil: +107%, Corn: +84%, Copper: +83%, Soybeans: +72%, Silver: +65%, Sugar: +59%, Cotton: +54%, Platinum: +52%, Natural Gas: +43%, Wheat: +19%, Coffee: +13%. I guess if you have no use for food, shelter, clothing, insurance, medical treatments, energy or anything else it takes to survive – then there's no inflation.
- Thursday: As Bloomberg reports, President Joe Biden will propose almost doubling the capital gains tax rate for wealthy individuals to 39.6%, which, coupled with an existing surtax on investment income, means that federal tax rates for investors could be as high as 43.4%. The plan would boost the capital gains rate to 39.6% for those earning $1m or more. This is an increase from the current base rate of 20%. A 3.8% tax on investment income that funds Obamacare would be kept in place, pushing the tax rate on returns on financial assets higher than the top rate on wage and salary income. The proposal could reverse a long-standing provision of the tax code that taxes returns on investment lower than on labor. Biden campaigned on equalizing the capital gains and income tax rates for wealthy individuals, saying it’s unfair that many of them pay lower rates than middle-class workers. For $1m earners in high-tax states, rates on capital gains could be above 50%. For New Yorkers, the combined state and federal capital gains rate could be as high as 52.22%. For Californians, the tax rate could be 56.7%.
- Friday: After puking yesterday on word that Biden wants to hike capital gains taxes to 43%, the market is unsettled today. My guess is that Joe floated that ridiculous 43% number so that they can negotiate it, and settle at 28%. I really dislike politics.
Marijuana’s Coming… and Everyone Knows It!
- The U.S. House of Representatives passed cannabis banking reform: The SAFE Banking Act, would enable banks and other financial institutions to serve state-legal marijuana businesses without fear of federal punishment. But history shows that it’s the Senate where the real hurdle is here.
- “Joe” is considering banning addictive nicotine levels… along with menthol cigarettes. Nicotine itself isn’t the cause of cancer, heart disease, or lung disease – but it is responsible for the addictive nature of sustances.
- Alcohol is seeing:
o A "Roaring '20s" Return.
o Outdoor Dining remains critical to alcohol’s survival
o Reopened Restaurants not stealing off-premise (State Store) sales.
o Buyers are reducing volume, but still purchasing premium.
o Smaller wine lists are here to stay.
o Party-ready millennials are driving the re-opening.
o Large gatherings are already becoming industry game changers.
o Demand for niche spirits is returning.
o Imports are rebounding – even the tariff-impacted ones.
o Shipping delays and staff shortages are serious challenges.
o The road to profitability is still “Long and Winding”.
Next Week: Markets Shrug it Off…?
Is this a Goldilocks Market or a Wrecking Ball of Risk? This market has been incredibly resilient.
- This week we have many upcoming catalysts: (a) the Monsters of Tech are all releasing earnings, (b) the FOMC is meeting, (c) Volumes are declining as Historical Volatility is rising, and (d) Micro Bitcoin futures kick off additional arbitrage agents on May 2nd.
Market Update: Markets finished the week slightly lower as the S&Ps rode the lower edge of their Expected Move (EM).
- Historical Volatility is rising on all indices and sectors – except BONDS: This is interesting because implied volatility has been stagnant to slightly falling, but historical volatility is clearly rising on declining volume / lower liquidity. This increases marketplace risk. BUT if you like selling premium, then look toward BONDS (TLT) for their continued liquidity.
- Options / Future volumes decline. About a year ago, we were seeing about 26m options being traded on a daily basis. In 2021, the year-to-date average daily volume had increased by 54% to 40m shares. Last week saw that average drop 15% to 34m shares.
- Normally, when markets get volatile – volume increases. In this instance, we have rising historical volatility coupled with a volume / liquidity decline. That is NOT a normal recipe for success.
This coming Week is a monster week for Big Tech Earnings: Was NFLX earnings flop an anomaly or is more bad news coming due to COVID-fatigue? Could COVID-fatigue (aka less ‘screen’ time) hit all of the big tech companies?
- Apple, Microsoft, Amazon, Google, Facebook and Tesla all report earnings this week.
- If you’re looking for a trade, buy an inexpensive Butterfly centered over either end of the expected move in every one of the Monsters of Tech the day of earnings, and sell that butterfly the day after each company’s earnings release.
Crypto Smackdown as Micro Bitcoin futures kick off on May 2nd: You may think that the Biden tax proposal caused more of a smackdown within crypto / Bitcoin – than it did within the regular marketplace. However, one large, specific crypto-element is the upcoming launch of Micro Bitcoin futures trading on May 2nd.
- Micro Bitcoin futures are 1/10th the size of the coin. So, instead of paying $50k against a futures contract, you get to reduce your notional value / exposure to $5,000 / contract.
- Micro Bitcoin futures will attract a lot more arbitrage agents, and THAT alone will cause BTC to come out of the shadows and influence more of the marketplace.
- Look for Bitcoin futures arbitrage to be ‘hot ‘n heavy’ post May 2nd, and to change the game inside of Bitcoin trading.
FOMC Meeting results on Wednesday afternoon:
- Have no fear because: Inflation is Transitory: and if you believe that – I have a bridge in Brooklyn that I would like to sell you.
SPX Expected Move:
- Last Week’s EM = $54 and Next Week’s EM = $62 == 15% higher volatility in the week to come.
- With declining liquidity, increasing volatility, and at least 4 catalysts on the horizon – measure your risk appropriately over these next couple of weeks.
Tips:
HODL’s: (Hold On for Dear Life)
- Bitcoin (BTC = $49,500 / in at $4,310) & buying more
- Bitcoin Cash (BCH = $770 / in at $170) & buying more
- CTI BioPharma (CTIC = $2.45)
o Sold May $3 CCs for income
- Electramericcanica Vehs (SOLO = $4.32)
o Sold May $4.50 CCs for income
- Express Inc (EXPR = $3.15)
o Sold May $3.50 CCs for income.
- Ethereum (ETH = $2,250 / in at $310) & buying more
- Grayscale Ethereum (ETHE = $23.12 / in @ $13.44)
- Grayscale Bitcoin Trust (GBTC = $42.38 / in @ $9.41) & buying more
- Grayscale Trust (GDLC = $35.55 / in @ $37.09) & buying more
- Hyliion (HYLN = $9.35 / in @ $0.32)
- Infinity Pharma (INFI = $3.09)
o Sold $3 CC’s for income
- Iridex Corp (IRIX = $7.71)
o Sold May $10 CCs for income.
- Kopin Corp (KOPN = $8.46)
o Sold May $10 CCs for income.
- Litecoin (LTC = $225 / in @ $191)
- Oncocyte Corp. (OCX = $4.64)
o Sold May $5 CCs for income.
- Opko Health (OPK = $4.27)
o Sold May $4 CCs for income.
- Sandstorm Gold (SAND = $7.64)
o Sold June $8 CCs for income.
- SOS Limited (SOS = $4.33)
o Sold May $5 CCs for income.
- VisLink Tech (VISL = $2.56)
o Sold May $2.50 CCs for income.
- VivoPower (VVPR = $8.66)
o Sold the August $12.50 CCs for income.
Thoughts:
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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