Signs are everywhere…
Once upon a time, I believed that this “Deer Xing” sign was there to tell the deer where to cross the road. It is not. It is there to let drivers know that this is the spot where deer often choose to cross the road. You see – deer can’t read signs. And even if they could, they probably wouldn’t bother to obey them. A good sign-maker knows these things, because a good sign-maker understands their audience. Unfortunately, today’s signs are often confusing, and just a reflection of the sign-maker’s frustration. Often, signs are printed in ALL CAPS – yelling about things nobody can control. And if you can’t influence something, why are you yelling about it?
As entrepreneurs, we have a chance to do work that we’re proud of – for people who care. Our hope is that we do it in a way that other people will read and understand our signs, and even tell others. Our goal is not to control an algorithm, but rather to behave in such a manner that others will want to follow and cross the road along with us.
Other people’s investments are out of my control. Last week I saw a sign / headline: “Credit Suisse’s Stocks to Protect against Inflation”. I laughed, “This article must have been written for the deer, because why would anyone care what Credit Suisse thought about anything?” After all, isn’t Credit Suisse floating a multibillion-dollar debt offering due to their complete incompetence and mismanagement of their Archegos investment? Heck, if I lost $4.7B while I was asleep at the wheel – I would remain silent and not post a sign.
But, as I get older, “Deer Xing” signs are everywhere. I’m never sure of their audience, and forever confused by their message. I’m bothered by their lack of integrity, but more frustrated by their lack of homework into the truth, strategy, common sense, and math behind their claims. Good sign-makers are rare. But as long as deer (who can’t read) continue to be their audience – I’m ok with that.
The Market:
The price action in the indexes last week was like Christmas lights – alternating red and green and back to red. The good news is that capital is not leaving the market – it’s just rotating between sectors. Both, the Nasdaq and Russell are setting up for potential breakouts. I suspect that they will remain range-bound until earnings are behind us.
Lately, I find a majority of my time being spent defending crypto-currencies. Fortunately, rewards in investing are measured on a single axis (percentage return). Everything else doesn’t matter and remains ‘behind the curtain’. To win, you need to be better than someone else. Sooner or later just like any other scarcity-driven competition you will lose, and you’ll need to acknowledge that the way you’ve done things for years – will no longer ‘cut the mustard’. Traditional investors point to Tesla (TSLA) as their big winner – until I bring up Ethereum (ETH). Or they will rave and/or reminisce about GameStop (GME) – until I bring up Dogecoin (DOGE). And then they rationalize ETH and DOGE as being too volatile for their portfolio – as if TSLA and GME aren’t? Factually, “The best investment for the past decade has been crypto.” Of course, history doesn’t exactly repeat itself, but it always rhymes. You can transfer the skill set you’ve developed in equities directly over to crypto, but you’ll need to be committed to doing so. Why? Because, some of your e-toolkit will need to be accomplished manually. If you have a chance to jump into the crypto-end of the pool, Monday would be a good time to start – when micro-bitcoin futures are unveiled. At minimum look into Celsius and Nexo as places to earn double-digit interest on your savings.
InfoBits:
- Elon Musk will host "Saturday Night Live" on May 8: SNL cast members won’t be forced to appear with Elon, as the episode is becoming quite the PR disaster. But as a consolation prize, Elon just added an additional $32.4B worth of Tesla shares to his pile.
- Oscar Ratings Crash to All-Time Low… as viewership falls under 10m for the first time ever. This is what happens when you lose touch with your customer.
- Pod battles intensify: Last week, Apple unveiled the AirTag. AirTags are fancy bluetooth buttons used for tracking valuables. It also dropped paid pod subscriptions for ad-free listening and exclusive content.
- Spending more on your PB&J? Consumer goods companies like General Mills are raising prices for the first time since 2018.
- Lyft has sold its self-driving car development arm… to Toyota for $550m. This will accelerate Lyft’s profitability curve.
- ZipRecruiter, a job search app and service… has filed for a direct listing.
- The run-up in GameStop's share price… has enabled 4 execs (including CEO George Sherman – who joined in 2019 and leaves in 90 days) to depart with stock valued at roughly $290m.
- Exxon sounds the ‘Blockbuster Alarm’ and refuses to ‘Go Green’: Blockbuster clung to VHS and DVD rentals, even while streaming emerged as the future. If VHS tapes are oil, streaming is clean energy. Exxon told the world last week that it will NOT pivot to clean energy, but rather live and die with oil.
- 5-Stars for 4-Paws... Rover is the world's largest online pet care marketplace – connecting you to dog walkers, house sitters, groomers, and even play dates for your pooch. It's going public via SPAC.
- Despite political tensions between the U.S. and China… about 60 Chinese companies are planning to go public in the U.S. this year
- It may be hard to find gas this summer… not because of any crude oil shortage. It's the tanker truck drivers that are in short supply.
- Tesla said for the first time… that it may NEVER achieve full, self-driving (FSD) technology.
- J. Powell says that there’s NO INFLATION: Then explain this:
o Cost to build a wood deck of 200 sq. feet in April of 2020 = $936.
o Cost for same deck in April 2021 = $3,696. (300% increase in 1 yr.)
- Microsoft posted its best quarterly sales growth since 2018… partly thanks to PC sales from the WFH and school-from-home life.
- Google’s sales soared 34% last quarter... largely thanks to pandemic YouTube binging. The average YouTube’r (2B) watches 30 minutes a day, and unlike Netflix – YouTube is paying $0 for content.
- U.S. Consumer Confidence jumped for the fourth-straight month… approaching pre-pandemic levels.
- Allbirds (the shoe brand)… is prepping for an IPO.
- Freshworks (the Salesforce competitor)… is prepping for an IPO.
- Zomato (India’s food delivery company)… is prepping to go public in India.
- Storm clouds are brewing that could rain on ad giants' parade.
o Apple’s new iOS privacy changes will hurt FB's and Google’s ad-targeting and ad sales abilities.
o 80% of Google’s sales and 98% of Facebook’s sales come from ads.
o FB expects growth to slow in the second half of the year.
o Google will feel pressured to implement similar changes on Android.
o Lina Khan (potential FTC head) is ramping up antitrust pressure.
o And re-openings are expected to reduce time online (bad for ads).
- Shares of Lyft, Uber and DoorDash… dipped lower after U.S. Sec. of Labor said that gig workers should be classified as company employees.
- NASA has told Elon Musk’s SpaceX to halt work… under a contract it won to develop a lunar spacecraft, pending the outcome of challenges by rival bidders. It seems that SpaceX had a chance to revise its bid, but that same ability was not given Jeff Bezos’ Blue Origin and/or defense contractor Dynetics.
- Amazon’s sales surged 44% last quarter… and profit more than tripled as the economic boom keeps booming.
- Consumer and govt. spending fueled 6.4% GDP growth last quarter… the 2ndfastest pace for economic growth since 2003.
- The FDA is looking to ban menthol cigarettes and flavored cigars… within the next year to significantly reduce disease and death.
Crypto-Bytes:
- The Winklevoss twins… are releasing the first crypto rewards credit card.
- JPM is preparing to offer an actively managed Bitcoin fund… for private wealth clients. The bank’s approach is a notable break from passive funds operated by Pantera Capital and Galaxy Digital.
- The head of Turkey’s central bank ruled out… any possibility of a governmental ban on crypto.
- U.S. Bank unveiled a crypto custody product… and also announced it will administer NYDIG’s bitcoin ETF, which is currently being reviewed by the SEC.
- A South Korean-Japanese video game publisher, Nexon… bought $100m Bitcoin using corporate reserves at an average price of $58,226.
- Goldman Sachs identified 19 blockchain and crypto-related stocks… that have outperformed the S&P this year.
- Ethereum (ETH) now makes up 27% of Genesis’ loan book… as clients deploy capital into decentralized finance protocols.
- The SEC will delay its decision on the VanEck Bitcoin ETF until June. It usually takes 45 days for an ETF application to get a decision. This has been going on for decades – so it seems. SEC, why give any date at all anymore?
- FED Chairman Jerome Powell thinks: “Capital markets, as typified by the dogecoin craze, are a bit frothy. Our central bank easy-money policy may have had something to do with that froth. The U.S. is entirely uninterested in running a digital currency race against China.” I’m guessing that the digital race is ON!
- DeFi is now a $100B sector… and likely tops 1m real users.
- The Intercontinental Exchange (owner of the NYSE)… sold its 1.4% stake in Coinbase for $1.2B to pay down debt.
- New German legislation will allow Spezialfonds… a special type of fund manager, to invest up to 20% of their portfolios in cryptocurrencies. This could send $425B in fresh capital into crypto markets.
- VC firm Andreessen Horowitz is raising $1B to start a cryptocurrency fund. The fund would become the 3rd-largest crypto-centric fund, and the largest pool of capital ever dedicated exclusively to cryptocurrency.
Last Week:
Tuesday: Tomorrow we're going to hear from the FED, and what they think of the economy. Many are speculating that they might hint at how they'd go about doing some removal of accommodation – but we’ll wait-n-see. Unfortunately, they can’t remove much unless they’re prepping for a market crash. Anyone that has been with me for more than a nano-second knows that the ONLY reason this market has been able to put in 31 new "all-time highs" in 2021 alone – is because of our relentless FED money printing. It's very simple: “If accommodation of any and all manner is the reason we're up so much, removal of such accommodation will result in a fade." I’ve said it many times, this market will NOT come down until our FED pulls the plug on their printing presses. And only they know the timing on that. So, is there anything screaming: “Buy me?” Based on yesterday's chart, I was going to say MP – but today it's fairly weak despite good technicals. The same with QS. Based on yesterday, one may have thought it was going to move – but it’s not. I am also watching CWH for an earnings run.
Wednesday: It’s FED day, and J. Powell (FED Chair) has not said ONE thing about tapering. In fact, he said he's keeping all the bond buying, and there are no rate hikes on the horizon. Naturally he dances around the inflation rate issue, saying that if there is some – it’s "transitory". So, the bottom line – NOTHING is changing at the FED, and that's one thing that the Street doesn't have to worry about. Now we’re on to Biden’s big tax hikes, and insane spending plans. The market "should" continue inching higher – not based on fundamentals, but rather on FED money.
Friday: As of right now, we're seeing the DOW give back ALL of yesterday’s gains. My feeling is that markets are not liking Biden’s ‘tax-n-spend’ plan. I also found it VERY interesting that the FED head Kaplan came out today and said: “Rate hikes should start in 2022. We are seeing excesses and imbalances in our financial markets. We also need to start talking about tapering bond buying soon.” Holy cow a FED head saying that there's excesses in the market, and that the FED should be tightening? WOW. Maybe between Biden’s taxes and the Fed at least hinting that they should do something, has put this market in a cranky mood.
Marijuana’s Coming… and Everyone Knows It!
- States where Marijuana Legalization is in Play:
o Connecticut (likely)
o Delaware (likely)
o Rhode Island (likely)
o Alabama (likely)
o North Carolina (maybe)
o Minnesota (questionable)
o Pennsylvania (questionable)
o South Carolina (questionable)
o Kansas (questionable)
o Nebraska (questionable)
Next Week: R U Ready to Ruuuumble?
Market Update:
Over the past 2 weeks, our market (SPX) is massively unchanged. We were at 4180 two and a half weeks ago, and on Friday we closed at 4181. The Nasdaq has seen very little movement for the last 3 weeks, and the IWM was at today’s level on February 1st.
The Monsters of Tech can’t help us. FB, AMZN, AAPL, GOOG, MSFT, and TSLA all rocked earnings, but the Nasdaq declined anyway.
Our FED said nothing, and the financials (XLF) loved it. Why did the financials gain, when the FED promised low interest rates forever, and our government it talking about higher taxes? Aren’t the financials holding a fair amount of debt in those soon to be taxed markets? Currently, money’s moving from tech into the financials. The financials are supporting this market. I’m looking at the financials and specifically Wells Fargo (WFC) – as a short.
The U.S. Dollar is ripping to the upside! Last week the dollar had one of the largest moves to the upside in recent memory. I view the dollar as a flight-to-quality. So, when I see the dollar moving higher, I begin to worry about the general health of the market. Also, our bonds are doing nothing on very large volume. Many of these elements do not make sense, and that’s why I think something dangerous this way comes.
Volatility is on the move… as the VVIX sits at 109.8. FYI: my ‘duck-n-cover’ area starts when the VVIX crosses above 110.
Here comes a move in the S&P:
1. Risk has accumulated over the past 3 weeks. During this time, we have been trading in a range between 4120 and 4210 – amplifying risk around the 4180 level.
2. Option volume exploded higher at the end of last week. Option accumulation is a sign of increased risk accompanied by a time limit.
3. Because risk is building, a Gamma Squeeze could easily become a self-fulfilling prophecy. That means a small move above or below 4180, could trigger a substantial hedging reaction.
4. Get ready to ruuuuumble! On Friday the SPX sold 1.4m option contracts, which was almost twice as much as the previous 5 days. The SPX is a $4,180 product so we’re moving almost $5B worth of notional value without including the SPY or the VIX.
5. Everyone that is ‘too big to fail’ MUST be market neutral. So, if people are buying calls on the VIX, then the market-maker who sold them must correspondingly buy stock in the VIX so that they can remain market neutral. The slightest selling (or buying) will cause a dynamic, hedging over-reaction around the SPX 4180 level.
6. Which direction are we moving? With the dollar, the VIX, and the VVIX all moving higher, it tells me that markets believe that a move to the downside may be in order.
7. STOP selling premium. Let the move come to you – BEFORE you trade it.
Micro BTC futures are starting May 3rd, and will change Bitcoin investing:
The CME will introduce micro-bitcoin futures on May 3rd. Micro-bitcoin futures are one-tenth the size of Bitcoin. Their volume, volatility, and speed of trade execution will be something that BTC has never experienced.
If you’re in the BTC market, the arbitrage associated with Bitcoin will be ‘on fire’.
SPX Expected Move:
Last Week’s Expected Move (EM) = $61.64. Next Week’s EM = $67.13. We all see the same risk. Please: “keep your hands and feet inside the vehicle at all times.”
Tips:
HODL’s: (Hold On for Dear Life)
- Bitcoin (BTC = $57,600 / in at $4,310) & buying
- Bitcoin Cash (BCH = $950 / in at $170) & buying
- CTI BioPharma (CTIC = $2.44)
o Sold May $3 CCs for income
- Electramericcanica Vehs (SOLO = $4.15)
o Sold May $4.50 CCs for income
- Express Inc (EXPR = $3.05)
o Sold May $3.50 CCs for income.
- Ethereum (ETH = $2,850 / in at $310) & buying
- Grayscale Ethereum (ETHE = $27.73 / in @ $13.44) & buying
- Grayscale Bitcoin Trust (GBTC = $46.85 / in @ $9.41) & buying
- Grayscale Trust (GDLC = $38.83 / in @ $37.09) & buying
- Hyliion (HYLN = $10.50 / in @ $0.32)
- Infinity Pharma (INFI = $3.32)
o Sold $3 CC’s for income
- Iridex Corp (IRIX = $8.60)
o Sold May $10 CCs for income.
- Kopin Corp (KOPN = $8.46)
o Sold May $10 CCs for income.
- Litecoin (LTC = $270 / in @ $191)
- Oncocyte Corp. (OCX = $5.14)
o Sold May $5 CCs for income.
- Opko Health (OPK = $4.10)
o Sold May $4 CCs for income.
- Sandstorm Gold (SAND = $7.42)
o Sold June $8 CCs for income.
- SOS Limited (SOS = $4.32)
o Sold May $5 CCs for income.
- VisLink Tech (VISL = $2.77)
o Sold May $2.50 CCs for income.
- VivoPower (VVPR = $7.60)
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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