This Week in Barrons: June 6th, 2021
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“We’ll fix it in Post…”
I don’t understand why we’re always ‘fixing things in post-production’. Everyone knows that the most expensive way:
- To adjust a movie – is at the end, in the editing room,
- To make a beautiful piece of furniture – is with sandpaper, and
- To satisfy a customer – is after they complain to customer service.
In 2021, the U.S. will grow at the fastest rate since 1984. China expanded at a record 18.3% last quarter, and the UK is growing at its fastest pace since WWII. Wealthy countries are spending trillions ‘jump starting’ their economies. Imagine how many bad decisions are going to be made when you triple a country’s growth rate? There isn’t enough time or money to: ‘fix them all in post’. What if there was no post-production? What if (before making any changes) someone had to ‘sell us’ on the benefits vs the costs? My guess is that we would plan and implement as if our lives depended on it.
The winning medal for ‘fixing it in post’ should go to Adam Aron (CEO of AMC) for keeping his company alive and relevant. Knowing that over 80% of AMC is owned by retail investors, Adam created an investor portal that gives visitors everything to keep them coming back – including free large popcorn. Speculation in meme stocks like AMC will evolve into an investment strategy and time will tell whether it’s an opportunity. But just maybe owning a meme stock is more about the feeling that it gives you, than the actual investment itself. Heck, factually the market maker The Citadel will either push GME to $100,000 per share or $0. The reason (in my opinion) to buy GameStop is for the statement you’re making, and for the journey.
By the way, ‘fixing it in post’ isn’t nearly as attractive when you’re the one doing the fixing. Aka: when you’re the one doing the late-night edits, sanding the furniture, and/or on the phone with the angry customer. I think you’ll find that by developing a plan – starting with the ‘finishing move’ and working your way back up the food chain – should result in an improved solution, a smoother implementation, measurable metrics, and (most importantly) a highly satisfied customer.
The Market:
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The DOW and S&P continue to consolidate near all-time-highs. The Nasdaq is not too far behind, and even the Russell small-cap index is back above its 50-day moving average. The market is hitting on all cylinders. This is a change from the constant sector rotations featuring basic materials, energy and financial stocks moving higher while tech moved lower – and vice versa.
Last week in Equities:
- The market was still experiencing a series of short-term moves.
- There were intraday fades, and institutions not interested in chasing breakouts, but eager to scoop up pullbacks.
- The most shorted stocks were the big gainers of the week – with AMC pushing $48, and GME around $250.
- The U.S. Dollar continued to weaken, while Brazil and other Latin American countries broke out to new highs.
- Areas of strength included: metals, gold, silver, oil, semis, medical devices, cannabis, autos, car parts, and even some software stocks.
- The Chinese Renminbi hit a new 3-yr high against the U.S. Dollar.
- With only 24% of the world’s population being vaccinated, both BNTX and MRNA (the vaccine creators) still look good.
- And financials like GS and JPM continued to trend higher.
Last week in Crypto:
- BTC was still rangebound between 32K-40K,
- Exchange flows continued to plateau, with no real directional trend,
- Stablecoins were waiting on the sideline,
- Traders were also sidelined – with the futures open interest and number of futures contracts == flat,
- Selling was mostly being done by younger coins,
- Long term holders were still adding, and offsetting any selling from short-term holders,
- Retail buying was medium to heavy – being attracted by lower prices, and
- Bitcoin remained undervalued compared to its on-chain capital flows.
Until Bitcoin’s price makes a decisive move in either direction, there will be a lot of capital on the sidelines. There are a lot of bids beneath $33,000 and a lot of sell orders above $40,000. Significant volume will be needed to break through those order walls. But after consolidating this long, I would expect a strong move soon in either direction.
InfoBits:
- Palantir's Alex Karp ($1.1B) and DoorDash’s Tony Xu ($400m)… received special stock awards that were among the largest CEO pay packages since 2007.
- Chamath Palihapitiya is looking to take 4 biotech companies public… via 4 different SPACs. He is targeting the neurology, oncology, organ and immunology health-care sectors.
- Amazon’s Prime Day… is June 21st and June 22nd.
- +40 ransomware attacks against food companies… have been reported in the past year.
- After raising over $2B… construction startup Katerra is shutting down, letting go of its 2,400 employees, and leaving dozens of apartment projects incomplete.
- In the past months, AMC has… raised capital twice (around $1B), and hit all-time highs. Normally those two do NOT go together. The funds will be used for: possible acquisitions, theater upgrades, and debt reduction.
- The weekly performance for other meme-stocks: GameStop (GME) + 13%, BlackBerry (BB) + 32%, Bed Bath & Beyond (BBBY) + 62%, and Koss +68%
- Depop will be acquired by Etsy for $1.6B in cash. Etsy is one of those few sites where 75% of the sellers are also buyers – so infrastructure matters.
- Cybersecurity firm FireEye is selling its products business for $1.2B. FireEye / Mandiant always liked the consulting world better.
- The gig economy is in an awkward phase... Uber and Lyft are raising rates in order to pay their drivers more, but customers are not happy and have shifted to DIY’ing it and buying their own car(s).
- Oil prices jumped to a 2-year high… after OPEC forecast higher demand.
- JBS (our largest meat supplier) shut down… after a major cyberattack.
- AMC is catering to the retail investor: 3.2m individual investors own 80% of AMC shares. In the words of CEO Adam Aron: "These people are the owners of AMC, and I work for them.” AMC unveiled a new website where shareholders can get exclusive discounts, promos, and a free (large) popcorn.
- Ex-Apple design boss Jony Ive… has recruited at least five former Apple colleagues to his new design firm, LoveFrom.
- Tesla Chinese vehicle orders fell by 50%... as they grappled with criticism over how they handled consumer complaints. In a way to save profitability and short-term stock price decline – they’re selling their BTC. The nerds don’t like it!
- TikTok just gave itself permission… to collect biometric data on U.S. users, including faceprints and voiceprints.
- Tesla’s global EV market share fell from 29% in March to 11% in April: Unfortunately for TSLA, the competition is hotter than ever, and they badly need a real differentiator to justify their higher prices.
- Twitter launched its first subscription service… but will people pay for social? Social media is normally free because they sell eyeballs to advertisers. Can you imagine the dominos that would fall if social offered an ad-free sub?
Crypto-Bytes:
- Jack Dorsey (CEO of Twitter & Square)… “I don’t think there is anything more important to work on than crypto.”
- El Salvador looks to become the world’s first country… to adopt bitcoin as legal tender. President Nayib Bukele announced this at Bitcoin 2021 in Miami.
- Makara, a newly launched crypto robo-advisor… claims to be the first SEC-registered crypto robo-advisor. Makara is partnering with Gemini to handle buying, selling, and storing of underlying assets.
- WisdomTree, VanEck, 21Shares and the ETC Group… received approval to list crypto ETPs on the Euronext stock exchanges in Paris and Amsterdam.
- Chinese brokerage platforms Tiger Brokers and Futu… are planning to expand into crypto even with Beijing’s crackdown.
- Miami is playing host to… the largest crypto conference to date.
- Recently, the European Investment Bank offered… €100m in “digital bonds” on the Ethereum blockchain. While the U.S., China, and Iran attempt to resist, Europe knows that crypto is an unstoppable force.
- There’s a serious migration of talent to Bitcoin and crypto: “The bitcoin and crypto industry has the highest opportunity of any industry, so it is not surprising to see thousands of people moving from legacy businesses to these disruptive upstarts,”Anthony Pompliano.
- On June 2nd, Google announced that it will be lifting its 2018 ban… on crypto exchanges and wallets using Google Ad services.
- Alibaba and Google are among +300 firms applying… for Singapore's payments and crypto exchange licenses.
- “Bitcoin’s killer app… is its ability to act as a clearing layer for everything else”… Paxful CEO Ray Youssef.
- This week a Chinese Government mouthpiece said… that people have the freedom to trade bitcoin – at their own risk.
- FTX paid an e-sports team $210m… to include FTX in its name.
- Jack Dorsey said at Bitcoin 2021 in Miami: “If I were not working at Square or Twitter I'd be working on crypto / Bitcoin.”
Last Week:
Monday: DRD tried to break free, but as gold and silver came off their highs – it also slid back. I could see taking DRD over $13. IBM looked like it was going to try and break out of a week’s long congestion, but it faded. Over $145.85 could set it free. Energy is hot and VLO looks like it wants to go. I'll try it over $82.95.
Tuesday: We came out of the gate roaring, only to see the indexes roll over by 10 am, and go flat for the balance of the day.
Wednesday: This seems like it was to be a repeat of Tuesday, only in slow motion. We’ve had two days of nudging the highs and testing things. A lot of stocks did better than the indexes would suggest. I think we’re going to take a serious shot at going higher tomorrow. I think we get a big up Thursday – it may carry into Friday. If it does hold, we may see significant gains next week. But if we surge higher tomorrow and lose half of it on Friday – we’re back in consolidation mode for the next attempt.
Thursday: On the good side, the ADP employment report came out very strong with 978K jobs created. The initial jobless claims fell below 400K for the first time in a year; however, continuing claims rose to over 3.7m – which is not good. Labor costs are rising a bit more than anyone likes.
Friday: The Jobs Report is out: We gained 559,000 jobs, the unemployment rate is 5.8%, and wages rose 0.5%. Is this going to be pop ‘n drop, or a jump ‘n go? Just getting to the highs is one thing, and getting over them is something else. With everything nudging up against all-time highs, bonds will be the deciding factor.
Marijuana:
- Canopy Growth reported earnings… with legal sales across the U.S. hitting a record $17.5B – up 46% from 2019. Canopy's sales are also growing thanks to: CBD-infused sparkling water, CBD wrinkle cream, and a Martha Stewart partnership.
- Sales of CBD-only products in MJ rec-legal states are falling… both in stores and online. The market share of non-inhalable pure CBD products in adult-use stores has declined 5% in California, Colorado and Washington state between 2018 and 2020 – and declined 23% in Nevada. The expansion of CBD-products in everyday retail, drug, grocery, and specialty stores, is responsible for the decline.
Next Week: Are we Breaking-Out to the Upside?
Market Update: We finished the week slightly higher – which begs the question: Is this the start of a major breakout? We’ve been stuck inside a trading range for 8 weeks, but this week we injected bonds and interest rates into the mix.
- On Friday, the Jobs number ‘missed’ and the market loved it. It told us that our economy is not recovering as fast as we had hoped, but also that our FED will continue printing and interest rates will remain low for the foreseeable future. But next week gives us another read on inflation – so buckle your seat belts.
- The financials and energy are leading our markets higher, and tech continues to lag. Just because we’re at the upper edge of the channel, doesn’t mean we’re breaking out. This same market (in a similar position) fell apart as recently as 30 days ago.
Are the Bonds (/ZB) starting to breakout? They are also right up against the upper edge of their 3.5-month range.
- If Bonds continue to break to the upside – then interest rates will head lower. If interest rates head lower, financials will be hurt but tech will love it. So, if bonds break out to the upside, then the S&Ps will suffer.
- Tech loves lower interest rates because of stock buybacks. Aka tech companies can borrow more money, at lower rates, in order to buyback (and artificially inflate) their own stock. This also promotes ‘eyeball’ pricing rather than focusing on earnings.
- Financials and Energy are moving in relative lockstep. So, if the financials come down due to lower interest rates, you can expect energy to come-in with it.
- I think if rates come down, the QQQ’s will rise, the XLF and XLE will come down = and the S&Ps will remain somewhat rangebound to lower for a while longer.
- Tip #1: I believe a Gamma Squeeze will take the S&Ps toward 4,300 early next week, and then the Bond market will flip us back down as a lower interest rate environment begins to stall out the financials and energy. That should return us into the S&P range that we’ve been in for the past 8-weeks.
SKEW Continues to Dominate: as it hits 52-week highs.
- Premium selling is spectacular in the SPY’s out into August. Tip #2: Look at selling a put spread out in August, centered around $321. That’s over 3 standard deviations off the current $422 SPY price, 77 days out – with amazing liquidity.
- If you wish to hedge the above Put Spread: Tip #3: Buy an out-of-the-money Call Spread on the VIX in either July or August = because it’s cheap!
SPX Expected Move:
- Last Week = $51 4-day Expected Move / Next Week = $53 (5-Day EM)
Tips:
How close are we to all-time highs? The S&P on May 7th closed at 4,232, and we closed Friday at 4,229. On May 7th the DOW closed at 34,777, and on Friday we closed at 34,756. The NASDAQ has about 400 points to go to get to its highs. Next week I think we break up and over the highs, but drift back under those levels a time or two. History shows that summers aren’t the best times to be putting in all-time highs, but history never had rabid FED heads and Central Banks buying stocks. If they get through and hold for a few days, then we have to guess a new leg up is upon us.
HODL’s: (Hold On for Dear Life)
- AMC – Bought it on principle,
- Bitcoin (BTC = $36,000 / in at $4,310) & buying
- Bitcoin Cash (BCH = $660 / in at $170) & buying
- CTI BioPharma (CTIC = $2.33)
o Sold June $3 CCs for income
- Electramericcanica Vehs (SOLO = $4.31)
o Sold Sept $4 CCs for income
- Education New Oriental (EDU = $9.22 / in @ $9.52)
o Sold July $10 CCs for income,
- Express Inc (EXPR = $4.94)
o Sold June $4, $5, and $6 CCs for income,
- Ethereum (ETH = $2,625 / in at $310) & buying
- GME – Bought it on principle,
- Grayscale Ethereum (ETHE = $27.25 / in @ $13.44) & buying
- Grayscale Bitcoin Trust (GBTC = $30.90 / in @ $9.41) & buying
- Grayscale Trust (GDLC = $26.33 / in @ $39.75) & buying
- Hyliion (HYLN = $11.55 / in @ $0.32)
o Sold June $10 CCs for income
- Infinity Pharma (INFI = $3.30)
o Sold June $4 CCs for income
- Iridex Corp (IRIX = $7.60)
o Sold June $8 CCs for income.
- Hecla Mining (HL = $8.92 in @ $7.50)
o Sold Sept $9 CCs for income.
- Litecoin (LTC = $175 / in @ $191)
- Transocean Limited (RIG = $4.42 in @ $3.80)
o Sold Aug $5 CCs for income.
- Sandstorm Gold (SAND = $8.59 in @ $6.90)
o Sold June $8 CCs for income.
- SOS Limited (SOS = $3.63 in @ $2.91)
o Sold June $3.50 CCs for income.
Thoughts:
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Please be safe out there!
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