‘Speed Bumps are our Guide’: Every day we get to make similar “Go or No Go” decisions. Some days we encounter detours, some potholes, and then are those unexpected speed bumps. Speed bumps are: real, unavoidable, and they hurt. Speed bumps that stop us from moving forward are called obstacles. The ONLY difference between a speed bump and an obstacle is OUR decision whether to keep going. The goal for all entrepreneurs is to learn how to quickly bounce back from speed bumps.
Are they ‘Disciplined’ or ‘Fair’? It’s tempting to believe that discipline and fairness cannot go together. Bosses are often seen as being one or the other, but in fact ‘fairness’ executed with rigor – naturally leads to increased productivity and efficiency. The opposite of discipline is actually laziness, irresponsibility, and distrust. Responsibility and trust are both requirements to execute any project on budget and on timeframe. I think you’ll find that your best mentors, coaches and leaders – have been both disciplined and fair.
“I did it for the money.” Why is that such a hard thing to admit? Maybe it’s because to many – money is tied to their status, self-worth, and connections. How many doctors would there be if doctors went unpaid? How many artists would be minting NFTs if they couldn’t sell them? But (if instead) what if someone paid you to: (a) say ‘Thank You’, (b) help them to cross the street, and/or (c) go to a family dinner? I often wonder what that world would look and feel like.
The Market:
‘Cathie Wood vs. Michael Burry – It’s about Inflation’: Cathie Wood holds bullish positions in companies like Tesla and Coinbase through her ARKK Innovation Fund. On the other side, Michael Burry (who predicted the 2007 financial crisis and the Great Recession) recently bet against AARK through his Scion Asset Management fund to the tune of about $31m worth of put options. Often these types of discussions pit a data-driven fundamentalist like Michael against a big ideas visionary like Cathie. Michael points to ARKK’s massively inflated price-earnings ratio, and in Cathie’s defense, if you’ve held ARKK from 2018 you’re still standing tall despite its many recent losses.
As sexy as this debate could be over sustainability vs innovation, this is really all about inflation. Michael is an inflation hawk who actively compares U.S. monetary policy to that of Weimar, Germany. Inflation is the enemy of ARKK holdings. Inflation threatens their valuation because it would lead our FED to raise interest rates and rein in the money supply. With so few of ARKK’s portfolio companies being profitable, their cost-of-capital would skyrocket and almost certainly doom the fund itself. So, this is not about innovation or entrepreneurship, but rather a bet on inflation. If you believe that inflation is transitory and well-managed by our FED – then just wait for Cathie’s next vision because ARKK will be fine. But if that jump in coffee prices and oil has you nervous, then you best ‘get the heck out of Dodge’ and into put options, commodities and crypto like Michael.
InfoBits:
- U.S. consumer sentiment… fell in early August to the lowest level in nearly a decade as Americans grew more concerned about the economy’s prospects, inflation and the recent surge in coronavirus cases.
- U.S. investor sentiment… rose to all-time-highs and is basically thumbing its nose at consumer sentiment and going full speed ahead.
- The U.S. Air Force is ready to bomb… the advanced military equipment that General Millie left in Afghanistan as a gift to the Taliban. We’re bombing our own equipment in Afghanistan – paid for with U.S. deficits & printed Monopoly money.
- 3 FED Governors are all calling for… a September decision to taper its own asset purchases. I’ll wait to hear what J. Powell says at Jackson Hole.
- Cannabis is on a tear… as sales at the top 10 publicly traded cannabis companies more than doubled YoY.
- The DIY boom is ending… but someone still needs to fix the faucet. Last quarter, sales of professional products for contractors exceeded sales from DIYers at both Home Depot and Lowes.
- Saudi Aramco, the #3 global oil company… is in talks to acquire a 20% stake in Reliance Industries’ oil refining and chemicals business. It’s the kind of deal where everybody potentially wins.
- U.S. auto safety regulators are investigating Tesla's… advanced driver-assistance system known as Autopilot after a series of crashes at emergency scenes.
- Swap-flation is coming... and not just in coffee. Companies deal with rising costs in 3 ways: raise prices (inflation), smaller servings (shrink-flation), or swapping ingredients (swap-flation). Consumers hate paying extra for the same product – so swap-flation is a natural to cover price hikes.
- Softbank sold $14B worth of listed stocks last quarter… as they continue to increase their pace of investment in technology startups. They liquidated their holdings in Facebook, Microsoft, Alphabet, Salesforce, and Netflix.
- Companies are separating into 2 camps… those that are hoarding cash and those that are diversifying into bitcoin – as the Delta variant takes over the globe.
- Palantir (a data analytics company) is betting on gold… as it buys $50m in gold bars this month alone.
- BHP Group (the world’s largest mining company)… will sell its oil-and-gas unit in a major bet on a lower-carbon future.
- T-Mobile confirmed the data breach on at least 47m users. The leak only included: social security numbers, phone numbers, full names, dates of birth, physical addresses, IMEI numbers for phones, driver license information, etc.
- Automakers lost $110B by cutting production: With COVID on the rise, many auto companies expected lower demand, but the opposite occurred.
- BMW just warned of the “second coming” of the chip shortage: With COVID spreading and lockdowns afflicting some regions, who knows if and when automakers will ever catch a break.
- Tilray is dropping $166m for a stake in MedMen. Tilray is a weed cultivator, supplier, & distributor – while MedMen is basically Apple stores for cannabis.
- The number of homes that sold for at least $100K over asking price… in Austin, Texas this year – jumped a whopping 5,700% over last year.
- Toyota will cut global car production by 40% next month… due to the spread of COVID in Southeast Asia.
- Macy’s is partnering with Toys ‘R’ Us… to launch 400 mini toy shops inside of Macy’s locations. (Can you say … #InceptionRetail).
- Apple is delaying its back-to-work plans for its U.S. corporate offices… until early next year. It’s also urging employees to get vaccinated.
- GM just recalled ALL Chevy Bolts… for a global battery problem – after a 2020 model caught fire this week.
Crypto-Bytes:
- The U.S. Treasury is breaking with Congress… over the definition of broker found in the bipartisan infrastructure bill. The agency will not go after crypto developers, miners and hardware firms that don’t meet the tax code’s own definition of a broker.
- The crypto market surpassed $2T for the first time since mid-May… with bitcoin leading the rally. Bitcoin was joined by Ether (ETH) and Cardano (ADA), which have surged 11% and 53% in the last seven days respectively.
- Crypto-friendly Congressmen are telling SEC Chair Gary Gensler… that instead of potentially regulating crypto innovation and job creation out of the U.S., he should “promote an active dialogue between regulators and market participants.”
- Crypto adoption has increased 23-fold globally… over the past year with India, Pakistan, Ukraine and other emerging markets driving the surge.
- Coinbase has named Mitsubishi UFJ Financial Group (MUFG)… as the banking partner to launch Coinbase Japan. MUFG, a bank with more than 40m Japanese customers, will provide “Quick Deposit” for Coinbase’s local users.
- About 41% of Robinhood’s total revenue in Q2… was derived from crypto trading commissions. Overall, HOOD said that more than 60% of its customers traded cryptocurrencies last quarter.
- “You have a better chance of tracking stolen funds on the blockchain than you do with fiat...” former U.S. Secret Service and Postal Investigator Joseph McGill.
- In 2022, It'll Be Stablecoins Versus CBDCs: The world is locked in a power struggle to determine which fiat currency will become the next global reserve. But, many experts now think digital money when they think global reserve status.
Last Week:
Monday: This market looks upset. The Q's have broken trendline by falling through their 21-day EMA. Now the question is, will it follow history and bounce back above it? They did bounce – so it seems that the fall of Afghanistan and the threat of the Feds moving sooner rather than later is meaningless. The market just laughs at this stuff now.
Tuesday: Retail sales were terrible for July - down 1.1% MoM. Factory operations are down, imports are at record highs, and consumers are using their credit cards to make ends meet. Yesterday all we heard all day was taper, taper, and more taper. But are they really going to taper as retail sales plunge 300% more than estimates? Doubtful.
Wednesday: 3 FED governors are making a case for tightening in September. I could make the case for trying some AMAT over $131.64, and some LRCX over $585.57. AAPL is still my canary in the coal mine. It needs to get over $150 and stay there, or techs may have a problem. Be careful, it still feels heavy and different out there. The biggest difference to me, is that the media is turning on Biden. Let the market work itself out before being too brave.
Friday: The FED is doing what they do – move the big favorites in a big way. While the small guys are catching a bid, the heavy lifting is being done by the old favorites. I didn’t expect to see monster green today – and that has me concerned. This crazy push makes no sense to me – especially ahead of Powell’s Jackson Hole speech later next week. Yesterday they couldn't save the S&P and get it over its 21-day moving average yesterday, and last night the futures were blood red. Then, like "magic" the futures run into this morning's open and we go on to post big DOW points – what changed? Did the Feds use their NY Trading desk? Did someone leak Powell's Jackson Hole memo? It's very strange.
TW3 (That Was - The Week - That Was):
‘We are ALL worthless…’: was the focus of a machine-learning seminar proclaiming that “regardless of how smart or creative we (humans) think we are – a machine will surpass us over the next few decades.” They went on to say that ‘old people’ (millennials and older) should do more ‘hanging on the beach and going to nightclubs’ once we tire of the COVID lockdowns. Machines would love if it our young people would continue playing video games and creating new worlds inside various digital metaverses. The trend is inevitable, irreversible, and the COVID shock just accelerated it. Our personal, online avatars will grow in importance – and we should all participate in their creation and education. Fascinating.
Only in Sweden… could the government (through incarceration) turn a drug dealer earning $150k/year into a savvy crypto investor earning over $800k/year. It seems 2 years ago Swedish authorities seized 36 BTC (worth $150k) from a drug dealer. By the time the enforcement authority came to auction off the bitcoin, its value had appreciated to the point that it only needed to sell 3 BTC for the original value to be recouped, and therefore they returned the remaining 33 BTC ($1.6m) to the drug dealer. Congrats to the Swedish authorities for successfully turning a drug dealer into a savvy crypto investor via a 2-year incarceration. Who knew?
Coinbase is putting crypto on its balance sheet. Why did it take this long? Recently, the company’s BOD approved the purchase of $500m in crypto, with a commitment to invest 10% of the company’s future profits into the asset class. They will accumulate: Ethereum, Proof of Stake assets, and DeFi tokens. The company’s investments will be based upon what users are holding on the COIN platform itself. For investors looking for a way to bet on the future of crypto via a company’s balance sheet, with this move COIN is trying to make itself the #1 option.
Next Week: Taper Talk – will Markets FOLD?
Market Update:
- We hit all-time-highs, broke down, and came back again: Markets hit yet another all-time-high on Monday, with the S&Ps touching 4,476, but then went on a wild ride to settle finally around 4,437. This is roughly the channel we’ve been in for the past month – where we continue to accumulate ‘gamma risk’. We saw volatility increase near the end of last week, but we’re still accumulating risk inside of the 4,350 to 4,450 S&P range.
- The Expected Move ranges were exceeded (to the downside) and volume exploded on Wednesday / Thursday – before our FED stepped in on Friday. Tip #1: I’m expecting increased price movement going forward, and some of it could be violent – especially surrounding the QQQ.
- Bonds moved to the back burner, but will resurface with the Jackson Hole economic summit later this coming week.
- The retail buyer of call options resurfaced as a driver of the markets. Microsoft hit all-time-highs as a million call options were purchased on Friday. But, the upside volume drivers were limited to the ‘monsters of tech’, and basically MSFT and NVDA.
- Oil markets are predicting a slowdown in economic growth. Oil has fallen from $75 to almost $60 per barrel, and right now – oil is looking for buyers. But the energy sector is still up over 20% on the year – so it could continue its downside move. Tip #2: Watch the behavior of oil (/CL) especially around the $60 / barrel level = because the energy sector has a large impact on the S&P.
- Volatility remains in a fragile state with the VVIX above 120, and the VIX moving from over $25 to around $18 on Friday alone.
- The dollar is on the verge of a breakout. If, the world economy continues to be worrisome, then the flight to quality will be to the U.S. dollar and to crypto (BTC).
- And then there’s China (FXI). The FXI is down 16% YTD and implied volatility is raging. Alibaba (BABA) volatility is at 100% - highest in history. Tip #3: There are no signs of fear or capitulation in the Chinese stocks, which leads me to believe that there’s more downside to come in the FXI and others like BABA.
Big Price Action:
- Financials: After 2 weeks where the financials broke to the upside, last week they broke substantially to the downside. I look for them to take a pause this coming week, unless bonds decide to breakout to the upside – in which case financials will suffer along with interest rates.
- Energy had a 3-sigma move to the downside this past week, with still more room to run if they wish. Tip #4: I’d be shorting any rallies in energy for the short-term, because it couldn’t get out of its own way on Friday.
- Tech is (currently) holding the markets together. It’s a Microsoft and Nvidia world and we’re just living in it (aka Gamma Gone Wild). NVDA is important because it’s a $500B company, but it carries twice the implied volatility of any comparable product. Tip #5: Watch NVDA because it’s showing us that it has the ability to move markets. But retail traders do NOT BUY PUT options with the same voracity that they buy call options = fair warning.
FED:
- Taper Talk: We all heard ya FED = Loud ‘n Clear! The Jackson Hole speeches run from Thursday evening through Saturday, so I don’t believe that it will have as dramatic an impact as we think on the markets. I don’t believe J. Powell will say anything about taper, but will instead focus on full employment.
SPX:
- We saw the SPX make its weekly move in one single day last week. This coming week we are looking at a 36% expansion in the Expected Move (from $50 to $68) – so Put your helmet and Big Boy Pants on. Tip #6: DO NOT SELL short-dated premium, but rather buy short-term premium and sell longer-dated premium to cover your short-term expense. The retail trader has NO EDGE in selling short-term premium, because ‘taper talk’ could begin to bend us rather dramatically.
Tips:
HODL’s: (Hold On for Dear Life)
- AMC – Holding
- Bitcoin (BTC = $48,500 / in at $4,310)
- Peabody Energy (BTU = $12.65)
o Selling Sept $13 CCs for income,
- Express Inc (EXPR = $6.72)
o Selling more Sept. $6 CCs for income / 13% MoM yield,
- Ethereum (ETH = $3,250 / in at $310)
- GME – Holding
- Grayscale Ethereum (ETHE = $30.84 / in @ $13.44)
- Grayscale Bitcoin Trust (GBTC = $39.58 / in @ $9.41)
- Grayscale Trust (GDLC = $47.80 / in @ $22.75) & buying
- Hyliion (HYLN = $8.14 / in @ $0.32)
o Selling $8.50 and $9 CCs for income,
- Infinity Pharma (INFI = $3.10)
o Selling more Sept $3 CCs for income, 13.3% MoM yield,
- Kinross Gold (KGC = $5.71)
o Waiting to sell CCs for income,
- Yamana Gold (AUY = $4.21)
o Waiting to sell 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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