When an entrepreneur gets funded… it’s often difficult for them to start spending money on assets because old habits die hard. What used to be smart is now dumb. What used to risky is now safe. Your college graduation means that you can no longer maintain that dormitory lifestyle. Age brings with it the realization that you can’t do things the way you previously did them. None of these changes are failures. They’re simply steps along a journey. To live your life without re-calibration is extremely unlikely.
The 1st Rule of YC Fight Club: Y Combinator has invested in thousands of startups, and recently has begun to really focus within sectors. Given the accelerator’s growth, competitive tensions are inevitable. YC seems to be actively leaning into startups that are roughly the same age, operating in the same countries, and targeting exactly the same opportunity with nearly identical business models. In fact, it's beginning to look like they plan on backing as many rival teams as possible – within the same space – and letting them duke-it-out. Remember: The 1st rule of YC Fight-Club…
Physical Therapy (PT) works in business – because:
1. PT is self-produced = done BY us and not TO us – with a professional,
2. PT is gradual = no one gets better after one session,
3. PT puts our own resources to work to create change,
4. PT is simple = no magic - just directed, persistent effort, AND
5. PT takes effort = if you want easy – you came to the wrong place.
Risk vs Reward: All I have to offer anymore is: bandwidth, time and trust. If someone asks me to endorse their new project because: it will only take a minute – they’re balancing my accumulated trust against their unproven project / minute. That’s too large a risk for the reward. If someone asks me to: forward something to everyone in my address book – it again pits my accumulated trust against their unproven / quick message. Just because it’s fast – doesn’t mean it’s worth doing.
The Market:
The notion of risk-on assets like stocks and crypto rising during a larger-scale war may seem absurd, but it is happening. Bonds are preventing risky assets from dropping in price. High inflation is causing bonds to be sold in favor of higher-yielding products. With inflation continuing to rise, this trade does not look like one that will flip any time soon. This week’s jobs data showed us that wage increases are not matching inflation – and this will be detrimental to the U.S. economy. Combine this with reduced supply and continued high prices for: oil, gas, wheat, nickel, and other key commodities = and you will slow economic growth. This is manifest in an inverted yield curve = warning us of an up-and-coming U.S. recession.
U.S. inflation reached a new 40-year high last month, with consumer prices really up between 12 to 16% YoY. After a decade of near-zero interest rates, the stimulus party is over. Our FED has started to raise rates to cool-down prices. Currently the U.S. is in boom-flation = high inflation + strong growth + a nearly recovered labor market. Watch for the yield-curve to push us into: stag-flation = high inflation + sluggish growth + high unemployment.
InfoBits:
- 20% of Americans are running out of money between paychecks… up 5% YoY.
- Tesla will request shareholder approval for a stock split… although it didn’t specify a date or what the ratio of shares would be.
- The average 30-year Fixed Rate Mortgage = 4.67%... the highest in a decade. Higher interest rates are not killing home demand… yet!
- Consumer Confidence posted an unexpected rise in March.
- GM is boosting its electric Hummer production… as reservations are nearly double what was expected.
- Americans are more worried about inflation… than at any time since the ’80s, and are least concerned about COVID than at any point during the pandemic.
- Waymo is rolling out fully autonomous rides in San Francisco. It will be Waymo’s first attempt at sending cars without human drivers into a major city.
- SoftBank is in trouble… given the estimated quarterly write-down for the Japanese group is $30B.
- Americans are neglecting their retirement savings. Only 17% of American adults list saving for retirement as a priority. 46% have less than $15,000 saved, and 25% have ZERO retirement savings.
- Auto sales are draggin’… as a result of vehicle shortages. Industry sales could fall as much as 16% in the coming months.
- VOTE = YES for Federal Marijuana Legalization: The MORE Act passed in the House to federally legalize marijuana and to forgive criminal penalties associated with marijuana usage or distribution. The Senate has a similar bill, but is unlikely to gain the 60 votes needed to pass.
- Amazon workers in New York… have voted to form the company's first U.S. union. It’s a huge win for labor, as the retail giant has managed to stave off union efforts for its entire 27-year history.
- Tiger Global has gone from bad to worse… as their premiere hedge fund lost nearly 34% in the first quarter.
- It pays to run Amazon… as CEO Andy Jassy received $212m total comp. for his first year at the helm. Not too shabby Andy.
Crypto-Bytes:
- A Gold / Crypto standard could be right around the corner: (a) gas prices are at record highs, (b) Saudi Arabia is considering accepting yuan instead of dollars for oil sales, (c) Inflation hit 7.9% in February - soon to be double-digits, and (d) a drought will hinder our wheat harvest. We’re going back to the gold standard or onward to crypto.
- Exxon is piloting a bitcoin-mining initiative in North Dakota... to slash emissions and use excess gas to power crypto mining.
- TerraLab's ongoing $10B BTC buying spree… has created an unexpected tailwind for crypto.
- The world's largest hedge fund, Bridgewater Associates… plans to invest in third-party crypto funds due to the risks of holding fiat currencies.
- Russia is considering accepting payments in Bitcoin… against the sale of its oil and gas. Bitcoin is playing a central role in world geopolitics, and could soon threaten the U.S. dollar.
- Kraken Bank is inching closer… to gaining a Federal Reserve Master Account, which would allow it to deposit funds with the U.S. central bank and access the global payments system.
- NFTs could soon be flooding Instagram feeds… and with that easy access comes a much lower bar into the NFT marketplace.
- Sudan’s Central Bank (amid country-wide crypto adoption)… is warning its citizens against crypto due to: fraud, e-piracy, and potential monetary losses.
- An SEC proposal is aiming to redefine securities dealers. It’s geared towards e-traders of U.S. Treasuries, but a footnote may have implications for digital assets that have been deemed to be securities.
- Lionel Messi just signed a $20m deal with crypto firm Socios… to promote digital fan tokens.
- Bitcoin’s illiquid supply is the highest it has ever been… meaning the amount of bitcoin sitting on crypto exchanges, which could be sold into the market at a moment’s notice, is sitting at a multi-year low. Therefore, any uptick in demand produces a pronounced increase in price.
- Ronin Network, the blockchain that supports Axie Infinity… suffered a $625m heist. The attacker used private keys in order to forge fake withdrawals, ultimately stealing 173,600 ETH and some USDC.
- OpenSea is adding Solana NFTs to its marketplace… a massive boon for the SOL-based economy. This would be the third Layer-1 system and fourth blockchain network whose NFTs can trade on OpenSea.
- Visa is launching their Creator Program… intended to support small businesses in music, fashion and film through the use of NFTs.
- BNY Mellon will serve as a ‘primary custodian’… for Circle as the stablecoin issuer looks to bring USDC into the world of regulated finance.
- Chandler, Arizona is welcoming utility payments via crypto… including Bitcoin, Ether, and Litecoin held in user’s PayPal accounts.
- Crypto exchanges will need to report digital tokens they hold… for customers on their balance sheets. The SEC is warning crypto-traders that they are effectively making unsecured loans to those token companies.
- Indonesia is planning to charge crypto transactions: VAT (value-added tax) and capital gains at a 0.1% rate - beginning May 1.
- Citi said the TAM (total addressable market) for the metaverse economy… could fall anywhere between $8T and $13T by 2030.
TW3 (That Was - The Week - That Was):
Monday: The big stock news is that TSLA is asking its board for more shares, so they can offer a stock split. Oil has pulled back this morning – still over $100/barrel, but off the weekend highs. I like the chart on WMT, but let it break thru $146 before buying it.
Tuesday: I'm still leaning towards this being a wicked bear bounce. That's probably not popular, but when you have: yield curve inversions, roaring inflation, high energy prices, labor issues, and a host of other ills – chances are that this is an emotion / momentum driven run. I’m liking the charts of: LWLG, WKHS, OUST, FIGS, FSLR, FSLY, PYPL, ALHC, QS, PGNY, and CLOV.
Wednesday: Okay, is today a pause day and tomorrow they resume the upward run? Or, has the accumulated bad news derailed things and we're going to start a fade? For right now I've got to guess that this is a pause day, and they'll try and send us higher tomorrow. All of that said, I don't see a thing that I trust to pick up and hold. It all looks fragile.
Thursday: Biden is looking at releasing 1 million barrels of oil a day from our Strategic Petroleum Reserves in order to bring down the price of energy. Lithium (LTHM) seems to be doing well, and if it gets over $26.93 it could really jump. Uranium (CCJ) is also spunky today, and over $30 – could make a nice trade.
Friday: The house is set to vote on the marijuana legalization bill today. If it passes, the pot stocks should catch a bid. The JOBS number is out and they say we gained 431k jobs, and the unemployment rate fell to 3.6%. The first day of both a quarter and a month is usually a buying event for funds, but I won't be surprised if we don't jump all that much as yesterday’s move is still haunting me.
AMA (Ask Me Anything…)
Why do you think there will be a recession? My #1 indicator for a recession (along with war, high inflation, ridiculously high commodity prices, increasing interest rates, etc.) is the inverted yield curve. That happened this week, when the 2-Year Treasury yield surpassed the 10-Year. Often, when professional investors are worried about a recession, they purchase 10-Year Treasuries (driving those rates lower) with the expectation that those same 10-Year securities will become more valuable after the economy returns to normal. If the pros are R-worried, then I’m R-worried.
Is there still inflation out there? YES. Excluding food and energy, the index our FED uses to gauge inflation increased 5.4% YoY. Including gas and groceries, the headline measure jumped 6.4%, the fastest pace in over 40 years. Higher prices are curtailing retail spending = which only rose 0.2% for the month, real disposable personal income = which fell 0.2% MoM, and personal savings = which moved higher by 6.3% YoY.
What happens in a recession? #1 = PRICE replaces brand loyalty. Buyers flee the comfort of their favorite brands for generic (less-expensive models). Inflation will be responsible for disrupting and changing many customer buying habits.
What are you buying in crypto? Now is the time to make plays around anything with an upcoming release or update (BTC / ETH), and let the market do the work. Keep track of the current narrative, because when Terraform Labs stops buying Bitcoin, a new bullish narrative will need to emerge for the market to continue higher.
Give me some crypto trading dates? If Bitcoin (BTC) can take out $48k in the next 30 days, then there’s a high probability of it touching $53k. It’s not time to throw caution to the wind, as the next catalyst may not come until the next FOMC meeting = May 4. If BTC doesn’t crack $48k before that time = sell and regroup.
Next Week: Indecision vs Ineptitude?
Description: The markets finished the week virtually unchanged WoW.
Bonds – Bonds – More Bonds… At this point, everybody knows about the ‘yield curve inversion’ and the probability of that signaling a recession. The Bond market is telling the FED, that if they continue to tighten and raise interest rates – bonds will throw us into a recession.
- Yield Curve Inversion = Recession. Traders are pricing in a 73% chance that our FED will raise interest rates by at least 50 bps at their May 4th mtg., an additional 50 bps on June 15th, and an additional 50 bps at their July 27th mtg.
- Will the FED have TIME to tighten before we enter a Recession? We’re seeing increasingly more price action inside the longer dated treasuries – which further inverts the yield curve – in an extremely short time-period.
- Tip #1: If there is continued selling of the bonds and notes, then financials, utilities, and technology will fall substantially – and that includes the mega-caps like Apple, Google, and Microsoft.
Positions:
- Commodities and the Dollar have absolutely soared. The U.S. released 1/3 of its strategic petroleum reserve, and the price of oil dipped by less than 10%. There are very few bullets left in our inflation gun. Tip #2: That there are huge upside risks to just about every commodity.
- Home Builders: The homebuilders (XHB) have already shown their bearish side. This is NOT something that you chase, but use as a template for other sectors to follow their lead.
- Financials: Historically, home builders and financials have had a very tight correlation. Tip #3: The financials will be move lower due to the slowing economy rather than higher due to rate hikes.
- Utilities: The XLU is currently at an all-time-high. If / when the economy slows – then everything slows. Tip #4: You want to be short after a sector makes an all-time-high and breaches the Expected Move 2 weeks in a row = XLU.
- Precious Metals: The GDX is an index of gold miners, and it recently pushed up and over some resistance. NEM also broke out to the upside. Tip #5: Investors are realizing that the miners have a lot of money in the ground. Watch them this coming week.
SPX Expected Move:
- Last Week = $89
- Next Week = $75 – This is the type of price action where everyone moves off their game. We just came thru a fairly docile day on Friday, and we still moved 55 S&P points in one day. Keep your helmet on – volatility will be returning to this marketplace in the very near future because our SKEW is above 145.
Tips:
HODL’s: (Hold On for Dear Life)
- CASH == Nexo & Celsius == @ 8 to 12% yield
- PHYSICAL COMMODITIES == Gold @ $1,928 / oz. & Silver @ $24.76 / oz.
- **BitFarm (BITF = $3.80 / in at $4.12)
o Sold May, Dec ‘22: $5 CCs for income,
- **Bitcoin (BTC = $46,500 / in at $4,310)
- CPG (CPG = $7.37 / in at $6.44)
o Sold Jul $7.50 CCs for income,
- Energy Fuels (UUUU = $9.35 / in at $11.29),
o Sold June $11 CCs for income,
- **Ethereum (ETH = $3,450 / in at $310)
- GME – Holding
- **Grayscale Ethereum (ETHE = $28.38 / in @ $13.44)
- **Grayscale Bitcoin Trust (GBTC = $30.17 / in @ $9.41)
- Hyliion (HYLN = $4.38 / in @ $6.01)
o Sold April $4 CCs for income,
- **Solana (SOL = $135 / in @ $141)
- Uranium Royalty (UROY = $4.11 / in at $4.41)
o Sold April $5 CCs for income,
- Vertex Energy (VTNR = $ 9.91 / in @ 4.74)
o Sold April $5 CCs for income.
** Denotes a crypto-relationship
Trades of the Week: Bearish:
- Apple - AAPL: BUY $175 / SELL $170 April 22 Put Spread
- Financials - XLF: BUY $41 / Sell $37 May 6 Put Spread
- Utilities - XLU: BUY $75 / Sell $73 May 20 Put Spread
Follow me on StockTwits.com to get my daily thoughts and trades – my handle is: taylorpamm.
Please be safe out there!
Disclaimer:
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