RF's Financial News

Sunday, June 19, 2022

This Week in Barrons: June 19th, 2022

How does anyone set reasonable expectations? Heck, how long should it take for someone to change the world? Or personally, how long would it take you to reinvent yourself? Forget about being the next world leader, how long will it take you to become… Yourself 2.0? My best guess is that it will take 10,000 hours = 6 years. Now, that doesn't mean you can't move the dial in 6 days or 6 months. It just means that life changing stuff takes hard work, luck, and timing. Give yourself 6 years to learn, build and create. It will be gone in a blink. So, get started on building the know-how and finding the opportunities – to fuel your next vision.

Why do we care about Acquisition Cost? The cost of a puppy may be $100 at the shelter, but it’s about $25,000 – when you add it all up. A child is a couple-thousand dollars to bring home from the hospital – but about $500,000 when all is said and done. Why are we so focused on the cost to acquire – instead of the cost to maintain and retain? Twitter and YouTube are NOT free. In fact, they cost a small fortune in time and brain power to always out-think the competition. Putting your business online is peanuts … except for the millions in management fees and salaries it takes to maintain your online competitive advantage. Thinking through and ‘fessing-up’ to the carrying costs of a decision, right up front - is a great way to avoid any future surprises.

The Market:

Here’s a brilliant interview with a Hall-of-Fame investor: Mr. Stanley Druckenmiller == https://www.youtube.com/watch?v=-7sWLIybWnQ Some out-takes:

1. “We never had a soft landing when inflation has gotten above 4.5%. Once Inflation goes above 5% - it has never come down before the FED funds rate went above the CPI (8.6%) and/or we’ve had a demonstrable recession.”

2. “We are nowhere near the end of this bear market. I’m seeing a recession in 2023 – whether it’s the first half, the 2^nd half, or both?”

3. “Do NOT invest in the present. The present does NOT move stock prices. Tell me what catalyst is required to move the price, and when / how we get that catalyst to fire.”

4. “If you believe we’re going to have irresponsible monetary policy and inflation going forward: Then if it’s in a ‘Bull phase’ = you’ll want to own Bitcoin, but if it’s in a ‘Bear / Stagflation phase’ you want to own gold (or copper).”

We all know that our FED doesn’t set interest rates – the bond market does. Our FED does its best to meet the bond market’s objectives. Currently, equity markets are calling ‘bulls@#t’ on our FED, and their idea that they can architect a ‘soft landing’ – without hurting the economy. Everyone’s seeing: softening economic data, record pessimism among consumers and business leaders, and big downside bets from hedge fund titans like Bridgewater. They’re all signaling a lot more pain ahead.

InfoBits:

- Qatar Energy signed a partnership deal with Total Energies… for a $30B expansion of the world’s largest liquefied natural gas (LNG) project. The project all but guarantees a long-term gas supply to Europe.

- TikTok has taken over:

o People are spending more time on TikTok than on Facebook.

o TikTok has 1.6B mo. users = over Twitter, Snap, and LinkedIn combined.

- The Sandy Hook family victims settled with Remington for $73m… using the same strategy that collapsed big tobacco and opioids.

- Spirit shareholders need to decide on their new home… Frontier, JetBlue, or neither. Acquiring Spirit will give the new owner more seats, gates, and pilots.

- Interest rates will be moving higher – faster… said our FED on Wednesday.

- A knock-off economy is emerging… as corporate departures and sanctions have not caused the Russian economy to shut down, but rather to rebuild with different brands. Next hurdle: micro-chips and Europe’s oil ban.

- Prologis, the world’s largest warehouse operator… is buying Duke Realty for $26B. They process online orders for Amazon and FedEx, so it’s a show of confidence in a slowing e-business sector.

- Wholesale prices rose 10.8% in May… a near record annual pace.

- Leon Cooperman is calling for a recession in 2023… expecting the S&P to drop another 20% from here.

- The 30-year Mortgage Rate surged to 6.3%… from 5.5% just last week. The National Assn. of Home Builders Index fell for the 6^th straight month as rising rates and record-high prices continue to slow demand.

- Ford recalled 48K of its Mustang Mach-E’s and halted sales… citing an overheating concern.

- US airline bookings slipped for the 2^nd month… as ticket prices spiked 30% from 2019 due to sky-high fueld costs and labor shortages.

- Americans owe $22B in LATE utility bills… as delinquencies rise.

- Hiring is slowing… Spotify down by 20%, Wealth Simple is reducing headcount by 13%, and Warner Bros. Discovery is cutting 1,000 ad sales jobs.

- U.S. Retail sales fell 0.3% MoM… as higher prices are hitting consumers’ wallets. It’s even hitting corporations, as Block / Square are giving up their San Fran. HQ as they transition to a more distributed workforce model.

- Experts predict US oil production… will be at pre-pandemic levels in 2023. And a global recession and collapsing demand would bring down oil prices.

- iPhone assembler Foxconn… plans to build its first EV battery plant in Taiwan.

- U.S. cosmetics company Revlon filed for bankruptcy.

- EV owners can’t escape inflation… as Tesla raised prices $6k on all US car models. Tesla was making more money repossessing cars than selling them!

Crypto-Bytes:

- The U.S. could have a new stablecoin law by the end of 2022: Sen. K. Gillibrand (D-NY) said: “We just had a financial crisis meltdown that catalyzed a process of drafting legislation that would otherwise have taken a decade.”

- Celsius paused all withdrawals, swaps, and transfers this week… due to extreme market conditions. “We are working with a singular focus: to protect and preserve assets to meet our obligations to our customers.” Nexo offered to buy Celsius but their offer was declined.

- 2,000 Terra investors filed a class action lawsuit against Binance US: It’s the 1^stmajor U.S.-based court filing relating to Terra, whose UST stablecoin wiped out around $40B in investor funds last month.

- Goldman Sachs started trading a derivative tied to ether (ETH).

- Financial Institutions are weighing in on crypto: (a) Bank of England: “Crypto has no intrinsic value”. Morgan Stanley: “Expectations of higher FED rates are depressing crypto prices.” Bank of America: “Consumer interest in the sector remains strong.”

- Coinbase will lay-off 18% of its workforce and BlockFi 20% of its team. Gemini, BitMEX, and Crypto.com made their cuts prior to last week.

- Celsius has hired restructuring attorneys… Akin Gump Strauss Hauer & Feld to advise on possible solutions for its financial problems.

- Tether has denied claims that its commercial paper portfolio… is 85% backed by Asian paper – some of the riskiest on the market.

- USDC issuer Circle is set to introduce a Euro-Backed stablecoin… by the end of June. The Euro Coin will be backed by euro-denominated reserves held by U.S.-regulated financial institutions.

- Three Arrows, a massive crypto VC and trading fund… was liquidated by BlockFi and other lending firms after it failed a margin call.

- A pool on Curve that lets investors exchange stETH for ETH… is running dry. Staked ETH, a revenue-generating version of ETH, traded at an 8% discount this week.

- Babel Finance is pulling a Celsius and suspending withdrawals… citing “unusual liquidity pressures.”

- Anna Sorkin (aka Anna Delvey) - the fake German heiress… is launching an NFT collection from her jail cell. Never say Never.

TW3 (That Was - The Week - That Was):

Monday: U.S. futures are plunging, with S&Ps dropping below 3,800. Following last Friday’s hotter than expected CPI data (where consumer prices hit 40-year highs), markets fear a more aggressive rate hike cycle than previously expected. Many economists are calling for a potential 75-bps hike this week, and 175-bps in the next 3-meetings combined. That’s a far cry from the prior expectation of two 50-bps hikes and then a pause in September. There are a lot of eyes watching the 3800 S&P level, and if/when we get down to 3750 – you may hear some panic cries on the financial stations. At some point, I'll look at commodity exposure again, but patience is a virtue right now.

Tuesday: Yesterday, the 10-Year note hit a level not seen since 2011. Now, if the debt market implodes – then all bets are off. Stocks are really nothing more than derivatives around the debt market. Today is the first day of a 2-day FED meeting and it’s often a green day. After the carnage of the last 3 sessions, I wouldn't be at all surprised if they pull off a win today. The 10-Year Note is up to 3.45% as everyone is expecting a 75-bps hike. How quickly 50-bps became yesterday’s weather.

Wednesday: Markets are now pricing in a 75-bp hike when the FOMC announces its decision today. Just last month J. Powell said that his Fed was not "actively considering"raising rates by 75-bps. Do they remain THAT MUCH in inflation denial? Mortgage rates hit 6.28% on Tuesday, up 150-bps in just a few weeks – leading to some headcount reduction in the industry. Job concerns are perking up with many top companies talking about job freezes (WMT, TGT, AMZN), and today we saw WBD cut 30% of their global ad salesforce. I truly don’t know how you could possibly wreck an economy better than our FED is doing it today. Our Government admits to 10.6% YoY inflation, which is actually more like 16 – 18%. The bond market is acting like it’s losing control of the credit market. Maybe the market will look at Powell’s 75-bps hike as a good thing – because it will cause a recession quicker, and then the Fed can pivot and cut rates and start QE all over again. Our FED could most definitely hike us right into a massive recession. Now, that’s directly in the face of the ECB who are holding an economic meeting because they’re considering going back to QE = money printing. Just remember, it takes more and more stimulus – for the same amount of economic ‘high’. So, the ECB is inflating their way to heaven versus a crushing recession. Interesting times.

Thursday: Yesterday they were all happy about the 75-bps hike, thinking that it will rush in a recession – and then our FED can go back to cutting rates. Then last night they came to the ugly realization that if the hike is going to cause a recession, it might not make sense to buy stocks in companies that could see their earnings take a hit. What’s a greedy fund manager to do? The fact is, we’re already in a recession, and hiking rates will just amplify it. It’ll hit almost every sector, so chances are good that the general direction is still down. I’m hearing rumblings of S&P 3500 or even 3000 before funds jump back in. Tomorrow is Quad-witching, and the start of a 3-day weekend.

Friday: What a week it has been. There's been forced selling, margin calls, the plunge patrol trying to keep us from literally crashing, horrid economic reports – the entire ball-of-wax. Over 90% of stocks in the S&P declined yesterday, and that’s happened for the 5^th time in the past 7 days. Since 1928, there is NO PRECEDENT for that behavior. It has been the most overwhelming display of selling in history. This morning housing starts declined, housing permits declined, and the Philly FED expected an expansion in business and instead saw a contraction. Hey, looking forward to the 3-day weekend!

AMA (Ask Me Anything…)

What’s our FED going to do? Going into this year, smart money was on our FED having to choose between two poisons: inflation or recession. Somehow, our FED is going to stumble their way into the worst-case scenario = both. Our FED has debased the Dollar for so long, and has brought our debt to such historic levels, that our FED is now bringing a knife to a gunfight. Our Debt-to-GDP ratio is at such a high level, that it would bankrupt the United States if our FED increased interest rates above 6%. Will our FED have the courage to push our economy into a recession, while dealing with 5-7% inflation – going into the midterms? There’s no chance of a soft landing. These aren’t skilled pilots who have landed on this runway hundreds of times. Our FED proved their lack of understanding and control when they spoke of inflation as transitory. An even better example was watching our FED inject money into the economy – while inflation was 7%. Our FED will play tough in the next few months, but the pivot will come. They must return to low interest rates and QE, or they will bankrupt the United States. So, the question is not ‘if’ there will be a recession, but simply ‘when’ = based upon the pivot.

Next Week: Market Killer = FED or Inflation…

- There is NO easy path forward for the markets… If our FED sticks to their playbook and pivots after a couple of rate hikes – then a market crash will be put on hold. If they try and tame inflation, then the S&Ps will fall another +20%.

- Our FED will ‘break a lot of sh*t’… as the selling has even hit the oil markets. Oil sees a recession and demand destruction coming. Last week’s oil collapse prevented the S&Ps from rallying. You can’t rally when a major sector is down 5.5%. The Bond market sees their yield curves inverting, because they’re not built to absorb 75bps moves, every 4 to 6 weeks – for the next 4 months.

- It’s bothersome that last week we had LOW volatility… combined with HEAVY selling. We closed almost 2X below the expected move, and the market barely yawned. Our markets (for the last month) have become ridiculously in-efficient. In the last 7 trading days, the S&Ps have lost 10% and nobody is out there buying PUTS. Something’s wrong. I worry that professional firms are selling volatility into an onslaught of risk – in desperate need of yield.

- Yields inverted, Bonds tanked and then rebounded… Tip #1: I would look for the 2-Year and the 10-Year to continue to invert (foreshadowing a recession). The 10-Year yield will move lower as our FED continues to tighten, and the 2-Year yield will move higher.

- Crypto is showing its liquidity and stability gaps: Per HL: I’d like a stablecoin that is actually stable = backed by the US Gov’t. I’d also like an Apple / Google wallet that allows me to move money back and forth from digital into USD. I understand the tax implications, and that means someone will need to track it. I’d also like to buy my NFTs with Apple Pay. We need easy ‘n secure ways to purchase derivative PUTs and CALLs on individual coins – because derivatives increase liquidity and stability. Tip #2: To that end, I believe that it’s time to nibble again in ETH – if we can hold the BTC = $20,000 level. I say that because over the past 18 months, the average price paid for BTC has been $20,000. If we dip under that, crypto could become an absolute retail, slaughter-fest.

- The metals (GLD / SLV and Copper) are holding up well – even with a strong Dollar… Tip #3: Look at buying In/Out Call Spreads into July or August in Gold, Silver, and/or Copper.

SPX Expected Move (EM):

- Last Week’s EM = $132… and we moved = $222. We’ve seen 2-Sigma moves for 2 consecutive weeks, with very little increase in volatility. We are short-term oversold, so I’m looking for a counter trend rally led by tech and energy.

- Next Week’s EM = $120.79 (4 trading days)… hold onto your shorts.

Tips:

HODL’s: (Hold On for Dear Life)

- CASH == Nexo == @ 8 to 12% yield on USDC

- PHYSICAL COMMODITIES == Gold @ $1,842 / oz. & Silver @ $21.63 / oz.

- **BitFarm (BITF = $1.33 / in at $4.12)

o Sold Dec ‘22: $5 CCs for income,

- **Bitcoin (BTC = $19,150 / in at $4,310)

- CDEV (CDEV = $7.25 / in at $7.83)

- CostCo (COST = $447)

o Bot July, +$465 / -$460 PUT Spread

- CPG (CPG = $7.86 / in at $6.44)

o Sold Jul $7.50 CCs for income,

- Emerging Markets (EEM = $39.71)

o Bot Jul +$40 / -$42 Back Ratio CALL Spread

- Energy Fuels (UUUU = $5.25 / in at $11.29),

o Sold June $8 CCs for income,

- **Ethereum (ETH = $1,075 / in at $310)

- GME – Holding

- **Grayscale Ethereum (ETHE = $7.08 / in @ $13.44)

- **Grayscale Bitcoin Trust (GBTC = $12.47 / in @ $9.41)

- Hudbay Minerals (HBM = $4.75 / in @ $5.04)

o Bot October 22, $7.50 CALLs,

- Silver (SLV = $20)

o Bot Jul +$19.50 / -$21.50 CALL Spread

- Uranium Royalty (UROY = $2.48 / in at $4.41)

o Sold July $5 CCs for income

** Denotes a crypto-relationship

Trade of the Week:

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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Sunday, June 12, 2022

This Week in Barrons: June 15th, 2022

Remember the Roadrunner and the Coyote… The coyote was always: (a) Looking for a quick win, (b) Feeling entitled to play by his own rules, (c) Constantly picking the wrong goal, and (d) Never pausing to consider what would happen if he actually took the time to create something of value.

Nobody wants to pay EXTRA: People buy things at a fair price. That means if someone wants to charge a premium – they’re going to have to offer increased quality, service, and/or design. Honestly, it’s tough to make a living selling things that don’t cost extra. On the other hand, the real work is in keeping the promise that your EXTRA – is truly worth the additional money.

What does ‘being Smart’ mean? Smart no longer means memorization, or being able to access the right information. Being smart requires: (a) situational awareness, (b) clarity of goals, (c) good taste, (d) empathy, and (e) decision-making ability. That makes being smart both a choice and a trainable skill-set.

The Market:

Economists are talking… about how we’re entering a new paradigm. They believe a new business cycle will emerge after this bear market, and we'll be off to the races – again. That's an easy story to sell to asset gatherers, skeptics, and a new generation of passive believers. I’m not onboard. I think that the current business downturn and subsequent market sell-off will help to re-center the current distorted wealth curve. Everyone knows that it's not okay to pay a CEO $50m just because the stock market went up, but BODs continued to do it. 2022 may serve to level the playing field. This market pullback is likely not-over, and potentially just in the early stages. My 2 Cents: Remember that cash + precious metals + commodities == a strategy to conserve principal and take advantage of inflation.

Inflation 101: The Consumer Price Index (CPI) hit on Friday and it wasn't pretty. It showed: +8.6% YoY inflation. You have to figure that they actually schmoozed that number a little, and it still came out butt-ugly. To separate out a few of the price increases: Fuel oil: +106.7%, Gas: +48.7%, Utilities: +30.2%, Used Cars: +16.1%, New Cars: +12.6%, Electricity: +12.0%, Food at home: +11.9%, and now $5 gas is the norm. Some of the numbers make little (or no) sense. Shelter is being reported at a 5.5% YoY increase – but rents are up 15% and real estate is up over 20%. The last time inflation was this high, our government decided to change the way they calculated inflation. Wages (once again) have failed to keep up with inflation. In fact, inflation-adjusted average hourly earnings for American workers have been negative for over a year. Economists are hoping that our FED’s tightening (higher rates and reduced money supply) will cool demand for food, shelter, and vehicles. Friday’s numbers extinguished any hopes that inflation was behind us. Our FED sees accelerated inflation, constricted supply chains, and the lowest EVER level of consumer confidence. At this point, they’re just hoping for a positive Q2 GDP print. They are out of options. Inflation reports may start to look better, but that’s only as a result of being compared to already high numbers. Remember, it was our FED’s undisciplined monetary policy that helped to create this mess. And now, no consumer, market participant, and/or business leader has any confidence in our FED’s ability to orchestrate an economic soft landing. My 2 Cents: Learn how to play the short side, practice buying PUTs in a ‘paper’ account, or at minimum consider the SDOW as a good contra-market option.

InfoBits:

- Treasury Sec. Janet Yellen warned… that the U.S. is likely to face a prolonged period of elevated inflation. She also thinks we can avoid a recession, and previously said: “Inflation is transitory”. Sorry Janet, my Econ. Prof. would fail me with only 33% correct.

- Just the Facts… the Atlanta FED’s GDP tracker is now pointing to a small annualized productivity gain of just 0.9% for Q2. Following a -1.5% drop in Q1, our economy doesn’t have much further to go before it slides into a recession.

- The law is on Twitter’s side, but… time is on Elon's side. If Elon takes Twitter to court, it will result in a pricey, drawn-out lawsuit that will scare off employees, users, and investors. Best to avoid a legal battle with the world’s richest man.

- It’s a miracle… that a small cancer-drug trial reported that all 18 patients went into total cancer remission after taking their treatment.

- Kohl’s is talking sale... to Vitamin Shoppe owner Franchise Group for $8B.

- The 1^st Starbucks that voted to unionize… is closing due to excessive costs.

- PayPal will now let you… transfer crypto from PayPal to other wallets & exchanges, and send crypto to other PayPal users instantly. Welcome to 2022.

- Bitter enemies Waymo and Uber are partnering on autonomous driving.

- Mortgage Applications fell 7% last week… and were 21% lower YoY. Refi’s dropped 6% for the week and was down 75% YoY.

- Jim Farley (CEO of Ford) explained… with the new Electric F-150 comes an adapter that will allow you to ‘jump-charge’ a stalled Tesla.

- Out with the new, in with the seasoned... as high-growth tech companies are now underperforming the market by the widest margin since 2000 (the dot-com era). Bring on the corporate execs who have experience generating cash flow.

- Tesla announced a 3 for 1 stock split… joining other heavyweights like Apple, Amazon, and Alphabet, who have all split (or are planning to). We’ll have to see if the stock experiences a pre-split rally, as we’ve seen in some of its peers.

- Robinhood, the Citadel, and Schwab are nervous… because under the SEC’s proposed changes, brokerages would have to compete in auctions to execute certain stock trades – thereby eliminating payment for order flow.

- Roku shares jumped 10%... because it may be a takeover target for Netflix.

- 8% could be… Social Security’s 2023 cost-of-living adjustment.

- U.S. gasoline prices topped $5/gallon nationally.

- Apple is opening its own buy now, pay later lending site… where the loans will be entirely funded from Apple’s own cash hoard. Can you say: Bank?

- Tesla’s autopilot is under Federal investigation… as to whether it’s a safety risk. Its status is now ‘engineering analysis’ – one step before ‘mandatory recall’.

Crypto-Bytes:

- AMEX will team with ABRA to launch a US Crypto rewards card: Their sweet spot is the client who already owns over 6-figures worth of crypto.

- Mike Novogratz (Galaxy Digital CEO) thinks… bitcoin will bottom before equities, and prices will start to climb again in Q4. Mike also said: “Nothing will trade well before the FED takes its foot off the break.”

- Mastercard (MA) cardholders can now buy NFTs… without first purchasing crypto. With 2.9B Mastercard holders, this changes a lot. Mastercard surveyed a group of 35,000 holders in 40 countries and found that 45% had purchased or would consider purchasing an NFT via MA.

- Lithuania is the latest impatient member of the EU… that is creating its own crypto licensing regime ahead of the EU’s landmark regulatory package.

- Crusoe Energy - using waste natural gas to mine Bitcoin… announced an expansion into the Middle East via an investment from the sovereign wealth fund of Abu Dhabi.

- Senators K. Gillibrand and C. Lummis have introduced… a crypto bill favoring the Commodity Futures Trading Commission (CFTC) as a watchdog and seeks to eliminate tax worries associated with crypto payments.

- BlockFi is looking to raise new funding… that would value the company at about $1B. BlockFi (a year ago) raised money at a $3B valuation.

- Grayscale Investments has strengthened its legal team… as it continues its mission to convert GBTC into a spot bitcoin ETF.

- Citadel Securities is building a cryptocurrency trading ecosystem… with the help of high-frequency trading and market-making firm Virtu Financial, as well as VC firms Sequoia and Paradigm.

TW3 (That Was - The Week - That Was):

Monday: The futures are higher mostly due to China easing COVID restrictions and pushing out better economic news than feared. I don’t believe China’s numbers, but I don’t believe our inflation or economic growth numbers either. Today Amazon starts trading post its 20 to 1 split. I’m watching CHPT.

Tuesday: This Friday, we get the May Consumer Price Index (CPI). A strong CPI report on Friday could solidify expectations that our FED will keep aggressively hiking rates as it tries to bring down price pressures. Commodity indexes are making new highs daily – driven by gasoline and wheat. This IS a bear market. Every good run up, is sold, and the people that are telling you the ‘consumer is flush with cash’ are somewhere else. Target just came out and said their margins (due to supply issues, soaring costs and logistics) are about 2% instead of 5.5%. There will be a price for fuel – at which point ALL other spending stops. We don't know where that is yet – because we've never had nationwide +$4.50 gasoline. At that point, gassing up for work will cost you ALL of your disposable income. Currently, holding anything but energy (day-to-day), is a good way to get shot in the foot. Watch DO. Back-in-the-day, the big three were SLB, RIG and DO. When COVID hit – DO was actually delisted. It’s back, and it looks like they are cleaning up some issues with maintenance and downed rigs.

Wednesday: In Europe, Credit Suisse Group AG (CS) warned that it was likely to post a loss for Q2. Oil prices are looking at fresh highs, rising above $120/barrel for WTI crude. Yesterday, uranium stocks were on fire. Biden suddenly requested $4B in funding to buy Uranium. Why? Because we get our uranium from Russia, and the push is on to buy more domestically. UUUU, UEC, URA, CCJ, URNM, and UROY all put in great sessions. Goldman is saying that $160/barrel oil is on the horizon. I could take CCJ over $27.90, and could see UUUU over $7.77. BSM looks pretty darned good, but it’s well above its 50-day. Keep an eye on it.

Thursday: I don’t have a good feeling about today given tomorrow brings us the CPI report, and that report will influence our FED. One stock I was looking at yesterday was DRQ – that is in the energy patch. They were working on getting over their 50-day, but folded up when the overall market rolled over. Keep an eye on them. Did you notice the move in the 2-Year and in the 10-Year? They’re both up big from yesterday. Lots of chatter about how ugly our CPI could be tomorrow.

Friday was Butt-Ugly, and will cause: Margin Call Monday.

AMA (Ask Me Anything…)

Beware of the Tipping Point… According to a report commissioned by the Federal Reserve, over 12% of U.S. adults held or used crypto in 2021. That seems like the kind of technology adoption that both the private and public sectors would happily get behind - right? Instead, the NY Attorney General decided to issue an investor alert to her constituents warning about the ‘dangers’ of digital assets while using inaccurate information. Even the SEC mocked investors who chose their own path of investing, and went over to the digital asset side. They need to be aware, as crypto-utilization approaches 15% to 18% – Global Adoption will occur, and once again our government will be helplessly behind-the-curve.

Payment for order flow… refers to the payments brokerages (like Robinhood and Schwab) receive from wholesale market makers (like Citadel and Virtu Financial) when they route their trades to them instead of directly to real exchanges. Firms like Citadel and Virtu argue they provide market liquidity and better pricing than routing directly to the exchange. Skeptics say this payment arrangement creates a conflict of interest in brokers’ best trade execution obligation. If you’re making your money by routing orders to a wholesale firm, how will you ever be incentivized to send orders to other venues that may give your clients better fills? Answer – you won’t. It appears that the SEC thinks that the answer is NO as well. The chairman has made it clear that increasing market competition and leveling the playing field for retail is a key part of his agenda. He has his staff: “considering requiring brokerages to route individual investors’ orders to buy or sell stocks into auctions.” The change would be a significant shakeup of market structure and virtually eliminate the “payment for order flow (PFOF)” that brokerages like Robinhood and Schwab rely on for a large share of their revenues.

Next Week: Going into Uncharted Territory…

Inflation, Stagflation, Recession, and Rising Rates:

- Sellers Return with a Vengeance… The S&P has returned to its historic self over the past 2 weeks. On Friday, the S&Ps fell 50 points in 1 minute. We broke through 3931, with the next resistance levels being 3250 and 2984 after that.

- Can we fall any further? We could be headed back to pre-COVID levels – before our FED-induced rally. There are still some marquis players out there, that haven’t taken the hit. If investors decide to sell: MSFT, AAPL, GOOGL and a few others – we will be down at that 3000 level in no time. Why 3000? Because that was the level from which our FED poured on the juice – aka = pre-COVID. If you believe that most of post-COVID was FED-induced, then the unwinding of this would go all the way back to the S&P 3,000 level. For example: Amazon is currently at its pre-COVID mark. Facebook is below its pre-COVID mark. The financials (XLF) are very close to their pre-COVID level. Tip #1: Continue to think risk vs reward. There remains more downside risk than upside potential; therefore, keep your hedges on.

- Expected Move and the 2-Sigma beast: Two weeks ago, we had a 2-Sigma move to the upside – aka the bear-market rally. This past week, we experienced that same 2-Sigma move (aka = 2 times the Expected Move) to the downside. The last time we had a pair of 2-Sigma moves within 2 weeks of each other was during the COVID-crash. Our marketplace is NOT performing efficiently right now. Tip #2: Do not SELL any short-duration premium right now.

- Bonds = 2-Yr vs 10-Yr Yield curve inverting: On June 1^st the 2-Year Note was about 0.3% below the 10-Year Note. On June 10^th, the 2-Year Note is less than 0.1% below the 10-Year Note. They are in the process of inverting. The 5-Year has already inverted vs the 10-Year. Our markets are preparing for a recession. Tip #3: We have raging Inflation, leading to a Yield Curve Inversion, and a hard landing into a Recession == ultimately leading to Stagflation.

- But, we are NOT seeing large jumps in volatility. We just went down 200 S&P points in 2 days and the VIX barely moved. Nobody is panicking, which is why I believe we are headed lower – into uncharted territory.

- Metals are being Bid Higher in the face of a strong dollar. Tip #4: I’m looking for a continued bid higher in the precious metals (SLV and GLD).

- This Week: (a) we have Triple Witching Options expiration with Trillions of dollars riding on our market’s efficiency, (b) an FOMC meeting that really doesn’t even matter at this point, and (c) the S&Ps being first pulled up into the 3931 level, but eventually being drawn lower.

SPX Expected Move (EM):

- Last Week’s = $102 (EM) produced a $200 downside (2-Sigma) move.

- Next Week’s = $132 (EM)… really? We just moved $110 on Friday alone? Is this marketplace asking to be proven wrong … again? The upside of the SPX EM is 4032, and the downside move takes us to 3770 = new lows for the year.

- Tip #5: It would make a lot of sense for our markets to start out short-covering, then dive lower (maybe with a couple earnings warnings) – forcing market makers to sell into this selling.

Tips:

HODL’s: (Hold On for Dear Life)

- CASH == Nexo & Celsius == @ 8 to 12% yield on USDC

- PHYSICAL COMMODITIES == Gold @ $1,875 / oz. & Silver @ $21.93 / oz.

- **BitFarm (BITF = $1.59 / in at $4.12)

o Sold Dec ‘22: $5 CCs for income,

- **Bitcoin (BTC = $29,150 / in at $4,310)

- CDEV (CDEV = $9.25 / in at $7.83)

- CostCo (COST = $463)

o Bot the July, +$465 / -$460 PUT Spread

- CPG (CPG = $10.27 / in at $6.44)