Was this TWTR thing… simply a cover-up to sell a boatload of expiring TSLA options? Was it an impulsive, bold, and totally egotistical in-your-face power play? Per TS: What are the consequences should Elon be allowed to walk? What would be the new meaning of ‘definitive deal’? Should deals be subject to stock-price movement: up = the deal is on, down = it’s off? This could be a dangerous contractual precedent. If the ‘Bot’ defense holds, what would prevent any company, in any industry, from making the same fraud claim – on virtually any written contract? My best guess is that the deal gets done at a reduced price. FYI, the options market was spot-on – as they priced this deal risk to perfection. Brains over Bots == “You do the math.”
“Knock Knock…” Per SG: the purpose of most communication is NOT to completely explain yourself and allow for a constructive, give-and-take dialogue. Too often, communication is designed to relieve tension, make a case, and close the door on discussion. The real purpose of communication should be to open-the-door for interaction, learning, and action. “Who’s there?” is a fine response. Communication is a process, not an event.
“Free Coffee … Next Exit…” is the most effective billboard I’ve seen. It’s (a) relevant to the viewer, (b) easy to see and understand, and (c) contains a call to action. Billboards are like social posts in that they work best when: (a) they’re about the viewer as much as they are about you, (b) can be seen and understood from a distance, and (c) made to sound like you.
The Market:
- Inflation… the U.S. CPI (Consumer Price Index) showed a YoY increase of 9.1% in June, up from May’s 8.6% pace – to a fresh 40-year high. That means our FED will continue to raise rates aggressively. Per SF, real, average hourly earnings across all employees DECLINED 1% in June. So, prices are up and our real wages are down … gotcha!
- Lies, Lies, everywhere the Lies… Per HT: Maybe someday our FED will actually tell us the truth and DO what they say they’re going to do – like QT (Quantitative Tightening). If you look at our FED’s balance sheet – surprise, but it’s NOT decreasing. Our FED is simply following the bond market by raising rates – all the while continuing to do "Special Operations" == print money and buy stock. That 9.1% inflation number didn't send the market crashing, because behind the scenes our NY FED was using their secret printing-press to prop-up the market. What a surprise that on red days the volume is high, but on green (big bounce) days – the volume is anemic and requires less money printing to manufacture a bounce. Then they rinse-n-repeatthe process – working our markets lower. FYI: Inflation comes down when gasoline gets under $3.50/gal.
- Next week the ECB will reveal… an unlimited bond-buying tool to help markets adjust to steeper and faster interest-rate increases. The Transmission Protection Mechanism, will carry light conditions for the governments that it’s helping. The liquidity that its purchases create will be reabsorbed in a process called sterilization == increased money-printing & more inflation.
InfoBits:
- Inflation… hit a 24-year high in South Korea, a 40-year high in the UK, and 73% (not a typo) in Turkey.
- Small business sentiment fell… to a 10-Year low as consumer inflation expectations hit a record high.
- Canoo soared 53%... after receiving a Walmart order to buy 4,500 EVs.
- 75% of workers’ salaries won’t keep up with inflation… and a bonus may not be enough to retain them. 33% of employers are considering midyear raises.
- In the U.S., $774,000 = ‘financially comfortable’… and it takes $4m to join the 1% Club. FYI: the median American net worth is $122,000.
- The U.S. Dollar is the ‘unofficial’ global reserve currency. Dollars are the preferred currency because U.S. interest rates are higher than the rest of the globe, and our Gov’t will never default on its debt.
- Euro weakness is being driven by… the EU’s weakening economies due to soaring energy and food prices.
- 15% of all home sale contracts… were withdrawn in June, as homebuyers backed out of deals at the highest rate since early 2020.
- Between a rock and a Musk-place: Retail investors have turned bearish on TWTR as they dump shares, exercise put options, and make short bets – as the $44B deal is headed for a protracted court fight.
- Rivian Automotive… is planning hundreds of layoffs to trim its workforce.
- India will surpass China in population next year.
- In 2020 and 2021, the global population grew… by under 1% a year for the first time since 1950, with Europe’s population actually falling.
- The 124,000 leaked Uber files (going back 5 years)… show them breaking local laws and lobbying (bribing) world leaders including President Biden.
- The FDA received its first OTC application to sell… a non-prescription “mini” birth-control pill.
- Twitter’s lawyers wrote: “Musk refuses to honor his obligations because the deal he signed no longer serves his personal interests. Musk apparently believes that he … is free to change his mind, trash the company, disrupt its operations, destroy stockholder value, and walk away.”
- Apple and Jony Ive (its former design leader)… are calling it quits.
- Panasonic is building a new battery factory in Kansas.
- Microsoft is cutting… 2,000 jobs.
- LoanDepot (a direct-to-consumer lender) is cutting… 4,800 jobs.
- 25% of the U.S. plans on buying EVs… the next time around.
- Since 40% of S&P earnings come from abroad… a strong dollar could price U.S. products right out of the market. Analysts expect the euro to lose another 10% of its value before stabilizing.
- Renting the average Manhattan apartment just reached… $5,000 / mo.
- GM will build a network of EV fast chargers… about 50 miles apart along U.S. highways. 2,000 will be installed in 2023. They will be owned by Pilot Co.
- Citi was the only bank that topped revenue expectations this week… as its operations benefited from rising interest rates and strong trading results.
- China’s Q2 GDP rate fell to 0.4%... adding to global recession fears.
- Consumer spending is two-thirds of the U.S. economy… and we’re spending more and getting less. Sentiment remains low, and banks are ramping up for more bad loans. There’s just no good retail news here.
Crypto-Bytes:
- Per MH: “Builders keep building... Bear markets can be brutal, but at least they show us who’s really in it for the tech.”
- Ethereum’s merge… is now projected for the week of Sept. 19.
- Three Arrows’ liquidators are working… to get Singapore courts to recognize the British Virgin Islands’ liquidation order against it, in order to preserve the assets that have been transferred to Singapore.
- Binance, allowed Iranians to trade on their platform… despite US sanctions and an internal company ban. When industry titans like Binance make headlines for not playing by the rules, tougher regulations are likely not far behind.
- Voyager’s FDIC insured U.S. dollar deposits will be returned in full… but it remains unclear how customers will be reimbursed for their cryptocurrency investments.
- GameStop has launched its NFT marketplace… for public beta testing.
- 141,686 BTC … is the amount that Mt. Gox’s bankruptcy trustee is close to releasing – after the worst crypto hack in history. The disbursement of these funds could put pressure on BTC prices if creditors choose to sell their coins.
- The Celsius Network has a $1.2B hole to fill in its balance sheet. Now, it’s owed $439m by private lending platform EquitiesFirst – who is repaying them at $5m per month.
- OpenSea the NFT marketplace… has laid off 20% of its employees.
- Dubai gave crypto firm OKX… a provisional virtual assets license.
- Bitcoin can be a hedge against inflation… but it also goes up with our FED’s QE injections. It’s just a matter of time before our FED turns the spigots back on, and BTC will shine again.
TW3 (That Was - The Week - That Was):
Monday: The NASDAQ lost its 50 day on January 4th, and only peeked back above it for about 15 sessions in March. I suspect that we’re in for more downside, but bear markets generally do have bounces that get so strong everyone starts preaching about “new all-time highs.” TIP #1: I’m looking at AllBirds (BIRD). It closed Friday at $5.02 per share, with large $7.50 and $10.00 Call option buying. The average price target of 17 analysts is $11 bucks a share. It held above $4.81, which is its 50-day, so I bought in. I’ll use $4.81 as a closing stop. If it can rally to $6, the September $7.50 calls might be pretty attractive to sell – around 80 cents.
Tuesday: The euro sank to parity with the dollar early today and stock markets fell over the prospect of further central bank tightening and worries about our global economic health. A COVID resurgence in China added to concerns about a global economic slowdown, with the International Energy Agency warning the worst of the energy crisis may be ahead. Yesterday was ugly and there was really no safe haven. Today, TJX looks interesting. It's in a battle to get back up and over its 50-day. I'll nibble on it if it gets up and over this morning’s high of $59.49.
Wednesday: The CPI is out – and it’s bad: CPI MoM 1.3%, CPI YoY 9.1%, CPI Core MoM 0.7%, and CPI Core YoY 5.9%. That’s as ugly as it gets! I don't trust this market. I think it was saved by our FED this am. They just wanted to stabilize things, and that’s not a great reason to buy something.
Thursday: Investors are increasing their bets that our FED will raise interest rates by 100 basis points when it meets later this month. In crypto, lender Celsius Network filed for Chapter 11 bankruptcy after a cash crunch. We've already heard from JPM and MS – both of which missed their earnings and JPM has halted buybacks. The PPI (Producer Price Index) also rose 1.1% MoM, and 11% YoY. Can you imagine what the real numbers are? Are we going to see the FED show up and buy it all?
Friday: China’s economy expanded at its slowest pace since the initial 2020 Wuhan outbreak. Today feels like a bear bounce and nothing more. We're so overdue for a face ripping bear bounce. Sure 600-point up-days look good, but if you only get one of them, what's the point? I want the kind of bounce that lasts and people begin to think 'wow, it's really over, time to load up!’ – because THAT will be the peak and we'll hit new lows shortly thereafter. There's absolutely NOTHING to do in here.
AMA (Ask Me Anything…)
What do VC’s advise? (Per HL)
1. Do the work, make the calls, read all of the legal docs … yourself!
2. Trust ONLY your own analysis.
3. What’s different NOW – that will allow an investment to be successful?
4. Describe your solution so a 4th Grader could understand it.
5. Don’t work with people and/or companies you don’t like.
6. You’re in this for the upside – not to minimize risk.
7. Make your decision – live with it for two days – THEN make the real decision.
Are wages keeping up with inflation? Not even close. Per AP: Last year the CPI was 5.4% and everyone was freaking out about high inflation, but our FED assured us that the inflation was ‘transitory’. So, our FED kept interest rates at 0%, and continued QE well into 2022. A ridiculously loose monetary policy + supply chain issues + demand shocks = have led to 9.1% YoY inflation. But that 9.1% inflation is on TOP of the 5.4% inflation. Welcome: Mr. Compounding! If you fell asleep in January 2020 and woke up today, you would NOT recognize any part of our economy – because you’re getting a lot less stuff – for at least 15% more money. Consumer prices exploded, home prices grew to the sky, and wages don’t even stand a CHANCE of keeping pace. If you’re NOT a 1%’er, then there is no soft-landing for this economy.
A RECESSION is right around the corner. Nobody knows how deep it will be, or how long it will last. The bond market expects higher inflation over the next 2 years than it does over the next 10 years – so a recession is not an IF but rather a WHEN. Additionally, the CME’s FedWatch Tool shows that the market has fully priced in a 75bps hike at our FED’s July meeting, and is now pricing the odds of a 100bp hike at 78%. Canada’s central bank hiked 100bps last week, so a move like that in the U.S. would not be unprecedented. As long as inflation readings stay high expect our FED to continue raising rates aggressively right into a recession.
Next Week: Economic Uncertainty is Mounting…
- What happened… Inflation happened. Families are now paying $500/mo. (+$6,000/yr.) more this year – for the same food and energy that they received last year. Consumer and producer inflation are both up over 17% in a year.
- The SPX is stuck in a trading range… between 3725 and 3931 – just accumulating open interest. We’ve been inside this range for over 30 days, and the longer you’re range-bound – the more dangerous a market becomes.
- The FOMC is on July 27th… and its members are going into their 10-day quiet period. They will raise rates 75bps – and utter the words data dependent a lot. Those two words are becoming sketchy as our FED continues to mis-read the tea leaves.
- Numbers are mixed, depending upon where you look. For example, retail sales came in higher than expected last week, but consumer credit card debt also exploded. And, with our FED about to increase rates – that will be a huge blow to the consumer +2 months down the road.
o JPM & MS = missed and were bearish for the future. Only Citi made their numbers.
o Tip #2: Market correlation is virtually 100%. That means that the entire market is moving as one. Stock picking is NOT the driver as much as market direction is.
o Medium Tech is on deck next week… in a market that’s heavily correlated.
- Tip #3: We have a hideously inverted yield curve… which is causing us to price in a recession – with rampant inflation.
- Tip #4: A Dollar / Commodity crisis is coming soon. For the most part, the world prices energy in U.S. Dollars. With the Dollar continuing to increase, it’s making energy almost prohibitively expensive globally.
- SPX Expected Move (EM):
o Last Week = $95 (EM) … We are on a ‘bounce’ and look for the SPX = 3931 level to act as both support and resistance – depending upon where our FED would like us to move.
o Next Week = $88 (EM) … Given we moved $72 just on Friday – do NOT trust the short-term Expected Moves in the SPX. Be careful, currently actual price movement is out-pacing implied volatility.
Tips:
Next week’s ECB “Unlimited Bond Buying” is something we've never seen. Beware, almost 100% of all bear markets, put in at least one (if not two) "rip your face off” rallies that go on for so long and so far – that everyone gets convinced that it's a new bull market and piles back in. Then of course, Mr. Bear bites again and down we go, lower than before. If they get the NASDAQ back to, and then OVER its 50-day moving average, I could see the DOW and S&P rallying to get back to their respective 50-days as well. But like last week, if Friday proves to be a one-day wonder and we don't see mega-cap tech try and get there – we will just stair-step lower again.
HODL’s: (Hold On for Dear Life)
- CASH == Nexo = 8% yield on USDC
- PHYSICAL COMMODITIES == Gold @ $1,706 / oz. & Silver @ $18.66 / oz.
- AllBirds (BIRD = $5.02 / in at $4.82)
o Waiting to sell $7.50’s for income
- **BitFarm (BITF = $1.17 / in at $4.12)
o Selling more CCs for income,
- **Bitcoin (BTC = $20,500 / in at $4,310)
- **Ethereum (ETH = $1,200 / in at $310)
- GME – DRS’d and HODL
- **Grayscale Ethereum (ETHE = $9.35 / in @ $13.44)
- **Grayscale Bitcoin Trust (GBTC = $13.70 / in @ $9.41)
- Innerscope (INND = $0.006 / in at $0.0052)
- XHB – short
o Bot August 19 / $60 - $58 PUT Spread for $0.82
** Denotes a crypto-relationship
Trade of the Week:
Tip #5 = Innerscope = INND makes OTC hearing aids. Hearing aids are big business and INND does NOT require a ear, nose, and throat doctor’s approval. Because the price has fallen into the ‘triples' meaning .006 cents, you can buy 100,000 shares for $600. What if it finally gets noticed and just makes it to a dime or $1.
Tip #6 = AllBirds = BIRD. See my write-up above as to how to play it.
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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