Do you cheat-at-golf? We all know organizations cheat – and often when nothing is on the line. They say things, put in clever clauses, and even spam media lists. They cover-up their long-term strategy – while they steal our personal data. Their cheating is costing them the benefit-of-the-doubt. Losing the benefit-of-the-doubt is how OpenAI / ChatGPT knocked the legs out from under Google last week. Remember the adage: ‘Your worst enemy is the one that you never see coming.’
“We are the Champions”… is one of the greatest crowd anthems of our time. Just imagine how frightening it must have been for Freddie Mercury & Queen to play that live for the first time? What if you were the lead singer / entrepreneur and nobody sang along? Per SG: “That’s why anthems are so scarce.” Entrepreneurs have been trained to search ‘n discover a few early adopters. Nobody’s prepared to navigate everyone (or no one) singing along with you. Feast or famine is just another reason why only 1 out of 1,000 entrepreneurs make it.
Learn how to say: ‘NO’: John Q. Public wants: cheap, short, funny, and blending into the surroundings. But what if today’s audience wants something that’s thrilling, challenging, unique, and memorable for months to come. Or maybe your audience wants something that’s expensive, but worth more than it costs. Often, the only way to manage that fork, is to learn how to say: “This one is not for you.”
The Market:
Charlie Bilello noted:
1. With 68% of companies reporting, the S&P’s Q4 GAAP earnings are DOWN 20% YoY.
2. This is the 3rd consecutive quarter of negative YoY growth, and the largest decline since Q2 2020.
3. Last week mortgage refinancing applications rose 18% WoW, but are still down 75% YoY. Both weekly jobless claims and continuing claims increased.
4. And +50 S&P companies have issued negative earnings guidance for Q1 (on already reduced benchmarks) – a historically high share.
Entrepreneurial Investing / per HL:
1. The ‘Tourist Investor’ of the last three years will not disappear as quickly as most believe. They are price-takers, and not price-makers. That will keep startup prices higher for longer, and produce a drag on returns.
2. Great founders will recognize the shift in technologies and markets – and take advantage of the abundant capital, available talent, and experienced investors looking to create new opportunities.
3. The biggest challenge for founders and VC’s is valuation compression. It is vital to be aligned on valuation expectations throughout the lifecycle of a startup.
InfoBits:
- "The disinflationary process is isolated to the goods sector… because supply chains have been fixed, demand is shifting back to services, and goods shortages have been abated." - FED Chair J. Powell.
- “Most forecasts call for core PCE to go back up to 4%... by the middle of the year. So, that would suggest there's more work left to do." - FED Chair J. Powell.
- 2022 was the first time… that clean-energy matched fossil-fuel investment.
- OpenAI announced a $20/month premium subscription for ChatGPT.
- In Q4 2022, Softbank lost $5.8B… which beat its $10B loss in the previous quarter.
- Dell is cutting about 5% of its workforce / about 6,600 jobs.
- May the best bot win: After ChatGPT was released free to the public, Google (trying to protect their search biz) released their version before it was time – and their stock promptly cratered.
- Meta is asking managers and directors… to become independent contractors or leave the company – as it attempts to regain profitability.
- LeBron James became the NBA’s all-time-scoring-leader… moving past the legendary Hall-of-Famer Kareem Abdul-Jabbar.
- MSFT revealed how Bing’s AI will change the search landscape… as it will return conversational-style Q&A to customers – instead of links. For example, you can ask Bing: “Will this couch fit inside my car?”
- Ford has sold most of its Rivian shares… after writing-off $7.3B of its investment last year. Rivian is down over ~70% YoY.
- Investors are feeling a little ‘Un-Yeezy’… as Adidas issued a revenue warning over ~$1.3B in unsold Yeezy inventory. #Thanks-Ye!
Crypto-Bytes:
- Binance controls over 50% of spot trading… as crypto struggles with DeFi vs CeFi / centralization.
- Revolut (the European neobank with 25m customers)… will offer staking services for Ethereum (ETH). The offering will be available to customers in the U.K. and European Economic Area (EEA).
- FTX is sending confidential letters to politicians & influencers… who SBF showered with donations – asking them to return the funds by month’s end.
- The SEC issued an investor alert… about self-directed individual retirement accounts (IRAs) investing in crypto – along with increasing its scrutiny of broker-dealers working with crypto.
- Bitcoin network activity has increased to 2021 levels… due to the popularity of allowing NFTs to be stored on its blockchain.
- Kraken has settled with the SEC… and is shutting down its on-chain staking program.
TW3 (That Was - The Week - That Was):
Monday: Powell is speaking tomorrow, and after Friday's jobs number exceeding estimates by 300%, he could come out swinging. Yes, he said the word disinflation last week, but he also said that employment needs to soften – and that didn't happen. I'm watching TSLA fairly closely. It’s tried to get over $200 several times, and based upon the options chains – if it breaks over $203 it goes ballistic. So, TSLA over $200 works. FYI: the CEO of NOW sold 93% of his shares last week – that’s a big deal!
Tuesday: So, the Powell that I was watching live, was obviously different than the Powell the market heard. The one I heard said it was appropriate for more rate hikes, and then keep rates at an elevated level for a fair amount of time. When David asked him "Why 2% inflation? Couldn't the FED be happy with say 3%?" Powell shook his head and said: “Absolutely not and there will be no discussion about the 2% rate.” So, higher for longer and no deviation from aiming for 2% inflation. The market heard: "We are seeing the beginning of disinflation." They didn't hear the very next line which was: "Which we think has considerably longer to go before we are anywhere near our targets - something I'd also call declining inflation." When asked: “How long will it take to hit your target inflation rate – year end?” Powell said: “It will probably take well into 2024.”
Wednesday: The incredible start to 2023 has been led by communications, technology, and consumer discretionary. @BespokeInvest noted: 7 stocks have each added more than $100B in market cap YTD for a combined $1.377T. (These same 7 lost $4.86T in 2022) – referring to AAPL, AMZN, GOOGL, META, MSFT, NVDA, and TSLA. @BespokeInvest also noted that yesterday was the 12th trading day in the last 13 where the S&Ps were up from the open to the close. I’m watching those same 7 names for any follow through.
Thursday: This morning Disney announced that it is laying off 7,000 workers and restructuring its business units. Then Pepsi beat estimates, hiked their dividend, and announced a Billion dollar buy back – because people continue to drink soda and buy snack food. So, let’s get this right: (a) tossing folks in the street without a job is great news, and (b) doing billion dollar stock buy backs (which used to be illegal) is fantastic, and (c) therefore – Let the Good Times Roll. This world couldn't get any more bizarro.
Friday: Oil prices are jumping with WTI crude oil ~$80 per barrel and Brent ~$86.50 – after Russia announced oil production cuts of 5% = 500,000 barrels per day. The 10-Year is up to 3.715% and the 2-Year is above 4.5%. The DOW is now above its 50-Day moving average, and that’s NOT by accident, but rather 3rd-party (governmental) mgmt. They've been using that 50-day for two weeks now as support. That said, next week is the CPI report (February 14th @ 8:30am ET), and if it's ugly – look out below.
AMA (Ask Me Anything…)
“It seemed like such a good idea at the time…” The ‘Great Resignation’ is now being dubbed the ‘Great Regret’ by 80% of the job hoppers – who now wish they hadn’t quit their old (pre-pandemic) roles. Gen Z’ers (anyone born between 1997 and 2012) are the most regretful. 80% of those who quit are admitting that they would love their old job back. Of course, they remember the huge signing bonuses, but that old adage: ‘money doesn’t buy happiness’ continues to ring true. Also, it seems that current job seekers are finding it more difficult to secure a new job than the data may suggest = +6 months and +50 applications / interviews. The #1 reason job-hoppers gave for wanting to return to their former employers was that they missed their old colleagues.
“How does anyone trade this market?”
- Short Answer: You don’t.
- Longer Answer: Keep your trade sizes small, and your timeframes 40 to 60 days.
Our economy has become such a political football that you need to look toward well-run companies like Apple (AAPL) for advice. Apple is (a) in control of their own destiny, (b) doesn’t need an immediate cash infusion, and (c) not responsible to our government for endless favors. With our FED raising rates, it’s taken corporations back to pre-1982 (when stock buy-backs were illegal), and forced them to: ‘make money the old-fashioned way = Earn It.” On Tuesday (CPI day), watch how AAPL reacts and gauge your trading from there.
Next Week: Are we Back on the Bear?
Is the Bear Back? Nope, not just yet. BUT there are signs that 2-sided trading has returned. This past week the 30-Year (/ZB) dipped below the $129-level and that caused rates to fly higher and dissuaded tech buying. In turn, we tagged the lower-edge of the expected move, and as soon as that happened – traders opened their eyes and started buying hedges. As far as I’m concerned, those are good signs of Wall Street coming to meet Main Street. Other signals are the VVIX, Bonds and the Dollar.
The VVIX, Bonds and the Dollar – Oh My!
- The VVIX (Volatility of the Volatility Index) is an indicator I use to let me know if/when traders are hedging – and it lit up last week (breaking 100). So right now, all we can say is that traders are nervous about Powell and the upcoming CPI.
- BONDS were crushed this past week – to the order of 2 standard deviations. The 10-Year started the week at 3.4% and ended it at 3.75% - that’s a big boy move. Rate sensitive stocks (like tech) immediately moved lower.
- The Dollar remained flat – in a very guarded stance.
- With the VVIX moving higher and the BONDS breaking down – we are definitely getting ready-to-rumble IF/WHEN a market-battle breaks out.
TSLA, NVDA, MSFT, AAPL, and GOOGL:
- The moment interest rates went higher = TSLA, NVDA, and MSFT reversed, but not anything outlandish – just comfortably inside of their expected moves.
- Apple (AAPL) has stalled out since its earnings release.
- The mega-cap loser of the week was Google – that moved well outside its lower expected move on the fear of it getting crushed by ChatGPT.
Financials have been bending, but have not broken: You will know it when the financials breakdown. The Financials have been the corner-stone of this rally, and when they breakdown – so does this rally. Rates are heading higher, and that news may actually help the financials maintain their bid.
V-Day == CPI Day: I would not be surprised if we would close around 4106 in the coming days.
- LEVEL SET: Above 4106, I am Bullish and below it – I am Bearish.
- ALERT: At 8:30 am on Valentine’s Day = February 14th … the latest consumer inflation (CPI) reading will be released – fasten your seatbelts.
TRADES:
- MS: is currently the out-performer of the financials, so I’m just looking for a slight move to the downside, and am buying the March In/Out PUT spread.
- PFE: has been getting crushed to the downside as part of a cyclical rotation, so I’m buying the March In/Out CALL Spread as a defensive move.
SPX Expected Move (EM):
- Last Week = $77 (5-day week) EM, and we tagged the lower edge of the expected move.
- Next Week = $104 (5-day week) EM: The market players are expecting 30% more movement this week than last. We are going to see a dangerous market; therefore, make sure you’re handling your risk appropriately.
Tips:
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GS… Goldman Sachs experienced some volatility when the market turned lower last year, and buyers are now working on reclaiming that $375 level. If GS remains above $375, you can be long with a target of $577 over the next 6-12 months.
HODL’s: (Hold On for Dear Life)
- PHYSICAL COMMODITIES = Gold @ $1,876 & Silver @ $22/oz.
- AGG – iShares Bond Fund: (AGG = $98.4 / in at $93)
- BIV – Vanguard Bond Fund (BIV = $75.3 / in at $74.5)
- 30, 60, & 90-Day Treasuries @ 4.4 to 5.1%
- **Bitcoin (BTC = $21,600 / in at $4,310)
- **Ethereum (ETH = $1,500 / in at $310)
- DNN – Denison Mines ($1.36 / in at $1.32)
o SOLD the April $1.50 CALLS
- GME – DRS’d and HODL
- Innerscope (INND = $0.0047 / in at $0.0052)
- MESO – Mesoblast Ltd. ($3.69 / in at $3.60)
o SOLD July $5 CALLS for $0.85
- MS – Morgan Stanley (Downside PUTS)
o BOT Mar: +$100 / -$97.5 PUT Spread for $1.14
- NFGC – Newfound Gold ($3.70 / in at $3.75)
o SOLD the April $5.00 CALLS
- PFE – Pfizer (Upside Calls):
o BOT Mar: +$44 / - $46 CALL Spread for $0.80
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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