RF's Financial News

Sunday, September 17, 2023

This Week in Barrons: Sept 17th, 2023

     Do I need a new smartphone? … per Bob L.?  Maybe, but your only choices are the iPhone 15 Pro or the iPhone 15 Pro Max.  After all, the war is over and Apple has won.  Five years ago, the iPhone had 18% of the U.S. market – today it has 55% for 2 reasons: iMessage and resale value.  Nobody really wants to be the owner of a green bubble.  If you're a youngster, it's a cultural thing that will immediately have you losing status in your high school.  The blue bubble is a must – your social life depends on it.  And then there's the resale value: iPhones hold it and Androids do not.  The average iPhone has 3 owners, an Android leaves the store and the value goes near zero – overnight.
     Which iPhone should I buy?  Well, the iPhone 15 is essentially the iPhone 14 Pro. It has last year's chip (the A16 Bionic), and it only has two camera lenses instead of three.  You want an iPhone 15 Pro or Pro Max.  They have the new chip (the A17 Bionic), better cameras, and a titanium case – which means the phone is lighter.  But the truth is these phones have a lifespan, and by buying last year's model (the iPhone 15) it means that you’re losing a year of functionality.  You’ll have to replace it a year earlier, so why not lay out the extra money to live large now – knowing that it will be a wash when it comes to trade-in time?
    When should I get a new iPhone?  Now/yesterday – if you have an 8 or a X.  iOS17 will not work on these devices so let’s not open ourselves up to security breaches.  Do you need an iPhone 15 Pro if you have a 14 or 13?  No, unless you want one or for the new colors.  It used to be you got a new iPhone and were wowed by the speed because the new chip made a huge difference.  Those days are gone, and the improvements are incremental. Stay with what you've got, and wait another year or two.

The Market:

“When the facts change, I change my mind.” … John Maynard Keynes.

The United Auto Workers’ contract deadline… with GM, Ford, and Stellantis expired Thursday night, and the UAW went out on strike in 3 strategic plants (1 from each manufacturer). Labor’s move will cost the U.S. economy $5B over the next 10 days. The union is asking for: a 46% raise, the restoration of traditional pensions, and a 32-hour workweek with 40-hour pay. The UAW strike doesn’t just affect the car manufacturers, but it ripples to everyone down the chain. From the companies who make the bolts, to the steel makers, and from the tire manufacturers to the glass companies – a prolonged strike will be felt by all. But mark my words: “No company ever got a union who didn’t deserve one.” … per Larry P.

InfoBits:

- Forget suits and ties... as only 3% of workers say they wear professional business outfits in the workplace, with most employees opting for khakis, laid-back button downs, and street clothes.

- “He shoots and scores…” as soccer icon Lionel Messi drove 288k new subscribers to Apple TV+’s MLS season add-on package – in a single month.

- Higher rates could turn U.S. consumption negative… in early 2024.

- MGM Resorts… experienced a ‘cybersecurity issue’ that shut down ATMs and slot machines and prevented guests from using their digital room keys. Reports suggest a fairly nontechnical approach was used to gain system entry – hackers called the company's help desk and imitated an employee found on LinkedIn, and requested assistance in accessing their employee account.

- FOBO (Fear of Becoming Obsolete) reached a high of 22%... especially among those between 18 and 34, and earning <$100k in household income.

- Mexico tops China to become U.S.'s #1 trade partner… and Canada is close at #3.

- PB&J icon Smucker buys Hostess for $5.6B… as the snackification of America intensifies. Smuckers can use Hostess’ portfolio to feed America’s snack appetite with fresh creations such as: PB&J Twinkies, anyone?

- Google’s anti-trust case kicked off last week with… the DOJ hammering Google for paying $10B a year to Apple and others to be the default search provider on smartphones, making it difficult for consumers to switch search engines, and for hiding information from the government. Sounds a lot like the DOJ vs Microsoft – way back when.

- The median household income… fell for the third consecutive year to $74.6k.

- August’s Consumer Price Index (CPI) rose 0.6% MoM… putting inflation back on the table.

- After Mexico’s presidential election… each branch of its government will be led by a woman.

- The August Producer Price Index (PPI) rose 0.7% MoM… marking its biggest monthly increase since June 2022.

- August retail sales jumped 0.6% MoM… as consumer spending continues to defy gravity / expectations.

- Oil hit $90/barrel this week... and has rallied 35% since the day Goldman said it no longer sees oil reaching $100 this year.

- American’s are maxing out their credit cards… as CC-debt surpassed a record $1T last quarter and pushed total household debt to over $17T.

- American’s savings rate fell in July… and consumer sentiment declined – leaving over 60% of US adults living paycheck to paycheck.

- NSYNC will release their first single in 22 years… as part of the "Trolls Band Together" soundtrack

- Goldman’s advice to the uber-wealthy… buy into a sports franchise. And lucky for the uber-wealthy, GS is creating a group that will help them do just that!

Crypto-Bytes:

- FTX bankruptcy assets are at $7B+… suggesting that a full recovery for customers is indeed possible.

- Franklin Templeton (with $1.5T under management)… filed for a Bitcoin spot ETF also utilizing Coinbase’s custodial service.

- VISA announced a Solana integration… for their stablecoin payment pilot program. The Solana blockchain allows for high transactional throughput for USDC-based, cross-border, stablecoin transactions. This continues to solidify stablecoins as one of the clearest findings of product market fit for crypto, which has now crossed over $18T/yr. in cumulative settlement.

- The SEC delayed a decision on multiple Bitcoin spot ETF approvals. The next batch of deadlines comes in mid-October. All final deadlines come in Q1 of 2024 – with the earliest (Ark Invest) coming on January 10, 2024.

- FASB approved a marked to market accounting rule… for companies holding Bitcoin/crypto on their balance sheet. That’s a crypto-favorable accounting law that allows firms to mark their holdings to current fair market value on their balance sheet.

- Coinbase bought back debt… and filed for institutional lending service rights. This move potentially signals early signs of credit returning to the crypto market.

- Binance.US’s CEO Brian Shroder has left the company… as it cuts a third of its workforce.

- Regulators continued to crack down on scammers… with OneCoin co-founder Karl Greenwood being sentenced to 20 years in prison.

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

Monday: The recent surge in Treasury yields, the dollar, and the 10-month highs in oil prices have all raised concerns for investors ahead of key economic data this week. The August CPI comes out on Wednesday, and the August retail sales report is due on Thursday. Right now, the energy numbers aren’t adding up to me, and I think we could run out of diesel and/or gasoline before the EOY. We’re trying to wreck the fossil fuel industry and things are beginning to go awry. I’m looking at names like: SLB, VLO, HES, XOM, OXY, CVS, and the uraniums to do well.

Wednesday: The yield on the 10-Year is a bit over 4.3%, so I'm a bit surprised that futures aren't lower. While they're probably in need of a well-deserved rest, I think you can do pretty well over the next six months in the energy patch. You could use ETF's like the IEO or XLE. Individual companies I like include: XOM, VLO, HES, CVX, COP, CCJ and UEC.

Friday: Today is quadruple witching option expiration and rebalancing day for the S&P, Russell and Nasdaq. Quadruple witching is the expiration of four derivative contracts: stock index futures, stock index options, single stock options, and single stock futures. It happens 4 times per year and the next one will be on Dec 15, 2023. GS estimates that over $3.4T of options exposure will expire today. Markets rolled over after the Empire State manufacturing report hit. It was supposed to be red by 10 – instead it was green by 2. Then import prices hit and they were supposed to be +0.3, but they came in +0.5%. Immediately everybody said: "Oh boy, this gives the FED room to hike if they want." The Inflation numbers are NOT really FED friendly – no matter how much they spin it. So, we've got a crashing housing market, an auto shut down, high inflation, banks on the brink, and our government approaching yet another shutdown. Once in a while the market notices these things and gets frumpy. This is one of those times.

AMA (Ask Me Anything…)

Is this stock market safe… because the stock market just generated its second official Hindenburg Omen (H.O.) within the last 30-days. This is a warning that the probability of a stock market crash within the next several months is now far greater than random. All stock market crashes since 1987 have occurred following an official H.O. warning, and there have been no crashes without an H.O. warning. I’m not saying we’re looking at a crash, but I do think this market has a date with much lower levels. Oil should remain firm because we’re running out of it, and with Iran and Saudi joining the BRICS – they could turn us off in a heartbeat. We’ve already drained our strategic reserves, so energy looks good moving forward. There’s absolutely no reason for a higher market and a million reasons for a lower one.

Next Week: NOT all Quiet on the Inflation Front.

Tech took a collective hit this past week… due to correlation amongst mega-cap tech stocks, and now we may see some follow-thru into next week. The energy sector (XLE) continued to be on fire, and the S&Ps ended the week down mildly. I’m not expecting much from our FED next week, but we will see increased volatility at least up and thru the meeting.

Triple witching hedges came off… especially in the Sept. AM side of the settlement. And when a lot of hedges are settled to ‘cash’ all at the same time – it creates a little momentary chaos and volatility that tends to ripple thru the market during the day.

Our FED is coming back to town! Although there’s a +95% probability that our FED will do nothing – virtually every number out there is showing increased inflation and/or inflationary tendencies. In fact, if you’re in doubt – look no further than oil that has risen +35% off of its lows and is sitting at +$91/barrel, and that includes an incredibly strong dollar (+$105).

Bonds, continuation to the downside? Bonds (/ZB) are back to the danger zone, and if they breakdown from here – they’re bringing the market with it because 10-Year rates will immediately climb above the 4.5% range.

SPX Expected Move (EM):

- Last Week’s EM was $59, and we were mildly lower by $10 – so within the EM.

- Next Week’s EM = $60. We have a FED mtg. coming up – and we just moved $57 on Friday alone. Be very careful playing short duration positions.

TIPS:

HODL’s: (Hold On for Dear Life)

- PHYSICAL COMMODITIES = Gold @ $1946/oz. & Silver @ $23.3/oz.

- 17-Week Treasuries @ 5.5%

- **Bitcoin (BTC = $26,900 / in at $4,310)

- **Ethereum (ETH = $1,6w0 / in at $310)

- Apple (AAPL = $175 / in at $177)

- CCJ – Uranium = ($40.3 / in at $33.8)

- DO – Diamond Offshore ($15.6 / in at $15)

- ET – Energy Transfer ($13.56 / in at $13.70)

- MESO – Mesoblast Ltd. ($1.42 / in at $3.60)

o SOLD Oct $5 CALLS

- NFGC – Newfound Gold ($4.40 / in at $3.75)

o SOLD Oct. & Jan. $5.00 CALLS

- UEC – Uranium Energy Corp ($5.38 / in at $4.80)

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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Saturday, September 9, 2023

This Week in Barrons: September 10th, 2023

Author Ursula Le Guin had a sign over her desk:

- Is it true?

- Is it necessary (or at least useful)?

- Is it compassionate (or at least unharmful)?

The Flexport roller-coaster… is one that most entrepreneurs will be riding this year and next. On Wednesday, Flexport founder Ryan Peterson took back the CEO job (pushing aside Dave Clark) because he felt the strategy for the business had to shift. In particular, Petersen and the board thought Clark's spending had gone overboard. They thought that Flexport should be sticking to its knitting – providing a way for e-commerce companies to coordinate shipments from factories, rather than recreating Amazon’s sprawling logistics network. Peterson also fired at least 5 top execs that Clark had helped to bring on, fired 75 middle managers, rescinded dozens of job offers, and removed +200 job postings from their website.

To be fair, just a year ago when Flexport poached Clark from his top exec position at Amazon – the board and Peterson wanted him to get-big-fast. Why be in one business when you can be in all? Why can’t we: take on the giants?

But suddenly, Wall Street wanted profitability and for that – every grand vision gets put on hold. This pattern is not unique to Flexport. Meta is scaling back the metaverse. Software companies (and even Netflix) are attempting to navigate slower growth. It seems that: New Times require Older Playbooks. The Older Playbook has entrepreneurs proving their team, business model, and technology – BEFORE – raising money. The adjustment back to profitability and sustainability for those who came up during the past decade – won’t be easy. They were not trained in organic growth or to hire & expand AFTER increased demand.

But hey, If it were easy – everybody would be an Entrepreneur.

The Market:

Just watch the 10-Year Yield (TNX):

- #1. Watch TNXs steady uptrend that began in May.

- #2. The TNX broke above its 50-dma, and has maintained that breakout.

- #3. See TNX’s recent initial rejection by resistance (4.4%), and the bounce off short-term support (4.15%).

- #4. If we break above 4.4%, we then go to new highs in bond yields. If we break below support at 4.15%, then we would bring a move to lower yields back on the table. With the recent upward momentum, the odds favor a break higher.

InfoBits:

- Visa and Mastercard… are increasing their fees to merchants starting in Oct.

- The US Health Department recommended moving marijuana… to a lower federal risk category.

- China is launching a $41B semiconductor fund… similar to our $53B worth of subsidies from the CHIPS Act.

- The U.S. deficit is expected to double to $2T (8% of GDP) in 2023… due to higher interest rates.

- Novo Nordisk, semaglutide maker… became the most valuable company in Europe after passing LVMH.

- Disney vs Charter Communications… Everyone wants a bigger slice of the streaming pie. Charter is so determined to get Disney’s streamers included in their cable deal that it’s willing to lose huge channels like ESPN and ABC. At the same time, thousands of writers and actors are striking for better pay from streamers. And the streamers themselves want a bigger slice of their own pie, hiking prices with their sights set on profitability. Grab some popcorn for this one.

- China is banning the use of iPhones… in government-backed agencies and state companies. It’s Apple’s biggest foreign market and global production base.

- Pumped up… are gas prices that hit their highest level in over a decade after the Saudis and Russia agreed to curb oil production through EOY.

- Cruise is on the verge of winning approval… to mass-produce robotaxis with no steering wheel or pedals.

- Insiders are reviving the old rumor that… Bob Iger’s end game is to SELL Disney to Apple.

- How do we avoid running out of diesel fuel… before the EOY? Inventories are horrifically low, and they've already tapped out the strategic reserves.

Crypto-Bytes:

- The IMF is channeling their inner therapist… asking governments to take a deep breath and reconsider blanket crypto bans.

- Spot trading volumes on centralized exchanges… are down 7.8% for the second month. This is the lowest monthly trading volume since March 2019.

- Binance, the king of spot trading with $183B… saw its market share shrink for the sixth straight month – now at 38.5%.

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

Monday: The economic news continues to deteriorate. They cut the employment numbers from the first of the year in half. Bank of America tells us the debt market is creaking and groaning as bonds continue to fall – for 3 years in a row now.

Wednesday: So, we've got a really soggy market. If these attitudes remain, we could easily lose another 100 S&P points. Right now, I am not interested in buying anything. Practically, if the market is moving sideways, a good chart play can work. If the market is moving higher, lots of things work. But when the market is falling, trying to find long side plays is swimming upstream. The yield on the 10-Year is up and markets don't like it a bit. When it hit 4.3%, the techs really took a gut punch. There’s a lot of commercial property out there that has debt that will have to be rolled over, and instead of 1.5% - they’re going to be paying 6.5%. That's a huge difference on say a $20m building. Honestly, some of it will just go into default.

Thursday: The S&P is on track for its third day of declines. Apple shares are looking lower again – after falling 3.5% on Wednesday – as China moves to widen state employee iPhone curbs. Treasury yields edged higher and the dollar extended gains to a six-month high amid increasing bets for further Federal Reserve policy tightening following stronger-than-expected macroeconomic indicators.

Friday: Stock futures edge lower after the S&P 500 closed lower for a third consecutive session on Thursday and the Nasdaq fell for a fourth day (still up 16% and 31% YTD respectively). A strong jobless claims report, weaker data out of China, and concerns over Chinese government restrictions to Apple iPhones are proving to be a large headwind for tech stocks. The recent economic data has stoked the twin fears of higher-for-longer restrictive Fed policy alongside a global economic slowdown.

AMA (Ask Me Anything…)

Stablecoins per Anthony P: Often the private market can be more effective than our government. We saw that when SpaceX revived the space industry through cost reduction and increased launch frequency. Amazon increased the minimum wage for many Americans to $15/hr, - yet the US federal minimum wage still sits at $7.25/hr. Private markets move faster because they’re closer to the problem. And if a private company ignores any market reality, they are almost guaranteed to fail.

The stablecoin market has grown from $3B to $125B over the past 5 years. There is a perfect product-market fit. The high adoption rates come from areas where there is: high-inflation, high-censorship, or high-fee related transactions. Once again, the private sector beat governments to the innovation punch. There is no material adoption of a state-created stablecoin today. In fact, Tether and USDC are likely doing more to increase dollar adoption globally than any other organization or technology.

We should be thanking the entrepreneurs behind each stablecoin for having the foresight, courage, and dedication to act when our governments would not. And until governments get their act together, entrepreneurs will continue to pick up the slack.

Next Week: Tech is Down… but Not Out.

Background:

- High-yield stocks such as consumer staples and utilities are having one of their worst years in a while. People are finding yield in Treasuries and shorter-term government bonds (+5% of guaranteed yield); therefore, nobody is looking toward stocks for yield.

- Technology Bifurcation: Last week the S&Ps, Technology and Financials all fell around or below their expected moves, while Energy moved higher. The S&Ps and NASDAQ fell because AAPL collapsed on the China / iPhone news. A lot of the other mega-cap tech stocks were up or unchanged on the week – yet the index collapsed under the weight of AAPL and NVDA. Tip #1: Instead of rotating from sector to sector, we are seeing a rotation within the tech-sector – because nothing else matters. Tech was bifurcated last week and we still moved 60 S&P points lower. Imagine how much further we can move when things become correlated.

- This coming week we get the CPI, PPI, and other economic data elements – that will drive markets because our FED is in their quiet period until 9/20. Any piece of data has the capability of being the catalyst in this marketplace.

- Tip #2: The Russell (IWM) is getting ripped, and therefore is the place to sell premium next week.

- Strong Dollar, Higher Rates, and Strong Oil indicate more risk ahead. Tip #3: When I look at the move the dollar made last week, I get scared. It had a huge move higher – which tells me a lot of other nations are scared that their own currencies suck and/or a lot of people are flying to the safety of the U.S. Dollar. Tip #4: And when I look at the 10-Year Rate (TNX), you need to go all the way back to 2007 to see rates this high, and it looks like it wants to break out. Tip #5: Oil is rocking to the upside. Many market crises have kicked off due to incredibly strong oil – and this could be the long-awaited catalyst.

SPX Expected Move (EM):

- Last Week - $48 EM on a 4-day week… but finished $60 down.

- Next Week - $59 EM on a 5-day week…

- Low Volatility & High Risk: I would have to see: (a) Bonds rally back up quickly, (b) the Dollar sell off, and (c) Oil cool off in order to not see incredible risk in this marketplace.

TIPS:

1. UEC = $4.67: I still believe in uranium, and am focused on UEC that has resistance ~$4.65. If it can get up and over $4.65 and hold, I'm a buyer as it has a legitimate shot at its 3-year top of $6.75.

2. Mercedes (MBGAF = $70.50): Mercedes has a dividend yield of +7% and a PE ratio of ~5. I’m a buyer of Mercedes stock / create your own dividend stream – all the while allowing the underlying to increase in value.

3. SOFI = $8.56: Watch SOFI as it’s been trying to get over its 50-day moving average for a few days. I'd take some over $8.95.