“When life hands you lemons… you do NOT make lemonade…” Fall from the House of Usher (NFLX) … https://www.youtube.com/watch?v=XAYeJzYJnkM
1. First, you roll out a multi-media campaign to convince people that lemons are incredibly scarce [which only works if you stockpile lemons, control the supply, and then issue a media blitz.]
2. Second, learn to say “I love you” with lemons. Lemons (not roses) are the must-have accessory for engagements or anniversaries. Billboards say that she won’t have sex with you unless you’ve got lemons. De Beers produces limited edition lemon bracelets with yellow diamonds called lemon drops. You get a Kardashian to suck a lemon wedge in a leaked sex tape.
3. Third, you start a hashtag campaign. Something isn’t “cool”, “tight” or “awesome,” – it’s “lemon.” “That concert was f-ing Lemon.” “OMG #Lemon.”
4. You get Dr. Oz to recommend 4 lemons a day and a lemon suppository supplement to get rid of toxins ‘cause there’s nothing scarier than toxins.
5. Then you patent the seeds. You write a line of genetic code that makes the lemons look just a little more like tits, and you get a gene patent for the tit-lemon DNA sequence. Circulate those seeds in the wild, and then sue the farmers for copyright infringement when that genetic code shows up on their land.
6. Finally, you sit back, rake in the millions, and when you’ve sold your Lem-pire for a few billion dollars, and THEN – you can make lemonade.
Financially, BOOMERS still rule. The challenge for the next younger group of difference makers is not going to be the thinking, but rather – DOING. It’s one thing to call out and dismiss tradition, but it’s quite another to ship-n-deliver impactful change. Our next generation should examine everything from today’s two-party system to our FED to our non-balanced budget(s). Maybe free-markets should decide everything, after all: nobody cares about 401(k)s or IRAs anymore. My only question is when will this younger group of decision-makers be bold enough to grab the torch and start DOING?
The Market:
We’ve exceeded $1T in annual interest payments on our national debt… and that guarantees our government will:
1. Continue to seek new ways to increase taxes, and
2. Continue to debase the currency – to monetize the debt with ‘cheaper’ dollars.
Don’t you just hate it when those ‘bitcoin people’ are right?
February is historically one of the worst investing periods... and for the rest of Q1 during Election years, stocks typically have a hard time. We saw a nice correction in Q3 last year, and I'm not saying this one needs to take as long, nor does sentiment need to adjust as violently as it did then – but Bull Markets do correct. Underneath the surface, we've seen a stealth correction already throughout January. And now, I think things could get uglier before they get better.
InfoBits:
- When your Uber driver starts recommending AI stocks… it means SELL because: the ducks are quackin’, the dogs are barkin’, the kids are screamin’, and there are too many people on one side of the lifeboat!
- Chinese property developer Evergrande faces liquidation… and a lot of hedge funds and international banks will be effected. The decision allows for a court-appointed liquidator to sell assets globally and repay debt.
- Tech layoffs topped 25,000 in January… the highest since March, 2023.
- "Suits" hauled in 57.7B viewing minutes in 2023… breaking the single-year record held by "The Office".
- Neuralink has completed its first implantation… of a brain-computer interface in a human subject - announced CEO Elon Musk.
- Amazon nixed their proposed $1.7B deal to buy iRobot… amid regulatory scrutiny in Europe. iRobot is laying off 31% of their workforce following news.
- During Q4, Novo Nordisk grew revenues +31% YoY… Ozempic grew +60%, and Wegovy grew +407%.
- Microsoft, Alphabet, + AMD lost ~$200B in 1 day… when analysts were less than impressed with their earnings numbers.
- UPS is cutting 12,000 non-union, managerial employees.
- Short sellers are targeting the “for-profit” college sector… sending Adtalem Global Education shares down 18% in one day.
- IBM’s new rule = “Get Out to the Office or just Get Out…” is the latest tech company to reduce its headcount by reducing remote work.
- Meta grew rev's +25% and increased operational efficiency… which masked their R&D unit’s continued money-flush.
Crypto-Bytes:
- FTX will pay back customers 100%... but they won’t reboot the exchange.
- The average funded startup in 2023… had 80% gross margins and a 600% projected revenue growth. VCs are heavily examining capital efficiency. Large growth rates to raise funds are not enough as unit economics are back in vogue.
- “Tether’s net profits are now 10% of J.P. Morgan’s... with +99% LESS employees… Ryan S.
- Crypto Celsius, the bankrupt crypto lending company… has emerged with a plan to distribute $3B to creditors. In addition to the crypto and cash, creditors will receive a stake in the newly formed bitcoin mining company: Ionic Digital – managed by the publicly traded Hut 8.
- Spot bitcoin ETFs have amassed $28B since January’s launch… with IBIT and FBTC (the low fee spot ETFs) capturing the largest share of the funds.
- Chainlink soared to its highest price since early 2022. LINK facilitates smart contracts and has emerged as an essential piece – connecting on-chain and off-chain data. They have enabled +$9.6T in transactions to date.
TW3 (That Was - The Week - That Was):
Monday: This week’s release schedule:
- Tuesday: 8:30 am JOLTS job openings, 4:05pm MSFT & 4:15 GOOG earnings.
- Wednesday: 2:00pm FOMC Rate Decision, and 2:30pm Jerome Powell Q&A.
- Thursday: 8:30am Nov. GDP rate, 4:00pm AMZN, 4:15pm META, and 4:30pm AAPL earnings.
- Friday: 8:30AM JOBS Report, and 10:00am Consumer Sentiment Data.
If the darling stocks hit home runs and Powell talks dovish, this market could scream higher. But if a few of them blow it, and Powell says the economy is strong enough that rate cuts aren't necessary – we could see an end to this crazy market.
Tuesday: The JOLTS report (the amount of job openings) came in with more open positions than they had hoped. Consumer confidence came in close to estimates.
Wednesday: Will FED Chairperson Powell be dovish and talk about the timing of rate cuts, or will he hold the line and push back – given they've manipulated the economic numbers to make the economy look strong? This market desperately wants a lot of rate cuts - quickly. If Powell talks tough, and you combine that with the not so stellar earnings we saw last evening – we could be set up for the first real correction. But if he is dovish, they'll ignore the earnings and push things higher.
Thursday: Yesterday was ugly in tech land as 345-point drops are not child’s play. All of the ingredients for a pullback are in place. FYI: The healthcare ETF (XLV) was only down a few pennies in an atrocious overall market that saw the S&P down 80. Wow – the 10-Year fell like a stone and the DOW immediately screamed 300 points higher. The 10-Year is falling because news is out that we’re running military bombing runs on Syria and Iraq/Iran over the weekend. People are rushing to the safety of debt and yields. The algos (on the other hand) don't care about war because they only see falling rates – which means risk-on so up we go in market land.
Friday: Today is Non-Farm Payroll’s Day – along with Groundhog Day. Estimates were for 185k new jobs created in January, and we got 353,000. Most of those jobs were added in professional and business services (74,000), healthcare (70,000), and retail trade (45,000). Average hourly earnings grew 4.5% year-over-year – up from 4.1% in December. Welcome to wage inflation. These news bits are NOT FED friendly, and all those people thinking that our FED would cut in March – are now in denial.
AMA (Ask Me Anything…)
Will our FED cut rates in March? On Wednesday, FED Chairperson Powell said: “The committee does NOT expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving substantially toward 2 percent. I don’t think it’s likely that the committee will reach a level of confidence by the March meeting.” It was repeated that our FED would rather accept the risk of keeping conditions too tight for too long, given the labor market and the economy’s overall resilience.
It’s time to short stocks when… according to J.C. Parets of All-Star Charts:
- Consumer Staples relative to the S&Ps are above those December lows.
- US Treasuries are above those December lows relative to High Yield Bonds.
Otherwise, I want to be shorting stocks where breakouts are failing to hold, and/or stocks are breaking down from what should be a continuation pattern. February is historically a great month to be shorting stocks.
Next Week: When Bonds Sell = Markets Break…
Background: A surge in bonds is the classic signal of a “flight to safety” and a warning that all heck’s about to break loose in stocks. But then the entire market fixated on tech and its stellar earnings. Tech is the market right now. On Friday, the Jobs Report sparked an explosion into the Dollar. If all of that sounds chaotic – it is. Tip #1: It’s time to buy some downside protection.
FED fumbles, but Tech is everything… Our FED came out and told us that inflation isn’t really ‘controlled’, and that there will be no rate cut in March. But the market didn’t really care because they were fixated on tech buying opportunities.
Bifurcation causes Tech to become the market… On Friday, the S&Ps were up over 50pts, and the advance / decline line was negative. That means that (a) the Mag 7 is propping up the market, and that (b) investors are SELLING BONDS like crazy. If BONDS continue being sold, then even the Mag 7 won’t hold up in a high interest rate environment. The 10-Year jumped to a little over 4% on Friday. Another day like that, and this market will begin to turn ugly. Currently, it’s MSFT, META, AMZN and NVDA that are running this marketplace to the upside.
When Bonds Sell = Markets shall break… The volume of sales in last week’s bonds, is some of the largest we’ve seen in recent history. But on Friday, when the JOBs number came out – money flowed out of bonds and into the U.S. Dollar. Tip #2: Watch the 10-Year (TNX) – because this market will have a tough time handling the TNX piercing above 4.2%. FYI: Our gov’t plans on selling a lot of bonds in Q1 and Q2.
The Dollar explodes off the Jobs Report… On Wednesday, bonds were a defensive play, but on Friday – the Dollar became the world’s flight to safety. Right now, you can add up all of the financial and energy stocks – and they will only equal 2 of the Mag 7 tech stocks. That’s the power of the Mag 7 right now.
Volatility is moving higher – and markets are moving higher… which is never a good thing. That tells me that: Tip #3: institutions and professional traders are buying hedges… because Bond market (TLT) volatility is higher than NASDAQ volatility.
SPX Expected Move (EM):
Last Week = $71… we tagged the EM to the upside.
Next Week = $68… but we do NOT have a FED announcement, a JOBS Report, or Mag 7 earnings to contend with. This market is showing its fear by giving us a higher-than-normal Expected Move. Add that to markets seeing a larger risk in bonds than in tech stocks – and you have a recipe for a real pullback.
TIPS:
Leveraging our way to the Top: This chart is a unique indicator. Per Thomas C: it’s the ratio of volumes traded in leveraged long vs short US equity ETFs. The higher it is, the more leveraged long trading there is – hence the more upside speculation. Spikes in this indicator are a fairly reliable predictor of short-term peaks in the market. Of the last 8 spikes in this indicator (pre-2020): 5 were signals of an impending sell-off (that came immediately after the indicator peaked), 2 were followed by range consolidation, and 1 was a false flag.
HODL’s: (Hold On for Dear Life)
- 13-Week Treasuries @ 5.3%
- PHYSICAL COMMODITIES = Gold @ $2037/oz. & Silver @ $22.9/oz.
- **Bitcoin (BTC = $43,000 / in at $4,310)
- **Ethereum (ETH = $2,300 / in at $310)
- **ChainLink (LINK = $17.70 / in at $7.78)
- AAPL – Apple = ($185 / in at $181)
- **COIN – Coinbase = ($129 / in at $125)
- DKFG - DraftKings ($41.5 / in at $41.5)
- DECK – Deckers ($882 / in at $882)
- INDA – India ETF ($50 / in at $50)
- **MARA – Marathon Digital = ($18.2 / in at $12)
o Sold the Feb. & April $32 Covered Calls
- MC – LVMH ($57 / in at $57)
- **RIOT – Riot Platforms = ($11.2 / in at $12.5)
o Sold the Feb. & April $20 Covered Calls
- UEC – Uranium Energy Corp ($8.1 / in at $4.8)
** Crypto-Currency aware
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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