Our stock market is rewarding Greedy behavior again… and that’s not a good, long-term game plan. Greed is not a sustainable model – especially when greed displaces growth and/or innovation. A few red flags for me:
- Our Government is pumping unlimited liquidity into our financial system, which mortgages the consumer’s future for short-term stock market gains.
- Reducing any company’s workforce by significant numbers, is usually at the expense of innovation.
- Using higher interest rates as an equity buy signal, kicks the corporate can into the next quarter when the coupons come due.
- Meta’s CEO Zuck – isn’t winning any altar boy of the year awards. So, why reward someone you wouldn’t be caught eating dinner with?
Be careful, Gravity has a violent way of dealing with Greed.
All Customers are NOT created equal… Per Seth G: Customers are why we’re here because they pay the bills and are the primary growth driver – but each adds a different value to your organization and journey.
- The customer who spends 100x as much as the average customer is worth considerably more attention and care.
- The customer who has feedback that will help you understand how to serve similar customers is worth listening to more closely.
- The customer who has influence and status should garner additional attention and care.
It’s okay to treat customers differently, just figure out what goals-and-bucket they fall into – prior to re-allocating your resources.
The Market:
What’s not to like:
- The economy and job markets are strong.
- Inflation is slowing down.
- Corporate earnings are beating estimates.
- There’s $6T sitting in money market funds – awaiting investment opportunities.
- And, it’s an election year – which means more deficit spending.
There are plenty of catalysts to push the Magnificent-7 stocks higher (MSFT, AAPL, AMZN, NVDA, GOOGL, META, and TSLA) – unfortunately, nobody knows how high. The current market cap of all Russell 2000 companies is less than that of Microsoft. A market driven by a Mag-7 co-op has its own set of risks – but Don’t fight the tape.
WeWork is back… and it’s x-CEO Adam Neumann is trying to buy the real-estate company out of bankruptcy. Leaving aside the antics that led to his WeWork firing (drugs, crazy plane flights, and incoherent business plans), he has NOT made a dime for anyone – on any of his previous or current ventures. According to reports, Neumann’s management of Flow (his current apartment-esque venture) doesn’t exude competence as Flow’s properties are draped in cash-flow issues (sound familiar?). I appreciate a good redemption story as much as the next guy – but why do we continue to give failed founders yet another shot at the brass ring? All that I’m asking is to have them prove themselves first in the profitability arena.
InfoBits:
- OnlyFake, an underground website… makes fake AI-generated IDs for $15, highlighting the need for better KYC systems
- Danish pharmaceutical giant Novo Nordisk… is buying drug manufacturer Catelent for $16.5B to help boost their production of weight loss drugs Wegovy and Ozempic.
- Estee Lauder will cut jobs due to China’s slowdown.
- Snap is laying off 10% in an effort to ‘reduce hierarchy’.
- DocuSign announces more layoffs as PE takeover talks stall.
- “Boeing’s at the “Last Chance Saloon”… said the boss of Emirates Air noting the progressive decline of Boeing’s quality & performance.
- Spotify reached over 600m homes with ~250m paying customers… and it’s still losing money. Don’t they teach profitability in business schools anymore?’
- Snap blamed its revenue miss on the Middle East conflict. LoL - U just can’t make this stuff up!
- Hershey slashes jobs as rising cocoa prices hit sales… causing inflation-hit consumers reduced their non-holiday spending.
- Bluesky, a "decentralized Twitter" with 3m invitation-only users… is opening up to the public. Many want a different experience that’s simple, easy and not run by a billionaire.
- Uber made its first annual profit… but it came AFTER ditching the ‘hyper-growth’ at all cost (VC) mentality.
- OpenAI hit a $2B run rate in Dec. 2023… making it the fastest growing startup to hit $1B in revenues – ever.
- The S&P 500 hit $5,000 on Friday… driven in no small part by tech's Mag-7.
- The Super Bowl:
o FanDuel and DraftKings… control ~70% of the US online sports-betting market.
o 68m Americans plan to wager $23B on the Super Bowl.
o The average cost of a 30-second Super Bowl ad is $7m… because 115m people watched last year’s game.
o Last year’s Super Bowl ranks second… behind the moon landing as the most-watched TV program – ever.
Crypto-Bytes:
- Solana went down this week for an hour… all the while doubling down on its mobile phone initiative. Solana (the blockchain network) launched the Saga in June 2022 – as its first mobile device with a built-in blockchain wallet. Today, Solana shared that its Chapter 2 mobile device secured 60,000 pre-orders (@ $450 each) and is expected to ship in 2025.
- El Salvador re-elected its pro-bitcoin president… to his second five-year term with over 85% of the vote. President Nayib Bukele is a millennial who made BTC legal tender, and promised to bring investment $’s to the country with bitcoin Volcano Bonds. His pro-crypto stance has given hope to an industry desperate for friendly officials.
- BTC’s closing above $45,100… will confirm the first bullish BTC breakout on a daily chart since October 16, 2023. And if we continue above $45,250 – that should cause a liquidation of about $5.2B shorts across the decentralized crypto-derivatives market.
TW3 (That Was - The Week - That Was):
Monday: Last week the non-manufacturing PMI came out much hotter than estimates – which caused the 10-Year to move higher and stocks to sell-off. But, nothing touches the Mag-7 as they simply seem to move higher. Every report is suggesting that our FED cannot cut rates, and it's driving traders crazy.
Tuesday: It’s hard finding stocks that can run, when only the Mag-7 are doing the heavy lifting. Yesterday BABA put in a pretty big day, and with the Chinese gov’t doing all it can to boost its stock market – BABA could have the ingredients for a run.
Wednesday: Remember when Powell said that there would probably be 3 rate cuts this year – maybe beginning in May. The market wasn't thrilled with that, but one thing to keep an eye on is oil = the USO oil ETF. Yesterday, it moved up and over its 50-day, and that could be the beginning of a run.
Thursday: Yesterday (just like in 1999) markets did one of their mindless romps higher. If we repeat 1999, we will pull back slightly and then see a surge over that 5k mark either later today, or tomorrow. This market is overpriced, but I can also see things becoming more over-done because it is an election year.
Friday: All eyes this morning are on the CPI 'revisions’. Traders are worried that the CPI would be revised higher, but then ‘magically’ there were no revisions. That excited traders. The market’s pattern has been to run hard, then take a pause day, then run hard again. Yesterday was a pause day, and with the S&P inches from crossing the 5,000 level – I could easily see them wanting to end the week with a victory over 5k.
Ask Me Anything…
Should I be shorting stocks? Market trends have changed, and hints are everywhere – except inside the Mag-7. If it was just one divergence, that would be one thing, but it’s not. Officially, newsletter writers are the most bullish they've been since 2021. And in 2021 most stocks had already peaked and shorting equities had already become the easier trade. Tip #1: Remember, History does not Repeat but it Rhymes; therefore, please be careful out there.
What are you buying? If you have a good set of trading tools, and you can be nimble – then playing moves in LRCX or NVDA can be both dramatic and profitable. As of late, I’m sticking with playing the ETFs: QQQ, XLK, and SPY.
Next Week: The Great Tech Squeeze…
Weekly background…
1. Per Thomas C: The 50-day moving average breadth indicator has rolled over from being overbought, and although not a perfect signal – the last 3 times it did that, markets moved higher.
2. Higher bond yields + a Higher U.S. Dollar + Elevated oil prices = are all short-term risk indicators. The movement in these 3 elements reinforced and/or triggered the weakness in stocks from Aug thru Oct of last year.
3. Bullish spec-trading is heading dangerously close to a potential correction trigger.
4. Investor complacency is worrisome as credit spreads push lower and market volatility falls asleep – in the face of increasingly higher equity valuations.
5. Per GMO: For the last decade, the top 10 stocks by market cap. (mostly tech) have outperformed the S&P 500 by ~5% per year on average.
6. History tells us that when stocks go up for 5 consecutive weeks – they tend to continue to move higher.
Nvidia (NVDA) is currently the most dangerous stock in this marketplace… because it’s ignoring everything – including bonds and currencies. Following Nvidia’s lead this week, the following tech stocks also hit or exceeded the upper edge of their ‘Expected Move’: MSFT, AAPL, AMZN, and GOOG. That was enough to take the S&Ps to all-time-highs on the week.
There’s bad news everywhere, except inside the Mag-7.
S&P 500 = new highs vs # of member Stocks at new highs… Last week the S&Ps breached the 5,000 level, but ironically only 19% of S&P 500 stocks are within 2% of all-time-highs. What pushed the S&Ps to all-time-highs last week was a very concentrated, heavy-lifting effort by the Mag-7. Tip #2: If you wish to participate in the Mag-7 rally, then Define Your Risk by using Option Spreads to assure your capital preservation.
Most Sectors are weaker in this wildly bullish environment… including the: XLE (Energy -2% YTD), XLP (Consumer Staples = flat), XLU (Utilities -6%), XLB (Materials -3%), etc. versus the XLK (Tech +10%). The Mag-7, Healthcare, and Financials are the only sectors that are positive YTD. This is an extremely dangerous market.
- 10-Year bonds are collapsing (rates moving higher) after the FED meeting,
- The Dollar is moving significantly higher (over 1.04),
- Volatility is lower as complacency settles in, and
- The S&Ps have moved significantly higher for the fifth consecutive week.
SPX Expected Move (EM):
- Last Week = $68 and we hit it on-the-button.
- Next Week = $66 – Tip #3: Which tells me that this marketplace is expecting ‘more of the same’ behavior, in an upward direction.
TIPS:
We’re Leveling-Up… As our numbers have grown, I've decided to migrate to a different e-mail service provider … BeeHiiv. The best part is – you don't have to do anything! As always, thank you for your continued support, co-operation, patience and understanding.
HODL’s: (Hold On for Dear Life)
- 13-Week Treasuries @ 5.3%
- PHYSICAL COMMODITIES = Gold @ $2037/oz. & Silver @ $22.6/oz.
- **Bitcoin (BTC = $47,600 / in at $4,310)
- **Ethereum (ETH = $2,500 / in at $310)
- **ChainLink (LINK = $19.27 / in at $7.78)
- AAPL – Apple = ($188 / in at $181)
- **COIN – Coinbase = ($141 / in at $125)
- DKFG - DraftKings ($43.3 / in at $41.5)
- DECK – Deckers ($845 / in at $882)
- INDA – India ETF ($50.7 / in at $50)
- **MARA – Marathon Digital = ($23.2 / in at $12)
o Sold the Mar. & April $32 Covered Calls
- MC – LVMH ($54 / in at $57)
- **RIOT – Riot Platforms = ($14.3 / in at $12.5)
o Sold the Mar. & April $20 Covered Calls
- UEC – Uranium Energy Corp ($7.7 / 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!
Disclaimer:
Expressed thoughts proffered within the BARRONS REPORT, a Private and free weekly economic newsletter, are those of noted entrepreneur, professor and author, R.F. Culbertson, contributing sources and those he interviews. You can learn more and get your subscription by visiting: <http://rfcfinancialnews.blogspot.com/>.
Please write to Mr. Culbertson at: <rfc@culbertsons.com> to inform him of any reproductions, including when and where copy will be reproduced. You may use in complete form or, if quoting in brief, reference <http://rfcfinancialnews.blogspot.com/>.
If you'd like to view R.F.'s actual stock trades - and see more of his thoughts - please feel free to sign up as a StockTwits follower - "taylorpamm" is the handle.
If you'd like to see R.F. in action - teaching people about investing - please feel free to view the TED talk that he gave on Fearless Investing:
https://www.youtube.com/watch?v=K2Z9I_6ciH0
Creativity = https://youtu.be/n2QiPSe_dKk
Investing = https://youtu.be/zIIlk6DlSOM
Marketing = https://youtu.be/p0wWGdOfYXI
Sales = https://youtu.be/blKw0zb6SZk
Startup Incinerator = https://youtu.be/ieR6vzCFldI
To unsubscribe please refer to the bottom of the email.
Views expressed are provided for information purposes only and should not be construed in any way as an offer, an endorsement, or inducement to invest and is not in any way a testimony of, or associated with Mr. Culbertson's other firms or associations. Mr. Culbertson and related parties are not registered and licensed brokers. This message may contain information that is confidential or privileged and is intended only for the individual or entity named above and does not constitute an offer for or advice about any alternative investment product. Such advice can only be made when accompanied by a prospectus or similar offering document. Please make sure to review important disclosures at the end of each article.
Note: Joining BARRONS REPORT is not an offering for any investment. It represents only the opinions of RF Culbertson and Associates.
PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING. WHEN CONSIDERING ALTERNATIVE INVESTMENTS (INCLUDING HEDGE FUNDS) AN INVESTOR SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS AND OTHER SPECULATIVE INVESTMENT PRACTICES MAY INCREASE RISK OF INVESTMENT LOSS; MAY NOT BE SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.
Alternative investment performance can be volatile. An investor could lose all or a substantial amount of his or her investment. Often, alternative investment fund and account managers have total trading authority over their funds or accounts; the use of a single advisor applying generally similar trading programs could mean lack of diversification and, consequently, higher risk. There is often no secondary market for an investor's interest in alternative investments, and none is expected to develop.
All material presented herein is believed to be reliable but we cannot attest to its accuracy. Opinions expressed in these reports may change without prior notice. Culbertson and/or the staff may or may not have investments in any funds cited above.
Remember the Blog: <http://rfcfinancialnews.blogspot.com/>
Until next week – be safe.
R.F. Culbertson
http://rfcfinancialnews.blogspot.com
