Sunday, July 7, 2024

This Week in Barrons: July 7, 2024

It’s an old trick… give out the perfect fake number, and then a month or two later (when nobody’s looking) revise it toward the real answer. Case-in-point, it was reported on Friday that April’s job growth was revised lower by 57,000 jobs, and May’s declined by 54,000. It seems our government delivers employment numbers that are much rosier than reality. Even June’s report included 59,000 fake jobs added as a result of their own birth/death model. Since June 2023, the U.S. has added 1.8m part-time jobs, and LOST 1.6m full-time jobs.

GOATs don’t seem to try very hard. They understand their assignment, and don’t confuse effort with results. They’ve learned:

To focus on the work at hand,
To not take on more than they can handle,
To ignore perfection,
To realize that questions are far more important than answers,
Practice, practice, and more practice,
To consistently add incremental challenges, and
That panic simply leads to more panic. Just stop, and begin again.

The Market:

I’d like the ‘Other’ choices please. Our fear indices are hovering near historic lows. Somehow, we believe that we can mitigate risk through inaction. Instead, we should be using improved communication, sharper focus, fewer choices, and leadership. At this stage, asking to see: ‘other sizes’ or ‘other toppings’ – is not the way to choose a new leader.

Footwear Faceoff vs Sneaker Showdown… Nike is still the world's most valuable shoe maker, but rivals are stepping up their game. “Chunky shoe” Hoka (owned by Deckers), Asics, New Balance, and On have all gained traction – doubling their market share since 2020.

Lessons from a GOAT commodities trader – Rick Rule:

The cure for high prices is: High Prices. The cure for low prices is: Low Prices.
The opportunity to buy low depends upon others making irrational sell decisions.
If you're NOT a contrarian, you will be a victim.
Volatility allows you to buy things cheaper.
Become a student of history, because expanding your vision improves decision-making.
The 8th wonder of the financial world is compounding.
Your real journey doesn't start until you fail. So, fail quickly.
You were given 2 ears and 1 mouth – use them in that proportion.

Things I use: I’m a subscriber and user of TheoTrade. Don Kaufmann and his team are excellent traders and educators. They will make you smarter, by using their trades to make you money. Earn while you learn. Please, try it out for free yourself … R.F. Culbertson.

[ Learn about TheoTrade here… ]

InfoBits:

Americans are increasingly hunting for deals. Chinese titans Shein and Temu are gaining US market share with ultra-affordable offerings. Even Amazon is launching a new discount section that will sell unbranded goods from China.

Bank of America reports a 25% increase in market volatility… from July to November in election years.

Disney’s “Inside Out 2”… became the first film to top $1B at the global box office since “Barbie.”

Homebuilding stocks are breaking down to 5-month lows… warning of further downside.

The US services sector contracted in June at the fastest pace in 4 years.

AI audio company ElevenLabs just announced… a new ‘Iconic Voices’ feature. It allows your favorite books to be read by AI-generated: Judy Garland, James Dean, Burt Reynolds, and Sir Laurence Olivier. [Voice actors just got a whole-new-level of competition.]

President Biden’s dilemma could be a study in War Games: ‘The only winning move is: Not to Play.’

Microsoft has initiated another round of layoffs… It’s third this year.

The #1 U.S. beer is Modelo… Bud Light gave a bad taste to some consumers, that could take a decade to go away.

Former House Spkr. Nancy Pelosi, just bought… 10,000 NVDA shares, and 20 (deep in the money) call options on AVGO due to expire in a year.

The UK’s Labour Party won a decisive election victory… ending 14 years of Conservative rule defined by austerity, Brexit, and an embattled prime minister whose tenure was shorter than the shelf life of a head of lettuce.

Crypto-Bytes:

Above is the daily chart of Bitcoin in 2024… and last week it did the unconscionable – it dipped below the $58,500 support level. With Germany moving more of their BTC to exchanges, and Mt. Gox moving billions back to individuals – prices are making new 3-month lows.

The ‘hash rate’ is… a metric that quantifies the Bitcoin network's computational power. The higher the ‘hash rate’, the more computing power there is powering the blockchain. Whenever you have a hash rate trending downward (as it is now), it means that bitcoin miners are turning off their rigs due to the challenging market conditions. These drops in the hash rate often coincide with market lows.

Short-term Holders Profit Ratios are less than 1… signaling that traders are selling BTC at a loss. Historically, that has been a great time to be a buyer.

Increased crypto market volatility should be expected… for the second half of 2024. But I would not expect the customary parabolic bull market response.

Uniswap (UNI) wallet users can now skip the middleman… and buy crypto directly with fiat. That means you can use Apple Pay, Google Pay, or your credit card to dive into DeFi.

Bitcoin dropped hard below its trendline on June 24… and now analysts are watching the 200-day moving average (near the $58,500 value area) as its next critical hurdle.

Things I read:

“There’s no organizational problem that increased revenue won’t cure. If you wish to increase sales, read Sunday Sales Delight - it will definitely be worth your time. Please, try it out for yourself … R.F. Culbertson.

[ Learn about Sunday Sales Delight here… ]

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

Tuesday: The degree of S&P stock concentration is extreme; the top 10 companies have the highest weight in the index since 1929. Meanwhile oil has been climbing to multi month highs and gasoline is at its highest levels since early April.

Friday: The Tech sector’s (XLK) YTD gains are +20%, with Communications (XLC) next at +18.5%, and Financials are third at +10.5% YTD. The Jobs Report is out and we made 206k new jobs in June, but revised the previous months down -110,000 jobs – wow. The unemployment rate moved up to 4.1%, and the labor force participation rate also ticked a bit higher. To some extent a weakening jobs reports means it's easier for the fed to cut rates. Some ‘on-the-radar’ stocks include: CDE, FIP, and ICE.

Morgan Moments…

Bitcoin is down 13% in the space of four days… and most altcoins have fallen into pretty disastrous drawdowns. Mt Gox is distributing $9B worth of Bitcoin over the next three months. I need to see Bitcoin back above 58,500 in the short-term, then a recovery above 60,000. I think a failed breakdown and a recovery back above these levels is the higher probability outcome, but until that happens – I'm watching from the sidelines.
In Options Trading = Timing is everything. If you are buying premium then you want to give your trade just enough time. Some people think buying more time is better, but you are paying for that additional time. If you think a move is going to happen within two weeks, why do you need to get options that expire in three months? This may sound simple but you’d be amazed how many traders fumble a trade by getting the idea right but the timing wrong. Don’t believe that more time is better or worse. Make sure your option trades match your thesis.
Hedra Labs now transforms static photos… into dynamic talking images, bringing your selfies to life with synchronized speech and facial animations. For best results, use a photo where you're not smiling, and where there is a high contrast between you and the background.

Go to Hedra Labs' website and create a free account.
Upload a high-quality, clear photo of yourself facing the camera.
Generate audio by typing text or by importing your own audio file.
Click "Generate video" to create your talking photo.
Preview, download, or share your special selfie!

Next Week: It remains a 1-Stock Market…

Bkg: While stocks continue to happily head higher and cyclical bull market signs are everywhere, the period of volatility compression that we have seen – may be coming to an end. Seasonality, geo-politics, and longer-term indicators all point to increased volatility / VIX. And then there’s Bitcoin losing $15,000 in 2 weeks – ouch.
Tesla saved the NVDA out of this market… The Tech/AI bifurcation continues in this marketplace. Last week we rotated from NVDA to TSLA and it exploded higher for a +4 std. deviation move. When you volatility weight Tesla, it carries the equivalent marketplace weight of AAPL. Then TSLA passed the torch to META, and META doubled its expected move higher. Over one quarter of all options traded are with Mag-7 companies. It’s clear that tech ignites the rally, and everything else follows.
Why META and Why NOW? To keep the dispersion trade alive, we’re seeing companies within the Mag-7 rotate marketplace leadership. The current trade has large hedge funds selling premium in the SPX – in order to finance their options buying within one of the Mag-7 companies. We’re seeing actual moves within some of the Mag-7 companies that theoretically should never happen – strictly due to the volume of the hedge fund option buying.
Tip #1: Bitcoin tanks – What are the implications? (a) Gold is breaking out to the upside, (b) Capital is rotating into Mag-7 Tech/AI names, and (c) watch out for other underlying energy assets such as oil.
Tip #2: Go Long Volatility… by buying out-of-the-money call spreads – 30 to 60 days into the future – and waiting for a government data drop / geo-political event to act as your catalyst.
SPX Expected Move (EM):

Last Week’s EM was $58, and we moved $110 (2 std. deviations) – based largely on the moves of META + TSLA.
Next Week: $63 EM. We just moved $110 last week – in only 3.5 trading sessions. This reeks of volatility suppression – take advantage of it.

TIPS:

Tip #3: RDDT is moving to all-time-highs, and it also causing a lot of shorts to get squeezed. The all-time-high + short-squeeze combo makes it a BUY in my book. [ BOT the October: +$70/-$100 Call Spread ]

HODL’s: (Hold On for Dear Life)

13 to 17-Week Treasuries @ 5.44%
Physical Commodities = Gold @ $2,399/oz. & Silver @ $31.5/oz.
**Bitcoin (BTC = $57,650 / in at $4,310)
**Ethereum (ETH = 3,010 / in at $310)
HROW – Harrow Health == $22.1 / in at $12
**IBIT – Blackrock’s Spot Bitcoin ETF ($32.2 / in at $24)
INDA – India ETF ($56.66 / in at $50) / BOT Nov, +$53 / -$55 Call Sp.
**MARA – Marathon Digital = ($20.17 / in at $12) / Sold Sept $30 Cov-Calls
**RIOT – Riot Bitcoin Mining ($9.6 / in at $12.5) / Sold Sept $16 Cov-Calls

** 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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Until next week – be safe.

R.F. Culbertson

<mailto:rfc@culbertsons.com>

http://rfcfinancialnews.blogspot.com

Sunday, June 30, 2024

This Week in Barrons: June 30, 2024

“Are you better off today … than 4 years ago?” If you believe that we’re constantly improving ourselves – then the answer is: Yes. But, are we SMARTER today than we were 4 years ago? That is where things start to get a little dicey. Technology has made us more capable and efficient, and opportunities grow simply due to larger liquidity pools. But, where are with we in terms of Intellectual Firepower? In order to beat what’s coming, we must be smarter (not just better off). Our businesses are definitely getting smarter while our politicians continue to get dumber. We cannot continue to kick-that-can down the road. We can fix this. What would happen if we all refused to dumb-things-down? What if we required everyone to step-up and do-their-homework – before engaging in conversation? Yes, we’d have to choose between: Learning vs ‘Tik-Tok’, and between: Engaging our Brains vs ‘Instagram’. Personally, I’m tired of dumbing s!@# down. Often the truth is just too complex, and in the not-to-distant future you will absolutely be required to be: Smarter than a 5^th Grader.

If you’re arguing for Free-Speech… then I must believe that you have something to say that’s worth listening to. Separately, all rational thought is based upon tests and improvements. Therefore, I assume you’re open to changing your mind based upon data, tests, results, and improvements. Because one without the other is worthless.

Pinocchio got it right? Pinocchio had a hard time having people believe his lies – because his nose got longer every time he didn’t tell the truth. We’re not very good at seeing invisible or gradual clues. If it’s important – Make it Visible. Create signals that shows us how we’re impacting the future. Per Seth G: Businesses gain competitive advantages by measuring & showing-n-telling elements others overlook.

The Market:

We got it all wrong with Inflation? We’re measuring the wrong stuff – on purpose. Past Treasury Sec. Larry Summers recently showed that all of the interest rate increases drastically accelerated the real inflation rate. He blames the increased real inflation on the current (fake) CPI measurement techniques. It seems that the BLS intentionally removed elements from the inflation calculation that became too expensive – like interest expenses. Larry said: “Pre-pandemic, borrowing costs associated with our mortgage and car payments were included in the CPI – and currently they are not. Therefore, when interest rates jumped, official inflation calculations did not fully capture the effects it had on the consumer. By incorporating those borrowing costs, inflation would have peaked last year at 18% - and not the 9% that our BLS told us.” The difference between 9% and 18% is a Big Difference. We can debate why interest payments were removed from the CPI calculation. But, what is not in question is that even with the CPI coming down – those interest payments have no end in sight.

The UBS investment team reported:

If Democrats sweep the Oval Office, House, and Senate – stocks will fall due to the potential for higher corporate tax rates, and regulatory oversight.
If Republicans sweep – stocks will rise due to less regulation, the potential for more M&A, and lower corporate taxes.

In both scenarios, choppier trading will be with us through the end of this year.

Learn more about World Copper here….

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InfoBits:

Friday was the last trading day of Q2, 2024… and both the S&P500 and Nasdaq100 went out at their highest quarterly closes in history – for the third consecutive quarter.

U.S. home ownership costs have risen 26% since 2020… adding an average of $1,510/mo. due to increased maintenance and property taxes.

Consumers are generally concerned about inflation… and are becoming more concerned about the job market.

Startups that raised money in the 2021-2022 bull run… are likely running out of money around now.

The 2 big EV hurdles are range anxiety and affordability. Americans are keeping their cars, trucks and SUVs for a record 12.6 years.

20 percent is the average rise in YoY car-insurance premiums.

Amazon is working on an AI chatbot to be launched in September.

EV maker Rivian just scored a $5B investment from Volkswagen.

Waymo fully opened its self-driving robotaxis in San Francisco… after the service has been offered in Phoenix since October 2020.

Containerships are backed up… as cargo vessels avoid the Suez Canal because of Houthi rebel attacks and the Panama Canal as it struggles with drought. Freight prices could rise to near pandemic highs.

The Supreme Court ruled that the U.S. Gov’t could… urge social media companies to take down content it believes to be misinformation.

SpaceX has landed an $843m NASA contract… to "de-orbit" the International Space Station in 2030.

Show me ‘da money… Researchers found that Stadium Projects have NOT resulted in any notable returns for taxpayers. The only revenue increase seems to be the increased income taxes being paid by the team’s high-priced players.

Crypto-Bytes:

Bitcoin lies at the bottom end of its trading range… and assuming that the primary trend remains intact, then this is a natural area to anticipate buyers to step in and drive prices higher into the end of the year.

The majority of Japanese Institutional Investors… plan on investing in crypto over the next 3 years.

Mt. Gox will start distributing $9B in Bitcoin in July. Current young holders are getting scared that all of that will be sold immediately. Professionals are just taking it in stride.

Chamath Palihapitiya says Bitcoin will hit $500k by Oct. 2025… and thinks Bitcoin’s post-halving scarcity and its emerging status as a global reserve asset will drive the price.

Analysts say crypto could mark the new “Trump trade”.

Javier Milei, Argentina's president, is doubling down on Bitcoin… pushing for a free market of digital currencies. His pro-BTC stance is a big win for the crypto community and aims to curb the country's addiction to money printing.

On the heels of the Ethereum ETF… VanEck filed for a Solana ETF with the SEC.

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

Monday: Mt. Gox holds over 140,000 bitcoins in bankruptcy. Bitcoin fell after Mt. Gox said it would start repaying crypto to creditors who lost their assets in a hack of the defunct platform more than a decade ago. Repayments are expected to start in July and be made in bitcoin and bitcoin cash. If bitcoin falls below its $60,000 trading support range, its next support levels is $51,500.

Tuesday: NVDA has a shareholder meeting tomorrow, and tomorrow MU will report earnings. If both do well, the entire AI sector will probably explode. I'm watching HAL here. After a big plunge two weeks back, it's been forming a decent "W" shape, and W's usually resolve to the upside. I'd take a shot at it over yesterday’s high of $34.62.

Wednesday: Take a peek at BROS – the chart looks interesting.

3 Morgan Moments…

Spot Bitcoin ETFs in the US… have suffered net outflows for 8 consecutive trading days.
Crypto-Bears talk about… the upcoming Mt. Gox repayments, miners selling BTC, and the Fed holding interest rates steady – as near-term ‘reasons’ for Bitcoin’s weakness.
Crypto-Bulls say… that they expect Bitcoin to reach a new all-time high above $73,000 in the coming months due to inflationary pressures, a potential FED interest rate cut, and continued institutional adoption.
D-ID (www.d-id.com) is an AI tool… that allows you to create a fully customizable, conversational AI avatar in a few steps – without coding:

Go to the D-ID website – log in/sign up to get free credits.
Click "Create" and select "AI agent" to access the creation tool.
Choose your AI agent's appearance from pre-generated avatars or upload your own, and configure its name, language, voice, and knowledge sources.
Once it’s ready, select “Create Agent” and start a conversation!

Next Week: Q2 is finally in-the-books…

Bkg… Against an ‘interesting’ geo-political backdrop, we have more: same-old / same-old. We have mixed signals and mixed performance within markets and across assets. (a) The Nasdaq faces mixed short-term signals (tailwind vs warning). (b) The top 10 stocks virtually never remain on top. And (c) our capital markets activity continues to remain sluggish vs historical norms.

Q2 went out with a whimper… drifting down 0.26% on Friday. But, don’t let that fool you – the S&Ps will close up a healthy 5.1% for the quarter. Don’t be distracted by the end-of-quarter selling because much of that is being driven by institutions engaged in quarterly rebalancing and corporate window-dressing.

Retail will take 2 steps back… before it takes one step forward. Names such as: Nike (NKE), Walgreens (WBA), and others will need a couple quarters to regroup before investors wander back in their direction.

Don’t give up on tech… because along with Amazon (AMZN), Apple (AAPL) and Google (GOOGL) there are names that I like such as: Crowdstrike (CRWD) and Microsoft (MSFT). We also have some strength in bitcoin miners / up-and-coming data centers such as Marathon Digital (MARA) and Hut 8 (HUT).

I also like Biotech for Q3… because I’d like to see Biotech (BTK) emerge as a market leader as this market cannot keep living according to the will of the tech sector alone. I believe that healthcare (XLV) and biotech (BTK) are more than capable of stepping up to the plate, and helping guide this market higher through the end of the year.

TIPS: