This Week in Barrons – 3-11-2018:
Thoughts:
I believe that
small business is NOT the job creator of our economy. A survey of 2,165 small businesses just
released by the Kaufmann Foundation (presented to me by MJP) helps drive home
that point.
1. Over
half of all small businesses surveyed had no employees. Another statistic shows that 85% of current small
businesses are 1-person shops.
2. The
profile of the ‘Older Business’ that is still alive after 5 years, is in direct
CONTRAST with the current ‘Startup’ profile.
This tells me that we are either: (a) in for a
tremendous amount of small business failures, (b) in for a complete ‘about
face’ in our economic business climate, (c) our government is backing the wrong
horse strictly for voting / political purposes, and/or (d) ALL of the above.
But let’s not rush to judgement. The same survey released more data
surrounding our newly minted entrepreneurs.
We also found out:
1.
With
all of our new government sponsored incubators, accelerators, and respirators –
64% of all new businesses never used any of them.
2.
It’s
twice as hard to hire good people as it is to find a place to locate.
3.
It’s
40% easier to find FUNDING for a business than it is to find paying CUSTOMERS for one. And it’s a shame that in over 90% of the
cases – the funding will ‘dry-up’ before the customers ‘catch-on’.
4.
In over
2/3 of the businesses, it’s darned near impossible to make any money to keep
the business – in business.
And right on cue, a group of business incubators
(that was shown to be irrelevant by the survey above) released their results to
a question: “What are the most important qualities of a successful startup founder?”
1.
Work & Action: Startups need DOERS not thinkers. Founders need to be ‘hands-on’ with the
business. Actions remove doubt. You need to learn quickly what does and does
not work.
2.
Customer Knowledge: Even though finding funding is easier than
getting customers – entrepreneurs need to bite the bullet and learn how to sell. Learn what customers want, and what it costs
to acquire and retain them.
3.
Know the Numbers: Figure out how to make money. Understand cash flows accelerating
receivables and delaying payables. These
items are more easily learned when you have money – then when you don’t.
4.
Listen to Everyone: Your willingness to listen and learn
gives you the ability to excite others. Your ability to be a persuasive
communicator and focus on sales will be the determining factor between winning
and losing. There is no business problem
that increased revenue won’t solve.
Now that we know: actions, sales, and
financial accountability are the main issues for survival – you would think
that incubators would teach: budgets, selling the decision-maker, and
timeframe(s). But alas, only a handful include
this in their curriculum. Instead they
teach: (a) ‘creating’ rather than ‘doing’ a business model, (b) ‘pitching’ an
investor rather than ‘selling’ a customer, and (c) ‘speaking’ in an elevator
versus ‘listening’ to your prospect. Government
monies must be flowing so freely to incubators that results just don’t even matter.
This is becoming even more apparent as cities
are getting into the ‘incubator’ act. Pittsburgh
is now proposing a taxpayer-financed effort to underwrite small-business
startups. To quote Colin McNickle: “Why would any city set up a fund to make grants to
businesses so they could pay the city for permits and licenses? If a startup can’t afford a license, how can
it afford equipment, supplies, and employees? If the city is eager to help startups, why not
waive the cost of permits and licenses for the first year?” Equally
troubling is the fact that businesses that are not ‘politically correct’ will
not qualify for the grants. Years ago, Dr.
Richard Florida proved that cities that require businesses to adhere to their
philosophy will NOT attract the entrepreneurs most likely to succeed.
There is a better way, and that is to cut business
taxes and jettison the anti-business mindset that tries to impose social goals
upon a business. A good job beats a ‘socially
desirable outcome’ any day. As Colin
writes: “Absent a reversal of our government’s oxymoronic groupthink – an economic
renaissance will be but a historical footnote.”
Let’s assume that we know our current batch of
startups won’t succeed because they lack the right profile. And let’s also assume we know what makes
small businesses successful, and we’re intentionally not teaching those
elements. That means our politicians and
government organizations know that this small business ‘effort’ is just that,
and our job growth comes from existing medium to large sized corporations. And any small business talk is strictly
designed to keep people catching the ‘fish’ that is tossed to them – rather than
teaching them to ‘fish’ for themselves.
The Markets:
"Every
once in a while, a new technology, an old problem, and a big idea turn into an
innovation." ― Dean Kamen
When MJP asked me to place ‘where we are’ on
the hype / technology adoption charts above, I thought – What a great
question. As I look at the two overlaid cycles
– I think we have just barely ‘Crossed the Chasm’ but are still in the ‘Trough
of Disillusionment’. I think this because
financial institutions that know in their hearts that a digital currency solution
is the correct path – are still fighting to maintain the status quo. They know that a decentralized cryptocurrency
operates without a single point of failure – which is the only way to win
against hackers and bad actors. Even J.P.
Morgan is fighting to use traditional methods in the offshore banking industry,
even though the transfer of fiat currencies require significant manual labor for:
transaction verification, anti-money laundering checks, and payment clearing. Cryptocurrencies like Bitcoin and Ethereum
have significant advantages in a number of these areas including: security,
borderless transaction settlement, efficient payment clearance, and lack of
dependence on centralized service providers. Although the offshore banking
industry is valued at $32T, maintaining the status quo still rides above
‘cheaper-better-faster’ solution for now – and hence my positioning on the graph.
Info-Bits:
-
"We're aware of the problem and working to
fix it" is what Amazon said about Alexa’s new-found ability to randomly
laugh at people. They also said: “Don't
worry, robots really can't take over the world.”
-
This week health insurer Cigna said they’re ‘coughing-up’
$52B to buy Express Scripts. This deal combines one of the country's
biggest health insurance companies with the largest pharmacy benefits manager.
-
Hundreds of doctors in Canada are saying: ‘Thanks,
but no thanks' to a pay increase.
They're signing a petition to have the government
take back their raises, and put them toward higher nursing wages and giving patients
more services. Congrats - that’s the
most Canadian thing I’ve ever heard.
-
People talking about trade wars seem to forget
this is NOT 1930 – when the U.S. was the largest exporter in the world. Today, we're not even in the top 10, and we run
an $800B deficit. When you run an
imbalance that large – you are in the driver’s seat when it comes to
tariffs. As J. Paul Getty said: "If you owe the bank $100 that's your problem. If you owe the bank $100 million, that's the
bank's problem.” Gary Cohn lost
the trade war battle, and now he's the latest to vote himself off the island.
-
News that Apple’s iPhone sales were 1% lower in February was met
by stories of new 2018 iPhones – one which will reportedly cost over $1,500.
Can an iPhone cost as much as a laptop? I’m sure this seems like a good
idea to somebody. Even with a 6.5 inch
screen, I’ll still need to spend more money for reading glasses.
-
"We are horrified" said the Utah State
Bar after accidentally emailing a photo of boobs to every lawyer in the
state. It wasn’t their ‘breast’ move.
-
The Wall Street Journal reported Tuesday that online retailer
Amazon is in talks with major banks about building a ‘checking-account-like’
product to offer its customers. The
report said the effort is focused on something that would appeal to younger
customers and those without bank accounts. The move by Amazon would remove a major
barrier to shopping on its website – the lack of a credit card. Amazon would let consumers store their money
with them in anticipation of spending it later. By teaming up with a bank, Amazon is clearly
thinking bigger than just a few dollars in a transactional account. Will Amazon begin to take your entire paycheck
as a direct deposit? Never say never.
- Uber’s male drivers earn
about 7% more than their female drivers because it seems that men drive faster
than women.
Crypto-Bytes:
-
Remember Mt. Gox? After the
exchange went belly up, a trustee was appointed to recover the funds. The good news is that they have recovered over
200k BTC and have been selling them feverishly since December, 2017. The bad news is that they still have 165k
Bitcoin left to sell. The concern is
that the price of Bitcoin has fallen 20% since they started selling, and with
165k Bitcoins left to play – the downward pressure on BTC should continue.
-
The Binance exchange continued its excitement last week as a
number of accounts had their balances drained
due to an elaborate phishing attack. Binance
restored the balances, but a wild ride was had by all.
-
The SEC announced that all digital asset
exchanges that list security tokens on
their trading platform “must register with the SEC as a national securities
exchange or be exempt from registration.”
-
PayPal reduced cryptocurrency transaction times – according to a recent
patent filing. It will operate a parallel
payment system on top of Bitcoin or other cryptocurrencies that will authenticate
transactions in real time. This proprietary
network will give PayPal cheaper transaction fees along with an additional security
layer.
-
3 college students are starting an ice-cream delivery service in
San Francisco that will run solely on bitcoin's Lightning Network – they’re
calling it: Block and Jerry's.
Last week investors were engulfed by anxiety
and tension through mid-week over President Trump’s plan of imposing tariffs on
steel and aluminum imports. The
situation became more unsettling when Trump’s chief economic adviser, Gary
Cohn, announced he was calling it quits.
Our stance angered several countries, and the European Commission
President Jean-Claude Juncker offered up his view: “This is a basically stupid
process … but we can also do stupid.” By Thursday Trump had softened his stance on
the tariffs and granted exceptions to NAFTA partners Canada and Mexico. And by the end of the week we were in
rally mode when the jobs data showed us the largest gain since mid-2016. For the indexes:
·
The S&Ps gained 1.7% on the week – up 4.2%
year-to-date with financials, industrials and technology leading the way.
·
The DOW gained a weekly 1.8% to close
above 25,000 for the first time since the end of February.
·
And the NASDAQ is up 9.5% year-to-date,
and set its first intraday high since January 26th.
The
reason for the market’s optimism was the strong jobs report, and the news that
Trump and North Korea's leader Kim Jung Un will be meeting face to face. It was important for bulls to get this market
up and over its 50-day moving average, and that was accomplished in stunning
fashion on Friday. Now, the quest will be
for trying to attack the all-time highs set back in January. I have little doubt that we’re going to try
and attack the all-time highs; however, the big test will be when they do – can
they exceed those highs? I think the
whole scenario can be summed up by one statement: IF we succeed in making new,
all-time highs – we’re probably going to see an extended rally that lasts a few
months. IF we attack the highs and get
rejected – then I think we start a multi-month sideways and down pattern that
goes lower than the February lows. So for now, I'm staying long and watching
how the markets deal with the all-time highs.
Tips:
The market will be watching closely the
retaliatory trade actions by other countries in response to Trump’s steel and
aluminum tariffs. On a positive note, a
month has passed since the S&P 500 underwent a correction, and stocks have
moved higher by 7% since then. Next week
we have: (a) the inflation report on Tuesday, (b) retail sales on Wednesday
morning, and (c) housing starts and building permits on Friday.
Top
Equity Recommendations:
Marijuana stocks (HODL):
-
Aurora (ACBFF) – is thinking of listing on
the NASDAQ, along with its current Toronto listing,
-
Cannabis Wheaton (CBWTF), and
-
Canntrust Holdings (CNTTF).
Options (I LIKE):
-
LuLuLemon (LULU) – pinning around $81 on
March 16,
-
Amazon (AMZN) – pinning around $1,600 on
March 16,
-
J.P. Morgan (JPM) – pinning around $115 on
March 16,
-
Deckers (DECK) – long into March 16,
-
Nvidia (NVDA) – long into
March 16,
-
EBay (EBAY) – long into
March 16,
-
Micron Technology (MU) – long into earnings on
March 22,
-
Microsoft (MSFT) – long into March 29,
-
Sketchers (SKX) – long into April 20,
-
Tyson Foods (TXN) – long into April 20, and
-
Take-Two Interactive (TTWO) – long into April
20.
Top
Crypto Recommendations:
-
Bitcoin (BTC),
-
Ethereum (ETH),
-
Nano (NANO),
-
OmisGo (OMG), and
-
Cash.
News continues to pound the cryptocurrency
markets stifling attempts of any recovery.
The news swing from the Binance exchange being hacked to the SEC
requesting trading platforms that deal with digital assets register as
exchanges. In large part, regulations
have proven to be positive for currencies attracting institutional funds. In other news, Japanese regulators have come
down hard on CoinCheck and six other exchanges. As a rule of thumb, I believe it’s better to
buy only after something stops falling – because in a bear market people dump
their holdings at ridiculous prices. In
terms of price points for each of the individual pairs:
BTC/USD: Bitcoin broke below its 50% Fibonacci
retracement level. If bears can keep the
price below $9,000, we’re headed for $8,404.
I would like to see clarity and any support level hodl before initiating
any new trade.
ETH/USD: Ethereum fell to the expected level of $637. ETH is currently in a downtrend as the price
is trading inside a descending channel, and below both the moving averages. Any rebound from the current levels is likely
to face selling pressure at multiple resistance zones. The advantage is with the bears until bulls
can break out and sustain above these two overhead resistances.
BCH/USD: I have been expecting Bitcoin Cash to
correct to $950 for a while now, but the bulls have held it above $1,000. If bulls can’t sustain BCH above $1,150, bears
will attempt to sink BCH towards the next support of $854. I’ll only change my bearish view once BCH rallies
above $1,400.
XRP/USD: Ripple is forming a large range from $0.56 and $0.70 on the downside to $0.90 to $1 on the upside. My target is $1.22. This may turn out to be a roller coaster ride because trading inside ranges like this can be volatile.
XLM/USD: Stellar has moved below its $0.32 support level. I’m looking for it to touch $0.22 – the lower part of its descending channel. I will buy it only after it remains above $0.32 for a couple of days.
LTC/USD: Litecoin broke and closed below its
descending triangle, and that leads me to believe we will see $160 and
potentially $140 after that. Because
both moving averages have flattened out, we should see range-bound trading for the
next few days.
To 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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