“This ain’t Business … it’s Personal.”
Q: What’s more personal: an ear-2-ear phone call or a zoom call?
Q: What creates more trust: an in-person meeting or a hand-written letter?
A: It depends. Communication is all about:
- Delivering the right message at the right time,
- Interpreting the data correctly,
- In order to solidify a personal and trustworthy connection.
There’s no universal-remote for communication. Every communication solution is unique and complicated – as it should be.
“This ain’t for everyone…” Some people build their body-of-work on the frontier of impossible, such as: curing cancer, doing breakthrough coding, or writing music that takes your breath away. The scarcity of those doing that work should be enough to tell most of us – that’s not our job. Instead, we get a chance to lead, to connect with others, and to do work that we’re proud of doing. We get to do things that we can describe to others – before we begin. We get to feel confident about things we know are worth doing. And, for the vast majority of us – that will have to be enough.
Inflation is a lose-lose situation: There is no way for the majority of Americans to avoid feeling 15% inflation (the real number). The use of Vladimir Putin as an inflationary scapegoat is comical. It’s absurd to believe that the highest inflation in the last 40 years was caused by actions that are less than 10 weeks old. The real problem is that all of our high inflation fighting tools will only accelerate slowdowns in the economy. The tools are designed to fight lower levels of inflation sooner, but are now: too little – too late. Two suggestions: (1) Ask your boss for a raise, and (2) Move your money into more inflation hedged assets. Recessions cause: significant market pullbacks, devaluations in the dollar, and crypto volatility. Our leadership is faced with a lose-lose situation – where they will always choose the direction that saves-their-jobs.
The Market: What about a Recession…
1. When the world senses a recession coming… commodities skyrocket in price. Unfortunately, when commodities like: oil, gas, wheat, corn, gold, silver, and copper are already high in price and volatility – the most likely scenario is that prices will fall. Fair Warning: ‘I have not seen bullish sentiment in physical commodities like we are seeing today – for almost 20 years.’
2. Fair Warning: The spread between the Consumer Price Index (8.5%) and the 10-Year Note (2.8%) is at an all-time-high. That means that the real yield of owning a 10-Year Note has NEVER been lower. The Producer Price Index (PPI) at over 11% indicates that there are higher CPI numbers on the horizon. Bonds should continue to sell off – raising the 10-Year Note yield. That is NOT good news for riskier assets like stocks and crypto.
3. Former Treasury Secretary Lawrence H. Summers has observed: over the past 75 years, every time inflation exceeded 4% and unemployment was below 5% a recession ensued within 18 months. Also, when 10-Year Rates fall below 2-Year Rates – a recession has occurred 12 months later. Both have occurred.
4. Bank of America cautions about ‘Recession Shock’… aka: “To kill inflation – we may need to FIRST kill stocks and then the economy.”
InfoBits:
- We can no longer count the number of billionaires… because private dollars have become increasingly untraceable – due to offshore accounts, physical commodities, and crypto.
- A new Harvard study found that 1 or 2 ‘office days’… is the sweet spot of hybrid work. It’s one of the only studies to look at actual work outcomes, not just personal preferences.
- U.S. consumer inflation jumped to a 40-year high of 8.5% in March led by:Gasoline + 48%, Used Cars + 35%, Meat/Fish/Eggs + 14%, and Electricity.
- The equation used to calculate CPI was changed in 1978. If we used that original equation today CPI would be at roughly 17% - an all-time-high.
- The producer price index (PPI)… which measures the prices paid by wholesalers, increased over 11% YoY. Stripping out food, energy and trade services, the core PPI rose almost 1% MoM.
- The paradox of recession-omics... the Fed can’t cool the worst inflation in 40 years without also slamming the brakes on growth. Last week Deutsche Bank was the first on Wall Street to predict a recession followed by Bank of America.
- JP Morgan kicked off earnings season… with a 42% drop in profits, and an announcement that it was setting aside $1B as cushion in case of a recession.
- Mortgage rates finally hit 5% for the 1st time in 10 years. Average monthly mortgage payments are up 38% YoY from $1,200/mo. to $1,700/mo.
- 44% of workers who left a job without having another… have no interest in returning to a traditional job, but rather are taking on very different roles.
- Farm-ageddon… from the pandemic and war to severe weather and historic drought – a rare combo of terrible circumstances has caused food prices to surge 75% since mid-2020 and are continuing to climb.
- Drones are coming… with AMZN and WMT delivering your allergy meds.
- The US IPO market had its slowest first quarter in six years.
- TikTok’s advertisement revenue is likely to triple in 2022… more than its two closest competitors (Twitter and Snapchat) combined.
- WarnerMedia and Discovery completed their $43B merger… creating another Hollywood heavyweight with 94m streaming subscribers – bringing it closer to Disney (130m) and Netflix (222m).
- Robotaxis just started servicing San Francisco… when recently one of them was pulled over by the police for having its lights off at night. Then the car just started up on its own and made a run for it. Can a robotaxi be ‘on-the-lamb’?
- Pepsi shrank Gatorade and Wheat Thins… and Doritos have 5 less chips / bag. It gives the customer the illusion that prices aren’t rising.
- Banks and airlines are using chatbots instead of employees… and restaurants are replacing waitstaff with QR codes.
- VC Distributions are down 90% YoY … What me Worry?
Crypto-Bytes:
- Coinbase is launching an NFT marketplace… that will also support the production of animated short films for The Bored Ape Yacht Club.
- Morgan Stanley said the U.S. could regulate stablecoin issuers like banks.
- MoonPay lets consumers pay for digital assets with credit cards… and has raised $87m from a list of celebrities including: Justin Bieber, Bruce Willis, Paris Hilton, Gwyneth Paltrow, and Matthew McConaughey.
- Ethereum core developer Tim Beiko confirmed… that ETH’s transition to proof-of-stake (PoS) will likely be a few months after the June deadline. The shift will cut Ethereum’s energy costs by 99% and make it easier to scale.
- The Ronin hacker has moved 21,000 ETH ($65m)… to privacy exchange Tornado Cash.
- The Luna Foundation Guard (LFG) has added $100m in BTC… to its UST Reserves, valuing their wallet at more than $2B.
- Amazon CEO Andy Jassy said that… it’s within the realm of possibility that Amazon would sell non-fungible tokens (NFT) in the future.
- 13 National Football League teams… are expected to launch partnerships with fan token platform Socios amid a boom in NFL crypto deals.
- The UK’s Treasury Dept. will soon reveal… its regulatory package on crypto.
- Slovenia has proposed… a 5% flat-rate tax on crypto sales and conversions.
- Crypto is in line to influence elections in… France, South Korea and the U.S.
- 77% of Bitcoin’s supply… is now owned by entities who historically HODL.
- Contracts collateralized with crypto have come down… from 70% to 40% - making it a healthier backdrop and lower likelihood for cascading sales.
- An NFT of Jack Dorsey’s first tweet sold for $2.9m last year… and was re-listed for $48m last week – BUT the highest bid was only $280.
TW3 (That Was - The Week - That Was):
Monday: They woke up a bit grumpy. The NASDAQ is getting waffled for -240 points, the S&P flirting with -50 and the DOW off -145. The DOW and S&P are still above their 50-day moving averages, but the NASDAQ has fallen far below its line. Watch the miners as they started the day well, but pulled back for a pause.
Wednesday: This morning earnings have started, and JPM has authorized a new share buyback of $30B effective May 1. Bonds remain in control of the equity side, and rates continue to skyrocket.
Thursday: The chip shortage is still with us, as wait times for semiconductor delivery grew again in March. Elon Musk has put in a giant offer to buy Twitter, but that’s just: boys being boys. Today the chip and tech sectors is being sold out from under themselves … again!
AMA (Ask Me Anything…) … Will Crypto save me in a Recession?
1. Politically, the U.S. Senate Republican Policy Committee (RPC), has issued a policy paper on crypto titled “Cryptocurrency Goes Mainstream,” signaling the Grand Old Party in Congress is beginning to see crypto as a voting block.
2. Specifically, for Bitcoin (in USD): it has shared an almost perfect correlation with the Nasdaq-100 during the last rolling 30-day period. If that correlation remains, Bitcoin could be heading lower – and that bodes poorly for the broader crypto market. The correlation says that Bitcoin might not be the risk-proof asset it has the reputation of being. With the likes of Janet Yellen and Jamie Dimon changing their tune on crypto, maybe the recognition of blockchain technology as the true-world changer its proponents claim it to be – is right around the corner. Maybe during the recession, Bitcoin will stay strong due to its decentralized nature and lack of sovereign affiliation. A move under $40,000, will likely target a move lower toward $37,000. However, a break above $43,500 will most likely trigger a move toward resistance at $48,300.
3. Specifically, for Ethereum (in USD): the $3,600 level is a ‘must pass zone’. There are two likely scenarios for ETH: (1) Buyers will be looking for a quick drop under $3,000 to buy back for another test towards the $3,600 level and eventually a target of $4,500. (2) Sellers will believe the $3,600 retest was final and conclusive, and they will target a full-on assault towards $1,800 – using the break of $2,500 yearly support as validation.
Next Week: The Coming Volatility Storm…
Market Update: Currently, the bond market is leading the entire marketplace toward a volatility storm. Last week we closed below the SPX and Nasdaq expected moves – as market makers were forced to sell into sell-side activity.
- Interest Rates are out-of-control, and will break the markets. The 10-Year is up 74% since January. The Bond Market is doing the job that our FED refuses to do. One way or another, the Nasdaq will be the market that will be forced to pay for its over-exuberance.
- What’s going to break? When the entire U.S. credit market increases rates by 74% inside of (roughly) 90 days – things will break. The homebuilders and home-related stocks will suffer. Most of the stock buybacks will be curtailed – which will hit technology stocks especially hard. We have not been in a Rising Interest Rate environment since 1998; therefore, welcome to discovery.
- Why is the Volatility Index (VIX) dead when risk is upon us? Because (a) we’ve seen this movie before, and (b) there are sectors (like energy +40%) that are still UP on a year-to-date basis. Currently Bond volatility is exceeding the VIX – which says that our credit markets have yet to impact the overall marketplace. Once the S&Ps move down to 4200, that’s when the VIX will rise-n-shine.
Positioning:
- Tip #1: Sell premium very lightly – because currently you’re not getting paid for your premium risk. Keep your powder dry, and wait for the VIX to rise – then sell more aggressively.
- Tip #2: Sell what is strong, and let correlation do the rest. Look at the XLP and/or the XLU. Buy low priced put spreads – 100 days from now, and once volatility takes hold (as it will) they will come down and you will get paid.
- Tip #3: When the Volatility Storm comes… the marketplace won’t just hit SOME stocks – it will hit them all. And that’s why you buy inexpensive put-spreads in strong sectors – and allow market correlation to do your work for you.
SPX Expected Move (EM)—
- Last Week = $77 (4-Day EM)
- Next Week = $98 (5-Day EM) = put your helmet on.
- If markets are bid-up in the beginning of the week, fade them and especially short sectors like the XLP and XLU.
Tips:
HODL’s: (Hold On for Dear Life)
- CASH == Nexo & Celsius == @ 8 to 12% yield
- PHYSICAL COMMODITIES == Gold @ $1,977 / oz. & Silver @ $25.85 / oz.
- **BitFarm (BITF = $3.14 / in at $4.12)
o Sold May, Dec ‘22: $5 CCs for income,
- **Bitcoin (BTC = $40,500 / in at $4,310)
- CPG (CPG = $7.49 / in at $6.44)
o Sold Jul $7.50 CCs for income,
- Energy Fuels (UUUU = $10.70 / in at $11.29),
o Sold June $11 CCs for income,
- **Ethereum (ETH = $3,050 / in at $310)
- GME – Holding
- **Grayscale Ethereum (ETHE = $22.21 / in @ $13.44)
- **Grayscale Bitcoin Trust (GBTC = $28.50 / in @ $9.41)
- Hyliion (HYLN = $3.78 / in @ $6.01)
- Uranium Royalty (UROY = $4.37 / in at $4.41)
** Denotes a crypto-relationship
Trade of the Week: XLP – look at buying inexpensive Put Spreads 100 days out
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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