Creating is scary… and often we need an inviting blank page to jump-start our thoughts. Creation often starts by decreasing the number of steps that are required. Start by: (a) leaving a laptop open, (b) pre-scheduling a blog post, and/or (c) by putting the creative whiteboard where it can be seen. Hint: Buy more blank canvasses and markers than you need – because blank pages beg to be filled.
Dreams, Plans, and Contradictions… Per Seth G: Dreams are great and fun, but until we resolve their contradictions – they will never be plans. Plans live within boundaries and reality – thriving on scarcity and constraints. Plans are open for inspection, and their success is dependent upon the welcoming of alterations.
You can’t fix stupid… The NBA levied a lifetime ban on Toronto Raptor bench-player Jontay Porter for: “Betting on NBA games, and limiting his own participation in games for betting purposes.” [Jeez, so making $3 million a year isn’t enough for a guy who plays in a handful of games per year?]. The ban comes after Porter was linked to a bet that was contingent upon him performing below average. [Jeez, At least Pete Rose had the dignity to bet on himself to WIN … (allegedly).]
The Market:
Per Pam CC: 75 is the new 55… ever since the +75-year old bracket became the fastest-growing age group in the U.S. workforce. More Americans are working past retirement age, and forecasters are expecting the group to double in size over the next decade.
Just the Facts:
- Inflation expectations are rising and that normally leads to inflationary market behavior. B of A believes that U.S. inflation will hit 4.8% by the 2024 election.
- 5% inflation levels cause investors to panic, and GS’s Panic Index just hit its highest level in a year.
- Retail sales are indicating a strong Q1 in consumer spending – delivering an upside to the 2.25% GDP forecast along with further Q2 momentum.
- Some store closings are as follows: Walmart = 23, Walgreens = 900, Lowes = 50, Starbucks = 61, Home Depot = 15, Foot Locker = 400, Gap = 350, Burger King = 400, Best Buy = 20, and various bank branches: B of A = 20, US Bank = 23, Capital One = 50, and Wells Fargo = 60.
- Our FULL-TIME employment situation is getting bad very quickly, and that often leads to a drag on U.S. home prices going forward.
Rinse ‘n Repeat…
- First, breadth leads and indexes follow.
- Second, the talking heads invent reasons for those price movements.
- Then, investors (who are paying others for financial advice) believe what they're being told.
- Finally, investors adjust their own portfolios – sell at the lows and vow to never follow the financial media again.
- Then breadth leads, indexes follow – and we start it all again.
InfoBits:
- Per Steve F: ~$1T of commercial real estate debt is coming due… and it makes up 18% of regional banks’ loan portfolios. As vacancies soar and buildings sell for peanuts, the specter of bank failures looms large. ~400 small to medium-sized banks will go ‘kaput’ over the next couple of years.
- Samsung is introducing a company-wide 6-day workweek… in order to inject a sense of urgency into their employees.
- MSFT’s talking heads… show-off an amazing ability to generate lifelike film clips from a single still image + audio clip. This level of fast/insane realism, will cause significant changes to production studios, gaming, and anime – but also to upcoming elections and anything influenced by bad actors.
- Tencent just developed InstantMesh… an open-source AI system that creates detailed 3D models from a single 2D image in under 10 seconds.
- An Ivy League education now costs… over $100,000/yr.
- New home construction fell 14.70% in March… matching an April 2020 decline, and recording the worst non-pandemic move since February 2015.
- 2023 was the craft beer industry’s worst production slump… ever.
- ASML’s sales declined ~22% YoY… and net profits fell -37%. ASML's machines manufacture the world’s most advanced semiconductors; therefore, their slowdown indicates that chips will have a weak earnings season.
- Elon is asking Tesla shareholders to restore his $56B pay package… nixed by a Delaware judge. [Jeez: Elon, be prepared to not like the answer.]
- Per Hank T: FINRA is demanding brokers return to the office June1… and if you insist on working-from-home – a home inspection is required.
- Meta has raised the stakes in the Chat GPT-4 battle by… (a) releasing the Llama AI-3 model, (b) embedding their chat assistant into Instagram, WhatsApp, and Facebook, and by (c) creating Meta.ai.
Crypto-Bytes:
- Put into Perspective… Bitcoin is down -18% from its peak, but up +30% YTD and up +120% YoY.
- Just when you thought the Bitcoin dip was a downer… it’s being reported that $1.7B in Bitcoin just found its way into long-term holder addresses. [Jeez: That’s a lot of BTC to be taken off the trading market – yeah!]
TW3 (That Was - The Week - That Was):
Wednesday: Stocks ended mixed on Tuesday after Jerome Powell tempered expectations around interest-rate cuts by saying: “It’s appropriate to allow restrictive policy further time to work.”
Thursday: U.S. stocks stumbled on Wednesday, as S&P futures declined for a 4th straight session, amid weakness in technology (semis), transports (truckers), and financials (banks/insurance). Major averages remained below short-term technical support levels following this recent pullback on rising yields and lower FED rate cut expectations. Personally, I think we're overdue for a small green close, but make no mistake – 90% of the charts out there are butt ugly. This market is sicker than it seems, and it’s only the ‘darlings’ that are propping it up.
Friday: S&P futures posted a massive collapse overnight when reports showed Israel launching an attack on Iran. The Volatility Index (VIX) hit 21.36, and the S&P, Nasdaq, and DOW are all poised for a third weekly decline. But here’s where it gets weird: (a) Reports came in that Israel had launched an attack on Iran. (b) Iran (yawned) and said that a couple quadra-copter drones were shot down. And (c) video from the attacked airbase shows no activity. Was the story simply made-up? Will anyone buy-n-hold ahead of this weekend? I think not.
Morgan’s Moments…
How is this even possible? 5 of the last 6 weeks, our government has displayed the exact same number for Initial Unemployment Filings. In fact, it’s been almost the same for the past 11 weeks – excluding holidays. We are a $28T economy with 160m workers. Initial unemployment claims are state specific, with 50 different rule sets, hundreds of offices, and 50 separate filing websites. You’re asking me to believe that his number doesn’t even vary by 100 applications a week? [Jeez: If they’re just cut-n-pasting numbers, what other numbers are being faked?]
A couple Levels:
BTC below $60,000 is a confirmed breakdown. If a floor has been set at $60,000, then we’ll see a: Tip #1: BTC = $60k to $72k trading range.
ETH over $3,000, with a longer target of $4,000. Patterns in previous bull market consolidations show a: Tip #2: ETH = $3k to $4k trading range.
Links that don’t suck…
- MSFT’s talking heads… you really need to see this.
- LetterFly = Generate high-quality cover letters from your resume.
- Capitol AI = Brings Stories to Life, and helps to visualize scripts and storyboards.
Next Week: “Wake-y Wake-y Volatility…”
Background: Last week, I pointed out that markets were on the ‘edge of the volatility abyss’. I said that tech had taken on zero damage thus far, and tech needed to take a big hit before volatility could come out and start crushing dreams. Well, this week we saw some damage to the AI-bubble leaders like Nvidia (down -10% Friday), Meta, and Amazon. Tip #3: Remember: Volatility is when all the real money is made.
The Tech damage has started… and there’s more to come. We had over a 2 standard deviation move in the NASDAQ last week. There is legitimate cause-for-concern moving forward as we continue to rotate out-of-tech into anything DOW-related. I don’t buy the geo-political risk argument because the Financials (XLF) were higher on Friday.
Be concerned about Correlation… because on Friday, when the S&Ps were down 1% - we had 65% of the S&P-100 still moving higher. So, we are not close to seeing capitulation. Tip #4: Markets NEVER capitulate when you have a positive advance / decline line. Instead of seeing real sell-side activity, we are seeing sector rotation. Heck, on a YTD basis, META remains up 37%, and the S&Ps are up +4% on the year. When I’m looking for capitulation, I look for 90 of the S&P-100 stocks to be negative on the day. Last week’s S&Ps were only down 1.5 standard deviations. We are NOT close to a bottom in this correction because we’re not seeing higher degrees of correlation.
Earnings are on deck… Microsoft is holding at $400 support, but if its earnings are not stellar – it will be sold. The same is true with META - that will fall bigly on any earnings miss next week. Apple’s earnings are 2 weeks out, but it has already been substantially punished for slowing iPhone sales. We are witness to the: great AI unwind.
Volatility is NOT subsiding… and will include some ‘rip-your-face-off’ rallies going forward – but unquestionably any rallies in AI/tech will be sold. We are potentially moving into a Volatility Backwardation scenario, where shorter-term (May) risk is going to exceed longer-term (June) risk. When the May volatility futures exceed the June ones – that’s when market capitulations often happen. Tip #5: Volatility backwardation often directly precedes market capitulation.
Are we there yet? NOPE - absolutely not.
SPX Expected Move (EM): The S&Ps closed outside the lower edge of their Expected Move for only the second time this year.
- Last Week: with a $100 EM… we moved down $150.
- Next Week’s EM == $97… Huh?
o Look-out for raging volatility.
o Watch for heavier degrees of correlation, prior to considering whether we are at a short-term bottom.
TIPS:
We may be in the late stages of our fiat currency system. Remember the old adage: “When all else fails – go to War.” Wars give governments an excuse for taking on more debt for: machinery, ammo, weapons, food, vehicles, etc. Governments can blame all of their past sins on: The War. Let’s see how this plays out.
HODL’s: (Hold On for Dear Life)
- 13-Week Treasuries @ 5.4%
- PHYSICAL COMMODITIES = Gold @ $2,406/oz. & Silver @ $28.7/oz.
- **Bitcoin (BTC = $64,900 / in at $4,310)
- **Ethereum (ETH = 3,170 / in at $310)
- **ChainLink (LINK = $14.8 / in at $7.78)
- **MARA – Marathon Digital = ($16.7 / in at $12)
o Sold June $40 Covered Calls
- **IBIT – Blackrock’s BTC ETF ($36.6 / in at $24)
- INDA – India ETF ($51.3 / in at $50)
o BOT Nov, +$53 / -$55 CALL Spread
- LUNR – Intuitive Machines: ($5.2 / in @ $6.40)
o SOLD: May $7 and June $7.50 Covered Calls
- **RIOT – Riot Bitcoin Mining ($9.1 / in at $12.5)
o Sold June $25 Covered Calls
- Various Bull Call Spreads:
o GLDJ – Gold Junior Miners: June = BOT $41 Calls
§ Now @ $3.40 – in @ $3.60
o MARA – Marathon Digital: Jan. = BOT $25 / SOLD $50
§ Now @ $2.39 – in @ $3.50
o NUE – Nucor Steel: Jan. = BOT $220 / SOLD $240
§ Now @ $4.60 – in @ $5.35
o RS – Reliance Steel: Sept = BOT $350 / SOLD $370
§ Now @ $4.05 – in @ $6.20
** 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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