Sometimes I tap things with a hammer… and sometimes I actually whack them with a bigger hammer. Almost always – I get a better outcome by taking my time, and gently applying more pressure. Persistent, gentle pressure almost always outperforms sudden, violent blows.
AI is a paradigm shift… We sleep through the future creeping up on us, but when it leaps – we tend to notice. Per Seth G: one spam phone call a day is an irritation, but 1,000 of them destroy the utility of the phone. One cheaper-faster alternative is a threat, but 1,000 of them drive you out of business. The most obvious 1,000X’er is AI. Entire systems are going to be replaced. New careers will develop and old ones will go away - overnight. When an AI unit can read a standard x-ray 1,000 times faster, cheaper, with increased accuracy than a radiologist – things will change rapidly. Change promotes change, and widespread change compounds exponentially.
The Market:
Most governments are broke. Some will try to rectify the issue by printing money until they fail. Others will continue hiking taxes until all the wealthy people leave. These strategies are so simple that the short-term oriented politicians will pursue them with energy and passion. After all - in their eyes, a bad solution is better than doing nothing. Instead, Why don’t governments create products and services that taxpayers are willing to pay for? Why don’t they turn some of their non-profit businesses into ‘for-profit’ entities? You could then measure them by top-line and bottom-line growth – with the added bonus of further understanding your customer / the taxpayer.
InfoBits:
- U.S. bankruptcies are up over 30% YoY… as interest rates rise.
- Drill, baby, drill… The U.S. is now producing more oil than any other country in the world - ever.
- Costco sold about $100m in gold in Q3… but their advantage wasn’t price. A Costco bar sold for $2,069.99 when the spot price was $2,020.58. Combine that with the restriction of only 2 bars per customer, and Costco seems to have found a product where price is not the issue.
- Amazon is considering upping its sports bet… as they are talking with Diamond Sports Group. Amazon would make an investment and sign a multiyear streaming partnership, and in return would become the streaming home for all of Diamond’s games across their 40 professional NBA, MLB, and NHL teams.
- The merger between Adobe and Figma is off… due to pressure from regulators in the UK and EU. The breakup is particularly bad news for Adobe that must pay a $1B break-up fee to Figma.
- At least 18 publicly traded EV and battery startups… are at risk of running out of cash in 2024. Most of them went public in 2020 via SPAC – and their stock prices are at least 80% lower than their market debut.
- Student-loan payments started back up in October… but 40% of borrowers (9m people) refuse to pay because: ‘They’d have to cut back on other essentials.’
- Buy Now, Pay Later (BNPL) lender Affirm… teamed up with Walmart to offer loans at the retailer’s self-checkout kiosks. Black Friday BNPL loans were up 43% YoY.
- Apple’s Vision Pro is in production… and likely to launch in February ’24.
- The Humane Ai Pin will start shipping in March.
Crypto-Bytes:
- Coinbase and others gave $78m to crypto-friendly super PACs. This spend is designed to support pro-crypto candidates in next year’s elections.
- A spot ETF will bring billions of dollars into the bitcoin market. Per Anthony P, about $100B will flow into a liquid market cap of $255B. That will cause a 40% price increase in bitcoin. But, there are two other factors at play:
o First, bitcoin halving is planned for early Q2 of this year. That will reduce the amount of incoming bitcoin from 900 to 450 / day. Increasing demand via the ETF, combined with decreasing incoming supply via the halving – should lead to higher prices than the ETF could produce by itself.
o Second, our FED and central banks around the world are going to be forced to loosen monetary policy over the next 18 months. Interest rate cuts will not be enough; therefore, our FED will have to restart the expansion of their balance sheet. As we saw during the COVID market boom, loose monetary policy increases the speculative nature of humans – which drives free-market assets like bitcoin hundreds of percent higher.
TW3 (That Was - The Week - That Was):
Tuesday: Two Fridays ago, the S&P 500 ETF (SPY) saw its largest, single-day inflow on record: $20.8B. Last week, the SPY ETF saw total inflows hit $35B in 6 trading days, and a Santa Claus Rally was born.
Wednesday: The daily RSI indicator on the S&Ps is now trading at one of the highest prints on record. There have only been 2 times that this indicator was higher: (a) January 26, 2018 and the S&P subsequently fell 11% in 2 weeks, and (b) September 2, 2020 when the S&P fell 11% in 3 weeks. This market is terribly stretched and while they may try to keep it moving – it’s getting more dangerous by the day.
AMA (Ask Me Anything…)
‘NO DEAL’… for Adobe and Figma: Per Sam L.: The lesson from the Adobe / Figma non-deal is that: Strategic Value is NOT as valuable as you think. You need to build more than a FEATURE. You need to build a successful business. Figma will be just fine and so will Adobe. Others will talk about regulatory overreach that will squash innovation by cutting off a path for startups to cash-out, but I actually appreciate getting back to old school discipline and success measured by real capitalism. This new reality requires you to build a profitable and sustainable business. As a tech platform, you can't count-on acquiring features to fill weak spots, but rather you need to internally build the processes to win consistently. Yes, the entrepreneurial ‘finishing-move’ is harder without a feature driven exit. Yes, the cost of capital for entrepreneurs will increase because of it. And yes, that means entrepreneurs will need to strap on the big-boy pants and do battle in order to win customers. Figma will have to actually unseat Adobe, and this battle will be fun to watch.
Next Week: Where did Risk Management go?
Risk Management has gone out-the-window… The S&Ps are up ~25%, the QQQ is up 55% - predominately due to the Magnificent-7 (MSFT +56%, AAPL +55%, AMZN +80%, META +183%, TSLA +134%, GOOGL +59%, and NVDA). Unfortunately, portfolio managers are groomed to not own the SPY and to believe that their ‘active management’ will out-perform any specific grouping of stocks; therefore, they’re coming into year’s end dramatically under-performing the S&Ps. In the past 2 weeks, these same portfolio managers have thrown caution-to-the-wind in search of yield, and are desperately trying to ‘game’ their end-of-year performance stats – throwing caution-to-the-wind.
An Economic Slowdown is in everyone’s forecasts (NKE, FDX, …) Nike and FedEx’s forecasts show a dramatic slowdown, but markets continue to cheer-them-on. Businesses that cool-off will cause both economies to slip and inflation to slow. If the data becomes too bad, our FED will cut interest rates.
The Rate-Cut Projections are ridiculous… but only if our economy doesn’t fall off of a cliff. Currently, our markets are projecting ~90% chance of at least a 25bps rate cut in March, 2024. That’s chaos in the making, because everything good has already been priced into this marketplace – including an interest rate cut in 90 days. If Q4 data doesn’t produce Goldilocks results, then all of the inflated P/E ratios and overhyped AI forecasts are going to come home-to-roost with a recessionary hard-landing. If rate cuts are coming, then Q4 data is going to be incredibly weak, and the S&Ps are going to tumble downward.
Two-Sided Trading returned… and our Options Markets are beginning to price in risk. The VVIX jumped over 110 on Wednesday. News-wise we have a quiet week coming up (between Christmas and New Year’s) – but our options markets are pricing in more risk next week than last – with only 4 trading-days.
SPX Expected Move (EM):
- Last Week = $55 (5-day week)… and we ended-up gaining 40 points (after first losing 80).
- Next Week = $58 (4-day week)… ‘keep ur hands ‘n feet inside the vehicle’.
TIPS:
Tip #1: Ethereum (ETH) resistance for next week is: $2,386. The Crypto Composite Index is coming off its highest levels since January 2021, and that’s causing me to look for a pause and potentially a pullback. However, the RSI is giving off bull market signals. Keep an eye on Ethereum’s weekly chart for a test of support, and if that happens and the RSI is between 40 and 50 – bulls will push prices higher in ETH.
HODL’s: (Hold On for Dear Life)
- 13-Week Treasuries @ 5.4%
- PHYSICAL COMMODITIES = Gold @ $2064/oz. & Silver @ $24.4/oz.
- **Bitcoin (BTC = $43,500 / in at $4,310) +911%
- **Ethereum (ETH = $2,280 / in at $310) +638%
- **MARA – Marathon Digital = ($26.7 / in at $12) +123%
- **ChainLink (LINK = $15.70 / in at $7.78) +102%
- **RIOT – Riot Platforms = ($17.7 / in at $12.5) +41%
- **COIN – Coinbase = ($175 / in at $125) +40%
- UEC – Uranium Energy Corp ($6.6 / in at $4.8) +38%
- AAPL – Apple = ($193 / in at $181) +7%
** 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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