“In the end, Everybody Wins…” To think like an entrepreneur, you need to: (a) think differently (increased risk = increased reward), (b) think like your customer, and then (c) “Nail the finishing move” (aka – ship product). Imagine (per FX), that you’re back in school, and your teacher just split your class into 6-person teams. The teacher then gave every team $5 and 90 minutes to make the most money that they could. And in the end, you had 3 minutes to present to the class. Results:
- Most of your class will try buying items for $5 and re-selling them for more. [Nobody’s taking enough risk to generate any kind of reward. And there’s no time to develop any significant volume.]
- A few of your classmates will think differently, and realize that the $5 is simply a distraction. They will then use their talents to consult, code, cut lawns, etc. to make hourly / gig wages. [Better – but no direction and/or common customer.]
- One group will both realize that the $5 is a distraction, AND the most valuable asset is hidden inside of the challenge = the presentation time. Having 3 minutes of uninterrupted airtime in front of a bunch of smart people – is the most precious commodity you have to sell. They sold a 3-minute, audio/visual AD for a business and returned over a 10,000% ROI.
- The Process:
o #1 = Recognize where your value lies.
o #2 = Figure out WHO would be best to take advantage of that value.
o #3 = SELL the VALUE.
- General Thoughts:
o Hard assets are over-valued.
o The ‘logical’ path is a ‘head fake’.
o Become the smartest person in the room. Now, what would you do?
“Everything is Relative…” We know that it’s not the Super Bowl or the World Series, but to every entrepreneur – tomorrow’s game is the big game. It may not be life or death, but it always feels that way. Know that most of our encounters are driven by emotion, and emotions root themselves in == budget, decision-maker, and timeframe.
Why is the market rallying? The typical bear market rally is a 50% to 61.8% retracement from the last major high, and we’re just about there. In that time, some of the most shorted stocks have staged monstrous comebacks. The price action we’ve seen – often precedes massive market pullbacks. This rally has been mainly based on the assumption that (a) the worst of inflation is behind us, and (b) our FED’s tightening will not be as aggressive going forward. The rally itself has been fueled by government spending (clean energy, semiconductor bills), government hiring, and a lack of real government tightening of their balance sheet. Keep your hedges on, because I think there is further to go in this bear market.
Could BlackRock be making a bitcoin ETF? BlackRock has trillions of dollars of client assets in ETFs. Currently, there is no bitcoin ETF, but BlackRock could have a very good chance of convincing the SEC to change that position. BlackRock just launched a private trust for client exposure to bitcoin. Assuming they take that public on one of the stock exchanges, it would look exactly like Grayscale’s GBTC product. BlackRock could then lobby the SEC to allow conversion of their private trust into a public ETF. The SEC may give their approval to BlackRock and Grayscale at the same time. This would kick off a battle between the largest asset manager in the legacy world vs the largest asset manager in the digital world. The bitcoin community has been saying: “The institutions are coming” for years. It looks like they’re finally here, hence the rally in BTC and ETH over the past 30 days.
- Land of the fee – Home of the Paid… US retailers pay 7X more in credit-card fees than European retailers – which cap their fees. These fees go to the bank that issued the card and increase costs for US families by $700 annually.
- Q2 worker productivity… fell at its steepest YoY pace (-4.6%) since 1948.
- Q2 unit labor costs… rose 10.8% YoY.
- We are in a Recession… say 62% of Americans.
- Consumer Confidence in housing… hit its lowest level since 2011.
- Headline PPI fell 0.5% MoM to a 9.8% YoY rate… down from 11.3% in June – driven by a drop in energy prices.
- Core Producer Prices (excluding food and energy) fell to 7.6% YoY… marking their fourth straight month of deceleration.
- The tide has shifted from a chip shortage to a demand slowdown.
- Softbank reported its largest quarterly loss ever of $23.4B... job cuts can’t be far behind.
- Alibaba laid off 10,000 employees in Q2… its first contraction in revenue,
- Groupon, which operates an e-commerce marketplace… laid off 15% of its workforce in Q2.
- Berkshire increased its stake in Occidental Petroleum… to over 20%.
- Walmart may add streaming services to its membership… potentially Paramount, Disney, and/or Peacock – as they keep-up with Amazon Prime,
- Ford will reopen F-150 Lightening orders… with an +$8,000 price increase.
- Taiwan Semi-Conductor makes 90%... of the world’s advanced chips, and China is only growing more dominant in the chip mfr. arena.
- The U.S. halted Chinese solar-panel imports… and as a result solar-panel imports could drop by 50% from last year.
- Elon Musk continues to shout HODL in public…. while continuing to sell. Since agreeing to buy Twitter, Elon has sold $15.4B worth of TSLA.
- 3 years after launching Disney+… they’re just 70m subs away from catching up to Netflix.
- Rivian lost $1.7B in Q2… as it continues to struggle to get enough supply to ramp up production.
- Last week Argentina hiked rates by 9.5% to 69.5%... as inflation spirals out of control.
- Robinhood shares slumped… after a judge ruled that the company must face U.S. market manipulation claims over the ‘meme stock’ rally.
- Regulators are pulling the plug on SpaceX’s Starlink $886m subsidy… after they failed to reach America’s most isolated areas. This could cause private investors to lose confidence as well.
- The U.S. Treasury banned all Americans from using Tornado Cash…. alleging its use in laundering stolen crypto funds.
- The Ethereum Merge will take place either Sept. 15, 16 or 20th… The planned upgrade will move Ethereum to the more efficient proof-of-stake arena from the currentenergy-intensive proof-of-work stage.
- The Merge means the end of an income stream for ETH miners… who are now rewarded with ETH tokens for supplying resources to the blockchain.
- Voyager Digital will reopen cash withdrawals… as the company is taking the first step in returning up to $270m in fiat currency to its customers.
- ETH futures are trading at their widest discount to spot prices in 2 years… in a phenomenon called ‘backwardation’. Traders are taking on short positions to hedge Merge-related price turbulence.
- Coinbase declined significantly… as they lost over $1B in Q2, and revenue declined by almost 64%.
- Companies holding the most Bitcoin include… MicroStrategy, Galaxy Digital, Voyager Digital, Tesla, Marathon, Block (formerly Square), Riot Blockchain, and Coinbase.
- Celsius Network CEO cashed out of some of his CEL token holdings… which have multiplied in value even after his company declared bankruptcy.
- Elizabeth Warren and Bernie Sanders have asked… the Office of the Comptroller of the Currency to ‘tighten the screws on crypto’.
- BlackRock (BLK) partnered with crypto-exchange Coinbase… and then launched a spot bitcoin private trust for U.S.-based institutional investors.
- Huobi Global, is in talks with Justin Sun and FTX… to sell a majority stake in the company valued at over $3B.
- Argentina’s capital Buenos Aires… plans to deploy Ethereum validation notes in2023, and revamp its regulatory regime.
- Quiet Quitting is real and gaining in Gen Z Pros… It’s when you feel your work no longer has purpose, and you stop going above and beyond in your career – passively focusing on yourself.
TW3 (That Was - The Week - That Was):
Monday: The futures are marching higher. We’re in a bear market bounce and like all good bounces – the pundits are saying the bottom is in, and a new bull market has begun. Lithium suppliers like ALB, LAC, PLL, SQM are screaming higher. Watch them as the week goes on and see if we can find a good entry point. One that didn't go totally nuts is CHPT. They're in the electric car charging business, and should see some of that new money. If it exceeds this morning’s high of $17.26 – I’ll take it. We've got companies doing buy backs, and Biden finding +$700B to splash around. We could have more to go in this bounce. Free money moves stocks.
Tuesday: Q2 labor costs went up 10.8%, and productivity fell 4.8%. I’m seeing a bit of action in energy, so I’m watching OXY.
Wednesday: The CPI is out and YoY it's up 8.5%. If you remove food and energy, the YoY reading is up 5.9% vs estimates of 6.1%. So, the DOW is higher by 444 points. A slightly better inflation read and the world thinks that our FED is going to pause or even pivot. Now that’s pretty silly. Inflation at 8.5% doesn’t sound wonderful to me. The CPI did NOT FALL, it came in unchanged from last month. I'd like to say "all aboard", but I can't. I will still take OXY on its next trip over $63. Another name that looks interesting is KOPN over $1.63 for a run to $2. Think about inflation for a minute:
- 1. The headline CPI is NOT our FED’s preferred measure of inflation.
- 2. A single-month decline does not equal a new trend.
- 3. Our FED told us it does not make decisions based on a single data point.
- 4. The primary driver of this drop was a decline in energy prices.
- 5. The labor market remains extremely tight, which puts upward pressure on inflation and makes our FED’s job that much harder.
Thursday: The PPI number hit and it’s DOWN 0.5%. Huh? Didn't Ford just say that they raised prices $8,000 on their new F-150 because input costs are soaring? They said that YoY PPI is up 9.8%. Initial jobless claims came in at 262K, the steepest number in months. For those calling this a ‘new bull market’… in 2000-2001, the Nasdaq rallied 20% or more 7 times, and every single time the rally was followed by a new, lower low. History doesn’t necessarily repeat, but it always rhymes. If we open big, there's usually a dip shortly after. When the dip stops and then turns higher, you can often snag the DIA, SPY and/or QQQ when it gets up and over that first 10 to 15-minute high for a couple point quick gain. Watch for that these mornings.
AMA (Ask Me Anything…)
On Monday: “The Treasury Department prohibited Americans from using the crypto-platform Tornado Cash, saying the service has helped criminals launder more than $7B in virtual currencies. The platform is a threat to U.S. national security, and Tornado Cash on a blacklist of entities, making it illegal for Americans to send or receive money using the service.”
A couple thoughts (per AP):
- #1 = We need to stop all Americans from using our large U.S. Banks = ASAP. In 2020, our Government exposed documents revealing that: “JPMorgan Chase, HSBC and other big banks defied money laundering crackdowns by moving staggering sums of illicit cash for global criminal networks. In most cases these same banks kept moving illicit funds even after U.S. officials warned them they’d face criminal prosecution.” Now, I’m not a money laundering expert, but if we are trying to actually curb money laundering then we should probably treat all of the platforms equally. Let’s close the large U.S. banks along with Tornado Cash, and practice ‘guilty until proven innocent’ – yes?
- #2 = Tornado Cash is open source software. There is no company to respond to subpoenas or legal requests. Bernstein v. Department of Justice (circa 1993) established code as free speech. If our Gov’t doesn’t like Tornado Cash – they are going to go crazy over DeFi and Web3. It seems the battle between privacy and our Gov’t is finally gettin’ started. Our Gov’t says they are stamping out bad actors, while many citizens believe their privacy is being invaded. Bring it on.
- #3 = Our Gov’t has been threatening crypto clampdowns for years. Treasury Sec. Yellen used the UST crash to warn against stablecoins, and the SEC’s Gary Gensler is on a viscous warpath against the industry. It’s not a problem for projects like Tornado Cash to pick up stakes and leave the country. Crypto is no longer asking our Gov’t for its approval or its participation.
Next Week: FED Pivot or Market Divot?
- Week in Review: Retail traders are back, but we still have a freight train of Inflation that moved from 9.1% to 8.5% - due to reduced energy prices.
- What do FED Futures say? Currently the Futures are evenly split between a 50 and 75 bps interest rate hike. I think the FED continues to move 75bps chunks until inflation slows and unemployment increases dramatically.
- Is the Bull Market back? You can’t ignore the fact that 46m option contracts were traded last Thursday. That’s a lot of option buying for a Thursday. The retail call buyer is back, and retail money is coming off the sidelines.
- Is this a Ride-it-Out or a Puke? What happens when you’re caught on the wrong side of a move – do you Ride-it-Out or Puke-Up the position. If you held short positions during last week’s Gamma Squeeze to the upside – you felt some pain. Give yourself TIME to Ride-it-Out.
- Volatility is back to EXACTLY where we were in late March, when the rally peaked and we rolled over going from 460 to 360 on the SPY.
- Tip #1: If you’re bullish, define your risk and put your hedges on. 3931 is just a doorway away from 4211, and going lower.
- Tip #2: The Dollar at 105.7 remains defensive and therefore bad for reducing inflation.
- The driving sectors and where to look for a reversal:
o Tip #3: XLF – the Financials experienced a 2 std-deviation move to the upside last week == hedge it by buying an OTM put-spread.
o Tip #4: AAPL – Apple is just 5% off all-time-highs. If Bonds continue moving lower – they will take tech and Apple down.
- SPX Expected Move (EM):
o Last Week = $87 (EM)… and we ended up +$137 dollars higher.
o Next Week = $76 (EM)… which is ridiculously low. We just had a $70 move in the SPX on Friday. With such a small Expected Move – watch for another Gamma Squeeze near the end of the week. Remember, the only way to stop inflation is to inflict pain to the marketplace via increased unemployment. There is no such thing as a soft landing.
We're in a period of massive buy backs, coupled with an administration that has given the NY Fed the green light to use their "un-named" account to buy futures. Add in the secret sauce that bear market bounces bring, and you've got a recipe for the big move that we’ve gotten. Currently, the DOW and S&P have stiff resistance just ahead. Both are facing down-sloping trend lines from January combined with their 200-day moving averages. This market needs to take a break, and some back-filling makes sense to me – early to mid this week.
HODL’s: (Hold On for Dear Life)
- CASH = Nexo @ 8% on USDC – waiting for their acquisition dust to clear.
- PHYSICAL COMMODITIES = Gold @ $1,818 /oz. & Silver @ $20.83 /oz.
- AllBirds (BIRD = $5.26 / in at $4.82)
o Sold Aug $5 CC’s, and
o Sell Sept. $7.50’s when BIRD touches $6
- **BitFarm (BITF = $2.00 / in at $4.12)
o Selling more CCs for income,
- **Bitcoin (BTC = $24,500 / in at $4,310)
- **Ethereum (ETH = $1,980 / in at $310)
- GME – DRS’d and HODL
- **Grayscale Ethereum (ETHE = $15.20 / in @ $13.44)
- **Grayscale Bitcoin Trust (GBTC = $15.22 / in @ $9.41)
- GS: Bot Sept 2: +$335 / -$330 PUT Spread for $2.30
- Innerscope (INND = $0.016 / in at $0.0052)
- VIX: Bot Sept 22: +$30 / - $35 CALL Spread for $0.75
** Denotes a crypto-relationship
Trade of the Week:
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