This Week in Barrons: 8-9-2020:
“If this IS the New Normal”… Learn how to De-Stress.
What if THIS is the new normal? If this is the New Normal, you’ll need to fall back on: your skillset, reputation, thoughts, attitudes and personal passions. After that, things move around a bit. Some people own real estate while others own machines. Some own intellectual property and others the ‘permission’ to interact with various individuals. If you’re an entrepreneur, it helps to own something. Companies are valuable because of the assets they own, and their market positioning. A simple, hard-working individual will struggle going forward because they will not be seen as owning enough. Corporations choose to do business with entities that own something that they want to use or lever. As you navigate toward your own ‘new normal’ – make sure you own the right stuff. A couple re-positionings I expect to see going forward:
- Higher education will jettison some of their real estate assets because they can now blame their mis-management on a global pandemic rather than ineptitude.
- Individuals will re-discover cars & trucks – now that we can’t count on ride-sharing companies to keep their vehicles any cleaner than our own dirty dishes.
- I expect a complete re-think of edu-tainment offerings, centering on streaming content as the only asset. After all, Disney’s sales plunged 42% due a majority of its assets being COVID unfriendly.
So, How do I DeStress?
If diet and exercise don’t work, maybe viewing is more your style – in which case check out Miami Harbor 360 degree camera focusing on their coral reef: http://www.coralcitycamera.com/
If that doesn’t work – try food. Per HL, download the Goldbelly app and potentially try some of these ‘go to’ addresses:
- Frankies Pizza Miami, FL – If you have the freezer space order a bunch of these. takes 10 min to heat up and better than any delivery or DiGiorno.
- Cherry Pie from Michigan – I didn’t know I liked Cherry Pie! Apple’s good too.
- Cuban Dinner from Miami – Order the pastry platter, and also get the whole family dinner. The 42 pack of Ham Croquetas is to die for.
- Fresh Tuna, Yellow Tail & Salmon from Hawaii – If you thought you were getting fresh salmon before … you ain’t see nuttin’ yet.
- Chocolate Chip Cookies from New York – Definitely one of Goldbelly’s faves. Microwave for 30 seconds before eating, add vanilla ice cream to suit.
- Wagyu Beef from Australia – It’s a little pricey but will cost you less than a steak at a steak-house.
- Prince Street Pizza – Frankies is thinner, but this is fantastic. Like Frankies, order as much as you can if you have the freezer space.
- Jumbalaya from Louisiana – It was fantastic – just like being there.
- Gumbo from New Orleans – It’s incredible when poured over white rice.
I’m personally embracing this New Normal.
The Market:
The combined market cap of Apple, Amazon, Microsoft and Google ($6.2T) is now greater than the GDP of every country in the world – except the U.S. and China.
On Thursday, the Labor Department said that another 1.2m initial jobless claims were filed for the previous week. The pace of U.S. private sector job growth slowed in July as goods producers added only 1,000 jobs – down from 496,000 in June, and services producers added only 166,000 jobs – which was down from 3.8m in the prior month. 2020’s worst-performing sectors in terms of asset prices are: department stores -63%, airlines -55%, travel -51%, oil & gas -51%, and resorts & casinos -45%. So if you’re planning a career – my recommendation would be to avoid this list.
On Friday we had the jobs report that told a different message. It showed that we created 1.8m new jobs in July and the unemployment rate dropped to 10.2%. Well, 241,000 of those new jobs came from their fictitious ‘birth/death model’. And the unemployment rate still doesn’t reflect: (a) people on Federal (long-term) unemployment & minor disability, (b) people that have stopped looking for employment (because it’s just not there), and (c) the self-employed who are barely hanging on by a thread. The U6 reading attempts to make allowance for those – showing an unemployment rate of 16%. But, if you really try and include all of the above, we’re over 24% unemployment. One out of every 4 people that you see is unemployed. We’ve never experienced numbers like this in our lifetime. Is this also the New Normal?
InfoBits:
- Happiest Tax Refund on Earth: Rhode Island issued some tax refund checks with Mickey Mouse's signature on them - instead of the Treasurer's. RI called it a "technical error", but to the rest of us it was: the happiest Tax Refund on Earth.
- The Ad-Pocalypse:
o #4: Twitter’s ad sales plunged 23%. Now it's looking at subscription services and other non-ad ways of making money.
o #3: Google had its 1st sales decline ever. Google even cut its own marketing spending by 50%.
o #2: Snap sales jumped 17%, but fell short on user growth.
o #1: Facebook sales jumped 11%, but the ad boycott started in July, so we'll see its impact on Q3 results.
- Teachers are protesting, and parents are panicking… because there are no clear federal guidelines on what to do when a student tests positive. Welcome to Back to School 2020.
- Researchers in Singapore have developed artificial skin… that recreates a sense of touch. They came up with a material made up of electronic sensors that can reportedly process information faster than the human nervous system.
- What’s doing well during COVID: U.S. firearms purchases have skyrocketed in July – making it the 3rd highest monthly total ever.
- NOT doing so well… is the apparel industry. Clothing companies like: The Gap, American Eagle, Urban Outfitters and Children's Place are about to miss their all-important back-to-school boost as schools remain closed or waiver.
- Clorox: sales surged 22% on corona-cleaning.
- Lordstown Motors: This e-truck maker will go public by merging with special purpose acquisition company Diamond Peak – and is valued at $1.6B.
- Google is paying $450M for a 6.6% stake in home security company ADT to help with Nest installation and service.
- The Indy 500 will run without fans… if a car zooms around a turn and no one’s there to hear it, does it really make a sound?
- The Clorox wipes shortage may last into 2021… Clorox says it’s making them as fast as they can, but everyone just keeps on wiping.
- Ice cream w/ liquor is now legal in New York… which is a really appropriate pandemic food choice.
- TikTok is the most interesting valuation… because it is not even a public company, and it has added $50B to Microsoft since the idea was floated for MSFT to buy their U.S. entity. TikTok / Tick-Tock.
- A Health-tech giant Is born when… Teladoc and Livongo Health announced a $18.5B remote health merger. Teladoc provides telemedicine and Livongo provides 21st century wellness services to chronic conditions.
- Toyota posted its weakest quarter in 9 years… with car sales halving and profits plunging by 98%.
- Ford is taking this opportunity to change leadership… escorting in the previous change-maker at Toyota: Mr Jim Farley.
- Anthony Levandowski… a self-driving truck entrepreneur has been sentenced to 18 months in prison for stealing trade secrets related to autonomous vehicles, in what the judge called “the biggest trade secret crime I have ever seen.”
- Kodak – well that was interesting: Less than one day after suggesting they open an investigation into KODK – the SEC opened one. After all, the CEO was granted stock options a day before the stock price soared 318%. KODK is now 75% off last week’s high.
Crypto-Bytes:
- Square’s bitcoin revenues… are booming. It seems revenue made from selling bitcoin to Cash App customers during Q2 was up 600% YoY. Square only takes a ‘small margin’ selling bitcoin – but increased profits 711% YoY.
- The Death of Cash: It seems Twitter’s baby – Square had a blowout quarter. Long live the white tablet and/or iPhone plug-in.
- “I haven't touched a $20 since 2019?” It turns out that contactless payment options thrive during a pandemic. Last week, Venmo-owner PayPal reported its strongest quarterly earnings ever with profits surging over 86% YoY.
- 70% of people fear for their health at a cash register. While a more cashless America could lower crime, it could also infringe upon privacy and hurt lower-income segments. Going cashless increases the digital divide because 6% of American adults have no bank account and 16% are underbanked.
Last Week:
Monday: Well, this morning’s optimism was over a COVID vaccine as we heard that Eli Lilly was beginning a Phase 3 trial. But also the WHO (World Health Organization) just came out and said that there’s no silver bullet for COVID and it may be here forever. Right now crypto, gold and silver are higher along with equities. Look at eBay as people rummage around their homes and sell things on line. I’d take it over $56.84.
Tuesday: There must be a glitch in the matrix, because the DOW futures are pointing to a red open. There's not a lot of news out there so far. Gold and silver are off a bit this morning. I'm still liking the looks of EBAY, and would still consider taking some over $56.84. I'm also looking at MU. They've been trading slightly sideways and higher for a long time, the 50-day just crossed the 200-day a week ago, and it looks to me like it might try and break free. A move of MU over $51.50 will pull me in. After remaining idle for quite a while, the gold/silver miners picked up the pace and moved higher. NEM looks interesting in here. It's trying to put in a breakout, and if it were to get over $69.94 I think I'd be tempted to snag some. I think I'll start watching AGI also, it looks like it might want to bounce soon.
Wednesday: We’re higher this morning on J. Powell’s optimism. This isn’t making a ton of sense. I am not doing anything in here today, I'm simply watching. I find it interesting that all the miners that were up so strong this morning have given up their gains. But, since I think gold continues higher from here, I'm not concerned. The U.S. Dollar continued its inevitable descent to zero with the DXY printing a fresh 2-year low. Will this hold support or dive? Bitcoin ripped higher by 4% with a bid – let’s call it $11,625. Financials and Industrials are strong and the long bond finally got sold. Is this what the road to recovery looks like?
Friday: The DOW up another 185 points – so things must be awfully good in econo-land. Oh wait, you mean that we're basically in a depression? We are desperately in need of a pullback. Trump has been doing a lot of things in the pharma space, trying to get more drugs made here in the US and at lower prices. With COVID and now a push to bring drug manufacturing home, we might just keep an eye on the XPH – the ETF for the big pharma space. If it exceeds yesterday's high of $45.10 - I'm going to nibble on some. I'm also starting to watch TJX. It doesn't have far to go to challenge its 200-day, so that's on the radar. Our miners are taking a well-deserved break, but I don't for a minute think they're done.
Gold: I say Gold ‘n Satochis … and they say Dollars:
- A huge shout out to all of the gold bugs out there. Yeah, Gold 2k – so there’s nobody out there that’s holding gold who is losing money. Now, with the US Dollar looking like a declining asset in a crazy geopolitical environment – this is nirvana for the gold lovers.
- I’m thinking (per HL) that the markets are starting to care about all of the money printing, unemployment benefits, tariffs, Friday Night Lights @ the White House, and the constant references to Socialism. The S&P is going up because of Facebook, Apple, Microsoft, Amazon and Google. Bitcoin has risen along with Gold in the past couple of months. To all the strong dollar buffs out there … I’d rather have Gold and Satochis than Dollars – thank you very much.
Next Week: Return of the Bid-less NASDAQ!
The word that comes to mind about the trading we’re seeing is ‘manic’. The NASDAQ has risen to all-time-highs but all along the way – we’ve seen hourly falls that should scare the bejesus out of you. These are manic moves to the downside that could be foreshadowing things to come. But then there are stocks like UPS that have done nothing for 5 years and in the past 2 weeks have run from $120 to $160 – basically like there is no tomorrow. This is retail trading at its best. The ‘TELL’ is when you see the out-of-the-money calls – eclipse the at-the-money calls in volume and price. This large amount of call buying does (in turn) drive the stock higher.
SPX – Closed right on their weekly Expected Move: The SPX is a $3,351 product that closed within several notches of its weekly $71.48 expected move. That tells me that hedging is also driving trading activity. If the SPX is moving higher and closing at its expected move, then who’s losing? That answer this week is the NASDAQ.
The Russell is ‘Rockin’ the rotation game: The biggest winner of the NASDAQ pull-back was the Russell Small-Cap index which is loaded with smal to mid-sized financials. Sure enough, the XLF was another winner this past week. So as tech gets killed, the rotation goes into financials – thereby driving the Russell Index higher. When you put the QQQ (NASDAQ) on the same chart as the SPY (S&Ps) and the IWM (Russell Small Caps) – over the past 3 years the out-performance by the QQQ’s has been nothing short of remarkable. Over the next 3 years, history tells us that there will be a leveling out. The trade here is to buy an out-of-the-money Iron Condor for September on the IWM. Buy (for example) the $170 Call and sell the $175 Call / and buy the $143 Put and Sell the $138 Put for September monthlies. I’m looking for volatility to come raging back. Or if you’re a little more daring, swap the call side out for buying the $161 / $166 spread.
Bond Volatility (TLT) has been crushed… lower than that of the S&Ps. If you believe that volatility is your friend and is here to stay, then your play is to buy a low priced Iron Condor on TLT – 45 days out – and let the market come to you in either direction. For September you would: Buy the $174 Call and sell the $179 Call and at the same time purchase the $166 Put and sell the $161 Put.
Could a bond sell-off trigger a reflation trade? Right now the entire world believes that interest rates will remain at zero forever. We are currently at some of the lowest interest rates ever on record. If you purchased a 10-Year Treasury Bond – you would get a ‘whopping’ 0.56% per year for the next 10 years. If interest rates begin to rise, that implies that bonds will sell-off moving forward. Nobody is looking for a large volatility explosion inside the bond market. Clearly the world is watching the QQQs and the S&Ps for any signal of volatility – but nobody is being careful covering the bonds.
Facebook skew inverts as retail comes pouring in: Facebook has been on an incredible win streak, but why? The answer is that people are simply buying out-of-the-money (OTM) Calls. Just like with UPS, the retail trader has found his mechanism of choice to move a stock higher under low volume conditions. For example, on Friday the entire marketplace did 31m option contracts and Facebook did about 2m (6.5%) of those. We’re seeing a total concentration of liquidity inside 5 to 10 names. Retail is solely focused on buying OTM calls on these 5 or 10 products … in order to (a) get the greatest bang for their buck and (b) to implicitly drive the price higher in a softly liquid market. This is uber-dangerous stuff. When you see a chart like FB or UPS, realize that the professional trade is a defined risk strategy to the downside. Do NOT be the last one searching for a deck chair when the music stops. Eventually these inverted SKEWs are going to flip over and the music will stop.
Buy volatility, but only when it’s cheap and low. If you believe that volatility is going to come back into our ‘quiet’ marketplace – then you need to think about buying some VIX when the VVIX is below 110 (now). The professionals will often sell a defined risk put spread in order to purchase a defined risk call spread. Such as the September monthlies: where you might sell the $23 / 18 Put spread, in order to finance the purchase of the $50 to $70 Call spread.
SPX – Next Week’s Expected Move: Last week’s expected move was $72 and we touched it. Next week the pros are expecting a $62 expected move. So the experts are taking volatility down – even after we slightly exceeded last week’s expected move. I look at this as being advantageous because I continue to be on the buy side of option premium and volatility. Watch your correlations, because when total correlation returns – that’s when ‘duck-n-cover’ will also return as a strategy.
Tips:
This is 1999 all over again. People are quitting their jobs to become day-traders. The market is over-extended. No less than 3 major banking analysts have said the market is in danger of a “severe” correction. And yet our FED is not allowing any corrections. My pride and joy is in the metals. Gold hit a new all-time-high, and Silver was flirting with $30. Yes it’s been a long time since the old highs of 2011, but it was worth the wait. Unfortunately, the reason gold is soaring is because they’re devaluing the dollar. Notice the price of food lately? I believe the metals have much further to go. Why? Because the world is finally losing faith in fiat currencies. They’re desperate for money that doesn’t get devalued daily by the Central banks. Gold, Silver and Bitcoin are my 3 favorites. As the FED and the ECB keep printing – gold, silver and bitcoin will go higher. I like physical metals as well as some miners as you’ll see below. One miner that I’ve been waiting to purchase is: DSVMF. It’s currently around $1.75 and has the ability to be a $4 or $5 stock. Bottom line = the dollar is doomed – nobody wants it. I’d rather have AMZN, FB, AAPL, MSFT, GOOGL, Gold, Silver and BTC. I can’t blame anyone for investing in that group.
HODL’s: (Hold On for Dear Life)
- Yamaha Gold (AUY = $6.48 / in @ $4.60 = up 41%),
- Canopy Growth Corp (CGC = $16.63 / in @ $22.17 = down 15%),
- CTI BioPharma (CTIC = $1.25 / in @ $1 = up 25% ), + Sold AUG $2 Covered Call for $0.35,
- EXK Gold (EXK = $4.10 / in @ $1.53 = up 168%),
- GBTC Bitcoin (GBTC = $13.06 / in @ $9.41 = up 39%),
- Hecla Mining (HL = $6.12 / in @ $2.36 = up 159%),
- KL Gold (KL = $52.58 / in @ 26.85 = up 96%),
- MUX Mining (MUX = $1.40 / in @ $1.14 = up 23%),
- NovaVax (NVAX = $170.29 / in @ $7.24 = up 2,252%),
- New Gold (NGD = $1.61 / in @ $0.82 = up 96%),
- Pan American Silver (PAAS = $36.70 / in @ $13.07 = up 181%),
Crypto:
- Bitcoin (BTC = $11,700),
- Ethereum (ETH = $390),
- Bitcoin Cash (BCH = $305)
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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