This Week in Barrons: 11-29-2020:
What are you thankful for in 2020?
Just because it’s been a weird year, doesn’t mean we don’t have a lot to be thankful for. My Top 10 List of: “I’m thankful for”…
- backyard haircuts getting better,
- sunny mornings with a window facing east,
- real, hand-written postcards and letters,
- honestly, it’s just a cold,
- our healthcare workers,
- CBD, THC, and marijuana legalization,
- waiting in line to vote,
- a Zoom Thanksgiving beating an ICU Christmas,
- returning to more kindness than hate, and
- an amazing young lady who said ‘YES’ to my son’s proposal.
Everybody knows a recession’s coming. So, I wonder what would happen if: instead of subtracting things to make our products and services cheaper – we actually added elements to make them better? The race to the bottom (the cheapest price) is tempting, but if you win – you may have to live there. Worse, what if you came in second – you accomplished nothing. Instead, what if you made something important, breathtaking, and wonderful – that everyone couldn’t live without? The race to the top is not only more satisfying, but it’s also more likely to work. And if you live there – you get to work on something you’re proud of, without excuses.
Essentially, Janet Yellen is likely to be Bitcoin’s greatest friend over the next 8 years. Janet’s never seen a monetary printing press that she didn’t like. She has never backed away from high inflation. And given our high unemployment due to COVID, I suspect Janet will begin to pull every screwdriver out of the monetary stimulus toolbox to get unemployment lower. Janet has a natural inflationary bias, and does not mind asset bubbles.
Who wins under Janet Yellen as Treasury Secretary = Bitcoin! Bitcoin will benefit from the fear of high inflation because it moves people to reposition their capital into inflation hedged assets = crypto-currencies. I suspect that Janet (very quickly) will solidify the narrative that higher inflation is coming, and that monetary stimulus bombs are right around the corner. This will provide an even stronger tailwind for Bitcoin in the coming months / years. If you like Bitcoin, you’re smiling at President-elect Biden’s choice for Treasury Secretary – Janet Yellen.
Unfortunately, this stock market does NOT mirror the economy. While the unemployment rate is declining, more than 11m Americans are still unemployed. Last week’s jobless claims posted their first back-to-back increase since July. Americans’ incomes, savings, and confidence levels all fell last month. But that’s nothing ‘bags of money’ won’t cure – right Janet? #HopeYou’reRight
- A double-dip recession is coming… says Moody’s Analytics. They see the economy shrinking during the 1st and 2nd quarters of 2021, and the unemployment rate going from 6.9% to 10% next summer.
- San Fran is yesterday’s weather… say the CEO’s of Dropbox and Splunk. They both recently bought homes in Austin, with plans to make Texas their permanent residences. Brex and Tanium are also moving out of San Fran. “By giving people the freedom to work remotely, they voted with their feet and fled.”
- Wish to earn $80/hour… offer to hold a place in line for a COVID test taker.
- ONLY 3.1% of COVID cases can be traced back to bars & restaurants… but 7.27% can be traced back to government agencies. Maybe we should revisit that mandatory ‘wearing of masks’ thing aye Mr. Government?
- 20% of those shopping online – drink substantially: 41% admit to having ‘one too many’ while shopping online, and 30% have purchased a gift online and not remembering doing so until it arrived.
- $810m is going to Uber and Lyft… along with the government contracts for transporting public agency employees.
- December 10th is the day… when the FDA advisers are slated to meet to review Pfizer’s emergency-use vaccine application.
- The DOW hit 30,000… for the first time last week. In March, the DOW dipped to 18,213, and in November it hit 30k. #ThanksFED
- Crude closed above $44… for the first time since it went negative.
- The SEC proposed new rules… that would allow public and private companies to offer equity compensation to gig workers.
- Elon Musk is the 2nd richest man… with a net worth of $128B - $100B of which was created this year thanks to Tesla’s stock price.
- Thanksgiving could be “the mother of all super-spreader events” … says CNN Dr. Jonathan Reiner asking travelers to avoid attending group events.
- If you need a creative gift idea…. British Airways is selling their drink trolleys, First Class slippers, and champagne flutes.
- Salesforce is thinking of buying Slack… in a deal that would likely top $17B and be Salesforce’s largest acquisition.
- Random House is buying Simon & Schuster… in a $2.2B deal poised to reshape the U.S. publishing industry.
- When smart / committed people disagree about the answer to a question… now that’s a question worth pursuing and a discussion worth having.
- FedEx and UPS are experiencing delivery van shortages… during this holiday season filled with package deliveries.
- Disney plans to lay off 32K more employees… mostly in its theme-park division.
- Tesla ran higher by 19% for the 2nd consecutive week. Since October 24, 2019, this stock is up 880%. Tesla is now up over 40% since the announcement dropped that the company will be added to the S&P 500 Index. #WinnersWin.
- U.S. online sales hit $5.1B on Friday... up 21.5% YoY. This extended weekend’s sales are expected to reach between $8.9B and $10.6B. Unfortunately, total retail sales fell short of projections.
- L.A. locks down… "The new order, which will be in effect until at least Dec. 20, advises residents to stay at home as much as possible, always wear a face-covering outside the home, and prohibits all public and private gatherings except for constitutionally-protected church services and protests.”
- Ripple (XRP) is riding a 16-month high.
- Bitcoin is less volatile than ¼ of the S&P stocks… reigniting the case for a Bitcoin ETF.
- Institutions are piling into Bitcoin at a continuously stronger pace. And in Q3, retail customers bought $1.6B worth of bitcoin using Square’s Cash App. Nearly 3X more than what was invested in Grayscale’s bitcoin product (GBTC).
- PayPal’s CEO Dan Schulman is bullish on Bitcoin… as an actual currency. PayPal will soon allow its network of merchants to accept bitcoin payments.
- Binance U.S. is cancelling service for all U.S. users… according to emails sent alerting them to withdraw their funds.
- Bitcoin’s implied volatility hit its highest level since May… due to the super-high level of retail Call buying.
- Bitcoin broke down -8% on Turkey Day.
Monday: If it isn't vaccine news, it's stimulus talk. If that doesn't work, then trot out a FED head to say they'll print more money. It's the same old game. I’m watching: JD, TRNE, STIM and OSTK. That said, I still think this market feels heavy. OSTK gapped too far for me to want in. JD, STIM, and TRNE all gapped and then faded. But due to their large gap ups, they'll have to travel a long way to get me interested again. I still like PLUG > $25.85, and AMD > $87.55.
Wednesday: Commodities have moved sharply higher – just look at oil. This makes sense, since they think Yellen's coming in to destroy the dollar. If you're desperate for something to play, consider LOW – as its stochastics are curving, and its MACD is rising. FB also looks like it wants to go. And Overstock (OSTK) over its 50-day looks good, but only if holds nearer to the close.
Friday: So, is there anything to play with today? Watch ZI, because it’s a perfect chart for a breakout. And watch PINS in here – they are getting attention because of their new technology. ZI opened and went too far too fast for me to play with, but PINS looks great, and I'll take it > $69.50.
- When reviewing the votes cast for marijuana legalization in 2020… voters were divided over legalization based only upon political affiliation. The overall electorate has shifted in favor of accepting both medical and adult-use cannabis.
- Publicly traded multistate cannabis operators… generally enjoyed robust Q3 financial performances, bolstered by sizzling sales growth during COVID.
- A new marijuana SPAC… the Subversive Capital Acquisition Corp. said that it has acquired two California cannabis companies and hired rapper and producer Shawn “Jay-Z” Carter to foster social equity in the industry.
- Denver CBD maker Caliper is entering the C-Store channel… with its line of dissolvable powders in 600 Texas Circle K outlets.
- The Circle K chain is making more moves in CBD…. by adding ingestible forms as well as topicals, vapes, and smokable hemp.
- Colorado retail MJ sales topped $1.6B YTD.
Next Week: “Will markets hold it together until year end?”
- Last week, the ‘Monsters of Tech’ did not have a lot of positive price action except for TESLA. Tesla did most (if not all) of the heavy lifting for the entire NASDAQ on extremely anemic liquidity.
- The economic picture is decaying:
o There’s no stimulus bill.
o Unemployment benefits are stopping for 10’s of millions of Americans on December 26th.
o Total retail sales are declining.
o COVID numbers are exploding – causing more lockdowns.
o Wall Street has completely decoupled from Main Street. All I’m hearing from traders is: “I’m not worried. A stimulus bill, Janet Yellen, and a vaccine are all coming. AND the FED’s got our back.”
- Small Caps (IWM), Financials (XLF), and Energy (XLE) are holding this market together?
o I’m expecting some tumultuous volatility from here into the end of the year.
o The S&Ps, IWM, QQQ’s, and even the DOW are effectively at all-time highs. The only 3 sectors holding this market together are: the IWM – up 11% YTD, the XLF – down 8.5% YTD, and the XLE – down 36% YTD.
o It appears as though mutual funds are out buying this year’s losers. There is a time and place for that type of investment (the inflation trade), but we’re slightly premature.
o The Monsters of Tech (up 42% YTD) have been underperforming lately.
o When you look at trading volumes, you find a severe lack of liquidity in this marketplace (except in Tesla). Tesla (a $585 product) traded 1.4m contracts on Friday ($819m), and the entire SPY ($363 product) only traded 1.8m contracts ($653m). In terms of notional value, Tesla is actually driving the entire market.
o Currently, it’s a TESLA ‘short-squeeze’ market, and we’re just living in it. More capital is flowing thru Tesla than thru the S&Ps. The fate of the NASDAQ and the S&Ps is in the hands of Elon Musk.
- I expect volatility to increase in the coming weeks, mostly due to the lack of liquidity.
o During this past 3.5-day trading week, the SPX exactly hit its expected move ($67).
o Next week’s expected move is only $70.5, and that’s with low liquidity, the financials, energy and small caps being extremely extended, and TESLA being in control. What can possibly go wrong?
- 3 Trade Ideas:
o INTC is overdone to the upside. Buy an In-Out Put spread. That is a Put spread with one strike In-the-Money and one strike Out-of-the-Money. I would be buying the December 24th - $48.50 Put and selling the $46.50 Put for a $1 debit.
o IWM keeps cracking its expected move to the upside, but its implied volatility is rock-bottom. I would BUY an Iron Condor about 42 days out – with strikes around 1 standard deviation ($14) away. I would buy the January $197.5 Call and sell the $200 Call, and also buy the $170 Put and Sell the $167.50 Put. Why? (a) There is low implied volatility so the premiums are cheap. And (b) if IWM moves wickedly higher or lower – you get paid.
o The VIX is moving higher. I would Sell a Close-to-the-Money Put Spread – in order to finance an Out-of-the-Money Call Spread. I would sell the January $20 Put and buy the $15 Put, in order to finance and Buy the $40 Call and Sell the $65 Call.
HODL’s: (Hold On for Dear Life) / (All %’s = YTD)
- CTI BioPharma (CTIC = $3.71),
o Selling Dec. $4 covered calls for income…
- EXK Gold (EXK = $3.42 / in @ $1.53 = up 122%),
o Sold Dec. $4 covered calls
- GBTC Bitcoin (GBTC = $18.84 / in @ $9.41 = up 100%),
- Hecla Mining (HL = $4.79 / in @ $2.36 = up 100%),
o Sold Dec. $5 covered calls
- Hyliion (HYLN = $24.49 / in @ $0.32 = 7,744%).
- New Gold (NGD = $1.83 / in @ $0.82 = up 122%),
o Sold Dec. $2 covered calls
- Pan American Silver (PAAS = $29.12 / in @ $13.07 = up 123%),
o Re-Sold Dec. $31 covered calls
- Bitcoin (BTC = $17,800),
- Ethereum (ETH = $540),
- Bitcoin Cash (BCH = $280)
Thoughts: Looks like Apple’s (AAPL) got a case of the blues. Maybe it’s due to the sluggishness associated with iPhone 12 sales. Or maybe it was news that AAPL’s security chief was indicted on bribery charges for trying to trade iPads for concealed carry permits from the Santa Clara Police. I guess he should have offered MacBook Pros instead? The Apple store has become a holiday gift guide for people who are long cash and short on ideas, and maybe it can provide enough sales to get the market feeling better about Apple’s prospects? Maybe AAPL’s sell off is a bullish sign? AAPL’s 20% implied volatility points to debit spreads as the strategy of choice. If you think AAPL might rally back in the next few weeks, the long call vertical that’s long the $113 Call and short the $115 Call in the Dec monthly is a bullish strategy that has a 63% probability of making 50% of its max. potential profit.
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Please be safe out there!
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