This Week in Barrons: May 9th, 2021
Entrepreneurial Education earns an ‘F’:
‘F’ stands for ‘Failure’. Entrepreneurial education has refused to use ‘FAILURE’ as a teaching tool, and therefore has been killing entrepreneurship since Apple released the iPhone (2007). Businesses are starting at slower rates, employing fewer workers, and only forming within a few major U.S. cities. Meanwhile, Amazon (that delivers everything anywhere) is rapidly displacing Main Street.
Remember when the stereo-typical entrepreneur was a young, white male starting a tech firm in Silicon Valley? The fantasy included that same entrepreneur being versed on the ins and outs of business funding, and having an extensive Ivy League network of peers and mentors eager to help. That picture has changed dramatically.
Today’s average entrepreneur is female and non-white. The number of women-owned businesses has increased 35 times since 1972. Women owned new businesses are now over 40% of all starting businesses. In a few years, women will make up more than half of the entrepreneurs in America. The average age of the American entrepreneur is 42. Therefore, the new stereo-typical entrepreneur is female, non-white, an immigrant, and over 40 years of age.
Unfortunately, the entrepreneurial educational structure within our universities, incubators, and accelerators does not even come close to addressing this demographic. Before I’d spend $200k on an MBA focused on Entrepreneurship, I’d ask 3 questions:
- (a) “Point me to a faculty member ‘just-like-me’ that’s ‘been-there / done-that’.
- (b) “Can I pay my tuition with crypto?” And:
- (c) Ask every entrepreneurship faculty when they last purchased something with bitcoin.
Entrepreneurial education refuses to teach (or even acknowledge) ‘FAILURE’ as a learning tool. Entrepreneurs are forced to experience failure on their own, and then become entrepreneurs at a much older age. Our entrepreneurial system deserves an ‘F’ because of its results and due to its refusal to acknowledge reality. It’s failing our students, and in doing so – failing the rest of us.
The Market:
At Berkshire Hathaway’s annual meeting, Warren Buffett told us that he loves oil, tobacco, and sugar companies. Warren thinks that Robinhood (the mobile exchange) caters to the gambling instincts of people. In fact, Warren is upset that 12% of Robinhood users trade short term Apple options. I (on the other hand) am amazed that 88% are trying hard to invest without options. As for Bitcoin, Ether and Coinbase, let’s allow their stock price to reflect how wrong Warren and his crew can continue to be. [FYI: dollar cost averaging or even just owning the Nasdaq (QQQ) has crushed Warren over the last 10 years, and will likely beat him over the next 10.] Bill Maher and Warren both vehemently dislike Bitcoin, and at this point would use their ‘buy-in’ signal as an exit catalyst. But Warren and Bill both live in a world where price discovery and disruptive technologies don’t matter. That’s not my world.
Do the math: Friday's jobs report found 9.8m presently unemployed in the U.S. – up from 9.7m in March and significantly above the 4m unemployed pre-COVID. Despite the rising levels of unemployed Americans, reports of labor shortages are growing. The Center on Budget and Policy reports the average weekly state unemployment payment as $387. That weekly total goes to $687 with the additional $300-a-week federal boost. So, we’re paying unemployed Americans $17.17 / hour (more than twice the federal minimum wage) to sit at home and play video games. Did anybody do the math? Montana, South Carolina and other states are going to stop receiving that extra $300 governmental benefit – in a move to drive people back to work. Our FED’s printing press is still running, therefore, the market will go higher along with inflation. Yes, hyper-inflation is on the way as evidenced by a sheet of plywood at Home Depot costing $90. This is what 10 years of central bank mismanagement delivers. The crypto space has the current momentum and strength, with the tech sector being at its lowest rank in over 10 years. It may be the same shirt, but it’s a very different day.
InfoBits:
- Facebook and others lookout… as 96% of U.S. Apple users (iOS 14) are choosing to ‘opt-out’ of ad tracking.
- Retail sales surged 10% in March… the largest jump in a year. That benefited Amazon, but it also boosted ad giants, who rely on your spending to sell ads.
- GDP grew at 6.4% last quarter… the second-fastest pace since 2003.
- Apollo Global is buying AOL / Yahoo from Verizon… for $5B in mostly cash.
- Twitter Spaces is a new live audio room… open to any account with more than 600 followers.
- Electric vehicle company Arrival is building an Uber car: The idea is to sell an electric, affordable vehicle that can rack up a lot of miles without falling apart. Can you say: Checker Taxi Cabs?
- In 2022, Sony will integrate Discord (the talking / texting app) into PlayStation.
- Epic games vs Apple… could be Apple's make-or-break moment: Apple’s App Store created an opportunity for developers. Apple argues that it gets to set the rules because it owns the store. Epic argues that Apple has an iPhone app monopoly, and purposely locks customers into its ecosystem. Place your bets.
- Ford and BMW are leading a $130M funding round… in EV battery startup Solid Power.
- The Honest Company by Jessica Alba… raised $413m in an IPO.
- Krispy Kreme is preparing to go public… again.
- Only 50% of all VC venture funds… outperform the S&P500.
- Treasury Secretary Yellen said… that the Fed might have to raise interest rates to keep the economy from overheating (if Biden's big spending plans are approved). Tech stocks plunged on the news, and then she walked it back.
- Pfizer’s vaccine is just the beginning… of an annual vax booster that will be required by employers / governments.
- Wealthy families could face tax rates of up to 61%... under Biden’s tax plan.
- Uber and Lyft are dealing with driver shortages: It seems drivers prefer delivering pizzas over contagious people – imagine that?
- Peloton has agreed to recall its treadmills… and CEO John Foley apologized for the company’s lingering refusal to comply with federal safety regulators who pushed for the action weeks ago.
- Equinox is in talks to go public via SPAC… backed by Chamath Palihapitiya. The fitness group (SoulCycle and Blink Fitness) is seeking a valuation over $7B.
- Facebook is launching Neighborhoods… a Nextdoor clone.
- Ever heard of Zkittlez – the THC-version of Skittles? Skittles-owner Mars is launching a trademark infringement lawsuit.
- It’s virtually impossible to play pool on your yacht... because the waves scatter the balls everywhere. Luckily, Bugatti (for $300,000) has developed a gyroscopic self-leveling technology – that re-levels the table every 5 milliseconds to compensate for wave motion. Whew – now that’s a relief!
Crypto-Bytes… The Flippening is real:
- All of Crypto is now EQUAL in value… to ALL of the U.S. dollars in circulation. So, if you’re NOT in crypto – what are you waiting for?
- Ether (ETH), the native cryptocurrency of the Ethereum blockchain… surged to a record price of over $3,900. Ether now has a market cap. of $452B – exceeding that of Bank of America and closing in on Jaime Dimon’s JPM ($488B). Remember when Jamie told us that Bitcoin was a fraud? I remember!
- The Digi-Dollar – you heard it 1st: The Digital Dollar Project will soon begin 5 pilot programs to test how a Federal Reserve-issued CBDC would function.
- “The future of money is digital: Whether it’s sovereign money or non-sovereign money" … Former CFTC Chairman Chris Giancarlo
- Berkshire Hathaway’s Charlie Munger on Bitcoin: “Of course I hate the bitcoin success. I don’t welcome a currency that’s so useful to kidnappers and extortionists, nor do I like just shuffling out billions of dollars to somebody who just invented a new financial product out of thin air. I think that the whole damn development is disgusting and contrary to the interests of civilization.” Gee Charlie, wish to share any facts behind those emotions? Guess not – gotcha.
- Mastercard found that 40% of its users… plan to use crypto within the next year. That’s a very big number of new users!
- The Flippening continues… as some $1.3B worth of ether (ETH) options trade daily. A further sign that the focus is shifting from BTC to ETH.
- Multicoin Capital has raised $100m for a 2nd venture fund… solely focused around DeFi, digital collectibles, and crypto-enabled infrastructure.
- In 2021, Bitcoin’s market share fell from 70% to 50%: Ether, the 2nd largest cryptocurrency has rallied over 300% this year, and unlike BTC:
o It has is NO cap: Unlike BTC’s cap of 21m coins, ETH has none.
o It’s App-Focused: Ether powers Ethereum, a blockchain technology that developers use to build decentralized apps.
- Defying All Odds… as ING analysts believe: “DeFi (decentralized finance) could be more disruptive than Bitcoin to the financial sector,”
- Banks and Credit Card companies should worry about DiFi – not crypto… because DeFi goes beyond just buying ‘n selling crypto. DeFi replaces all of the financial middlemen like banks and credit card companies. The rally in ETH is due in part to developers building DeFi apps on Ethereum.
- Visa has partnered with fintech startup Tala… to help underbanked populations onboard onto USDC.
- Coinbase is closing its headquarters in San Francisco… and going fully remote because: "no one location is more important than another."
- Galaxy Digital will buy BitGo for $1.2B. The acquisition will allow Galaxy to become a registered broker-dealer and signals the expanded role custodians like BitGo play amid ever-increasing crypto asset valuations.
- Uniswap 3.0… is now a $7B decentralized exchange.
- Square's Cash App generated $3.5B in bitcoin revenue… in Q1 of 2021.
- India’s central bank-owned retail payments platform… will NOT ban crypto.
- In the last 10 days, $6.7B of stablecoin have been printed. That’s a lot of new demand from investors entering the crypto space.
- Binance’s exchange balance continues to go up. This is a good way to visualize the capital that is flowing into highly speculative altcoins.
- Crypto-miners are NOT selling.
- Bitcoin continues to consolidate… as weaker hands continue to sell to older market participants. Coins continue to move to entities that statistically have very low probability of selling.
- Crypto-macro indicators continue to show consolidation… building up a huge base of capital. Signs of a market top are NOT close to flashing. HODL on.
Last Week:
Monday: ISM Manufacturing reported a 60.7 reading, but we expected 65.0 – and it was far below the previous = 64.7. Then Janet Yellen decided to tell us: "I don't believe that inflation will be an issue." Meanwhile, lumber prices are adding an additional $34,000 to the price of the average new home pushing material costs higher at a rate not seen since 2008. LOW appears to be breaking from its downward slope, and over $200 might work. HAL looks like it could be trying to reverse higher, and a move over $20.61 would bring me in. It's pretty crazy with the DOW up 320 and the NASDAQ red.
Wednesday: All commodities are soaring over the inflation that our FED says "doesn't exist". CLF is on my radar. On April 5, it hit an intra-day high of $20.87 then faded. If it can take out $20.87 – I’m in. CAT has also broken out. I’m watching it for tomorrow.
Warning: The NASDAQ closed at 13,582 today. If it doesn’t end its pukefest at its 50-day moving average (13516), it could drag down the DOW and S&P with it. The DOW’s 50-day is 1,200 points lower – so it’s extended. The S&P has the same issue as it’s 148 points above its 50-day. So, correcting just to their 50-days will involve some pain. The fate of the short-term market is the hands of tech. If the NASDAQ can bounce and start climbing higher, then all is well in market land. If it puts in 2 or more closes below it, I think that they’ll pull some of the air out of the DOW and S&P.
Thursday: What’s beginning to get some media attention is that there are millions of jobs available, and no one's showing up to take them. In Tampa, McDonalds offered $50 to folks that come in and just fill out an application. If tomorrow’s JOBS report comes in hot at 1m new jobs created, the street is going to look at Yellen’s statement and say: "Holy crap, with this job growth, they're going to start tapering.” That will translate into a tech market sell off.
Friday: Currently we have 1% interest rates. If we're going to see GDP go from barely alive to +12%, we are going to pour gasoline on an already soaring inflation number. The JOBS REPORT just came out and it showed a measly 266k jobs created in April. It also revised last month lower, and manufacturing actually LOST 18k jobs. This is further evidence that most people are making more money sitting home than they ever did working. Until something changes, no one will take the jobs offered. The good and bad news is that our FED can't raise rates or taper because it would crush whatever is left of the functioning economy. Oh, and by the way, the Fed's birth/death model added 289k fake jobs – so we actually LOST 32k jobs in April.
Marijuana’s Coming… everyone knows it!
- If you have physical gold and/or silver, just HOLD ON. If you go to any of the top retailers for gold bullion and take a look at what they're charging for an American Eagle gold coin – it will be about $400 / ounce higher than the spot price for gold. The spot prices have not caught up to the physical because the overall markets are flooded with bullion derivatives. It’s only a matter of time before the short contracts keeping the price down expire. I'm one of those old dinosaurs that still believes in gold – mostly because China, Russia and other sovereigns continue to load up on the stuff. In the case of the Chinese, I believe they will ultimately back their digital yuan with a percentage of gold.
- Tilray & Aphria have closed on their business combination. The newco has a market cap of $8.2B, and shares of the new company (Tilray) will begin trading under the symbol TLRY.
- Rhode Island’s efforts to pass MJ legislation… now look less likely.
- Texas is making progress… in expanding its medical marijuana program by increasing the THC limit and adding new conditions for treatment.
- In Minnesota, MJ legalization grows… as the governor expects a vote soon. .
- Valens acquired Green Roads… and that’s all about gaining U.S. traction.
- The population grew in the 17 states where recreational cannabis is legal… but overall U.S. population growth has slowed to Depression-era levels.
- Alabama gave final approval… for a statewide medical marijuana program.
Next Week: Jobs, FED and a Market of Denial.
We’re at an all-time high, but what’s driving the move = financials + energy. The SPX has been living inside of an incredibly tight range (4120 to 4220) for the past month. But the driving force behind the SPX has been both the financials (+30% YTD) and energy (up +40% YTD).
Our FED’s message to the markets spoke of ‘lofty’ equity valuations. They were insinuating that they may not back-stop all of these inflated markets – specifically tech.
The JOBS number told us that if you are going to miss a prediction - miss BIG! We looked for 1m new jobs created, but only received 266k – and revised the previous month downward.
The reaction to the JOBS Report was explained by the Bonds as either upcoming inflation or a slowing economic recovery. The bonds moved lower in Friday’s session.
We are seeing fractured / non-correlated markets. The advance / decline line refuses to correlate – even on a huge up-day such as Friday. We are seeing huge sector rotations occur. All the while bonds are vacillating between a slowing recovery and/or hyper-inflation?
- Tech closed at the lower edge of its weekly expected move.
- The Russell finished the week as it did the last 6 weeks = totally flat.
- The S&Ps were very close to last week’s upper edge of their expected move.
- The Financials: As consumer credit spiked higher (ending the savings spree), financials closed higher on the week outside their expected move.
- Energy outpaced everything last week as they grew by 2.5 standard deviations to the upside.
TIP #1: Watch for a bullish Gamma Squeeze in the financials (XLF) ahead. Watch for a break slightly lower early in the week, and then a potential explosion higher to 4300 in the SPX caused by the financials. Be ready to close your shorts. We will NOT trickle to the upside because there’s just too much Gamma risk. So, if you’re positioned to the downside, be ready to put on some hedges. Tip #2: For short durations = buy premium. For longer durations = sell premium due to this Gamma Squeeze.
VIX Hedges are cheap and getting cheaper. If you are positioned to the downside, use the VIX to put on some hedges to take advantage of the upward move in financials and/or energy. But you may want to: (a) purchase those short-term VIX PUTS to take advantage of the upside move, and then (b) sell VIX premium out into July to take advantage of the market moving back down due to inflation and/or a slowing recovery.
Crypto: Bitcoin actually moved higher on the jobs number. I thought crypto was an uncorrelated asset, and was surprised that crypto moved at all on the JOBS report. But crypto is moving into mainstream now that exchanges such as TastyTrade are making trading in the majors and in some of the altcoins seamless. I also thought that micro-bitcoin futures would change the crypto marketplace, BUT they (/MBT) were dead-on-arrival due to CME’s fees. The CME is trying to collect DOUBLE the normal trading commission, so my hopes for a micro-bitcoin actively traded product went up in smoke. TIP #3: Watch ETH moving to $5,000 – especially as it gets closer to eclipsing JPM in total market cap.
Tips:
HODL’s: (Hold On for Dear Life)
- Bitcoin (BTC = $58,000 / in at $4,310) & buying
- Bitcoin Cash (BCH = $1,350 / in at $170) & buying
- CTI BioPharma (CTIC = $2.25)
o Sold May $3 CCs for income
- Electramericcanica Vehs (SOLO = $3.62)
o Sold May $4.50 CCs for income
- Express Inc (EXPR = $3.40)
o Sold May $3.50 CCs for income.
- Ethereum (ETH = $3,900 / in at $310) & buying
- Grayscale Ethereum (ETHE = $35.07 / in @ $13.44) & buying
- Grayscale Bitcoin Trust (GBTC = $46.88 / in @ $9.41) & buying
- Grayscale Trust (GDLC = $44.30 / in @ $37.09) & buying
- Hyliion (HYLN = $9.07 / in @ $0.32)
- Infinity Pharma (INFI = $3.32)
o Sold $3 CC’s for income
- Iridex Corp (IRIX = $7.80)
o Sold May $7.50 CCs for income.
- Kopin Corp (KOPN = $8.46)
o Sold May $10 CCs for income.
- Litecoin (LTC = $360 / in @ $191)
- Sandstorm Gold (SAND = $8.03)
o Sold June $8 CCs for income.
Thoughts: I guess “disruption” isn’t quite the selling point it used to be. ARKK, the ETF containing stocks that manager Cathie Wood deems “disruptive innovators”, has dropped 11% in the last week. That puts it down significantly on the year. ARKK’s been underperforming for a while, and its recent sell-off has just taken it to the bottom of its range. That volatility is exhibited in ARKK’s options. ARKK’s 50% overall implied volatility is high enough to make short premium strategies interesting, and have reward out-pace the risk. If you think that ARKK might bounce back, or at least not collapse in the next few weeks – the short $90 Put in the June expiration is a bullish strategy that has a 93% probability of making 50% of its max. potential profit before expiring.
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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