“Wells The Fargo… really?”
Organizations grow when they develop a base of customers. Organizations profit when their customers are changed by what their organization does. It is the most difficult and important thing that an organization does, and is the only area that you cannot outsource or work your way around.
On Thursday of this past week, out of the clear blue with no warning, Wells came out and said that any and all personal lines of credit with the bank have been cancelled effective immediately. Any and all personal line of credit loans will need to be paid off. You can no longer (for example) initiate a personal loan to consolidate higher-interest credit card debt, pay for home renovations, and/or avoid overdraft fees on linked checking accounts. I don’t understand. Don't banks make their money by making loans and charging interest on them? If so, why would they stop loaning money? Do they know somethings coming, and they're afraid they won't get paid back? If so, what's coming? I found it very odd, as it seemed like it was not normal operating procedure, but more like an emergency ‘defense’ announcement.
And by the way, Wells says that customers credit scores may get dinged as these accounts are shut off. How nice of them? Remember, these are the same criminal bastards that opened thousands of ‘fake’ credit card accounts without the owner’s knowledge, and they’re NOW shutting down normal customer accounts and screwing up their credit profile. Hey WTF, do you have to practice at sucking or does it just come naturally after all of these years? I’ve seen moves by banks like this in the past, and it only succeeded in displaying fear and insecurity to their customers.
Ridiculous moves such as this often signal a dramatic change in customer focus. Customer traction doesn’t come from increased social posting or asking for favors from your network. It comes from ‘being there’ when your customers need you. And NOW the tough part comes from convincing non-customers that you won’t ‘screw’ them – like you just ‘screwed’ their friends. In the case of Wells, I honestly don’t know how this bank is still in business. When your largest investor for over a decade (Warren Buffet) no longer believes in you and sells his position … what’s / who’s left?
The Market:
As we all look toward the 2nd half of 2021, the probability of success grows increasingly narrower – because:
- Stock market alternatives like real-estate are trading at record highs with less room to the upside than stocks.
- The potential stock-split risk for the most valuable companies make them difficult to short.
- Implied volatility is low, and therefore bullish from a risk perspective.
- A record earnings cycle is just a few days away.
- China and Russia are quiet(ish), and most of the domestic political lunacy has calmed down.
- The IWM (the small-cap ETF) continues to build a base, and has been making higher lows since May. If it ever breaks above $235 (currently @ $224), it is likely to have a significant run.
- And 5 institutional firms control over $20T in customer assets – so, what can go wrong?
On another level, the Reddit vs Robinhood IPO is on a collision course with regulators over a controversial practice called payment for order flow that generates over 81% of its revenue. In its IPO filing, Robinhood disclosed that virtually all of its Q1 revenue came from sending its customers’ stock, options and cryptocurrency orders to high-speed trading firms – like The Citadel. Thanks go out to HT for this scary truth: https://youtu.be/nPWztxtr7-w
InfoBits:
- Marvel released Black Widow in theaters and Disney+: It’s the first Marvel flick to debut in theaters since COVID.
- Space Jam for Billionaires: Virgin Galactic founder Richard Branson plans to board a test spaceflight on Sunday – just 9 days before Jeff Bezos is scheduled to embark on his Blue Origin space trip.
- Labor shortage update... The unemployment rate increased as more Americans started job-searching with the free-money checks ending, and demand for workers revving up.
- Bezos was focused on blistering growth... while Jassy (the new CEO of AMZN) just added 2 new AMZN principles: “Strive to be Earth’s Best Employer,” and “Success and Scale Bring Broad Responsibility.”
- The Defense Department cancelled… a $10B cloud-computing Defense Infrastructure contract that it had awarded to MSFT and was being bitterly contested by AMZN.
- China issued a warning to its biggest companies… vowing to tighten controls surrounding overseas listings – less than a week after Didi Global’s contentious decision to go public in the U.S.
- Nextdoor, the social media app for neighborhoods… announced that it will go public through a SPAC with a $4.3B valuation.
- Grubhub will use self-driving robots… to deliver on college campuses this fall.
- 36 states and Wash. D.C. filed an antitrust lawsuit against Google… alleging operating an illegal monopoly with its Google Play store.
- Consumer demand is at an all-time-high… for auto financing, credit cards, and personal loans.
- Tens of millions of Americans gained weight during COVID… with an average gain of 30 pounds.
- Dr. Jonathan Reiner (CNN) declared that it’s time… to mandate a COVID vaccine for all Americans.
- IMF Chief Warns of… a “sustained rise in U.S. inflation.”
- EU regulators fined VW, BMW and Daimler more than $1B… for colluding to avoid upgrading their emissions technology.
- Barry Diller says… the movie business is dead.
Crypto-Bytes:
- Square CEO Jack Dorsey just confirmed… his plan to build a Bitcoin digital hardware wallet. Bitcoin hardware wallets help to store private keys offline, and Square will prioritize smartphone-compatibility and mobility. Heck, maybe they’ll even be able to store Square’s 8,000+ BTC?
- FED-Chair J. Powell met w/ Coinbase CEO Brian Armstrong… and “Crypto Daddy” Christopher Giancarlo for 30 minutes. Now that’s a Big Deal!
- Coinbase is looking to hire hundreds… of engineers, entrepreneurs, and builders for its new hub in India.
- More than 80% of institutional investors… expect to increase their exposure to crypto and digital assets by the end of this year.
- Goldman Sachs thinks ether (ETH) could overtake bitcoin (BTC)… in becoming the dominant "store-of-value" crypto – because Ethereum is the most popular development platform for smart contracts.
- Coinbase wants to change its stance… and begin to list as many cryptocurrencies as possible.
- Visa reported over $1B spent in 2021 with its crypto-linked cards. Visa allows clients to convert and pay with digital assets at over 70m merchants.
- Circle (the company behind the US Dollar Coin)… is going public via SPAC valued at $4.5B. CEO Jeremy Allaire said: “Circle intends to become the most public and transparent operator of full-reserve stablecoins in the market.’’
- France just tested a cross-border CBDC transaction with Singapore… marking the first use of a smart contract-based, automated liquidity pool for the digital EUR/SGD currency pair.
- Sotheby's is accepting crypto payment… for a 100+ carat diamond. The auction house is also a fan of NFTs.
Last Week:
Monday: Oil is going higher. Keep an eye on RIG, as an insider bought another million shares. One tiny play in the energy sector that could wake up is CEI – on the AMEX exchange trading for $0.70. Earlier this year they were over $3. TSLA and others doing business in China could be in for a rough go of it.
Tuesday: The Nasdaq closed at a 52-week high today; however, only 31% of all Nasdaq stocks advanced – the lowest out of all previous records.
Wednesday: We do have the Fed's minutes on tap today, but until the FED stops printing – the markets will go up. That said, we could easily trade sideways for a few weeks as we catch our breath. The Chinese have decided to ban their companies from listing on U.S. exchanges – which only impacts about 106 scheduled IPO’s. In terms of things that are interesting: WMT over $141 and UUU over $9.55 look good. In the FED minutes several participants saw benefits to reducing the pace of mortgage backed securities purchases in light of valuation pressures in housing markets.
Thursday: The futures are down – huh? It seems like a coordinated profit-taking attack to me. Yesterday, someone bought over 40,000 SPXU contracts – which is an inverse ETF that goes up when the S&P falls. They bought them for next weeks' expiration. I think AAPL is the tell here. It opened lower and sunk from there, but is now only 70 cents from going green. If it goes green, then: AMZN, ROKU, SNOW, MSFT, FB, etc. will be quick to follow.
Friday: Yesterday I was questioning whether a 500-point drop was a one-day wonder, or the start of some form of draw down. I guess we have our answer. They like industrials today. CAT, JCI, and the auto parts suppliers are up big. A couple things: (a) MMM has earnings on the 27th, and looks poised to move up into them – so over $201.90 could work. (b) JCI has earnings on the 30th. They have broken out, and a move over $70.40 could work. And (c) LOW doesn't report until Aug 18th, and they look good over $196.75,
Crypto Microscope…
Thanks WC: Key crypto takeaways from this week:
- Supply continues to be reaccumulated by entities with little history of selling,
- Exchange flows have even returned to a clear trend of accumulation,
- Hash rates seem to have found a local bottom,
- There is an uptick in positive whale activity,
- Money is flowing into stablecoins, and
- We are seeing new, all-time highs in users coming into the crypto network
Next Week: A market on the verge…
Market Update:
- Wild ranges throughout the holiday trading week… ended up landing the SPX ‘inside’ their expected move. But price action told a very different story as it broke down and recovered ‘miraculously’. I say ‘miraculously’ because moves this week were absolutely HUGE and unpredictable. I’m looking for these wild, market moves to continue next week.
- We moved from a bifurcated market place into a correlated one. Highly correlated markets are capable of easily moving into unknown territory – as high correlation coefficients often lead to break-outs and break-downs.
- Amazon (AMZN) exploded into all-time-highs this week. One way to view the price action is to count the overwhelming number of ‘market’ orders. A ton of retail Calls that would normally sell for $11 / were filled as ‘market’ orders for $14, and immediately reverted back to $11 – as the market ‘gladly takes’ from those who are ‘willing to give’. This type of ‘feverish’ price action, often signals that the move in the stock (breaking to all-time-highs) is over. Tip #1: I’m not anticipating much upside movement in AMZN in the near future.
- Apple (AAPL) has been on an absolute tear to the upside, and I would not short it. Tip #2: 7% of all the option contracts traded were on Apple this week, so that’s a ton of conviction to the upside – and I would NOT step in front of that train. If you’re a fund manager that’s trying to ‘game’ the system, Apple has more upside potential than most things on the board.
- The Financials (XLF) are on a wild ride trending lower. Most of the movement in the financials has nothing to do with the companies themselves, but everything to do with the bond market. Financials have earnings next week and they should have stellar numbers; however, most of the good news (including announced stock buybacks) should already be priced into the stocks.
- The Energy sector (XLE) continues to behave like the financials, but it ended the week ‘beneath’ it’s expected move. Consecutive weekly breaches of the expected move within both the financials and the energy sector – do not bode well for rational behavior going forward.
- The Emerging Markets (EEM) are heavily weighted by China, and moves by the Chinese government this past week did not disappoint. Last week we had an almost 3 Sigma move to the downside in the EEM – which is exciting to say the least.
- The Nasdaq (QQQ) is almost an unstoppable force – finishing the week mildly higher.
Bonds are back in charge:
- Are lower rates in the 10-year (TNX) to continue? We moved from inflation fears and loving the financials to interest rates approaching 1% and loving tech – within the span of 8 weeks. What happened? If rates continue lower, then the financials will be crippled, but tech will be celebrated. If however, the bonds continue to explode to the upside – you will likely ignite more fear about growth slowing. Tip #3: “The trend is your friend until it ends.” Right now, the trend in bonds (/ZB) is higher, so be careful what you wish for as many people are looking for interest rates to approach and bottom around 1%.
- The CPI (Consumer Price Index) is coming out on Tuesday of this week … and that WILL have an impact on how the market feels toward bonds and interest rates – which will trigger trading inside the financials and energy and then tech. Tip #4: I would not trade any ‘size’ until after I see the market reaction to the CPI. Any rally in bonds (/ZB) and the market is likely to get nervous and sell-off.
SPX Expected Move:
- Last Week we had a $42 SPX expected move, and closed inside of those limits. Next week’s expected move is $61- and we moved almost $50 on Friday alone.
- Do NOT sell short-duration premium, but rather sell back-month volatility.
Tips:
HODL’s: (Hold On for Dear Life)
- AMC – Buying
- Bitcoin (BTC = $353,400 / in at $4,310)
- Bitcoin Cash (BCH = $480 / in at $170)
- Peabody Energy (BTU = $11.03)
o Sold July $8 CCs for income
o Sold Aug $10 CCs for income
- CTI BioPharma (CTIC = $2.39)
- Electramericcanica Vehs (SOLO = $3.86)
o Sold Sept $4 and $5 CCs for income
- Education New Oriental (EDU = $6.60)
o Sold July $10 CCs for income,
- ENG (ENG = $2.90 in at $2.86)
o Sold Aug $5 CCs for income,
- Express Inc (EXPR = $5.78)
o Sold July $5 & $6 CCs for income,
- Ethereum (ETH = $2,050 / in at $310)
- Franks International (FI = $2.85)
o Sold Oct $5 CCs for income,
- GME – Buying
- Grayscale Ethereum (ETHE = $20.41 / in @ $13.44)
- Grayscale Bitcoin Trust (GBTC = $27.56 / in @ $9.41)
- Grayscale Trust (GDLC = $25.81 / in @ $22.75) & buying
- Hecla Mining (HL = $7.14)
o Sold Sept $9 CCs for income.
- Hyliion (HYLN = $10.39 / in @ $0.32)
o Sold July $13 CCs for income
o Sold Aug $13 CCs for income
- Infinity Pharma (INFI = $2.95)
o Sold $3 CCs for income
- Litecoin (LTC = $130 / in @ $191)
- Transocean Limited (RIG = $4.50)
o Sold Aug $5 CCs for income.
- SOS Limited (SOS = $2.92)
o Sold July $3.50 / $4 / $4.50 CCs for income,
o Sold Aug $4 CCs for income.
o Sold Nov $4 CCs for income.
- Tellurian (TELL = $4.32)
o Sold July $5 CCs for income.
o Sold Oct $5.5 CCs for income.
Thoughts: Clean Energy Fuels (CLNE) provides natural gas to fleets. Retailers pushed it from $2 to $19+ in Feb. 2021. It has since given up 50% of its gains. With earnings coming on Aug 5, CLNE’s current 95% IV makes it an interesting short premium candidate. CLNE and others like it (BTU) could move higher, and if you’re willing to take a risk through earnings – the short $8 Put in the Aug expiration is a bullish strategy that has an 85% probability of making 50% of its 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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