RF's Financial News

RF's Financial News

Sunday, October 31, 2021

This Week in Barrons: October 31st, 2021

Customer Service is FREE … maybe – but good customer service is expensive.  

-       You need to hire empathic and kind people.  

-       You need to provide systems, training and support.  

-       You need to treat people a lot better than the minimum, and 

-       You need to trust people to do the right thing.  

   Good customer service IS the cheapest way to spread the word about what you do.  Both, great customer service and NO customer service (Google) pay for themselves.  It’s the in-between spots that are simply a waste of time and money.  The single biggest marketing bargain remains a customer who voluntarily recruits new customers for you.

It’s WRONG to believe…  that QUALITY is a result of hard work.  Organizations with a reputation for quality will tell you that they do NOT accomplish higher quality from increased effort.  In fact, focusing on effort all but guarantees that your quality problems will persist.  They will tell you that quality is more a function of systems and processes than effort.  Your question should NOT be: “Who needs to work harder?” but rather: “How do we do this correctly – at each step along the line?”

Maximizing Leverage…  is constantly overlooked.  Marketing knows that the best way to grow sales and share is to design a product that takes advantage of the network effect and has WOW and engagement built in.  But, they still spend 3 hours/wk. discussing where/when to do their next media buy.  Small businesses are transformed by creating sell-through and market demand for their products.  But they will spend forever on reducing shipping costs – knowing that those supply chains can’t be fixed for a year.  Restaurants need to create reasons for their customers to come back and to tell their friends – instead of making the silverware and napkins ‘more’ perfect.  Always remember to: Maximize your Leverage.  Solve the problem that cures the most ills, for the most people, in the shortest length of time.  Then: Rinse ‘n Repeat.

The Market:

   Per HL: When you look at the recent Q3 numbers on seed and early-stage VC fundraising, you might think we are in the later stages of a VC bubble.  However, the words I would use to describe the current environment in early-stage VC are “Fast and Furious”.  The element that leads me to believe that this could be the new normal is the number of people who are choosing to work in, or are forming – new startups.  It has never been easier to start a company, build a team, and build product – as no geography is required.  People are finally choosing projects over careers.  We are in a world where too much money is chasing too many good deals.

Per FW:  Come for the Asset ‘n Stay for the Experience.  In Web2.0, we: “Came for the Tools ‘n stayed for the Network”.  But in Web3, consumers are starting with ‘something’ and staying ‘because they love it’.  Initially, it was Bitcoin, and they loved Coinbase.  Then it was a TopShot, and they collected and traded it.  Then it was CryptoPunk, and they made it their Twitter avatar.  Then it was an Axie token, and they used it to play Axie Infinity.  The twist here is that the assets you start with – do NOT need to remain in that environment.  You can move your Bitcoin to your Ledger wallet.  You can list your CryptoPunk on OpenSea.  You can use your Axie token to buy a car.  So, in 2021, people are: ‘Coming for the Asset ‘n Staying for the Experience’.


-       Hertz is buying 100,000 Tesla Model 3’s…  representing over 20% of the company’s rental fleet.  The vehicles will be delivered over the next 14 months, and should be available in major U.S. markets and in Europe starting November.  The order is worth $4B, and is a real turnaround for the rental company that just emerged from bankruptcy in June 2021.

-       The bus shortage intensifies…   as a Boston high school was forced to use a party bus (complete with a dance pole and neon lights) for a recent field trip. Slightly more fun than being picked up by the National Guard.

-       AMZN could make up half of all U.S. online sales this year…   and is set to hire 150k seasonal staff – 50% more than last year.

-       Per HL, over $500 billion has flowed…   into the hands of venture capitalists and founders this year from acquisitions/deals.  That’s being plowed back into: jet sharing services, homes, condos, and more startups.

-       Per SF, Denver's airport held a job fair…   they were expecting 5,000 applicants – but only 100 showed up.

-       23andMe is buying Lemonaid Health for $400M.   The telehealth startup offers affordable access to care and delivers meds from its own pharmacies.  23andMe will integrate genetic data with primary care, in order to have Lemonaid’s doctors better determine which drugs are best suited to patients.

-       Tesla’s market valuation went over $1T  only 11 years after going public.  Shares rose in response to the Hertz news along with recent sales and profitability numbers.  Elon Musk’s net worth also grew… by $42B.

-       47% of businesses are reporting a shortage of skilled workers.

-       A Kellogg’s customer filed a $5m lawsuit alleging…  strawberry Pop-Tarts do not contain enough strawberries.  Someone thought this was a health food?

-       Facebook is now a subsidiary…   of a company called Meta.

-       Spotify wants to be the public square for creators…   valuing the creator economy at over $100B.  Spotify has 165M paying customer (more than Apple and Amazon combined) and is focused on giving creators more ways to get paid.

-       FB’s (‘Meta’) rebrand is about self-reliance:   Currently ad sales make up 97% of FB’s revenue and depends upon your scrolling.  But, their metaverse could be a hub for virtual interaction and commerce: from games and ticket sales to hangouts – all powered by FB.

-       YouTube, Snap, and TikTok testified before Congress…   making the case that theycare more about safety than Facebook.

-       The inflation that our FED tells us is transitory…   well, German import prices just rose 17.7% == for their steepest increase in 40 years. 

-       The DOJ is probing VISA…   the U.S.’s biggest card network, and wondering if their financial incentives for Square, Stripe, and PayPal prevent other card networks from establishing relationships with similar fintech companies.

-       Hertz partnered with Uber… to make 50k Teslas available in the ride-hailing app.

-       Apple and Amazon reported disappointing quarterly results…   with AMZN impacted by the surge in labor and fulfillment costs, and Apple unable to meet demand for its own products due to supply chain issues.

-       72% of unvaccinated U.S. workers said…   that they would leave their jobs if their employers mandated COVID vaccines to comply with federal guidelines.

-       Pepsi is building digital hubs…   dedicated to solving supply-chain problems and creating new snack brands.

-       Andreessen Horowitz, whose founders played big roles in the development of the Internet…   aims to own (and set the rules) for a huge part of the digital currency world.  FYI:  Marc Andreessen (and wife) just bought a 7-acre, oceanfront compound in Malibu for $177m. 

-       The FDA just authorized Pfizer and BioNTech’s COVID-19 vaccine…   for children between the ages of 5 and 11. 


-       Bakkt (BKKT) announced a deal with MasterCard…   that allows customers to earn and spend rewards in crypto instead of receiving traditional loyalty points.  They also announced a deal with Fiserv expanding their crypto opportunities by allowing merchants to offer a variety of crypto payment options to customers.  BKKT gained 234.43% that day.

-       Nigeria launched a digital currency called the eNaira…   only months after it barred banks and financial institutions from dealing in or facilitating transactions in cryptocurrencies.

-       The Treasury Department and other agencies will specify that…   the SEC has authority over tokens like Tether.  They will also urge Congress to pass legislation specifying coins should be regulated similarly to bank deposits.

-       Andreessen Horowitz (a16z) is planning to raise $6.5B…   to fuel the firm’s aggressive deal-making pace.

-       Tether has started a trial partnership with Notabene…   to help it combat money laundering in cross-border transactions.

-       GameStop has posted a job listing looking to build…  an Ethereum-based Web3 arm. 

-       Helium is partnering with DISH…   to build a user-powered wireless network.

-       Sequoia Capital is becoming a registered investment advisor...   because a RIA gives the firm far more flexibility to increase its investments in emerging asset classes like cryptocurrencies.  And they want to be like a16z – which was restructured as a RIA in 2019.  This turns up the dial on digital assets, including investing in tokens – which don't fit neatly into traditional venture models.

-       The Bank of Spain issued instructions for banks…   on how to register potential crypto-related services in the country.

-       The Commodity Futures Trading Commission is ready to be the ‘primary cop’ for crypto…   should Congress expand the agency’s jurisdiction.  It is estimated that 60% of digital assets are commodities. 

-       Visa has joined Mastercard as an investor in Deserve…   the startup that offers a credit card with bitcoin rewards in partnership with BlockFi.  Transaction volume for the card is approaching $2B.  BlockFi cardholders are spending $30,000/yr – 50% more than the average credit card holder.

-       SkyBridge Capital is offering the chance for you to invest in Kraken…   as the U.S. cryptocurrency exchange plans to go public next year. 

-       GSA Capital (a $2.6 B Quant Hedge Fund)…   joined the rush to crypto.

-       A team of U.S. bank regulators…   is devising ways in which banks may hold crypto on their balance sheets, provide custody and facilitate client trading.  “If we don’t bring this activity inside the banks, it is going to develop outside of the banks,” said the chair of the FDIC.

-       The U.S. DOJ is looking for someone…   to head its newly announced National Cryptocurrency Enforcement team. 

-       The Indian government is likely to regulate cryptocurrencies…   rather than imposing an outright ban.

-       Ethereum has outperformed Bitcoin this year…   thanks to: NFTs, DeFi, and Web3 applications.  It’s up 55% in October (off its lows) and 476% YTD.

Last Week:

Monday:  Gold and silver are looking pretty good today.  I could see taking DRD on a move over $9.51.  Little Uranium miner DNN is trying to make a double top breakout, and over $1.97 could be worth a look.

Tuesday:  Friday we made our 37th new high on the DOW for the year.  This morning: FCX and CLF may be interesting.  QS took a hit Friday and then snapped right back yesterday – so I'll be watching what they do this morning as well.  One that has my attention is EXPI if it gets over yesterday's high at $54.88.

Wednesday:  If not for Google being up $170 and MSFT up $15, everything would be red.  I'm just going to pass on today.

Thursday:  Today the numbers stunk.  Initial claims came in +281,000 – telling me that almost 300k people still need unemployment assistance.  Our Q3 GDP came in at 2%.  The estimates were for +2.6% to 2.8% - so we missed on a lot of fronts.

Friday:  Yesterday, everything connected to EV's was hot because Biden was on TV saying how he's going to install thousands of EV charging stations across the country. If the momentum continues, watch TSLA & CHPT first – and then BLDP & RUN.  There’s a good chance that money will leave AAPL and GOOG and flow into TSLA.  We are overdue for a market pull back, yet our FED keeps this market moving higher every day.  One day there's going to be a rude awakening, but until that time – ‘Party on Garth’. 

TW3 (That Was - The Week - That Was):

Jack Dorsey sent the tweet heard ‘round the world’.  In the tweet, he explicitly called out hyperinflation, which has been historically considered an off-limits topic in developed nations.  Per AP: Jack Dorsey sits at the top of one of the most important and accurate data sets in the world designed to measure true inflation == Twitter and Square.  They have a suite of products that display a multidimensional view of what is happening in the economy, how the price of goods is changing, and differences between demographics, location, and/or income levels.  Square’s products include:

1.Square Reader (a mobile phone payment processor),

2.Square Register (a cash register, merchant payment processor),

3.Virtual gift cards,

4.CashApp (a consumer mobile app for banking services & investing),

5.Square Capital (that offers financing to merchants),

6.Square Payroll,

7.Square Financial Services,

8.Credit Karma Tax (a part of CashApp), and

9.Afterpay (a “Buy Now, Pay Later” giant).

   Their products directly integrate with merchants at the point-of-sale.  They have over 30m monthly active users on CashApp, and more than 7m people using CashCard.  Square also has the payroll data of many companies across industries.  This robust, real-time data set is highly compelling when compared to the CPI data set that our government uses.  Bottom line, when Jack tells us that hyperinflation is coming – he knows what he’s talking about!

Next Week:  Hey Gamma Squeeze … We’re Back.

Market Update:  This week we saw massive activity inside the bond, note and dollar markets – ahead of Wednesday’s FED announcement surrounding The Taper.  It was also focused around professional, hedging activity – responding to retail call buying.  

Gamma Squeeze:  The last two weeks within the S&Ps showed a relentless buying of all-time-highs.  That is a typical, retail trading pattern = FOMO, and it often results in Gamma Squeeze behavior.  In a nutshell, a Gamma Squeeze is when a lot of retail traders decide to buy Call options in a particular product (like TSLA) – the market maker who sells those calls will need to balance their own risk.  In order for the market maker to remain ‘net neutral’, they will need to go out and buy the underlying stock so as to offset the Call option they just sold.  When this is done often enough in a similar direction, the price movement tends to be self-reinforcing and termed: a Gamma Squeeze.

The Tesla Skew and Why I sold Calls:  There was no better example of a Gamma Squeeze this past week – than in the out-of-the-money Call buying in Tesla.  The prices of the 2 and 3 ‘standard deviation’ Calls went through the roof, and therefore the right play was to: Tip #1:SELL the Tesla, November $2,000 Calls (TSLA = $1,114) for ridiculously high prices.  This trade will repeat itself before the FED announcement on Wednesday = SELL the Nov $2,000 Calls for $2.30.

Watch NVDA (SKEW = same as TSLA):  This same TSLA FOMO behavior, could be present next week in Nvidia.  The SKEW inside of NVDA is beginning to take-off.  Because they have earnings on the 17th of November, Tip #2: SELL the November 12th (weekly), out-of-the-money Call Options.

AAPL nor AMZN can take down this market.  Because the S&Ps moved higher (Gamma Squeeze) right up into their pre-calculated ‘Expected Move’ - Apple and Amazon did that exact same thing.    

Bond volume – why the massive movement of capital?  When you review the action in the 30-Year Treasury Bonds (/ZB) and the 10-Year Notes (/ZN), the ONLY time you see this type of dramatic increase in Bond / Note volume is – Tip #3: when it’s a precursor to anOVER 3% move in the NASDAQ.  The current volatility of the bonds is 43% - where the SPY’s are 9%.  So, the action right now is in the Bond market.  The SKEW is also through the roof – telling us that the price of short-term PUTs is much higher than the price of CALLs; therefore, continue to SELL options rather than buy them (in the short-term).  

Enter the FED – It’s Taper Time.  Because this is one of Jerome Powell’s last conversations as FED Chair, it appears that he finally may ‘Do the Right Thing’ – and stop all of this nonsensical market manipulation.  The Taper could be upon us.

SPX Expected Move (EM):  Last Week’s EM = $54, and we moved $58 to the upside.  Next Week’s EM = $64.  With (a) the expansion of volatility, (b) the dollar continuing to move higher, (c) bond volume going crazy, (d) the SKEW being elevated, (e) and crypto making new all-time-highs == it’s time to ‘Wrap Your Risk’.  Put your hedges on, and when you’re buying – use Spreads.


HODL’s: (Hold On for Dear Life)

-       **Algorand (ALGO = $1.81 / in at $1.75)

-       AMC – Holding

-       **Cosmos (ATOM = $37.33 / in at $33.18)

-       **Bitcoin (BTC = $61,700 / in at $4,310)

-       Englobal (ENG = $2.24)

o   Sold Nov. & Dec. $2 and $2.50 Calls for income,

-       **Ethereum (ETH = $4,300 / in at $310)

-       Express (EXPR = $3.84)

o   Sold Oct $5’s and Nov $5’s

-       GME – Holding

-       **Grayscale Ethereum (ETHE = $42.55 / in @ $13.44)

-       **Grayscale Bitcoin Trust (GBTC = $49.69 / in @ $9.41)

-       Hyliion (HYLN = $8.09 / in @ $0.32)

o   Sold Nov. $9 CCs for income,

-       Infinity Pharma (INFI = $2.54)

o   Sold Oct $3 and Nov $3 Calls for income,

-       **Solana (SOL = $192 / in @ $141)

-       Transocean (RIG = $3.53)

o   Sold Nov. $4 Calls for income,

-       Uranium Royalty (UROY = $4.82)

o   Sold Nov and Jan $5 Calls for income,

-       Exela Tech (XELA = $1.88)

o   Sold Oct $2 and Nov $2 Calls for income, 

-       Yamana Gold (AUY = $3.95 / in at $4.53)

o   Waiting to sell CCs for income.

** Denotes a cryptocurrency


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Please be safe out there!


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