Being in-the-zone: Being ‘in-the-zone’ is priceless. It happens when we lose ourselves in our work – connecting with the task without commentary or doubt. Being ‘in-the-zone’causes: time to slow down, satisfaction to rise, and a feeling of total engagement. An easy way to get ‘out-of-the-zone’ is to start evaluating your progress according to milestones. The irony is: the best way to make progress is to be ‘in-the-zone’. BUT if progress is your yardstick – you won’t be ‘in-the-zone’ for long. Ans: Find a different yardstick.
Disney, move over: A massive amount of start-up capital ‘n digital asset wealth was raised ‘n created in 2021. Some call it a bubble. But someone is always on the other side of that ‘opportunity’ trade. If they weren’t, there wouldn’t be a game. I’ve grown to appreciate asset prices falling back from extreme levels – presenting a more sustainable upside. Am I the only one hoping to buy Bitcoin under $20K, ETH under $1,500, and still ridiculously bullish on digital? Sending Elizabeth Holmes to jail will not impact start-up funding. Crypto won’t die when someone or some nation throws a fit. We should be so lucky as to get a 2nd chance on a digital asset reboot. Keep some powder dry as 2022 becomes: ‘Mr. Toad’s Wild Ride.’
I can remember the 80’s… and being part of something so huge – that it was growing by leaps and bounds every day. It offered everyone the ability to connect with people we knew, and to be heard by thousands of people we didn’t. Then, it became noisy, unfiltered, and basically pointless. Then it went away. I loved my CB radio – until I didn’t. Sound familiar?
The Market:
Portfolio construction: The mistake we often make in building a portfolio is trying to amass guaranteed, ideal choices. Instead, focus on the edges, and not some imaginary center. For example: Consider a lunch buffet of: one spicy dish, one vegan dish, something gluten-free, and a weird cuisine dish. Your chances of ‘Best Lunch Ever” are far higher than if you simply put out slight variations on a central theme. When the future is unknown, portfolios that invest in the edges outperform those that pretend to know the right answer – every time. 2022 Litmus test: Ask someone their portfolio’s digital asset percentage.
FED Chairperson Powell stated: “As we move through this year – if things develop as expected, we’ll be normalizing policy. That means we are going to end our asset purchases in March, and raise rates over the course of the year. At some point (perhaps later this year) we will then start to allow the balance sheet to run off, and that’s just the road to normalizing policy.”
To put the stock market gains of the last few years into perspective:
- A 20% decline in 2022 would bring us back to 2021 levels.
- A 30% decline would bring us back to 2020 levels.
- A 50% decline would bring us back to 2019 levels.
- And a 70% decline would simply bring us back to 2017 levels.
InfoBits:
- Instagram is once again… the world's most downloaded app in Q4.
- Grand Theft Farmville… as Take-Two (the gaming studio behind Grand Theft Auto and NBA 2K) is buying mobile gaming giant Zynga (Farmville) for $12.7B. Farmville maximizes users while minimizing costs. Social-media games like FarmVille cost less than $250k to make in under 6 months while GTA-5 cost $265m and 3 years to create.
- WhatsApp co-founder Brian Acton left Meta/Facebook… over how they were monetizing his messaging platform (which he sold to them for $16B). He formed Signal - another messaging company. I’m betting on the jockey.
- Fed Vice Chair Richard Clarida is leaving the FED… because he failed to disclose his ‘insider trading activities’. Our FED insider trading = imagine that.
- Goldman Sachs predicts… our FED will raise interest rates 4 times this year.
- Pfizer will expand the use of its mRNA tech beyond Covid… starting with a $1.3B agreement with gene-editing company Beam Therapeutics to develop treatments for rare genetic diseases.
- Regulators are worried about the lack of private company oversight… so the SEC has begun work on a plan to require more private companies to routinely disclose information about their finances and operations.
- It’s a GREAT deal for Y-Combinator… When a company is accepted into the YC program: YC will invest $125k for a 7% stake of the business, and will now invest an additional $375k in an uncapped note at a valuation reflecting the best possible terms offered in a subsequent round by a company’s later investors.
- Robinhood is trading down 53% from its IPO… just waiting to be acquired by a fintech company such as: Schwab, Vanguard, or Ameriprise.
- Turo – the world’s largest car-sharing company… has filed to go public. Turo lets private car owners rent out their Porsches and Pickups – taking a cut from both owners and renters.
- Goldman Sachs predicts… the Eurozone’s economy will grow faster than the US’s over the next 2 years. Europe plans to invest billions in its nations, Biden's $1.8T Build Back Better Act is ‘dead-on-arrival’.
- U.S. household debt fell early in the pandemic… but spiked 6% last year as families are taking out loans to cover falling incomes and cost of living increases.
- Per MJP: U.S. Steel has decided to build a $3B steel mill in Osceola, Arkansas. Why Arkansas? “Arkansas gives us a path to the future without roadblocks. Arkansas recognized the importance of broadening economic opportunities and went the extra mile to compete.” Pittsburgh did not offer U.S. Steel easy access to the power grid, rivers and rail – in return for high-paying jobs and a better trained workforce. Dems – voters go where the jobs are.
- Navient, a private student loan agency… just announced that it will cancel $1.7B worth of loans to 66,000 different borrowers. Navient’s move will avoid lawsuits claiming that they engaged in deceptive lending practices.
- Monster beverage is expanding into booze… by snapping up the craft beer and hard-seltzer maker Canarchy for $330m. Just followin’ Coke ‘n Pepsi.
Crypto-Bytes:
- Binance CEO Changpeng “CZ” Zhao is worth an estimated $96B… excluding his crypto holdings.
- PayPal is looking into launching its own stablecoin.
- The beloved NFT project Pudgy Penguins voted out its founders… after they failed to deliver on stated goals and drained the treasury of funds.
- VC firms Paradigm Capital and Sequoia Capital… have agreed to invest $1.15B in Citadel Securities, a sister company of crypto skeptic Ken Griffin’s hedge fund Citadel. With Citadel’s GME issues, this just doesn’t smell right.
- TaxBit has launched the TaxBit Network… a network supported by the top 20 crypto companies – that will allow their clients to access 2021 crypto tax forms at no charge.
- A group of U.S. banks plan to offer their own stablecoin (USDF)… in an effort to tackle concerns about the reserves behind nonbank-issued equivalents.
- Strike, the Bitcoin Lightning Network payments app tied to El Salvador’s embrace of crypto… began services in Argentina last week. In 2022, Strike plans to expand into Brazil, Colombia and other Latin American markets.
- Coinbase is acquiring FairX… a derivatives exchange that has the blessing of the CFTC. The exchange plans to bring regulated crypto derivatives to market through FairX’s existing partner ecosystem.
- Visa has teamed up with Ethereum incubator ConsenSys… to build a central bank digital currency-linked VISA card and digital wallet – that will be accepted anywhere that Visa is accepted globally.
- Crypto exchange Gemini has acquired digital asset manager Bitria… to expand its offering for financial advisers.
- Goldman Sachs is “bullish” about online brokers’ Q4 earnings… citing a surge in retail-led, crypto-trading revenue.
- Rio de Janeiro will put 1% of its treasury reserves into ‘crypto’… and offer discounts to those who pay their city taxes in bitcoin.
Last Week:
Monday: Last week was all about sending J. Powell a message: “Stop the taper, the hikes, and the balance sheet reduction – or you will get more of this Jerome.” Our FED has backed down from the market for 10 years. If he doesn't back down, then there's more red to come. We're off the lows of the morning, but I don't know that we should be front-running J. Powell’s remarks.
Tuesday: Today’s the day of showmanship, lies, distortions, and fantasy. Will J. Powell be able to walk that fine line between keeping the market happy, and fighting inflation? Yesterday we sold off until the magic levitation machine kicked in and then up we went. The Nasdaq was off almost 400 points and they made it to green. That's pretty impressive, and I'm betting that they want to add to that. Goldman is spewing things like: “This economy is so strong we could absorb 4 rate hikes." So, they want yesterday to be a bottom, and we just go back to moving higher. But if Powell doesn't lighten up a bit on the taper/rate hikes/balance sheet rhetoric, there's going to be blood in the streets. Well, J. Powell did not say anything that he didn’t say before, and the market responded with (thus far) a dead-cat bounce. Frankly I think it's some short-term bravado because nothing has been done yet. I suspect when we see the tapering in real time and that initial rate hike hits, that’s when everyone will reassess their stance. Is it possible that today is a one and done? It's possible, but I don't think so because this rally is pretty broad.
Wednesday: Basically, J. Powell must continue keeping his spinning plates in the air. One day that narrative will change, but yesterday wasn’t that day. Earnings season starts on Friday, but earnings are not the meat and potatoes of the market any more – debt is. As long as we are still creating debt and printing like mad, that money's gotta go somewhere. Energy continues to win, as crude soares higher. I’m watching: BTU, BHP, VALE, CSCO, and AI. One stock that looks pretty attractive and won't break the bank is NOK. In financial land, MS appears to have broken out. There are a ton of charts out there where today's action has a candle with a long spindle top and bottom – signaling indecision and nothing I’d trust holding for more than a day.
Thursday: It's a very strange session. I haven't done a thing. The S&Ps are off 16, and the NASDAQ is down 144. The only thing that looks really tempting to me is X. I could see nibbling on some X on its next move over $26.12.
Friday: I’m not trusting this market – there’s lots of rotation mixed with some fear. I don’t have a feel for what happens next. Volatility rules the roost. Things are swinging around like crazy. Oil is still hot, as terrible as that is. High oil means high gas which hurts everyone. Names like OXY look good, but I’m not playing in here today.
TW3 (That Was - The Week - That Was):
- 49% of small businesses… will increase their prices in 2022.
- Inflation nation Pt1: The headline CPI (consumer price index) rose 7% from last year – marking the fastest rate of inflation since June, 1982.
- Inflation Nation Pt2: The latest PPI (producer price index) rose for the 20th straight month at a 9.7% YoY rate – another record high.
- Inflation Nation Pt3: In 1980, inflation reached a peak of 14.8% under Jimmy Carter. Fed Chair Volcker made it his mission to squash inflation and raised rates to 19% in 1981 – prompting a recession. However in 1982, interest rates and inflation fell dramatically. Paul Volcker is the legend who killed double-digit inflation. Fear not – our politicians nor J. Powell have the ‘stones’ to repeat history. Inflation has at least a 3 year run ahead of it.
- Over 50% of global CEOs fear… that inflation will remain elevated until mid-2023 ‘n beyond.
- Per SF: Doug King’s Merchant Commodity Fund posted a record 74% return last year. King expects oil to hit $100 to $200/barrel due to a lack of exploration and investment. Dems – so much for putting the people first.
- Currently, 1 Bitcoin is worth 500 barrels of oil. Place your bets = which will appreciate faster during the year?
- The stocks that tend to do well in rising rate environments are… TNX (10-Year Yield), EQRR (Equities for Rising Rates), XLF (Financials ETF), and XLE (Energy ETF).
Next Week: Is Volatility here to stay?
Market Action & Volatility:
- We’re seeing big moves in a tight range. Over the past year, the market complexion has changed. The S&Ps are locked into a volatile range going from 4,500 to 4,800. But this week alone we traded from 4,580 all the way up to 4,740. The ATR (Average True Range) has continued to climb over the past year and shows no signs of slowing down. That tells me that there’s an extraordinarily high probability that our current trading range will be broken over the next 2 weeks.
- The current VIX (volatility index) indicates a certain amount of range complacency associated with: “We’ve seen this movie before. Our FED’s got our back. Don’t worry – Be happy!”
Levels of Critical Concern:
- Tip #1: The S&Ps need to remain above: 4,500… or the VIX will explode higher, and we will drop another 250 points – because THAT is a movie that we have NOT seen before.
- Tip #2: The Nasdaq needs to hold 15,600… or it will drop another 1,100 points – and the Nasdaq could lead the way lower.
- Tip #3: The ARKK effect (-17% YTD) is real. As fast as institutional money ran toward ARKK when it was formed – that same money is running for the hills right now. Redemptions in the ARKK ETF are causing sales in its underlying’s such as: TSLA (-12% YTD), ROKU (-28%), TDOC (-16%), and SQ (-18%).
What are the Risk Factors to the Equity Markets?
- I’m more worried about our FED’s balance sheet than inflation and/or rate increases.
- Tip #4: If oil breaks above $85 per barrel… the trickle down will begin. If you look back across other equity corrections, you will see significantly higher oil / energy prices triggering the correction.
- Tip #5: The TNX (10-Year Treasury Note) breaking above 2% … will bring some pain to the market place, and will ignite sell-side activity inside of Big Tech.
- Tip #6: The market will need a catalyst in order to sell-off. Currently there is a general lack of correlation. If this were to change, and (for example) 90 equities out of the S&P 100 were all trading in a single direction – that would be enough to break us out of the current volatility range / box.
Next Week’s SPX Expected Move (EM):
- Last week’s EM was $76. We tagged it on the downside and on the upside, and finished mildly lower.
- Next week’s (4-day) EM is $86. Watch over the next 2 weeks for this market to break out of its volatility box – most likely to the downside.
Tips:
HODL’s: (Hold On for Dear Life)
- *BitFarm (BITF = $4.56 / in at $4.12)
o Sold Feb, May, Dec ‘22: $5, $7.50 CCs for income,
- **Bitcoin (BTC = $43,000 / in at $4,310)
- Energy Fuels (UUUU = $7.18 / in at $11.29),
o Sold June $11 CCs for income,
- **Ethereum (ETH = $3,300 / in at $310)
- GME – Holding
- **Grayscale Ethereum (ETHE = $29.18 / in @ $13.44)
- **Grayscale Bitcoin Trust (GBTC = $27.02 / in @ $9.41)
- Hyliion (HYLN = $5.27 / in @ $6.01)
o Sold April $6 and $7 CCs for income,
- **Loopring (LRC = $1.30 / in at $1.94)
- **Solana (SOL = $145 / in @ $141)
- Uranium Royalty (UROY = $3.73 / in at $4.41)
o Sold April $5 CCs for income,
- Vertex Energy (VTNR = $5.05 / in @ 4.74)
o Sold April $5 CCs for income.
- **Yearn Finance (YFI = $33,531 / in @ 32,850)
** Denotes a crypto-relationship
Thoughts: Spec Play: In the XLE: Buy the FEB $64 Put / Sell the FEB $61 Put for $1,
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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