Your mission is to identify, reward and retain every NFP: Fred W. reminded me that the goal of any business is to retain its ‘Non-Fungible People’ (NFPs). The most important NFP is the founder: the visionary, the one who recruited early team members, often built the first product, and set the culture and values. After the founder, it’s common to move on to the top-ranking managers. Unfortunately, the managerial function is much easier to replace than a uniquely skilled individual. A classic NFP role is CTO / Chief Scientist. That’s who sets the technology direction, makes the tough tech decisions, builds the tech, but doesn’t manage the engineering function. NFPs are also often in customer service, sales, and marketing. Try to avoid promoting an NFP to their highest level of incompetence, and then forcing the NFP to depart in order for them to be properly rewarded. NFPs are rare. Your mission as founder should be to identify, reward and retain them – at ‘almost’ any cost.
It’s Easy (once you know how to do it)… is the dilemma that faces every teacher. The art is in the translation, pace, and engagement, and not in the content. After all, the pupil doesn’t know what you know, doesn’t learn the way you do, and most likely engages differently. The 3 elements to successful education are: (a) everyone realizing that communicating knowledge is tough, (b) finding each student’s correct level of engagement, and (c) continuously testing their progress. I’m reminded of the quote: “Tell me and I will forget, teach me and I may remember, involve me and I will learn.”
“You’re not paying me enough to care”… is the result of sorting by price. Branding, customer feedback, reviews, corporate responsibility, and employee satisfaction no longer matter. Price is all that matters. Sorting by price insulates the customer from the supplier. When your only advantage is price, you reap what you sow. Eventually you get a: “Rocket ship where every part was built by the lowest bidder.”
The Market:
A very dangerous combo… To quote Professor Cowen, at George Mason University, who was named one of the top 36 most influential economists over the past decade: “I started out as a crypto-skeptic but over time I have become a crypto-hopeful. I can see legitimate use cases for crypto with high benefits, and I think there’s a good chance it will succeed. I’m impressed by the high amount of talent working in crypto and the crypto movement. I think (on average) crypto-people are super, super smart. Smarter than the average economist. They have a very particular set of skills, and have skin in the game”.
Russia’s new legislation… will officially recognize crypto as a form of currency in the country, and have decided to regulate and tax it rather than ban it. Russia is home to 144m people – with about 10% holding about 2T rubles ($26.7B) worth of crypto, and a large crypto mining industry. One theory says that Russia becomes increasingly sympathetic to the bitcoin and crypto industry (including putting the digital currency on their balance sheet / mining with state resources) – and thereby forces the hand of the U.S. There is a global financial competition underway that has an open, decentralized system at the heart of it. Game Theory says that no one wants to start the global fintech cascade, but once your adversary does it – you are forced to adopt the technology or risk being left (financially) behind.
Cheap shots in a soft market: Is Facebook now cheap? How about: HOOD, RIVN, and SPCE? Are virtually all of the 2021 IPO’s and SPAC’s cheap? Typical investor behavior combines: BUYING cheap assets with NEVER SELLING expensive ones. So, when is something cheap? Nobody knows. All you know is that right now – you won’t be buying the highs.
InfoBits:
- Meta blamed Apple’s iOS update… which asks users if they would like to opt out of ad-tracking on apps like FB & Insta – for slow sales and shrinking profits.
- Canned cocktails will hit $4.5B this year… and grow 13X over the next 10 years. Coke and Pepsi have launched Simply Spiked lemonade and a boozy Baja Blast respectively.
- Last year funding to supply chain startups almost doubled… which shows an acceptance of tech in a sector known to run on pen, paper, and spreadsheets.
- Sometime next week… Peloton could belong to: Amazon, Disney, Nike, Google, or Apple.
- Spirit and Frontier are merging… in an effort to create a low-cost budget giant with real ramifications for the broader airline industry.
- Peter Thiel, one of Facebook’s first investors… and longest-standing board member, will step down from his position on Meta’s board.
- SoftBank’s $66 billion sale of ARM to Nvidia… collapsed last week after regulators raised serious concerns about its effects on competition.
- Uber completed its $1.1B purchase of alcohol-delivery startup Drizly.
- Peloton is replacing Founder/CEO John Foley and cutting 2,800 jobs… John purchased a $55m estate in the Hamptons, which endeared him to his x-employees who are receiving: severance, a little healthcare, and free Peloton classes for a year. I can’t make this stuff up.
- Microsoft will acquire cybersecurity firm Mandiant… which will bolster MSFT’s efforts to protect its customers from hacks and breaches
- Apple unveiled its ‘Square Killer’… a tap-to-pay feature that will allow businesses and retailers to use an iPhone to accept Apple Pay, credit and debit cards, and crypto == without any other hardware necessary.
- American Express launched a no-fee checking account… aiming to lure non-business account holders with generous perks.
- The Oscars are coming… but once again they’ve snubbed the 2 top-grossing movies: “Spider-Man” and “No Time to Die”. FYI: 50% of pre-pandemic moviegoers have yet to return to theatres, and 10% say they never will.
- Inflation continued its never-ending pace… as the CPI increased 7.5% YoY – the fastest rate since 1982. Fuel oil was +9.5% and electricity +4.2% in January alone. Used cars are now up 40% YoY.
- Per Steve F - Pt1… the drop in private employment from December 2021 to January 2022 was the largest decline during the recovery. The numbers are beginning to stink like 3-day old fish.
- Per Steve F – Pt2… What about the +467k jobs in January? It was caused by an unprecedented increase in government hiring. Federal, state, and local governments hired +750k employees since December 2021. There has not been an increase in government employment this large for at least 20 years. High inflation and no jobs – all in an election year!
Crypto-Bytes:
- ‘What a Crypto-Bowl’ – Pt1: This game could take on a crypto-flavor because of all the ads – including Matt Damon’s now infamous Crypto.com commercial.
- ‘What a Crypto Bowl’ – Pt2: Coinbase, FTX, and Crypto.com are all running ads, some of which sold for a record $7M per 30-second slot. FTX said that their ads aren’t just meant to win over customers, but also to court regulators by promoting a ‘healthy image’.
- Meanwhile Budweiser & Miller commercials… will feature NFTs, the metaverse, and even Barbra Streisand.
- Biden plans to release an executive action… demanding regulation for Bitcoin and other cryptocurrencies. Since they are being traded freely between countries, crypto is now a “matter of national security.” Don’t expect any real reform this year, and then there’s the mid-term elections.
- The trust banking arm of Mitsubishi UFJ… is set to issue a stablecoin as a means to enable instant settlement of securities transactions rather than days.
- Investment in blockchain and crypto in 2021… exceeded the total for the 3 previous years combined.
- The Canadian branch of KPMG… has made its first purchase / allocation of crypto assets to its corporate treasury.
- The robo-advisory firm Betterment says it's acquiring Makara… a crypto-currency robo-advisor, as it jumps into digital assets.
- BlackRock, the world’s largest asset manager… is preparing to offer crypto-currency trading services to its institutional investor clients.
- Binance invested $200m in Forbes… as the legacy publisher looks to go public via SPAC = Magnum Opus.
- Zynga, the gaming company with hits like Farmville… is building out its blockchain team and readying the launch of its first NFT games.
- What’s this world coming to… Ted Cruz bought his first Bitcoin, and Tucker Carlson is now regularly hosting pro-crypto guests on Fox News.
- A bill introduced into Tennessee’s State House… would allow all state and municipal jurisdictions to invest in crypto and NFTs.
- Texas is the world’s up-and-coming Bitcoin mining hub: The Texas Gov. recently announced that thousands of pounds of Bitcoin mining equipment are being transferred from China to Texas.
Last Week:
Monday: We still have a gazillion earnings reports ahead of us, but most are of smaller size. Do we continue to bounce higher, or stall out here? If we go higher, will it be energy or mega-cap tech that is going to take us there? Well, they’re buying the prime names like: AMD, NVDA, LRCX, SNOW, but I don't trust them. I could see nibbling on WFC over $57.12 and maybe some VALE over $17. Energy is still in vogue, so maybe we could look at SLB over $39.60. Be cautious.
Tuesday: Remember GOOGL? They crushed earnings and announced a 20 for 1 stock split – which got them a 400-point gap up. But in the last 4 sessions they've virtually given it all back. Facebook is down 100 points in two sessions. Something has changed. I feel the Street is not willing to go higher until they see what the CPI says on Thursday. Here’s a weird thought: if everyone is dying of COVID, shouldn't funeral homes be swimming in profits? I just pulled up a chart of HI, and I liked what I saw. It opened at $46.92 and has already run to $48.23. There’s also CSV in that space, and I could see taking that if it got over $51.
Wednesday: We’re moving decisively higher on virtually no news. The only thing that makes sense to me is that maybe they leaked the CPI (inflation data) yesterday afternoon – and it’s not that bad. I don't know that to be the case, but it's awfully strange to have a monster up day, one session ahead of an interest rate moving report. Inflation in the agriculture space, has really boosted their ETF = DBA, and I could see it continuing to move higher.
Thursday: The CPI came in 7.6% YoY, which is worse than any time since 1982. Given it’s really around 15%, the CME is now giving the FED a 53% change that it increases interest rates by 50-basis points in March. Maybe they try and push the market higher on the idea that the economy will roar higher with fewer mask / vaccine mandates, but that CPI number was really butt-ugly. This market is broken. There's some serious back-n-forth going on in this market. I’m expecting a lot more volatility.
Friday: We haven't seen our FED do a hike “in-between meetings” in a decade. Just the idea that they might come out with a big 50-point hike scared them, and by the time yesterday was over, the DOW was down -500 points. This morning it's all about damage control. Let’s face it, we are going to see a rate hike. The real question is when and how many? If they don’t move quickly, inflation could resemble Weimar, Germany. One or two little hikes will do nothing to halt this inflation, but doing the amount necessary, will crush the economy and the market. Stop the Presses: our FED just called an unscheduled, closed door meeting for Monday. The last time they did that (2015), they hiked rates 2 days later. Secondly, via a U.S. Press Conference we were just told that the Russians are going to attack Ukraine this coming week. They say Putin has made up his mind. It’s a heck of a way to go into a weekend – if it’s true?
TW3 (That Was - The Week - That Was):
A little backstory… In 2016, Bitfinex was hacked for $60m. Last Tuesday, the U.S. Justice Department said that it recovered the money tied to the 2016 Bitfinex hack. That money has now turned into more than $4B, and those who lost big will be getting a huge payday.
How did it happen?
- US DOJ agents arrested a married couple, Ilya "Dutch" Lichtenstein and Heather Morgan, in New York on Tuesday on charges that they conspired to launder proceeds from the Bitfinex hack in 2016. The defendants allegedly used a number of techniques to launder the stolen bitcoin, including splitting transactions up into thousands of smaller transactions, using darknet markets, and converting the crypto into different crypto.
- The police were able to access the stolen funds after decrypting a file (saved to Lichtenstein’s cloud storage account) which included 2,000 crypto wallet addresses and their private keys associated with the hack. An unsealed federal court opinion emphasized the role blockchain analytics played in tracking the funds.
- The judge has halted the release of Dutch and Heather on bond due to them being a potential flight risk. And because it seems that Dutch and Heather are: “odd ducks” – and hardly staying out-of-sight and off-the-grid. Heather is a self-confirmed expert in social engineering, a surrealist rapper, and a frequent TikTok poster. Dutch is a self-proclaimed cloud security expert not shy of pushing a YouTube video out there every now and again.
- They’ve been living a life of luxury and travel for the past 16 years. They’ve been producing TikTok and YouTube videos – under the auspice of ‘hiding in plain sight’. The charge against them carries a maximum sentence of 20 years in prison, and potentially a fine of no more than twice the value of the property involved (< $8B).
- From an investment standpoint, $60m was invested and 16 years later – over $4B will be returned. A 41% / yr. return is nothing to sneeze at.
Next Week: Pick 1: Inflation vs Economy vs Elections
Market Update:
- In Review: Inflation is out of control. With an 8% inflation reading, our FED has no handle on inflation and their words are no longer working.
- We’re Back… inside of the Volatility Box == an S&P area from 4450 down to 4211. Unfortunately, it’s the NASDAQ that has me concerned.
- The Volatility Futures (/VX)… are inverted & ‘in backwardation’ – which means that the market is viewing 100 days out as being LESS risky than 30 days out. Tip #1: If/when this market goes below 4211, traders will begin to: ‘sell first and ask questions later.’
- The VVIX is around 140… which says everybody is hedging.
- Our Bonds are displaying real fear… Large amounts of capital are moving into Bonds and the Dollar. The world knows that the equity side is a bubble, and nobody believes our FED can navigate our economy smoothly. The only other asset class catching a bid right now is energy (/CL).
- Our Dollar remains bid… reflecting a flight-to-quality just like bonds and oil.
Looking Forward:
- A Quickie FED Meeting was called for Monday: The rumor-mill is talking about 50bp surprise rate hike, but right now that is complete conjecture.
- Tip #2: If there is a surprise rate hike next week, it will have negative implications for the economy = = abandon tech & embrace energy.
- Tip #3: The Nasdaq (/NQ) breaking under 14k == Mr. Toad’s Wild Ride. The QQQ’s are close to ‘bear market territory’ == down +13% YTD.
- The Financials (XLF) could suffer their largest losses… because they have been somewhat unscathed to date.
- Tip #4: Crises happen in markets, when oil is exploding higher. Every major spike in oil has foreshadowed an upcoming, significant market move lower.
Volatility Tactics = What do you do?
- Volatility is excellent… at allowing traders to do EXACTLY the right thing – at EXACTLY the wrong time.
- Sell Premium… because picking a direction, a top or a bottom is going to be futile in this market.
- Tip #5: Try Hedging using Inside Spreads… If / when you get a chance to review the trade below, you will see: that it makes money due to high volatility – wherever the market moves, BUT it requires baby-sitting / timing decisions if the markets were to move decidedly lower. It isn’t for everyone, but is based around premium selling.
SPX Expected Move:
- Last Week’s (EM) = $107. We almost hit the upside on the Expected Move on Wednesday, and almost touched the downside on Friday.
- Next Week’s (EM) = $135. I’m finding duck-n-cover behavior everywhere.
Tips:
HODL’s: (Hold On for Dear Life)
- **BitFarm (BITF = $3.91 / in at $4.12)
o Sold May, Dec ‘22: $5, $7.50 CCs for income,
- **Bitcoin (BTC = $42,600 / in at $4,310)
- CPG (CPG = $6.70 / in at $6.44)
o Sold Jul $7.50 CCs for income,
- Energy Fuels (UUUU = $6.81 / in at $11.29),
o Sold June $11 CCs for income,
- **Ethereum (ETH = $2,950 / in at $310)
- GME – Holding
- **Grayscale Ethereum (ETHE = $23.75 / in @ $13.44)
- **Grayscale Bitcoin Trust (GBTC = $29.61 / in @ $9.41)
- Hyliion (HYLN = $4.02 / in @ $6.01)
o Sold April $6 and $7 CCs for income,
- **Loopring (LRC = $0.96 / in at $1.94)
- **Solana (SOL = $97 / in @ $141)
- Uranium Royalty (UROY = $3.36 / in at $4.41)
o Sold April $5 CCs for income,
- Vertex Energy (VTNR = $4.86 / in @ 4.74)
o Sold April $5 CCs for income.
- **Yearn Finance (YFI = $23,300 / in @ 32,850)
** Denotes a crypto-relationship
Thoughts:
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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