RF's Financial News

RF's Financial News

Monday, March 28, 2022

This Week in Barrons: March 27th, 2022

A simple act of kindness (thx RO)…   Steve Mitchell passed away recently.  He was the gentleman who sat behind Coach K. in Duke University's Cameron Indoor Stadium for the last 37 years.  Steve was born with Down syndrome.  His family shrugged off the doctors’ advice, took him home post-diagnosis, and integrated him into the community.   In 1980, the only thing Steve wanted for Christmas was a Duke basketball ticket (a big ask).  Steve’s brother had a construction company that was hired to renovate the new coach’s (Mike "Coach K" Krzyzewski’s) home.  He explained his brother’s Christmas wish to the new coach, who said: “He can sit behind me.”  The following season, Steve wrote the coach a letter: “Coach, I know we’re going to have another great year. I was hoping that I could sit near you again.”  For 37 years, Coach K. said ‘Yes’ to a family that had heard their share of ‘No’s’. Coach K. shook Steve’s hand before every game.  This type of kindness extends far beyond team affiliation.  This is the first season that a ticket reserved for Steve Mitchell – isn’t waiting at the Will Call desk.  Best of luck to you Coach K. and to Steve – may you rest-in-peace.

Remember when FedEx answered their phone on the 1st ring?    FedEx used to hire people who cared about the customer experience.  They gave those employees the tools to keep FedEx’s promises.  Service wasn’t simply a tool used to make profits, but a key part of why they were there in the first place.  But FedEx changed in response to stock-market pressures – sacrificing their response times, their personal touch, and their culture.  Hospitality is NOT a tactic, but rather a choice.  You can always build a profitable organization, when you surround yourself with people who care, love solving problems, and enjoy creating connections.  Sounds like FedEx used to be a great place to work.

Hire for Attitude – Train for Expertise:  The typical online job site lists millions of jobs with just about every one requiring in-depth experience.  Only 10% of the applicants have the required level of expertise, and organizations will be required to pay far more for them, and work a lot harder to retain that sort of skillset.  Therefore, most companies are creating jobs that can be done OK by people with an average amount of expertise.  That means that the only differentiator for just about every job is: attitude, honesty, resilience, commitment, compassion, and a willingness to be coached.  If that’s true, why aren’t organizations simply: hiring for attitude and training for expertise?

The Market:  

Stagflation (inflation + stagnant growth) is coming…    Typically, inflation and recessions don’t happen simultaneously.  Unfortunately, when they do: profits shrink, assets (stocks) tumble, and workers lose jobs.  The only cure for stagflation = recession (or worse).  Consider yourself warned. 

Just looking … thanks.  The #1 element in sales is: How do you manage the window shoppers?  Buyers will manage themselves, but the window shoppers drive sales people crazy.  Rookies will spend a lot of time hustling to get the shoppers to act.  Should we: post again, create more incentives, dumb it down, or do we just focus on creating urgency.  95% of our shoppers – will remain window shoppers forever.  The goal is to focus on the 5% buying segment.  Why?  Because when buyers use your product / service to gain a competitive advantage – that’s when the shoppers will turn into buyers.  Shoppers will only buy when they MUST, and not when they SHOULD.  You can work on shopper-to-buyer conversion OR work on segmenting that 5% buying contingent and selling them.  Personally, I’d focus my time and effort on the later. 

History doesn’t repeat, but it rhymes:  Most people are convinced that ‘the bottom’ is in, but to me this feels like a bear market bounce.  Bear market bounces can go further and longer than you'd expect.  In late 2000, the S&P put in a 10% bounce after falling a considerable way – and then fell from 1425 to 1075.  It then bounced to 1325 (21%) before falling to 975 – bouncing to 1175 (24%), and yes – back down again to 775.  So, if you ask why I think we're probably in a bear market – it’s because I’ve seen this pattern before.  In early 2008, when the market started to implode, we got a 14% rally before falling further.  Having said all of that, the commodity / energy play will last longer than people think.  And we know that NO COUNTRY can pay their bills – so some new financial system is virtually inevitable.


-       Carl Icahn thinks we could be heading into…   a “recession or even worse.  I really don’t know if they can engineer a soft landing.  I think there is going to be a rough landing.  Inflation is a terrible thing when it gets going.”

-       Goldman Sachs estimates that the odds…    of a US recession are 35%, and has already cut its growth forecast for this year.

-       J. Powell says:   “We may well conclude that we need to move more quickly.”

-       Berkshire agreed to buy insurance conglomerate Allegheny…   for $11.6B in cash.  Insurance is a Berkshire bread-and-butter industry that generates one fifth of its profits.

-       Date night on a school night…   as Match launches Stir, a dating app for single parents.  Match is targeting the 20m single US parents.

-       GM is doubling down on driverless-ness…   by pouring another $3.5B into its self-driving subsidiary Cruise, as SoftBank sells its stake.  Cruise opened its robo-taxis to the public last month, but is still losing cash.

-       Tesla just cut the ribbon…   at its new Gigafactory outside Berlin.

-       Russia’s war on Ukraine has sent fertilizer prices up 40%...   as Russia is a crucial supplier of the world’s fertilizer, and that’s threatening a global food crisis ahead of spring planting season.

-       Pot stocks trended higher this week…   on rumors that the House Rules Committee may vote on the federal legalization of marijuana next week.  The MORE Act aims to scrub marijuana from the U.S.’s controlled substance list, as well as revoke criminal penalties associated with marijuana sales.

-       Jobless claims haven’t been this low in 52 years…   as unemployment rolls continue to shrink.  Employers continue to struggle to fill positions, and available workers continue to ask for higher wages and better benefits.

-       Mortgages haven’t been this high since…   January 2019 – as the 30-year mortgage rate surged to 4.42% last week.  This could slow re-financing and buying – which in turn could result in falling home prices.

-       Instacart was just Insta-Devalued…   by almost 40% to help the company attract talent and adapt to market conditions.

-       Apple is working on a hardware subscription service for iPhones.

-       SoftBank is seeking a $60B valuation for ARM…   when the business goes public.  SoftBank acquired the business in 2016 for about $32B.


-       Remember the BTO song “You Ain't Seen Nothing Yet”…   Inflation is only just getting warmed-up.  The recent increase in energy and food prices have yet to be priced-in in the Consumer Price Index (CPI) data.  The next CPI report could see inflation in the double-digits.

-       In an effort to continue expanding globally…   cryptocurrency exchange FTX is establishing a new division in Australia. 

-       Goldman Sachs completed an OTC crypto-related trade…   with Galaxy Digital.  This is just the latest move drawing the two closer together. 

-       Big banks are caving to crypto….   Goldman Sachs is the first to trade crypto options directly, opening the door to more crypto products on Wall Street.

-       NFTs are becoming more practical:   Early NFTs centered on digital art, but are now being used to verify ownership of physical assets – from a plot of real estate to a herd of cows.

-       Thailand will ban crypto as a means of payment, but not on ‘trading’.   The agency cited money laundering concerns as the reason for the ban. 

-       BlackRock (BLK – the world’s largest money manager)…   is exploring how to serve its clients with digital currencies.  Larry Fink (CEO) cited increasing interest from clients as well as a belief that the Russia-Ukraine war will lead to the accelerated adoption of digital assets.

-       Fireblocks and the New Zealand Banking Group (ANZ) have teamed up to mint a stablecoin that will be pegged to the Australian dollar. 

-       The U.S. Senate is considering a bill…   that would examine El Salvador’s bitcoin (BTC) experiment.  They’re looking to understand and mitigate the potential risks that adopting bitcoin as legal tender in a foreign country would have on the U.S. financial system. 

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

The bottom line is that we closed out the week with the DOW up maybe 300 points from the start and I didn't expect that.  What happens this week?  IF nothing goes boom this weekend, I think they're going to try and scratch and claw us higher, but it will be tough.  But if something happens this weekend, I could easily see us roll over and plunge.  News flow should still rule the daily direction.  So, be on guard for fast reversals.  Energy, defense, and cyber security are all good bets.  Alternative energy plays like EV's should also remain in vogue.

AMA (Ask Me Anything…)

   A Russian brain-drain of epic proportions…  As the world turns, distributed software development continues.  What’s going on beneath the surface is the largest real-time intellectual migration in history.  Russian / Ukrainian developers despise Putin at a level that only they can comprehend.  Many have left their homes as a consequence of the attack on Ukraine.  They locked their apartments, covered their cars, grabbed their kids, and decided where to go based upon flight availability.  Their savings are worthless and none believe that they will ever return.  It’s incredible that one nation can be intellectually decimated in that short of time.

   Russian oil moves OFF the dollar standard… Last week Putin declared that Russia’s gas and oil would have to be paid for in Russian Rubles.  Whoa – wait a minute.  The US dollar has been the worlds reserve currency for decades.  Why?  After WWII, we said that we'd cover the dollar with Gold – making it a gold-backed currency with real value.  But when we printed more dollars than we had gold to cover, we immediately closed the gold window and went directly to the Saudi's.  We said: "If you only sell oil in dollars, we'll pledge our military to protect you forever."  The house of Saudi liked that deal, and it's been that way since the 70's. Because oil could only be sold in dollars, every country had no choice but to turn in their currency and buy dollars on the open market, so they could in turn buy oil.  It was our way of continuing to be the world’s reserve currency.  It's why we alone can print trillions of dollars and force our inflation around the world. 

   All that changed this week.  Europe gets 40% of their natural gas from Russia, and they cannot do without it.  Now, they're going to have to go shopping for Rubles to pay for it.  That will cause a demand spike for Rubles, and the value of the Ruble will move a lot higher.  Russia will (once again) be able to trade with Southeastern nations and especially China.  Everything that Russia used to buy from the US, they will turn to either India and/or China.  When any other nation wanted to sell their oil in something other than Dollars – we put a violent stop to that.  So, this was a major escalation, and frankly it scares me a bit.  The west has wanted to decimate Russia for many years, and has hurt them very hard with these sanctions.  The next move lies within NATO and the global Central Bankers.

Next Week:  Will Bonds bring down the Nasdaq?

Who’s Driving this Bus?  The S&P is only down 5% YTD, and recovering nicely from a nasty sell-off.  And volatility is being crushed down to an almost unbelievable level – especially given what is going on in the world.  

-       The BOND MARKET is driving this bus.  Bonds are getting decimated / Interest rates are sky-rocketing.  A rising interest rate environment can be quite formidable for the home builders, and the home products stores.  The financials (XLF) have been on the good side of rising rates and are now basically unchanged for the year.  

-       The 10-Year Treasury is now sitting at 2.5% - after starting the year at 1.6%.  That means that the 10-year is up 53% on the year.  This rate impacts credit cards, mortgages, car loans, and stock buy-backs.  Without stock buybacks, the NASDAQ will be ‘dead in the water’.  AND we have a yield curve inversion, which basically means that we’re ‘on the clock’ for a recession.  

-       With all of these elements screaming: “Watch out below.”  Tip #1: You may not WANT to go SHORT, but you SHOULD buy some protection.  I believe we’re in the middle of a short-covering gamma squeeze, until interest rates can no longer be ignored – and down we go.  

-       Commodity Volatility is huge.  Oil, gold, copper, and grains are still rocketing to the upside with virtually no end in sight.

-       Equity Volatility is coming – perhaps as soon as next week with the PPI and CPI on next week’s calendar.

Trade Ideas and Positioning

-       Financials are ripe for a short – Tip #2: In the Apr 29 or May 6 series: Buy the $41 Put and Sell the $37 Put for < $1.58.  Why?  If Bonds rally – rates fall and financials fall along with them.  If Bonds continue to sell-off – then rates will rise and shortly choke-off all stock buy-backs – hitting the equities right where it hurts.  And once the NASDAQ / mega-market-caps come down – the rest of the equity markets come with it. 

-       Apple is ripe for a down period – given it has been UP 9 days in a row.  And with interest rates screaming higher – How does their BOD approve any stock-buy-backs in order to keep their stock price higher?  Tip #3: In the Apr 22 series: Buy the $175 Put and Sell the $170 Put.

 SPX Expected Move (EM):

-       Last Week’s EM = $106

-       Next Week’s EM = $89


J. Powell is out on the circuit threatening 50 basis point rate increases.  Mortgage applications are crashing because people can't afford the last rate hike.  Inflation is so high that the AVERAGE price of a new home is over $500k.  And the ‘talking heads’ believe that we could rally to all-time highs.  Remember in 2008, the S&Ps rallied almost 9% right after Lehman imploded, and then went straight down.  Later in 2008, we rallied 18.5% before going a lot lower.  Counter-trend rallies in a down market are wicked.  If you wish to participate in these bounces, my only advice is to: hold your nose and jump in.  I personally prefer the 3 C’s: cash, crypto, and commodities.

HODL’s: (Hold On for Dear Life)

-       CASH == Nexo & Celsius == @ 8 to 12% yield

-       PHYSICAL COMMODITIES == Gold @ $1,922 / oz. & Silver @ $25.14 / oz.

-       **BitFarm (BITF = $3.73 / in at $4.12)

o   Sold May, Dec ‘22: $5 CCs for income,

-       **Bitcoin (BTC = $44,300 / in at $4,310)

-       CPG (CPG = $7.86 / in at $6.44)

o   Sold Jul $7.50 CCs for income,

-       Energy Fuels (UUUU = $9.64 / in at $11.29),

o   Sold June $11 CCs for income, 

-       **Ethereum (ETH = $3,100 / in at $310)

-       GME – Holding

-       **Grayscale Ethereum (ETHE = $25.76 / in @ $13.44)

-       **Grayscale Bitcoin Trust (GBTC = $30.17 / in @ $9.41)

-       Hyliion (HYLN = $4.37 / in @ $6.01)

o   Sold April $4 CCs for income,

-       **Solana (SOL = $103 / in @ $141)

-       Uranium Royalty (UROY = $4.33 / in at $4.41)

o   Sold April $5 CCs for income,

-       Vertex Energy (VTNR = $    9.39 / in @ 4.74)

o   Sold April $5 CCs for income.

** Denotes a crypto-relationship

Trades of the Week:  

-       Bearish Put Spread in AAPL:

+1 Buy 22 Apr 22 $175 Put // -1 Sell 14 Apr 22 $170 Put == < $2.00 debit

-       Bearish Put Spread in XLF:

+1 Buy 6 May 22 $41 Put // -1 Sell 6 May 22 $37 Put == < $1.58 debit

Follow me on StockTwits.com to get my daily thoughts and trades – my handle is: taylorpamm.

Please be safe out there!


Expressed thoughts proffered within the BARRONS REPORT, a Private and free weekly economic newsletter, are those of noted entrepreneur, professor and author, R.F. Culbertson, contributing sources and those he interviews.  You can learn more and get your subscription by visiting: <http://rfcfinancialnews.blogspot.com/>. 


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