Ask more questions… The ability to speak-up always creates conflict, disruption, and inefficiency. The student raising his hand, the critic, and even the suggestion box – all create an environment for improvement. It’s much easier to sit there, shut-up, and do what you’re told. After all, you’re probably not getting paid-to-think. And falling-in-line comes with inducements, bonuses, and the promise of discovering the most efficient process. Unfortunately, 80% of the time the existing path requires updating, and its supporters will refuse to admit defeat or bounce-back stronger. As the world changes, you’ll find that open, transparent systems that accept all contributions and disruptions – are far less brittle than their shiny object counterparts. Their only issue is that they CAN’T be controlled by a single entity. Shame on them!
Let’s benchmark it… Benchmarking is the ability to look at every element of your offering, and compare it with its best-in-class competition. Unfortunately, what makes your offering remarkable is NOT a particular element, but rather the combination of the pieces working together as a unit. What aspect of your offering is: (a) worth talking about, (b) hard to find, and/or (c) helps you achieve your goals: cheaper-better-faster? 80% of the time, benchmarking is a distraction. Find out what makes your offering great / gives you an edge – and do it even better!
The Market:
Isolation and De-Globalization: I worry about the future of globalization, the sharing of technology, and how it will impact world markets going forward. Over the last few decades (since the end of the Cold War), we have experienced massive global growth. However, in the past year that growth has contracted.
1. First came China’s decision to redefine and reposition its technology assets. This was a large misjudgment on their part that both weakened their money flow and exposed their soft market structure.
2. Then came Russia’s move to invade Ukraine. Another misjudgment that not only underestimated reality, but also put themselves on an island of untouchables that no one will want to work with going forward.
3. China has time to turn things around. I remain optimistic that we’re witnessing a hurdle – not a roadblock. But Russia has lost trust and pace, and will never catch up.
My worry surrounds the risk of isolation and de-globalization. This would be a setback with huge consequences for innovation, education, and growth. There is currently a lot being accomplished in decentralized finance, but I don’t know that DeFi alone is enough to keep the global dream alive. DeFi eliminates trade barriers, currency risk, and transaction logistics – but it’s currently away from mainstream implementation. I’m counting on China to make the correct next step – fingers crossed.
InfoBits:
- Tesla (last week) raised its car prices TWICE… after warning of inflationary pressures. Buy a Tesla AND the price goes up!
- We can return to the office, but not back to normal: Pre-pandemic, just 4% of Americans worked fully-remote, but by May 2020 – it was nearly 50%. It’s now back to 38% this month. The real issue is that 90% of remote workers want to stay at least partly remote. That means pre-pandemic behavior isn’t happening anytime soon.
- Going for the gold… especially as gold prices approach all-time highs. People are moving $’s from stocks to safe haven assets like gold, bonds, and cash.
- Global venture funding fell 17% MoM… and the most impacted were early and late-stage funding opportunities. This suggests that caution has started to creep into startup investing.
- Morgan Stanley sees 0% GDP growth for China this quarter.
- The U.S. Bond market is down 7.5% from August 2020… the largest correction we've seen in the last 25 years. During that time, the 10-Year Treasury yield has almost TRIPLED.
- Ford will ship Explorer SUVs without all the parts… and add them later. I guess having most of a car is better than no car at all – right?
- Foxconn, which assembles most of the world’s iPhones… has paused production at its two Shenzhen factories.
- Uber is adding on a $0.50 fuel surcharge… which will be in place for at least 2 months and go entirely to drivers and couriers to offset the rising cost of gasoline.
- Meta employees will have to start paying for: their laundry, valet service, and dinners. Perks are being cut as the company transitions to a hybrid-work model.
- Latest Producer Price Index hits 10% YoY... the largest 12-month move ever. But it came before Russia’s invasion of Ukraine – which says: there’s more where that came from.
- SoftBank lost $25B and laid off thousands... amid the tech crash. They borrowed against their declining tech investments, and that ate away at their book value and loan-to-value ratio.
- The Saudis are considering accepting Yuan instead of Dollars… for Chinese oil sales. The U.S. dollar was the dominant currency in the global petroleum market == ‘not anymore!’
- Time to dust off that old college coffee mug… because Starbucks is phasing out its signature paper and plastic cups over the next 3 years in a renewed effort to get customers to embrace reusables.
- Changing the Clocks:
o Shoppers spend nearly 4% less in the month following the time change.
o When the U.S. loses an hour of sleep – it costs $500m in lost productivity.
o SAT scores drop by 2% when taken after the fall time change, and
o An extra hour of darkness increases depression by over 10%.
- EU regulators greenlighted AMZN’s purchase of MGM because of:
o the need for streaming services with larger content libraries,
o the additional scale needed for film and TV production, and
o the additional fees that multi-billion-dollar M&A activity create.
- Benz is opening a $1B EV battery plant near its Alabama factory… which will be retooled to make electric SUVs.
- The housing market is still a dumpster fire… as the FED’s increased rates are pushing mortgages above 4% for the first time since May 2019.
- General Motors has bought… SoftBank’s stake in self-driving startup Cruise for $2.1B – giving GM 80% ownership.
Crypto-Bytes:
- Members of the European Parliament voted on… a draft uniform legal framework for crypto assets in the EU. The framework includes measures for consumer protection, fraud, and the environmental impacts of mining.
- Yuga Labs, the creator of Bored Apes Yacht Club… is buying CryptoPunks and Meebits – bringing the 3 most valuable NFT collections under 1 pixelated roof.
- Michele Korver has joined Andreessen Horowitz… as head of crypto regulatory. She’s a former DOJ official who also served as the 1st chief digital currency advisor of U.S. FinCEN.
- The Zuck confirmed that Meta is building more Instagram functionality… that allows users to display and mint some NFTs.
- Argentinian crypto exchange Lemon Cash is expanding into Brazil. Lemon Cash also plans to launch a crypto card this year via a partnership with Visa.
- Crypto miner Bit Digital (after moving out of China)… has deployed about half of its total crypto mining rigs in North America.
- Ukraine’s parliament passed a bill to legalize cryptocurrency. It includes the framework for the regulation and management of cryptocurrencies like Bitcoin and Ethereum.
- eBay announced that it will be exploring… new forms of payments and a digital wallet to be released in Q2 of 2022. A digital wallet would allow users to pay in crypto and support an NFT marketplace.
- Taiwan’s MaiCoin Crypto Exchange… is considering selling shares on the Nasdaq within 2 years.
TW3 (That Was - The Week - That Was):
Monday: Global bond markets are tumbling – pushing yields higher, with the benchmark 10-year almost at recent highs. Stocks are looking to bounce back after another dreadful week, where the S&P 500 lost 2.9%, the Nasdaq dropped -3.5% and the Dow lost 2% - falling for five-straight weeks now. On Friday, a huge options expiration is coming. Word is that some $3T worth will be closing out and rolling out. That's big. This is an over-sold, bear-market rally – in my opinion. After all, peace talks have ended with no resolve. China is shutting down entire cities over COVID. We’re just one, ugly headline away from down-you-go. Now we have China suggesting that they might be open to supporting Russia's military. Our FED is desperately trying to keep the wheels from flying off this market. Now that we're down so close to those Feb lows, any good news could spring board us into a wicked rally.
Tuesday: Check this headline: the WSJ reports that Saudi Arabia is in talks to price its oil sales to China in Yuan. That could very well be the ‘crack in the dam’ that forces the U.S. off its global currency reserve perch. Now with this situation in Ukraine, sides are being drawn up. The Saudi's don't seem to like Pres. Joe very much. China is sympathetic to some of Russia's concerns. Huge shifts are taking place around the world. There are a ton of imbalances out there. The PPI came in under estimates (cough-cough / wink-wink) – at least now J. Powell can back off from having to say he's aggressive, and take a more moderate approach. They think Powell's hike is going to be beneficial for financials, but I think that's questionable.
Wednesday: So, we got our quarter point rate hike, but I don’t know quite what to think about it. Powell also announced that there will be 6 more rate hikes in 2022. As Ukraine continues to heat up, the markets might slow down all on their own. So, he could blame the war, not his hikes. This whole market is fluid and reverts back to news flow constantly. Yes, we might eek out another green day tomorrow, but, I don't quite trust it. In addition to raising interest rates, the Fed anticipates reducing its $9T balance sheet. J. Powell indicated that trimming the Fed’s fat balance sheet could begin in May, and it could act like an 8th rate hike.
Friday: It's a quad-witching Friday. Is this rally really the start of something big, or a classic bear market bounce? Bear markets are notorious for sliding lower and lower and then punctuated by vicious reversals higher, only to fade off and go lower. Only time will tell, but I have to say, I don't think this market is pricing in the problems we're going to have in the near future. Every country is on the hate Russia band wagon, and (on the surface) refusing any business with Russia. We're going to see global shortages of diesel fuel. Russia produces gobs of diesel fuel – almost more than anyone else. Reuters' John Kemp reported this week that diesel fuel inventories in Europe are at their lowest levels since 2008, and 8% (35m barrels) lower than the 5-year average for this time of the year. In the U.S., the situation is worse – where diesel fuel inventories are 21% lower than the pre-pandemic 5-year seasonal average. In Singapore, a global energy trade hub, diesel fuel inventories are 4m barrels below the pre-pandemic seasonal 5-year average. If diesel begins to run higher here in the U.S., it’s going to drive the price of everything we do much higher again. This is just one inflationary effort that is NOT being priced into a malfunctioning supply chain.
AMA (Ask Me Anything…) – an aggregation of e-mail questions
Crypto’s moving … How do I get involved? First – get a Coinbase account on www.coinbase.com . Then you may want to (per Suze Orman) dollar cost average into buying some crypto. The idea is that rather than making one big investment at a single price, you buy a little today, a little more next month, etc. The goal is lower your average cost of owning an asset – assuming the cost of that asset goes higher over time. Crypto volatility can be intimidating, and dollar cost averaging is a way to reduce that. The strategy is minimal engagement, but the flexibility of crypto sizing fits nicely. With Bitcoin and Ethereum well off last autumn’s highs, and with a new White House push to begin regulating crypto – the world isn’t quite as bullish on crypto as it had been. But if you think inflation isn’t going anywhere anytime soon and crypto might be more attractive than traditional currency, and if you think technology will beat government – those cryptos might present a bullish opportunity. Small custom dollar amounts in BTC and ETH are low-capital ways to get long crypto a little bit at a time. And when they rally in the future, well – “I love it when a plan comes together!”
Next Week: Are we Bottoming?
Fun with the FOMC:
- We had a 250-point, gamma-squeeze rally to the upside last week, the likes of which we haven’t seen in a very long time.
- Our FED = we have liftoff – aka a 0.25-point rate hike with more to come. But they did postpone talking about that $9T balance sheet run-off for another day.
- The Treasury Yield Curve has issues, and is foreshadowing a RECESSION. On the U.S. Treasury website, you can see that the yield is higher on the 3-year than on the 10-year note. The yield curve is flattening and, in some cases, inverting. Tip #1: A yield curve inversion forecasts that a RECESSION is on the horizon.
- Why do you want to fight the FED? The FED told us that they are raising interest rates at every meeting for the coming year – at minimum. We know that this is in response to higher commodity prices and inflation, with their goal being to curb-our-enthusiasm for more goods ‘n services. Therefore, last week’s rally flies in the face of the FED’s current and upcoming moves.
Risks on the Horizon:
- Volatility was crushed along with last week’s rally – so it’s time to reload.
- The Dollar is still bid, and that tells me that currency risk has not abated and the ‘flight-to-quality’ trade is still alive and well. Tip #2: Watch the dollar ($DXY) – risk off is when the Dollar falls to $96 and risk on is when the Dollar continues higher.
- Oil caught a bid late last week, and appears to want to remain above $100/barrel. Tip #3: Watch Oil (USO) and Gold (GLD) as both could be headed higher along with the Dollar.
- Inflation is out of control, and if calculated using the ‘old rules’ would be showing us over a 16% YoY increase. This has profound negative retail implications on companies like Walmart. People are going to be nervous about spending money that they don’t have. Tip #4: Watch Walmart (WMT) to the downside over the summer.
Geopolitics:
- The damage has already been inflicted, and in fact if the war ended – sanctions against Russia will remain.
- Add that to inflation and our FED = limited upside reward.
Trade Setups:
- Higher = Gold (GLD), Oil (USO).
- Lower = Walmart (WMT) over the summer.
- Currently, there is a huge amount of S&P open interest around the 4350 range; therefore, look for the market to gravitate there (or lower) over the coming weeks.
SPX Expected Move (EM):
- Last Week’s EM == $144 (expected move), but the actual move was almost $250 to the upside. Currently, the market has limited upside reward vs downside risk.
- Next Week’s EM == $106 (expected move) is smaller due to the collapse in the volatility index (VIX).
- Are we bottoming? Short-term = maybe, but Longer-term (into the summer) = NO WAY!
Tips:
HODL’s: (Hold On for Dear Life)
- CASH == Nexo & Celsius == @ 8 to 12% yield
- PHYSICAL == Gold @ $1,922 / oz. & Silver @ $25.14 / oz.
- **BitFarm (BITF = $3.97 / in at $4.12)
o Sold May, Dec ‘22: $5 CCs for income,
- **Bitcoin (BTC = $41,900 / in at $4,310)
- CPG (CPG = $6.97 / in at $6.44)
o Sold Jul $7.50 CCs for income,
- Energy Fuels (UUUU = $9.70 / in at $11.29),
o Sold June $11 CCs for income,
- **Ethereum (ETH = $2,950 / in at $310)
- GME – Holding
- **Grayscale Ethereum (ETHE = $24.20 / in @ $13.44)
- **Grayscale Bitcoin Trust (GBTC = $28.70 / in @ $9.41)
- Hyliion (HYLN = $4.41 / in @ $6.01)
o Sold April $4 CCs for income,
- **Solana (SOL = $92.50 / in @ $141)
- Uranium Royalty (UROY = $4.73 / in at $4.41)
o Sold April $5 CCs for income,
- Vertex Energy (VTNR = $8.64 / in @ 4.74)
o Sold April $5 CCs for income.
** Denotes a crypto-relationship
Trade of the Week: Oil and gas prices rallied sharply at the end of last week, and could be the shape of things to come. The Long Call vertical in USO could be exciting:
- BUY the 14 April 22 $75 Call, and
- SELL the 14 April 22 $73 Call – if you think that oil might continue to rally or at least stay off its lows for the next few weeks.
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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