RF's Financial News

RF's Financial News

Sunday, May 15, 2022

This Week in Barrons: May 15th, 2022


Our FED – who needs ‘em? 
 Think about it, why do we need a FED?  If ever there was a case to support a floating Fed Funds rate based upon real-time efficient markets, that time is now.  The antiquated process of group decisions by seven random Fed governors, appointed by some president for 14-year terms, may have made sense in 1914 but makes zero sense in 2022.  We have a liquid, $50T debt marketplace that sets the true daily rates.  However, for some unknown reason we rationalize that a group of very smart academics are better qualified than the market itself for setting interest rates.  I think the reason those roles still exist is mostly for resume purposes and speaking fees.  Ben Bernanke made less than $200k / yr. as Fed Chair, and now makes $400k / hr. for speaking at industry events.  The Fed hasn’t made a proactive move on interest rates in over 13 years.  Everything they do is a delayed reaction to the current market.  They are the ultimate masters of the obvious.  We use the Fed as an economic distraction much like the UK uses their royal family.  It’s simple - just let the marketplace set the rates and that way there is no confusion, no conflicts, no political pressure, and no more listening to Fed Chairs tell us that nobody can predict the future.  Michael Keaton said it best in Nightshift: “Instead of mixing the tuna fish in a bowl with mayonnaise, why don’t we just feed the tuna fish mayonnaise – problem solved.”  



The Market:



This market is an accident looking for a place to happen…   We are faced with a market in conflict.  What do you do when you see conflict?  Do you: (a) Just go with your gut = solve it with screaming and yelling, and move on?  (b) Avoid any action and the responsibility that comes with it – hoping that time will solve it?  (c) Or wait to get a few questions answered, do your own research (me-search) – then issue a diagnosis.  The preferred path is naturally the third one.  (a) Giving a kneejerk / screaming reaction is not an admirable trait.  (b) Stalling needlessly is never a good look.  (c) Allowing the tension to mount before opening the door for connection, accuracy, and insight = gives everyone enough time for engagement, problem-solving, and solution buy-in.


We are one day into a bear market bounce.  It can last 2 days, 2 weeks, or even 2 months. What I think I know is that we haven’t seen the real bottom in this market…yet.  We may have seen a short-term bottom, but not the big one.  With that in mind, if this upswing holds for a bit, I think you BUY what’s working.  ASML comes to mind, as silver miners finally look primed for a move higher.  Also, look toward the indices (DIA and SPY) as they must move higher along with the market.



InfoBits:



-       What grows in Vegas does NOT stay in Vegas…   as Sin City just outlawed grass.   To save water, Las Vegas is mandating the removal of lawns.


-       Weddings are everywhere in 2022…   and wedding-related expenses and jewelry are set to surpass 2019 levels.


-       Consumer confidence dipped in April…   and people have started spending less.  If inflation remains high and savings run dry, this is how recessions are born.


-       BNPL (buy now, pay later) lenders like Klarna, Afterpay, and Affirm…   are turning into BNPN (buy now, pay now) as credit is beginning to tighten.


-       Ecommerce stocks like Shopify are getting hammered…   as consumers are shopping like it's 2019 – more on experiences, less on stuff.


-       Rivian’s stock plummeted 20%...   after Ford, one of its biggest backers, dumped $8M worth of shares.


-       Uber told employees…   “our focus going forward is on free-cash-flow, and hiring is to be treated as a privilege.” 


-       Fast rising real estate prices…   are coming to an end as a result of higher mortgage rates and diminishing affordability.


-       Going-private deals (think Twitter)…   have reached a 10-year high amid sharp declines in market valuations and high cash balances among deal makers.


-       Oil giant Saudi Aramco surpassed Apple…   as the world’s most valuable firm.


-       Google is releasing its own…   smartwatch and wallet.  Take that Apple.


-       San Fran police are using driverless cars…   as mobile surveillance cameras.


-       Netflix is planning to launch…   an ad-supported tier by the end of the year.


-       Airbnb is merging…   the things that customers love about the service (like: staying in a treehouse) with the comforts of the traditional hotel experience (think: getting exactly what you pay for, and a refund if you don’t).


-       Just 8% of Manhattan office workers are back at their desks full time…   a sign that employees are winning the hybrid-work battle – at least for now.


-       Tiger Global has seen $17B in losses due to this year’s tech stock sell-off.  That’s one of the biggest declines for a hedge fund in history.


-       SoftBank Group lost more money than it ever has ($13.2B)…   and will cut back its pace of new investments by as much as 50%.



Crypto-Bytes:



-       Stablecoins are cryptocurrencies whose value is basically pegged to USD.   This week TerraUSD (UST), the third-largest stablecoin, was unpegged from its $1 value and fell to 15 cents.  Investors sold UST and LUNA (it’s main backer) (think: crypto bank run), sending jolts through the crypto-market.  Time will tell whether Do Kwon (CEO) can bring it back into equilibrium. 


-       Last year NFTs became a $17B market overnight…   but global sales are down 92% from September.  Recently, Coinbase launched its NFT marketplace, but saw less than $60K worth of trades.


-       The Pomp’s Crypto Jobs List == https://pompcryptojobs.com/   If you don’t like your job or you think the mission is unfulfilling – there are hundreds of open roles at the top crypto companies.  Feel free to browse and respond.


-       A Goldman Sachs’ basket of 11 sensitive to crypto stocks…   is down 68% over the past 6 months – vs the S&P's 15% decline and the Nasdaq's 27% fall.


-       Coinbase is spending more on…   its tech, development, and SG&A expenses – than it’s making in revenue.


-       El Salvador bought the dip…  and purchased 500 more bitcoin for $15.3m.


-       Crypto billionaires are feeling the pinch…   Coinbase's Brian Armstrong’s personal fortune went from $13.7B in Nov. to $2.2B in May, and Mike Novograntz’s (CEO of Galaxy Digital) has gone from $8.5B to $2.5B.


-       NFT collections like Bored Ape Yacht Club…   have seen their prices plummet  29%over the past week.


-       Conspiracy theory…   Citadel Securities and BlackRock allegedly borrowed 100,000 bitcoin from Gemini, swapped 25% for UST which they then dumped – crashing Luna and the price of bitcoin.


-       The CEO of FTX…  took a 7.6% stake ($650m) in Robinhood.


-       Each share of GTBC (trading for $18.35)…   is holding $26.46 worth of bitcoin.

 

-       Japanese investment bank Nomura…   began trading cryptocurrency derivative contracts this week – giving their clients a way into crypto.


-       Per HL:  Look at the TCAP token… as it’s down 60% since November, but gives holders real-time price exposure to the entire cryptocurrency market via a single token.  It’s a new, 200% fully backed, fully collateralized asset that’s both audited and accurately representative of the entire cryptocurrency complex by total market capitalization.  



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


Monday:  More losses for U.S. stocks are on tap as the 10-year yield tops 3.2%, and concerns over a hard landing from the Fed raise investor nervousness.  Our FED’s effort to tame inflation with aggressive rate hikes has most worried that a recession is inevitable.  The DOW comes into this week on a 6-week losing streak, while the S&P 500 and Nasdaq Composite have been down 5-straight weeks.  Investors are unloading both winners and losers to start 2022, with the S&P down -13.5% YTD, the Nasdaq -22.3% YTD, the DOW -9.5% YTD, and the Russell down -18% YTD.  Only 35% of the stocks in the S&P remain above their 200-day moving averages.  Losing 4150 on the S&P has acted like a trap door, and there's no real interest in buying-the-dip.  We are short-term oversold, but there is no panic selling to give us a capitulation signal.  I don't think you can feel good about going long until we see a huge volume bar on an upside tick.  I'm just a watcher for now.  If the DOW closes below 32,272, we could see a significant back-door plunge.  The S&P is flirting with the 4000 level.  If it holds, maybe they bounce us, but if it fails – then it's probably a ride to 3800 in short order. 


Tuesday:  The Nasdaq is having easily its worst yearly start on record – being down -25.4% YTD All eyes are on inflation data this week with the CPI (Consumer Prices) for April expected on Wednesday 8:30 AM, and the PPI (Producer Prices) expected Thursday.  Yesterday was ugly as the S&P closed below that 4000 level, and I have to believe that 3800 is next on deck.  The charts are all broken, and the market is simply a hot mess.  Heck, Jim Cramer called the bottom in this market well over a month ago.  (How’s that workin’ out for ya?).  This morning, on CNBC, they put Cramer back on, and he said he had just talked to David Tepper, and David just covered his NASDAQ short.  David T. told him that NASDAQ 12K should hold.  Guess we wait and see.


Thursday:  The selling pressure continues, pushing the NASDAQ and Russell down 30% from all-time highs, and the S&P down 18% - hovering around bear market territory.   Even Apple (AAPL) closed down -5.2% to its lowest value since Oct. 15.  Yesterday we had another hot inflation reading as the CPI surged 8.3% in April, holding near 40-year highs.  The PPI came out today (again hot) showing an 11% YoY increase.  I expect more lumpy trading, as every decent attempt at a rally has fizzled out.  In just 6 sessions, the DOW has lost 2,800 points.  Even when I look back to 2008, or even 2000-2001 I don't see drops like that without a single giant surge higher. 


Friday:  So yesterday afternoon, at about 2:40pm the S&P dipped to a level that equated to a 20% drop from the highs – the infamous bear market signal.  Instantly the Plunge Patrol Team kicked in, and took us well off those lows.  With just 8 minutes left in the session, they were gunning for green – but came up a bit shy.  This morning, bitcoin and other crypto assets are rebounding as yesterday’s bitcoin price (around $28k) was down nearly 60% from the all-time high of $69k hit in November.  The entire crypto market now has a market cap. of $1.2T – less than half of the $2.9T it was worth in November.  Musk's purchase of TWTR is on hold, and frankly I'm not buying the reason given.  It’s Friday the 13th, and for the first time in forever it seems like we may have a market follow-thru to the upside.  Could we finally be getting the bear market bounce I expected all the way back on Monday?  Maybe.  Is it safe to buy into this with the DOW up almost 500, the S&P up 80, and the NASDAQ up 300?  No.  When you have this much movement, chances are you might be buying the day’s top.  If this bounce has merit, we can scale into things next week.



AMA (Ask Me Anything…)



Has inflation peaked?  The most recent CPI data pinned inflation at 8.3% and we all know that this metric significantly underestimates the problem.  Unfortunately, with a reading that high – the peak doesn’t matter as much as when can we get it under 4%?  The main culprits for YoY price increases are:  Gasoline: +43.6%, Used Cars: +22.7%, Utilities: +22.7%, Meats/Fish/Eggs: +14.3%, New Cars: +13.2%, Electricity: +11.0%, and Eating Food at Home: +10.8%.  Yes, the ‘Eating Food at Home Index’ saw the largest YoY increase since November 1980.  This is completely unsustainable for the average American family.  It seems odd that Shelter is only up 5% according to our government.  Every report shows rents and real estate prices increasing 20% YoY; therefore, it’s hard to imagine landlord and banks eating all of those increased costs.  



Next Week:  Structural Cracks in the Market



Market Update:

-       Low / S&P Volume:  I worry about our markets trading in huge gaps rather than in normal step-by-step increments.  This shows a Lack of Liquidity.  On the S&P futures, we’re seeing < 100 contracts offered, where we used to trade 1,000’s.  Nobody wants to step in and buy / rescue this market.  Right now, we’re seeing trader’s short-covering buying and not pure investment buying.


-       The SKEW is at its lowest level in 9 months:  Which means that PUTs are cheap relatively to where they have been, and that means investors are selling PUTS.  They could be: (a) selling PUTS in order to open positions (which I don’t believe), or (b) selling their hedges – putting themselves in a non-hedged position.  That means that if our market tanks – those that sold their PUTS are out there with no protection. 


-       Volatility did not explode because people are selling PUTS.  Which says that traders are believing that this ‘bounce’ has more room to run.  


-       Volatility futures are normalizing, and that bothers me.  We just went through one of the most tumultuous markets in the past 10 years and volatility is normalizing, something doesn’t feel right to me.


-       The Dollar won’t back off....   and is being use as a flight-to-quality instrument.  Even with the rally on Friday, the dollar did move appreciably lower.  In fact, the dollar has been so strong that it has been keeping the prices of gold and silver lower. 


-       Crypto’s stable coins – aren’t so stable.  You’re seeing more of a spill-over between markets than anything else.  As investors need money to plug a particular hole – they will take it from wherever they can find it.  It’s the curse of dimensionality allowing things to go much, much lower.


-       Oil is moving higher – again.   In the face of an incredibly strong dollar, oil continues to simply move higher – and potentially break above $110/barrel.


-       The hawkishness of our FED is increasing, and (in fact) they warned of an up-coming yield-curve inversion (aka short-term rates rising above long-term rates).  They have also warned J.Q. Public of their being: hard-times-ahead.  Bonds could go back to being a stability hedge.


-       Next Week…   we could see SPX = 4211 before we turn over and move lower.  


SPX Expected Move (EM):

-       Last Week’s EM = $136 – which made the lower bound 3,987.  The SPX touched down as low as 3,858, before rebounding to 4,024.  This shows a degree of efficiency inside of our markets.


-       Next Week’s EM = $133.  The S&Ps are down -16% YTD, the QQQs are down -25% YTD, and the DOW is down -12% YTD.  Look for the largest DOW constituents: UNH, GS, HD and MSFT to play catch-up to the downside.  One of 2 things will happen: (a) either the S&Ps rally another 4% or (b) the DOW will move lower by 4%



Tips:  



HODL’s: (Hold On for Dear Life)


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

-       PHYSICAL COMMODITIES == Gold @ $1,810 / oz. & Silver @ $21.12 / oz.


-       **BitFarm (BITF = $2.03 / in at $4.12)

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

-       **Bitcoin (BTC = $30,500 / in at $4,310)

-       CPG (CPG = $7.12 / in at $6.44)

o   Sold Jul $7.50 CCs for income,

-       Energy Fuels (UUUU = $5.84 / in at $11.29),

o   Sold June $8 CCs for income, 

-       **Ethereum (ETH = $2,050 / in at $310)

-       GME – Holding

-       **Grayscale Ethereum (ETHE = $14.14 / in @ $13.44)

-       **Grayscale Bitcoin Trust (GBTC = $19.70 / in @ $9.41)

-       Uranium Royalty (UROY = $2.80 / in at $4.41)

o   Sold July $5 CCs for income


** Denotes a crypto-relationship


Trade of the Week: Watch ASML (a silver miner)


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


Please be safe out there!


Disclaimer:

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/>. 

 

Please write to Mr. Culbertson at: <rfc@culbertsons.com> to inform him of any reproductions, including when and where copy will be reproduced. You may use in complete form or, if quoting in brief, reference <http://rfcfinancialnews.blogspot.com/>.

 

If you'd like to view R.F.'s actual stock trades - and see more of his thoughts - please feel free to sign up as a StockTwits follower -  "taylorpamm" is the handle.

 

If you'd like to see R.F. in action - teaching people about investing - please feel free to view the TED talk that he gave on Fearless Investing: 

https://www.youtube.com/watch?v=K2Z9I_6ciH0   

Creativity = https://youtu.be/n2QiPSe_dKk   

Investing = https://youtu.be/zIIlk6DlSOM

Marketing = https://youtu.be/p0wWGdOfYXI

Sales = https://youtu.be/blKw0zb6SZk

Startup Incinerator = https://youtu.be/ieR6vzCFldI

 

To unsubscribe please refer to the bottom of the email.

 

Views expressed are provided for information purposes only and should not be construed in any way as an offer, an endorsement, or inducement to invest and is not in any way a testimony of, or associated with Mr. Culbertson's other firms or associations.  Mr. Culbertson and related parties are not registered and licensed brokers.  This message may contain information that is confidential or privileged and is intended only for the individual or entity named above and does not constitute an offer for or advice about any alternative investment product. Such advice can only be made when accompanied by a prospectus or similar offering document.  Please make sure to review important disclosures at the end of each article.

 

Note: Joining BARRONS REPORT is not an offering for any investment. It represents only the opinions of RF Culbertson and Associates.

 

PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING. WHEN CONSIDERING ALTERNATIVE INVESTMENTS (INCLUDING HEDGE FUNDS) AN INVESTOR SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS AND OTHER SPECULATIVE INVESTMENT PRACTICES MAY INCREASE RISK OF INVESTMENT LOSS; MAY NOT BE SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.

 

Alternative investment performance can be volatile. An investor could lose all or a substantial amount of his or her investment. Often, alternative investment fund and account managers have total trading authority over their funds or accounts; the use of a single advisor applying generally similar trading programs could mean lack of diversification and, consequently, higher risk. There is often no secondary market for an investor's interest in alternative investments, and none is expected to develop.

 

All material presented herein is believed to be reliable but we cannot attest to its accuracy. Opinions expressed in these reports may change without prior notice. Culbertson and/or the staff may or may not have investments in any funds cited above.

 

Remember the Blog: <http://rfcfinancialnews.blogspot.com/> 
Until next week – be safe.


R.F. Culbertson

<mailto:rfc@culbertsons.com>

<http://rfcfinancialnews.blogspot.com>

No comments:

Post a Comment