Everybody’s a Project Manager… Leading a project is about causing the death of a thousand: IFs, ANDs, & BUTs. For example: There’s a long line at the ice cream stand. The person in front can’t decide between four flavors. Not because any of the flavors wouldn’t be fine, but rather because choosing one flavor meant NOT having the other three. It turned buying an ice cream cone into a dance of regret. Do not focus on the frustration associated with the choices that you are missing, but rather enjoy committing to the one you chose. Obsess over a project’s constraints (budget, decision-maker, timeframe, etc.), because without them there would be no project. In fact, view a project’s constraints as stepping stones, and getting them correct is when you know you’re on to something.
Everybody needs to be an investor… (Per HL)
1. Trillion-dollar companies require public markets, and they need private markets of startups, venture capitalists, and angel investors.
2. The language of the markets requires both reading and writing.
3. Learn to play a game that is rigged, but not against you specifically. I love this historical look at why ‘the market is rigged’ by JB.
4. Invest in your greatest asset - your network (social and face to face). It will reduce speed-to-market by 50%.
5. Investing can be for profit as well as joy.
6. Markets in turmoil give investors more opportunities.
7. Investing is behavioral (fear) and financial (greed).
8. Always have a system.
9. Trust in people not an idea == “Bet on the jockey – not the horse.”
Buy the Close – Sell the Open: FYI: If you bought the S&Ps (SPY) at the Close, every day since 1993 – and sold them at the Open the following day – you would be up 480% over 20 years. But if you bought the S&Ps at the Open and Cold the close each day – you would be down 20%.
What is a Recession? A recession is two consecutive quarters of negative real GDP. So, with Q2 GDP coming in at minus -0.9% - we are officially in a recession. But with the midterm elections approaching and the administration’s approval ratings being in the tank – they’re modifying the definition of a recession as part of their damage control. Most on Wall Street and beyond acknowledge the recession and do NOT share the view that it will be either short or shallow.
- The PCE, our FED’s preferred measure of inflation… re-accelerated in June to 6.8% - the highest reading since January 1982. Our FED will remain aggressive in tightening financial conditions.
- J. Powell reiterated that another outsized hike could be appropriate… but the committee will decide as the data rolls in. He also noted: “This process is likely to involve a period of below-trend economic growth and some softening of the labor market.” Our FED is willing to push the economy into a recession and cause a weakening of the labor market in order to get inflation in check.
o Treasury Sec. Janet Yellen said that the U.S. economy is not in a recession because it didn’t meet her new, complex criteria.
o The Dallas FED Mfr. and Chicago FED Nat’l Activity Index showed declining optimism and business activity.
o Pending home sales fell 20% in June… their slowest pace since 9/11.
o Wholesale and retail inventories rose 2% in June.
o Mortgage applications fell to a 22-year low in June.
o Retail spending rose 1.1% in June, but real personal incomes fell 0.3%.
- The NFL just launched its own streaming service called NFL+. For $5 / mo., the service is available exclusively on smartphones and tablets.
- Higher supply and lower demand are already pushing down gas prices… but a recession could tank them.
- The DOE is loaning $2.5B to GM’s joint venture with LG Energy… to help finance construction of new lithium-ion battery manufacturing facilities.
- Russia’s pulling out of the Int’l Space Station… and building its own.
- Microsoft reported its slowest earnings growth in 2 years… as cloud and gaming sales slowed.
- Meta (Facebook) had its first YoY sales decline since going public: Advertisers are pulling back, plus Meta is dealing with competition from TikTok.
- Gold and Silver had one of their strongest weeks of the year… on the back of increasing recession fears and a weaker U.S. Dollar.
- Hershey warned that it won’t be able to meet demand… for this year’s Halloween candy.
- Comcast added ZERO new broadband customers… for the first time ever.
- Layoffs are growing among automakers… as Ford cut jobs on their internal combustion engine side to focus on their EV side of the house.
- There are virtually no IPO’s in 2022… yet VC fundraising is set to surpass the 2021 record.
- Aptos Labs, a project looking to resuscitate Facebook’s mothballed Libra project… raised $150m in a funding round led by FTX Ventures.
- Failed lender Voyager has rejected FTX’s proposed buyout… because it only benefitted FTX and did not make their customers whole.
- Both Terra and Celsius… were named in another class action lawsuit.
- Binance CEO Zhao filed a defamation of character lawsuit… that accused him of running a “Ponzi Scheme”.
- A bipartisan bill to regulate stablecoins in the U.S…. is bogged down in negotiations, and likely won’t pass this year.
- Ark Investment funds… dumped 1.4m shares of Coinbase – admitting defeat on one of the fund’s most prominent investments.
- Chainalysis, a crypto-investigations firm… is spinning up a subsidiary specifically to work with its biggest client, the U.S. Government.
- 67% of the public oppose a U.S. digital dollar… with major concerns surrounding the loss of privacy and damage to U.S. banks.
- FTX.US has opened up stock trading… and the company will not be charging fees or following the Robinhood-esque “payment for order flow” business model.
- Apple is looking to add… a creative & art director with Web3 chops.
- Our FED and the FDIC issued a cease-and-desist order to Voyager Digital… for making false claims about government protection in the event of failure.
TW3 (That Was - The Week - That Was):
Monday: This week we get hundreds of earnings, our FED announcing their latest monetary policy, and a Q2 GDP report – which most likely will show negative growth. Will this administration admit to a recession? Nah – they’ll just make something up.
Tuesday: WMT missed earnings. You know it's bad when the "leader in low cost goods"can't sell product. Logitech has cut their full year sales outlook. GM earnings missed. UPS slumped as package deliveries fell more than expected. The economy is not doing well, and our FED will hike rates tomorrow. That’s a treacherous combination.
Wednesday: We got the 75bp rate hike, and the market inched higher on Powell’s Q&A. Our market didn’t care about: (a) our epic-sized debt load, (b) people are being priced out of homes and cars, and (c) our FED admitting that the economy is slowing. Right now, the market is betting on us being ‘just that much closer’ to our FED pivoting and cutting rates. Oh by the way, our FED is NOT reducing its balance sheet at all. So, on one hand they're hiking rates, but with the other they’re still buying.
Thursday: Solar and alternative energy stocks are moving higher after Sen. Joe Manchin and Sen. Chuck Schumer struck a deal on a $369B energy-climate plan. Bitcoin is above US$22,700 and ETH is above US$1,600. MSFT, META, Google, and Best Buy all missed earnings. Q2 GDP is out and it is MINUS -0.9% = Recession.
Friday: This morning our FED’s inflation tool (the PCE) came in at a hot +4.8% YoY. I’m watching ENG. If it holds above its 200-day at $1.42 – it could go up another dollar. I think there's a little more room higher for stocks next week, but then we start to fade.
AMA (Ask Me Anything…)
- Big Tech is signaling a collapse in the office space and job markets. Amazon has delayed or canceled 13 warehouses around the country.
- Salesforce and Meta have cancelled plans to take additional office space and are putting some of their existing office space up for sub-lease.
- GoPuff will close 76 warehouses following their crashed IPO strategy.
- With current office vacancy rates at catastrophic levels (>30%), many companies will never grow into their current commitments.
- Microsoft, Tesla, Vimeo, Netflix, Twitter, Substack, Rivian, and a host of other tech companies have announced workforce layoffs.
- Google will slow hiring for the rest of the year, and Apple will slow hiring in 2023.
WHAT’S THE PROBLEM?
- Companies have been hoarding office space & employees due to the extreme amounts of Fed-pumped liquidity that intentionally distorted reality.
- With our CPI being over 9%, QE now being QT, low now being high interest rates, and crypto imploding == corporations are telling themselves that their growth projections need to come down.
- For those calling for a bottom = “You Ain’t Seen Nothing Yet.”
o We have yet to see the massive layoffs that come from a recession,
o And the corresponding increase in weekly unemployment claims.
- Watch for other sectors following tech’s lead and admitting that their growth forever projections were WRONG. Our FED’s hypergrowth binge is over, and the resulting reality will be ugly.
Next Week: Inflation + Rate Hikes + Recession = Rally?
- Bad News is back to being Good News:
o Our FED did exactly what everyone thought – a 75bp hike, but the S&P’s continued to rally and broke through their expected move. The PCE data showed the highest inflation number since 1982, but our markets rallied. In any case, 2 consecutive quarters of negative GDP is not a good look.
o The S&Ps have rallied 500 points (3639 to 4133). That’s almost the exact amount they rallied in March (4130 to 4600) – before heading lower.
o This past week we saw the increased, dynamic hedging activity that the professionals are being forced to do – once the edge of the SPX Expected Move had been breached.
o TIP #1: Our FED will break something as it tries to bring inflation down from 9.1% to 2%.
- Earnings have been Bifurcated:
o Rallies: AAPL, AMZN, and Exxon – to Crushes: INTC, ROKU, & PG.
- Mega Market Caps save the day: The QQQ is still down 21% YTD, but what has changed is that bad news is being interpreted as good news.
- Realized Volatility is still flying: Historical SPX volatility is running at 22.5%. Implied volatility is averaging around 17%. The market is ‘moving’ significantly more than you’re getting paid for. “The juice ain’t worth the squeeze.” TIP #2: Do NOT sell short-duration premium.
- The Reality of the Rally: We breached the EM the last 2 weeks. It is incredibly rare to have 3 sequential, upside breaches of the EM. There is a line of SPX resistance at 4211, and the upper bound of the Expected Move is 4213; therefore, there is a high probably that this rally stalls and we begin to fade.
- Are the BEARS DONE? Tip #3: Don’t Fight the FED. As the FED was feeding the market juice over the past 12 years … we traded like a Bull. As the FED is hiking rates and trying to squash inflation (and jobs) … trade like a Bear. I bought the PUT Spread on Goldman Sachs hi-lited below.
- The New VIX floor? TIP #4: If / when the VIX hits 20 … I’ll be increasing my allocation to the VIX Call Spread hi-lited below.
- SPX Expected Move (EM):
o Last Week = $97 EM: We moved $170 in the EM last week.
o Next Week = $81 EM. The risk is higher and the rewards are limited. Watch for the head-fake higher and then the fade.
Lean into buying physical gold and silver. Watch the miners. And potentially scale into some shorts / PUT options near the middle to the end of next week.
HODL’s: (Hold On for Dear Life)
- CASH == Nexo @ 8% on USDC – wait for their acquisition dust to clear.
- PHYSICAL COMMODITIES == Gold @ $1,782 / oz. & Silver @ $20.34 / oz.
- AllBirds (BIRD = $5.14 / in at $4.82)
o Sold Aug $5 CC’s, and
o Sell Sept. $7.50’s when BIRD touches $6
- **BitFarm (BITF = $1.46 / in at $4.12)
o Selling more CCs for income,
- **Bitcoin (BTC = $23,900 / in at $4,310)
- **Ethereum (ETH = $1,700 / in at $310)
- GME – DRS’d and HODL
- **Grayscale Ethereum (ETHE = $12.57 / in @ $13.44)
- **Grayscale Bitcoin Trust (GBTC = $14.81 / in @ $9.41)
- GS: Bot Sept 2: +$335 / -$330 PUT Spread for $2.30
- Innerscope (INND = $0.013 / in at $0.0052)
- VIX: Bot Sept 22: +$30 / - $35 CALL Spread for $0.75
- XHB: Bot Aug 19: $60 / $58 PUT Spread for $0.82
** Denotes a crypto-relationship
Trade of the Week:
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Please be safe out there!
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