You’re NOT trying hard enough IF:
1. You’re succeeding over 80% of the time,
2. You already know what you need to know, or
3. You’re always confident that things are going to work out.
We’re trained to pay attention to thunder and lightning. Unfortunately, the events that change our culture happen over time, and are distributed across parts of the population too small to notice. For example: The Grateful Dead were the #1 live touring band for decades, but only had one top 40 hit. They proved that real connections are worth a lot more than a wide-n-shallow approach. Your 1st challenge is finding the focus and the patience to work on your next big idea. Your 2nd is not sacrificing your goals – for any single presentation. Remember: waves are made one drop at a time.
Worker disengagement is a problem… that costs us 11% of our GDP. The solution is putting the appropriate challenges, partnerships, and accountabilities in place. FYI, none of those are possible to accomplish via Zoom or Google Meet.
The Market:
Everything Old is Newmann again… Adam Neumann, the controversial cofounder of WeWork, is in the process of creating a vast network of residential real estate properties that can be rented on a highly flexible basis to people who don't want to be confined to one location but want to live as "global citizens." It's an idea that in a remote-work era – makes sense. Neumann says: “FLOW is going to be a new way of living, day to day, week to week, month to month, or year to year. You will be a global citizen of the world. If you’re a member somewhere, you’re a member everywhere.” In fact, the idea is so timely that Bill Smith (another serial entrepreneur who’s further along than Neumann) is doing it. Bill is the 36-year-old founder of the 3-year-old, 600-person, membership-only, flexible, furnished rental company called: Landing. Adam, despite raising $350m from Andreessen Horowitz – haven’t we seen this movie before?
InfoBits:
- Being behind the curve is costly… as retailers have too much of the wrong stuff, and not enough of the right stuff. But becoming ‘guest-relevant’ will take a few quarters – and that will hit profits now.
- Apple will begin to stick ads into more of its apps. Apple’s ad biz generates $4B in revenue a year, and the plan is to double that.
- Japan avoided a recession as its Q2 GDP grew 2.2%... buoyed by consumer spending.
- U.S. housing starts fell 10%... to their lowest level since August 2020, and existing home sales fell into a recession – at their lowest level since May 2020.
- Apple employees (starting in September)… will return to the office 3 days a week under a new hybrid model.
- The FDA will allow some hearing aids to be sold over the counter… aiming to widen their availability in ways that could bring down costs and encourage development of better devices (INND).
- UK inflation hits a new 40-year high of 10.1%... as the food and energy price surge continues.
- Eurozone inflation hit a new record of 8.9% YoY… as the ECB began its tightening cycle last month. It still has a long way to go.
- The Big Ten athletic conference signed a $7.5B deal… with CBS, FOX and NBC.
- Wayfair, the online home goods retailer… is laying off 900.
- U.S. companies will re-shore almost 350k jobs this year.
Crypto-Bytes:
- Pension-fund managers are investing public workers' retirement dollars in crypto.
- ETH has a good chance of exceeding bitcoin (BTC) in market cap… over the next year due to its transition to a proof-of-stake.
- Currently crypto-miners are selling more BTC… than what they’re mining – which is affecting prices.
- Our FED minutes showed more rate hikes coming and rising concerns about crypto. FED heads feel that stablecoins could pose a threat to financial stability and potential bank runs.
- The CME Group is adding ETH options… to its crypto offerings ahead of the Ethereum Merge.
- Crypto.com laid off 260 employees… then quietly let go of hundreds more.
- Layoffs are in the works… for half of 700 companies that PwC surveyed.
- 63% of the current on-chain volume on Bitcoin… comes from transfers of over $10m. We’re seeing an increased role for institutional players, and BTC becoming more comfortable as a global settlement layer.
- “Coinbase will quit the Ethereum staking business… before censoring the network to comply with sanctions” … CEO Brian Armstrong.
TW3 (That Was - The Week - That Was):
Monday: Our futures are down, and China cut interest rates. This week we get the FOMC minutes, and the retail sales report. The NY Empire index dropped to -31, and that’s ugly. The NY Fed said that the new orders index dropped to -30, and the shipments index plummeted to -24. The housing index shows that we’re in ‘contraction’ territory – with a massive supply of new homes for sale (highest supply since May, 2010). It seems a lot of people bought houses over the past 2 years without selling their prior home – in anticipation of riding the massive spike higher in home prices via a highly leveraged investment. Sellers are finding that home prices aren’t what they once were, are cutting their losses, and creating stress in the U.S. housing market. With the overwhelming majority of American's wealth tied to their home, this could become a big problem as it relates to other economic activity.
Tuesday: One of the issues with wicked bear market bounces is that nothing matters except going up. Anyone with a decent risk profile usually misses the rally, because it simply makes no sense. As it continues higher, more and more people think that “this really is a new bull market" and get back in. That is when the bear growls and wipes them out.
Wednesday: Zero Hedge is saying that this market is probably topping, and you should start to short. Yesterday little INND (that we bought at four-tenths of a cent ($0.004) received full FDA approval for over-the-counter hearing aids. Now things really could get interesting. I don’t think J. Powell wants to be remembered for the highest inflation in 40 years, and if he has to break some eggs to get it down – so be it. One of the statements talked about eventually ending the rate hikes, but NOT about pivoting and cutting them again – just leaving them elevated. As for the market, I think we’ll have one last surge to try and get all three indexes over their 200-day moving averages, come up short, and then roll over.
Friday: The dollar surged back near 2-year highs, the 10-year is approaching 3%, and there are renewed worries about inflation after Germany reported record producer prices last night. If they don't come in and save the day, my guess is that the bounce has run its course. If you look at an intra-day chart of yesterday's action, they were really getting things in gear heading into noon. Then, the air came out of all three indexes and down we went. Today, Zero Hedge highlighted 2 different market indicators that have NEVER been wrong. One is saying that we’ve bottomed and we’re moving higher from here, and the other says that we’ve got a long way to fall. One of them is going to be wrong. From where I sit, the world is melting down. German inflation accelerated to a fresh all time high of +37.2% YoY. German Natural Gas is up +59% on the month. The same is true of our bond market. Friday was just the shape of things to come.
AMA (Ask Me Anything…)
“Is a Soft-Landing even possible?”
1. A Soft-Landing == reduced inflation + robust growth.
2. The good news is that all of the jobs lost during the pandemic have been recovered, but the group doing the most hiring was our government. After government workers, the next group being hired were those seeking a 2nd or 3rd job. The 3rd group being hired were those most recently laid-off. The BLS assumes a certain percentage of those laid-off workers have started their own business and the BLS just adds ‘fake jobs’ accordingly.
3. The labor participation rate remains in the tank, so the people who have decided to leave the labor force during COVID – have left for good.
4. Inflation is coming down due to lower energy and commodity prices. However, the supply chain for these items hasn’t improved, so any price reduction is mostly a result of weaker demand. The stickier parts of inflation (wages and rents) are still experiencing off-the-charts increases.
5. Economists are forecasting negative real wage growth for the next couple of years, and because of that J.Q. Public continues to reach for a credit card to bridge their purchasing-power gap. With our government, multiple jobholders, and fake new-businesses supplying most of the job creation – credit cards are being used until our FED begins printing ‘free money’ again. We are being set-up for an elongated recession – NOT a Soft-Landing.
“What’s a Merge?” In a month, the Ethereum blockchain will move from a proof-of-work to a proof-of-stake consensus mechanism. This is “The Merge”, and it’s a big deal.
1. The Merge reduces the carbon footprint of the Ethereum blockchain significantly. That removes the environmental concern for the most used smart contract blockchain.
2. The supply/demand balance of the Ethereum token will change. Ethereum will move from a system that has $20m a day of structural outflows to a system that has $0.5m a day of structural inflows. This shift will result in a different dynamic for all of the ETH-pairs moving forward.
3. Proof-of-Stake systems are more secure.
4. The Merge is the most important change that a large scaled blockchain has ever undergone. After it runs smoothly, in my opinion ETH will shortly become the #1 holding in most portfolios.
Next Week: Selling Begets more Selling…
- The SPX moved right back to 4211 - ‘almost’. This week we had a reversal along with fairly strong correlation, but we did NOT hit 4211. Volatility (VIX) hasn’t picked-up to the level that will push us down thru the 4211 level as of yet. Markets are not ready to get ugly just yet. This rally started on July 25th – when we broke through 3931 and then 4211 three weeks later. If we move back below the 4211, we will be back inside a ‘volatility box’ that will allow us to experience real two-sided trading == IN/OUT Spreads and real Premium Selling.
- Inflation fears resurfaced this past week… ignited by the inflation number out of Germany – that was over 5% per month. WOW. And once inflation was re-ignited, then bonds and the Dollar came back into the picture.
- Bonds sold-off, Rates ripped higher and Tech moved lower… due to the 10-Year rate almost touching 3%. This week we have our FED’s Jackson Hole Symposium that will shine a bright light on combatting inflation with steady and significant interest rates increases.
- Financials were hit hard in a rising rate environment… which is puzzling because rising rate environments should be good for financials.
- Crypto got crushed last week… on significant volume. Over the past several weeks, other retail favorites like Bed Bath and Beyond (BBBY), GameStop (GME), and AMC have also experienced similar price action to crypto. There is a rumor that Citadel is losing $B’s per day as GME moves higher – and they sold their crypto to raise cash. In any case, crushing the retail trader could resonate back into the NAS and the S&Ps.
- Volatility is NOT making the moves we would expect… but if we get a move below 4211 (SPX) – many retail traders are going to ‘bail-out’. Volatility is asleep right now, and that worries me because without the pros buying PUT options, there’s no confirmation of the sell-side of this market.
- Critical Equity and Index moves…
o Tip #1: A rally in the Dollar is not only defensive, but also bearish for equities as people adopt a ‘duck-n-cover’ mentality.
o Tip #2: The financials (XLF) are critical to keeping this market moving higher.
o Tip #3: Google broke into its own volatility box. Any continued move lower will be a warning for tech in specific and the markets in general.
o Tip #4: If you need to WATCH two products that will move this market right now – it’s all about Apple (AAPL) and the financials (XLF).
- SPX Expected Move (EM):
o Last Week’s EM = $76: We had 4 days of very little movement and then Friday we moved close to the bottom of the Expected Move.
o Next Week’s EM = $82: We had a $62 move on Friday alone. I’m not willing to sell-term premium surrounding that $82 EM.
o Inflation fears will resurface next week… because we will get reports on: durable goods orders, PMI, and GDP. On Friday J. Powell will deliver the keynote speech at his Jackson Hole Financial Symposium.
Tips:
Friday’s action was important. The DOW is the most watched index in the world. Seeing it slice down through its 200-day and end the session down 150 points below it (after being 300 points over it on Tuesday) – is NOT a bullish sign. I think we’re headed lower and then maybe another push higher after Labor Day.
HODL’s: (Hold On for Dear Life)
- CASH = Nexo @ 8% on USDC – waiting for their acquisition dust to clear.
- PHYSICAL COMMODITIES = Gold @ $1,760 /oz. & Silver @ $18.96 /oz.
- **BitFarm (BITF = $1.50 / in at $4.12)
o Selling more CCs for income,
- **Bitcoin (BTC = $21,250 / in at $4,310)
- **Ethereum (ETH = $1,620 / in at $310)
- GME – DRS’d and HODL
- **Grayscale Ethereum (ETHE = $12.45 / in @ $13.44)
- **Grayscale Bitcoin Trust (GBTC = $13.24 / in @ $9.41)
- GOOGL – Bot Sept 23: +$179 / -$177 PUT Spread for $0.93
- GS – Bot Sept 2: +$335 / -$330 PUT Spread for $2.30
- Innerscope (INND = $0.024 / in at $0.0052)
- SPY: Bot Sept 16: +$416 / -$406 PUT Spread for $0.94
- VIX: Bot Sept: +$30 / - $35 CALL Spread for $0.75
- XLU: Bot Sept 23: +$78.5 / -$76.5 PUT Spread for $0.93
** Denotes a crypto-relationship
Trade of the Week: Tip #5: If you’re not in INND … get into it before October. It’s 2 cents / share!
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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