“It’s a Miracle.” Yep, that’s Entrepreneurship: Every year, tens of thousands of people get into famous colleges. Per SG: It’s likely that someone you know will get in, but it’s not very likely that it will be YOU. But that’s not a miracle – it’s just a long shot. If you add a pound a day to the leg machine at the gym, it’s possible that you will press 250 lbs. by the end of a year. But that’s not a miracle – it’s just difficult. Neither of these outcomes require a miracle. The first may have low odds, but the second just requires persistence. A miracle is something that’s virtually never been done before. A miracle is an entrepreneur’s ability to withstand 999 NOs – just to receive 1 YES. One in every thousand small businesses survive. One in every ten-thousand sustain themselves. And one in over-a-million are miracles – that change our lives. The world needs more entrepreneurs … in order to create and deliver a lot more miracles.
Imagine if you founded Robinhood? Your number of active users has fallen 33%, and your stock has fallen from $55 to $9/share. Per AP: In April you laid off 9% of your staff, and this week you laid off an additional 23%. Many companies that conducted hiring freezes or layoffs earlier this year, will be back for a second round in the coming weeks / months. Some of them misjudged their burn rates and revenue forecasts – while others have seen their markets shrink as our FED destroys demand. Larry Summers (former Treasury Sec.) believes that we’ll need 5% unemployment for 5 years to get inflation under control. That’s a 40% increase in the unemployed. The UK thinks that it will take 18 months to clear this FED-induced hangover. For people who lose their jobs – you may want to consider Entrepreneurship. The struggle isn’t easy, but you’re in control – and you won’t need a ’69 Mets type of miracle to survive.
The Market:
- I’m surprised… that the #1 global dream involves snakes, but the #1 U.S. dream involves your teeth falling out. I’m not surprised that the businesses that were depressed by the pandemic are rebounding, and those boosted by it are falling back to normal levels. Y Combinator is investing less, and startups are looking for non-dilutive funding (debt) to buy them more time.
- It’s confirmed… Global shipping giant Maersk loaded +7% fewer containers on ships than a year ago. Global growth is definitely slowing, and the only real questions are: How bad will it get? How long will it last?
- The Bank of England hiked rates… and forecast a UK recession starting in Q4 of 2022 and not emerging until 2024. They’re looking for household incomes to fall sharply, and cause dramatically reduced consumption.
- Are we laying-off the right people? (a) Robinhood cut 32% of its workforce and is only saving 8% of its total $2.2B compensation budget. (b) Rivian is cutting a thousand employees just to save less than 2% of their total $5B compensation budget. (c) Coinbase cut 1,100 employees to save a little over 5% of their total $2.6B compensation budget. This tells me that some huge compensation packages are not even close to being cut. Learn to focus on punishing and laying-off the people that MADE the bad decisions – NOT the people that were simply the recipients of the bad decision-making.
InfoBits:
- Why did Nancy Pelosi visit Taiwan… because it’s the most important country on Earth, and we WILL fight over it. It’s an existential risk to the U.S. to have the world’s principal supplier of semiconductors under the direct political control of China, and it’s a similar risk to China not to have this control.
- U.S. manufacturing slowed to a 2-year low… as new orders contracted and inventories piled up.
- Nikola rallied 8%... on news it will acquire battery pack supplier Romeo Power for $144m in an all-stock transaction.
- Online advertising is weakening... and uncertainty means less ad-spending until their ad customers get a better handle on their own businesses.
- In Q2, US household (credit card) debt surpassed $16T… for the first-time.
- OPEC+ raised its oil output by 100,000 barrels/day… The 0.1% increase is virtually meaningless and almost an insult to the U.S.’s political gesture.
- a16z wants to manage the money of the entrepreneurs it backs… and hired former Jordan Park Group CIO Michael Del Buono to do just that.
- Activist hedge fund Elliott Management… sparked 14% rallies in both PayPal and Pinterest once they announced that they were both companies’ top shareholder.
- Walmart started laying off corporate employees… and cut prices to get rid of piled-up inventory.
- Paramount saw a 19% revenue boost… due to “Top Gun: Maverick,” and topped 43m subscribers as other streamers hit a wall.
- U.S. Non-farm payrolls rose by 528,000 in July… dropping the unemployment rate to 3.5% – the lowest since 1969.
- The new Inflation Reduction Act will pass… by keeping the carried interest tax loophole, but adding a new excise tax on stock buybacks.
- Wages rose 0.5% MoM and 5.2% YoY… and that will continue increasing inflationary pressure.
Crypto-Bytes:
- The Ethereum Merge ends the income stream for ETH miners… who (in the past) were rewarded with ETH tokens for supplying resources to the blockchain.
- Citigroup says that the new ETH will become deflationary… due to decreased token issuance and continued token burning post-PoS transition.
- ETH is #1 in options market trading volume… as traders are buying ETH calls,hoping that ETH’s impending Merge will cause a 90% reduction in ETH issuance and a corresponding price increase.
- Tiffany unveiled a new line of CryptoPunk-branded necklaces: The necklaces cost 30 ETH, and will be available to CryptoPunk holders who buy the NFT (non-fungible token) that is redeemable for a physical piece of jewelry.
- Coinbase Prime is now offering ETH staking to U.S. institutions.
- FTX has received full approval to operate a crypto exchange in Dubai.
- Celsius Network customers are trying… to get their money back from frozen custodial accounts – which equals 4% of the total assets locked up in Celsius.
- Cathie Woods predicts that… ETH will go up by 18X in 7.5 years.
- The Commodity Futures Trading Commission… will be the exclusive crypto regulator under a new Senate bill.
- The Digital Commodities Consumer Protection Act of 2022… will create a definition of a "digital commodity" that includes Bitcoin and Ether, but nothing that may be considered a security.
- Europe and Africa saw an increase in Q2 crypto venture deals… bucking a 22% global decline.
- Honduras, Brazil, and Paraguay are expanding… Latin America’s crypto footprint - nearly a year after El Salvador legalized Bitcoin.
- Dubai announced a “Metaverse Strategy” … which aims to add $4B to its economy over the next five years, 5X the number of metaverse and blockchain companies, and support over 40,000 virtual jobs.
TW3 (That Was - The Week - That Was):
Monday: The rally from last week can go another few days, but as we get into the middle of August – I suspect we’ll see another fade. Our economy is in the toilet. Amazon just announced a 100,000-person layoff. Across corporate America head-counts are falling. Gold, silver, and the miners are looking at a possible rally that could have legs.
Tuesday: We're being held hostage by the Pelosi visit. China has barked pretty loudly that they will respond militarily if she comes. If you have some mad money, nibble a few shares of DIA or QQQ, and "roll the dice" that calmer heads will prevail.
Wednesday: The indexes are fighting resistance at: DOW = 33k, S&P = 4,100, and the NASDAQ = 12,500. These resistance levels were built back in late May / early June where 8 sessions of chop ultimately resulted in a failure to the downside.
Thursday: JP Morgan noted 4 reasons markets have been rallying:
- 1) Short covering - investors feel if growth disappoints, our FED will end its rate cuts earlier,
- 2) Better earnings in Mega Cap tech than expected,
- 3) Lots of money is on the sidelines allowing low volume and lower liquidity to push prices higher (institutional investors are not chasing this rally), and
- 4) Sidelined money will be put to work ONLY after new lows – with the VIX hitting 40 and the SPX being is down 4% to 5% - as part of a bottoming process.
- JPM also thinks we have seen the high in yields of 3.47% on June 14th. Bear market bounces can move further than anticipated, but reality is lurking in the background.
AMA (Ask Me Anything…)
Why are we pausing? The market is pausing at the same level that it did back in June – before prices continued their downward trend. Also, the market has gone up 15% in two months, leading some analysts to believe that a healthy consolidation is in order. Bearish analysts view this retest of resistance as an opportunity to sell their long positions and/or initiate short positions – expecting a decline deeper than June’s.
What’s up with ETC? Ethereum Classic (ETC) has risen by almost 140% in the last 30 days. This rise in value appears to have been driven by investors backing ETC as a chain to absorb remaining ETH miners and users - once Ethereum transitions from PoW (Proof-of-Work) to PoS (Proof-of-Stake). Ethereum’s founder said that the ETH community is invited to use ETC if they prefer PoW as it is: “a totally fine chain.”
Why did Coinbase (COIN) jump this week? Blackrock announced a partnership with Coinbase – in order to give investors, the ability “to manage their crypto-portfolios and conduct risk analysis on total investment decisions.” The partnership will only pertain to bitcoin initially. It’s a big deal because the world’s largest asset manager is announcing a partnership with the largest publicly-traded crypto exchange after bitcoin has fallen approximately 70% from the all-time high of $69,000. Bitcoin-natives understand that the real value in any market is captured during the down segments. If institutions aren’t leaving crypto during bear markets, then the market outlook for bitcoin over the medium to long-term is quite compelling.
Next Week: Good News = Bad News…AGAIN
- The 528k jobs shocked the market… and was a reminder of how precariously this market is balanced. But nothing in market-land is what it seems and the Jobs Report is no exception. 309,000 of those 528k jobs came from the “Birth/Death” model. The “Birth/Death” model is a guess by the Bureau of Labor Statistics that for every person unemployed – some percentage will start their own business and hire "?" number of people. Those fake jobs are counted as real jobs. There is no proof, tax receipts, or worker’s comp. indications that the jobs even exist. But on Friday, because of the large BLS calculation – the market was hit with a dose of reality. It was looking for a small amount of hiring so that that our FED would pause hiking rates. But with a jobs report that strong, the FED immediately remarked that their actions haven’t affected employment, and instantly the odds of another 75bp hike spiked higher.
- The S&Ps were virtually unchanged for the week… but the sector rotations were considerable. Year-to-date, Tech is down 20%, the S&Ps are down 13%, the Financials are down 15%, and Energy is up 27%. But last week, Tech breached the upper end of its Expected Move, Financials touched their lower boundary, and Energy breached their lower end before slightly bouncing.
- We are in the midst of one of the largest Yield Curve Inversions… EVER. The 2-Year is currently at 3.24% and the 10-Year is currently at 2.83% - putting that gap at over 0.4% = which is huge and will only continue higher in my opinion. This will put a large percentage of TECH (especially the ones without large cash positions) in pain. Bonds were crushed last week and tech started to feel the pain. Friday’s Jobs Report confirmed that BONDS are in the driver’s seat. Tip #1: If we continue to see sell-side activity in bonds (the /ZB under 141), tech will be moving lower.
- Examining the Mega-Cap Tech companies YTD… the QQQ is down 20%, MSFT is down 15%, AMZN is down 17%, META is down 50%, GOOGL is down 19%, but AAPL is only down 9%. In large part, Apple alone set the tone for the last past 8-week rally in tech. Tip #2: If you like buying the QQQs, reduce your risk and just buy AAPL. AND as a hedge, also buy an inexpensive, out-of-the-money PUT Spread in APPL.
- Can inflation be tamed while the dollar is raging higher? Because virtually every commodity is priced in Dollars, we get to export our inflation to the world. Therefore, along with our Dollar gaining in currency strength, our inflation efforts are reflected to the world through commodity pricing. Taming global inflation while the dollar is still strong will be a virtual impossibility. Tip #3: If the Dollar continues its move higher, the S&Ps will be moving lower.
- The CPI shall define this market. The CPI (consumer inflation) number will be out on Wednesday at 8:30am. If the CPI number comes out ‘hot’, then “It’s all over but the cryin’”. That’s when you will begin to hear about 100bps and inter-meeting interest rate hikes. Tip #4: The CPI will cause an explosive binary move
- SPX Expected Move (EM):
o Last Week = $81 EM… and we moved $13. We’ve only had 2 other weeks this year where we did not hit the lower or upper edge of the EM.
o Next Week = $88 EM. Tip #5: If we get to 4211 before the CPI is released on Wednesday, and the CPI comes in weak – we could explode to the upside for another 3 to 4 weeks.
Tips:
HODL’s: (Hold On for Dear Life)
- CASH = Nexo @ 8% on USDC – waiting for their acquisition dust to clear.
- PHYSICAL COMMODITIES = Gold @ $1,792 /oz. & Silver @ $19.86 /oz.
- AllBirds (BIRD = $5.27 / in at $4.82)
o Sold Aug $5 CC’s, and
o Sell Sept. $7.50’s when BIRD touches $6
- **BitFarm (BITF = $1.62 / in at $4.12)
o Selling more CCs for income,
- **Bitcoin (BTC = $23,100 / in at $4,310)
- **Ethereum (ETH = $1,690 / in at $310)
- GME – DRS’d and HODL
- **Grayscale Ethereum (ETHE = $12.50 / in @ $13.44)
- **Grayscale Bitcoin Trust (GBTC = $14.23 / in @ $9.41)
- GS: Bot Sept 2: +$335 / -$330 PUT Spread for $2.30
- Innerscope (INND = $0.012 / in at $0.0052)
- VIX: Bot Sept 22: +$30 / - $35 CALL Spread for $0.75
** Denotes a crypto-relationship
Trade of the Week:
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Please be safe out there!
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