It’s really tough to embrace AI… Creative people say ‘YES’ 4 times for every time they say ‘NO’. Non-creative people (including educators) say ‘NO’ 4 times for every single ‘YES’. When I first used ChatGPT and its drawing counter-part DALL-E, I thought: (a) here come the cries to ban it from education, (b) out-law it from society, and (c) keep it out of the hands of J.Q. Public (including young people). Creatives will welcome AI engines and use them to create even greater things, while Non-creatives will continue to just say NO. Shortly it will be time to choose sides – because we can’t put this genie back into the bottle. Per FW: “We need to embrace AI. I’ll forever wonder why we don’t teach our students how to use these tools rather than pretend they don’t exist.” Heck, create best essay and best drawing competitions using AI rather than the constant ‘banning’ notices that I’m seeing from educators. Calculators replaced slide rules… eventually. Cell phones replaced land lines… more quickly. My fear is that AI integration into education will be accomplished in spite of our educators ‘kicking-and-screaming’. All the while, the haves will further distance themselves from the have-nots. Hey, it won’t be the first time that educators are ‘last-in-line’ at the innovation window.
We aren’t smarter for our successes… we are smarter for our failures – as long as we learn from them.
The Market:
The US hit its $31.4T debt limit last week, and is risking a scenario where the gov’t can’t pay its bills. Historically, leading into the June debt limit deadline:
- Real inflation will continue to run around 15% YoY - causing market volatility.
- Non-panic’d investors will be rewarded AFTER the debt limit is raised.
o Long-term T-bills always do well AFTER an averted debt crisis.
- PRIOR to the event investors will seek safety in:
o Short-term (1 mo. / 2 mo. / 3 mo.) U.S. T-Bills.
o Bitcoin, gold and silver.
- Bitcoin was a big winner in the 2020 / 2021 debt crisis. Unfortunately, the idea of bitcoin being a safe haven asset continues to anger the media – but the data is the data. BTC is decentralized and programmatic in its creation; therefore, it’s ‘steady-as-she-goes’ with BTC (along w/ GLD & SLV).
InfoBits:
- Retail sales posted its biggest drop in a year… and 2nd monthly decline.
- Amazon’s “Buy with Prime” button… on non-Amazon sites could be a game changer. It will increase shopper conversion, provide speedy payment processing, and offer free next-day delivery (to Prime Customers).
- Goldman Sachs missed earnings by the largest margin in a decade… due to an 11% rise in costs.
- Property transactions in Dubai hit a record high in 2022… as it boasts a 90% ex-pat population, zero income tax, and is one of the world’s safest cities.
- British legislators are set to approve a new social-media bill… that could see the CEOs of major tech firms be held criminally liable if they don’t protect children from certain online content.
- Amazon is cutting 18,000 jobs… Google 12k, and Microsoft 10k.
- China’s population shrank… for the first time since the 1960’s.
- China’s GDP grew at 3% in 2022 – down from 8.1%… and below their 5.5% target. It’s their 2nd second slowest pace since the ’70s.
- As commercial-property values slide, investors want out… at the fastest rate since the Great Recession.
- U.S. industrial production declined for the 2nd month… and inventories increased 15%.
- Is something wrong with Sequoia… GoMechanic (another Sequoia startup) is cutting 70% of its workforce after EY identified ‘grave errors’ in their financials.
- Southwest is about to face a pilot strike.
- Proctor & Gamble’s revenue and profits fell… as shoppers switched to generics.
- Amazon is stopping its charity-donation program.
- The difference between a Recession and a Depression: A Recession is when your neighbor gets laid off. A Depression is when YOU get laid off.
Crypto-Bytes:
- 33% of Congress took direct contributions from SBF & FTX.
- Crypto’s market cap briefly topped $1T… for the first time since Nov.
- After SBF published a spreadsheet showing that FTX.US was still solvent… new FTX CEO John J. Ray said that the bankrupt exchange could be restarted as: “Everything is on the table.”
- Bitcoin has moved 30% higher in January… and if Bitcoin closes this month above $20,495, it will be its highest close since July 2022.
- Binance was the final destination for millions in Bitzlato funds… which was shut down for alleged money laundering.
- SBF’s assets (value him at almost $700m): and will be subject to forfeiture if he’s guilty of fraud. $526m of SBF’s wealth comes from his 55m shares of Robinhood.
TW3 (That Was - The Week - That Was):
Monday: So far in 2023, the S&P 500 has risen 4.2%, the Dow +3.5% and the Nasdaq +5.9%. The last six days have been one giant short squeeze with the most shorted stocks surging in an almost unbroken buying panic.
- The Volatility Index (VIX) hit its lowest level since Jan 2022 = No Fear.
- Big Bets are rolling in against the US Dollar – thinking that our FED won’t maintain its 5% nominal rate call.
- Oil prices are on the rise – their longest up-streak since Dec 2021.
- Gold prices are at their best levels since April 2022.
- Bitcoin is over $21,000 for the first time since November.
Goldman Sachs missed their earnings estimate. The Empire State Mfg. Index was down -33 versus an estimate of -8. Auto loan delinquencies are up +26% YoY.
Wednesday: There is a rumor going around that Putin will be giving a speech and in it he will start calling Ukraine a WAR.
Friday: Everyone’s hyping the heck out of NFLX because they gained a lot more subs than expected. Unfortunately, a ton of people binging on streaming video isn't my idea of a robust economy. Amazon, Google, and Microsoft laying off 40,000 people tells me more about our economy than does Netflix.
AMA (Ask Me Anything…)
Is everything politically motivated? The Bureau of Labor Statistics (BLS) recently announced that they are changing the way that they calculate inflation. Previously, the BLS updated their weighted basket of products and services based on the last 2 years of data. Now, they are going to update the weighted basket based upon only 1 year of past data. This impact will be profound and will immediately begin to REDUCE the official inflation numbers – making our FED appear more successful. It also means that: (a) the average citizen will continue to pay much higher prices for the same goods and services, and (b) our FED will potentially pivot away from hiking interest rates faster than they would otherwise. My main point is not about our FED’s actions, but rather that the BLS is changing the inflation calculation while we are ACTIVELY engaged in taming inflation – incredible.
Next Week: Volatility’s back in town…
SPX 3931 is back… and over the next 2 weeks – we will be at an inflection point in terms of which direction to move. The highest probability of trading is around the 3931 level on the SPX.
Financials will continue to lead these markets. Last week the financials closed outside the lower edge of their expected move. Remember, before we get to the FOMC on February 1st, we have a slew of economic reports to get through this week.
Next week’s earnings calendar contains TSLA & MSFT. But next week’s economic reports such as: durable goods, GDP, and inventories – are far more critical than any individual earnings.
Bonds and the Dollar are a source of indecision. The dollar appears that it may bounce higher off the $102 level, while bonds (/ZB = 30-Year) appear that they may want to move down from 132.
Volatility is moving higher. SKEW (the difference between out-of-the-money PUTS & out-of-the-money CALLS) jumped higher – which is indicative of increased ‘hedging activity’.
TRADES:
- XHB = BOT a March, +$64 / -$59 PUT Spread
- Gold (GLD), Silver (SLV), and Copper: Gold, silver and copper are in the process of carving out decade-long bases. All are on the precipice of resolving higher and launching their next structural uptrend.
- TotalEnergies (TTE): TTE is in the process of reclaiming its 2018 highs and resolving a half-decade base. TTE looks buyable above $65.50.
SPX Expected Move (EM):
- Last Week’s EM = $65 (4-day week): Price action in this market is violent – as we moved $74 on Friday alone.
- Next Week’s EM = $72 (5-day week): We are on the verge of increased volatility.
Tips:
HODL’s: (Hold On for Dear Life)
- PHYSICAL COMMODITIES = Gold @ $1,928 & Silver @ $24 /oz.
- AGG – iShares Bond Fund: (AGG = $100.1 / in at $93)
- BIV – Vanguard Bond Fund (BIV = $76.8 / in at $74.54)
- 30, 60, & 90-Day Treasuries @ 4.2 to 4.9%
- **Bitcoin (BTC = $23,300 / in at $4,310)
- **Ethereum (ETH = $1,650 / in at $310)
- CAT (Downside PUTS):
o BOT Feb: +$200 / -$190 PUT Spread
- DNN buy shares and sell the April $1.50 calls against them for 11% gain.
- GDX – Metals Miners ETF: (GDX = $32.4 / in at $30)
- GDXJ – Metals Jr. Miners ETF: (GDXJ = $40.3 / in at $37.50)
- GLD – Gold ETF: (GLD = $179.3 / in at $176)
- GME – DRS’d and HODL
- Innerscope (INND = $0.006 / in at $0.0052)
- SLV – Silver ETF: (SLV = $22 / in $20.51)
- SPY (Downside PUTS):
o BOT Feb: +$355 / -$365 PUT Spread
- XLF (Downside PUTS):
o BOT Feb: +$32 / -$30 PUT Spread
o BOT Feb: +37 PUT
Follow me on StockTwits.com to get my daily thoughts and trades – my handle is: taylorpamm.
Please be safe out there!
Disclaimer:
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