How does Sam Altman get fired… and George Santos still have a job?
Apple’s success was not due to Steve Jobs’ turtlenecks… just as SBF’s hair didn’t put him in jail. Successful marketing and the associated network effects are so confusing that we often try to duplicate someone else’s media circus. But there’s no need to become part of that circus. If you can find a problem that people will pay you to solve, and solve it – you can skip the clown car.
Avoid the second mistake… because it’s the one that often causes the real trouble. The first miscue: flusters us, breaks our rhythm, and messes with our confidence – often causing the second miscue. We can’t avoid making mistakes, but avoiding the second mishap is a learnable skill.
We need more people to: ‘hold-the-camera’. When you’re ‘holding-the-camera’, you’re often NOT in the shot – but that doesn’t mean you’re not doing important work.
I want this to be perfect… Per Seth G.: Somewhere, there is the ideal rose-growing soil, the best possible wave for surfing, and the most romantic sunset for a proposal. Unfortunately, it’s not right here or right now. Our success mostly has to do with how we dance when the conditions aren’t quite perfect.
The Market:
Luxury does not mean… the best, or the highest priced, or the scarcest. Luxury is a state of mind and a function of the experience. Ayron Senna said one of my favorite business building quotes: “You cannot overtake 15 cars in sunny weather… but you can when it’s raining.” That is the opportunity.
Our FED's preferred inflation Index… (Core Services Ex-Shelter) actually accelerated to +3.85% YoY. Funny, I never heard a peep from our media about any aspect of the CPI rising.
Overall, there is almost a sense of… “If it’s stupid, but it works – it’s not stupid”. Maybe that’s the right approach, and maybe sentiment and technicals take the stock market higher for longer. But there are some uncomfortable macro murmurings, and remember: You are buying into a very expensive market.
2023 Financial sector layoffs include: Citi = 7k employees, Goldman = 4k, Farmers Insurance = 11% of workforce, Robinhood = 7%, Schwab = 6%, Wells = 5%, Ally Financial = 5%, Morgan Stanley = 4%, and the list goes on. Do financial companies naturally do layoffs when things are going well? I don’t think so.
InfoBits:
- Serious Q3 delinquencies (+90 days) have increased… for credit cards, auto loans, and mortgages.
- Chrysler offered a voluntary separation package… to 1/2 of its U.S. white-collar employees.
- Drive-thru visitors rose 30% from 2019 to 2022… while indoor dining dropped 47%. Chains are in a drive-thru space race. McDonald’s and Taco Bell have opened drive-thru-only stores. Chick-fil-A is building a 75-car, four-lane drive-thru location. And AI chatbots are handling orders at Carl’s & Wendy’s.
- A witness in the Google antitrust trial revealed… that Google gives Apple a 36% cut of search ad revenue that comes from Safari.
- Since its launch, Donald's Trump's Truth Social… has generated $3.7m in net sales, and $73m in losses – raising concerns about its sustainability.
- Women are expected to live for ~80 years… while men for only 74 yrs. That’s the largest gap in 30 years.
- Apple remains about 50%... of Berkshire's stock investments.
- Homebuilder sentiment fell to its lowest level in a year… as high-interest rates and low affordability continue to curtail demand. ~36% of builders cut prices in November.
- Continuing Jobless Claims… rose to their highest level in two years as the labor market’s softening continues.
- Walmart’s CFO said consumers are “leaning heavily” into promotions… and that “there are trends emerging that are making us pause and rethink the health of the consumer.”
- Janet Yellen (before meeting with Chinese President Xi)… stopped at In-N-Out and had a cheeseburger with fries and onions.
- Ford, GM, and Tesla have all… put new EV investments on ice – citing slowing demand and economic jitters.
- Meta just eliminated its ‘Responsible AI Team’.
- The top contenders to topple GPT-4 are: Google Gemini, Claude 3, Inflection 3, and Grok 2. Google Gemini (Q1 arrival) has a 76% probability of beating OpenAI’s GPT-4, but GPT-5 is on the horizon.
Crypto-Bytes:
- Former FTX employees are planning to launch a new crypto exchange. Maybe this time, the CEO won’t try to steal ~$10B of investors’ money.
- BlackRock filed a spot Ethereum ETF prospectus with the SEC.
- JPMorgan is testing tokenized portfolios… using Avalanche blockchain technology.
- Circle eyes an IPO… as the tightening stablecoin market benefits from high rates.
- With over 70% of all bitcoin in circulation sitting dormant for a year… we are poised to see a continued increase in price as new demand enters the market. The bitcoin market is proving that an illiquid asset, that is met with higher demand, must increase in price in order to accommodate everyone.
- Bitcoin’s price popped… after Argentina elected a pro-crypto president.
TW3 (That Was - The Week - That Was):
Friday: Stocks remained on track for their 4th straight week of gains. For the week, the Dow and S&P 500 were up 0.9% each and the Nasdaq was up 1%. It was the longest weekly winning streak for the S&Ps and Nasdaq since June, and for the DOW since April. Stocks have moved higher as Treasury yields eased to multi-month lows on hope inflation is cooling and the Federal Reserve may be done raising rates. The U.S. dollar slipped as investors bet U.S. interest rates have peaked, while the yen edged higher, reinforcing views that the Bank of Japan (BOJ) may soon roll back monetary stimulus.
AMA (Ask Me Anything…)
Is OpenAI still open? You could argue that this is just drama and not much changes. Google, Facebook, and the open-source software world – all have comparable AI systems and are racing to develop them as fast as they can. And whether or not OpenAI exists may not even matter. On the other hand, for the last couple of years OpenAI has shown that it has been the company that has made AI matter to consumers, and it has been at the forefront of this technology. Much of that relies on the company’s scientists, but also on Sam, who has raised the vast sums of money that it takes to develop this technology. Without this pairing, OpenAI would almost certainly be in a very tough position.
As the new week begins, it seems that Sam Altman is back at OpenAI as CEO. They are still working out the details but a new BOD will include former Salesforce CEO Bret Taylor, former Treasury Secretary Larry Summers, and board member and Quora CEO Adam D'Angelo. No explicit mention was made of whether OpenAI Chief Scientist Ilya Sutskever or OpenAI board members Tasha McCauley and Helen Toner will stay on the board – but the odds are not good. As for Altman and OpenAI president and co-founder Greg Brockman, it’s rumored that they will give up their board seats, and Altman will agree to an investigation into his behavior as CEO. I wonder whether OpenAI's "capped profit" model will remain in place. The idea was to give investors up to 100 times their return before giving away excess profit to the rest of the world. Investors who are planning to buy $1B in secondary shares of OpenAI at an $86B valuation would be very happy to see OpenAI dispense with that model.
Next Week: Markets Up … Economy Down
Some notes: Year-to-date: the financials are up 3%, energy is flat, healthcare is down -3%, utilities are down -11%, the Nasdaq is up 47%, and the SPY (due to the Nasdaq) is up 20% YTD. However if you look out into May, markets are predicting a FED rate cut. That means in March / April we will be in a ‘deep enough’ recession that our (‘higher for longer’) FED will be admitting: (a) it missed the signs again, and (b) we’re in so much pain that we need to restart the printing presses and inject liquidity ‘n inflation back into our Argentinian economy. WOW – so why are markets higher? The answer to that question is easy == The Magnificent 7.
Volatility has been crushed too far… there’s even talk (and evidence) that UBS is having troubles, and other banks are running low on liquidity. Could we be seeing the beginning of the credit event? But our VIX (volatility index) is down around 12 – effectively dead and therefore losing its predictive effectiveness. Tip #1: The VIX does not see anything that has less than 9 DTE (days ‘till expiration), but the activity that moves markets is all less than 7 DTE. In fact, next week’s implied volatility for the SPX is only 8% - making it dangerous to sell premium; therefore, (to be safe) be a net buyer of that directional premium.
Is this the last hurrah for bonds? As I think thru supply ‘n demand for bonds, I see a lot more supply than demand – meaning: Tip #2: that rates will need to go higher in order to entice buyers; therefore, bonds have more downside in their future – which will put pressure on stocks.
Does anything other than the Magnificent 7 matter? Absolutely not. Currently, there is an incredible amount of concentrated risk into these 7 major tech stocks. All you need is for one of the Mag-7 to report stellar earnings and profits (like NVDA) and move significantly to the downside (like NVDA – that’s up 233% YTD) – and the corresponding tsunami will magnify in intensity as it impacts multiple index products.
Will markets hold-it-together until year-end? SKEW (the price of OTM (out-of-the-money) Puts to OTM Calls is incredibly high due to professionals / institutions hedging (buying puts) to protect their end-of-year portfolio winnings. I do NOT think that we will hold-it-togetherbecause:
- FED Funds futures are telling me something is wrong economically,
- Nvidia (Mag-7) that reported stellar earnings and investors sold-the-news,
- Google and Meta (both Mag-7) that rely totally on advertising dollars,
- Amazon (Mag-7) with its huge retail component that depends upon holiday spending for its success.
Tip #3: Combining FED Feds futures with any one of the Mag-7 faltering (as to what almost happened to MSFT with OpenAI last week) – the downside risk is 500 S&P points.
The SPX Expected Move (EM):
- Last Week’s EM = $48.5 (3.5-day week) = we touched the upper edge of the EM.
- This Week’s EM = $46.3 (5-day week) which is shockingly low – keep your hands and feet inside the vehicle!
A Little Extra: A Thanksgiving thought by Samuel F. Pugh:
“When I have food, help me to remember the hungry;
when I have work, help me to remember the jobless;
when I have a warm home, help me to remember the homeless;
when I am without pain, help me to remember those who suffer;
and in remembering, help me to destroy my complacency and ignite my compassion.
Make me concerned enough to help, by word and deed, for those who cry out for what we take for granted.”
TIPS:
Per Howard L: Imagine, how overvalued things are in AI-land, and how big a LOCK Google has on the sector because: (a) they have their own AI toolkit, and (b) because they own all of the traffic & apps that we currently use most (g-mail, search, maps, etc.).
I’m watching: (a) TK, (b) ZIM - down from ~$20 in April, and (c) taking on more CCJ.
HODL’s: (Hold On for Dear Life)
- PHYSICAL COMMODITIES = Gold @ $2003/oz. & Silver @ $24.4/oz.
- 13-Week Treasuries @ 5.4%
- **Bitcoin (BTC = $38,290 / in at $4,310)
- **Ethereum (ETH = $2,120 / in at $310)
- **ChainLink (LINK = $14.80 / in at $7.78)
- AAPL – Apple = ($190 / in at $181)
- CCJ – Uranium = ($45.1 / in at $33.8)
- UEC – Uranium Energy Corp ($6.4 / in at $4.8)
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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