Engagement thru Speculation: As two pro-hockey teams came back out on the ice, the scoreboard in the center of the arena posted the second half over/under in goals and the money-line on the game – because we have become a legion of betting junkies. We are consumed with any form of fintech-based speculation. Everyone is watching a betting/trading app on their phone. Like The Apprentice before it, engagement thru speculation will create more price efficiency and/or sustainability. Engagement (betting) will either move onto listed exchanges, or the speculative capital will move into more efficient, more liquid financial products.
After years of record quit rates… US workers are hunkering down for The Big Stay. But don’t get it twisted: job satisfaction has slumped 10% this year – the lowest since early 2020. Inflation continues to water-down paychecks and return-to-office plans have workers remembering why they don’t sit in traffic by choice. Factually, 40% of workers have run out of their pandemic savings, student-loan repayments have resumed, and we’ve racked up a record $1T+ in credit-card debt. It’s hard to give up a stable job.
The Market:
Marketing 101 … per Seth G:
- Trust is worth more than attention.
- Helping people get where they’re going… is more effective than persuading them to follow you.
- Choose your customers… and let them choose your future.
- Tell ten people, and if they don’t tell others... make a better product.
- Make it easy and rewarding for people to spread your word.
- Customer service is free.
- Motto: “You’ll pay a lot, but you’ll always get more than you paid for.”
- Act like a million people are watching… because they are.
InfoBits:
- The US is facing a nursing visa backlog… as hospitals are looking abroad to fill 100,000 pandemic-related nursing vacancies.
- Consumer Inflation came in exactly as predicted… up 0.1.
- X / Twitter will generate $2.5B in 2023… a decrease from ~$4B in 2022.
- The FCC has rejected Starlink's application for $885m… in public funds to provide internet service to rural America. They say that they: “failed to demonstrate that it could deliver the promised service.”
- Meta is outdoing itself… not only with the creepiness factor of embedding a camera in a pair of glasses, but now equipping them with multimodal AI.
- Tesla is recalling nearly all 2m of its cars on U.S. roads… due to regulators' concerns over the company's Autopilot feature.
- The EU plans to reclassify gig workers as employees… costing ride-hailing and food delivery companies billions.
- AI tools like ChatGPT… have not increased cheating rates in schools.
- Citi will offer early bonuses for voluntary exits… as companies struggle with high head-counts, lower quit rates, and workers hunkering down to save $’s.
- Elon Musk’s charity outlined plans… to create a STEM-focused K-12 school in Austin, Texas. He’ll fund the project for $100m, with the school ultimately intending to expand its operations to create a university “dedicated to education at the highest levels.”
- A Microsoft chatbot gave wrong answers… to one-third of the political questions it was asked – often misquoting sources or just making stuff up.
Crypto-Bytes:
- Pay no mind to Sen. Warren or Jaime Dimon… the two events that crypto investors are eyeing are: (a) the approval of a crypto spot ETF in January, 2024, and (b) the next halving in April, 2024.
- Goldman sees FED rate cuts boosting Bitcoin… as lower interest rates typically increase risk appetite among investors.
- Solana’s stellar year… has been turning heads as it surpassed Ethereum in on-chain activity and in NFT sales.
- Google will soon allow ads for ‘crypto coin trusts’… financial products that let investors trade in an actively managed basket of coins. This will pave the way for spot bitcoin ETF ads on Google – as soon as next month.
- El Salvador proposes ‘volcano bonds’… as they seek to raise $1B to purchase bitcoin and build Bitcoin City – a tax-free zone that would host crypto miners powering their rigs with renewable geothermal energy from a volcano.
TW3 (That Was - The Week - That Was):
Monday: This week is simply too full of market moving events. Most investors will be focused on CPI, PPI and The Fed this week, but the *real* event will be Tuesday, when the Treasury holds a 30-yr Bond Auction. The U.S. Treasury prefers its debt sales to be humdrum affairs, but lately they are sparking market fireworks. For years, many in Washington and on Wall Street assumed that investors would buy any number of bonds the government issued, no matter the fiscal outlook. Testing that assumption, the U.S. will sell a record ~$21T of new Treasuries issued this year. Whether the market can absorb the rolling waves of debt without disruption is the biggest question on Wall Street. The last 30-year auction was so poorly received that it rattled other markets. Investors fear that signs of weak demand may raise the cost of government borrowing and hurt the economy.
Wednesday: Of course, our FED left rates unchanged, but in reality the FOMC results were very close to a full-on, dovish pivot.
- Fed says growth of economy "has slowed" since Q3 2023
- Most Fed officials see 3 rate cuts in 2024
- Fed sees 4.1% unemployment by end of 2024
- Fed sees US GDP growth at 2.6% in 2023 and 1.4% in 2024
- The market immediately priced in DOUBLE the number of FED 2024 rate cuts.
Chairperson Powell said the quiet part out loud – aka that they're probably at the height of rates for this cycle. He also said that rate cuts will be taking place when it is time. The market believes that our FED managed a soft landing, killed inflation, and is now giving a gift to the Democrats in Biden’s White House.
Thursday: Ok, our FED is buying their own baloney that they've got inflation under control, and there is no need for any more tightness. But wait a minute. If our FED is even thinking about cutting rates, it means the economy has slowed to the point where they need to adjust monetary policy lower – to further ignite commercial activity. The market FALLS 90% of the time from the start of rate cuts.
AMA (Ask Me Anything…)
When an online shopping site cuts 11% of its staff two weeks before Christmas, you know something’s up. This should be the happiest time of the year for Etsy, an online marketplace that today was promising “Last minute gifts at every price!” Instead, the firm joined a growing list of businesses laying people off in recent days—including Spotify last week and toy maker Hasbro on Monday. Tougher economic times caused by higher interest rates are likely hurting all these companies. Etsy has cited the impact of consumers’ belt-tightening, as well as competition from overseas-based online sellers such as Temu.
Next Week: Irrational FED Exuberance…
Rate Cut Mania… Currently our market is saying that there’s a 70% chance of a rate cut at the FED’s March meeting. In my thinking, that’s almost impossible unless there are other forces at work – in which case:
- Let’s ‘talk’ rates lower because the interest payment on our national debt will top $1 Trillion in 2024.
- Let’s de-emphasize the CORE inflation still being 4%.
- And let’s allow the market to talk rates lower to stimulate home-buying.
Somebody (or something) spooked Chairperson Powell to move him from: ‘higher rates for longer’ to ‘3 rate cuts in 2024’.
10-Year takes a dive… as our FED was extremely effective in talking the 10-Year rate down from ~5% to under 4% … inside of 2 weeks. But how did the financials (who love higher interest rates) go from being down -9%YTD to being +9%YTD over that same 2-week period?
Portfolio Managers and Hedge funds are in panic mode… The S&Ps are up ~23% YTD. Good Portfolio Managers (like Citadel) are panicking because they are only up 15%YTD. If you did not own the Magnificent 7, you are potentially down on the year. At this point, what’s to prevent their clients from pulling some of their money from their actively managed portfolios and put it into passively managed S&P funds – earning an additional 8%? We are seeing desperate wild rotations toward virtually any hot sector – by portfolio managers and hedgies in search of yield.
We have an ‘almost’ record-high SKEW… Last week SKEW (a measure of S&P risk) hit its second highest print in its 12-year history – despite a VIX environment. This implies that traders believe that markets are going lower 30-days from now, and are buying out-of-the-money (OTM) Puts and selling OTM Calls to finance their purchase.
Huge moves in a low VIX environment… Unfortunately, most people think that when our FED starts to cut rates – markets will move higher. THAT IS FALSE. Markets fall 90% of the time from the start of rate cuts. Why? Because for our FED to cut rates, it means the economy has slowed to the point where they need to adjust monetary policy lower – in order to try and ignite commercial activity. This opens the door for the markets to run higher into year end. Is any backpedaling on rates going higher from other Fed heads going to stop markets from moving higher? Probably not. This has all of the earmarks of a Teflon market – that is impervious to anything. Tip #1: Traders are currently buying January and February Calls in the VIX like they’re going out of style. They either believe: (a) higher parabolic market moves - almost always resolve themselves lower, or (b) portfolios require a hedge – just like everything else in life.
SPX Expected Move (EM)
- Last Week = $65 EM … and we moved $105 (with a 12 VIX)
- Next Week == $55 EM
TIPS:
HODL’s: (Hold On for Dear Life)
- PHYSICAL COMMODITIES = Gold @ $2030/oz. & Silver @ $24.1/oz.
- 13-Week Treasuries @ 5.4%
- **Bitcoin (BTC = $42,450 / in at $4,310)
- **Ethereum (ETH = $2,250 / in at $310)
- **ChainLink (LINK = $16.30 / in at $7.78)
- AAPL – Apple = ($198 / in at $181)
- **COIN – Coinbase = ($148 / in at $125)
- **MARA – Marathon Digital = ($18.3 / in at $12)
- **RIOT – Riot Platforms = ($15.6 / in at $12.5)
- UEC – Uranium Energy Corp ($6.3 / 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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