Everybody’s hiring. Amazon is paying an average starting wage of $17 per hour, and is offering $1,000 signing bonuses. Chipotle is paying $15 per hour, and says employees can earn $100,000 per year after three years. The issue is that the average monthly unemployment payout is $2,500 / month, and has 42% of the unemployed earning more than they did when they were working. This situation will result in:
- #1: increasing the working wage – when wage growth has been stagnant,
- #2: and / or any wage growth will be canceled by higher prices – which are inevitable.
Lessons:
- #1: The labor shortage could slow economic growth.
- #2: Workers will return to work as benefits expire and schools reopen.
- #3: Businesses will find it hard to lower wages, which will result in eventual downsizing.
Where SHOULD I spend my time? Eventually, we figure out the ‘right’ amount of time to spend on something. How long should an education take? How fast should we deliver an order? How much time do we spend with a patient? How long should we devote to learning a new skill? Remember: if you spend the same amount of time as everyone else == you’re probably going to get the same result. Consider:
1. Spending more time than everyone else and measuring the results. If your results are the same – the additional time was wasted.
2. Spending far less time than everyone else, and investing the remainder into processes, alternatives, and benefits that everyone else is overlooking. That should give your offering yet another differentiable, competitive advantage.
Lesson: Change happens when someone has the guts to reorganize and manipulate their own time stack.
The Market: It’s a ‘BTFD’ vs ‘I Told u So’ moment.
All innovations go through their: ’Buy the Dip’ vs ‘I told you so’ moments, and crypto is no different. It’s moments like these when investments become more than simple allocations of capital. Paul Tudor-Jones (a hedge fund manager credited with sparking the institutional wave into bitcoin) believes that bitcoin could become an inflation hedge. Stanley Druckenmiller thinks that bitcoin is on its way to becoming a global reserve currency. And Twitter and Square CEO Jack Dorsey would like bitcoin to be the native currency of the Internet. If bitcoin succeeds in any of those roles, it would be massive. Another motivation of many bitcoiners is that it returns financial power to the people.
Factually:
#1. Bitcoin adoption is accelerating: The number of blockchain wallet users increased throughout 2020. In 2021, the number of new wallets created grows by millions each month. Square’s (SQ) revenue from its bitcoin business alone increased 11-fold YoY.
#2. Bitcoin’s value proposition is perfectly suited to this macro climate: We are witness to a new financial crisis with more ‘indirect’ bailouts, ridiculously low interest rates, and increased quantitative easing. Bitcoin’s protocol has a hardcoded limit of 21m coins, thereby creating a unique digital scarcity. Within 2 months of going live, PayPal is already buying more than 100% of all newly minted Bitcoin.
#3. Wall Street likes crypto: Bitcoin was the best performing asset class of the last two years, as well as of the last 10. Gold and equities were crushed in comparison. Even after this week’s severe correction, Bitcoin has outperformed every other asset class since the March 2020 COVID market crash. Institutions and ‘smart money’ are back to buying the dip.
#4. After any crash, Bitcoin has always surpassed its previous all-time highs. Bitcoin has been ‘left for dead’ over 383 times over the past 10 years by mainstream media. It always comes back stronger than ever, and there’s no reason to believe history will not repeat itself.
- In mid-2011, Bitcoin hit $30 on the Mt. Gox exchange – plummeted to $2 in November 2011, and back to over $30 in 2012.
- In April 2013, Bitcoin touched $260 – then tanked to $125 during a DDoS attack, and back to over $275 just 7 months later.
- In late 2013, Bitcoin hit $1,000 – with the price collapsing to $175 over the next 2 years, and then over $20,000 in December of 2017.
#5. Before Bitcoin can reclaim its rightful position, market sentiment must get ugly. Unsurprisingly, market sentiment is very poor right now. The ‘Fear & Greed Index’ is showing Extreme Fear, and registering its lowest reading since March 2020. That suggests that a bottom is close. So, Buy The Friggin’ Dip (BTFD).
InfoBits:
- AT&T announced a deal to merge Warner Media with Discovery… paving the way for one of Hollywood’s biggest studios to compete with Netflix and Disney. This is a ‘Hail Mary’ for Warner and Discovery to grab a musical chair before there are no more seats at the table.
- 5 EV startups that went public via SPAC… are currently bouncing off their lows. Nikola, Fisker, Lordstown Motors, Canoo and Arrival were once worth over $60B, but now their execution is in question.
- MGM is in talks to sell itself to Amazon: The deal would turbocharge Amazon’s streaming ambitions by bringing James Bond, Rocky, RoboCop and other film and television properties into the e-commerce giant’s fold.
- People without a high-school degree… suffered the biggest financial hit from the corona economy.
- Hostess Twinkies beat earnings estimates this week… because indulgent snacking is thriving.
- Shein (the “Tik Tok” for e-commerce)… overtook Amazon as the most installed shopping app in U.S. for the first time.
- Pickup trucks accounted for half… of the auto industry’s top 10 best-selling vehicles last year, and made up 13% of all cars sold in the US last year. Ford’s F-150 was #1, GM's Chevy Silverado was #2, and Chrysler's Ram was #3.
- California accounts for 35% of all Tesla’s sales: Meanwhile, F-150 sales are strongest in red states. Electrifying F-150 owners means winning over America’s heartland. F-150 owners liking the ‘Ford Lightning’ (the Ford EV truck offering) will be a turning point for EV adoption.
- When Bezos buys the MGM Lion... it comes with a whole movie studio. This would be the 'Zon's biggest move yet into entertainment.
- Craig Federighi, Apple’s SVP of software engineering, said… during the Epic-Apple trial that: “There is a significant, large malware problem with the Mac.”
- Semiconductor lead times increased to 17 weeks last month… indicating users are getting more desperate to secure supply,
- Chinese EV maker Evergrande is worth more than… Ford and GM — without ever having sold a single car.
- JPM will begin giving credit cards to people with no credit scores. The dilemma has always been that in order to build credit – you need to borrow and pay it back in a timely fashion. But if you never had a credit card, how do you borrow in order to pay anything back?
- For the Week:
o The Nasdaq was the only major index to move higher. Are growth and tech back?
o Energy tumbled 2.5%, and failed to fly through its former February 2020 high.
o Gold gained 2% on the week – moving higher for 7 straight sessions.
o Ethereum flopped 40% as it came in from 3,600 to 1,900.
Crypto-Bytes:
- Another day, another NFT: The Uffizi Gallery in Florence sold Michelangelo’s Doni Tondo as an NFT for $170,000.
- A report surfaced (much to Elon’s chagrin)… showing how bitcoin mining is more than twice as green as the international banking system.
- Bitcoin and other major cryptocurrencies slumped… after the People’s Bank of China conveyed a statement reiterating that digital tokens can’t be used as a form of payment.
- Every bull run in crypto… has seen 5-7 declines of 30% or more.
- Nexo has seen clients roll out of Bitcoin and into Ethereum.
- 80% of Central Banks are exploring use cases involving CBDCs (Central Bank Digital Currencies)… with 40% already testing proof-of-concept programs.
- “The best time to buy Bitcoin was 10 years ago. The 2nd-best time is now.” Bitcoiners have developed a trading strategy: they amass as much bitcoin as possible and never sell. A dip is just a reminder to buy.
- Cathie Wood, CEO of Ark Investment Management said: “Bitcoin will touch $500,000.”
- The U.S. Treasury Department announced… that it is taking steps to crack down on cryptocurrency markets and transactions. It will require any transfer of $10,000 or more to be reported to the Internal Revenue Service.
Last Week:
Monday: I'm seeing disturbing selling in some of the big tech names. I'm simply not convinced that this market is healthy. On the other hand, the gold and silver miners are going bonkers. I think they're a bit too stretched to chase. But I did grab some HL and some RIG this morning. But overall, I'm just not feelin’ it.
Tuesday: The silver miners had quite the day yesterday. Some of the moves were outstanding. Keep an eye on SILJ which is the junior miner ETF. Single-family housing starts fell over 13% last month, and that's putting a drag on the DOW. I'm watching AMD here. If it gets over yesterday's high at $75.52, I'm going to take a shot. I’m also watching MVIS. If it gets over $16.25 I'll take some.
Wednesday: This is NOT a healthy market. They're trying their best to get the S&P over its 50-day moving average. That number stands at 4080. The S&P has tested last Wednesday's session low and is now trying desperately to get up and over that 50. I'm a spectator today. The FED minutes came out, and they did not change a single line in their forecast. They said that they still need to see 2% inflation (while it's really 16% now) and they will "telegraph well in advance any changes in QE" meaning that's still full blast. BUT then our FED released a sound byte saying with all of the increased economic activity, tapering could begin sooner rather than later. Huh?
Thursday: I think that the market set a low last Wednesday, bounced, and then retested that low yesterday. Thus, they've got the green light to move us higher if they want. One that looks attractive to me is NXPI. If it can get over its 50-day moving average – I’ll take a shot. Watch little SUNW. It’s been basing for 7 sessions and has not popped out. Over $9.35 and I’m in. Watch MU as the stochastics are about to cross, breaking it out of some congestion. If it hits $80.82, I'm taking it.
Marijuana… and Alcohol…
- Rite Aid is now offering alternative medicines… and even considering cannabis remedies. Citing growing demand, the fourth-largest U.S. pharmacy chain will begin to offer CBD products.
- Green Thumb Industries has enjoyed 2021… with sales nearly doubling to $194m in Q1. The company's adjusted operating EBITDA is up 180% YoY.
- Colorado has posted total cannabis sales up 28% YoY… through the first quarter of 2021. The state's adult-use sales were responsible for the bulk of the increase, surging 29%, while medical sales were up 25%.
- Boston Beer (Samuel Adams and Truly Hard Seltzer)… will be opening a research hub in Canada aimed at developing cannabis-infused beverages.
Next Week: Will the Crypto Crush move into Equities?
Market Update:
- We have been in the exact same, tight range for the past 6 weeks – moving between 4,100 and 4,200 on the S&Ps. This is rare because underneath the surface things are moving around quite a bit.
- The VVIX is a rockin’ because traders are buying VIX Calls. The more VIX Calls that are purchased – the higher the VVIX goes. The VVIX broke above 110 and into the ‘danger zone’ – 2 weeks ago. It remained on that same trajectory last week as it bounced between 125 and 150. The pros are not hedging out of fear, but rather as a risk mitigation tactic. That is not necessarily bearish.
- The SKEW (the value of the OTM (out-of-the-money) Puts vs OTM Calls) was almost at an all-time-high last week. It’s saying that the pros have their hedges in place, and it’s the retail trader that could be in trouble if this market sells off.
- The movements within sectors are suddenly correlated as the SPX, IWM (small caps) and the QQQs (Nasdaq) all did basically NOTHING on the week.
Markets Looking Forward:
- The financials are still hangin’ in there despite every other sector being down. That means: TIP #1: If you wish to get bearish on the market – the financials (XLF) are the obvious choice of where to short. In specific, Wells Fargo (WFC) is up 55% YTD. Warren Buffet just sold his remaining WFC holdings. WFC could fall a long distance before reverting to its mean.
- Market correlation should drive us ‘outside’ the expected move. Previously the financials and energy were moving higher as tech was moving lower. This past week everybody stopped rotating from sector to sector, and began marching in lockstep. TIP #2: Correlations (combined with high volatility and a tight range) are often a leading indicator of an upcoming large market move.
- The 3rd shoe to fall is that Bond Volatility is moving higher. Bonds (/ZB) have been in a very tight range for the past 4 months. For the past several weeks, the implied volatility in bonds has been working its way higher. TIP #3: This also signals that a ’larger than expected move’ is coming.
Crypto Smackdown:
- Bitcoin, Dogecoin and Ether – Oh My. The issue that I have with the crypto-crash is that it has the potential to spread due to all of the fragmented exchanges and leveraged players within those exchanges. With 100 to 1 leverage on many of these new exchanges, the crypto margin calls could spill over into equities via: Coinbase (COIN), Tesla (TSLA) and ARKK.
- Tesla has positioned itself as being somewhat of a crypto-lightening rod, and some of the more dramatic moves inside of TSLA (down 20% YTD) have also coincided with moves inside of crypto. Between this week’s comments by Elon Musk (concerning bitcoin mining) and the Chinese government (concerning regulation), Coinbase could continue to decline (down 30% YTD).
- As both COIN and TSLA decline, the ARKK innovation fund will also get hit (down 15% YTD). As redemptions come into ARKK ($23B under management) – it will be forced to sell some of its components such as: BIDU (-12% YTD), ZOOM (-12% YTD), TDOC (-30% YTD), and SQ (-10% YTD). Therefore, crypto is NOT in its own little world – isolated to a bunch of smaller exchanges. Crypto is deeply into the fabric of our larger equity markets.
- Crypto will most-likely over-shoot the natural mean-reversion that is going on, and the only part that worries me is the lack of liquidity within many of the newer, smaller crypto exchanges. With crypto blowing back onto Tesla, and Tesla having such a large impact on the S&P – I wouldn’t be surprised to hear a more crypto-friendly sound byte come out of Elon this week.
- Crypto will cleanse itself of the ‘posers’, because that is what crypto does. The U.S. isn’t going to ban crypto or even get too pushy about it. The Chinese digital yuan is NOT being accepted as the Chinese government would have hoped, and the world sees that. I also believe that the U.S. cannot regulate crypto much beyond the lip service that it’s getting right now. Therefore, think of this move as a ‘mean reversion’ and your inability to invest is more mental than physical at this point.
Tips:
For two weeks in a row, the DOW and S&P have closed lower. The NASDAQ opened above its 50-day moving average on Friday (for the first time since May 7th) and couldn’t hold it. We can blame the roll over on the Chinese cracking down on crypto, but when a 4 for 1 stock split in NVDA can’t keep the NASDAQ up over its 50-day – there’s still weakness out there. Our FED knows that they’re in a box, and just talking about tapering rattles things. TIP #4: If the NASDAQ can’t move over its 50-day, we could start to see the DOW put in a series of lower highs and lower lows. So, if they come out roaring on Monday and they drive us higher for a few days – we will be okay for a while longer, but you can feel the pressure.
HODL’s: (Hold On for Dear Life)
- Bitcoin (BTC = $33,600 / in at $4,310) & buying
- Bitcoin Cash (BCH = $520 / in at $170) & buying
- CTI BioPharma (CTIC = $2.54)
o Selling $3 CCs for income
- Electramericcanica Vehs (SOLO = $3.26)
o Sold Sept $4 CCs for income
- Express Inc (EXPR = $3.23)
o Selling $4 CCs for income.
- Ethereum (ETH = $1,900 / in at $310) & buying
- Grayscale Ethereum (ETHE = $23.37 / in @ $13.44) & buying
- Grayscale Bitcoin Trust (GBTC = $30.10 / in @ $9.41) & buying
- Grayscale Trust (GDLC = $26.42 / in @ $39.75) & buying
- Hyliion (HYLN = $10.03 / in @ $0.32)
- Infinity Pharma (INFI = $3.13)
o Selling $4 CCs for income
- Iridex Corp (IRIX = $7.70)
o Selling $9 CCs for income.
- Hecla Mining (HL = $7.56 in @ $7.50)
o Sold Sept $9 CCs for income.
- Litecoin (LTC = $310 / in @ $191)
- Transocean Limited (RIG = $3.81 in @ $3.80)
o Sold Aug $5 CCs for income.
- Sandstorm Gold (SAND = $8.40 in @ $6.90)
o Sold June $8 CCs for income.
Thoughts:
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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