RF's Financial News

RF's Financial News

Sunday, October 10, 2021

This Week in Barrons: October 10th, 2021


Tesla delivered 241,300 vehicles in Q3 2021.  Tesla sold 102,000 (73%) more cars than it did in the same quarter of 2020.  Compare that with General Motors and Ford where sales were down 33% and 27% respectively.  Auto sales are down because there is a shortage of computer chips, brought on by a combination of the pandemic shutdowns and canceled orders due to anticipated drops in demand.  Tesla was affected by that same chip shortage, but Tesla was able to substitute alternative chips and re-write their car’s firmware.  In other words, Elon and the other employees at Tesla kept doing what they'd always done – adapt to a changing landscape and find ways to solve problems on the fly.  It seems non-entrepreneurial Fortune-500 CEO’s consistently reject solutions that are outside their company’s immediate business model.  It’s the entrepreneurial mindset that has permeated Tesla to the point that if you’re faced with something you don't know how to do – just learn how to do it.  Tesla employees also believe that your successes and failures mainly result from things you do – not from elements thrust upon you.  Kudos to Tesla for a job well done!


Post-college, do you want a job?  Here are the Top 5 & Bottom 5 college majors by salary and unemployment rate:

         TOP 5:

1.    Architectural Engineering: Annual: $90,000, and 1.3% unemployed,

2.    Construction Services: $80,000, and 1% unemployed,

3.    Computer Engineering: $101,000, and 2.3% unemployed,

4.    Aerospace Engineering: $100,000. And 1.9% unemployed, and

5.    Transportation Sciences and Technologies: $86,000, and 1.8%

 

BOTTOM 5:

1.   Clinical Psychology: Annual: $49,000, and 3.8% unemployed,

2.   Composition and Speech: $42,000, and 4.9% unemployed,

3.   Drama and Theater Arts: $41,000, and 4.5% unemployed, 

4.   Miscellaneous Fine Arts: $38,000, and 5.6% unemployed, and 

5.   Visual and Performing Arts: $35,500, and 3.6% unemployed.



The Market:



Would the real Jamie Dimon (CEO of JP Morgan) please stand up?

-       Jamie Dimon recently said that he remains a bitcoin skeptic because: “It has no intrinsic value.  Regulators will eventually regulate the hell out of it. Bitcoin will be around for the long term, but it’s like fool’s gold.”

-       Jamie – need I remind you: (a) in February 2019, you started rolling out your own digital currency called JPM Coin, (b) in October 2020, you created a new unit within JPM for crypto-blockchain projects, and (c) in August 2021, you started giving your own wealth management clients access to crypto funds.

-       Jamie, it sounds to me like you’re trying to talk Bitcoin lower so that you can buy more of it.  Come on man…


Unlike equity markets, sporting events involve true uncertainty.   There is no predetermined ending, but a ton of predictions.  For these reasons, social scientists study sports to learn lessons about the human mind.  If you turn on almost any sporting event, you will hear tales of heroes and villains.  Sports broadcasters often use moralistic language like “clutch” and “choke” to explain outcomes.  The broadcasters turn games into statements of character, but anybody who watches sports for long enough will notice that these morality plays do not age well.  Many athletes or coaches who have been branded as “chokers”: Clayton Kershaw, Andy Reid, Phil Mickelson, Alex Rodriguez, and John Elway, have eventually won championships with “clutch” performances.  So, in sports (just like in equities) history is NO predictor of future performance.  But, if I were to pick some ‘clutch’ sectors moving forward:

-       FinTech:  There are no bad choices if you like a company capitalizing on the 24/7/365 digital financial markets and/or the constant disruption of global currencies due to interest rates remaining at zero. 

-       Healthcare: Healthcare data monitoring & aggregation companies such as: stress & depression mgmt., diet & exercise understanding, and sleep optimization will soon start driving healthcare costs lower.

-       Online GDP: Gaming, e-commerce, and robo-financial decision-making (especially in crypto) – will all have the ability to be game-changers. 



InfoBits:



-       Centralization’s single point of failure…   was clearly on display when Facebook’s entire operation went down for over 7 hours last week.


-       Netflix soared to all-time highs…   as Squid Game continues to be on track to become the company’s most popular show ever. 


-       Having a bad week?  Connecticut Senator Blumenthal called on Mark Zuckerberg (CEO of FB) to act and take responsibility. “Mark Zuckerberg ought to be looking himself in the mirror today.  But rather than take responsibility and showing leadership, Mr. Zuckerberg is going sailing… Mark Zuckerberg, you need to explain to Frances Haugen, to us, to the world, and to the parents of America what you were doing and why you did it.”


-       Volvo, owned by the Chinese auto giant Geely…   plans to raise $2.9B in an IPO in Sweden to accelerate its EV plans.


-       JPMorgan is banning business travel for unvaccinated employees…   and it will deduct extra pay from unvaccinated staff to cover COVID-19 tests.


-       Oil cracked the $80/barrel mark for the first time in 7 years…   and could hit $100 by winter.  Small businesses especially will suffer due to high gasoline costs.


-       Amazon-owned Twitch not only saw…   its source code hacked and leaked online, but also revenue data on how much the various streamers were making.


-       Tesla is worth 10X GM…   even though it delivered 10X fewer cars.  Tesla is a tech company – not like a carmaker.  GM owns Cruise, and it’s gunning for its own sky-high tech valuation as an EV car maker tapping revenue streams like robotaxis and driverless delivery services.


-       California passed a law requiring food-delivery giants…   like DoorDash, Uber Eats, and Grubhub to pay out 100% of tips to gig workers.


-       Gen Z accounts for half of the retail shoppers in the US…   and a whopping $140B in spending power.  60% of Gen Z males use StockX, a sneaker-bidding marketplace where a rare pair of Jordans can cost over $500.


-       Tesla is moving its headquarters from Palo Alto, Ca. to Austin, Texas.


-       Google and YouTube will no longer allow digital ads bought on its…   platform to appear next to online content that denies climate change.


-       WeWork’s September revenue reached $228m…   and occupancy rates improved.  They’re prepping to list on the NYSE via a $9B SPAC merger.


-       Global startups raised an all-time-high…   $158B in Q3.


-       The median price of next year’s California home is set be: $800,000.



Crypto-Bytes:



-       Mr. Goax (crypto-trader) has earned 21% YTD:   To trade his crypto portfolio, the hamster rotates the crypto trading wheel until he reaches his preferred crypto.  He then leaves the crypto-wheel and signals his preferred path by running through either the ‘buy’ or ‘sell’ tunnel.  Are you earning 21% YTD?


-       Crypto is welcoming “Uptober.”


-       Fueled by NFTs…   Polygon’s count of unique daily active addresses rose to a record high of 566,516 on Saturday, surpassing ETH for the first time.


-       Corporate NFT Partnerships:  Last week, TikTok announced its first foray into the world of NFTs with “TikTok Top Moments” – a set of digital collectibles tied to short videos.


-       Trading in NFTs climbed 700% in Q3 to $10.7B.


-       Hive Blockchain, a BTC and ETH crypto mining company…   reported its Q1 profit surged 10-fold higher than a year earlier. 


-       Our FED is set to release…    its review of a potential central bank digital currency (CBDC) as early as this week.  Chair Powell said that a CBDC would only launch if there are “clear and tangible benefits that outweigh any risks.” 


-       The Bank for International Settlements’ conclusion on CBDCs was…   that a digital currency could have a manageable effect on the banking system. 


-       The Bank of England said crypto assets…   are becoming more integrated into the U.K.’s financial system.


-       Bitcoin broke above $50K this past week…   and is now up 77% YTD.  The boost is even more surprising considering China’s recent decision to ban crypto.  


-       SEC Chairman Gary Gensler told Congress…   that the agency has no plans to ban crypto.


-       Rep. Patrick McHenry (R-NC)…   introduced a bill that would provide a “safe harbor” for crypto startups looking to raise capital through token sales. 


-       This year’s Forbes top 400 richest people…  count 6 new Billionaires from the crypto world – up from just 1 last year.


-       This week Bank of America proclaimed Bitcoin and crypto…   “too large to ignore.  Bitcoin is important, but the digital ecosystem is so much more.”


-       The Federal Deposit Insurance Corp. (FDIC)…   is studying whether certain stablecoins might be eligible for its coverage. 


-       Remittance giant MoneyGram…    has partnered with Stellar and USDC for blockchain-based payments. 


-       The Mexican Stock Exchange is considering listing crypto futures…  on its derivatives exchange.


-       “There’s a huge opportunity out there to bridge two very different worlds – traditional financial systems and the new systems from a crypto perspective…” Moneygram’s CEO Alex Holmes



Last Week:



Monday:  This downtrend is NOT what the bulls had in mind for the start of Q4.  I still like energy and especially Uranium.  England has said they have no choice but to rely on nuclear, and I think that's something that will resound around the world.  I like URA > $25.45CCJ > $23.25, DNN > $1.53, and UROY > $4.45.


Tuesday:  Do we put our money to work chasing tech and hoping that we’re right?  Or do we keep grinding with things that make fundamental sense like oil and energy.  MRO and BTU are going great. How about SLB?  I’m liking SLB > $31.58.


Wednesday:  It’s all about 4,300 on the S&P.  If we lose that on a closing basis, this market will implode.  So, they will defend that level with all they got, and they have a lot.  What’s weighing on the markets this morning?  Everything: 

-       We have a civil war going on between the jabbed and unjabbed. 

-       We have teachers, firefighters, police, nurses and doctors walking off the job. 

-       We have ports loaded with product, but we can't seem to unload. 

-       We have Generals in China asking XI for the green light to go take Taiwan.

   So, there are a ton of reasons for the market to be struggling, and only ONE for it to be up – our insider trading FED.  Some tech is trying to remain strong, but there are undercurrents there.  Facebook went down for hours, and while they say it was nothing nefarious – no one seems to believe that.  Because of a "surprise" build in crude and gasoline, the oil patch is down today.  We'll see a surprise draw down next week – so prices will come back.  At 1:20pm the Republicans saved the day: “Mitch McConnell will offer a short debt limit extension.”  From that moment on, the markets moved higher.


Friday:  So, everyone is happy because they kicked the debt ceiling can down the road to December 3.  Only in American can markets rally on the notion that going further into debt – on debts that can never be repaid – is a good thing.  Today is jobs day, and with all of the Government unemployment assistance gone – people are probably going to have to face the idea of working again.  September payrolls rose by 194k, wages were up 0.6%, and the unemployment rate fell to 4.8%.  Everyone was a bit surprised it wasn't stronger, since the extra unemployment benefits went away.  So, the first reaction was to sell the news.  My guess is that they built a lot of market momentum yesterday, and today we ride it out flat.



TW3 (That Was - The Week - That Was):



Crypto has re-named October == Uptober.  The difference in the crypto markets has a lot to do with the age of the average participant, experience level, and general attitude.  Per HL: “Crypto is public venture capital, and the best investors need to rethink and ‘rewire’ themselves for the evolution.”  Factually:

-       1.  Analysts are optimistic that Bitcoin ETF approvals are finally approaching.

-       2.  FED Chairman Powell clarified he has “no intention to ban” cryptocurrencies.

-       3.  Inflation may be making BTC more enticing as a gold-like store of value.

-       4.  And, the rapid adoption of the Lightning Network is helping Bitcoin scale. 


Why does this matter?  It was around this time last year, that crypto began its race from less than $11,000 to $60,000 in just 5 months.  Crypto’s fundamentals are arguably stronger now than they were a year ago.  More people are using crypto than ever before.  Crypto is being used in more ways: from NFTs and DeFi to buying groceries in El Salvador and soon – Brazil.  Place your bets.



Next Week:  Where are the Dip Buyers?



Market Update:

-       Sector Analysis and Expected Moves: For the week: the SPY gained / the QQQ’s were flat / the IWM was mildly lower / and the XLF and XLE exploded higher.  The overall market is experiencing a fair amount of divergence, and therefore “Buying the Dip” will be extremely difficult through the end of the year. 


-       Volatility Check:  The VIX abated under the 20, but market volatility is settling in.  It’s becoming a more volatile market.  If you need a hedge – act now or forever hold your peace.  The VVIX is also just below 110 telling us that now is the time to re-hedge.


-       Bearish Bonds threaten to Stall Markets:  Bonds are seeing unbelievable volume right now, and have broken lower.  This is pushing interest rates higher, and is showing no signs of abating.  Tip #1: Do NOT step in and sell PUTS on the Bonds – as this could get quite serious.


-       Energy gets a Scary Bid:  Oil prices have steadily risen since September, and the XLE (Energy Sector ETF) has risen over 12% in a month. 


Merry-Go-Round of Risks = Headwinds for the Dip Buyers

-       China:  The real estate crisis (EverGrande) is continuing to worsen as they will default on their bonds this weekend.  


-       The other RISKS that we will hear about are: (a) Interest Rates, (b) Inflation (leading to earnings decay) (c) our FED tapering, and (d) Supply Chain constraints into the Holiday season.  These risk fears will continue to disturb the bond market.  As long as the bond market has a downward trend, it will put pressure on big TECH.  


-       Lower Highs and Lower Lows continue to draw the Retail trader into the markets.  So, if you want to “Buy the Dip” – be aware that the headwinds you’re going to feel via the BOND and other markets are quite severe.


Trade Opportunities:

-       DOW Performance vs Goldman Sachs: The DOW is a price weighted index.  Therefore, the highest priced stocks in the DOW get hit the hardest as the DOW declines.  So, watch the United Healthcare (UNH +17% YTD), Goldman (GS +48% YTD), Home Depot (HD +27% YTD), and Microsoft (MSFT +35% YTD).  I’m looking for a pullback in the DOW that will impact GS.  Tip #2: On Goldman Sachs (GS) + BUY the Nov. $375 PUT and – SELL the Nov. $355 PUT.  If the DOW breaks down over the next 40 days, GS will be a recipient of that downward momentum.  This a lower probability / less expensive trade that can be used as an excellent hedge if the market place retreats. 


-       Watch out for an Energy Sector Pull Back: We’ve had 3 (almost 4) breaches of the expected move (higher) in the last 3 to 4 consecutive weeks within the XLF.  That’s a ton of forward momentum.  Tip #3: Looking for a small pullback in the XLF.  Buy a Put-Spread out into November.  I am NOT long-term bearish on energy, but rather just looking for a short-term pullback.  


SPX Expected Move (EM):

-       Last week’s EM was $89.  We ended the week slightly higher.  


-       Next week’s EM is $80.  We have a ton of options expiring this week, so I think we will move ‘at minimum’ $80 this coming week.  We are in a downtrend, and therefore, I would NOT be Buying the Dip until further notice. 



Tips:



HODL’s: (Hold On for Dear Life)


-       Algorand (ALGO = $1.89 / in at $1.75)

-       AMC – Holding

-       Cosmos (ATOM = $35.18 / in at $33.18)

-       Bitcoin (BTC = $54,800 / in at $4,310)

-       B2Gold (BTG = $3.66 / in at $4.16)

o   Waiting to sell CCs for income,

-       Englobal (ENG = $2.48)

o   Sold Nov. & Dec. $2.50 Calls for income,

-       Ethereum (ETH = $3,550 / in at $310)

-       Express (EXPR = $4.52)

o   Sold Oct $5’s and Nov $5’s

-       GME – Holding

-       Grayscale Ethereum (ETHE = $34.75 / in @ $13.44)

-       Grayscale Bitcoin Trust (GBTC = $42.34 / in @ $9.41)

-       Grayscale Trust (GDLC = $34.30 / in @ $22.75)

-       Hyliion (HYLN = $7.82 / in @ $0.32)

o   Sold Oct. $10 CCs for income,

-       Infinity Pharma (INFI = $2.71)

o   Sold Oct $3 and Nov $3 Calls for income,

-       Solana (SOL = $156 / in @ $141)

-       Transocean (RIG = $3.92)

o   Sold Nov. $4 Calls for income,

-       Exela Tech (XELA = $1.65)

o   Sold Oct $2 and Nov $2 Calls for income, 

-       Yamana Gold (AUY = $4.10 / in at $4.53)

o   Waiting to sell 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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Sunday, October 3, 2021

This Week in Barrons: October 3rd, 2021


I doubt that the Chinese government…  has conceded global economic domination to the U.S.  But why are they pissing off their: equity holders, technologists, entrepreneurs, and digital innovators?  That is not a blueprint for sustainable growth or redistribution of wealth.  What concerns me is that we live in a world of governmental monkey see – monkey do.  Increasing the authority of our governmental regulators and policy makers is not a recipe for success.  We need to encourage a massive Chinese brain drain.  We should invite their geniuses to come play for us.  Simply gaining one invitee would-be reason enough for the global invitation.


I wish we could divide the world into smaller bits.  I wish we could separate good restaurants from bad ones, and successful people from failures.  Unfortunately, distinctions such as those are always distracting and almost always wrong.  We tend to ignore all of the small steps that it took to reach a particular destination.  There’s an old saying: “They took 20 years to become an overnight success.”  For the entrepreneur, today’s world doesn’t offer discrete steps and definite platforms.  The best you can do is find a trending slope into a ‘messy middle’ where you can place a sign post as a reminder of days gone by.



The Market:



Last week, some real market action took place that scared a lot of people.  Thursday (for example) was a day of ups and downs, and ultimately the DOW closed down 547 points.  That means that the DOW had just fallen 1,218 points in just 3 sessions.  In Thursday’s overnight session, the DOW futures fell right to their 200-day moving average, and then the magic happened.  It bounced off that level.  At the same time, Merck came out and said that their new “COVID pill” was having such good results that they were stopping trials and heading to the FDA for emergency approval.  Experts think that it could be a potential breakthrough in how the virus is being treated.  That paved the way for a pretty hefty rally.  It was already the first day of a new month and quarter, and that’s generally a pretty good start – but this gave the rally even more fuel.  So, at the end of the day, we had put in a 482-point bounce.  But, that means we did NOT get back all of Thursday’s collapse. 


I’m not saying we can’t be embarking on a new move higher.  We could, and the end of the year is usually rally time.  But, I’m not convinced that we’ve gotten all of the sellers out of the way just yet.  I think we’re in for some additional volatility over the next 10 days, and then we see them go for the gold.  I still like energy.  China’s in an energy crunch, and they’re willing to pay anything for energy – especially oil and coal.  I think plays like BTU and oil will remain with us for quite some time.  The market may try and rally tomorrow, but I’m suspicious of a “pop and drop” start to the week.



InfoBits:



-       FB knows that Insta is harmful for a significant percentage of users…   and has done nothing.  Factually: (a) 32% of teen girls said that Instagram made them feel worse about their bodies.  (b) 6% of Americans having suicidal thoughts trace them to Instagram. And (c) Suicidal deaths in the 10 to 14 age group tripled from 2007 to 2017 – during the time Insta saw mass adoption.  


-       TikTok has over 1B monthly active users.  U.S. users spend 25 hours on TikTok each month, and people now watch TikTok more than YouTube.


-       It’s almost autonomous…   says Tesla as it launched its “full self-driving” (FSD) update.  But Tesla, GM, Volvo and Toyota still require driver supervision.  


-       The heads of the Boston and Dallas FED…   are retiring after it was uncovered they made insider trades – prior to their own FED buys.


-       Citadel and Robinhood executives vehemently deny…   Citadel’s role in pressuring Robinhood to halt GME buying during January’s Meme-Madness – due to their tremendous short position on GME.  A Robinhood insider has said: “It’s a total mess.  You wouldn’t believe the convos we had with Citadel.


-       Lego, the world’s largest toy biz…   hit record sales and profits in the first half of 2021.  Following in Disney’s footsteps, Lego is expanding its toy lines into movies as well as … sneakers.


-       Warby Parker, the eyewear company…   went public with a $6B valuation.  Warby’s growth is built around online sales, engaging stores, and brand values.  Other dynamos like: Allbirds, Casper, Blue Apron, and Honest Company followed Warby’s formula and are (like Warby) unprofitable.  Since their IPO, Casper’s stock is down 60%, Honest’s is down 45%, and Blue Apron’s is down 95%.


-       United Airlines said that 600 US employees face termination…   after failing to comply with its vax policy.


-       Camber Energy closed positive for the 6th consecutive week…   and CEI is now up 252% YTD.


-       Gap, Lululemon, and Nike manufacture…   31 to 50% of their products in Vietnam.  When Vietnam locked down due to COVID, Nike lost sales on 100m pairs of shoes, and LULU is now using airplanes to ship goods.  


-       Lordstown Motors (RIDE) will sell its auto factory in Ohio…  to contract assembler Foxconn for a purchase price of $230m and a $50m investment.


-       Merck announced that its experimental Covid-19 pill…   cut the risk of death to 0 and hospitalization by 50%.  It’s filing for emergency use authorization.


-       PE firm Symphony plans to merge FireEye Products and McAfee…   to form a new company with $2 billion in revenues, 40,000 customers and 5,000 employees – all focused on cybersecurity.  



Crypto-Bytes:



-       One-third of all Salvadorians…   are actively using the state-issued Chivo bitcoin wallet.  So, less than 1 month after bitcoin became legal tender, MORE people are using crypto – than any bank in El Salvador. 


-       FTX has officially moved its headquarters…   from Hong Kong to the Bahamas, amid increasing worldwide regulatory scrutiny.


-       Decentralized exchanges (DEXs)…   are seeing growing volumes in the aftermath of China’s crypto crackdown – with value accruing to their tokens.


-       Coinbase, the largest U.S. crypto exchange…   announced that you can now use all or part of your direct deposit wages to purchase crypto at zero fees.


-       Revolut, a fintech company with a $33B valuation…   already offers crypto buying as part of its services, is also looking to launch its own token.


-       FED Chair Powell told Congress…  that it would be ‘ideal’ to work with them on a digital dollar.


-       Bitfinex paid $23.7m in transaction fees…   to deposit $100,000 on the blockchain.  OOPS!  This behavior is becoming normal as earlier this year, Bitfinex customers lost nearly 119,756 BTC ($60m) from the crypto exchange.


-       Elon Musk says that…   the U.S. government should avoid regulating crypto.


-       Crypto liquidity is ready to eat cross-border payments’ lunch.


-       SEC Commissioner Gary Gensler reiterated his support…   for a narrow class of bitcoin ETFs that would invest in crypto futures contracts.


-       The Terra blockchain has completed a hotly anticipated upgrade:  LUNA, the native asset of the Terra blockchain, has surged in value in 2021 and is currently the 12th-largest cryptocurrency by market cap.


-       San Jose, California…   plans to fund internet access for low-income families through HNT tokens mined on the Helium network.


-       "I do believe that government personnel are trying to gain control over the cryptocurrency industry, and that really isn't conducive to growth, entrepreneurial activity and/or opportunity." – Rep. Tom Emmer (R-Minn.), on the U.S.’s crypto-regulatory efforts.


-       Stablecoin issuers like Circle and Tether…   could face bank-like regulations.  The U.S. would like to create a special-purpose bank charter for stablecoin issuers.  The goal is to address regulators’ fear of stablecoins, which some think could usher in financial instability.



Last Week:



Monday:  The DOW is being led by energy and financials.  We're heading into winter with "not enough" oil, or natural gas.  MRO is looking great.  Most of the names I'd be interested in, like SLB, VLO JPM, and GS – have all gapped pretty hard.  One that's got my attention a little bit is NXPI.  For 3 days in a row it's put in a high at the $218-ish level.  If it gets over $218.25, I think it might finally break free.


Tuesday:  The futures are down – by a lot.  The excuses being given are: 1) another Fed head has resigned after getting caught insider trading, and 2) the fight over infrastructure / Government shutdown continues.  But aren’t they forgetting: rising interest rates, the impending debt ceiling, and inflation?  But that all seems sort of "meh".  MMAT is one of those that I’d like to buy, but can it hold up?  I'll play chicken and just watch today.  We're actually sinking lower, not firming up as the DOW just broke over 600 points down.  Until I get a grip on what's really happening, I'm passing.


Thursday:  Today happens to be the last day of the month and the last day of the 3rd quarter.  Normally, last days and the first couple days of the new month/quarter are pretty good.  Managers buy some stocks that had performed well, so they can print statements showing they were smart and owned the right things.  Therefore, it won't surprise me to see a green final day of September.  But this market is heavy.  Initial jobless claims keep rising, but there are thousands of jobs.  Consumer sentiment is falling, durable goods are struggling, and supply chains are decimated.  More of that will be coming.  Is there anywhere safe?  I still like commodities and crypto, because this inflation is not stopping.  There are people talking about $200/barrel oil.


Friday:  Today is the first day of a new quarter, and there’s a new batch of $120B+ in funny (freshly printed) money to take care of.  BTU is looking good, and China's energy supply is dire.  Yesterday China told their companies to do whatever it takes to secure energy.  They're in a deficit, and they need natural gas, oil and coal.  So, the demand is certainly there and a nice way to play it could be via BTU.  But (shifting gears) something's nagging me about this Merck pill.  If the pill is so great, then no need for vaccinations, no vaccine passports, and no more lockdowns?  Are governments prepared to give all that up?  Nah.  The single most "solid" part of today's rally is the action from last night.  The DOW futures reached all the way down and hit their 200-day moving average and then bounced.  That's a perfectly technical market move, and could keep this moving higher.



TW3 (That Was - The Week - That Was):



-       “Full faith and credit” has a reputation to protect...  T-bonds are backed by the “full faith and credit” of the US government.  If the Treasury can’t repay its bondholders, investors may lose faith.  The U.S. can borrow trillions at very low interest rates, since T-bonds are seen as low-risk.  If the U.S. defaults for the first time, investors could become skeptical about lending it money.  Higher risk would drive up interest rates on the debt – which means less money to spend on social programs and/or higher taxes which would slow economic growth and increase the $29T national debt.


-       Friday morning Merck came out with big news.  They have been working on a COVID "pill" that you can take up to 5 days after infection.  In the trials, it caused a 50% decrease in hospitalizations and 0 deaths.  Everyone's calling it a game changer, but something’s nagging at me.  Merck invented Ivermectin (IVM).  IVM has a 70 - 78% rate of keeping people out of hospitals and 0 deaths in India.  I’m betting that Merck’s new "pill" is based on IVM.  IVM is sold over the counter for 17 cents a pill.  Merck’s new drug will be sold to the gov’t for $700 / prescription.  Merck may have found another way to monetize IVM.  Place your bets.


-       In 2000, 406 companies went public…   and raised a record $93B in the process.  In 2021, Renaissance Capital is estimating that there will be 875 IPOs this year, including 500 SPACs.  These companies will generate $250B in proceeds – almost 3 TIMES that of 2000.



Next Week:  Finally, a Volatility Inflection Point.



Market Update:

-       Risk has enveloped the markets.  The S&Ps got their ‘groove’ back (a little) on Friday, but the Nasdaq is still lagging considerably.  The S&Ps are still in a very defined downtrend.


-       The U.S. dollar smashed through some highs…   that had held for quite some time.  The dollar is a measure of volatility.  The ‘fear trade’ is moving toward the U.S. dollar and toward cryptocurrencies.  European banks can’t ‘go to cash’ due to Europe’s NIRP (negative interest rate policy) – so the U.S. dollar is the next best thing.  Tip #1: If traders continue to ‘buy the dollar’ ($DXY), things will get hostile in market-land.


-       Bonds have become a double-edged sword, and it’s the Bonds that are driving the action in the S&Ps.  Look at the TNX (the 10-year Treasury Index).  The equity markets get quite nervous once the 10-year rate crosses above 1.5%.  Rising rates destabilize the S&Ps because higher rates impact big tech’s ability to borrow and do stock buybacks.  Falling rates negatively impact the financials.  Tip #2: I’m looking for bonds to begin to channel in a very tight range in order to stabilize the S&Ps.  There aren’t a lot of places to hide, but Bitcoin (BTC) and crypto are one, and they exploded higher last week.


-       Where was last week’s implied volatility spike?  Our markets have a good short-term financial memory, and they remembered the previous week’s 100-point SPX drop that was bought.  The issue here is that when markets are selling off and nobody is feeling the fear – capitulation is not yet upon us.  


-       To make volatility even more complex…   the SKEW softened.  That means professional traders are both selling PUTS and buying CALLS – aka looking for a  bounce higher going forward.


Sector Analysis is telling me that we should be in the throws of some significant volatility during the month of October. 

-       Tip #3: The Monsters of Tech (AAPL + AMZN + FB + GOOGL + MSFT + NVDA) will continue to underperform.  Google and NVidia were up 75% YTD, and are now up only 58%.  FB has fallen from being up 40% to being up 28% YTD.  Big tech is being hurt by interest rates moving higher.


-       The Financials are beginning to feel the impact of the rate changes.  Tip #4: If you’re looking for a short-term trade, think about shorting the financials.  


-       Energy was the big gainer last week.  Tip #5:  I’m looking for energy to grab an early weekly bid, and then get sold off mid to later in the week.  


-       The focus shifts to retail: TGT, WMT, and COST.  The WalMart (WMT) chart looks downright ugly, but so do Target (TGT) and CostCo (COST).  Retail is getting pummeled and is much more of a market mindset than it is an influencer of the indices.  It’s telling the world that nobody is doing well.  If you’re looking for a trade in the sector, Tip #6: look for Home Depot (HD) to head lower over the coming month.


SPX Expected Move (EM):

-       Last week’s EM was $71.  We smashed thru the EM to the downside early in the week, and we finished the week outside the lower end of the EM.  


-       Next week’s EM is $89.  If markets continue to break outside their EMs, you’ll know that market efficiency is in question and to put your hedges on.



Tips:



HODL’s: (Hold On for Dear Life)


-       AMC – Holding

-       Bitcoin (BTC = $48,100 / in at $4,310)

-       B2Gold (BTG = $3.39 / in at $4.16)

o   Waiting to sell CCs for income,

-       Englobal (ENG = $3.44)

o   Sold Dec. $2.50 Calls for income,

-       Ethereum (ETH = $3,400 / in at $310)

-       Express (EXPR = $4.73)

o   Sold Oct $5’s and Nov $5’s

-       GME – Holding

-       Grayscale Ethereum (ETHE = $31.53 / in @ $13.44)

-       Grayscale Bitcoin Trust (GBTC = $37.19 / in @ $9.41)

-       Grayscale Trust (GDLC = $27.51 / in @ $22.75)

-       Hyliion (HYLN = $8.05 / in @ $0.32)

o   Sold Oct. $10 CCs for income,

-       Infinity Pharma (INFI = $3.36)

o   Sold Oct $3 and Nov $3 Calls for income,

-       Transocean (RIG = $3.82)

o   Sold Nov. $4 Calls for income,

-       Exela Tech (XELA = $1.87)

o   Sold Oct $2 and Nov $2 Calls for income, 

-       Yamana Gold (AUY = $3.91)

o   Waiting to sell 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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