It’s all about Control: Would you rather write the script, read the script, watch the movie, or write the review? Control varies across the many areas of our lives. Many of us need to control our work, but not necessarily what we eat for dinner? Industries allocate control as part of their hierarchies. Interestingly enough, over 80% of the time the control decision is solely up to you, and ‘yes’ it’s a learned skill.
Then comes Responsibility: ‘My bad’, ‘I got this’, and ‘That’s on me’ are all phrases that most people go out of their way to avoid saying. They create incredible value at work, and provide a much deeper connection on a personal level. Just like control, responsibility is a learned skill that can be taught. A bias toward taking responsibility is one of the most important things to look for when hiring an employee or building a team.
Finally, your Recommendation: We pay a significant premium for pre-selection, confidence, things seamlessly working together, and a guarantee. That’s why when selection is difficult – half a bushel of perfect apples is worth more than a full bushel with ‘maybe’ a rotten apple in it. Never take your recommendation lightly, as it is the one element that can both follow you and haunt you – forever.
The Market:
Markets are going to get interesting again… because the past decade of FED-market-genius is coming to an end. The ‘close your eyes’ and buy crypto or Tesla in order to become a billionaire – is no longer acceptable, scalable and/or repeatable. The devil we know is becoming fully priced. For the next 5 years, we could see an active trader’s market. I can see the Journal writing: 'Active is the New Passive'. And this even goes for crypto as it’s not beyond getting ‘rekt’. The crypto market fell 11% on Friday afternoon. ‘It was a bad day to take your paycheck in crypto – that’s for sure’.
What is an NFT? While many think NFTs are pictures with some provenance or ownership guarantees provided by a blockchain, NFTs actually hold the potential for immense utility. NFTs are among the most flexible data structures in crypto, with use cases ranging from in-game assets to financial contracts. Aside from ownership, the key element of Web3 is the notion of composability, or the idea that assets such as code snippets can be transported and repurposed from one environment to another – seamlessly and without friction.
InfoBits:
- Silicon Valley’s status as the only major innovation hub is under siege. Unfortunately for SV, the pandemic accelerated the mantra: “Talent is equally distributed, opportunity is not.”
- Tiger Woods is raising a $150m SPAC… Sports, Health & Tech Acquisition is looking to merge with a company in the fan engagement, consumer-facing, health, fitness, well-being, and technology sector. Tiger, isn’t that everything?
- Snoop Doggs… is a new hot dog brand coming to a supermarket near you.
- Microsoft acquires Activision Blizzard for $68.7B… becoming the largest deal in the game industry’s history.
- Games could be key to monetizing the metaverse(s)... platforms like Fortnite and Roblox have massive followings and in-game virtual economies. MSFT CEO believes that: “Activision will play a key role in building metaverse platforms”.
- YouTube is shutting down its original programming division.
- Peloton is pausing production and laying off 41% of sales and marketing.
- SoFi acquired Golden Pacific Bancorp... and is securing approval from the Office of the Comptroller of the Currency (OCC) and the Federal Reserve to become a bank holding company.
- Airbnb’s CEO and co-founder will work remotely… and move from city to city every couple of weeks – staying at a different Airbnb rental.
- An activist investor told Kohl’s to shape up or sell the company… because their current executive team is "incapable" of creating shareholder value.
- Acorns is cancelling its $2.2B SPAC merger… and will go back into fund-raising mode.
- Instagram and TikTok began testing… tools that allow creators to offer their own paid subscriptions.
- P&G will increase the price of Tide and Downy in February. Personal hygiene products will also see price increases come Spring.
- Inflation in the UK hit its highest level in 30 years.
- Through 13 trading days… the NAS is off to its worst yearly start in history.
- Netflix’s stock plunged +20%... after it showed stalled subscriber growth numbers, and raised US and Canadian pricing.
- Amazon is opening a clothing store… that features algorithm-driven recommendations and touchscreen-order dressing rooms. As America’s #1 clothing seller, the ’Zon will promote its private labels.
- The NAS (QQQ) closed below its 200-day moving avg… for the first time since April of 2020 – ending a 450-trading day run.
- The average CEO pay increased 1,322% since 1978… while the average worker pay only increased 18% during that same time period.
Crypto-Bytes:
- Hulu posted a job opening looking for: ‘the streamers of tomorrow’.
- Postings that include: “Bitcoin, Ethereum, Blockchain, and/or Crypto’…. grew by 400% in the U.S. from 2020 to 2021 - significantly higher than the 100% increase in job listings for tech during that same timeframe.
- Most of JPM’s clients expect bitcoin to be above $60,000… by EOY.
- Prada and Adidas are allowing fans… to submit photos to turn into NFTs on SuperRare – which will later be auctioned to support artists and creators.
- Crypto.com has extended its venture arm’s fund size to $500m… as it looks to more aggressively back early-stage startups, following similar moves by rivals Binance, Coinbase, and FTX.
- Bitcoin’s use at merchants dropped to about 65% last year… while ETH grew to 15th, and stablecoins moved up to 13%.
- Block, formerly known as Square… is integrating the Lightning Network into its popular Cash App so users can send BTC without fees.
- BXM Operations, founded by the CEO of BitMEX… plans to purchase the German bank: Bankhaus von der Heydt.
- Mastercard has inked a big deal with Coinbase… where Coinbase customers will be able to use Mastercard credit and debit cards to make purchases on the Coinbase's NFT marketplace – eliminating the need for a digital wallet.
- Gemini has introduced a prime brokerage wing… for institutional investors following the acquisition of trading technology platform Omniex.
- OpenSea, the NFT marketplace platform with a $13.3B valuation… has acquired Dharma Labs, a wallet company launched in 2019.
- The Gap, Crocs, and the UFC are cozying up to crypto… via a partnership with Dapper Labs for a mixed martial arts’ version of NBA Top Shot.
- Over the past 5 weeks, investors have pulled +$500m out of crypto funds.
Last Week: This is what triggered the fall…
Tuesday: The 10-year yield moved above the 1.8% level while the 2-yr yield topped the 1% level for the first time since February 2020 – reflecting investor concern for not only a prolonged period of faster inflation readings, but also an aggressive response from our FED. Year-to-date, the S&P 500 is -2.2%, the Dow has lost 1.1%, and the Nasdaq has shed -4.8% - with more than one third of companies in the index at least 50% from their 52-week highs. Crude oil is rising with the increasing tensions between Russia and Ukraine heightening the potential for a disruption to global crude supplies. It has been my call all along that if our FED really steps away from the punch bowl – this market will NOT be able to withstand it. My only question is whether our FED can hold firm or not? Our FED has a history of talking tough, allowing markets to fade, and then reversing their thinking. Right now, it feels like they've been instructed to do something about inflation, and if the market falls, so be it. If that's true, we'll be going considerably lower. Right this minute, this market smells a lot like 2000 - 2001 coming off the tech bubble of the 90's. The whole reason we're dumping out here is the ten-year hit 1.86%, a level not seen since March of 2020.
Wednesday: Technology was the biggest drag on markets yesterday while energy extended its recent outperformance on rising oil prices (7-year highs). The Nasdaq ended down about 9.7% from its Nov. 19 record close and finished below its 200-day moving average for the first time since April 21, 2020.
Thursday: The NASDAQ has lost its 50,100, and 200-day moving averages. The S&P has lost its 50 and 100-day. The DOW has lost its 50 and 100-day, and is just 76 points above its 200-day. The bottom line is that we're seeing all of this red, and our FED hasn’t done squat. Be careful out there. Remember, cash is a position. If our FED doesn't come out and jawbone for less aggressiveness on their part, there's nothing that says we can't fall 10% to 20% more.
Friday: For the last 3 sessions, they've used the 2:30 - 3:50 pm area to wholesale dump stock. That means markets are taking the morning to lure in the dip buyers, and then fleecing them in the afternoon. This is an action used by professionals / institutions to reduce their positions. Some think that if the market keeps giving the Feds the finger, that Powell will come out next week and soften his rhetoric about aggressively combating inflation. If that happens, then once again our FED has bowed to the markets – and up we go. But if he doesn’t – we have a lot more falling to do. Why would our FED change its tune? Politics. If our FED does a 180 and starts talking about not tapering as soon or fewer rate cuts – it will be seen as pandering to the mid-term elections. Our FED is caught – you can’t fix inflation without a falling market. Next Wednesday we get to see who blinks.
TW3 (That Was - The Week - That Was):
- Fidelity believes that more countries will follow El Salvador’s lead… and adopt bitcoin. Therefore, countries that buy BTC today will be better off – prior to the sovereigns being forced to acquire it as a form of ‘insurance’.
- Russia’s Central Bank issued a report saying: ‘Russia must ban crypto-currencies but not a private citizen’s right to own them’ – in order to prevent capital from escaping their national economy.
- The GM for the Bank for International Settlements… spoke out against private, nationless currencies calling them “undesirable – because the soul of money is trust.”
- El Salvador started offering businesses $10m in crypto-based loans. This could directly benefit the 86% of Salvadoran companies without banking access. Crypto will be converted to stablecoins, which will then be distributed via a crypto startup and state-owned bank to firms – with the loans and interest being paid back in fiat.
Next Week: Yo FED – do ya hear me now?
Do we see the whites of their eyes? Are we feeling the fear?
- The FOMC meeting is on Wednesday. The market (that is hooked on the free-FED-money juice) just sent its strongest / diabolical message to the FED – to date. And it only took a 4-day trading week.
- Sectors YTD: the SPY is down 8%, QQQ’s down 12%, Financials and Energy down 3% (with more to come), Amazon - 16%, Tesla – 21%, Nvidia – 22%, Google broke $2,700, and NetFlix went from $700 to $500 in 4-days. These are NOT small numbers, and NOT going away anytime soon.
- Volatility Inversion = The February /VX futures are showing 27.40 … but the April volatility futures are only 26.77. The catalyst to the fall was when February’s vol. futures eclipsed those of April. That means that there’s more ‘fear’ in the next 26 days than there is in the next 89 days – and that makes no sense. And when elements are completely unexplainable markets move to quality = bonds and cash. Tip #1: Whenever volatility futures become inverted == You SELL first and Ask Questions later.
- Why is a volatility inversion an issue? Many institutions mitigate risk by SELLING short term volatility and BUYING long term volatility. The minute the product you’re SELLING explodes higher – you need to hedge ASAP. To hedge, they SELL S&P futures and the S&P dominos start falling because selling causes a lot more selling. Unfortunately, the VIX (volatility index) did not even break into the 30’s – telling us that there easily could be more downside action to come.
- The SKEW (# of OTM Puts vs OTM Calls purchased) jumped, but not all that much. This puts more and more weight on this week’s FOMC meeting.
- Bonds caught a bid – which means that interest rates moved lower. But Bonds only caught a bid because institutions are scared and Bonds are a flight to quality product.
- The S&P 100 is becoming 100% correlated and moving lower, but no one cares. Why? Every institution is fixated on hedging and preparing for Wednesday’s FOMC conclusions.
The Magnitude of last week’s move was ‘Gynormous’:
- The S&Ps (SPX) fell 265 pts = 3 standard deviations.
- The QQQ’s fell 28 pts = 3 standard deviations.
- Crypto is in full-blown crash mode with BTC being down over 21% YTD. Looking at BITO, they breached their expected move by about 1.5 standard deviations. Tip #2:That means that the move in crypto (in comparison to equities) was a lot smaller, more manageable, and really only happened on Friday. The selling in crypto could have been as a result of equities and the need for resource hedging via the Bonds.
Our FED’s tactics (FOMC):
- Is the FED willing to crush the stock market in order to fight inflation – by systematically slowing demand?
- The economic indicators have started to decline. There is enough ‘soft economic data’ out there right now, that would allow J. Powell and the FED to soften their hawkish stance.
- Tip #3: I think that the FOMC will SOFTEN their hawkish stance just to talk the marketplace off-the-edge. Remember, J. Powell’s roots were Wall Street not academia.
SPX Expected Moves (EM):
- Last week’s EM was $86 and we moved $265
- Next week’s EM is $150 == ‘put on your big-boy pants’. This is the largest expected move since the onset of the COVID crash.
Tips:
HODL’s: (Hold On for Dear Life)
- *BitFarm (BITF = $3.50 / in at $4.12)
o Sold Feb, May, Dec ‘22: $5, $7.50 CCs for income,
- **Bitcoin (BTC = $36,700 / in at $4,310)
- Energy Fuels (UUUU = $6.20 / in at $11.29),
o Sold June $11 CCs for income,
- **Ethereum (ETH = $2,600 / in at $310)
- GME – Holding
- **Grayscale Ethereum (ETHE = $20.75 / in @ $13.44)
- **Grayscale Bitcoin Trust (GBTC = $25.57 / in @ $9.41)
- Hyliion (HYLN = $4.16 / in @ $6.01)
o Sold April $6 and $7 CCs for income,
- **Loopring (LRC = $0.85 / in at $1.94)
- **Solana (SOL = $105 / in @ $141)
- Uranium Royalty (UROY = $3.02 / in at $4.41)
o Sold April $5 CCs for income,
- Vertex Energy (VTNR = $4.45 / in @ 4.74)
o Sold April $5 CCs for income.
- **Yearn Finance (YFI = $24,674 / in @ 32,850)
** Denotes a crypto-relationship
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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