RF's Financial News

RF's Financial News

Sunday, September 11, 2022

This Week in Barrons: Sept 11, 2022

“If Only…”  those pesky constraints were lifted.  But if the constraints go away – they go away for your competition as well.  Constraints are often the gift that keeps on giving – as they can be (a) a barrier to entry, and (b) the motivation and focus of your entire company.   Instead of cursing those constraints – embrace and celebrate them.

“If your brand is so good – why don’t you spin it off…   into an IPO (Initial Porsche Offering).  Porsche is speeding toward becoming a public company (via IPO) despite a bumpy market.  Volkswagen (Porsche’s parent) said that it plans to take the luxe-car brand public within weeks, in what could be Europe’s biggest IPO since 1999.  VW could itself raise $10B in the listing, and plans to use the cash to boost EV production.  Porsche is proving that IPOs aren’t gone – they’re just changing.  Companies that are buzzy, fast growing and never profitable are being tossed aside for corporations that continue to spin off profitable brands to boost value.  This IPO should be fun to watch!


The Market: 


Simon Sinek is back talking about the hard stuff.   Why is Gen Z the least resilient generation?  What are the impacts of COVID on the workplace?  Did we cause our younger generation to have a ‘privileged mindset’?  I happen to really enjoy the way Simon analyzes complex situations, and to me it’s 13 minutes well spent addressing difficult, personal issues.


Do NOT TRUST this rally.  After 3 weeks of taking heavy losses, this market became stupidly oversold, and gave us a wicked, rip your face off rally in return.  Naturally this weekend’s talking heads were asked: “Do you think that the bottom is in, and the downside risk is finally over?”  And depending upon the fund manager answering the question they either lied and said: “Sure, dive in – the water’s fine”, or were honest and said: “This is just a bear market bounce.  There’s more downside risk ahead.”  After all, what’s changed? (a) Has Ukraine been solved?  (b) What about the Taiwan situation?  (c) Has the U.S. emerged from bankruptcy?  (d) Has inflation been contained?  Personally, I use local farm markets for meat, seafood, and vegetables - but I use Walmart delivered grocery for many other things.  For the longest time a particular salad dressing that I buy was always $1 at WMT.  On my last online order, I noticed that it had gone up to $2.48.  Wow.  It’s my opinion that prices on food and energy are going to remain ‘contained’ for the next 40’ish days – until the election.  But post-election, I believe we revisit $135/barrel for oil, and rampant food shortages.  Therefore, continue to hedge your financial risk – in order to win on both sides of the ball.



InfoBits:



-       Citi will begin to issue credit cards to people without credit scores:  They’re joining JPM and Wells Fargo in a government-sponsored program to expand credit access.  Does anyone NOT know how this movie ends?


-       Turkey’s inflation rate hit 80% YoY…   a 24-year high.


-       Deal funding in August…  hit its lowest level in 2 years.


-       Serena Williams’ final match averaged 4.8m viewers…   making it ESPN’s most-watched tennis match – every!


-       Rated ‘E’ for EVeryone…   as GM’s going all in on affordable electric vehicles with the launch of the Chevy Equinox EV.  The Tron-esque SUV will go on sale in the US next fall, with the cheapest model starting at $30K.


-       Are Lyft’s days as an independent public company numbered…   because shares of the ride-hailing firm jumped 17% Friday on chatter that GM may be thinking about taking another run at acquiring them.


-       Benz and Rivian are teaming up…   to build different EV commercial vans on a shared assembly line to cut costs.


-       Smith & Wesson shares fell to a two-year low…   after reporting that the demand for guns has returned to pre-pandemic levels.


-       The European energy solution could look something like this:

o   Customers pay crazy high energy bills,

o   Energy firms rake in massive profits,

o   Governments take the excess profits, and

o   Give the money back to customers to help them pay crazy energy bills.


-       A national rail strike could hit the U.S. starting next week…   as the union could walk off the job on Sept. 16.  The economic impact of a national strike would be over $2B /day, and would further exacerbate global supply shortages.



Crypto-Bytes:



-       Iran will allow the use of cryptocurrencies… for cross-border payments. 


-       Russia announced that they must: “intensively develop digital assets which can guarantee uninterrupted payment for deliveries of goods from abroad and for export”.  i.e. Russia is legalizing the use of crypto in international trade.


-       BDO (Revolut’s auditor)…   was said to have taken an "inadequate" approach to revenue recognition which created "unacceptably high risk”.


-       The Nigerian Export Authority is in discussions with Binance…   to create a virtual free zone focused on blockchain development – similar to Dubai's crypto hub built with Binance last year.


-       Binance will stop supporting USDC stablecoin on Sept. 29….  converting them into its own stablecoin (BUSD) after that date. 


-       Netflix is banning all crypto commercials…   on its ad-based service. 


-       The final countdown to The Merge has officially begun:  as the Bellatrix upgrade on Ethereum was activated on Monday.  That’s one of the final steps prior to switching from proof-of-work (PoW) to proof-of-stake on Sept. 13.


-       Former SEC Commission Chairman Jay Clayton… recently joined venture firm Electric Capita.  It’s part of a growing wave of ex-regulators flocking to the crypto space as the industry faces increasing scrutiny.


-       Vermont Regulator says Celsius resembled a Ponzi Scheme…  as Celsius misled investors about its financial health.  It used its own CEL token to bolster its balance sheet and at times used new investor funds to repay old investors.


-       Israel granted its first, permanent crypto license…  to a private company – Hybrid Bridge Holdings, Ltd. 


-       Taiwan approved 24 crypto platforms… for anti-money laundering compliance.  


-       Cleaning up your act can get messy:  The White House called out energy-intensive crypto (like proof-of-work bitcoin) – saying that it should collaborate with environmental and energy regulators to develop clean standards. 


-       FTX Ventures has agreed to buy 30% of SkyBridge Capital…   a hedge fund founded by Anthony Scaramucci.  Anthony will use some of the funds to buy $40m in cryptocurrencies to hold on its balance sheet as a long-term investment. 



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



Tuesday: The futures are up sharply, but it’s not on good news:  (a) Russia says it has absolutely no plans to resume Nord Stream until the West collectively agrees to lift economic sanctions.  (b) Europe’s largest steel producer has stopped operations over energy, and winter is coming. And (c) OPEC has decided to CUT production, stating that the increase they gave Biden, was just for ONE month!  Today it's the gyration in the 10-Year that has everyone excited.  It's not so much the level, but rather the speed with which it's bouncing around.  Keep an eye on SHOP.  They had a tremendous earnings report and over $30.25 – I’d give them a shot.


Wednesday:  Rising treasury yields, looming interest rate hikes, and recession fears continue to weigh on market sentiment.  The 2-Year gained 10-bps to 3.499% and the 10-Year gained nearly 15-bps to 3.339% - the largest one-day gains in a month.  Charles Nenner (a market cycle guy) believes that: “stocks, bonds, even real estate have further to fall from here.  Global destruction is in full swing, and from my perspective, Europe's going to fall first – then China and Asia – and finally the U.S.”



AMA (Ask Me Anything…)



Energy (even non-nuclear) is a powerful weapon.  By controlling Europe’s gas supply, Russia is attacking its economic heart.  A winter shortage could tip Europe’s ailing economy into a full recession, and cause a collapse in energy trading.  Europe’s gas-storage levels have surged ahead of targets, which could help it avoid having to ration – but consumers and the economy could take a major hit from record prices.


Lower Prices always win.   Sales of eco-friendly brands like Beyond Meat have wilted as demand for pricey meat alternatives continue to fall.  But Ugly Grocers have a distinct price advantage over their competition and are winning over cost-conscious shoppers – regardless of sustainability.


Crypto should embrace self-regulation:  The Biden administration supports crypto collaborating with other industries – which suggests that crypto could come out to the upside.  The Merge will demonstrate that Ethereum can change without regulation, and thereby serve as a natural roadmap for the rest of crypto.



Next Week:  This Rally makes No Sense...



-       #1 = These Bonds are NOT stable…  Just because we’re moving to the upside, does not mean: “Mortimer, we’re back.”  It just means that market makers are maintaining their neutral position, and in low volume arrangements – they often move markets unintentionally (wink-wink).   This week we saw sell-side activity inside of the bonds, and that naturally increases interest rates.  Tip #1:  If Bonds (/ZB) break thru 130, tech will drop like a stone thru the 11,000 level.


-       #2 = The Dollar is meandering lower like a coiled spring…  as it’s only 1 day away from exploding thru the 111 level.  Tip #2: If we explode thru the 111 level on the DXY – this market is ‘fully baked’.   The Dollar (currently at 109) would have to fall to 105 for me to buy into the idea that we’re going to rally.  The Dollar along with the Bonds are compounding the risk in this marketplace. 


-       #3 = Oil (/CL) is poised for a rebound:  Even though oil has had a strong move to the downside, globally people are talking about an energy crisis.  Some are talking demand destruction, but all the while OPEC and others are cutting production.  Tip #3: Oil could have turned on Friday, and with the Brussels energy meetings over the weekend – watch for a move higher.


-       #4 = Everything is Highly Correlated…  within the S&P 100.  Due to this level of high correlation, individual stocks no longer matter.  The indices will tell you all that you need to know.  


-       #5 = Volatility is yawning:  Even though we’re just 3 days away from 3931 on the SPX, the volatility index (VIX) has fallen asleep and is down to the 22 level.   Manic moves under complacent volatility are everywhere – and that scares me.  Tip #4: Markets are doing a ridiculously poor job of handicapping short-term risk.  


-       #6 = The SPX’s Expected Move is statistically insane…   6 out of the last 8 weeks we’ve had breaches of the Expected Move on the SPX – and none of thos breaches have been small.  Tip #5: It’s time to hedge and REDUCE RISK.  


-       SPX’s Expected Move (EM):

o   Last Week - $94EM (4-day week) – but we moved $140.

o   Next Week - $97EM.  Do not trust this marketplace, and do not trust this latest rally.



Tips:  



HODL’s: (Hold On for Dear Life)


-       CASH = Nexo @ 8% on USDC – waiting for The Merge dust to clear.

-       PHYSICAL COMMODITIES = Gold @ $1,728 /oz. & Silver @ $18.79 /oz.


-       **BitFarm (BITF = $1.41 / in at $4.12)

o   Selling more CCs for income,

-       **Bitcoin (BTC = $21,500 / in at $4,310)

-       **Ethereum (ETH = $1,725 / in at $310)

-       GME – DRS’d and HODL

-       **Grayscale Ethereum (ETHE = $13.01 / in @ $13.44)

-       Innerscope (INND = $0.018 / in at $0.0052)

-       SPY:

o   BOT Oct 21 / +$377 / - $367 Put Spread

o   BOT Oct 7 / +380 / - $370 Put Spread

-       Walmart (WMT): 

o   BOT Oct 21 / +    / -    Put Spread

* * Denotes a crypto-relationship


Trading Tips:  In the DIA, SPY and QQQ:

o   Note the high during the first 30 minutes of a trading session, 

o   If the index exceeds that high later in the session – take some and sell for a profit before the close (bail if it goes negative).

o   Does it always work?  Nope, but it’s the 80/20 rule.


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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Expressed thoughts proffered within the BARRONS REPORT, a Private and free weekly economic newsletter, are those of noted entrepreneur, professor and author, R.F. Culbertson, contributing sources and those he interviews.  You can learn more and get your subscription by visiting: <http://rfcfinancialnews.blogspot.com/>. 

 

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Sunday, September 4, 2022

This Week in Barrons: Sept 4, 2022


How can I help?  It’s a simple, ‘harmless’ question that both opens doors and creates tension.  What if the other person doesn’t want help, believe they need help, or that help is even possible.  There’s a certain solitude that comes from being stuck, and not having immediate, roadside assistance.  What about helpers that don’t follow through, aren’t as generous as advertised, or the entrepreneur has made it too difficult for them to help.  Fortunately, the only way to know – is to keep asking the question.


I’m not perfect, just unbeatable.  I’m unbeatable because I fail.  More than once a month Google shuts down a business that frightened the competition and seduced consumers.  Failing frequently allows you to become: unbeatable.  Just ask: Western Union, A & P, Woolworth’s, and Sears – who all forgot how to fail.  


Doing anything at the last minute…   ruins the finishing move – if it takes more than a minute.  The last minute is not a buffer zone, or a time to double-check your work.  The last minute is simply sixty seconds to enjoy a plan that successfully came together, and then move on to the next one.



The Market: 



Thoughts:  Most investors are under-water this year.  Weak equities are a result of: higher interest rates, QT, global behavior, and the strong Dollar.  Our FED won’t stop hiking rates due to the strong jobs market.  HL & JM uncovered an interesting fact: “The S&P has closed below its 200-day moving average for the longest streak since the 2008 financial crisis.”  When markets remain below their 200-day moving averages long enough: (a) bear market bottoms form, and (b) really bad things also happen.   Learn how to hedge, buy put spreads, or understand that ‘cash is a position’.


You scared yet?  As much as I love a two-sided trade, this market is beginning to scare the children.  Everybody’s blaming Powell’s honest remarks on rates, but he said nothing out of the ordinary.  His hawkish tone was not a surprise.  Bonds have dropped steadily in the past 10 days – while the Dollar continues to move sharply higher.  Currently, equities are simply a side show to the bond market and the Dollar.  To quote Al Roker: “When it looks like rain ‘n feels like rain – it’s raining.  I get paid to predict the weather – nobody really cares about WHY.”



InfoBits:



-       U.S. housing affordability is at its lowest level in 33 years…   below the peak of the housing bubble in July 2006.  Per CB, home prices fell another 25% after their December 2011 lows.  FYI: real estate price declines have further to go.


-       BofA, do you remember the housing crisis?   You just launched zero down payment mortgages to help minorities buy their first homes.  Are you trying to unload some really bad real-estate that you purchased?


-       Friday’s Jobs Report showed…   the strong labor market continuing.  Average hourly earnings were up 5.2% YoY, worker productivity fell by 4.1%, and unit labor costs were up 10.2% YoY (and up 16% for those job switchers).


-       The Labor Force Participation Rate…   increased to 62.4% from 62.1% - which caused a rise in the unemployment rate from 3.5% to 3.7%.  Bulls look at more workers joining the labor force as potentially easing wage inflation.  Bears say that inflation, diminished savings, and anxiety over health insurance are pushing people back to work.


-       The CEO of Aurora Innovation…    recently laid out a range of options for the self-driving company under these worsening market conditions – including a possible sale to Apple.


-       Porsche has lined up investor interest…   in its $85B IPO.


-       Need for speed: Taco Bell opened a table-free restaurant with taco-delivering "vertical lifts."  Chipotle’s adding more digital-order Chipot-lanes, and McD’s is working with IBM to automate their drive-thrus.


-       Honda and LG are teaming up…   to build a $4.4B EV-battery plant. 


-       Snapchat shares fell 3%...   after announcing another 20% layoff of staff.


-       NYC’s median one-bedroom rent is up 40% YoY…   with two-bedroom apartments charging +47% more. 


-       To Infinity and Elon…   as NASA awarded SpaceX five more astronaut mission contracts worth $1.4B, turning up the heat in the private sector space race between SpaceX, Boeing, and others.


-       Germany’s inflation rate was 8.8% for August.  This monthly rate is at a 50-year high.


-       Support for labor unions is at a 57-year high.  A tight labor market and widening wealth inequality have pushed support to its highest in decades.


-       It’s been over 100 days…  since a U.S. company raised +$100m in an IPO.



Crypto-Bytes:



-       The Merge is full steam ahead…    and crypto's future is along for the ride.  If the upgrade succeeds, the train will run cleaner and could inspire the broader crypto industry to follow suit. If it fails?  Hold on.


-       OpenSea has turned into an NFT ghost-town.   The marketplace processed $5m worth of NFT transactions on Friday.  That is roughly 99% less than its record high of +$400m on May 1.


-       Crypto Lender Nexo allocated +$50m for token buybacks.  Hats off to Nexo who has thus far managed to avoid the troubles experienced by crypto lending rivals due to the grueling market downturn. 


-       The Bank of Korea is asking regulators…   to re-institutionalize initial coin offerings (ICOs), which were banned in the country in 2017 – because the policy has failed and led to even more market insecurity. 


-       Crypto.com accidentally transferred $10.5m AUD to an Australian woman…   instead of refunding her $100 AUD.  Now it’s struggling to get the millions back.  It’s also pulling the plug on its $500m Champions League sponsorship.


-       The District of Columbia accused MicroStrategy founder…   Michael Saylor of avoiding paying more than $25m in taxes over the past 10+ years.


-       California Gov. Gavin Newsom is set to sign…   a bill that would require digital asset exchanges and other crypto companies to obtain a license to operate.


-       Celsius (crypto lender)…   filed to begin returning some customer funds. The company froze withdrawals in June and filed for bankruptcy in July.



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



Monday:  The dollar index hit 20-year highs of 109.50, and bitcoin dropped around 4% as the ‘risk-off’ environment continued.  The U.S. 2-Year yield rose to 3.466% (the highest since end-2007), and the 10-year yield rose to 3.034%.  This morning, if the S&P loses its 50-day (3996) we could see another bloodbath.  Several times today, we've seen the PPT drive the S&P to within a few points of going green, but I'm not trusting this market at all.  I’m scared because: (a) 1000-point dumps are rare, and (b) the reasons we dumped haven't been fixed.  Today, the NASDAQ and the DOW both bounced off their 50-day moving averages – which tells me that there's still a modicum of strength left in this market.


Tuesday:  Today it’s all about 10-year (TNX).  It’s been jumping around like crazy, and when the bond market gets unstable – nobody cares about the stock market.  With the 10-year rate up again, money is coming out of stocks and all three indexes have fallen through their 50-day moving averages.  Yes, we're short term oversold and a reversal bounce would make sense – but we're only going to get that bounce if the bond market calms down.  I was asked earlier today if the market is going to crash?  Crashes are rare, but fast 15% drops are not.  I think September will be a ‘down month’, we're going to test the summer lows – but we won’t get there in a straight line.


Wednesday:  After 3 days of dumping, is there anywhere to look for a good bounce?   I’m looking for a bounce that will allow me to get a decent price on buying some additional PUT-spreads.  The 10-Year Treasury = 3.121 +0.35%.  When the 10-Year moves up – stocks roll over.


Thursday:  The 10-Year remains moving higher.  For years I've said that one day there will be a massive crash, and that crash will be sparked not by fund managers taking profits – but by our debt market freezing due to a lack of liquidity.  Our world runs on debt – with its biggest proponent being the bond market itself.  Bonds are the financial backbone of most financial systems.  So, is this the big one?  Not yet.  In June, we went from DOW 33,156 to 29,653 in 8 trading sessions.  Right now, we're in day 5 of a significant sell down of 2,142 DOW points.  But when we test the summer lows (and we will), THAT will be the deciding moment.  If we fail to hold those summer lows, then we’re probably crashing and the bottom could be many thousands of points lower.



AMA (Ask Me Anything…)



A proper(ty) predicament…. up to 75% of China’s household wealth is in real estate.  Home sales have declined for 11 consecutive months while property prices have tanked.  China is in a real-estate depression.  Country Garden, China’s biggest developer, saw profits plunge 96% in the first half of the year.  Evergrande, China’s second-largest developer with $300B in debt, defaulted on its US bonds in December.  Hundreds of thousands of Chinese homebuyers are refusing to pay their mortgages because of building delays and sinking property prices. China’s property industry accounts for 30% of its GDP – twice as much as in the U.S.  Every 1% decline in China’s GDP = 0.3% dip in global GDP.


Re-Commerce is on the rise… because that 2012 Volvo in your garage and the vintage dress in your closet are showing their value.  As inflation strains wallets, more consumers are buying previously-loved goods.  The U.S. secondhand market is expected to double by 2026.  More than 75% of Americans say they buy or sell secondhand products.  Not missing a beat, traditional retailers are also placing big bets on resale.  Macy’s, Gap, Adidas, and Crocs have all struck “resale as a service” partnerships with ThredUp.  Hey, anybody have a ‘mint condition’ pair of Yeezy’s they’d like to sell?



Next Week:  Relentless Selling = just Beginning?



Week in Review:  I don’t think anybody saw the relentless selling that we’ve seen over the past week.  We had a nice bounce off of the Jobs Report up to 4019, and then collapsed down (to end the week) at 3924.  We talked about 3931 being the next resting place for the SPX.  And the SPX remained at 3931 for about 90 minutes, on its way to 3907 – 50 points below the lower edge of the expected move.  The only sign of this market’s relentless flight-to-quality – is the continued upward move in the Dollar.  


The Volatility Complex is frightening:  

-       VVIX:  The Volatility of the Volatility Futures – is at its lowest level in 5 years.  That tells us that nobody is out there hedging / buying PUTs.  

-       /VX (Vol Futures):  are still acting normally.  The 19-day contracts are trading for +$26 and the 47-day contracts are trading for $27.  The world is quietly telling us that there is a lot more risk coming down the pike.  If that’s true, there’s some serious price-action (lower) coming our way. 

-       VIX:  We’ve just experienced a 10% dip in the market over the past 2 weeks, and the volatility index barely caught a bid.  The last time the SPX was around 3900 – the VIX was around 34.  This time, it’s around 26.  

-       SKEW:  indicates the number of out-of-the-money PUTS vs the out-of-the-money CALLS people are buying.  It’s low, because there’s really no demand for people buying out-of-the-money ‘hedges’.

-       Putting it all together:  

o   If we have a precipitous drop next week to say 3750,

o   Traders will start to feel the fear and buy Calls on the VIX, and

o   Market making firms will be forced to sell S&P Futures in a hurry.

o   Tip #1: If we go down, we’re going to go down HARD – because of the nature of the hedge.


The Dollar broke out:  last week – further allowing us to export inflation.


Look at the Bonds = TLT:  is showing us a ONCE IN A GENERATION MOVE.  Bonds are in bear market territory.  We’re living through the largest downward move EVER in the bonds (TLT).  Tip #2: This move in Bonds is catastrophic enough, that it will cause tremendous risk moving forward for the S&P 500


There’s no place to hide under /ES 3931 (SPY 393):  Tip #3: If equities return the favor, and move to within a ‘stones throw’ of where they were 10 years ago – the SPY will move from 400 to 150 in very short order.  Everybody understands that the S&Ps could come down further, but nobody’s drawing the correlation to the bond market and the damage that has been inflicted over there.  There is no ‘happy place’ under 3931 for the S&Ps to rest.  The summer low was down at 3639.  The 3-year low is 3211.  


Tip #4: Bounces higher are simply opportunistic times to sell or buy PUT spreads.  Anything under 3931 is dangerous.


SPX Expected Move (EM):  We have had 5 breaches of the EM out of the last 7 weeks.  Markets are becoming unruly and completely inefficient.

-       Last Week’s EM = $108 … and we finished outside of it to the downside.

-       Next Week’s (4 days) EM = $94.  



Tips:  



HODL’s: (Hold On for Dear Life)


-       CASH = Nexo @ 8% on USDC – waiting for their acquisition dust to clear.

-       PHYSICAL COMMODITIES = Gold @ $1,722 /oz. & Silver @ $17.91 /oz.


-       **BitFarm (BITF = $1.22 / in at $4.12)

o   Selling more CCs for income,

-       **Bitcoin (BTC = $19,750 / in at $4,310)

-       **Ethereum (ETH = $1,550 / in at $310)

-       GME – DRS’d and HODL

-       **Grayscale Ethereum (ETHE = $11.62 / in @ $13.44)

-       Innerscope (INND = $0.019 / in at $0.0052)

-       SPY:

o   Buying Oct 22 / +$377 / - $367 Put Spread

o   Buying Oct 7 / +380 / - $370 Put Spread

* * Denotes a crypto-relationship


Trade of the Week:     


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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