Reality Sucks… Just like Barbie, Ken and their real (rentable) house, our culture makes it easy to insulate ourselves from reality. For example: credit card debt is an invisible burden, until it’s not. Ignoring our climate makes our days easier, but not our years. The life we create for ourselves can give us a ‘shock absorber’ that allows each of us to focus on how we’d like things to be. This ‘fake reality’ is the same one that entrepreneurs use when they raise money. After all, if you’re focused on a story that gets you an investment, you can avoid the reality of building, implementing, and profitability – until you can’t. Often, when going the large investment route, the entrepreneur will find that reality becomes their worst enemy. On the other hand, a customer-focused, cash-flow profitable business will allow investors to come to them.
The Grad School Seduction: If you’re good at school, the challenge and offer of ‘grad school’ means that you get to do more of what you’re good at. You’re offered a path to a well-paid job and several years of more school – instead of the scary freedom of what happens next. Grad school allows our intelligent and passionate young people to go out and help people, dive into running for office, and/or explore entrepreneurship. The problem is that our Grad schools are not optimized for any of these things. Entrepreneurs (for example) require a lot more ‘street smarts’ than what MBA programs have to offer. Often it makes more sense to not wait for your certificate / permit, but rather simply start creating the change you seek to make (‘baby steps’) right now.
The Market:
Apple has a $3T market cap… and the Nasdaq had its best first half ever (+39%).
The forever channel problem: Nike has a sneaker problem. Why? Because Overstock (a retail partner) allowed their Nike sneaker inventory to grow almost 300% in the past two quarters. And Foot Locker (where Nike makes up 70% of its sales) just cut its annual outlook, and will likely have a glut of Nike’s to move through markdowns. The sneaker surplus comes as Nike continues to pull back on its retail (direct-2-consumer = D2C) channel, and pivot toward their wholesale (business-2-business = B2B) efforts. There’s always a channel problem, the only issue is the speed/price of the cure.
Portfolio Theory: One show can make Netflix’s year. One stock can make the numbers for an investor. One player can drive a team to victory. The issue with falling in love with the potential associated with a single egg – is that we end up making the entire basket like that egg. That means there is no longer a portfolio, but rather one single thing made over and over again. The best portfolios have elements you’re pretty sure are wrong, and somehow, they end up being right.
InfoBits:
- In 2 years, 2.2m people have moved to the Southeast… Florida, Texas, Georgia, the Carolinas, and Tennessee now contribute more to our GDP than the Northeast (Washington-New York-Boston corridor).
- Google DeepMind’s CEO said… Gemini (the company’s next AI algorithm) will tap AlphaGo techniques and will eclipse ChatGTP – in a number of months.
- Ryan Reynolds and Michael B. Jordan… are among a group purchasing a 24% equity stake in Alpine Racing – valuing the Formula One team at $900m.
- A new weight-loss drug from Eli Lilly… shows an average drop of 24% body weight over 48 weeks. These are the most effective results to date for the new class of drugs known as semaglutides.
- Federal regulators approved NYC’s congestion pricing plan… to charge a daily toll on vehicles entering Manhattan's central business district.
- Lordstown filed for bankruptcy… and sued Foxconn after the electric truck startup’s $170m investment deal with the Taiwanese firm unraveled.
- Ford is cutting 1,000 engineering jobs in the U.S. / Canada.
- Amazon says it’ll invest billions in India… as mega-tech goes all in on the fast-growing economy.
- Volvo has adopted Tesla’s NA Charging Standard… and will have access to 12,000 Tesla Superchargers via an adapter starting in 2024.
- International markets are driving Hollywood… as overseas ticket sales are doubling North America, and half of the top 10 films in May were non-English-speaking.
- 25% of all office workers would like to ‘change jobs’ next year.
- Watch out, ketchup, there’s a new sauce in town… Pepsi is releasing a limited-edition condiment dubbed “Colachup” made with its flagship soft drink.
- Bank of America is facing $100B in bond market paper losses… due to interest rate increases. The effects of rapidly rising interest rates continue.
- SCOTUS blocked plans to cancel $430B in student debt… There goes a significant amount of purchasing power from our young consumers.
- EPSN laid-off on-air personalities… While the sports business is booming, the sports / media business continues to face pressures from independent content creators and cable cord-cutters.
Crypto-Bytes:
- YTD, the crypto market is up +49.71%
- FTX has recovered $7B in assets… but need another $2B to cover executives’ misappropriations.
- Bitcoin whales accumulated $3.5B BTC… during the market downturn.
- Bitcoin (BTC) hit a new YTD high of $31,400.
- Bitcoin Cash (BCH) soared more than 100%… and is currently the best-performing crypto among the top 100 cryptocurrencies.
- Singapore, HSBC, and JP Morgan… are collaborating on use cases for tokenized assets.
- MicroStrategy recently added 12,333 BTC… valued at $347m – boosting its vault to 152,333 BTC with the average purchase price of $28,136 per token.
- Y Combinator Summer ’23 startups program… received a record 24,000 applications, 50% involving AI – and with <1% acceptance rate.
- Bitcoin fell following a report of the SEC saying… that the recent spot Bitcoin ETF filings are inadequate – which led to a flurry of Friday re-filings.
TW3 (That Was - The Week - That Was):
Monday: There are a ton of pops and drops this morning. SNOW got a pretty good deal with MSFT, and I'd try them over $182. LCID got a very interesting deal with Aston Martin, and over $6.30 gets interesting. This could break to either side as things are pretty unsettled out there.
Tuesday: META > $285.25 and SNOW > $178 could be a good catch. This rally isn't that wide, so play cautiously in case of reversals
Wednesday: Powell didn't waver on the idea that they could go back to doing hikes back to back, with no "pausing" in between. This is a market that for months, was betting on rate CUTS, and here's the Chair saying that more hikes are probable.
Thursday: After the bell last night MU had nice things to say about chips and memory. This market doesn't feel strong to me at all. LCID has gotten some battery contracts and partnerships lately, and if they can get over their 50 day at $6.95, I'd be tempted to take them on. I could see PLUG over $10.22.
Friday: The futures are pretty strong this morning. It looks like they want some window dressing to make their end-of-month / end-of-quarter statements look better. The PCE numbers are out and for the most part they're coming in a tad lower than last month. But that core number, YoY is still at 4.6% and our FED doesn’t like that. Okay, so on this last day of the quarter watch AAPL as they try to get that $3T market cap. Watch LCID and let's see if it gets over that 50-day at $6.96 and holds it.
AMA (Ask Me Anything…)
Pickleball’s impact on our Healthcare System. 22.3m people will play Pickleball this year vs. 3.5m 10 years ago. Pickleball is creating $250 to $500m in annual medical costs. 80% of the patients are +60 years old, and Medicare is picking up +85% of the total cost of care.
Here, try some of mine…. Elon Musk takes ketamine, and Sergey Brin (Google) enjoys magic mushrooms. Executives at VC firm Founders Fund (known for investing in SpaceX and Facebook) throw parties that include psychedelics. Routine drug use has moved squarely into corporate culture, leaving boards and business leaders to wrestle with their responsibilities for a workforce that frequently uses drugs. It seems that tech execs see psychedelics such as psilocybin, ketamine and LSD – as gateways to business breakthroughs.
Next Week: Will End-of-Quarter = End-of-Rally?
- Window Dressing or a Real Rally? This week’s market exploded thru the upper end of the expected move and produced a 2-Sigma move. That means that the options market has been wrong for the third consecutive week when trying to handicap future market moves. So, for short-term options – you want to be a buyer – not a seller. Secondly, much of Friday’s action was brokers buying ‘window dressing’ to show their clients that they were only invested in ‘the good stuff’ (NVDA, TSLA, etc.). But having said all of that, this is a ‘real rally’ that has a lot to do with order-flow.
- Tech order-flow has changed… Last week there was a large amount of call buying in Apple (AAPL) ‘at the ASK or above’. Which means, people were buying AAPL calls at whatever price was offered, and created their own gamma squeeze. Unfortunately, this too shall pass because this ‘call buying’ mania did NOT extend over to MSFT, NVDA or TSLA. FAIR WARNING: By examining the ‘implied volatility skew’ – you’ll find that prop-traders can flip this market in a second by selling out of the money calls for good money.
- Expected Moves: XLF vs XLE vs QQQ…. Next week’s EM in the SPX is $54; however, we moved over $100 this week. How does this make any sense? Last week the energy and financial sectors came to life – both exhibiting 2-Sigma moves higher. And last week, the S&Ps out-performed the NASDAQ.
- Bonds, Yield Curve, and Commodities… Last week we saw the 10-Year (TNX) increase from 3.4% to 3.8%. That’s a 10% increase in a week. At some point, the fact that 10-Year rates are knocking on 4% won’t be good for tech. We still have an inverted yield curve with the 2-Year at 4.86%. Commodities such as wheat (/ZW) and corn (/ZC) are just getting annihilated. This is bothersome indeed.
- Trades:
o Disney (DIS)… BOT Aug 4th: +89 / -$92 Call Spread for $1.30
o DraftKings (DKNG)… BOT Jan 2024: +25 / -$40 Call Spread for $1.30
o Bitcoin (BTC)… “Software that you can’t shut down…AVC”
§ BUY when there’s a firm close above $31,000.
- SPX Expected Move:
o Last Week’s EM = $55 (5-day week)
o Next Week’s EM = $54 (3.5-day week)
o FAIR WARNING: When we begin to see an inefficient market (like we have now) move to an efficient market – VOLATILITY will begin to take hold.
TIPS:
Downside Risk continues to resonate with me. This market continues to ‘just go up’. For whatever reasons, this market is defying gravity. It is: disconnected from reality, technical analysis is broken, P/E ratios no longer work, and fundamentals have been checked at the door. The FOMO, hop on at any cost, push to higher – are all symptoms of a bubble. Often new quarters start with a bang, so, I can see this market going higher for a bit. Just keep a few things in mind: (a) we are getting more rate hikes, (b) SCOTUS just shot down student loan forgiveness – so there's $430B that won't be going into paying rent, buying new phones, clothes, and food in the coming months. (c) inflation is far from dead, and (d) more people than ever are living paycheck to paycheck. Please be careful!
HODL’s: (Hold On for Dear Life)
- PHYSICAL COMMODITIES = Gold @ $1928/oz. & Silver @ $23/oz.
- 13 Week Treasuries @ 5.41%
- **Bitcoin (BTC = $30,665 / in at $4,310)
- **Ethereum (ETH = $1,947 / in at $310)
- Apple (AAPL = $193.97 / in at $177)
- Big Bear Holdings (BBAI = $2.35 / in at $2.90)
o BOT Sept $4 CALLS for $0.35
- Disney (DIS = $89.28 / $89)
o BOT Aug 4th: +89 / -$92 Call Spread for $1.30
- DNN – Denison Mines ($1.25 / in at $1.32)
- DKNG – DraftKings ($26.57 / in at $25)
o BOT Jan 2024: +25 / -$40 Call Spread for $1.30
- MESO – Mesoblast Ltd. ($3.91 / in at $3.60)
o SOLD July $5 CALLS for $0.85
- NFGC – Newfound Gold ($4.95 / in at $3.75)
o SOLD July, Oct. & Jan. $5.00 CALLS
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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