This Week in Barrons: 10.6.2024

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• Baker Mayfield: “The Tampa Bay locker room was ‘too stressful’ when Tom Brady was their QB.” 

  Tom Brady: “I thought stressful was NOT having Super Bowl rings.  There was a mindset of a champion that I took to work every day.  This wasn’t daycare.  If I wanted to have fun, I’d have taken my kids to Disneyland.”

• A cure for political ad overload… As we near the 2024 presidential election, the total ad spend is mind-blowing.  All kinds of records are going to be set and watching anything on television (including your favorite sports teams) is becoming brutally painful.  So, here’s a potential solution to voter apathy and the torture of political ads:

  - By Registering to Vote and Voting …

  - You get the ability to: 'Block ALL Junk & Political Ads’.

  That will reduce the ad spend, and have 99% voter registration overnight.

• Global liquidity is rising, and so will asset prices…  Cheap capital is coming fast and furious, and global liquidity is in a cyclical uptick period.  As rates continue to decline, investors won’t be able to help themselves, and borrowing & investing will accelerate.  We will also see: fiat currency devaluations, eroding purchasing power, and a return to inflated asset prices.

• “For me, it was never about the money. I thought if I could make people happy, then they would like me. And if they like me, I’ll feel good about myself. And all I can say about that is: ‘Thank God for the money’.”… Ellen DeGeneres: For Your Approval.

• “I’ll buy THAT for a dollar” …  This week (for a buck) you could have bought: (a) a small fry at McDonald’s, (b) a Big Gulp at 7-Eleven, and (c) a satellite TV company with nearly 9m subscribers – as DirectTV is acquiring Dish Network for $1.

• China’s main issue…  is that their property prices are declining, and it’s hurting consumer psychology.  The Chinese consumer is saving 30% of their income, and there’s double-digit youth unemployment.  In terms of Chinese stocks, I would rather not buy into a parabola created by momentum monkeys.  The momentum bet has less than a week or two left in the tank, and then China will pull back.  Tip #1: Invest AFTER you see the PR piece on how China’s stimulus isn’t enough or must be backed by stronger fiscal supports.

• In Q3, the Equal-weighted S&P crushed the Market-Cap weighted index.  When this occurs, it signals: 

  1. Small and Medium-sized companies are doing well relative to large ones. 

  2. Investors are rotating out of the dominant growth names.

  3. And optimism exists for different market sectors (outside of tech).

• Tesla’s Elon Musk will reveal a Cybercab prototype this wek…  and share the latest advancements in Tesla's full self-driving technology.  Musk has said that Tesla will be ready to launch its robotaxi service in 2025.

• Harvard students hacked Meta's new AI-powered smart glasses … to instantly reveal ALL of someone’s personal information simply by looking at their face.

• Older adults that can cope with life’s difficult circumstances…  have a lower risk of death.  When measuring qualities like: a sense of purpose, calmness, perseverance, self-reliance, and the recognition that certain experiences must be faced alone, those who scored higher – had a significantly lower (-38%) risk of dying.

• Jenson Huang (Nvidia CEO) said: “It will be impossible to win the AI race without nuclear power.”

• Flippin’ the switch one reactor at a time.  Nuclear-tech company Holtec secured a $1.5B loan from the DOE to restart Michigan’s Palisades nuclear plant.  

• Boeing is contemplating a $10B stock sale due to its on-going strike. 

• The U.S. quit rate fell to its lowest level since June 2020…  as the hiring rate also slumped to its lowest level since 2013 (excluding the pandemic).

• U.S. new-car sales fell about 2% last quarter…  as consumers balked at high prices.

• Hurricane Helene hit the town of Spruce Pines hard …  forcing the town that mines most of the world’s quartz (needed for chip-making) – to shut down. 

• Apple will use its upcoming iPhone SE 4 … as the guinea pig for its new internally developed 5G modem.  It’s trying to move away from its current Qualcomm-made modems.  The 5G modem will also offer Wi-Fi and Bluetooth – allowing Apple to replace Broadcom’s chips as well.

• OpenAI:

  o Raised the largest round ($6.6B) ever…  at a $157B valuation.

  o Could lose ~$5B this year …  largely due to computing costs associated with training and operating large language models.

  o Told its employees that…  they will soon be allowed to sell some of their equity at the company's latest valuation.  [So, let’s all say goodbye to the remaining OpenAI employees!] 

• Bitcoin’s Up-tober…  In October, Bitcoin has gone up ~71% of the time, with an overall October performance of +21%.

• HBO is set to release "Money Electric: The Bitcoin Mystery" … claiming to reveal who Satoshi Nakamoto really is. 

• Someone dropped ~$56m on a CryptoPunk … which makes it one of the biggest NFT transactions ever – and one of the biggest in over 2 years.

• Stablecoins are now 43% of crypto transactions in Sub-Saharan Africa … as local currencies continue to devalue.  Nigeria and Ethiopia are experiencing massive growth in stablecoin usage due to its financial stability.  Institutions prefer stablecoins over Bitcoin due to better liquidity and reduced volatility.

• Our national debt is growing astronomically…  while our FED cuts interest rates.  Bitcoiners are withdrawing their coins into self-custody.  Republicans and Democrats are finding common ground with a decentralized, supply constrained, monetary asset.  This all seems bullish to me.

• Monday:  Our FED seems hell bent on not letting things implode: the money spigots are wide open, more rate cuts are coming, QE is upon us, and the AI bubble continues to inflate.  Tip #2: Fair Warning: Warren Buffet has sold $131B worth of stock since 2022.  He knows that this bull market will stop, a bear market will come, and he would like to be in a better position to buy.

• Friday: The dockworkers strike has been put off until January, and in terms of Friday’s JOBS Report:

  1. Estimates were for 150,000 jobs created in September,

  2. our BLS said we created 254,000 jobs,

  3. August’s hiring was revised higher,

  4. and the unemployment rate ticked down a bit. 

  I have mixed feelings about a JOBS number this Goldilocksy large.

• Meta ain’t talkin’…  about whether it’s using the images taken by its AI-powered Ray-Ban smart glasses (with their built-in discreet camera) to train its AI models.  This raises huge privacy concerns, as it comes after Meta admitted that, since 2007, it’s been using all public US Instagram and Facebook posts to train its AI models.  History at least rhymes – which means that the Zuck is going to claim ‘publicly available data’ with the images taken by its Ray-Ban glasses.  [Darn, just when I was beginning to like the Zuck.]

• On Tuesday, for the first time since 1977…  over 45,000 U.S. dockworkers went on strike from Maine to Texas.  Then on Friday the strike was officially postponed until January, 2025.  70% of Americans support labor unions, and that’s just 1% shy of the highest approval rating since 1965.  The 2 major dock worker requests: a 70% wage increase and a ban on port-automation technology.  [I can’t comment on the economics, but the technology ban hinders innovation.]

• Bkgd:

  1. We have uneasy financial conditions.

  2. Resistance levels remain in place.

  3. Tip #3: Risk == U.S. tech stocks (goldilocks & policy perfection), and the U.S. dollar (China stimulus).

  4. Tip #4: Rotate into: commodities, emerging markets, and small caps. 

   Overall, equity valuations, sentiment, and allocations are elevated.  It’s a positive sign that the market has done this well thus far.  I’m concentrating on risk management and sector rotation.

• S&P Movements are muted…  because markets are ‘floating’ rather than ‘trading’.  We ended the week as close to where we started as possible.  We are still inside an 80-point S&P range that extends from 5740 to 5820. 

• Sector Movements are large…  as bonds have tanked and corresponding 10-year interest rates have gone from 3.6% to 4% in 2-weeks.  That means that rates are moving exactly opposite the direction our FED had intended with its rate-cutting cycle.  Markets tagged Friday’s incredibly large JOBS number as inflationary, and are back to fighting inflation on their own terms – by raising market interest rates.   

• The Dollar, Yen, and Gold…  It seems that the Japanese have backed off their raising rate stance, so the Yen is back to falling, and the Japanese Carry-Trade is back-on.  With the Yen’s fall comes a U.S. Dollar rebound higher.  Tip #5:  It’s scary when you see the U.S. Dollar explode higher and you do NOT see gold move lower.  That’s when you realize how wildly inflationary current global monetary policy is.

• Earnings season…  is upon us, and with the 10-year flying high – banks are moving higher. This week the energy sector also moved 2-standard deviations higher – mostly due to geo-political risk.  Meta moved higher (outside its expected move), while Apple, Microsoft, Tesla, and Amazon were all lower. 

• Gamma will expand…  The longer you remain inside of a range, the more open interest (gamma) you will accumulate – making the velocity of the breakout/breakdown that much more intense.  

• The Binary Outcome…. The instant this large ball of risk decides to breakdown or breakout of this range – then the entire market weight will move with it.  Until that time, volatility (VIX and VVIX) and skew (SKEW) are not backing down. 

• SPX Expected Move (EM):

  - Last Week’s EM = $99 and we moved all of $5.

  - Next Week’s EM = $100.  Volatility is not backing down.  There is a ton of risk in this market right now – just waiting to be directionally resolved. 

  - Tip #6:  If you are wildly bullish or bearish – please trade using ‘defined risk’ strategies!

• I continue to raise cash, and invest more defensively. 

• HODL’s: (Hold-On for Dear Life)

  - 13 to 17-Week Treasuries @ 4.75%

  - Physical Commodities = Gold @ $2,673/oz. & Silver @ $32.4/oz.

  - **Bitcoin (BTC = $61,900 / in at $4,310)

  - **Ethereum (ETH = 2,400 / in at $310)

  - HROW – Harrow Health = $50.3 / in at $12

  - INDA – India ETF ($57.1 / in at $50)

  - BRK/B – Berkshire = ($462 / in at $439)

  - **IBIT – Blackrock’s Spot Bitcoin ETF ($35.5 / in at $24)

• Options to Reduce Risk:

  - Materials / Utilities: Long Call Verticals…

  o XLU – Utilities: Jan ’25: $85 / $89 CALL-Sp.

  o WEC – Wisconsin Power: Jan ’25: +$100 / -$105 CALL-Sp.

  o SVM – Jan. ’25: +$5 Calls

• Options as Hedges:

  - SPY – S&Ps: Jan ’25: +$520 / -$500 PUT-Sp.

  - SPY – S&Ps: Jan ’25: +$500 PUTs

  - GLD – Gold ETF: Jan ‘25: +$255 / -$260 CALL-Sp.

• Options for Income:

  - **RIOT – Riot Bitcoin Mining

  o Bi-Weekly:

  o BUY Puts 1 Std. Dev. OTM for protection

  o SELL Calls ½ Std. Dev. OTM for income

   

  ** Crypto-Currency aware

  Please be safe out there!

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