This Week in Barrons: 12.1.2024

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• It’s tempting to be a market pioneer …  Be the one who shows up with the first charge card, the first personal training firm, or the first personal computer - but it’s a challenging road.  Per Seth Godin: Entrepreneurs often focus on needs and not markets; therefore, they often fail to account for just how difficult it is to turn those ideas into opportunities.  If you’re anticipating creating a market, it helps to be prepared for how difficult it’s going to be.  In a nutshell, people buy pain-killers NOT what ifs.

• To set your kids up for success in adulthood …  research tells us to: assign them chores to do around the house.  It seems to reach the upper tier of life’s ladder, youngsters should start by doing the dishes and taking out the trash.

• Crawl, Walk, Run … Before buying a house, spend a day walking around the neighborhood – because you’ll notice details you missed on your ‘drive-by’.  Before starting a business, spend some time working the cash register at a competitor.  And, before taking a job in marketing – go try and make some sales.

• Buy the Rumor & Sell the News …  There was a lot of champagne popping last week when Gary Gensler announced he was stepping down as SEC Chair.  I am 100% sure that longer term, anybody else who fills the role will be better for the trading community.  But it also got me thinking, how much of the latest rally in stocks, the dollar, and more specifically Bitcoin can be attributed to the market’s anticipating life without Gary Gensler at the helm? Is the demise of Gensler overpriced as witnessed by the market’s hyperbolic rise in anti-Gensler sectors?  This sure feels like a Buy the Rumor & Sell the News opportunity.

• Ready to move into bonds?  This market continues to exhibit strong, bullish mojo to the upside, and that’s giving investors a sense of euphoria.  According to Callum Thomas, one of the most contrarian moves right now would be to move from stocks into bonds.  Maybe now’s not the right time, but it will come sooner rather than later – it always does.

• The small-cap Russell 2000 made new all-time highs … as bulls continue to take on more risk.  Now, all the major U.S. indexes are trading at all-time highs.

• Trump vows 25% tariffs on Mexican & Canadian imports, and 10% on China …however, markets give Trump only 36% odds that he will actually impose those tariffs.  Welcome to Negotiating 101.

• If the incoming Trump administration axes the $7,500 tax credit for EVs … Gov. Gavin Newsom said that California will intervene and provide their own EV rebates to residents.

• A record high 56% of Americans believe … that stock prices will move higher over the next 12 months.

• November’s Consumer Confidence Index ticked higher.

• The cost of international diversification … was high during Trump’s first term.  Strategists do not see that changing over the next 4 years.

• New home sales slumped to a two-year low.

• Fashion retailers are permanently banning customers … with excessive return rates.

• Our FED’s 3-month inflation rate … is markedly above its 2% target – and turning higher. 

• Nvidia’s stock price is close to breaking-down … and if that happens, risk appetite in the overall market will face a stiff headwind until a new catalyst to replace the “AI Boom” is uncovered.

• Australia approved their social media ban for children under 16 … backed by 77% voter support.  Is the land Down Under the canary in the coal mine for social media regulation?

• Bluesky engagement is picking up … just as Meta pushes users to Threads, and X tries to shore up its disintegrating userbase.  Bluesky (the new indie social network) is picking up steam because people are actually using it.

• The total crypto market is up: +100.59% YTD & +139.97% YoY.

• The total altcoin market is up: +74.17% YTD & +114.80% YoY.

• MicroStrategy bought another $5.4B of BTC at $98k.

• Cantor Fitzgerald is in talks with lead stablecoin company Tether … to participate in a project that would lend clients $2B against their bitcoin.

• Trump’s team wants to strip the SEC of crypto oversight … and hand it to the CFTC, which is seen as friendlier and less overbearing.  This shift could turbocharge crypto innovation in the U.S.

• A federal court ruled that smart contracts are not property … so the Treasury Dept. cannot sanction them.  This is a win for decentralized tools and clearly states that you cannot blame the tool for the way someone uses it.

• Crypto on average rises in December … but the stats aren’t great.  Its average increase is 32% while the average decrease is -14%.  Therefore, the overall monthly change is +12%. 

• The SEC could approve dozens of altcoin ETFs by next year … making 2025 the year the crypto market goes wild.  Bloomberg analyst Eric Balchunas says: “If the SEC doesn’t screw it up, crypto ETFs could finally go mainstream.”

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• Monday:  After NVDA did well with earnings, the institutions started upgrading price targets on AI related companies and that kicked off a rally last week.  That rally should run at least until the December FED meeting. And, if Powell cuts in December, it will probably run into January.  News of hedge fund manager Scott Bessent's nomination as U.S. Treasury Secretary eased some of the fiscal concerns that had been pushing bond yields higher.  Thanksgiving week is generally a good one. The market is closed on Thursday and closes at 1pm on Friday.  Watch QS and MARA. DNN (a little uranium company) is looking at a breakout forming. Finally, AMD looks ready to try and punch up over $140 and hold it. If it can, it could go really well.

• Why did Bitcoin fall from $98,000 to $92,000?

  1. In simple terms, bitcoin sellers out-numbered buyers: “Long-Term Holders (LTH) have distributed $60B worth of supply in the last 30-days.  That is the most LTH supply that has moved since the FTX bottom, and the heaviest profit taking so far this cycle.”

  2. Kyle Doops explains: “Long-term Bitcoin holders sold 128K BTC, but U.S. spot ETFs absorbed 90% of the selling pressure.  Strong institutional demand is fueling BTC’s rally.”

  3. Joe Consorti highlights a potential scenario: “Bitcoin has tracked global M2 with a ~70-day lag since September 2023.  If it continues, bitcoin could be in for a 20-25% correction.” (See graph: Bitcoin = orange and Money Supply = white).

• Bkgd:  The S&Ps closed up ~6% in November (+26.47% YTD).  That marks the 13th month in a row for the S&Ps closing above their 200-day moving average.  There are numerous indicators pointing to a bullish euphoria.  Fair Warning: the stock-to-bond ratio looks stretched & divergent, and this is often a self-correcting indicator.  Combining this with the highest hedging activity in history, and it begs the question: Did the Santa Claus Rally come early?

• OMG = Walmart (WMT) is up +73% YTD … and has formed a "Parabolic Trap".  Tip #1: I don’t like the risk vs reward scenario within WMT, but if you’re going to get bullish in WMT – use Call Spreads to define your risk. 

• The U.S. Dollar’s reversal … is causing erratic behavior within emerging markets.  I would have expected that our Dollar’s move lower would have the emerging markets index (EEM) exploding higher - not lower.  Tip #2: If the Dollar ($106) continues its move lower into the $105 to $104 area, it will begin to impact the S&Ps.

• Bonds Rally …  Is the most recent Bond rally defensive in nature?  There is a natural correlation between bond rallies and market vulnerability that is making its presence felt.   

• Tip #3: Put your hedges on … SKEW (the implied volatility of OTM Puts vs OTM Calls) is showing us one of the highest readings in history.  That means that institutional traders are well-hedged, paying record premiums for their downside protection, and are financing their Put buying by selling Calls. 

• Cryptos Rally … Is Bitcoin’s inability to break the $100,000 barrier showing us a major warning sign?  NO.  It just moved from $68k to $98k in the month of November.  Let’s give it time to digest its move and prepare for the next one.  In the meantime, Tip #4: AltCoins are having a moment.  Look at: LINK, UNI, AAVE, SOL, and DOGE. 

• SPX Expected Move (EM):

  - Last Week’s EM = $65 … and we hit the upper edge of the EM on Friday’s shortened trading session.

  - This Week’s EM = $75

• HODL’s: (Hold-On for Dear Life)

  - ICSH == iShares Ultra Short-Term Bond Active ETF (6% yield)

  - JPC == Nuveen Preferred Income Opportunities Fund (10% yield)

  -  Physical Commodities = Gold @ $2,670/oz. & Silver @ $31.1/oz.

  - Bitcoin (BTC = $96,500 / in at $4,310)

  - Ethereum (ETH = 3,670 / in at $310)

  - HROW – Harrow Health = $41.9 / in at $12

  - IBIT – Blackrock’s Spot Bitcoin ETF ($55.2 / in at $24)

  - ETHA – Blackrock’s Spot Ethereum ETF ($27.1 / in at $20)

  - GLD – Gold ETF ($245 / in at $212)

   

  Options for Income: **RIOT / MARA – Bitcoin Mining

  - Bi-Weekly:  BUY the Stock

  - BUY Puts 1 Std. Dev. OTM for protection

  - SELL Covered Calls ½ Std. Dev. OTM for income

   

  Crypto Alts == LINK, UNI, AAVE, SOL, & DOGE.

   

  Please be safe out there!

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