This Week inwards Barrons: 3-17-2019:
Dear R.F.:
Do Robo-advisors actually work? YES they practise truly work. Robo-advisors are a hot expanse of Fintech, in addition to are beingness offered to customers yesteryear many investment companies. Robo-advisors are calculator programs that automatically laid up, monitor, in addition to rebalance investors’ portfolios based on their goals, jeopardy tolerance, in addition to other needs. They are less costly because they are machines. Amazingly, they improve investment performance. According to enquiry published yesteryear Professor’s D’Acunto, Prabhala, in addition to Rossi: Robo-advised portfolios experienced higher returns, were to a greater extent than fully diversified, in addition to experienced less volatility. Robo-advisors mitigate the 2 most prominent investor behavioral biases: (a) the style of rookie investors to sell their winners in addition to withdraw hold their losers, in addition to (b) momentum chasing – the fine art of buying high in addition to selling low.
“That’s a $75 modify fee.” I couldn’t gear upward this materials up. A friend of mine was flying out of Chicago terminal calendar week – heading toward NYC’s Traders Expo. He breezed through security in addition to was xc minutes early on for his crowded 8am flight. There were 2 before NYC flights, in addition to both had plenty of availability. He went upward to the gate agent in addition to volunteered to switch flights – thinking that it would allow the airline to gear upward fifty-fifty to a greater extent than money via re-selling his topographic point on the crowded 8am flight. The gate agent told him: “We’re going to have got to accuse you lot $75 to switch flights, it’s our policy.” He tried to capitalize on his semi-celebrity condition in addition to his airline miles – but they wouldn’t waive the fee in addition to he returned to wait. After an hr of doing work, a novel gate agent called his call in addition to called him to the counter. There the agent asked him: “Sir, practise you lot withdraw heed if nosotros modify your topographic point from 6C to 7D – they are both aisle seats?” Then is when the genius happened – he said: “Sure, but I’ll have got to accuse you lot $75. Even though your modify is non unreasonable, it’s my wife’s personal policy in addition to I don’t have got the authorisation to waive the fee.” What in addition to hence ensued was an awkward staring contest, with no smiles – good possibly a smirk on my friend’s part. He returned to hold off for his flying in addition to his 6C seat.
“Michelle Obama – come upward on down.” Last calendar week a friend of mine wrote me with his expectations surrounding the adjacent election process. He thinks that the Democrats volition pose forth many dissimilar candidates to run against Donald Trump inwards 2020. Those candidates volition live a smoke-screen in addition to only designed to attempt out a lot of wildly dissimilar ideologies – to consider which resonate with the American people. The Democrats volition appear every bit a political party inwards consummate disarray. Then, precisely every bit it looks similar they can't seem to acquire behind whatsoever 1 candidate, in addition to the thought of losing to Trump 1 time again becomes a reality – Michelle Obama volition emerge. She volition denote piece of cake inwards the game that she must run on Barack’s platform because the province needs her. If that happens, the fractured Democrats volition all come upward together with a singular focus, in addition to gear upward her the nominee. I responded with: “The odds of a fatal bird crash are 1 inwards xi million. You have got a amend adventure of beingness struck yesteryear lightning, getting hitting yesteryear a meteor, winning an Oscar, in addition to yes - becoming President. So given at that topographic point have got been 2 Boeing bird crashes inwards 2 consecutive years – statistically improbable events surely practise happen, in addition to possibly for a reason.
Our Manipulated Market:
Plenty of pundits have got compared the trading activity inwards our electrical flow marketplace to the bursting of the dot-com bubble. Longtime bull Richard Bernstein said: “We’re at a betoken inwards the technology scientific discipline cycle where investors are starting to travel pure momentum traders. They start out to believe that tech is no longer cyclical. It’s something new. It’s something different. And that’s sounding a fighting similar March of 2000.” To his credit, Mr. Bernstein (in March of 2000) published a study declaring tech stocks every bit overpriced in addition to that the smart money should live headed toward loose energy in addition to commodities. Six months later, the tech-heavy Nasdaq Composite was inwards tatters, in addition to yesteryear piece of cake 2000, it had shed almost 80% of its value. This fourth dimension unopen to Bernstein says that he’s non worried virtually nosebleed valuations creating some other massive meltdown, but he does fearfulness that skittish investors have got a flawed way of thinking virtually corporate earnings that could ultimately laid them upward for disappointment. “As profits decelerate (which is what most people concord is going to happen) tech is mostly 1 of the worst performing sectors. The most of import portfolio factors are lineament in addition to stability.”
Info Bits:
- The Facebook privacy pivot: FB has faced a lot of criticism due to previous privacy breaches. Last week, FB founder Mark Zuckerberg said that the companionship would live taking steps to improve its information privacy in addition to protection.
- Adios Facebook: Facebook’s longstanding Chief Product Officer in addition to Head of the Facebook App, Instagram, WhatsApp, in addition to Messenger (Chris Cox) said “No Mas” on Friday. No argue was given for his departure, but privately he disagrees with Mark Zuckerberg’s novel focus on privacy, encryption, in addition to FB’s novel direction. Chris Daniels, caput of WhatsApp, also left the company.
- Legally: The Connecticut Supreme Court ruled that families of the Sandy Hook victims can sue the gun manufacturer behind the AR-15 rifle used inwards the 2012 schoolhouse shooting. This could render a legal opening for other lawsuits against gun manufacturers unopen to the US.
- Uber: “Show me da money”: Uber is going populace inwards April. The companionship is seeking a $120B valuation. That’s much bigger than Lyft’s $25B valuation in addition to larger than most currently traded companies that are older, profitable, in addition to ain existent assets. Oh yes, Uber is NOT fifty-fifty unopen to profitability – hence at to the lowest degree they have got that going for them.
- Tesla – same shirt / dissimilar day: Tesla revealed their Model Y crossover last calendar week – priced betwixt $39k in addition to $69k. It volition live available inwards staggered releases betwixt 2020 in addition to 2021. Analysts were underwhelmed by: the car, the delay inwards delivery, in addition to the company's rail tape of overpromising in addition to underdelivering. The stock tanked 4%.
- Tesla – “Just kidding: Instead of closing all of those retail stores, let’s heighten prices instead,” said Elon. So the hundreds of employees who were effectively fired with an ‘all stores are closing’ tweet, were precisely re-hired with a ‘just kidding’ tweet. I’m assuming the Tesla HR subdivision is actively looking for other jobs.
- U.S. beats Saudi Arabia: The U.S. is virtually to travel the world’s leader inwards exporting oil, natural gas liquids, in addition to petroleum. That's hasn’t happened since the mid 1950’s. This was accomplished yesteryear the shale oil in addition to natural gas nail inwards Texas, North Dakota in addition to Pennsylvania. The U.S. has doubled its oil production over the yesteryear decade, in addition to forthwith out-pumps both the Saudis in addition to the Russians.
- Speaking of 5G: Verizon is laid to travel the commencement network to publicly unleash 5G tech for U.S. smartphones. Next month, it's rolling out the tech for users inwards Chicago in addition to Minneapolis, but they'll demand novel gear in addition to pay an extra $10/mo.
Crypto Bytes:
- The Marshall Islands: are moving toward launching their ain national cryptocurrency. They have got partnered with Israeli startup Neema to educate their coin, in addition to aim to number 2.4m to the citizens of the islands – yesteryear the 2ndhalf of 2019.
- In Venezuela: Bitcoin volume is the 2ndlargest in the basis – after the U.S.
- IBM: is trying to fill upward twice every bit many blockchain positions every bit whatsoever other company.
- Ripple (XRP): 19 companies are using XRP to powerfulness cross-border payments.
- ICOs in addition to Utility Tokens: Germany volition start out to regulate them, but NOT every bit securities.
- Bitcoin’s Bull Cross: Bitcoin’s 50-day moving average is virtually to cross over its 100-day for the commencement fourth dimension since August 2018. It is precisely the latest indicator (along with MACD in addition to the money flow index) calling for a BTC motility toward $4,236.
- Is FB edifice a digital currency? Facebook’s digital currency is expected to live integrated into the WhatsApp Messenger in addition to other Facebook-owned services. When that’s the case, users volition live able to ship in addition to have money through WhatsApp using the cryptocurrency. They volition also live able to transfer money internationally – circumventing the exorbitant fees charged yesteryear large banks in addition to fiscal institutions. However, FB is truly launching a stable money – pegging the token’s worth to a fiat currency such every bit the U.S. Dollar.
- Who’s going to consider the Crypto movie? Yep, a existent cinema called ‘Crypto’ starring Kurt Russel opens inwards theatres on Apr 12th . It follows a immature police enforcement agent on a trip to his abode town inwards New York, where he encounters the Russian mob in addition to their crypto money-laundering operation.
- WorldWire is coming to a neighborhood close you: IBM is teasing their upcoming solution (WorldWire) that targets cross-border payments using stable-coins. Big Blue is talking to its target clients in addition to banks virtually the novel production – which volition provide “fungibility of digital assets for fiscal institutions.”
- Blockchain on Tap: At SXSW, the GDPR startup Civic showcased iii vending machines selling beer. They demo’d at Consensus terminal twelvemonth – in addition to plans are for them to officially ringlet out a $15k machine that tin verify a user’s historic menses in addition to convey payment via crypto – before delivering an ice-cold beer.
Last Week (we learned):
Economically, there's no adept argue (other than corporate buy-backs in addition to the ‘Plunge Patrol Team’) for our markets to live this high. The China merchandise bargain is non coming every bit chop-chop every bit hoped, in addition to fifty-fifty with a bargain – their industrial output brutal off of a cliff (lower) terminal week. Then there’s the ‘Brexit’ episode of ‘Deal or No-Deal’ that’s going on over inwards England. Our latest novel abode sales numbers FELL 7% vs an estimated 0.2% gain. So things are non looking economically audio at the moment. Factually: 96% of all U.S. stocks generate a LIFE-TIME render that matches a TWO-MONTH render on your CD. The argue why hence many usual funds neglect to shell the marketplace is because hence many stocks neglect to shell the market.
Having said that, this yesteryear calendar week investors bought everything in addition to anything. We expected the SPX (S&P Index) to motility $44 during the calendar week – in addition to instead it moved $80. That’s the 2nd week inwards a row that the marketplace moved 2X the expected move. That agency the entire options marketplace (with hundreds of billions of dollars at risk) has gotten the expected motility dramatically incorrect – 2 weeks inwards a row. Factually: the probability of that occurring is less than 1%.
The utility index (XLU) is usually a defensive sector, but this twelvemonth is on par with the S&Ps – upward 12% YTD. The existent estate index (XLRE) is also a defensive sector, but is upward 40% to a greater extent than than the S&Ps – upward 17% YTD. This marketplace is non normal. When risk-on in addition to risk-off assets both rally, it tells us either: (a) something is virtually to plough drastically lower, or (b) involvement rates are virtually to travel to null – every bit inwards a recession.
The adept word is that our thoughts are confirmed yesteryear what we’re seeing inwards treasury – every bit the vi calendar month treasury yield is higher than the 2-year treasury yield in addition to on par with the 7-year treasury note. That agency that investors are seeing every bit much jeopardy inwards the adjacent vi months – every bit they practise inwards the adjacent vii years. That is termed a yield bend inversion. It is a 100% predictor of an on-coming recession, in addition to farther explains why professionals are buying defensive sectors similar utilities in addition to existent estate investment trusts.
Finally, terminal calendar week nosotros saw marketplace liquidity come upward into question. On Fri (a triple-witching expiration) the marketplace processed 1.3m contracts on the S&P futures – which is extremely low-cal volume. So non alone are markets doing a bad labor of looking frontward in addition to estimating the size of the expected move, but they’re also inefficient when settling trades due to the lack of liquidity. I volition hash out this to a greater extent than under Next Week, but factually: higher probability trades such every bit selling options premium volition non function every bit good inwards this marketplace every bit lower probability, directional trades.
Weed in addition to More Weed:
By forthwith you lot know my stance on cannabis investing. There are real few growth markets on the planet – cannabis is 1 of them. Markets ever pay-up for growth. Hold your olfactory organ in addition to dive into the higher jeopardy halt of the puddle – the water’s fine.
- Everyone Wins: Last week, Aurora Cannabis (ACB) snagged a novel advisor. Not precisely whatsoever advisor withdraw heed you lot – but Nelson Peltz, the billionaire activist investor. ACB got an amazing strategic advisor / Mr. Peltz got options to purchase 20m shares, in addition to ACB’s stock went upward over 13%. A existent win-win-win.
- The Wine & Spirits Annual Marketing Seminar: Ended with a word of the emerging cannabis manufacture in addition to how it volition touching the imbibe industry. Bruce Linton, CEO of Canopy Growth (CGC), delivered the much anticipated keynote address. CGC has been alongside the most-discussed players inwards cannabis since Constellation Brands took a $4B stake inwards the companionship terminal year. Canopy is forthwith nowadays inwards thirteen countries, in addition to is targeting global growth areas every bit to a greater extent than governments consider the upside to monetizing, regulating, in addition to educating inwards the category. Canada legalized cannabis after it realized it was ignoring an untaxed cash flow of unopen to $6B. CGC is using Constellation’s massive investment to: “protect their IP, practise brands, M&A, in addition to infrastructure.” They latterly acquired: a vaporizer company, a hemp performance inwards NY, in addition to an R&D company. He touted Canopy’s novel partnership with Martha Stewart which grew out of her existing human relationship with CBD lover & rapper Snoop Dogg. Linton said: “You should view the cannabis flora every bit a bioreactor. Inside the flora are over 100 active ingredients, alone 2 of which nosotros currently acquire paid for: THC in addition to CBD. Our labor is to grow the plant, extract the ingredients, in addition to pose them dorsum together inwards dissimilar ways for dissimilar outcomes.”
- Harvest Health & Recreation acquired Verano Holdings for $850m. The combined entity volition have got 200 facility licenses across xvi states, including 123 retailer dispensary licenses, in addition to thirteen tillage in addition to manufacturing facilities running yesteryear the halt of the year.
- Aphria received more permits from Health Canada to start out cannabis flora production on an additional 800,000 sq. ft. inwards Leamington, Ontario. The novel infinite volition to a greater extent than than triple production.
- In New Hampshire: 68% of the state’s residents back upward legal recreational cannabis usage. That’s a 20% growth over the yesteryear v years. Only 1 problem, Republican Governor Chris Sununu has vowed to veto whatsoever legalization nib despite the widespread support.
- Eaze Solutions (delivery) partnered with Kaleafa (dispensary): to serve the local Portland market. Eaze provides a smartphone app that enables customers to house cannabis delivery orders – which Kaleafa fills. Eaze has expanded its reach to deliver CBD products inwards 41 states in addition to D.C.
- New United Mexican States legalized recreational cannabis. But the legislation: (a) Only allows for state-run enterprises, (b) Bans all abode growing efforts, in addition to (c) Mandates that consumers maintain purchase receipts for cannabis or human face upward criminal charges for possession. Taxes would live eliminated for medical marijuana in addition to laid at 17% for recreational sales (emulating Colorado).
- Other legal:
Next Week:
Factually, this marketplace (for the yesteryear 2 weeks) has rewarded lower probability trading. I tend to think this conduct volition continue, in addition to this marketplace volition travel on to defy expectations until it doesn’t. Meaning – it volition travel on to rising – until it senses that it has captured all of the momentum traders – in addition to and hence it volition yank the rug. Look at doing ‘risk twist spreads’ – peculiarly within of an index similar the SPY where at that topographic point is plenty of liquidity. A ‘risk twist spread’ is a lower probability trade, that risks a minimal amount of capital, bets on a marketplace direction, in addition to if right – reaps huge rewards. Why fifty-fifty consider such a move, because currently nosotros have: stocks up, bonds up, gilt up, dogs ‘n cats living together … everything that could live happening – is happening. Things volition conform (they ever do) within the adjacent lx to xc days. So, for your alternative trades – human face out into May or June. An instance of a sector setting upward for a ‘risk twist spread’ would live the abode builders – who have got come upward roaring back; withal the facts tell us that nobody is buying houses. If you lot think that the abode edifice sector (XLB) may travel lower, you lot could either: (a) purchase an Apr or May, $41 PUT on the XLB, or (b) practise a ‘risk twist spread’ to the downside on the XHB out into May. [For an instance of a ‘risk twist spread’ – consider my SPY topographic point under Tips.]
In general, the 2,800 to 2,815 degree on the S&P had been a sticking betoken since October. The marketplace had a employment closing over that degree – until Friday. On Fri the S&P was rebalanced, all fashion of options expired, in addition to the S&P pose inwards its commencement unopen over 2,815. So, what happens now? Well, at that topographic point few ways this could play out.
- 1st, the shorts could acquire truly brave, attempt their best to pile on, in addition to pound this marketplace dorsum down. If they are successful inwards moving this marketplace lower – the marketplace would travel a lot lower real quickly.
- 2nd, instead of trying to live brave, the shorts could surrender on the thought of the marketplace moving lower in addition to start to comprehend all their brusque positions. You comprehend a brusque topographic point yesteryear buying the stock. If plenty traders practise it, it's called a brusque mash in addition to that tin live an awfully powerful momentum trade.
I’m guessing that nosotros are going higher, in addition to the shorts are going to panic. I think nosotros travel higher for a while, drag inwards the terminal of the people sitting on the sidelines, in addition to when everyone’s inwards the marketplace in addition to convinced we're going to DOW 30K – they delineate the carpet in addition to nosotros autumn similar the proverbial rock. If I’m right, in addition to 2,815 holds in addition to nosotros motility higher – in addition to hence all-time highs are right unopen to the corner. If not, in addition to the 2,815 degree doesn’t withdraw hold – nosotros volition consider 2,750 in addition to and hence 2,700 yesteryear the halt of March. I practise believe that this volition live the terminal leg of whatsoever upside – hence merchandise accordingly.
Tips:
Top Equity Recommendations:
HODL’s:
- Aurora (ACB = $9.63 / inwards @ $3.57) ,
- Canntrust Holdings (CTST = $8.88 / inwards @ $3.12),
- Canopy Growth Corp (CGC = $45.89 / inwards @ 22.17),
- HEXO (HEXO = $6.11 / inwards @ $5.12),
- Nova Vax (NVAX = $0.52 / inwards @ $1.59)
Crypto:
- Bitcoin (BTC = $4,025)
- Ethereum (ETH = 142.00)
- Bitcoin Cash (BCH = 156.00)
Options:
- ACB(9.63): Buy Mar 22, +(1) 9.5/ -(2) 10/ +(1) 10.5, Call B-Fly for $0.10db,
- JPM(106.35): Buy Mar 22, +(1) 106/ -(2) 108/ +(1) 110, Call B-Fly for $0.55db,
- SPY (281.14): Buy May 17, - (1) 268 / +(3) 258 / -(1) 256, Put B-Fly for $0.86db – to live used every bit a hedge to the downside
Thoughts:
- SPX: Sic semper tyrannis! Yes, the Ides of March is the fourth dimension to stick it to the dictators inwards our lives. But until you lot truly ‘off a dictator’, you lot may desire to telephone recollect for the autumn of the SPX – the most tyrannical of the indices. Debit spreads are the weapon of alternative if you lot are bearish. The PUT vertical that’s long the $2,820 PUT in addition to brusque the $2,815 pose inwards the Apr monthly serial is a bearish strategy that has a 62% probability of making 50% of its max turn a profit before expiration.
- GE: One stock that’s been struggling since getting booted out of the DJIA terminal twelvemonth is GE, in addition to its 62% implied volatility suggests that could live a house to discovery some brusque premium. If you lot prefer to live bullish on a stock that’s downward on its luck rather than 1 that’s close its all-time highs, you lot should consider GE. Shorting the $9 PUT in addition to buying the $8 PUT every bit protection inwards the monthly Apr serial is a bullish strategy with a 74% probability of expiring worthless.
- ASHR is an ETF that holds a broad handbasket of Chinese stocks that merchandise on the mainland (versus FXI who’s stocks are traded inwards Hong Kong). ASHR has been outperforming FXI, but has an implied volatility 150% higher than FXI. If you lot don’t have got an view on the management of the Chinese economy, in addition to think that it powerfulness merchandise inwards a broad gain – in addition to hence an Iron Condor could live right upward your alley. The brusque Iron Condor that’s long the $24 PUT, brusque the $26 PUT, brusque the $30 CALL in addition to long the $32 CALL inwards the Apr weekly expiration with xl days until expiration is a neutral strategy that has a 75% probability of making 50% of its max turn a profit before expiration.
Follow me on StockTwits.com to acquire my daily thoughts in addition to trades – my grip is: taylorpamm.
Please live security out there!
Disclaimer:
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Until adjacent calendar week – live safe.
R.F. Culbertson
Until adjacent calendar week – live safe.
R.F. Culbertson
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