This Week inward Barrons: 12-15-2019:
Thoughts:
When I was growing up, the gap betwixt skillful as well as non bad was much smaller, at that topographic point were gatekeepers to brand for sure nobody ‘became famous’ that couldn’t handgrip it – either inward talent or run ethic. People who created famous people were careful to only bestow it on those that they believed had something to offer. As fourth dimension moved on, the race for fame grew faster, as well as many of the gatekeepers as well as their requirements faded away. This has allowed people to drib dead famous who receive got really piffling to offer. This is NOT the example alongside Paul Graham (co-founder of Y-Combinator) who is both famous as well as virtually ever has something meaningful to offer. He lately wrote: “The most damaging affair y'all learned inward schoolhouse was learning how to acquire skillful grades. It has caused immature people to believe that ‘life’ is similar taking a serial of tests, as well as that someone tin precisely ‘teach’ y'all what y'all demand to live successful. Unfortunately, nil could live farther from the truth.” And alongside most schools giving upward on teaching our kids how to learn, we’re stuck alongside a generation of ‘test takers’. Life is ruthless. It requires everyone to accept i test, opportunity, or challenge later some other – each i requiring to a greater extent than retained information than the last. Startups are the same way – except that their focus is on a unmarried chemical element – growth. Startups are NOT almost raising money as well as giving investor pitches, but rather almost learning what your customers desire – doing it – rinse as well as repeat.
What makes a startup a skillful investment? “Growth is what makes a startup a good investment. Ideally growth inward revenue, but at to the lowest degree inward users.” Constantly hold rails as well as brag almost how many people are using your production at whatever given 2nd of the day.
How exercise y'all acquire a lot of users? “Most rookies recollect that y'all demand a lot of money to purchase your production exposure, as well as that exposure volition (in turn) generate involvement as well as to a greater extent than users. Unfortunately, the way y'all acquire a lot of users is to brand a production that’s actually great.” People naturally usage non bad products, as well as actively recommend them to their friends. Growth will trickle in at first, as well as and therefore drib dead exponential. So really simply, the way to acquire a lot of users – is past times making a production that no i tin pose down.
How exercise y'all acquire a lot of users? “Most rookies recollect that y'all demand a lot of money to purchase your production exposure, as well as that exposure volition (in turn) generate involvement as well as to a greater extent than users. Unfortunately, the way y'all acquire a lot of users is to brand a production that’s actually great.” People naturally usage non bad products, as well as actively recommend them to their friends. Growth will trickle in at first, as well as and therefore drib dead exponential. So really simply, the way to acquire a lot of users – is past times making a production that no i tin pose down.
What’s the best way to brand VCs invest inward you? “Well, even if y'all could ‘make’ a VC invest inward y'all – you’d live tricking yourself. After all, you're investing your ain fourth dimension as well as endeavour into the same companionship you're asking them to invest in. If it's non a skillful investment for y'all – why are YOU doing it?” VCs invest inward growth. People pay a lot of money to uncovering companies / products that are growing – inward society to acquire behind them. If y'all receive got growth – brag almost it. If y'all don’t receive got growth – uncovering it. Show people that you’re growing, as well as the globe volition line upward behind you.
It seems similar such an like shooting fish in a barrel concept – doesn’t it? But instead of edifice a product, growing a client base, as well as allowing your customers to live your mouthpiece – the average entrepreneur seems destined to drib dead downwards the raising money as well as deploying upper-case alphabetic quality path. They allow the amount of money they’ve raised to receive got a louder vocalism than their customers. Words like: passion, commitment, as well as making-a-difference receive got morphed into dollar-denominated phrases alongside zeros on the halt of them.
I guess what actually irks me, is that if the electrical flow crop of entrepreneurship professors precisely focus on ‘How to beg for money’, - couldn’t they at to the lowest degree (with the same breath) learn entrepreneurs how to care their money? After all, over 50% of Americans can’t scrape together $500 for an emergency so: “Houston, nosotros receive got a problem.”
It strikes me that people equally insightful equally Paul Graham highlight such of import points regarding the difference betwixt learning as well as exam taking, but our educational organisation actively avoids the most of import topic – managing money. Maybe it’s because of Henry Ford who i time said, “It’s skillful that people don’t empathize our banking as well as monetary system, for if they did – at that topographic point would live a revolution past times morning.”
I abhor to hold driving the dot abode on crypto, but at to the lowest degree Bitcoin helps to focus to a greater extent than people toward asking the correct questions. It demonstrates a dissimilar path. If teaching people almost money is dangerous, as well as therefore showing Bitcoin’s continued cost appreciation against the U.S.A. of America dollar should incentivize people to drib dead curious plenty to empathize how fiat money industrial plant – as well as how it doesn’t work.
The Market:
Google is i mensuration closer to making robo-taxis a reality equally it launched its Waymo app lastly week. In the past times year, citizens of Phoenix receive got taken over 100,000 rides inward robo-taxis – ofttimes alongside a human ‘safety driver’ behind the wheel. Now inward the Phoenix area, y'all tin telephone phone a Waymo robo-taxi ride alongside no ‘safety driver’. Doing some stone oil math:
- Average Uber ride = $10.
- $7 is the amount the driver gets to keep.
- $2 (of the $7) is the amount the driver needs to comprehend gas, insurance, as well as the machine payment.
- Therefore, $5 is the cost of the driver, as well as goes away alongside robo-taxis.
This way that the cost of the average ride all of a precipitous gets cutting inward one-half equally the human Uber or Lyft driver is eliminated.
Economically this past times week:
- Heavy truck sales are down, as well as companies are commencement to drib dead belly-up.
- U.S. production vicious the most since 2015.
- Diesel demand is down, signaling a manufacturing force dorsum is even therefore happening.
- U.S. manufacturers are reducing upper-case alphabetic quality spending for the initiative of all fourth dimension inward xi years.
- The average novel machine loan hitting an all-time-high of $31,500.
- Per SF: U.S. line of piece of work organisation debt exceeded household debt for the initiative of all fourth dimension since 1991. This is a alert sign for the economic scheme equally corporate investment softens.
- Per Prof. Jay Ritter: 81% of U.S. companies going world since 2018 did therefore alongside negative 12-month trailing earnings – the highest figure since the tech bubble.
- Unless the FED threads a really fine needle, within a yoke weeks nosotros could live looking at a crush where our FED’s 'non-QE / REPO" computer programme turns into a total frontal laid on of truthful QE. Why? Because our banks don't receive got the cash to brand their reserve margins, as well as they’re going to receive got to borrow a lot of money.
I blew it this twelvemonth on my prediction. After lastly December’s 20% ‘mini-crash’ as well as and therefore rebound into February, I idea it was a bounce dorsum from a quick dump as well as we'd live stair stepping lower inward a controlled marketplace meltdown. That never happened. The FED cutting rates, printed trillions, had the Swiss National Bank purchase billions worth of U.S. stocks, as well as our ain companies bought-back to a greater extent than stock. The FED made it happen.
The query is, tin this proceed through 2020? We have: election jitters, the national debt, liquidity problems, the impeachment mess, the Barr investigations, civil unrest, the Chinese merchandise deal, North Korea, etc. They definitely used some voodoo to acquire past times this year. I never saw the non-QE / QE move. The FED’s mightiness to funnel money through the REPO side of a depository fiscal establishment as well as into the upper-case alphabetic quality markets was ingenious. But mayhap they’ve run out of rabbits or hats? I’ll brand my predictions adjacent week.
Info Bits: Who’s winning the race over the past times 10 years?
- Any press is skillful press... That’s debatable equally Peloton’s new TV Ad is jacked alongside controversy, sexism as well as elitism. But it also has everyone chatting Peloton during the at-home fitness company’s most of import sales season. Then the ad’s actress owned the drama past times jumping into a commercial for Ryan Reynolds' gin – drinking her cycling-induced worries away. Only sales figures volition tell.
- Goldman industrial plant alongside WeWork: Goldman Sachs is putting together a $1.75B line of credit for WeWork. This is the initiative of all mensuration inward comport out Softbank’s computer programme to acquire the companionship dorsum on track.
- The Golden Globe Nominations… were handed out lastly calendar week alongside Netflix dominating alongside 34 nominations. Amazon had 8, alongside Disney as well as Apple each grabbing 3. To the victor drib dead the spoils.
- China has ordered U.S. tech off of… all authorities as well as world institutional machines within three years. This motility echoes the efforts of the U.S. to curb the usage of Chinese technology.
- Elon Musk… turned heads inward Malibu when he showed up at a eatery inward his novel Tesla Cybertruck.
- Morgan Stanley is cutting 1,500 jobs equally they ready for an uncertain 2020.
- Southwest Airlines has reached an agreement… with Boeing to live compensated for fiscal damages due to the 737 Max grounding. Southwest indicated that it would percentage $125m of the observe alongside its employees.
- Convenience wins: We aid to a greater extent than almost convenience than precisely almost anything. We’ll gladly merchandise privacy or our ain ethical standards to but to relieve a few clicks. So, if nosotros desire things to live to a greater extent than fair – brand them to a greater extent than convenient.
- As nosotros hitting all-time highs on the Nasdaq… only Apple as well as Google from FAANG receive got hung alongside the leaders. Amazon, Facebook as well as Netflix are lagging.
- Marc Andreesen precisely dropped… this 44 infinitesimal video interview titled ‘Why We Should Be Optimistic About The Future’ = definitely worth a look. https://www.youtube.com/watch?v=UnU5Dikdr2U&feature=youtu.be
- Robinhood introduces factional ownership: Just similar inward crypto, fractional shares are immediately coming to Robinhood. Invest inward 1000’s of stocks for equally piffling equally $1. Choose the amount y'all desire to invest, as well as Robinhood volition piece the shares into pieces – starting alongside $1. Investing inward fractional shares is done inward real-time and, commission-free. Yep, this is a large deal.
- Investors pulled $135.5B from… U.S. stock-focused usual funds as well as ETFs therefore far this year. This is the biggest withdrawal on record.
- Where’s my bonus? Deutsche Bank CEO, Christian Sewing, announced that DB is considering cutting bonuses past times 20%. Bonuses? DB’s stock is downwards 60% since the commencement of 2018. Why are at that topographic point bonuses at all?
- Bah Humbug! November retail sales rose 0.2%, piece analysts were expecting a 0.5% increase. Dollar sales inward Nov declined across the board. Is the economic scheme slowing, or are nosotros becoming cheap?
- Morgan Stanley estimates… that Amazon is immediately delivering half of its ain packages.
- WeWork is paying Publicis… $500,000 a calendar month for crisis PR as well as advertising services – precisely weeks later almost running out of cash.
- Where’s everybody going – as well as why? 1,480 CEOs receive got left their posts inward 2019, according to Challenger, Gray & Christmas. 2019 volition laid this record – eclipsing the previous 2008 high. What exercise all those CEOs know that nosotros don’t?
Crypto-Bytes:
- Crypto Is KING: Cryptocurrencies receive got i time once again outperformed whatever other major property classes. Crypto has risen good higher upward the annualized returns for U.S. equities, commodities, as well as bond markets inward 2019. Large-cap cryptocurrencies rest i of the greatest investment success stories of the lastly decade.
- Halving Boost: Bitcoin's scheduled mining-reward halving inward May 2020 could leave of absence prices for the cryptocurrency inward a hit betwixt $20,000 as well as $50,000, according to Charles Hwang, managing fellow member Lightning Capital as well as an adjunct professor at Baruch College.
- If a recession were to occur… we’d reckon shrinking stock portfolios, growth inward other property classes similar crypto, along alongside novel fractional ownership models. Given people are pulling monies from stocks, crypto is growing along alongside fractional ownership – is a recession correct to a greater extent than or less the corner?
- Record-low bond yields as well as expensive marketplace valuations… indicate lower hereafter returns as well as greater adventure to the downside for most property classes. The backdrop remains favorable for bitcoin, particularly over longer fourth dimension horizons. Improved growth prospects tend to wound non-income producing assets similar gold. A potential policy divergence betwixt the FED as well as other major peers may travail the U.S. dollar to intermission higher – accelerating economical weakness.
- Banking Assistance: Telegram told investors it was using BNY Mellon as well as Credit Suisse to motility as well as shop fiat currency raised inward lastly year’s $1.7B token sale. The banks declined comment, noting that few fiscal institutions exterior of JPM receive got been willing to run on crypto projects.
- A decentralized Twitter: Jack Dorsey (Twitter as well as Square's CEO) volition back upward an independent squad of v opened upward source architects, engineers as well as designers to educate an “open as well as decentralized standard” for social media. The destination is for Twitter to ultimately live a client of this standard.
- Dutch courage: ING (Dutch banking multinational) is developing engineering for crypto custody. The motility volition brand ING the initiative of all major depository fiscal establishment to offering secure, crypto storage
Last Week:
- Monday: If investors are pulling $135.5B from U.S. stock-focused usual funds as well as ETFs therefore far this year, how tin stocks proceed ever higher? Easy. Our FED is buying them alongside printed money, as well as they’re loaning large corporations costless money therefore they tin buy-back their ain shares. I could even therefore reckon picking upward some Citi (C ) if it gets upward as well as over $76.25
- Tuesday: The futures were ruby all morning, as well as and therefore mysteriously jumped green. Why? The WSJ says that the U.S.A. of America as well as Red People's Republic of China are planning for the Dec 15th tariff hikes to live delayed. So the algorithms loved that, as well as we're light-green across the board. If the fiscal ETF (XLF) gets over $30.50 – that’s interesting.
- Wednesday: I bought some Citi (C ) at $76.25 yesterday. If they force off the tariff hike, I recollect it would kicking our yearend rally inward gear. Speaking of rally, the S&P is less than 1% from its all-time high. The DOW is almost 1.5% off that level.
- Thursday: Welcome to the fine art of negotiation.
The perceived threat of leaving a negotiation, is a powerful tactic. When the other side feels y'all could bolt at whatever 2nd – they deed differently. Street vendors know that best because their prospect is standing correct inward front end of them – making the short-term the most of import (and only) term to consider.
Commitment has a similar effect. When both parties know that each is committed to a hereafter together, it makes a positive resultant to a greater extent than likely. Monopolies (on the other hand) create unwilling commitment – because the client is trapped. Nations similar the U.S. as well as Red People's Republic of China are discovering that shifts inward loyalty due to the instantaneous transferability of assets are a existent number going forward. One selection is to brand leaving to a greater extent than difficult.
On Th nosotros saw: (a) U.S. negotiators offering to cutting existing tariff rates past times upward to 50% on $360B of Chinese Imports. (b) U.S. negotiators also offered to cancel the novel tariffs laid to accept trial on Dec. 15. (c) U.S. asked Red People's Republic of China for line of piece of work solid commitments on increased U.S. production purchases. And (d) the U.S. volition reimpose master copy tariff levels if Red People's Republic of China fails to comport out pledges. I bought into the chip ETF (SMH) at $138.57.
- Friday: Okay, therefore yesterday nosotros got a deal. Of course of study at that topographic point are no existent details. The Chinese haven't said boo almost it. I remove heed that it can't live written - only oral. Here are the particulars: (a) The Chinese receive got concord to many structural changes / along alongside purchases of U.S. agricultural products, release energy as well as manufactured goods. (b) 25% tariffs volition rest inward place, alongside 7.5% pose on much of the remainder. (c) The penalization tariffs of Dec. 15th will NOT live charged.
Weed: The edibles are coming – the edibles are coming… 12/17/2019 inward Canada.
- Four federal agencies… issued a articulation argument confirming that banks were no longer required to file suspicious activity reports (SAR) for customers only because they are engaged inward the growth or tillage of hemp.
- Canopy Growth launched… its initiative of all hemp-derived CBD drink, mark the company’s initiative of all official presence inward the U.S. consumer market.
- A flurry of meetings as well as negotiations… are occurring behind the scenes inward Sacramento since California’s cannabis taxation increment was announced. Some recollect the survival of the state’s legal marijuana marketplace is at stake.
- More than twenty congressional lawmakers… sent a bipartisan letter to U.S. Attorney General William Barr requesting that the D.E.A. allow federally licensed researchers to purchase products from state-legal dispensaries to study the medical benefits as well as risks of cannabis.
- Justin Dye of Dye Capital Group… is replacing Andy Williams equally CEO of Medicine Man Technologies – a marijuana line of piece of work solid he co-founded inward 2014.
- Canopy Growth… announced the appointment of David Klein equally CEO. Klein has served equally the CFO of Constellation Brands since mid-2015. If at that topographic point was ever a doubt, Klein’s appointment makes it clear that Constellation intends to exert its influence as well as steer Canopy toward profitability.
- Massachusetts nears $400m inward 1st year Sales: Sales began lastly Nov alongside 2 stores and, since then, 31 receive got opened statewide alongside some other 54 awaiting concluding approval. While Massachusetts’ total sales figure is dwarfed past times California’s $2.5B as well as Colorado’s $1.5B, on a per-store footing Massachusetts dispensaries far outpaced ($12m) the average shop inward either of those states California ($4m) as well as Colorado ($3m).
- Cannabis stores post strong sales inward Michigan: Michigan’s v rec. marijuana stores sold to a greater extent than than $1.6m in the 8 days of legal rec. sales.
- Arkansas posted impressive medical… cannabis sales during the program’s initiative of all half dozen months of functioning – fifty-fifty though only a tertiary of approved dispensaries are opened upward for business.
- Cannabis legalization inward Mexico… is expected to accept total trial past times the end of Apr 2020. It volition live the largest federally regulated marketplace inward the world.
- New Bailiwick of Jersey residents volition vote on MJ legalization… as business office of the 2020 national presidential election ballot.
Next Week: What’s left to juice these markets?
- The VIX (volatility index) contracted a chip later the Red People's Republic of China news, the FED, as well as Brexit. However, the expected motility inward the S&Ps (SPX) for adjacent calendar week moved higher from $42 this calendar week – to $46 adjacent week. Markets rest nervous almost merchandise as well as are anticipating an expansion of volatility. For the past times nineteen weeks, the SPX has remained within its expected move. Probabilistically, that’s v weeks likewise long. Given that S&P options (SPX + SPY) command over 25% of the options trading majority – they motility the markets as well as non the other way around.
- BONDS are ready to move. We are due to reckon to a greater extent than bad economical information this week, as well as nosotros tin no longer blame trade, the FED or Brexit. I human face to a greater extent than upper-case alphabetic quality to catamenia into bonds, driving rates downwards as well as inciting recession fears again. If rates drib below 1.6%, that volition invert the yield bend as well as markets volition i time again utter recession, impeachment as well as the 2020 election. If/when rates start dropping, human face out below for the financials as well as the homebuilders.
- REPO Market: The FED precisely committed one-half a trillion dollars inward liquidity to propping them up, as well as I’m supposed to believe that there’s no problem? I’ve heard that same ‘no problem’ spoken communication from: Greenspan (before 2000), Bernanke (before 2008), as well as immediately J. Powell.
- What’s NOT Working: Boeing (BA), Costco (COST), as well as Lululemon (LULU) are all moving lower.
- Watch For #1: Financials (XLF) to get moving lower.
- Watch For #2: Tesla (TSLA) to motility into all-time high territory.
Tips:
Top Equity Recommendations:
HODL’s:
Aurora (ACB = $2.63 / inward @ $3.07)
First Majestic Silver (AG = $11.53 / inward @ 10.50)
Canopy Growth Corp (CGC = $20.68 / inward @ $22.17),
DRD Gold (DRD = $4.60 / inward @ $4.20),
GBTC Bitcoin (GBTC = $8.79 / inward @ $10.01),
Microsoft (MSFT = $154.53 / inward @ $145),
Pan American Silver (PAAS = $21.53 / inward @ 18.00),
Crypto:
Bitcoin (BTC = $7,150)
Ethereum (ETH = $140)
Bitcoin Cash (BCH = $210)
Options:
RIOT ($1.34):
Bot January 17, Sold $3 Call / Sold $3 Put / Bot $4 Call for $1.85 CR
Bot January 17, Sold $2 Call / Sold $2 Put / Bot $3 Call for $1.45 CR
(can only lose money if RIOT falls below $0.70).
Thoughts:
Twitter (TWTR = $30.39) After dropping the equivalent of 5.8 criterion deviations dorsum on Oct 24 on an earnings miss, TWTR has been trading inward a two-point range. But that relative lack of volatility doesn’t seem to jibe the importance TWTR has inward our political as well as cultural lives. You’d recollect it would surge alongside every i of Trump’s tweets during impeachment, or Boris Johnson’s full-steam-ahead tidings toward Brexit. The upcoming Senate trial along alongside Brexit tidings could boost TWTR’s advertizing revenues as well as bust it out of its hit to the upside. If you’re bullish on it, the long telephone phone vertical that’s long the $29 Call as well as brusk the $31 Call inward the January monthly expiration is a bullish strategy that has a 61% probability of making 50% of its max turn a profit earlier expiring.
Follow me on StockTwits.com to acquire my daily thoughts as well as trades – my handgrip is: taylorpamm.
Please live rubber out there!
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Until adjacent calendar week – live safe.
R.F. Culbertson
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