This Week inwards Barrons: 4-21-2019:
Photo of a Black Hole
Talk most a Black Hole (pictured above) – that’s most how the Uber IPO is priced. Uber should live available to merchandise side past times side month, as well as regardless of how they debut, they’ll live worth most 5.5 Lyfts. The practiced intelligence for Uber investors is that year-over-year revenue is silent growing. The bad intelligence is that Uber’s increase has slowed from 69% inwards Q1 of 2018 to 22% inwards Q4 of 2018. Another ‘red flag’ is that Uber is alarm that it “may non live able to accomplish or maintain profitability inwards the close term or at all” in its marrow business. It mentions risks including authorities regulation (which Uber has repeatedly flouted) as well as intense contest – which volition require lower rates as well as greater discounts. They tried to diversify away from that marrow concern past times launching: (a) a nutrient delivery service (Uber Eats), (b) a cargo service (Uber Freight) as well as (c) a wheel rental app (Jump). But lastly year’s revenue was 82% subject upon traditional taxi service. Uber Eats (the most promising side service) makes a sizeable chunk of its revenue from exactly five cities including: New York, Los Angeles, as well as London.
But what most Uber’s Advanced Technologies Group (autonomous vehicles) which it says "has a long-term potential to furnish safer as well as to a greater extent than efficient rides as well as deliveries to consumers"? Uber has spent to a greater extent than than $1B on this grouping thus far, mostly because its largest expense comes from paying drivers, as well as paying the legal fees associated alongside their drivers’ work status. If Uber tin dramatically cut back the number of drivers – it could travel profitable. But fifty-fifty Uber admits that the transition to autonomous vehicles volition live a long menses of hybrid autonomy, as well as its ain master copy scientist wonders - What if it takes also long? If Uber is hoping to exactly hold burning through cash until the autonomous driving robots convey over – it may real good run out of roadway. And to add together insult to injury, Lyft IPO’d at $72, rose to $89, as well as is at nowadays sitting some $60.
Uber did follow the 3 main caveats of edifice a little business:
1. It focused on a big, annoying hurting that a lot of people have.
2. It built what others called a great ‘feature’ to solve that pain.
3. And it evolved that ‘feature’ into a platform that created a market.
The Market:
Remember when Disney couldn’t travel out of its ain way? Last week Disney launched its much-heralded streaming service, which it hopes volition compete direct alongside Netflix as well as Amazon Prime Video. To their credit, they came at it hard. Disney’s pricing their novel service at $6.99 a calendar month (almost 50% less than Netflix’s $13 rate). They are promising 25 exclusive original series, as well as 10 original films inwards the real starting fourth dimension year. Don’t forget that Disney isn’t exactly singing princesses as well as magic activeness figures anymore – it owns the Marvel superhero franchise as well as the Star Wars universe. That makes for a rigid arsenal of content – which is the number 1 argue whatever streaming service lives or dies. Disney shot upward 11% on the intelligence as well as striking all-time highs, spell Netflix was downwards 4%. And recollect Netflix does have got that ‘sharing of logins’ number to debate with. Heck, fifty-fifty I’m thinking most moving from Netflix to Disney, as well as maybe giving Myspace as well as Snapchat some other facial expression spell I’m at it.
In contrast, I can’t figure out what a Tesla Model 3 costs. Earlier this year, Tesla announced that they would sell a $35,000 version of their Model 3. As of yesterday, you lot tin no longer purchase the lower-priced model online; you lot have got to telephone phone them or travel to a Tesla retail location. Mind you, Tesla shut almost all of their retail stores, alone to denote that they’re rethinking that decision. Then Tesla announced that they won’t allow you lot lease cars anymore – as well as this morn I received a detect most leasing a novel Tesla. So, is Tesla inwards the concern of manufacturing as well as selling cars or confusion? I’m growing fifty-fifty to a greater extent than skeptical of Tesla’s powerfulness to hold upward when I listen that Panasonic is stopping all investment inwards Tesla’s Giga-factories – effective right away due to Tesla’s slowing sales as well as questionable decision-making. When compare Disney to Tesla, you lot demand to beak most an ‘old has-been’ swapping bodies alongside a ‘Wall Street darling’. Wow – “Let the 4th live alongside you.”
InfoBits:
- Rite Aid: stock has been nether $1 since December, as well as it savage 10% to 51 cents on Fri afterward missing revenue estimates as well as giving a misfortunate forecast. But at to the lowest degree they have got selling CBD products in select states going for them.
- Kim Kardashian West, Esq?: Model – Instagram influencer – as well as at nowadays attorney? Yep, Kim Kardashian West wants to live a lawyer, so she's apprenticing alongside a police force job solid to laid upward for the California bar exam. I’ll defend myself – thanks.
- Cash makes no enemies: Thanks to force per unit of measurement area from activists, cashless Amazon Go stores volition at nowadays start accepting (wait for it) … cash.
- 25,536,442 minutes: A man's three-year-old tried to unlock his iPad so many times, that it's at nowadays locked until 2067. That's 1 way of limiting your covert time.
- Could my hateful solar daytime acquire whatever worse? Lori Loughlin, her husband, as well as xiv other people are facing novel charges in the college admissions scandal. While they were already charged alongside conspiracy to commit post as well as wire fraud, they're at nowadays facing money laundering charges. Aunt Becky could live inwards prison theatre for forty years.
- Like Netflix, but for Radio: Netflix is launching a full-time comedy radio channel on Sirius-XM. The channel volition characteristic a mix of sound presentations from past times Netflix standup specials, original content, as well as studio shows.
- FB: same shirt – different day: Facebook could live held legally responsible for whatever tearing content on their platforms – nether novel rules proposed past times the UK of Britain as well as Northern Republic of Ireland government. The rules would forcefulness tech companies to scrub from their platforms whatever content that incites violence, encourages suicide, or constitutes cyber-bullying. The authorities would block access to websites or apps that neglect to comply, as well as senior managers of those companies could confront civil fines as well as criminal liability.
Crypto-Bytes:
- Hit ‘em where it hurts – the bag book: Cryptocurrency central Coinbase has launched a Visa debit card. “The Coinbase Card, volition allow users pass Bitcoin (BTC), ethereum (ETH), litecoin (LTC), as well as all other cryptocurrencies supported past times the platform every bit effortlessly every bit the money inwards their bank,”Coinbase said. The central volition instantly convert the cryptocurrency to fiat at fourth dimension of transaction.
- Make dear non war: Money transfer giant Western Union has teamed upward alongside blockchain startup Coins.ph to enable residents of the Philippines to to a greater extent than easily have cash. The newly inked bargain volition run into both international as well as domestic payments made via Western Union’s network acquire inwards direct into the digital wallets held past times Coins.ph’s users. “There are many overseas Filipino workers who regularly ship money dorsum home, as well as nosotros are ever looking for additional remittance options,” said Coins.ph co-founder as well as CEO Ron Hose.
- You didn’t wanna hedge? Crypto-focused venture fund Polychain has lost nearly 40% of its assets ($400m) since August 2018, as well as at nowadays alone has $592m remaining – according to their most recent SEC filing. Their latest filing said: “We give no assurance that digital assets volition maintain their long-term value.” Or amend phrased: “You guys demand to larn how to deal a existent fund past times putting hedges inwards place. Because anybody that allows you lot to deal their money from hither on out has their caput upward their ___.”
- Absolute powerfulness corrupts absolutely: The Competitive Enterprise Institute has released a report criticizing the SEC’s stance on cryptocurrencies, maxim that: “It threatens conception inwards fiscal transactions as well as other consumer products.” The study believes that cryptos should live regulated every bit consumer products, as well as whatever extended classification could run into the SEC extend their jurisdiction over physical goods sometimes used for investment – such every bit comic books or baseball game cards.
Last Week:
The S&Ps ended the calendar week fifteen points higher than it started (yawn). There was a full general theme of depression majority as well as over-reaction inside the diverse sectors. The financials saw J.P. Morgan (JPM) knock it out of the commons on earnings as well as live rewarded alongside a 4.7% motion to the upside. Wells Fargo (keeping to form) bombed terribly. The marketplace is assuming that all of the other financials volition perform similar JPM – every bit most were upward 4% on Friday. So ‘look-out-below’ if either Bank of America, Citi, Morgan Stanley, or Goldman bomb side past times side week. Tech as well as healthcare were 2 sectors that were weak on a relative basis.
Last calendar week our marketplace moved higher on stronger than anticipated import/export information inwards China. One of the ‘tells’ surrounding a docile marketplace that volatility is returning, is that the activeness on the surface exactly masks the demeanour beneath. I do non run into this docile marketplace continuing much longer. I run into continued froth to the upside, as well as so some downside volatility as well as excitement.
Ted Siedle addressed Congress lastly calendar week alongside a beak entitled: “Too delicate to work, as well as also misfortunate to retire”. It was his view of what volition travel the novel normal for many elderly Americans. “We are on the precipice of the greatest retirement crisis inwards the history of the world. In the decades to come, nosotros volition witness millions of elderly Americans, Baby Boomers as well as others – sideslip into poverty.”Ted said. The 2 main issues are the rising cost of healthcare as well as our underfunded pension programs (including Social Security). Ted also cited the job alongside pension oversight boards being: “Frequently staffed alongside inexperienced portfolio managers. Couple that alongside inconsistent audits as well as politically influenced investments (stadiums) – as well as you lot have got a recipe for disaster.”
Weed:
Greenlane Holdings plans to heighten $100m through an initial populace offering on the Nasdaq, which would arguably brand it the closest affair to a U.S. cannabis companionship available for trading on a major U.S. exchange. The Boca Raton, Florida, companionship sells cannabis vape hardware as well as accessories such every bit rolling papers as well as pipes to retail businesses as well as consumers some the world. But its biggest concern is wholesaling vape products from Pax Labs Inc., as well as its one-time subsidiary Juul – which makes nicotine vape pens. In short, Greenlane (GNLN) supplies smoke shops. So, why is this companionship probable to live approved?
1. By manufacture standards, Greenlane doesn’t “touch the plant.” It doesn’t grow, distribute, or sell marijuana – as well as thence stays on the correct side of federal drug trafficking as well as racketeering laws. That’s critical because the senior exchanges inwards the U.S. have got refused to allow companies that are involved alongside U.S. marijuana cultivation, distribution, as well as sales to listing their stock. Companies that are listed such every bit Tilray (TLRY) as well as Aurora (ACB) do so because their recreational weed operations are located inwards Canada – where both adult recreational utilisation as well as medical pot are allowed nether federal law.
2. Greenlane has a little number of suppliers, as well as thousands of customers. Their products basically come upward from Pax as well as Juul. And fifty-fifty Juul (which produces nicotine vape pens) was a unit of measurement of Pax until it was spun out inwards belatedly 2017.
3. And Greenlane’s products are legal – non violating whatever federal or solid ground statutes.
Next Week:
As you lot review the yearly nautical chart of the S&Ps above, what you lot should live thinking is: ‘Wait, so Allocate’:
- Given we’re thirty points away from all-time highs – is this the ideal seat for getting to a greater extent than bullish?
- Wouldn’t this live a great seat for the marketplace to entice to a greater extent than as well as to a greater extent than people to bring together as well as so flatten them similar pancakes?
It’s the forever question: Will nosotros break-out or break-down? And if nosotros do have got a break-out to the upside: Wouldn’t that furnish us a amend chance to acquire ‘short’? After all, the marketplace is already ‘up’ considerably inwards a higher identify the averages for the year.
From August to early on Oct of 2018, nosotros traded inwards as well as some 2,911 – where nosotros are correct now. But dissimilar dorsum then, nosotros are currently seeing some fairly wild sector rotations. This past times calendar week the bonds backed-off – which helped the financials considerably. Currently: financials are upward almost 13% YTD, as well as ‘big tech’ is upward almost 20% YTD - but relatively apartment to ‘down’ lastly week.
Watch depository fiscal establishment earnings early on inwards side past times side week. If Bank of America, Morgan Stanley as well as Goldman Sachs tin deliver the same over-achieving numbers every bit JPM – we’ll live off to the races. If even so 1 of them misses a beat, so they volition live moving downwards the same amount they went upward lastly calendar week (4%) – as well as more. Next calendar week the S&Ps are anticipating 1 of the smallest moves of the twelvemonth – plus or minus 27 points. Because of this lower volatility – you lot should live a cyberspace buyer of options inwards anticipation of an earnings missy as well as a corresponding motion higher inwards volatility. All it would convey is a slight up-tick inwards bonds along alongside a missy of earnings past times 1 of the large financials – to run into this marketplace motion lower. Having said that, I’m looking for us to top all-time highs inwards the short-term, as well as so (after the markets describe inwards to a greater extent than money from the sidelines) – motion dramatically lower. I’m anticipating volatility coming dorsum into the marketplace because the marketplace is displaying signs of confusion.
Tips:
Top Equity Recommendations:
HODL’s:
- Aurora (ACB = $8.88 / inwards @ $3.07),
- Canntrust Holdings (CTST = $7.17 / inwards @ $3.12),
- Canopy Growth Corp (CGC = $42.29 / inwards @ $22.17),
- HEXO (HEXO = $6.30 / inwards @ $6.37),
- Nova Vax (NVAX = $0.54 / inwards @ $1.59)
Crypto:
- Bitcoin (BTC = $5,110)
- Ethereum (ETH = $164.00)
- Bitcoin Cash (BCH = $278.00)
Options:
- CGC (42.29): Buy May 17, 47.5 / 50 / 52 Call BFly for $0.03 CR
- CGC (42.29): Sell May 17, -40 / +37.5 Put Credit Spread for $0.70 CR
- HYG (86.96): Buy Apr 18, +77 Put for $0.03 DB,
- SPY (290.16): Buy May 17, (-1) 268 / (+3) 258 / (-1) 256 Put BFly for $0.44 DB
- XLF (27.14): Buy Apr 18, 26.5 / 27 / 27.5 Call B-fly for $0.10 DB
Thoughts:
- Boeing (BA): So, you lot think learning to code agency you lot have got a prophylactic job? With Boeing (BA) announcing belatedly Th that has successfully tested its 737 MAX alongside the updated software, you lot have got to wonder how programmers tin write code when they’re busy pointing fingers at each other. BA has fallen dorsum this calendar week afterward a rebound. That’s pushed BA’s implied volatility higher. Earnings are coming upward on 4/24. That agency if you’re a contrarian trader willing to merchandise through earnings as well as think that BA powerfulness halt dropping, you lot powerfulness consider a bullish brusk premium trade. The brusk pose vertical that’s long the 352.5 PUT as well as brusk the 355 PUT inwards the May weekly expiration alongside 49 days until expiration is a bullish strategy that collects a credit 1/3 the width of the strikes, has a 67% probability of expiring worthless.
- QQQ: Now that nosotros finally have got a painting of a existent alive dark hole, nosotros tin run into an illustration where gravity beats everything. Here on Earth, gravity doesn’t seem to operate alongside markets every bit the QQQ’s are upward over 20% on the twelvemonth – defying Newton’s fundamental force. Maybe it’s our strong nuclear forces combined alongside practiced one-time electromagnetic ones keeping QQQs up. But peradventure gravity has been given novel promise alongside its powerfulness displayed inwards this dark hole picture. If you lot think the QQQs may non sustain their rally (for either terrestrial or stellar reasons), you lot powerfulness consider a bearish strategy. The long pose vertical that’s brusk the 184.5 PUT as well as long the 186.5 PUT inwards the May weekly expiration alongside 43 days until expiration is a bearish strategy alongside a 61% probability of making 50% of its max turn a profit earlier expiring.
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Please live prophylactic out there!
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Until side past times side calendar week – live safe.
R.F. Culbertson
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