This Week In Barrons: January 28th, 2024

Optimize vs Maximize:  Optimization involves finding the best set of tradeoffs for a particular set of environmental, financial, safety, and efficiency conditions.  Per Seth G: maximization simply seeks the best solution for one variable.  In its prime, Yahoo’s goal was to maximize its short-term stock price (satisfying the needs of its top execs) instead of optimizing for customer experience, innovation, resilience, and utility.  Most social networks faded away because they began to treat their users as products, and not as the customers that they truly were.  Maximizing is simple, easy to measure, rarely satisfying, and doesn’t involve difficult tradeoffs.  But it constantly reminds me: ‘Just because You Can – doesn’t mean You Should.’

The Market:

I hate to be the one who throws cold water on this market…  but in my capacity as someone who’s seen every bubble and crash in the last 40+ years – it’s time.  It’s time to: ‘Feed the Ducks.’  Blind faith with house money and FOMO are the driving forces behind this market rally.  Here’s how crazy things are getting.  

• Investors who lost up to 70% of their investment in Twitter – are getting priority to invest in Musk’s AI startup at a $20B valuation.  Oui vey!  
• Sam Altman is raising billions for a network of AI chip factories.  I asked: ‘At what valuation?’  The answer was: ‘Who cares – it’s free money.’  Double oui vey.  

We are witnessing a classic institutional top of a market that was once described to me as: ‘I’ll buy it with your money, but I’m not touching it with my money’.

Wanna retire early?  You may want to re-think that strategy as retirements are set to break records this year.

• ~11,000 Americans will turn 65 every day - joining the 44% of boomers already retired.  This will create major issues for various skill sets within our labor force. 
• Americans 65+ hold more than half of the US’s wealth, but ~43% of those have $0 in retirement savings. 
• The average 401(k) balance dropped by 20% in 2022.  

This problem isn’t going away as ~150m jobs worldwide (over the next 6 years) are shifting to workers whose current average age is 55+.

• Magnificent 7 earnings growth…  is expected to be +47% in Q4.

• The Conference Board Leading Economic Index (LEI) fell…  for the 21st consecutive month in December, hitting its lowest level since May 2020.

• The US economy grew at an annualized rate of 3.3% in Q4…  outpacing analyst expectations of around 2%, and causing us to wonder about fake data?

• L.A. Times to lay off 20% of its newsroom staff…  coming just 4 days after their journalists went on strike for first time in the newspaper's 142-year history.

• Microsoft laid off 1,900 video game workers…  following its Activision Blizzard acquisition.

• WWE and Netflix agree to 10-year, $5B deal…  that streams WWE's flagship "Raw" program on Netflix beginning in 2025.

o   In other WWE money news…   former wrestler Dwayne ‘The Rock’ Johnson is joining TKO’s BOD.  He’s set to receive $30m in stock grants, and obtain full ownership over the trademarked name ‘The Rock’ as part of a new licensing arrangement.

• That Apple doesn’t fall far from the tree…

o   Apple’s Vision Pro sold out…  of ~180,000 units in their first 4 hours of being open for business.

o   Apple topped Samsung in annual smartphone shipments…  for the first time since 2010.

• Tesla’s hitting potholes…

o   Chinese EV carmaker BYD became the world’s #1 EV seller.

o   Versions of Tesla’s Model 3 became ineligible for the US $7.5k tax credits.

o   Hertz and Sixt have sold thousands of Tesla’s from their fleet of EVs.

o   Tesla’s cutting prices in Europe.

o   The Cybertruck has had mixed reviews. 

o   Tesla’s shares put in their biggest slump in over a year, after the company missed sales estimates and warned of a slowdown ahead. 

• “This ain’t business … It’s personal” … Rocky

o   After regulators put the kibosh on Adobe’s merger with Figma, Figma is cutting its valuation by 50% and offering buyout packages (at the lower valuation) to employees who want to bail.

o   Senior executives at Google apparently just tried Bard, because they immediately fired the AI firm that created & trained their pseudo-ChatGPT competitor.  

o   San Francisco is suing California for allowing Waymo and Cruise to expand their autonomous car operations despite the software’s serious issues.

• Bitcoin’s price has fallen 16%...  since the spot ETFs launched on January 11.

• Inflows into the sport ETFs…  have totaled ~$4.7B by EOD Tuesday.

• Due to Grayscale’s ETF fees (1.5%)…  vs Blackrock’s and Fidelity’s 0% fees - about $3.7B has left Grayscale’s fund.

• Hackers stole $1.7B from crypto platforms last year…  which is a 50% YoY drop as DeFi protocols have ‘battened down their hatches’.

Wednesday:  China is planning a stock market rescue package backed by $278B.  With that in mind, watch BABA – it ran straight into its 50-day moving average and stopped on a dime.  But here's the issue: Is there anything out there NOT absurdly expensive that seems like it wants to go?  AMZN over 158.44 might work.  Otherwise, this is all about the Mag 7 - because this market is pretty skinny out there.  

Thursday:  While we see the Mag 7 push the indexes higher:

• Initial Jobless Claims came in at 214k – while we expected 200k,  
• Durable goods came in stronger than expected,
• Q4 GDP crushed estimates at 3.3%, after 2% was expected, and 
• Core PCE (inflation) came in at 2% - with 2% being expected. 
• With a GDP this strong, are they sure our FED is going to cut rates?

What if we’re being FED bad data?  What if inflation is already back to its 2% target?  Truflation is showing the current inflation rate as 1.86% - almost 50% lower than our Fed’s 3.4% current reading.  Per Anthony P: What if our FED wants to cut interest rates – because it sees a dis-inflation recession coming?  Factually:

• Small business hiring fell to the lowest level since June, and marked its second lowest reading since the 2020 pandemic.
• Both manufacturers and service companies cut jobs in December, the first time that’s happened since October 2022.
• Job growth was revised lower in 11 of the last 12 months. This often occurs when an economy is at an inflection point, or shifting from growth to contraction.
• Credit card debt hit a record high of $1.1T and delinquencies were at their highest levels since 2011.
• Profit margins for S&P 500 companies shrank to 10.9% in Q4, their lowest level since 2020.
• The inverted yield curve (the 2-Year T-Bill rate being above the 10-Year) has been with us for over a year.

When it looks like a duck and quacks like a duck…

Next Week... Just Listen to our FED's Remarks...

   After the GDP reading came in hot (even accounting for them fudging the numbers during an election year), that puts the market (and our FED) in a tough place.  Our market wants multiple rate cuts this year, and it’s hard for our FED to justify slashing rates – if the economy is doing so well. With that in mind, it's going to be very interesting to hear from the FOMC this week. Between rate cuts and goosing the GDP & inflation numbers - I think this market has gotten a little ahead of itself, and could use a sideways pause.  If Powell is hawkish, we might get a little correction.  But, if he's dovish and is considering removing the accommodation – then we may continue surging to more all-time highs. So, it’s the Powell show this week. 

HODL’s: (Hold On for Dear Life)

• 13-Week Treasuries @ 5.3%
• PHYSICAL COMMODITIES = Gold @ $2037/oz. & Silver @ $22.9/oz.
• **Bitcoin (BTC = $42,300 / in at $4,310) 
• **Ethereum (ETH = $2,270 / in at $310) 
• **ChainLink (LINK = $14.41 / in at $7.78)                     
• AAPL – Apple = ($192.4 / in at $181)    
• **COIN – Coinbase = ($125.2 / in at $125)                   
• **MARA – Marathon Digital = ($17.85 / in at $12) 

o   Sold the Feb. & March $32 Covered Calls

• **RIOT – Riot Platforms = ($11.3 / in at $12.5)           

o   Sold the Feb. & March $22 Covered Calls

• UEC – Uranium Energy Corp ($7.4 / in at $4.8) 
• UROY – Uranium Pure Play ($3.3 / in at $3.1)
• XLK – Technology ETF (201.75 / in at $201.2)

** Crypto-Currency aware

Follow me on StockTwits.com to get my daily thoughts and trades – my handle is: taylorpamm.



Please be safe out there!