This Week in Barrons: 2.16.2025

We are becoming: Dumber-for-Longer.

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• Is AI allowing us to be: Dumber-for-Longer?? Researchers from Microsoft and Carnegie Mellon University recently published a paper?looking at how generative AI is affecting our critical thinking skills.? The paper concludes: (a) “Technology can and does often result in the deterioration of our cognitive faculties.? And (b) When we rely too much on AI to think for us, we do get worse at solving problems ourselves.”? [So, YES – AI is allowing us to be: Dumber-for-Longer.]
• AI could kill entrepreneurship … because its machine learning efficiency may eliminate the timing associated with an opportunity.? Opportunities are created due to inefficiencies, and business-related arbitrage.? Entrepreneurship is opportunistic, but AI is the opposite – formulaic.? The risk to losing your job is not the building of a software agent to replace you – that’s inevitable.? The risk to being replaced sooner rather than later – is that your decision-making is too accurate and provides predictable outcomes.
• “Bull markets are born out of pessimism, grow on skepticism, mature on optimism, and die on euphoria” … Sir John Templeton.

The Markets:

• “You can start late, look different, be uncertain – and still succeed.” … Misty Copeland
• Costco and Walmart are in a bubble and have 'gone parabolic'.? But that doesn’t mean the bubble is bursting tomorrow; after all – a ton of wealth has been created while riding bubbles higher. ?Costco’s and Walmart's all-time-high forward PE’s are 56x and 39x respectively. ?That makes Nvidia’s forward PE of 32x, Meta’s 28x, and Google’s 21x seem reasonable.? First, you need to recognize that you’re in a bubble.? Second, you SELL when you get your first daily, sharp, red, downward candle.?
• There’s a delay between the time something goes wrong and when we notice it.? Some of the art of project management is noticing things more quickly.? But then again, by the time we notice something has gone wrong, it’s often too late to easily undo it – at which point our work becomes mostly damage control.
• “We’re close on inflation, but not there yet” said FED Chair Jerome Powell in his semi-annual Congressional testimony. ?This week we learned that the CPI moved +0.5% MoM in Jan. vs the 0.3% expected, and the Core CPI moved +0.4% MoM vs 0.3% expected.? [Basically, inflation is too ‘hot’ for everyone’s taste.]

?InfoBits:

• Startup Government Finance 101 == 'Move fast and break things'?… except DOGE is revealing that most things are already broken.? Given the amount of waste, fraud, and abuse in Gov’t, I can see DOGE doing a massive push to put:? all payments on-chain – and ‘let sunlight to be the ultimate disinfectant’.
• Government Finance 101 … the U.S. Gov’t holds our GOLD on their balance sheet at $42/oz – while the market rate is $2,920/oz.? That’s a 70X differential – leaving ~$750B left unaccounted for. ?[FYI: It’s interesting that our Gov’t prices its Bitcoin (‘digital gold’) on its balance sheet at market prices.]
• “Stop making cents” … Our Treasury Dept. has been directed to stop minting new pennies – which famously cost ~4 cents to create each penny.?
• Nippon Steel will ‘Invest in’ (rather than ‘Own’)?US Steel.
• ChatGPT Search vs Google … OpenAI gave users access to its AI-powered search feature: ChatGPT Search.? Sam Altman (OpenAI’s CEO) said: “Add in our recent release of the Deep Research Agent (which performs multi-step, deeper data dives) – and that could give us the edge in search.”
• Our FED held interest rates at a 2-decade high in January … and the only thing Jerome Powell revealed to Congress was that he didn’t have much to say about how stubborn inflation has been.
• Apple has partnered with Chinese tech giant Alibaba …? to bring its Apple Intelligence features to iPhones in China.? They chose to work with a Chinese firm in order to speed up China’s strict regulatory approval process.
• Gold & Silver Miners are selling at an all-time-discount to the S&P. … Per C. Thomas.? Buy when things are: unloved, under-appreciated, and under-accumulated. ?[FYI: Silver broke thru $33/oz. on Thursday.]
• Chevron will lay off ~9,000 jobs … during their $53B acquisition of Hess Corp.
• a16z’s Head of Crypto Policy, Brian Quintenz … will head up the Commodity Futures Trading Commission.? ?[VCs and bankers are thrilled.]
• Joann Fabrics will be closing 500 of its 800 locations … as it filed for bankruptcy for the second time in the past year.
• Apple TV launched on Android … and now Android smartphone and tablet users can download the app via the Google Play Store.

?Crypto-Bytes:

• The Kansas City Chiefs and Crypto Ads … were both noticeably absent from this year’s Super Bowl.
• Bitcoin Trading 101 … There is plenty of trading activity, and no crisis either way.nbsp; The exchange balances haven’t shifted dramatically, and it’s hard to spot fear or greed when both sides look evenly matched.
• Ethereum Trading 101 … There are more outflows than inflows.? We’re either seeing a cautious accumulation or a slow retreat – depending upon who you ask.
• Economics 101 … The amount of Bitcoin available for purchase on exchanges is at its lowest point since November 2018.? When supply fades while demand remains steady (or increases) – prices rise.? The fun starts when buyers spot the scarcity and decide to pounce.
• Cathie Woods thinks institutions and Bitcoin are like ants on a sugar hill … They will drive bitcoin prices to $1.5m over the next 5 years.? Scarcity + Big-money FOMO == “Get in or get left behind.”
• The Abu Dhabi sovereign wealth fund revealed … that they own $436m worth of Blackrock’s bitcoin ETF (IBIT).
• Wisconsin’s pension investment board revealed … that they increased their bitcoin holdings from 2.9m shares of IBIT to 6m shares in Jan.?
• BNY Mellon, Citi, and State Street are planning to offer … their own crypto custody products.? Some will be focused on bitcoin, while others are focused on all crypto assets.

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?TW3 (That Was - The Week - That Was):

• Monday:? President Trump introduced new 25% tariffs on all steel and aluminum imports into the U.S., on top of existing metals duties.? He also announced reciprocal tariffs against all countries – simply matching their tariff rate.? “If they charge us, we charge them.”? Markets are taking the headlines in stride. ?Top stories this week include FED Chair Powell’s semi-annual economic testimony to Congress on Tues./Wed., the CPI on Wed., the PPI and Initial Jobless Claims on Thurs., and Retail Sales on Friday.?
• Friday:

Q: Where do we find the ‘cash’ needed to turn a debt-based economy into a savings-based one?

A: Gold ‘n Silver Miners.? If the metals can build a base at these higher levels, and if tariffs do not exclude them – then gold, silver, and their corresponding miners are going to go thru-the-roof.? Gold is already up +14% in the past 4 months vs the S&P’s +2%.? Gold, Silver and Copper miners are cash cows.? Hedging activity is at an all-time-high, and institutions are hedging with Gold ‘n Silver.?

Tip #1: ?Barrick Gold (GOLD) is a miner poised to move from $18 to $30.? Buy the stock and buy PUTs for protection – finance the PUTs with Barrick’s quarterly dividends.

Morgan’s Moments…?

• CONGRATS to CEO Vladimir Tenev and his team at Robinhood … for just crossing over the $50B market-cap level.? Entrepreneurship is tough. ?It was made tougher by COVID, and tougher still by entrepreneur-voyeurs who made fun of Robinhood and ‘Vlad’ (Vladimir) in their early years.? Per Howard Lindzon: (a) I remember Chamath ‘SPAC’ Palihapitiya going on CNBC, promoting his almost worthless SPAC’s, and openly proclaiming: ‘Vlad should go to jail’.? Hey Chamath, how many investors did you leave ‘holding the bag’ on your worthless SPAC’s and your endless pump-n-dump CNBC promotions?? (b) I remember David Portnoy who literally sells betting parlays for a living?– going around screaming: ‘Jail for Vlad’ to anyone that would listen. ?Yep, the same David Portnoy who was just last week pumping his worthless memecoin called ‘JailCoin’.? (c) And then there’s Scott Galloway ranting about ‘Robinhood causing addiction’, but NOT disclosing that he was an investor in Public.com == a Robinhood clone.? Robinhood crossing $50B is a finger-to-the-face of Chamath, David, and Scott. ?As the ‘degenerate part of this economy’ accelerates, we all need to learn how to spot the sucker in the room – otherwise it could be us.? Above you’ll see Howard Lindzon’s Degenerate Stock Portfolio – please use it as a reference tool.?

Next Week: A Gamma Squeeze is coming …

• We are sitting at the top of a tight range – with massive gamma risk … and we hit that top right out-of-the-gate on Friday.? Therefore, markets moved numerically almost exactly as anticipated, but on much lighter trading volume.? And nobody likes making all-time-highs on trading volume that resembles the Day after Christmas.? We’ve been S&P range-bound from ~5,900 to ~6,100 since the election in early November.? During that time, we are building Open Interest in the options marketplace, and its explosion (to the upside or downside) will be impressive.?
• Last week the market was invincible ... especially with all of the tariff talk, inflation coming in hot, and retail sales coming in ridiculously light.?
• The VIX has found a new floor … and it’s the 15 level.?

Tip #2: Here is where you purchase an inexpensive Call Spread, wait for markets to get excited, sell on the excitement == rinse ‘n repeat.

• To gauge real volatility, watch the Vol. Futures, the VVIX, and the SKEW … We are at all-time-highs on the SKEW.? That means that traders are buying hedges like there is no tomorrow.? Hedging is being accomplished through buying PUTS, but also via buying gold, silver and to a lesser degree – bitcoin.?
• We are down to the Mag-3: AAPL, NVDA, and META … after kicking MSFT, AMZN, GOOGL, and TSLA out of the club.?
• SPX Expected Move (EM):

-????? Last Week (5-trading days) == $97.71 and we moved +$90.

-????? Next Week (4-trading days) == $70 Expected Move.?

Tip #3: Even though next week’s EM is slightly reduced, do NOT SELL short-duration options because the VIX is on the ‘floor’ and can only move higher.

Tip #4: On this monthly options expiration week, watch for a market head-fake: Where we Explode 100 pts. Higher – Reverse – and Implode 200 pts. Lower.?

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TIPS:

• Market sentiment is shifting from euphoria to doubt as valuations continue to move toward the upper end of their new higher range.? Passive index funds continue show inflows over active funds.? The risk of recession is low due to: manufacturing being in expansion mode, our GDP currently being at 3.9%, and earnings continuing to beat estimates.? Per Callum Thomas, the U.S. dominates the global equities’ arena.? The sentiment shift from extreme bullishness and frenzied inflows – to increased skepticism and concern – is simply a part of today’s reality.

• HODL’s: (Hold-On for Dear Life)

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

-????? (+) IBIT – Blackrock’s Spot Bitcoin ETF ($55 / in at $24)

-????? (+) Physical Commodities = Gold @ $2,893/oz. & Silver @ $32.6/oz.

-????? Bitcoin (BTC = $97,200 / in at $4,310)

-????? Ethereum (ETH = 2,690 / in at $310)

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

-????? (+) GLD – Gold ETF ($266 / in at $212)

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Options for Income: **IBIT

-????? Bi-Weekly: ?BUY the IBIT ETF

-????? BUY Puts 1 Std. Dev. OTM (out-of-the-money) for protection

-????? SELL Covered Calls ? to 1 Std. Dev. OTM for income, and to finance the PUTs.

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Crypto Alts:

-????? (-) Aave (AAVE = $250 / in at $155)

-????? (-) ChainLink (LINK = $18.8 / in at $11.15)

-????? Doge (DOGE = $0.26 / in at $0.22)

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‘De-Gen’ Economy:

-????? Apple (AAPL = $244 / in at $220)

-????? (-) Google (GOOG = $186 / in at $197)

-????? (+) Robinhood (HOOD = $65 / in at $42)

-????? Roblox (RBLX = $66.7 / in at $61)

-????? (+) Singapore (SE = $134.9 / in at $107)

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Sample Short-term Trades:

-????? Miners are beginning to break out. ?Watch AEM, FCX, and

o? BOT RIO – on a move from $62 to $72,

o? BOT ERO – on a move from $13 to $22.?

-????? Low Risk / High Reward Options Spreads:

o? GLD ($266): ?BOT March: +$268 / -$270 Call Spread

o? GLD ($266):? BOT March: +$275 / -$280 Call Spread

o? SLV ($29): BOT March: +$29 / -$31 Call Spread

-????? META ($736) after 18 consecutive up-days … BOT March: +$735 / -$730 Put Spread

Please be safe out there!

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