This Week in Barrons: 6.16.2024

• Elon’s 2018 agreement with Tesla’s BOD said: “If Mr. Musk increases the value of Tesla to $650B (making Tesla one of the 5 largest companies in the U.S.) he will receive an additional 300m shares.? If he falls short of that goal, Mr. Musk will receive nothing.” ?Of course, $56B is a ridiculous pay day, but it’s going to someone who created an absurd amount of shareholder value – that was deemed impossible 6 years ago.? From 2019 to 2021 Elon did the impossible by taking Tesla from $30B to $1.3T, and you could claim was ‘under-paid’ for his efforts.? Elon defied his critics, his BOD, and the odds.? He deserves that bag!
• Yeah – AI will end Participation Trophies… ?Creatives are upset that AI draws, writes, and composes – cheaper, better and faster than the average freelancer.? Instead, they should be upset over why we ever rewarded average freelancers?? Badly written copy and paint-by-numbers art were here long before OpenAI.? OpenAI simply raised the bar, and challenged us to only pay for excellence.? That leaves no time to give out any more of those darn participation trophies.
• Why do we buy the pitch from those snake oil sales people?

-?????? We’re Bored.? When things feel safe, we get an itch for adventure.?

-?????? We’re Greedy.? ?We want more, right away, and without a lot of effort.

-?????? We crave Attention.? ?Attention gives us traction, and traction beats standing still.

Social media teaches us daily to: Trust but Verify.? Remember: be nice to the people you see on the way up, because you’ll see the same ones on the way down.

The Market:

• The problem with living this long…? is that: “Everything old is new again”.? ?Back in the 70’s and 80’s when several of us had the pleasure of working with Dr’s Herb Simon (Nobel Prize), Richard Cyert, and Allen Newell on AI – the issues were never about coding human decision-making and problem-solving.? The issues were: (a) How do we get J.Q. Public to TRUST our communication, and (b) How do we SECURE & maintain the PRIVACY of J.Q. Public’s data?? This past week we learned that Apple placed these same 2 issues – front and center.? They realized that no form of AI will be used without first creating TRUST in the collection and delivery mechanism, and that everything is hackable once it leaves your control.? Apple announced:

-?????? (a) That next-gen Siri will converse more naturally, remember conversations and context, and accomplish complex tasks though increased understanding.? By Siri ‘sweating the small stuff’ – Apple hopes that we will grow to TRUST her path, cadence, and decision-making abilities.?

-?????? (b) Apple’s AI-reveal Party also included privacy.? They’re using a smal language model and on-device processing whenever possible.? The concerning part is when they need to involve ChatGPT-4o and maintain our privacy across corporate cultures.? Apple’s working on bringing that piece in-house ASAP.?

Apple’s attention to detail during their 2-hour edutainment experience, was a master class in explaining complex technology to ordinary people.? Apple increased their stock price by over 10% last week by simply concentrating and demonstrating that they understood the #1 reason for their existence == The Customer.

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InfoBits:

• I thought this fight was for democracy…? but U.S. Sen. Lindsey Graham let it slide that: "Ukraine’s countryside holds trillions of dollars’ worth of critical minerals. ?Vladimir Putin cannot be allowed to access those resources because he will share them with China."
• WNBA sensation Caitlin Clark… ?will not be on the USA’s Summer Olympics team.? [I wonder if leaving the most popular female athlete on the planet – out of the Olympics – will bring in the viewership that advertisers demand?]?
• Apple’s almost backwardly compatible AI features…? will help drive an iPhone upgrade cycle like the world has never seen – given 95% of the company’s installed base do not have iPhone 15 Pro or Pro Max phones.
• PIMCO is warning of up-coming regional bank failures...? concentrated on those central banks with high concentrations of commercial real-estate loans.?
• The EU will impose?38% tariffs on Chinese EVs imports…? following the US’s 100% tariffs.
• MSFT is dialing down its relationship with OpenAI…? to focus on its own, in-house AI technology.? Microsoft hired Mustafa Suleyman (former Head of AI at Google and co-founder of OpenAI) to develop their own AI model.
• Our FOMC projects 1 rate cut in 2024…?? even with lower CPI & PPI expectations.
• Initial jobless claims rose to a 9-month high… ?with analysts looking to see if labor is beginning to soften.? [Opinion: Labor is definitely softening, and our FED will be too late to this party as well.]
• Consumer sentiment fell to a 7-month low… ?as inflation worries and weaker incomes are gaining traction.
• May’s U.S. home sales were the third lowest in history…? with housing prices and mortgage rates remaining high.

Crypto-Bytes:

• An estimated 20% of all BTC?is lost forever. ??Owners have lost private keys, passed away without sharing access, or thrown away hard drives with fortunes on them.
• When the SEC approved 8 proposals for spot ETH ETFs…? it appears that a summer-long process for final approval is now underway.
• Bitcoin’s public ETFs remained above $1B in inflows in May.?
• MicroStrategy is raising another $500m to buy more Bitcoin.

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

1.?? Tuesday:? Our FED has painted themselves into a corner. ?Our economy is starting to come apart, which begs for rate cuts – but inflation is still out there, which begs for "higher for longer."? Our FED and Gov’t created this mess on purpose, and I will be anxious to see how they navigate giving us the medicine.? Everything’s wiggling around the flat line prior to Wednesday’s CPI & FED announcements.?

2.?? Wednesday:? Yesterday the NASDAQ and the S&P both made all-time highs, but 9 of 11 S&P sectors were down on a day.? How did we pull that off?? AAPL went up 7% and accounted for ~40% of the S&P move.? One stock = One market.? For this morning’s CPI, every measure of inflation declined.? How is that possible?? I guess this afternoon we get to hear Powell tell us how we're winning the fight against inflation.? You can't make this stuff up.

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Morgan’s Moments… ?

• Bitcoin could go higher:

-?????? Bitcoin inflows coming into ETF are back on the plus side again.? 10 days ago we saw $887m worth of inflows into the ETFs, which is the largest day of inflows going back to March 13th.?

-?????? The Nasdaq, the S&P, growth stocks, no matter how you slice or dice it, are working higher. Which considering the strength in the dollar is a little surprising.? You can see a brief divergence forming here. While the Nasdaq 100 is at new highs and printing higher highs, Bitcoin is still consolidating.? Again, if equity markets continue marching higher, Bitcoin will likely have nowhere to go but up.

-?????? Tip #1: Bitcoin Miners (MARA, RIOT, MIGI, and WULF) are dramatically outperforming Bitcoin and crypto.? You can trade shares, option contracts (Call Credit Spreads), or both.

• Bitcoin could go lower:

-?????? US dollar strength tends to weaken crypto markets. ?On days when the dollar is rallying, most crypto assets get crushed. ?Last week’s action was the perfect example.

-?????? Bitcoin addresses that have been inactive for 1 to 2 years, have been selling – offsetting accumulation by longer-term holders.

• ToonCrafter is an AI video tool that you can try for free on Hugging Face:

1.?? Visit the Hugging Face ToonCrafter page.

2.?? Upload two images (a starting and an ending one). ?For better results, these images should be of the same character or scene with slight variations.

3.?? Write a description of the action in the prompt field.

4.?? Adjust settings to your liking and click “Generate” to create your short video.

Next Week: “It’s Big Tech vs the S&P…”

• Bkg:? Last week, we moved right up to the edge of the SPX Expected Move and stopped (SPX = 5,425), but the divergence between big tech and everything else continued. ?This is exactly the way the options strategists planned it – a week in advance.
• Under the surface, the following ETFs are looking downside ugly: the IWM (Russell), DJI (DOW), XLE (energy), XLF (financials), XLP (staples), XLU (utilities), XLV (healthcare), XLI (industrials), XLB (home builders), and the XTL (telco). ?The 2 sectors that are holding this market together are: Big Tech and Semi-Conductors.?
• Divergence ends with heavy Volatility and Convergence.? We are in a historically significant level of divergence that always violently makes its way back to center.? However, at this point there has not been a hint of a pullback or lack of volume in the Big Tech darlings – especially Nvidia.? ??
• SKEW and the Dollar…? The professionals are beginning to increase their hedging positions.? We know this because the SKEW moved from ~100 to ~162 on Friday.? This past week we also saw a dramatic rush to purchase the U.S. Dollar – often stimulated by geo-political events (the recent G7 meeting).
• This week is Triple Witching & Holiday-shortened… ?therefore, the action will be more pronounced and condensed.? Tip #2: Play the hand in front of you == I’m still in AAPL, NVDA and MSFT.?
• SPX Expected Move (EM):

-?????? Last Week’s EM = $75 … ended moving $84 higher.

-?????? Next Week’s EM = $62 … packed into a 4-day trading week.?

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TIPS:

• HODL’s: (Hold On for Dear Life)

-?????? 13 to 17-Week Treasuries @ 5.44%

-?????? Physical Commodities = Gold @ $2,348/oz. & Silver @ $29.6/oz.

-?????? **Bitcoin (BTC = $66,150 / in at $4,310)

-?????? **Ethereum (ETH = 3,540 / in at $310)

-?????? **ChainLink (LINK = $14.7 / in at $7.78)

-?????? INDA – India ETF ($55.2 / in at $50) / BOT Nov, +$53 / -$55 Call Sp.

-?????? HROW – Harrow Health == $17.9 / in at $12

-?????? **IBIT – Blackrock’s Spot Bitcoin ETF ($37.3 / in at $24)

-?????? **MARA – Marathon Digital = ($19.4 / in at $12) / Sold Sept $30 Cov-Calls

-?????? **RIOT – Riot Bitcoin Mining ($10.5 / in at $12.5) / Sold Sept $20 Cov-Calls

-?????? TGB – Gold Miner == $2.3 / in at $2.7

** Crypto-Currency aware

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Please be safe out there!

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