Friday, May 13th, 2021 – Volume 2 – Issue 219

Dow Jones: 32,196 (+1.47%)

S&P 500: 4,023 (+2.39%)

Nasdaq: 11,805 (+3.82%)

Russell 2000: 1,792 (+3.06%)

Bitcoin: $29,942 (+4.99%)

Ethereum: $2,058 (+6.58%)

 

One thing is for certain… There’s no shortage of volatility this year. Stocks were able to stage a strong move to the upside today, but are still wrapping up the week with an L after a lot of pain.

For the week: The Dow Jones (-2.14%) just hit its 7th straight week of losses, the S&P 500 (-2.41%) is on its longest weekly losing streak since 2011, and the Nasdaq (-2.79%) continues to get crushed.

Gains in consumer discretionary and tech led the market higher today. Even meme stocks like AMC (+5%) and GME (+7.7%) climbed higher, continuing to pump from their big moves yesterday.

So far, the S&P 500 and the Dow Jones have been able to avoid bear market territory. But every rally we’ve seen has been met by an even sharper sell-off… so the stock market isn’t out of the woods just yet.

Crypto: Prices rebounded with stocks despite the ongoing Terra-drama. But we wrote a whole story about that — so more on this later.

Are you Hungry? Because we are. Share this newsletter with that friend who relies on you for market updates… We’ll take it from there!

Now, for the top five stories of the day…

Source: Heat Map & Sector Performance — Finviz.com

Robinhood Surges on New Billionaire Investor

After falling 69% (nice) from its IPO price, Robinhood investors are finally getting a well-deserved break.

Robinhood (HOOD) jumped over 24% today as the CEO of FTX, Sam Bankman-Fried, disclosed a 7.6% stake in the retail investing app.

  • Sam Bankman-Fried is the sole director and majority owner of Emergent Fidelity Technologies, the entity that scooped up the 7.6% stake in HOOD.
  • The stake was worth about $648 million at the time of purchase (earlier this month), according to the SEC filing.
  • Emergent Fidelity Technologies is now the third-largest shareholder in HOOD.

Why Robinhood? According to the filing, Bankman-Fried #likesthestock because it “represent[s] an attractive investment.” The filing reveals that he “intends to hold the Shares as an investment” (as opposed to a trade) and doesn’t have “any intention of taking any action toward changing or influencing the control of the Issuer.”

The Stock: HOOD is down 42% year-to-date. Over the past 3 months, 12 analysts have given recommendations on the stock. Here’s the breakdown:

  • 4 say ‘Buy,’ 5 say ‘Hold,’ and 3 say ‘Sell’
  • Average 12-month price target: $13.66 (27.54% upside)
  • The highest analyst price target is $36.

Zooming Out: Crypto trading has been a significant piece of the puzzle that is Robinhood’s bottom line. The company is also rolling out its crypto wallet feature as it looks to boost crypto offerings. With the CEO of FTX on its side, Robinhood may be able to more effectively tap into the cryptosphere.

America is Scared…

Investors are nervous right now, but so is everyone. The latest University of Michigan’s sentiment index was released today, and the drop is startling.

The index fell 9.35% from 65.2 to 59.1 in April. This is the lowest reading since 2011 as inflation headlocks the American consumer. The reading also came in well below the Bloomberg survey of economist expectation of 64… Well below.

The current conditions gauge dropped to 63.6, the lowest level since 2009. The future expectation gauge dropped 6.2 points as well. American’s sentiment about their current financial situation is now at its lowest level since 2013, according to the director of the survey.

What’s consumers biggest fear? Inflation. Purchases of durable goods, like household appliances, hit the lowest level since records started being kept, back in 1978. Consumer spending has been able to hold up for now, as the strong labor market is keeping consumers afloat.

Buying Crypto is Becoming Cool Again

Well, LUNA is now worth a fraction of a fraction of a penny after trading for over $80 a week ago… so that happened. And UST is now worth just $0.16.

  • Terra founder Do Kwon revealed an updated “Revival Plan” today, essentially conceding that the Terra ecosystem has experienced total collapse.
  • “Even if the [UST] peg were to eventually restore after the last marginal buyers and sellers have capitulated, the holders of Luna have so severely been liquidated and diluted that we will lack the ecosystem to build back up from the ashes,” Kwon wrote.

But in the wake of what seems like Terra’s unofficial death, the crypto market is actually rebounding. Here are the factors giving a boost to BTC today:

Tether gets its ‘stuff’ together… The world’s largest stablecoin, Tether (USDT), briefly depegged from the U.S. dollar yesterday as investors were concerned about a larger stablecoin contagion. But it was able to regain its $1 peg even after processing over $3 billion in withdrawals.

Buy-the-dip is back, baby… Amid all the craziness, Google search trends for ‘bitcoin,’ ‘ethereum,’ and ‘should I buy (bitcoin or ethereum)’ have been blowing up. #buythedip is also trending on Twitter again.

    • Technical signals still remain pretty negative on the BTC charts, but it looks like investors are using this crash as an opportunity to scoop up more of their favorite blue-chip cryptos at a discount.
    • Bitcoin rebounded to the $30,000 level today after falling below $26,000 yesterday.
    • Indicators: The RSI on the Bitcoin weekly chart is the most oversold it’s been since March 2020. Analysts see immediate support at $30,000 and $27,000 — and resistance at $33,000 and $35,000, according to CoinDesk.

The Market Bottom: Is it Time to Buy?

It’s been a rough week… Heck, its been a tough year! But investors who have held strong and showed those diamond hands got some relief today, so is there more to come?

Be greedy when others are fearful… The great Warren Buffett once said. With CNN’s fear & greed index hitting a level of 6 (Extreme fear) yesterday, one has to wonder if this is as bad as it gets. Even during the Covid crash, the index didn’t reach these lows. Today, the index made a jump to 12 as markets rallied.

History repeats itself? This market crash has similarities to the 2018 fall, as the Fed hiked rates 4 times between March and December in 2018 causing the S&P to drop nearly 20%. Given its a bit more aggressive this time, but.

The “don’t fight the Fed” moniker has cost the Nasdaq to sink 30%, well below the bear market mark. But as many of you know, individual names like Coin (-81%) and UpStart (-90%) have faired much worse.

Buying when others are selling is scary, but its made many of millionaires over the years. If history repeats itself, and 2022 plays out somewhat similar to 2018, this could be a great thrift shopping opportunity.For reference, Amazon stock dropped over 30% in 2018, but those who bought the bottom saw a 36% return in the year to follow, and would still be up 61% right now, even with the latest drop.

No one knows what’s going to happen next, but here’s a quote from Warren Buffett’s 2009 Berkshire annual letter.

  • “Amid this bad news, however, never forget that our country has faced far worse travails in the past. In the 20th Century alone, we dealt with two great wars (one of which we initially appeared to be losing); a dozen or so panics and recessions; virulent inflation that led to a 21 1⁄2% prime rate in 1980; and the Great Depression of the 1930s, when unemployment ranged between 15% and 25% for many years. America has had no shortage of challenges,” he said, before adding, “America’s best days lie ahead.”

Elon is Making Everyone Nervous

The tweet heard around the world: This morning, Elon shocked the world, tweeting, “Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users.” He shared this article from Reuters.
 
  • Twitter previously said it had 229 million users in the first quarter who were served advertising.
Is Elon backing out?
 
  • Due to current market conditions, Twitter might be too pricey (even for the world’s richest man). Even before Elon’s announcement, Twitter’s market cap had dropped to $9 billion below his offer price.
  • Someone on Twitter told Elon that he could create a better platform from scratch for less than $1 billion. He replied, “You might be right.”
  • Musk made a second tweet clarifying that he is “still committed to the acquisition,” but not everyone is convinced.
On Musk putting the deal on ice, Daniel Ives, an analyst with Wedbush, said, “Many will view this as Musk using this Twitter filing/spam accounts as a way to get out of this deal in a vastly changing market.”
 
Following the announcement, Twitter stock tumbled 9.69%, while Tesla stock gained around 6%.

Bulls

Affirm (AFRM): +31.43% – Affirm surged today after beating its most recent earnings by a modest amount. 

Beyond Meat (BYND): +24.56% – Beyond Meat has recovered all of its post-earnings losses as the stock rallied hard today. 

Coinbase (COIN): +16.02% –  Coinbase led the crypto recovery today as bitcoin retakes $30K, alongside MicroStrategy and other crypto-based stocks. 

Bears

Twitter (TWTR): -9.67% – Elon Musk announced his deal to take Twitter private was on hold pending more information on the number of fake accounts. 

Kroger (KR): -1.52% – Jefferies cut its earnings estimate for Kroger today amid rising food prices. 

Best Buy (BBY): -1.14% – Best Buy couldn’t join the market rally today, no news. 

UPS (UPS) – JPMorgan downgraded UPS from overweight to neutral due to a lack of catalysts. “Pressure continues mounting on the U.S. consumer and e-comm growth decelerates. … UPS is operating very well in a dynamic environment but we expect further improvements will be gradual and do not see much upside to a 2022 guide already pulled forward.”

Tesla (TSLA) – Bank of America cut its price target from $1,300 to $925. “Following the quarter, we raised our forward estimates, but maintained our $1,300 PO. However, we are now lowering our price objective from $1,000 to $925 on lower assumed multiples with the market sell-off, specifically now based on ~13x EV/Sales and ~55x EV/EBITDA (prior 18x, 78x) on our 2023 estimates.”

Ford (F) Morgan Stanley upgraded Ford from underweight to equal weight following the pullback. “We believe the ‘run-off’ value of Ford’s authentic/emotional ICE (internal combustion engine) vehicles and fleet-oriented commercial end markets may be underestimated by the market.”

Quote of the Day: “The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and a behavioral discipline that are likely to get you where you want to go.” – Benjamin Graham

Fun Fact: The NYSE & NASDAQ combined are worth more than the next seven stock exchanges combined; Japan, China, Euronext, London, Hong Kong & Saudi & Canada.

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