Thursday, June 23rd, 2022 – Volume 2 – Issue 248

Dow Jones: 30,677 (-0.15%)

S&P 500: 3,795 (+0.95%)

Nasdaq: 11,232 (+1.62%)

Russell 2000: 1,711 (+1.27%)

Bitcoin: $20,864 (+4.50%)

Ethereum: $1,131 (+7.07%)

Oil prices are slipping… Making energy the worst-performing sector in the S&P as the rest of the market rallied.

Defensive sectors (consumer staples, utilities, real estate, and health care stocks) each rose over 2%, giving the market a boost.

The Fed: Jerome Powell reiterated that the central bank is “strongly committed” to bringing inflation down as he spoke to Congress for the second day. In his words, a recession is a “possibility.” Some analysts are far more convinced…

Crypto: Bitcoin surged late in the day, briefly rising above $21k even as the crypto firm drama continued. Voyager limited withdrawals to $10k amid its 3AC exposure issues.

Now, for the top stories of the day…

Source: Heat Map & Sector Performance — Finviz.com

Tesla Cybertruck Progress Revealed

The Tesla Cybertruck might be the most anticipated vehicle launch of all time. While many call it ugly, there is a cult group of Tesla fans eagerly awaiting the alien-like truck. Today, we got some insight on the progress of the Cybertruck, as the project has been delayed multiple times now, like many of Elon’s products.

Design = Finished: During an interview with the Tesla’s Owners Club of Silicon Valley, when asked about the vehicle, Musk said “We need to get on that [getting the Cybertruck to production]. At least, the design is finally locked. We got too carried away [with design updates].”

When: During the interview, Musk projected that the Cybertruck was now set to launch into production sometime “mid-2023”, almost four years since it was announced.

Long Time Coming: Back on November 23rd, 2019, Musk tweeted that there were over 146,000 orders in under two days since the reveal, and one has to believe that number has only grown. At that time, the original production forecast was by the end of 2021, but we all know that didn’t happen.

The $500 Million Outflow That Crashed the Market

Remember that heart attack you had when BTC fell below $18,000 on Saturday? Well, this might help you explain what happened…

On Friday, outflows from the Purpose Bitcoin ETF (BTCC) — the first Bitcoin exchange-traded fund in North America — hit a one-day record of $500 million.

  • Withdrawals totaled 24,510 BTC, nearly 51% of the ETF’s total assets under management.

Triggered: “The enormous outflows are likely caused by a forced seller in a huge liquidation. The forced selling of the 24,000 BTC could have triggered BTC’s move down towards $17,600 this weekend,” wrote Vetle Lunde, analyst at Arcane Crypto.

Over-Leveraged: This rare, massive one-day outflow serves as an example for the entire crypto market, where leverage became increasingly popular during the latest bull run. Over-leveraged traders face enormous pressure as the price of BTC struggles.

  • “The bottom line is that forced liquidations of over-leveraged crypto traders likely triggered Bitcoin’s crash, not anything pertaining to the Bitcoin ETF structure,” said Nate Geraci, president of the advisory firm The ETF Store.

  • “The recent crypto bloodbath has shown there is no shortage of leverage in the system, which works well on the way up, but not so well on the way down,” Geraci said.

The Crypto Outperformer: While much of the crypto market is licking its wounds, smart contracts platform Avalanche (token: AVAX), jumped over 7% this morning as it launched support for Bitcoin in its cross-chain bridge. This allows users to gain exposure to the Avalanche DeFi ecosystem by bridging native Bitcoin. Read more about Avalanche’s latest addition here.

Kevin O'Leary's Top Tip for Investors

Kevin O’Leary is known for a lot of things, with being real and giving tough love being right there at the top. Mr. Wonderful has learned a lot of lessons in his life, and he wanted to share this gem with all the young investors today, stay off margin!

Yung Kev: “When I was a young Buckaroo trader, I used margins, and I got slaughtered. And I never did it again,” he said during a recent interview with CNBC. “You can tell every young investor that’s never seen a bear market … but until they experience the fear, the darkness, and getting completely wiped down of their account, that’s how you learn.”

“I think it’s very important that young traders learn that, and they’re learning it right now.” Well, I think it’s safe to say many new investors have found that out the hard way this year. “…you win some, you lose some. That’s the nature of how investing works. It’s never straight up.”

“They don’t understand it till they get wiped out to zero on margin calls, and that’s happening in every sector, particularly crypto right now,” he said. “Grown men are weeping on the crypto place.”

Fatherly Love: “Just before I came on here, [I was] talking to my son about this — he’s 25 years old — and he’s learned his lesson. But I also taught him diversification. So he knows you don’t put all your eggs in one basket or [in] one stock or one asset class,” O’Leary added.

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Warren Buffett Doubles Down on His Massive Energy Bet

The Oracle of Omaha has watched energy prices (as well as energy stocks) surge like crazy this year… but he thinks there’s still more room to go in the long term.

According to a securities filing last night, Buffett’s Berkshire Hathaway scooped up another 9.55 million shares of Occidental Petroleum for $529 million over the past week.

  • Occidental Petroleum (OXY) is up almost 80% year-to-date, buffering Berkshire’s market losses as the holding company is down about 12% in the same time period.

  • Berkshire’s stake in the company now totals 16%.

Doubling Down: Berkshire Hathaway now owns more than 152 million shares of Occidental. At the end of the first quarter, OXY was already the seventh largest position in Berkshire’s portfolio — so it’s clear that Buffett really #likesthestock.

Despite the energy sector surging in 2022, Buffett and Berkshire aren’t unloading their positions. In fact, Occidental isn’t Buffett’s only big bet in the energy market. At least, not yet.

  • Chevron (CVX) was also a top-five holding in Berkshire’s portfolio at the end of the first quarter.

  • CVX is up approximately 18% year-to-date after falling today.

Zooming Out: Brent crude futures and WTI crude futures fell today as investors continue to weigh recession fears. Economic slowdowns are generally not great for oil prices due to slowing demand — but Buffett’s big bets suggest that OXY and CVX are still undervalued in the long term as they continue to produce strong cash flows.

JPMorgan Sees 27% Stock Rally Ahead to Record High

There must be something funky in the water at JPMorgan these days because it seems the firm is having a hard time making a collective forecast of what is going to happen to the economy and stock market. After Jamie Dimon warned of an impending hurricane, one of the firm’s top analysts is now calling for a 27.7% rally this year.

Marko Kolanovic, whos been one of the rare bulls this year despite such a devastating market, told clients in a note today that his team expects the S&P to end the year at 4,800, a rally of nearly 30%.

Bullish Thesis

  • Kolanovic believes diplomatic solutions will improve the Ukraine-Russia war in the second half of the year and alleviate some inflationary pressures.
  • Inflation will begin to slow in the latter half of 2022
  • An influx of cash into markets due to record low investor positioning will push stocks higher.
  • Attractive risk/reward situations will entice investors.
  • The expectation is that core PCE inflation (the Fed’s preferred inflation measure) will drop to a 2.9% annual rate in the second half of the year.

“Anything short of a recession will likely catch most investors completely wrong-footed, especially after a broad correction that resulted in the average stock drawdown ~80% of the way to prior recession bottoms,” Kolanovic said. “Our forecast expects the Fed to be largely successful in engineering a soft landing, at least through the end of next year.”

Despite the optimism, Kolanovic still acknowledges that there may be a recession further out. JPMorgan’s model suggests a 63% chance of a recession over the next 2 years and an 81% chance over the next 3.

Bulls

Weber (WEBR) +16.34%: Stocks with high short interest have been flying lately as the market stages a rally. 

WeWork (WE) +15.79%: Shares of WeWork jumped after Credit Suisse initiated coverage of the stock with a $11 price target, nearly double what it’s trading for today. 

KB Homes (KBH) +8.62%: The home builder reported better than expected second-quarter earnings, beating EPS and revenue by a good margin. 

Bears

Deutsche Bank (DB) -11.15%: Shares of the largest bank in Germany were down for no obvious reason, but the 10-year German bond has fallen over the past few days and new economic data showed a slowing in economic activity in the region. 

Haliburton (HAL) -6.36%: Oil slumped today as fears of an economic slowdown cut into record-high gas prices. 

AMC (AMC) -4.25%: Traditional meme stocks took a seat today as traders look at newer opportunities in the market.

Snowflake (SNOW) – JPMorgan upgraded Snowflake from neutral to outperform saying the stock is attractively priced. “In addition, we are incrementally confident that Snowflake is reaching an inflection point in terms of material FCF generation, and we think that trendline has the potential to surprise positively, creating the initial framework toward FCF-based valuation support.”

Southwest (LUV) – Raymond James upgrades Southwest from outperform to strong buy saying investors should buy the dip. “We view the recent pullback as an attractive entry point and, in turn, upgrade shares of LUV from Outperform to Strong Buy.”

Netflix (NFLX) – Bank of America cuts its price target on Netflix from $240 to $196 seeing a “worsening macro.” “As the domestic subscription run-up for Netflix seems to be at or very near its peak, the availability of more services in addition to more compelling competitor value propositions have led customers to subscribe to more services on the whole while still keeping Netflix.”

Quote of the Day: “Optimism is the essence of every fighter; the belief that no matter what you’ll find a way to win.” – MMA

Fun Fact: The retina scan technology of your Apple product is not made by Apple but manufactured by Samsung.