Timing & trends

Elon Musk Calls for End to Government Subsidies in Build Back Better Act

Fifth Element cosplayer Elon Musk would like the government to knock it off with the whole trying to pass climate legislation thing. His beef with the Build Back Better Act? Among other things, subsidies for electric vehicles. Thus, Musk continues a long tradition of what people in “the biz” call “pulling up the ladder.”

Musk’s comments came at Wall Street Journal’s CEO Summit when asked about the Build Back Better Act by Journal reporter Joanna Stern. She posed a hypothetical where President Joe Biden called Musk to ask what he wanted in the legislation that has passed the House but is currently being tweaked in the Senate.

“To be totally frank, no one at Tesla has brought up whether they care about this bill or not. … We don’t think about it at all, really,” he said before indicating he has, in fact, thought of the bill. “It might better if the bill doesn’t pass. The federal budget deficit is insane.”…read more.

Crypto Could Become “A True Competitor” To The U.S. Dollar: Jon Najarian

This is an interview with Jon “Dr. J” Najarian. Jon was a linebacker for the Chicago Bears before he turned to trading on the Chicago Board Options Exchange. He then became a member of the CBOE, NYSE, CME and CBOT and worked as a floor trader for some 25 years.

Today, he is a professional investor that specializes in options. He is also a cast member of the “Halftime Report” and “Fast Money” shows on CNBC. Jon and his brother Pete invest in and work with start-ups via Rebellion Partners, a venture consulting firm they launched in 2015.

In 2016 Jon and Pete co-founded Market Rebellion, a company focused on educating the individual investor.

Q: Hi Jon, thanks for taking the time to answer some questions for my Fringe Finance readers. Right off the bat – I have been asking this question of everyone I interview and want your perspective on what the biggest threat facing the market is right now, and why?

I think the biggest threat is that the Fed knows the inflation genie is out of the bottle and that they have this Sophie’s choice of which to address; inflation by raising rates, or a stagnating economy and new [Covid] variant.

I’m not as worried about Iran, Russia or China as I am about how the Fed deals with inflation and the economy. A fast rise in rates will absolutely kneecap the economy and take the stock market with it.

Have you and your brother ever considered crypto to be a multi trillion trojan horse that could cause systemic problems? When China exits the crypto market, could it be because they are worried about a crash – or do you think it’s just so it doesn’t compete with the digital yuan?

I know you’re not a big crypto fan Chris, but I truly believe that fiat currencies need the discipline of a legitimate competitor. Not a competitor in transactions, although that is coming, but a competitor in a store of value.

The main reason Bitcoin was created was that someone or some group (Satoshi Nakamoto) saw that governments were taking advantage of their printing presses and [their] ability to create more money out of thin air.

As crypto hovers near $3 trillion in market cap, I believe we are close to creating that true competitor to the dollar. If we have failures of repaying of debt and or other monetary issues, people, especially young people will get deeper into crypto. Could that end badly? Sure. But I think crypto has the potential to discipline central bankers.

What stocks would you avoid at all costs right now?

Sadly, much as I love our meme stock brethren, I think the GameStops and AMCs are dead money. I think they are the modern equivalent of the emperor’s new clothes.

I asked this to a respected trader last week and want your take. Listening to the Cathie Woods of the world, I have to wonder: is it truly “different” this time? Meaning, will we normalize at these PE ratios and this balance of growth vs. value? Or will PEs eventually crash back under 10 and will value be a virtue again?

I think it will be a while before we see normalized PEs. I think stuff like the metaverse will keep this party going a while longer. Perhaps a year or more. But past that, yes I think we need an adjustment back to normalcy.

You guys are options experts. What do you make of the option volume and activity in Tesla?

I think we’re both surprised by the volatile moves TSLA makes on a weekly basis. The costs of the calls and puts is among the highest among active options, as it is not uncommon to see a call or put that is trading $15 or $20 trade 20,000 or 30,000 contracts. That’s a ton of volume for a stock 1/10th the price of TSLA’s $1100.

I guess overall the reason we see so much activity is that so few people cannot afford to buy shares, so they have one choice: trade options.

Just like that other Wall Street adage, TINA , there is no alternative.

Do you think options are being weaponized to create gamma squeezes in the NASDAQ? Why or why not? And if so, what consequences could there be for this?

I think options have always been used by shrewd traders to “bully” stocks up or down.

We witnessed this in the infamous Herbalife fight between Carl Icahn and Bill Ackman. Carl didn’t have a dog in the hunt, but when he saw that Ackman was short big in HLF, he bought OTC calls and paid for them by selling OTC puts in HLF. That effectively put the squeeze on Ackman and any shorts that had joined him.

So I do think people on Reddit or Twitter could gang up, buy a bunch of calls and like GameStop (GME), never sell them. and thus, very effectively squeeze shorts like Melvin Capital.

What sectors interest you the most for long-term investments from this point, whether or not we wind up having  a pullback. Is there anything cheap anymore?

I think given all the hype and dollars chasing the EV space that the best opportunities are in components for lithium ion batteries. Full disclosure, I am long one of my favorite names in the space; American Battery Tech (ABML). They recycle lithium and repurpose the lithium, cobalt and nickel from used batteries and do so without the brute force and heat that China uses to accomplish this. I also like ALB, LAC and PLL as plays to be in the cat bird’s seat for the massive demand for lithium.

How do you feel about the strength of the USD and confidence in treasuries currently?

I think the dollar actually gets stronger, not weaker over time.

The reasons are that the European Union is in worse shape, China is likely to flex more, meaning they will push things in Taiwan pretty close, but not to the point of war, which will likely make investors nervous and that nervousness [will push] them into the dollar.

Does the Fed and the Biden administration have a handle on the inflation problem? Why or why not?

That’s the easiest question of all. NO!

The administration has cut pipelines like they did with XL Pipeline and then they wonder why oil producers are not producing as much? It’s crazy how the administration doesn’t recognize cause and effect. You cut leases for oil and gas, you reduce transport (pipelines) and you wonder why our prices spike? I wonder how these people even tie their shoes.

Thanks Jon.


After China’s Crypto Ban, Who Leads in Bitcoin Mining?

Bitcoin Mining Moves to America

Bitcoin mining is a process that verifies transactions on the blockchain ledger, while also bringing new bitcoins into circulation.

To be successful at this, cryptominers require vast amounts of computing power, meaning electricity becomes one of their most significant costs. This pushes them to locate wherever electricity is cheapest.

For years, China was the optimal location—the country has an abundance of cheap, coal-powered electricity. However, in September 2021, the Chinese government issued a blanket ban on all crypto activities…read more.

FTC Demands Wal-Mart, Amazon & Others Participate In Supply-Chain Probe

Shortly after President Biden sat down with top executives from Wal-Mart, a handful of regional grocers and others to hold a “round table” to discuss “supply chain” issues, the FTC announced Monday afternoon that it would launch an investigation into the factors contributing to these types of disruptions, which have been blamed for contributing to inflation by helping to drive up prices.

Just as reports claimed the supply chain crunch appears to finally be waning, President Biden sicced the FTC on the issue. Once again, it’s bureaucracy to the rescue; and anybody who doesn’t go along with the Biden Administration’s preferred narrative (ie that this is part of a global phenomenon, and that the US isn’t unique) better hope the administration doesn’t accidentally make things worse.

At any rate, it’s bureaucracy to the rescue.

And we don’t say that because we think America’s ports need assistance (they clearly do). The problem is that the supply chain crunch goes far beyond the ships and the ports and the truckers. It’s what an economist might call a “complex”” issue.

While President Biden met with a senior Wal-Mart executive in person, and in front of the cameras, as part of Monday’s “supply chain round table” at the White House, Bloomberg says it is ordering large retailers, wholesalers and consumer good suppliers including Amazon and Walmart to provide the White House with “detailed information” that might aid in a newly launched inquiry into the ongoing supply chain disruptions that are contributing to President Biden’s inflation (or should we say, reflation?) fears…read more.

Visa and MasterCard’s duopoly is under threat


In the fast-changing world of payments, Visa is beginning to feel as left out as those of us who didn’t get invited to a Friendsgiving.

Last week, Amazon said it would stop accepting Visa-branded credit cards from UK customers beginning next year. That move follows another snipe in Australia and Singapore, where Amazon slapped a small fee on customers who pay using Visa credit cards there. And to put a cherry on top, Amazon also said it was considering switching its own co-branded card from Visa to Mastercard.

Why is Amazon doing this? The company cited Visa’s high processing fees, though data shows that Mastercard’s and Visa’s fees are pretty much the same in the UK. “I find it quite odd that they’re claiming they did this because of the high cost of acceptance of these in the UK,” Visa CEO Al Kelly told the FT.

Payments analysts say Amazon’s ditching of Visa is a negotiating tactic to secure lower processing fees from the company. And they don’t expect it to hurt Visa’s bottom line in any tangible way.

But it’s definitely a worrying sign for credit card networks

Visa and Mastercard have worked for decades to build the “railways” upon which global payments travel, and they’ve been extremely successful. Both Visa and Mastercard are among the companies with the highest margins in the S&P 500, at 65.6% and 53.3%, respectively.

But retailers have never been happy with an arrangement that forces them to pay a fee every time you swipe a credit card at the counter. Merchants forked over $110 billion in credit card processing fees just last year.

And thanks to fintech innovations, there are more options available than ever to bypass these credit card railroads for hyperloops. Buy now, pay later services like Affirm are surging in popularity, as are direct bank-to-bank transfers.

Bottom line: Growth in digital payments and alternative payment methods is threatening to disrupt the Visa–Mastercard duopoly.