Weekly Roundup: From DC to Texas to … Mars

Hey Influence Traders,

It’s the weekend, which means it’s time for Power Moves Weekly Roundup.

Sorry it’s coming out a day late … with the good snow forecasts, I pulled a #PowerMove and took the family skiing in Colorado.

That was a blast, but I had Texas-esque internet infrastructure.

A quick programming note before we dive in: I’ve started a new Roundup feature identifying the Power Mover and Power Loser of the week … with plenty of competition for both titles on the first go-round.

DC Action

I typically start my weekly summaries talking about executive orders and cabinet confirmations, but there is little to report.

The only item of note is that President Biden’s nominee to lead the Office of Management and Budget, Neera Tanden, has an uphill battle to be confirmed by the Senate.

She was always considered a weak candidate – known more for her tweeting than her abilities.

Insiders are saying that her fate might be sealed since Democratic power broker Senator Joe Manchin announced that he will vote against her.

Weather

The weather was the headline story of the week for much of the U.S., but particularly in Texas.

Politically, the weather in Texas is as polarizing as an Arctic vortex!

Both sides of the aisle immediately took it as an opportunity to push agendas.

Who will win out?

Will it impact the Biden Administration’s climate agenda?

More on that in the Power Loser section …

Power Mover

The week saw a number of winners.

Bitcoin is on a run, up more than 20% for the week. Many people believe that we are just in another crypto bubble, but in a future issue I’m going to discuss why this time might be different.

Naomi Osaka of Japan beat Jennifer Brady to win the Australian Open, remaining undefeated in Grand Slam finals as she claimed her fourth major title.

She became the first woman to win her first four Grand Slam finals since Monica Seles did it in 1990 and 1991.

But the inaugural Power Mover of the Week is …

NASA

Our newest Martian, a robot named Perseverance, was sent 249 million miles from Earth to the Red Planet.

Despite hitting the Martian atmosphere at 12,000 miles an hour, the ingenuity of the scientists who built it managed to land it safely.

Its mission is to search for life beyond Earth.

The rover is the size of a small car and is equipped with sophisticated cameras and lasers to analyze the chemical makeup of Martian rocks, as well as ground-penetrating radar to identify the chemical signatures of fossilized life.

Later this month it will launch a drone, which will be the first vehicle to fly in another planet’s atmosphere.

Everything I just typed is absolutely incredible when you think about it.

Bravo, NASA!

Sometimes it’s nice to see a win for the home team.

Power Loser

Again, numerous contenders:

Robinhood's decision to restrict trading on GameStop stock put it squarely in the hot seat in front of the U.S. House Financial Services Committee.

But as my buddy Bill Griffo from Power Income opined, the Congressional GameStop Hearing was, “A big nothingburger.”

But Robinhood did have some fallout, as a California federal judge refused to toss out a proposed class action alleging that the app’s repeated service outages harmed retail stock traders.

And “Roaring Kitty” who, despite easy treatment on the Hill, did receive a class-action lawsuit of his own.

Keith Gill, known as Roaring Kitty on social media sites like the WallStreetBets Reddit forum, along with his brokerage MMI, was hit with a lawsuit accusing him of misrepresenting himself as an amateur investor and profiting by artificially inflating the price of the stock.

The suit alleges that Gill is a licensed securities professional who manipulated the market for his own profit.

It also says that, “He caused enormous losses not only to those who bought option contracts, but also to those who fell for Gill’s act and bought GameStop stock during the market frenzy at greatly inflated prices.”

The suit was filed on behalf of Christian Lovin who sold $200,000 worth of call options on GameStop shares when the stock was below $100. The stock quickly moved above $400 a share, forcing him to buy the calls back at elevated prices.

I read the 35-page complaint. While there are some damning accusations, it was brought as a class-action, which will be difficult to maintain with just one named plaintiff.

Power Loser of the Week

But my Power Loser of the week is the Texas Power grid, which failed on multiple levels.

Naturally, that failure was instantly politicized, with one side blaming renewable energy, and the other blaming climate changes, fossil fuels and old infrastructure.

Tuesday was the coldest day in North Texas in 72 years, and the Dallas-Fort Worth area reached a record low of -2 degrees. 

The cold temperatures along with freezing rain caused wind turbines to freeze to a halt, knocking out almost half of the state’s wind turbine energy.

Wind power is the fastest-growing source of energy in the Texas power grid and provides 23% of the state’s energy. Wind is also the state’s second-largest source of energy after natural gas.

Folks on the right immediately jumped at the opportunity to blame green energy programs for the grid failure.

But oil and natural gas did not fare too well either, with many pipes freezing up. This caused oil and natural gas futures to fall.

The left, meanwhile, took the opportunity to blame all of the issues in Texas on climate change.

The entire mess highlights the challenges the Biden administration will face in modernizing the electricity system to run entirely on wind turbines, solar panels,and batteries.

Many in the administration are now arguing that the federal government and energy businesses will have to spend trillions of dollars to harden electricity grids against the threat posed by climate change and to move away from fossil fuels. 

John Kerry, the White House’s special envoy on climate, doubled down on this position when he warned that the U.S. only has less than a decade left to avoid a climate catastrophe. He made that statement on Friday, the same day the U.S. formally reentered the Paris Climate Agreement.

The weather is causing DC to make ripples.)))

While there are two sides to this argument, the administration has a head of steam and is controlling the narrative. 

It will be hard to arrest those power moves. 

I anticipate a big infrastructure spending bill to be fast tracked and we’ll talk about what could mean for you in the weeks ahead.

Cutting Through the Noise for You.

Frank

Caution: Hot

Hey Influence Traders,

Happy Presidents Day … Week!

My kids are off from school, which means distractions at home (sometimes I do miss going to an office).

Speaking of presidents (or former presidents) and pandemonium, it looks like the side-show circus in D.C. might have finally come to an end …

Hey, I almost wrote that with a straight face!

Seriously, with Trump Impeachment Part Deux wrapped up, perhaps D.C. will now get down to business.

Time will tell if that is a good thing.

I’m from the Government and I’m Here to Help

As Ronald Reagan said, there are no more terrifying words in the English language.

It looks like the Biden administration is going to leverage its Hill majority to push through the $1.9 trillion spending package with or without Republican support.

This will be followed by $2-3 trillion in infrastructure spending — and the economy has already seen trillions in stimulus the past year.

All of this money pouring into the economy raises fears of it overheating and causing inflation.

Administration officials dismissed the notion, however, rationalizing that it is relief and not stimulus.

Stimulus vs. Inflation Concerns

Biden’s $1.9 trillion stimulus plan would be the second largest in U.S. history.

Only 2020’s CARES Act was bigger, but the impact was arguably less since it came at the start of the pandemic and in the depths of the recession.

But this round will go into an economy that’s already bounced much of the way back.

Biden, his advisors and Federal Reserve Chair Jerome Powell have brushed aside inflation concerns.

But the fiscal and monetary policies that have been implemented and are being discussed will almost certainly cause inflation to pick up.

It’s OK to Overheat A Little …

The Federal Reserve targets a 2% inflation rate but will allow that rate to go higher if it facilitates maximum employment.

Almost 10 million fewer Americans were working last month than in February 2020.

Janet Yellen wants to get unemployment down to 4% and is willing to use aggressive policy to do so.

The administration is calling this a goal of a “high-pressure economy” that pulls low-income workers back into employment.

But Overheating Too Much = Inflation

Even some on the left are voicing concerns. Lawrence Summers, a former Treasury secretary and top adviser in the Clinton and Obama administrations, stated that Biden’s plans could stir up a whirlwind of rising prices.

Inflation impacts the relative valuation of current and future profits and thus stock prices.

Inflation fears can cause changes in investment focus, such as sector rotations, and there are reasons to fear inflation.

Household Spending Will Rise

When spending increases, prices tend to follow.

Reopening the U.S. and world economies will permit spending.

Throughout the pandemic, many people have been saving money and U.S. household savings deposits are high – currently above $11.1 billion.

Source: Federal Reserve Bank of St. Louis

All of that savings will drive demand when the economy reopens.

Demand Squared

Massive stimulus packages will increase demand.

Some economists are worried that $1.9 trillion of stimulus will put cash in the hands of folks who don’t really need it and they will pour that money into financial markets.

It will take time for the manufacture and supply chain of goods to catch up with the increased demand.

Demand Cubed – Let It Run Hot

As I said, the Fed has committed to keeping interest rates low, even if inflation starts to appear.

Accommodative monetary policy suppresses the incentive to save and lowers the burden of having debt.

Larry Summers recently opined that extra spending combined with a successful vaccine rollout could result in “an economy that is literally on fire.”

Perfect Fourth – Infrastructure is on the Way

Following on the heels of the stimulus spending will be Biden’s $2-3 trillion infrastructure plan.

While that was lining up to be a mid-to-late 2021 initiative, the power outages across the U.S. from this week’s snow will be used to highlight the need for new infrastructure and energy policy.

Impact on Investments

Despite the Fed’s wish to be accommodating, at some point inflation will force it to act and begin to raise interest rates

Rate hikes generally impact the value of future profits.

Profits impact stock prices.

Monetary policy causes massive ripples. It’s time to start watching them.

That’s enough good news –enjoy the rest of your week!

Cutting Through the Noise for You,

Frank

Week in Review and Things to Watch

Hey Influence Traders,

Welcome to the (three-day) weekend!

All the snow in my yard is making me think of one thing – SKIING!

We didn’t see a lot coming out of DC this week that directly influences the markets, but there are some signals being sent that will cause ripples down the road.

Since I was away, and in a Mexican tequila haze, I missed a few things myself, so let me give some highlights and look at opportunities:

Impeachment

The House impeachment managers wrapped up their case against former president Trump.

Trump’s defense team presented its case.

You can expect a vote soon after they’re done.

Chance of conviction – nil.

Level of distraction – Mario Level 100

What this did accomplish was slowing down the confirmation of President Biden’s nominees and his agenda moving through congress.

But don’t worry, Biden made that up with executive orders!

Executive Orders

Biden continued his onslaught of executive orders – 52 so far.

·       15 addressing COVID

·       10 on immigration

·       7 dealing with “equity”

·       6 with the economy

·       5 with the environment

But he said it is nothing to worry about since “I’m not making new law; I’m eliminating bad policy.”

Psst – eliminating a law is … making new law.

One that I’m keeping an eye on is his order to elevate climate change to be an essential element of US foreign policy and national security.

Part of the order is the development of new emissions reduction targets, which will be announced by April 22. This could have a massive impact on US industry and lay the foundation for his upcoming green infrastructure spending program.

To telegraph this intent, on Wednesday, Biden also promised to use the government’s purchasing power to fund a federal clean-car fleet.

In light of these announcements, Bloomberg reported that clean-energy companies are raising record amounts of cash through stock offerings.

  • Shoals (Ticker: SHLS), a maker of solar-power components, raised $1.9 billion in an upsized initial public offering, pricing the shares above a marketed range.

  • Plug Power (Ticker: PLUG), which has seen its stock nearly quadruple since Election Day, announced Tuesday it was selling $1.5 billion in shares.

  • Gevo (Ticker: GEVO), a biofuel maker, sold $350 million in stock.

  • ReneSola Ltd. (Ticker: SOL), a solar developer, announced two offerings.

Biden also announced that he will soon issue an order addressing the short supply of semiconductors by undertaking a “comprehensive review of supply chains for critical goods.”

The review will look to improve production amid a global chip shortage, which hurts industries like the auto sector.

That was not a sector I was monitoring, but now I am.

Covid-19

The Biden Administration says that it has acquired enough vaccine doses to inoculate nearly all Americans.

Now – how to deliver them? I like Mark Sebastian’s plays on pharmacies.

Nominations

Biden nominated Julie Su to the No. 2 post at the Department of Labor under Marty Walsh. Why is this important?

She is an advocate for unions,so we anticipate power moves from the DOL to promote and enforce unionization efforts that could impact small and gig businesses.

Su currently serves as Secretary of the California Labor and Workforce Development Agency and oversees the enforcement of labor laws and employment programs.

Labor groups love her but she was criticized for the fraud in the state’s unemployment system that occurred under her watch.

Specifically, it was announced last month that hackers, identity thieves and overseas criminal rings stole more than $11 billion of the $114 billion that California paid in unemployment claims last year.

We’ve said that cybersecurity companies should do well under the Biden administration, and this is further evidence of that need.

Reddit

Government agencies, including the Department of Justice and the Commodity Futures Trading Commission are lining up to go after Robinhood and Reddit.

The DOJ’s fraud section and the San Francisco US attorney’s office have reportedly subpoenaed information from Robinhood.

And Reddit is under investigation by the CFTC for misconduct with traders at the subreddit r/WallStreetBets, who spurred the buying spree of GameStop along with other “meme” stocks. 

Finally, the Financial Industry Regulatory Authority warned broker-dealers to be wary of digital platforms with interactive and “game-like” features, as they could run afoul of the regulator’s “Communications With the Public” rule when using them.

Frenzie buying is not going away, but it will certainly be under the microscope.

The Economy

Despite warnings of overspending and inflation, Biden and the Hill are pushing forward with massive additional stimulus.

Many democratic lawmakers were pleased with data indicating that the economy did not heat up as much as anticipated and that the deficits came in lower than expected — which means that the checks can fly!

That has to be paid for, and Sen. Elizabeth Warren might be a key figure in that payment plan.

We know that taxes have to go up to pay for spending.

Warren is set to become a member of the Senate Finance Committee and plans to introduce legislation implementing a wealth tax on fortunes over $50 million.

“Wealth tax” legislation aims to impose a two-cent tax on every dollar of individual wealth over $50 million and an extra surtax on every dollar of wealth over $1 billion.

She has also hinted at a financial transaction tax.

LOOK OUT!

It’s time to “pay the piper”  and Bill Griffo from Power Income and I will be diving into that topic heavily.

(Speaking of Bill, grab his incredible new Trade the Fed ebook that was released this week! It will be very useful in the months ahead.)

It was a week of noise in DC … but some ripples are starting to form.

We’re going to keep an eye on how those ripples develop.

Cutting Through the Noise for You.

Frank


Possibly the Most Important Metal

Hey Influence Traders,

I’m back to the cold and snow of the Northeast.

Mexico was amazing – celebrated a friend’s birthday and drank my fair share of margaritas (and perhaps a few other’s fair shares too).

Lo siento mucho!

Pre-Covid
Mexico felt almost like pre-covid … at least where we were in Tulum.

Not a lot of mask wearing and a true tourist mentality.

We did have to get tested before returning to the US, which is a great business for in room testers at Mexican hotels.

Green Business
While green vehicles have not been embraced in Mexico, Tulum certainly focuses on keeping things clean and natural.

They like natural surroundings and maintain them with a low human and carbon footprint.

I’m going to miss the natural approach.

Back to Work
I definitely didn’t miss the snow.

And I can’t say that I missed seeing the start of the next round of DC circus performances.

The impeachment is in full swing – the markets don’t seem to care and they shouldn’t.

It’s just more noise and distraction.

What I did see when I got home were a lot of Tesla’s and a lot of talk about green energy/being carbon neutral.

And I saw an opportunity.

More batteries = more lithium = more digging out of the ground.

Lithium & Cobalt
Last go around, we discussed Cobalt.

Today, we’re digging in on its partner – Lithium.

The average electric vehicle (EV) battery weighs about 1,000 pounds and requires the excavation of more than 500,000 pounds of materials.

Fun fact: About 140 pounds of a Tesla Model S battery is lithium.

While EVs account for just 3% of the U.S. car market, demand here and abroad is rising, and the demand for lithium will rise with it. GM, for example, announced last month that it will move to all-electric production by 2035.

Many lithium stocks saw great gains in 2020, but there is currently no replacement for its use in generating, storing and using energy.

So, as demand rises, we will see supply issues … which will cause the price of the commodity to rise and make lithium a solid long-term investment.

I’m keeping my eye on a few of the big producers:

Albemarle (Ticker: ALB): ALB is Charlotte, N.C.-based company that is the world’s largest maker of lithium for EV car batteries. ALB’s stock price has been volatile over the years, but it is making smart moves. It just raised over $1.2 billion from a recent stock offering to increase production, and announced that it plans to double battery production in its Nevada plant by 2025. This plan should be helped by Biden’s Buy America program. ALB will release it’s 4Q results on Feb. 17  and is expected to beat estimates.

Tesla (Ticker: TSLA): You can’t discuss EV batteries and lithium without mentioning TSLA. Yes, the stock price has gone through the roof and is probably due for a correction, but TSLA continues to impress.

The EV car market is growing and TSLA is the undoubted leader in the space. While competitors are coming onliine, no company has the brand appeal of TSLA, which will allow it to remain a dominant supplier of EV cars.

Importantly, TSLA is making gains in the U.S., not just in market share but with a reputation for providing high-paying jobs. In short, while many EV car makers talk a big game, TSLA tends to deliver on its ideas.

In addition, the pandemic showed us the downside of not controlling critical supply chains, and TSLA is responding to that threat by dipping its toe into the lithium mining business. Expect that initiative to grow.

Lithium Americas (Ticker: LAC):  LAC is a development-stage lithium mining company. LAC owns and operates the Thacker Pass lithium project in Nevada. The mine is estimated to have enough lithium reserves for a 46 year mine life at full capacity. Phase one of the mine is expected to be commissioned in 2022.

LAC will require some belief in the future of EV car needs. LAC gained 295% in 2020 and moved another 57.1% in January on good news regarding the expected commercialization of the Thacker project. It might be fun to watch for dips.

Cutting Through the Noise for You,

Frank

These Pricy Metals Are Worth A Look

Hey Influence Traders,

Greetings from Mexico – I made a Power Move to escape the cold/snow and catch some rays!

Mucho gusto!

We’ve got a new Super Bowl champion (with an old captain at the helm).

That win kicked off the week with a bang and it does not look like it will slow down.

We’ve got a $1.9 trillion stimulus package on the horizon …

And the Fed is arguing for full employment next year …

Meanwhile, the circus continues in DC as Trump’s second impeachment trial kicks off “with a sense of urgency.”

The outcome might be pre-ordained, but it will be good theater either way.

Champa Bay!

Never count the old guy out – Brady led the Bucs to a win and claimed his seventh Super Bowl ring.

A lot of people said that Brady was too old to compete with the young guns. But don’t dismiss the old guard … particularly when they want it.

Experience counts – whether looking at quarterbacks and teams or trading stocks!

How Did I Do?

I picked the winner, lost the over and won the coin toss.

In the words of Michael Lee Aday (aka the recording artist Meatloaf), “Two out of three ain’t bad.”

By the way, I was one of the 23 million people who bet a total of $4.3 billion on the game.

Stimulus and The Fed

Many on both sides of the aisle are saying that President Biden’s planned $1.9 trillion recovery plan is excessive and will lead to inflation.

Treasury Secretary Yellen came to Biden’s defense this weekend and urged Congress to pass the bill, claiming that it will lead to full employment next year.

She argued on Sunday that there are 10 million Americans who are unemployed and another 4 million who’ve dropped out of the labor force, and that these people and small businesses need help to get back on their feet.

Yellen continued on, saying that while inflation is a concern, she has the experience to deal with it, and there is no reason in her mind to have a long, slow recovery when we can act fast.

Without the bill she believes that it will take until 2025 to get unemployment to the key 4% level.

Her views seem to be in the minority in both parties

In addition to the general dismissal of the inflation concern, there was no mention of the nature and quality of the jobs that she believes will be created.

We knew we were going to get an aggressive Treasury Secretary …

And to paraphrase a famous football coach rant, “She is who we thought she was!”

Old Guard

Alphabet, Amazon, Apple, Facebook and Microsoft saw combined revenue growth of $1.1 trillion over the past year and their combined market caps skyrocketed to $8 trillion

All that tech is going to need things dug out of the ground.

So don’t bury mining …

Lithium & Cobalt

Lithium demand is being driven by the battery market, particularly with the rise of electric vehicles. 

Big producers like Albemarle (Ticker: ALB), Tesla (Ticker: TSLA) and Lithium Americas (LAC) look strong for the long-term.

But there is another crucial element to battery production – cobalt.

Cobalt is a rare, hard, metallic element with broad applications, from magnets to chemical catalysts.

But more than half of all cobalt produced is used to make battery chemicals for EV batteries, along with production of superalloys used in aircraft engines.

Cobalt is expensive, which means that price swings can greatly impact revenue …

I’m keeping my eye on these two:

Glencore (Ticker: GLNCY): The world’s largest cobalt producer. Cobalt is a minor part of its business, but every $1 change in the price per pound of cobalt can impact Glencore’s earnings by $100 million.

Vale (Ticker: VALE): A Brazilian miner that recently struck a deal to sell 75% of its future cobalt production from its Voisey’s Bay mine in Canada to two companies: Cobalt 27 Capital and Wheaton Precious Metals. That move gave it the cash to increase development.

Adios for now …

Cutting Through the Noise for You,

Frank

Week in Review

Hey Influence Traders,

It was certainly an exciting week in the markets between the GameStop Saga of ‘21 and a sputtering #silversqueeze.

GameStop took off toward the moon and tried to drag a few other names and the silver market along with it.

That mostly fizzled out — but not before catching the attention of the Hill, regulators and the SEC.

It will be interesting to see how long that lasts.

Otherwise, it was a relatively quiet week in Washington from a ripple perspective.

Executive Order Count

Biden certainly slowed down this week from his initial executive order flurry.

According to the Washington Post, to date he has issued 29 new executive orders and revoked another 30 that were issued by former President Trump.

The majority of the recent orders have centered around immigration reform, with a smattering of national security actions.

Confirmation Calendar

The Senate has now confirmed six of Biden’s 23 cabinet picks … with no controversy.

For those keeping score, it’s (cue Chicago Bulls 90s intro music):

  • Janet Yellen – Treasury Secretary
  • Pete Buttigieg – Transportation Secretary
  • Alejandro Mayorkas – Homeland Security Secretary
  • Antony Blinken – Secretary of State
  • Llyod Austin – Secretary of Defense
  • Avril Haines – Director of National Intelligence

With the exception of Yellen, these picks are not too exciting and aren’t causing a lot of K-Street to Wall Street ripples.

The Next Batch

We do have a few upcoming hearings that will have a bigger impact on the markets, so I’m keeping a close eye on this quartet of women:

  • Jennifer Granholm – Secretary of Energy
  • Deb Haaland – Secretary of the Interior
  • Cecilia Rouse – Counsel of Economic Advisors Chair
  • Isabel Guzman – Small Business Administration Administrator

Biden has issued a number of executive orders around energy and climate policy, and Granholm and Haaland will each lead departments that will have significant influence over such policy direction.

Rouse and Guzman on the other hand will help lead the administration’s economic response to the pandemic, including getting government grant money into the hands of small businesses.

It’s important to remember that political appointees can often have more impact on the market than the elected officials who appointed them, because they’re responsible for how policy is implemented.

Next time I’ll review a few names that could be impacted by the policies of the four nominees above.

I’ll also focus on some smaller mining sectors that, while not as large as gold and lithium, should not be ignored.

The Super Bowl

Tampa Bay is a 3-point underdog. I think that they ill not only cover — but will win outright.

Yes, Mahomes is the future of the sport and the Chiefs are the defending champs … but this could be Brady’s last stand for another ring. I think that he’s going all-in for his (and Option Pit Chief Income Trader Bill Griffo’s) new home town.

Plus the Bucs have a solid pass defense.

Total points is 56 – I’ll take the over with the two QBs driving those buses. I’m shooting from the hip on this one, as I’m basing my decision purely on offense.

Coin toss – heads (just because).

Cutting Through the Noise for You,

Frank Gregory

Mining By Another Name Is … Crypto

This week’s #silversqueeze was more of an “end-of-first-date, let’s-just-be-friends side hug” than a big squeeze But it was fun theater either way. There are, however, some ripples in the water that are causing other mining stories to move. I’ve written a lot about traditional mining lately (and will continue to in the future), but today let’s go in a different direction. Fast and Furious By way of background – I founded and ran a blockchain company a few years ago. Bitcoin and Ether have had a fast and furious week thus far. As of this writing:
  • BTC = up 16.3% since Sunday to $38,691
  • ETH = up 32.3% since Sunday to $1,691
But I’m not here to talk about owning crypto, which I think is a good long-term hold (and certainly high-octane to trade). We know that crypto is highly volatile … But there are some dots to connect on a few crypto companies. Digital Convergence A number of ripples are colliding and amplifying Gary Gensler, a crypto advocate, is going to be the next SEC Chairman … And rising crypto prices are causing systemic problems that can be exploited. Let’s take a look at Biden’s nominee to head the SEC, who will be instrumental to the future of crypto currencies … Gary Gensler, SEC Gensler has a deep background in crypto. He has testified on digital currencies policy and regulation before Congress and has taught blockchain and digital currencies at the MIT Sloan School of Management. Although the Senate has not yet scheduled a hearing on his nomination – it’s busy with other priorities (and some nonsense) – he is expected to easily pass. He received 88 Senate votes for confirmation as chairman of the Commodity Futures Trading Commission in 2009 when Democrats controlled the majority. Gensler has a reputation as a tough regulator who is expected to bring greater federal oversight to the crypto market. And he’s been very open about his views on crypto:
  • Pure-cash cryptocurrencies like Bitcoin “need more protection.”
    • Cryptocurrency exchanges require more regulation. “If it gets broad adoption, if we really think the crypto world is going to be part of the future, it needs to come inside of the public policy envelope,” Gensler said in 2018. “That means we need to guard against illicit activity. And yes, we need to protect investors. The crypto exchanges, big exchanges like Coinbase, need to come within the SEC or the CFTC.”
  • Greater oversight will lead to greater mainstream adoption.
Gensler has also advocated against illegal securities offerings and will support the SEC’s efforts to go after them, such as the recent lawsuit against Ripple Labs Inc. related to its crypto currency XRP. In a 2019 keynote at Harvard Law School, Gensler said, “I don’t think the SEC is going to leave many (initial coin offerings) off the hook.” Regulations can be positive or negative, but Gensler’s positions are generally viewed as good news for digital assets.  He’s seen as open-minded about crypto and he believes that regulators can play a role in boosting innovation. And greater main-stream adoption would most likely lead to more money in digital assets — and higher prices. The Downsides of Higher Prices Now for a little inside baseball — the crypto mining and its speciality hardware markets have historically predictable moves that track with the price of BTC and ETH. When crypto is down, hardware for “mining rigs” is ample and affordable but investment capital is scarce … When crypto prices pop, investment capital flows freely but hardware is scarce and expensive. I had a conversation over the weekend with a friend who runs a large server farm. His demand for space is going through the roof – everyone wants machines, but chips are scarce – which means that hardware prices are going vertical. Crypto Mining Ripples Crypto mining is the process of obtaining cryptocurrencies by solving cryptographic equations with computers. “Miners” validate data blocks and add transaction records to a public record, or ledger, known as a blockchain. The global crypto mining market is projected to go from $1b+ today to $2.6b in 2026, for a 16.8% compound annual growth rate. COVID hurt crypto mining companies, both logistically and in terms of miner supply. A return to post-COVID normal will be a positive factor for crypto miners, so I’m going to watch a few: Riot Blockchain Inc. (Ticker: RIOT): This Colorado-based company focuses on BTC mining and has a market cap of $1 billion+. Over the past year it has increased its BTC mining hash rate by “an expected 65%” by upgrading chips and machines. The company has so far been unprofitable but the increase in BTC price could be a catalyst for change. Marathon Patent Group (Ticker: MARA): This Nevada-based company made big moves in 2020 and grew to a market cap of $600 million, with an exponential growth rate as BTC prices increase. Marathon invests in expansion, so further BTC price appreciation should boost profitability. Canaan (TICKER: CAN): Most BTC mining equipment comes from China, and Canaan is a Chinese BTC hardware manufacturer. Rising BTC prices should lead to more hardware sales. In September 2020, the company repurchased $10mm shares. This was a fun trip down the crypto mine. Back to more tactile efforts in the next issue. Cutting Through the Noise for You. Frank

More Mining Please

Hey Influence Traders,

It’s Monday, the first day of February, and I’m expecting a wild week in the markets.

We’re coming off last week’s Reddit run, but unlike other rallies that impact one sector, this one is trying to move around the Ouija Board.

The Next Target
Are commodities like Gold and Silver next?

We are certainly starting to see some movement, particularly in silver names. BlackRock reported on Friday that its iSHares Silver Trust (Ticker: SLV) has seen almost $1 billion in inflows.

First Majestic Silver (Ticker: AG) and Pan American Silver (Ticker: PAAS) are both up in pre-market activity.

Does the Reddit crowd want to recreate the 1979-80 move that saw silver jump 713% in a year?

It might not be as easy as the Redditers hopes … commodities don’t always trade like company stock and there are big off-market exchanges that banks use to trade commodities.

Also, after the Hunt brothers tried to corner the silver market in 1979 and ran up the price, the COMEX adopted “Silver Rule 7” which put restrictions on the purchase of commodities on margin.

But that doesn’t mean it can’t be done – there is short interest in some of these names, and we saw what that meant for GameStop.

Like I said, it should be a wild week.

DC Response?
The SEC is going to be under pressure to look into GameStop and the Reddit phenom.

You’re going to hear lots of questions coming from Washington:

  • “What happened?”

  • “Was their market manipulation?”

  • “Is the system flawed?”

Gary Gensler is still waiting to be confirmed as SEC Chairman. His first days should be lively.

The SEC is used to going after manipulation by the big guys. it will be interesting to see how it addresses a merry band of Reddit users going after the kings …

Particularly when their motivation was more about sticking it to hedge funds than making money.

Gensler has a background in stopping market manipulation. As the head of the FTC he brought dozens of cases against big banks for manipulating key interest rates.

But going after small investors is not what the SEC is used to doing … and it will be a political landmine.

Many on both sides of the aisle are cheering the actions of the Reddit mob and are calling for Robinhood and hedge fund heads to roll.

I anticipate a lot of long and drawn out investigations that will make it look like a lot is being done.

I will be monitoring the rhetoric about “fundamental problems with the system” as that will have the potential for long-term impacts.

Enough With The Noise
Let’s get back to mining. Last time I talked about global mining companies that could do well.

But what about domestics?

Well, Joe Biden has instituted a Buy America program.

His intent is to help strengthen union jobs and domestic production by requiring more goods and services to be made in America when purchased for government contracts.

Biden has set a 180-day timeline for revamping the procurement process to meet this goal.

He is also going to institute massive infrastructure spending on traditional and green policy projects.

This will benefit mining companies.

Domestic Mining
Many of the biggest global mining companies are located in Australia, Canada, China and South America.

But the U.S. has its fair share as well.

Here are the leading U.S. mining companies based on 2020 revenue (in billions of U.S. dollars):

 

There are also a number of high-quality operations in the U.S. that should benefit from traditional infrastructure and green deal spending policies.

I’m keeping my eye on these two:

  • Freeport McMoRan (Ticker: FCX): This Phoenix-based company is one of the world’s largest copper producers with operations in the Americas and Indonesia. It also produces gold and silver. Over 70% of its sales are from U.S. operations. FCA just beat its EPS by 33%, yet saw its stock price slide with the rest of the market in the closing weeks of January.

  • Albemarle (Ticker: ALB): This Charlotte-based company is a global leader in lithium and bromine and recorded a 36.4% increase in sales in 2020 over 2018. I like that just 25% of its sales currently come from North American operations (there’s room to grow in the U.S.). ALB is a little rich with a 45 P/E ratio, but it recently topped its quarterly consensus EPS estimate of $0.78 by $0.31, despite a year-over-year decrease in revenue. Like FCX, it saw its stock price slide in January. I’m going to keep an eye on its next quarterly earnings report which is set to be published on Feb. 17.

I think that these two could be real gems.

Cutting Through the Noise for You,

Frank

Hell Hath Frozen Over – Let’s Go Mining!

Hey Influence Traders, Well, that was an exciting week on both K-Street and Wall Street. A bunch of individual investors on Reddit put their collective voice behind GameStop and some other stocks, drove up the prices, and stuck it to the MAN … or in this case, a few hedge funds. Melvin Capital announced over the weekend that it lost a whopping 53% in January. And the nation learned new terms like “short squeeze” and “gamma boss.” We also learned that the trading platform Robinhood was a little more tied into Wall Street than previously thought. Because Robinhood shut down trading in some targeted names, and thus shut down the little guys. But the little guys lost twice because a lot of the hedge fund money lost is money managed for pensions and other funds of … little guys. It’s never as clean as it looks! Too Rich for K-Street Naturally, this drew the ire of K-street. I’ve occasionally considered what I will have to pack on my train ride to hell with some of my friends … but apparently it’s ice skates, cause hell officially froze over this past week. Look no further than Ted Cruze and Don Trump Jr. agreeing with AOC and Elizabeth Warren. The list of politicos from both sides of the aisles (and Elon Musk to boot) who piled on to the controversy became almost absurd. The pitchforks are out, the torches are lit, and the townspeople are marching from the square. The mob is coming for someone … and it ain’t the little guy. Congress is going to hold hearings. The SEC might get involved. Rep. Maxine Waters, head of the U.S. House Financial Services Committee, said that, “We must deal with the hedge funds whose unethical conduct directly led to the recent market volatility and we must examine the market in general and how it has been manipulated by hedge funds and their financial partners to benefit themselves while others pay the price.” This is some dangerous rhetoric, but at the moment it is still just noise. Here at Power Moves we are watching the situation closely because these are the kinds of ripples that could jump across ponds and have unintended consequences. Stay tuned for more! MORE NOISE — DC Marches On While GameStop provided a nice distraction, the White House continues its march. In the first nine days of his presidency, Biden has now issued 40 executive orders, including:
  • Halting the keystone pipeline
  • Rejoining the Paris Climate Accords
  • Halting new oil and natural gas leases for 60 days
  • Signing a bill ordering the federal government to “advance environmental justice”
The President is not only pursuing his Green New Deal agenda, he’s accelerating that pursuit. But he also signed an order requiring the federal government to support U.S. businesses, which included raising the price preference for domestic goods … This could bode well for domestic producers. I’ve been talking about steel and plastics, both of which are proving to be solid plays. But there’s a third leg to that stool that will also play out … mining (and concrete, too, but I’m looping that in with mining). Why Mining? The Big Picture Wind and solar are integral to Green New Deal policies. For both technologies, ALL the underlying key components — concrete, steel and fiberglass for wind; silicon, copper and glass for solar … need to be mined! To build the number of solar panels called for by 2050 to meet the Paris green goals, it is estimated that:
  • Silver mining will jump 250%
  • Indium mining will jump 1,200%
  • Rare Earth mining will jump between 300%-1000%
To replace gas powered cars with electric vehicles, cobalt and lithium mining will have to rise more than 20x from today’s levels. For reference, 50-100 pounds of various materials are mined, moved and processed for every pound of battery produced. Why Mining? The Details Mining stocks saw a rise going into the new year, with gold and silver reaching highs … but they have since seen pullbacks. As with other stocks that I watch, I like well diversified companies that will benefit from green policies and have seen a price pullback. Let’s start with gold silver and copper:
  • Barrick Gold (Ticker: Gold): A leading mining company with operations in more than a dozen countries. In addition to gold, it is a leading copper supplier. I like that it has built a cash-rich balance sheet by selling non-core assets and repaying debt.
  • Gold Fields Limited (Ticker: GFI): Has a diverse set of resources and reserves, with a focus on gold. GFI has nine mines in Chile, South Africa, Australia, Ghana and Peru, and maintains massive gold and copper reserves.
  • Agnico Eagle Mines Limited (Ticker: AEM) An exploration, development, and production business with mines in Canada, Mexico and Finland. The company produces and sells gold, silver, zinc and copper. AEM has seen price contraction, but it’s outlook is positive and it will be announcing fourth quarter and full year 2020 results on Feb. 11.
What About Silver? There are rumors floating around that the silver market is the next target of the Reddit mob. If so, listings with shorts could be interesting. These include:
  • iShares Silver Trust (Ticker: SLV)
  • Pan American Silver Trust (Ticker: PAAS)
  • First Majestic Silver Corp. (Ticker: AG)
If the Reddit crowd acts, silver could be a wild, short-term ride. But don’t forget to also focus on the long game. More to come soon on mining, including analysis of domestic companies and alternate metals. Cutting Through the Noise for You. Frank DISCLAIMER: FOR EDUCATIONAL AND INFORMATION PURPOSES ONLY; NOT INVESTMENT ADVICE. The materials presented from Option Pit LLC are for your informational and educational purposes only. Neither Option Pit LLC nor its employees offer investment, legal or tax advice of any kind, and the analysis displayed with various tools does not constitute investment, legal or tax advice and should not be interpreted as such. Using the data and analysis contained in the materials for reasons other than the informational and educational purposes intended is at the user’s own risk. DISCLAIMER: OPTION PIT LLC IS NOT AN INVESTMENT ADVISOR OR REGISTERED BROKER. Option Pit LLC is not responsible for any losses that may occur from transactions effected based upon information or analysis contained in the presented materials. Specific trading ideas or strategies discussed in the presentations or materials are entirely illustrative and do not constitute the solicitation of a transaction (or transactions) or a recommendation to execute a particular transaction or implement a particular trading strategy. DISCLAIMER: TRADE AT YOUR OWN RISK; TRADING INVOLVES RISK OF LOSS; SEEK PROFESSIONAL ADVICE. To the extent that you make use of the concepts with the presentation material, you are solely responsible for the applicable trading or investment decision. Trading activity, including options transactions, can involve the risk of loss, so use caution when entering any option transaction. You trade at your own risk, and it is recommended you consult with a financial advisor for investment, legal or tax advice relating to options transactions.

(((The Biden Ripple Effect)))

Hey Influence Traders,

 

Is there any ink left in DC?

 

More than 36 executive orders already from President Biden and counting …

 

My hand would have cramped up with all that writing!

 

The big move was halting oil and gas drilling on Federal lands … which drew immediate praise and scorn depending on the side of the aisle. (You can guess which was which.)

 

That’s a double whammy on the heels of the Keystone Pipeline shutdown, which is estimated to have cost 11,000 direct and more than 60,000 indirect jobs.

 

The Ute Indian Tribe in Utah claimed the drilling moratorium violates the tribe’s sovereignty and an industry group has already brought a lawsuit against it.

But Biden knows that his policies will not move quickly and there is always opposition.

 

Former President Trump fought for a year to halt drilling off the Atlantic coast (which he finally won).

 

(((Ripples Are Moving in Many Directions)))


There continue to be many ripples in the political pool …

 

Some seem to be colliding, but if you look closely they are also aligning.

 

Here are a few:

 

  • Janet Yellen has been confirmed as Treasury Secretary. She is going to start looking at stimulus plans and that means infrastructure spending – demand!
  • Biden is taking swift steps to limit oil (Keystone and permitting) – reduced supply!
  • Biden signed a “Made in America” executive order – good for American suppliers!
  • Corporate America, including the oil/gas and automotive industries, are accepting that tighter emissions standards are on the horizon and are ramping up to meet that new reality, not slowing down – demand for raw materials is going up!
  • Green infrastructure spending requires steel and petroleum – demand is going up!

 

While they might not be as fast out of the gate as President Biden, some ripples are aligning and will pick up speed.

 

(((Patience Is a Virtue)))


There is always noise in D.C.

 

That noise often causes ripples.

 

Sometimes ripples amplify each other, and other times they slow each other down.

 

I’ve talked a lot about steel and petroleum, which are going to be good long-term plays that will benefit from climate policy.

 

But they are not quick hits, and some ripples in DC collided – yes, Biden is limiting supply and increasing demand, but opposition might slow down those moves.

 

That slowing will temporarily cause growth in those sectors to move like … heavy crude.

 

But they will move.

 

Be patient … stay the course. More to come on this.

 

Cutting Through the Noise for You,

 

Frank

DISCLAIMER: FOR EDUCATIONAL AND INFORMATION PURPOSES ONLY; NOT INVESTMENT ADVICE. The materials presented from Option Pit LLC are for your informational and educational purposes only. Neither Option Pit LLC nor its employees offer investment, legal or tax advice of any kind, and the analysis displayed with various tools does not constitute investment, legal or tax advice and should not be interpreted as such. Using the data and analysis contained in the materials for reasons other than the informational and educational purposes intended is at the user’s own risk.

DISCLAIMER: OPTION PIT LLC IS NOT AN INVESTMENT ADVISOR OR REGISTERED BROKER. Option Pit LLC is not responsible for any losses that may occur from transactions effected based upon information or analysis contained in the presented materials. Specific trading ideas or strategies discussed in the presentations or materials are entirely illustrative and do not constitute the solicitation of a transaction (or transactions) or a recommendation to execute a particular transaction or implement a particular trading strategy.

DISCLAIMER: TRADE AT YOUR OWN RISK; TRADING INVOLVES RISK OF LOSS; SEEK PROFESSIONAL ADVICE. To the extent that you make use of the concepts with the presentation material, you are solely responsible for the applicable trading or investment decision. Trading activity, including options transactions, can involve the risk of loss, so use caution when entering any option transaction. You trade at your own risk, and it is recommended you consult with a financial advisor for investment, legal or tax advice relating to options transactions.