- Memes + Social Media + Trading = Inverse Cramer ETF
- CeFi Troubles: Celsius Execs Withdrew Millions Before Bankruptcy
- Musk’s U-Turn on Twitter Deal
- Bitcoin Open Interest Data: Uptober Month Ahead?
- OPEC+ Slashes Oil Supply, Prices to Reach $100/ Barrel
- Investors Can Soon Short Jim Cramer with Tuttle Capital’s Inverse Cramer ETF (link)
Public exposure is a two-way street. On one end, you exert your influence, and on the other, your influence is scrutinized. After running Mad Money for 17 years, the 67-year-old Jim Cramer is taking a social media beating, after a heavy build up.
It all started a year ago with the @CramerTracker Twitter account, having grown since to over 110k followers. By contrasting Cramer’s calls on stock investments with their subsequent performance, the Inverse Cramer meme was born.
But the social media scrutiny buck didn’t stop there. The meme became a financial reality, or soon could be. Tuttle Capital Management (TCM), managing a portfolio worth $36 million for 83 companies, filed to open two Cramer-centered funds.
Embarrassingly named Inverse Cramer ETF and Long Cramer ETF, they would allow investors to place their bets in opposition to Cramer’s recommendations. For example, Inverse Cramer ETF (SJIM) would include up to 25 equally weighted stocks.
Positions against them would be made based on Cramer’s Twitter/TV recommendations, and then exited after a week if Cramer continues his course or when profits targets are met. In other words, the funds rest on the strength of the Inverse Cramer meme. But, does it really hold up under scrutiny as a true meme?
Not really. Given that Cramer co-founded TheStreet.com, all of his calls can be found there. Based on Cramer’s 30 stock recommendations this year, up to June, 60% of his picks were profitable. Cramer’s forecasting power drops only when accounting for year-to-date returns, where 40% of his picks were profitable.
Image credit: Money Crashers
And he made those calls during a historically volatile market downturn, triggered by the Fed’s interest rate hikes. Year-to-date, all market benchmarks are down: Nasdaq (-11%), S&P 500 (-21%) and Dow Jones Industrial Average (-17%). Therefore, even Cramer’s -1.9% YTD don’t seem so bad in the grand scheme of things.
More importantly, Cramer doesn’t even invest personal money into individual stocks. He revealed to his CNBC employer that half of his assets are in hard cash, while 40% are in domestic index funds. The remaining 10% is split evenly between international index funds and gold/crypto.
This suggests Cramer is an investor, not a speculative trader as he appears to be on TV.
The takeaway? Things aren’t always what they seem to be on TV. The big takeaway? The fusion of memes, social media, and trading is continuing to impact financial markets like never before.
- Report: Just Weeks Before Bankruptcy, Celsius Founder Withdrew $10 Million (link)
- Celsius’ Top 3 Execs Cashed Out $17M in Crypto Before Bankruptcy (link)
After Celsius got to $20 billion AuM in August of 2021, research firms like Alpha Sigma Capital were projecting Celsius to reach $30 billion AuM by 2025. What was there not to like: just drop coins for other people to borrow and receive double-digit yields as interest rate. No fuss about it.
Instead, the rising CeFi star erupted into bankruptcy. Why did the experiment fail?
- Interest yield rates were set artificially high (18%) to draw in more users.
- “Extreme market conditions” popped up, plummeting crypto prices, leading to loan liquidations.
- Celsius had loaned funds to other firms, such as 3AC, which went bankrupt.
In other words, the bear market and crypto contagion crashed into Celsius, gobbling up its liquidity. With the bear ripping Celsius apart, there was little to do but declare Chapter 11 bankruptcy.
None of this is news. But Celsius executives made headlines this week as bankruptcy filings were made public. So what happened?
Well, before Celsius suspended withdrawals, on June 12th, then-CEO Alex Mashinsky was still assuring people that Celsius concerns were “FUD”.
Thanks to the Statement of Financial Affairs filed this Wednesday, now we know what was happening in the background.
Mashinksy withdrew $10 million in crypto in May 2022. CSO Daniel Leon withdrew about $7 million between May 27 and May 31. In mid-July, the firm filed for chapter 11 bankruptcy.
After withdrawing some of their own assets, they suspended customer withdrawals, leaving those deposits up for the bankruptcy court to sort out.
The Celsius situation just seems to continue going from bad to worse, as CeFi gets another black eye.
- Twitter Shares Soar 20%+ As Musk Offers to Follow Through on Original Purchase (link)
- Elon’s Back (link)
Over the last three years, Twitter’s business has been less than stellar. It made $1.2 billion in net income, but lost $2.2 billion. Nonetheless, the network effect made it valuable beyond raw numbers. So much so that Jack Dorsey deeply regrets making Twitter a company, calling the move “the original sin”.
This was revealed as part of Twitter’s lawsuit against Elon Musk. The treasure trove consists of hundreds of private conversations, not only between Dorsey and Musk but with crypto bailout king and FTX head Sam Bankman-Fried (SBF) as well.
In one of those messages to Musk, Dorsey said that Twitter should have been a protocol, a “bit like what Signal has done”. Interestingly, Dorsey pointed to an advertising model as an attack vector because “If it has a centralized entity behind, it will be attacked”.
It appears that both SBF and Musk agreed that bot spam can be dealt with by having a blockchain protocol to impose spam cost. This way, users would pay microtransactions to register on-chain messages. To Musk, that seemed like a good idea because “There is no throat to choke, so free speech is guaranteed”.
Apparently, Dorsey was a Musk fan, as Dorsey tried to get Musk a board seat at least a year before Musk put the $44 billion offer on the table.
One message in particular suggested a strong relationship between the two. “I trust you but def will do,” Jack wrote to Elon, in response to Elon asking Jack to warn him if he does “something dumb”.
So, what’s going on with the Twitter takeover now?
The reason why Musk opted out of the $44 billion deal, at $54.20 per TWTR share, is because he claimed Twitter lied about the magnitude of its bot activity, which skewed accurate user base and user activity data. In turn, Twitter sued Musk, and the trial was supposed to begin in October.
This Monday, Musk filed a proposal to the SEC that he wants to close the original deal. Upon the news, Twitter stock jumped by 20%, now holding very close to the original $54.20 deal mark.
TWTR stock reaction to the news of Musk wanting to follow through on his original offer. Image credit: TradingView.
SBF was also active in chatting with Musk, offering to join the deal with a contribution of $5 billion. To that, Musk responded that he doesn’t want to “have a laborious blockchain debate”. It would be safe to assume that Musk doesn’t want a laborious trial either. Or, his legal team convinced him he wouldn’t win the bot battle. Either way, it looks as if the Musk-Twitter deal is going through, afterall.
- Open Interest in BTC Up $1.6B Since the Start of October (link)
Over the last 30 days, Bitcoin outperformed S&P 500 by +5%. Moreover, Bitcoin held its ground against the dollar strength index, which went up by +2.25% in the same period. Typically, Bitcoin fares poorly against DXY as many see BTC as a hedge against currency debasement.
However, a new momentum is arriving that appears to be helping Bitcoin. Year-to-date, EUR (-11.55%), GBP (-14.76%) and JPY (-19.93%) weakened against the USD, causing investor anxiety which compensates for the dollar strength. As this is happening, Bitcoin open interest rose as well.
Since October 1st, aggregate open interest increased by $1.6 billion. Image credit: Coinanalyze
Representing futures contracts, by which traders bet on BTC going up (longs) or down (shorts), open interest consists predominantly of perpetual contracts. These are just futures without expiry dates. Instead, they are perpetually funded, by either longs paying shorts, or shorts paying longs.
When the majority of perps are long, the funding rate is positive, which means that most traders are betting on BTC to go up. The likely reasons for this are two-fold. Firstly, October has been historically known as Uptober, just after the historically lousy September. Going back to 2009, Bitcoin returns average +26.39% in the month of October.
Image credit: BitcoinMonthlyReturns.com
Secondly, the Federal Reserve will have its next FOMC meeting on November 1st, which leaves the entire month without an announcement from the Federal Reserve.
Lastly, some international bodies are putting pressure on the Fed to reconsider its hikes. The United Nations Conference on Trade and Development (UNCTAD) made it quite clear:
“Any belief that they (central banks) will be able to bring down prices by relying on higher interest rates without generating a recession is, the report suggests, an imprudent gamble,”
In numbers, India and Thailand had to spend over 10% of their reserves, $75 billion and $27 billion respectively, to bolster their national currencies. More such global instability is in the cards if the Fed were to continue raising rates, due to the dollar’s role as global reserve currency.
- U.S. delivers angry rebuke of massive OPEC+ production cut — and it could backfire for Saudi Arabia (link)
- Oil prices could soon return to $100 as OPEC+ considers ‘historic’ cut, analysts say (link)
In addition to money supply increase, energy cost is one of the main drivers of inflation. According to a White House statement from June, “energy and food prices account for half of the monthly price increases since May.”
Of course, more so energy as it is used to manufacture and transport food. But how is the oil price determined as the main energy source? Well, by regulating the dynamic between supply and demand. If demand is higher than supply, people will have to pay more for it — sort of.
In the case of oil, a committee sets this dynamic. Specifically, the Organization of the Petroleum Exporting Countries (OPEC). This oil production coordinating body holds 80% of known crude oil reserves, consisting of 13 member nations.
Image credit: opec.org
OPEC+ is an extension with 10 major oil exporters added, including Russia. OPEC+ alone is responsible for 55.4% of global oil production. In contrast, the US is responsible for 18.5%. This week, OPEC+ reached a decision to make the largest supply cut since 2020, by 2 million barrels per day. By lowering supply, the cost of energy will inevitably increase.
Such a move can be construed in a few potential ways:
- OPEC+ is helping Russia after it requested a production cut last week. Because Russia is energy-independent, this would indirectly help the sanctioned nation.
- OPEC+ is bringing target oil production in line with its actual production, which has been lagging over the last year, causing shortfalls. This means that the real-word output will be lowered by about 1 million b/p.
The White House stated they are “disappointed by the shortsighted decision”. To lessen the potential price increase impact in November, Biden admin will release an additional 10 million barrels from the country’s already-depleted strategic oil reserves.
US Crude Oil in the Strategic Petroleum Reserve Stocks. Image credit: YCharts.com
During the week, the price of crude oil increased by +7.27%.
BREAKING: BNB announced it halted transactions after “irregularities” on the chain were discovered. According to Binance, the network is currently under maintenance.
US National Debt hits $31 trillion for the first time, an increase of $8 trillion (35%) over the last 3 years.
Every time the Fed had to seriously fight inflation, they ALWAYS ended up raising Fed Funds above the prevailing core inflation rate.
1980: Core CPI 14%, FF 18%
1984: Core CPI 5%, FF 12%
1990s: Core CPI 6%, FF 10%
1999: Core CPI 3%, FF 6%
2006: Core CPI 3%, FF 5%
These are the top assets held by crypto funds/VCs by market sector:
1. Smart Contract Platforms
3. Data Management
5. File Storage
Credit Suisse is not the only major bank whose price-to-book is flashing warning signals. The list below is of all G-SIBs with PtBs of under 40%. A failure of one of them is likely to call the survival of the others into question.