Global Market Comments
May 27, 2019
Fiat Lux
SPECIAL MEMORIAL DAY ISSUE
Featured Trade:
(A TRIBUTE TO A TRUE VETERAN)
Mad Hedge Hot Tips
May 24, 2019
Fiat Lux
The Five Most Important Things That Happened Today
(and what to do about them)
1) All Markets Now Signaling Recession, with bonds up huge and everything else down huge, like all stocks, oil, commodities, and real estate. Technology is leading the charge to the downside. The bigger they are, the harder they fall. Ten-year US Treasury yields plunge to 2.30%. It might be a good summer to take a round the world cruise. Click here.
2) Mad Hedge Market Timing Index Dives to 28, from a high of 72 just weeks ago. That means stocks have more downside to go, and a solid “BUY” won’t appear for two months. Click here.
3) The Federal Reserve Warns that Trade Could Demolish the Recovery. You break it, you own it. Isn’t it amazing how quickly panics happen? Risk happens fast. Click here.
4) Tesla Production May Hit New Record in Q2. That’s why I bought (TSLA) yesterday. The 5.3% 2025 convertible bonds are essentially a no risk 10% yield here for the next six years. Tweeting is out, leaked documents are in, and not an SEC offending coming from Elon Musk anywhere. Is this the new business model? Click here.
5) British Prime Minister Theresa May Resigns, sending the British pound into a tailspin. Brexit goes on hold one more time. Click here.
Published today in the Mad Hedge Global Trading Dispatch:
(MONDAY JULY 8 VENICE, ITALY STRATEGY LUNCHEON)
(FROM THE FRONT LINE OF THE TRADE WAR)
(SPY), (AAPL), (TLT)
While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to a six-month time frame, Mad Day Trader, provided by Bill Davis, will exploit money-making opportunities over a brief ten minute to three-day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points. Read more
Global Market Comments
May 24, 2019
Fiat Lux
Featured Trade:
(MONDAY JULY 8 VENICE, ITALY GLOBAL STRATEGY LUNCHEON)
(FROM THE FRONT LINE OF THE TRADE WAR)
(SPY), (AAPL), (TLT)
Poke your hand into a hornet's nest and you can count on an extreme reaction, a quite painful one.
As California is the growth engine for the entire US economy, accounting for 20% of US GDP, it is no surprise that it has become the primary target of Chinese retaliation in the new trade war.
The Golden State exported $28.5 billion worth of products to China in 2017, primarily electronic goods, with a host of agricultural products a close second.
In the most devious way possible, the Middle Kingdom targeted Trump supporters in the most liberal state in the country with laser-like focus. California exports 46% of its pistachios to China, followed by 35% of its exported plums, 20% of exported oranges, 12% of its almonds.
By comparison, California imported gargantuan $160.5 billion worth of goods from China last year, mostly electronics, clothing, toys, and other low-end consumer goods.
Some $16 billion of this was recycled back into the state via investment in real estate and technology companies.
Anecdotal evidence shows that figure could be dwarfed by the purchase of California homes by Chinese individuals looking for a safe place to hide their savings. Local brokers report that up to one-third of recent purchases have been by Chinese nations paying all cash.
The Chinese tried to spend more. Their money is thought to be behind Broadcom’s (AVGO) $105 billion bid for QUALCOMM (QCOM), which was turned down for national security reasons.
The next big chapter in the trade war will be over the theft of intellectual property, and that one will be ALL about the Golden State.
Also at risk is virtually Apple’s (AAPL) entire manufacturing base in China where more than one million workers at Foxconn assemble iPhones, Macs, iPads, and iPods. It took Apple 20 years to build this facility. It will take 20 more years to move it.
The Cupertino giant could get squeezed from both sides. The Chinese could interfere with its production facilities, or its phones could get slapped with an American import duty.
By comparison, in 2017 the US imported a total of $505.6 billion in goods from China and exported $130.4 billion. Against this imbalance, the US runs the largest surplus in services.
The last Chinese escalation will involve a 25% tariff on American pork and recycled aluminum. Who is the largest pork producer in the US? Iowa, with $4.2 billion worth, the location of an early presidential election primary.
Beyond that, Beijing has darkly hinted that is will continue to boycott new US Treasury bond auctions, as it has done for the past six months, or unload some of its massive $1.6 trillion in bond holdings.
Given the price action in the bond market today, with the United States Treasury Bond Fund (TLT) at a two-year high, I would say that the market doesn’t believe that for two seconds. The Chinese won’t cut off their nose to spite their face.
The administration is discovering to its great surprise that its base is overwhelming against a trade war. And as business slows down, it will become evident in the numbers as well.
The US was the big beneficiary of the global trading system. Why change the rules of a game we are winning?
Still, national pride dies hard.
How soon will the trade war end? Does China want to help Donald Trump get elected in 2020, or his opponent?
It looks like it is going to be a long slog.
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
Mad Hedge Hot Tips
May 23, 2019
Fiat Lux
The Five Most Important Things That Happened Today
(and what to do about them)
1) The Tech Cold War is Dominating Trading, triggering a global stock market route. The bond market, at two-year highs, says the recession is already here. If you didn’t make your money in Q1, you’re screwed. In the cruelest move, China blocked the broadcast of the final episode of Game of Thrones, forcing fanatics to search the Internet for the final conclusion. Click here.
2) The Fed is Patient, and indefinitely so. That is the revelation coming out of yesterday’s Fed minutes. That means the next rate move will be a cut more likely than a hike, and this is BEFORE the trade war saw a major escalation. Watch bond yields (TLT) fall to new lows. Click here.
3) No China Meetings for at Least a Month, says US Treasury Secretary Steven Mnuchin. Don’t expect any respite from this front. It seems preventing Trump’s tax returns from being released is taking up all his time. Also, the US government runs out of money at summer’s end, unless the Democratic-controlled House opens up the checkbook first. Click here.
4) New Homes Sales Down 6.9% in April. As in past cycles, they are seeing the recession first, despite ultra-low interest rates. Prices here still rising, thanks to trade war-induced rocketing materials and lumber costs. Click here.
5) Heard at SALT. US Consumer Debt Service is only 10% of disposable income. That is reasonably low and may suggest that we may have longer to go until the next recession. Consumer Spending accounts for a gargantuan 70% of the US economy.
Published today in the Mad Hedge Global Trading Dispatch and Mad Hedge Technology Letter:
(TUESDAY, JUNE 25 SYDNEY, AUSTRALIA STRATEGY LUNCHEON)
(DINING WITH THE BOTTOM 20%)
(ANOTHER 5G PLAY TO LOOK AT)
(EQIX), (CSCO), (GOOGL), (MSFT), (ORCL)
While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to a six-month time frame, Mad Day Trader, provided by Bill Davis, will exploit money-making opportunities over a brief ten minute to three-day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points. Read more
Mad Hedge Technology Letter
May 23, 2019
Fiat Lux
Featured Trade:
(ANOTHER 5G PLAY TO LOOK AT)
(EQIX), (CSCO), (GOOGL), (MSFT), (ORCL)
One of the seismic outcomes from the upcoming rollout of 5G is the plethora of generated data and data storage that will be needed from it.
If you are a cloud purist and want to bet the ranch on data being the new oil, then look no further than Equinix (EQIX) who connects the world's leading businesses to their customers, employees, and partners inside the most-interconnected data centers.
On this global platform for digital business, companies come together worldwide on five continents to reach everywhere, interconnect everyone and integrate everything they need to reap a digital windfall.
And whether we like it or not, the future will be more interconnected than ever because of the explosion of data and the 5G that harnesses the data will allow business to reach across the globe and expand their addressable audience.
The stock has reacted like you would have thought with a victorious swing up after a tumultuous last winter.
The cherry on top was the positive earnings report earlier this month.
The highlights were impressive and plentiful with revenues for Q1 coming in at $1.36 billion, up 11% year-over-year meaningfully ahead of management expectations.
Equinix’s market-leading interconnection franchise is performing well, with revenues continuing to outpace colocation, growing 12% year-over-year, as the cloud ecosystem continues to scale.
Penetration in “lighthouse accounts” or early adopters increased nearly 50% from the Fortune 500 and 35% from the Global 2,000 demonstrating the expanding opportunity as Equinix unearths more value from the enterprise industry.
Equinix is now the market leader in 16 out of the 24 countries in which they operate, and they’re expanding its platform with 32 projects announced across 27 markets, with Q1 openings in Frankfurt, Hong Kong, London, Paris, and Shanghai.
Equinix’s network vertical experienced solid bookings led by strength in Access Point (AP), which is a hardware device or a computer's software that acts as a communication hub for users of a wireless device to connect to a wired LAN.
APs are important for providing heightened wireless security and for extending the physical range of service a wireless user has access to and driven by major telecommunication companies, mobile operators, and NSP resale.
Expansions this quarter include Hutchison, a leading British mobile network operator upgrading their infrastructure to support 5G and cloud services, as well as a leading Asian communication provider, migrating subsea cable notes and connecting to ECX Fabric for low latency.
Equinix’s financial services vertical experienced record bookings led by Europe, the Middle East and Africa (EMEA) and rapid growth in insurance and banking.
New contracts include a fortune 500 Global insurer transforming IT delivery with a cloud-first strategy, a top three auto insurer transforming network topology while securely connecting to multiple clouds, and one of the largest global payment and technology companies optimizing their corporate and commercial networks.
Demand in the social media sub-segment as providers are hellbent on improving user experience and expanding the scope of their business models.
Equinix’s gaming and e-commerce sub-segment grew the fastest year-over-year led by customers, including Tencent, neighbor, and roadblocks.
Cloud and IT verticals also captured strong bookings led by SaaS as the cloud diversifies towards a hybrid multi-cloud architecture.
A robust pipeline can be rejoiced around as cloud service providers continue to push to new frontiers and roll out additional services.
Developments include a leading SaaS provider expanding to support growth in new markets and with the Federal Government as well as an AI-powered commerce platform upgrading to enhance user experience support a rapidly growing customer base.
As digital transformation accelerates, the enterprise vertical continues to be Equinix’s sweet spot led by healthcare, legal and travel sub-segments this quarter and main catalysts to why I keep recommending reader into enterprise software companies.
The chips are being counted with new contracts from Air Canada, a top five North American airline deploying a hybrid multi-cloud strategy, Space X deploying infrastructure to interconnect dense network and partner ecosystems and one of the big four audit firms regenerating networks and interconnecting to multi-cloud to improve the user experience for both employees and clients.
Channel bookings also registered continued strength delivering over 20% of bookings with accelerated growth rates selling to Equinix’s key cloud players and technology alliance partners, including Cisco (CSCO), Google (GOOGL), Microsoft (MSFT), and Oracle (ORCL).
New channel wins this quarter includes a win with Anixter for a leading French transportation and freight logistics company deploying mobility platform, as well as a win with AT&T for a top-five U.S. Bank accessing our network and cloud provider.
Management signaled to investors they are expecting a great year with full-year revenue guidance of $5.6B, a 9-10% year-over-year boost and a $25M revision from the previous guidance.
Equinix can boast 65 consecutive quarters of increasing revenues, which eclipses every other company in the S&P 500, and it anticipates 8%-10% in annual revenue growth through 2022.
This is an incredibly stable yet growing business and the 2.17% dividend yield, although not the highest, is another sign of a healthy balance sheet for a profitable company.
If you had any concerns about this stock, then just take a look at its 3-year EPS growth rate of 73% which should tell you that the massive operational scale of Equinix is starting to allow efficiencies to take hold dropping revenue straight down to the bottom line.
If you are searching for a company that cuts across every nook and cranny of the tech sector by taking advantage of the unifying demand and storage requirements of big data, then this is the perfect company for you.
This company will only become more vital once 5G goes online and being the global wizards of the data center will mean the stock goes higher in the long-term.
