"I manage one million people, and managing people is like managing animals, and I don't like managing one million animals," said Terry Gou, CEO of Chinese manufacturer, Foxconn, where employee suicides have been rife.
Mad Hedge Hot Tips
March 13, 2019
Fiat Lux
The Five Most Important Things That Happened Today
(and what to do about them)
1) Pick Your Airline Carefully. Southwest, American, Norwegian, and Icelandic Air have the most 737 Max 8 planes and their shares are getting hammered, while United (UAL) has none. As for me, I either fly my own plane or take the train. Keep buying the dip in (BA). Click here.
2) China Trade Talks to End Within Weeks, deal or no deal, says head US negotiator Robert Lighthizer. What is this, the 45th time the administration has used this headline to goose the market? Traders are getting fed up. Click here.
3) Tesla Unveils its Model Y on Thursday, a small SUV to compete with the Toyota RAV 4. The grab for market share and volume production continues. Firing their sales staff cuts overall costs by 6%. Buy (TSLA) at $260 with a tight stop. Click here.
4) Reverse Mortgages are Making a Big Comeback. Just ask actor Tom Selleck who is making millions advertising them on TV. Be careful, or your mother will end up on the street when the equity goes below zero. Click here.
5) January Construction Spending Up 1.3%, in a rare positive data point. Nothing to say here. Click here.
Published today in the Mad Hedge Global Trading Dispatch and Mad Hedge Technology Letter:
(WHY BOND YIELDS ARE GOING TO ZERO),
(TLT), (TBT), ($TNX),
(TESTIMONIAL)
(NVIDIA STEPS UP ITS GAME),
(NVDA), (INTC), (MSFT), (ANET), (CSCO), (MCHP), (XLNX)
Global Market Comments
March 13, 2019
Fiat Lux
Featured Trade:
(WHY BOND YIELDS ARE GOING TO ZERO),
(TLT), (TBT), ($TNX),
(TESTIMONIAL)
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
March 13, 2019
Fiat Lux
Featured Trade:
(NVIDIA STEPS UP ITS GAME),
(NVDA), (INTC), (MSFT), (ANET), (CSCO), (MCHP), (XLNX)
Nvidia (NVDA) was right to pull the trigger – that was my first reaction when I first learned that they had aggressively acquired Israeli chip company Mellanox for $6.9 billion.
The fight to seize these assets were fierce triggering a bidding war -American heavyweights Intel and Microsoft were also in the mix but lost out.
CEO of Nvidia Jensen Huang touted the importance of the deal by explaining that “the emergence of AI and data science as well as billions of simultaneous computer users, is fueling skyrocketing demand on the world's data centers."
Therefore, satisfying this demand will require holistic architectures that connect massive numbers of fast computing nodes over intelligent networking fabrics to form a giant datacenter-scale compute engine.
Mellanox and its capabilities cover all the bases for Nvidia and will nicely slot into its portfolio offering, an added bonus of cross-selling and upselling opportunities to existing clients.
The strategic motives behind the deal are plentiful with increased importance of connectivity and bandwidth enhancing Nvidia's ability to provide datacenter-scale computing across the full stack for next-generation high-performance computing and AI workloads.
The agreement is the result of the company's shift toward next-gen technology as adoption of cloud, AI, and robotics ramps up and Nvidia will be at the forefront of this massive migration.
As the fourth industrial revolution advances, Nvidia is best of breed of semiconductor companies and the imminent adoption of 5G will aid the likes of Microchip Technology (MCHP) and Xilinx (XLNX).
Technology is rapidly changing, and the data center is the segment that is accelerating at a faster clip than in previous years translating into de-emphasizing current revenues of gaming and autonomous on a relative growth basis.
These segments will be secondary to the addressable opportunity in data center and signing up Mellanox is a key strategic initiative to exploit this growth opportunity.
Missing the boat on this compelling opportunity could have dragged Nvidia into an existential crisis down the road as the missed opportunity costs of lucrative data center revenues would begin to bite, and with no quick fix on the horizon, Nvidia’s growth drivers would be potentially disarmed.
Investors need to remember that Nvidia derives half of its revenue from China and up until this point, gaming had been a huge tailwind to its total revenue, however, the Chinese communist party has identified gaming addiction in young adults as a national crisis and have been refusing to deliver new gaming licenses to gaming creators.
As the data center via the cloud begins its next ramp-up of insatiable demand, Nvidia was acutely aware they could not miss the boat and to grab a foot hole against larger player Intel.
Almost overpaying to have more skin in the game does not do justice to what the ramifications would have been if Intel or even Microsoft were able to hijack this deal.
The two-fold victory will in turn boost sales of Nvidia's data center products long term while depriving Intel of extending the lead in data center.
And after the lack of recent underperformance in the prior quarter, Nvidia needed a gamechanger to cauterize the blood flow.
Nvidia's total revenue plunged more than 24% YOY in Q4 of 2018, and shareholders have been looking for remedies, especially after the once mythical cryptocurrency business blew up and the company was stuck with a glut of inventory.
The purchase of Mellanox will help Nvidia start competing with other dominant players like Cisco Systems (CSCO) and Arista Networks (ANET).
Mellanox is one of a handful of firms selling hardware that connects devices in the data center through network cards, switches, and cables.
The deal still needs regulatory approval and could be a stumbling block if Chinese authorities drag this into the orbit of the trade war and make it a bullet point in negotiations.
The net result is positive to the overall business model, and this move will breathe oxygen into Nvidia’s long-term narrative with a flow of revenue set to come online once the 5,000 Mellanox employees are integrated into Nvidia’s levers of operation.
Shares should be the recipient of short-term strength and after getting smushed by a poor last quarter, there is substantial room to the upside.
A dip back to $150 would serve as a good entry point to strap on a short-term bullish trade in Nvidia shares.
While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to the 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 Hot Tips
March 12, 2019
Fiat Lux
The Five Most Important Things That Happened Today
(and what to do about them)
1) See You at the Skybridge SALT Conference in Las Vegas, May 7-10, the Woodstock of alternative asset investors. Learn what the hedge funds are planning next, and it’s a blast. Discount registration ends on Friday. Check it out by clicking here.
2) The Boeing 737 Max Crisis Widens, with most countries now grounding the ill-fated aircraft. Keep buying the dip in (BA) shares. This is a simple fix. Click here.
3) Dicks Ducks, with disappointing earnings, and the shares dive 10%. Avoid (DKS) and anything retail. Apparently, the market for assault rifles is bigger than we thought, which the company banned last year. Click here.
4) Another Day, Another Brexit Vote set for tonight which will probably fail again. The pound is doing the Watusi. Avoid all UK plays until the issue is decided. Click here.
5) The Buy Back Blackout Starts on Friday for many companies which are not allowed to repurchase their own shares up to 30 days ahead of earnings reports. You take the largest buyers of shares out of the market, what is left? Look to play the short side for the market. Click here.
Published today in the Mad Hedge Global Trading Dispatch and Mad Hedge Technology Letter:
(AN AFTERNOON WITH ANTHONY SCARAMUCCI OF SKYBRIDGE),
(BRK/A), (EEM)
(FIREEYE’S LAST LINE OF DEFENSE),
(FEYE), (MSFT), (AMZN), (GOOGL), (ORCL), (EFX), (IBM)
Global Market Comments
March 12, 2019
Fiat Lux
Featured Trade:
(AN AFTERNOON WITH ANTHONY SCARAMUCCI OF SKYBRIDGE),
(BRK/A), (EEM)
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