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
Global Market Comments
September 28, 2021
Fiat Lux
Featured Trade:
(TESTIMONIAL),
(THE DEATH OF KING COAL),
(BTU), (ARCH)
Hi John,
You have been doing this for a long time indeed. The recent bounce has been nice. How did you feel that it was going to bounce given the Fed meeting and the noise around the China Evergrande Group?
Or have you seen this movie so many times that unless it was a major black swan event (like February-March 2020) that this was always buy the dip?
Or does it even matter as long as you are controlling your risk given how much you have made in the market in your lifetime?
For someone trying to reset and start growing their account, I don't have this luxury but have been selectively choosing the trades to take.
Again, great trading.
Regards,
Dallas
Melbourne, Australia
Virtually all of the research you receive are about stocks you should buy. This report is about stocks you should sell….with both hands as fast as you can.
It is perhaps the most important data release of the last several years that no one noticed. As a result, one of the best shorting opportunities in years is rearing its ugly head.
US coal production hit a 41-year low in 2020. Coal as a percentage of US power output has plunged from 28% to 10% over the last decade to only 437 million short tons. Total coal production has plunged by 64% during this time.
The end result will be a massive shift of wealth out of the major coal-producing regions of the US in the east.
If energy has a proverbial buggy whip maker, it is king coal. And while US coal production has been in free fall, alternatives have been rising sharply, especially solar, now accounting for 20% of US energy consumption.
The implications for the US economy are enormous. I used to be kept awake at night by the wailing whistles of Union Pacific (UNP) engines delivering Wyoming coal to California ports for shipment on to China. They have all disappeared.
Those trains are now moving oil south from Canada and North Dakota to the oil distribution hub in Cushing, Oklahoma, or even all the way to Gulf ports, except that this time they are using a North/South rail line like Norfolk Southern (NSC) rather than the East/West running Union Pacific. Clearly, there are consequences.
In recent the last year, the few listed coal names left have enjoyed a nice rally. This is because of the generalized global “RISK ON” move that has unfolded since the pandemic peaked. The Van Eck Vectors Coal ETF was shut down in 2020 for lack of interest.
It also helps that the incoming Biden administration is unlikely to hammer away at China on trade front as did the previous one. China is far and away the world’s largest buyer of coal.
I believe that in the coming years, the entire US coal industry will go bankrupt and get purchased by the Chinese for pennies on the dollar, or for their outstanding debt alone at a big discount. Needless to say, this makes the entire sector a great candidate for a core short.
Coal is hopelessly uncompetitive with natural gas. Burning gas produces a fraction of the carbon dioxide of coal, and alternatives like wind and solar produce none whatsoever. Coal faces onerous environmental regulation, which will almost certainly get worse under a future administration. US utilities are therefore closing coal-fired power plants as fast as they can.
The outgoing administration was the most pro-coal one in American history. Yet, not a single new coal-fired was built during their reign.
However, coal-dependent communities are not about to turn into ghost towns. They have the great advantage of offering some of the lowest operating costs anywhere in the country. Free rent is becoming common. You'd be nuts to start a new business in the San Francisco Bay Area these days, which has become a haven of the wealthy.
Throw in some decent broadband and they can handily join the global economic community. Yes, you can turn coal miners into programmers, at least the young ones. They all grew up playing video games just like the rest of us.
I Don’t See Any Future in This, Do You?
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 Technology Letter
September 27, 2021
Fiat Lux
Featured Trade:
(A SHORTENED RUNWAY FOR SILICON VALLEY)
(AAPL), (FB), (WIC), (SME)
I’m not going to go so far as to claim the Silicon Valley tech story is over — that’s too premature.
But—and a very big but—I will say that the runway has been significantly shortened for the aircraft taking off.
In an everchanging zig-zagging tech climate — it’s my job to take the pulse of it and correspond it to the reader.
I would characterize myself as concerned with the latest developments in technology, and I specifically mean for those business models that many of you have poured your hard earned cash into.
I have gone on record saying that Silicon Valley suffers from a lack of imagination and the gravitas shortage in which to sort this out is starting to stick out like a sore thumb.
What we have is what we have.
Dynastic, hegemonic tech companies who, instead of taking the reins and helping the industry develop in terms of paradigm shifts, have chosen the way of incremental development to suck the marrow dry via the capitalistic model of short-term profits that manifest themselves in higher stock prices.
I have no problem with that at any level—higher stock prices have given my readers a chance to enrich themselves with generational wealth.
And yes, I agree with you, investing for paradigm shifts isn’t cheap, and who wants to be on the hook for this bill anyway when this gravy train isn’t over yet?
Recent signals are emblematic of the narrowing paths to profits for tech companies; they are increasingly required to pull off 4th quarter heroics to get ahead, and we are starting to rub up against the extreme limits.
Exhibit A — Facebook.
The company has confronted sharp criticism from lawmakers and users for its plan to develop an Instagram for kids and said it was pausing work on the project.
Facebook said it will re-evaluate the project at a later date as a damning expose by the Wall Street Journal.
This latest app was intended for children aged 10 to 12.
One internal Facebook presentation said that among teens who reported suicidal thoughts, 13% of British users and 6% of American users traced the issue to Instagram.
Remember that Facebook bought Instagram because Facebook, its flagship platform, was dropping users left and right.
Instagram was the savior.
I would argue that Facebook would be a $200 stock without this asset.
The next question investors should ask is, if Facebook “kids” was going to be the next growth sub-sector for Facebook, what does it do now?
It’s an uncomfortable question for Facebook shareholders and rightly so.
Again, this screams lack of innovation to me—shareholders cannot just tolerate Instagram for 8–10-year-olds, then Instagram for 6–8-year-olds, only to be followed up by the Instagram for 4-6-year-olds.
Crazy as it sounds, that was the path Facebook intended to go down.
Now, it’s time for a reset while their metaverse project isn’t ready.
Silicon Valley's Exhibit B — Apple.
Apple's earnings for Greater China in Q2 2021 were up 87.5% from this time last year, to $17.7 billion.
During its latest earnings call, Apple has announced dramatically increased revenues from Greater China for the three months ending March 2021. At 87.5% year-on-year, the percentage rise exceeds all other territories bar the rest of Asia Pacific.
On a standalone basis, higher revenue is great for the stock, and here at the Mad Hedge Tech Letter, we love higher tech shares.
The problem is that Apple’s biggest growth driver is China revenue.
I am sure that many readers have started to notice the calm before the storm in China.
If it wasn’t the real estate problems there, then sure, that’s a different industry but worrying.
However, Chairman of China Xi Ji Ping has gone on an aggressive defanging of the Chinese tech sector.
From imprisoning executives to massive fines — he is really stirring up the pot.
Apple readers also must ask themselves — how long will Apple be immune to the whims of Chairman Xi?
The answer is that it’s increasingly starting to seem like not long.
Just this last weekend, some of the biggest names in China’s tech industry made an appearance at the World Internet Conference (WIC) in Wuzhen to pledge support for the country’s “common prosperity” and small and medium-sized enterprises (SMEs) nearly a year after the government began an extensive crackdown on the sector.
There’s a legitimate risk that Apple’s immunity pass won’t be valid for much longer.
Remind yourself that Apple just came out with iPhone 13 and is on the path to make iPhone 14, 15, 16, and up to 100 because they make good money doing it.
Also remind yourself that Android phones are now just as good for half the price so in terms of relative competition, if they didn’t have a loyal base, people might not buy iPhones anymore.
Reality sucks, doesn’t it?
The defanging of Silicon Valley is a when and not if proposition; they will be forced to bet on the next paradigm shift and if they choose correctly, they will also be the winner of it so they might as well enlarge the budget for it.
“When I was first getting started, I told myself that there's two people in the world when it came to technology: There's the people who created it and there's everybody else.” – Said Tech Investor and Owner of an NBA Franchise Mark Cuban
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
Global Market Comments
September 27, 2021
Fiat Lux
Featured Trade:
(THE MAD HEDGE SUMMIT VIDEOS ARE UP)
(MARKET OUTLOOK FOR THE WEEK AHEAD, or THE YEAREND RALLY HAS BEGUN),
(DIS), (TLT), (SPY), (GS), (JPM), (BLK), (MS), (BRKB), (GOOG)