When I heard that White House economic advisor and former Goldman Sachs (GS) CEO Gary Cohen resigned, I thought the Dow Average would crash 1,000 points.

Sure enough, the overnight futures markets was already reflecting down 450.

So, I spent last night writing up Trade Alerts to execute at the market opening. Laid out neatly on my desk in the proper order were alerts to BUY Intel (INTC), sell short US Treasury bonds (TLT), Buy Cisco Systems (CSCO), and sell short the IPath S&P 500 VIX Short-Term Futures ETN (VXX).

When the bell rang, the Dow instantly cratered 350 points and I got the (INTC) Alert off to the Mad Hedge Technology Letter subscribers. And that was it. The market turned around so fast that it was impossible to get anything else off.

So where's the crash?

Surely Gary Cohen has to be disappointed, who almost certainly believed the end of his government employment was worth 1,000 Dow points, instead of the paltry 350 points we saw.

What a come down.

The hard truth is that investors have been instilled with a Pavlovian reaction to buy stocks on any Washington inspired sell off because at the end of the day, they all amount to precisely nothing.

This has worked like a finely tuned Swiss watch, and will continue working, until it doesn't.

Here is the harsh reality.

At a 16X price earnings multiple at a Dow OF 23,800, and overnight rates at 1.50%, US stocks are still A SCREAMING BUY!

It doesn't get any easier than that. And here is another harsh reality. With earnings growing at a 15% annual rate, thanks to the tax cuts, the 23,800 PE multiple floor at 23,800 is rising by 3,570 points a year.

So this year's 23,800 16X multiple bottom becomes next year's 27,370 bottom. That means on any kind of pull back you buy with both hands. If it falls some more, you buy more. Period, end of story.

Normally, I dismiss purely academic valuation arguments out there. But the brutal fact is that there is still $50 trillion in cash sitting on the sidelines held by individuals, intuitions, mutual funds, hedge funds, and foreign investors trying to get into SOMETHING.

US technology stocks are their first choice by miles. That's why I started the new Mad Hedge Technology Letter five weeks ago, and it has been the smartest thing that I have done in a decade.

I expect this to remain the case until US interest rates rise too high, causing the yield curve to invert, eventually triggering a bear market and a recession. But I don't expect this scenario to unfold for another year.

Until then, make hay while the sun shines, and I'll try to get those Trade Alerts out a little faster. After all, I don't expect another major market meltdown until this afternoon, or tomorrow at the latest.

For new subscribers, and the old ones who have already forgotten, let me list below the ten reasons why there will be no stock market crash in 2018:

1) US stocks are still one of the highest yielding asset classes in the world

2) Oil prices are still less than half of where they were 5 years ago.

3) Stronger Japanese and European economies are enabling them to buy more of our exports.

4) While US interest rates are rising, they are doing so at a snail's pace.

5) Delayed US interest rate hikes will keep the US dollar cheaper for longer so more foreigners can buy our stuff.

6) Technology everywhere is hyper accelerating, sending profits through the roof.

7) Stock buy backs and M&A are shrinking the supply of equities.

8) Corporate earnings growth at the fastest in history, some 15% YOY.

9) The hurricanes created a big de facto infrastructure bill.

10) Trade war is more bark than bite.

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What, No Stock Market Crash?

 

Stay ahead of the curve. That has been my seminal lesson after 50 years of trading the global financial markets.

Stay ahead of the curve, and riches will shower down upon you. Fall behind the curve, and life will become dull, mean, and brutish, and very poorly compensated.

Fortunately, I learned that crucial lesson early on in life. In 1972, when the US left the gold standard, I thought gold had a very bright future, then trading at $34 an ounce. It soared to $900 in seven years. I nailed that peak waiting in a line in Johannesburg to sell the last of my krugerrands.

In 1999, I saw a major crash coming in the Great Dotcom Bubble. I not only turned bearish, I sold my entire hedge fund management company at an enormous premium. Stocks then fell by 80%. Hedge funds died by the thousands.

I am now starting to get an inkling of another major market move.

But first, let me tell you to what extent the most devious, hardest core hedge fund managers are now going to get ahead of the curve.

Want to get a lead on the copper market? How about leasing time on a geostationary satellite to park over the storage facilities of Sociedad Qimica Y Minera (SQM) in Chile, one of the world’s largest producers.

Ore in the pipeline is a fabulous predictor of prices. By the way, (SQM) has risen by 400% in three years.

Stories like this are legion in the hedge fund community. Researchers pick up guys in bars outside of Foxconn factories in China to get a head start on iPhone production.

Another satellite counts ships laid up in Singapore Harbor to predict shipping rates.

I even once relied on a retired KGB officer in Russia to give me the heads up on wheat production there.

Long time readers will remember that I put out a Trade Alert based on this information to buy wheat (WEAT), right after the Mad Hedge Fund Trader was blessed with 50 new subscribers from Italy (I spoke at a conference there).

They made so much money that I received a lifetime’s worth of invitations to pasta dinners in Rome and Milan, which are made out of wheat. Some eight years later and I’m still collecting.

So having established the value of TRULY granular, on-the-ground research, let me tell you what I learned lately.

I was having lunch with a major San Francisco real estate investor the other day, and what I heard blew my mind.

Alphabet (GOOGL) is soaking up office space like there is no tomorrow. In 2017 it was the top lessor of space in the area, taking more than any other private or government entity.

The creation of Sergei Brin and Larry page currently owns or leases 20 million square feet of office space in the entire San Francisco Bay Area, housing some 34,000 workers.

To give you some idea of the scale of these holdings, that is DOUBLE the square footage of the pre-9/11 Twin Towers in New York.

What’s more, Alphabet is looking to DOUBLE this figure within the next five years.

Google already dominates the skyline of its hometown of Mountain View, California, where it already has 20,000 workers. It is negotiating with the City of San Jose for the purchase of a full city block large enough to build a new tower for a further 20,000 workers.

Various Alphabet divisions are spilling throughout the region, as far north as Marin County and as far east as Oakland and Alameda. What’s more interesting is that many of these leases contain options to buy. These are definitely long-term plays.

Other tech titans are similarly expanding, although not at the frenetic rate seen at Alphabet. Apple has 25,000 Bay area employees and is just in the process of moving into its brand new, flying saucer shaped “Donut” headquarters (the vanity address is One Infinite Loop, Cupertino, CA). Fly over it on a clear day in a small plane and you can’t miss it.

Facebook is also enjoying a growth spurt. Half of its 25,000 employees work at its Mountain View headquarters (address: One Hacker Way, Mountain View, CA). It is scouring the landscape for more.

The influx of so many highly paid tech workers in such a confined space has far reaching implications.

Residential real estate prices are through the roof, up 13% YOY, and more than 100% in five years. The local real estate pages have shrunk to nothingness, as everyone is afraid to sell for fear of not being able to get back in.

Traffic is now worse than in Los Angeles. And good luck hiring a cleaning lady, gardener, or housekeeper. You can only hire an experienced nanny if you throw in a free BMW. Every contractor is booked beyond infinity.

And good luck getting your kids into a private school at $40,000 a year each. Applications are outrunning places by 5:1.

The implications for technology share investors is nothing less that mind boggling.

If Alphabet thinks it will more than double its business, it’s safe to assume that the share price will double as well. What is more likely is that the stock will appreciate even more, given the economies of scale and their dominance of the current advertising industry by Alphabet.

It isn’t just the ad people and their programmers who are demanding more space. YouTube, the autonomous driving subsidiary Waymo, and their life sciences spinoff Verily are also growing by leaps and bounds.

I think the conclusion of all of this is pretty obvious. Buy Alphabet and any dip, and then go out and buy some more.