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
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
September 11, 2019
Fiat Lux
Featured Trade:
(ANOTHER VIEW OF THE ANTITRUST ASSAULT)
(FB), (APPL), (GOOGL)
The big story here is that regulation is creeping closer careening towards us as if we had always expected it.
The ramifications are massive and, at a bare minimum, investors can expect the kibosh to be put on FANG stocks.
That doesn’t mean they will fall off a cliff, but the upside in the short-run is capped and appears as if this will be the base case scenario.
Investors will need to filter out the cadence to be able to hear the true chords.
There will still be many twists and turns in this on-going saga.
The Federal Trade Commission fining Facebook (FB) over privacy issues earlier this year was just the tip of the iceberg.
The government is launching a multi-pronged barrage on big tech that will include 48 state attorney generals with only California and Alabama abstaining.
Our vilified big tech companies are now confronted with two Congressional, six state and local, and eight federal investigations.
Nothing is cut and dry as judges could apply anti-trust law in different ways.
States could also go at them alone if they feel justice is not served.
The only winner here are lawyers that will earn a windfall in these proceedings.
Even if the larger society generally understands how harmful these platforms are, it does not necessarily mean the government’s case will hold up in a court of law.
It is absolutely true that social media platforms have had severe unintended consequences that have devastated the harmony of American society and culture as a whole.
But that doesn’t mean it is illegal.
Another unintended consequence is tainting the reputations of big tech and it will be meaningfully harder to hire the best of breed moving forward causing companies to relatively overpay for premium talent.
It is no surprise that millennials desire to work for companies that are a net positive social contributor and not the other way around.
It is becoming increasingly exhausting identifying new Millenial staff who immediately know their job would be to exploit consumers by culling highly targeted and personal data.
The contagion doesn’t just stop there, these big tech companies have become a nightmare to work for in their current state as the avalanche of criticism from media, society, and the state have caused management to lead in a schizophrenic and paranoid way with a siege mentality.
Would you be scared out of your mind if you knew what you were involved in could eventually be brought up in a court of law or even imprison you?
The paranoia has surfaced in the email communications with companies such as Facebook and Alphabet banning all political and societal discourse.
I will argue that Facebook has more to lose than Alphabet.
Alphabet provides real services while Facebook is built out of thin air.
I can pinpoint YouTube and Google Maps as ultimate winners if these two are spun out into their own entities.
The fact of big tech being cash cows means there is a great deal at stake in these rulings for the consumers, shareholder, employees, and the entire world.
“The Chinese government still would like to see U.S. Internet companies explore the Chinese market, providing they are willing to abide by Chinese law. I think companies like Facebook should think about the Chinese market.” – Said Founder and CEO of Baidu Robin Li
Global Market Comments
September 11, 2019
Fiat Lux
Featured Trade:
(HAS THE VALUE OF YOUR HOME JUST PEAKED?),
(ITB), (PHM), (KBH), (LEN), (DHI), (NVR), (TOL),
(JOIN US AT THE MAD HEDGE LAKE TAHOE, NEVADA CONFERENCE, OCTOBER 25-26, 2019)
Lately, my inbox has been flooded with emails from subscribers asking how to hedge the value of their homes. This can only mean one thing: the residential real estate market has peaked.
They have a lot to protect. Since prices hit rock bottom in 2011 and foreclosures crested, the national real estate market has risen by 50%.
I could almost tell you the day the market bounced. That’s when a couple of homes in my neighborhood that had been for sale for years suddenly went into escrow.
The hottest markets, like those in Seattle, San Francisco, and Reno, are up by more than 125%, and certain neighborhoods of Oakland, CA have shot up by 400%.
The concerns are confirmed by data that started to roll over in the spring and have been dismal ever since. It is not just one data series that has rolled over, they have all gone bad. One bad data point can be a blip. An onslaught is a new trend. Let me give you a dismal sampling.
*Home Affordability hit a decade low, thanks to rising prices and interest rates and trade war-induced soaring construction costs
*July Housing Starts have been in a tailspin as tariff-induced rocketing costs wipe out the profitability of new homes
*New Home Sales collapsed YOY.
*14% of all June Real Estate Listings saw price cuts, a two-year high
*Chinese Buying of West Coast homes has vaporized over trade war fears
Fortunately, investors have a lot of options for either hedging the value of their own homes or making a bet that the market will fall.
In 2006, the Chicago Mercantile Exchange (CME) started trading futures contracts for the Corelogic S&P/Case-Schiller Home Price Index, which covered both U.S. residential and commercial properties.
The Case-Shiller index, originated in the 1980s by Karl Case and Robert Shiller, is widely considered to be the most reliable gauge to measure housing price movements. The data comes out monthly with a three-month lag.
This index is a widely-used and respected barometer of the U.S. housing market and the broader economy and is regularly covered in the Mad Hedge Fund Trader biweekly global strategy webinars.
The composite weight of the CSI index is as follows:
However, these contracts suffer from the limitations suffered by all futures contracts. They can be illiquid, expensive to deal in, and you probably couldn’t get permission from your brokers to trade them anyway.
If you want to be more conservative, you could take out bearish positions on the iShares US Home Construction Index (ITB), a basket of the largest homebuilders (click here for their prospectus). Baskets usually present half the volatility and therefore half the risk of any individual stock.
If real estate is headed for the ashcan of history, there are far bigger problems for your investment portfolio than the value of your home. Real estate represents a major part of the US economy and if it is going into the toilet, you could too.
It is joined by the sickly auto industry. Thanks to the trade wars, farm incomes are now at a decade low. As we lose each major segment of the economy, the risk is looming that the whole thing could go kaput. That, ladies and gentlemen, is called a recession and a bear market.
On the other hand, you could take no action at all in protecting the value of your home.
Those who bought homes a decade ago, took a ten-year cruise and looked at the value of their residence today will wonder what all the fuss is about. By the way, I met just such a person on the Queen Mary 2 last summer. Yes, ten years at sea!
And the next recession is likely to be nowhere near as bad as the last one, which was a twice-a-century event. So it’s probably not worth selling your home and buying it back later, as I did during the Great Recession.
See you onboard!
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
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
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
