While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to 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
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
February 15, 2018
Fiat Lux
Featured Trade:
(THE NEW CASE FOR EUROPE),
(FXE), (DXJ), (RSX), (FXE), (EUO),
(WHY ARE BOND YIELDS STILL SO LOW?),
(TLT), (TBT), (JNK), (LQD), (MUB)
It is time to revisit this once troubled continent. The reality is that the European economy is now growing substantially faster than the US, with a better stock market performance to match.
Not only that, the Euro has been rising, thanks to America’s exploding budget deficits.
Rising markets and rising currencies create an upward hockey stick effect on your profits.
I bet you didn’t know that the Greek stock market rose over 40% from November, and the Euro (FXE) added another 7%!
I have been to Greece many times over the past 50 years, and I’ll tell you that I just love the place.
The beaches are perfect, the Ouzo wine enticing, and I’ll never say “No” to a good moussaka.
As for the old Youth Hostel in Athens with the permanently clogged sewer lines, I now much prefer the five star King George Hotel.
However, I don’t let Greece dictate my investment strategy.
Greece, in fact, accounts for less than 2% of Europe’s GDP.
It is not a storm in a teacup that is going on there, but a storm in a thimble.
Greece is really just a full employment contract for financial journalists, who like to throw around big words like bankruptcy, default, and contagion.
I have other things to worry about.
In fact, I am starting to come around to the belief that Europe is looking pretty good right here, refugee crisis, Brexit, and trade wars be damned!
That’s why the better hedge funds have been piling in there since the presidential election. In fact, many managers prefer foreign developed stock market than the domestic US variety.
Fiat CEO, Sergio Marchionne, the brilliant personal savior of Chrysler during the crash, thinks the beleaguered continent is about to recover from “hell” to only “purgatory.”
Only a devout Catholic could come up with such a characterization.
But I love Sergio nevertheless because he generously helps me with my Italian pronunciation when we speak (“aspirapolvere” means “vacuum cleaner”, really?).
Notice that these European based equity ETF’s vastly outperform those for the main US indexes during the same time by a large margin, many by 2:1.
And here is where I come in with my own 30,000-foot view.
The undisputed lesson of the past nine years is that you always want to own stock markets that are about to receive an overdose of quantitative easing.
Since the US Federal Reserve launched their aggressive monetary policy, the S&P 500 (SPY) has nearly quadrupled off the bottom.
Europe was a late entrant to the QE game, and it could run for at least six more months.
Corporations across the pond are being force-fed mountains of cash at recently neagative interest rates, much like a goose being fattened for a fine dish of foie gras (only decriminalized in California last year).
Get Europe off the mat, and you can also add another 10% to US share prices as well, as the global economy revives.
Buy the Wisdom Tree International Hedged Equity Fund ETF (HEDJ) down here on dips, which is long a basket of European stocks and short the Euro (FXE). The recent correction just gave us a nice fat entry point.
These could be the big performers this year.
Praise the Lord and pass the foie gras!
Mad Hedge Technology Letter
February 15, 2018
Fiat Lux
Featured Trade:
(GAMING YOUR WAY TO PROFITS WITH ACTIVISION)
(ATVI), (FB), (TTWO)
Lately, I have noticed an upsurge in questions about WWII from kids in their teens, and twenties, usually men.
Over the past 50 years, I have visited virtually every WWII battlefield, have read hundreds of books on the topic, and rank as an armchair general in my own right.
I also have has the pleasure of meeting the veterans of many armies, from a German ME 262 jet pilot, to my own Uncle Mitch, the first Medal of Honor winner of WWII.
The question for me always was, why are kids born a half century after the war suddenly interested in the subject. The answer is always the same: they heard about it on a video game. Gaming, in fact, is coming to shape these kids' understanding of history.
E-gaming is not typically pigeonholed as a highly attractive stock on Wall Street. But in 2018, the e-gaming phenomenon emphatically has legs.
People are spending more time playing video games globally with an accelerating pace.
The e-gaming sector is a far larger chunk of American economy that you would imagine.
Many American children under the age of 18 play video games for nearly 20 hours a week. This social abnormality has reached an extreme tipping point, where 10% of children are classified as obsessively addicted to these consoles.
The lucky firm procuring these satisfying yields are the video game producer, top dog Activision (ATVI).
Unzipping their quarterly data, investors can quickly grasp the vibrant breadth of this industry.
The most salient pillar of success is total net audience, which printed $385 million MAU/quarter-an increase of 1 million users from Q3 2017.
The business is split into 3 different segments: Activision along with subsidiaries Blizzard and King, which Activison bought in recent years. All are contributing unique gaming franchises which are immensely profitable.
Activision checked in at $1.33 billion of revenue for the quarter. Blizzard ratcheted up to $599 million, and King was on Blizzard's tail with $516 million.
The bread and butter of Activision is the gaming classic Call of Duty: World War II, which was the highest global grossing game in 2017. This franchise has been ranked #1 in the industry for eight of the last nine years.
Along with many brick and mortar businesses, e-gaming is stampeding into the online digital world. The industry is migrating in a consumer-led surge to full-game downloads instead of boxed purchases in stores.
This monetization method connects the gaming companies adjacent to the consumer with tightly bound synergies that cut out the middleman, Gamestop Corp (GME).
The skyward propulsion was also partially attributed to Activision's Blizzard and King upping their overall "daily time spent per user", exceeding 50 minutes. Daily usage per day is starting to reflect that of Facebook (FB), which is a mighty feat.
Activision capped off the most successful year in history, with a total operating income of over $1 billion and operating margin of over 38%.
Their pipeline includes World of Warcraft's Battle for Azeroth, expected to be released this summer.
Guidance was quite impressive, and Activision shelled out two blueprints depicting their plans to gather a head of steam.
The most profitable business is steered predominantly by Call of Duty's Live Ops package.
What are Live Ops? They are in-game purchases by the user. This has become the new normal in gaming, where players must buy items in order to stay ahead of the curve.
This method has proved extremely popular while pushing up the ROI/user.
The Live-Ops manifest in 3 forms:
Gacha - Popularized by Japanese capsule toy vending machines, the appeal of paying virtual currency for a chance to get an ultra-rare item has proven to be a sticky feature.
The objective is performance progress. Gamers are offered free or discounted gachas during the initial stages but must pay for higher tiered gacha that in return represent a higher-level score.
Online Competition - This includes competitive structures such as guilds, leagues, playoffs or leader-boards that will boost the retention rate. The core idea is exclusive competition with unique rewards.
One-time Events - Time sensitive events corral gamers into an exclusive venue, creating a forced spending environment to conflate spending with winning.
In-game offerings have been such a hit that the feature crossed the $1 billion threshold in Q4 2017, which comprised about 25% of total quarterly revenue.
Activision truly has the highest-quality downloadable content in 2017, including Zombies Chronicles for Call of Duty: Black Ops III, the top add-on service of the year for PlayStation.
Constructing stunning Live Ops features are a challenge for game studios, because Live Ops teams must build database servers that scale with the involvement of millions of hardcore gamers. Harmonizing these functions is a nightmare, but is highly effective if successful.
After Live Ops, the second stage of the blueprint is mobile execution. Mobile gaming has not been scaled to the extent of the PC and gaming console market. The mobile market is still in its infancy and gaming studios can capture the immense growth potential, especially in Asia.
Technology has progressed to the degree where Activision is able to triumphantly consummate this strategy. These two great initiatives will spur Activision to extreme heights.
The wild card is the Overwatch League that commenced late last year and is in its incubation stage. Overwatch is a new global e-gaming league that is televised in a traditional sporting-league format. The league reached 10 million unique viewers and almost 300,000 average viewer/minute in the first week.
The follow through, post week 1, was also exceptional, with viewership stabilized. The audience can access Amazon's Twitch platform to view these contests.
Activision has made a calculated bet that the "average joe" gamer will want to watch world-class caliber gamers perform as a spectator sport.
Activision plans to sell new expansion teams to an array of global cities, and if gaming maintains its appeal to the global youth, the league could potentially rival one of the physical sporting leagues in the United States. And yes, Activision intends to weave in its add-on features to these live encounters.
If you are keen on Activision's (ATVI) competitors, who also run healthy gaming franchises of their own, then have a look at Take-Two Interactive (TTWO), who hawk their legendary game, Grand Theft Auto or EA Sports- held up by the NFL Madden and FIFA soccer labels.
In short, Activison looks like a "BUY" here, and the recent correction has given us the gift of a fabulous entry point.
To visit Activision's website, please click here.
"It is impossible to compete with a big company that doesn't want to make money," said J. Crew founder Mickey Drexler about Amazon.
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
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