"The longer you wait to fire someone, the longer it has been since you should have fired them," said Elon Musk, founder and CEO of Space X and Tesla Motors.
The tech industry is infatuated with acronyms.
The two-, three- and four-letter acronyms of yore have been spruced up by a new wave of contemporary terms.
There are a lot more of them now and readers will need to absorb the meaning of each term to avoid our content seeming like a Grecian dialect.
The Mad Hedge Technology Letter will break down the relevant terminology that applies to the current tech sector.
This will aid readers in their pursuit of financial satisfaction.
FANG: Facebook (FB), Amazon (AMZN), Netflix (NFLX), and Google (now Alphabet) (GOOGL)
Jim Cramer, the host of CNBC's Mad Money, coined this term as this quartet became such a force to reckon with, that they deserved their own grouping. Financial commentators and analysts often refer to the FANGs that ultimately represent the developments and destiny of large cap tech. Apple is sometimes grouped in this bundle with analysts adding a second A inside the acronym.
AWS - Amazon Web Services
The cloud arm of Amazon is its cash cow. Amazon invented this business out of thin air in 2006. It offers the ability for Amazon to operate its e-commerce division close to cost by plowing profits from its thriving cloud arm. AWS is the backbone to the whole Amazon operation. Without it, Jeff Bezos would need to rethink another genius business model because current and future success hinges on this one subsidiary. AWS is the market leader in the cloud industry, carving out 33% of the total market. Microsoft is the runner-up and saw its market share surge from 10% to 13% in the latest quarter.
GDPR - General Data Protection Regulation
Europe has been a stickler concerning individual data protection, and the American companies running riot with Europeans personal data has reached its climax. On May 25, 2018, new European regulations were implemented to give the user more control of handing out their personal data. Penalties for non-compliance are steep. Companies risk being fined up to 20 million Euros or 4% of annual worldwide turnover, whichever is larger. Facebook's Mark Zuckerberg now has a reason to behave like an angel. The least regulated industry in the world is finally experiencing the bitter regulation pill most industries have felt for centuries.
SaaS - Software as a Service
A software distribution model licensing software on a subscription basis. Instead of installing many of these software programs, many of them are available through the Internet on the cloud. Most subscriptions work on an annual basis, and this recurring revenue model has carved out additional income from companies that were used to paying a one-off fee for software. This model has been highly successful. Even former legacy companies have deployed this business model to critical acclaim.
AI - Artificial Intelligence
An area of computer science that strives to deploy human intelligence into machine simulation. The four main tasks it carries out are speech recognition, learning, planning, and problem solving. A.I. has been identified as a cutting-edge tool to fuse with technology products boosting the underlying performance creating massive profits for the participants. This phenomenon is controversial with the prophecy that robots might advance rapidly and turn on their inventors. As each day passes, A.I. is starting to infiltrate deeper into our daily lives, and humans are becoming entirely reliant on their positive functions to carry out daily tasks.
IoT - Internet of Things
Internet connectivity with things. This network will connect billions and billions of devices together. Your bathtub, thermostat, and razor will be armed with sensors and processors that reroute the performance data back to the manufacturer. Deploying the data, engineers will be able to enhance products with even more precision and high quality serving the end customer needs. 5G testing is ongoing in select American cities and new hyper-fast Internet speeds will make mass adoption of IoT products a reality.
5G - 5th generation wireless system
This is the successor to 4G and is poised to increase wireless Internet speeds up to 20 gigabits per second. Some of the traits will be low latency, high mobility, and will be able to accommodate high connection density. This technology is crucial to the development of the next generation of groundbreaking technology such as autonomous cars that need a faster Internet speed to run elaborate software. The war to develop this technology with the Chinese has turned into a heated standoff. China is stubbornly bent on becoming the global leader of technology in the future, and the communist government views 5G as the keys to the Ferrari. U.S. companies Verizon (VZ), AT&T (T) and Sprint (S) plan to roll out 5G in 2019. Other key companies are Huawei, Intel (INTC), Samsung, Nokia, Ericsson and Qualcomm (QCOM).
BAT - Baidu, Alibaba, and Tencent
This trio is the Middle Kingdom's answer to America's FANG. The nine-year domestic bull market has been led by large-cap tech, at the same time China's economy has been fueled by Baidu, Alibaba, and Tencent. Baidu and Alibaba are tradable through American depositary receipts (ADR). Tencent is public on Hong Kong's Hang Seng stock exchange, the third largest stock market in Asia. These companies are all a mix and mash of functionality that covers the same broad spectrum of the FANGs. They are the best companies in China and are on the cusp of every single cutting-edge technology from A.I. to autonomous vehicles. The Mad Hedge Technology Letter does not recommend these stocks to our subscribers because the Chinese government is on a nationalistic mission to delist Alibaba and Baidu from America and bring them back home. Initially, Alibaba wanted to list on the Hang Seng Hong Kong stock exchange, but draconian rules applied to dual-listing made the company flee to America.
NIMBY - Not In My Back Yard
Local opposition to proposed development in local areas. Although not a pure tech term, the epicenter of the NIMBY movement is smack dab in the middle of the San Francisco Bay Area where all the premium tech jobs are located. Local opposition has made it grueling for any developers to build.
What's more, the expensive cost of land has made any new building a tough proposition. This explains the 10-year drought where San Francisco experienced not a single new hotel built. The dearth of housing has caused San Francisco housing prices to skyrocket to a medium price of $1.61 million as of March 2018. Exorbitant housing prices have triggered a mass migration of Californians fleeing the Bay Area in droves. The shocking aftereffects have put highly paid Millennial tech workers spending the bulk of their salary on housing or living in dilapidated shacks. The extreme conditions we are now seeing are forcing schools around the Bay Area to close in unison as young families cannot afford to stay. Tech companies have become public enemy No. 1 in the Bay Area as locals are desperate to maintain their current lifestyle but are finding it more difficult by the day.
MAU - Monthly Active Users
Favored by social media companies to measure growth trajectories. This is how Twitter (TWTR) analyzes the health of its user numbers delivering a narrative to potential investors by hyping up user growth. If investors value this metric, this allows companies to focus on driving growth at the expense of burning cash. Thus, emerging social media companies such as Snapchat (SNAP) run huge loss-making operations for the promise of future profits after scaling.
ARPU - Average Revenue Per User
Favored by maturing social media companies, particularly Facebook, which has already grown global usership to 2.2 billion. Once the emerging hypergrowth phase comes to an end, social media companies focus on extracting more income per user through targeted ads. Facebook and Alphabet have the best ad tech divisions in all of Silicon Valley. The business model has made Facebook an inordinate amount of money as advertiser's flock to this de-facto marketplace paying more for effective ads whose price is set at an auction. It's a vicious cycle that attracts more traditional advertisers because it is the only method of selling to Millennials who are addicted to social media platforms. Cord-cutting is accelerating this trend forcing advertisers to co-exist with the Mark Zuckerberg model.
There are many more acronyms in the tech world that need explaining and that is exactly what I will do. The Mad Hedge Technology Letter will be back with another slew of technical terms to help subscribers understand the tech universe.
_________________________________________________________________________________________________
Quote of the Day
"You can worry about the competition... or you can focus on what's ahead of you and drive fast," said Square and Twitter CEO Jack Dorsey.
Global Market Comments
June 12, 2018
Fiat Lux
Featured Trade:
(THE LAST CHANCE TO ATTEND THE THURSDAY, JUNE 14, 2018, NEW YORK, NY, GLOBAL STRATEGY LUNCHEON)
(SHORT SELLING SCHOOL 101),
(SH), (SDS), (PSQ), (DOG), (RWM), (SPXU), (AAPL),
(VIX), (VXX), (IPO), (MTUM), (SPHB), (HDGE),
Come join me for lunch at the Mad Hedge Fund Trader's Global Strategy Update, which I will be conducting in New York City on Thursday, June 14, 2018. An excellent meal will be followed by a wide-ranging discussion and an extended question-and-answer period.
I'll be giving you my up-to-date view on stocks, bonds, currencies, commodities, precious metals, and real estate. And to keep you in suspense, I'll be throwing a few surprises out there, too. Tickets are available for $278.
I'll be arriving at noon and leaving late in case anyone wants to have a one-on-one discussion, or just sit around and chew the fat about the financial markets.
The lunch will be held at an exclusive downtown private club. The precise location will be emailed with your purchase confirmation.
I look forward to meeting you and thank you for supporting my research.
To purchase a ticket, please click here.
Mad Hedge Technology Letter
June 12, 2018
Fiat Lux
Featured Trade:
(THE NEXT INDUSTRY SET FOR DISRUPTION),
(BITCOIN), (DASH), (MONERO), (LITECOIN)
Time after time.
Headlines leak into the public sensationalizing hackers and ruthless breaches of mass data.
It happens time after time.
To where do all these emails, phone numbers, and credit card numbers wash away?
Do they float off to data heaven?
Enter the dark web.
First, the deep web is part of the Internet that is not indexed by search engines.
You won't be able to populate these sites on a regular Google search or Bing.com (Do people still use this?).
The dark web is a small part of the greater deep web.
The way to access this part of the hidden Internet is to use a VPN (virtual private network) to connect to a specific server that facilitates the access to the dark web.
The last step is to download a specific Linux browser as a graphic interface tool to surf these sites.
In a 2017 report based on 2015 data from the Digital Society, eight countries were found with heavy usage of more than 300 Tor users per 100,000 Internet users.
Tor is the aforementioned Linux browser used to access the dark web. These countries and one territory with elevated Tor activity were in no particular order: Moldova, Monaco, Iceland, Liechtenstein, Seychelles, Cayman Islands, Luxembourg and Andorra.
The common link tying seven of these locations is their reputation as a hub for offshore capital.
Small, island countries have the propensity to attract capital by loosening regulation and becoming international financial centers.
Moldova is the only outlier. The high usage of Tor is certainly due to its close proximity, set adjacent to Ukraine, which is still bogged down in an atrocious war against Russian separatists in the southeast of Ukraine.
No doubt, the average person would rather not know what illicit products and services are flowing through the Moldovan conduit leading to the borders and territories of Ukraine and Russia.
These offshore capital hotbeds are using the dark web for targeted reasons.
The main products sold on the dark web are not for the faint of heart.
Illegal drugs of any ilk, hacking services, adult-rated content, and fraudulent documents is on the a la carte menu.
Effectively, this mysterious marketplace offers incentives for hackers to commit heinous crimes in order to sell on the information they desire.
To maintain anonymity, products are mainly transacted in cryptocurrency.
Bitcoin has been the crypto of choice for dark web vendors. However, its exorbitant transaction costs have propelled other cryptocurrencies into the main light, with Litecoin currently being accepted by about 30% of dark web vendors.
Bitcoin is in the process of being undercut by its digital brethren.
The dark web is the economic backbone to the existence of cryptocurrency, and any regulation on the dark web would hammer the price of its main flagship currency bitcoin.
The billions in arms' sales and illicit drugs compromise a meaningful chunk of bitcoin volume, and the ease of use and speed of transaction are important to time-sensitive deals.
Litecoin has grown in popularity - even with its lax security protocols - in Eastern Europe. It could be estimated that Ukraine is a focal point for dark web activity particularly in weapons and other war-related services.
Dash is another cryptocurrency finding favor with cybercriminal inner circles as it is easy to use.
A spike in demand for alternative currencies would hurt the price of Bitcoin that spiked just below the $20,000 threshold in late December 2017, only to reverse back to reality crashing to the $6,700 level.
Bitcoin is ensnared by the speed of processing the transactions.
Cybercriminals cringe because of the sloth-like transactional speeds.
Usually, the processing time is a few hours.
This shift to more exotic digital tender could explain part of the reason of the bitcoin crash.
Bitcoin could turn out to be the victim of its own success.
The overwhelming popularity has alerted enforcement to target bitcoin transactions because of the large volume.
However, it could be game over for bitcoin as alternative currencies offer criminals an added layer of anonymity because law enforcement agencies do not have the expertise or the resources to track every type of cryptocurrency around the world.
As of April 2018, the world played host to 1,565 cryptocurrencies, and the number is growing by the day.
Particularly, Monero has caught fire in Asia where bitcoin volume is highest and is ground zero of the bitcoin movement.
North Korean state-sponsored hacking teams are especially fond of Monero.
Monero does not even crack the top 10 of cryptocurrencies aiding North Korean operations flying under the radar.
No doubt North Koreans have branched out into other undetectable crypto assets that have higher degrees of stealth elements.
Proprietary software created by the North Koreans saw infected code successfully mine Monero on South Korean computers that rerouted the proceeds back to North Korea.
Crypto mining is the process of solving complicated math problems resulting in the creation of new coins.
Developers have praised Monero for being "super anonymous" and is one of the best currencies to avoid capital controls.
Monero has given life to North Korean hackers and its blockchain is intentionally made to be obscure.
It obfuscates the wallet addresses from where people send Monero, rendering it more anonymous.
A Monero transaction only takes 21 minutes to complete, giving cybercriminals a fast way to smash and grab and move onto the next deal.
Japan, hoping to be the unequivocal leader of the fintech and blockchain revolution, officially recognized bitcoin as an official currency in April 2017.
The cryptocurrency tax windfall is predicted to mint the Japanese government coffers by up to $10 billion in the 2017 fiscal year.
If this digital currency revolution has legs, Japan wants to be the leader in the field and has positioned itself to reap the rewards.
And with most businesses in this world, the migration toward technology is forcing anything and everything to become fully or partially digitized.
Currency is no exception.
China has outright banned cryptocurrency on the mainland, but the use case for Chinese citizens is strong.
Each Chinese citizen is allowed to convert a yearly quota of $10,000 into U.S. dollars from Chinese local currency as a way for the government to control the currency price movements.
This is a paltry amount for a country that has seen its elite enriched and a burgeoning middle class that wants to park its assets overseas in safe Western financial systems.
Cryptocurrency proved wildly popular in China by locals circumnavigating capital controls before the ban and proves that many countries rich and poor have a use case for cryptocurrency.
In the future, expect the Asian region to take the lead in cryptocurrencies. The bitcoin crash could get worse as a result of the disruption caused by lesser known cryptocurrencies with better technology and faster transaction speeds.
Bitcoin could be on the verge of going to zero, and its economic pipeline from the dark web could be spread out into thousands of untraceable currencies of which people have never heard.
Let's face it, if law enforcement is setting traps for bitcoin transactions, it is probably better to use one of the other 1,564 currencies at your disposal.
It does not take a genius to figure this out.
As for the Mad Hedge Fund Trader, to go that far out on the risk curve with a highly unpredictable and highly volatile digital currency that is based on no fundamentals is not my cup of tea.
There are so many better things to buy right now.
_________________________________________________________________________________________________
Quote of the Day
"It's probably rat poison squared," - said legendary investor Warren Buffett when asked about bitcoin.
Global Market Comments
June 11, 2018
Fiat Lux
Featured Trade:
(LAST CHANCE TO ATTEND THE WEDNESDAY, JUNE 13, 2018, PHILADELPHIA, PA, GLOBAL STRATEGY LUNCHEON),
(THE MARKET OUTLOOK FOR THE WEEK AHEAD, or WELCOME TO THE NEW WORLD ORDER),
(AAPL), (MU), (TWTR),
(I'M HITTING THE ROAD)
Come join me for lunch at the Mad Hedge Fund Trader's Global Strategy Update, which I will be conducting in Philadelphia, PA, at 12:00 noon on Wednesday, June 13, 2018. An excellent meal will be followed by a wide-ranging discussion and an extended question-and-answer period.
I'll be giving you my up-to-date view on stocks, bonds, currencies, commodities, precious metals, and real estate. And to keep you in suspense, I'll be throwing a few surprises out there, too. Tickets are available for $238.
I'll be arriving at 11:45 AM, and leaving late in case anyone wants to have a one-on-one discussion, or just sit around and chew the fat about the financial markets.
The lunch will be held at an exclusive downtown private club. The precise location will be emailed with your purchase confirmation.
I look forward to meeting you and thank you for supporting my research.
To purchase a ticket, please click here.
It seems like another day, another analyst downgrade for technology. The latest report came from Japan's Nihon Keizai Shimbun, which reported that Apple has asked parts suppliers throughout Asia to cut back parts shipments for its iPhones by 20%. Apple shares responded by falling by $5 to $190.
Granted, the global cell phone market has been flat for the past two years. What is new is that Apple has been extracting an ever-larger share of the global smart phone profit stream, now at a heady 92%, thanks to more expensive products with better functionality. That's what I'm focusing on.
We saw a similar downgrade for the chip sector days early, which cut $9 off the high beta play there, Micron technology (MU).
The bad news was enough to trigger a long overdue rotation from perennial leaders in technology toward laggard banks, retailers, materials, and consumer discretionary.
Remember, as long as no new net cash is coming into equities beyond share buybacks, the main indexes can't break out to new all-time highs. My 10-month range for the (SPY) lives!
It is normal to hear a rising tide of wailing from Cassandras decrying impending doom as we reach the end of an economic and stock market cycle. At nine years, this one is already the second longest in history. But we have six more years to run to top the market performance from 1949 to 1961.
Personally, I believe the current technology cycle has a minimum of one to two years to go, so there is more than ample time to make money in the sector.
Much media was focused last week on the G7 Meeting in Quebec City Canada, which appears to soon become the G6, ex the United States. Here we see the unfolding of another aspect of Trump's global strategy.
He wants to break up the American led post WWII order, which made us all wealthy and abandon Europe, Japan, and Australia as allies. This is what all the new trade wars against our friends are all about.
Instead, the NEW world order has us allied with Russia, Saudi Arabia, and a handful of Gulf sheikdoms. If carried out, it should shrink U.S. GDP growth by 1% to 2% a year, caused the mother of all stock market crashes, and greatly undermine the security of the United States.
My prediction is that it won't last. The market risk is zero for the short term, but enormous for the long term. I am not alone in these predictions.
There was another new world order emerging this week, and that the addition of Twitter (TWTR) this week to the S&P 500, replacing old line chemical company Monsanto (MON). I have to confess that I totally missed the Twitter turnaround, which has rocked from $14 to $45 in a year.
Maybe meeting Twitter employees during my nightly hikes on Grizzly Peak and meeting despairing Twitter employees who went up there to commit suicide had something to do with it. This kind of experience kind of puts one off a stock for life.
As for the Mad Hedge Trade Alert Service we are having another blockbuster month. I caught the upside breakout by the lapels and shook it for all it was worth with aggressive long positions in Microsoft (MSFT), Amazon (AMZN), Salesforce (CRM), Apple (AAPL), and the Biotechnology Index (IBB).
The result was to take the performance of the Mad Hedge Trade Alert Service to yet another all-time high. Those who signed up at any time in the past 12 months have to be extremely happy.
After one trading day, my June return is +6.24%, my year-to-date return stands at a robust 26.75%, my trailing one-year returns have risen to 62.14%, and my eight-year profit sits at a 303.65% apex.
This coming week will be all about the big Fed decision on interest rates on Wednesday.
On Monday, June 11, no data of note is released.
On Tuesday, June 12, the Federal Open Market Committee Meeting begins. At 8:30 AM EST, the May Consumer Price Index is released, the most important indicator of inflation.
On Wednesday, June 13, at 7:00 AM, the MBA Mortgage Applications come out. At 2:00 PM EST, the Fed is expected to raise interest rates by 25 basis points. At 2:30 Fed Chair Jerome Powell holds a press conference.
Thursday, June 14, leads with the Weekly Jobless Claims at 8:30 AM EST, which saw a fall of 13,000 last week to 222,000. Also announced are May Retail Sales.
On Friday, June 15 at 9:15 AM EST, we get May Industrial Production. Then the Baker Hughes Rig Count is announced at 1:00 PM EST.
As for me, I will be taking off on my 2018 Mad Hedge U.S. Road Show. See you at lunch.
Good Luck and Good Trading.
Mad Hedge Technology Letter
June 11, 2018
Fiat Lux
Featured Trade:
(HERE ARE SOME GREAT SECOND-TIER CLOUD PLAYS TO SALT AWAY),
(DOCU), (ZUO), (ZS), (MSFT), (AMZN)
