Below please find subscribers’ Q&A for the Mad Hedge Fund Trader July 24Global Strategy Webinar broadcast from Zermatt, Switzerland with my guest and co-host Bill Davis of the Mad Day Trader. Keep those questions coming!
Q: What are your thoughts on the Freeport McMoRan (FCX) long position here?
A: We could take a profit here. We probably have about 50% of the maximum potential profit, but I want to hang on and go to the max on this because we’re so far in the money. Cash always has a premium ahead on any Fed interest rate decision. But long term, I think the stock could double, and with the earnings report now out of the way, we have room to run.
Q: What can you say about semiconductor stocks?
A: Long term we love them, short term they are too high to chase here. I would wait for any kind of pullback and, better yet, pull back from the other side of the next recession. We’re not seeing an improvement in prices or orders so this is strictly a technical/momentum-driven trade right now.
Q: How do you play the Volatility Index (VIX)?
A: There are numerous ways you can do it; you can buy call options on the (VIX), you can buy futures on the (VIX), or you can buy the iPath Series B S&P 500 VIX Short Term Futures ETN (VXX). We are probably a week away from a nice entry point on the long side here.
Q: Does a languishing U.S. dollar mean emerging market opportunities?
A: It absolutely does. If we really start to get a serious drop in the U.S. dollar (UUP)—like 5-10%—it will be off to the races for commodities, bonds (TLT), emerging stock markets (EEM), emerging bond markets (ELD), emerging currencies (CEW), and gold (GLD). All of your weak dollar plays will be off to the races—that’s why I went straight into bonds, the Aussie (FXA), and copper through Freeport McMoRan (FCX). All of these trades have been profitable.
Q: When should we sell the U.S. dollar?
A: How about now? For any kind of strength in a dollar against the (FXA), (FXE), (FXC) and (FXY), I would be buying any dips on those foreign exchange ETFs. We’re about to enter a six-month - one-year period weakness on the dollar. It could be the easiest trade out there. The only one I would avoid is the British pound (FXB) because of its own special problems with Brexit. You never want to go long the currency of a country that is destroying itself, which is exactly what’s happening with the pound.
Q: Should I start selling pounds?
A: It’s pretty late in the pound game now. We went into Brexit with the pound at $1.65 and got all the way down to $1.20. We’re a little bit above that now at $1.21. If for some reason, you get a surprise pop in the pound, say to $1.25, that’s where I would sell it, but down here, no.
Q: I missed the (FCX) trade—would you get in on the next dip?
A: Yes, we may not get many dips from here because the earnings were out. Today, they were not as bad as expected, and that was keeping a lot of buyers out of the market on (FCX), so any dips you can get, go a dollar out on your strikes and then take it because this thing could double over the medium term. If the trade war with China ends, this thing could make it to the old high of $50.
Q: Is now a good time to refi my home?
A: Yes, because by the time you get the paperwork and approvals and everything else done (that’ll take about 2 months), rates will likely be lower; and in any case you’re looking to refi either a 7/1 ARM or a 15-year fixed, and the rates on those have already dropped quite substantially. I was offered 3.0% for a 15-year fixed loan on my home just the other day.
Q: On trades like (FCX), why not sell short the put spread?
A: It’s really six of one, half dozen of the other. The profit on either one should be about the same. If it isn’t, an options market maker will step in and arbitrage out the difference. That’s something only an algorithm can do these days. I recommend in-the-money call spreads versus shorting sell short vertical bear put credit spreads because for beginners, in-the-money call spreads are much easier to understand.
Q: The Mueller hearings in Congress are today. Is there any potential impact on the market?
A: The market has completely detached itself from Washington—it couldn't care less about what’s happening there. I don't think politics have the capacity to affect stock prices. The only possible impact was the prospect of the government shutdown in September. That seems to have been averted in the latest deal between the House and the White House.
Q: What about Amazon (AMZN)?
A: Like the rest of technology, long term I love it, but short term it’s overdue for a small correction. I’m looking for Amazon to go to $3,000 a share—it’s essentially taking over the world. The antitrust threats will go absolutely nowhere; Congress doesn’t even understand what these companies do, let alone know how to break them up. I wouldn’t worry about it.
Q: I just received an email inviting me to buy a new Bitcoin auto trading system that is guaranteed to make me a millionaire in four months. It is being promoted by Nicole Kidman. Do you think I should try it?
A: I wouldn’t touch this with a ten-foot pole. No, wait. I wouldn’t touch this with a 100-foot pole! Whenever a new type of security comes out, these types of "get rich quick" investment scams come out of the woodwork. Cryptocurrency is no different. Nicole Kidman was probably paid $500,000 to make the pitch by a promotor. Or more likely, Nicole Kidman has nothing to do with these people and they just swiped her picture off the Internet. I hear about these things daily. Follow their plan and you are more likely to get completely wiped out than become a millionaire. There are NO get rich quick schemes. There are only get rich slowly strategies, such as following this newsletter. Click here to see the above-mentioned scam which you should avoid at all cost. Gee, do you think Nicole Kidman would be interested in promoting the Mad Hedge Fund Trader?
Bridgewater Associates Founder Ray Dalio carefully articulates an economic landscape in which the unrelenting chase for short-term tech profits finally catches up meaningfully with the gyrations of tech shares.
All of this could come home to roost and the early manifestations can be found in the housing migratory trends.
The robust housing demand, lack of housing supply, mixed with the avalanche of inquisitive tech money will propel these housing markets to new heights and this phenomenon is happening as we speak.
Salesforce Founder and CEO Marc Benioff has lamented that San Francisco, where ironically he is from, is a diabolical “train wreck” and urged fellow tech CEOs to “walk down the street” and see it with their own eyes to observe the numerous homeless encampments dotted around the city limits.
The leader of Salesforce doesn’t mince his words when he talks and beelines to the heart of the issues.
After relinquishing some of his CEO duties to newly anointed Co-CEO Keith Block, Benioff will have the operational time and a wealth of resources to get on top of the pulse of not only tech issues but bigger picture stuff and he now has a mouthpiece for it with Time Magazine which he and his wife recently bought.
In condemning large swaths of the beneficiaries of the Silicon Valley ethos, he has signaled that it won’t be smooth sailing forever.
In tech wonderland, and he urged companies to transform their business model if they are irresponsible with user data.
The tech lash could get messier this year because companies that go rogue with personal data will face a cringeworthy reckoning as the techlash fury seeps into government policy and the social stigma worsens.
I have walked around the streets of San Francisco myself.
Places around Powell Bart station close to the Tenderloin district are eyesores littered with used syringes that lay in the gutter.
South of Market Street isn’t a place I would want to barbecue on a terrace either.
Summing it up, the unlimited tech talent reservoir that Silicon Valley gorged on isn’t flowing anymore because people don’t want to live there now.
This tech talent, equipped with heart-tugging stories from siblings and anecdotes from classmates getting shafted by the San Francisco dream, has recently put the Bay Area in the rear-view mirror for many who would have stayed if it were 20 years ago.
This is exactly what Apple’s $1 billion investment into a new tech campus in Austin, Texas and Amazon adding 500 employees in Nashville, Tennessee are all about.
Apple also added numbers in San Diego, Atlanta, Culver City, and Boulder just to name a few.
Apple currently employs 90,000 people in 50 states and is in the works to create 20,000 more jobs in the US by 2023.
Most of these new jobs won’t be in Silicon Valley.
Since the tech talent isn’t giddy-upping into Silicon Valley anymore, tech firms must get off their saddle and go find them.
The tables have turned but that is what happens when the heart of western tech becomes unlivable to the average tech worker earning $150,000 per year.
Driving out young people who envision a long-term future elsewhere than the San Francisco Bay Area forces Silicon Valley to adapt to the new patterns revealing themselves.
Sacramento has experienced a dizzying rise of newcomers from the Bay Area itself.
Some are even commuting, making that 60-mile jaunt past Davis, but that will give way to entire tech operations moving to the state capitol.
Millennials are reaching that age of family formation and they are fleeing to places that are affordable and possible to become a new home buyer.
These are some of the practical issues that tech has failed to embrace and to maintain the furious pace of growth that investors' capricious expectations harbor.
Silicon Valley will have to become more practical adding a dash of empathy as well instead of just going by the raw and heartless data.
We aren’t robots yet, and much of the world still augurs to emotional decisions and disregards the empirical data.
But, instead of physical offices being planted in the Bay Area, the tech industry will heed way to the “spirit” of Silicon Valley with offices in far-flung places.
And remember that all of these new tech talent strongholds will need housing, and housing that an IT worker making $150,000 per year desires.
No wonder why San Jose real estate has dropped in the past year, people and their paychecks are on the way out.
https://www.madhedgefundtrader.com/wp-content/uploads/2019/07/US-employment-aapl.png866972Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2019-07-24 03:02:032019-08-27 14:46:27Ciao Silicon Valley
Anti-A.I. physicist Professor Stephen Hawking was a staunch supporter of preserving human interests against the future existential threat from machines and artificial intelligence (A.I.).
He was diagnosed with motor neuron disease, more commonly known as Lou Gehrig's disease, in 1963 at the age of 21 and sadly passed away March 14, 2018 at the age of 76.
Famed for his work on black holes, Professor Hawking represented the human quest to maintain its superiority against quickly advancing artificial acculturation.
His passing was a huge loss for mankind as his voice was a deterrent to A.I.'s relentless march to supremacy. He was one of the few who had the authority to opine on these issues. Gone is a voice of reason.
Critics have argued that living with A.I. poses a red alert threat to privacy, security, and society as a whole. Unfortunately, those most credible and knowledgeable about A.I. are tech firms. They have shown that policing themselves on this front is remarkably unproductive.
Mark Zuckerberg, CEO of Facebook (FB), has labeled naysayers as "irresponsible" and dismissed the threat. After failing to prevent Russian interference in the last election, he is exhibiting the same defensive posture translating into a de facto admission of guilt. His track record of shirking accountability is becoming a trend.
Share prices will materially nosedive if A.I. is stonewalled and development stunted. Many CEOs who stake careers on doubling or tripling down on A.I. cannot see it die out. There is too much money to lose.
The world will see major improvements in the quality of life in the next 10 years. But there is another side to the coin which Zuckerberg and company refuse to delve into...the dark side of technology.
Defective Amazon (AMZN) Alexa recently produced unexplained laughter because of a mistaken command to start laughing. Despite avoiding calamity, these small events show the magnitude of potential chaos capable of haywire A.I. functions. If one day a user attempts to order a box of tissues and Alexa burns down the house, who is liable?
Tesla's (TSLA) CEO Elon Musk has shared his anxiety about robots flipping the script on humans. Musk acknowledges that A.I. and autonomous vehicles are important factors in the battle for new technology.
The winner is yet to be determined as China has bet the ranch with unlimited resources from Chairman Xi.
The quagmire with China has been squarely centered around the great race for technological supremacy.
A.I. is the ultimate X factor in this race and whoever can harness and develop the fastest will win.
Musk has hinted that robots and humans could merge into one species in the future.
Is this the next point of competition among tech companies? The future is murky at best.
Bill Gates noted that robots should be taxed like humans.
This reflects the bubble in which the ultra-elite reside.
This comment implies that humans and robots are at the same level. It shows a severe lack of empathy for the 40% of working Americans who will be replaced by machines over the next 10 years.
The West is comprised of a deeply hierarchical system of winners and losers. Hawking's premise that evolution has inbuilt greed can be found in the underpinnings of America's economic miracle.
Wall Street has bred a culture that is entirely self-serving regardless of the bigger system in which it finds itself.
Most of us are participating in this perpetual money game chase because our system treats it as a natural part of life.
A.I. will help more people do well in this paper chase to the detriment of the majority.
Quarterly earnings performance is paramount for CEOs.
Return value back to shareholders, or face the sack in the morning.
It's impossible to convince anyone that America's capitalist model is deteriorating in the greatest bull market of all time.
Wall Street has an insatiable hunger for cutting-edge technology from companies that sequentially beat earnings and raise guidance.
Flourishing technology companies enrich the participants creating a Teflon-like resistance to downside market risk.
The issue with Professor Hawking's work is that his timeframe is too far in the future.
Professor Hawking was probably correct, but it will take 25 years to prove it.
The world is quickly changing as science fiction becomes reality.
The year 2020 will signal the real beginning of A.I. in tangible form when autonomous fleets flood main streets and is another step in the direction of human's overreliance on machines.
People on Wall Street are a product of the system in place and earn a tremendous amount of money because they proficiently execute a specialized job.
Traders are busy focusing on how to move ahead of the next guy.
Firms building autonomous cars are free to operate as is.
Hyper-accelerating technology spurs on the development of A.I., machine learning, and enhanced algorithms.
Record profits will topple, and investors will funnel investments back into an even narrower grouping of technology stocks after the weak hands are flushed out.
Professor Hawking said we need to explore our technological capabilities to the fullest in order to avoid extinction.
In 2019, exploring these new capabilities still equals monetizing through the medium of products and services.
This is all bullish for equities as the leading companies associated with A.I. have a red carpet laid out in front of them.
And let me remind you that technology is still the least regulated industry on the planet even if sentiment has pivoted this year.
The only solution is keeping companies accountable by a function of law or creating a third-party task force to regulate A.I.
In 2019, the thought of overseeing robots sounds crazy.
However, by 2020, it might be as normal as uncontrollable laughter from your smart home device.
https://www.madhedgefundtrader.com/wp-content/uploads/2019/07/ai-revenues.png672972Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2019-07-22 01:02:572019-08-19 16:08:21Does Artificial Intelligence Work for You?
Take a look at these beauties that I recommended at the beginning of December 2018.
At that time, Okta (OKTA) was trading at $62 and Zscaler (ZS) was at $40 on the button – fast forward to today and Okta is now over $136 and Zscaler victoriously sitting at $82.
Oh, how do times change!
That was my reaction watching their performance for the past 7 months giving belief to my assessment that second-tier cloud companies will have a field day this year.
Cloud companies aren’t going away anytime soon, please tattoo that on your forehead.
There isn’t a hotter topic circulating the gossip winds these days than digital security pressured by geopolitics.
Okta is the best in show for identity management – a snazzy term for managing employees’ passwords.
Okta’s products are built on top of the Amazon Web Services cloud.
Coincidentally, Okta was erected in 2009 by a team of former Salesforce (CRM) executives. Salesforce is one of my favorite cloud-based software companies, offering a blueprint for success to other up-and-coming software companies.
Current Okta CEO and founder Todd McKinnon previously served as the Senior Vice President of Engineering at Salesforce.
Other founders include Okta COO Freddy Kerrest who also meandered through the corridors of Salesforce.
I can tell you that you could do much worse than starting a new software company with a collection of Salesforce upper echelon talent.
This all-star team is behind the insatiable growth of Okta whose revenue has grown over 600% since establishing itself.
Okta’s first-quarter results didn’t disappoint with revenues of $125 million—a rise of 50% year-over-year beating the consensus of $117 million.
Subscription revenues comprised 94% of sales and the company expects sales of $130 million amounting to a rise of 37% year-over-year.
Okta’s subscriber base has risen over 500% in the past 5 years and annual contract value of over $100,000 has expanded 60% annually.
The company still loses money but hopes to make some headway on this issue with projected EPS estimated to grow 25% annually in the next five years.
This year spawned a massive divergence between tech who has legs and tech who will be dragged down to the depths of the ocean floor by the heavy weight of regulation, overwhelming competition, or just flat out poor management or inferior product development.
Zscaler echoed similar positive sentiment of Okta by recording a quarter to remember growing revenue by 61% year-over-year while calculated billings grew 55% year-over-year.
In addition to the top line growth, operating margins improved 14% points year-over-year to 8%.
The quarterly results demonstrate the leverage in cloud security business models and the ability to drive growth and profitability.
String together a third consecutive quarter of profitability is just part of the battle, Zscaler will continue to aggressively invest for significant market opportunity that lie ahead.
Cloud security potential means going after a $20.3 billion Total Addressable Market in calendar 2019.
Let me divulge a tad bit about the competitive landscape and why Zscaler is brilliantly positioned for success.
As organizations increasingly make the shift to the cloud, traditional firewall and VPN vendors are finally acknowledging that the legacy security appliances can secure the new digital enterprise and are attempting to build a security cloud using single tenant software designed for on-premise appliances just like you can't create a Netflix service by stacking thousands of DVD players in the cloud.
You can't offer an inline high-performance security cloud by spinning up a bunch of virtual machines in a public cloud. This is a defensive strategy of cloud imitators which, in our view, serves the self-preservation of the vendor, not the needs of the customers.
Zscaler has a significant competitive advantage as a result of the technology, architecture and maturity of cloud security platform including one, Zscaler was born in the cloud, for the cloud just like Salesforce and Workday.
Two, Zscaler has a purpose built globally distributed multi-tenant cloud for fast user experience, unlike imitation cloud, Zscaler requires no back hauling from front doors to a central computing data center of a public cloud.
Three, Zscaler performs SSL inspection at scale as a purpose-built proxy for better security.
Lastly, Zscaler continues to deliver zero trust network access that provides application access without network access reducing business risk unlike firewalls and VPNs.
The duo of Okta and Zscaler are the bright lights of the cloud generation and leading the digital economy in digital security.
https://www.madhedgefundtrader.com/wp-content/uploads/2019/07/zscaler.png568972Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2019-07-12 08:30:352019-08-19 16:09:58Cloud Security on the March
https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png00Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2019-07-12 01:06:502019-07-11 21:05:30July 12, 2019
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