Global Market Comments
July 11, 2019
Fiat Lux
Featured Trade:
(THE INSIDER’S VIEW ON THE FUTURE OF TECHNOLOGY),
(AMZN), (GOOG), (DELL), (MSFT), (EBAY),
(MY DATE WITH HITLER’S GIRLFRIEND)
Global Market Comments
July 11, 2019
Fiat Lux
Featured Trade:
(THE INSIDER’S VIEW ON THE FUTURE OF TECHNOLOGY),
(AMZN), (GOOG), (DELL), (MSFT), (EBAY),
(MY DATE WITH HITLER’S GIRLFRIEND)
Global Market Comments
June 21, 2019
Fiat Lux
Featured Trade:
(MONDAY, JULY 8 VENICE, ITALY STRATEGY LUNCHEON)
(PLAYING THE SHORT SIDE WITH VERTICAL BEAR PUT SPREADS), (TLT)
(WHY TECHNICAL ANALYSIS DOESN’T WORK)
(FB), (AAPL), (AMZN), (GOOG), (MSFT), (VIX)
Global Market Comments
June 14, 2019
Fiat Lux
Featured Trade:
(WEDNESDAY JUNE 26 BRISBANE, AUSTRALIA STRATEGY LUNCHEON)
(MAY 29 BIWEEKLY STRATEGY WEBINAR Q&A),
(TSLA), (BYND), (AMZN), (GOOG), (AAPL), (CRM), (UT), (RTN), (DIS), (TLT), (HAL), (BABA), (BIDU), (SLV), (EEM)
Below please find subscribers’ Q&A for the Mad Hedge Fund Trader June 12 Global Strategy Webinar with my guest and co-host Bill Davis of the Mad Day Trader. Keep those questions coming!
Q: Do you think Tesla (TSLA) will survive?
A: Not only do I think it will survive, but it’ll go up 10 times from the current level. That’s why we urged people to buy the stock at $180. Tesla is so far ahead of the competition, it is incredible. They will sell 400,000 cars this year. The number two electric car competitor will sell only 25,000. They have a ten-year head start in the technology and they are increasing that lead every day. Battery costs will drop another 90% over the next decade eventually making these cars incredibly cheap. Increase sales by ten times and double profit margins and eventually, you get to a $1 trillion company.
Q: Beyond Meat (BYND)—the veggie burger stock—just crashed 25% after JP Morgan downgraded the stock. Are you a buyer here?
A: Absolutely not; veggie burgers are not my area of expertise. Although there will be a large long-term market here potentially worth $140 billion, short term, the profits in no way justify the current stock price which exists only for lack of anything else going on in the market. You don’t get rich buying stocks at 37 times company sales.
Q: Are you worried about antitrust fears destroying the Tech stocks?
A: No, it really comes down to a choice: would you rather American or Chinese companies dominate technology? If we break up all our big tech companies, the only large ones left will be Chinese. It’s in the national interest to keep these companies going. If you did break up any of the FANGS, you’d be creating a ton of value. Amazon (AMZN) is probably worth double if it were broken up into four different pieces. Amazon Web Services alone, their cloud business, will probably be worth $1 trillion as a stand-alone company in five years. The same is true with Apple (AAPL) or Google (GOOG). So, that’s not a big threat overhanging the market.
Q: Is it time to buy Salesforce (CRM)?
A: Yes, you want to be picking up any cloud company you can on any kind of sizeable selloff, and although this isn’t a sizeable selloff, Salesforce is the dominant player in cloud plays; you just want to keep buying this all day long. We get back into it every chance we can.
Q: Do you think the proposed merger of United Technologies (UT) and Raytheon (RTN) will lower the business quality of United Tech’s aerospace business?
A: No, these are almost perfectly complementary companies. One is strong in aerospace while the other is weak, and vice versa with defense. You mesh the two together, you get big economies of scale. The resulting layoffs from the merger will show an increase in overall profitability.
Q: I had the Disney (DIS) shares put to me at $114 a share; would you buy these?
A: Disney stock is going to go up ahead of the summer blockbuster season, so the puts are going to expire being worthless. Sell the puts you have and then go short even more to make back your money. Go naked short a small non-leveraged amount Disney $114 puts, and that should bring in a nice return in an otherwise dead market. Make sure you wait for another selloff in the market to do that.
Q: What role does global warming play in your bullish hypothesis for the 2020s?
A: If people start to actually address global warming, it will be hugely positive for the global economy. It would demand the creation of a plethora of industries around the world, such as solar and other alternative energy industries. When I originally made my “Golden Age” forecast years ago, it was based on the demographics, not global warming; but now that you mention it, any kind of increase in government spending is positive for the global economy, even if it’s borrowed. Spending to avert global warming could be the turbocharger.
Q: Why not go long in the United States Treasury Bond Fund (TLT) into the Fed interest rate cuts?
A: I would, but only on a larger pullback. The problem is that at a 2.06% ten-year Treasury yield, three of the next five quarter-point cuts are already priced into the market. Ideally, if you can get down to $126 in the (TLT), that would be a sweet spot. I have a feeling we’re not going to pull back that far—if you can pull back five points from the recent high at $133, that would be a good point at which to be long in the (TLT).
Q: Extreme weather is driving energy demand to its highest peak since 2010...is there a play here in some energy companies that I’m missing?
A: No, if we’re going into recession and there’s a global supply glut of oil, you don’t want to be anywhere near the energy space whatsoever; and the charts we just went through—Halliburton (HAL) and so on—amply demonstrate that fact. The only play here in oil is on the short side. When US production is in the process of ramping up from 5 million (2005) to $12.3 million (now), to 17 million barrels a day (by 2024) you don’t want to have any exposure to the price of oil whatsoever.
Q: What about China’s FANGS—Alibaba (BABA) and Baidu (BIDU). What do you think of them?
A: I wanted to start buying these on extreme selloff days in anticipation of a trade deal that happens sometime next year. You actually did get rallies without a deal in these things showing that they have finally bottomed down. So yes, I want to be a player in the Chinese FANGS in expectation of a trade deal in the future sometime, but not soon.
Q: Silver (SLV) seems weaker than gold. What’s your view on this?
A: Silver is always the high beta play. It usually moves 1.5-2.5 times faster than gold, so not only do you get bigger rallies in silver, you get bigger selloffs also. The industrial case for silver basically disappeared when we went to digital cameras twenty years ago.
Q: Does this extended trade war mean the end for emerging markets (EEM)?
A: Yes, for the time being. Emerging markets are one of the biggest victims of trade wars. They are more dependent on trade than any of the major economies, so as long as we have a trade war that’s getting worse, we want to avoid emerging markets like the plague.
Q: We just got a huge rebound in the market out of dovish Fed comments. Is this delivering the way for a more dovish message for the rest of the year?
A: Yes, the market is discounting five interest rate cuts through next year; so far, the Fed has delivered none of them. If they delayed that cutting strategy at all, even for a month, it could lead to a 10% selloff in the stock market very quickly and that in and of itself will bring more Fed interest rate cuts. So, it is sort of a self-fulfilling prophecy. The bottom line is that we’re looking at an ultra-low interest rate world for the foreseeable future.
Good Luck and Good Trading.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
June 10, 2019
Fiat Lux
Featured Trade:
(JUNE 21 AUCKLAND NEW ZEALAND STRATEGY LUNCH)
(MARKET OUTLOOK FOR THE WEEK AHEAD, OR THE GRAND PLAN)
(MSFT), (GOOGL), (AMZN), (TESLA), (TLT), ($TNX)
Global Market Comments
June 7, 2019
Fiat Lux
Featured Trade:
(SUNDAY, JUNE 30 MANILA, PHILIPPINES STRATEGY LUNCHEON)
(THE CONTINUING DEATH OF RETAIL),
(AMZN), (WMT), (M), (JWN),
(TESTIMONIAL)
Global Market Comments
June 5, 2019
Fiat Lux
Featured Trade:
(WEDNESDAY, JUNE 26 BRISBANE, AUSTRALIA STRATEGY LUNCHEON)
(WHY CONSUMER STAPLES ARE DYING),
(XLP), (PG), (KO), (PEP), (PM), (WMT), (AMZN),
(WHY YOUR OTHER INVESTMENT NEWSLETTER IS SO DANGEROUS)
Mad Hedge Technology Letter
June 4, 2019
Fiat Lux
Featured Trade:
(THE GOVERNMENT’S WAR ON GOOGLE)
(GOOGL), (FB), (AMZN)
I told you so.
It’s finally happening.
The Department of Justice (DOJ) preparing an antitrust probe on Google (GOOGL) was never about if but when.
The Federal Trade Commission is in the fold as well, as they have secured the authority to investigate Facebook (FB).
The probe will peel back the corrosive layers of Facebook and Google’s businesses such as search, ad marketplace and its other assets in order to excavate the truth.
Investors will get color on whether these businesses are gaining an unfair advantage and perverting the premise of fair competition that every tech company should abide by.
Tech companies skirting the law and living on the margins are in for a stifling reckoning if these probes pick up steam.
Facebook is about to get dragged through the mud kicking and screaming facing an unprecedented existential crisis that have repercussions to not only the broad economy for the next 50 years, but far beyond American shores with America mired in a trade war pitted against the upstart Chinese most powerful tech companies.
Even though I have consistently propped up Alphabet on a pedestal as possessing a few of the most robust assets in tech, I have numerous times flogged their dirty laundry in public view, referencing the regulatory risks that could rear its ugly head at any time.
These companies have been playing with fire and everyone knows it, but in the world of short-term results via stock market earnings report, this trade kept working until governments decided to get their act together because of the accelerating erosion of government trust partly facilitated by technology apps.
As much as a handful of Americans have monetized Silicon Valley to great effect, I can tell you that I spend a great deal of my time abroad, and American soft power is at a generational low ebb.
Blame technology - our dirty secrets are not only exposed in frontal view but it’s pretty much a 3D view of the good, bad, and the ugly and there is a lot of ugly.
I am not saying that punishment is a given for these ultra-rich firms swimming in money.
Historically, Alphabet has stymied regulators before beating out an antitrust investigation in 2013 after a two-year inquiry ended with the FTC unanimously voting to halt the investigation.
Remember that this time around, the probe follows the fine in Europe when The European Union slapped Google with a $1.69 billion for actively disrupting competition in the online advertisement sector.
The European Commission claimed that Google installed exclusivity contracts on website owners, preventing them from populating on non-Google search engines.
It was quite a dirty trick, but do you expect much of anything else from one of the most crooked industries in the economy?
And this wasn’t the first time that Google has run amok.
EU regulators levied a $5 billion penalty on Google for egregious violations regarding its dominance of its Android mobile operating system.
Google was accused by the EU of favoring its in-house apps and services on Android-based smartphones giving manufacturers no alternative but to bundle Google products like Search, Maps and Chrome with its app store Play ensuring that Alphabet would benefit from a lopsided arrangement.
Anti-trust legislation has a myriad of supporters including the current administration who have stepped up its onslaught on Silicon Valley.
President of the United States Donald Trump has even hurled insults at Amazon (AMZN) creator Jeff Bezos and even claimed that Alphabet’s artificial intelligence has aided China’s technological rise.
To say FANG companies are in the good graces of Washington would be laughable.
I would point to Facebook to accelerating the regulatory headwinds as investors have seen Co-Founder and CEO Mark Zuckerberg fire every major executive that has opposed his vision of merging Facebook, Instagram, and WhatsApp into a cesspool of apps that pump out precious big data.
The tone-deaf boss has doubled down to reinvigorate the growth after Facebook sold off from $210.
Board members want Zuckerberg out and he is defiant against any attack on his leadership spinning it around as a vendetta on his reign.
Facebook is walking straight into a minefield and the rest of Silicon Valley is guilty by association, the contagion is that bad.
Facebook is the one to blame because of the daily nature of social interaction on its platform and the pursuance of revenue through hyper-targeting data that 3rd party companies pay access for.
They have no product.
Amazon sells consumer goods which is not as bad.
Facebook facilitates the social dialogue that has unwittingly boosted extremism of almost every type of form possible.
It has given the marginal and nefarious characters in society a platform in which to engineer devastating results and Facebook have an incentive to turn a blind eye to this because of the lust for user engagement.
This has resulted in heinous activities such as terror attacks being broadcasted live on Facebook like the 2019 New Zealand massacre at a mosque.
The former security chief at Facebook Alex Stamos hinted that Mark Zuckerberg’s tenure should wind down and the company needs to shape up and hire a replacement.
The security implications are grave, and many Americans have uploaded all their private information onto the platform.
What is the end game?
Facebook is in hotter water than Google, not by much, but their business model engineers more mayhem than Google currently.
Facebook could get neutered to the point that their ad model is dead and buried.
If Facebook goes down, this would unlock a treasure chest full of ad dollars looking for new avenues.
Facebook’s most precious asset is their data which might be blocked from being monetized moving forward.
Without data, they are worth zero.
The existential risk is far higher for Facebook than Alphabet.
No matter what, Alphabet will still be around, but in what form?
Assets such as YouTube, Google Search, and Waymo, which are all legitimate services, could get spun out to fend for themselves creating many offspring left to sink or swim.
In this case, YouTube, Google Maps, Chrome, Google Play, and Google Search would still possess potent value and offer shareholders future value creation.
Waymo would become a speculative investment based on the future and would be hard to predict the valuation.
Then there is the issue of whether Chinese companies would dominate the collection of FANGs after the split or not.
As I see it, Chinese tech companies will not be allowed to operate in the U.S. at all, and anti-trust repercussions will have many of these homegrown tech companies carved out of their parents to reset a level playing field in a way to re-democratize the tech economy.
This would spur domestic innovation allowing smaller companies to finally compete on a national stage.
The government finally clamping down epitomizes the current volatile tech climate and how Alphabet who has some of the best assets in the industry can go from barnstormer to pariah in a matter of seconds.
As for Facebook, they have always had a bad stench.
The cookie could still crumble in many ways, each case looks high risk for Facebook and Google for the next 365 days.
Stay away from these shares until we get any meaningful indication of how things will play out, but I have a feeling this is just the beginning of a tortuous process.
Global Market Comments
June 3, 2019
Fiat Lux
Featured Trade:
(MONDAY, JUNE 24 MELBOURNE, AUSTRALIA STRATEGY LUNCHEON)
(MARKET OUTLOOK FOR THE WEEK AHEAD, OR WHAT A WASTE OF TIME!),
(SPY), ($INDU), (JPM), (MSFT), (AMZN), (TSLA)
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