Posts

August 23, 2019

Global Market Comments
August 23, 2019
Fiat Lux

Featured Trade:

(AUGUST 21 BIWEEKLY STRATEGY WEBINAR Q&A),
(FXB), (NVDA), (MU), (LRCX), (AMD),
 (WFC), (JPM), (BIDU), (GE), (TLT), (BA)

July 26, 2019

Mad Hedge Technology Letter
July 26, 2019
Fiat Lux

Featured Trade:

(WHY 3D PRINTING WILL BOOST THE AIRPLANE INDUSTRY),
(SSYS), (ETSY), (MSFT), (BA), (NFLX), (GE), (LMT)

Why 3D Printing Will Boost the Airplane Industry

If you need a new investment idea – here’s one.

3D printing.

Yes, the same 3D printing that was once considered a raging but hopeless fad.

A lot has changed since then.

Early adopters were largely cut down at the knees as they tried to traverse the rocky terrain from a niche market to going full out mainstream.

The teething pains echo bitcoin which was the fad of 2017, on the contrary, this technology it is built on is rock solid, yet the path to sustainability is littered with corpses.

Production complications and the lack of specialists in the industry meant that problems were rampant and nurturing an industry from scratch is harder than you think.

It is time to stand up and take notice of 3D printing, this time it is here to stay.

Certain tech companies love this technology.

Etsy (ETSY) e-commerce participants gravitate towards 3D printing because it gets firms from paper to the real world in a fraction of the time.

The cost of production doesn’t change whether you’re producing one item or a million because of the economies of scale.

The previous 3D printing bonanza was a frenzy and this corner of tech became known for the use of buzzwords representing the potential to reinvent the world.

With lofty expectations, there was a natural disappointment when outsiders understood growing pains were part of the critical evolution instead of a direct route to profits.

The initial goal was to democratize production which sounds eerily similar to bitcoins mantra of democratizing money.

The way to do this was to make it simple to produce whatever one wishes.

That would assume that the general public could pick up professional production 3D printing skills on arrival.

That was wishful thinking.

The truth was that applying 3D printers was time-draining and aggravating.

Issues cropped up like faulty first-generation hardware or software -problems that overwhelmed newbies.

Then if everything was going smoothly on that front, there was the larger issue of realizing it’s just a lot harder to design specific things than initially thought without a deep working knowledge of computer-aided software (CAD) design.

Most people know how to throw a football, but that doesn’t mean that most people can wake up one day in their pajamas and convince themselves they will be the next starting quarterback to lead an NFL team to the Super Bowl.

The high-quality 3D printing designs were reserved for authentic professionals that could put together complicated designs.

The move to compiling a comprehensive library will help spur on the 3D printing revolution while upping the foundational skill base.

Then there is the fact that 3D printing technology is a lot better now than it once was, and the printing technology has come down in price making it more affordable for the masses.

These trends will propel broad-based adoption and as the printing process standardizes, more products can rely on this technology from scratch.

The holy grail of 3D printing would be 3D printing on demand like Netflix (NFLX), but imagine this on-demand 3D printing would function to personalize a physical product on the spot.

Think of a hungry customer walking into a restaurant and not even looking at a menu because one sentence would be enough to trigger specific models in the database that could conjure up the design for the meal.

This would involve integrating artificial intelligence into 3D printing and the production process would quicken to minutes, even seconds.

At some point, crafting the perfect meal or designing a personalized Tuscan villa could take minutes.

The 3D printing industry is reaching an inflection point where the advancement of the technology, expertise, and an updated production process are brewing together at the perfect time.

The company at the forefront of this phenomenon is Stratasys (SSYS).

Stratasys produces in-office prototypes and direct digital manufacturing systems for automotive, aerospace, industrial, recreational, electronic, medical and consumer products.

And when I talk about real pros who have the intellectual property to whip out a complex CAD-based 3D design, I am specifically talking about Stratasys who have been in this business since the industry was in infancy.

And if you add in the integration of cloud software, 3D printing would dovetail nicely with it.

All the elements are in place to fuel this industry into the mainstream.

Take for example airplanes made by Boeing (BA) and Airbus, 3D printer-designed parts comprise only 0.1% of the actual plane now.

It is estimated that 3D printed design parts could consist up to 20% of the overall plane.

These massive airline manufacturers like Boeing (BA) have profit margins of around 15% to 20%, and carving out more 3D printer-designed parts to integrate into the main design will boost profit margins to up to 50%.

The development of the 3D printing process into aerospace technology is happening fast with Boeing inking a five-year collaboration agreement with Swiss technology and engineering group Oerlikon to develop standard processes and materials for metal 3D printing.

Any combat pilot knows who Oerlikon is because they are famed for building ultra-highspeed machines to shoot down, you guessed it, airplanes and missiles.

They will collaborate to use the data resulting from their agreement to support the creation of a standard titanium 3D printing processes.

Only last November, GE announced that GE’s Aviation’s GEnx-2B aircraft engine for the Boeing 747-8 will apply a 3D printed bracket approved by the Federal Aviation Administration (FAA) for the engine, replacing a traditionally manufactured power door opening system (PDOS) bracket.

With the positive revelations that the (FAA) is supporting the adoption of 3D printing-based designs, GE is preparing to begin imminent mass production of the 3D printed brackets at its Auburn, Alabama facility.

Eric Gatlin, general manager of GE Aviation’s additive integrated product team gushed that “It’s the first project we took from design to production in less than ten months.”

Defense companies are also dipping their toe into the water with aerospace company Lockheed Martin (LMT), the world’s largest defense contractor, winning a $5.8 million contract with the Office of Naval Research to help further develop 3D printing for the aerospace industry.

They will partner up to investigate the use of artificial intelligence in training robots to independently oversee the 3D printing of complex aerospace components.

3D printed designs have the potential to crash the cost of making big-ticket items from cars to nuclear plants while substantially shortening the manufacturing process.

Further emphasis on cornering the North America aerospace market could cement this stock as a no-brainer buy of 2019 as the (FAA) embraces more of the technology opening up the addressable market for the active participants.

As it stands, Stratasys is the industry leader in this field, and placing best of breed tech companies into your portfolio will put you in better position to weather the squalls of the capricious tech sector.

The company is still relatively unknown even though it has been around for ages.

Stratasys is a company to put on your radar and remember this space as the 3D printing market blossoms.

It’s nonetheless still a speculative punt but a compelling part of the tech industry.

 

 

March 8, 2019

Global Market Comments
March 8, 2019
Fiat Lux

Featured Trade:

(MARCH 6 BIWEEKLY STRATEGY WEBINAR Q&A),
(SPY), (SDS), (TLT), (TBT), (GE), (IYM),
 (MSFT), (IWM), (AAPL), (ITB), (FCX), (FXE)

March 6 Biweekly Strategy Webinar Q&A

Below please find subscribers’ Q&A for the Mad Hedge Fund Trader March 3 Global Strategy Webinar with my guest and co-host Bill Davis of the Mad Day Trader. Keep those questions coming!

Q: Are you sticking to your market top (SPY), (SDS) by mid-May?

A: Yes, at the rate that economic data is deteriorating, and earnings are falling, there’s no prospect of more economic stimulation here, my May top in the market is looking better than ever. Europe going into recession will be the gasoline on the fire.

Q: Where do you see interest rates (TLT) in 1-2 years?

A: Interest rates in 2 years could be at zero. If interest rates peaked at 3.25% last year, then the next move could be to zero, or negative numbers. The world is awash in cash, and without any economic growth to support that, you could have massive cuts in interest rates.

Q: Will (TLT) be going higher when a market panic sets in?

A: It will, which is why I’m being cautious on my short positions and why I’m only using tops to sell. You can be wrong in this market but still make money on every put spread, as long as you’re going far enough in the money. That said, when the stock market starts to roll over big time, you want to go long bonds, not short, and we may do that someday.

Q: Do you see a selloff to stocks similar to last December?

A: As long as the Fed does not raise interest rates, I don’t expect to get a selloff of more than 5% or 6% initially. If we do get a dramatic worsening of economic data and it looks like we’re headed in that direction, the Fed will start cutting interest rates, the recession signal will be on and only then will we drop to the December lows—and possibly as low as 18,000 in the Dow.

Q: General Electric has gone from $6 to $10; what would you do now?

A: Short term, sell with a 66% gain in a stock. Long term, you probably want to hold on. However, their problems are massive and will take years to sort out, probably not until the other side of the next recession.

Q: Microsoft (MSFT): long term hold or sell?

A: Absolutely long-term hold; look for another double in this company over the next 3 years. This is the gold standard in technology stocks today. Short term, you’re looking at no more than $15 of downside to the December low.

Q: Would you short banks (IYF) here since interest rates have failed to push them higher?

A: I would not; they’ve been one of the worst performing sectors of the market and they’re all very low, historically. You want to short highs like I’m doing now in the (SPY), the (IWM), and Apple (AAPL), not lows.

Q: Is the China trade deal (FXI) a ‘sell the news’ event?

A: Absolutely; there’s not a hedge fund out there that isn’t waiting to go short on a China trade deal. The weakness this week is them front-running that news.

Q: Do you see emerging markets (EEM) pushing higher from the 42 level, or will a global recession bring it back to earth?

A: First of all, (EEM) will go higher as long as interest rates in the U.S. are flatlining, so I expect a rally to last until the spring; however, when a real recession does become apparent, that sector will roll over along with everything else.

Q: Would you buy homebuilders (ITB) if this lower interest rate environment persists?

A: I wouldn’t. First of all, they’ve already had a big 28% run since the beginning of the year— like everything else—and second, low-interest rates don’t help if you can’t afford the house in the first place.

Q: Would you short corporate bonds if you think there’s going to be a recession next year?

A: I’m glad you asked. Absolutely not, not even on pain of death. I would buy bonds because interest rates going to zero takes bond prices up hugely.

Q: Should you buy stocks in front of a blackout period on corporate buybacks?

A: Absolutely not. Corporate buybacks are the number one buyers of shares this year, possibly exceeding $1 trillion. Companies are not allowed to buy their own stocks anywhere from a couple of weeks to a month ahead of their earnings release. By removing the principal buyer of a share, you want to sell, not buy.

Q: What are the chances the China trade deal (FXI) breaks down this month and no signing takes place?

A: I have a feeling Trump is desperate to sign anything these days, and I think the Chinese know that as well, especially in the wake of the North Korean diplomatic disaster. He has to sign the deal or we’ll go to recession, and that would be tough to run on for reelection.

Q: Which stock or ETF would you short on real estate?

A: If you short the iShares US Home Construction ETF (ITB), you short the basket. Shorting individual stocks is always risky—you really have to know what’s going on there.

Q: What’s the best commodity play out there?

A: Copper. If China is the only country that’s stimulating its economy right now, and China is the largest consumer of copper, then you want to buy copper. The electric car boom feeds into copper because every new vehicle needs 20 pounds of copper for wiring and rotors. Copper is also cheap as it is coming off of a seven-year bear market. What do you buy at market tops? Only cheap stuff.

Q: Why did you go so far in the money in the Freeport-McMoRan (FCX) call spread with only a 10% profit on the trade in five weeks?

A: In this kind of market, I’ll take 10% in 5 weeks all day long. But additionally, when prices are this high, I want to be as conservative as possible. Going deep in the money on that is a very low-risk trade. It’s a bet that copper doesn’t go back to the December lows in five weeks, and that’s a bet I’m willing to make.

Q: Will a new round of QE in Europe affect our stock market?

A: Yes, it’s terrible news. It will weaken the Euro (FXE), strengthen the dollar (UUP), and force US companies to lower earnings guidance even further. That is bad for the market and is a reason why I have been selling short.

 

 

 

 

 

Sending You Trade Alerts from Africa

January 17, 2019

Global Market Comments
January 17, 2019
Fiat Lux

Featured Trade: 

(WHAT HAPPENED TO THE DOW?)
($INDU), (EK), (S), (BS), (CVX), (DD), (MMM),
 (FBHS), (MGDDY), (FL), (GE), (TSLA), (GM)
(WHY YOUR OTHER INVESTMENT NEWSLETTER IS SO DANGEROUS)

What Happened to the Dow?

When I joined Morgan Stanley some 35 years ago, one of the grizzled old veterans took me aside and gave me a piece of sage advice.

“Never buy a Dow stock”, he said. “They are a guarantee of failure.”

That was quite a bold statement, given that at the time the closely watched index of 30 stocks included such high-flying darlings as Eastman Kodak (EK), Sears Roebuck & Company (S), and Bethlehem Steel (BS). It turned out to be excellent advice.

Only ten of the Dow stocks of 1983 are still in the index (see tables below), and almost all of the survivors changed names. Standard Oil of California became Chevron (CVX), E.I du Pont de Nemours & Company became DowDuPont, Inc. (DD), and Minnesota Mining & Manufacturing became 3M (MMM).

Almost all of the rest went out of business, like Union Carbide Corporation (the Bhopal disaster) and Johns-Manville (asbestos products) or were taken over. A small fragment of the old E.W. Woolworth is known as Foot Locker (FL) today.

Charles Dow created his namesake average on May 26, 1896, consisting of 12 names. Almost all were gigantic trusts and monopolies that were broken up only a few years later by the Sherman Antitrust Act.

In many ways, the index has evolved to reflect the maturing of the US economy from an 18th century British agricultural colony, to the manufacturing powerhouse of the 20th century, to the technology and services-driven economy of today.

Of the original Dow stocks, only one, US Leather, vanished without a trace. It was the victim of the leap from horses to automobile transportation and the internal combustion engine. United States Rubber is now part of France’s Michelin Group (MGDDY).

American Tobacco reinvented itself as Fortune Brands (FBHS) to ditch the unpopular “tobacco” word. National Lead moved into paints with the Dutch Boy brand. It sold off that division when the prospects for leaded paints dimmed in 1970 (they cause mental illness in children).

What was the longest lived of the original 1896 Dow stocks? General Electric (GE), originally founded by light bulb inventor Thomas Edison. It went down in flames thanks to poor management and was delisted in 2018. It was a 122-year run. Today, it is one of the great turnaround challenges facing American Industry.

Which company is the American Leather of today? My bet is that it’s General Motors (GM) which is greatly lagging behind Tesla (TSLA) in the development of electric cars (90% market share versus 5%). With a product development cycle of five years, it simply lacks the DNA to compete in the technology age.

What will be the largest Dow stock in a decade? Regular readers already know the answer.

 

 

 

 

January 16, 2019

Mad Hedge Technology Letter
January 16, 2019
Fiat Lux

Featured Trade:

(3D PRINTING GETS A SECOND WIND),
(SSYS), (ETSY), (MSFT), (BA), (NFLX), (GE), (LMT)

3D Printing Gets a Second Wind

If you need a new investment idea – here’s one.

3D printing.

Yes, the same 3D printing that was once considered a raging but hopeless fad.

A lot has changed since then.

Early adopters were largely cut down at the knees as they tried to traverse the rocky terrain from a niche market to going full out mainstream.

The teething pains echo bitcoin which was the fad of 2017, the technology it is built on is rock solid, yet the path to sustainability is littered with corpses.

Production complications and the lack of specialists in the industry meant that problems were rampant and nurturing an industry from scratch is harder than you think.

It is time to stand up and take notice of 3D printing, this time it is here to stay.

Certain tech companies love this technology.

Etsy (ETSY) e-commerce participants gravitate towards 3D printing because it gets firms from paper to the real world in a fraction of the time.

The cost of production doesn’t change whether you’re producing one item or a million because of the economies of scale.

The previous 3D printing bonanza was a frenzy and this corner of tech became known for the use of buzzwords representing the potential to reinvent the world.

With lofty expectations, there was a natural disappointment when outsiders understood growing pains were part of the critical evolution instead of a direct route to profits.

The initial goal was to democratize production which sounds eerily similar to bitcoins mantra of democratizing money.

The way to do this was to make it simple to produce whatever one wishes.

That would assume that the general public could pick up professional production 3D printing skills on arrival.

That was wishful thinking.

The truth was that applying 3D printers was time-draining and aggravating.

Issues cropped up like first generation hardware or software problems that overwhelmed newbies.

Then if everything was going smoothly on that front, there was the larger issue of realizing it’s just a lot harder to design specific things than initially thought without a deep working knowledge of computer-aided software (CAD) design.

Most people know how to throw a football, but that doesn’t mean that most people can wake up one day in their pajamas and convince themselves they will be the next starting quarterback to lead an NFL team to the Super Bowl.

The high-quality 3D printing designs were reserved for authentic professionals that could put together complicated designs.

The move to compiling a comprehensive library will help spur on the 3D printing revolution while upping the foundational skill base.

Then there is the fact that 3D printing technology is a lot better now than it once was, and the printing technology has come down in price making it more affordable for the masses.

These trends will propel broad-based adoption and as the printing process standardizes, more products can rely on this technology from scratch.

The holy grail of 3D printing would be 3D printing on demand like Netflix (NFLX), but imagine this on-demand 3D printing would function to personalize a physical product on the spot.

Think of a hungry customer walking into a restaurant and not even looking at a menu because one sentence would be enough to trigger specific models in the database that could conjure up the design for the meal.

This would involve integrating artificial intelligence into 3D printing and the production process would quicken to minutes, even seconds.

At some point, crafting the perfect meal or designing a personalized Tuscan villa could take minutes.

The 3D printing industry is reaching an inflection point where the advancement of the technology, expertise, and an updated production process are brewing together at the perfect time.

The company at the forefront of this phenomenon is Stratasys (SSYS).

Stratasys produces in-office prototypes and direct digital manufacturing systems for automotive, aerospace, industrial, recreational, electronic, medical and consumer products.

And when I talk about real pros who have the intellectual property to whip out a complex CAD-based 3D design, I am specifically talking about Stratasys who have been in this business since the industry was in infancy.

And if you add in the integration of cloud software, 3D printing would dovetail nicely with it.

All the elements are in place to fuel this industry into the mainstream.

Take for example airplanes made by Boeing (BA) and Airbus, 3D printer designed parts comprise only 0.1% of the actual plane now.

It is estimated that 3D printed design parts could consist up to 20% of the overall plane.

These massive airline manufacturers like Boeing (BA) have profit margins of around 15% to 20%, and carving out more 3D printed designed parts to integrate into the main design will boost profit margins to up to 50%.

The development of the 3D printing process into aerospace technology is happening fast with Boeing inking a five-year collaboration agreement with Swiss technology and engineering group Oerlikon to develop standard processes and materials for metal 3D printing.

Any combat pilot knows who Oerlikon is because they are famed for building ultra-highspeed machines to shoot down, you guessed it, airplanes and missiles.

They will collaborate to use the data resulting from their agreement to support the creation of a standard titanium 3D printing processes.

Only last November, GE announced that GE’s Aviation’s GEnx-2B aircraft engine for the Boeing 747-8 will apply a 3D printed bracket approved by the Federal Aviation Administration (FAA) for the engine, replacing a traditionally manufactured power door opening system (PDOS) bracket.

With the positive revelations that the (FAA) is supporting the adoption of 3D printing-based designs, GE is preparing to begin imminent mass production of the 3D printed brackets at its Auburn, Alabama facility.

Eric Gatlin, general manager of GE Aviation’s additive integrated product team gushed that “It’s the first project we took from design to production in less than ten months.”

Defense companies are also dipping their toe into the water with aerospace company Lockheed Martin (LMT), the world’s largest defense contractor, winning a $5.8 million contract with the Office of Naval Research to help further develop 3D printing for the aerospace industry.

They will partner up to investigate the use of artificial intelligence in training robots to independently oversee the 3D printing of complex aerospace components.

3D printed designs have the potential to crash the cost of making big-ticket items from cars to nuclear plants while substantially shortening the manufacturing process.

The incentive is there to make this work, and when I talk about hyper-accelerating technology that has the potential to rewrite the history books – this is it.

If Stratasys is serious, they should be bolting down and locking up the best design talent in the industry.

Tech companies have been adept at talent grabs to invigorate their in-house knowledge base.

Further emphasis on cornering the North America aerospace market could cement this stock as a no-brainer buy of 2019 as the (FAA) embraces more of the technology opening up the addressable market for the active participants.

As it stands, Stratasys is the industry leader in this field, and placing best of breed tech companies into your portfolio will put you in better position to weather the squalls of the capricious tech sector.

The company is still relatively unknown even though it has been around for ages.

Stratasys is a company to put on your radar and remember this space as the 3D printing market blossoms.

 

 

IT’S FINALLY NOT JUST A FAD

November 30, 2018

Global Market Comments
November 30, 2018
Fiat Lux

Featured Trade:

(NOVEMBER 28 BIWEEKLY STRATEGY WEBINAR Q&A),
(VXX), (VIX), (GE), (ROKU), (AAPL),
 (MSFT), (SQ), (XLK), (SPLS), (EWZ), (EEM)