(GOOGL) Archives - Page 42 of 77 - Mad Hedge Fund Trader

The Road Out of Silicon Valley

In a study last year, 44% of Millennials planned to move out of the Bay Area in the “next few years.”

In the same study, 8% of Millennials indicated that they would move out of the Bay Area within the next 365 days.

Then Covid-19 hit.

The pandemic has accelerated this trend of Millennials ditching big-ticket cities and rental prices in San Francisco have experienced 30% drops with many owners offering free two months upon move in to salvage a souring situation.

The U.S. has also moved to ban foreign HB-1 visas citing the 40 million unemployed American citizens that are now looking for a job.

The knock-on effect is a wave of Indian and Chinese tech workers, who are usually the recipients of the HB-1 visas, that won’t be renting Silicon Valley apartments at inflated market prices.

The migratory trends sum it all up and the Bay Area has finally hit that inflection point where it is no longer the most desirable place to live anymore.

On a social level, the area has also become squalid like some third world countries due to a ravaging homeless problem that is growing faster than any software company.

The pandemic forced the local city government to create a tent encampment in front of San Francisco city hall.

The ones that weren’t gifted a spot in front of city hall were temporarily put up in five-star hotels in Russian Hill and paid by for the city because of the absence of any travelers.

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 corrosion of society.

The leader of Salesforce doesn’t mince his words when he talks and beelines to the heart of the issues.

Sadly, the pandemic will put more pressure on the lower end of society and force more Americans into homelessness adding to the surge.

How many homeless can San Francisco absorb?

It’s scary to think about what will happen when the eviction moratorium ends and extended unemployment benefits stop.

It’s just another factor in a long list of why San Francisco is losing talent.

The environment has really turned from day to night in Silicon Valley where just a half a year ago, Silicon Valley was overflowing with tech jobs and now start-ups are shedding jobs faster than ever.

Uber, Lyft, and Google are just some that have rescinded job offers to new graduates, frozen salaries, slashed annual bonuses, and straight-up laid-off employees.

The trend of outsourcing tech jobs from California was already well underway before the pandemic.

That was exactly what Apple’s $1 billion investment into a new tech campus in Austin, Texas and Amazon adding 500 employees in Nashville, Tennessee is 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 but is it possible that the pace of new hires will get bogged down because of the health crisis.

Millennials are reaching that age of family formation and they are fleeing to places that are affordable and possible to take the first step onto the property ladder.

The health crisis has crushed many of their dreams to become a first-time homebuyer, meaning they could become lifelong renters.

Millennials came of age during 9-11, graduated into the Great Recession of 2008, and have now been dealt a cruel and devastating blow of navigating through Covid-19 during many of their best years of income earning.

No wonder why Silicon real estate has dropped, people and their paychecks are on the way out.

In a perfect storm of a health crisis, economic crisis, and the desire to live in more physical space as most jobs become remote, San Francisco has never been less attractive at any point in time.

It will no longer be the economic juggernaut that was so vital to tech companies.

Silicon Valley simply doesn’t share the wealth with all of its participants and the place is now feeling the side effects.

The last time San Francisco was this unattractive, you would have to go back to before the California Gold Rush of 1848 when San Francisco was just a backwater village of 10,000 people.

When hiring comes back, look for many of the second-tier cities like Nashville to recover fast taking off from what Silicon Valley built.

Just as harrowing as the health crisis, the start of wildfire season has just commenced in the state of California.

It used to be such a great place to live.

July 17, 2020

Diary, Newsletter, Summary

Global Market Comments
July 17, 2020
Fiat Lux

Featured Trade:

(JULY 15 BIWEEKLY STRATEGY WEBINAR Q&A),
(EEM), (GLD), (GDX), (NEM), (GOLD), (UUP), (FXA), (FXE), (FXY), (AMZN), (AAPL), (GOOGL), (FB), (BIDU), (TLT), (TBT), (IBB), (ROM)

July 15 Biweekly Strategy Webinar Q&A

Diary, Newsletter

Below please find subscribers’ Q&A for the July 15 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Lake Tahoe, NV with my guest and co-host Bill Davis of the Mad Day Trader. Keep those questions coming!

Q: Do you expect foreign equities to begin to outperform US equities sometime soon?

A: I expect them to outperform imminently simply because Europe did their shutdown properly, a total shutdown, and got rid of the virus, so their economy and schools are opening. We did a partial shutdown, some states did not shut down at all, and as a result, the epidemic is on fire here, and our shutdown will have to last an extra six months to a year. So that means you’ll probably want to be rotating out of US stocks and into emerging stocks, and the (EEM) is the ETF to go with there.

Q: Would you buy gold LEAPS at this point?

A: Normally, I say only buy LEAPS on capitulation selloffs like we had in March. We actually put out 25 LEAP recommendations on the long side in tech and biotech in March and they all proved spectacular winners. However, at this point, gold is just short of an all-time high; if you break the high you could get a $500 or $1,000 move very quickly to the upside. If you want to do LEAPS, I would go out one year, I would go fairly close to the money, something like a $200-$210 LEAP in the (GLD) ETF. Your much bigger bang, by the way, would be to do LEAPS on the individual stocks; go 10% or 20% out of the money, you might make 100%-200% on those and the stocks to do there would be Newmont Mining (NEM) and Barrick Gold (GOLD).

Q: Would the US or any other country consider backing their currency with gold?

A: Absolutely not. We went off the gold standard in 1972 for a reason. That’s because they're not making it anymore; there isn't enough gold to support growth in a global economy. On the other hand, a supply of paper is unlimited, and that's why we've had such terrific economic growth since we’ve gone off the gold standard.

Q: I’m seeing some really great deals in energy. Should I get involved?

A: Absolutely not. Don’t confuse “gone down a lot” with “cheap.” We think the oil business is long term going out of business. It can't compete with alternatives and electric cars; the economics for investing in a non-scalable energy form just are not there. It’s like asking an analog adding machine to compete with a computer.

Q: Is it too late to sell the US dollar or the Invesco DB US Dollar Index Bullish Fund ETF (UUP)?

A: No, we’re only in the very early stages of the collapse of the US dollar, so you want to be buying all of the nondollar ETFs like the Australian dollar (FXA), the euro (FXE), and the Japanese yen (FXY). Massive over issuance of currency will destroy its value, that’s one of the seminal lessons of currency markets. The US is not immune to that.

Q: Biotech is getting overheated here—should I buy the rumor, sell the news?

A: We’re also just in the opening stages of the biotech golden age. Even if they cure corona tomorrow, there are another 100 diseases they will cure over the next 10 years using all of the new advanced technology that has just been developed, like gene editing, monoclonal antibodies, and quantum computers. It’s another reason to subscribe to the Mad Hedge Biotech and Healthcare Letter for $1,500 a year (click here).

Q: I see Bill Gross is bullish on value stocks—would you go with that view?

A: No, leave the value stocks for Bill Gross. He's semi-retired and hasn’t been as good on the stock market lately as he used to be, as much as he is a dear friend. This is a chasing-a-winner type market. I would wait for value stocks. You could die a long horrible death by the time value stocks turn around so I would avoid them. Go for earnings growth, that’s the only thing that counts in the future.

Q: What would you recommend as a portfolio starter?

A: I would recommend 100% cash. I know you don’t want to hear that you should keep cash if you just bought an expensive trade alert service, but the fact is the risk now is the highest it’s been in years. I only add new trade at market sweet spots, and you don’t get those every day of the year. I will send you an alert if I see a low-risk high-return trade. Wait for the summer correction—that will set up another bet-the-ranch opportunity. Don’t worry about trade alerts, we’ll be doing about 400 of them this year, but they do tend to come in bunches at market bottoms and market tops.

Q: Do American companies have much of a chance against Chinese tech?

A: The US has an overwhelming lead, which will probably increase at an exponential rate. I think the threat of Chinese tech is vastly overstated by the administration. They needed an enemy to protect us from to stick around. The reality is that the US is so far ahead it’s unbelievable; that’s the reason they steal our technology. And they only have leads in very specific areas, such as surveillance of large populations. I wouldn’t worry too much about tech—if the Chinese really had a lead on tech, would Amazon (AMZN), Apple (AAPL), Alphabet (GOOGL), Facebook (FB) all be going to new highs every day, while Baidu (BIDU) lagged?

Q: Should we close out the Regeneron call spread?

A: At this point, we’re so far in the money I would just wait two more days and it will expire at its maximum $10 value, and you can avoid all the fees. You’ll end up making $1,600 or 16.28% 15 trading days.

Q: Presidential candidate Joe Biden has just had a huge surge in the polls in battleground states. Will he be damaging to the market?

A: No, ever since he started his rise in the polls, the stock market has been rising almost every day, and that’s even after announcing in advance that he’s going to raise corporate taxes from 21% to 28%. He’s also going to eliminate the carried interest, which should have been eliminated a long time ago. I imagine there will be some super punitive Roosevelt style 90% tax on net taxable income over a billion dollars—a real billionaire’s punishment tax, as they’ve basically made all the money for the last 30 years. The stock market is voting with confidence for the future Biden government, who am I to disagree? The market is always right.

Q: Will gold hit a new high?

A: Yes, I think we will have a new high in a couple of weeks. That's why I said it’s a rare case when you actually buy LEAPS in a rising market, especially if you go one or two years out. Guess where gold will be in two years? My bet is $3,000, so a $200/$210 LEAP in the (GLD) could bring in a 1,000% return, The overwhelming fundamentals are in favor of gold. I'll keep hammering away at that in the newsletter.

Q: I only trade stocks; how can I take advantage of your recommendations?

A: First of all, buy the stocks. Second, you can buy stocks on margin, which gives you double exposure. Third, there are many 2X ETFs on the stocks or sectors we recommend, like the (TBT), which you can also trade in a stock account. For example, for biotech, you can get your exposure there through the (IBB), and through tech, you can buy the 2X (ROM); but I wouldn’t buy it today because it is too high. In fact, only about 25% of our followers do options, the rest trade stocks or use it to manage their own long-term portfolios.

Q: Will we hit 0% yielding US Treasuries (TLT)?

A: Probably not, that move is behind us. We got down to a 31 basis points yield at the lows. Now, massive oversupply from the US government will be the primary factor dictating Treasury prices, and that means going down a lot.

Good Luck and Stay Healthy

John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader

July 15, 2020

Tech Letter

Mad Hedge Technology Letter
July 15, 2020
Fiat Lux

Featured Trade:

(CLOUD 101)
(AMZN), (MSFT), (GOOGL), (DOCU), (CRM), (ZS)

Cloud 101

Tech Letter

If you've been living under a rock the past few years, the cloud phenomenon hasn't passed you by and you still have time to cash in.

You want to hitch your wagon to cloud-based investments in any way, shape, or form.

Amazon leads the cloud industry it created.

It still maintains more than 30% of the cloud market. Microsoft would need to gain a lot of ground to even come close to this jewel of a business.

Amazon (AMZN) relies on AWS to underpin the rest of its businesses and that is why AWS contributes most of Amazon's total operating income.

Total revenue for just the AWS division would operate as a healthy stand-alone tech company if need be.

The future is about the cloud.

These days, the average investor probably hears about the cloud a dozen times a day.

If you work in Silicon Valley, you can triple that figure.

So, before we get deep into the weeds with this letter on cloud services, cloud fundamentals, cloud plays, and cloud Trade Alerts, let's get into the basics of what the cloud actually is.

Think of this as a cloud primer.

It's important to understand the cloud, both its strengths and limitations.

Giant companies that have it figured out, such as Salesforce (CRM) and Zscaler (ZS), are some of the fastest-growing companies in the world.

Understand the cloud and you will readily identify its bottlenecks and bulges that can lead to extreme investment opportunities. And that's where I come in.

Cloud storage refers to the online space where you can store data. It resides across multiple remote servers housed inside massive data centers all over the country, some as large as football fields, often in rural areas where land, labor, and electricity are cheap.

They are built using virtualization technology, which means that storage space spans across many different servers and multiple locations. If this sounds crazy, remember that the original Department of Defense packet-switching design was intended to make the system atomic bomb proof.

As a user, you can access any single server at any one time anywhere in the world. These servers are owned, maintained, and operated by giant third-party companies such as Amazon, Microsoft, and Alphabet (GOOGL), which may or may not charge a fee for using them.

The most important features of cloud storage are:

1) It is a service provided by an external provider.

2) All data is stored outside your computer residing inside an in-house network.

3) A simple Internet connection will allow you to access your data at any time from anywhere.

4) Because of all these features, sharing data with others is vastly easier, and you can even work with multiple people online at the same time, making it the perfect, collaborative vehicle for our globalized world.

Once you start using the cloud to store a company's data, the benefits are many.

No Maintenance

Many companies, regardless of their size, prefer to store data inside in-house servers and data centers.

However, these require constant 24-hour-a-day maintenance, so the company has to employ a large in-house IT staff to manage them - a costly proposition.

Thanks to cloud storage, businesses can save costs on maintenance since their servers are now the headache of third-party providers.

Instead, they can focus resources on the core aspects of their business where they can add the most value, without worrying about managing IT staff of prima donnas.

Greater Flexibility

Today's employees want to have a better work/life balance and this goal can be best achieved by letting them telecommute. Increasingly, workers are bending their jobs to fit their lifestyles, and that is certainly the case here at Mad Hedge Fund Trader.

How else can I send off a Trade Alert while hanging from the face of a Swiss Alp?

Cloud storage services, such as Google Drive, offer exactly this kind of flexibility for employees.

With data stored online, it's easy for employees to log into a cloud portal, work on the data they need to, and then log off when they're done. This way a single project can be worked on by a global team, the work handed off from time zone to time zone until it's done.

It also makes them work more efficiently, saving money for penny-pinching entrepreneurs.

Better Collaboration and Communication

In today's business environment, it's common practice for employees to collaborate and communicate with co-workers located around the world.

For example, they may have to work on the same client proposal together or provide feedback on training documents. Cloud-based tools from DocuSign, Dropbox, and Google Drive make collaboration and document management a piece of cake.

These products, which all offer free entry-level versions, allow users to access the latest versions of any document so they can stay on top of real-time changes which can help businesses to better manage workflow, regardless of geographical location.

Data Protection

Another important reason to move to the cloud is for better protection of your data, especially in the event of a natural disaster. Hurricane Sandy wreaked havoc on local data centers in New York City, forcing many websites to shut down their operations for days.

The cloud simply routes traffic around problem areas as if, yes, they have just been destroyed by a nuclear attack.

It's best to move data to the cloud, to avoid such disruptions because there your data will be stored in multiple locations.

This redundancy makes it so that even if one area is affected, your operations don't have to capitulate, and data remains accessible no matter what happens. It's a system called deduplication.

Lower Overhead

The cloud can save businesses a lot of money.

By outsourcing data storage to cloud providers, businesses save on capital and maintenance costs, money that in turn can be used to expand the business. Setting up an in-house data center requires tens of thousands of dollars in investment, and that's not to mention the maintenance costs it carries.

Plus, considering the security, reduced lag, up-time and controlled environments that providers such as Amazon's AWS have, creating an in-house data center seems about as contemporary as a buggy whip, a corset, or a Model T.

July 1, 2020

Tech Letter

Mad Hedge Technology Letter
July 1, 2020
Fiat Lux

Featured Trade:

(HOW THE “SPLINTERNET” IS TAKING OVER)
(TIKTOK), (FB), (GOOGL), (TWTR), (AMZN)

How the “Splinternet” is Taking Over

Tech Letter

The balkanization of the internet is spiking in the short-term, knocking off the value of multiple Fortune 500 companies in one fell swoop.

In technology terms, this is frequently referred to as “splinternet.”

A quick explanation for the novices can be summed up by saying the splinternet is the fragmenting of the Internet, causing it to divide due to powerful forces such as technology, commerce, politics, nationalism, religion, and interests.

What investors are seeing now is a hard fork of the global tech game into a multi-pronged world of conflicting tech assets sparring for their own digital territory.

The epicenter of balkanization is now heart and center in West Asia polarizing the Indian and Chinese tech economy after a skirmish along the shared border.

This is fast becoming a winner-take-all affair.

India had to do something after 20 dead Indian soldiers felled by the Chinese Army stoked a wave of national outcry against regional rival China.

The backlash was swift with the Indian government banning 59 premium apps developed by China citing “national security and defense.”

The ban includes the short-form video platform TikTok, which counts India as its biggest overseas market.

TikTok was projected to easily breeze past 300 million Indian users by the end of 2020 and was clearly hardest hit out of all the apps.

India is the second biggest base of global internet users with nearly half of its 1.3 billion population online.

The government rolled out the typical national security playbook saying that the stockpiling of local Indian data in Chinese servers undermines national security.

The ruling will impact roughly one in three smartphone users in India. TikTok, Club Factory, and UC Browser and other apps in aggregate tally more than 500 million monthly active users in May 2020.

Highlighting the magnitude of this purge - 27 of these 59 apps were among the top 1,000 Android apps in India last month.

China dove headfirst into the Indian market with their smartphones, apps, and an array of hardware equipment. Now, that is all on hold and looks like a terrible mistake.

Chinese smartphone makers command more than 80% of the smartphone market in India, which is the world’s second largest.

One of the reasons Apple (AAPL) could never make any headway in China is because they were constantly undercut by predatory Chinese phone makers with stolen technology.

TikTok is also being eyed-up for bans in Europe and the United States recently as it constantly curries to Beijing’s every whim by banning content unfavorable to the Chinese communist party and rerouting data back to servers in China.

I am surprised it hasn’t happened yet with an abundant phalanx of Chinese hawks in the conservative administration.

To be fair, China has rolled out the same playbook before when the state spews out nationalist narratives triggering local furor that resulted in bashing Japanese-made cars or shuttering Korean supermarket.

Chinese tech is clearly the main loser for their government’s “distract its own people at all costs” campaign to shield themselves from the epic contagion of the lingering pandemic.

What does this mean for American tech?

For one, India will strengthen ties with the U.S., being the biggest democracy in Asia, meaning a massive foreign policy loss and loss of face for the Chinese communist regime.

The resulting losses for Chinese tech will usher in a new generation of local Indian tech with Silicon Valley being the next in line playing the role of a wingman.

Even though the U.S. avoided the carnage from this round of balkanization, the situation in Europe is tenuous, to say the least.

Fault lines will compound the problem of a multinational tech revenue machine and the relationship with France is on the verge of becoming fractious.

I believe if the relationship worsens with the Europeans - France, Germany, and Britain could ban big tech companies like Facebook (FB), Twitter (TWTR), Google (GOOGL).

This would be a massive blow to not only revenue streams but also global prestige for American tech.

The U.S. is still licking its wounds after the EU announced a travel ban on American tourists who hoped to re-enter the Schengen Zone on its reopening on July 1st.

Not only do Silicon Valley leaders see a murky future outside its borders, but digital territories are also getting carved out as we speak domestically.

Amazon (AMZN)-owned Twitch and Twitter have clamped down on U.S. President Donald Trump’s account.

This could quickly spiral into a left-versus-right war in which there are competing apps for different political beliefs and for every subgenre of apps.

This would effectively mean a balkanization of tech assets within U.S. borders and division is the last thing Silicon Valley wants.

Silicon Valley wants products sold to the largest addressable market possible.

The balkanization of the internet is now turning into an equally high risk as the antitrust and regulatory issues.

The issues keep piling up, but nothing has been able to topple big tech yet as they lead the broader market out of the pandemic.

The key point to understand is that these are growing risks until they blow up in front of your eyes and become the next black swan like Covid-19.

Let’s hope that never happens.

SUPERCHARGING THE BALKANIZATION OF THE INTERNET

June 15, 2020

Tech Letter

Mad Hedge Technology Letter
June 15, 2020
Fiat Lux

Featured Trade:

(DON’T TAKE YOUR EYES OFF BIG TECH SHARES),
(GOOGL), (AAPL), (MSFT), (NFLX), (FB), (AMZN), (IBM), (CSCO)

Don't Take Your Eyes Off Big Tech Shares

Tech Letter

There is literally no possible scenario in a post-second-wave lockdown where the 7 tech stocks of Facebook, Google, Apple, Microsoft, Netflix, Facebook, and Amazon don’t shoot the lights out unless the world ceases to exist.

25,891 – that is the number of new coronavirus cases registered in the U.S. on June 13^th, 2020 which is about in line with the recent near-term peaks of total daily U.S. coronavirus cases.

Why is this important?

Traders are calculating whether a “second wave” will possibly rear its ugly head to crush the frothy momentum in tech stocks.

That is where we are at now in the tech market.

Tech stocks could possibly ride another magnificent ride up in share appreciation if the reopening of the economy can kick into second gear.

Skeptics are sounding the alarms that this is not even the “second wave” and we still in the latter half of the first wave.

Consensus has it that this could be just a head fake.

The jitters are real with recent dive in tech shares.

The five biggest tech companies burned more than $269 billion in value last Thursday - the worst day for U.S. stocks since March and the 25^th worst day in stock market history.

Nasdaq stocks ended the day largely 5% in the red with Microsoft shedding $80 billion in market cap in just one day.

Larger drops were led by IBM who lost 9% and Cisco who lost 8%.

It was a dreadful day at the office, to say the least.

We are teetering on a knife's edge and the tension is running high in the White House with Treasury Secretary Steven Mnuchin already announcing that the U.S. can’t afford another lockdown.

It’s not up to him in the end, it’s about how consumers will assess the confronted health risks.

Tech will undoubtedly be dragged down with the rest on the next lockdown sparing few survivors.

The housing market might actually go down as well as the initial push to the suburbs will dissipate and fresh forbearances will explode higher.

Consumers might not even have the cash to pay for their monthly Apple phone service or internet bill if the worst-case scenario manifests itself.

The health scare has already dented new software purchases by small and medium businesses (SMBs) and tech companies in industries such as travel, retail, and hospitality; online ad spending by the likes of automakers and online travel agencies; and smartphone, automotive and industrial chip purchases.

Small business has held off on reducing their tech software spending too much on the expectation that macro conditions will perform a V-shaped recovery.

Numerous tech firms have cited “demand stabilization,” but it’s not guaranteed to last if we revert to another lockdown.

If a lockdown happens again, it will be another referendum on Fed’s enormous liquidity impulses versus the drop in real earnings or flat out losses to tech business models.

Even with the media’s onslaught of vicious fearmongering campaigns, I do believe this is the time for long-term investors to scale into the best of tech such as Amazon, Apple, Google, Microsoft, Facebook, Netflix.

If you thought these 7 companies had anti-trust issues before, then look away.

We could gradually head into an economy where up to 40% of the public markets comprise of only 7 tech stocks which is at a mind-boggling 25% now.

Never waste a good crisis – tech is following through like no other sector!

Bonds don’t make money anymore and hiding out now means putting your life savings into these 7 premium tech stocks.

In the short-term, this is a good opportunity for a tactical bullish tech trade.