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Tag Archive for: (GOOGL)

MHFTR

September 4, 2018

Tech Letter

Mad Hedge Technology Letter
September 4, 2018
Fiat Lux
 

 

Featured Trade:
(READY PLAYER ONE’S INSIGHT INTO THE FUTURE OF TECHNOLOGY),
(MSFT), (SQ), (TTWO), (AMD), (NVDA), (EA), (ATVI), (PYPL), (GOOGL), (FB)

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 MHFTR https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png MHFTR2018-09-04 01:06:472018-08-31 20:49:59September 4, 2018
MHFTR

Ready Player One’s Insight into the Future of Technology

Tech Letter

The technology-laced film Ready Player One gives viewers a snapshot into the future where technology, income inequality, and society have run their course, and the year 2045 looks vastly different from the world of 2018.

Set in a semi-dystopian backdrop, the movie offers us a deeper insight into how certain technology trends will permeate into everyday life.

The first and most obvious future trend is the copious use of avatars.

Avatars will become the new normal. The first place that humans will find them is through the use of social media and entertainment, as children eventually becoming a part of us like our social media profiles today.

The Mad Hedge Technology Letter has incessantly hammered home about the phenomenon of gaming, and this will incorporate virtual reality allowing gamers access to a new digital world.

This was the on show in the film where the likes of protagonist Wade Watts, played by Tye Sheridan spent most of his life playing in the virtual world of Oasis using his character Parzival.

This could be your child in the future.

Wade Watts character is the new cool for Generation Z, as they are largely unconcerned about underage drinking and partying like the generations before them.

Gaming and hanging out on their preferred social media platforms are the new cool.

The companies dictating the current video game industry will have the first crack at it to realize profits and develop new businesses such as Microsoft (MSFT), Nvidia (NVDA), Advanced Micro Devices (AMD), Electronic Arts Inc. (EA), Take-Two Interactive Software, Inc. (TTWO), and Activision Blizzard, Inc. (ATVI).

Children just aren’t going outside like they used to and per most studies, they are addicted to the smartphone you bought them at age 10.

Most studies have found that once a child becomes hooked on technology, it is hard to reverse the habit, as once they enter into adult life and start their career, they become even more reliant on the technologies that got them to that point in the first place.

If your kid is already staring at tech devices three to four hours per day now for activities other than school work, expect that to grow to a minimum of six to seven hours per day once he hits puberty and smartphone time limits begin to fade away.

This all means that VR and gaming could be the handsome winner in all this, and the use of social media platforms will reap the benefits as well.

Generation Z just surpassed Millennials in terms of population comprising 25% of the American populace.

Neither of these generations have grown up with VR in their daily lives because the technology wasn’t advanced enough to really make a dent in their lives.

More than 75% of Generation Z has access to a smartphone, and they can truly be called the first generation of digital natives.

Avatars will push deeper into everyday life because the facial tracking technology has advanced by leaps and bounds.

Instead of cartoon-like avatars, lifelike avatars have replaced the less refined versions. It will be a tough time going forward distinguishing what is real and what is fake.

If you think fake news is a problem now, imagine how fake it will become in the future.

This could devastate the news industry as news organizations run the risk of melting down at any point, or just being completely taken over by tech companies and their algorithms, which is already happening now with Alphabet (GOOGL).

The future looks bleak for all newspaper assets, and the ones with the most advanced digital strategies will survive.

Newspapers only have so much time they can hang on with digital ad revenue, the reason they are still in business.

Viewers don’t want to see ads – period. And at some point, they will be disrupted as well.

Swashbuckling youth already have downloaded ad-blockers to completely remove ads from their lives, and refuse to open any website that forces them to white list a website.

There are children in Generation Z who might never have seen an ad before because their digital native capability allows them to navigate around ads with adept skill.

Or the easy solution for many Millennials is just watch Netflix because the platform is ad-less. The aversion to ads is so strong that traditional media giants such as Fox are experimenting with six-second ads because that is all a viewer can tolerate these days.

The traditional media giants were forced to adopt this new format after Alphabet’s YouTube rolled out micro-ads.

Popular browser Mozilla announced it will block all tracking scripts by default beginning in 2019, thwarting unregulated data collection and relentless ad pop-ups.

The reason why digital ads will have an existential crisis is because companies will be able to monetize the pure data, forcing companies with huge digital ad businesses such as Facebook (FB) to battle with the new competition that only wants your data and not hawk ads.

This is already happening in the e-brokerage space with disruptors such as Robinhood, which charges no commission and is more interested in collecting data and getting by with interest payment revenue.

Let’s face it, digital ads are not a high-quality business even though they are a high-margin business. As tech moves forward, the quality of tech will rise eliminating all low-grade tech that is still profiting in 2018.

On the business side of things, automation is replacing humans faster than humans realize, and the replacement will be an avatar representing the face of a company.

For lower-end services, an avatar chosen by the customer will populate to often give better service than a human can provide.

If this type of service is scaled, it would offer a massive cut in costs for American corporations saving on employee costs.

It will have the same effect that self-checkout kiosks have at supermarkets, wiping out another position at the low-end.

The front-end avatar that will service you is all possible because of the rapid advancement of artificial intelligence.

Every possible situation will be programmed in the software and executed briskly.

If customers desire the human touch, they will have to pay up.

Human interaction will command a premium price because human interaction cannot be automated.

The financial industry has a huge target on its back, and swaths of financial advisors could be sacked in favor of avatars with the functional software behind it to produce profits.

In fact, many financial advisors are instructed to refrain from recommendations now and urged to collect input to enter into a proprietary algorithm that will decide the customers’ portfolio.

Big banks have enjoyed their time in the sun, but technology will disrupt them in the near future. This is why you have seen huge run-ups in innovative fintech companies such as Square (SQ) and PayPal (PYPL).

Many forms of outside entertainment are on the chopping block, as well as indoor entertainment such as Hollywood.

Hollywood A-list actors command hefty premiums to contract their services, and that could all crumble if younger audiences prefer avatar-based films with the human roles performed by unknowns.

Johnny Depp earns more than $50 million for one movie, and these insane amounts could deflate rapidly if human participation in films becomes marginalized.

Ready Player One was a test case for how much technology could be infused into a movie, and the audience easily absorbed it.

I could argue that audiences could argue even more in this VR format.

The movie had a budget of $175 million, and returned $582 million at the box office.

The resounding success will encourage more directors to inject technology into their movies, and they will have to, if they hope to tempt younger audiences to the movie theater.

Going to the movie theater is another activity that has struggled to cope against the rise of Netflix and technology.

Theaters have been forced to improve the overall experience of watching a film with prime seating, comfortable seats, and other extras that never existed.

Every industry is going through the same headache of competing with technological disruption.

Stagnation is akin to surrendering in 2018.

And it wasn’t just a fringe director creating Ready Player One, it was visionary director Steven Spielberg, one of the most famous movie directors to ever exist.

This will pave the way for other lesser-known movie directors relying on technology to pump out the profits.

They wouldn’t be the first people or the first industry to go down this road either.

 

 

The Avatars Used In Ready Player One

 

 

 

________________________________________________________________________________________________

Quote of the Day

“The worst thing a kid can say about homework is that it is too hard. The worst thing a kid can say about a game is it's too easy,” – said American media scholar Henry Jenkins III.

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MHFTR

August 30, 2018

Tech Letter

Mad Hedge Technology Letter
August 30, 2018
Fiat Lux

Featured Trade:
(ON TRUMP’S TECHNOLOGY ATTACK),
(AMZN), (GOOGL), (FB), (AMD), (TWTR)

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 MHFTR https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png MHFTR2018-08-30 01:06:162018-08-29 20:36:04August 30, 2018
MHFTR

On Trump’s Technology Attack

Tech Letter

First Amazon (AMZN), now Alphabet.

In a strategic move to fortify his base ahead of critical midterm elections, the President of the United States Donald J. Trump has denounced tech behemoth Alphabet (GOOGL) describing search results using his name as “rigged.”

If Trump loses the midterm elections, it could open a can of worms and threaten his position.

It is no surprise that he plans to invest 40 days traveling around America campaigning for Republicans in November.

This is a big deal.

Silicon Valley has been a frequent bashing target for the White House.

The data privacy fiasco of 2018 has offered ample ammunition to pretty much anyone who wants to rain on big tech’s parade.

Big tech has experienced a wave of bad press shifting public opinion against them ruining future guidance for social media companies such as Facebook (FB).

How does the administration’s attack against Alphabet affect its stock price going forward?

It won’t even blink.

Alphabet’s stock barely budged after the President used his Twitter (TWTR) feed to sound off against the famous digital search engine company.

The stock closed down 0.83% on the day.

We have seen this story again and again with the administration lashing out at certain sectors or individuals, only for the stock market to shrug off any resemblance of weakness and power higher to new all-time highs.

Resiliency would be the best way to characterize this market.

Ironically, Trump found time yesterday to tweet that the Nasdaq had just surpassed 8,000 for the first time, showing off the tech strength underpinning the nine-year bull market.

The FANGs are front and center the stars of the show. Grumbling about a prominent member of this cohort will do nothing to stop the profit engines that tech companies have constructed.

Stellar corporate earnings are the secret sauce in this recipe and investors would be crazy to veer away from that.

Investors have no reason to panic because the tech narrative will not go away anytime soon, and the market knows that.

Political turbulence has been baked into the pie, and it would be eerie if the airwaves went silent.

Investors have largely avoided pinpointing non-economic issues and focused on the economy and its robust 4% growth rate.

It helps that the unemployment rate has fallen to 3.9%, and the full labor market is a net positive, even though inflation and wage growth has yet to contribute as much as initially hoped.

Of course, politics play a substantial role in influencing the stock market. But looking back at the past crisis, the stock market reacted the same as it will now and go much higher.

The market is still very much a tech story, and last week’s price action confirmed this.

The Mad Hedge Technology Letter is still net negative on chip stocks, but the two chip stocks that circumvent my negative calls are companies I recommended recently and that have seen a breathtaking leg up.

Not all chip companies are made equal and Advanced Micro Devices, Inc. (AMD) proved that by spiking 35% so far in August, 23% in the past week, and more than 140% this year.

The hockey stick move has seen (AMD) short sellers singed to a tune of $3 billion in 2018.

Chip stocks were supposed to get crushed by the weight of the trade war. However, these two stalwarts prove that if you are in the right names, you’ll avoid the carnage, which has beset many smaller chip companies that have the bulk of revenue tied to China.

Tech companies have bought back more than $1 trillion of their own stock since the beginning of 2009 because they have the money to do so.

Silicon Valley companies continue to purchase back their own stocks at a furious pace, putting a floor under many cash cow tech firms to the benefit of share prices.

Whether you want to believe or not, the market is metamorphizing into an all-tech story as every sector migrates to the cloud and the heavy use of big data.

Industrial giants are turning into industrial IoT companies.

Turn over any stone and you would be hard pressed to not find some sort of tech in new products.

Silicon Valley is on the cusp of rolling out its self-autonomous driving technology for commercial operations with Alphabet’s subsidiary Waymo.

If that wasn’t a good reason to buy Alphabet, then let’s review the other positive levers in their portfolio.

Alphabet is one member of a two-man team dominating digital advertising revenues with Facebook.

Global media spend is expanding at 13% YOY as the migration to mobile sees no end.

Google has the best search engine in the world. There are no competitors even close to supplanting its holy grail search engine business, unless you consider bing.com a worthy competitor, which it isn’t.

Data is the new oil, and Alphabet is able to douse itself in data because of the gobs it possesses.

This is the reason Google knows everything about most people in the world outside of China.

Alphabet will be able to leverage this enormous treasure trove of big data and monetize it using artificial intelligence technology.

Add it all up and Alphabet is massively profitable and positioned on the vanguard of every future groundbreaking technology in the world.

Picking on the big boys won’t do much, and the stock price will power on unabated for the foreseeable future.

As the midterm elections draw closer, Trump could also double down on his foreign exploits attempting to consolidate political capital.

That means virulently attacking China’s trade policy, which could go into overdrive as they could give him the source of expansive buffer for which he is looking.

However, it is a double-edge sword as many constituents in red states could be the recipient of higher costs that elevated tariffs would bring.

At the bare minimum, Trump has cast a light on China’s unfair trading policies that has tapped an uneasy nerve for many other countries quietly agreeing with the American president.

This could create a whack-a-mole scenario as China could experience growing problems with numerous undeveloped countries felt wronged, and these headaches could take on different forms such as the Forest City project in Malaysia.

Back in the equity world, the smaller chip companies are baring the brunt of the administration’s scathing rhetoric toward China, but the economy, stock market, and consumer health will hum along as if nothing happened.

The damage is limited, giving Trump sufficient leeway to speak out about side issues as the vital midterm elections roll around.

The bull market is not close to dying and there is still room to run.

 

 

 

________________________________________________________________________________________________

Quote of the Day

“Technology itself is neither good nor bad. People are good or bad,” – said former CEO of InfoSpace, Inc. and cofounder of Moon Express Naveen Jain.

 

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MHFTR

August 29, 2018

Tech Letter

Mad Hedge Technology Letter
August 29, 2018
Fiat Lux
 

Featured Trade:
(THE BEST TECH STOCK YOU’VE NEVER HEARD OF),
(TTD), (AMZN), (GOOGL), (NFLX), (BIDU), (BABA), (SPOT), (P), (FB)

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 MHFTR https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png MHFTR2018-08-29 01:06:402018-08-28 20:44:18August 29, 2018
MHFTR

The Best Tech Stock You’ve Never Heard of

Tech Letter

If you asked me which is the best company that most people do not know about then there is one clear answer.

The Trade Desk (TTD).

This company was founded by one of the pioneers of the ad tech industry Jeff Green, and he has spent the past 20 years improving data-based digital advertising.

Green established AdECN in 2004 and its claim to fame was the world’s first online ad exchange.

After three years, Microsoft gobbled up this firm and Green stayed on until 2009 when he launched The Trade Desk. This is where he planned to infuse everything he learned about the digital ad agency into his own brainchild.

Green concluded that creating a self-service platform, avoiding privacy issues, and harnessing big data for digital ad campaigns was the best route at the time.

Green hoped to avoid the pitfalls that damaged the digital ad industry mainly bundling random ads together that diluted the quality and potency of the ad campaigns.

It did not make sense that a digital ad for baby diapers could be commingled with an ad for retirement homes.

Green created real-time bidding (RTB), which is a process in which an ad buyer bids on a digital ad and, if won, the buyer’s ad is instantly displayed on the selected site.

This revolutionary method allowed ad buyers to optimize ad inventory, prioritize ad channels, and boost the effectiveness of campaigns.

(RTB) is a far better way to optimize digital ad campaigns than static auctions, which group ads by the thousand.

In real time, advertisers are able to determine a bespoke ad for the user to display on a website. Green used this model to develop his company by building a platform tailor-made to execute (RTB).

Naturally, he won over many naysayers and his company took off like a rocket.

Results, in a results-based business, were seen right away by ad buyers.

A poignant example was aiding a performance-based ad agency in trimming ad waste by more than 50% for a national fast food chain with thousands of locations across America.

It took just one year for The Trade Desk to carve out a profitable business as ad agencies flocked to its platform desiring to take advantage of (RTB) or also commonly known as programmatic advertising.

Customer satisfaction is evident in its client retention rate of 95% for the past few years highlighting the dominating position The Trade Desk possesses in the digital ad industry.

The Trade Desk has not raised fees for ad buyers lately, but the value added from The Trade Desk to customers is accelerating at a brisk pace.

A great value proposition for potential clients.

The vigor of the business was highlighted when Green cited that each second his company is “considering over 9 million ad opportunities” for their ad inventory shows how The Trade Desk is up to date on almost every single ad permutation out there.

This speaks volume of the ad tech, which is the main engine powering the bottom lines at Google search and rogue ad seller Facebook (FB).

Google only gets 63,000 searches per second and shows that The Trade Desk has pushed the envelope in providing the best platform for ad buyers to seek its perfect audience.

Green’s mission of supporting big ad buyers optimize their ad budget has really caught fire and in a way that is completely transparent and objective.

The foundations that Green has assembled became even more valuable when Alphabet (GOOGL) chose to remove DoubleClick IDs, which would now prevent ad buyers from cross-platform reporting and measurement.

Previously, DoubleClick ID could cull data from assorted ads and online products based on a unique user ID named DoubleClick ID.

Ad purchasers then would data transfer to pull DoubleClick log files and measure them against impressions served from other ad servers across the web.

Effectively, ad buyers could track the user through the whole ad process and determine how useful an ad would be to that specific user.

In an utter conservative move to satisfy Europe’s General Data Protection Regulation (GDPR), DoubleClick IDs are no longer available for use, and tracking the ad inventory performance from start to finish became much harder.

Cutting off the visibility of the DoubleClick ID in the DoubleClick ecosystem was a huge victory for The Trade Desk because DoubleClick ID measured 75% of the global ad inventory.

Ad buyers would be forced to find other measurement systems to help calculate ad performance.

Branding and executing as the transparent and fair ad platform helping ad agencies was a great idea in hindsight with the world becoming a great deal more sensitive to data privacy.

The Trade Desk is perfectly placed to reap all the benefits and boast excellent technology to capitalize on this changing big data landscape. It is already seeing this happen with new business wins including large global brands such as a major food company, a global airline, and another large beverage company.

The global digital ad market is a $700 billion market today and trending toward $1 trillion in the next five to seven years

The generational shift to mobile and online platforms will invigorate The Trade Desk’s bottom line as more big ad buyers will make use of its proprietary platform to place programmatic ads.

Content distribution systems are fragmenting into skinny bundles hyper-targeting niche content users such as Sling TV, FuboTV, and Hulu.

There are probably 30 different ways to watch ESPN now, and these 30 platforms all require ad placement and optimization.

Some of the names The Trade Desk is working with are the who’s who of digital content ownership or distribution including Baidu (BIDU), Google, Alibaba (BABA), Pandora (P), and Spotify (SPOT) -- and the names are almost endless.

It’s the Wild West of ads and content these days because TV distribution has never been more fragmented.

Content creation avenues are desperate to boost ad income and are increasingly attempting to go direct to consumers.

Ad-funded Internet TV barely existed a few years ago. And ad inventory is all up for grabs benefitting The Trade Desk.

All of this explains why the stock is up more than 180% in 2018, and this is just the beginning.

The growth numbers put Amazon (AMZN) and Netflix (NFLX) to shame.

The Trade Desk scale on inventory has spiked by more than 700% YOY.

The option to hyper-target increases as more ad inventory is stocked.

Management mentioned in its second-quarter performance that “nearly everything went right. We executed well and one of the most dynamic environments we've seen.”

It is one of the most bullish statements I have heard from a public company.

Quarterly revenue ballooned 54% YOY to a record $112 million, and the 54% YOY growth equaled the 54% YOY growth in Q2 2017.

Ad Age's top 50 worldwide advertisers doubled ad spend in the past year positioning The Trade Desk for continued hyper-growth, not only for 2018 but in 2019 and beyond.

Mobile spend jumped nearly 100% YOY, accounting for 45% of ad spend on the platform, which is 400% higher than the industry average for mobile ad spend according to eMarketer.

Data spend was also a huge winner rising by nearly 100% smashing another record.

In the meantime, the overseas business continued its robust growth in Europe and Asia, up 85% YOY.

The Trade Desk confidence in its performance chose to increase guidance to $456 million for the year, a 48% YOY improvement.

When upper management says “when we see surprises, they typically are to the upside” you take notice, because this tech company is perfectly placed in a growth sweet spot.

Massive developing markets are just starting to dabble with programmatic advertising. Markets such as China will see it become the new normal soon, opening up even more business for The Trade Desk.

The Trade Desk is also rolling out new products that will automate more of the process and reduce the number of clicks.

Wait for the pullback to get into this ad tech stock because even though it is up big this year, we are still in the early innings, and shares will march even higher.

 

 

 

 

________________________________________________________________________________________________

Quote of the Day

“I have a deep respect for the fundamentals of television, the traditions of it, even, but I don't have any reverence for it,” – said Netflix chief content officer Ted Sarandos.

 

https://www.madhedgefundtrader.com/wp-content/uploads/2018/08/The-Trade-Desk-image-3-e1535488202887.jpg 478 580 MHFTR https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png MHFTR2018-08-29 01:05:422018-08-28 20:43:26The Best Tech Stock You’ve Never Heard of
MHFTR

August 27, 2018

Tech Letter

Mad Hedge Technology Letter
August 27, 2018
Fiat Lux

Featured Trade:
(WHY ALIBABA IS THE FIRST STOCK TO BUY WITH THE OUTBREAK OF TRADE PEACE),
(BABA), (GOOGL), (AMZN), (YELP), (MSFT), (MU), (ZTE), (HUAWEI)

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 MHFTR https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png MHFTR2018-08-27 01:06:082018-08-24 20:38:00August 27, 2018
MHFTR

Why Alibaba is the First Stock to Buy with the Outbreak of Trade Peace

Tech Letter

According to the government agency, China Internet Network Information Center, the Chinese Internet community has surpassed 802 million, which only represents a 57.7% penetration rate, miles behind the 89% penetration rate in America.

The gargantuan scale of the Chinese Internet world means China has three times as many Internet users than America, and this is a big deal.

The additional 30 million added to the Chinese Internet ecosphere in the first half of 2018 shows the scale in which local Chinese tech companies are playing with and use to their clear-cut advantage.

Ostensibly, most business strategies in China revolve around scaled tactics as the backbone to operations.

There is even more room to expand in the Middle Kingdom and one clear victor sits atop the parapet looking at the riffraff below and that is Chinese Internet conglomerate Alibaba (BABA).

Alibaba, led by Chinese Internet pioneer Jack Ma, posted its highest-performing growth quarter in the past four years.

Total quarterly revenue ballooned an incredible 61% YOY to $11.8 billion, highlighting the dominant position Alibaba possesses in the Chinese e-commerce landscape.

If you want to know what Amazon (AMZN) is going to do next watch Alibaba.

Profit margins were somewhat sacrificed in the process because of M&A activity that saw Alibaba move into the physical supermarket business snapping up 35 Hema supermarket locations then reinvesting into the business. Echoes of Whole Foods?

Alibaba did not stop there, funneling another $3 billion into food delivery app ele.me, which plans to merge its operations with Yelp (YELP) lookalike app Koubei.

If you thought Silicon Valley moves at a rapid pace, the Chinese Internet space moves faster than lighting.

Alibaba last year dipped into the retail segment as well pocketing a department store chain with 29 stores along with 17 shopping malls.

Alibaba is the closest replica the world has to Amazon and thus is an ideal barometer of the health of the overall Chinese consumer and a peek under the complicated hood that is the Chinese economy.

Alibaba also provides onlookers at how China and its Internet behemoths are coping with the global trading war that has invaded the news headlines from its outset.

The short answer to all this is that China is coping quite well and by no means is ready to back down.

Indeed, there will be peripheral pressures exerted from the fringes, but the core engines remain intact and Chairman Xi can fall asleep in his Beijing abode more than peacefully.

A reason for the stalemate between the two governments is that both are quietly confident they have the levers in place to absorb whatever Molotov cocktails the other has to throw at them.

Investors would be mad to dismiss China’s capabilities after experiencing a mesmerizing economic rise enriching hundreds of millions of Chinese nationals that can be found comfortably living in western megacities in luxury real estate often with a real estate portfolio dotted around the world.

Alibaba’s management made it known on the earnings report that it is not worried much about the trade war because it is largely focused on the domestic Chinese consumer, which has been one of the best economic stories of the past decade.

The overseas expansion unfolding under Alibaba’s tutelage is away from the western world and predominantly focused on Southeast Asia and Eastern Europe where cheap, value-for-money hardware and software allows citizens at these income levels to participate in the e-commerce game.

These individuals can’t afford iPhones on a salary of peanuts. And Alibaba has targeted the undeveloped world as a potential lever of substantial growth.

The regulatory harshness of the west has shut out Huawei and ZTE from its shores. Australia followed suit as well, banning the two telecom companies even though it enjoys a better relationship with Beijing than Europe or North America.

China has already planned a workaround because the engines driving the Chinese tech miracle are semiconductor companies such as Micron (MU), which sells boatloads of DRAM memory chips to Chinese tech companies that flood the world with smartphones and other gadgets.

Beijing has already formulated a plan to circumvent American chips by tapping Korean, European, and Japanese chips to replace the current American supply that could vanish at any time.

Shenzhen-based chip company HiSilicon fully owned by Huawei is responsible for supplying Huawei with chips and is the biggest local designer of integrated circuits in China.

This is what the future of China looks like when China can finally build up the adequate supply necessary to achieve its plans to dominate global technology, America, and the world.

But the plan is still in the process of playing out. The awkwardness was highly visible when the administration’s ban of selling U.S. manufactured components to telecommunications company ZTE resulted in the company almost shutting down until a last-second change of heart by the administration.

The near-death experience will invigorate ZTE to muster its own local supply of chips to avoid the unreliable foreign supply and a deja vu feeling.

American chip companies won’t be able to enjoy the Chinese market for long as all these negative experiences for Chinese companies has forced Chinese tech companies to search and secure a guaranteed chip supply.

At the same time, Chinese local smartphone players have gone from 0 to 60 in no time with companies that barely existed a few years ago, such as Oppo, Vivo coming into the fore along with Huawei picking up 43% of the global smartphone market.

This is bad news for Apple as local competitors are learning fast and furious how to build premium smartphones via re-engineering the current technology or through forced technology transfers.

These companies subsequently offer these phones at the lowest possible price point. And at some point in the near future Apple could be expendable if Chinese smartphones start to display the type of quality the best phones show.

Chinese domestic consumption and investment comprise 90% of the GDP growth in China and are propped up by three robust trends including real wage growth boosting the middle-class population, high savings rate that of which Americans would be jealous, and easy access to credit vehicles.

When I was recently in the Middle Kingdom, it was highly evident that as the generations became younger, their quality of life was higher than their parents.

The opposite is happening in America with millennials earning demonstrably less than their parents’ generation while the American middle class is shrinking at an accelerated pace.

Beijing knows this and hopes to wait things out as it feels time is a positive variable for China and not America.

It is true that if this trade war took place in 20 years in the future, China would be in a stronger strategic position to extract whatever concessions it desires because even though Chinese growth is slowing, it is still growing at 6.5%.

And if you don’t believe what I just said then just look at Alibaba’s cloud division, which grew 93% YOY opening artificial intelligence-based data centers around Europe to battle Amazon (AMZN) and Microsoft (MSFT).

Europe was once Elysian Fields for American tech companies, but with European regulators going after American tech and China encroaching on European turf, the future looks a lot less certain for the FANGs there than ever before.

Alibaba’s operating margins dipped 10% YOY but the slide will be returned to shareholders in the future in the form of high-quality revenue and is worth the investment into the most innovative ideas of tomorrow.

I did not even mention the large stake Alibaba has in Ant Financial, which operates the ubiquitous digital payment app Alipay.

It would be analogous to Amazon if it owned Visa.

Alibaba is one of the best tech companies in the world headed by a former Chinese English language teacher in Hangzhou.

If America becomes too difficult or expensive with which to do business, Alibaba and Chinese tech will just recalibrate their strategy to deeper infiltrate the confines of Southeast Asia and the rest of the undeveloped world.

Any price war on undeveloped soil favors the Chinese as they have mastered scale better than anyone on the planet.

The stellar Alibaba numbers also mean the trade war has no end in sight as each player thinks they have the upper hand. But it also means the tech giants from both countries will come out unscathed and will lead their country’s respective equity markets higher for the foreseeable future.

 

 

 

The Jeff Bezos of China – Alibaba’s Jack Ma

________________________________________________________________________________________________

Quote of the Day

“Technology is nothing. What's important is that you have a faith in people, that they're basically good and smart, and if you give them tools, they'll do wonderful things with them,” – said Apple cofounder and former CEO Steve Jobs.

 

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 MHFTR https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png MHFTR2018-08-27 01:05:482018-08-24 20:37:39Why Alibaba is the First Stock to Buy with the Outbreak of Trade Peace
MHFTR

August 23, 2018

Diary, Newsletter, Summary

Global Market Comments
August 23, 2018
Fiat Lux

Featured Trade:
(WHY THE DOW IS GOING TO 120,000),
(X), (IBM), (GM), (MSFT), (INTC), (DELL),

($INDU), (NFLX), (AMZN), (AAPL), (GOOGL),
(THE MAD HEDGE CONCIERGE SERVICE HAS AN OPENING),
(TESTIMONIAL)

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 MHFTR https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png MHFTR2018-08-23 01:09:182018-08-22 21:24:40August 23, 2018
MHFTR

Why the Dow is Going to 120,000

Diary, Newsletter, Research

For years, I have been predicting that a new Golden Age was setting up for America, a repeat of the Roaring Twenties. The response I received was that I was a permabull, a nut job, or a conman simply trying to sell more newsletters.

Now some strategists are finally starting to agree with me. They too are recognizing that a ganging up of three generations of investment preferences will combine to drive markets higher during the 2020s, much higher.

How high are we talking? How about a Dow Average of 120,000 by 2030, up another 465% from here? That is a 20-fold gain from the March 2009 bottom.

It’s all about demographics, which are creating an epic structural shortage of stocks. I’m talking about the 80 million Baby Boomers, 65 million from Generation X, and now 85 million Millennials. Add the three generations together and you end up with a staggering 230 million investors chasing stocks, the most in history, perhaps by a factor of two.

Oh, and by the way, the number of shares out there to buy is actually shrinking, thanks to a record $1 trillion in corporate stock buybacks.

I’m not talking pie in the sky stuff here. Such ballistic moves have happened many times in history. And I am not talking about the 17th century tulip bubble. They have happened in my lifetime. From August 1982 until April 2000 the Dow Average rose, you guessed it, exactly 20 times, from 600 to 12,000, when the Dotcom bubble popped.

What have the Millennials been buying? I know many, like my kids, their friends, and the many new Millennials who have recently been subscribing to the Diary of a Mad Hedge Fund Trader. Yes, it seems you can learn new tricks from an old dog. But they are a different kind of investor.

Like all of us, they buy companies they know, work for, and are comfortable with. During my Dad’s generation that meant loading your portfolio with U.S. Steel (X), IBM (IBM), and General Motors (GM).

For my generation that meant buying Microsoft (MSFT), Intel (INTC), and Dell Computer (DELL).

For Millennials that means focusing on Netflix (NFLX), Amazon (AMZN), Apple (AAPL), and Alphabet (GOOGL).

That’s why these four stocks account for some 40% of this year’s 7% gain. Oh yes, and they bought a few Bitcoin along the way too, to their eternal grief.

There is one catch to this hyper-bullish scenario. Somewhere on the way to the next market apex at Dow 120,000 in 2030 we need to squeeze in a recession. That is increasingly becoming a topic of market discussion.

The consensus now is that an impending inverted yield curve will force a recession sometime between August 2019 to August 2020. Throwing fat on the fire will be a one-time only tax break and deficit spending that burns out sometime in 2019. These will be a major factor in U.S. corporate earnings growth dramatically slowing down from 26% today to 5% next year.

Bear markets in stocks historically precede recessions by an average of seven months so that puts the next peak in top prices taking place between February 2019 to February 2020.

When I get a better read on precise dates and market levels, you’ll be the first to know.

To read my full research piece on the topic please click here to read “Get Ready for the Coming Golden Age.” 

 

 

Dow 1982-2000 Up 20 Times in 18 Years

 

 

Dow 2009-Today Up 4.3 Times in 9 Years So Far

 

https://www.madhedgefundtrader.com/wp-content/uploads/2018/08/John-on-mechanical-bull-story-1-image-3-e1534972073238.jpg 313 250 MHFTR https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png MHFTR2018-08-23 01:08:052018-08-22 21:23:50Why the Dow is Going to 120,000
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