Global Market Comments
June 30, 2020
Fiat Lux
Featured Trade:
(STORAGE WARS),
(MSFT), (IBM), (CSCO), (SWCH),
(THE MAD HEDGE JUNE 4 TRADERS & INVESTORS SUMMIT RECORDING IS UP),
Posts
Global Market Comments
June 19, 2020
Fiat Lux
Featured Trade:
(JUNE 17 BIWEEKLY STRATEGY WEBINAR Q&A),
(SPY), (AAPL), (FXE), (FXA), (BA), (UAL), (AAPL), (MSFT), (BIIB), (PFE), (OXY), (SPCE), (WMT), (CSCO), (TGT)
Global Market Comments
June 11, 2020
Fiat Lux
Featured Trade:
(WHY TECHNICAL ANALYSIS DOESN’T WORK)
(FB), (AAPL), (AMZN), (GOOG), (MSFT), (VIX)
(TESTIMONIAL)
Santa Claus came early this year.
We have now rocketed all the back from -37% to a feeble 0% return for the Dow Average for 2018. By comparison, the Mad Hedge Fund Trader is up a nosebleed 8.5% during the same period.
If you had taken Cunard’s round-the-world cruise four months ago, as I recommended, you would be landing in New York about now, wondering what the big deal was. Indexes are nearly unchanged since you departed, with the Dow only 5.50% short of an all-time high.
This truly has been the Teflon market. Nothing will stick to it. Not, plague, not depression, not mass bankruptcies, not the worst economic data in history.
Go figure.
It makes you want to throw your hands up in despair and your empty beer can at the TV set. All this work and I’m delivered the perfectly wrong conclusions?
Let me point out a few harsh lessons learned from this most recent meltdown and the rip-your-face-off rally that followed.
Remember all those market gurus claiming stocks would rise every day for the rest of the year? They were wrong.
This is why almost every Trade Alert I shot out for the past two months has been from the “RISK ON” side, but only after cataclysmic market selloffs.
We have just moved from a “Buy in November” to a “Sell in May” posture.
The next six months are ones of historical seasonal market weakness. For the misty origins of this trend, read “If You Sell in May, What to Do in April?” On top of that, we have the uncertainty of the presidential election to deal with.
We go into this with big tech leaders, including Facebook (FB), Apple (AAPL), Amazon (AMZN), Google (GOOG), and Microsoft (MSFT), all at or close to all-time highs.
The other lesson learned this year was the utter uselessness of technical analyses. Usually, these guys are right only 50% of the time. This year, they missed the boat entirely. After perfectly buying the last top, they begged you to dump shares at the bottom.
When the S&P 500 (SPY) was meandering in a narrow nine-point range, and the Volatility Index (VIX) hugged the $11-$15 neighborhood, they said this would continue for the rest of the year.
It didn’t.
When the market finally broke down in February, cutting through imaginary support levels like a hot knife through butter ($26,000? $25,000? $24,500?), they said the market would plunge to $24,000, and possibly as low as $22,000.
It didn’t do that either.
If you believed their hogwash, you lost your shirt. The market just kept going, and going, and going down to $18,000.
This is why technical analysis is utterly useless as an investment strategy. How many hedge funds use a pure technical strategy? Absolutely none, as it doesn’t make any money on a stand-alone basis.
At best, it is just one of 100 tools you need to trade the market effectively. The shorter the time frame, the more accurate it becomes.
On an intraday basis, technical analysis is actually quite useful. But I doubt a few of you engage in this hopeless persuasion.
This is why I advise portfolio managers and financial advisors to use technical analysis as a means of timing order executions, and nothing more.
Most professionals agree with me.
Technical analysis derives from humans’ preference for looking at pictures instead of engaging in abstract mental processes. A picture is worth 1,000 words, and probably a lot more.
This is why technical analysis appeals to so many young people entering the market for the first time. Buy a book for $5 on Amazon and you can become a Master of the Universe.
Who can resist that?
The problem is that high-frequency traders also bought that same book from Amazon a long time ago and have designed algorithms to frustrate every move of the technical analyst.
Sorry to be the buzzkill, but that is my take on technical analysis.
Hope you enjoyed your cruise.
Global Market Comments
June 5, 2020
Fiat Lux
Featured Trade:
(JUNE 3 BIWEEKLY STRATEGY WEBINAR Q&A),
(FB), (M), (UAL), (LVS) , (WYNN), (MS), (SPX), (TBT), (TLT), (AAPL), (FB), (MSFT), (SDS), (SPX), (AMZN) (LEN), (KBI), (PHM), (TSLA)
Below please find subscribers’ Q&A for the June 3 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Silicon Valley, CA with my guest and co-host Bill Davis of the Mad Day Trader. Keep those questions coming!
Q: Domino's Pizza (DPZ) is at all-time highs? Would you buy this name right here, right now?
A: No, I would not even buy their pizza. You would be crazy to buy them right now up here this high. I prefer Round Table, the pizza not the stock. All of these “reopening” stocks are way overextended.
Q: Will the riots delay the recovery?
A: Yes, they will, it could take as much as another 1% off the current GDP growth rate. It’s hitting the already worst-hit sector—retailers. Many retailers will not come back from these, especially the small ones. These businesses were just returning from being closed for two months when they got burned down. But we won’t see it in the macro data for many months because its happening largely at the micro level. If you didn’t like Macy’s (M) before when it was headed for Chapter 11, you definitely won’t like it now that it is burning down.
Q: If airlines like United Airlines (UAL) can’t use the middle seat, do you see ticket prices going up 10%, 25%, or 50%?
A: Yes. In theory, to just cover the middle seat, they have to increase prices 33%. And there will be a whole lot of new costs that the airlines have to endure as part of this pandemic, such as extra cleaning, disinfecting, and temperature taking. So, they’re really going to need to increase prices by 50% or more just to break even. My guess is that the airline industry will shrink in half in the fall when all the government bailout money runs out. So, I've been telling people to take profits on the airlines, especially if you have a double or triple in them, or if you have the LEAPS.
Q: Is Facebook (FB) immune from any big selloff?
A: No, nobody is immune—look how much Facebook sold off in March, some 35%. Mark Zuckerberg seems to be making a deal with the devil, accommodating the president with unrestricted incendiary Facebook posts. And the consequences of a Democratic win for Facebook could be hugely negative, so I am not participating in that one. Mark doesn’t have a lot of friends in congress right now so regulation looms.
Q: What do you think about buying Las Vegas Sands (LVS) or Wynn Resorts (WYNN) on the expectation of reopening?
A: I’m a Nevada resident and get frequently updated on the casino news. They’re only going to be allowed half of peak casino visitors that they had in January, so they will generate huge losses. Almost all companies are being allowed to reopen back to half the level that guarantees bankruptcy in 3-6 months. But we won’t see that in the numbers for many months either. I’m negative on any industry that depends on packing people in, like airlines, cruise lines, and movie theaters.
Q: What are the chances of a mass student debt cancellation?
A: That is a possibility if the Democrats win in November, and it has already been proposed. It is about a $1.5 trillion ticket. If you’re bailing out large companies, small companies, airlines, and the oil industry, why not students? It would have the benefit of adding 10 million more consumers to the economy, who are not current participants because they have massive student debts that are appreciating at 10% a year and have terrible credit ratings. So that would be another great economic stimulus measure. By the way, I paid off my student loans 40 years ago in a lump sum payment with my first paycheck from Morgan Stanley (MS). How much did four years of college cost during the 1960s? $3,000. Such a deal.
Q: What’s the next resistance level on the S&P 500 (SPX)?
A: The target we’ve been looking for is $3,125. I’m looking for roughly $40 points above that level—it should be about $3,165. We’re in uncharted territory here because nobody’s ever seen a market rise 40% in two months, so any technical recommendation has to be bearish except for a very short term, like intra-day or daily views.
Q: Any correlation between the 1918 epidemic and now?
A: Here is your History of Virology Lesson 101 for today. There is some similarity, but the 1918 flu actually originated on a farm in Kansas, had a 2% death rate, took a trip to Europe, mutated, came back months later, and then had a death rate of 50%. We haven't seen that second wave yet, or major mutations. We have seen a couple of different DNA strands out there though, meaning we would need multiple different vaccines when we get them. By the way, it was called the “Spanish Flu” because during WWI, every country had censorship except Spain because it was not a combatant. So, the pandemic was only reported in the Spanish newspapers.
Q: Would you get out of any of the previously recommended LEAPS?
A: Yes, I would be taking profits on all of your LEAPS—whether tech, domestic, “recovery”, or whatever else—so if we do get a correction over the summer, you can get back in at better prices, with longer expirations. You can go two years out from say August for example. The risk/reward today is terrible.
Q: Would you hold on to the (SDS) right now, or wait for the pullback
A: No, we have offsetting profits on all of our (SDS) positions, until today—if the market keeps accelerating to the upside, SDS losses will start to offset our profits on the positions, so that’s why I would get out.
Q: Should I buy the ProShares Ultra-Short 20 + Year Treasury Bond Fund (TBT)? I don’t do options.
A: You don’t need to do options, (TBT) is an ETF; anybody can buy that, it’s just like buying a stock.
Q: What is happening with the Australian market?
A: It will trade with the US stock market tick for tick, which means they’ve had a fantastic rally, overdue for a selloff. Wait to buy the next dip.
Q: If markets are going to go down soon, why exit the (SDS)
A: It may go up first before it goes down. And in any case, I have a great profit on the combined position of long (SDS) and short bonds. These days, I like taking big profits rather than praying they become bigger. It’s about risk control and knowing what you can get away with in certain market conditions.
Q: Is now the time to sell the highflyers in tech?
A: Yes, I would be selling Apple (AAPL), Facebook (FB), Microsoft (MSFT), and Amazon (AMZN). Get dry powder, which is worth a lot after you’ve seen a move like this; especially if the economy gets worse, which is likely. My late mentor Barton Biggs taught me to always leave the last 10% of a move for the next guy.
Q: At what point do you buy the ProShares Ultra Short S&P 500 ETF (SDS) outright?
A: Only if there is an immediate collapse in the market, which I can’t foresee with any certainty. When you play these bear ETFs, the costs are very high. You are short double the (SPX) dividend, which is about 5% a year, plus hefty management fees. So, you really have to catch a quick, large move to the downside to make any real money.
Q: Real estate seems like the big winner of the pandemic. Will prices be up by the end of the year or is this just a temporary spike?
A: They will be up at the end of the year. I have been telling readers all year that their home will be their best investment in 2020 and that is coming true. Real estate has a massive tailwind behind it which has really been in place for a couple of years now, and that is the millennials upgrading and buying houses. The pandemic has really poured gasoline on the fire and triggered a stampede out of the city and into the suburbs. Having 85 millennials ready to upgrade their homes is a huge positive for the real estate market, and I’d be looking to buy the homebuilders on any dip. That’s probably the best domestic play out there. Buy Lennar Corp. (LEN) and Pulte Homes (PHM) on dips.
Q: Post pandemic, will manufacturing have any way of helping US economic growth, or is bringing back the supply chains fake news?
A: It is fake news because if companies bring back production, it will be machines and not people making things. Unless you want to pay $10,000 for an iPhone, or $5,000 for a low-end laptop. Oh yes, and the stocks which made these things would be 90% lower as well. That’s what those products cost in today’s dollars if they were made in the United States. I wouldn't count on any repatriation of US jobs unless people want to work for $3 a day like the Chinese do. Offshoring happened for a reason.
Q: How do I hedge a municipal bond portfolio?
A: You might think about taking profits in muni bonds. They’re yielding around 2% and change. And they could get hit with a nice little 20-point decline if the US Treasury bond market (TLT) falls apart, which it will. Then you can think about buying them back. If you really want to hedge, you sell short the (TLT) against your long muni bond portfolio. But that is an imperfect hedge because the default rate on munis is going to be much higher than it is now than it was in 2008-2009, and much higher than US Treasuries, which never defaults despite what the president has said.
Q: What is dry powder?
A: It means having cash to buy stocks at market bottom. In the 1800s before cartridges were invented, black powder got wet whenever it rained causing guns to fail to shoot. That is the historical analogy.
Q: What do we do now if we’re getting started?
A: It will require a lot of discipline on your part as coming in at market tops is always risky. Wait for the next trade alert. Every one of these is meant to work on a standalone basis. I would do nothing unless you see one of these things happen; any 2 or 3-point rally in bonds (TLT), you want to sell short. We’re just at the beginning of a multiyear trade here so it’s not too late to get back into that. Gold (GLD) is probably safe to buy on the dip here since we are at the very beginning of a historic expansion of the global money supply. I wouldn’t touch any stocks unless we get at least a 10% drop and then I'll start putting out call spread recommendations on single stocks. But right here, on top of the biggest bounceback in stocks in market history, don’t do anything. Just read the research and make lists of things to buy when they do dip—something I do for you anyway.
Q: What about Beyond Meat (BYND)?
A: The burgers are not that bad, but the stock is way overpriced and you don’t want to touch it. It's one of the fad stocks of the day.
Q: Can we access the slides after the webinar?
A: Yes, we post it on the website under your “Account” section about two hours after we’re done.
Q: Are you saying sell everything currently profitable?
A: Yes, I would be selling everything on a short term basis, keep tech and biotech on a long term basis. We are the most overbought in history and you don’t get asked twice to sell tops. But yes, it could go higher before the turn happens. From a risk-reward point of view, it’s terrible to do anything right now.
Q: Could we get a pullback to the $260-$270 area in the S&P 500 (SPY)?
A: Yes, especially if we get a second worse wave of corona and the stimulus takes much longer than we thought to get into the economy, or if the rioting continues.
Q: Should you sell CCI now?
A: Yes, I actually would. You have a 57% gain in the stock in ten weeks, so why not? Long term, it’s a hold.
Q: Are any retail stocks a buy?
A: No, they aren’t because a lot of them are going to go under but you don’t know which ones. After shutting down and losing 60% of their revenues, they’re now being burned down. The pros who do well in the sector are bankruptcy specialists who have massive research teams that analyze every lease in every mall and then cherry-pick. You and I don’t have the ability to do that so stay away.
Q: What is the best way to play real estate?
A: Buy a house. If not, then you buy (LEN), (KBI), and (PHM).
Q: Is it too late to get back in the stock market?
A: Yes, I'm afraid it is. Buying, because it has gone up, is a classic retail investor mistake. After this meltdown, maybe you will learn to buy stocks when everyone else is throwing up on their shoes. That's what I was doing in March and we got returns of 50% to 100% on everything and 500% to 1,000% on the LEAPS (TSLA).
Q: Are you buying puts?
A: No, I am not taking outright short positions any more than I have now because we have a Fed-driven melt-up underway with a stimulus that's 20x larger than that seen during the 2008-2009 Great Recession. When I don’t know what’s going to happen, I get out.
Good Luck and Stay Healthy.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
May 26, 2020
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or LOOKING FOR THE NEW AMERICA),
(FB), (AAPL), (NFLX), (GOOGL), (MSFT), (TSLA), (VIX)
We are getting some tantalizing tastes of the new America that will soon arise from the wreckage of the pandemic.
Companies are evolving their business models at an astonishing rate, digitizing what’s left and abandoning the rest, and taking a meat cleaver to costs.
The corporate America that makes it through to the other side of the Great Depression will earn far more money on far fewer sales. That has been the pattern of every recession for the past 100 years.
While the pandemic may take earnings down from $162 per S&P 500 share in 2019 to only $50 in 2020, it sets up a run at a staggering $500 a share during the coming Roaring Twenties and Golden Age. All surprises will be to the upside and anything you touch will make you look like a genius.
For example, Target’s online sales have exploded 153%, allowing customers to order their groceries online and pick them up at curbside. (TGT) pulled this off in a mere three weeks. Without a pandemic, it would have taken three years to implement such a radical idea, if ever.
Survival is a great motivator.
The (SPY) has been greatly exaggerating the public’s understanding of the stock market. Five FANGs and Tesla (TSLA) with 50%-200% moves off the bottom have made the index look irrationally strong.
The fact is that the majority who have shares have not even made a 50% retracement of this year’s losses. A lot of stocks, especially the reopening ones, are still crawling back of subterranean bottoms.
Investors now have the choice of chasing wildly expensive stocks that have already had spectacular runs, or cheap ones that will go bankrupt by the end of the year. It is a Hobson’s choice for the ages. I expect 10% of the S&P 500 to go under by the end of 2020.
I am spending a lot of time on the ground talking to businesses in California and Nevada and have come to two conclusions. They cannot fathom the true depth of the Depression we are now in and are greatly underestimating the length of time it may take to recover. We may not see the headline unemployment rate under 10% for years unless the government redefines the statistics, which they always do.
The S&P 500 is not the economy. It only employs 25% of America’s private sector labor force accounting for 20% of its total costs. Real estate accounts for another 15%. That leaves 35% of costs that can be completely eliminated or reengineered. This creates enormous share price upside possibilities.
The concentration of the market is the most extreme I have ever seen, with five stocks getting most of the action, (FB), (AAPL), (NFLX), (GOOGL), and (MSFT).
There is a staggering $3.6 trillion in equity allocations sitting on the sidelines in cash. All those who got out at the March bottom are now desperately trying to get back in at the May top. Algorithms are making sure you get out cheap and get back expensive.
It will all end in tears.
One of the stunning developments of the crash has been the near doubling of retail stock trading. Options trading has increased even more. Millions of stimulus check recipients have poured their newfound wealth into the stock market instead of spending it on consumer goods, like they were supposed to.
This explains the over-concentration on the five FANG stocks, (FB), (AAPL), (NFLX), (GOOGL), and (MSFT), the greatest momentum stocks are out age, but in high speculative ones like Tesla (TSLA). The lowest cost online platforms like Tastyworks (click here) and Robin Hood (click here).
All of this is completely irrevocably changing the character of the stock market, perhaps permanently. This may also explain why the Volatility Index remains stuck above$26.
Fed Governor Jerome Powell said no recovery without vaccine, and that’s without a second wave. It could be a long wait. In the meantime, the Atlanta Fed said Q2 US GDP will be down -42%, the weakest quarter in American history. We find out mid-July.
Housing Starts collapsed by 30.2% in April, in the sharpest drop on record. But prices aren’t falling. There is still a massive bid under the market from still-employed millennials. Your home could be you best performing asset this year. The 30-year fixed rate mortgage at 3.0% is a big help.
Weekly Jobless Claims topped 2.4 million, taking the two-month total to a breathtaking 39 million. One out of four Americans is now unemployed, matching the Great Depression peak. US deaths just topped 98,000, 21 times China’s fatality rate where the disease originated and with four times our population. People will keep losing jobs until the death rate peaks, which could be many months, or years.
Leading Economic Indicators crashed by 4.4% for April, showing the economy is still in free fall. So, how much more stock do you want to buy here?
Up to 60% of mall tenants aren’t paying rent, with $7.4 billion skipped in April alone. See my earlier “Death of the Mall” piece. It’s another harsh example of the epidemic accelerating all existing trends.
The market is not reflecting the long-term damage to the economy, says my old buddy and Morgan Stanley colleague David Gerstenhaber. When the bailouts run out, the economy could go into free fall. It could take years to get below 10% unemployment rate again, as many of the layoffs and furloughs are permanent. Keep positions small. Anything could happen. I spent the 1987 crash with David.
Existing Home Sales cratered an incredible 17.8% in April to an annualized 4.88 million units, the largest one-month drop since 2010. Inventory dropped to an all-time low of only 1.7 million, down 19.7%, presenting a 4.1-month supply. Sellers failed to list and those who had a home took them off. Unbelievably, this pushed median home prices to a new all-time high of 286,000, up 7.4% YOY. The biggest sales fall in the west, where the US epidemic started.
China took over Hong Kong, suspending most civil liberties in response to Trump’s multiple attacks. And you know what? There is nothing we can do about it that hasn’t already been done. Talk about going into battle with no dry powder. I’m sure the US 7th Fleet will be out there soon to provoke an attack. Anything to distract attention from the 100,000 Americans who died from Covid-19 on Trump’s watch. As if markets didn’t already have enough to worry about.
When we come out on the other side of this, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With interest rates at zero, oil at $0 a barrel, and many stocks down by three quarters, there will be no reason not to. The Dow Average will rise by 400% or more in the coming decade.
My Global Trading Dispatch performance had another fabulous week, up an awesome +4.97%, and blasting us up to a new eleven-year all-time high of 77%. It has been one of the most heroic performance comebacks of all time.
My aggressive short bond positions really delivered some nice profits, despite the fact the bond market went almost nowhere. That’s because time decay for the June 19 expiration is really starting to kick in. I also got away with a small long in the bond market for the second time in two weeks.
That takes my 2020 YTD return up to +10.86%. That compares to a loss for the Dow Average of -12.6%. My trailing one-year return exploded to 50.85%, nearly an all-time high. My eleven-year average annualized profit exploded to +35.21%.
The only numbers that count for the market are the number of US Coronavirus cases and deaths, which you can find here at https://coronavirus.jhu.edu.
On Monday, May 25, I’ll be leading the neighborhood veterans parade for Memorial Day. Markets are closed.
On Tuesday, May 26 at 9:00 AM, the S&P Case Shiller National Home Price Index is released.
On Wednesday, May 27, at 4:30 PM, weekly EIA Crude Oil Stocks are published.
On Thursday, May 28 at 8:30 AM, Weekly Jobless Claims are announced. We also get the second estimate for the Q1 GDP is printed. At 10:00 AM, April Pending Home Sales are announced.
On Friday, May 29, at 2:00 PM, the Baker Hughes Rig Count follows at 2:00 PM.
As for me, I will be hitting the town beaches at Lake Tahoe for the first time this spring, mask in hand, where waitresses serve you mixed drinks on order. Outdoors will be the only safe place this year.
Stay healthy.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
May 20, 2020
Fiat Lux
Featured Trade:
(THE HYPER-ACCELERATION OF 5G)
(AMZN), (5G), (CCI), (MSFT), (NFLX), (APPL)
I will explain to everyone why a wonky side effect of coronavirus is supercharging the 5G revolution.
Market valuations reflect the state of expected future cash flows in a company.
Under this assumption, some could argue that most tech companies with staying power are almost a good buy at any price.
No-brainers would include a list of Microsoft, Amazon, Apple, and Netflix.
The health scare and the carnage associated with it has brought forward the tech industry as a whole to the forefront of the global economy.
When you mix that with the Fed hellbent on saving everything that has a heartbeat, it sets up conditions for heavy buying in an industry that is going to be king of the global economy anyway.
It is not a question of if, but when and the health phenomenon has accelerated the dramatic migration to tech by showing how business will be conducted in about 15 years.
The change took place in a blistering 4 weeks.
The clearest signal of who is really calling the shots in the equity market is looking at which companies are dragging it up.
Technology is shouldering the responsibility of the equity market by outperforming the broader market with many software companies’ share price higher than before the crisis.
For every Amazon or Microsoft, there is also a Macy’s or JC Penny showing that this is really a stock pickers market.
We have not only learned that tech companies are critical to our functioning as a society, but that large tech companies will be even more central than before even if they are currently losing gross revenue.
The relative gains to tech stemming from the coronavirus are equal or greater than an innovation of a game-changing product and will double the effect of 5G.
We are setting up for the Golden Age of 5G with tech poised to invade even more of the broader equity market.
One rough estimate notes that the 5G industry is expected to add about $40bn in incremental revenue to the semiconductor industry, add 5X growth in mobile data monthly traffic by 2024, and a $4.2tn boost to global economies from revenue streams connected to 5G in the next ten years.
I do agree that currently, the network effect is working in reverse order, but the positive force multiplier, when the economy is riding high again cannot be emphasized enough.
Digital revenue streams will effectively be pumped into every nook and crevice of the digital economy because of current modifications to the business environment.
When business does come back online, investors of physical assets will sell what they can at discounted prices to get into the digital ecosystem causing asset prices to explode as investors chase prices to the sky.
Do you remember commercial real estate guru and Colony Capital’s CEO Tom Barrack?
The company hoped to sell as much as 90% of its $20 billion property portfolio of hotels, warehouses, and other commercial real estate by the end of 2021.
They are also another big investor in nursing homes.
A real-estate pioneer who founded Colony in the early 1990s and is the firm’s chief executive and executive chairman, Barrack said he wanted to go “all digital.”
Rejigging the 29-year-old investment company represented an extreme response to the way technologies have been dismantling cash flow for almost every type of commercial real estate, and Barrack was met with fierce backlash from entrenched stakeholders regarding the new direction.
Commercial real estate and hotel operators have had to fight against the triple whammy of office sharing WeWork, short-term hotel platform Airbnb, and the coronavirus - a lethal three-part cocktail of malicious forces to the “traditional” model.
The coronavirus has proven Barrack was spot on with his synopsis, but he wasn’t able to get rid of Colony’s inventory of commercial real estate in the expeditious way he desired.
Other companies have taken a direct hit like 24 Hour Fitness who is pondering filing for bankruptcy, but I could say the same for a slew of companies like Colony Capital.
Another key manifestation of the current economic malaise is that regulators, antitrust, tax, foreign, and all of the above are less likely to disrupt big tech companies moving forward considering they may be the only ones able to get us out of a similar crisis in the future.
Government officials will be under rapid pressure to boost GDP levels and crimping big tech is counterintuitive to this overall goal.
I don’t agree with the glass half empty crowd who believe Amazon needs to be clamped down because of dominating retail during the time of the virus - if Amazon didn’t exist, the panic could have accelerated to an uncontrollable level creating anarchy in the streets.
The big boys have pushed soft power as a legitimate policy tool with Apple sourcing over 20 million face masks and is now building and shipping face shields.
Big tech is becoming like a mini-government in its own right.
Granted that thousands of bankruptcies from restaurants, nail salons, and yoga studio will be swept into the dust bin of economic history, but once the next iteration of the economic cycle turns up, tech is about to go gangbusters in a way many never thought imaginable.
Then if you bake a little 5G into the pecan pie, investors are justified to be salivating about the tech industry’s prospects.
Any deep-pocketed investors should be cherry-picking every quality 5G tech play possible because they will be the most supercharged sub-sector of tech once the economy is reset.
Any long-term investor with a pulse should buy Crown Castle International Corp. (REIT) (CCI) on any and all dips.
They are the largest owner of cell towers owning over 40,000 in the U.S.
