Posts

January 22, 2019

Mad Hedge Technology Letter
January 22, 2019
Fiat Lux

Featured Trade:

(HOW TO PLAY TECHNOLOGY STOCKS IN 2019),
(NFLX), (AAPL), (TSLA), (STT), (BLK)

January 16, 2019

Mad Hedge Technology Letter
January 16, 2019
Fiat Lux

Featured Trade:

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

3D Printing Gets a Second Wind

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

3D printing.

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

A lot has changed since then.

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

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

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

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

Certain tech companies love this technology.

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

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

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

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

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

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

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

That was wishful thinking.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

 

IT’S FINALLY NOT JUST A FAD

December 17, 2018

Global Market Comments
December 17, 2018
Fiat Lux

Featured Trade:

(THE MARKET OUTLOOK FOR THE WEEK AHEAD, or THERE’S NO SANTA CLAUS IN CHINA)
($INDU), (SPY), (TLT), (AAPL), (AMZN), (NVDA), (PYPL), (NFLX)

December 13, 2018

Global Market Comments
December 13, 2018
Fiat Lux

Featured Trade:

(WHAT’S THE MATTER WITH APPLE?),
(AAPL), (MSFT), (KO), (AMZN), (CLX), (NFLX),
(WHY YOUR OTHER INVESTMENT NEWSLETTER IS SO DANGEROUS)

November 26, 2018

Global Market Comments
November 26, 2018
Fiat Lux

Featured Trade:
(THE MARKET OUTLOOK FOR THE WEEK AHEAD, or ARE WE IN OR OUT?)
(FB), (AAPL), (AMZN), (NFLX),
(GOOG), (SPY), (TLT), (USO), (UNG), (ROM)

November 23, 2018

Global Market Comments
November 23, 2018
Fiat Lux

Featured Trade:

(SURVIVING THANKSGIVING)
(SPY), (TLT), (TBT), (GLD), (FXE), (FXY), (USO), (VIX), (VXX), (NVDA), (NFLX), (AMZN)

Surviving Thanksgiving

The Mad Hedge Fund Trader took a much-needed break this week to enjoy turkey with his vast extended family on the pristine shores of Incline Village, Nevada.

The weather was crystal clear, the temperature in the sixties throughout the day, and down into the teens at night. The kids took turns freezing bottles of water outside. To a fire-weary Californian, that’s cool.

During my nighttime snowshoeing on the Tahoe Rim Trail, I am overawed by a pale waning moon setting into the lake. I walked through a heard of elk in the darkness, the snow crunching under my boots. On the way back, I noticed that a mountain lion had been tracking me.

The Trade Alerts went out so fast and furious this year, bringing in my biggest outperformance of my competitors since my service started 11 years ago. As of today, we are up 26% on the year versus a Dow Average (INDU) that has gained exactly zero.

Great managers are not measured by how much they make in rising markets but by how little they lose in falling ones.

I made money during the two market meltdowns this year, at least until this week. That last 1,000-point dive really hurt and breaks all precedent with Thanksgiving weeks past.

I played tech hard from the long side during the first half, then avoided it like the plague in the third quarter.

Short positions in bonds (TLT) continued to be my “rich uncle” trade every month this year. I am currently running a double position there.

I avoided banks, energy, gold, and commodities which performed horribly despite many entreaties to get in.

I avoided the foreign exchange markets such as the Japanese yen (FXY) and the Euro (FXE) because they were largely moribund and there were better fish to dry elsewhere.

The Volatility Index (VIX), (VXX) was a push on the year with both longs and shorts.

My big miss of the year was in biotechnology and health care. I am well familiar with the great long-term bull case for these sectors. But I was afraid that the president would announce mandatory drug price controls the day after I took a position.

I still believe in the year-end rally, although we will be starting from much lower levels than I thought possible. The recent technology crash was really something to behold, with some of the best quality companies like NVIDIA (NVDA), Amazon (AMZN), and Netflix (NFLX) down 30%-60% in weeks. It all looked like a Dotcom Bust Part II.

These are all screaming buys for the long term here. Tech companies are now trading cheaper than toilet paper making ones.

As Wilber Wright, whose biography I am now reading, once said, “Eagles can’t soar to greatness in calm skies.” His picture now adorns every American commercial pilot’s license, including mine.

This is a week when my mother’s seven children, 22 grandchildren, and 11 great-grandchildren suddenly remember that they have a wealthy uncle, cousin, or brother with a mansion at Lake Tahoe.

So, the house is packed, all the sofa beds put to use. We even had to put a toddler to sleep in a bathtub on pillows.

A 28-pound bird made the ultimate sacrifice and was accompanied with mashed potatoes, gravy, stuffing, potato salad, and mince pie. Cooking a turkey here at 6,125 feet can be tricky where water boils only at 198 degrees Fahrenheit. You have to add 15% to the cooking time or you end up with medium-rare meat, not such a great idea with a turkey.

Topping it all was a fine Duckhorn Chardonnay which the White House served at state dinners during a former administration. I’m told the current president doesn’t drink.

I ate an entire pumpkin pie topped with whipped cream last night just to give my digestive system an early warning that some heavy lifting was on its way.

I am the oldest of seven of the most fractious and divided siblings on the planet, so attending these affairs is always a bit of an emotional and physical challenge.

I bet many of my readers are faced with the same dilemma, with mixed red state/blue state families, and they all have my sympathy. Hint: Don’t mention Bitcoin. Your Millennial guests will suddenly develop food poisoning, down 80% in a year.

My family ranges throughout the entire political spectrum, from far-right big oil to far-left pot legalization and transgender rights. For this first time in family history, we all voted for the same candidate in the last election in every one of three generations.

Hillary Clinton. Go figure!

Suffice it to say that we’ll be talking a lot about the only two safe subjects there are, sports and the weather. Go Niners! Hurray Giants! Will it snow?

We are all giving thanks that we weren’t roasted alive in a wildfire and prayed for the 1,000 missing who won’t be sitting down for Thanksgiving dinners this year. Most will never be found.

I learned from my brother who runs a trading desk at Goldman Sachs that the industry expects a recession in 2019. (GS) stock has been hammered because the had to refund $600 million in fees that were stolen from the Malaysian government.

Dodd-Frank and Glass Steagall are history, and interest rates are steadily rising like clockwork. Trading volumes are shrinking as the algorithms take over everything. Some 80% of all trading is now thought to be machine-driven.

He finally traded in his Bentley Turbo R for a new black high-performance Tesla Model X with the “ludicrous” mode. I take delivery of mine at the Fremont, CA factory next week. After six decades, sibling rivalry still lives. I cautioned him to keep an ample supply of airline airsick bags in the car. Good thing he got it before the subsidies expired at yearend!

It looks like it’s OK to be rich again.

My born-again Christian sister was appalled at the way the government separated children from parents at the border earlier this year. There are still several hundred lost.

My gay rights activist sister has been marching to protest current government policy on the issue. She was quick to point out that Colorado elected its first gay governor, although I doubt anyone there will notice since they are all stoned in the aftermath of marijuana legalization.

A third sister married to a very pleasant fellow in Big Oil (USO) will be making the long trip from Borneo where he is involved in offshore exploration. This is the guy who escaped from Libya a few years ago by the skin of his teeth.

In the meantime, his industry has been beset by waves of cost-cutting and forced early retirements triggered by the recent oil price crash. He says the US will have to build energy infrastructure for a decade before it can export what it is producing now in oil and natural gas.

So far, the local headhunters haven’t taken a trophy yet. And I mean real headhunters, not the recruiting kind.

Sister no. 4, who made a killing in commodities in Australia and then got out at the top seven years, thanks to a certain newsletter she reads, graced us with a rare visit.

Fortunately, she took my advice and converted all her winnings to greenbacks, thus avoiding the 30% hit the Aussie (FXA) has taken in recent years.

She’s now investing in cash flow positive Reno condos, again, thanks to the same newsletter.

My poor youngest sister, no. 5, took it on the nose in the subprime derivatives market during the 2008 crash. Fortunately, she followed my counsel to hang on to the securities instead of dumping everything at the bottom for pennies.

She is the only member of the family I was not able to convince to sell her house in 2005 to duck the coming real estate collapse because she thought the nirvana would last forever. At least that is what her broker told her.

Thanks to the seven-year-old real estate boom, she is now well above her cost, while serial refi’s have taken her cost of carry down by more than half.

My Arabic speaking nephew in Army Intelligence cashed out of the service and is now attending college on the newly revamped GI Bill.

He is majoring in math and computer science on my recommendation. My dad immensely benefited from the program after WWII, a poor, battle-scarred kid from Brooklyn attending USC. For the first time in 45 years, not a single family member is fighting in a foreign war. No gold stars here, only blue ones. If it can only last!

My oldest son is now in his 10th year as an English language professor at a government university in China. He spends his free time polishing up his Japanese, Russian, Korean, and Kazak, whatever that is.

At night, he trades the markets for his own account. Where do these kids get their interest in foreign languages anyway? Beats me. I was happy with seven.

He is planning on coming home soon. Things have recently gotten very uncomfortable for American residents of the Middle Kingdom.

It’s true that the apple doesn’t fall far from the tree.

My second son is now the head of SEO (search engine optimization) at a major Bay Area online company. Hint: you use their services every day. His tales of excess remind me of the most feverish days of the Dotcom boom. He says that technology is moving forward so fast that he can barely keep up.

His big score this year was winning a lottery to get a rent-controlled apartment in a prime San Francisco neighborhood. It’s all of 400 square feet but has a great view and allows dogs, a rarity indeed.

My oldest daughter took time out from her PhD program at the University of California to bear me my first grandchild, a boy. It seems all my kids are late bloomers. We are all looking forward to the first Dr. Thomas someday (we have an oversupply of Captains).

I am looking forward to my annual Scrabble tournament with all, paging my way through old family photo albums between turns. And yes, “Jo” is a word (a 19th century term for a young girl). So is “Qi.” The pinball machine is still broken from last Thanksgiving, or maybe it just has too many quarters stuffed in it.

Before dinner, we engaged in an old family tradition of chopping down some Christmas trees in the nearby Toiyabe National Forest on the Eastern shore of Lake Tahoe.

To keep it all legal I obtained the proper permits from the US Forest Service at $10 a pop.

There are only three more trading weeks left this year before we shut down for the Christmas holidays.

That is if I survive my relatives.

Good luck and good trading!
Captain John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader

 

November 1, 2018

Global Market Comments
November 1, 2018
Fiat Lux

Featured Trade:

(THE TERRIFYING CHART FORMATION THAT IS SETTING UP),
(SPY), (AMD), (MU), (AMZN), (NFLX),
(THE TECHNOLOGY NIGHTMARE COMING TO YOUR CITY)

October 29, 2018

Global Market Comments
October 29, 2018
Fiat Lux

Featured Trade:

(THE MARKET OUTLOOK FOR THE WEEK AHEAD, or THE COMING 2018 REPLAY),
(TLT), (SPY), (VIX), (VXX), (AAPL),
(FB), (AMZN), (NFLX), (TESLA),
(A COW-BASED ECONOMICS LESSON)