Global Market Comments
January 10, 2019
Fiat Lux
Featured Trade:
(JANUARY 9 BIWEEKLY STRATEGY WEBINAR Q&A),
(SPY), (UUP), (FXE), (FXY), (FXA), (AAPL), (GLD), (SLV), (FCX), (SOYB), (USO), (MU), (NVDA), (AMD), (TLT), (TBT), (BIIB), (TSLA)
(TESTIMONIAL)
Due to technical problems, I was unable to read your questions. However, I was able to get a print out after the fact.
Below please find subscribers’ Q&A for the Mad Hedge Fund Trader January 9 Global Strategy Webinar with my guest and co-host Bill Davis of the Mad Day Trader.
Q: Is the bottom in for stocks?
A: It is for six months to a year. A price earnings multiple at 14X seems to be the line in the sand. The Christmas Eve massacre, which took us down to a (SPY) of $230, was the final capitulation bottom of the entire down move. We may try a few more retests of the lows on bad tweets or data points. But from here on, you’re trying to buy the dip. That’s why I cut my vacation short a week and issued eight emergency trade alerts, five for Global Trading Dispatch and three for the tech letter. By the way, I hope you appreciate those trade alerts because I had to call back staff from vacations in four different countries to get them done. But it was worth it. We’ve had the strongest start to a New Year in a decade, up 5.75%. We made back all our Q4 losses in two days!
Q: Is the strong dollar play (UUP) over? Is it time to start buying Euro (FXE) and Yen (FXE)?
A: Yes, it is. The Fed flipping from hawk to dove sounds the death knell for the dollar. With the expansion of the yield spread between the buck and other currencies stopped dead in its tracks, a massive short covering rally will drive the currencies higher. That’s why I bought the Euro on Monday for the first time in more than a year (FXE). The Japanese yen where the biggest shorts has already moved too far, up 8%. That’s where hedge fund typically finance positions because yen yields have been at zero forever.
Q: How about the Aussie (FXA)? Do we have a shot now?
A: I think so. But the bigger driver with Aussie is the trade war with China. That said, I believe that will get resolved soon too unless Trump wants to run for reelection during a recession. The Aussie also has relatively high-interest rates so it should soar.
Q: Is the government shutdown starting to hurt the economy?
A: Yes, it is. Estimates on the damage the shutdown is doing range from 0.5% to 1% a week. That means at a minimum of 20-week shut down cuts 2019 GDP growth by 1%. If your assumption for growth this year is only 2%, that brings us perilously close to a recession. However, with the big stock market rally of the past week investors clearly believe the shutdown will be over in a week. Buy “Wall” stocks.
Q: What’s the biggest risk to the market now?
A: Companies announced great earnings in October and the stocks promptly collapsed. Q4 earnings start in a few weeks, except this time, the earnings will be smaller. The big one, Apple (AAPL) is reporting on January 29 and will be especially exciting since they already announced a major disappointment. If we get a repeat, you could get another meltdown in February just like we saw last year.
Q: Do you still like gold (GLD)?
A: I did in Q4 as a hedge for a collapsing stock market. Now that stocks are on fire again, I think gold and silver (SLV) will take a rest. You’re not going to get a serious move in gold until we see higher inflation and that is a while off.
Q: Is the bear market in commodities over?
A: I think so, with a flattening interest rate picture and a weakening dollar, the entire commodity complex is looking better. That includes copper (FCX), energy (USO), and the ags (SOYB). What do you buy in an expensive market? Cheap stuff, and all of these are at seven-year lows. I think people are ready to give paper assets a rest. All we need now for these to work is inflation. My cleaning lady just asked for a raise so there’s hope.
Q: The semiconductors have just had a good move. Is it time to get in?
A: You want to buy the semis, like Micron Technology (MU), NVIDIA (NVDA), and Advanced Micro Devices (AMD) when they’ve just had a BAD move. Market conditions have improved, but not to the extent you want to buy the most volatile stocks in the market. That said, if we get another crushing move in February you might dip your toe in with some semis on capitulation day. If you want to buy semis in this environment, you might have a gambling addiction.
Q: If the Fed has stopped raising rates, are you still bearish on the (TLT) and bullish on the (TBT)?
A: I think what governor Jay Powell’s dovish comments will do is put bonds in a six-month range, say 2.45%-3.0% in yield. All of my future bond alerts will trade around those levels. In the option world, we will be setting up a short strangle, betting that interest rates don’t move out of this range for a while. In that case, our two bond positions will be OK, with the nearest money one expiring in only seven trading days.
Q: Is it too late to get into biotech (BIIB)?
A: No, along with technology, biotech will be one of the two leading sectors in the entire market for the next ten years. However, me being an eternal cheapskate, I want to get in again on a decent dip. This is the industry that will cure cancer over the next decade and that will be worth a trillion dollars in profits.
Q: You’ve kept us out of Tesla (TSLA) for a couple of years. Is it time to go back in?
A: I think I would. If production can ramp up from 7,000 to 10,000 a week, the stock should do the same. The ten-year view for this stock is that it goes from today’s $330 to $2,500. That said, this is a notorious trading stock so it is very important to buy it on a dip. Wait for the next tweet from Elon Musk.
Q: If we enter a bear market in May 2019, what would be the appropriate long-term investments at that time?
A: Nothing beats cash, especially now that you are actually getting paid something decent. You can find cash equivalents now yielding all the way up to 4%. In a bear market, stocks either go down a lot, or a whole lot, so there is nothing worth keeping. The only reason to stay in is to avoid a monster tax bill (my cost on Apple is 25 cents) or you still work for the company.
Mad Hedge Technology Letter
January 3, 2019
Fiat Lux
Featured Trade:
(HOW TO TAKE OVER THE WORLD),
(SFTBY), (BABA), (NVDA)
The wild west of the data wars is spawning into an all-out, gunslinging shoot-out with a winner-takes-all mentality.
This slugfest is reminiscent of the unregulated 19th-century American oil barons whose clout and complete control of the supply of oil fueled the industrial revolution that drove America's economy to the top of the global food chain.
Yes, data has become the oil of the 21st century. It is the oxygen of the next leg of the Internet revolution.
And there is one man moving early to stake out the premium real estate of our futures: SoftBank's Masayoshi Son.
His $100 billion SoftBank Vision Fund is not only creating waves in Silicon Valley but tidal waves.
Many countries, such as Iran, Saudi Arabia, and Russia, still rely on petroleum for the lion's share of government revenues. Saudi Arabia is attempting to wean themselves from the reliance on oil, but teething pains are sprouting up everywhere.
The choreographed killing of former Saudi Arabian dissident Jamal Khashoggi at a Saudi Arabian Embassy in Turkey will have many unintended consequences to the future economy further delaying the supposed pivot to a legitimate knowledge economy.
Oil prices crashing offers less financial support to make this pivot even possible.
Even though oil is still integral to the growth of the global economy, there is a new sheriff in town: big data.
Cut it up any way you want, data is simply information, the "zeros" and "ones" that make up the digital world. The information that commands mouthwatering premiums these days can be unraveled by computers.
Computer-deciphered data can show behavioral and consumer trends in stark daylight, helping companies ferret out business strategies that are proving immensely powerful.
There is an exponential hockey stick effect going on here. As the quantity of data accumulates, the more valuable it becomes.
The types of data being collected are personal data, transactional data, web data, and sensor data used for IoT (Internet of Things) products.
Who is the major player vacuuming up this data?
Masayoshi Son, the CEO of SoftBank (SFTBY), is an ethnic Korean who grew up in a small village in Japan. He transferred to Serramonte High School on the San Francisco Peninsula as a bustling youth and graduated in three weeks.
He was and still is that brilliant.
Son ventured on to UC Berkeley majoring in economics and computer science. He is one of the most dynamic people in the world and has amassed personal wealth of around $25 billion.
A few of his brilliant preemptive strikes were seed-investing in Yahoo, creating Yahoo Japan, and a $20 million for a stake in Alibaba (BABA) in 1999. These investments increased more than 100-fold in value.
Son is on a mission to own or control assets that are the linchpin to global growth nourished by Artificial Intelligence in selective industries such as transportation, food, work, medicine, and finance.
The solid anchor that ties all these firms together is the massive hordes of harvested data which are central to directing how future automated robots and machines perform.
His goal envisions the construction of responsive robots that will emerge as the cash cow in 2045. The construction, utilization, and high performance of these machines will be the key to his vision.
Instead of splurging for premium human data, investors will be competing for the best performing robots and the data derived from them. Accurate human data will provide the springboard to the machine data these robots will generate.
After the first generation of robots endows us with their first batch of data, all human data will be irrelevant. Human information is the test case on which robots are founded.
Once the first cohort of robot data comes to market, the second generation of robots will be derived off the first generation of robots.
Humans and the data generated from us will become irrelevant.
Once you marry the treasure trove of data with A.I., the results will enter the realm of today's science fiction. Imagine being the first CEO to bring functional robots to mass market and how valuable that first tranche of robot data would represent.
Priceless.
Son is positioning himself to organically engineer the highest-grade robots catalyzing the next gap up in global competition.
This year, Son is on a global treasure hunt to meld together the most precise "big data" he requires to build his robot squadron that will take over the world.
The fight these days is acquiring the oxygen to power these non-human contraptions. Without pure oxygen, i.e. massive amounts of data, engineers will create faulty, error-prone robots that underperform and are less valuable.
Looking at the amalgam of companies in which Son has bet on, it is difficult to decipher any rhyme or reason. That is until you find the commonality of big data.
Son invested $200 million in "Plenty" in July 2017, a company developing indoor farms. If indoor farm data is not diverse enough, then how about the $300 million he showered on the San Francisco dog-walking app called "Wag."
The biggest holding in the SoftBank Vision Fund is Uber. For those without an Internet connection, Uber is ubiquitously known as a ride-sharing company that shuttles passengers from spot A to spot B.
Sweetening the deal was a substantial discount the Vision Fund received on a private placement of Uber shares. Uber is now worth about $70 billion and may someday become a FANG in its own right.
Supplementing this transaction is the custom online map app Mapbox, founded as a competitor to Google Maps. Some of Mapbox's partners include Snapchat, Lonely Planet, and The Weather Channel.
Vision Fund's second largest position is ARM Holdings which is an English semiconductor chip company that has carved out a large segment of the Android and laptop market.
It produces simple CPUs (central processing units) and much more advanced GPUs (graphics processing units) that are placed in smartphones, TVs, tablets, and computers.
Son has shelled out $8.2 billion through the SoftBank Vision Fund already, and the remaining 75% stake is owned by parent company SoftBank Group. ARM is one of the shining beacons of European tech and SoftBank has pegged its future to its success.
There are even whispers of a second $100 billion vision fund lurking around the corner.
Unsurprisingly, Nvidia (NVDA) is the third-largest weighting, and the $5 billion SoftBank investment into Nvidia (NVDA) represents a 4.9% stake in the company. The Nvidia commitment is logical considering ARM licenses its chip designs to Nvidia.
As autonomous vehicles will be one of the first benefactors from the cross-pollination between big data and automation, these investments completely justify Son's long-term vision.
Son has also snapped up other ride-sharing entities such as Didi Chuxing in China, Ola in India, Grab in Southeast Asia, and 99 in Brazil.
Some 31% of the global population is without Internet connectivity. Thus, Son bought OneWeb which pioneers low-cost, high-quality satellites striving to grant Internet access for the people still without access. This maneuver will surely see his net data load increase.
In many of the Mad Hedge Technology Letters, we often offer readers the creme de la creme of public stock symbols, but this time it is different.
First, the major holdings in the SoftBank vision fund, aside from Nvidia, are privately held companies that do not trade on any stock market.
However, it is very important to watch what he buys as it gives insights into the best-performing, fastest-growing sub-sectors of technology and a comprehensive barometer or tech risk appetite from higher echelon VCs.
Or you could just buy SoftBank itself whose shares have doubled over the past two years.
Giving further color to the backstory, not all is doom and gloom for Saudi Arabia as they have invested heavily into the Vision Fund giving Son a key source of financing.
Son’s relationship with the Saudis is important to spearheading a 2nd Vision Fund which he hopes to deploy shortly.
Readers must not forget that 40% of the $100 billion constitutes debt and must be serviced forcing Son to supercharge the growth of the companies he purchases to maintenance his monthly debt bills.
Son won't just flip these companies for a 30% or 50% profit. Tenfold, or hundred-fold gains are the order of the day and that is exactly what he has been successful at.
In reality, Son's ultimate goal is to leach out the future aggregate data spewing from his underlying portfolio and cross-pollinate it with A.I. and automation to revolutionize the world while becoming the richest man in the world.
As 5G is literally on our doorstep, Son, large tech firms, China, and the rest of the VC universe are jockeying with each other and staunchly positioning themselves accordingly for the next 30, 40 and 50 years.
Welcome to the future and good luck.
Global Market Comments
December 17, 2018
Fiat Lux
Featured Trade:
(THE MARKET OUTLOOK FOR THE WEEK AHEAD, or THERE’S NO SANTA CLAUS IN CHINA)
($INDU), (SPY), (TLT), (AAPL), (AMZN), (NVDA), (PYPL), (NFLX)
On Friday, five serious hedge fund managers separately called me out of the blue and all had the same thing to say. They had never seen the market so negative before in the wake of the worst quarter in seven years. Therefore, it had to be a “BUY”.
I, on the other hand, am a little more cautious. I have four 10% positions left that expire on Friday, in four trading days, and on that day I am going 100% into cash. At that point, I will be up 3.5% for the month of December, up 31.34% on the year, and will have generated positive return for one of the worst quarters in market history.
I’m therefore going to call it a win and head for the High Sierras for a well-earned Christmas vacation. After that, I am going to wait for the market to tell me what to do. If it collapses, I’ll buy it. If it rockets, I’ll sell short. And I’ll tell you why.
These are not the trading conditions you would expect when the economy is humming along at a 2.8% annual rate, unemployment is running at a half-century low, and earnings are growing a 26% year on year. You can’t find a parking spot in a shopping mall anywhere.
However, the lead stocks like Apple (AAPL), Amazon (AMZN), and Netflix (NFLX) have plunged by 30%-60%. Price earnings multiples dropped by a stunning 27.5% from 20X to 14.5X in a mere ten weeks. Half of the S&P 500 (SPY) is in a bear market, although the index itself isn’t there yet. I would rather be buying markets on their way up than to try and catch a falling knife.
There is only one catalyst for that apparent yawning contradiction: The President of the United States.
Trump has created a global trade war solely on his own authority. Only he can end it. As a result, asset classes of every description are beset with uncertainty, confusion, and doubt about the future. Analysts are shaving 2019 growth forecasts as fast as they can, businesses are postponing capital spending plans, and investors are running for the sidelines in droves. Business confidence is falling like a rock
To paraphrase a saying they used to teach you in Marine Corps flight school, “It’s better to be in cash wishing you were fully invested than to be fully invested wishing you were in cash.”
The Chinese have absolutely no interest in caving into Trump’s wishes. They read the New York Times, see the midterm election result and the opinion polls, and are willing to bet that they can get a much better deal from a future president in two years.
I have been dealing personally with both Trump and the Chinese government for four decades. The Middle Kingdom measures history in Millenia. The president lives from tweet to tweet. The Chinese government can take pain by simply ordering its people to take it. We have elections every two years with immediate consequences.
The best we can hope for is that the president folds, declares victory, and then retreats from his personal war. This can happen at any time, or it may not happen at all. No one has an advantage in predicting what will happen with any certainty. Not even the president knows what he is going to do from minute to minute.
It is the possibility of trade peace at any time that has kept me out of the short side of the stock market in this severe downturn. That robs a real hedge fund manager of half his potential income. Trade peace could be worth an instant rally of 10% in the stock market. Even a lesser move, like the firing of trade advisor Peter Navarro, would accomplish the same.
The market was long overdue for a correction like the one we have just had. Investors were getting overconfident, cocky, and excessively leveraged. In October, we really needed the tide to go out to see who was swimming without a swimsuit. But if the tide goes out too far, we will all appear naked.
Thanks to some very artful trading, my year to date return recovered to +27.54% boosting my trailing one-year return back up to 27.54%. I covered an aggressive short position in the bond market (TLT) for a welcome 14.4% profit. I also took profits with an instant winner in PayPal (PYPL). On the debit side, I stopped out of an Apple call spread for a minimal loss.
December is showing a very modest loss at -0.26%. The market has become virtually untradeable now, with tweets and China rumors roiling markets for 500 points at a pop. And this is against a Dow Average that is down a miserable -2.8% so far in 2018. I should have listened to my mother when she wanted me to become a doctor.
My nine-year return nudged up to +304.01. The average annualized return revived to +33.77.
The upcoming week is all about housing data, with the big focus on the Fed’s interest rate hike on Wednesday.
Monday, December 17 at 10:00 AM EST, the November Homebuilders Index is out.
On Tuesday, December 18 at 8:30 AM, November Housing Starts are published.
On Wednesday, December 19 at 10:00 AM EST, November Existing Home Sales are released.
At 10:30 AM EST the Energy Information Administration announces oil inventory figures with its Petroleum Status Report.
At 2:00 PM the Federal Reserve Open Market Committee announces a 25 basis point rise in interest rates, taking the overnight rate to 2.25% to 2.50%. An important press conference with governor Jay Powell follows.
Thursday, December 20 at 8:30 AM EST, we get Weekly Jobless Claims.
On Friday, December 21, at 8:30 AM EST, we learn the latest revision to Q3 GDP which now stands at 2.8%.
The Baker-Hughes Rig Count follows at 1:00 PM.
As for me, I’ll be battling snow storms driving up to Lake Tahoe where I’ll be camping out for the next two weeks. Mistletoe, eggnog, and endless games of Monopoly and Scrabble await me.
Good luck and good trading!
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Mad Hedge Technology Letter
December 4, 2018
Fiat Lux
Featured Trade:
(THE CHIP STOCKS HAVE BOTTOMED)
(NVDA), (AMD), (INTC)
Now that the trade war has officially been put on ice, two short-term trades to scoop up out there for the taking would be chip leaders Advanced Micro Devices (AMD) and Nvidia (NVDA).
Even though I am still bearish on the chip sector as a whole, the mini rapprochement signals a much-needed reprieve to China-sensitive stocks that have been beaten down for most of the year.
The timing is favorable now to jump into some of the avant-garde chip stocks and succinctly two companies that have captured the imagination of the global gaming revolution by constructing the critical GPUs needed to display the mouth-watering graphics that appear life-like.
They are two dominators that have cornered the GPU market and don’t apologize for it.
Even if next year fails to pinpoint a comprehensive détente, China-based supply chains will have more time to make epochal decisions to whether risk the full brunt of a future multilateral spat or mosey on over to greener pastures to insulate themselves from tariff and political fallout.
Most of American tech supply chains are in China now, but that doesn’t mean that can’t change.
Either way, ratcheting down the tone of the jawboning will help chip stocks and the GPU mainstay firms should finish out the year resolutely.
After building an abnormally high amount of inventory due to last year's bitcoin euphoria, Nvidia got ahead of itself drowning in excess GPU units with evaporating crypto mining demand from the bitcoin crash.
It was never imagined that the crypto phenomenon could incite a build-up of inventory channels to the levels that started to erode pricing, but when you consider that two companies and not one were pumping out the GPU units, they simply overdid it.
Conveniently enough, management on both sides blamed each other.
In any case, I believe the spike in inventory says more to the crash and burn of bitcoin pricing than having something to do with these two solidly run companies.
Bitcoin revenue stream only accounted for 10% of revenue at last year’s peak of crypto ecstasy.
The Mad Hedge Technology Letter has steered wide and clear of the crypto phenomenon because even though the blockchain technology is indeed intriguing, there are probably a few more crash and burn scenarios to unfold before it becomes legitimately accepted in mainstream finance.
In any effect, GPU pricing has started to turn the corner up 15% from the September lows, and for the first time since earlier in the year, inventory levels are starting to flush itself out.
The “crypto hangover” headlines roughed up shares of the duopolists but now the light is at the end of the tunnel, and combined with the ceasefire in Washington, has created a positive platform for these two favorites to trade into yearend.
The record-breaking sales volume from Black Friday and Cyber Monday is a minor boost giving credence to the inventory channels clear-up.
Jubilant shoppers were gobbling up GPUs to dish out to gamer friends and family.
At the annual Siggraph conference in Vancouver, Canada, CEO of Nvidia Jensen Huang said, “Turing is Nvidia’s most important innovation in computer graphics in more than a decade.”
The development of real-time ray tracing is the “holy grail” of the GPU industry.
The Turing products render graphics six times faster than their predecessor Pascal-based chip.
Nvidia has rolled out three new graphics cards based on this technology.
In fact, the Turing T4 Cloud GPU has been a massive success in the data center space.
Not only is gaming benefitting from these high-end chips, they can be slotted around offering a diverse set of functionalities.
Ian Buck, Vice President and General Manager of Accelerated Computing at Nvidia said, “We have never before seen such rapid adoption of a data center processor.”
Nvidia’s T4 offers the modern cloud of today the performance and efficiency needed for compute-intensive workloads at scale.
The two companies continue to manufacture top-level GPUs that the competition cannot touch.
The headwinds facing these two titans are of a temporary basis and will eventually dry up.
Both missed on earnings and the stocks sold off badly.
The one-off short-term headwinds will quickly shore up.
The lucky opportunity for investors to get into a best of breed at a cheaper price does not come around too often.
If the near-term fluctuations provide too intense, both companies are great long-term buy and hold stocks.
The bad news has been mostly baked into the pie at this point.
The reset in expectations should factor in the evolving inventory situation and the crypto headwinds.
I fully expect both companies to convincingly beat earnings on the top and bottom line next quarter.
Core gaming demand is robust and by next earnings, the companies will be back to their normal selves – systematically crushing earnings expectations.
This one-off in performance was a curveball, and AMD is a company that I am bullish on with AMD snatching away market share from Intel (INTC).
German’s large tech e-tailer Mindfactory published a survey showing AMD doubling the number of CPUs sold leaving Intel in the dust in November.
Intel’s CPU sales are nosediving quickly because of AMD’s innovative designs and reliable production performance.
Intel has essentially gifted a huge swath of the CPU market to AMD, and AMD has embraced the change and is running with it.
I expect AMD to turn the screws next year on Intel and hoover up more of the CPU market.
Add in that 50% of AMD’s revenue comes from newly launched products and then you can start to cook up why these companies are ahead of the game.
They concoct best in show products leverage with groundbreaking technology and scale up these state-of-the-art offerings to the strongest segments of the chip industry and presto!
You have a magical recipe of success.
At the Mad Hedge Lake Tahoe Conference at the end of October, AMD plummeted to around $17 and I convincingly proclaimed this stock a buy without hesitation.
The stock is up over 25% since then to almost $24, and I believe this stock is in it for the long haul.
Global Market Comments
November 23, 2018
Fiat Lux
Featured Trade:
(SURVIVING THANKSGIVING)
(SPY), (TLT), (TBT), (GLD), (FXE), (FXY), (USO), (VIX), (VXX), (NVDA), (NFLX), (AMZN)
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
