(PANW) Archives - Page 9 of 10 - Mad Hedge Fund Trader

Take a 2020 Rain Check with Symantec

If you said I am going to the well too many times with this enterprise software theme, I would say you are out of your mind.

Next up is Symantec Corp. (SYMC) who offers global cybersecurity products, services, and solutions, and will be a primary beneficiary of the acceleration of network security products that expanded 12.6% YOY in 2018 and a secondary beneficiary to the migration to enterprise software.

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The uptick in gorging cybersecurity products helps reflect the strongest industry metrics since analytics started tracking cybersecurity figures.

As more corporations take the leap of faith and splurge on data centers to house digital secrets, cloud service providers will store corporate data on these massive server farms and perimeter protection software is needed to guard against trojan horses and other malware.

This development has led to a vibrantly healthy market for firewall products, a traditional cybersecurity tool applied to block access to portions of a corporate network from the outside internet.

Firewall products weren’t shy registering 16.3% YOY growth to $2.4 billion in Q4 2018.

Advanced threat protection products used to find more sophisticated and modern offshoots of malicious software exploded to $416 million in Q4 2018, up 19.1% YOY.

Where does it stop?

Nobody knows, but the internet is becoming more of a chaotic free-for-all, and corporations existing for the sheer purpose of maximizing shareholder value will need to dole out an extra layer or two of digital protection.

Remember executive careers can be ruined from corporate cyberespionage these days and being the guy who lets the North Korean cyber army through the front door to fleece proprietary data isn’t a great pitch for a future executive gig.

The thorny Huawei issue has also heightened awareness of this sensitivity of security issues demonstrating how American tech prowess can be looted in a zero-sum cross-border game.

Internet users have also experienced a sudden balkanization of the web by totalitarian governments ready to weaponize the internet where they see fit while clamping down on freedom of expression on expressions that aren’t favorable to the interests above.

The orange alert climate has forced corporations to rush into cybersecurity products and my two favorite companies in this sphere are Palo Alto Networks, Inc. (PANW) and Fortinet, Inc. (FTNT).

I cannot say that Symantec is a better company than these two, it wouldn’t be true because their model doesn’t have the super growth trajectory when you analyze them head to head.

But this year should be an improvement on last year and I see room to the upside.

Every important metric will improve, aided by a return to better-calibrated execution, stabilization in business mix, and the benefit of revenue already on the balance sheet.

Operating margins slightly beat guidance with a 32% upswing last quarter and strong cash flow from operations of $377 million in the third quarter meant the company is more profitable.

Enterprise Security chipped in with revenue of $616 million, $31 million above the high end of the guidance range, and after a turbulent first half of 2018, Enterprise Security is back to organic growth of 3%.

And the main reason this company won’t be a massive winner is because of the lack of top-line growth indicating expansion in fiscal 2019 of only 1.5% in total revenue comprising of relatively flat revenue for Enterprise Security and 3% growth for the Consumer Digital Safety division.

Not good enough in the tech world of today.

Remember that the Consumer Digital Safety division contributes 49% to the top line while Enterprise Security only makes up 15%.

I believe this amounts to serious weakness in their business model because it should be the other way around to take advantage of the fast-growing enterprise business market and the even better margins.

The sluggish growth has hit shares with the chart flat as a pancake if you string it out the past 5 years with undulation in between.

The top line growth from 2017 to 2018, went from $4.02B to $4.83B and was a revelation, yet management has begged for more time with its prognosis of flat revenue for 2019.

Symantec will compensate for the lack of revenue growth with slightly better profitability maintaining a 30% operating margin, and predicting cash flow from operations for fiscal year 2019 to be in the range of $1.25B to $1.35B, a nice bump from the total cash flows from operations of $950 million in fiscal year 2018.

The catalyst to share appreciation is hidden in between the lines with management hyping up 2020 as the period when Symantec gets its mojo back with mid-single digit growth, with the Enterprise Security segment particularly benefiting from organic revenue expanding in the mid to high single digits from 2019.

A roll-off from existing contract liabilities will boost the Consumer Digital Safety segment but will not demonstrate any meaningful organic revenue growth projected to be unchanged at the low to mid-single digits YOY.

This sets up nicely for 2020 – the company expects a boost in operating margins to mid-30s and expected EPS growth in the low double digits with cash flow from operations benefitting from the 2019 restructuring, transition and transformation effort.

In short, they had a poor 2018 and Symantec’s management is telling investors to allocate downtime to fix the firm - growth will be missing this year, but they will be more profitable than last year, albeit with flat revenue.

The jury will be out in 2020 which is when they promised to have all their ducks in a row.

Even though they aren’t promising double-digit revenue growth in 2020, the high single-digit growth could see shares slowly grind up for the rest of this year.

This is another example of how legacy companies get stuck digging themselves out of a sinkhole before they can hyper-energize their profit model.

They are still in a holding pattern and I am neutral to slightly bullish on Symantec shares.

July 24, 2018

Tech Letter

Mad Hedge Technology Letter
July 24, 2018
Fiat Lux

Featured Trade:
(SECURE THE GATES),
(FTNT), (PANW)

Secure the Gates

Tech Letter

Does it give you the creepy-crawlies to know that while you are meandering around on your favorite website, nefarious forces are preying on your every click?

An entire industry is devoted to defending your needs, to ensure you can roam and frolic aimlessly on the World Wide Web.

The global cybersecurity industry aimed at protecting the end user is on pace to mushroom, surpassing $180 billion in revenue by 2023, a monstrous uptick in business activity from the $114 billion in 2017.

Recent political sable rattling and aggressive posturing underscores the seriousness of defending proprietary trade secrets and vital data, which are propelling these businesses to outperform.

The multitude of security breaches has fueled a security spending binge in 95% of firms.

And this is just the beginning.

Hyper-accelerating technology has augmented big data as the new oil, and this data is useless if hackers can infiltrate a system leaving it a shell of its former self, then selling it on to the highest bidder on the dark web.

Corporations are furiously spending on the newest cutting-edge fortifications.

CEOs have awoken and realize getting nicked of a precarious treasure trove of data is a sackable offense.

The trend in global cybersecurity spending augurs well for Fortinet (FTNT), a company I have touted in the past. To read my recommendation for this stock click here. Please note you must be logged in to read the article.

I urged readers to dip their toe in this stock when shares were trading at $54 in the middle of March.

The ensuing price action has been nothing short of spectacular with frequent antagonistic macroeconomic headlines boosting the stock.

Fortinet is trading at $68 today, levitating over 20% since I recommended it barely four months ago.

Fortinet has the pulse on the cybersecurity industry and provided some insight to the industry combat zone from its 30,000-foot perch as one of the leading lights of the industry.

This is what it deals with on a daily basis.

Intrusion methods are constantly transforming to keep the cybersecurity forces off-kilter.

The game of cat and mouse has become a zero-sum proposition deploying massive scale. This newfound acceleration is forcing cybersecurity companies to up their game.

The latest data from Fortinet illustrates cybercriminals malware usage has crept up in sophistication relying on formulating modern zero-day vulnerabilities, better understood as attacks exploiting previously unknown security vulnerabilities, operating with lighting quick speed and mammoth scale.

Unique exploit detections surged by 12%, and from these intrusions, 73% of firms were materially damaged.

These aren't your father's cybercriminals.

The newfound mainstream popularity of cryptocurrency has caused a new wave of fiat money to funnel through Internet checkpoints into their crypto brokerage accounts.

This fashionable asset class for Millennials has coincided with a major increase in "cryptojacking," the theft of crypto assets.

The aforementioned malware is becoming uber complex undetectable to the unexperienced cybersecurity professional.

The migration into cryptomining has given cybercriminals another platform to strike it digitally rich.

The activity of cryptomining malware has shot up doubling the amount of malware permeating through the system.

Cryptomining malware has demonstrated a vast array of variations of malware. This brand of stealthier, fileless malware deploys infected, undetectable code into browsers.

Hackers aren't just targeting one type of cryptocurrency. They are going after the alternative currencies such as Dash and Monero that knock about in the crypto asset ecosphere.

Monero is a favorite of the North Korean state hacker team.

Hackers are employing a trial and error strategy, aggregating the industries' best practices to mold into an even more deadly weapon.

These dark forces aren't just spraying around attacks mindlessly. To cause maximum damage, hackers are growingly deploying their venom in a targeted fashion, pinpointing the exact weakness in a system, providing a timely entry point into a gateway allowing them to open a Pandora's box when inside.

Worldwide events are magnets to this bombardment of attacks, and these hackers are routinely carrying out diligent reconnaissance work to lay the groundwork for a laser-like, designed attack.

These digital Ocean's 11 are hard to stop unless you call on Fortinet.

The scope of damage is increasing over time with hackers directing malware to disperse laterally throughout a network before triggering the most vicious phase of the attack.

The Olympic Destroyer malware and the SamSam ransomware rearing its ugly head in Q1 2018, demonstrate how cybercriminals fused together a designer attack with a destructive payload for devastating results.

Some examples of the rapid escalation in expertise are GandCrab ransomware that turned up in January. It was the first ransomware demanding Dash cryptocurrency as a payment.

Complicating the matter, attacks aren't just pointed at one direction. A multifaceted pronged attack has proved effective for expert hackers and mobile is becoming a habitual point of entry.

Hackers would target routers or Internet hardware exploiting these soft spots contributing to 21% of corporations being blindsided by malware, a sharp increase from 7%.

The explosion of IoT devices such as Amazon Echo and Apple's HomePod will be a battleground arena for this industry to stop probing hackers from extracting the treasure trove of data.

Unpatched software and hardware are also ripe for penetration.

Microsoft ranked as the most targeted firm. The other avenue for attacks mainly fell to routers that garnered a substantial portion of malware volume.

Botnets are described as a network of private computers infected with malware while controlled without the owners' knowledge.

Logically, the longer the botnets are in the system, the more havoc they cause.

Same-day detection and removal of botnets came in at 58.5% of infections.

Unfortunately, it took two days to get rid of 17.6% and three days to oust 7.%.

Further down the time horizon, it took more than a week to dispose of 5%.

One glaring example was the Andromeda botnet removed in Q4 2017, but it was still running riot prominently in Q1 2018.

An elixir to solve the problem is not always perfect, but Fortinet manages to successfully smother potential carnage leading to a slew of massive contracts.

All of these aforenoted dangers are on what Fortinet clamps down.

It does its best to put a muzzle on the hideous activity. Then the review and enhancement of products will only help them generate a flurry of sales going forward.

The cybersecurity sector is relatively new and swiftly evolving to the forefront of corporate governance.

The speed of change in technology is outstripping the development of academic qualifications for cybersecurity experts.

Consequently, an acute scarcity of qualified technicians could stifle the effort to combat these wicked forces. Reports suggest a substantial number of middle-tier specialist positions cannot be found causing strain further down the pecking order.

Fortinet uses the most modern A.I. (artificial intelligence) algorithms to address these hyper-critical security threats, whether in networks, applications, cloud, or mobile environments.

The company is the industry leader along with Palo Alto Networks Inc, (PANW), hawking premium firewall technology, end-point security software, and cloud protection solutions.

They have been consistently growing the top line while expanding their hybrid-solutions product lineup.

Just four years ago Fortinet took home $770 million of revenue Fast-forward to 2017, and Fortinet ended the year with $1.49 billion in revenue.

Fortinet continues to hit all-time highs as its stock is on fire.

Its total addressable market maintains robust, and Fortinet is well placed to reap the benefits moving forward.

Its revenue mix is slowly changing from a reliance on hardware to a pivot to software and services boding well for the future.

Gross margins are healthy ticking higher to 77% in Q1 2018, a small increase of 2% YOY.

Revenues are set to blow past $3 billion by 2022, and Fortinet is an all-around great company.

Shares have run too far too fast. Wait for shares to drop anywhere close to the 50-day moving average to put new money to work in this high-caliber cybersecurity stock.

________________________________________________________________________________________________

Quote of the Day

"A company shouldn't get addicted to being shiny, because shiny doesn't last," - said Amazon founder and CEO Jeff Bezos.

July 20, 2018

Tech Letter

Mad Hedge Technology Letter
July 20, 2018
Fiat Lux

Featured Trade:
(A SELLERS' MARKET)
(CSCO), (MSCC), (GOOGL), (MCHP), (SWKS), (JNPR), (AMAT),
(PANW), (UBER), (AMZN), (AVGO), (QCOM), (CA), (CRM)

A Sellers' Market

Tech Letter

I bet you are wondering where all that money from the tax cuts is going.

Believe it or not, the No. 1 destination of this new windfall is technology companies, not just the stocks, but entire companies.

In fact, the takeover boom in Silicon Valley has already started, and it is rapidly accelerating.

The only logical conclusion in 2018 is that tech firms are about to get a lot more expensive. I'll explain exactly why.

The corporate cash glut is pushing up prices for unrealized M&A activity in 2018. U.S. firms accumulated an overseas treasure trove of around $2.6 trillion and the capital is spilling back into the States with a herd-type mentality.

I have chewed the fat with many CEOs about their cash pile road map. All mirrored each other to a T: strategic acquisition and share buybacks, period. The acquisition effect will be felt through all channels of the tech arterial system in 2018.

As the global race to acquire the best next generation technology heats up, domestic mergers could pierce the 400-deal threshold after a lukewarm 2017.

Spend or die.

Apple alone boomeranged back more than $250 billion with hopes of selective mergers and share buybacks. Cisco (CSCO), Microsoft (MSFT), and Google (GOOGL) were also in the running for most cash repatriated.

The tech behemoths are eager to make transformative injections into security, big data, semiconductor chips, and SaaS (service as a software) among others.

Hint: You want to own stocks in all of these areas.

Even non-traditional tech companies are getting in on the act with Walmart concentrating the heart of its strategic future on the pivot to technology.

Walk into your nearest Walmart every few months.

You'll notice major changes and not for decorative measures.

U-turns from legacy technology firms hawking desktop computers and HDD's (Hard Disk Drive) suddenly realize they are behind the eight ball.

M&A activity will naturally tilt toward firms dabbling in earlier-stage software and 5G supported technology. This flourishing trend will reshape autonomous vehicles and IoT (Internet of Things) products.

The dilemma in waiting to splash on a potential new expansion initiative is that the premium grows with the passage of time. Time is money.

It's a sellers' market and the sellers know this wholeheartedly.

Unleashing the M&A beast comes amid a seismic shift of rapid consolidation in the semiconductor sector. Cut costs to compete now or get crushed under the weight of other rivals that do. Ruthless rules of the game cause ruthless executive decisions.

The best way to cut costs is with immense scale to offer nice shortcuts in the cost structure. Buying another company and using each other's dynamism to find a cheaper way to operate is what Microchip Technology's (MCHP) culling of Microsemi Corporation (MSCC) in a deal worth $10bn was about.

Microsemi, based in Aliso Viejo, California, focuses on manufacturing chips for aerospace, military, and communications equipment.

Microchip's focal point is industrial, automobile and IoT products.

Included in the party bag is a built-in $1.8 billion annual revenue stream and more than $300 million of dynamic synergies set to take effect within three years. The bonus from this package is the ability to cross-sell chips into unique end markets opposed to selling from scratch.

Each business hyper-targets different segments of the chip industry and is highly complementary.

Benefits of a relatively robust credit market create an environment ripe for mergers. Some 57% of tech management questioned intend to go on the prowl for marquee pieces to add to their arsenal.

Then we have chip company Broadcom (AVGO) led by CEO Hock Tan, whose entire strategy is based on M&A and minimal capital spending.

His low-quality strategy of buying market share will ultimately fritter out. His lack of capital spending was also a salient reason for blocking Broadcom's purchase of Qualcomm (QCOM), which if stripped of its capital spending budget would have fallen behind China's Huawei to develop critical 5G infrastructure.

Tan's strategy flies in the face of the most powerful tech companies that are using M&A to enhance their products expanding their halo effect around the world.

Gutting innovation and skimming profits off the top is an entirely self-serving, myopic strategy to the detriment of long-term shareholders.

Investors punished Broadcom for it's latest investment of CA Technologies (CA) for $18.9 billion, even though this pickup signals a different tack.

CA Technologies is a leading provider of information technology (IT) management software, which suggests a belated move into the enterprise software market dominated by incumbents such as Salesforce (CRM).

Better late than never.

No need to mince words here as 2018 won't see any discounts of any sort. Nimble buyers should prepare for price wars as the new normal.

Not only are the plain vanilla big cap tech firms dicing up ways to enter new markets, alternative funds are looking to splash the cash, too.

Sovereign wealth funds and private equity firms are ambitiously circling around like vultures above waiting for the prey to show itself.

Private equity firms dove head first into the M&A circus already tripling output for tech firms.

Highlighting the synchronized show of force is none other than Travis Kalanick, the infamous founder of Uber. He christened his own venture capital fund that hopes to invest in e-commerce, real estate, and companies located in China and India.

The new fund is called 10100 and is backed by his own money. All this is possible because of SoftBank CEO Masayoshi Son's investment in Uber, which netted Kalanick a cool $1.4 billion representing Kalanick's 30% stake in Uber.

It is undeniable that valuations are exorbitant, but all data and chip related companies are selling for huge premiums. The premium will only increase as the applications of 5G, A.I., autonomous cars start to pervade deeper into the mainstream economy.

Adding fuel to the fire is the corporate tax cut. The lower tax rate will rotate more cash into M&A instead of Washington's tax coffers enhancing the ability for companies to stump up for a higher bill. Sellers know firms are bloated with cash and position themselves accordingly.

Highlighting the challenges buyers face in a sellers' market is Microsemi Corp.'s (MSCC) purchase of PMC-Sierra Inc. Even though PMC-Sierra had been looking to get in bed with Skyworks Solutions Inc. (SWKS) just before the MSCC merger, PMC-Sierra reneged on the acquisition after (SWKS) refused to bump up its original offer.

(SWKS) manufactures radio frequency semiconductors facilitating communication among smartphones, tablets and wireless networks found in iPhones and iPads.

(SWKS) is a prime takeover target for Apple. (SWKS) estimates to have the highest EPS growth over the next three to five years for companies not already participating in M&A. Apple (AAPL) could briskly mold this piece into its supply chain. Directly manufacturing chips would be a huge boon for Apple in a chip market in short supply.

In 2013, Japan's Tokyo Electron and Applied Materials (AMAT) angled to become one company called Eteris. This maneuver would have created the world's largest supplier of semiconductor processing equipment.

After two years of regulatory review, the merger was in violation of anti-trust concerns according to the United States. (AMAT), headquartered in Santa Clara, California, is a premium target as equipment is critical to manufacturing semiconductor chips. (AMAT) competes directly with Lam Research (LRCX), which is an absolute gem of a company.

Juniper Networks (JNPR) sells the third-most routers and switches used by ISP's (Internet Service Providers). It is also No. 2 in core routers with a 25% market share. Additionally, (JNPR) has a 24.8% market share of the firewall market.

In 2014, Palo Alto Networks (PANW), another takeover target focusing on cybersecurity, paid a $175 million settlement fee for allegedly infringing (JNPR)'s application firewall patents.

In data center security applications, (JNPR) routinely plays second fiddle to Cisco Systems (CSCO). Cisco, the best of breed in this space would benefit by snapping up (JNPR) and integrating its expertise into an expanding network.

Unsurprisingly, health care is the other sector experiencing a tidal wave of M&A, and it's not shocking that health care firms accumulated cash hoards abroad too. The dots are all starting to connect.

Firms want to partner with innovative companies. Companies hope to focus on customer demands and build a great user experience that will lead the economy. Health care costs are outrageous in America, and Jeff Bezos could flip this industry on its head.

Amazon (AMZN) pursuing lower health costs ultimately will bind these two industries together at the hip and is net positive for the American consumer.

Ride-sharing company Uber embarked on a new digital application called Uber Health that book patients who are medically unfit for regular Uber and shuttle them around to hospital facilities.

Health care providers can hail a ride for sick people immediately and are able to make an appointment 30 days in advance. It is a little difficult to move around in a wheel chair, and tech solves problems that stir up zero appetite for most business ventures. Apple is another large cap tech titan keeping close tabs on the health care space.

It's a two-way street with health care companies looking to snap up exceptional tech and vice versa.

It's practically a game of musical chairs.

Ultimately, Tech M&A is the catch of the day, and boosting earnings requires cutting-edge technology no matter how expensive it is. Investors will be kicking themselves for waiting too long. Buy now while you can.

Yes, It's All Going Into Tech Stocks

________________________________________________________________________________________________

Quote of the Day

"Companies in every industry need to assume that a software revolution is coming," - said American venture capitalist Marc Andreessen.

June 25, 2018

Diary, Newsletter

Global Market Comments
June 25, 2018
Fiat Lux

Featured Trade:
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June 20 Biweekly Strategy Webinar Q&A

Diary, Newsletter

Below please find subscribers' Q&A for the Mad Hedge Fund Trader June 20 Global Strategy Webinar with my guest and co-host Bill Davis of the Mad Day Trader.

As usual, every asset class long and short was covered. You are certainly an inquisitive lot, and keep those questions coming!

Q: What are your thoughts on Square (SQ) as a credit spread or buyout proposition?

A: I love Square long term, and I think there's another double in it. They were a takeover target, but now the stock's getting so expensive it may not be worth it. So, Square is a buy. However, look for a summer sell-off to get into a new position.

Q: The FANGs feel a little bubbly here; will they pull back on a market dip?

A: Yes, my entire portfolio of FANG options is designed to expire on the July 20th expiration. In fact, I may even come out before then as we reach the maximum profit point on these option call spreads. Then look for a summer meltdown to get back in. The FANGs could double from here. If I am wrong they will just continue to go straight up.

Q: Palo Alto Networks (PANW) has a new CEO; are you concerned?

A: Absolutely not, I love Palo Alto networks, as well as the (FEYE) FireEye. It's just a question of getting in at the right price. It's one of the many ballistic stocks in Tech this year that we've been recommending for a long time. Hacking an online theft is never going to go out of style.

Q: Is it time to sell Facebook (FB)?

A: Yes, if you're a trader. No, if you're a long-term investor. There's another double in it. You're going to have natural profit taking on all of these Techs for the short-term, and possibly for the summer, because they've just had enormous runs. If you aren't in the FANGs this year, you basically don't have any performance because almost all of the rest of the market has gone down.

Q: What are your thoughts on Lam Research (LRCX)?

A: The whole chip sector has had two big sell-offs this year because of their China exposure and the trade wars. Expect more to come. China gets 80% of their chips from the U.S. This is normal at the end of a 10-year bull market. It's also normal when a sector transitions from highly cyclical to secular, which is what's happening in the chip sector. Twice the volatility gets you twice the returns.

Q: Would you stay away from Chinese stocks like Alibaba (BABA), Momo Inc.(MOMO), IQ (IQ), and Baidu (BIDU)?

A: I have stayed away because of the trade war fears, and it was the completely wrong thing to do, because they've gone up as much as our Tech stocks, except for the last week. So yes, I would be buying dips on these big Chinese Tech stocks, because they are drinking the same Kool Aid as our Techs, and it's working.

Q: I hear that short selling of volatility is coming back; is that a good thing?

A: Actually, it is a good thing, because it creates buyers on these dips when you had no short sellers left. The entire industry got wiped out in February creating $8 billion in losses. There was no one left to cover those shorts and support the market. Of course, the result was we got a lower low down here because of that. It's always better to have a two-way market to get a real price. Now professionals are sneaking back in on the short side, which is as it should be. This should never have been a retail product.

Q: Why are international markets so disconnected from the U.S.? Many Asian markets are down heavily while the U.S. are up.

A: The U.S. stock market benefits from a rising dollar and rising interest rates, whereas international markets suffer. When you have weak currencies in the emerging markets, people sell their stocks to avoid the currency hit, and that takes the emerging markets down massively. A lot of emerging market companies have their debts denominated in U.S. dollars, so they get killed by a strong greenback. Also, the emerging markets make a lot of money selling goods into China, so when the Chinese economy gets attacked by the U.S. and growth slows, it has the byproduct of attacking all our other allies in Southeast Asia.

Q: Is it a good idea to sell everything for the summer and just de-risk for my portfolio?

A: That's what I'm doing. Summer trading is usually horrible, and now we're going into the summer at close to a high for the year, with a terrible political backdrop and possible economic growth peaking right here. So, yes, it's a good time to sit back, count your money, and maybe even spend some of it on a European vacation.

Q: When do you think the yield curve will invert?

A: In a year, and that is typically when you get a peaking of economic growth and the stock market.

Q: Is the Fed's faster-than-expected desire to raise rates good for equities, or will investors likely sell this news as quantitative tightening continues?

A: Short-term they will buy the market on rising rates, they always do at the early part of an interest rate rising cycle. They sell stocks when you get to the middle or the end of a rate rising cycle.

Q: Do you think large Tech stocks are expensive here?

A: No, I think the Large-Cap Tech stocks can potentially double here. It can take another year to year and a half to do it, and if they don't do it in this cycle they will certainly do it in the next one, after the next recession in the 2020s. So, long term you want to think FANG, FANG, FANG, TECH, TECH, TECH. You really shouldn't have anything else in the long term, except for maybe Biotech, where you can now get in at a multiyear low.

Q: Can I buy a chip company like Advanced Micro Devices (AMD), or should I buy a cloud company, like Microsoft (MSFT)?

A: I would go with the Cloud company. The innovation there is incredible. Cloud is growing like the Internet itself was growing on its own in 1995, and with chip stocks like (AMD), you're going to get much higher volatility, but more gain. So, pick your poison. But I would go with the Cloud plays.

Q: Can we watch the recorded version of this webinar later?

A: Yes, we post the webinar on our website a couple hours later, if you're a paid subscriber.

Q: What about the CRISPR stocks?

A: They are a screaming buy right now, buy Editas Medicine (EDIT) and Intellia Therapeutics (NTLA) on the dip. The paper that triggered the sell-off saying that CRISPR causes cancer is complete BS.

Q: Only 30 million in Bitcoin was stolen in South Korea so will that still have an impact?

A: Yes, but there have been countless other hacks this year and the total loss is well over $500 million. In addition, Bitcoin is now down 70% from its December top so not all is well in cryptocurrency land.

Q: Should we expect any Trade Alerts before August 8?

A: Yes, some of my best trades have been done while only vacation. I once sold short the Euro (FXE) from the back of a camel in Morocco. Another time, I bought the S&P 500 (SPY) while hanging from a cliff face on the Matterhorn. Both of those made good money.

Q: Will the S&P 500 reach new highs before the end of the year?

A: Yes, once you get the election out of the way, that removes a huge amount of uncertainty from the market. If we could end our trade war before then, I think you're looking at another 10-15% in gains from this level by the end of the year. That takes you to an (SPX) of 3,100 by the end of 2018, which was my January 1 prediction.

Q: What does all the heavy mergers and acquisition activity mean for the market?

A: It means fewer stocks are left to trade. Stock shortages leads to higher prices, always, so it is a big market positive this year

Good Luck and Good Trading.

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

May 1, 2018

Diary, Newsletter

Global Market Comments
May 1, 2018
Fiat Lux

Featured Trade:
(FRIDAY, JUNE 15, 2018, DENVER, CO, GLOBAL STRATEGY LUNCHEON)
(ANATOMY OF A GREAT TRADE)
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(CYBERSECURITY IS ONLY JUST GETTING STARTED),
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March 26, 2018

Diary, Newsletter

Global Market Comments
March 26, 2018
Fiat Lux

Featured Trade:
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(TESTIMONIAL)

My Briefing from the Joint Chiefs of Staff

Diary, Newsletter

I have always considered the US military to have one of the world?s greatest research organizations. The frustrating thing is that their ?clients? only consist of the President and a handful of three and four star generals.

So I thought that I would review my notes from a dinner I had with General James E. Cartwright, the former Vice Chairman of the Joint Chiefs of Staff, who is known as ?Hoss? to his close subordinates.

Meeting the tip of the spear in person was fascinating. The four star Marine pilot was the second highest ranking officer in the US armed forces and showed up in his drab green alpha suit, his naval aviator wings matching my own, and spit and polished shoes.

As he spoke, I was ticking off the stock, ETF and futures plays that would best capitalize on the long term trends he was outlining.

The cycle of warfare is now driven by Moore?s Law more than anything else (XLK), (CSCO) and (PANW). Peer nation states, like Russia, are no longer the main concern.

Historically, inertia has limited changes in defense budgets to 5%-10% a year, but in 2010 defense secretary Robert Gates pulled off a 30% realignment, thanks to a major management shakeup. We can only afford to spend on winning current conflicts, not potential future wars. No more exercises in the Fulda Gap.

The war on terrorism will continue for at least 4-8 more years. Afghanistan is a long haul that will depend more on cooperation from neighboring Iran and Pakistan. ?We?re not going to be able to kill our way or buy our way to success in Afghanistan,? said the general.? However, the 30,000-man surge there brought a dramatic improvement on the ground situation.

Iran is a big concern and the strategy there is to interfere with outside suppliers of nuclear technology in order to stretch out their weapons development until a regime change cancels the whole program.

Water (PHO), (CGW) is going to become a big defense issue, as the countries running out the fastest, like Pakistan and the Sahel, happen to be the least politically stable.

Cyber warfare is another weak point, as excellent protection of .mil sites cannot legally be extended to .gov and .com sites.?

We may have to lose a few private institutions in an attack to get congress to change the law and accept the legal concept of ?voluntarism.? General Cartwright said ?Anyone in business will tell you that they?re losing intellectual capital on a daily basis.??

The START negotiations have become complicated by the fact that for demographic reasons, Russia (RSX) will never be able to field a million man army again, so they need more tactical nukes to defend against the Chinese (FXI).? The Russians are trying to cut the cost of defending against the US, so they can spend more on defense against a far larger force from China.

I left the dinner with dozens of ideas percolating through my mind, which I will write about in future letters.

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