September 9, 2019

Global Market Comments
September 9, 2019
Fiat Lux

Featured Trade:

(FXB), (M), (XOM), (BAC), (FB), (AAPL),
 (AMZN), (ROKU), (VIX), (GS), (MS),


September 6, 2019

Global Market Comments
September 6, 2019
Fiat Lux

Featured Trade:

(INDU), (FXY), (FXB), (USO), (XLE), (TLT), (TBT),
(FB), (AMZN), (MSFT), (DIS), (WMT), (IWM), (TSLA), (ROKU), (UBER), (LYFT), (SLV), (SIL)

August 27, 2019

Global Market Comments
August 27, 2019
Fiat Lux

Featured Trade:

(AAPL), (AMZN), (SQ), (ROKU), (MSFT),

August 14, 2019

Mad Hedge Technology Letter
August 14, 2019
Fiat Lux

Featured Trade:


Why Uber Bombed

I told you to stay away from the Uber IPO!

The technology industry is just one piece of the pie and is now being utterly eclipsed by geopolitics left, right, and center.

At times like this, fundamentals and growth rates go out the window.

It’s a shame because growth rates for the best of breed in technology are still nothing short of spectacular.

The elevated risk here is that frontier companies such as Uber (UBER) become marginalized and their narrative starts to turn into a version of technology that is too expensive and unable to pin down expenses.

The easy money in tech is no more as we are barreling towards a global slowdown with China and America doing their best to move forward the global recession into the beginning of 2020.

So when Uber prints $5.2 billion in losses from the prior quarter which is a sequential increase of 30%, the vicious sell off in shares epitomizes the souring of sentiment that is pervading through the equity landscape.

The Uber’s earnings call was summed up when CEO of Uber Dara Khosrowshahi chimed in saying, “No doubt in my mind that the business will eventually be a break even and profitable business.”

These vague statements that offends time-sensitive hawks is a recipe for disaster in August 2019.

The purse strings of tech are not nearly as loose as they once were even 6 months ago.

Investors want profit making enterprises mixed with accelerating revenue growth – put your money where your mouth is type of ventures.

This has reduced the appealing side of tech down to outperforming software companies and even they are battling in the trenches as the wave of geopolitical risk-off sentiment crushes shares.

I would sell every Uber dead cat bounce because there is no way that Uber shares will surpass its all-time high of $46.38 this year.

The surge in bond prices show that risk appetite has dried up and Uber is unfortunately at the opposite end of the risk appetite spectrum.

I would also put its brother in arms Lyft (LYFT) in the same boat.

Lyft loses less money but are a speculative bet to “eventually” make money, and that is exactly what people don’t want to hear right now.

It will be a slippery slope for any tech company further out on the risk curve to invest in a business model that doesn’t turn a profit.

As it stands, Uber and Lyft were lucky to go public when they did, barely getting the IPOs over the line.

If they waited a few more months, they would have had to postpone it.

Expect meager M&A movement moving forward as the global slowdown will test the business models of every tech company and that means the weakest will need to restructure, go under, or even sell themselves at garage sale prices.

It is time to hunker down in tech shares and not bet the ranch.

The positions I have are short-dated deep in the money call spreads in software stocks that are bets that shares won’t go lower in a straight line.

I have fused that with positions in semiconductor stocks from the short side as a tech global slowdown means less demand in consumer electronics which hoover up semiconductor chips.

August 12, 2019

Mad Hedge Technology Letter
August 12, 2019
Fiat Lux

Featured Trade:


Unstoppable Roku

Roku has been unleashed.

To be honest, I was worried when it dipped all the way down to $25 last year because it was a stock that was prime for liftoff.

Liftoff has happened but a little later than I first surmised.

Roku had a blowout quarter crushing estimates with expanding their pie 59% year-over-year to $250 million scorching consensus estimates of $224 million.

The outperformance doesn’t stop there with the company rapidly adding users to 30.5 million active users during the quarter, up 39% year-over-year.

The monetization side showed the same outperformance with average revenue per user (ARPU) up to $21.06, up $2.00 year-over-year.

For all the doubters out there, who dismissed the potential of Roku because they weren’t part of an Amazon, Google, Facebook, or Apple group, then you were wrong.

What we have seen in the past year is the potential transforming in real-time into high octane outperformance.

The x-factor that put the company’s business model over the edge was the “onslaught” of new streaming assets coming online this year and in 2020 from Disney, NBCUniversal, and HBO.

Recent surveys suggest that Amazon’s Fire TVs haven’t been able to keep up with Roku.

And as Disney and NBC roll out gleaming new streaming assets, Roku will be able to do what is does best – sell digital ads.

Roku being independent doesn’t care who streams what because selling ads can be sold on any streaming program.

This makes me believe that Roku is in a better position not being a Fang because of a lack of conflict of interest.

For example, Google and Amazon have skirmished about different crossover partnerships such as YouTube on the Amazon Kindle and so on.

They plainly don’t want to help each other

Part of the DNA of these big tech companies is bringing each other down.

In my mind, Roku has definitely benefited from the first-mover advantage and have perfected selling digital ads over over-the-top (OTT) boxes.

It just so happens that Roku has prepared itself to extract maximum profits from the intersection of integrating online streaming assets and the consumer quitting analog cable.

The timing couldn’t have been better if they tried.

In its infancy, Roku’s revenue was reliant on selling the physical hardware, but that revenue has trailed off at the perfect time because of the explosion of digital ad growth in the industry boosting its other business.

Perhaps even more impressive is the loss of 8 cents last quarter when the company was expected to lose 22 cents.

This signals to investors that profitability is just around the corner for Roku and after years of burning cash, they are finally ready to turn the page and start a new chapter in the history of Roku.

Roku bottomed out at $25 and is now trading over $125, an extraordinary feat and one of the stories of the tech industry in 2019.

I wouldn’t chase the stock here, but I will say the momentum is palpable and Roku will end the year higher than where it is now.

It’s a great stock with an even more compelling story and about to harvest and monetize the new streaming assets that are coming through the pipeline.


May 14, 2019

Global Market Comments
May 14, 2019
Fiat Lux

Featured Trade:

(AAPL), (AMZN), (SQ), (ROKU), (MSFT)

March 25, 2019

Mad Hedge Technology Letter
March 25, 2019
Fiat Lux

Featured Trade:


Apple’s Big Push Into Services

The future of Apple (AAPL) has arrived.

Apple has endured a tumultuous last six months, but the company and the stock have turned the page on the back of the anticipation of the new Apple streaming service that Apple plans to introduce next week at an Apple event.

The company also recently announced a partnership with Goldman Sachs (GS) to launch an Apple-branded credit card.

In the deal, Goldman Sachs will pay Apple for each consumer credit card that is issued.

These new initiatives indicate that Apple is doing its utmost to wean itself from hardware sales.

Effectively, Apple’s over-reliance on hardware sales was the reason for its catastrophic winter of 2018 when Apple shares fell off a cliff trending lower by almost 35%.

This new Apple is finally here to save the day and will demonstrate the high-quality of engineering the company possesses to roll out such a momentous service.

Frankly speaking, Apple needs this badly.

They were awkwardly wrong-footed when Chinese consumers in unison stopped buying iPhones destroying sales targets that heaped bad news onto a bad situation.

I never thought that Apple could pivot this quickly.

Apple’s move into online streaming has huge ramifications to competing companies such as Roku (ROKU).

In 2018, I was an unmitigated bull on this streaming platform that aggregates online streaming channels such a Sling TV, Hulu, Netflix and charges digital advertisers to promote their products on the platform through digital ads.

I believe this trade is no more and Roku will be negatively impacted by Apple’s ambitious move into online streaming.

What we do know about the service is that channels such as Starz and HBO will be subscription-based channels that device owners will need to pay a monthly fee and Apple will collect an affiliate commission on these sales.

Apple needs to supplement its original content strategy with periphery deals because Apple just doesn’t have the volume to offer consumers a comprehensive streaming product like Netflix.

Only $1 billion on original content has been spent, and this content will be free for device owners who have Apple IDs.

Apple’s original content budget is 1/9 of Netflix annual original content budget.

My guess is that Apple wants to take stock of the streaming product on a smaller scale, run the data analytics and make some tough strategic decisions before launching this service in a full-blown way.

It’s easier to clean up a $1 billion mess than a $9 billion mess, but knowing Apple and its hallmarks of precise execution, I’d be shocked if they make a boondoggle out of this.

Transforming the company from a hardware to a software company will be the long-lasting legacy of Tim Cook.

The first stage of implementation will see Apple seeking for a mainstay show that can ingrain the service into the public’s consciousness.

Netflix was a great example, showing that hit shows such as House of Cards can make or break an ecosystem and keep it extremely sticky ensuring viewers will stay inside a walled pay garden.

Apple hopes to convince traditional media giants such as the Wall Street Journal to place content on Apple’s platform, but there has already been blowback from companies like the New York Times who referenced Netflix’s demolition of traditional video content as a crucial reason to avoid placing original content on big tech platforms.

Netflix understands how they blew up other media companies and don’t expect them to be on Apple’s streaming service.

They wouldn’t be caught dead on it.

Tim Cook will have to run this race without the wind of Netflix’s sails at their back.

Netflix has great content, and that content will never leave the Netflix platform come hell or high water.

Apple is just starting with a $1 billion content budget, but I believe that will mushroom between $4 to $5 billion next year, and double again in 2021 to take advantage of the positive network effect.

Apple has every incentive to manufacture original content if third-party original content is not willing to place content on Apple’s platform due to fear of cannibalization or loss of control.

Ultimately, Apple is up against Netflix in the long run and Apple has a serious shot at competing because of the embedment of 1 billion users already inside of Apple’s iOS ecosystem that can easily be converted into Apple streaming service customers.

If you haven’t noticed lately, Silicon Valley’s big tech companies are all migrating into service-related SaaS products with Alphabet (GOOGL) announcing a new gaming product that will bypass traditional consoles and operate through the Google Chrome browser.

Even Walmart (WMT) announced its own solution to gaming with a new cloud-based gaming service.

I envision Apple traversing into the gaming environment too and using this new streaming service as a fulcrum to launch this gaming product on Apple TV in the future.

The big just keep getting bigger and are nimble enough to go where internet users spend their time and money whether it’s sports, gaming, or shopping.

Apple is no longer the iPhone company.

I have said numerous times that Apple’s pivot to software was about a year too late. 

The announcement next week would have been more conducive to supporting Apple’s stock price if it was announced the same time last year, but better late than never.

Moving forward, Apple shares should be a great buy and hold investment vehicle.

Expect many more cloud-based services under the umbrella of the Apple brand.

This is just the beginning.