• support@madhedgefundtrader.com
  • Member Login
Mad Hedge Fund Trader
  • Home
  • About
  • Store
  • Luncheons
  • Testimonials
  • Contact Us
  • Click to open the search input field Click to open the search input field Search
  • Menu Menu
Mad Hedge Fund Trader

Hot Inflation Number Bodes Poorly For Tech Stocks

Tech Letter

Fed swaps now fully price in 150 basis points of hikes over the next two meetings after awful inflation numbers came in showing inflation heading in the wrong direction.

The 9.1% inflation print was an acceleration of the 8.6% which was what we got last time.

I don’t want to beat a dead horse, but inflation accelerating and beating the expectations of 8.8%, is paramount to the trajectory of tech shares.

The awful number also underscores the magnitude of policy mistakes that the U.S. Fed Central Bank has overseen.

This is the only thing that matters because macro liquidity drives the trajectory of equities in the short term.

These clowns aren’t serious about tackling inflation, as I said a few times already and this proves it!

Itty bitty rate rises won’t stamp out 9.1% inflation and in fact, encourages it.

The Fed would need to raise the Fed Funds rate by 7.35% to 9.1% immediately from the current 1.75% for the real inflation rate to be non-inflationary.

According to the official Fed website, the Fed targets 2% inflation because they call this level “healthy.”

By their own measure, to achieve this 2% inflation, they would still need to raise rates by 5.35% immediately, but they absolutely won’t because Powell simply has no interest in doing his job, period.

These core expenses skyrocketing is why I keep and kept mentioning that Americans have less money to splurge on tech gadgets and software and again, this inflation report validates my thesis.

Think about pitiful tech stocks that didn’t work in bull markets like ride chauffeurs Lyft (LYFT) and Uber (UBER), I fully expect these companies to perform terribly over the next 6 months amid a rising rate backdrop.

Not only are they growth tech, but their business is directly tied to energy prices.

They are the poster boys for the pain tech companies will feel from hyperinflation.

The outlook is quite poor for technology in the short term, and we are still waiting to form a bottom. It will come back but we need a capitulation.

The accelerated rate of inflation means that we push back the big recovery in tech stocks.

Ecommerce stocks will suffer like Amazon (AMZN), Shopify (SHOP), and MercadoLibre (MELI) because of the decline in discretional spending for the consumer.

Digital ad giants like Google (GOOGL), Snap (SNAP), Meta (META), and Twitter (TWTR) will need to reckon with smaller ad budgets from 3rd party ad purchasers as companies cut back on marketing spend.

Don’t need to increase marketing spend when people have no money to spend on products.

Travel tech stocks like Expedia (EXPE) and Tripadvisor (TRIP) can expect summer to mark peak travel as Americans get more concerned about food and oil budgets after the summer of travel revenge from the arbitrary lockdowns.

It also means there will be a meaningful next leg down for tech stocks as many CFOs are now furiously crunching the new revenue and margin downgrades to reflect this heightened risk.

The new re-rating isn’t reflected yet in tech shares.

It’s already been a few months on the trot where many analysts say this is the top, they have been inaccurate every time.

Even if it is the top, inflation will stay higher for longer and stagflation is the consensus for 2023.

The clowns at the Fed not doing their job means that economic cycles will be shorter and a great deal more volatile because the smoothing effect of moderated inflation is now stripped out of calculations. This effectively means a contracted boom-bust trajectory for tech stocks which is unequivocally what we are seeing in market behavior.

 

tech inflation

 

 

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2022-07-13 13:02:392022-08-02 21:13:11Hot Inflation Number Bodes Poorly For Tech Stocks
Mad Hedge Fund Trader

Quote of the Day - July 13, 2022

Tech Letter

“Raising corporate taxes is fine to discuss. Taming inflation is critical to discuss. Mushing them together is just misdirection.” – Said Founder of Amazon Jeff Bezos

 

https://www.madhedgefundtrader.com/wp-content/uploads/2018/05/Jeff-Bezos-quote-of-the-day.jpg 256 256 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2022-07-13 13:00:362022-07-13 14:58:10Quote of the Day - July 13, 2022
Mad Hedge Fund Trader

July 11, 2022

Tech Letter

Mad Hedge Technology Letter
July 11, 2022
Fiat Lux

Featured Trade:

(TOYING WITH BAD MANAGEMENT)
(TWTR), (TSLA)

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2022-07-11 15:04:252022-07-12 10:10:18July 11, 2022
Mad Hedge Fund Trader

Toying With Bad Management

Tech Letter

Musk has pulled out of the Twitter deal.

By the time Twitter (TWTR) gets this acquisition through the courts which is now estimated as much as 5 years, Twitter will be bankrupt.

There will naturally be some movement before then.

Regardless of timing, Twitter shares are set to plunge. And you can't then blame Elon Musk for Twitter's demise and poor management.

In fact, Twitter is quite infamous in Silicon Valley for one of the worst management teams and this open secret has come back to hurt them in the wallet.

This is highly bullish for Tesla’s (TSLA) stock because it avoids Musk’s capital getting tied up in an overpriced Twitter deal.

TSLA stock bounced on this news and even if he does reverse course and buy Twitter for a discount as it drops fast, it will be seen as a great bargain for Musk and TSLA shares.

Tesla’s CEO announced his plans to buy social networking site Twitter in April for $44 billion and many thought this wasn’t a serious offer to begin with.  

The contract says that Musk is required to pay a $1 billion breakup penalty and he has indicated that he is also trying to get out of that.

I believe Twitter was foolish in setting such a low break-up fee for the richest man in the world.

For most people, a $1 billion fee would be astronomical, but not when one can just liquidate a few odd Tesla shares with a snap of the fingers.

This low fee has been exploited and leveraged to get what he wants because he doesn’t care if he has to pay it.

In hindsight, management should have set Twitter’s breakup fee at a level which would have hurt the richest man in the world meaningfully and created a massive windfall for Twitter.

They didn’t and now the circus begins and who knows when, who, and how much will be the payout if any.

My guess is a termination fee of something around $10 billion would have been quite painful and cost-prohibitive for Musk.

Readers should remember that Musk offloaded $4 billion of Tesla shares around April to pay for Twitter. He sold out at all-time highs and so even if he paid back the $1 billion, the penalty is largely blunted by shifting around his resources.

My guess is that Musk exploits this situation to drain Twitter of its financial resources while buying its stock on the way down.

After he beats the company into submission, there will likely be a huge discount.

If the stock goes to $25, he’ll get a 60% discount on what at first would have been a $44 billion price tag.

Twitter has been fooled big time, made to look incompetent which exactly was the working assumption taken into this deal, which management has totally botched.  

TWTR is trading at $34 today which is a far cry from the $54.20 he agreed to buy Twitter at.

This isn’t about Musk because everyone with half a brain would pull out of this deal with a deleveraging tech bubble.

My bet is Twitter slowly grinds lower and Musk finds a way to get Twitter on the cheap then fires the whole management team.

 

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2022-07-11 15:02:212022-07-12 10:10:12Toying With Bad Management
Mad Hedge Fund Trader

Quote of the Day - July 11, 2022

Tech Letter

“I would like to die on Mars. Just not on impact.” – Said Tesla Founder Elon Musk

https://www.madhedgefundtrader.com/wp-content/uploads/2022/07/elon-musk-e1657569459368.png 350 215 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2022-07-11 15:00:182022-07-13 14:57:13Quote of the Day - July 11, 2022
Mad Hedge Fund Trader

July 8, 2022

Tech Letter

Mad Hedge Technology Letter
July 8, 2022
Fiat Lux

Featured Trade:

(THE END OF SAMSUNG)
(SAMSUNG), (QCOM), (MU), (AAPL)

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2022-07-08 15:04:012022-07-08 16:56:28July 8, 2022
Mad Hedge Fund Trader

The End of Samsung

Tech Letter

Samsung, Korea’s stalwart chaebol, is toast.

Remember the past two years when lockdowns were in vogue?

Digital products were the hottest item in the world as everybody was stuck in their homes.

Growth brought forward is never a bad thing for a company, especially tech companies.  

However, it sets the stage for hard comps to topple and a reversion back to the mean which can look messy.

The world needed chips and phones back then, the world is now traveling, getting on planes, and taking cruise ships to the Caribbean.  

This is why video game growth is quite subdued this year.

Samsung internally has also been taking a machete to its forward-looking estimates multiple times in order to front-run collapsing demand.

The boom bust nature of chips and devices is an inherent beast in the industry that is hard to tame.

Samsung was able to hit watered-down targets in the second quarter, but that was mainly due to a 7% currency tailwind of the Korean won sliding fast just like many Asian currencies.

Take a look at the Japanese yen, it’s gone off a cliff all the way to 136 per $1.

I remember when I took a vacation to Tokyo in 2011, Japan felt awfully expensive at 77 yen to $1.

The currency tailwinds are a transitory elixir yet under the hood, these economies are weakening fast.

The aging population and cost of living crisis are also crushing sales.

Internal data reveals deeper damage than initially thought.

Operating profit missed by a wider margin than revenue beat and prices for its premium products isn’t fetching the prices they once did.

For example, Samsung markets its Exynos 2200 chips as on-par rivals to the Snapdragon 8 Gen 1 and Apple’s (AAPL) A15 Bionic chip found in smartphones.

However, the Exynos fails to compete with its supposed flagship chip comps, performing at levels lagging almost a generation behind in speed and functionality.

It’s clear that devices made with Exynos chips simply won’t be able to sell for as much as flagship Android phones with Snapdragon 8 Gen 1 or Apple iPhones with A15 Bionic chips.

I fully expect the operation profit to go from 6% to 3% for Samsung.

US rival Micron (MU) has already rung the alarm. While the world’s third-largest maker of DRAM posted revenue and operating profit for the quarter in line with estimates, its forecast for the coming three months was 20% lower than expectations.

It now sees the PC and smartphone markets much weaker than previously thought.

Tech has experienced a massive downgrade in terms of sentiment and sales while massive pressure on the supply side costs.

Cloud computing and streaming services which all need chips have been the poster boys of underperformance.

Growth stocks have also gotten killed.

I do believe this is more a signal of deeper individual malaise at Samsung and an indication they are getting trounced by Chinese firms who just do it better for cheaper.

Margins won’t ever come back up for Samsung as they lack the nimbleness of the Chinese and brute power of the American tech.

They are essentially stuck between a rock and a hard place where products will become less competitive, face rapidly shrinking margins, and participate in a Korean economy that lacks vibrancy.

Once chip stocks bottom, avoid Samsung, and get into Qualcomm (QCOM) and Micron (MU).

 

samsung

 

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2022-07-08 15:02:262022-07-12 20:41:43The End of Samsung
Mad Hedge Fund Trader

Quote of the Day - July 8, 2022

Tech Letter

"We are unicorn hunters." - Said Founder and CEO of SoftBank Masayoshi Son

 

https://www.madhedgefundtrader.com/wp-content/uploads/2018/10/masayoshi.png 424 362 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2022-07-08 15:00:232022-07-08 16:55:47Quote of the Day - July 8, 2022
Mad Hedge Fund Trader

July 6, 2022

Tech Letter

Mad Hedge Technology Letter
July 6, 2022
Fiat Lux

Featured Trade:

(GOOD NEWS IS BAD NEWS)
(ARKK), (TSLA), (APPL), (ASML)

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2022-07-06 16:04:102022-07-06 16:29:54July 6, 2022
Mad Hedge Fund Trader

Good News Is Bad News

Tech Letter

As the bear market rally picked up steam Tuesday with even Cathy Wood’s growth ETF (ARKK) gaining 9%, it’s clearly a reaction to the Nasdaq repricing its biggest underlying risk.

The market is now pricing in a global recession and that has replaced inflation as the number one worry for investors.

This new development has led to the Nasdaq sniffing out the return to the bad news is good news effect.

That is why the U.S. 10-year treasury yield cratered from 3.5% to 2.8% which reflects the future expectation of a pulled-forward global recession.

This would trigger a fresh interest rate lowering cycle by global central banks.

Lowering rates is good for Nasdaq stocks and tech stocks will be a big beneficiary of lowered rates as they have overshot to the downside on this rate rise cycle.  

That doesn’t mean it’s all rosy in the land of the Nasdaq, hardly so.

We are still in the fog of war and amid improving technical data like lower oil prices, worsening economic relations between the large nuclear-equipped countries are not only moving the world towards a soft technological decoupling but a hard fracturing of general relations.

My first thought was will China finally strike back against the United States in the form of destroying Tesla’s (TSLA) Gigafactory in Shanghai or blacklist Apple (AAPL) iPhones in China.

These two events would be the point of no return for the two countries’ economic cooperation and anything beyond that, relations could spiral out of control rapidly and even be the impetus for a Taiwan takeover.

Clearly, Silicon Valley does much better when the world is getting along, and everyone is paying for their stuff.

That can’t happen as smoothly with the world rapidly balkanizing which is a big reason for massive selloffs in Netflix whose international audience has soured.

On the production side of things, Chinese-produced stuff won’t be able to get sold back to Americans using Guangdong factory production as semiconductor chips and equipment have become the focal point of national security efforts.

The US has placed export controls against Chinese technology firms from purchasing chips and equipment.

Now Biden is blackmailing the Netherlands to ban one of its top chipmakers from selling semiconductor equipment to Chinese companies.

The Biden administration is pushing hard for Dutch chip equipment maker ASML Holding NV (ASML) to halt selling some of its older deep ultraviolet lithography, or DUV, systems.

Even though these machines are one generation behind cutting-edge, they offer high-tech chips for automobiles and consumer electronics.

Washington has also pressured Japan to stop shipping semiconductor machines to China.

Since the Trump tariffs, China has been the biggest buyer of chipmaking gear for the last two years.

On the European front, regulation is hitting home hard as the U.K. has initiated investigations on Amazon’s selling practice by in-house brands and is looking into Microsoft’s anti-competitive acquisition of Activision.

If American tech companies have nowhere to produce, nobody to acquire for instant growth, and nobody to sell to then it becomes a massive issue for shareholders.

Even though the equity mojo boost of good news is bad news is a nice reprieve, a global recession where many companies fire staff and can’t sell their product because lack of parts is worse.

Therefore, we are still issuing a sell the rallies in tech type of recommendation to our readers while acknowledging there has been a small wave of dip buyers entering back into the game.

 

 

 

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2022-07-06 16:02:362022-07-06 16:30:07Good News Is Bad News
Page 111 of 314«‹109110111112113›»

tastytrade, Inc. (“tastytrade”) has entered into a Marketing Agreement with Mad Hedge Fund Trader (“Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’s brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade and/or any of its affiliated companies. Neither tastytrade nor any of its affiliated companies is responsible for the privacy practices of Marketing Agent or this website. tastytrade does not warrant the accuracy or content of the products or services offered by Marketing Agent or this website. Marketing Agent is independent and is not an affiliate of tastytrade. 

Legal Disclaimer

There is a very high degree of risk involved in trading. Past results are not indicative of future returns. MadHedgeFundTrader.com and all individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein. Affiliates of MadHedgeFundTrader.com may have a position or effect transactions in the securities described herein (or options thereon) and/or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies.

Copyright © 2025. Mad Hedge Fund Trader. All Rights Reserved. support@madhedgefundtrader.com
  • Privacy Policy
  • Disclaimer
  • FAQ
Scroll to top