Stay ahead of the curve. That has been my seminal lesson after 50 years of trading the global financial markets.
Stay ahead of the curve, and riches will shower down upon you. Fall behind the curve, and life will become dull, mean, and brutish, and very poorly compensated.
Fortunately, I learned that crucial lesson early on in life. In 1972, when the US left the gold standard, I thought gold had a very bright future, then trading at $34 an ounce. It soared to $900 in seven years. I nailed that peak waiting in a line in Johannesburg to sell the last of my krugerrands.
In 1999, I saw a major crash coming in the Great Dotcom Bubble. I not only turned bearish, I sold my entire hedge fund management company at an enormous premium. Stocks then fell by 80%. Hedge funds died by the thousands.
I am now starting to get an inkling of another major market move.
But first, let me tell you to what extent the most devious, hardest core hedge fund managers are now going to get ahead of the curve.
Want to get a lead on the copper market? How about leasing time on a geostationary satellite to park over the storage facilities of Sociedad Qimica Y Minera (SQM) in Chile, one of the world’s largest producers.
Ore in the pipeline is a fabulous predictor of prices. By the way, (SQM) has risen by 400% in three years.
Stories like this are legion in the hedge fund community. Researchers pick up guys in bars outside of Foxconn factories in China to get a head start on iPhone production.
Another satellite counts ships laid up in Singapore Harbor to predict shipping rates.
I even once relied on a retired KGB officer in Russia to give me the heads up on wheat production there.
Long time readers will remember that I put out a Trade Alert based on this information to buy wheat (WEAT), right after the Mad Hedge Fund Trader was blessed with 50 new subscribers from Italy (I spoke at a conference there).
They made so much money that I received a lifetime’s worth of invitations to pasta dinners in Rome and Milan, which are made out of wheat. Some eight years later and I’m still collecting.
So having established the value of TRULY granular, on-the-ground research, let me tell you what I learned lately.
I was having lunch with a major San Francisco real estate investor the other day, and what I heard blew my mind.
Alphabet (GOOGL) is soaking up office space like there is no tomorrow. In 2017 it was the top lessor of space in the area, taking more than any other private or government entity.
The creation of Sergei Brin and Larry page currently owns or leases 20 million square feet of office space in the entire San Francisco Bay Area, housing some 34,000 workers.
To give you some idea of the scale of these holdings, that is DOUBLE the square footage of the pre-9/11 Twin Towers in New York.
What’s more, Alphabet is looking to DOUBLE this figure within the next five years.
Google already dominates the skyline of its hometown of Mountain View, California, where it already has 20,000 workers. It is negotiating with the City of San Jose for the purchase of a full city block large enough to build a new tower for a further 20,000 workers.
Various Alphabet divisions are spilling throughout the region, as far north as Marin County and as far east as Oakland and Alameda. What’s more interesting is that many of these leases contain options to buy. These are definitely long-term plays.
Other tech titans are similarly expanding, although not at the frenetic rate seen at Alphabet. Apple has 25,000 Bay area employees and is just in the process of moving into its brand new, flying saucer shaped “Donut” headquarters (the vanity address is One Infinite Loop, Cupertino, CA). Fly over it on a clear day in a small plane and you can’t miss it.
Facebook is also enjoying a growth spurt. Half of its 25,000 employees work at its Mountain View headquarters (address: One Hacker Way, Mountain View, CA). It is scouring the landscape for more.
The influx of so many highly paid tech workers in such a confined space has far reaching implications.
Residential real estate prices are through the roof, up 13% YOY, and more than 100% in five years. The local real estate pages have shrunk to nothingness, as everyone is afraid to sell for fear of not being able to get back in.
Traffic is now worse than in Los Angeles. And good luck hiring a cleaning lady, gardener, or housekeeper. You can only hire an experienced nanny if you throw in a free BMW. Every contractor is booked beyond infinity.
And good luck getting your kids into a private school at $40,000 a year each. Applications are outrunning places by 5:1.
The implications for technology share investors is nothing less that mind boggling.
If Alphabet thinks it will more than double its business, it’s safe to assume that the share price will double as well. What is more likely is that the stock will appreciate even more, given the economies of scale and their dominance of the current advertising industry by Alphabet.
It isn’t just the ad people and their programmers who are demanding more space. YouTube, the autonomous driving subsidiary Waymo, and their life sciences spinoff Verily are also growing by leaps and bounds.
I think the conclusion of all of this is pretty obvious. Buy Alphabet and any dip, and then go out and buy some more.
