(AMZN) Archives

Goodbye to the Old World, Hello to the New

With the ongoing impacts of coronavirus, our world is suddenly changing beyond all recognition.

The WWII comparisons here are valid. Just as technological innovation accelerated tenfold from 1941-1945, bringing us computers, penicillin, jet engines, and the atomic bomb, the same kind of great leaps forward are happening now.

The end result will be a faster rate of innovation and economic growth, greater corporate profits in the right industries, and a hugely performing stock market. It perfectly sets up my coming Golden Age and the next Roaring Twenties.

Living in Silicon Valley for the last 25 years, I have gotten pretty used to change. But what is happening now is mind-boggling.

The bottom line for the impacts of the coronavirus pandemic has been to greatly accelerate all existing trends. The biggest one of these has been the movement of the economy online, which has been taking place since the eighties. Except that it is now happening lightning fast. Business models are hyper-evolving.

Legacy brick and mortar companies must move online or perish, as much of the restaurant business is now doing. Target (TGT) and Walmart (WMT) have accomplished this. Those with feet in both worlds are closing down their physical presence and going entirely digital. Pure digital companies, like Zoom (ZM), Netflix (NFLX), PayPal (PYPL), and Square (SQ) are booming.

The side effect of the virus may be to move an even greater share of America’s business activity to the San Francisco Bay area and Seattle. Almost all tech companies here are hiring like crazy. Amazon has announced plans for hiring a staggering 175,000 since the epidemic started, as millions shift to home delivery of everything.

The productivity of tech is also growing by leaps and bounds. Since everyone is working at home, no one wastes two hours a day commuting. Meetings in person are a thing of the past. Everything now happens on Zoom.

The whole mental health industry is now conducted on Zoom. So is much of non-Corona related medicine. And I haven’t seen my accountant in years. I think he died, replaced by a younger, cheaper clone.

Even my own Boy Scout troop has gone virtual. The National Council is offering 58 online merit badges, including Railroading, Stamp Collecting, and Genealogy (click here for the full list).

The stock market has noticed and several tech companies like Microsoft (MSFT) and Amazon are showing positive gains for 2020. Many legacy companies see share prices still down 80% or more. Sector selection for portfolio mangers has essentially shrunk from 100 to only 2: tech/biotech and healthcare.

Business models are evolving at an astonishing rate. Who knew the yoga instructor in Chicago was much better than the one down the street, thanks to Skype.

Education is now entirely online and much of it may never go back to school. My kids are totally comfortable in this new world. They have been social distancing since I bought them their own iPhones five years ago.

Now, if I can only figure out how to do my own haircut, the third most searched term on Google. It’s longer than at any time since the summer of love in 1967.

These are just a few of the practical impacts of coronavirus. The social changes are equally eye-popping.

While death rates are soaring, crime has fallen by up to 75%. So have deaths from car accidents. Alcohol and domestic abuse have gone through the roof. Drug addiction is plummeting because dealers are afraid to go out on the street.

There are many lessons to be learned from this crash. Too many companies drank the Kool-Aid and assumed business conditions would remain perfect forever.

Let's call a spade a spade. The year 2019 and the first two months of 2020 were the bubble top. All the growth in stock prices then were pure fluff.

That means you didn’t need costly reserves ran on thin margins, borrowed like crazy at artificially low-interest rates, and kept endlessly buying back your own stock and paying generous dividends.

Manufacturers didn’t need inventories, counting on a seamless, global supply chain to keep assembly lines running. “Just in time” has switched to “just-in-case.” Companies are going to have to keep enough inventories in the warehouse to guard against future disease-driven disruptions. This will raise costs and shrink profits.

It’s really hard to see how entire industries are going to come back. Cruise ships were packing guests onboard like sardines in a can to make money. I bet it will be a while before you sit at a crowded casino blackjack table. Want to stand in line at a popular chain restaurant?

Airlines have become the poster boy for the evils of bubblicious management. They flew full most of the time, seating their customers shoulder to shoulder, yet their net profit per fight depended on selling that last economy class seat.

The industry spent $50 billion in dividends and the buyback of shares that are now largely worthless, while senior management laughed all the way to the bank. They were the only industry to actually list a global pandemic as a major risk to their business in their SEC filings.

Now they want a government bailout at your expense.

As for me, I am looking forward to this brave new world. Until then, I’ll be spending my afternoons getting in shape hiking in the High Sierras, long hair and all. I’m the only one up here. Maybe it will scare the mountain lions away.

April 15, 2020/by Mad Hedge Fund Trader

April 14, 2020

Diary, Newsletter, Summary

Global Market Comments
April 14, 2020
Fiat Lux

Featured Trade:

(APRIL 8 BIWEEKLY STRATEGY WEBINAR Q&A),
(INDU), (SPY), (SDS), (BA), (VIX), (VXX), (GLD), (GDX),
(GOLD), (NEM), (QCOM), (HYG), (JNK)
(WHY SENIORS NEVER CHANGE THEIR PASSWORDS)

April 14, 2020/by Mad Hedge Fund Trader

April 13, 2020

Diary, Newsletter, Summary

Global Market Comments
April 13, 2020
Fiat Lux

Featured Trade:

(MARKET OUTLOOK FOR THE WEEK AHEAD,
or THE BEAR MARKET RALLY IS OVER),
(INDU), (SPX), (TLT), (VIX, (VXX), (GLD), (JPM), (AMZN), (MSFT)

April 13, 2020/by Mad Hedge Fund Trader

The Market Outlook for the Week Ahead, or The Bear Market Rally is Over

Diary, Newsletter

The Bear market rally is over, or at least that’s what Asian stock futures are screaming at us, and the shorts are piling back on….again.

For the first time in 16 years, I did not have to get up at 6:00 AM to hide Easter eggs. It’s not because my kids don’t believe in the Easter Bunny anymore. They’ll believe in anything that delivers them a free chocolate bunny. It’s because I couldn’t get any eggs. Much of the country’s egg production is being diverted into vaccine production for testing, of which, along with antivirals, there are more than 300 worldwide.

Enough of the happy talk.

It was a classic bear market rally we saw over the past two weeks in every way, retracing 50% of the loss this year. Junk stocks, like hotels, airlines, and cruise lines led, while quality big tech lagged. That’s the exact opposite of what you want to see for a new bull market.

At the Friday high, the Dow (IND) was down only 17% from the February all-time high at a two-decade 20X valuation high.

The US is now losing 2,000 citizens a day to the Coronavirus. That’s how many we lost at the peak of the Vietnam War in a month. We are suffering another 9/11 every day of the week.

More than 16.8 million have lost jobs in three weeks, more than all those gained in six years. Of all American companies with fewer than 500 employees, 54% have closed! JP Morgan (JPM) has just cut its forecast for Q2 GDP from a 25% loss to an end of world 40% decline on an annualized bases.

New York is losing 800 people a day and is burying many of them in mass graves. Bread lines have formed in countless major cities. And you think 17% is enough for a discount for stocks, given that a near-total shutdown will continue for another five weeks?

Are you out of your freaking mind?

Which leads me to believe that another retest in the lows is in the work, no matter how much government money is headed our way.

For a start, it will be three months before the Fed handouts show any meaningful impact on the economy. Second, we are due for a second wave of the virus in the fall, once the initial shelter-in-place ends. Markets will likely behave the same.

In the meantime, long term analysts of the global economic structure are going dizzy with possible permanent changes. I am in the process of writing a couple of pieces on this if I can only get away from the market long enough to do so.

It seems like half the country has lost their jobs, while the other half are now working double time without pay, like myself.

The market was stunned by 6.1 million in Weekly Jobless Claims, taking the implied Unemployment Rate to over 14%, more than seen during the 2008-2009 Great Recession. One out of four Americans will lose their jobs or suffer a serious pay cut in the next two months. At this rate, we will top the Great Depression peak of 25 million in two weeks.

The Fed launched a second $2.3 trillion rescue program, this time lending to states, local municipalities, and buying oil industry junk bonds. More money was made available to small businesses. Jay Powell is redefining what it means to be a central bank, but no one is complaining. It was worth one 500-point rally in the Dow Average, which we have already given back. At this point, almost the entire country is living on welfare.

Stocks soared firefly on falling death rates. Chinese cases are falling after the border closed, Italy and Madrid are going flat, and San Francisco is looking good. There is still a massive, but extremely nervous bid under the market. I’m selling into this rally. We will continue to chop in a (SPX) $2180-$2800 range for the foreseeable future.

Trump says there’s a light at the end of the tunnel, but he doesn’t tell you that the light is an oncoming express train. At the very least, the number of deaths will rise at least tenfold from here. That’s how many we lost in the Korean War. It hasn’t even hit the unsheltered states in the Midwest yet.

Gold (GLD) is making a run another all-time highs, topping $1,700. Expect everyone’s favorite hedge to go ballistic. QE infinity and zero interest rates will eventually bring hyperinflation and render the US dollar worthless. Gold production is falling due to the virus. Anything else you need to know?

Mortgage defaults are up 18-fold. People can’t even get through to their banks to tell them they are not going to pay. This is the next financial crisis. Fannie Mae and Freddie Mac are going to go broke….again.

Can the US government spend money fast enough, given that it has been shrinking for three years? I’m not getting my check until September. It’s not easy to spend $2 trillion in a hurry. I can’t even spend a billion in a hurry. It’s darn hard and I’ve tried. It suggests any recovery will be slower and lasts longer.

Here’s the bearish view on the economy, with Barclay’s Bank looking for an “L” shaped recovery, which means no recovery at all. I’m looking more for a square root type recovery, which means a sharp bounce back to a lower rate of growth. And there may be two “square roots” back to back.

Bond giant PIMCO predicts 30% GDP loss in Q2 on an annualized basis. Everyone staying home doing jigsaw puzzles isn’t doing much for our economic growth. This may end up becoming the most positive forecast out there.

When we come out on the other side of this, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With interest rates at zero, oil at $20 a barrel, and many stocks down by three quarters, there will be no reason not to. The Dow Average will rise by 400% or more in the coming decade.

My Global Trading Dispatch performance had a tough week, destroying my performance back to positive numbers for the year. That is thanks to my piling on the shorts in a steadily rising market. This brings short term pain, but medium-term ecstasy.

We are now down -3.99% in April, taking my 2020 YTD return down to -12.41%. That compares to an incredible loss for the Dow Average of -17% from the February top. My trailing one-year return sank to 30.02%. My ten-year average annualized profit was pared back to +33.51%.

My short volatility positions (VXX) were hammered even in a rising market, which means no one believes the rally, including me.

I took nice profits on two very deep in-the-money, very short dated call spreads in Amazon (AMZN) and Microsoft (MSFT), the two safest companies in the entire market, betting that we don’t go to new lows in the next nine trading days. As the market rose, I continued to add to my short position with the 2X ProShares Ultra Short S&P 500 (SDS).

This week, we get the first look at Q1 earnings. All economic data points will be out of date and utterly meaningless this week. The only numbers that count for the market are the number of US Coronavirus cases and deaths, which you can find here.

On Monday, April 13 Citigroup (C) and JP Morgan (JPM) report earnings.

On Tuesday, April 14 at 11:30 AM, the API Crude Oil Stocks are announced.

On Wednesday, April 15, at 2:00 PM, the New York State Manufacturing Index is released.

On Thursday, April 16 at 8:30 AM, Weekly Jobless Claims are announced. The number could top 6,000,000 again. At 7:30 AM, US Housing Starts for March are published.

On Friday, April 17 at 7:30 AM, the Baker Hughes Rig Count is released at 2:00 PM. Expect these figures to crash as well.

As for me, before the market carnage of the coming week ensues, I shall be sitting down with my kids and touring the National Gallery of Art in Washington DC. Many art museums have now opened up their collections online, for free. There is a special exhibition of “Degas at the Opera.” Please enjoy by clicking here.

Next to come will be the Louvre in Paris (click here), and the National Museum of the Marine Corps in Triangle, VA (click here). I have them tracing the dog tags I brought back from Guadalcanal. I bet some of my old weapons are in there.

Stay healthy.

John Thomas

CEO & Publisher

The Diary of a Mad Hedge Fund Trader

Still Sheltering in Place

April 13, 2020/by Mad Hedge Fund Trader

April 9, 2020

Diary, Newsletter, Summary

Global Market Comments
April 9, 2020
Fiat Lux

Featured Trade:

(TEN LONG TERM LEAPS TO BUY AT THE BOTTOM)
(MSFT), (AAPL), (GOOGL), (QCOM), (AMZN),
(V), (AXP), (NVDA), (DIS), (TGT)

April 9, 2020/by Mad Hedge Fund Trader

Ten Long Term LEAPS to Buy at the Bottom

Diary, Newsletter

I am often asked how professional hedge fund traders invest their personal money. They all do the exact same thing. They wait for a market crash like we are seeing now, and buy the longest-term LEAPS (Long Term Equity Participation Securities) possible for their favorite names.

The reasons are very simple. The risk on LEAPS is limited. You can’t lose any more than you put in. At the same time, they permit enormous amounts of leverage.

Two years out, the longest maturity available for most LEAPS, allows plenty of time for the world and the markets to get back on an even keel. Recessions, pandemics, hurricanes, oil shocks, interest rate spikes, and political instability all go away within two years and pave the way for dramatic stock market recoveries.

You just put them away and forget about them. Wake me up when it is 2022.

I put together this portfolio using the following parameters. I set the strike prices just short of the all-time highs set two weeks ago. I went for the maximum maturity. I used today’s prices. And of course, I picked the names that have the best long-term outlooks.

You should only buy LEAPS of the best quality companies with the rosiest growth prospects and rock-solid balance sheets to be certain they will still be around in two years. I’m talking about picking up Cadillacs, Rolls Royces, and even Ferraris at fire sale prices. Don’t waste your money on speculative low-quality stocks that may never come back.

If you buy LEAPS at these prices and the stocks all go to new highs, then you should earn an average 131.8% profit from an average stock price increase of only 17.6%.

That is a staggering return 7.7 times greater than the underlying stock gain. And let’s face it. None of the companies below are going to zero, ever. Now you know why hedge fund traders only employ this strategy.

There is a smarter way to execute this portfolio. Put in throw-away crash bids at levels so low they will only get executed on the next cataclysmic 1,000-point down day in the Dow Average.

You can play around with the strike prices all you want. Going farther out of the money increases your returns, but raises your risk as well. Going closer to the money reduces risk and returns, but the gains are still a multiple of the underlying stock.

Buying when everyone else is throwing up on their shoes is always the best policy. That way, your return will rise to ten times the move in the underlying stock.

If you are unable or unwilling to trade options, then you will do well buying the underlying shares outright. I expect the list below to rise by 50% or more over the next two years.

Enjoy.

Microsoft (MSFT) - March 18 2022 $180-$190 bull call spread at $2.67 delivers a 274% gain with the stock at $190, up 16% from the current level. As the global move online vastly accelerates the world is clamoring for more computers and laptops, 90% of which run Microsoft’s Windows operating system. The company’s new cloud present with Azure will also be a big beneficiary.

Apple (AAPL) – June 17 2022 $210-$220 bull call spread at $6.47 delivers a 55% gain with the stock at $226, up 14% from the current level. With most of the world’s Apple stores now closed, sales are cratering. That will translate into an explosion of new sales in the second half when they reopen. The company’s online services business is also exploding.

Alphabet (GOOGL) – January 21 2022 $1,500-$1,520 bull call spread at $7.80 delivers a 28% gain with the stock at $226, up 14% from the current level. Global online searches are up 30% to 300%, depending on the country. While advertising revenues are flagging now, they will come roaring back

QUALCOMM (QCOM) – January 21 2022 $90-$95 bull call spread at $1.55 delivers a 222% gain with the stock at $95, up 23% from the current level. We are on the cusp of a global 5G rollout and almost every cell phone in the world is going to have to use one of QUALCOMM’s proprietary chips.

Amazon (AMZN) – January 21 2022 $2,100-$2,150 bull call spread at $17.92 delivers a 179% gain with the stock at $2,150, up 15% from the current level. If you thought Amazon was taking over the world before, they have just been given a turbocharger. Much of the new online business is never going back to brick and mortar.

Visa (V) – June 17 2022 $205-$215 bull call spread at $3.75 delivers a 166% gain with the stock at $215, up 16% from the current level. Sales are down for the short term but will benefit enormously from the mass online migration of new business only. They are one of a monopoly of three.

American Express (AXP) – June 17 2022 $130-$135 bull call spread at $1.87 delivers a 167% gain with the stock at $135, up 28% from the current level. This is another one of the three credit card processors in the monopoly, except they get to charge much higher fees.

NVIDIA (NVDA) – September 16 2022 $290-$310 bull call spread at $6.90 delivers a 189% gain with the stock at $310, up 19% from the current level. They are the world’s leader in graphics card design and manufacturing used on high-end PCs, artificial intelligence, and gaining. They befit from the soaring demand for new computers and the coming shortage of chips everywhere.

Walt Disney (DIS) – January 21 2022 $140-$150 bull call spread at $2.55 delivers a 55% gain with the stock at $116, up 31% from the current level. How would you like to be in the theme park, hotel, and cruise line business right now? It’s in the price. Its growing Disney Plus streaming service will make (DIS) the next Netflix.

Target (TGT) – June 17 2022 $125-$130 bull call spread at $1.40 delivers a 257% gain with the stock at $130, up 16% from the current level. Some store sales are up 50% month on month and lines are running around the block. Their recent online growth is also saving their bacon.

Looks Like a “BUY” signal to Me

April 9, 2020/by Mad Hedge Fund Trader

April 6, 2020

Diary, Newsletter, Summary

Global Market Comments
April 6, 2020
Fiat Lux

Featured Trade:

(MARKET OUTLOOK FOR THE WEEK AHEAD, or MAD HEDGE GOES POSITIVE ON THE YEAR)
(INDU), (SPY), (VIX), (VXX), (AMZN), (MSFT), (BAC), (JPM)

April 6, 2020/by Mad Hedge Fund Trader

The New Crown Jewels of Social Distancing

Tech Letter

The second tier of social distancing tech stocks will do well in this brave new world in which digital lives have superseded physical ones.

Sure, most of you already know that Amazon (AMZN), Slack (WORK), Microsoft (MSFT), Zoom Communications (ZM), and Teladoc Health (TDOC) are the crown jewels of current social distancing tech stocks, but there is another group that should also outperform.

Here are 4 that you should take a look at with DocuSign being the best of the bunch:

DocuSign (DOCU)

Teleconferencing and other niches have come front and center and consummating deals have migrated to one place since people cannot physically sign their name from pen to paper.

Electronic signatures were basically a cottage industry when it came out, but it is here to stay and this company has investors buzzing. Although the volume of business agreements being signed globally may temporarily slip, those that are continuing to work are enabled by DocuSign to close agreements without meeting eye to eye.

I expect resiliency in the type of products DocuSign provides and the remote implementation options.

DocuSign is well-positioned within the defensive category of digital transformation spend. Their recent acquisition of Seal Software will help boost DocuSign’s ability to leverage the power of artificial intelligence in the domain of contract analytics.

The opportunity to mitigate time spent on manual workflows through the addition of Seal to the portfolio can bolster the value proposition and drive ROI (return on investment) for customers.

The trajectory of the company was validated by DocuSign’s strong fourth-quarter earnings results with adjusted earnings increasing 12 cents per share which is a 100% increase year over year.

Just as impressive, DocuSign posted quarterly revenue of $274.9 million, an increase of 38%. As the data suggests, the signals all point to this company continuing its outperformance.

The e-document market has been monopolized by DocuSign with competition shut out, and as business goes 100% virtual in the current environment, this should have a positive network effect that will resonate when the world opens back up.

The next 3 stocks aren’t growth companies like DocuSign but are cheap stocks under $10 that might be worth a look.

Sirius XM Holdings (SIRI)

With all the extra time at home, satellite radio has hit the jackpot, making their services much more appealing.

Since Sirius and XM Radio merged in 2008, the combined Sirius XM Holdings has enjoyed a near-monopoly on satellite radio.

Sirius built on that with the 2018 acquisition of Pandora, the music streaming product, helping to fill the sails again with rapid revenue growth; its audio products now reach more than 100 million people.

Sirius' situation is appearing healthy and added a further 1.1 million subscribers in 2019 alone, bringing its total paying subscribers to roughly 30 million. The company's audacious strategy of partnering with auto manufacturers to pre-install SiriusXM in new models should help steadily grow the business.

Zynga (ZNGA)

This video game stock is cheap and could be a beneficiary of the stay at home revolution.

Zynga's portfolio of popular games, combined with hyper-charged growth, makes it one of the best cheap stocks to buy under $10.

Last quarter, the social gaming developer behind franchises like Words With Friends, Zynga Poker, CSR Racing, and FarmVille set new company revenue records up 48%.

While growth is likely to decelerate quickly from such temporary coronavirus catalysts, I expect double-digit revenue growth in 2020.

Still, Zynga is holding up remarkably well, especially in the COVID-19 era, as people increasingly turn to mobile devices for entertainment.

Nokia Corp. (NOK)

Nokia's expected earnings growth is impressive with Wall Street looking for an 8% bump in 2020 and roughly 30% profit growth in 2021.

Cheap stocks to invest in under $10 don't often come in the form of well-oiled global corporations valued at $15 billion.

The Finnish communication equipment telecom is one of the rare exceptions against the rule.

Sales have grown 14% annually for the last five years. Nokia may end up one of the 5G stocks to watch in the coming years because of the stigma of Huawei forcing many Europeans to go with brands closer to home.

Nokia pays a hefty 8% dividend as well and will never need a last-second bailout.

March 30, 2020/by Mad Hedge Fund Trader

The Boom in E-Commerce

Tech Letter

Social distancing signals the death of business in March and April 2020. Enter online shopping and E-commerce.

E-commerce’s greatest strength is pulling ahead of its competition while Millennials have also been the catalyst in turning the general shopping experience into a seamless digital affair.

And now that the world is at the mercy of an invisible virus, the use case for e-commerce business models has never been brighter, more appealing, and contactless.

That’s not to say that there are still net negatives from worker’s losing their jobs and being unable to buy goods, whether online or not. The overall damage to tech companies as a result of the pandemic cannot be ameliorated with a simple panacea.

The pain is just starting as the tech market searches for a bottom.

Covid-19 cases have mushroomed to over 11,200, and investors need to digest that continued underperformance lies ahead in the short-term.

But, the long-term migration towards digital models is looking better by the second.

Essentially, the e-commerce method is being supercharged by the coronavirus and the positive unintended consequences harvested by the e-commerce business models are directly correlated to increasing fatalities.

The health scare is ushering in a giant wave of new long-term customers who are just starting their digital experiences, making investing and e-commerce a topic worth discussing.

Astonishingly, the work environment has truly metamorphosized the past two weeks - any worker who can work at home is now working at home.

No longer do we have the hesitant boss who thinks working at home is all fantasy and no production.

Local policies have been so drastic in some cities that lockdowns of schools and restaurants have become commonplace.

People in those cities have also begun shunning public, crowded places in the name of health and survival.

How bad is it out there on the streets, and how poorly are U.S. tech firms doing?

The economic pain caused by the escalating coronavirus pandemic will be worse than the Great Financial Crisis of 2008.

The Chinese economy is contracting at a 15% annual rate, while the European economy is already in severe recession because of the drop off of China revenue.

In the U.S., they are shutting down restaurants, schools and major events; people are going to be without a paycheck, and this doesn’t set up nicely for consumers to pay for tech services that aren’t utilities.

Unless there are major policy moves soon, a downward spiral will usher in something akin to a global tech recession, and U.S. Secretary of the Treasury Steve Mnuchin is already ringing the alarm bells by saying unemployment could spike to 20%.

Tech won’t avoid the carnage in this drastic scenario, and it's still not “buy the dip” time.

Many industries are already queued up at Washington’s front door for a bailout and even though tech firms are better positioned than say, the oil industry, the overall slide in demand from consumers will hit come next earnings report which is just around the corner.

The bill Washington will need to foot appears upwards of $3 trillion and it’s easy to understand why when, according to a March 2020 YouGov survey, over a quarter (27%) of those in the US and 14% in the UK said they avoided public places and that number has to be closer to 80% now.

What's important to note when it comes to investing in e-commerce, is that some tech firms are a little bit luckier than others, such as Amazon, who can’t find enough workers and is raising wages and opening 100,000 new positions across the US to ensure its delivery network can service the coronavirus pandemic.

Not only do they need full-time positions but also part-time positions will be made available to meet historical seasonal labor demand in its fulfillment centers.

Management promised to inject $350 million to raising wages by $2 per hour in the US throughout April.

Amazon announced it would limit its warehouses to critical items such as medicine and household staples to ensure they meet demand.

Right now, investing in e-commerce means the companies that provide currently popular goods, such groceries, pet supplies, beauty and personal care products, health and household items, baby products, and industrial items.

Other e-commerce companies haven’t fared as well as Amazon, such as furniture e-company Wayfair who reportedly relies on mainland China for half of its merchandise and sell only one type of product - furniture.

Wayfair’s supply chain disruptions are hurting the company’s ability to deliver furniture, but it also coincides with a massive drop off in demand as consumers shun furniture for household items and groceries.

Shares of Wayfair have dropped over 400% since January partly because the company has never been profitable and is now entering into a worsening climate to sell furniture which equated to an optimal signal for investors to dump the stock in bucketloads.

I have been bearish on Wayfair since last year and envisioned an imminent wealth-destroying effect for their business model, but I am shocked that shares dropped this rapidly.

Three weeks ago, the Boston-based company fired 500 people to help “lower costs,” validating my hypothesis.

The exorbitant cost of acquiring each additional customer was the reason I hated this company in the first place.

Uncertainty is the message of the day, and certain e-commerce companies will enjoy the turbocharging or discharging of their models.

Tech shares hate uncertainty and investors must brace themselves with regards to investing and e-commerce.

March 20, 2020/by Mad Hedge Fund Trader

Long Term Economic Effects of the Coronavirus

Diary, Newsletter

The world will never be the same again.
Not only is the old world rapidly disappearing before our eyes, the new one is breaking down the front door with alarming speed. In short: the future is happening fast, very fast, and with coronavirus, people are understanding wondering about economic effects long term.

To a large extent, long term economic trends already in place have been given a turbocharger. Quite simply, you just take out the people. Human contact of any kind will be minimized. I’ll tick off some of the more obvious.

You may think I’m nuts. But all San Francisco Bay Area counties have been given a “shelter in place” order. All travel is banned except to gain essential necessities. In any case, the grocery stores are now empty, unless you have a taste for chickpea-based pasta.

Let me clarify first that it is highly unlikely that you will get the Corona virus. If China peaks at the current 90,000 cases and 4,000 deaths, that means there is one chance in 325,000 you will die of the Corona virus. If the number of cases doubles, that drops to one chance in 175,000. In other words, you are more likely to win the lottery than die of Corona virus.

However, that is logic speaking. Fear is what is firmly in the driver’s seat right now. The only data point that counts now is the number of new Corona cases. You can find that figure here.

In the meantime, you better get used to your new life. You know that home office of yours? It is about to gain a full-time occupant, i.e. you. Most large companies already migrated to four, or even three-day work weeks, with the remainder to be spent at home.

One email, and that has suddenly become a five-day week at home. Many of these employees are never coming back, preferring to avoid horrendous commutes, lower costs, and yes, future pandemic viruses. We are already using GoToMeeting (LOGM) and Zoom (ZM) for many meetings. That simply becomes a full-time enterprise.

Commerce will change beyond all recognition. Did you do a lot of shopping on Amazon (AMZN) like I do? Now, you’re really going to pour it on. Amazon just announced the hiring of 100,000 new distribution and delivery people today to handle the surge in business. The pandemic is really going to be the death knell of the mall, where a potentially fatal disease is only a sneeze away. Avoid mall REITs (SPG) like the plague, no matter how much they promise to pay you in yield.

And how are you going to pay for that transaction? Guess what one of the most efficient transmitter of disease is? That would be US dollar bills. Take paper money in change and you are not only getting contact from the salesclerk, but the last dozen people who handled the money.

Contactless payments deal with this nicely. People may be swiping their iPhone wallet, or are simply scanned when they walk in the store, as with some Whole Foods shops owned by Amazon.

Conferences? A thing of the past. All of my public speaking events around the world over the next three months have been cancelled. In their place will be webinars. They offer lower conversion rates but include cheaper costs as well. At least I won’t have 18 hours of jet lag to deal with anymore. I’m sure Quantas will miss those first-class ticket purchases and I’ll miss the Champaign.

Entertainment is also morphing beyond all recognition. Comcast just announced that newly released movies will be available for a $20 rental. Clearly, they are assuming that theater attendance will go to zero. Again, this has been a long time coming and the other major movie producers will soon follow suit.

With the president banning assemblies of more than ten people today that’s a safe bet. Regal has announced that it is closing all 542 of its theaters. Stay away from AMC Entertainment Holdings (AMC), although its already almost gone to zero, down 75% this year.

Exercise is changing overnight. All gyms and health clubs are now closed, so working out will become a solo exercise far away on a high mountain. I have already been doing this for 30 years, so piece of cake here. Friends with yoga classes are now doing them in the living room, streaming their instructors online.

That's just a snapshot of some of the long term economic effects of coronavirus.

If you are having trouble getting your kids to comply with social distancing requirements, have a family movie night and watch Gwyneth Paltrow in Contagion. Is has been applauded by scientists as the most accurate presentation of the kind of out-of-control pandemic which we may now be facing.

It is bone-chilling.

As for me, I have my stockpile of food and will be self-quarantining for the foreseeable future.

Stay healthy.