Mad Hedge Technology Letter
March 29, 2021
Fiat Lux
Featured Trade:
(THE SECULAR TAILWINDS ARE INTACT)
(AMZN), (FB)
Posts
As we zoom out from tech, energy and industrials stocks have muddled through lately relatively well, while growth tech has been lethargic.
I cannot argue that we are in the middle of a rotation away from growth with capital migrating into value stocks.
Issuing low-interest rate corporate debt and spinning around to unload it to the debt market is advantageous because growth projects can be initiated without worrying about a crushing amount of future interest payments.
There is an expectation of three rate hikes by the end of 2023 which the market must absorb.
Then a mid-term expectation that the domestic economy will come roaring back is now penalizing expensive cloud services and digital communications stocks.
So now, here we are at a rock and hard place with growth with the broader market attempting to digest these roadblocks before the Nasdaq turns higher.
Just take a look at the ultimate growth stock Amazon (AMZN) or even Facebook (FB) to see a frustrating sideways consolidation from last September.
As much of this is quite disheartening for the tech investor, the tech sector remains one of the best places to look for companies creating innovative products and services that transcend industries.
I view this more as a buy the dip opportunity with the dip being elongated with numerous external events working against tech stocks.
So what are tech’s secular drivers?
According to IDC, investments in digital transformation will nearly double by 2023 to $2.3 trillion, representing more than 50% of total IT spending worldwide.
Deloitte recently released a report revealing that during the next 18 months, they expect to witness global companies embrace the bespoke-for-billions trend by exploring ways to use human-centered design and digital technology to create personalized, digitally enriched interactions at scale.
The study found that digital engagement was essential in 2020, with 96% of business leaders reporting companies who did not digitize customer engagement would experience severe negative repercussions.
These problems include a reduction in competitiveness and an inability to meet customer demands.
The companies who chose to embrace software agility meant empowering their developers to prepare tech firms for the unknown and meeting these customer expectations.
Whether it's a meteor hitting the earth, or anything else that is threatening to disrupt an industry or a business, the companies who do best can change on a dime to suit themselves for conditions in the current marketplace.
The health crisis accelerated transformation overnight.
Healthcare had to accelerate the adoption of telemedicine, and commerce companies accelerated their e-commerce plans.
The funnel that led to the consumer wallet has forever changed and in 2021, we will see further strength and momentum where we left off from last year.
Given the increased importance of digital engagement to the company's success moving forward, nearly all business leaders surveyed, 95%, expect to increase investment in digital tools after the pandemic.
Firms are now hyper-targeting a model revolving around customer engagement platforms that truly serve the end-to-end life cycle of all customer engagement in the enterprise.
Why? Because companies need to understand who their customers are, what products they're looking for, what products they bought, and where customers are interacting with their brand across multiple touchpoints.
Platforms allow the developers of the world to build, to take all of those bits of data that are siloed throughout the company to build a cohesive picture of the customer, build a world-class customer service experience and deliver the right communication over the right channel at the right time.
The endgame is to meaningfully improve every interaction every business has with every customer.
That's incredibly valuable to enterprises because it allows them to create differentiated customer experiences and all of the successful tech companies have participated in this trend.
I think that the infrastructure to build great digital products and great digital experiences spans many categories.
This rich area of opportunity will unlock developer influence and developers' ability in tech companies to build the future of these companies.
Now that every other company and industry needs tech to reach the end-user and to even initiate the selling cycle, tech is entrenched as the long-term winner.
Global business will cease to exist without software and no company will reach full potential without being powered by the best tech tools in the world, period.
And as the digital transformation is suppressed momentarily by external factors out of the control of the tech companies themselves, tech investors wait for signals for when the consolidation is over.
Tech already comprises 40% of the S&P, and by 2030, that number will be close to 75%.
This is still an industry that nobody should bet against in the long term.
Mad Hedge Technology Letter
March 26, 2021
Fiat Lux
Featured Trade:
(AVOID THIS KOREAN ECOMMERCE COMPANY)
(CPNG), (AMZN), (GRUB), (UBER), (JD), (SHOP), (MELI)
I might characterize Coupang (CPNG) as something akin to China’s JD.com.
It's an e-commerce company that has fulfillment solutions, not dissimilar to Amazon (AMZN) Fulfillment. They also have storefronts that they provide for businesses, which isn't dissimilar to say, a Shopify (SHOP).
Even combining aspects of Amazon and Shopify are there but they don’t have the powerful AWS cloud business.
Similar to JD.com (JD), which is a Chinese e-commerce platform, Coupang has differentiated itself by owning its entire logistics and delivery system.
What is different about Coupang versus the other players in Korean e-commerce is that they own their own inventory for the most part.
That means that they have inventory sitting on their balance sheets.
They have responsibility for pushing that through. But it also means, since they directly negotiate with the manufacturers of these items, they're able, for the most part, to get lower prices.
Total Korean e-commerce spend was $128 billion in 2019, which is expected to grow to $206 billion by 2024, implying a CAGR of approximately 10%.
This is where Coupang has a chance but in a rising interest rate environment and with competition on the New York exchanges from Amazon (AMZN), Shopify (SHOP), even MercadoLibre (MELI), I don’t believe Coupang is more attractive than these 3 in its current form as it relates to American investors pouring money into their stock.
Is it an advantage if 70% of Koreans live within seven miles of the Coupang logistic centers?
Certainly, there is that train of thought.
The massive investments into fulfillment centers mean they can surpass the delivery speed of many of its competitors because South Korea is essentially one capital city with millions upon millions hovering on top of each other like many other parts of Asia.
The problem I can have with this scenario is that margins could suffer because a busy Korean lifestyle doesn't lend itself to things like in-store shopping as readily as it does in the United States, and it could manifest itself with Koreans tapping into higher frequency in which they buy online which will push up total spend, but margins will decrease because you are buying stuff that won’t move the needle higher because you've paid for the service.
I can easily see someone just buying one item for delivery in the morning and doing that seven days per week.
Now I need a set of tweezers, I'm going to order that. Tomorrow, I need cotton pads, I’m going to order that.
Over time, operating margin will get butchered with a business like this.
And what do you know? I’m right, they have been losing billions upon billions the past few years with no end in sight.
How long will the external investors subsidize their losses?
At a broader level, mobile phone penetration is already at 96% of Koreans and 40% of Koreans order groceries online, so it’s hard for me to digest where the addressable market can expand from here because they have already collected so much of the available harvest.
This IPO does feel a little bit like an ex-growth dump on the retail investor and that’s not saying shares can’t appreciate at all, but investors believing this is the next Amazon are sorely mistaken.
They are not Amazon, not even close, and they are also confined to one small market where the population has peaked and will start decreasing in numbers.
The population is only 15% of the U.S. and incomes in the U.S. are vastly higher, so how does Coupang become an Amazon without the AWS business?
Just as disturbing, the median age in Korea has ballooned from 31.9 in 2000 to 43.7 in 2020 and this cohort doesn’t strike me as the group in the glory years of family formation, peak spend, or technological know-how.
As the Korean population starts to decline in 2025 and the median age creeps up from 43.7 to 50, then aside from adult diapers, where does the incremental growth come from in Korea?
I just don’t see it.
Personal incomes are going to rise at an annualized rate of about 3% every year and I believe much of the total spend will be fought out attempting to woo the big buyers which offer a point of attack for competition that should come around in the next 2 to 3 years.
They also have Coupang Eats, not dissimilar to Grubhub (GRUB) or Uber (UBER) Eats. They have grocery delivery, and even an integrated payment processor. All of these things that took Amazon much longer to build out, admittedly, were a little before their time there, Coupang has already integrated that into the platform.
For this, I give them credit, but they are still nothing like Amazon in terms of potency and scale.
In 2019, active customers rose 34% and that’s what a prototypical growth company should do.
It’s not shocking.
Then an analyst would think that with covid and all that public chaos pinning consumers at home, surely, Coupang would grow active customers by 50% of even 60% in 2020, right?
But active customers only grew 18% in 2020, and they provided zero insight about why active customer growth slowed nearly in half year-over-year, and that for me shows, Coupang is severely limited by what Korea can offer in terms of growth and total spend.
If readers want to get into the Korean economy then I would advise to wait on other Korean homegrown entrepreneur-led startups with IPOs in the pipeline by Krafton Inc., the creator of hit game PUBG, and the country’s biggest mobile-only bank Kakao Bank. Unlike Coupang, those firms are profitable.
Ultimately, total e-commerce spend for all Internet buyers in Korea is expected to grow from approximately $2,600 in 2019 to approximately $4,300 in 2024 on a per buyer basis and Coupang will take advantage of that but I don’t foresee the 30% annual rise in underlying shares that others do.
I can definitely visualize a grind up with periodical substantial selloffs because of missed targets and disappointing forecasts.
That’s not the type of price action I want to see.
The signs point to Coupang maturing immediately and the executive management creating a special clause to allow them to dump shares right after the IPO illustrates that this tech company will stall out moving forward.
Normally, management must wait 6 months after going public before the lock-up period ends.
Highly unusual and can you believe it? They even gave stock shares to their courier drivers at the IPO, making me pause, then come to the conclusion that I rather invest in a tech company returning incremental value to the shareholders and not the manual labor that is paid by an hourly wage. How bizarre!
Avoid Coupang like the plague.
Global Market Comments
March 24, 2021
Fiat Lux
Featured Trade:
(FIVE TECH STOCKS TO BUY AT THE BOTTOM),
(AAPL), (AMZN), (SQ), (ROKU), (MSFT)
I have prudently ignored investing in tech stocks for the past seven months, and justly so.
Tech has been peddling hard on the business front, but the shares have been going nowhere in a hurry. Many of the leading names are down 30%-50% from their peak prices.
As a result, they are rapidly approaching value territory. When growth becomes cheap and value gets expensive, it’s time to shift from one side of the barbell strategy to the other.
I’m not saying that tech stocks have bottomed. But we are getting close, perhaps within 10% in the best names. It’s now time to lists of stocks to pounce on when the big turn inevitably comes.
Fortunately, Arthur Henry’s Mad Hedge Technology Letter has already done that job for you. See below his list of recommendations.
By the way, if you want to subscribe to Arthur’s groundbreaking, cutting-edge service, please click here.
It’s the best read on technology investing in the entire market.
You don’t want to catch a falling knife, but at the same time, diligently prepare yourself to buy the best discounts of the year.
Here are the names of five of the best stocks to slip into your portfolio in no particular order when the next downside whoosh occurs.
Remember, tech ALWAYS comes back.
Apple
Steve Job’s creation is weathering the gale-fore storm quite well. Apple has been on a tear reconfirming its smooth pivot to software services tilted tech company. The timing is perfect as China has enhanced its smartphone technology by leaps and bounds.
Even though China cannot produce the top-notch quality phones that Apple can, they have caught up to the point local Chinese are reasonably content with its functionality.
That hasn’t stopped Apple from vigorously growing revenue in greater China 20% YOY during a feverishly testy political climate that has their supply chain in Beijing’s crosshairs.
The pivot is picking up steam and Apple’s revenue will morph into a software company with software and services eventually contributing 25% to total revenue.
They aren’t just an iPhone company anymore. Apple has led the charge with stock buybacks and will gobble up a total of $200 billion in shares by the end of 2021. Get into this stock while you can as entry points are few and far between.
Oh, and their 5G phones are selling like hotcakes. Some one billion need to be replaced to bring consumers into the new high-speed 5G world.
Amazon (AMZN)
This is the best company in America hands down and commands 5% of total American retail sales or 49% of American e-commerce sales. The pandemic has vastly accelerated the growth of their business.
It became the second company to eclipse a market capitalization of over $1 trillion. Its Amazon Web Services (AWS) cloud business pioneered the cloud industry and had an almost 10-year head start to craft it into its cash cow. Amazon has branched off into many other businesses since then oozing innovation and is a one-stop wrecking ball.
The newest direction is the smart home where they seek to place every single smart product around the Amazon Echo, the smart speaker sitting nicely inside your house. A smart doorbell was the first step along with recently investing in a pre-fab house start-up aimed at building smart homes.
Microsoft (MSFT)
The optics in 2021 look utterly different from when Bill Gates was roaming around the corridors in the Redmond, Washington headquarter and that is a good thing.
Current CEO Satya Nadella has turned this former legacy company into the 2nd largest cloud competitor to Amazon and then some.
Microsoft Azure is rapidly catching up to Amazon in the cloud space because of the Amazon-effect working in reverse. Companies don’t want to store proprietary data to Amazon’s server farm when they could possibly destroy them down the road. Microsoft is mainly a software company and gained the trust of many big companies especially retailers.
Microsoft is also on the vanguard of the gaming industry taking advantage of the young generation’s fear of outside activity. Xbox-related revenue is up 36% YOY, and its gaming division is a $10.3 billion per year business.
Microsoft Azure grew 87% YOY last quarter. The previous quarter saw Azure rocket by 98%. Shares are cheaper than Amazon and almost as potent.
Square (SQ)
CEO Jack Dorsey is doing everything right at this fin-tech company blazing a trail right to the doorsteps of the traditional banks.
The various businesses they have on offer make me think of Amazon’s portfolio because of the supreme diversity. The Cash App is a peer-to-peer money transfer program that cohabits with a bitcoin investing function on the same smartphone app.
Square has targeted the smaller businesses first and is a godsend for these entrepreneurs who lack immense capital to create a financial and payment infrastructure. Not only do they provide the physical payment systems for restaurant chains, but they also offer payroll services and other small loans.
The pipeline of innovation is strong with upper management mentioning they are considering stock trading products and other bank-like products. Wall Street bigwigs must be shaking in their boots.
Roku (ROKU)
Benefitting from the broad-based migration from cable tv to online steaming and cord-cutting, Roku is perfectly placed to delectably harvest the spoils.
This uber-growth company offers an over-the-top (OTT) streaming platform along with the necessary hardware and picks up revenue by selling digital ads.
Founder and CEO Anthony Woods owns 21 million shares of his brainchild and insistently notes that he has no interest in selling his company to a Netflix or Apple.
Viewers are reaffirming the obsession with on-demand online streaming content with hours streamed on the platform increasing 58% to 5.5 billion.
The Roku platform can be bought for just $30 and is easy to set-up. Roku enjoys the lead in the over-the-top (OTT) streaming device industry controlling 37% of the market share leading Amazon’s Fire Stick at 28%.
The runway is long as (OTT) boxes nestle cozily in only 40% of American homes with broadband, up from a paltry 6% in 2010.
They are consistently absent from the backbiting and jawboning the FANGs consistently find themselves in partly because they do not create original content and they are not an offshoot from a larger parent tech firm.
This growth stock experiences the same type of volatility as Square.
Global Market Comments
March 1, 2021
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or WAKE UP CALL),
(TLT), (JPM), (BAC), (C), (MS), (GS),
(JNJ), (AAPL), (FB), (AMZN), (GOOGL)
This was the week the stock traders learned there was such a thing as a bond market. They know this because it was bonds that completely demolished their stock trading books.
Suddenly, markets went from zero offered to zero bid. Many strategists labored under the erroneous assumption that ten-year US Treasury yields would never surpass 1.50% in 2021. Yet, here we are only in March and it’s already topped 1.61%. It’s become the one-way trade of the year.
The bond market seems to be discounting an imminent runaway inflation rate. But at a 1.4% annual figure, it's nowhere to be seen, not with 20 million unemployed and Main Streets everywhere looking like ghost towns.
I still believe that technology is evolving so fast, hyper-accelerated by the pandemic, that it will wipe out any return of inflation. I will not believe in inflation until I see the whites of its eyes, to paraphrase Colonel William Prescott at the Battle of Bunker Hill.
Of course, it is I who has been screaming from the rooftops about the coming crash of the bond markets, since March 20. Being short the bond market has been one of my most profitable trades of 2020 AND 2021. If I am annoyed by anything, it happened too fast, depriving me several more round trips a slower crash would have permitted.
When you have to own stocks, make them financials (JPM), (BAC), (C), which benefit from rising rates. Their loan rates are rocketing while their cost of money is fixed at the Fed overnight cost of funds at 0.25%. Trading volumes at the brokers (MS), (GS) are through the roof, especially for options traders.
It is all a perfect money-making machine. At least, the stock market thinks so.
I’ll tell you something that markets are not paying attention to at all, and it is the tremendous improvement in the pandemic. Since January 20, news cases have cratered from 250,000 a day to only 70,000, down 72%. The best-case scenario which markets discounted by near doubling in 11 months is happening.
With the addition of the Johnson & Johnson (JNJ) vaccine, some 700 million doses will be available by June. We could be back to normal by summer, at least in the parts of the country that don’t believe it is still a hoax.
This breathes life into the blockbuster 7.5% GDP growth scenarios now making the rounds. I think people have no idea how hot the economy is really going to get. Labor and materials shortages may be only three months off, but with no inflation.
So, what does all this mean for the markets? It all sets up the normal 5%-10% correction that I have been predicting. If you have two-year LEAPS on your favorite names, hang on to them. We are going much higher.
I went into the Monday selloff with a rare 100% cash position. The 20% I have now in commodities I picked up on puke out, throw up on your shoe capitulation days.
The barbell is still the winning strategy.
Domestic recovery stocks have been on fire for six months, with small banks up a ballistic 80%. Big tech has gone nowhere. But their earnings are still exploding, in effect, making them 20% cheaper over the same time period.
It’s just a matter of time before markets rotate back into tech and give domestic recovery a break. Think (AAPL), (FB), (AMZN), and (GOOGL). That is where the smart money is going right now.
The bond auction was a total disaster. The US Treasury offered $62 billion worth of seven-year US Treasury bonds, double the amount a year earlier. At a 1.95% yield and no one showed. Foreign participation was the worst in seven years. The bid-to-cover ratio was pitiful. Over issuance by the government crushing the market? Who knew? Imagine how high interest rates would be if the Fed wasn’t buying $120 billion a month of bonds?
The insanity is back, with GameStop (GME) doubling in the last 15 minutes of the month. Nobody knows why. It was why stocks tanked at the close on Thursday, scaring away real investors in real stocks. (GME) has become an indicator of all that’s wrong with the market.
Copper demand is rocketing, says Freeport McMoRan (FCX) CEO Richard Adkerson. That’s why he is opening three new US mines this year, adding 250 million pounds in annual output. Biden’s ambitious EV plans are the trigger. You can’t build an EV without a lot of the red metal. The world’s largest copper producer has become a major climate change and ESG play.
NVIDIA blows it away, with sales up a blockbuster 66%. Demand from gamers locked up at home was overwhelming. Purchases by bitcoin miners were through the roof. Even demand from the auto industry was up 16%, even though card sales aren’t. Too bad they picked the wrong day to announce, with the stock off 8.2%. (NVDA) is the one tech stock I would buy on dips.
Fed says business failures will continue at record pace, mostly occurring among small, unlisted local businesses. Biden’s $1.9 trillion rescue budget will come too late for many. Unemployment could stay chronically high for years, as the Weekly Jobless Claims are suggesting.
Housing starts fell in January, down 6.0% to 1.58 million units. A much smaller drop was expected. Rising land and lumber costs are cutting into the economics of new construction. Home prices are going to have to accelerate to suck in more supply. Housing Permits for new construction soared by 10.4% last month, so the future looks bright for builders.
Tesla (TSLA) crashed, down $180 in two days. We have just suffered a perfect storm of bad news about Tesla. Interest rates have been soaring, bad for all tech in the mind of the market. Competitor Lucid Motors announced a SPAC valued at $11 billion. And Elon Musk said Bitcoin looked “high” after investing $1.5 billion. Get ready to buy the dip, but not yet.
Quantitative easing to continue, says Fed governor Jay Powell, even if the economy improves. The $120 billion in bond-buying remains, even if the economy improves. He’s doing everything possible to create inflation.
Panic hits the crypto markets, dragging down technology equities with them. The two have been trading 1:1 for four months. Bitcoin suffered an eye-popping 25% plunge from $58,000 to 43,600. The tail is now wagging the dog. All risk-taking may have spiked with the Friday options expiration. Watch Bitcoin for a tech stock revival and vice versa. Stocks have earnings multiple support. Crypto doesn’t. I’ll buy Bitcoin when they post a customer support number.
Australian dollars soars as predicted, from $58 to $79 in 11 months. We could hit parity in 2022. The Aussie is basically a call option on a synchronized global economic recovery. End of the pandemic will also bring a resumption of massive Chinese investment in the Land Down Under. Keep buying the dips in (FXA).
Case-Shiller explodes to the upside, up 10.4% in December. It’s the hottest read in seven years for the National Home Price Index. Phoenix (14.4%), San Diego (13.0%), and Seattle (13.6%) were the strongest cities. The flight from the cities continues.
(TLT) breaks $138, surpassing my end 2021 target of a 1.50% ten-year US Treasury yield. So, I lied. My new yearend target is now $120, which would take ten-year yields to 2.00%. With a $1.9 trillion rescue budget about to kick in after the $900 billion that passed in December, the economy and demand for funds are about to rocket. Better hurry up and buy that house before mortgage rates rise out of reach.
Weekly Jobless Claims sink to 730,000. I can’t believe that 730,000 is now considered a good number, compared to 50,000 a year ago.
When we come out the other side of pandemic, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With interest rates still at zero, oil cheap, there will be no reason not to. The Dow Average will rise by 400% to 120,000 or more in the coming decade. The American coming out the other side of the pandemic will be far more efficient and profitable than the old. Dow 120,000 here we come!
My Mad Hedge Global Trading Dispatch closed out with a 13.28% profit in February after a blockbuster 10.21% in January. The Dow Average is up a miniscule 1.1% so far in 2021.
This is my fourth double-digit month in a row. My 2021 year-to-date performance soared to 23.49%. After the February 19 option expiration, I am now 80% in cash, with longs in (XME) and (FCX).
That brings my 11-year total return to 446.04%, some 2.12 times the S&P 500 (SPX) over the same period. My 11-year average annualized return now stands at an unbelievable 39.64%.
My trailing one-year return exploded to 93.48%, the highest in the 13-year history of the Mad Hedge Fund Trader. We have earned 103.31% since the March 20, 2020 low.
We need to keep an eye on the number of US Coronavirus cases at 28 million and deaths topping 510,000, which you can find here.
The coming week will be a boring one on the data front.
On Monday, March 1, at 10:00 AM EST, the ISM Manufacturing Index is out. Zoom (ZM) reports.
On Tuesday, March 2, at 9:00 AM, Total US Vehicle Sales for February are announced. Target (TGT) and Hewlett Packard (HPQ) report.
On Wednesday, March 3 at 8:15 AM, the ADP Private Employment Report is released. Snowflake (SNOW) reports.
On Thursday, March 4 at 9:30 AM, Weekly Jobless Claims are printed. Broadcom (AVG) and Costco (CSCO) report.
On Friday, March 5 at 8:30 AM, The February Nonfarm Payroll Report is announced. Big Lots (BIG) reports. At 2:00 PM, we learn the Baker-Hughes Rig Count.
As for me, the deed is done, I got my first Covid-19 shot, pure Pfizer.
The Marine Corps failed to deliver, as only active duty are getting shots. Washoe County ran out. Incline Village said I couldn’t get a shot until July. My own doctor had no clue.
Then I got an automated call from the doctor who did my stem cell treatment on my knees five years ago. They belonged to a large group that had my birthday in their system and my number came up on the first day the under ’70s opened up.
Going there was a celebration. Everyone was thrilled to death to get their shot. It was like winning the lottery. Our little local hospital operated with machine-like efficiency, inoculating 1,300 a day. It was a straight drive in, dive out. It was an “all hands-on deck” effort, with everyone from the board directors to the billing clerks manning the needles. It took longer to buy a Big Mac than to get my shot.
To make sure I didn’t pass out, I was sent to a holding area, where a person was assigned to each car. I got the CEO and grilled him relentlessly on his business model for 30 minutes.
I haven’t felt this good since I got my polio vaccine sugar cube in 1955.
Stay healthy.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
January 20 Infection Rate
March 3 Infection Rate
Global Market Comments
February 24, 2021
Fiat Lux
Featured Trade:
(LONG TERM ECONOMIC EFFECTS OF THE CORONA VIRUS),
(ZM), (LOGM), (AMZN), (PYPL), (SQ), CNK), (AMC), (IMAX), (CCL), (RCL), (NCLH), (CVS), (RAD), (WMT)
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.
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 changes.
All San Francisco Bay Area counties are still living under a “shelter in place” order. All schools have now been closed for a year. In March 2020 the local high school managed to get the first weekend of their annual musical “Titanic” done, but not the second.
All travel is banned except to gain essential necessities. Most bars and restaurants have been closed indefinitely, except for takeout. Some cities are issuing $1,000 fines for failure to wear a mask. The kids have turned into white, pasty zombies after staring at laptops for 12 months.
To say that we are merely fatigued from a yearlong quarantine would be a vast understatement. Climbing the walls is more like it.
As I write this, US Covid-19 deaths have topped a half million and cases have surpassed 28 million. China peaked at 4,000 deaths with four times our population. The difference was leadership issue. China welded the doors of Covid carriers shut. Here said it was a big nothing and would “magically” go away.
The magic didn’t work.
In the meantime, you better get used to your new life. You know that home office of yours you’ve been living in? It is now a permanent affair, as your employer figured out that they can make more money and earn a high stock multiple with you at home.
Besides, they didn’t like you anyway.
Many employees are never coming back, preferring to avoid horrendous commutes, lower costs, and yes, future pandemic viruses. GoToMeeting (LOGM) and Zoom (ZM) are now a permanent aspect of your life.
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 hired a staggering 500,000 new distribution and delivery people in 2020 to handle the surge in business, the most by any organization since WWII. I can’t believe the stock is only at $3,200. It is worth double that, especially if they break up the company.
The epidemic really hammered the mall, where a fatal disease is only a sneeze away. Mall REITs are only just starting to crawl off the floor and may never again reach their old highs, 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 transmitters of disease is? That would be US dollar bills. Something like 50% of all US paper money already tests positive for drugs, according to one Fed study.
Take paper money in change and you are not only getting contact from the salesclerk, but the last dozen people who handled the money. You are crazy now to take change and then not go swimming in Purell afterwards. Personally, I leave it all as a tip.
Contactless payments deal with this nicely (PYPL), (SQ), two of the top-performing stocks since April. People pay by 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 have been cancelled. Webinars now rule. They offer lower conversion rates but include vastly cheaper costs as well. I can reach more viewers for $1,000 on Zoom than the Money Show could ever attract to the Las Vegas Mandalay Bay for $1 million.
At least I won’t have 18 hours of jet lag to deal with anymore. I’m sure Qantas will miss those first-class ticket purchases and I’ll miss the Champaign.
Entertainment is also morphing beyond all recognition. Streaming is now the order of the day. Disney+ (DIS) was probably the best-timed launch in business history, earning enough to cancel out most of the losses from the closure of the theme parks. Again, this has been a long time coming and the other major movie producers will soon follow suit.
Movie theaters, which have been closed for a year, may also never see their peak business again (CNK), (AMC), (IMAX). The theaters that survive will do so by only accumulating so much debt that they won’t be attractive investments for a decade.
The same is true for cruise lines (CCL), (RCL), (NCLH). But that won’t forestall dead cat bounces that are worth a double in the meantime, as they are coming off of such low levels. No vaccination, no cruise.
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 a piece of cake here.
Friends with yoga classes are now doing them in the living room, streaming their instructors online. The economics of online yoga classes are so compelling, with hundreds attending online classes, that the old model may never come back.
If you are having trouble getting your kids to comply with social distancing requirements, have a family movie night and watch Gwyneth Paltrow and Cate Winslet die in Contagion. It 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. I am at the top of five lists to get vaccinations, but so far all I have received is a ton of special offers from CVS (CVS), Rite Aid (RAD), and Walmart (WMT)
Stay healthy.
