Mad Hedge Technology Letter
November 28, 2018
Fiat Lux
Featured Trade:
(TRUMP'S TARIFF THREAT FOR APPLE))
(AAPL), (BABA), (EBAY), (WMT), (FB), (MSFT), (AMZN)
Posts
Global Market Comments
November 28, 2018
Fiat Lux
Featured Trade:
(WHAT I TOLD MY BIGGEST HEDGE FUND CLIENT)
(SPY), (AAPL), (AMZN), (MSFT)
The administration’s threat of levying 10% on iPhones is a great sign for the technology sector as a whole.
The short-term media sensationalism has flipped this story the other way around crying about this as if it is a major penalty to Apple (AAPL).
Don’t get me wrong, these potential stiff tariffs have the possibility of triggering a $1 billion loss on Apple’s revenue, but this is all about protecting American technology long term.
This is not like taking a sledgehammer and ruining their business model, and it will not strip away this brilliant wealth creation vehicle.
Apple remains a cheap stock to buy for patient long-term holders and is one of the best run companies in the world with an operating maestro executing the roll-out of premium products named Tim Cook, the CEO of Apple.
The administration might not like some of technology firms’ tactics, but in reality, they are a pivotal reason why the economy has been humming along in the longest bull-market ever.
Effectively, the administration has put Apple and its peers up on a pedestal and is defending them from Chinese competition.
What industry wouldn’t want this?
Most of 2018, the current administration presided over a stock market that was going up in a straight line and the bulk of those gains were harvested by the major tech companies, mainly the FANGs.
The administration was quick to take credit for a strengthening stock market and would like to see rates suppressed to engineer more upside.
The FANGs are going through a reversion to the mean after 100% gains and giving back 20% or 30% of profits offer opportune entry point for long-term investors.
The only FANG that needs a structural change is Facebook (FB) and has the funds to do it. The other three plus Microsoft (MSFT) will lead the tech charge when the short-term weakness subsides.
If you think Chinese consumers would bail on Apple products because of the trade war, then you are wrong.
Apple has been grandfathered into Chinese society and it is one of the few iconic American products that can boast this achievement.
Apple is a luxury brand produced by an epochal superpower.
The presence of Apple products reverberates around China’s economic landscape, and even if Chinese people do not like America, they respect its economic prowess and wish to learn from its capitalistic ways.
This is the main reason they send their kids to American universities.
Historically, China was once entirely dependent on Russia to fill in its economic and social vision with the communist party sending its best and brightest to Moscow to study the Soviet Union’s secret sauce.
If you go to Beijing now, most of the second ring road of flats conspicuously remind me of Khrushchyovkas, the unofficial name of a type of low-cost, concrete-paneled or brick three- to five-storied apartment building which was developed in the Soviet Union during the early 1960s.
During this time, its namesake Nikita Khrushchev directed the Soviet government.
Pre-Deng Xiaoping Soviet influences can still be found everywhere in central Beijing.
Once the Chinese communist government realized that the Soviet model impoverished large swaths of society, they went on the open market to find a more optimal method to run their economy that could take advantage of their monstrous man power.
The model they decided on was a fusion of communism and capitalism, and for 30 years, this system fueled Chinese peasants out of poverty and to the promenades of Saint-Tropez.
Because of Chinese laser-like obsession on social status, material possessions are the most important way for them to differentiate against each other.
For Chinese women, the x-factor is skin tone, but for Chinese men, it is the brand, quality, and volume of possessions.
Even if rich Chinese hate Apple and their iPhones, they are permanently married to this product because owning a Chinese smartphone would be a monumental faux pas on the same level as American First Lady Melania Trump shopping for her new clothes at Walmart (WMT).
This is the same reason why every political who’s who in China drives an Audi A6, and every successful Chinese business executive drives a BMW.
Luxury brands are closely associated to the person’s social status in China and these unwritten rules have even more weight than the official rules in China partly because most Chinese over 40 are uneducated, plus China’s lack of public trust.
Apple’s tentacles reaching deep into Chinese society have in fact led to a situation where Apple-related jobs for Chinese citizens add up to over 5 million jobs which is over double the number of jobs Apple supports in America.
The result of Apple morphing into a pseudo-Chinese company is that pain for Apple means a loss of Chinese jobs on a large scale at a time when the Chinese economy is becoming more precarious by the day.
The Chinese economy is softening under a massive burden of crippling public and private debt that is putting the cap on growth.
As a result of the trade skirmish, China has temporarily halted its deleveraging effort that was intended to remedy the health of the economy and has reverted back to the China of old, low-quality infrastructure projects and heavily polluted coal production.
China’s rapid ascent to prosperity could also mean the Chinese consumer and economy could go through a reversion to the mean scenario with private and public companies loaded to their eyeballs with debt going bust and a looming economic stimulus in the cards if this plays out.
All this means is that Apple is too big to fail in China and CEO of Apple Tim Cook absolutely knows this.
Theoretically, Chinese consumers absolutely have access to local smartphone substitutes for $200 that would do the same job as a $1,000 iPhone.
I have tested out Huawei and Xiaomi premium smartphones costing $400, and they have more than enough firepower to be a reliable everyday smartphone and some.
The fact is that Chinese consumers intentionally choose not to substitute Apple products.
And I would go deeper than that by saying Steve Jobs is revered in China like a demigod and his passing turned him into a sort of tech martyr with a level of status that not even Alibaba (BABA) originator Jack Ma can touch.
Jack Ma performed miracles by copying eBay’s (EBAY) blueprint of e-commerce from a shabby Hangzhou flat ditching his former job as an English teacher then copying Amazon (AMZN) to juice up growth.
But Jack Ma never created the iPhone, iPod, tablet, or Apple app store from thin air. That he never did.
Making matters even more ironic is that most Chinese communist members actually use an Apple iPhone for the same reasons I mentioned earlier.
Not only that, the children of Chinese communist politicians take lavish vacations to Silicon Valley to take selfie’s in front of Apple’s spaceship headquarters in Cupertino and upload them onto social media.
They then proceed to visit the nearest Apple store right next door at the Apple Park visitor center which is essentially an Apple store on steroids to make bulk purchases of Apple tablets, watches, computers, iPhones for their extended circle of friends and distant relatives because they are “cheaper in America than in China” mainly due to the heavy import duties levied on Apple products in China.
As for tech equities, what this does is blunt short-term positive sentiment for tech stocks and particularly chip stocks that I have told readers to stay away from like the plague.
Apple’s supply chain frenemies don’t have the luxury of selling 80 million luxury phones at $1,000 per quarter and are often the recipient of indiscriminate sell-offs shellacking shares.
Even with the overhanging issue of rising tariffs, tech stocks should produce great earnings next year.
Look at Apple and the consensus EPS outlook for next quarter comes in at $4.73 and that is after EPS increasing 41% sequentially from the quarter before.
Apple will soon become a $300 billion of sales per year company with profitability expanding at a rapid clip.
They are a company that prints money then buys back their own stock profusely. Not many companies can do that.
These negative reports that have been coming fast and furious don’t help the momentum, but the share’s weakness solely means that better entry points are available for investors before Apple launches over $200 again.
There is a high chance that the administration is using Apple as a bargaining chip and nothing will come of it.
Think about it, after all this commotion about the trade war with China, revenue was up almost 20% last quarter in greater China, so what gives?
It means that things aren’t as dire as it seems. A lot of hot steam over nothing is a gift to long-term investors, but short-term traders will feel the pain of the temporarily elevated headline risk.
APPLE PARK VISITOR CENTER – CHINESE TOURIST ATTRACTION
Global Market Comments
November 27, 2018
Fiat Lux
Featured Trade:
(THE QUANTUM COMPUTER IN YOUR FUTURE),
(AMZN), (GOOG),
(THE WORST TRADE IN HISTORY), (AAPL)
At our weekly Monday staff meeting, coworkers were griping and grimacing about their failed internet connections and annoying glitches to their favorite e-commerce sites during the mad rush to find the best deal during Black Friday and Cyber Monday.
Internet traffic was that torrential when sites were driven offline for minutes and some, hours by a bombardment of gleeful shoppers hoping to splash their credit card numbers all over the web on sweet discounts.
The crashing of system servers epitomizes the robust transition to online commerce that has most of us pinned to our devices surfing our go-to platforms all day long.
According to data from Adobe (ADBE) analytics, Black Friday sales jumped 23.6% YOY to $6.22 billion, and it was the first time in history that mobile sales broke the $2 billion threshold.
It is a clear victory for e-commerce and, in particular, mobile shopping that has become more integrated into modern tech DNA.
Mobile sales comprised 33.5% of total sales and were up from 29.1% last year, signaling that more is yet to come from this transcending movement that is shoving everything from content, digital ads, entertainment, banking and pretty much everything you can think of to your handheld smartphone.
CEO of Kohl’s (KSS) Michelle Gass confirmed the e-commerce strength by saying, “80 percent of traffic online came from mobile devices.”
The beauty of this movement is that it’s not an “Amazon (AMZN) takes all” scenario with other players allowed to feast on a growing size of the e-commerce pie.
“Click and collect” has been a strategy that has paid off handsomely with sales up 73% YOY during the shopping holidays.
This all supports my prior claim that e-commerce is one of the most innovative and dynamic parts of technology especially the grocery space, and the buckets full of capital attempting to reconfigure the e-commerce spectrum is creating an enhanced customer experience for the final buyer resulting in better products, superior delivery methods, and cheaper prices.
Some other retailers spicing up their e-commerce strategy are dinosaur big-box retailer’s intent to defend their business from the Amazon death star.
If you can’t innovate in-house, then “borrow” the innovation from somewhere else.
That is exactly what Target (TGT) has chosen to do announcing last week that it would grant free 2-day shipping with no minimum sale threshold.
The tactic is bent on undercutting Walmart (WMT) who currently operate a 2-day free shipping policy with a minimum order of $35.
Most shoppers will buy in bulk easily eclipsing the $35 per order mark minimizing the rot of small orders.
And if they aren’t eclipsing the $35 per order mark, it demonstrates the firm’s offerings lack the diversity and quality to compete with Amazon.
Capturing the incremental sale squarely rests on the e-tailers ability to coax out the buyers’ impulses to move on the can’t-miss items.
The lesser known retailers fail miserably at matching the lineup of products that Amazon can roll out.
The bountiful product selection at Amazon leads customers to pay for 3, 4, 5, 6 or more items on Amazon.com.
That said, I am bullish on Walmart’s e-commerce strategy. The “click and collect” strategy has shown to be an outsized winner increasing industry sales of this type 120% YOY.
Walmart is at the center of this strategy and they are refurbishing their supercenters to accommodate this growth in collecting from the curb.
Effectively, this gives customers the option to skip the queue instead of bracing the hoards and navigating the crowds of shoppers in the supercenter.
Other changes are minor but will help, such as offering online product location maps to customers beforehand and allowing customers to pay for large items like big-screen televisions on the spot.
The biggest windfall is derived from the cataclysmic demise of Toy “R” Us, giving Walmart a new foothold into the toy business.
Walmart is beefing up toy items by 40% in the stores and layering that addition with another 30% increase in their e-commerce division.
Adobe’s upper management recently said in an interview that interactive toys have been a wildly popular theme this year amid a backdrop of the best holiday shopping season ever recorded.
Another attractive gift selling like hotcakes are video games, titles boding well for sales at Activision (ATVI), EA Sport (EA), and Take-Two Interactive (TTWO).
Reliant IT infrastructure will be a key component to executing these holiday sales bonanzas.
Clothing retailer J. Crew and home improvement chain Lowe's (LOW) were grappling with sudden disruptions to their IT systems before they managed to get back online.
More than 75 million shoppers parade the internet to shop during Black Friday and Cyber Monday, and the opportunity cost swallowed to a tech glitch is a CEO’s worst nightmare.
Ultimately, what does this all mean?
Focusing on the positive side of the surging holiday sales is the right thing to do because the avalanche of momentum will have a knock-on effect on the rest of the economy.
Certain companies are positioned to harvest the benefits more than others.
Amazon guided its 4th quarter estimates conservatively and is in-line to beat top and bottom line forecasts.
Other pockets of strength are Walmart’s tech pivot, albeit from a low base. Walmart still has more room to maneuver and they are in the 2nd inning of their tech transformation snatching the low-hanging fruit for now.
Another interesting e-commerce company swinging its elbows around is Etsy (ETSY).
They sell vintage and handmade craft adding the personalized touch that Amazon can’t destroy.
Margins will be higher than the typical low-cost, value e-commerce platform, but scaling this type of business will be more difficult.
Sales grew 41% sequentially and just in time for a winter holiday blowout.
Etsy became profitable in 2017 after three straight loss-making years, and 2018 is poised to become its best year ever.
The profitability bug is hitting Etsy at the perfect time with its EPS growth rate up 36% sequentially.
They report at the end of February and I expect them to smash all estimates.
There are some deep ramifications for the long term of e-commerce that is beginning to suss itself out.
For one, shipping times will continue to be slashed with a machete. If you are enjoying the 2-day free shipping from Amazon and Target now, then wait until 2-day becomes 1-day free shipping.
Then after 1-day free shipping, customers will get 10-hour shipping, and this won’t stop until goods are shipped to the customer’s door in less than 1-hour or less.
This is what the massive $50 billion in logistical investments over the next five years by the likes of Uber and Amazon are telling us.
It will take years for the efficiencies to come to fruition, but it is certainly in the works.
In the next five years, America’s logistics infrastructure will have to accommodate the doubling of e-commerce packages from 2 billion to 4 billion per year.
Another trend is that omnichannel offerings are sticking and won’t go away anytime soon.
It was once premised that online sales would destroy brick and mortar, yet moving forward, a mix of different sales channels will be the most efficient way of moving goods in the future.
Pop-up stores have been an intriguing phenomenon of late, and surprisingly, 60% of consumers still require interaction with the product to be convinced it's worthy of buying.
Certain products such as fashionable dresses and designer shoes must be given a whirl before a decision can be made. This won’t change anytime soon.
The timing of the sales and marketing push has been moved forward as competitors are eager to get a jump on one another.
Management is agnostic to the timing of the sale.
Thus, discounted sales will show up a week before Thanksgiving as pre-Thanksgiving sales in the future elongating the holiday shopping season cycle by starting it early and delaying the finish of it.
Lastly, the record numbers prove that the e-commerce renaissance and the pivot to mobile is not just a flash in the plan.
What does this mean for tech equities?
The temporal tech sell-off of late is largely a result of outside macro forces and is not indicative of the overall health of the tech sector that has experienced record earnings.
If the markets can keep its head above the February lows, it sets up an intriguing December fueled by Americans flashing their digital wallets on online platforms.
Global Market Comments
November 26, 2018
Fiat Lux
Featured Trade:
(THE MARKET OUTLOOK FOR THE WEEK AHEAD, or ARE WE IN OR OUT?)
(FB), (AAPL), (AMZN), (NFLX),
(GOOG), (SPY), (TLT), (USO), (UNG), (ROM)
Mad Hedge Technology Letter
November 26, 2018
Fiat Lux
Featured Trade:
(WILL THE FAANGS FINALLY KILL OFF TELEVISION?)
(AMZN), (DIS), (FOX), (ROKU), (FB), (AAPL), (GOOGL)
Are we already in a recession or still safely out of one?
That is the question painfully vexing investors after the stock market action of the past seven weeks.
There is no doubt that the economic data has suddenly started to worsen, setting off recession alarms everywhere.
October Durable Goods were down a shocking 4.4%. Weekly Jobless Claims hit 224,000, continuing a grind up to a 4 ½ month high. Is the employment miracle ending? Goldman Sachs says growth is to drop below 2% in 2019, well below Obama era levels. Maybe that’s what the stock market crash is trying to tell us?
The Washington political situation continues to erode confidence by the day. We have already lost real estate, autos, energy, semiconductors, retailers, utilities, and banks. But as long as tech held up, everything was alright.
Now it’s not alright.
The tech selloff we have just seen was far steeper and faster than we saw in the 2008-2009 crash. You have to go all the way back to the Dotcom Bust 18 years ago to see the kind of price action we have just witnessed. The closely watched ProShares Ultra Technology Fund (ROM) has cratered from $123 to $83 in a heartbeat, off 32.5%.
Which begs the question: Are we already ten months into a bear market? Or is this all one big fake-out and there is one more leg up to go before the fat lady sings?
I vote for the latter.
If this is a new bear market, then it is the first one in history with the lead sectors, technology, biotechnology, and health care, announcing new all-time profits going in.
So, either Facebook (FB), Apple (AAPL), Amazon (AMZN), Netflix (NFLX), and Google (GOOG) are all about to announce big losses in coming quarters, which they aren’t, or the market is just plain wrong, which it is.
Which leads us to the next problem.
Markets can be wrong for quite a while which is why I cut my positions by half at the beginning of last week. To quote my old friend, John Maynard Keynes, “Markets can remain irrational longer than you can remain liquid,” who lists his entire fortune in the commodities markets during the Great Depression.
To see this all happen in October was expected. After all, markets always crash in October. To see it continue well into November is nearly unprecedented when the strongest seasonals of the year kick in. This was the worst Thanksgiving week since 2011 when we were still a wet dog shaking off the after-effects of the great crash.
There are a lot of hopes hanging on the November 29 G-20 Summit to turn things around which could hatch a surprise China trade deal when the leaders of the two great countries meet. The Chinese stock market hit a one month high last week on hopes of a positive outcome. Do they know something we don’t?
There were multiple crises in the energy world. You always find out who’s been swimming without a swimsuit when the tide goes out. James Cordier certainly suffered an ebb tide of tsunami proportions when his hedge fund blew up taking natural gas (UNG) down 20% in a day.
Cordier got away with naked call option selling for years until he didn’t. All of his investors were completely wiped out. I have always told followers to avoid this strategy for years. It’s picking up pennies in front of a steamroller. Same for naked puts selling too.
The Bitcoin crash continued slipping to $4,200. I always thought that this was an asset class created out of thin air to absorb excess global liquidity. Remove that liquidity and Bitcoin goes back to being thin air, which it is in the process of doing.
Oil (USO) got crushed again, down an incredible 35.06% in six weeks, from $77 a barrel all the way down to $50 as recession fears run rampant. Panic dumping of wrong-footed hedge fund longs accelerated the slide. They all had expected oil to rocket to $100 a barrel in the wake of the demise of the Iran Nuclear Deal and the economic sanctions that followed.
Apparently, Saudi Arabia’s deal with the US now is that they can chop up all the journalists they want at the expense of a $27 a barrel drop in the price of oil. That will cut their oil revenues by a stunning $97 billion a year. That’s one expensive journalist!
Watch the price of Texas tea carefully because a bottom there might signal a bottom for everything including tech stocks. And I don’t see oil falling much from here.
As for performance, Thanksgiving came early this year, at least in terms of the skinning, gutting, and roasting of my numbers. If you do this long enough, it happens. Every now and then, markets instill you with a strong dose of humility and this is one of those time.
My year to date return dropped to +25.72%, and chopping my trailing one-year return stands at 31.71%. November so far stands at a discouraging -3.91%. And this is against a Dow Average that is down -2.01% so far in 2018.
My nine-year return withered to +302.19%. The average annualized return retraced to +33.57%.
The upcoming week has some important real estate data coming. However, all eyes will be upon the Friday G-20 announcement from Buenos Aires. Will the trade war with China end, or get worse before it gets better?
Monday, November 26 at 8:30 EST, the Chicago Fed National Activity Index is published.
On Tuesday, November 27 at 9:00 AM, the all-important CoreLogic Case-Shiller National Home Price Index is out. It will be interesting to see how fast it is falling.
On Wednesday, November 28 at 8:30 AM, Q3 GDP is updated. How fast is it shrinking?
At 10:30 AM the Energy Information Administration announces oil inventory figures with its Petroleum Status Report.
Thursday, November 29 at 8:30 we get Weekly Jobless Claims which have been on a four-month uptrend. At 10:00 AM, October Pending Home Sales are printed.
On Friday, November 30, at 9:45 AM, the week ends with a whimper with the Chicago Purchasing Managers Index.
The Baker-Hughes Rig Count follows at 1:00 PM. At some point, we will get an announcement from the G-20 Summit of advanced industrial nations.
As for me, I drove through the first blizzard of the year over Donner Pass to finally crystal clear skies of San Francisco. Long-awaited drenching rains had finally cleansed the skies. Every Tahoe hotel was packed with Californians fleeing the smokey skies.
Good luck and good trading.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
November 23, 2018
Fiat Lux
Featured Trade:
(SURVIVING THANKSGIVING)
(SPY), (TLT), (TBT), (GLD), (FXE), (FXY), (USO), (VIX), (VXX), (NVDA), (NFLX), (AMZN)
The Mad Hedge Fund Trader took a much-needed break this week to enjoy turkey with his vast extended family on the pristine shores of Incline Village, Nevada.
The weather was crystal clear, the temperature in the sixties throughout the day, and down into the teens at night. The kids took turns freezing bottles of water outside. To a fire-weary Californian, that’s cool.
During my nighttime snowshoeing on the Tahoe Rim Trail, I am overawed by a pale waning moon setting into the lake. I walked through a heard of elk in the darkness, the snow crunching under my boots. On the way back, I noticed that a mountain lion had been tracking me.
The Trade Alerts went out so fast and furious this year, bringing in my biggest outperformance of my competitors since my service started 11 years ago. As of today, we are up 26% on the year versus a Dow Average (INDU) that has gained exactly zero.
Great managers are not measured by how much they make in rising markets but by how little they lose in falling ones.
I made money during the two market meltdowns this year, at least until this week. That last 1,000-point dive really hurt and breaks all precedent with Thanksgiving weeks past.
I played tech hard from the long side during the first half, then avoided it like the plague in the third quarter.
Short positions in bonds (TLT) continued to be my “rich uncle” trade every month this year. I am currently running a double position there.
I avoided banks, energy, gold, and commodities which performed horribly despite many entreaties to get in.
I avoided the foreign exchange markets such as the Japanese yen (FXY) and the Euro (FXE) because they were largely moribund and there were better fish to dry elsewhere.
The Volatility Index (VIX), (VXX) was a push on the year with both longs and shorts.
My big miss of the year was in biotechnology and health care. I am well familiar with the great long-term bull case for these sectors. But I was afraid that the president would announce mandatory drug price controls the day after I took a position.
I still believe in the year-end rally, although we will be starting from much lower levels than I thought possible. The recent technology crash was really something to behold, with some of the best quality companies like NVIDIA (NVDA), Amazon (AMZN), and Netflix (NFLX) down 30%-60% in weeks. It all looked like a Dotcom Bust Part II.
These are all screaming buys for the long term here. Tech companies are now trading cheaper than toilet paper making ones.
As Wilber Wright, whose biography I am now reading, once said, “Eagles can’t soar to greatness in calm skies.” His picture now adorns every American commercial pilot’s license, including mine.
This is a week when my mother’s seven children, 22 grandchildren, and 11 great-grandchildren suddenly remember that they have a wealthy uncle, cousin, or brother with a mansion at Lake Tahoe.
So, the house is packed, all the sofa beds put to use. We even had to put a toddler to sleep in a bathtub on pillows.
A 28-pound bird made the ultimate sacrifice and was accompanied with mashed potatoes, gravy, stuffing, potato salad, and mince pie. Cooking a turkey here at 6,125 feet can be tricky where water boils only at 198 degrees Fahrenheit. You have to add 15% to the cooking time or you end up with medium-rare meat, not such a great idea with a turkey.
Topping it all was a fine Duckhorn Chardonnay which the White House served at state dinners during a former administration. I’m told the current president doesn’t drink.
I ate an entire pumpkin pie topped with whipped cream last night just to give my digestive system an early warning that some heavy lifting was on its way.
I am the oldest of seven of the most fractious and divided siblings on the planet, so attending these affairs is always a bit of an emotional and physical challenge.
I bet many of my readers are faced with the same dilemma, with mixed red state/blue state families, and they all have my sympathy. Hint: Don’t mention Bitcoin. Your Millennial guests will suddenly develop food poisoning, down 80% in a year.
My family ranges throughout the entire political spectrum, from far-right big oil to far-left pot legalization and transgender rights. For this first time in family history, we all voted for the same candidate in the last election in every one of three generations.
Hillary Clinton. Go figure!
Suffice it to say that we'll be talking a lot about the only two safe subjects there are, sports and the weather. Go Niners! Hurray Giants! Will it snow?
We are all giving thanks that we weren’t roasted alive in a wildfire and prayed for the 1,000 missing who won’t be sitting down for Thanksgiving dinners this year. Most will never be found.
I learned from my brother who runs a trading desk at Goldman Sachs that the industry expects a recession in 2019. (GS) stock has been hammered because the had to refund $600 million in fees that were stolen from the Malaysian government.
Dodd-Frank and Glass Steagall are history, and interest rates are steadily rising like clockwork. Trading volumes are shrinking as the algorithms take over everything. Some 80% of all trading is now thought to be machine-driven.
He finally traded in his Bentley Turbo R for a new black high-performance Tesla Model X with the “ludicrous” mode. I take delivery of mine at the Fremont, CA factory next week. After six decades, sibling rivalry still lives. I cautioned him to keep an ample supply of airline airsick bags in the car. Good thing he got it before the subsidies expired at yearend!
It looks like it’s OK to be rich again.
My born-again Christian sister was appalled at the way the government separated children from parents at the border earlier this year. There are still several hundred lost.
My gay rights activist sister has been marching to protest current government policy on the issue. She was quick to point out that Colorado elected its first gay governor, although I doubt anyone there will notice since they are all stoned in the aftermath of marijuana legalization.
A third sister married to a very pleasant fellow in Big Oil (USO) will be making the long trip from Borneo where he is involved in offshore exploration. This is the guy who escaped from Libya a few years ago by the skin of his teeth.
In the meantime, his industry has been beset by waves of cost-cutting and forced early retirements triggered by the recent oil price crash. He says the US will have to build energy infrastructure for a decade before it can export what it is producing now in oil and natural gas.
So far, the local headhunters haven’t taken a trophy yet. And I mean real headhunters, not the recruiting kind.
Sister no. 4, who made a killing in commodities in Australia and then got out at the top seven years, thanks to a certain newsletter she reads, graced us with a rare visit.
Fortunately, she took my advice and converted all her winnings to greenbacks, thus avoiding the 30% hit the Aussie (FXA) has taken in recent years.
She’s now investing in cash flow positive Reno condos, again, thanks to the same newsletter.
My poor youngest sister, no. 5, took it on the nose in the subprime derivatives market during the 2008 crash. Fortunately, she followed my counsel to hang on to the securities instead of dumping everything at the bottom for pennies.
She is the only member of the family I was not able to convince to sell her house in 2005 to duck the coming real estate collapse because she thought the nirvana would last forever. At least that is what her broker told her.
Thanks to the seven-year-old real estate boom, she is now well above her cost, while serial refi’s have taken her cost of carry down by more than half.
My Arabic speaking nephew in Army Intelligence cashed out of the service and is now attending college on the newly revamped GI Bill.
He is majoring in math and computer science on my recommendation. My dad immensely benefited from the program after WWII, a poor, battle-scarred kid from Brooklyn attending USC. For the first time in 45 years, not a single family member is fighting in a foreign war. No gold stars here, only blue ones. If it can only last!
My oldest son is now in his 10th year as an English language professor at a government university in China. He spends his free time polishing up his Japanese, Russian, Korean, and Kazak, whatever that is.
At night, he trades the markets for his own account. Where do these kids get their interest in foreign languages anyway? Beats me. I was happy with seven.
He is planning on coming home soon. Things have recently gotten very uncomfortable for American residents of the Middle Kingdom.
It’s true that the apple doesn’t fall far from the tree.
My second son is now the head of SEO (search engine optimization) at a major Bay Area online company. Hint: you use their services every day. His tales of excess remind me of the most feverish days of the Dotcom boom. He says that technology is moving forward so fast that he can barely keep up.
His big score this year was winning a lottery to get a rent-controlled apartment in a prime San Francisco neighborhood. It’s all of 400 square feet but has a great view and allows dogs, a rarity indeed.
My oldest daughter took time out from her PhD program at the University of California to bear me my first grandchild, a boy. It seems all my kids are late bloomers. We are all looking forward to the first Dr. Thomas someday (we have an oversupply of Captains).
I am looking forward to my annual Scrabble tournament with all, paging my way through old family photo albums between turns. And yes, “Jo” is a word (a 19th century term for a young girl). So is “Qi.” The pinball machine is still broken from last Thanksgiving, or maybe it just has too many quarters stuffed in it.
Before dinner, we engaged in an old family tradition of chopping down some Christmas trees in the nearby Toiyabe National Forest on the Eastern shore of Lake Tahoe.
To keep it all legal I obtained the proper permits from the US Forest Service at $10 a pop.
There are only three more trading weeks left this year before we shut down for the Christmas holidays.
That is if I survive my relatives.
Good luck and good trading!
Captain John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
