Global Market Comments
October 10, 2023
Fiat Lux
Featured Trade:
(FRIDAY, OCTOBER 13 KIEV, UKRAINE GLOBAL STRATEGY LUNCHEON)
(WILL SPACEX BE YOUR NEXT TEN BAGGER?)
(EBAY), (TSLA), (SCTY), (BA), (LMT)
Posts
Global Market Comments
June 23, 2020
Fiat Lux
Featured Trade:
(HERE ARE THE FOUR BEST PANDEMIC-INSPIRED TECHNOLOGY TRENDS),
(AMZN), (CHWY), (EBAY), NFLX), (SPOT), (TMUS), (ATVI), (V), (PYPL), (AAPL), (MA), (TDOC), (ISRG), (TMDI)
Successful investors rarely disclose their modus operandi.
The truth is that success comes in all shapes and sizes.
Many take the volatility index and aggressively short it until death hoping to avoid the “big one” that wipes them out.
Picking up pennies in front of the steam roller on steroids works until it doesn’t.
Conversely, long-term investors with an eagle-eye view of the underlying trends in the economy, society, and the tech sector will let the market crash come to them only to slip in a few long-dated long-term equity anticipation securities (LEAPs) in their favorite names.
The reasons are very obvious. The risk on a LEAP is limited. You can’t lose any more than you put in. At the same time, they permit enormous amounts of upside leverage.
Two years out, the longest maturity available for most LEAPS, allow plenty of time for the world and the markets to get back on an even keel.
Depressions, pandemics, tsunamis, oil shocks, interest rates going to 0, and political instability all fall away within two years and pave the way for dramatic stock market reversals.
You just put them away and forget about them. Wake me up when it is 2022.
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 1,000 point down day in the Nasdaq Index which could happen any day.
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.
Committing to risk when there is blood in the streets seems scary at the time, but is often the origins of fruitful trades that get fully harvested down the road.
I am zeroing in on two companies that aren’t the vaunted FANGs but are positioned right behind their back shoulder and whose share prices are poised to shoot higher long before the January 2020 expiration.
Considering we have just had an eye-gouging 20% sell-off in tech shares, there is the argument that tech shares are on discount in the shop window as we speak.
The two companies who fit the bill are Twitter (TWTR) and eBay (EBAY).
What do they have in common?
Both are being bullied and cajoled by Elliott Management, the vulture fund who cut its teeth on profiting off of distressed debt but have now ventured into the realm of public markets to only bring the same type of aggressiveness and bottom line mentality to the octagon cage.
They exist solely to deliver shareholders higher returns and brutally squeeze growth out of underperforming assets.
There is no empathy or feel-good factor at Elliot.
They have identified Twitter and eBay as low-hanging fruit in the tech ecosystem and have adamantly demanded that management get their finger out and improve its execution.
I agree with Elliot that Twitter and eBay have failed to find the parabolic growth that something like a Facebook has experienced.
Elliot Management is here to set things straight, after they quietly acquired a 4% stake in Twitter, and that couldn’t be more evident when they tried to oust CEO of Twitter Jack Dorsey a few days ago.
The vulture fund was already peeved that Dorsey was splitting time with his other company Square and imagine how they felt when Dorsey announced he would seek to spend the year in Africa working remotely.
The outcry and backlash were considerable, and the strong-arm tactics have worked out beautifully for Elliot Management who scored an extra 3 seats on Twitter’s board for agreeing to allow Dorsey to keep his job.
On top of that, Dorsey agreed to expand Twitter’s user base by at least 20% this year, achieve accelerating revenue growth, and gain market share as a digital advertiser.
In effect, Elliot Management put Dorsey in his place, and they have had the same type of end result in eBay’s management ranks as well.
Under almost any scenario, it’s hard to fathom that these two tech companies will have share prices lower by January 2022.
Granted, short-term gyrations are ripe for volatility as the coronavirus wreaks havoc on the sensitive minds of investors and traders, but the risk/reward in these two LEAPs are overwhelmingly favorable.
I would suggest looking at the $23 strike price for Twitter and eBay and executing a limit order near the bid price.
At the $23 strike price, 7 contracts would cost around $10,000 for Twitter’s LEAPs and 8 contracts for eBay.
Executing limit orders is necessary otherwise you will get gouged on the spread nullifying the leverage that is critical to making this trade a homerun.
If the market swan dives, there is a high chance of getting an order filled at the price you are comfortable with.
There is a strong likelihood of cashing out in January 2022 – what’s not to like about that?
Twitter’s Jan 2022 LEAP:
Twitter’s Jan 2022 LEAP:
Google (GOOGL) and Facebook (FB) are dominant to the extent that the U.S. administration is hoping to dismantle them.
The two companies enjoy a flourishing duopoly and guzzle up digital ad dollars.
Governments around the world are scratching their heads attempting to figure out how to put a dent in these fortresses and so far, have been unsuccessful.
Big tech has made governments look bad, to say the least, and their response has been even more shambolic.
Alphabet installed Google CEO Sundar Pichai as the top decision-maker for all Alphabet assets preparing for the onslaught of digital privacy headwinds and regulation that the E.U., U.S., and everyone else will throw at them.
Luckily, they do not need to deal with the Chinese communist party as big tech minus Apple was effectively banned years ago.
What’s on Google and Facebook’s plate right now?
Attorney General William Barr has pointed the finger at these two platforms for hiding behind a clause that gives them immunity from lawsuits while their platforms carry material promoting illicit and immoral conduct and suppressing opinions.
Barr is currently looking into potential changes to Section 230 of the Communications Decency Act, which was passed in 1996 and has been also referred to as the supercharger to tech riches.
What could eventually come of this?
Barr could decide for the Justice Department to explore ways to limit the provision, which protects internet companies from liability for user-generated content.
This could open up Google and Facebook to higher costs of managing content on their platforms and lawsuits related to malcontent in which they fail to remove.
Even though platforms love to market that they actively thwart bad actors, at the end of the day, they aren’t on the hook for what happens.
Massive alterations could fundamentally weaken their business models and force them to review each word and photo that is thrown upon their platform.
They have already hired an army of hourly paid contractors, but at their massive scale, content is simply impossible to smother.
Content generators understand how to sidestep machine learning algorithms which are based on backdated data, meaning they would not be able to catch a new iteration of past content.
Absolving themselves of any responsibility for policing their platforms has been an important catalyst in the outperformance in shares for both Facebook and Google.
The social side of this has cringeworthy unintended consequences.
The Computer & Communications Industry Association, a tech trade group that counts Google and Facebook as members want the government to stay out of it as they believe they are overreaching.
Government has been slowly making inroads in combatting the strength of these digital platforms, and the first successful foray was when Congress eliminated the liability protection for companies that knowingly facilitate online sex trafficking.
Big tech won’t go with a whimper and they will propose a range of changes to avoid direct damage to their business model such as raising the bar a smidgeon on which companies can have the shield, to carving out other laws negating attempt to weaken their platforms, to delaying the repealing of Section 230.
There is too much shareholder value on the line and as the coronavirus rears its ugly head, it’s ironic that investors perceive safety in not only the U.S. dollar but in the vaunted FANG tech group.
Ultimately, the math wins out and these companies with gargantuan earnings can weather any storm with a moat as wide as ever.
It’s to the point that a $10 billion fine is a massive victory, and what other group of companies can boast about that?
We can only trade the market we have in front of us and not the one we want.
I pulled the trigger on a Google call spread and I believe this narrow group of power tech players and their partners in crime cloud stocks of the likes of Twitter (TWTR), eBay (EBAY), Fortinet (FTNT), Adobe (ADBE), and a few others will hoist the market on its back like I predicted it would at the beginning of the trading year.
Behavioral trends have a sizable say in which tech companies will outperform the next and a recent report from SimilarWeb offers insight into how much users navigate around the monstrosity known as the internet.
The optimal way to comprehend the trends are from a top-down method by absorbing the divergence between desktop traffic and mobile traffic.
It’s no secret that the last decade delivered consumers a massive leap in mobile phone performance in which tech companies were able to neatly package applications that acted as monetization platforms by offering software and services to the end-user.
Thus, it probably won’t shock you to find out that desktop traffic is down 3.3% since 2017 as users have migrated towards mobile and the trend has only been exaggerated by the younger generations as some have become entirely mobile-only users.
All told, the 30.6% expansion in mobile traffic has penalized tech firms who have neglected mobile-first strategies and one example would be Facebook (FB), who even though has a failing flagship product in Facebook.com, are compensated by Instagram, who is showing wild growth numbers.
The fact that mobile screens are smaller than desktop screens means that users are staying on web pages not as long as they used to – precisely 49 seconds to be exact.
This trend means that content generators are heavily incentivized to frontload content and scrunch it up at the top of the page. This also means that sellers who don’t populate on Google’s first page of search results are practically invisible.
The high stakes of internet commerce are not for the faint of heart and numerous companies have complained about algorithm changes toppling their algorithm-sensitive businesses.
Even using a brute force analysis and investing in companies that are in the top 15 of internet traffic, then the companies that scream undervalued are Twitter (TWTR) and eBay (EBAY).
Twitter is a company I have liked for quite a while and is definitely a buy on the dip candidate.
The asset is the 7th most visited property on the internet behind the likes of Instagram, Google, Baidu, Wikipedia, Amazon, and Facebook.
This position puts them just ahead of Pornhub.com, Netflix, and Yahoo.
And if you take one step back and analyze traffic from the top 100 sites, traffic is up 8% since 2018 and 11.8% since 2017 averaging 223 billion visits per month.
Rounding out the top 15 is eBay who I believe is undervalued along with Twitter - these two are legitimate buy and holds.
Ebay was the recipient of poor management for many years and they are now addressing these sore points.
Certain content is suitable for mobile such as adult sites, gambling sites, food & drink, pets & animals, health, community & society, sports, and lifestyle.
And just over the last year or two, other categories are gaining traction in mobile that once was dominated by desktop such as news and media, vehicle sites, travel, reference, finance, and others.
Many consumers are becoming more comfortable at doing more on mobile and spending more to the point where people are making large purchases on their iPhones.
The biggest loser by far was news - they are losing traffic in droves.
Traffic at the top 100 media publications was down 5.3% year-over-year from 2018 to 2019, a loss of 4 billion visits, and down by 7% since 2017.
Personally, I believe the state of the digital news industry is in shambles, and Twitter has moved into this space becoming the de facto news source while pushing the relevancy of news sites down the rankings.
Facebook and Twitter are essentially undercutting the news by forcing news companies to insert them between the reader and the news company because they have strategized a position so close to the user’s fingertips.
The negative sentiment in news is broad based on popular news, entertainment news and local news all showing decreases of more than 25%.
Finance and women’s interest news categories are the only ones showing positive traffic growth.
The state of internet traffic growth supports my underlying thesis of the big getting bigger and the subsequent network effect stimulating further synergies that drop straight down to the bottom line.
The top 10 biggest sites racked up a total of 167.5 billion monthly visits in 2019, up 10.7% over 2018 and the remaining 90 largest sites out of the top 100 only increased 2.3%.
This has set the stage for just five gargantuan tech firms to become worth more than $5 trillion or 15.7% of the S&P 500’s market value and 19.7% of the total U.S. stock market’s value.
Now we have real data backing up my iron-clad thesis and these cornerstone beliefs underpins my trading philosophy.
Many of the biggest wield a two-headed monster like Google who has Google.com and YouTube video streaming and Facebook, who have Facebook.com and Instagram.
It doesn’t matter that Facebook has lost 8.6% of traffic over the past year because Instagram compensates for Facebook being a poor product.
And if you are searching for another Facebook growth driver under their umbrella of assets then let’s pinpoint chat app WhatsApp who experienced 74% year-over-year traffic.
Beside the news sites, other outsized losers were Yahoo’s web traffic shrinking by 33.6% and Tumblr, which banned adult sites in 2018, leading to a 33% loss in traffic.
If I can sum up the data, buy the shares of companies who are in the top 15 of internet traffic and be on the lookout for any dip in eBay or Twitter because they are relatively undervalued.
Global Market Comments
November 19, 2019
Fiat Lux
Featured Trade:
(BLACK FRIDAY DISCOUNT OFFER FOR THE MAD HEDGE TECHNOLOGY LETTER),
(ADBE), (EBAY), (PANW)
The Mad Hedge Technology Letter has been on an absolute tear lately.
It has posted an eye-popping 25.25% net profit since August. The last 14 consecutive trade alerts have been profitable, a success rate of 100%. Some 20 out of the last 22 trade alerts have been profitable, a success rate of 90.9%.
We nailed the 27.3% move in the multimedia software company, Adobe (ADBE). We killed the 23.28% pop in e-commerce leader eBay (EBAY). And we hit a total home run with a positively ballistic 30.42% gain in cybersecurity giant Palo Alto Networks (PANW).
And here’s the method to our madness. While no one was looking, the stock market has made a dramatic shift from buying in large-cap tech techs to smaller cap ones. In order words, we’ve moved from the FANGs to the mini FANG’s, and WE CAUGHT ALL OF IT!
Which brings me to the topic at hand. You absolutely HAVE to get in on this move, the most important of the year. And I’m going to make it incredibly easy for you to do so. For here at Mad Hedge Fund Trader, Black Friday comes early.
I am offering the Mad Hedge Technology Letter at an insanely bargain-basement price of $998. That is a full 61% discount to the $2,500 list price offered on our website.
I’m not doing this to make money. I am chopping prices so YOU can make money. And there is nothing I like better than happy, money-making customers. For focusing in on this one crucial sector will be the most important investment decision you make in your lifetime.
With the Mad Hedge Technology Letter, you will get:
*A three times weekly morning newsletter covering the most important technology stocks and trends of our time.
*Technology trade alerts sent out at market sweet spots telling when and where best to enter the market.
*Trade alerts sent out at market tops on where best to take profits or stop out of the rare losers.
*Invitations to biweekly Strategy Webinars with live Q&A.
*The best customer support in the industry with same day answers to all questions.
*Access to a searchable ten-year database of technology research.
*Invitations to Mad Hedge Strategy Luncheons around the world (the last one was in Zermatt, Switzerland).
In order to take advantage of this one time only offer, please click here.
Let me give you a warning. We are only accepting 25 orders at this deep discounted one-time offer so it’s a first-come, first-served basis.
I look forward to working with you.
John Thomas
CEO & Publisher
The Mad Hedge Technology Letter
Mad Hedge Technology Letter
August 2, 2019
Fiat Lux
Featured Trade:
(THE GREAT LATIN AMERICAN INTERNET PLAY),
(MELI), (PYPL), (AMZN), (EBAY)
How do you get exposure to the e-commerce story in Latin America?
The best way to do that is to dive into Mercado Libre (MELI), meaning “free market” in Spanish, an Argentine company incorporated in the United States that operates online marketplaces dedicated to e-commerce and online auctions, including mercadolibre.com.
Mercado Libre was established as an Argentine company in 1999 and Founder & CEO Marcos Galperin, while attending Stanford University, acquired funding from HM Capital Partners co-founder John Muse to start his brainchild.
Mercado Libre received additional funding from JPMorgan Partners, Flatiron Partners, Goldman Sachs, GE Capital, and Banco Santander Central Hispano.
The company has used M&A along with organic growth to drive the company.
Relevant examples are of eBay (EBAY) buying a 19.5% stake in the company and then selling its stake in Mercado Libre in 2016, but the companies continue to expand eBay sellers into Latin America.
The cooperation remains strong with eBay opening its first branded store on the Mercado Libre marketplace from Chile in March 2017.
Mercado Libre has acquired iBazar Como, the Brazilian subsidiary of eBay's earlier acquisition, iBazar S.A.
The success culminated with becoming the first Latin American technology company to be listed on the NASDAQ, under the ticker symbol MELI.
The firm offers investors a way to invest in one of the fastest-growing e-commerce markets in the world.
The company has 280 million registered users out of 644 million people who live in Latin America.
The stock has soared 543% in the last five years making the firm one of the fastest growing e-commerce companies in the world by many metrics.
The main drag is that the valuation looks frothy at these price levels.
Mobile payments have mushroomed naturally because of its title, the "eBay of Latin America."
They can also claim to be the PayPal of the region, thanks to robust growth happening in the MercadoPago digital payments business.
In the first quarter, total payment volume rose 82.5% year-over-year.
Off-marketplace payment volume is up 194% – accelerating each and every quarter.
Off-marketplace payments now comprise 45% of the company's total payment volume, and management sees high penetration trends happening in certain areas.
PayPal (PYPL) have become huge supporters of MercadoLibre with an investment of $750 million into MercadoPago.
The deal will join the firms together to work on the shared vision to digitize the economy, especially for the underbanked, in Latin America.
It's a stamp of approval of Mercado's brand recognition in the region that PayPal chose to invest in the company instead of competing.
How fast is the addressable market growing?
Investors have been seduced by the company's impressive growth in payments, but the core marketplace business is still doing backflips.
Gross merchandise volume (GMV) expanded 27% year-over-year in the first quarter, driven by 70% growth in Mexico.
Brazil is the largest market and expanded GMV by 18% year-over-year in the quarter.
Management referenced supermarket items in Mexico and increasing apparel selection as two areas that are showing strong results.
Apparel is the fastest-growing category, up 79% year-over-year last quarter.
With signs that new development is headed in the right direction, new categories and the company expanding its logistics footprint, the market will definitely expand.
MercadoLibre can grow beyond the marketplace business to become a formidable fintech company.
As it expands into other services, Mercado is fortifying its strong brand across Latin America.
Even as Amazon.com (AMZN) enters the high stakes industry, Mercado's first mover advantage can’t be underestimated.
The stock is pricey so lay off it for the time being but add with any major dips.
Global Market Comments
July 11, 2019
Fiat Lux
Featured Trade:
(THE INSIDER’S VIEW ON THE FUTURE OF TECHNOLOGY),
(AMZN), (GOOG), (DELL), (MSFT), (EBAY),
(MY DATE WITH HITLER’S GIRLFRIEND)
