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Augmented Reality is Heating Up

First, what is augmented reality for all the newbies?

Augmented reality is an interactive experience of a real-world environment where the objects that reside in the real world are enhanced by computer-generated perceptual information, sometimes across multiple sensory modalities.

Augmented reality (AR) went rival in 2016 when the Pokemon Go mania captivated everyone from children to adults.

No sooner than 2021, the AR addressable market is poised to mushroom to $83 billion - a sizeable increase from the $350 million in 2018.

Much like machine learning, corporations are learning to marry up this technology with their existing products supercharging the performance.

Ulta Beauty, for example, has acquired AR and artificial intelligence start-ups to help customers digitally test the final appearance of makeup before users purchase the product.

That is just one micro example of what can and will be achieved.

Looking deeper into the guts, Qualcomm (QCOM) is hellbent on making their chips a critical part of the puzzle.

The company is better known for a telecom and a semiconductor play, not often lumped in with a list of AR stocks.

Qualcomm is strategically positioned to capitalize on the integration of augmented reality in mainstream corporate business embedding their chips into the devices.

Maximizing Qualcomm’s future role in the industry, the company announced in 2018 that it would be developing a chipset specifically for AR and VR applications.

This broad-based solution will make it easier for other developers to bring new glasses to the marketplace.

Autodesk (ADSK) is one of my favorite software stocks and a best of breed of industry design.

They sell 3D rendering software to designers and creators by offering a platform in which they can transform 2D designs into digital models that are both interactive and immersive, creating compelling experiences for end-users.

Autodesk has an array of powerful software suites to augment virtually any application, such as 3ds Max, a 3D modeling program; Maya LT game development software; its automotive modeling program VRED; and Forge, a development platform for cloud-based design.

Facebook (FB) has been piling capital into AR for years.

CEO Mark Zuckerberg wants to create an alternative profit-driver and is desperate to wean his brainchild from the digital ad circus.

One example is Facebook’s Portal TV and its Spark AR which is the platform responsible for mobile augmented reality experiences on Facebook, Messenger, and Instagram.

It supplies the virtual effects for consumers to play around with, but it is yet to be seen if consumers gravitate towards this product.

Lumentum (LITE) is the leader in 3D-sensing markets developing cloud and 5G wireless network deployments.

They manufacture 3D sensor lasers that can be used with smartphones to turn handsets into a sort of radar. Sensors are clearly a huge input in how AR functions along with the chips.

CEO of Apple (AAPL) Tim Cook put it best when he earlier said, “I do think that a significant portion of the population of developed countries, and eventually all countries, will have AR experiences every day, almost like eating three meals a day, it will become that much a part of you.”

He said that in 2016 and AR has yet to mushroom into the game-changing sector initially thought partly because the roll-out of 5G is taking longer than first expected.

Apple consumers will need to then adopt a 5G device or phone to really get the AR party started and that won’t happen until the backend of next year.

My initial channel checks hint that the Cupertino firm is planning a 5.4-inch model, two 6.1-inch devices, and one 6.7-inch phone, all of which will support 5G connectivity.

I surmise that Apple’s two premium devices will feature “world-facing” 3D sensing, a technology that could help Apple boost its augmented-reality capabilities and support other feature improvements on its priciest devices.

Apple has had a big hand in Lumentum's growth and will continue to buy their sensors, but other key component suppliers will get contracts such as Finisar, a manufacturer of optical communication components and subsystems.

Apple planned to debut AR glasses by 2020, but the rollout is now delayed until 2022.

They are clearly on the back foot with Microsoft (MSFT) further along in the process.

Microsoft already has a second iteration of its AR headset, HoloLens, and is compatible with several apps and has integration with Azure as well.

The head start of 2 years could really make a meaningful impact and might be hard for Apple to recover.

Facebook isn’t the only social media company going full steam into AR, Snap (SNAP) recently unveiled its newest spectacles, which feature AR elements.

Another application of AR is autonomous driving with Nvidia working on improving the driving experience by fusing AR with artificial intelligence.

Nvidia (NVDA) is already thinking about the next generation of AR technologies with varifocal displays, which improve the clarity of an object for a user.

It will take time to transform our relationship with AR, the infrastructure is still getting built out and many people just don’t have a device that will allow us to tap into the technology.

Investors must know that AR-related stocks will start to appreciate from the anticipation of full sale adoption and there could be a killer app that forces the mainstream user to take notice.

Until then, companies jockey for position and hope to be the ones that take the lion’s share of the revenue once the technology goes into overdrive.

December 6, 2019/by Mad Hedge Fund Trader

December 2, 2019

Diary, Newsletter, Summary

Global Market Comments
December 2, 2019
Fiat Lux

Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or 2020 IS ALREADY HAPPENING),
(TSLA), (X), (GE), (FCX), (SLB), (GOOGL), (MSFT), (GLD)

December 2, 2019/by Mad Hedge Fund Trader

AI Has Reached Farther Than You Think

Tech Letter

I was lucky enough to get my hands on the Deloitte Private Technology Trends report named, “Seizing Opportunity.”

I’ll break down some of the gems I took away that will give us insight into the current state of technology.

This might not be necessarily a new idea because artificial intelligence has been around for a while, but it certainly is gaining steam with respondents placing greater value on artificial intelligence to drive business results.

Firms are using AI for analysis automation 48% of the time in 2019 versus 30% in 2018, putting the responsibility on this technology to super-drive profits.

It’s not a surprise that big data analysts have become one of the most sought-after commodities in Silicon Valley.

It’s appropriate to say that the FANGs have pulled away from any resemblance of competition in 2019 and this if forcing many mid-market and private companies to view talent and emerging technologies as the x-factors to stay competitive.

Behemoth tech companies have the luxury of cheap access to capital to buy out competition or break it by throwing money at problems until they can copy the technology and scale it applying force multiplier ecosystems to cross-pollinate and intertwine services with each other.

These same companies buy back their own stock with cheap capital enriching stakeholders and management.

In fact, Apple (AAPL) is buying back so much stock that it will have bought out its entire trove of stock by 2030 to effectively go private.

Deloitte found that 43% say they are spending more than 5% of their firm’s revenue on technology, a 15-point increase since 2016.

More than half of respondents forecast annual growth rates of 11% or higher and 68% plan to hire to harness the emerging technology.

Another trend that will pick up steam that I have noted before is the predictive analytics and legacy system modernization, and this is topping private companies’ investment priorities list.

In fact, the number of private companies surveyed using predictive analytics to diagnose business results skyrocketed 65% over the past five years.

Firms are prioritizing information security risks, the adoption of 5G technology, and business innovation over the next 365 days.

Digital disruption is the norm du jour.

Firms expect shifts in sales (55%), marketing (50%), and supply chain roles (49%) in the next 3-5 years.

In preparation, 54% of mid-market and private companies are re-skilling employees and 52% are reconfiguring jobs to accommodate this shift.

Also, 72% believe internal development and reskilling is a method to enhance employees’ potential because of the exorbitant costs of talent acquisition.

Over two-thirds (69%) will construct new talent acquisition strategies to marry it up with the trend of hiring in data analytics, AI and other emerging technologies.

In a major reversal, respondents are less likely to seek out crowdsourcing and gig economy workers because these types of workers are less effective than full-time workers and have high turnover rates.

More than 32% of private companies acknowledge that embedded value is trending towards machine learning, robotic process automation and other cognitive capabilities, a 12% increase from 2018’s survey results.

Although executives are experiencing greater benefits from AI technologies, more than one-half of respondents (55%) are worried about the use of AI, particularly when it comes to HR decision-making.

Personally, I believe using AI in HR is mostly flawed.

In short, firms are doubling down on “emerging technologies” and to combat the superior business models of big tech companies.

They almost have no choice.

These conditions favor the status quo of behemoth tech titans who can invest in machine learning and artificial intelligence because of their cheap sources of capital.

From the data, smaller companies are desperate to hang on to their talent because of a shrinking talent pool and high talent acquisition cost.

The belief that leveraging foundational technologies to springboard revenue is only getting stronger. This favors the goliaths at the top because they have the resources to integrate these levers unlike companies further down the food chain.

This article could almost signal why investors can’t be short Apple (AAPL), Microsoft (MSFT), and Google (GOOGL).

They are at the vanguard of every major technology trend and they have demonstrated that they are definitely “seizing opportunity.”

November 25, 2019/by Mad Hedge Fund Trader

November 25, 2019

Diary, Newsletter, Summary

Global Market Comments
November 25, 2019
Fiat Lux

Featured Trade:

(MARKET OUTLOOK FOR THE WEEK AHEAD, or CATCHING OUR BREATH),
(MSFT), (GOOGL), (TLT), (VIX), (TSLA)

November 25, 2019/by Mad Hedge Fund Trader

My Current Technology Trading Strategy

Tech Letter

Some might say that we were due for a revaluation of growth tech stocks.

They have contributed greatly in this nine-year bull market.

Profit-generating software stocks are the order of the day.

Tech has led the overall market higher after projected quarterly earnings growth of -9% came in better than expected at -5%.

We have ebbed and flowed from pricing in a full-out recession in mid-2020 to now believing a recession is further off than first thought.

The pendulum swing ruptured many growth stocks from Workday (WKDAY) to The Trade Desk, Inc. (TTD) plummeting 30%.

We have retraced some of those losses but momentum in share appreciation has shifted to the perceived safer variation of tech stocks.

Investors have cut volatility and headed into bulletproof companies of Apple (AAPL), Google (GOOGL), and Microsoft (MSFT).

These companies have significant competitive advantages, Teflon balance sheets, and print money.

The tech markets just about priced in the U.S - China trade war in the fall as broad-based volatility plummeted because of optimism around making a deal.

This, in turn, has boosted chips stocks along with investors front running the 5G revolution and the administration granting Huawei a reprieve was a cherry on top.

The Mad Hedge Technology Letter has taken every dip to initiate new longs in safe trades like software companies Adobe (ADBE) and Veeva Systems (VEEV).

Tech is at the point that all loss-making companies are out of the running for tech alerts because the moment there is a recession scare, these shares drop 10% and often don’t stop until they lose 30%.

Now there is a deeply embedded set of narrow tech leadership by a few dominant tech companies buttressed by a select set of second-tier software stocks.

I would put PayPal (PYPL) and Twitter (TWTR), which I currently have open trades on, in the ranks of the second tier and they should do well as long as economic growth does better than expected.

Their share prices dipped on weak guidance and the bad news appears to have been shaken out of these names.

Professional investors could also be hanging on to meet end-of-year performance targets.

I do expect unique entry points on software stocks that drop after bad future guidance.

Profitability has moved to the fore as the biggest factor in holding a name or not.

Newly minted IPOs have fared even worse showing the markets' waning appetite for loss makers like Uber (UBER) and Lyft (LYFT).

Loss-making companies often tout their ability to change the world and disrupt industry, but that has been discovered as nothing more than a ruse.

They aren’t disrupting the way we change the world. For example, Uber is a dressed-up taxi service and the new CEO has failed to create any new momentum in the unit economics that spectacularly fail by any type of metric.

Even worse for these growth stocks, as the economy starts to falter, there will be even less appetite for them, and even more appetite for safer tech stocks.

A worst-case scenario would see Uber drop to $10 and Lyft to $20.

New all-time highs have crystalized with Google (GOOGL) under the gauntlet of regulation hysteria displaying the domination of these big tech machines.

The ongoing, consistent rotation out of growth and into value hasn’t run its course yet and fortunately, by identifying this important trend, our readers will be well placed to advantageously position themselves going into 2020.

Growth stocks won’t make a comeback anytime soon and deteriorating conditions could trigger renewed synchronized global monetary policy easing and central bank stimulus.

And yes, more negative rates.

I believe Oracle (ORCL), Fortinet (FTNT), Akamai Technologies, Inc. (AKAM) could weather the storm next year.

Tech growth is slowing and trade uncertainty is high, and readers must have a sense of urgency to avoid the losers in this scenario.

U.S. economic growth could slow to 1.3% next year, avoiding a recession, and the lack of enterprise spend will reduce software sales and combine that with peak smartphone growth and it won’t be smooth sailing.

The Mad Hedge Technology Letter has the pulse of the tech market and will show you how to navigate this minefield.

November 20, 2019/by Mad Hedge Fund Trader

The FANG's Big Move Into Banking

Tech Letter

First, Apple (APPL) collaborates with Goldman Sachs’ (GS) offering of a credit card even giving credit access to subprime borrowers.

And now Google (GOOGL) has its eyes on the banking industry — specifically, it’ll soon offer checking accounts.

In a copycat league where anything and everything is fair game, we are seeing a huge influx of big tech companies vie for the digital wallets of Americans.

The project is aptly named Cache and accounts will be handled by Citibank (C) and a credit union at Stanford.

Google’s spokesman shared with us admitting that Google hopes to “partner deeply with banks and the financial system,” and further added, “If we can help more people do more stuff in a digital way online, it’s good for the internet and good for us.”

I would disagree with the marginal statement that it would be good for us.

Facebook (FB) is now offering a Pay option and how long will it be until Amazon (AMZN), Microsoft (MSFT), and others throw their name into the banking mix.

I believe there will be some monumental failures because it appears that these tech companies won’t offer anything that current bank intuitions aren’t offering already.

Moving forward, the odd that digital banking products will become saturated quickly is high.

Let’s cut to the chase, this is a pure data grab, and not in the vein of offering innovative services that force the consumer down a revolutionary product experience.

As the consumer starts to smarten up, will they happily reveal every single data point possible to these tech companies?

Big tech continues to be adamant that personal data is secure with them, but their track records are pitiful.

Even if Google doesn’t sell “individual data”, there are easy workarounds by just slapping number tags on aggregated data, then aggregated data can be reverse-engineered by extracting specific data with number tags.

The cracks have already started to surface, Co-Founder of Apple Steve Wozniak has already claimed that the credit algorithm for Apple’s Goldman Sach’s credit card is sexist and flawed.

Time is ticking until the first mass data theft as well and let me add that the result of this is usually a slap on the wrist incentivizing bad behavior.

I believe big tech companies should be banned from issuing banking products.

Only 4% of consumers switched banks last year, and a 2017 survey by Bankrate shows that the average American adult keeps the same checking account for around 16 years.

As anti-trust regulation starts to gather more steam, I envision lawmakers snuffing out any and every attempt for big tech to diversify into fintech.

It’s fair to say that Google should have done this 10 years ago when the regulatory issues were nonexistent.

Now they have regulators breathing down their necks.

Let me remind readers that the reason why Facebook abandoned their digital currency Libra was because of the pressure lawmakers applied to every company interesting in working with Facebook’s Libra.

Lawmakers threatened Visa and Mastercard that they would investigate every part of their business, including the parts that have nothing to do with Facebook’s Libra, if they went ahead with the Libra project.

The most telling insight comes from the best tech company Microsoft who has raised the bar in terms of protecting their reputation on data and trust.

They decided to stay away from financial products like the black plague.

Better to stay in their lane than take wild shots that incur unneeded high risks.

When U.S. Senator Mark Warner, a Democrat on the Senate panel that oversees banking, was asked about Google and banking, he quipped, “There ought to be very strict scrutiny.”

Big tech is now on the verge of getting ferociously regulated and that could turn out positive for the big American banks, PayPal (PYPL), Visa (V), Mastercard (MA) and Square (SQ).

I heavily doubt that Google will turn Cache into a meaningful business unless Google offers some jaw-dropping interest rates or elevated points to move the needle.

Google has canceled weekly all-hands meetings because of the tension between staff members and Facebook is also just as dysfunctional at the employee level.

Whoever said it's easy to manage a high-stake, too-big-to-fail tech firm?

Even with all the negativity, Google is still a cash cow and if regulatory headwinds are 2-3 years off, they are a buy and hold until they are not.

The recent tech rally, after the rotation to value, has seen investors flood into Apple, Microsoft, and Google as de-facto safe haven tech plays.

November 18, 2019/by Mad Hedge Fund Trader

Here's the Infrastructure Company for Everything

Tech Letter

Cisco (CSCO) is an accurate proxy for global enterprise spending around the world.

This foundational company offers the base for software-reliant companies to flourish and tuning into their quarterly earnings report is a front-row affair.

Even though the firm beat on the bottom line, 2020 prospects dimmed substantially, enough to question whether the underpinnings of global growth remain in-tact.

Topline revenue beat as well with the company earning $13.16 billion in revenue eclipsing the estimated $13.09 billion.

But analysts and investors were mainly there to scrutinize the commentary on future earnings considering that 2020 is unfolding into the most uncertain year in recent history coincides with a potentially fractious U.S. presidential election.

The onus was on CEO Chuck Robbins to provide some comfort and that comfort was visibly lacking in his call.

The disappointment started with the commentary regarding annualized revenue growth.

Cisco expects annual revenue to slide between 3-5% next year.

Earlier this year, Robbins had revealed that the slowdown had been confined to smaller parts of the market but now it is suddenly expanding into almost all corners of the world.

The delay in IT spend has hit conversion rates which were lower than normal and large deals got done but in a smaller way.

Businesses have consciously chosen to elongate their refresh cycle and are defiantly sticking with the current IT technology to subdue costs.

Usually, new IT infrastructure begets more spending on newer software but that is all grinding down to a halt for the foreseeable future.

Cisco has a massive install base of users to grab data points from, and this should put some cold water on a narrowing tech rally.

Safe haven names have received the lion’s share of the tech rally momentum as of late.

The most suitable adjective to describe the current IT slowdown is “broad-based” and countries such as China are showing weak IT spend too.

China isn’t a huge customer for Cisco, and emerging markets have been exhibiting more weakness than the larger economies.

Cisco’s poor guidance dovetails nicely with my recent theme of a prolonged tech earnings recession laced with bad guidance.

The lamentable commentary about 2020 will persist in tech.

I do view the more than 7% dive in Cisco’s shares today as a solid entry point into one of the premier tech infrastructure stocks in the world, but will let the market digest the results first.

Even though corporate America is heading toward a new valley in an earnings recession that could last the entire calendar year, Cisco will muscle its way through as higher-tech spend will at some point reshape the earnings outlook.

But don’t expect that for the next quarter or two.

Investors should expect more softness in tech shares and rerouting of capital into top-grade tech shares like Microsoft (MSFT).

November 15, 2019/by Mad Hedge Fund Trader

What I Told My Biggest Hedge Fund Client

Diary, Newsletter

This week, I had to fly off to a party given by my biggest hedge fund client at the Penthouse Suite at the Bellagio Hotel in Las Vegas. And what a party it was!

The showgirls were flowing hot and heavy, roaming magicians performed magic tricks, and there was the odd fire-breather or two. For entertainment, we were treated to rock legend Lenny Kravitz who played his signature song, American Woman.

I managed to get a few hours in private with my client, one of the wealthiest men in the world whom you would all recognize in an instant, and this is what I told him.

SELL THE NEXT BIG RALLY IN STOCKS. IT MAY BE YOUR LAST CHANCE TO GET OUT AT THE TOP BEFORE THE NEXT BEAR MARKET. ANY STOCK YOU KEEP AFTER THAT YOU WILL HAVE TO OWN FOR AT LEAST TWO YEARS AND 4-5 YEARS TO GET BACK UP TO YOUR ORIGINAL COST!

The markets are coiled for a sharp year-end rally for the following 16 reasons:

1) The S&P 500 (SPY) is more overbought than at any time in a decade, according to my Mad Hedge Marketing Timing Index at 90. Technology is the most oversold since the Dotcom bubble. We are in the early stages of the final melt-up.

2) The algorithms that drove the markets down so quickly and severely are now poised to flip to the upside.

3) Bear markets never started with real interest rates of zero (1.75% inflation rate – 1.75% ten year US Treasury yield).

4) Bear markets also don’t start with all-time high profits reported by the leading companies like Apple (AAPL), Amazon (AMZN), and Microsoft (MSFT)

5) We are now in the strongest seasonal period of market gains from November to May.

6) Sales during both Black Friday and Cyber Monday will do exceptionally well as the consumer is on fire.

7) At least $100 billion in corporate share buybacks have to kick end by yearend.

8) Risk Parity Traders, another new hedge fund strategy bedeviling the markets, are now in a position to strongly buy stocks, and sell bonds, which have gone nowhere.

9) Both month-end and year-end window-dressing purchases are not to be underestimated.

10) Much stock selling is being deferred to January when capital gains taxes are not payable for 16 months.

11) A lot of hedge fund shorts have to be covered by the end of 2019.

12) Global liquidity growth is slowing but is still enormous. There is nothing else to buy but US stocks. If you missed 2019, you get to do it all over again in 2020.

13) The collapse of oil prices from $77 to $50 a barrel has created a $200 billion surprise economic stimulus package for the US, especially for big energy consumers like transportation.

IT ALL ADDS UP TO A BIG FAT “BUY.”

I expect this rally to set up a classic head and shoulders top in the first quarter of 2019 (see chart below). Here’s where stocks fail, and we enter a new bear market. Here are ten reasons why:

1) Next year, S&P 500 earnings growth will sharply downshift from a 26% annual growth rate in 2018 to zero in 2020.

2) The upfront benefits of the corporate tax cuts will be all spent. With all the tax breaks in the world, companies won’t spend a dime if they believe the US is going into recession.

3) The massive expansion of government spending Trump brought us will be slowed by a Democratic-controlled House of Representatives, especially for defense.

4) The trade war with China will continue, cutting US growth. The Chinese are determined to outlast Donald Trump. The Middle Kingdom can take far more pain than the US, which has open elections.

5) The global synchronized recession worsens, dragging the US into the tar pit.

6) The Fed will cut interest rates any more in this cycle. You’re going to have to live on the hyper stimulus you have already received.

7) If the Fed had any doubts, they only need to look at the inflationary impacts of new duties on most imported goods.

8) A continuation of the China trade war also will trigger depression in the agricultural sector which is suffering from a China boycott that has crushed prices. Millions of tons of crops rotting in storage silos. This will spill over into a regional banking crisis.

9) The mere age of this Methuselah-like bull market at 11 years is an issue. Too many people have made too much money too easily for too long.

This all adds up to a big “SELL” sometime in the spring.

I just thought you’d like to know.

To watch the video of Lenny Kravitz playing, please click here.

November 8, 2019/by MHFTF

November 4, 2019

Diary, Newsletter, Summary

Global Market Comments
November 4, 2019
Fiat Lux

Featured Trade:

(MARKET OUTLOOK FOR THE WEEK AHEAD, or WELCOME TO THE SUMMIT)
(GM), (BA), (MSFT), (SPY), (TLT), (TSLA), (AMZN)

November 4, 2019/by Mad Hedge Fund Trader

The Chickens Come Home to Roost with Small Tech

Tech Letter

The tech story is still intact, but the edges are losing its shine.

That is the takeaway from the recent slew of earnings reports from many of the prominent yet second-tier tech companies.

On one hand, companies like Apple (AAPL) have been holding the fort as it blasts through to new highs even amid the backdrop of the Chinese trade war that has dragged many of the strong tech names into the mud.

What we did see lately was a magnificent swan dive by chip names like Western Digital (WDC) and Texas Instruments (TXI) which were blindsided by 10-15% haircuts because of lackluster guidance.

The agony didn’t stop there with second rate cloud names like Pinterest (PINS) and Arista Networks, Inc. (ANET) reaching for scapegoats for their weak guidance. These took instant 20% haircuts.

The problem with smaller stocks like these besides having narrower spreads, they are slaves to just a few contracts and when one goes, their guidance and revenue estimates implode in their faces.

Arista slid more than 25% on news that they expect quarterly revenue of $540 million-$560 million, with the midpoint about 20% below the previous Street consensus at $686.2 million.

Arista CEO Jayshree Ullal said in a statement that the company expects “a sudden softening in Q4 with a specific cloud titan customer.”

That is Facebook who comprise about 10% of Arista’s revenue composition because Facebook has pulled back the reigns on cloud spend to cut costs amid a murky global backdrop and regulatory minefield.

Unfortunately, second tier cloud names must accept that they do not offer the best pricing when directly competing with the superior cloud names of Google Cloud, Microsoft Azure, and Amazon Web Services (AWS) because they simply can’t scale as well to the extent these monopolistic FANGs can.

Data storage often comes down to whoever has the cheapest cost of capital to pile into server farms allowing pricing to be ultra-cheap and these three companies win out.

If these firms lose one contract like Walmart’s switch over to Microsoft Azure from Amazon, it’s not a big deal.

It doesn’t put a 10% black hole in the revenue stream like for Arista.

Pinterest was one of the most overhyped IPOs of 2019 promising growth, growth and more growth.

Its digital ad business needs to deliver accelerating growth for its share price to rise and when the latest earnings report showed year-over-year growth slow from 62% to 47%, investors saw the writing on the wall.

The company only grew its users 8% in the lucrative North American market and 38% abroad.

But the foreign markets were tainted by the gruesome underbelly of earning only 13 cents per foreign users.

There is user growth but at the cost of an inferior quality of growth.

Analysts can clearly observe the accelerated erosion of Pinterest, and I can say from a personal point of view that the website isn’t that useful.

Management’s excuse was a tough comparison to the prior year but if a growth firm has a superior model, they should be able to grow past any minor problems if the secular trends stay hemmed in.

Weak excuses now and probably weak excuses next quarter as the global tech landscape gets squeezed even more at the periphery.

What does this all mean?

There has been a flight to tech quality into the Teflon names like Microsoft and Apple.

Names that are showing growth headaches saddled with too much competition and structural softness are getting killed.

Don’t even think about investing in the marginal names like Pinterest and Arista.

Better to be safe on your perch inside the moat than outside isolated from the drawbridge.

Not all tech is created equal and it's rearing its ugly face in a frothy market.

November 4, 2019/by Mad Hedge Fund Trader

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