Global Market Comments
June 4, 2018
Fiat Lux
Featured Trade:
(WEDNESDAY, JUNE 13, 2018, PHILADELPHIA, PA, GLOBAL STRATEGY LUNCHEON)
(THE MARKET OUTLOOK FOR THE WEEK AHEAD, or NEW ALL-TIME HIGHS AND NEW ALL-TIME HIGHS),
(AAPL), (FB), (AMZN), (MSFT), (TLT)
Global Market Comments
May 11, 2018
Fiat Lux
Featured Trade:
(WEDNESDAY, JUNE 13, 2018, PHILADELPHIA, PA, GLOBAL STRATEGY LUNCHEON),
(MAY 9 BIWEEKLY STRATEGY WEBINAR Q&A),
(FB), (MU), (NVDA), (AMZN), (GOOGL),
(TLT), (SPX), (MSFT), (DAL),
(MAD HEDGE DINNER WITH BEN BERNANKE)
Global Market Comments
May 4, 2018
Fiat Lux
Featured Trade:
(DON'T MISS THE MAY 9 GLOBAL STRATEGY WEBINAR),
(A DAY IN THE LIFE OF THE MAD HEDGE FUND TRADER),
(SPY), (TLT), (TBT), (FXE),(GLD), (GDX), (USO),
(AMLP), (STBX), (NFLX), (DIS), (AAPL), (GM)
Global Market Comments
May 3, 2018
Fiat Lux
Featured Trade:
(STORAGE WARS),
(MSFT), (IBM), (CSCO), (SWCH),
(DON'T BE SHORT CHINA HERE),
($SSEC), (FXI), (CYB), (CHL), (BIDU),
Global Market Comments
April 13, 2018
Fiat Lux
Featured Trade:
(ANNOUNCING THE MAD HEDGE LAKE TAHOE, NEVADA, CONFERENCE, OCTOBER 26-27, 2018),
(APRIL 11 GLOBAL STRATEGY WEBINAR Q&A),
(TLT), (TBT), (GOOGL), (MU), (LRCX), (NVDA) (IBM),
(GLD), (AMZN), (MSFT), (XOM), (SPY), (QQQ)
There is no doubt that old tech is back with a vengeance.
Look at the trifecta of blockbuster earnings reports from Microsoft (MSFT), Amazon (AMZN), and Alphabet (GOOGL) recently, and you can reach no other conclusion.
The Microsoft turnaround in particular has been amazing.
PCs, and the software to run them were so 1990s.
After the Dotcom bust in 2000, Microsoft was dead money for years.
Founder Bill Gates retired in 2008. CEO Steve Ballmer finally got the message in 2013, and retired to pay through the nose, some $2 billion, for the basketball team, the LA Clippers.
Succeeding operating systems offered little that was new, and they fell woefully behind the technology curve.
Even I gave away my own machines years ago to switch to Apple devices. These virus immune machines are perfect for a small business like mine, as they seamlessly integrate and all talk to each other.
When the company brought out the Windows Phone in 2010, three years after Apple, people in Silicon Valley laughed.
Long given up for dead as a trading and investment vehicle, the shares have been on a tear in 2015.
The stock is hitting a new all time high FOR THE FIRST TIME IN 15 YEARS!
Satya Nadella, who took over management of the company in 2014, clearly had other ideas. The challenge for Nadella from day one was to move boldly into new technologies, while preserving its legacy Windows business lines.
So far, so good.
The key to the company?s new found success was it?s dumping of its old ?Wintel? strategy of yore that focused entirely on the growth of the PC market.
The problem was that the PC market stopped growing, as the world moved onto the Cloud and mobile.
The company is now rivaling Apple with $100 billion in cash, almost all held tax-free overseas.
EPS growth will reach 10% next year, beating other big competitors.
Windows and servers, the (MSFT)?s core products, still account for 80% of the firm?s business.
But its cloud presence is being ramped up at a frenetic pace, where the future for the company lies, nearly doubling YOY. Mobile technologies, where it has lagged until now, are also on fire.
Rave reviews from its latest operating system upgrade, Windows 10, also helped.
On top of all of this, Microsoft is paying a generous 3% dividend. It?s earnings multiple at 15X makes it a bargain compared to other big tech companies and the rest of the market.
As I explained in my recent research piece ?Switching From Growth to Value? (click here?), Microsoft makes a perfect investment for a mature bull market.
It is not only at a multiple discount to the rest of the market, now at 18X, it is cheap when compared to the rest of its own sector as well.
This is when investors and traders bail from their high priced stocks to safer, lower multiple companies.
Obviously, I don?t want to pile into Microsoft, or any other of the big tech stocks on top of a furious 10% spike. But it is now safely in the ?buy on the dip? camp, along with the rest of big tech.
The party has only just stated.
To read my interview with Bill Gates? father, click here for ?An Evening With Bill Gates, Sr.?.
I had a chat with Bill Gates, Sr. recently, co-chairman of the Bill and Melinda Gates Foundation, the world's largest private philanthropic organization. There, a staff of 800 helps him manage $30 billion.
The foundation will give away $3.1 billion this year, a 10% increase over last year. Some $1.5 billion will go to emerging nation healthcare and another $750 million to enhance American education.
The foundation's spending in Africa has been so massive, that it is starting to have a major impact on conditions and is part of the bull case for investing.
The fund happens to be one of the best-managed institutions out there, having sold the bulk of its Microsoft (MSFT) stock just before the dotcom bust and moving the money into Treasury bonds.
Mr. Gates' pet peeve is the precarious state of the US K-12 public education system, where teaching is not as good as it could be, expectations are low and financial incentives and national standards are needed.
When asked about retirement, he says, "Having a son with a billion dollars puts a whole new spin on things." Now a razor-sharp 88, his favorite treat is the free Net Jet miles he gets from his son Bill every year. In his memoir Showing up for Life, he says a major influence on his life was his Scoutmaster 70 years ago.
Being an Eagle Scout myself, I quickly drilled him on some complex knots, and he whipped right through all of them.
The world needs more Bill Gates, Seniors.
A Bowline Knot
For those of you who heeded my expert advice to buy the ProShares Ultra Short Euro ETF (EUO) last July, well done!
You are up a massive 48%! This is on a move in the underlying European currency of only 18.5%.
My browsing of the Galleria in Milan, the strolls through Spanish shopping malls, and my dickering with an assortment of dubious Greek merchants, all paid off big time. It turns out that everything I predicted for this beleaguered currency came true.
The European economy did collapse. Cantankerous governments made the problem worse by squabbling, delaying and obfuscating, as usual.
The European Central Bank finally threw in the towel and did everything they could to collapse the value of the Euro and reinvigorate their comatose economies. This they did by imitating America?s wildly successful quantitative easing, which they announced with local variations last Thursday.
And now for the good news: The best is yet to come!
Europe is now six days into a strategy of aggressive monetary easing which may take as long as five years until it delivers tangible, sustainable results. That?s how long it took for the Federal Reserve?s QE to restore satisfactory levels of confidence in the US economy.
The net net is that we have almost certainly only seen the first act of a weakening of the Euro which may last for years. A short Euro could be the trade that keeps on giving.
The ECB?s own target now is obviously parity against the greenback, which you will find predicted in my own 2015 Annual Asset Class Review released at the beginning of January (click here).
Once they hit that target, 87 cents to the Euro will become the new goal, and that could be achieved sooner than later.
However, you will not find me short the Euro up the wazoo this minute. I think we have just stumbled into a classic ?Buy the Rumor, Sell the News? situation with the Euro.
The next act will involve the ECB sitting on its hands for a year, realizing that their first pass at QE was inadequate, superficial, and flaccid, and that it is time to pull the bazooka out of their pockets once again.
This is a problem when the entire investment world is short the Euro. That paves the way for countless, rip your face off short covering rallies in the months ahead. Any smidgeon or blip of positive European economic data could spark one of these.
Trading the Euro for the past eight months has been like falling off a log. It is about to get dull, mean and brutish. So for the moment, my currency play has morphed into selling short the Japanese yen, which has its own unique set of problems.
As for the unintended consequences of the Euro crash, the Q4 earnings reports announced so far by corporate America tells the whole story.
Companies with a heavy dependence on foreign (read Euro and yen) denominated earnings are almost universally coming up short. On this list you can include Caterpillar (CAT), Procter and Gamble (PG), and Microsoft (MSFT).
Who are the winners in the strong dollar, weak Euro contest? US companies that see a high proportion of their costs denominated in flagging foreign currencies, but see their incomes arrive totally in the form of robust, virile dollars.
You may not realize it, but you are playing the global currency arbitrage game every time you go shopping. The standout names here are US retailers, which manufacture abroad virtually all of the junk they sell you here, especially in low waged China.
The stars here are Macy?s (M), Family Dollar Stores (FDO), Costco (COST), Target (TGT), and Wal-Mart (WMT).
You can see this divergence crystal clear in examining the behavior of the major stock indexes. The chart for the Guggenheim S&P 500 Equal Weight ETF (RSP), which has the greatest share of currency sensitive multinationals, looks positively dire, and may be about to put in a fatal ?Head and Shoulders? top (see the following story).
The chart for the NASDAQ (QQQ), where constituent companies have less, but still a substantial foreign currency exposure, appears to be putting in a sideways pennant formation before eventually breaking out to new highs once again.
The small cap Russell 2000, which is composed of almost entirely domestic, dollar based, ?Made in America? type companies, is by far the strongest index of the trio, and looks like it is just biding time before it blasts through to new highs.
If you are a follower of my Trade Alert Service, then you already know that I have a long position in the (IWM), which has already chipped in 2.12% to my 2015 performance.
You see, there is a method to my Madness.
Never Underestimate the Value of Research
Call it the shot heard round the world. David Einhorn?s lawsuit against tech goliath Apple (AAPL) has focused a giant spotlight on what has been one of the worst performing stock market sectors of 2013-- large old technology stocks. Could this be the set up for the biggest sector rotation of the year?
Most of the price action in this year can be divided into kinds: big cap banks and industrials, and what I call garbage. So the shares of Bank of America (BAC), JP Morgan (JPM), Caterpillar (CAT), Procter & Gamble (PG), and Exxon (XOM) have been going through the roof. Garbage stocks, best represented by Netflix (NFLX) have done even better, largely driven by the desperate short covering of big hedge funds.
The Einhorn suit resonated with many of the long suffering owners of Apple, which has seen the value of their holdings plunge 38% since the September $706 peak. His basic message is that the company?s many past near death experiences have fostered a depression mentality where there is no such thing as too much cash.
As a result, $130 billion sits in T bills and money market funds earning nothing, the largest such accumulation in history. Just this hoard, alone, would rank as America?s 19th largest company by market capitalization.
Such conservatism in management is laudable. But Einhorn argues that it has been taken to such extremes at Apple that it has crossed the boundary into mismanagement and malfeasance. The activist shareholder wants the company to return money to shareholders in the form of high dividends and stock buybacks. Such action could trigger a rapid doubling in the value of the stock.
The litigation was enough to ignite a 10% in Apple stock last week. I think David is interested in far more than just this. Is this the final bottom for the beleaguered company? Is it time to buy? The NASDAQ Index certainly things so. Check out the chart below and you?ll see that the action in Apple enabled it to bust out of its recent torpor to the upside.
The really interesting possibility is that the rebirth of Apple could have major implications for the market as a whole. Survey the landscape these days, and you find shares that are either extremely overbought, or extremely oversold. If money shifts from the leaders to the laggards, it could give the indexes enough juice to take another, and possibly final leg upward.
I just thought you?d like to know.
Apple: More Than Just a Bounce?