(PYPL) - Page 8 - Mad Hedge Fund Trader

Long-Term Economic Effects of the Coronavirus

The world will never be the same again.

Not only is the old world rapidly disappearing before our eyes, the new one is breaking down the front door with alarming speed. In short: the future is happening fast, very fast.

To a large extent, long-term economic trends already in place have been given a turbocharger. Quite simply, you just take out the people. Human contact of any kind will be minimized. I’ll tick off some of the more obvious changes.

All San Francisco Bay Area counties are still living under a “shelter in place” order. All schools have now been closed for a year. In March 2020 the local high school managed to get the first weekend of their annual musical “Titanic” done, but not the second.

All travel is banned except to gain essential necessities. Most bars and restaurants have been closed indefinitely, except for takeout. Some cities are issuing $1,000 fines for failure to wear a mask. The kids have turned into white, pasty zombies after staring at laptops for 12 months.

To say that we are merely fatigued from a yearlong quarantine would be a vast understatement. Climbing the walls is more like it.

As I write this, US Covid-19 deaths have topped a half million and cases have surpassed 28 million. China peaked at 4,000 deaths with four times our population. The difference was leadership issue. China welded the doors of Covid carriers shut. Here said it was a big nothing and would “magically” go away.

The magic didn’t work.

In the meantime, you better get used to your new life. You know that home office of yours you’ve been living in? It is now a permanent affair, as your employer figured out that they can make more money and earn a high stock multiple with you at home.

Besides, they didn’t like you anyway.

Many employees are never coming back, preferring to avoid horrendous commutes, lower costs, and yes, future pandemic viruses. GoToMeeting (LOGM) and Zoom (ZM) are now a permanent aspect of your life.

Commerce will change beyond all recognition. Did you do a lot of shopping on Amazon (AMZN) like I do? Now, you’re really going to pour it on.

Amazon hired a staggering 500,000 new distribution and delivery people in 2020 to handle the surge in business, the most by any organization since WWII. I can’t believe the stock is only at $3,200. It is worth double that, especially if they break up the company.

The epidemic really hammered the mall, where a fatal disease is only a sneeze away. Mall REITs are only just starting to crawl off the floor and may never again reach their old highs, no matter how much they promise to pay you in yield.

And how are you going to pay for that transaction? Guess what one of the most efficient transmitters of disease is? That would be US dollar bills. Something like 50% of all US paper money already tests positive for drugs, according to one Fed study.

Take paper money in change and you are not only getting contact from the salesclerk, but the last dozen people who handled the money. You are crazy now to take change and then not go swimming in Purell afterwards. Personally, I leave it all as a tip.

Contactless payments deal with this nicely (PYPL), (SQ), two of the top-performing stocks since April. People pay by swiping their iPhone wallet, or are simply scanned when they walk in the store, as with some Whole Foods shops owned by Amazon.

Conferences? A thing of the past. All of my public speaking events around the world have been cancelled. Webinars now rule. They offer lower conversion rates but include vastly cheaper costs as well. I can reach more viewers for $1,000 on Zoom than the Money Show could ever attract to the Las Vegas Mandalay Bay for $1 million.

At least I won’t have 18 hours of jet lag to deal with anymore. I’m sure Qantas will miss those first-class ticket purchases and I’ll miss the Champaign.

Entertainment is also morphing beyond all recognition. Streaming is now the order of the day. Disney+ (DIS) was probably the best-timed launch in business history, earning enough to cancel out most of the losses from the closure of the theme parks. Again, this has been a long time coming and the other major movie producers will soon follow suit.

Movie theaters, which have been closed for a year, may also never see their peak business again (CNK), (AMC), (IMAX). The theaters that survive will do so by only accumulating so much debt that they won’t be attractive investments for a decade.

The same is true for cruise lines (CCL), (RCL), (NCLH). But that won’t forestall dead cat bounces that are worth a double in the meantime, as they are coming off of such low levels. No vaccination, no cruise.

Exercise is changing overnight. All gyms and health clubs are now closed, so working out will become a solo exercise far away on a high mountain. I have already been doing this for 30 years, so a piece of cake here.

Friends with yoga classes are now doing them in the living room, streaming their instructors online. The economics of online yoga classes are so compelling, with hundreds attending online classes, that the old model may never come back.

If you are having trouble getting your kids to comply with social distancing requirements, have a family movie night and watch Gwyneth Paltrow and Cate Winslet die in Contagion. It has been applauded by scientists as the most accurate presentation of the kind of out-of-control pandemic which we may now be facing.

It is bone-chilling.

As for me, I have my stockpile of food and will be self-quarantining for the foreseeable future. I am at the top of five lists to get vaccinations, but so far all I have received is a ton of special offers from CVS (CVS), Rite Aid (RAD), and Walmart (WMT)

Stay healthy.

February 24, 2021/by Mad Hedge Fund Trader

February 19, 2021

Tech Letter

Mad Hedge Technology Letter
February 19, 2021
Fiat Lux

Featured Trade:

(ARE TECH STOCKS IRRATIONAL?)
(TSLA), (PYPL), (BIG TECH)

February 19, 2021/by Mad Hedge Fund Trader

Are Big Tech Stocks Irrational?

Tech Letter

It’s no joke – we are in the nosebleed section with tech stocks here.

But that doesn’t mean there is no more room to run.

Euphoria can continue until it doesn’t, and that’s where we are right now in the Nasdaq as we close in on 14,000 points.

If we take a minute to understand the different opinions out there, overall, people think tech isn’t cheap right now and rightly so.

Out of all assets, bitcoin and U.S. tech stocks are considered in bubble territory right now.

A survey contributed by market professionals in late January found that 89% of professionals believe we are in a bubble.

In the bubble, bitcoin is the posterchild of bubble activity.

The next so-called bubble poster child is big cap U.S. tech stocks.

Hard not to say no when the likes of fintech giants PayPal (PYPL) are up 25% YTD.

Another name that has seen insatiable appreciation in underlying shares is electric vehicle (EV) maker Tesla (TSLA) peaking at $880 and consolidating back to $790 today.

Tesla, meanwhile, also saw a massive climb in its share price in 2020 and that has extended into the new year.

CEO Elon Musk was crowned the world’s richest person.

The stock is up more than 700% year over year.

It is not exactly certain what might take down these robust names.

The number of tailwinds is still plentiful.

Loose monetary situations supportive of bubbles will stick around with the public health situation lingering for longer than first anticipated.

The health dilemma is highly likely to spill over into 2022 at this point.

More investors say the rollout of vaccines deployment is failing (41%) than those who said it’s been better than expected (22%).

Only half of those surveyed see normality returning by December.

Then checking in with the latest from a big American investment bank validated these survey numbers with massive in-flow of equity capital.

Brokers have been busy and rightly so as equities have been frontpage news lately with speculative mania reaching fever pitch.

A record net 25% of investors surveyed by the American investment bank this month are taking higher-than-normal risks.

Cash levels slumped to the lowest since 2013, while optimism on cyclical risk assets rose to the highest since 2011.

The yields out there have never been lower and bearing more risk is required to produce the same number of gains.

Unrivaled optimism has been percolating with 84% of fund managers expecting global corporate profits to improve over the next 12 months.

For the first time in a year, investors say companies should focus on spending rather than improving their balance sheets.

We are in the midst of going from balance sheet protection to really letting it loose with capital spending and the synergies that surround it.

Easy money and upcoming health solutions are fueling tech investors into reflation trades of all stripes but mostly trading that is hypertargeting towards the best of tech.

Even if a mini correction presented itself, the mentality of “buy the dip” has strengthened since last March and it will really take a mega black swan event to topple this momentum.

In short, the tech narrative is strengthening with not only the gold standard of tech monopolizing even more revenue, but the second tier is gaining ground in terms of percentage appreciation as well.

The secular trends that buttress tech have also fortified over the pandemic and no government, big or small, has proven a match for proper regulating big tech.

February 19, 2021/by Mad Hedge Fund Trader

February 2, 2021

Diary, Newsletter, Summary

Global Market Comments
February 2, 2021
Fiat Lux

Featured Trade:

(MY NEWLY UPDATED LONG-TERM PORTFOLIO),
(PFE), (BMY), (AMGN), (CELG), (CRSP), (FB), (PYPL), (GOOGL), (AAPL), (AMZN), (SQ), (JPM), (BAC), (MS), (GS), (BABA), (EEM), (FXA), (FCX), (GLD), (SLV), (TLT)

February 2, 2021/by Mad Hedge Fund Trader

My Newly Updated Long-Term Portfolio

Diary, Newsletter

I am really happy with the performance of the Mad Hedge Long Term Portfolio since the last update on July 21, 2020. In fact, not only did we nail the best sectors to go heavily overweight, we also completely dodged the bullets in the worst-performing ones.

For new subscribers, the Mad Hedge Long Term Portfolio is a “buy and forget” portfolio of stocks and ETFs. If trading is not your thing, these are the investments you can make, and then not touch until you start drawing down your retirement funds at age 72.

For some of you, that is not for another 50 years. For others, it was yesterday.

There is only one thing you need to do now and that is to rebalance. Buy or sell what you need to reweight every position to its appropriate 5% or 10% weighting. Rebalancing is one of the only free lunches out there and always adds performance over time. You should follow the rules assiduously.

Despite the seismic changes that have taken place in the global economy over the past nine months, I only need to make minor changes to the portfolio, which I have highlighted below.

To download the entire new portfolio in an excel spreadsheet, please go to www.madhedgefundtrader.com, log in, go “My Account”, then “Global Trading Dispatch”, then click on the “Long Term Portfolio” button.

Changes

I am cutting back my weighting in biotech from 25% to 20% because Celgene (CELG) was taken over by Bristol Myers (BMY) at a 110% profit compared to our original cost. We also earned a spectacular 145% gain on Crisper Therapeutics (CRSP). I’m keeping it because I believe it has more to run.

My 30% weighting in technology also gets pared back to 20% because virtually all of my names have doubled or more. These have been in a sideways correction for the past six months but are still an important part of any barbell portfolio. So, take out Facebook (FB) and PayPal (PYPL) and keep the rest.

I am increasing my weighting in banks from 10% to 20%. Interest rates are finally starting to rise, setting up a perfect storm in favor of bank earnings. Loan default rates are falling. Banks are overcapitalized, thanks to Dodd-Frank. And because of the trillions in government stimulus loans they are disbursing, they are now the most subsidized sector of the economy. So, add in Morgan Stanley (MS) and Goldman Sachs (GS), which will profit enormously from a continuing bull market in stocks.

Along the same vein, I am committing 10% of my portfolio to a short position in the United States Treasury Bond Fund (TLT) as I think bonds are about to go to hell in a handbasket. I rant on this sector on an almost daily basis, so go read Global Trading Dispatch.

I am keeping my 10% international exposure in Chinese Internet giant Alibaba (BABA) and the iShares MSCI Emerging Market ETF (EEM). The Biden administration will most likely dial back the recent vociferous anti-Chinese stance, setting these names on fire.

I am also keeping my foreign currency exposure unchanged, maintaining a double long in the Australian dollar (FXA). The Aussie has been the best performing currency against the US dollar and that should continue.

Australia will be a leveraged beneficiary of the synchronized global economic recovery, both through strong commodity prices and gold which has already started to rise, and the post-pandemic return of Chinese tourism and investment. I argue that the Aussie will eventually make it to parity with the US dollar, or 1:1.

As for precious metals, I’m baling on my 10% holding in gold (GLD), which delivered a nice 20% gain in 2020. From here, it is having trouble keeping up with other alternative assets, like Bitcoin, and there are better fish to fry.

Yes, in this liquidity-driven global bull market, a 20% return is just not enough to keep my interest. Instead, I add a 5% weighting in the higher beta and more volatile iShares Silver Trust (SLV), which has far wider industrial uses in solar panels and electric vehicles.

As for energy, I will keep my weighting at zero. Never confuse “gone down a lot” with “cheap”. I think the bankruptcies have only just started and will stretch on for a decade. Thanks to hyper-accelerating technology, the adoption of electric cars, and less movement overall in the new economy, energy is about to become free. You are looking at the next buggy whip industry.

My ten-year assumption for the US and the global economy remains the same. I’m looking at 3%-5% a year growth for the next decade.

When we come out the other side of this, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With interest rates still at zero, oil cheap, there will be no reason not to. The Dow Average will rise by 400% or more in the coming decade. The America coming out the other side of the pandemic will be far more efficient, productive, and profitable than the old.

You won’t believe what’s coming your way!

I hope you find this useful and I’ll be sending out another update in six months so you can rebalance once again.

Stay healthy.

John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader

February 2, 2021/by Mad Hedge Fund Trader

December 18, 2020

Tech Letter

Mad Hedge Technology Letter
December 18, 2020
Fiat Lux

Featured Trade:

(TECH IN 2021)
(ZM), (WORK), (NVDA), (AMD), (QCOM), (SQ), (PYPL), (INTU), (PANW), (OKTA), (CRWD), (SHOP), (MELI), (ETSY), (NOW), (AKAM), (TWLO)

December 18, 2020/by Mad Hedge Fund Trader

Tech in 2021

Tech Letter

The tech sector has been through a whirlwind in 2020, and if investors didn’t lose their shirt in March and sell at the bottom, many of them should have ended the year in the green.

My prediction at the end of 2019 that cybersecurity and health cloud companies would outperform came true.

What I didn’t get right was that almost every other tech company would double as well.

Saying that video conferencing Zoom (ZM) is the Tech Company of 2020 is not a revelation at this point, but it shows how quickly a hot software tool can come to the forefront of the tech ecosystem.

M&A was as hot as can be as many cash-heavy cloud firms try to keep pace with the Apples and Googles of the tech world like Salesforce’s purchase of workforce collaboration app Slack (WORK).

Not only has the cloud felt the huge tailwinds from the pandemic, but hardware companies like HP and Dell have been helped by the massive demand for devices since the whole world moved online in March.

What can we expect in 2021?

Although I don’t foresee many tech firms making 100% returns like in 2020, they are still the star QB on the team and are carrying the rest of the market on their back.

That won’t change and in fact, tech will need smaller companies to do more heavy lifting come 2021.

The only other sector to get through completely unscathed from the pandemic is housing, and unsurprisingly, it goes hand in hand with converted remote offices that wield the software that I talk about.

The world has essentially become silos of remote offices and we plug into the central system to do business with each other with this thing called the internet.

In 2021, this concept accelerates, and cloud companies could easily check in with 20%-30% return by 2022. The true “growth” cloud firms will see 40% returns if external factors stay favorable.

This year was the beginning of the end for many non-tech businesses and just because vaccines are rolling out across the U.S. doesn’t mean that everyone will ditch the masks and congregate in tight, indoor places.

There is nothing stopping tech from snatching more turf from the other sectors and the coast couldn’t be clearer minus the few dealing with anti-trust issues.

I can tell you with conviction that Facebook, Google, Apple, and Amazon have run out of time and meaningful regulation will rear its ugly head in 2021.

We are already seeing the EU try to ratchet up the tax coffers and lawsuits up the wazoo on Facebook are starting to mount.

Eventually, they will all be broken up which will spawn even more shareholder value.

Even Fed Chair Jerome Powell told us that he thinks stocks aren’t expensive based on how low rates have become.

That is the green light to throw new money at growth stocks unless the Fed signal otherwise.

As we head into the 5G world, I would not bet against the semiconductor trade and the likes of Nvidia (NVDA), AMD (AMD), Qualcomm (QCOM) should overperform in 2021.

Communication is the glue of society and communications-as-a-platform app Twilio (TWLO) will improve on its 2020 form along with cloud apps that make the internet more efficient and robust like Akamai (AKAM).

Workflow cloud app ServiceNow (NOW) is another one that will continue its success.

The uninterrupted shift to the cloud will not stop in 2021 and will be a strong growth driver for numerous tech companies next year.

I will not say this is a digital revolution, but as corporate executives realize they haven’t spent enough on the cloud in the lead-up to the pandemic and must now play catch-up in order to satisfy new demands in the business.

The most recent CIO survey was the thesis that cloud and digital adoption at 10% of enterprise and 15% of consumer spend entering 2020 would continue to accelerate post-pandemic and into 2021-2022.

A key dynamic playing out in the tech world over the next 12 to 18 months is the secular growth areas around cloud and cybersecurity that are seeing eye-popping demand trends.

Consumers will still be stuck at home, meaning e-commerce will still be big winners in 2021 such as Shopify (SHOP), Etsy (ETSY), and MercadoLibre (MELI).

The reliance on e-commerce will open the door for more tech companies to participate in the digital flow of transactions and the U.S. will finally catch up to the Chinese idea of paying through contactless instruments and not cards.

This highly benefits U.S. fintech companies like Square (SQ) and PayPal (PYPL). Intuit (INTU) and its accounting software is another niche player that will dominate.

Intuit most recently bought Credit Karma for $8.1 billion signaling deeper penetration into fintech.

Since we are all splurging online, we need cybersecurity to protect us and the likes of Palo Alto Networks (PANW), Okta (OKTA), and CrowdStrike Holdings, Inc. (CRWD).

The side effect of the accelerating shift to digital and cloud are troves of data that need to be stored, thus anything related to big data will also outperform.

Most of the information created (97%) has historically been stored, processed, or archived.

As new mountains of digital gold are created, we expect AI will have an increasingly critical role.

I believe that 2021 will finally see the integration of 5G technology ushering in another wave of digital migration and data generation that the world has never seen before and above are some of the tech companies that will make out well.

The average household is using 38x the amount of internet data they were using ten years ago and this is just the beginning.

December 18, 2020/by Mad Hedge Fund Trader

December 4, 2020

Tech Letter

Mad Hedge Technology Letter
December 4, 2020
Fiat Lux

Featured Trade:

(THE NORMALIZATION OF CRYPTOCURRENCY)
(BITCOIN), (SQ), (PYPL)

December 4, 2020/by Mad Hedge Fund Trader

The Normalization of Cryptocurrency

Tech Letter

The price of Bitcoin mushrooming to an all-time peak of just south of $20,000 is a seminal moment for digital currencies.

Although the Mad Hedge Technology Letter rarely wades into these types of waters, crypto must be addressed because the recent legitimization of digital currencies cannot be diminished.

That’s not to say they will be the de facto monetary instrument tomorrow morning, but the concept of digital currencies and development of it this year has been far and wide-reaching.

The price of Bitcoin has gained more than 170% this year, with most of the price action coming since September.

Why has it been so successful?

Riskier assets are back in vogue as the unprecedented fiscal and monetary stimulus means there are fewer places to achieve any sort of proper yield.

Then consider recent mainstream acceptance that is coming to full fruition such as payment companies including PayPal (PYPL) and Square (SQ) which have recently incorporated digital currencies into their business model.

Government and Central Banks are the largest reason for the short-term elevated attention as their fumbled virus response has led to lockdowns and a massive loss of trust in their leadership.

The global debacle has led many investors to search for alternative routes to fiscal safe havens seeking shelter from rapidly increasing central bank quantitate easing and the rampant asset inflation that everyone agrees is already taking place.

Much of the money printing has not been done responsibly with mainly only corporations and their offshoots benefiting from an unprecedented, pandemic-marred market reality in which stocks are trading at nosebleed prices while bond yields are hovering around zero.

Moving forward, the risk of protests, revolution, and war has increased significantly in large swaths of the developed and undeveloped world and higher societal and systemic risk makes the idea of digital currencies that are out of the reach of taxable authorities more conducive to storing savings and for-profit trading.

Bonds have no yield EVERYWHERE at this point and keeping wealth in cash is dangerous.

Investors used to put their money in gold, but gold is going down because it is being replaced by digital gold called bitcoin.

It was only in 2017 when the bitcoin surge lost momentum and caused the price of Bitcoin to lose half its value within days of reaching an all-time high.

What is the difference today?

Today’s bull market is resting upon more solid foundations and in 2017, the bubble was artificially propped up by Initial Coin Offerings (ICOs), which saw charlatans sell mostly worthless new currencies to the naïve retail investor.

It’s true that today, Bitcoin is regulated tighter translating to less dumb money circulating in the system.

Bitcoin’s foundations are also more firm in 2020 because its adoption base has increased meaning more people have skin in the game and aren’t going to dump the asset at the first sign of consolidation.

A company called Grayscale has been quite intelligent in pitching Bitcoin as an alternative to gold and selling it to millions of millennial investors in the form of shares.

The large avoidance of corporate bitcoin adoption has changed 180 degrees in the year of the pandemic with PayPal announcing last month that it will soon allow users to buy cryptocurrency within its app.

Next year, PayPal will allow users to draw from cryptocurrency accounts to pay for goods and services at 28 million merchants that use the company's platform.

PayPal will also enable customers to use Venmo, its popular peer-to-peer payment service, to buy and shop with cryptocurrencies.

CEO Dan Schulman implied that the size of the waiting list for last month's crypto offering for access to crypto was two or three times as great as what the company anticipated.

Obviously, this is setting up a shortage of bitcoin in more corporates needing access to its supply.

Schulman also argued that companies and central banks are experimenting with cryptocurrencies and the utility of digital wallets.

“Digital wallets are a natural complement to all forms of digital currency,” said Schulman, adding that PayPal is in close talks with central banks and regulators to explore new uses for these wallets.

Schulman said PayPal views cryptocurrency systems as cheaper and more efficient than ACH, which is the network that supports the existing banking system.

He also said that the current financial system is “not working” for many low-income people meaning that there is a huge untapped audience that would find crypto more useful.

Last week, cryptocurrency giant Coinbase announced a debit card that can be used at ordinary merchants, while MasterCard in September announced a service to let central banks test out digital currencies.

There are strong rumblings by investors that gold will eventually be displaced by “digital gold” and abandoning the sinking ship early could lead to all gold investors diverting their capital into bitcoin.

This would massively expand the user base as well and the valuation could be 25 times higher than it is today.

Institutions have taken the baton from the retail-driven pandemonium of 2017 and in 2020, many liquid investors will look at any crash or dip in bitcoin as a buying opportunity.

What a change from just 4 years ago!

I hate to say it, but as central banks go even more off the deep end to prop up a decaying financial system riddled with conflicts of interest, the price of bitcoin will gain in strength resulting in much higher prices.

Not only that, but the adoption rate could also go into overdrive opening up pathways for secondary coins like Ethereum to gain widespread adoption as well.

At this point, it appears that this overarching trend is unstoppable, and in the future, historians will look at this 2^nd bull run to $20,000 in 2020 as just another data point in its meteoric rise to jaw-dropping prices of $30,000 then $40,000.