Mad Hedge Technology Letter
December 27, 2023
Fiat Lux
Featured Trade:
(BUYER BEWARE)
(TIKTOK)
Mad Hedge Technology Letter
December 27, 2023
Fiat Lux
Featured Trade:
(BUYER BEWARE)
(TIKTOK)
Sometimes the best way to become successful at investing in technology stocks is to avoid the black swan or the big disaster.
I hate to say it but investment risk has never been higher.
One question that keeps getting rehashed that I thought I might take time to address is the rise of the TikTok influencer-adviser.
According to a brief Google search, TikTok, known in China as Douyin, is a video-sharing social networking service owned by Chinese company ByteDance.
The social media platform is used to make a variety of short-form videos, from genres like dance, comedy, and education, that have a duration from three seconds to one minute.
Unfortunately, for serious retail investors lately, content has migrated into high-stakes themes like financial education and financial advising giving rise to content that is produced by video creators to get a piece of the financial industry.
Naturally, this has brought down the quality of the financial content on the internet to historic lows simply because most of the content is marginal at best.
These promulgators often preach about their status as “trading gurus” and often leverage the hype of digital currencies to claim they are fully invested in “crypto assets” and urge anyone reading to become one of their new “cult followers.”
They are also usually paid to market a “bulletproof” financial app or certain crypto asset to avid followers without properly disclosing that they are being paid for the advertisement.
This behavior is being encouraged by the TikTok algorithms which order this type of misleading content at the top of searches simply because it gets more hits being a click-bait type of content.
The more outlandish the videos become, gloating about get-rich-quick schemes and 1,000% daily returns, the higher up in the search queries they usually populate when filtered through TikTok algorithms.
These accounts are known as financial “influencers” and post 100s of such videos every month featuring fraudulent success or minimizing the difficulty of profiting through trading and a mix or mash of everything in between.
Even some proclaim to have unlocked the holy grail of trading and “guarantee” 100% returns or your money back.
Another speaking point they like to touch on is how video watchers can “also” afford wealthy lifestyles without having to work, at least in the traditional way.
To dumb down the travails of investing and trading to something easier than pouring a glass of water is a lie.
Many of these novice investors are duped into paying for exorbitant services that are nothing more than promotional buzz offering hyped-up marketing language as specific trading advice.
Unfortunately, US regulators have turned a blind eye to what is happening on this nefarious Chinese platform, and imitators are spawned daily and are certainly incentivized to do so.
While I must admit that regulating this type of behavior on TikTok is incredibly messy, to leave this unchecked will result in massive fraud for the little guy that I try to help.
The justification for ignoring these TikTok “influencers” is that there is even worse cybercrime taking place out there and the content these influencers are peddling is straddling the gray areas of the law.
But it’s not enough, and readers need to understand the heightened risks of diving feet-first into these TikTok polar vortexes where you just get whipped around unknowingly.
Pre-emptively protecting your portfolio by avoiding these TikTok trading gurus is the order of the day.
As we enter 2024, taking tabs on the fallout has been epic.
The TikTok crypto marketers were largely being sponsored by the crypto exchange FTX.
They were peddling FTX’s own digital currency that was made out of thin air.
Anyone trading in this FTX in-house digital coin known as FTT lost most of their money as the CEO of FTX Sam Bankman-Fried was extradited back to the United States and found guilty in court.
FTX’s FTT coin went from $40 at the beginning of 2022 to 80 cents on December 30, 2022, highlighting the dangers of listening to fake crypto “trading gurus” on TikTok pushing FTT coin like there is no tomorrow.
Stay vigilant and happy trading and remember, there is no free lunch in trading.
It’s hard work earning your crust of bread.
BUYER BEWARE
Mad Hedge Technology Letter
December 30, 2022
Fiat Lux
Featured Trade:
(BUYER BEWARE)
(TIKTOK)
Sometimes the best way to become successful at investing in technology stocks is to avoid the black swan or the big disaster.
I hate to say it but investment risk has never been higher.
One question that keeps getting rehashed that I thought I might take time to address is the rise of the TikTok influencer-adviser.
According to a brief Google search, TikTok, known in China as Douyin, is a video-sharing social networking service owned by Chinese company ByteDance.
The social media platform is used to make a variety of short-form videos, from genres like dance, comedy, and education, that have a duration from three seconds to one minute.
Unfortunately, for serious retail investors lately, content has migrated into high-stakes themes like financial education and financial advising giving rise to content that is produced by video creators to get a piece of the financial industry.
Naturally, this has brought down the quality of the financial content on the internet to historic lows simply because most of the content is marginal at best.
These promulgators often preach about their status as “trading gurus” and often leverage the hype of digital currencies to claim they are fully invested in “crypto assets” and urge anyone reading to become one of their new “cult followers.”
They are also usually paid to market a “bulletproof” financial app or certain crypto asset to avid followers without properly disclosing that they are being paid for the advertisement.
This behavior is being encouraged by the TikTok algorithms which order this type of misleading content at the top of searches simply because it gets more hits being a click-bait type of content.
The more outlandish the videos become, gloating about get-rich-quick schemes and 1,000% daily returns, the higher up in the search queries they usually populate when filtered through TikTok algorithms.
These accounts are known as financial “influencers” and post 100s of such videos every month featuring fraudulent success or minimizing the difficulty of profiting through trading and a mix or mash of everything in between.
Even some proclaim to have unlocked the holy grail of trading and “guarantee” 100% returns or your money back.
Another speaking point they like to touch on is how video watchers can “also” afford wealthy lifestyles without having to work, at least in the traditional way.
To dumb down the travails of investing and trading to something easier than pouring a glass of water is a lie.
Many of these novice investors are duped into paying for exorbitant services that are nothing more than promotional buzz offering hyped-up marketing language as specific trading advice.
Unfortunately, US regulators have turned a blind eye to what is happening on this nefarious Chinese platform, and imitators are spawned daily and are certainly incentivized to do so.
While I must admit that regulating this type of behavior on TikTok is incredibly messy, to leave this unchecked will result in massive fraud for the little guy that I try to help.
The justification for ignoring these TikTok “influencers” is because there is even worse cybercrime taking place out there and the content these influencers are peddling is straddling the gray areas of the law.
But it’s not enough, and readers need to understand the heightened risks of diving feet first into these TikTok polar vortexes where you just get whipped around unknowingly.
Pre-emptively protect your portfolio by avoiding these TikTok trading gurus is the order of the day.
As we enter 2023, taking tabs of the fallout has been epic.
The TikTok crypto marketers were largely being sponsored by crypto exchange FTX.
They were peddling FTX’s own digital currency that was made out of thin air.
Anyone trading in this FTX in-house digital coin known as FTT lost most of their money as the CEO of FTX Sam Bankman-Fried was extradited back to the United States from the Bahamas for illegally using billions of dollars in customer deposits.
FTX’s FTT coin went from $40 at the beginning of 2022 to 80 cents on December 30, 2022 highlighting the dangers of listening to fake crypto “trading gurus” on TikTok pushing FTT coin like there is no tomorrow.
Stay vigilant and happy trading and remember, there is no free lunch in trading.
It’s hard work earning your crust of bread.
BUYER BEWARE
Mad Hedge Technology Letter
July 29, 2022
Fiat Lux
Featured Trade:
(BUYER BEWARE)
(TIKTOK)
Mad Hedge Technology Letter
April 27, 2022
Fiat Lux
Featured Trade:
(GOOGLE LAYS AN EGG)
(GOOGL), (TIKTOK), (NFLX), (FB)
It’s not that easy to make money in big tech these days – that is what the big takeaway was with the Google (GOOGL) or Alphabet earnings report that came out after the close yesterday.
The glory years are long gone.
First, it was almost like Groundhog Day with the Netflix-like streaming catastrophe that has now victimized yet another tech company.
YouTube competes differently with other streamers and is reliant on the digital ad model which is why an ad shows every 10 seconds when we watch YouTube.
I know it’s annoying but that’s how they grow revenue, and the blame was squarely attributed to China’s TikTok which is a short-form video platform eating everyone else’s lunch.
YouTube led all platforms in the first quarter of 2022 when respondents were asked which platform they used most often for mobile video, but YouTube dropped to 35% of respondents vs. 45% in the first quarter of 2021 while TikTok was #2 with 22%.
Besides, YouTube is literally entertainment, and with the health situation normalized again and the weather heating up, don’t blame others for grabbing a beer or two with their friends whom they haven’t seen for ages.
That clearly doesn’t help the YouTube ad revenue when people are out and about.
Google will need to deal with this TikTok problem because it’s real and it’s not disappearing anytime soon.
Google has a TikTok copy called YouTube Shorts and it’s not going that well if we compare it to TikTok which has surged to well over 1 billion subscribers.
If management allows the platform to get stale, it could become another dying tech company like Facebook.
The sum of the parts wasn’t particularly impressive either and that is weird to say based on Google’s history of outperformance.
Investors almost never see them miss on the top and bottom line and the EPS miss was not even close.
Things are getting more expensive for all of us, and Google just laid bare what we knew it our guts.
Just look at their research and development spend, it went from $7.5 billion to $9.1 billion which is a $1.6 billion increase in nominal spend.
They are also getting less revenue from Google Play which lowered developer fees to 15% or less for 99% of apps, down from 30% previously.
The bright spots were search advertising and cloud businesses.
Google Cloud has been growing quickly, but still remains unprofitable. It grew sales 43% for the first quarter to reach $5.8 billion, which was about in line with expectations. However, operating losses were wider than expected at $931 million.
Investing aggressively in the cloud is Google’s silver bullet, and that’s clearly having an impact in terms of the free cash flow numbers as well as the higher expenses and the margin compression we’re seeing not only in that segment but in the broader business.
Big Tech is decelerating, and external forces are magnifying the weakness in growth.
I do believe much of the negativity has been priced into GOOGL’s stock and this isn’t the case of a broken business model like Netflix (NFLX) or Facebook (FB).
I believe GOOGL shares will have a positive second half of the year.
Mad Hedge Technology Letter
January 24, 2022
Fiat Lux
Featured Trade:
(BEST OF THE REST GETS SLAUGHTERED)
(MSFT), (SNAP), (GOOGL), (AAPL), (AMZN), (FB), (TIKTOK)
Popular nostrum has it that earnings will save the stock market.
The strength of corporate America time and time again is on display to show investors how high short-term growth follows through.
Anytime the Nasdaq enters a little rut, earnings bail us out and the next move is usually higher for tech shares.
Well, wait a second, things are different this time.
The bad news now is that confirmation of solid fundamentals during the upcoming earnings season, won’t make the Nasdaq index go higher.
The market is pricing in business as usually for the largest 5 tech stocks which are really the only ones that matter.
Internally, the rest of tech has been deeply damaged by this January sell-off and we are talking about 8-9% one-day sell-offs for the small cap tech growth and I haven’t even mentioned the peak to trough underperformance which is much worse.
Larger cap Enterprise and Cyber Security stocks still boast solid foundations and are going down less than the meme stocks, shelter-at-home stocks, and the best of the rest tech stocks.
Basically, we need to get through earnings because there is minimal upside for tech stocks as investors peruse through a lack of short-term catalysts.
We are stuck in a ditch where monetary and fiscal policy has been set dead straight against an environment of potentially appreciating tech stocks.
Until that changes, I don’t envision a snappy reversal apart from a dead cat bounce to sell into.
Chasing growth in a low-interest rate environment gave us an overshoot to the upside and now that is all working in reverse.
And for the big FANG stocks outperforming small cap, it just means shares are performing better than tech growth because they command lower volatility due to stronger balance sheets.
Resilience to indiscriminate selling is currency in today’s trading world.
Nothing wrong with growth, but they are what they are, so much so that if you cannot generate profitability now, sell-offs are indicative of their poor strategic position among bigger tech.
The carnage under the hood is stark today with Snap stock cratering after the social media company’s shares were downgraded amid risks to revenue growth and tough competition from rival TikTok.
Snap’s headwinds result from a weakening business profile stemming from IDFA headwinds, difficult [year-over-year comparisons] from stellar growth in 2020-21, and increasing competition from TikTok.
IDFA is a serious thorn in the side for the android-based systems of Google as well as for Facebook.
IDFA is Apple minimizing the reach of data harvesting platforms by turning off their data reach and these modifications by Apple (AAPL) to rules for advertising on mobile apps have forced companies like Snap to lower guidance.
When it reported quarterly earnings last October, Snap revealed that the impact on its advertising business could be long lasting and now we are experiencing that.
The IDFA issues could cut growth rates by half as these social media firms have been unable to remedy its loss of reach in digital advertising.
Snap has the unenviable position to not only be behind Google and Facebook, but they are also the next company to be upended by TikTok that has really come on the last few years.
TikTok has supplanted Snap as the go-to social media platform for teens and young adults.
In a rising interest rate environment, the best of the rest like Snap gets punished for not being the best of class.
Snap shares are down over 200% from its peak and threatening to close in on 300% in the red.
Snap represents the fortunes for the marginal tech stocks that rely on growth and that is not working in 2022.
Although not as loss-making as other tech growth, SNAP has been fairly pigeonholed as the tech you don’t want to own now.
It’s a dangerous position to fill in times of the VIX spiking to 30.
The problems don’t stop there with TikTok really threatening Snap’s position and the momentum signaling that Snap is prepared for a deeper slowdown than initially expected.
Snap’s foothold is strongest in the 13-34-year-old range in the U.S., Canada, the U.K., France, Australia, and the Netherlands, but TikTok’s audience is the most similar to Snap’s which means it puts both Snap’s user face time spent and ad dollars at risk.
From a monetary standpoint, digital advertisers will start to play off ad competition between TikTok and Snap, resulting in discounted ad revenue per unit which will narrow margins moving forward.
Not being able to command the prior ad premium is a stinging blow to Snap who thought they were in the driving seat to the third position behind Google and Facebook, but it shows that being a tech minnow is a harrowing experience and fending off toxicity is part of the playbook just to survive.
Head to higher waters in this volatile environment.
Mad Hedge Technology Letter
September 22, 2021
Fiat Lux
Featured Trade:
(SHOP UNTIL YOU DROP)
(SHOP), (ZM), (TDOC), (TIKTOK)
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