Global Market Comments
February 15, 2019
Fiat Lux
Featured Trade:
(THE CONTINUING DEATH OF RETAIL),
(AMZN), (WMT), (M), (JWN),
(TESTIMONIAL)
Global Market Comments
February 15, 2019
Fiat Lux
Featured Trade:
(THE CONTINUING DEATH OF RETAIL),
(AMZN), (WMT), (M), (JWN),
(TESTIMONIAL)
Mad Hedge Technology Letter
January 9, 2019
Fiat Lux
Featured Trade:
(TOP 8 TECH TRENDS OF 2018),
(GOOGL), (FB), (WMT), (SQ), (AMZN), (ROKU), (KR), (FDX), (UPS), (CRM), (TWLO), (ADBE), (PYPL)
As 2019 christens us with new technological trends, building our portfolio and lives around these themes will give us a leg up in battling the algorithms that have upped the ante in our drive to get ahead.
Now it’s time to chronicle some of these trends that will permeate through the tech universe.
Some are obvious, and some might as well be hidden treasures.
American consumers will start to notice that locations they frequent and the proximities around them will integrate more smart-tech.
The hoards of data that big tech possesses and the profiles they subsequently create on the American consumer will advance allowing the possibilities of more precise and useful products.
These products won’t just accumulate in a person’s home but in public areas, and business will jump at the chance to improve services if it means more revenue.
Amazon and Google have piled money into the smart home through the voice assistant initiatives and adoption has been breathtaking.
The next generation will provide even more variety to integrate into daily lives.
The gains in technology have given the consumer broader control over their lives.
The ability to practically manage one’s life from a remote location has remarkably improved leaps and bounds.
The deflation of mobile phone data costs, the advancement of high-speed broadband internet services in developing countries, more cloud-based software accessible from any internet entry point, and the development of affordable professional grade hardware have made life easy for the small business owners.
What a difference a few years make!
This has truly given a headache for traditional companies who have failed to evolve with the times such as television staples who rely on analog advertising revenue.
Millennials are more interested in flicking on their favorite YouTuber channel who broadcast from anywhere and aren’t locally based.
Another example is the quality of cameras and audio equipment that have risen to the point that anybody can become the next Justin Bieber.
Music executives are even using Spotify to target new talent to invest in.
Blockchain technology has the makings of transforming the world we live in.
And the currency based on the blockchain technology had a field day in the press and backyard summer barbecues all over the country.
Well, 2019 will finally put this topic on the backburner even though Bitcoin won’t disappear into irrelevancy, the pendulum will swing the other direction and this digital currency will become underhyped.
The rise to $20,000 and the catastrophic selloff down to $4,000 was a bubble popping in front of us.
It made a lot of people rich like the Winklevoss brothers Cameron and Tyler who took the $65 million from Facebook CEO Mark Zuckerberg and spun it into bitcoin before the euphoria mesmerized the American public.
On the way down from $20,000, retail investors were tearing their hair out but that is the type of volatility investors must subscribe to with assets that are far out on the risk curve.
The volatility that FinTech leader Square (SQ) and OTT Box streamer Roku (ROKU) have are nothing compared to the extreme volatility that digital currency investors must endure.
Video games classified as a spectator sport will expand up to 40% in 2019.
This phenomenon has already captivated the Asian continent and is coming stateside.
This is a bit out of my realm as standard spectator sports don’t appeal to me much at all, and watching others play video games for fun is something I am even further removed from.
But that’s what the youth like and how they grew up, and this trend shows no signs of stopping.
Industry experts believe that the U.S. is at an inflection point and adoption will accelerate.
Remember that kids don’t play physical sports anymore because of the risk to head trauma, blown ligaments, and the sheer distances involved traveling to and from venues turn participants away.
Franchise rights, advertising, and streaming contracts will energize revenue as a ballooning audience gravitates towards popular leagues, tapping into the fanbase for successful video game series such as Overwatch.
The rise of eSports can be attributed to not only kids not playing physical sports but also younger people watching less television and spending more time online.
Soon, there will be no difference in terms of pay and stature of pro athletes and video gaming athletes.
The amount of money being thrown at the world’s best gamers makes your spine tingle.
The era of digital data regulation is upon us and whacked a few companies like Google and Facebook in 2018.
Well, this is just the beginning.
The vacuum that once allowed tech companies to run riot is no more, and the government has big tech in their cross-hairs.
The A word will start to reverberate in social circles around the tech ecosphere – Antitrust.
At some point towards the end of 2019, some of these mammoth technology companies could face the mother of all regulation in dismantling their business model through an antitrust suit.
Companies such as Amazon and Facebook are praying to the heavens that this never comes to fruition, but the rhetoric about it will slowly increase in 2019 because of the mischievous ways these tech companies have behaved.
The unintended consequences in 2018 were too widespread and damaging to ignore anymore.
Antitrust lawsuits will creep closer in 2019 and this has spawned an all-out grab for the best lobbyists tech money can buy.
Tech lobbyists now amount to the most in volume historically and they certainly will be wielded in the best interest of Silicon Valley.
Watch this space.
The demand for smart consumer devices will fall off a cliff because most of the people who can afford a device already are reading my newsletter from it.
The stunting of smart device innovation has made the upgrade cycle duration longer and consumers feel no need to incrementally upgrade when they aren’t getting more bang for their buck.
The late-cycle nature of the economy that is losing momentum because of a trade war and higher interest rates will see companies look to add to efficiencies by upgrading software systems and processes.
This bodes well for companies such as Microsoft (MSFT), Salesforce (CRM), Twilio (TWLO), PayPal (PYPL), and Adobe (ADBE) in 2019.
This is where Amazon has gotten so good at efficiently moving goods from point A to point B that it is threatening to blow a hole in the logistic stalwarts of UPS and FedEx.
Robots that help deploy packages in the Amazon warehouses won’t just be an Amazon phenomenon forever.
Smaller businesses will be able to take advantage of more robotics as robotics will benefit from the tailwind of deflation making them affordable to smaller business owners.
Amazon’s ramp-up in logistics was a focal point in their purchase of overpriced grocer Whole Foods.
This was more of a bet on their ability to physically deliver well relative to competition than it was its ability to stock above average quality groceries.
If Whole Foods ever did fail, Amazon would be able to spin the prime real estate into a warehouse located in wealthy areas serving the same wealthy clientele.
Therefore, there is no downside short or long-term by buying Whole Foods. Amazon will be able to fine-tune their logistics strategy which they are piling a ton of innovation into.
Possible new logistical innovations include Amazon attempting to deliver to garages to avoid rampant theft.
This is all happening while Amazon pushes onto FedEx’s (FDX) and UPS’s (UPS) turf by building out their own fleet.
Innovative logistics is forcing other grocers to improve fast giving customers better grocery service and prices.
Kroger (KR) has heavily invested in a new British-based logistics warehouse system and Walmart (WMT) is fast changing into a tech play.
Current Chair of the Federal Reserve Jerome Powell unleashed a dragon when he boxed himself into a corner last year and had to announce a rate hike to preserve the integrity of the institution.
Markets whipsawed like a bull at a rodeo and investors lost their pants.
Tech companies who have been leading the economy and trot out robust EPS growth out of a whole swath of industries will experience further volatility as geopolitics and interest rate rhetoric grips the world.
Apple’s revenue warning did not help either and just wait until semiconductors start announcing disastrous earnings.
The short volatility industry crashed last February, and the unwinding of the Fed’s balance sheet mixed with the Chinese avoiding treasury purchases due to the trade war will insert even more volatility into the mix.
Powell attempted to readjust his message by claiming that the Fed “will be patient” and tech shares have had a monstrous rally capped off with Roku exploding over 30% after news of positive subscriber numbers and news of streaming content platform Hulu blowing past the 25 million subscriber mark.
Volatility is good for traders as it offers prime entry points and call spreads can be executed deeper in the money because of the heightened implied volatility.
Mad Hedge Technology Letter
January 7, 2019
Fiat Lux
Featured Trade:
(NOT TOO GOOD TO BE TRUE),
(SCHW), (FB), (SQ), (WMT), (AMZN), (FFIDX), (BOX)
Global Market Comments
November 19, 2018
Fiat Lux
Featured Trade:
(THE MARKET OUTLOOK FOR THE WEEK AHEAD, or MASS EVACUATION)
(SPY), (WMT), (NVDA), (EEM), (FCX), (AMZN), (AAPL), (FCX), (USO), (TLT), (TSLA), (CRM), (SQ)
Global Market Comments
October 3, 2018
Fiat Lux
Featured Trade:
(TAKING A LOOK AT GENERAL ELECTRIC LEAPS), (GE),
(TEN SURPRISES THAT WOULD DESTROY THIS MARKET),
(USO), (AMZN), (MCD), (WMT), (TGT)
Global Market Comments
August 2, 2018
Fiat Lux
NETFLIX SPECIAL REPORT
Featured Trade:
(WHAT'S NEXT FOR NETFLIX?),
(NFLX), (WMT), (AMZN)
Global Market Comments
July 26, 2018
Fiat Lux
AMAZON SPECIAL REPORT
Featured Trade:
(SO WHERE DID THOSE AMAZON EARNINGS REALLY COME FROM
AND WHERE ARE THEY GOING?),
(AMZN), (WMT)
Global Market Comments
April 26, 2018
Fiat Lux
Featured Trade:
(WEDNESDAY, JUNE 13, 2018, PHILADELPHIA, PA, GLOBAL STRATEGY LUNCHEON)
(WHY CONSUMER STAPLES ARE DYING),
(XLP), (PG), (KO), (PEP), (PM), (WMT), (AMZN),
(WHY YOUR OTHER INVESTMENT NEWSLETTER IS SO DANGEROUS)
I stopped at a Wal-Mart (WMT) the other day on my way to Napa Valley.
I am not normally a customer of this establishment. But I was on my way to a meeting where a dozen red long stem roses would prove useful. I happened to know you could get these for $10 at Wal-Mart.
After I found my flowers, I browsed around the store to see what else they had for sale. The first thing I noticed was that half the employees were missing their front teeth.
The clothing offered was out of style and made of cheap material. It might as well have been the Chinese embassy. Most concerning, there was almost no one there.
So I was not surprised when the company announced that it was closing 267 stores worldwide. The closures amount to only 1% of Wal-Mart?s total floor space. Some 10,000 American jobs will be lost.
The Wal-Mart downsizing is only the latest evidence of a major change in the global economy that has been evolving over the last two decades.
However, it now appears we have reached a tipping point, and a point of no return. The future is happening faster than anyone thought possible. Call it the Death of Retail.
I remember the first purchases I made at Amazon 20 years ago. The idea was so dubious that I made my initial purchases with a credit card with a low $1,000 limit. That way, if the wheels fell off, my losses would be limited.
This is despite the fact that I knew Jeff Bezos personally as a former Morgan Stanley colleague. And how stupid was that name, Amazon? At least he didn?t call it ?Yahoo?.
Today, I do almost all of my shopping at Amazon (AMZN). It saves me immense amounts of time while expanding my choices exponentially. And I don?t have to fight traffic, engage in the parking space wars, or wait in line to pay.
It can accommodate all of my requests, no matter how bizarre or esoteric. A WWII reproduction Army Air Corps canvas flight jacket in size XXL? No problem!
A used 42-inch Sub Zero refrigerator with a front door icemaker and water dispenser? Have it there in two days, with free shipping.
In 2000, after the great ?Y2K? disaster that failed to show, I met with Bill Gates Sr. to discuss the foundation?s investments. It turned out that they had liquidated their entire equity portfolio and placed all their money into bonds. It turned out to be a brilliant move, coming mere months before the Dotcom bust.
Mr. Gates (another Eagle Scout) mentioned something fascinating to me. He said that unlike most other foundations their size, they hadn?t invested a dollar in commercial real estate.
It was his view that the US economy would move entirely online, everyone would work from home, emptying out city centers and rendering commuting unnecessary. Shopping malls would become low rent climbing walls and paint ball game centers.
Mr. Gates? prediction may finally be occurring. Some counties in the San Francisco Bay area now see 25% of their workers telecommuting.
It is becoming common for staff to work Tuesday-Thursday at the office, and from home on Monday and Friday. Productivity increases. People are bending their jobs to fit their lifestyles. And oh yes, happy people work for less money in exchange for personal freedom, boosting profits.
The Mad Hedge Fund Trader itself may be a model for the future. We are entirely a virtual company, with no office. Everyone works at home across the country and around the world.
You may have noticed that I can work from anywhere and anytime (although sending a Trade Alert from the back of a camel in the Sahara Desert was a stretch).
The cost of global distribution is essentially zero. Profits go into a bonus pool shared by all. Oh, and we?re hiring, especially in marketing.
You can see this in the business prospects of traditional brick and mortar retailers last year, which were dire.
As a result, Macy?s (M) stock plunged by a shocking -53%, Nordstrom (JWN) by -43%, and Best Buy (BBY) by -39%. Value players have mistaken the present low prices and subterranean price earnings multiples for a ?Black Friday? sale.
It has been like leading lambs to the slaughter.
Yes, some of this was caused by record warm temperatures on the US East coast, which led many to cancel their purchases of a new winter coat. But it is also happening because the entire ?bricks and mortar? industry is getting left behind by the march of history.
Sure, they have been pouring millions into online commerce and jazzed up websites. But they all seem to be poor imitations of amazon, with higher prices. It is all ?Hour late and dollar short? stuff.
In the meantime, Amazon soared by 150%, and was one of the top performing stocks of 2015. It is thought that Amazon accounted for a staggering 25% of all the new growth in US retail sales last year.
And here is the bad news. Bricks and Mortar retailers are about to lose more of their lunch to Chinese Internet giant Alibaba (BABA), which is ramping up its US operations and is FOUR TIMES THE SIZE OF AMAZON!
There?s a good reason why you haven?t heard much from me about retailers. I made the decision 30 years ago never to touch the troubled sector.
I did this when I realized that management never knew beforehand which of their products would succeed, and which would bomb, and therefore were constantly clueless about future earnings.
The business for them was an endless roll of the dice. That is a proposition which I was unwilling to invest in. There were always better trades.
I confess that I had to look up the ticker symbols for this story, as I never use them.
However, I also missed the miracle at Amazon. I could never grasp their long tail strategy and their 100 X multiples. I have had to admire it from the sidelines. At least I wasn?t short.
You will no doubt be enticed to buy retail stocks as the deal of the century by the talking heads on TV, Internet research, and maybe even your own brokers.
It will be much like buying the coal industry (KOL) a few years ago, another industry headed for the dustbin of history. That was when ?cheap? was on its way to zero.
So the next time someone recommends that you buy retail stocks, you should probably lie down and take a long nap first. When you awaken, hopefully the temptation will be gone.
Or better yet, go shopping at Amazon. The deals are to die for.
To read ?An Evening with Bill Gates Sr.?, please click here.
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