Momentum Monday – Weed and Gold?

As a reminder, Marketsmith (by Investor’s Business Daily) is now a sponsor of the weekly show. All the charts you have been seeing in the videos and will continue to see are from Marketsmith. They are offering my readers a three week trial for $19.95. Click this link if you would like to try it out.

I let Ivamhoff drive most of this week’s episode because he has had the hot hand sidestepping the downdraft. Click here to watch or see the embed below:

Weed is leading right now and gold is perking up. I care about neither, but I seem to be in the minority.

If you want to follow weed, the ETF is $MJ and Canopy Growth is the big Company in the space that is breaking out again. I am hungry from just typing these tickers.

Elsewhere, some big retailers are at the top of long bases including Ulta Salon and Autozone.

I try and avoid these volatile and choppy markets. Trends are ending and I am trying to just sit on my hands and watch.

The one interesting stock for me today was Sendgrid, which was acquired by Twilio. I’ve had this thesis that a lot of mergers would take place in the enterprise software space. The companies are flush with cash and high stock prices.

Enjoy the episode.

What Does Careful Look Like? and Hard Pennies

After yesterday’s post someone said to me I like bullish Howard, not bearish Howard.

I won’t argue…I like bullish Howard.

But, I don’t have a bearish side. I leave parties early and based on the price action I am seeing of late, careful Howard is in charge.

Back in July, I posted ‘Keep and Eye on The Homebuilders‘. It was not a post that said SHORT homebuilders (though that would have been a great trade). I was pointing out that if you were long, you might want to be careful and have an exit plan.

Take a look at the Homebuilders today. The Regional banks look the same and it’s most likely due to rising interest rates. Institutions are following a playbook.

I have learned to embrace the volatility, not fear it. First, it shakes weak holders out of the market. Volatility creates long term opportunities as new trends emerge in periods when the volatility subsides.

That said, I am more careful during periods of high volatility.

I love this thought from Mark MInervini on the subject:

Day traders and very short term guys love this type of high volatility market. I avoid these periods. This is what I call a “hard penny” environment. Why fight for pennies when you can simply wait for easy dollars?

When I say be careful, I mean have some perspective. I think Nasdaq 10,000 is inevitable, but Nasdaq 6,000 is surely a possibility on the way. Here is the monthly Nasdaq chart that may help give you some perspective. At Nasdaq 6,000 there would be panic, and I would like to be in position to do the opposite. That is being careful, not bearish.

If stocks start hitting new all-time highs in regular fashion over the next few weeks and months, I will resume my bullish nature.

On the optimistic side, if you draw a thick enough trend line, the S&P looks like it hit major support. Traders should have a fun week.

Ivanhoff and I will dig deeper tomorrow in Momentum Monday.

Have a great week.

It Is OK To Panic If You Panic First

I love this cartoon that @stockcats posted:

I am a believer in panicking early.

Most of the stock investing I do is in my retirement accounts. I can panic early and if I have gains not worry about taxes.

I use a long term trend/momentum strategy for part of my stock portfolio so I can sell on the ride up. I can panic early. The price of this strategy is the possibility of a whipsaw which I just live with. There is no perfect strategy. I’m just comfortable leaving parties early.

Over the years I have also built my 8 to 80 portfolio of stocks…so when others panic, I can go shopping.

This week felt like a panic. It was an early panic, so my momentum strategy forced me out of stocks. I did not yet do any buying in my 8 to 80 list, but if the panic persists, I imagine I will be buying a few stocks soon.

There are a lot of reasons investors might have panicked. I liked Ben Hunt’s piece best titled ‘The Narrative Giveth and The Narrative Taketh Away‘. Take the time and read it.

Ben’s view: the inflation narrative will surge again, as wage inflation is, in truth, not contained at all.

My favorite parts of Ben’s piece:

The stage is now set for an explosive market re-evaluation of inflation and its impact on the price of money and the real return on invested capital. This is no longer a complacent crowd. This is now a highly focused crowd. The crowd is now watching the crowd in regards to inflation. Everyone knows that everyone knows that inflation is an important issue. The only thing missing is the Missionary statement, the little girl crying out that the Emperor has no clothes. That’s when common knowledge crystalizes into behavior. That’s the freak-out moment for markets.

What is the crystalizing Missionary statement? I think it’s wage inflation in a future jobs report.

and…

To steal a line from Game of Thrones (see, told you I couldn’t help myself), we’re now at the point where the catch phrase is about to shift from “Inflation is Coming” to “Inflation is Here.” And if that’s married with disappointing growth from say, oh, I dunno … a TRADE WAR WITH CHINA … well, that’s not just inflation, that’s stagflation. And that’s the market equivalent of the Night King and the White Walkers running rampant over all of Westeros. Is that the most likely scenario? No. Is it a scenario that we need to take seriously? Absolutely.

So what’s to be done?

Well, it’s time to stop thinking about what inflation means for your portfolio, much less stagflation, and start doing something about it. And yes, I know our inflation-investing muscles are severly atrophied. Time to start flexing those muscles. Time to start exercising those muscles. Because you’re going to need them.

The Fed is also acting like inflation is a big possibility and no matter how much Trump whines, the market is still expecting another rate hike. Charlie has the goods here.

This should be an interesting week in the markets.

In the meantime, It is Sunday and I plan on doing what every other New Yorker does (for once)….have a nice brunch.

Robinhood Clearing and Custodial

Our portfolio company Robinhood continues to take risk, delight and amaze. It’s not just software and design that makes Robinhood special.

This week they announced Robinhood clearing.

Robinhood now has the only clearing system built from scratch on modern technology in at least the last decade.

Robinhood co-founder and co-CEO Vlad Tenev tells me. Most clearing services ran mainframes and terminal-based UIs that aren’t built for the pace of startup innovation. Going in-house “allows us to vertically integrate our business so we won’t have to depend on third-parties for foundational aspects. It’s a huge investment in the future of Robinhood that will massively impact our customers and their experience, but also help us out on building the kind of business we want to build.”

Vlad Tenevev, one of the founders, also wrote this open letter to the public and of course their users explaining the execution system and exchanges and how rebates work in the markets.

Have a read.

This latest and great Robinhood attack on improving the industry is why I am super bullish on not just our investment in Robinhood, but also our fund’s (Social Leverage) ability to continue to find and fund great teams and products using software, design and hard work to change the landscape of financial services.

PS – Rally Road, another portfolio company of Social Leverage, is getting rave reviews from leaders in the technology industry for their use of software, design, creativity and hard work to disrupt the financial services industry.

I love this line about Rally Road from Alexis Ohanian Sr. (Reddit Founder):

In a world with lots of capital seeking yield, software is creating more financial opportunities in new & creative ways.

Here is Alexis’s tweet.

Have a great weekend.

A Millenials First Nasdaq Crash

A lot of young investors asked me what the best recession hedge was today?

I told them ‘marry rich‘. Being born rich is one hell of a hedge as well, but you MUST be really nice to your parents to make sure they cover any future margin calls.

Stefan, who runs content and community at Stocktwits , had a great post up titled ‘I Survived The Great Bear Market of 10/10

If you’re 29-years-old, your first job started in 2011 or 2012. That means you did not start really saving until a few more years after that. It’s at that point you began investing. It’s at that point you probably really started to pay attention to markets. And that’s where today’s sell-off is historic.

An entire generation of new investors saw their first big drop today. It also happened in the sector they love: tech. Think Netflix, Amazon, Facebook, Twitter, Square, and all the biggest names sprawled across the current generation’s iPhone. The landscape of young and inexperienced investors is interested in buying names generations before them do not understand. Most of these happen to be categorized as tech companies. Most of them were pulverized from 9:30 AM ET until 4:00 PM ET today. Some were hit even harder in after-hours.

I don’t know if this is the start of a wider sell-off. No one ever really knows. But I do know, for many in this age group, today was the first big sell-off they’ve seen in their young investing careers across the basket of stocks they’ve handpicked themselves. I think that’s worth noting, and worth talking about the next time you and your friends get together to chat about markets.

I’ve been hanging in the Stocktwits HQ a little this week and I love seeing the passion, energy and respect Stefan and his team have towards covering the markets.

For most of the afternoon yesterday, I was on a train to Washington DC, so I was just watching the close and trying to figure out how ugly the markets were going to get.

By about 5 pm I shared that from my reading…the bears were extremely smug, the FANG believers were shaken and than CNBC announced a markets in turmoil. I tweeted these were conditions for a bounce. I quickly changed my Twitter profile to Nibbling Lindzon.

As if on cue, the markets are pointing to a very strong opening.

Sentiment Trader has the ultimate chart to show how CNBC ‘markets in turmoil’ events are great moments to buy stocks.

I have no idea if this mini crash continues today or we stop and rest. We will see.

We can argue whether the last few days were a crash, but this chart captures how nasty it has been for technology stocks at least.

I suggest you stroll through Charlie’s stream of charts he put together yesterday that will explain the damage effectively with some charts.

Have a great Friday.

Bear Market Lindzon …What Next?

I was working at Stocktwits HQ yesterday afternoon during the meltdown and the office and streams were of course buzzing. It was fun to see the crew keep their sense of humor. When we started Stocktwits we wanted to keep our brand educational, fun and irreverent. Losses are not funny, but the community is about sharing ideas, getting smarter and helping people learn the language of the markets.

The entry to the office sets the tone:

Now to the markets…today was just nasty.

My friend Michael Batnick said it best about yesterday’s market:

Today was one of those days where we’re reminded what it feels like to lose money. We know this is what we signed up for, but it doesn’t make dealing with them any easier when they happen. All of the red dots in the plot below felt like it was the end of the party. One of them, maybe this one, will in fact be the final hurrah.

The S&P 500 experienced its twentieth -3% day since the bear market ended in 2009. The NASDAQ-100 experienced its eighth -4% day. Today was not fun.

If you panicked and sold today, you still had a good year as the S&P is still up 5 percent and today’s S&P prices just bring us back to July

Another friend Frank Zorilla is dead on with this:

Keep your cool, what’s done is done. There’s no ROI in whipping yourself, buckle down and move ahead.

Ivanhoff reminded me that in nasty down markets, stocks tend to move together, so avoid them and if you must trade, use the indexes. This is always good advice.

I made a few mistakes by nibbling on stocks and will have to regroup tomorrow.

I was having dinner last night with Charlie Bilelo and we were reviewing the last few weeks and all the negative signals he was sharing in the stream (housing stocks crushed, rising rates, rising oil, destroyed emerging market stocks, and poor breadth). In hindight, today was inevitable.

As Charlie said to me…Now, we are in it and nobody really knows. We will see.

Last week after Ivanhoff mentioned he was getting short stocks in our ‘Momentum Monday’ weekly episode, I switched my Twitter handle to Bear Market Lindzon. I wish I had also shorted stocks, but I am wired to be long.

On October 6th my inner voice was telling me to ‘sell stocks’ but I did not.

Some of the carnage today:

Goldman Sachs at 52 week lows

Blackrock at 52 week lows

Momentum Stocks breached their 200 day average (first time since 2016)

Airlines at 24 month low (one year ago, American Airlines CEO sais they would never lose money again…)

That 3x leveraged homebuilder stock with the cutesy ticket symbol $NAIL….down 61 percent.

I don’t plan on doing much today, but will be on Stocktwits sharing my thoughts, watching the action and taking action if the right opportunities do present themselves. I have my lists with my levels prepared.

PS – While I was stuck in meetings, Ivanhoff made a mid week ‘Momentum Monday’ episode (watch here). He took a few funny pot shots at me and laid out some ideas and offered some context for what’s happening in the markets.

Snapchat, Tencent and Robocalls

Before I get started…this quote I stumbled across today made me laugh:

“Once, every village had an idiot. It took the internet to bring them all together.” Colonel Robert Bateman

With that quote in mind…this article ‘The Internet of Idiots‘ is a good read.

Also..Just in case you are feeling stupid about investing ….know there are still people 1n 2018 paying Bill Ackman 2 and 20 to buy shares in Starbucks. Bill now likes Starbucks to the tune of $900 million. You can buy it on Robinhood for free if you like.

Onwards…

For the last year I get one or two spam phone calls a day. I get less spam in Gmail!

For some asinine reason I take a lot of these calls. The salesperson in me believes that someone must be calling from Nigeria to give ME money.

Today I saw Brett Taylor ask about all this spam on his Twitter feed. Brett, unlike me, is no dummy. He might have one of the greatest resumes in the world.

Here are his credentials:

Facebook CTO

Co-creator of Google Maps. Yes…Google freaking maps.

Founded Quip which was acquired by Salesforce for $750 million.

Twitter Board member (won’t hold this against him based on his track record).

Turns out NPR wrote about the problem. No matter how smart we get, the assholes programming the robots are one step ahead.

Here are some tips on what you can do to slow it down.

Ok…back to markets.

I have three stocks in my portfolio that have been going down everyday. Tencent, $MMYT and $SCIF (Indian Small Cap ETF). Tencent is in my 8-80 list and I started buying it in the 20’s, went as high as 60 and is now back in the 30’s. Because Tencent is one of my 8 to 80 companies, I have been a buyer in the low 40’s as well as when my 8 to 80 stocks drop 25-30 percent, I add to them. The stock has lost over $200 billion in market value (ten Twitter’s):

Their $2 billion investment in Snapchat when the stock was at $12 now just looks sloppy as Snapchat bleeds money. I am not sure if the markets are more worried about Tencent losing the $2 billion they invested in snapchat or that they may buy the remaining 88 percent of it. The bigger issues are government related crackdowns in China, which I have zero insight into. In the meantime, I will hold because their products are LOVED by a majority of 8 to 80 citizens of China.

The other two losers are Indian investments I continue to classify as venture investments for exposure to India’s emerging market. I am sticking with the exposure to them both but losses are now near 30 percent which is not fun to watch.

I have a plan, but sometimes the best laid plans bleed out.

Momentum Monday – Do You Buy The Dip?

A quick shout out to Momentum Monday sponsor Marketsmith (by Investor’s Business Daily). All the charts you have been seeing in the videos and will continue to see are from Marketsmith. They are offering my readers a three week trial for $19.95. Click this link if you would like to try it out.

It has not been a good few weeks in my world of momentum stocks.

This is a chart of Investor Business Daily’s (Marketsmith), innovator list (high growth, high volatility) thanks to @the_chart_life:

All major market indexes (SPY, QQQ, IWM) are below their 50-day moving average, which is a big yellow flag for long-only momentum investors.

Today, Ivanhoff and I tour the markets discussing various gameplans and scenarios. Here is this week’s episode.

Yesterday I did nibble on a few stocks …you can follow along on my Stocktwits stream if you like.

I hope you enjoy.

The Ultimate Markets Dashboard

I don’t have money for a Bloomberg Terminal.

If I did, I doubt I would pay.

Since 2006 I have been fascinated with building a terminal of information for myself. Stocktwits and Twitter give me all the watchlist, news, sentiment and communication I will ever need, but I want more in the way of a robust dashboard that gives me more market data and context (charts, fundamentals, lists, global data, relative performance). I don’t expect it to be free.

Way back, I invested in Ycharts which was gunning to be the next Yahoo/Google Finance. The company is growing fast, but for the prosumer and small institutional market it is expensive.

There is a gaping void in this space an and there is a big market for the right product.

Yahoo Finance is a train wreck as a website.

Google Finance gave up completely this year which is saying something because over the last 10 years it was a stomping ground for pissing away money for executives from Bloomberg and Reuters amped to turn it into a Bloomberg killer. Note to founders in this space…only Bloomberg can kill Bloomberg.

Which brings me to a new product I have been using called Koyfin (we are NOT investors).

Koyfin is a new web app that has dashboards and charting tools for investors to research stocks and follow market trends. Relative to other platforms I’ve tried, there are three big differences. First it’s really intuitive to use and has a ton of functionality. It is very easy to navigate around. Second, the data coverage is really wide and includes equities, fundamentals, estimates, economics and macro indicators. Third, the market data is organized via a dozen dashboards so you can browse country performance, top movers, global bonds, or economic indicators. Best of all, the site is currently free!

I try and use every new product that comes to market in this space.

I think the timing is right for something good to take hold.

Rob, the founder, was at Goldman for six years in the strategy department but I have decided not to hold that against him. He’s good people.

If you want to hit him up with feedback and/or features you would like to see please do so – ROB AT KOYFIN DOT COM.

State of Venture Capital

I collected a few articles that should give you a good 10,000 foot feel of the state of the Venture Capital Industry right now.

Money has been pouring in. Eric Feng of Kleiner Perkins has a stats-based look behind the venture capital curtain

In the past 15 years, the amount of money invested by US-based VC firms into startups grew more than 4x to almost $85 billion dollars last year. Before 2011, an average of $28 billion was deployed each year but in the past 7 years, that number has jumped to $62 billion invested annually. Not surprisingly the number of deals has seen a corresponding sharp increase. From 2003 to 2010, the industry averaged almost 3,800 investment deals per year. But since 2011, the average number of deals per year has shot up to more than 8,700.

When you look at the dollar amounts deployed, venture and growth stage deals (i.e. non seed deals) have accounted for over 90% of the capital and that ratio has been consistent over the past decade. So even with the sharp influx of seed funds, the vast majority of the dollars are still invested by traditional venture and growth funds.

Despite the massive amount of dollars flowing through the US Venture Capital markets, The U.S. share of global venture capital fell more than 20% in 5 years.

It took a while, but the Venture Capitalists and the institutions that fund them, are getting what they needed and that is IPO’s. Profitability be damned once again though so maybe it’s buyer beware time? Over 80% of 2018 IPOs are unprofitable, setting a new record.

The circle of venture capital life continues, it’s just more global.

I think more dollars for more founders is just a good thing overall, but I am sure each of us can and will read the data differently. Have at it.