The Pause That Refreshes

I’m back home in Phoenix for the weekend and the kids are coming to see us too which is great.

Ellen has been busy fixing up our Phoenix home and it looks great.

We like modern, simple and clean and Al Beadle created amazing indoor/outdoor living spaces that are very compact and space efficient.

I have had 10 days at our Coronado home alone with our dog Lindzee. I am feeling really refreshed and relaxed. I had dinner with my friends Brad and Amy Feld. Brad is one of my mentors and I can always count on Brad and Amy to give me great advice and help me with strategy. I put a lot of miles on my bike, a few rounds of golf with friends and a lot of reading and writing.

My podcast idea is coming together and I have Fred Wilson offering to do a monthly Video/Podcast AMA with me which I need to make happen as well.

Happy 53rd to my cousin Adam in Toronto who reads the blog. I miss you buddy.

I am ready to hit the road hard the next two weeks as I zig zag back and forth across the country.

I have a ton of half written posts which usually have my best ideas…I should just do a book that has the 200 plus half written blog posts sitting in my wordpress account.

What Did We Learn From The Panic/Selloff

I like to say if you are going to panic, panic early. My friend Morgan Housel has a classic post up titled’ When Things Get Wild‘ which has so many gems but this one about panic stood out:

Your lifetime results as an investor will be mostly determined by what you do during wild times.

Just 10 days ago I was getting blitzed with panic texts and tweets from friends and Schwab emails about the bear market that was about to ravage my portfolio.

We had TWO ‘Markets in Turmoil’ specials from the predictable CNBC. They are the masters of panic. I chronicled the silliness on the blog last Monday.

Apple has since been banged up, but the market as a whole has been in a strong bounce mode.

Tomorrow will be a much better time to panic. If the markets keel back over next week you will have calmly panicked early.

So what has changed since September (the last all-time high in the indexes) and the ‘midterm panic of 2018’?

I have no idea to be honest, but here is a list of stocks at all-time highs tonight:

Mostly yawner companies you have never heard of. Boring is cool at the moment.

A few months ago it was sexy enterprise software stocks. Six months ago it was all Chinese internet stocks.

The good news is the all-time high list was just one stock 10 days ago. Leaders are quickly emerging once again.

I own McDonald’s and Twilio which are on the list. Johnson and Johnson, Disney and Etsy are inches away (I own them as well).

Google, Amazon and Apple have been battered but not beaten.

I look a this chart from Ben Evans and say I am grateful for the panic because I have a good idea where the puck is still going (directionally).

Internet, ecommerce, smartphones….while the players may change, the big trends remains in place.

Fintech (crypto too), weed, gaming and sports betting (more on that in another post soon) will remain massive growth opportunities as well.

Hopefully this gets you up to speed at a high level for how I am thinking.

All that said, I truly have no idea what’s up next for the markets as a whole.

For the last month I have been in STFR (sell the fu*king rip) over BTDF (buy the fu*king dip) mode.

It’s nice to have a panic behind us but I am not sure if that was ‘THE’ panic or a longer drawn out bear market is immediately ahead.

How Do You Measure Investing Success?

I know most of the lines from Caddyshack.

There were so many classics.

Chevy Chase was at the height of his silliness and one of my favorite lines is ‘How Do You Measure Yourslf Against Other Golfers?’

If only life was as simple as Chevy Chase lived it in the movie.

Which brings me to reality…in my business performance matters.

Yesterday, our banker at First Republic banker sent over the Prequin US Venture Capital Update excited that our fund was on the top performing list.

I am thrilled to see our Social Leverage Fund 2 as a top venture fund (vintage 2007-2015).

Tom, Gary and I are proud of our firm, our track record, our LP’s and our reputation. It is good to see our fund returns in context though. We are competitive, so being recognized is cool.

We know some of the firms on the list and they are unbelievable. I am good friends with Roger Ehrenberg who runs IA Ventures and I know he is an incredible investor, so being in any group with him is special. He is an investor in Stocktwits and was an investor in Wallstrip and he is also an LP in all three of our Social Leverage funds. He is winning in every direction.

In private equity investing I have long heard you have to be in the high 20 IRR’s to be considered good. That is a lot of pressure for returns.

Back to the reality of it all…even if the returns are great, it is hard to raise capital and repeat past performance. Just take my word for it. I have been raising capital since my briss.

Back to the grind tomorrow.

Momentum Monday…The FANG/FAANG Blues and Mood Matters

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.

Here is today’s episode where we cover Apple, the defensive stocks and some new leadership stocks.

You do not have to watch every episode of Momentum Monday, but Ivanhoff and I do them every Monday as our way of doing homework on the markets momentum and to chat about trends that are showing up in our lists.

One thing that has changed over the last six weeks is that the technology momentum leaders started to lose their breakouts and the US started to catch up with the rest of the world’s market weakness.

Ivanhoff sums it up well with this statement

Apple beat earnings estimates again, but it sold off after it gave a soft sales guidance and said it will stop to provide unit sales updates. The market reaction is not unique to AAPL. The market has been unforgiving this earnings season. It has punished the slightest weakness in all earnings reports. This is why we say that the market mood matters. Lower prices are usually the end result of high expectations and sour mood.

If you like boring stocks …all is not lost. Starbucks, McDonalds and J&J continue to lead. I call these 8 to 80 stocks and prefer to buy them when they are down 20-30 percent because they are not growth stocks anymore. Large money likes to hide out in them when the markets are weak and they have to own stocks. Ivanhoff and I believe they will not be immune if the market takes another leg down, but right now the price action is sweet.

If I Could Turn Back Time

I have been home alone on Coronado with our dog Lindzee the last week. Time really slows down on Coronado. This morning I went out hoping to get in a long bike ride, but four miles in I had a double flat and just called an Uber to bring me home.

Before the iPhone, Google Maps and Uber I would have lost an hour or two getting myself home and getting on with my day.

I love all the spare time that technology has afforded me. I am getting better at appreciating it in my 50’s and maybe being an empty nester has made me appreciate time even more.

Time has gone from being on my side to being my enemy in my 50’s. I appreciate time so much more now that I have less of it.

I hated Cher’s song If I Could Turn Back Time .

I hate the question…what would you tell a 20 year old self?

I have an almost 20 year old self in Max Lindzon. He’s very busy being Max. My daughter Rachel is thinking about the Peace Corps after graduating. That’s way more interesting than anything I would have done at her age or could tell her to do.

But, seeing today is daylight savings it’s fun to just think about it.

I joked about it on Twitter today:

I waste so much time, but I have also never been more efficient with my time.

We have never had more time saving tools (smartphone, Google Maps, Uber) and needed more medicine to focus.

Thank goodness we got that extra hour today.

Off to watch Netflix’s ‘The Bodyguard’ and piss that hour away.

A Few Good Reads…

Before I get into the reads…my son Max told me about ‘Red Oaks‘ on Amazon Prime. Ellen and I ripped through Season 1 and 2. Season 1 was excellent.

Backstory…I took the family to see Seth Myers in New York last Thanksgiving and Max was really not interested in going. We got the backstage green room treatment and it was Myers family night which meant Seth was having his family on the show. He has a brother Josh who I did not know was also an actor. Turns out Max recognized Josh from his role in ‘Red Oaks’ and though I got no cool points for knowing Seth, it was pretty cool that Max talked to Josh and probably really fun for Josh to be recognized over Seth.

To the reads…

I really enjoyed ‘A Dozen Lessons About Business from Anthony Bourdain

My friend David Moon had an excellent piece on the ‘Casper’ mattress story. What an amazing company and brand.

Market lovers…Charlie has the definitive post on market bounces – there are FIVE types…one type which took place this week.

You Are What the Record Says You Are…is dead on from Ben Hunt.

One last one from Ben Hunt you can share with your kids in college, but a good reminder for people of all ages – Oh, hell, Martha, go ahead and burn yourself if you want to.

Paying it Forward

This afternoon, I went for a long walk along the coast of Del Mar with my friend Brian who was showing me around. I live so close, but never really take the time to enjoy it. It was a fantastic afternoon to soak in the coast and the sun:

Onwards…

My friend Josh just wrote about his tenth anniversary of blogging.

He feels that it changed his life and I am glad for him, as we have had some great times together and he is a hell of a writer. In the post he lists some of the people that helped encourage him in his first year and it was nice to be one of the remembered. He calls us his first adopters which is true.

These are the people who I would do anything for, all they’d ever need to do is ask. My first adopters. I hope I haven’t let them down in the years since.

Now there is a responsibility that comes along with this. At least, to me there is.

That responsibility is for me to serve as an early adopter of people who are first getting started that I believe in. People whose work I should be reading, linking to and sharing. People whose efforts I should be calling attention to. I think I’ve done a lot of this sort of thing.

If I come across a young or new writer who is saying truthful, helpful and interesting things, I go out of my way to make sure other people see it. It’s literally the least I could do, given how important this sort of encouragement was for me ten years ago.

So thank you to all of my readers and supporters, believers and boosters, fans and friends. Ten years is a long time and lots of things in my life have changed. I’m busier than ever, both personally and professionally, but your readership is like oxygen.

I talk about my mentors here often and I am thrilled when readers email me, many of them peers in the trading and investing industry, to tell me that I have been their mentor or encouraged them in their work.

Like Josh says, it is a thrill for me to pay it forward or serve as an early supporter or adopter of people who are getting started that I believe in.

I was told today that Wikipedia says I was ‘highly accessible’ (by a young founder – a long time reader of my blog and my ‘peloton’ service), who drove down from Los Angeles to meet with me and pick my brain about his startup.

I can live with that label.

Apple and The Meta Game

I have been working from home in Coronado the last few days and it has been insanely productive. My daily view from the dining room table/desk is here:

It seems like years ago that Schwab email blasted their customers after the markets had been plunging for a month to warn of the bear market. It was just Monday. I suspected that was a tradeable bottom and have had a few good days watching this rebound.

Which brings me to Apple and their stock plunge this evening.

I am surprised Tim Cook did not blame George Soros and The Honduran caravan for the ‘sales miss’ this quarter.

There is nothing more important and more silly than quarterly earnings and conference calls. They are important because public companies need to be accountable and it is a ritual that is not going away. They are silly because they are gamed. Apple is a $1 trillion company and impossible to truly measure so anyone trading earnings is proof that Elon Musk is right. We are part of the simulation.

Instead of ‘permabull’ me analyzing the Apple quarter and reaction, I just clipped my friend Danny Jassy’s (super smart friend and CFA) email to me on the subject. I think it’s extremely well done:

Hey Howard,

Wanted to ping you on one big news item that sent AAPL lower AH – they were already down on a not “huge beat” but it was when they said this:

that the stock took an extra nosedive. My first impression…yikes thats bad.

Less transparency is really hard to spin as good. Here’s some counterpoints though. At the time (mid September) I had heard that Lisa Jackson’s presentation at the Apple Keynote Event was significant. I never watched it or cared, so it didn’t register, but I thought maybe they’d have mentioned something about a software not hardware focus or something like that and this link pretaining to her speech came up:

Ben Thompson (Stratechery) on her speech:

That is the iPhone: it is a franchise, the closest thing to a hardware annuity stream tech has ever seen. Some people buy an iPhone every year; some are on a two-year cycle; others wait for screens to crack, batteries to die, or apps to slow. Nearly all, though, buy another iPhone, making the purpose of yesterday’s keynote less an exercise in selling a device and more a matter of informing self-selected segments which device they will ultimately buy, and for what price.

Horace Dediu (Asymco) on her speech:

I think Lisa Jackson’s presentation at the September 2018 iPhone launch event was perhaps the most interesting and most profound…

Apple now strives to design and build durable products that last as long as possible. That means long-lasting hardware coupled with long-lasting software. She pointed out that iOS 12 runs even on iPhone 5S, now five years old. Because iPhones last longer, you can keep
using them or pass them on to someone who will continue to use them after you upgrade…

So why would Apple want to do this? What is the logic of this durability focus as a business model? It may be good for the environment but is it good for the bottom line?
The important call to make is that Apple is making a bet that sustainability is a growth business. Fundamentally, Apple is betting on having customers not selling them products.

So now it’s clear in hindsight that they were telegraphing moving away from being a “hardware” company into…a software or lifestyle brand (you were what, like 8 yrs ahead of this trend here?) – but whatever it is, the conclusion seems to be “we’ve squeezed out unit sales, now we want to monetize the device you have whether its 1 day or 5 yrs old, and thats our focus”. And to best highlight that, they’re taking to focus off units and on revenue.

Anyway, this is my take on it – don’t have a pov on if the market immediately gloms onto that view, but Apple has been extremely smart in how they run the business, so I’m erring to think this new focus (irrespective of how they report it) pays off for shareholder returns.

– Daniel Jassy, CFA

My point of view is the same as it’s been for a long time…stay long Apple. Buy the big dips.

Tim Cook is crushing it. He had an almost impossible job and shoes to fill. The genius bar, the retail stores and the move to focus on ‘revenue’ – especially service revenue – is very META. If the shareholder base has to change short term (ridding the stock of iPhone unit sales, China growth and India growth blathering every day) to get the multiple up long-term (software and services)…count me in.

PS – I still have a Sweet Tarts high going from yesterday.

Diplomats and Gentlemen

I hit the age where I appreciate diplomats and gentlemen.

We need more of them.

While we were busy building flying cars and connecting everyone (so they could share their political beliefs, gifs and cat pictures), we lost our minds and our way.

Thank goodness for old comedians.

I watched this interview with Dave Chapelle and Jon Stewart and I was thrilled to see how calm and poised they were talking about life, comedy and politics.

Lean back and enjoy. I wish it was longer.

This weekend, Ellen and I were reluctant to watch the new Adam Sandler Netflix comedy special. Most are duds.

Surprise, surprise…it was fantastic. We both laughed out loud a lot!

Despite some filthy material, I came away thinking that Adam would be one hell of a diplomat and he seems like a gentleman. His tribute to Chris Farley was touching and epic. You can watch it here. Go watch the special.

Words Matter

I really liked this post by Jeff Lawson, CEO of Twilio, titled ‘Words Matter‘.

Leaders act to cement our best attributes, bring out our strongest selves and align us as a people around our core values. Especially when we can’t look to our politicians as leaders, community leaders in civic, religious, and business realms need to speak up. So as a business leader, I feel the duty to take up that responsibility.

Those currently in political power have turned our values upside down, and legitimized aspects of our society that were previously shunned. By telling white supremacists it’s ok to have racist views, they’ve made it acceptable to talk about white supremacy in the open, without fear of reprisal, making racist views akin to discussing who you favor in the World Series or whether organic foods are worth the cost. And emboldened by this legitimacy, some will go further than words.

Society is a delicate thing — getting millions of humans to act in some form of harmony and common good is remarkable. Humans are tribal creatures by nature, and our modern societies are a reflection of the tribe at a massive scale. So it’s our job as a society to decide who’s part of our tribe, and who is not. We’ve seen the ugly side of this in recent years — those in power telling us who ISN’T a part of the American tribe: immigrants. But as disturbing is who has allowed to become a part of our tribe: white supremacists.

Later Jeff writes:

Words matter — they legitimize hate and the acts that hate brings from the most unhinged of society. So far the executive branch has led this campaign, and the congress has done nothing to mitigate it. It’s time to end this insanity, and stabilize our tribe’s values. Next week, we have the opportunity to vote — and send a message about the tribe we are. There are candidates of both parties who will stand up against the normalization of racism, xenophobia, anti-semitism, and hate. Regardless of which party you support, I believe the only American stance is to support candidates who will stand up against the words of hate and hold power-holders accountable. And standing up means speaking up strongly against this hate, not just quietly shaking your head.

I could not have written it better myself. Thank-you Jeff.

I am fascinated with words because of comedy. I am grateful that I see the world through the lens I was given.

I am jewish. I was raised a conservative jew and went to Beth Tzedec elementary and middle school in Toronto. Half the day we studied in Hebrew and half the day in English. We also had Yiddish and French class. I know what words can do and have done.

Words matter.