Cash And Juul Are King

Ellen and I have been doing yoga three times a week for the last couple of months. At dinner last night, Ellen was telling Rachel stories about all the noises coming from me during a class. I pitched them a sitcom idea while they tore me apart….a show where people tell their friends about that time they did Yoga behind me.

Onwards….

If you love cancer, poison and want to be a lawyer, this was a fantastic week for you.

Philip Morris is investing $13 billion into Juul at a $35 billion valuation.

I can see Fat Nixon sending Justice Ginsburg a get well soon card with a Juul.

Elsewhere…

Cash went from worst to best performing asset this year. Has never been best in 19 yrs.

Have a great weekend everyone.

When Will This Crash End?

I wish I knew how this slow motion crash was going to end.

Right now, it is fascinating to watch the price action, feel the emotion and see the behavior.

The ridiculous ‘oversold’ readings continue with the highest put to call ratio since the flash crash in 2011:

The high Put/Call ratio means simply that a ton of puts were bought versus calls. The premium that people are paying for protection sure looks like panic:

Even with all this I am just probing with some buys and nibbling because oversold can become more oversold.

Be careful about relying on oversold indicators as your investing or trading guide because as Mark Minervini points out:

Oversold is a very dangerous condition if relied upon incorrectly. Keep in mind, all the biggest meltdowns in market history STARTED from extremely oversold conditions.

All these ‘oversold’ readings mean a few things. A bounce is coming (timing it is just a game I like to play). Too many trends are broken from this crash so I highly doubt a bounce becomes a new uptrend. Most importantly, with emotions so high and stocks so broken, it will take a lot of time to heal and build bases for a meaningful next leg higher.

Be patient. This is one shitty market.

The Donald Trump Stock Market Crash – How Low Can He and The Market Go

Yes Janet I miss You.

I have been mesmerized by the markets the last 48 hours.

I rarely screen watch. I did a lifetime of screen watching before I started Wallstrip, Stocktwits and Social Leverage. Screen watching was not productive and made me miserable.

But, as Stefan put it today (his Stocktwits room is great):

Sometimes it’s good to join the madness. At least if you are aware that you are indeed joining” it.

After watching intensely for two days, I still have no idea what is happening or will happen next.

Some fear gauges are high and others seem complacent.

Maybe all the ‘passive’ investors are too busy with Christmas and will panic early January when they check their retirement statements.

Steven shared this chart that offers some context for the wreckage. Only the ‘flash crash’ and the financial crisis saw price action like this.

In the real world, shit is hitting the fan. Here is the CEO of Fedex (whose stock has lost 30 percent in the last few months):

This is very, very important, and I’ll just conclude by saying most of the issues that we’re dealing with today are induced by bad political choices, I mean, making a bad decision about a new tax, creating a tremendously difficult situation with Brexit, the immigration crisis in Germany, the mercantilism and state-owned enterprise initiatives in China, the tariffs that the United States put in unilaterally. So you just go down the list, and they’re all things that have created macroeconomic slowdowns.

Notice he is not complaining about Amazon, Uber or UPS.

I loved Josh’s post on all this calling it politely ‘unforced errors‘. I say screw polite.

No one knows how low the markets or Trump can go.

I did buy some stocks today, but I am already thinking about backpedalling.

PS – Yes Facebook is a train wreck (I bought some shares today) and I have smart friends saying it will get way worse. I say if it’s bad for Facebook it is worse for Equifax. Sure enough, Equifax is flirting with the lows of the 2017 data breach scandal it somehow survived. I can see this stock in the 50’s if all hell continues to break loose (no position, but rooting for it’s demise).

What Could Go Right? and The Year of The Disaster

Before I get started with ‘what could go right’…

Yesterday my friend Alex (a GP at a large VC firm) called me to talk about the financial services landscape and it was like the movie ‘Big’ because halfway through the call as he was dealing with his Uber driver and peeling a jerky wrapper, I just yelled at him and said why are you acting like me and me like you…

It was a reminder of what people must have to put up with in working with me!

Onwards…

The Japan Times have called 2018 ‘The Year Of The Disaster’ which pretty much sums up the markets globally as well:

I am hearing that General Electric and Trump 2020 are bidding for the logo rights…

The anxiety and dread levels are global and rising at the moment.

I fielded many nervous calls from friends with magnitudes of capital larger than me today.

I have been through so many panics and love being the call that people make when volatility rises.

As usual, I tell people to ignore all headlines for at least a week or two and turn off the TV.

Headlines have a way of getting through to even the calmest people when their portfolios are down 10-30 percent this quickly.

How bad is this market correction been this quarter? This bad:

Just to put things into perspective. The 12.6% selloff in S&P 500 in Q4 2018 would be the 9th largest historically, UBS has calculated. Only Great Depression, Pearl Harbor/WWII, ’87 crash and ’08 crisis worse.

The markets have people woke. They should be.

It’s why I preach panicking first.

As an optimist and panic first disciple, I love these moments in time.

Volatility is messy and noisy and scary but it is also a great environment for investors and traders that live quietly (no news, no tv) with strong networks, scale best.

I like this one chart from Jesse on Stocktwits today which you should blow up and read:

It is really easy to see what can go wrong right now…but a lot can still go right from here.

Momentum Monday – Nothing But Red and Nowhere to Hide

Before I get into it, a quick thanks you to my Momentum Monday sponsor Marketsmith. Great people and great product…

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.

Thanks everyone…onwards…

The year 2018 so far…

First we lost Crypto

Then Goldman (no complaints);

Then Netflix;

Then Nvidia;

Then Apple;

It seems like the last recognizable stocks standing are Twilio (I am long) and Microsoft. The thing about bear markets though is the sellers come for everything. We are in one of those rare market moments when all the momentum is to the downside.

A panic – I call it a woosh – is in process.

With all that in mind, this week’s episode of Momentum Monday is a walk through the wreckage.

(click here to watch it) and I hope you enjoy:

Despite the no good terrible stock market of 2018, there are still 62 stocks that have at least DOUBLED in 2018 and Ivanhoff points out a few that the sellers may be coming for next.

My favorite explanation of the market meltdown (because it’s just true) is from Eddy who has a way with financial words:

If I had to pin the blame on one factor for the stock market selloff, I would say it’s lower share prices.

So what am I going to do?

I am going to put some cash to work tomorrow, but it will most likely be a trade.

PS —-

These stats from Ryan are interesting:

The S&P 500 is down 7.8% in December so far.

This would be the worst month of the year, topping October’s 6.9% drop.

Since the S&P 500 started in 1957, December has never been the worst month of the year.

Will Santa save us? Or is 2018 going to break the streak?

And… 2018 has been rather calm:

New YTD low for S&P 500. But think about this.

Max YTD gain this yr was 9.6% (Sept peak) and min YTD loss is today’s -4.8%.

This comes out to a range of 14.4%, versus avg range since 1950 of more than 23%.

2018 is actually one of the smallest ranges for a year ever.

Daddy…What Is a Downtrend? And Learn It, Know It, Live It!

The New York Times (the Styles section no less) is telling investors to ‘assume the crash position’.

If the Styles section is weighing in on the markets, we may not be near a bottom, but we are definitely in a downtrend.

Right now 68 percent of S&P stocks are below their 200 day moving average.

The Nasdaq might be worse (even though it is still up in 2018), a whopping 80 percent of stocks are below their 200 day moving average.

I have no idea what this downtrend brings next or when a new uptrend might begin. Nobody does.

What I do is look for signs. There are no stocks making all-time highs right now, so my cash level remains very high.

History helps as a guide so I look at a lot of charts from previous downtrending markets.

I remember 2008 well.

The selling was relentless and the rallies were spectacular.

Brian Shannon summarizes it best with this one chart:

Even in the horrific downtrend and bear market of 2008, there were NINE S&P rallies of nearly 10 percent and THREE rallies of greater than 20 percent.

That market required in credible discipline and patience.

If you were sucked into one of the big rallies, you were wrecked weeks later.

I think in terms of probabilities and based on the price action I am seeing, the probability we go lower the next few months is high.

I like this insight from JC about the weakness and probability of lower prices ahead:

If the regional bank index, transportation index & semiconductor Index (among many others) are all below their Q1 lows, why should we not expect the Dow & S&P to do the same?

The markets are doing their job nauseating all the fresh Coinbase and Robinhood active investors.

If you really fancy yourself an active investor, get used to investing through downtrends.

PS – If you are an active investor like me, I suggest you read this great piece from Jim O’Shaughnessy titled ‘Successful Active Stock Investing is Hard: Here are Seven Traits that I Believe are Required for Active Investors to Win in the Long Term‘.

Learn it, know it, live it.

Goodbye 2018…

The year 2018 has been really good to me.

Ellen, Rachel and Max are healthy. Full stop.

I am grateful.

I am looking forward to 2019 and plan to hit the ground hard, but am taking the next two weeks slow at home with the family to end the year.

I learned a lot in 2018 and tried to share as much of it here, on Stocktwits and Twitter.

I thought Morgan’s ‘Career Lessons’ from 2018 summed things up pretty well:

Ramp’s was a classic as well:

One more from my friend Ramp that made me LOL:

PS – Ellen and I are watching the BBC show Luther (on Netflix) and it is pretty good.

PSS – While 2018 was horrific for many investors, especially crypto, it’s always good to have some perspective. I share this one often from 2010 (do not count out the HODLR’s in 2019):

Gradually Than Suddenly and The ‘Off The Chain Podcast’

The markets feel a lot like Hemingway’s Law of Motion

“How did you go bankrupt?” Bill asked.
“Two ways,” Mike said. “Gradually and then suddenly.”

(from the Sun Also Rises)

Next week should be a doozy.

I don’t really have a game plan yet if the market meltdown accelerates on Monday. I will have one by Sunday evening because there will be opportunities.

I will see you on the streams next week.

PS – I did a podcast with Anthony Pompliano last week that does a deep walk though of our firm and the financial services investing strategy we are deploying at the seed level. We also talk about Ambien and Bitcoin and my run in with a ghost. I hope you enjoy.

Listen here!

The State of Startups and Being Audacious

Today Robinhood launched a free checking and savings account, a Mastercard debit card and a 3 percent cash interest rate.

My friend Matthew texted me this morning that Robinhood is audacious in the best possible way. Matthew is a CEO of a Unicorn company himself and he knows audacious!

Like I wrote on my blog yesterday…you can’t just code yourself to unicorn status anymore. You have to be able to build incredible product and MARKET like hell… and by hell I mean creatively and relentlessly… and not just being an expert using Facebook and Instagram. You have to be audacious and it has to be good audacious because customers are smart and switching costs are low. You will need world class branding, messaging and customer support right out of the gate.

The good news – as I wrote yesterday on my blog – is all the world class SMB technology tools at everyone’s fingertips.

Game on!

Speaking of game on…First Round Capital is out with their annual ‘State of Startups‘, which has some very interesting stats.

2019 – The State of Technology

Ben Thompson has a great piece up titled ‘The State of Technology At The End of 2018‘. Read it all. The conclusion:

..the enterprise market is thriving, and the consumer market is stagnant, dominated by the “innovations” that a few large behemoths deign to develop for consumers (and probably by ripping off a smaller company). Meanwhile a backlash is brewing on both sides of the political spectrum, but with no immediately viable outlet through competition or antitrust action, the politics surrounding technology simply becomes ever more rancid.

Still, some might argue, this moment may soon pass: just look at Microsoft. I praised them above for their new-found competitiveness, driven by the fundamental shift wrought by the combination of cloud computing and mobile that obviated their PC monopoly-based business model. Surely Google’s dominance will soon pass, just like Microsoft’s did, right?

I’m not so sure.

If you follow stocks prices, like we do here, you have seen this play out in the markets. Slack is going public in 2018, but Microsoft (with their Slack competitor Teams) is now the most valuable company in the world and an enterprise juggernaut once again. Salesforce, Workday, Mulesoft, Okta, Twlio, Zendesk raged higher most of 2018.

Ben is not so sure we have a technology around the corner that levels out the paying feiled enough to stop the consumer internet giants.

It is one reason why I am long FAANG right now, but the government sure wants to talk to them a lot.

Jeff Richards, a great venture capitalist at GGV, sees things a little differently from his angle of the investing world. His post titled ‘Oh What’s That Over There? It’s SMB Tech: $200+ Billion of Market Value Created in the Last 8 Years‘ is dead on. Please read it.

SMB tech has been an incredible sector for investors like Jeff. He says the real rise of SMB Tech can be traced to four important factors, all of which happened in the same 3-4 year window between 2006-2010:

Cloud
Mobile
Digital
Payments

I don’t think 2019 will be much different as platforms like Twilio ($TWLO) continue to emerge to further help SMB’s grow.

This trend should continue to be friendly.