Catching up On The Markets – What Have You Done for Me Lately!

I am heading home to Phoenix today from Palm Beach. I was meeting with some of our fund LP’s and not really following the markets. I am excited to have Max and Rachel coming home for Spring Break

Catching up early this morning on what’s working so I thought I would share some interesting charts and articles.

Last week I shared the spring cleaning I was doing.

The four major bullish themes so far this year are shaping up to be: enterprise software, cybersecurity, regional banks, Brazil.

In a tour around the world there are NO countries in a bear market.

The TOP NINE country ETF’s are ALL emerging markets.

The BIGGEST technology sector ETF is now back at all-time highs. Hopefully we hold above these levels as it crosses 1999 highs and momentum investors stay with it. These levels are interesting.

Ivanhoff points out that despite the price wars in brokerage commissions and the new entrants like Robinhood and Coinbase, the ‘boomer’ brokerages are hitting all time highs again. (I own Schwab)

Ivanhoff also points out the gene editing stocks that are acting well.

While I have not talked much about cryptocurrency much of late on this blog (I remain long some Ethereum and Bitcoin), the blockchain remains all the rage amongst venture capitalists and large corporations. My friend Mike Dudas pointed out that Rakuten – one of the largest global consumer technology companies – is moving their $9B points system onto a blockchain, rebranding them as Rakuten Coins.

Finally…a big argument in my streams was about all the buybacks that were going to come from the corporate tax breaks.

This week, I reread a great piece on stock buybacks with some great charts from Urban. The gist…stocks with the most buybacks have heavily underperformed the S&P. There’s a lot more to equity performance than ‘financial engineering.

Hope this helps keep you focused on the areas that matter right now in the markets.

Pattern Recognition

Before I start…One of the funniest comedians working right now is Sebastian Maniscola. This clip will make your day:

Onward…

The biggest argument when it comes to public market investing is the usefulness of charts.

I use them for pattern recognition. For example, these large cap stocks closed at all-time highs yesterday.

For some it may be the first day, for others – Like Amazon, Netflix, Mastercard and Salesforce it’s been a daily, monthly and yearly occurrence.

I like to shop for all my stocks on the different all-time high lists. Looking at thousands of these charts of stocks a month you start to see patterns that go beyond the names.

The argument over pattern recognition (and chart reading) happens in the early stage investing world as well.

I don’t think it works well. It is almost the opposite of my public market investing style when it comes to pattern recognition.

This post on the ‘Case Against Pattern Recognition‘ sums it up really well (at least for me).

The Market Does Not Care

The market did not care about the murder and sadness last week in Florida.

While the parents and teens were mourning, the markets were ripping higher.

This free blog went off topic last week to talk about my own feelings and I should not have been surprised that a few people chimed in with their disappointment at not getting a free idea and told me they would unsubscribe.

This week I am in Palm Beach working.

I think the markets did surprise most last week by continuing a march higher.

One stock that continues to impress is Netflix which is now just 20 percent less in market capitalization than Disney (founded in 1923). Disney really needs to launch their streaming movie and content channel yesterday.

Amazon hit $1,500 and is now expected to challenge UPS and Fedex.

An 8-80 candidate Domino’s ($DPZ) hit more all time highs as well. I picked the wrong food company for my list in Starbucks (which I have recently removed).

Enterprise stocks which I mentioned on this blog last week, had another great week.

While Snapchat may be doomed, they did team up with two of my favorite companies and holdings Nike and my Shopify to launch an e-commerce store that sold out really quickly.

Goldman Sachs is back within a few percent of all time highs but JP Morgan is already there. That crash/correction of a few weeks ago was just a rash.

JC says that Emerging Markets are leading the way here so it may be worth having a read and seeing if anything interests you.

Happy Monday and have a great week.

I Love You …I Hate You…Snapchat Twitter and Facebook

This Matt Levine post about Snapchat made me laugh today:

I don’t really understand Snapchat. I sort of understood it for five minutes back when Snap Inc. went public and its prospectus explained how to use it — turns out, the way I learn best is by having things explained to me by securities lawyers — but apparently since then the product has been revamped and now nothing is where it used to be. But my limited understanding is that the basic point of Snapchat is that you open up the app and somehow a Kardashian is there, and then you consume Kardashian content in some way, and your life is, one assumes, better for it. Now however the Kardashians might be leaving

.

Now Kylie does not like Snapchat anymore and her Tweet might have toughed off a wave of selling that has so far wiped $1.3 billon off Snapchat’s valuation.

It’s not just Snapchat…

This piece from Om chronicles how Jonah Peretti, the founder of Buzzfeed, used to love Fabeook. Now…not so much:

OMG! Facebook is amazing!

On Facebook media is just another way to express your feelings and more importantly a way to do something with your friends. On Facebook you share things that define you. Think of your social content not as information you want to get into people’s heads, but as an excuse for people to react. The content matters, but [what matters] more importantly the ability to share a laugh with friend. Techcrunch 2011

Content is for connections, LOL

Facebook is much more tied to broad human emotion and things that everyone can relate to, and things that connect people with the people in their lives. It’s not so much about the information in the content; it’s about how that content allows you to connect with other people in your life. Fortune 2013

Let’s go fishing for eyeballs in the stream.

Social has really become the starting point — the Facebook newsfeed, the Twitter stream — where most people are finding their news and information now. Fortune 2013

Social media has helped us build a unique brand.

The emergence of social media initiated the convergence of content and communication. Content wasn’t just being consumed for informational value; it became a way for people to connect with other people in their lives. This opened up the possibility of building a more intimate connection with audiences. December 2016.

Pay me, waaah!

Google and Facebook are taking the vast majority of ad revenue, and paying content creators far too little for the

value they deliver to users. This puts high-quality creators at a financial disadvantage, and favors publishers of cheap media December 2017

Oh damn, I got played by Zuck!

“I don’t think they fully understand the perspective of media or content or other industries. Or, on occasion, they interact with people at media companies and they don’t think they’re that smart.” Feb 2018

The End.

I think Facebook will be fine.

But, after this week, I think that Twitter stood out as the most important so far in 2018

Enough is Enough

This piece from a doctor treating patients of the Parkland shooting is a must read.

As a doctor, I feel I have a duty to inform the public of what I have learned as I have observed these wounds and cared for these patients. It’s clear to me that AR-15 or other high-velocity weapons, especially when outfitted with a high-capacity magazine, have no place in a civilian’s gun cabinet. I have friends who own AR-15 rifles; they enjoy shooting them at target practice for sport, and fervently defend their right to own them. But I cannot accept that their right to enjoy their hobby supersedes my right to send my own children to school, to a movie theater, or to a concert and to know that they are safe. Can the answer really be to subject our school children to active shooter drills—to learn to hide under desks, turn off the lights, lock the door and be silent—instead of addressing the root cause of the problem and passing legislation to take AR-15-style weapons out of the hands of civilians?

Smith and Wesson makes an AR-15. The company changed their name to American Outdoor Brands in December 2016. How Make America Great Again of them.

It has not helped their stock price.

Ruger makes an AR-15 as well. Their stock price has been a dog the last 5 years.

I doubt they would miss selling semi-automatic assault rifles to Americans.

Enough is enough.

Never Underestimate Your First Idea

Every entrepreneur and investor should listen to this podcast with Reid Hoffman (founder of LinkedIn) and Ev Williams. From Reid on Ev:

For this week’s show, I had a very free-flowing conversation with Ev Williams, who founded (in order) Blogger, Twitter and Medium. His career has had such an over-arching impact on how we communicate online that it’s like a history of the entire medium (no pun intended). Any time you share an idea online, chances are Ev helped you express it.

This from Reid on asking yourself the big question is fantastic:

Ev and I have a lot in common. We’re both serial entrepreneurs who’ve paradoxically spent our careers in an almost single-minded pursuit of a single idea. When you look at the companies we’ve founded or invested in, it’s clear that both of us have a fundamental question we’re trying to answer. For Ev, it’s: “How do we connect all the world’s brains into one idea-sharing machine?” For me, it’s: “How do you build social and professional networks that enable us to help each other?”

If you ask this type of sweeping question at the beginning of your career — and if you happen to be riding a wave of massive social and technological change — you’d be surprised by just how long you can keep riding it, without ever getting bored.

Reid is summing up how I felt and continue to feel about financial services and financial media.

In 2006, I did not love my life as a money manager, hated CNBC and The Wall Street Journal and could not afford a Bloomberg. When YouTube and Twitter hit my radar I felt the massive social and technological change coming to the financial industry was something I could ride. The smartphone only made the wave bigger and stronger.

I started Wallstrip and Stocktwits to help people learn the language of the markets, educate themselves, find mentors, share ideas, give back and invest for profit and joy. Our Social Leverage funds and many of our investments are a way for us to invest in companies like Robinhood, ChartIQ and Rally Road that are focused on the same sweeping question and mission.

Revenge Trading and Portfolio Cleaning

Time for a bit of a market update…

The markets are angry (my favorite Seinfeld clip). Michael has the best take on these changes.

The markets always make most sense in hindsight.

As a trend investor I prefer to focus on living in the future by following the smartest people that play with technology/toys and playing with the toys myself rather than trying to predict how the markets will look six months out. The trick is – at least with public stocks – is you have to be a disciplined seller when price trends change.

Take a look at the one chart that is likely having the biggest impact on stocks.

Earning TWO percent (basically risk free) is not something to get excited about, but when it was .2 percent just two years ago, it is a relative windfall for people with cash that do not love stocks today:

Next up…

I have been on a bit of a revenge trade binge since the $XIV whooping a few weeks back

I have shared all the ideas in real time on Stocktwits of course.

I put on a few trades that I believed were high probability. It was an extra few hours a day (for me at least) of scanning through my feeds and lists.

The first big win has been $OKTA which I took partial profits in. A second trade was buying S&P puts last week which I covered a little early yesterday, but was a good win.

Over the decades of trading/investing I have learned to get back on the bike very quickly after a big loss. The easiest way is to take the setups you are used to and decrease size while you gain back confidence. I generally increase size because of my focus and narrow my picks to setups that look and feel the best (my eyes/gut). I think sharing them in real-time really helps the most.

Next up…

I think it is a great time to cleanup your portfolio.

Let’s call it an early spring cleaning brought on by the correction and increase in volatility.

Last week I sold my Snapchat ($SNAP) in the 20’s (shared on Stocktwits). It was a stock I owned as part of my public venture portfolio.

I have too many individual stock positions (the good problem of a bull market) and since I am doing the cleaning, I am shedding the stocks that I have least conviction in for future gains. In the case of Snapchat – I do not use the product and it’s had a great run the last month. Users are revolting against the new product changes, but users revolted on Twitter as well (#RIPTwitter) when the stock was $14.

I am keeping my other public venture investments – Bitcoin, Ethereum, $MMYT and $CTRP

My biggest positions continue to be Apple, Google, Amazon, Zendesk, Nike, Schwab, Shopify and Tencent. I also own Mastercard, Visa, Disney, Zebra, OKTA, GRID, Twitter, NOAH, Palo Alto Networks, Mulesoft, Goldman and Mongo DB.

Still too many public market positions so I expect to keep pruning if the market chops and/or declines.

Hope this helps.

Be Very Afraid ?

I have watched and studied the Stocktwits streams coming up on 10 years now.

I have my own filters/biases just like every active user does, but I believe strongly in the edge my eyes, ears and network in the community have given me. I have never set out to quantify it, I just have my results.

Ian, the Stocktwits CEO, also shares with me the daily data (I am still Chairman). I have my own way to look at that as well.

I can scan it in a few seconds…but over the years have learned to spot patterns.

From day one the Stocktwits users have always been more bullish than other sources. Being that messages started flowing in the summer of 2008, the heart of the financial crisis, that might seem surprising, but the audience skews young and in March 2009, the markets started moving higher so the crisis was quickly forgotten.

Garrett, who leads Stocktwits data, shared the results of the data he crunched from the most recent correction and it was very different. He found that investors are more more afraid of a downturn than ever before.

Take a read.

I will be keeping a close eye to see how the next few months play out.

Right now a lot of large and mid cap stocks continue to hit all-time highs. If this continues, I will be interested to check back in with Garrett in the next month.

Netflix Versus The Rest

It seems like Netflix is pulling away from any competition.

It is my homepage before bed and on days like yesterday when I was shut down with the flu.

Bob Lefsetz says they have ‘already won‘. It’s a good read.

They have 117 million subscribers in 190 countries.

I am sure Apple wishes they bought them.

Here is a great podcast on the business of creativity between Marc Andreesen and Ted from Netflix.

In the meantime, Twitter, Amazon, Google and Verizon are chasing the NFL for content.

Netflix says that real-time programmed television is not something they care about. I tend to agree.

Save your money Twitter and battle some bots please.

The End of The Low Volatility Regime?

Before I get into today’s post on volatility, I wanted to share a good Umair Haque piece where he asks ‘Is There Any Price Americans Won’t Ask Their Kids to Pay?’ The post begins with:

We ask five year olds in American schools to perform ‘active shooter drills’.

He concludes:

What has really happened here? Older Americans shifted every kind of cost possible to their kids — human, economic, social, cultural — no matter how much it traumatized, wounded, or scarred them. They just appeared totally indifferent to their own kids’ plight.

First, the costs of school shootings and distrust and unsafety. Then the costs of inadequate education and healthcare, of a failing democracy, of a broken economy, one by one, as they aged. Their elders simply said: “you pay for all this. Whether now with dollars — or later, with your quality and quantity of life.” And so young people are ending up bearing the many costs of social collapse disproportionately — which is itself happening because their parents refused to pay those costs to begin with.

It is up to America’s young to change all this — not continue it. Their lives are on the line. This is no game. Their elders have failed them terribly, shifting the costs of never fixing a broken society to them. It is their challenge to rebuild, reform, and reconstruct the institutions that incurred such terrible costs in the first place.

OK onward to the markets…

It would be great if America had the same $VIX (measure of volatility in markets) as Tuscany (which I have pegged at 8).

We got a taste of that Tuscany VIX in 2017, despite what seemed a media and political VIX of 4o each day.

We have now seen that 2018 will not be anything like 2017.

The research team at 13D has a good piece out on ‘The End of The Low Volatility Regime‘. Take a read.

The conclusion:

As with all corrections in history, the long-term implications of last week’s market moves mean far more than the short-term outcomes. QE gave birth to algorithmic strategies dependent on unnaturally low volatility, from equities to bonds. The firms that created the strategies ignored long-term threats in favor of short-term returns. Regulators, enamored with the market’s trajectory and intimidated by the technical complexity of algorithmic innovation, turned a blind eye.

Last week offered a glimpse of the downside power of the post-crisis algorithmic revolution. We are beginning to see regulators awaken to the threat. It’ll no doubt prove too little too late after a decade of algorithmic experimentation in a low volatility world. The new machinery will be tested and more pain appears inevitable.