RIP Big Bull Market of 1982-2022 ?

Happy Monday!?

I spent Sunday resting from my long Palomar climb.

Momentum Monday will go out tomorrow.

In the meantime, I wanted to share this piece from Andy Kessler titled ‘RIP Bull Market of 1982-2022’. Read it here.

I read a lot, but I really focus on listening to very few people as you know from reading this blog. Andy Kessler is one of those people. I have been reading his thoughts on tech since the 1990’s when he was running his hedge fund and writing I think for TheStreet.com. Everyone was writing for them back in the day.

Andy’s first book is a classic titled ‘Running Money‘ and as history repeats itself for tech stocks in 2022, think about how few people if any..sold the top and walked away. We know that most in ‘growth’ tech and momentum tripled down (hello Tiger, Softbank). Andy did that in 1999 and chronicled the sentiment and how and why he did. I am going to go back and read it again and I probably would have saved a lot of money if I had read it again in 2021.

As per his latest thoughts from the article this weekend, I loved this part:

As a wet-behind-the-ears engineer designing chips, I was hired by Paine Webber to track semiconductor companies soon after the bull’s birth. The industry was a roller coaster—shortages followed by gluts. Still is. Not wanting gray hair and ulcers, I searched for Silicon Valley’s fountain of growth. It was pretty simple: the elasticity of ever-declining costs for chips, per bit, per gate, per function drove demand. These magic beans fed the stampeding stock-market bull as cheaper laser printers, servers and eventually smartphones were delivered to the masses.

Forty-seven times in 40 years is a heck of a run. A lot of folks made a lot of money. But as the adage goes, don’t confuse a bull market with brains. Especially with technology—don’t just buy a name and stick with it. Digital Equipment and its minicomputers peaked in 1987. IBM began a long stretch of mediocrity. Apple was practically dead until the iPhone. Intel had a good run but lost its formula. Meanwhile, cloud and e-commerce and social-media companies became earnings machines and trillion-dollar babies.

But now what? Like it or not, we’re in a new era. Capital, as always, sloshes around the globe searching for its highest return. Inflation usually means money is attracted to real assets rather than ideas. Energy? Real estate? Commodities? Fixed income will be attractive again. Corporate earnings, meanwhile, have started to decline as input costs—material, labor, regulatory overhead—spiral upward, red meat for bears.

Of course, a new bull market could start anytime, but don’t even think about another big one driven by interest-rate declines until, well, interest rates go up enough. Instead, the next bull will be fueled by earnings growth from whatever drives productivity next. Forget last cycle’s winners, find new ones—next-generation machine intelligence, geothermal energy, gene therapy, insta-vaccines, nuclear fusion or, more likely, something completely out of left field that starts out expensive, is dismissed by skeptics and then gets relentlessly cheaper over decades, creating wealth for society.

This is why we should always nurture the supply side, with capital-forming low tax rates and regulations that allow productivity to increase. The bull is dead, long live the bull.

I need to reach out to Andy again and get him on the ‘Panic’ podcast. Back in 2013 he came to keynote at my Stocktoberfest on Coronado and his presentation was titled ‘Into The Cloud’. It was a moneymaker for anyone that listened and luckily I did.

Sunday Reads and Listens…Netflix and Chips?

Good morning. I am off to ride Palomar mountain after I post this.

I have a busy three weeks of training to get ready for my September on the road.

As always, each Sunday I share some reads and listens.

First up is Netflix and the advertising business. I think Netflix will thrive with ads and new formats of content, but as we have seen through Netflix’s history, it will be bumpy. Long-term it has been smart to invest with Reed Hastings.

Next up…Is it time to get greedy in energy? I have not touched energy stocks, but I worry this pullback in oil prices and the stocks is just a pause that refreshes them. I would love to be wrong.

My biggest complaint about crypto is that I don’t trust or enjoy the web 2 messaging platforms used to discuss and engage with it. Tom explains why ‘Messaging is the Web 3 Bottleneck‘. The gist:

Every new software era has its messaging protocol. IRC in the 1980s. Instant messenger in the 1990s. SMS in the 2000s. WhatsApp, Telegram in the 2010s. There will be a new messaging protocol native to the web3 era.

When web3 messaging arrives, consumers will send billions of private messages to each other. Users inviting others will welcome the next hundred million users to web3. Applications won’t trail far behind sending product, marketing, & support messages.

Messaging protocols are oxygen for startups & consumers alike. It’s time web3 had its own.

Every week Tadas curates a podcast list for your weekend pleasure. Here is this weeks list.

Finally – expect to hear more about ‘chips’ for decades to come because it is ‘political’ and getting more political. I did not know that $AMD passed $INTC in market cap. Ben Thompson has a good essay on the subjects titled ‘Political Chips‘.

Ben Hunt had this to say about chips and politics and Taiwan:

Why is Nancy Pelosi visiting Taiwan? Why did Congress, which can’t even agree on supporting US veterans for their service injuries, agree to provide US semiconductor companies with hundreds of billions of dollars in support?

Because of this, something I wrote two years ago:

It is an existential risk to the US to have the world’s principal supplier of semiconductors under the direct political control of China. It is an existential risk to China not to have this control.

Taiwan is now Arrakis. It’s now the most important country on earth. And we WILL fight over it.

Have a great Sunday.

The Marriage of Venture Capital and Wealth Management…Inevitable

Good morning everyone.

I took the day off the blog yesterday. I’m in Big Sky Montana with Ellen visiting Max who has a few days off. Max is having a great summer working at Spanish Peaks. Yesterday he and a few members took me out for a round. The course and the surrounding property and mountains are spectacular. My golf… not so much.

Onwards…

Way back in 2005 and 2006 while I was still managing my hedge fund full time (and miserable), I was becoming fascinated with angel investing and venture capital. I was becoming friendly with Fred Wilson at Union Square Ventures and about to start Wallstrip (which Fred was my first angel). I thought I saw an opportunity for Union Square to expand their business into founder Wealth Management. Union Square was doing such an incredible job picking winners and backing incredible founders I thought it made sense for them to close the loop on the money that had multiplied so it would not leave the firm. After all, Union Square was in the trust and relationship business and wealth management is the ultimate long term, highly profitable, trust and relationship business. Fred was just not interested in being in the wealth management part of the business and did not care that Goldman Sachs et all would swoop in to manage the money of the teams they backed once successful.

This week, A16z hired a CIO with the intention of managing the money of the entrepreneurs and companies it backs. Of course, I think this makes sense.

At Social Leverage I have long thought about rolling out wealth management services and imagine that one day soon we will do so. We will be announcing a couple more investments in the wealth management and RIA space very soon. If you think about it, the ultimate growth business to be in after 12 years of global easing and money printing is wealth management.

I can’t give away all our secrets and strategies but stay tuned.

Will Ahmed, Founder and CEO of WHOOP: On a Mission to Unlock Human Performance and Save Lives

Why Web 3 Is For Me…And The End Of Social Media?

Ellen and I are headed to Montana for a few days to spend some time with Max.

I continue down the web 3 rabbit hole learning as much as I can trying products and finding people to follow. More and more of the product and platform builders I respected in web 2 (Reid Hoffman, Kevin Rose) are building cool things in web 3.

As web 3 comes more into focus, a huge portion of web 2 – social media – is under assault by an algorithmic world led by Tik Tok (YouTube not so bad at itself).

Michael Mignano has a great post titled ‘The End Of Social Media‘, that is worth a FULL READ. I like Michael’s framing of ‘recommendation media’:

In recommendation media, content is not distributed to networks of connected people as the primary means of distribution. Instead, the main mechanism for the distribution of content is through opaque, platform-defined algorithms that favor maximum attention and engagement from consumers. The exact type of attention these recommendations seek is always defined by the platform and often tailored specifically to the user who is consuming content. For example, if the platform determines that someone loves movies, that person will likely see a lot of movie related content because that’s what captures that person’s attention best. This means platforms can also decide what consumers won’t see, such as problematic or polarizing content.

One web 3 newsletter I really enjoy is ‘Milk Road‘. They just interviewed Reid Hoffman (LinkedIn founder) on his web 3 plunge and I think you will enjoy his concise explanations.

Have a great day.

W3BCLOUD to Go Public via Business Combination With Social Leverage Acquisition Corp I

Good morning everyone…

Way back in March 2021, we (Social Leverage Acquisition Corp – $SLAC) launched a SPAC. I went on the ‘Odd Lots’ podcast to talk about all things SPAC and why we did it.

Today, I am thrilled to announce $SLAC has agreed to combine with W3BCLOUD to continue building and growing a leading developer platform that powers Web3. The press release is here with more details.

Social Leverage Acquisition Corp I has $345 million in trust and has received commitments from AMD, ConsenSys, SK Inc. and others for an additional $50 million in new investments

* W3BCLOUD provides the storage and compute infrastructure needed to power Web3
* W3BCLOUD has been a joint venture among AMD, ConsenSys, and the company’s founders.
* W3BCLOUD’s management team is experienced and diverse, the founding partners (AMD & ConsenSys) have deep domain experience and skin in the game, and the recent volatility in the sector is a level set for the significant demand anticipated ahead in/for compute and infrastructure needed for NFT and Web3 companies/projects.
* Read more about the proposed transaction in our press release and investor presentation, including important disclaimers investors.

I will share more as I can.

Have a great day.

Momentum Monday – I Like Saying Breadth Thrusts…And Is Bear Market Bottoming?

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.

Good morning…

There was lots of talk last week of a ‘bottom’.

If we have bottomed…fantastic. There will be lot’s of gains in the future.

What I do not want to do is chase stocks when the indexes are below the 200 days moving averages.

As always, Ivanhoff and I got together to discuss the markets, some ideas, where we think the markets are at, breadth thrusts and some interesting charts. You can watch/listen right here on YouTube (subscribe on YouTube and you will get an alert each weekend). I have also embedded it below on the blog:

The data on ‘breadth thrusts’ is really good and I have enclosed it here from Krinsky:

One good piece of evidence for a continued rally is the bearish sentiment which I talked about in the show – have a look.

A couple other links:

Here is Charlie’s ‘This Week In Charts‘.

Charlie’s 9 chart Friday.

Stocktwits weekly Momentum Lists.

Here are Ivanhoff’s thoughts:

We see more stocks from various sectors setting up. This season, the market reaction to earnings has been predominantly positive – many names didn’t sell off after missing estimates and cutting guidance; many broke out after stronger than expected earnings. This is a notable change in sentiment compared to the previous two earnings seasons.

Other than Facebook (META), all mega caps had positive reactions to their earnings this season – TSLA, GOOGL, MSFT, AAPL, AMZN. Why does it matter? Those stocks can only be moved by institutional money.

Two new Bills in the making have given a significant boost to two groups of stocks – semiconductors and clean energy. Those are shaping up to be among the current market leaders.

The Fed has given signs that interest rate increases will slow down if the economic data requires it. They are paying attention to inflation and jobs data primarily. GDP was negative in the past two Qs, so the US is basically in a recession. The market reads this as a reason for the Fed’s tightening to become a lot less aggressive.

Have a great week.

Disclaimer: All information provided is for educational purposes only and does not constitute investment, legal or tax advice, or an offer to buy or sell any security. For full disclosures, click here.

Sunday Reads and Listens – So Much Cash and The Future of Tech

Happy Sunday.

Last night I watched the HBO Arther Ashe documentary ‘Citizen Ashe‘ and really enjoyed it. I got into tennis at the age of 10 the year Arthur won Wimbledon. He packed a lot of smiles and warmth and goodness into a short life.

Switching gears…young people will enjoy this piece titled ‘The Case For Travelling More

Nike has always been able to live in the fashion and culture future and today is no different. Their acquisition of Rftkt is no different and this piece is excellent on the subject.

My friend Om Malik a frequent podcast guest of mine wrote about the future of tech as he sees it. If you want to listen to his latest podcast with me a few weeks back…here you go.

Alex Danco, who runs Money and NFT’s at Shopify discusses how NFT’s are transforming Shopify and Commerce.

Finally today, while there are almost no IPO’s in 2022, Venture Capital fundraising is set to surpass the 2021 record. I have mixed feelings about this because it seems to me there has been so much misallocation of capital already since COVID began.

Have a great Sunday.

Reduce Your Money Anxiety With The Stackin App

Good morning everyone.

Our portfolio company Stackin has released a new app focused on helping people reduce their anxiety around money.

I know this is a big problem as my friend Morgan Housel wrote a massive financial best seller titled ‘The Psychology Of Money‘.

Tom, the CEO of Stackin, wrote this piece below introducing the app and benefits. If not for you, please share with all your genz and millennial friends.

Thanks….

I’m absolutely thrilled to announce the launch of Stackin’s financial wellness app for iOS and Android.

Stackin’ is tackling what I believe is one of the most vexatious challenges we face in our modern world — our relationship with money.

As with any relationship it requires work. And this one is a hot mess of societal expectations, social media FOMO, banal advice and all shaken up with that classic dichotomy between the person we wish we were with who we actually are.

The driving force behind this service issue is anxiety around money. On almost every metric it’s off the charts. More than twice as many Americans suffer from money anxiety than obesity. The stress caused by money anxiety wrecks relationships, careers and our health. Financial related stress is linked to increased risk of heart disease, diabetes, migraines, sleep problems, depression and more.

When we first started digging into this problem we carried the same assumptions I think of lot people do: Lack of money causes money anxiety and so the simple solution is just to get more money, right?

Well, as we got further in we ran into problems with this hypothesis. Some specific examples:

  • When we looked at the impact of the US’s extraordinary direct-to-consumer stimulus payments for the COVID pandemic we’d expected to see a corresponding drop in financial anxiety. In fact we found the opposite. People who described their financial health as “Somewhat Unhealthy” and “Very Unhealthy” rose from 13% and 9% to 21% and 17% respectively.
  • We started filtering our research into studies that looked at people in the top half of the income distribution to try and uncover drivers for the anxiety above and beyond just lack of money. Time and again we found research like this: One-third of Americans earning more than $250,000 feel like they live paycheck-to-paycheck.

It was at this point that it hit us: It wasn’t lack of money that was causing this anxiety. It was something far more personal and persistent for these individuals.

Performing user interviews we’d encounter people time and again who had taken years to get out of debt but within a short period of time found themselves right back in it. Or people who saved religiously and had investment accounts larger than a years worth of their salary, but would crumble at the first sign of an unexpected bill or go on punishing themselves to put aside every last cent they could.

We realized at this point that what we‘d uncovered was not a finance crisis, but a health crisis.

People’s beliefs around money are formed very early on in their lives. Research suggests that most are formed between the ages of 6–10 years old. These beliefs are then embedded deep in our limbic system. Similarly to other limbic responses they control our behaviors in ways that are outside our traditional consciousness. No matter how hard we can try and act in a rational manner, if this action goes against our natural limbic response our limbic response always wins.

If you grew up in a family with a history of money worries it’s likely that you’ll exhibit behavior that we title Money Protection, or if you experienced a negative change in your family’s financial circumstances early in your life more likely to exhibit Money Romance behaviors.

Without diagnosing and then working out how to manage and harness these limbic reactions we can never take back control.

This is why advice such as “just make a budget!” or “track your spending better!”, although well meaning, never helps fix the problem. In fact they can actually make the situation worse as to fail at what seem like such simple tasks can spur more negative emotion further increasing despondency and a lack of general confidence.

The final point I’d like to leave you with is perhaps one of the least well understood but most impactful in all of this.

Almost everyone working in finance tends to focus only on the left tail of changes to a person’s financial situation i.e. helping them weather negative financial shocks — receiving an unexpected bill or losing their paycheck.

But in our opinion the right hand side might actually be the more important. This is about ensuring that everyone has the attitude, perspective and behavior in place to maximize the positive changes to their financial situation.

One of my favorite statistics is that you’re more likely to go bankrupt if you win tens of millions on the lottery than if you don’t. If we don’t fix this right side then social mobility will continue to decay and millions of Americans are consigned to never reaching their full potential.

The first version of our app is now available in both the Apple and Google Play App Stores. We’d love to get as much feedback as possible so sign-up and let us know what you think.