When I was a kid I played ‘Pong’ and ‘Space Invaders’ and Coleco Football and Mattel ‘Intellivision’.

In college I stopped.

Maybe if there were smartphones and no women, I would still be a ‘gamer’, but my generation was looking up not down.

I found the markets because I needed a first job and I was hooked.

It has been a battle of wits and behavior since. The markets have brought me to panic and fear on many occasions but mostly they bring me joy.

I have no time or energy for the grind of ‘poker’ which so many of my friends tell me to try, or any video or mobile games. I do see Rachel playing mobile smartphone games while watching Netflix shows.

I have spent the last year mostly at home and staring at my laptop so I have been happily fascinated by the insane growth in new investors/traders and the investor in me continues to wonder what is next.

Gaming is such a part of the human life experience, but as a non gamer it is very hard for me to participate in the mega trend because I don’t use the products. Between Tencent, Riot, xBox, Nintendo, Skillz, Zynga, Roblox, Playtika…I have no idea how to analyze the sector and opportunities.

The great thing about the markets as I think about the gaming platforms is the markets have basically one playing field…price and volume. Of course there are tickers and now a whole world of decentralized tickers and exchanges, but it is still just one giant platform of tickers and prices and fundamentals and opinions and behavior and wit.

I think this ‘game’ of the markets is more a game than ever because onboarding is so much easier and fractional ownership allows for people to play the game in a much more enjoyable way.

So while everyone is yelling that the markets and stocks are overvalued and due for a long bear market and that this ‘bubble’ will pop I am contemplating the idea that we just have a massive supply/demand imbalance and the game creators (bankers and founders and venture capitalists and SPACers) need to create more supply. They are of course.

My partner Charlie (who runs the advisory business Compound Advisors) and I have been chatting for a month or so about the possibilities of secular changes in the markets. Charlie put together a great post on the changes that have my attention. It begins:

The most significant investing trends over the last 10 years can be summarized as follows…

1. Large Caps over Small Caps.
2. US over International.
3. Growth over Value.
4. Tech over Everything.
5. Long Duration over Short Duration (Yields Falling, Curve Flattening).
6. Stocks over Commodities.
7. When Covid-19 first hit the US last February and March, all of these pre-existing trends accelerated.

And that made perfect sense.

The narrative: a global Depression coming, and during a Depression a) large companies were more likely to survive than smaller companies, b) the US should do better than much of the world given the enormous monetary/fiscal stimulus, c) growth companies would be bid up in a world starved for it, d) technology would thrive as people were forced to stay at home, e) bond yields would plummet as deflationary pressures took hold, and f) commodities would crash from the lack of demand.

These narratives seemed inevitable, and prices were confirming.

But then, with no advance warning, a strange thing started happening. One by one, these trends began to reverse course…

Take the time to read because it is excellent and you will have an idea of the subtle changes we are keeping an eye on, but the gist of the research on these big trend changes is as follows:

When secular trends reverse, no bell is rung, and no one can believe that a shift has actually occurred.

But as narratives follow prices, the longer they are sustained, the more the story changes and the more people believe it.

That has already begun, with the current narrative of a Depression averted, with a) small companies benefitting more from stimulus measures than their larger counterparts, b) global stocks benefitting from a falling dollar and higher global growth, c) value stocks improving with the rise of interest rates and the steepening yield curve, d) technology underperforming as the vaccines and herd immunity will allow people to leave their homes again, e) bond yields rising with inflation pressures mounting, and f) commodities moving higher with a resumption of growth and demand.

When Covid-19 first hit, all of these narratives would have seemed absurd. And yet here we are. Where the story goes from here remains unknown, but the fact that we’re even entertaining these secular shifts is remarkable, and more proof that the only sure thing in markets is that they are full of surprises.

As Trump slouches out of the White House without a tweet, and China ‘putz’ Navarro leaves his perch with China stronger than ever (oh look we found Jack Ma the day you leave), and with the Chinese internet stocks at all-time highs, and Yellen back at the helm at The FED, the economic and financial time bombs of the past Presidency will start detonating making these secular changes of trend even more difficult to read.

in the meantime, this morning Netflix is up $60 to ‘all time highs’ as they surpass 200 million members. Old trends (and 8-80 companies) die hard.

Disclosure – Long Netflix, Tencent, Alibaba

Back in 2016 I wrote my first ‘Death of Retail Is The Birth of Retail‘ post and it had some good links and thoughts. I concluded to stay long $aapl, $amzn, $shop and $pypl. That was a good idea and I still own Apple, Amazon and Shopify, but I sold Paypal too early last year.

I have updated the series over the years and the whole process has helped me think through which companies/brands matter as ecommerce grew and retail changed.

Here we are in January 2021 and the end of COVID is in sight now that we have working vaccines so where are we with ecommerce and retail?

I like Elena Berger’s take:

The takeaway shouldn’t be “eCommerce is eating the world” it should be “despite lockdown, store closures, mass layoffs, and global logistics networks that rival militaries in terms of sophistication, eCommerce was less than one-sixth of sales in the US.”

Elena had a good essay I just read on the subject. You can read it here.

Web Smith follows it up with his take on the essay and the bubble that we had built in physcial retail with his post ‘The Forgotten Middle‘. For more with Web, I had him on my Panic Podcast this summer and he dropped some great knowledge on all these subjects.

As the physical bubble in retail gets reorganized and reimagined and the next generation of investors gets into stock picking, while the current generation of ecommerce moguls begins to think about taking their skills and applying them to beaten down retail brands and the influencer economy continues to explode (TWO great recent reads on that here and here)…look for more Gamestops.

The reimagining of retail, not just e-commerce, will continue to create venture style returns in the public markets for many investors.

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.

It’s Monday and though the markets are closed, Ivanhoff and I never stop bringing you Momentum Monday. Ivanhoff and I tour the markets and share some fresh ideas.

You can listen/watch today’s show here on Youtube and the show is embedded below:

There is a lot going on in the markets, but my attention is on the change of trend that might be underway with small caps and large caps. Eddy sums it up best with this chart and set of tweets:

Also, The big cap tech – Facebook, Apple et al are now underperforming the resrt of the Nasdaq 100:

The one stock and company that has surprised me most is Goldman Sachs which has broken out to new all-time highs. The suits are having a day.

The other big surprise in looking at the charts is gold’s relative weakness to the other commodities which are all rallying. The gold bugs are miserable seeing their rock get digitized and blockchained before paper and Goldman.

Ivanhoff sums up the action this way:

The two big catalysts in the past couple of months that have defined everything in the stocks market are:

1. The U.S. election results – clean energy stocks accelerated their ascent since then. Cannabis stocks gapped up and have been clear leaders. Semiconductors and biotech have also been extremely strong post the elections for their own unpolitical reasons. The odds are that those sectors will continue to lead in 2021 but that doesn’t mean chase them when they are up multiple days in a row. Wait for proper setups that create better risk/reward entry points – pullbacks to rising 20 day moving average or a range contraction.
2. The announcement of a working COVID vaccine – after Pfizer and Moderna revealed their vaccines, retailers, financials, and energy gapped up and have been among the leaders since then. Basically, they are the reasons the small-cap ETFs have done so well. Russel 2000 (IWM) doubled in 9 months since its March 2020 lows. To see a move of this magnitude, you have to go back all the way to 2009 when it took IIWM 14 months to double from its lows. Nothing goes up with such veracity in such a short period of time without having reactions along the way. Don’t be surprised to see 10-20% pullbacks in the indexes in 2021, but overall I expect those pullbacks (corrections) to be buying opportunities.

In the meantime, mega-cap stocks and many software stocks have pulled back or just moved sideways consolidating their gains from the first half of the year. I expected some of them to have strong pre-earnings rallies (AMZN, NFLX) considering their reports in the previous quarter but so far I have been wrong on that. The new earnings season officially starts next week with NFLX and a bunch of financials. After that, we have the big tech and everyone else.

Have a great week everyone.

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. 

I am going to try something new on the blog…a regular ‘Sunday Sentiment’ post.

I am fascinated by the moods of the markets and the fact that narratives and storytelling have driven the fundamentals to the background.

Because I am more excited and fascinated than ever to be a full time investor in private and public markets I think having a Sunday sentiment post will help me improve my long term returns.

I write this blog for my own personal selfish needs and to hopefully grow, but do appreciate everyone reading and sending their comments so please feel free to chime in on this idea and share some ideas on sentiment, who to read, follow and how to think about it.

This week a few charts and data points stand out but long story short make

I think JC nailed something in his post ‘Stealth Correction‘. Small Caps, SPAC’s, IPO’s, Alts, and lates stage monster rounds are getting money flows while $10 plus trillion in the FAANG and friends group of 10 stocks goes nowhere.

There is a new narrative developing and I am trying to piece it together, but for now, it seems like a possible change in trend towards smaller caps over mega caps and decentralized over centralized.

One of my favorite ‘feelings’ about Trump being out of the Oval Office is that the overall tensions in markets will drop. Trump loved to move the markets using Twitter.

One thing that will not go away with Trump gone is that social media influencers (while not as likely to be able to move markets) will be able to move stocks.

The king of that for now is Elon Musk. Brian captured this perfectly with this tweet:

My friend Jim O’Shaughnessy, a smart man and a quant, says Brian’s tweet perfectly captures the zeitgeist of our times. I agree with Jim and would add that the markets going forward will be a great platform for both the quants and the artists. The unbundling of the indexes as new investors pick stocks, build their own portfolios because of fractionalization and the repleneshing of the markets with thousands of new public companies over the next 3-5 years is a trend I am positioned for.

Of course, while this is happening, the pockets of froth and exuberance (Reddit had to change their rules as penny stock peddlers have been piling in) that we see right now as the put/call ratio flashes warning signs would indicate that a correction might be at hand.

Finally, one thing I have noticed about this recent surge in crypto is that weekends on Stocktwits have become dominated by crypto discussion. In 2017 that never happened. This boom haas a different feel.

Have a great Sunday.

There are a lot of people calling Zoom ‘the next AOL’ as we start 2021.

Zoom is in my 8-80 portfolio so of course I have to think about that because there is a BIG difference between a company for the ages and one that flames out like AOL.

I won’t get into that today, but the pessimism is good. Stocks can’t go higher if everyone agrees that the product and company is invincible.

One sector that will NEVER give up Zoom is one that I never thought would use Zoom and that is the financial industry.

This week I had a bunch of calls with banks and hedge funds and Zoom was the product of choice. There was not one mention of security in any of the calls. I imagine my calls were beamed to China and someone that looked like me is now using the same pitch to raise money from bankers in China?

Anyways, this post has nothing to do with China or bankers or pitches or Zoom…I think.

At the end of the day, I walked past Knut as I left the office and we thought my Zoom fundraising attire deserved a photo.

I shared it on Twitter:

This morning it has nearly 500,000 views and some very funny comments and threads.

My point is that while Twitter the stock is a turd (for reasons I have outlined over the years on this blog), only on Twitter could a 55 year old putz like me get a laugh from such a broad community over something so silly and mundane as my life.

I love to tell stories.

Back in 2017 I wrote a post called ‘Tell Me A Story‘ and today it feels like everyone has caught on and is doing the same.

There are Snapchat Stories and Instagram Stories, but Tik Tok ‘tipped’ storytelling for a next generation.

Now that the TikTok generation has discovered stocks, the markets just might have reached ‘peak’ storytelling.

That does not mean stocks will stop going up or crash today or next month, but I do worry when everyone can tell a stock story like me.

Lately I get 10 -20 texts a day from a friend who just bought Cathie Woods ETF’s ($ARK_, $ARK_ etc) asking me ‘what do I think’? Until mid last year I had not heard of her.

Each and every one of her family of ETF’s (I now call them WTF’s) was up over 100 percent last year.

She is not just famous for being very smart and well spoken and being up 100 percent. I know many people up multi-hundred percent last year. My daughter’s Robinhood account was up more.

If you search Cathie’s name…she is everywhere. She has been telling ‘stories’ specifically technology stories about Tesla and Genetics and now Space that just resonate.

My friend Michael has the very best take on the power of storytelling as it relates to Cathie Woods right now.

I have mad respect for Cathy Woods and storytelling. It is fantastic that a next generation of investors is now both onboarded (thanks to the FED, COVID, TikTok, Robinhood, Etoro, Stocktwits etc) and doing their part to unbundle the indexes and push money to companies that resonate with them. The idea that you blindly put your money in an index fund that went to Wells Fargo, Exxon, Nokia to neatly fit the ‘cost’ narrative pushed by Vanguard and Blackrock was maddening.

I have been telling the story of ‘do it yourself’ and the ‘unbundling’ of indexes for a long time. My payday is Etoro and Robinhood and Stocktwits and Alpaca etc…not beating the averages, but this is a ‘story’ for another time (by the way that story is don’t get caught up in trying to ‘beat’ the averages any one year or quarter).

Now that we are here, I would and do urge people to be careful whose stories they are following and where they just might be in the storytelling food chain in an era where everyone has the tools to be a great storyteller.

My ‘Panic With Friends’ today is with the VERY funny Douglas Boneparth. He is a financial advisor to the yoots.

I really tried to make it difficult for him to start the conversation but he smoothly worked through my banter to talk about building a financial advisor business catering to millennials.

You can listen to the podcast here on Spotify or right here on Megaphone.

For more details on Douglas the the show read on below…

Guest: Douglas Boneparth

Profile: President, Financial Advisor at Bone Fide Wealth

Where to Find Him: LinkedIn, Twitter

Fun Fact: Douglas became a fully licensed Certified Financial Planner at age 21.

What’s the Panic About:

If our last guest Tiffany Zhong was the Gen Z whisper, then Douglas Boneparth might just be the Millennial version. And he has the titles to prove it, including the newly named millennial voice of CNBC’s Digital Financial Advisor Council. After spending over a decade in the financial planning industry, Douglas noticed a gap – a Buzzfeed reading, avocado toast eating, Slack using gap. Millennials weren’t getting the same level of thoughtful time and advice as other older players in finance. Douglas stopped chasing after old money and started finding young people to invest in. He is the founder and president of Bone Fide Wealth, a Manhattan-based wealth management firm specializing in high achieving Millennials, young professionals and entrepreneurs. They currently oversee approximately $80 million in assets. Douglas is a funny, charismatic, driven and smart man. In this episode, Douglas and I talk about high earning millennials, financial education, when he got interested in the financial world of business, his comedic perspective on his professional and personal life, what a day in the life of a financial planner looks like, his plans for the future, marketing, SEO and more. Enjoy!

The Takeaway:

Millennials just want respect, transparency and time. And they see through BS. The second you sound like you’re making something up or being opaque, you’re going to lose this valuable group of people.

Favorite Quotes:

“If you’re not growing, you’re dying.”

“Be ridiculously objective and transparent in everything you do and say.”

“I’m a big promoter of leaving this planet more financially educated than when I found it.”

“the hedonistic treadmill of SEO” – not a full quote, but a phrase I think I’m going to start using more in my everyday life

Food for Thought:

If you’re interested in learning more about Douglas’ perspective, I recommend checking out his book “The Millennial Money Fix” and his podcast “We Should Be Sleeping.”

PS – I am now doing one ‘Panic With Friends’ podcast per week. Thanks for listening and make sure you subscribe over on Spotify or Apple.

I loved the movie Fletch. When Max was young he loved it too. Little kids know silly.

One of my fave scenes is Chevy posing as a mechanic and riffing ‘It’s all ball bearings‘:

Fetch/Chevy got away with this because he said it with such confidence.

I see this behavior all day from people talking about stocks and markets.

They wax poetic about the latest stock and catalyst that will make their stock a 10-bagger. In markets like today’s it can actually work, but over the years I have seen so many people get burned.

If I can’t understand the technology in the moment with a practical use case…consider me out.

That has not stopped me from catching many incredible trends in the public and private markets with my relatively boring 8 to 80 and ‘fashology’ companies/stocks (you can search my blog archive for past posts).

One sector that has always made me think of Fletch is ‘hydrogen’. Two stocks that have been etched in my brain over that time and perennial dogs (losers) have been Plug Power and Fuel Cell ($PLUG and $FCEL).

Here are the charts over the last 12 months:

Here they are over the last 20 years:

The last 20 years, investors were ‘Fletched’.

Maybe this time it is for real?

I am asking a lot of questions these days about hydrogen, fuel cells and batteries.

One of the great things about being an old man armchair quarterback with a keyboard is I get to change my mind and not cost too many people their jobs. I wrote some initial thoughts a couple days ago.

Because I started a much smaller social network than Twitter, I never had to make the ‘should we kick off Donald Trump (insert any terms of use abuser)’ because it might turn into a global debate decision. We have our house rules and we kick people off often. It is not something we enjoy. We would rather everyone use our network/platform to share ideas and journal their trades.

Fred Wilson who was an early investor in Twitter and still holds shares had a much different take. Here is Fred’s thoughts:

Yes, I think it is problematic that Twitter has this much power. Not only are they silencing Trump, they are taking away his tens of millions of followers, and they are prohibiting all of his followers from seeing his tweets.

We should be careful what we wish for. This is a slippery slope we are heading down.

It is long past time that we move away from centralized applications to protocols.

If Twitter was a protocol, Twitter the app could ban the President from using its application and could block his tweets from being available in its app. But Trump could use another Twitter protocol client and his followers could as well and all of that social graph would still be available to them.

That is the way the web works. That is the way email works. That is the way social media should work as well and it is high time we start moving there.

This should be a warning sign to everyone in DC; the Senators, the Representatives, the folks leaving the White House and the folks entering it. He who kills the king becomes the king.

It is time to force the big centralized apps to open up. It is time to force the mobile app stores to open up. The longer we wait the worse this will get.

No wonder Bitcoin and Ethereum have been rallying. Many executives at the networks knew this was coming and maybe they leaked it or they themselves started buying crypto. Maybe Team Trump knew it was coming and bought crypto.

Now the news is out and talks of decentralization are all over Twitter.

I like Pomp’s take…’Decentralization is a Necessity Now‘.

We will see decentralized websites, decentralized mobile apps, decentralized social networks, and much more. The risk of a centralized organization imposing their will, regardless of the validity of that decision, has become too great to ignore now. It was previously believed that decentralization was only a fascination of those who were paranoid, but now we are seeing that it is becoming a business imperative at a breakneck speed.

This transition won’t happen overnight. It also won’t only be about decentralization. We are likely to see a significant rise in privacy technologies, along with decentralization. These renewed focuses will leverage technology to equalize power on the internet. The days of large centralized companies overseeing their dictatorships without fear of being held accountable are over. The people can’t change the status quo, but they can vote with their feet and start using new technology stacks.

These new decentralized, privacy-centric tech stacks will take time to build. It isn’t about building a new front end. We literally have to rebuild everything at this point. You can’t simply rely on Amazon’s AWS. You have to leverage Amazon, Google, Microsoft, and self-hosting in combination with each other to drastically improve the resiliency of what you’re building. You have to allow for the natural adoption of these new technologies and products, so that they can reach true decentralization.

Any shortcuts that someone takes will jeopardize the very decentralization and privacy that is going to be sought now. Developers and entrepreneurs will have to do the work. Investors will have to fund the work. And users will have to adopt the work.

This mission is too big for any one person. A global shift is underway and it is likely to impact every company, every industry, and every product. Why are people going to use communication products where companies spy on their every word if there is a product that has feature parity, dense network effect, and also happens to be privacy-centric? (Hello, Signal!)

The age of decentralization is here. The age of privacy is here.

Fred’s partner Albert has his own great take on the subject worth reading titled ‘Welcome to the Government-IT Infrastructure Complex‘. The gist:

Lots of people seem to think: what’s the harm? These are corporations enforcing their Terms of Service and they should have every right to do so. And yes, if there were lots of competitors (e.g. multiple app stores) then this line of reasoning would be perfectly fine because the Terms of Service don’t suddenly substitute for the law. We have to keep in mind that Terms of Service can and have been changed again and again and thus something that’s perfectly fine today may run afoul of a change tomorrow.

What is the worst the can happen? I believe there is a high likelihood that we are witnessing the visible emergence of the government-IT infrastructure complex. Government will be even less inclined to try and generate competition in this space. It is so much more convenient to have just a few large entities that an executive agency can influence behind the scenes rather than having to bother with the rule of law. We have already had this in the payments space for a while where instead of targeted interventions against actual abuses payment providers withdraw wholesale support for companies in certain categories (most prominently anything related to sexwork).

Where will this power be used next? One obvious place is crypto and blockchain technology, which threatens both the power of governments and the power of large corporations. A difficult set of topics that would require judicious law making and novel regulations. So much easier to just deal with it behind the scenes. Or take encryption. Why bother trying to come up with good regulation? Get Facebook to backdoor WhatsApp and then have everyone agree that Signal represents too much of a risk and needs to be banned. The big companies are inviting this approach. It will be good for them and good for executive power. But it will be bad for democracy.

Sure it is absolutely possible that none of this will happen. That Parler will be a one time emergency event. An exception and not a precedent. I would love nothing more than to be wrong with my concerns here, just as I would have loved to be wrong about Trump.

Howard here…

Twitter the company continues to pay the price for early ‘very bad’ strategy decisions (per Fred’s post) that led them to this point.

To undo the Trump ban would mean a new CEO. I think it is long past that time either way.