I have no idea what will happen in 2016. I am glad I waited a week to get them out. It seems a little easier now that we are in crash mode in global markets.
I have some fantasies, some predictions based on trends I see and guesses that I will outline below. I will continue to risk capital – as I have been doing the last 25 years – in stocks and people. Last year, while my hedge fund was very light stocks, Social Leverage (our seed fund) was very active. We made 12 early stage investments. That is the same pace as every year since I started angel investing full-time in 2007. This was not planned, but the quality of entrepreneurs and ideas remained strong throughout the year.
If you read this blog, I have been light equities since March of last year. If you pay for our Social Leverage Research service (Ivanhoff runs on a day to day basis), you have seen us get chopped around on the 20-25 percent we have allocated to stocks in the model portfolio since March of last year. By last Monday we were 100 percent in cash. I had Ivan open up this week’s for anyone that wants to click here.
It’s easier in hindsight to see what started going wrong last March and why we stopped being thrilled about stocks. We did not get bearish, we got defensive. It is very rare that I short stocks so being defensive for our service and my fund is cash. Take a look at this chart:
In particular look at the blue line at the bottom. Today, just 25 percent of all S&P stocks are above their 200 day moving average. Notice in March of last year how stocks began deteriorating. I had no idea, nor did Ivanhoff, that it would get as bad as last week, but some pretty simple indicators like the ones in this chart helped.
I do not have enough money to move markets, I am at the mercy of it. While a majority of stocks remain below their 200-day moving average I have no desire to be aggressive in stocks.
Look at last week’s crash numbers:
S&P 500 down 6%
Nasdaq 100 down 7%
Russell 2000 down 8%
Semiconductors down 9%,
Biotechs (IBB) down 10%
Crude oil was down 11%
China was down 12%
The SL50 list lost 8.7% (our proprietary trend list that I use to hunt for stock market growth leaders).
All this leads to my 2016 Guesses, Forecasts and Predictions …let’s call them #GuessForeDictions:
1. Global Macro is cool again. While stocks struggle and volatility increases, the Global Macro traders lick their chops. I read a lot of this boring stuff because I just love it. I am happy to pay for it because the people I follow share ideas that I can profit from. They include RealVision TV and Mercenary Trader and I will get anyone a great discount if you ping me.
2. If the S&P continues to be weak, Biotechs will be relatively weaker.
3. The ‘Phablet’ is everything. I would add to Fred’s post that the Ipad Pro is going to be huge for in the financial markets for apps and services the next 10 years.
4. The video trend continues. The ‘Phablet’, connected TV’s have a lot to do with this trend just continuing. I discussed it here recently on Hunter Walk’s blog. Facebook, YouTube, Time Warner (HBO), Netflix and Apple remain the leaders. I am long $TUBE as well.
5. Early Stage Investing remains very lucrative. While late stage cools down and global markets remain weak, startups offer a lot of alpha with a better optionality value. Obviously it is not for everyone and I feel that I have an edge. I would rather have a long dated option on people and ideas than using options on stocks which force me to predict time. While cash rich leaders slowed their acquisition pace, they are loaded to the gills with cash and the trend to corporate VC arms will continue. Family Offices and Hedge Funds will also help as their money continues to come downstream searching for alpha.
6. If you buy the S&P next week and average in over the next 30 days you will make money in 2016.
I won’t pick specific stocks because as I outlined earlier so many are trading below their 200 day moving average. That said, I am already building a list of great brands to own into this latest panic. The problem is they are mostly all mega-caps at this point and really have not given up much if this really is an extended bear market for stocks (it already is one for most stocks).
They include Google (long), Apple (long), Nike (long), LULU, Netflix, LinkedIN, Facebook, Amazon (long), Linkedin, Schwab (long), Under Armor (long). I am going to add the newly hated Chipotles to this list now that its down 40 percent from some bad chicken!
7. The enterprise software space is cool. I love Slack. It is probably the most productive tool I have used as a CEO. LinkedIn remains a favorite as well. I also like Zendesk $ZEN (long). Social Leverage is an investor in a many startups in the customer support space, the latest being Kustomer.com (stealth at the moment).
8. Crude oil is at 13 year lows and has spent a full-year below it’s 200 day moving average (remember that when trying to pick a bottom in stocks). Saudi Arabia seems to be hurting for cash in that Aramco is considering filing for an IPO. My gut is that while the panic is long from played out, that more evil forces will prevail (Saudi Arabia, Goldman Sachs) and I will stick with my plan from just a few weeks ago.
9. E-commerce remains the big winner – specifically software for e-commerce. We are investors in Narvar a fast growing now venture backed (Accel) startup focused on world class post purchase experiences.
10. New financial web and app services continue to grab headlines and customers. I do believe that customer acquisition gets harder in a crowded market so we will see many failures and even a large shakeout. This is an old mantra and theme of mine here and it has worked so it’s easy to search the archives on all my investments in the space.