Category Archives: Technology

Something Is Going To Snap

Snapchat is trading this morning at a $40 billion valuation. In 2016 revenue was $404 million, and it lost $514.6 million. User growth slowed from 17 percent in Q2 2016 to 3.2 percent in Q4.

There is only one word that applies – mania.

Ad Blockers

There’s a fuss being made by the advertising industry about the increasing use of ad blockers. The industry is, to say the least, being disingenuous.

I run into sites that say I’m running an ad blocker. But I’m not blocking ads. I’m blocking trackers – third party cookies, for example – which are an entirely different thing. I don’t object to advertising, especially on free sites. I do object to using the ads as a stalking horse for data collection about my browsing habits. Arguably, the advertisers are all about the data collection – the ads themselves are incidental.

Turn off the tracking and just show me ads and I won’t object. And don’t lie about what you’re doing.

More Of The Same

Market internals are horrible and fundamentals more so, but the major indices are being held up by the mega-cap stocks that Hussman terms the “winner take all” group. The poster children make up the FANG group – Facebook (P/E 107), Amazon (P/E 952), Netflix (P/E 348) and Google (P/E 32). It seems that people are selling everything else and buying these momo monkeys.

If previous collapses are any precedent, these gems can be expected (with the possible exception of Google) to lose over 90% of their value.

Wow

Stocks (equities) are up huge this morning, following “whatever it takes” Draghi yesterday, strong earnings from so-called “techs” last evening, and then rate cuts in China overnight. Looks like a double top at least. Trend following systems are all getting long. Bonds are being punished for no obvious reason.

Commodities aren’t following – crude is down this morning as the China rate cuts indicate increasing desperation on the part of the Chinese government.

The October 28th. Fed meeting is the next major pivot point. This is the Armageddon of central banks.

Pump Pump Pump

Google is being pumped furiously, probably as the best way to manipulate the NDX since it is up anyway and not being sold hard, so the wind would be at your back.

Out of curiosity I looked to see if any other NDX stocks were up. I found five – AAL (American Airlines), ESRX (Express Scripts), NVDA (Nvidia), PAYX (Paychex) and TSCO (Tractor Supply). Tractor Supply? Really?

Are reorganizations the new buybacks?

Same Old

Last night China announced a modest devaluation of the yuan, exporting deflation and making Chinese goods more competitive in the global race to cut prices. The U.S. reported that wholesale inventories grew rapidly in June, adding yet another pointer to recession. Oil fell back into the $43/bbl. range. Dr. Copper fell 3%.

But in important news, Google announced a corporate reorganization, adding a holding company and a new layer of management. This was worth $24 billion in market cap, apparently. Which had a huge positive effect on the stock indexes, given Google’s already enormous market cap. This for a company supported by primarily by advertising spending.

Aren’t bubbles fun?

Edit: Oil later made it into the $42 area.

Hmmm

There were more IPOs in June than in any other month since August 2000.

The Death Of Momo

The story today is the collapse of the momentum stocks as Joe Sixpack runs for his life. The 10-stock momentum portfolio I set up is down 3.3% as I write today and 6% (ok, 5.94%, I exaggerate) since it was created on 8/15. Meantime, the Dow is down 44 and the S&P is down 9 and change, 0.5% or less.

No doubt in my mind that those stocks have been heavily shorted by the pros at the same time as they have been pimped to retail and the pros have decided it is time to collect.

So they short more, and then when the retail traders are scared or getting margin calls (or both) they cover their shorts by buying the stock from the weak hands who just bought them at much higher prices.

Bond Hatred Erupts

Bill Gross has left Pimco, asserting that he is going back to being a fund manager rather than an organization manager. There is muttering that he quit rather than be fired for yelling at his subordinates, but whatever. Interestingly, this change at the largest bond fund in the world has resulted in a fresh wave of bond hatred, claims that Bill is “getting out just in time” and assertion that Pimco will now be dumping its bond holdings.

I was getting concerned that people were looking at the bond charts and the economic prospects rather than shorting on emotion and Fed forecasts, both equally unreliable, and I am glad to see that this is not the case.

In stocks, my momentum portfolio from August 15 is down only about 0.5% so there has been no real impact from last week’s sell-off at this point. The true believers are keeping faith, the two gainers in the group are FB and TWTR – the latter up nearly 15% no less, while sporting a 30x price/sales ratio. I expect this virtual portfolio will lose 80-90% of its value at the bottom.

Where’s The Magic?

Market reaction yesterday to the Apple announcements was decidedly negative, as in my opinion it should have been. So this morning the “analysts” got to work, I presume because the big houses have stock to unload.

No fewer than 16 analysts polled by FactSet raised their price targets on Apple AAPL, -0.04% Wednesday, with most maintaining bullish buy or overweight ratings.

Cantor Fitzgerald analyst Brian White called it the “most memorable iPhone event” since the very first announcement of the iPhone in January 2007, and said the unveiling of the new Apple Watch was “magical.”

And they got AAPL up to 101, +3% on the day. What a joke. Late stage mania, of course, but even so. Here was a product announcement that I thought was a huge disappointment. Nothing at all innovative, just improved speeds and feeds for the iPhone – 6th. generation, roll ’em one more time, followed by a watch that is expensive and late – and by the way offers nothing that the products already out there don’t. Where was Apple’s design culture? Oh, and Apple wants to replace the wallet. Please. Why not just walk around with a sign saying “hack me” on your back?

Arthur C. Clarke’s well-known quote says “any sufficiently advanced technology is indistinguishable from magic.” I suggest the converse is also true.