The markets are looking for any excuse they can find to bring us into the long expected next recession. There is no better proof of that than yesterday’s bizarre news after Amazon’s earnings call.
Amazon outperformed expectations on every level. Every level. Amazon has been in a freefall since the end of the 3rd quarter of 2018 – for no obvious reason beyond a vague sense of dread at the veiled threats of President Donald Dump.
Here is the lowdown. Amazon has:
Led the way in voice devices all the way and put more Alexa devices in the world than any other company by a huge factor
AWS revenue grew by 45% – making them even more dominant in this increasingly important space
Amazon is making serious in roads into healthcare, travel, and shipping (thus reducing dependence on the USPS)
Amazon announced that in 2019 they will be putting more focus on investment in infrastructure, development, and hiring
Amazon is a world leader in AI, automation, and other technologies that are changing our world
I can go on, but I shouldn’t have to. On the challenge front, Amazon faces competition in India and China as well as regulation and economic growth issues in the same. Yesterday’s call mentioned that and mentioned the increased focus on investment – and then the shit hit the fan – Amazon briefly jumped to 1750 at the close of the market and then began a bot induced whipsaw between the 1630s and the 1730s – this was nothing more than AI bot induced fervor with hungry traders taking profits or selling in FOMO as a completely imaginary FUD took control of the stock.
The reality, is that Amazon is growing at an incomprehensible rate and expanding their reach into new sectors, new markets, and new worlds (virtual). Back in September, major investing banks were saying that any price under $2200 is too low. I still stand by that. Amazon is trading at more than 30% below value right now.
There are only three reasons Amazon could have fallen 1) irrational bot/trader interaction 2) information we don’t have access to 3) a self fulfilling recession is on its way.
I know this week in the stock and crypto markets has been difficult for many people. I’m not one of them. My stock portfolio and my crypto portfolio both lost quite a bit of value over the past month – this week was more of the same. I feel good about every decision I made this week – with one exception – after taking sharp declines in my shares of TVIX, I sold a little above break even and missed 80% growth the past two days…in this case, I let my fear of losses outweigh my desire for gains. And, let’s be honest – I was drinking the kool-ade, I was mostly believing the narrative that the markets would simply keep going up and up and that the crash would come sometime in late 2019 or 2020.
The pullback hit a lot of the rising tech stars of 2018 the hardest. Yext, AMD, Square – along with some old favorites like Ali Baba, Amazon, Google, Netflix. Oddly, Tesla didn’t suffer much, maybe because a bottom was already in. McDonalds and Starbucks both weathered the storm nicely, with both companies actually taking gains in a sea of red. Gene editing, industrial automation, electric self-driving cars, and marijuana stocks all took hard hits.
With all the blood in the equity markets, I thought cryptocurrencies might stage a rally but there was some news timed just right – Gemini, the crypto giant created by the Winklevoss Twins, was denied their bitcoin ETF, again by the SEC. So, crypto dropped significantly.
At this point, I”m grateful to crypotcurrency for making me a better investor. Yes, my investments are down by large margins compared to a year ago, but bitcoin and alt-coin losses have made it possible for me to suffer 20% losses (or 90% losses) and not lose my head. I’ve seen the massive volatility, the rise and fall of shares and all of that has brought me back to the fundamentals. Invest in companies for the long term. Find quality companies with quality management. Watch for buying opportunities. Let winners run. Ditch losers early. Take profits when you can.
The hardest part of this week was controlling the urge to cash in my savings and invest it in more shares of Amazon, Square, AliBaba, and Yext. I’m still bullish on IBM, but sold most of my shares a few weeks ago at the highs. My investing goal right now is to take enough profits to step out of my margin account. This week demonstrated the danger of margin – luckily, I avoided a margin call, but essentially a margin call would have meant 2x the loss.
I’m still drinking the Kool-Ade, by the way. I think the markets are going to rally through the next 12 months with a couple little down turns. I’m hopeful that we’ll see a bitcoin/crypto rally in the next few months as well. The market is going to come down – but the policy makers have enough control at the moment to keep it bouncing back. The range on that is narrowing, however.
My strategy moving forward is to continue scooping up quality companies at bargain prices. I don’t think that Amazon, IBM, Editas, AliBaba, or Square are going anywhere but up from this point. I’m calling this the AIEAS strategy. I live near the town of AIEA, Hawaii. It’s the only U.S. city with no consonants.
For my consonants, my crypto strategy. Bitcoin (BTC), Cardano(ADA), Litecoin(LTC), Digibyte (DGB), Ethereum Classic (ETC), and Ripple (XRP) – or BALDER.
I’m not a classic conspiracy theorist, but I do think that there are great powers pulling the strings behind the scenes. We see some of what they are doing, but most of it is obfuscated. I believe that this past week was a test balloon to see how markets would react and what they could make them do. Yes, rising interest rates, yield curve, inflation, and more were at play – but the bottom line is – nobody that I’ve heard or read, has given a compelling arguement for why this massive crash happened – there was no obvious catalyst. More crashes will come and more bull runs. The invisible hand is at play here. We don’t know what it is heading towards, why it is making the moves it is making, or when they will happen – only that they will happen.
So, my AIEAS BALDER strategy is designed with that in mind. Quality companies and crypto projects. The bulk of my investment will be in Bitcoin and Amazon. They aren’t pure safehavens, but they are the best we have at the moment.
I read something the other day that was very interesting. It was talking about how the trade war and tariffs and political scandals that should be rocking the market daily – simply aren’t. The reason, this article said, was that the money in the market which was scared or nervous had already left.
Think about that for a second.
It means that the money that is still in the market is either sure that the markets will recover from negative news or that it is not concerned with negative news and holding on with a longer term perspective. I’d like to offer a different and much more dangerous perspective: the violent rises and falls of the stock markets since Spring of 2018 have made many investors more gun-shy about losing out on gains following dips, than on losing out on dips. It means that the risk tolerance for the market as a whole has gone much higher. Personally, I think that the Robinhood App and the violent rise and fall of Bitcoin have a lot to do with it.
Robinhood and Bitcoin in tandem have brought an entire new generation of investors into the markets. I remember hearing a seasoned trader in January say something like “I don’t know where this volume is coming from, but these traders are absolutely stupid” because the conventional rules were being broken by a large number of traders.
Let me break it down. Bitcoin bubbling in late 2017 and early 2018 brought millions of mom and pops, college kids, mechanics, builders, waiters, house cleaners, and other non-traditional investing types into an ultra-high-risk trading environment where dreams of becoming debt free, financially independent, or filthy rich were born and crushed. For those who took part in the 80% rise and 90% fall of Bitcoin over the past year – seeing a stock swing 7% is nothing. Seeing a stock swing 20% is almost nothing.
Those same bitcoin losers (and I’m a bitcoin loser as well, but time will tell if that stays the case) probably found the Robinhood App the same way I did – through the fact that Robinhood opened up to trading cryptocurrency AND stocks on the same phone app. So, where is the money the Robinhood traders are trading with coming from…there are a few possibilities.
1) From their bitcoin gains
2) It’s what is left after their bitcoin losses
3) They have borrowed, used student loans, taken out mortgages
4) They have closed down other broker accounts, 401ks, IRAs, or are using savings
Any way you look at it – this is not the same conservative money that looks to build 6% annually and sells a loser after 7%. Because they are in the market (along with trading bots) those strategies are no longer as effective as they once were. The massive market swings trigger buy and sell orders, sweep through stop losses, and leave traders who aren’t paying attention with overpriced shit on their hands or with selling at a loss and then watching a 250% wild upward swing…which brings me to the bots.
The vast majority of trades on all of the markets today are conducted by trading bots which conduct millions of trades each minute (or faster). There is no human way to beat the bots except through playing it safe and getting lucky.
So, with all of that, what scares me about these markets?
It’s the human traders using the app with their finger on the trigger. They may be exhibiting a strong risk tolerance, but they are human and eventually…somethinig is going to collectively set them off…when it does, the bots will take over and the losses will be massive and nearly instant. Yes, the markets will shut down…but as we saw with Tilray yesterday…that doesn’t necessarily solve things. Imagine what happened there, happeneing on a market wide scale.
These markets are terrifying…but honestly, there are huge gains to be made – despite that.
I’ve shifted my investing strategy. I’m not day-trading or trying to lock in short term gains. I look at a company and try to imagine where it will be in twenty years. I look at what it offers in growth between then and now and what it currently offers in dividend and yield. That’s where my money goes. At the moment there are three very exciting places I have my money parked.
1) IBM – big blue has become a world class innovator while the innovators like Google and Facebook have become boring and conservative. IBM offers one of the best dividends out there and is constantly innovating in new areas of growth.
2) Gene editing. There are three companies leading the charge here. Crispr Therapeutics, Editas Medicine, and Intellia Therapeutics. This is the area where disease gets solved, aging gets set aside, and humans potentially take the next step in evolution
3) Industrial Automation. The workplace is being automated. There is nothing that can be done about that. Brookstone, Holisys Automation, and ABB Group are the three companies currently leading the charge on this world changing shift.
I also believe that Amazon will continue to dominate and grow like the Borg and that electric cars with self driving technology will take over the automotive industry. Tesla may be a dead man walking but GM, Volkswagon, and Toyota are stepping up and newcomer NIO out of China is one to watch closely.
I’m putting my money in these areas now and in twenty years, I expect that I won’t be disappointed.
Now, a word about Bitcoin and blockchain. I still believe in Bitcoin. I think any money put into it before 2020 will see massive returns. I also believe that there are a number of great use cases for blockchain technology – but the more I’ve learned about the current run of projects – the more I believe that there is better coming and the money I’ve put into them may never be recovered. The hype got me…now, whether I get lucky from that – that’s just a matter of luck and fortitude. I’m not going anywhere with my losses…and it would be nice to see them turn into winners. Only time will tell.
A lot of users in the US have been complaining about scams on craigslist but it seems that Amazon may have some scams and that’s a huge concern for us.
This weekend, I was looking for a brand new tv (Samsung 55″ LED tv) and I found a tv that was available for a cheaper price from a new seller. Price was at $1,100 vs. $1,600. Seller mentioned that he just opened the box and the tv was brand new. He also asked me to send him an email. Then, he replied to my email asking me for my contact details (this is where I feel that this is a potential scam). I replied back with my contact details and he sent me an email with an invoice from Amazon Payments and ask for a payment in cash through Money Gram (ok now we are sure this is a scam).
Where it gets concerning is that I talked to customer care at Amazon they did not seem to care about it. I asked them specifically if it was a scam or not after I sent them all the details and they had no idea. They were not able to tell me whether Amazon Payments was legitimate or not.
I guess from now on I will have careful look on sellers on Amazon considering that Amazon does not seem to know about potential scams on their platform…