Yup 200000 not including 100s of calls through next year. He talks to them all the time. Word on the street now is Tik Tok is doing their own CDN as of this morning. I bailed on the premarket up swing. Gave back every penny I ever made on this stock. Only myself to blame as I knew the deal here.
hummm that will take a while CDN networks are proxy based in geographical regions.
Well good on getting out..I still think this is a huge over reaction by the market IMO bailing today is a bad idea.
Dan taking about be squeezed is a big reason this dumped..He's not so bright.
What deal was it you knew? it beat the street but didn't match expectations .
I'm waiting it out a few months but I have nothing near what you or your buddy had.
Sorry you got nicked up GM
Well good on getting out..I still think this is a huge over reaction by the market IMO bailing today is a bad idea.
Dan taking about be squeezed is a big reason this dumped..He's not so bright.
What deal was it you knew? it beat the street but didn't match expectations .
I'm waiting it out a few months but I have nothing near what you or your buddy had.
Sorry you got nicked up GM
Question where was it you got that tiktok CDN info...from your buddy who got it from LL?
LIMELIGHT NETWORKS, INC. (LLNW-NASDAQ)
Infrastructure Software
Robert Majek | (212) 297-5653 | robert.majek@raymondjames.com
Chase Donovan, Sr. Res. Assoc. | (312) 612-7716 | chase.donovan@raymondjames.com
Q4 Guidance Looks Conservative, Reiterate Outperform
RECOMMENDATION
We are maintaining our Outperform rating on shares of Limelight but tweaking our price target down to $8.00 (from $8.50) following in-line 3Q revenues, but a weaker-than-expected gross margin in the quarter and a reiteration of FY guidance that now implies a wide range for Q4 revenue growth. Gross margins, which have varied in 2020 as the company makes ongoing investments in expanding capacity (ahead of demand) and improving its network, will undoubtedly bounce back as capacity utilization increases, although we wonder if GMs are ultimately capped in the 40%s range in the near to medium term. The reiteration of the FY guidance (instead of an increase) disappointed investors, but we think management is being overly conservative and the company will likely exceed the midpoint of its guidance range, although will likely face some tough y/y comps over the next few quarters. Bigger picture, we continue to believe the company's long-term revenue growth potential is underappreciated. Our target of $8.00 is based on 3.5x our FY21E revenue of $255M, a material discount to direct peers, a valuation gap that can narrow over time if Limelight continues to grow revenue in the double digits and show operating leverage.
US RESEARCH | PUBLISHED BY RAYMOND JAMES & ASSOCIATES
OCTOBER 23, 2020 | 12:43 AM EDT COMPANY COMMENT
Suitability High Risk/Speculation
Outperform 2
Target Price $8.00 ↓ old: $8.50
MARKET DATA
Current Price (Oct-22-20) Market Cap (mln)
Current Net Debt (mln) Enterprise Value (mln) Shares Outstanding (mln) 30-Day Avg. Daily Value (mln) Dividend
Dividend Yield 52-Week Range
KEY FINANCIAL METRICS
$6.18 $754 $(18) $736 122.1 $22.3 $0.00 0.0%
$3.51 - $8.19
1Q 2Q 3Q 4Q
Non-GAAP EPS ($, Dec FY)
2019A (0.04) (0.03) 0.01 0.05 2020E (0.00) 0.03 0.01 0.05
new (0.00) A 0.03 A (0.02) A 0.02
2021E 0.01 0.00 0.03 0.05
new 0.00 0.01 0.01 0.01
2019A 2020E 2021E
Non-GAAP EPS ($, Dec old (0.02) new (0.02)
P/E (Non-GAAP)
NM Revenue (mln) ($, Dec old 201 new 201
GAAP EPS ($, Dec FY)
old (0.13)
new (0.13) (0.09) (0.06)
Source: Thomson One, Raymond James & ssociates. Quarterly figures may not add to full year due to rounding.
Non-GP EPS excludes stock-based compensation.
FY)
0.09 0.09
0.02 0.02
NM NM FY)
239 260
235 255
(0.04) 0.00
Please read domestic and foreign disclosure/risk information beginning on page 6 and Analyst Certification on page 7.
INTERNATIONAL HEADQUARTERS: THE RAYMOND JAMES FINANCIAL CENTER | 880 CARILLON PARKWAY | ST. PETERSBURG FLORIDA 33716
US RESEARCH
LIMELIGHT NETWORKS, INC.
3Q20 Results vs. RJE and the Street
.
Source: Raymond James Research, LLNW Updated 2020 Guidance
.
Source: Raymond James Research, LLNW
LIMELIGHT NETWORKS, INC. (LLNW-NASDAQ)
Infrastructure Software
Robert Majek | (212) 297-5653 | robert.majek@raymondjames.com
Chase Donovan, Sr. Res. Assoc. | (312) 612-7716 | chase.donovan@raymondjames.com
Q4 Guidance Looks Conservative, Reiterate Outperform
RECOMMENDATION
We are maintaining our Outperform rating on shares of Limelight but tweaking our price target down to $8.00 (from $8.50) following in-line 3Q revenues, but a weaker-than-expected gross margin in the quarter and a reiteration of FY guidance that now implies a wide range for Q4 revenue growth. Gross margins, which have varied in 2020 as the company makes ongoing investments in expanding capacity (ahead of demand) and improving its network, will undoubtedly bounce back as capacity utilization increases, although we wonder if GMs are ultimately capped in the 40%s range in the near to medium term. The reiteration of the FY guidance (instead of an increase) disappointed investors, but we think management is being overly conservative and the company will likely exceed the midpoint of its guidance range, although will likely face some tough y/y comps over the next few quarters. Bigger picture, we continue to believe the company's long-term revenue growth potential is underappreciated. Our target of $8.00 is based on 3.5x our FY21E revenue of $255M, a material discount to direct peers, a valuation gap that can narrow over time if Limelight continues to grow revenue in the double digits and show operating leverage.
- ● Wide Range for Implied 4Q Guidance. Coming off 3Q20 revenue, which was in-line with Street, Limelight reiterated its FY20 revenue guide, implying a 4Q20 range of $55-65M, or $60M at the midpoint (0% y/y). Investors were concerned about the wide range and mgmt. noted that this was more an act of conservatism due to the unexpected nature of 2020 and the low end would be a very Draconian scenario (e.g. OEMs unable to ship next-gen consoles on time) and was just as likely to hit the high end of the range. The company remains confident in the LT traffic growth tailwinds of its business, including gaming and OTT. While there are no major OTT launches on the horizon, the continued shift in cord-cutting (as well as the geo expansion of OTT offerings) will continue to drive more video traffic over the internet (vs. cable providers).
- ● GM Variability Q/Q Around Capacity Expansion. 2020 has been a story of two gross margins after hitting a low of 36.4% in 1Q20, bouncing back to 40.6%, only to retreat again in 3Q20 to 36.7%. Mgmt. cited increased costs related to capacity expansion, initial stages of rolling out network automation upgrades, and costs associated with internal realignments of teams. While investors are frustrated with the gross margin variability quarter to quarter, the company noted that it has a few LT levers that should benefit the overall gross margin profile including improving network efficiency through automation, increasing non-peak usage as well as an increasing mix of higher-margin non-CDN revenue (RJE ~20% of revenues).
- ● Estimates. We are slightly decreasing our FY20E revenue from $239M to $235M (+17% y/y). We are also tweaking down our FY21E revenue estimate to $255M (+9% y/y) from, $260M. Our non-GAAP EPS for 2020/2021E go to $0.02/0.02, from $0.09/0.09.
Valuation: Our target of $8.00 is based on 3.5x our FY21E revenue of $255M, a material discount to direct peers, a valuation gap that can narrow over time if Limelight can continue to grow revenue in the double digits and show operating leverage.
US RESEARCH | PUBLISHED BY RAYMOND JAMES & ASSOCIATES
Suitability High Risk/Speculation
Target Price $8.00 ↓ old: $8.50
Current Price (Oct-22-20) Market Cap (mln)
Current Net Debt (mln) Enterprise Value (mln) Shares Outstanding (mln) 30-Day Avg. Daily Value (mln) Dividend
Dividend Yield 52-Week Range
KEY FINANCIAL METRICS
$6.18 $754 $(18) $736 122.1 $22.3 $0.00 0.0%
$3.51 - $8.19
Non-GAAP EPS ($, Dec FY)
2019A (0.04) (0.03) 0.01 0.05 2020E (0.00) 0.03 0.01 0.05
new (0.00) A 0.03 A (0.02) A 0.02
2021E 0.01 0.00 0.03 0.05
new 0.00 0.01 0.01 0.01
2019A 2020E 2021E
Non-GAAP EPS ($, Dec old (0.02) new (0.02)
P/E (Non-GAAP)
NM Revenue (mln) ($, Dec old 201 new 201
GAAP EPS ($, Dec FY)
old (0.13)
new (0.13) (0.09) (0.06)
Source: Thomson One, Raymond James & ssociates. Quarterly figures may not add to full year due to rounding.
Non-GP EPS excludes stock-based compensation.
FY)
0.09 0.09
0.02 0.02
NM NM FY)
239 260
235 255
(0.04) 0.00
INTERNATIONAL HEADQUARTERS: THE RAYMOND JAMES FINANCIAL CENTER | 880 CARILLON PARKWAY | ST. PETERSBURG FLORIDA 33716
US RESEARCH
LIMELIGHT NETWORKS, INC.
Source: Raymond James Research, LLNW Updated 2020 Guidance
.
Source: Raymond James Research, LLNW
Not only will this be over subscribed but it'll be priced beyond the projection..I'd buy ANT but it can't be purchased in the US markets, it'll be the biggest payment arm in the world eventually..This adds at least 10.2 billion to BABA's bottom line once everything is placed..10.2 is mind blowing.
Green light on BABA next week once this is priced.
Green light on BABA next week once this is priced.
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Barrons mentions section..Surprised Barrons would even consider an investment in china given their Bear outlook till recently.
Welcome to Wall Street Brunch, our preview of stock market events for investors to watch during the upcoming week. You can also catch this article a day early by subscribing to the Stocks to Watch account for Saturday morning delivery.
Outlook
Economic reports in the week ahead
ShutterstockBig tech gets a big test next week when Apple (NASDAQ:AAPL), Facebook (NASDAQ:FB), Amazon (NASDAQ:AMZN) and Google-parent Alphabet (GOOGLE) all step up to the earnings plate after a sizzling run for the sector. Wedbush Securities thinks the reports will fuel up another tech rally into the end of the year, despite the general nervousness over stimulus and the election. Apple is the firm's favorite FAANG name, Microsoft (NASDAQ:MSFT) and Salesforce (NYSE:CRM) are the top cloud software picks and Zscaler (NASDAQ:ZS) is called the cybersecurity standout. There will also be some focus next week on a U.S. Senate hearing on Section 230 immunity, with Twitter's (NYSE:TWTR) Jack Dorsey, Facebook's Mark Zuckerberg and Google's Sundar Pichai all in the firing line. The economic calendar includes updates on new home sales, durable goods and consumer sentiment, as well as what will be an eye-popping Q3 GDP report. A historic 33% Q/Q surge in Q3 GDP is expected to be reported to follow on the 31.4% drop in Q2. Despite the strong bounce in Q3, the Fed's official forecast for this year is for GDP to decline 3.7%, which would mark the biggest single-year drop since at least World War II. Also on the schedule in the week ahead, look for some ideas to be generated out of the Robin Hood conference and SPAC creation Lordstown Motors Corp. (RIDE) could burn some rubber when it starts trading.
Earnings
Hasbro (NASDAQ:HAS), NXP Semiconductors (NASDAQ:NXPI) and Boyd Gaming (NYSE:BYD) on October 26; Microsoft (NASDAQ:MSFT), BP (NYSE:BP), Caterpillar (NYSE:CAT), JetBlue (NASDAQ:JBLU), Centene (NYSE:CNC), Raytheon (RTN), Pfizer (NYSE:PFE) and Merck (NYSE:MRK) on October 27; General Electric (NYSE:GE), General Dynamics (NYSE:GD), Mastercard (NYSE:MA), UPS (NYSE:UPS), Boeing (NYSE:BA), Sony (NYSE:SNE), Ford (NYSE:F), Western Digital (NASDAQ:WDC), Amgen (NASDAQ:AMGN), Visa (NYSE:V) and eBay (NASDAQ:EBAY); on October 28; Shopify (NYSE:SHOP), Twitter (NYSE:TWTR), Kraft Heinz (NASDAQ:KHC), Yum Brands (NYSE:YUM), Comcast (NASDAQ:CMCSA), Anheuser-Busch InBev (NYSE:BUD), Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL), Google (NASDAQ:GOOG), Facebook (NASDAQ:FB) and Starbucks (NASDAQ:SBUX) on October 29; Exxon Mobil (NYSE:XOM), Chevron (NYSE:CVX), Phillips 66 (NYSE:PSX) and Under Armour (NYSE:UAA) on October 30.
Wedbush says it has seen strong cloud deal activity around Azure in the field during the September quarter with another Street "beat and raise" likely in the cards for Microsoft. "This current work from home environment is further catalyzing more enterprises to make the strategic cloud shift with Microsoft across the board with Azure growth likely in the 50% range. In many cases we are seeing enterprises accelerate their digital transformation and cloud strategy with Microsoft by 6 to 12 months as the prospects of a heavy remote workforce for the foreseeable future now looks in the cards with this COVID-19 backdrop," previews analyst Dan Ives. The firm continues to see MSFT as the core cloud name to play the transformational secular trend.
Investors are expected to key in on whatever details Apple (AAPL) doles out on how iPhone 12 sales are going more than the Q3 tallies, although service revenue and non-iPhone hardware sales will still be closely watched. Earlier in the week, Morgan Stanley noted that average lead times were running 18.5 days for the iPhone 12 Pro and 10.1 days for the iPhone 12, up from 11.2 days and 0.2 days, respectively, when preorders began on October 1.
Go Deeper: Compare Seeking Alpha Quant Ratings on systems software stocks.
IPOs
Amerihome (AHM) expects to price its IPO on October 28. The offering of 14.7M shares is expected to price in a range of $16 to $18. Biodesix (BDSX) is also slated to price its IPO on October 28, with 4.17M shares due to go off in an expected range of $17 to $19. Other companies that could price IPOs next week include Allegro MicroSystems (ALGM), Caliber Home Loans (HOMS), Leslie's (LESL), Root (ROOT) and Mavenir (MVNR). Keep an eye on avocado pure-play Mission Produce (NASDAQ:AVO) with the analyst quiet period expiring following the company's IPO. Shares have shown a modest gain from the IPO pricing level of $12. IPO lockups expire on Sprout Social (NASDAQ:SPT), Lyra Therapeutics (NASDAQ:LYRA) and Zentalis Pharmaceuticals (NASDAQ:ZNTL). Ant Group has secured the final regulatory approval to launch what is shaping up to be the world's largest initial public offering. The Mainland China leg of the IPO will be priced on October 27. Ant has been running a digital IPO roadshow across Asia, Europe and the U.S. to gauge investor interest. Go Deeper: Catch up on all the latest IPO news.
M&A
Shareholders with Jernigan Capital (NYSE:JCAP) are set to vote on the NextPoint deal on October 26. The tender offer for the Wright Medical (NASDAQ:WMGI)-Stryker (NYSE:SYK)combination arrives on October 28. Shareholders with Teladoc (NYSE:TDOC) and Livongo Health (NASDAQ:LVGO) will vote on the upcoming merger on October 29.
Healthcare
A FDA advisory committee meeting is on the calendar for Neovasc's (NASDAQ:NVCN) reducer device on October 27. The FDA action date arrives for Kala Pharmaceuticals' (NASDAQ:KALA) Eysuvis (loteprednol etabonate ophthalmic suspension) 0.25% for dry eye on October 30. The application is the company's second crack at approval. The Allogeneic Cell Therapies Summit 2020 from October 26-28 will feature presentations from Adicet Bio (NASDAQ:ACET), Allogene Therapeutics (NASDAQ:ALLO), Atara Biotherapeutics (NASDAQ:ATRA), bluebird bio(NASDAQ:BLUE), Precision Biosciences (NASDAQ:DTIL), Eli Lilly (NYSE:LLY) and TCR2 Therapeutics (NASDAQ:TCRR).
Events
Fisker: A special meeting of Spartan Energy Acquisition Corp. (NYSE:SPAQ) shareholders will take up a vote on the business combination with Fisker Inc. Following the proposed business combination, EV automaker Fisker will be listed on the New York Stock Exchange under the new ticker symbol FSR. The crazy intersection of electric vehicle stocks and SPAC interest is just getting more crowded, with QuantumScape-Kensington Capital (NYSE:KCAC), Lordstown Motors-DiamondPeak Holdings (NASDAQ:DPHC), Canoo-Hennessy Capital (NASDAQ:HCAC), XL Fleet-Pivotal Investment II (NYSE:PIC) and Romeo Systems-RMG (NYSE:RMG) the new combinations to watch.
Robin Hood Conference: The annual Robin Hood Investors Conference runs from October 28-29 in a virtual format with presentations scheduled from the White House's Lawrence Kudlow, AQR Capital Management's Cliff Asness, Greenlight Capital's David Einhorn, Citadel's Ken Griffin, Eli Lilly (NYSE:LLY) CEO Dave Ricks, Regeneron (NASDAQ:REGN) Co-President George Yancopoulous, Softbank (OTCPK:SFTBY) COO Marcelo Claure and Robinhood's Wes Moore. The Best Idea Blitz on October 27 at 2:30 p.m. ET features short pitches from Lakewood Capital Management, Lone Pine Capital, Saba Capital, Tusk Investment Partners, Sachem Head Capital Management and Glenview Capital Management.
OpenText:OpenText (NASDAQ:OTEX) will hold its OpenText World 2020 event from October 26-29. The conference brings together leading experts together to rethink the challenges facing business and society, with talks from OpenText's CEO, Chief Product Officer and engineering execs. Former Vice President Al Gore will also be a guest speaker.
Talking Cars: CarGurus (NASDAQ:CARG) is holding an event on October 26-27 designed to help educate automotive retail professionals on how to adapt to the rapidly changing landscape their industry has been facing over the past year. Virtual attendees will learn more about inventory acquisition strategies in this new environment and best practices for digital retail as the industry moves towards more online connections. CarGurus is scrapping for more sales after revenue dropped 38% Y/Y in Q2.
Investor meetings and business updates: Bed Bath & Beyond (NASDAQ:BBBY) holds a highly-anticipated investor day event on October 28. Also on the calendar, Veeva Systems (NYSE:VEEV) has an Analyst & Investor Day scheduled for on October 29. Kroger (NYSE:KR) has an investor update call scheduled on October 27. Chairman/CEO Rodney McMullen and CFO Gary Millerchip will provide an investor update to replace the traditional Investor Day event, which has been pushed back to spring 2021. Stitch Fix (NASDAQ:SFIX)President/COO Mike Smith is a speaker at a Barron's Live Event. His talk will delve into the rapid evolution of express delivery amid the pandemic and cover future e-commerce trends.
Go Deeper: See Seeking Alpha's Catalyst Watch for which presentations may stand out.
Barron's mentions
Coca-Cola (NYSE:KO) is profiled as an underappreciated post-pandemic play. The beverage stock is also seen as a hedge against a weaker dollar with 75% of it profit derived from outside the U.S. In the world of REITs, positive trends for medical real estate are seen lifting Community Healthcare Trust (NYSE:CHCT), Physicians Realty Trust (NYSE:DOC) and Healthcare Realty Trust (NYSE:HR). The publication suggests it may be time to look outside U.S. tech giants for future growth. Alibaba (NYSE:BABA), China Tourism Group Duty Free, Huazhu Group (NASDAQ:HTHT), Innovent Biologics (OTCPK:IVBIY), MercadoLibre (NASDAQ:MELI) and Reliance Industries make the list of intriguing ways to play emerging markets.
Sources: EDGAR, Bloomberg, CNBC, Automotive News, Reuters
I havent been able to figure this market out.......wall street and main street seem to be on different planets.....not different parts of the city. I keep thinking there needs to be a significant retreat.....the hard part is to factor in is the effect of the feds.
The market is getting beat up today. Is this the start of a more major retraction? Further stimulus doesn't appear to be happening anytime soon....which the market has reacted positively to the potential of more stimulus.
Others thoughts?
The market is getting beat up today. Is this the start of a more major retraction? Further stimulus doesn't appear to be happening anytime soon....which the market has reacted positively to the potential of more stimulus.
Others thoughts?
I'm just buying the dips, adding a few shares to stocks I'm holding long. I sold off my index funds a month or so ago, waiting for the elections to be over. The problem is, I keep spending the money from that sell off (the index funds) on the dips...hoping I'm not screwing myself. I want to get back into the index funds after the elections.
All I know is im glad I bailed. 21 Million shares traded today. Market cap down over 200 million since Friday. Hedge funds dropping it like crazy. Still more to drop. So mad at myself for not selling 2 weeks ago when it hit 7. Thought management finally was using there brains. My buddy told me today an investigation into management is likely.
My dad who traded government and municipal bonds always says the market hates uncertainty.
I've sold about 40% of what I had in another account..waiting this out some.
BABA touched 319 today I have an open limit order @ 300.00 doubtful it fills. early I thought there was shot..Not chasing it up today + $10.00
Sold my Vale SA today.
This a great deep dive in to Tencent...
Long Ideas
[h=1]Tencent: The Path To Tripling By 2022[/h]Oct. 26, 2020 2:26 PM ET|
25 comments
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About: Invesco China Technology ETF (CQQQ), FXI, KWEB, MCHI, TCEHY, TCOM, TCTZF, Includes: BABA, BEKE, DAO, EDU, GSX, MEIT, MPNGF, MPNGY, TAL
ALT Perspective
Long/Short Equity, Growth At Reasonable Price, Contrarian, Deep Value
(9,550followers)
Summary
China reported an acceleration in its GDP growth for the third quarter, making it on track to be the only major economy to report positive growth in 2020.
The improving travel scene in China could help Trip.com break out of its multi-year share price downtrend resistance.
Tencent's valuation metrics leave much to be desired but that's ignoring its savvy investments which have appreciated significantly in value.
Tencent's innovation prowess and investment acumen could propel its stock back to former glory and greater heights.
According to the multi-year price chart, Tencent could double by early 2022 (upper resistance of the lower channel) or even triple (upper resistance of the full channel).
By ALT Perspective
The week started well with China reporting on Monday an acceleration in its economy in the third quarter. The growth in Gross Domestic Product [GDP] at 4.9 percent was higher than the 3.2 percent growth recorded in the second quarter. Although it was slower than the median 5.2 percent forecast by analysts in a Reuters poll, none of the major economies would even come close to that.
It also bears reminding that China's GDP growth in the fourth quarter of 2019, before COVID-19 struck, was only 6.0 percent. The GDP growth rate was already expected to fall below the 6 percent mark in-line with an ever-enlarging economy before the ravaging impact of the pandemic.
More importantly, in the third quarter, the coronavirus was still prevalent in many parts of the world and reducing the export demand of Chinese manufacturers. At the same time, Chinese consumers were cautious about the outlook and that diminished their spending propensity. Thus, 4.9 percent of GDP growth should be considered highly respectable.
To make the achievement sweeter, September data was better than consensus estimates. If China continues on the pick up in momentum, we should be expecting good news on the final quarter of 2020. The International Monetary Fund [IMF] is forecasting China to report a 1.9 percent GDP growth this year, against a 4.4 percent decline in the world. U.S. would do just slightly better at a negative 4.3 percent GDP growth.
Source: USC U.S.-China Institute / Data from IMFIt might sound insulting to some that IMF suggested China's growth is helping to "limit the global economic damage from the pandemic." However, according to IMF projections, China would indeed be the only major economy to report positive growth in 2020. Although the U.S. would fare worse than Russia, it is expected to do better than the other large economies including European ones.
From the ground level, companies around the world, including American ones, are benefiting from the prompt recovery in China. Nike's (NKE) reportedrevenue falling 2 percent for its North American business in the quarter ending August 31, 2020, while Greater China revenue expanded by 6 percent.
In a September update, Starbucks (SBUX) revealed that comparable sales fell 11 percent in August in the U.S. while it was flat in China and business was "approaching a full sales recovery". Ritch Allison, the CEO of Domino's Pizza (DPZ), had glowing words on its China prospects during its third-quarter earnings conference call:
"China really has been a terrific success story in 2020, while we've had some slowdown in some of our markets around the world, China is definitely not one of them. Sales growth and unit growth have been very strong in China this year. We've got a terrific management team over there in place with our master franchisee, Dash.
And we've got a lot of optimism around the future growth of our business in China. ... And, as I look forward on China, I expect that there will be a point in the future where China will be the second-largest Domino's Pizza business in the world behind the U.S."
While Ford Motor (F) suffered from a 4.8 percent decline in its auto sales in the U.S., the company and its joint ventures, Changan Ford, JMC, and Ford Lio-Ho, sold 25.4 percent more vehicles in China in Q3 on a year-on-year basis, and 3.6 percent higher quarter-on-quarter. Looking at the bright picture for American firms in China, it doesn't take much imagination to think about how the Chinese companies are themselves benefiting from the recovering economy.And we've got a lot of optimism around the future growth of our business in China. ... And, as I look forward on China, I expect that there will be a point in the future where China will be the second-largest Domino's Pizza business in the world behind the U.S."
Bolstering investors' confidence is a slew of bullish indicators. Industrial production grew 6.9 percent in September, accelerating from the 5.6 percent rise the prior month and beating estimates of 5.8 percent. The retail sector was also sustaining momentum, growing 3.3 percent from the modest 0.5 percent a month ago and exceeding estimates of 1.6 percent.
Fixed-asset investment growth was mildly positive in the first nine months, growing 0.8 percent from a year earlier. Nevertheless, that was a marked reversal from the negative 0.3 percent in the first eight months, implying a spectacular growth in September.
In contrast, U.S. stock markets were whipsawed by conflicting progress in the stimulus bill. Consequently, the representative ETFs of Chinese companies (CQQQ)(FXI)(MCHI) rallied in the past week while their U.S. counterparts (QQQ)(DIA)(SPY) floundered.
That jump might be cold comfort for shareholders as it paled in comparison with a larger drop the week before. Nonetheless, the leading Chinese online travel agency remains well on its recovery track from the March nadir. That is if the stock could overcome the multi-year downward-sloping resistance (in red, in the following chart).
Source: ALT Perspective (drawn on TradingView.com)
The share price of Trip.com could succumb to the resistance and plunge as it did on three occasions in the past three years. However, I think the likelihood is low. First, the current uptrend is missing the sharp climbs prior to the previous touch-and-go incidents of the resistance.
Second, China is unlikely to see a repeat of the lockdowns experienced in the first quarter of this year given the extensive contact tracing exercises as well as the activation of comprehensive and rapid testing once a cluster is identified. This meant that the worst that could happen has already passed. As the saying goes, what doesn't kills you makes you stronger. Trip.com is now the toughened player.
Third, while there may be skepticism over China's macro data, operational statistics are regarded as credible and indications are that domestic travel had approached pre-pandemic levels. Hotel-occupancy rates had fully recovered while domestic flight passengers rebounded to around 80 percent of the 2019 level by the end of August.
Source: McKinsey & CompanyThe resumption of international flights and cruises would be a strong catalyst for a breakout in Trip.com's stock. I am eyeing a return to Trip.com's 52-week high at around $39 by March next year (refer to the price chart posted earlier) after market players receive a bullish set of numbers from China's Lunar New Year extended holiday.
Pinduoduo (PDD) also did well, climbing 3.4 percent for the week. The fast-growing e-commerce player committed last week to help manufacturers in China develop new home-grown brands in their journey to achieve 1 trillion yuan (US$150 billion) in total sales over the next five years.
The initiative is inspired by the now-famous "dual-circulation" strategy espoused by the Chinese president to boost local consumption while supporting export volumes as the country tackles the pandemic-led slowdown. It is the latest iteration of Pinduoduo's policy smarts and demonstrates how it became the second-largest e-commerce services provider by the number of annual active buyers.
At the other end of the spectrum is Meituan-Dianping (MEIT)(OTCPK:MPNGF)(OTCPK:MPNGY) which declined 2.1 percent, dragging down the KWEB ETF. The other heavyweights, Alibaba Group (BABA) and Tencent Holdings (OTCPK:TCEHY)(OTCPK:TCTZF), had lackluster gains, rising a paltry 0.85 percent and 0.43 percent respectively.
U.S.-listed Chinese education companies generally fared poorly last week. Shareholders of GSX Techedu (GSX), which became a top 10 holding of the KWEB ETF recently, reacted explosively to the downside apparently on a mid-week downgrade by the Asian desk of Credit Suisse (CS). Its share price plunged 37.3 percent for the week.
New Oriental Education & Technology Group (EDU) avoided the bloodbath as it had already reported its consensus-beating quarterly results the prior week. On the other hand, Youdao (DAO), the educational arm of gaming powerhouse NetEase (NTES), was slaughtered together with GSX Techedu and TAL Education. The former is expected to announce its quarterly results only next month.
As explained in a past issue of the Chinese Internet Weekly, I found the KWEB ETF holding the most representative stocks in the sector. As such, an overview of the week's share price movements of the top few holdings of KWEB as compared with the ETF itself is provided as follows for convenient reference especially for the stocks mentioned in this article.
[h=2]Tencent's valuation metrics leave much to be desired but that's ignoring its savvy investments[/h]Tencent Holdings, as an internet behemoth in all the exciting fields, is trading in the doldrums. Looking at its more than a decade listing history, its share price has been trudging along on a somewhat enviable uptrend. However, in the past two years, the stock appeared unable to recover from the heady post-2009 economic crisis boom. It is crawling on the floor of the uptrend price channel.
Source: ALT Perspective (chart drawn using Yahoo Finance)
Savvy readers would be fair to say the lackluster trading pattern can be attributed to Tencent's slowing growth metrics. For instance, its revenue growth on a forward basis at 23.4 percent is around one-quarter lower than its five-year average. Its EPS growth on a diluted year-on-year basis at 15.5 percent is a whopping half that of its five-year average.
Source: Seeking Alpha Premium (Tencent, 2020 October 24)
Tencent's saving grace could be that its levered free cash flow per share is growing at nearly double the rate of its five-year average. Its operating cash flow is also growing 57 percent faster than its five-year average.
Furthermore, in spite of the advertising headwinds due to COVID-19, Tencent is still expected to post a 33.7 percent revenue growth this year. This goes to show the resilience and potential of its diversified businesses. If the consensus growth estimates for the next two years come to fruition, its price-to-sales ratio on a forward basis would fall to a mere 6.55 times.
Source: Seeking Alpha Premium (Tencent, 2020 October 24)
On Friday, I received the email on pre-market portfolio update from Seeking Alpha as usual and the quant rating upgrade for Alibaba from "Neutral" to "Very Bullish" caught my eyes immediately (see the following snapshot). The rating downgrades for Alphabet (GOOG)(GOOGL), as well as hot favorites Nvidia (NVDA) and Overstock (OSTK), were interesting too.
Source: Seeking Alpha (snapshot from daily pre-market portfolio summary, October 23, 2020)
I proceeded to check out Alibaba on Seeking Alpha for the details and was pleasantly surprised by the close to full score of 5 that Alibaba was awarded. On the other hand, Tencent only received a score of 3.47 giving it a neutral rating.
Source: Seeking Alpha Premium (Alibaba, 2020 October 24)
Looking deeper, Tencent's factor grades are good, ranging from A- to A+, except for "Value" which scored an F.
Source: Seeking Alpha Premium (Tencent, 2020 October 24)
Now, I'm afraid judging Tencent on its price-to-sales or EV-to-profitability might not do justice to the conglomerate it is. Tencent has dozens of significant investments in startups (hey, it's called Tencent Holdings for a reason). While it has its fair share of duds like any venture capitalists and angel investors, those that do well can really move the needle.
The most impressive yet understated investment that Tencent made has to be Tesla (TSLA). Tencent acquired 5 percent of the electric vehicle maker for $1.78 billion in 2017. At a market capitalization of $392 billion at Friday's close, that 5 percent stake is now worth $19.6 billion, an 11-fold return in three years.
Nio (NIO), a leading Chinese EV maker, saw its share price skyrocketing after the passing of its liquidity issues and the ramp-up in its deliveries. After a series of additional fund injection, Tencent now owns 15.1 percent of the company worth $5.6 billion as of Friday.
In 2017, Tencent also acquired a 12 percent stake in Snap (SNAP). The operator of messaging app Snapchat saw investors clamoring for its shares last week, bringing its one-year returns to 219 percent. That ownership is worth $7.7 billion, again as of Friday.
Sea Group (SE), a gaming and e-commerce powerhouse based in Singapore, also counts Tencent as a major shareholder. The latter is reported to own around 20 percent of the fast-growing company, meaning that the investment is worth $15.9 billion as of Friday.
Tencent holds a hefty 18 percent stake in Meituan-Dianping. After a good run since its listing in Hong Kong, the food delivery and local lifestyle services platform provider has a market capitalization of $199 billion, and Tencent's investment is worth $35.8 billion.
KE Holdings (BEKE), which is backed by Tencent and recently had a successful IPO, is already up 86.9 percent since going public. We could go on and on but you get the picture. Tencent when evaluated ex-investments would score better on the value metric. Tencent could also be regarded as a better vehicle to invest than Internet themed ETFs, given the low prices it has bought into the investments and its role in providing synergistic collaboration between the investees.
Yes, you are right! Tencent did so in 2017. Connie Chan, a general partner at venture capital firm Andreessen Horowitz said in a podcast that "App Clips are very, very similar to the mini program ecosystem that WeChat launched." If it was Tencent who was emulating Apple (AAPL), you bet that many would be baying for blood. This is a validation of Tencent's innovative capabilities and potential.
If Tencent just keeps innovating and investing as well as it has done, eventually we would see the market rewarding the company appropriately. From the price chart drawn earlier, the stock could double by early 2022 if it simply hit the upper resistance of the lower channel. If shareholders turn bullish on the company, the stock could even triple in the same timeframe when it hits the upper resistance of the full price channel, as it had done so several times in 2009-2018.
With the U.S. elections so close, questions of what we should do with Chinese holdings are rife. There's talks of a possible Blue wave potentially to the benefit of China and Chinese companies but also arguments on the contrary: Biden being capable of uniting U.S. allies in exerting a coordinated and more powerful punch on China.
I don't have adequate expertise on politics to comment but I found myself agreeing with a recent article by a fellow Seeking Alpha contributor arguing against market timing:
- Most of the stock market's returns are generated during a limited period of time, which, if you miss, will impair your overall returns.
- Investing based on the demonstrably random vicissitudes of the market is a fallacious starting point from which to approach investing in general.
Disclosure: I am/we are long BABA, BIDU, JD, FB, TCEHY, DAO, TCOM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company
VIX.....VIX scares the shit outa, personally I never hold it over night..won 13% earlier this year in one day.
I'll post up a few..Heres todays.
hope all is well NS
Quote of the Day
“Blue skies, nothing but blue skies. Never saw the sun shining so bright, things going so right, grey days, all of them gone. Nothing but blue skies from now on,” said the top musical lyric of early 1929, by Irving Berlin.
This is not a solicitation to buy or sell securities
The Mad Hedge Fund Trader is not an Investment advisor
For full disclosures click here at:
http://www.madhedgefundtrader.com/disclosures
The "Diary of a Mad Hedge Fund Trader"(TM)
and the "Mad Hedge Fund Trader" (TM)
are protected by the United States Patent and Trademark Office
The "Diary of the Mad Hedge Fund Trader" (C)
is protected by the United States Copyright Office
Futures trading involves a high degree of risk and may not be suitable for everyone.
I'll post up a few..Heres todays.
hope all is well NS
Global Market Comments
October 29, 2020
Fiat Lux
October 29, 2020
Fiat Lux
Featured Trade:
(HANGING WITH LEONARDO)
Hanging With Leonardo
With the Volatility Index (VIX) going through the roof today, I think it is timely to remind everyone what it is.At my advanced age, I have very few friends. Most of them are either puttering around some county golf course, or are dead.
By there is one who has stuck with me for my entire 50-year trading career, through thick and thin.
That would be Leonardo Fibonacci.
It always seemed like he could read my mind, as well as everyone else’s.
When a stock looks like it fell into a bottomless pit, it would bounce hard off of the precise price that he selected.
Similarly, he always knew high prices would rise before they topped out.
As a result, I think of Fibonacci as more of a magician than a mathematician.
I remember the 12[SUP]th[/SUP] century like it was yesterday.
In those days, the leading intellectuals used to get together and drink wine by the gallon, which then was really little more than rotten grape juice.
The problem was that we all used to pass out before anybody came up with a great idea.
Then someone started importing coffee from the Middle East, and thinkers stayed awake long enough to produce great thoughts.
Enter the Renaissance.
One of the guys I used to hang out with then was named Leonardo Fibonacci.
Good old Leo was a man after my own heart, a world-class nerd and geek, with a penchant for mathematics.
His dad was a diplomat from the Court at Pisa to the Algiers sultanate who had a nice little import/export business on the side.
It is safe to say that there was probably as little action in Algiers than as there is today. I know, because I’ve been there.
Instead of camping out in his dad’s basement and staying depressed like a lot of young men these days, Leo killed time trolling the local bazaars for interesting used books he could buy on the cheap.
Remember, this was before texting.
That was not hard to do since most people couldn’t read. He took the trouble to learn Arabic and translated them back into Latin. Ancient math books were his specialty.
It didn’t take Leo long to figure out that the Arabs had developed a numbering system vastly superior to the Roman numerals then in use in Europe.
Most importantly, they mastered the concept of zero and the placement of digits in addition and subtraction. The Arabs themselves, in fact, lifted these concepts from archaic Indian mathematicians as far back as the 6[SUP]th[/SUP]century.
If you don’t believe me about the significance of this discovery, try multiplying CCVII by XXXIV. (The answer is VIIXXXVIII, or 7,038).
Good luck designing a house, a bridge, or a computer software program with such a cumbersome numbering system.
Leo didn’t just stop there.
He also discovered a series of numbers, which seemed to have magical predictive powers. The formula is extremely simple. Start with zero, add the next number, and you have the next number in the series.
Continue the progression and you get 0,1,1,2,3,5,8,13,21,34,55…. and so on. It’s no surprise that the sequence became known as the “Fibonacci Sequence”.
The great thing about this series is that if you divide any number in it by the next one, you get a product that has become known as the “Golden Ratio”. This number is 1:1.618, or 0.618 to one.
Fibonacci’s original application for this number was to predict the growth rate of a population of breeding rabbits.
Then some other mathematicians started poking around with it. It turns out the Great Pyramid in Egypt was built to the specification of a Fibonacci ratio.
So is the rate of change of the curvature in a seashell, or a human ear. So is the ratio of the length of your arms to your legs.
Upon closer inspection, the Fibonacci formula turned out to be absolutely everywhere, from the structure of the tiniest cell to the swirl of the largest galaxies in the universe.
Fibonacci introduced his findings in a book entitled “Liber Abaci”, or “Free Abacus” in English, which he published in 1202.
In it, he proposed the 0-9 numbering system, place values, lattice multiplication, fractions, bookkeeping, commercial weights and measures, and the calculation of interest.
It included everything we would recognize as modern mathematics.
The book launched the scientific revolution in Europe that led us to where we are today and was a major bestseller. In fact, you can still buy it on Amazon, making it the longest continuously published book in history.
Enter the stock market.
By the end of the 19[SUP]th[/SUP]century, some observers noticed that share prices tended to move in predictable patterns on charts.
In particular, they always seemed to advance and pull back around the numbers forecast by my friend, Fibonacci, seven hundred years earlier.
These people came to be known as “technical analysts,” as opposed to fundamental analysts, who look at the underlying business behind each company.
By the 1930s, Fibonacci numbers had worked their way into mainstream technical analytical theories, such as Elliot Wave.
Today, most market tracking software and data systems, like Bloomberg, will automatically throw up Fibonacci support and resistance numbers on every stock chart.
Why am I talking about this?
Because I am frequently asked how I pick the precise strike prices for options in my own Trade Alert Service.
I use a combination of moving averages, moving average convergence-divergence (MACD) indicators, Bollinger bands, Fibonacci numbers, and a mumbling chant taught to me by an old Yaqui Indian shaman.
And I do all of this only after going over the underlying fundamentals of the stock or index with a fine-tooth comb. I can’t be any clearer than that.
Enter the high-frequency traders. Knowing that the bulk of us rely on Fibonacci numbers for our short-term trading calls, they have developed algorithms that seek to exploit that preference.
They enter a large number of stop-loss orders to sell just below a “Fibo” support level, then put up fake, but extremely large offers just above it which are usually cancelled.
Only 1% of these orders ever get executed.
When conventional traders see these huge offers to sell, they panic, dump their stocks, and trigger the stop losses. The HFTs then jump in and cover their own shorts for a quick profit, sometimes only for a fraction of a penny.
The net effect of these shenanigans is to make Fibo numbers less effective. Fibo support is just not as rock solid as it used to be, nor is resistance.
This is why the performance of several leading technical analysts has seriously deteriorated in recent years.
Although their importance is now somewhat diluted, I still enjoy Fibonacci numbers as I see them in nature all around me. They occasionally have other uses such as in cryptography.
When I watched The Da Vinci Code sequel, “Angels & Demons,” and listened to the clues, I recognized the handiwork of my old friend Leo.
The rest of the audience sat there clueless, except for the group in the next row wearing “UC BERKELEY” hoodies.
For the fellow geeks and nerds among you, here are the precise Fibonacci numbers indicating support and resistance, which you will find on a stock chart.
Fibonacci Ratios
Fibonacci ratios are mathematical relationships, expressed as ratios, derived from the Fibonacci sequence. The key Fibonacci ratios are 0%, 23.6%, 38.2%, and 100%.
The key Fibonacci ratio of 0.618 is derived by dividing any number in the sequence by the number that immediately follows it. For example: 8/13 is approximately 0.6154, and 55/89 is approximately 0.6180.
The 0.382 ratio is found by dividing any number in the sequence by the number that is found two places to the right. For example: 34/89 is approximately 0.3820.
The 0.236 ratio is found by dividing any number in the sequence by the number that is three places to the right. For example: 55/233 is approximately 0.2361.
The 0 ratio is :
[h=2]Leonardo Fibonacci (Maybe)[/h]
With the Volatility Index (VIX) going through the roof today, I think it is timely to remind everyone what it is.At my advanced age, I have very few friends. Most of them are either puttering around some county golf course, or are dead.
By there is one who has stuck with me for my entire 50-year trading career, through thick and thin.
That would be Leonardo Fibonacci.
It always seemed like he could read my mind, as well as everyone else’s.
When a stock looks like it fell into a bottomless pit, it would bounce hard off of the precise price that he selected.
Similarly, he always knew high prices would rise before they topped out.
As a result, I think of Fibonacci as more of a magician than a mathematician.
I remember the 12[SUP]th[/SUP] century like it was yesterday.
In those days, the leading intellectuals used to get together and drink wine by the gallon, which then was really little more than rotten grape juice.
The problem was that we all used to pass out before anybody came up with a great idea.
Then someone started importing coffee from the Middle East, and thinkers stayed awake long enough to produce great thoughts.
Enter the Renaissance.
One of the guys I used to hang out with then was named Leonardo Fibonacci.
Good old Leo was a man after my own heart, a world-class nerd and geek, with a penchant for mathematics.
His dad was a diplomat from the Court at Pisa to the Algiers sultanate who had a nice little import/export business on the side.
It is safe to say that there was probably as little action in Algiers than as there is today. I know, because I’ve been there.
Instead of camping out in his dad’s basement and staying depressed like a lot of young men these days, Leo killed time trolling the local bazaars for interesting used books he could buy on the cheap.
Remember, this was before texting.
That was not hard to do since most people couldn’t read. He took the trouble to learn Arabic and translated them back into Latin. Ancient math books were his specialty.
It didn’t take Leo long to figure out that the Arabs had developed a numbering system vastly superior to the Roman numerals then in use in Europe.
Most importantly, they mastered the concept of zero and the placement of digits in addition and subtraction. The Arabs themselves, in fact, lifted these concepts from archaic Indian mathematicians as far back as the 6[SUP]th[/SUP]century.
If you don’t believe me about the significance of this discovery, try multiplying CCVII by XXXIV. (The answer is VIIXXXVIII, or 7,038).
Good luck designing a house, a bridge, or a computer software program with such a cumbersome numbering system.
Leo didn’t just stop there.
He also discovered a series of numbers, which seemed to have magical predictive powers. The formula is extremely simple. Start with zero, add the next number, and you have the next number in the series.
Continue the progression and you get 0,1,1,2,3,5,8,13,21,34,55…. and so on. It’s no surprise that the sequence became known as the “Fibonacci Sequence”.
The great thing about this series is that if you divide any number in it by the next one, you get a product that has become known as the “Golden Ratio”. This number is 1:1.618, or 0.618 to one.
Fibonacci’s original application for this number was to predict the growth rate of a population of breeding rabbits.
Then some other mathematicians started poking around with it. It turns out the Great Pyramid in Egypt was built to the specification of a Fibonacci ratio.
So is the rate of change of the curvature in a seashell, or a human ear. So is the ratio of the length of your arms to your legs.
Upon closer inspection, the Fibonacci formula turned out to be absolutely everywhere, from the structure of the tiniest cell to the swirl of the largest galaxies in the universe.
Fibonacci introduced his findings in a book entitled “Liber Abaci”, or “Free Abacus” in English, which he published in 1202.
In it, he proposed the 0-9 numbering system, place values, lattice multiplication, fractions, bookkeeping, commercial weights and measures, and the calculation of interest.
It included everything we would recognize as modern mathematics.
The book launched the scientific revolution in Europe that led us to where we are today and was a major bestseller. In fact, you can still buy it on Amazon, making it the longest continuously published book in history.
Enter the stock market.
By the end of the 19[SUP]th[/SUP]century, some observers noticed that share prices tended to move in predictable patterns on charts.
In particular, they always seemed to advance and pull back around the numbers forecast by my friend, Fibonacci, seven hundred years earlier.
These people came to be known as “technical analysts,” as opposed to fundamental analysts, who look at the underlying business behind each company.
By the 1930s, Fibonacci numbers had worked their way into mainstream technical analytical theories, such as Elliot Wave.
Today, most market tracking software and data systems, like Bloomberg, will automatically throw up Fibonacci support and resistance numbers on every stock chart.
Why am I talking about this?
Because I am frequently asked how I pick the precise strike prices for options in my own Trade Alert Service.
I use a combination of moving averages, moving average convergence-divergence (MACD) indicators, Bollinger bands, Fibonacci numbers, and a mumbling chant taught to me by an old Yaqui Indian shaman.
And I do all of this only after going over the underlying fundamentals of the stock or index with a fine-tooth comb. I can’t be any clearer than that.
Enter the high-frequency traders. Knowing that the bulk of us rely on Fibonacci numbers for our short-term trading calls, they have developed algorithms that seek to exploit that preference.
They enter a large number of stop-loss orders to sell just below a “Fibo” support level, then put up fake, but extremely large offers just above it which are usually cancelled.
Only 1% of these orders ever get executed.
When conventional traders see these huge offers to sell, they panic, dump their stocks, and trigger the stop losses. The HFTs then jump in and cover their own shorts for a quick profit, sometimes only for a fraction of a penny.
The net effect of these shenanigans is to make Fibo numbers less effective. Fibo support is just not as rock solid as it used to be, nor is resistance.
This is why the performance of several leading technical analysts has seriously deteriorated in recent years.
Although their importance is now somewhat diluted, I still enjoy Fibonacci numbers as I see them in nature all around me. They occasionally have other uses such as in cryptography.
When I watched The Da Vinci Code sequel, “Angels & Demons,” and listened to the clues, I recognized the handiwork of my old friend Leo.
The rest of the audience sat there clueless, except for the group in the next row wearing “UC BERKELEY” hoodies.
For the fellow geeks and nerds among you, here are the precise Fibonacci numbers indicating support and resistance, which you will find on a stock chart.
Fibonacci Ratios
Fibonacci ratios are mathematical relationships, expressed as ratios, derived from the Fibonacci sequence. The key Fibonacci ratios are 0%, 23.6%, 38.2%, and 100%.
The key Fibonacci ratio of 0.618 is derived by dividing any number in the sequence by the number that immediately follows it. For example: 8/13 is approximately 0.6154, and 55/89 is approximately 0.6180.
The 0.382 ratio is found by dividing any number in the sequence by the number that is found two places to the right. For example: 34/89 is approximately 0.3820.
The 0.236 ratio is found by dividing any number in the sequence by the number that is three places to the right. For example: 55/233 is approximately 0.2361.
The 0 ratio is :
Quote of the Day
“Blue skies, nothing but blue skies. Never saw the sun shining so bright, things going so right, grey days, all of them gone. Nothing but blue skies from now on,” said the top musical lyric of early 1929, by Irving Berlin.
This is not a solicitation to buy or sell securities
The Mad Hedge Fund Trader is not an Investment advisor
For full disclosures click here at:
http://www.madhedgefundtrader.com/disclosures
The "Diary of a Mad Hedge Fund Trader"(TM)
and the "Mad Hedge Fund Trader" (TM)
are protected by the United States Patent and Trademark Office
The "Diary of the Mad Hedge Fund Trader" (C)
is protected by the United States Copyright Office
Futures trading involves a high degree of risk and may not be suitable for everyone.
Monday...
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| Global Market Comments October 26, 2020 Fiat Lux Featured Trade:(MARKET OUTLOOK FOR THE WEEK AHEAD, or MIXED MESSAGES)
(SPY), (TLT), (UUP), (FCX) 
|
The Market Outlook for the Week Ahead, or Mixed Messages It was definitely a week of mixed messages in the stock market.Is Covid-19 going to disappear by itself shortly, or is it the worst thing since the black plague? Are we going to get a $2 trillion stimulus package out of Washington, or not? Are stocks too expensive, or still cheap? We are being told the answers to these questions loud and clear, we just can’t hear them. For this election looks to set all records on turnout. Every city in the country is seeing lines of voters snaking around the block waiting 2-8 hours. But which way are they voting? Are there hoards of hidden Biden voters coming out of the woodwork, or Trump ones? We won’t know the result for eight more days. In the meantime, the markets bide their time. Which raises one last question: how low can stocks fall over the next seven trading days? In the meantime, some asset classes aren’t willing to sit on their hands any longer. Interest rates have started to rise, hitting a four-month high. This has knocked 15 points off of bond (TLT) prices. Yet, contrary to expectations, the US dollar is hugging a multiyear low (UUP), while commodity prices (FCX) soar. All of this spell a record economic recovery in 2021. All that remains is for stock prices to play catch-up. The word is that there is over $1 trillion sitting on the stock market ready to dive in the day after the election, possibly tacking on at least 10% to the major indexes by yearend. There could be one hell of a post-election celebration, no matter who wins. Baby Boomers are unloading stocks to Gen Xers mostly, but Millennials as well. Of course, they have all the money, with a 53% ownership of all stocks, compared to 27% for Gen Xer’s and a mere 3% for Millennials. The Greatest Generation, born before 1946, have been shrinking their share ownership since 1990 and own only 17% of the total now. A coming jump in capital gains taxes will accelerate the process. China’s Economy soared by 4.9%, in Q3 YOY with the pandemic in the rear-view mirror. First into the Coronavirus brings first out. Retail sales are through the roof and industrial production and business investment is accelerating. Goldman Sachs says a Blue Wave will increase spending and boost the stock market. Total one-party control of the government eliminates the haggling that we are currently seeing in Washington and will deliver more Covid-19 aid faster. It should more than offset the ill effects of tax increases. Beware of the coming Tax Loss Selling. A Biden win could unleash a torrent of selling as investors rush to beat an increase in the capital gains tax. That’s when you buy. US Housing Permits blow the roof off at 1.553 million, up a staggering 22% YOY and a 13-year high. I wondered why I was suddenly getting a lot of flat tires on the freeway. They’re caused by nails and screws falling off the back up pickup trucks on the way to jobs. The long-term structural housing shortage continues. 30-year money at 2.75% makes a big difference. Tesla generates a record profit for the fifth consecutive quarter in a row. The company is relying on its China factory to hit its 2020 target of 500,000 million units. Again, $397 million in regulatory credits drive earnings, payments from other carmakers who are lagging on electric car production. Gross margins rose 250 basis points to 23.5%. S&P 500 listing here we come! Next target $2,500! Weekly Jobless Claims dropped to 787,000, better, but still horrible. California is finally reporting again. When we come out the other side of this, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With interest rates still at zero, oil cheap, there will be no reason not to. The Dow Average will rise by 400% or more in the coming decade. The American coming out the other side of the pandemic will be far more efficient and profitable than the old. Dow 120,000 here we come! My Global Trading Dispatch hit a new all-time high last week by staying 100% in cash. I was just as grateful for having no positions on the up 600-point days as I was on the down 600-point days. Safe to say that I will be an increasingly more aggressive buyer on ever smaller dips and a seller on bigger rallies. October has now reached to a welcome 1.89% profit. That keeps our 2020 year-to-date performance at a blistering +36.29%, versus a LOSS of -0.57% for the Dow Average. That takes my eleven year average annualized performance back to +36.21%. My 11 year total return stood at new all-time high at +392.30%. My trailing one year return appreciated to +42.86%. The coming week will be a dull one on the data front. The only numbers that really count for the market are the number of US Coronavirus cases and deaths, now at 225,239, which you can find here. On Monday, October 26 at 10:00 AM EST, New Home Sales are published. Ely Lilly (LLY) and Merck (MRK) report earnings. On Tuesday, October 27 at 9:00 AM EST, the S&P Case Shiller Home Price Index for August is released. Microsoft (MSFT) and Pfizer (PFE) report earnings. On Wednesday, October 28, at 2:00 PM EST, the EIA Cushing Crude Oil Stocks are out. Boeing (BA) and Visa (V) report earnings. On Thursday, October 29 at 8:30 AM EST, the Weekly Jobless Claimsare announced. At the same time, we get the first read on Q3 GDP. Alphabet (GOOGL) and Amazon (AMZN) report earnings. On Friday, October 30, at 8:30 AM, Personal Income for September is printed. Exxon (XOM) reports earnings. At 2:00 PM we learn the Baker-Hughes Rig Count. As for me, I’ll be charging up every electronic device I have as the San Francisco Bay Area is expected to suffer a complete power blackout for the next three days. PG&E is shutting off the juice because winds are expected to reach 70 miles per hour and it hasn’t raised in six months. I won’t be affected because I am totally off the grid with my own solar and battery network. You can easily find me because mine will be the only house in the mountains with the lights on. Stay healthy. John Thomas CEO & Publisher The Diary of a Mad Hedge Fund Trader 
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Quote of the Day “An investment strategy that depends on the Fed quitting sounds pretty risky to me….The Fed can remain solvent longer than you can remain solvent,” said Chris White, the CEO of Bondcliq. 
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The Yuen is slowly being untied, a digital Yuen version is being launched..Future reserve currency ? Those two things aren't addressed here but it's interesting and scary.
The IMF Has A Message For Investors
A 2017 50 subject uncut sheet of $1 dollar notes sits on display in Washington, D.C., U.S. ... [+] © 2017 BLOOMBERG FINANCE LPHow huge is “huge?”
Is it just verbal hyperbole to colorfully underscore a point? Or do you take it at face value and prepare for a monumental moment of change?
Those are the questions one is left with in the wake of recent comments from International Monetary Fund managing director Kristalina Georgieva. In mid-October, she announced that the world must “seize this new Bretton Woods moment,” a reference to the famous 1944 agreement in New Hampshire that established the U.S. dollar as the world reserve currency.
Now, the global investor universe rightly wonders if Ms. Georgieva’s comments allude to what former London hedge fund manager Raoul Pal recently labeled in a tweet a “huge change coming.”
There’s certainly reason to believe Mr. Pal is on the right scent.
Recommended For You
Though Bretton Woods officially established the dollar as the world’s reserve currency, for all practical purposes the dollar has held that position since about 1920, in the aftermath of World War I. For the last century, the dollar has reigned supreme.
Yet every world reserve currency that has ever existed has ultimately lost its perch atop the mountain. Going back to the Portuguese real of the mid-1400s, the world has seen the rise of six reserve currencies, and the fall of five – so far. Each held its aerie for between 80 and 110 years.
And the dollar is right at the 100-year mark:
Timeline of World Reserve Currencies
JEFF OPDYKEThis centennial moment arrives amid a pandemic that has seen global governmental debts explode to worryingly large levels. U.S. national debt now exceeds 137% of GDP, and further debt-fueled spending is assured soon. That has global investors rightly concerned about DC’s capacity to manage its future obligations.
The centennial also arises as key countries – namely China and Russia, though others populate that list to – grow weary of the financial advantages America accrues from having its currency rule the world. Movements are afoot to bypass the buck and, ultimately, to relieve it of its status.
Taken as a whole, then, the stars clearly are not lining up favorably for the greenback.
And now comes this idea of a “new Bretton Woods moment” that could very well see the dollar’s role reduced to that of co-star alongside a basket of other currencies. Or, it might completely lose its Superman cape as the world adopts some other globalized currency to facilitate global trade. What that might be, who knows with any certainty?
Whatever the case, Ms. Georgieva’s “new Bretton Woods moment” is a call to action for investors paying attention. The IMF is flat out insinuating – and not so obliquely – that the dollar’s days as king of the jungle are numbered, whether the U.S. likes it or not. When the death knell officially sounds, it will, no doubt, come as a shock to the world, despite clear indications now that this moment in nigh. Investors, commentators, and the financial media will refer to it as a “black swan event.”
That, it will assuredly not be. It’s a gray rhino: Obvious, known, visible, right in front of you … and highly damaging when it attacks.There are a couple ways to protect yourself. You could short the dollar, but that’s a risky venture if only because the timing of a currency regime change is unknowable. You could own leveraged exposure to other currencies, particularly the Swiss franc, the Japanese yen and the Singapore dollar (a proxy for the Chinese yuan). Again, though, there’s that matter of timing.
A better strategy: Own gold.
Whatever comes of a new Bretton Woods moment, gold will feel the knock-on effects. Maybe that comes by way of gold’s inclusion in whatever currency reset occurs. Maybe it’s just a function of investor panic that the dollar’s reserve-currency status has, like every other reserve currency, faded into history.
Some observers, no doubt, will say all of this is wrong – that the dollar will never lose its reserve currency title for this reason or that, or that gold is archaic and has no role to play in the future of modern currencies.
Maybe.
More likely, though, is the fact that history proves all of those assertions wrong.
So, assuming “a new Bretton Woods moment” does signal a “huge change coming,” what makes more sense for an investor: Buying into the wisdom of economists and financial prognosticators who’ve spent a chronologically short amount of time on this planet analyzing currencies designed by bureaucrats? Or trusting the tides of history in which gold has played a crucial, financial role across 5,000 years – including its role repairing every currency catastrophe instigated by governmental hubris from ancient Rome onward?
Seems like a very easy answer for those paying attention to the gray rhino staring at us.
The IMF Has A Message For Investors
A 2017 50 subject uncut sheet of $1 dollar notes sits on display in Washington, D.C., U.S. ... [+] © 2017 BLOOMBERG FINANCE LPHow huge is “huge?”
Is it just verbal hyperbole to colorfully underscore a point? Or do you take it at face value and prepare for a monumental moment of change?
Those are the questions one is left with in the wake of recent comments from International Monetary Fund managing director Kristalina Georgieva. In mid-October, she announced that the world must “seize this new Bretton Woods moment,” a reference to the famous 1944 agreement in New Hampshire that established the U.S. dollar as the world reserve currency.
Now, the global investor universe rightly wonders if Ms. Georgieva’s comments allude to what former London hedge fund manager Raoul Pal recently labeled in a tweet a “huge change coming.”
There’s certainly reason to believe Mr. Pal is on the right scent.
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Though Bretton Woods officially established the dollar as the world’s reserve currency, for all practical purposes the dollar has held that position since about 1920, in the aftermath of World War I. For the last century, the dollar has reigned supreme.
Yet every world reserve currency that has ever existed has ultimately lost its perch atop the mountain. Going back to the Portuguese real of the mid-1400s, the world has seen the rise of six reserve currencies, and the fall of five – so far. Each held its aerie for between 80 and 110 years.
And the dollar is right at the 100-year mark:
Timeline of World Reserve Currencies
JEFF OPDYKEThis centennial moment arrives amid a pandemic that has seen global governmental debts explode to worryingly large levels. U.S. national debt now exceeds 137% of GDP, and further debt-fueled spending is assured soon. That has global investors rightly concerned about DC’s capacity to manage its future obligations.
The centennial also arises as key countries – namely China and Russia, though others populate that list to – grow weary of the financial advantages America accrues from having its currency rule the world. Movements are afoot to bypass the buck and, ultimately, to relieve it of its status.
Taken as a whole, then, the stars clearly are not lining up favorably for the greenback.
And now comes this idea of a “new Bretton Woods moment” that could very well see the dollar’s role reduced to that of co-star alongside a basket of other currencies. Or, it might completely lose its Superman cape as the world adopts some other globalized currency to facilitate global trade. What that might be, who knows with any certainty?
Whatever the case, Ms. Georgieva’s “new Bretton Woods moment” is a call to action for investors paying attention. The IMF is flat out insinuating – and not so obliquely – that the dollar’s days as king of the jungle are numbered, whether the U.S. likes it or not. When the death knell officially sounds, it will, no doubt, come as a shock to the world, despite clear indications now that this moment in nigh. Investors, commentators, and the financial media will refer to it as a “black swan event.”
That, it will assuredly not be. It’s a gray rhino: Obvious, known, visible, right in front of you … and highly damaging when it attacks.There are a couple ways to protect yourself. You could short the dollar, but that’s a risky venture if only because the timing of a currency regime change is unknowable. You could own leveraged exposure to other currencies, particularly the Swiss franc, the Japanese yen and the Singapore dollar (a proxy for the Chinese yuan). Again, though, there’s that matter of timing.
A better strategy: Own gold.
Whatever comes of a new Bretton Woods moment, gold will feel the knock-on effects. Maybe that comes by way of gold’s inclusion in whatever currency reset occurs. Maybe it’s just a function of investor panic that the dollar’s reserve-currency status has, like every other reserve currency, faded into history.
Some observers, no doubt, will say all of this is wrong – that the dollar will never lose its reserve currency title for this reason or that, or that gold is archaic and has no role to play in the future of modern currencies.
Maybe.
More likely, though, is the fact that history proves all of those assertions wrong.
So, assuming “a new Bretton Woods moment” does signal a “huge change coming,” what makes more sense for an investor: Buying into the wisdom of economists and financial prognosticators who’ve spent a chronologically short amount of time on this planet analyzing currencies designed by bureaucrats? Or trusting the tides of history in which gold has played a crucial, financial role across 5,000 years – including its role repairing every currency catastrophe instigated by governmental hubris from ancient Rome onward?
Seems like a very easy answer for those paying attention to the gray rhino staring at us.
Well stated.....earnings are my biggest worry, it's gotta be beyond stellar to impress this market.
BABA
"Over the next two weeks we have Ants IPO (expected to be the largest ever), we have an earnings report (also expected to be one the best ever for BABA), a presidential. election that could also be favorable for BABA, and finally Singles Day (expected to be a 35% greater event than last year). I expect this stock to jump to 350 or greater by end of the year."
BABA
"Over the next two weeks we have Ants IPO (expected to be the largest ever), we have an earnings report (also expected to be one the best ever for BABA), a presidential. election that could also be favorable for BABA, and finally Singles Day (expected to be a 35% greater event than last year). I expect this stock to jump to 350 or greater by end of the year."
