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Recovering Large Cap Growth PM. How I invest my own money is nothing like how I had to play the insane benchmark game.


A long term trend that began post financial crisis is civil unrest stemming from slowing global growth and huge government debt burdens causing the tyranny of the state to confiscate wealth via taxes and financial repression.  This is going to be a trend that will be accelerating over the next 2-10 years.  Governments across the globe will be trying to cling to their power as the super debt cycle implodes.  The elites and the plebs will be warring as the plebs grow tired of austerity.  The way to play this trend is TWTR!  I am long term bullish on this trend and as a former growth stock manager this is a must own stock for the long haul.  Valuation is high so this is not a trade and should be accumulated on a dislocation.  I am bearish the market near term but this would be a stock on my buy list after a sell off.

Fundamental case:  The Arab Spring was a Twitter and Facebook revolution.  The conflict in Gaza is a Twitter war.  The teenage bobbsey twins at the US State Department were using Twitter posts as evidence to blame Russia for the downing of MH17.  Now civil unrest is coming to the USA via #Ferguson.  The mainstream media is being disrupted by this social media app.  The #Ferguson story was broken on Twitter and the mainstream media is behind the eight ball here.  This app makes the participants of an event all free lance journalists that can and do scoop the story.  The alternative media is on equal footing with the main stream media via this app.  I anticipate that Twitter will get a huge bump in its metrics as people at cocktail parties are embarrassed by their lack of knowledge of what is happening  by those who actively use the Twitter app.  If you rely on the NYT for your news you will increasingly be made to look like a fool.  Trendies don’t like to look dumb so I would suspect more engagement during episodes like this and maybe even more subs.

An example of the power of Twitter:  InfoWars reporter Staff Sergeant Joe Biggs captured on film an officer pointing an M4 rifle in the face of a Journalist and the officer said “I will f-cking kill you.”  When asked his name he said “go f-ck youself.”  Joe Biggs tweeted this event out and then the film later.  It has gone viral.  The officer is now known as #officergof-ckyourself.   The ability of the MSM to control the message and be a tool of the state is officially dead.  The truth of an event is more likely to be found on Twitter.  Increasingly more and more people will turn to Twitter during these types of events.

I was originally a skeptic on the Twitter business model but I have been converted.  If I was still running $14 billion in Growth stocks I would initiate a 50 BP position with an eye towards getting this up to a full 3%-5% position over time.  I am bullish on revolution, war and civil unrest long term and as a result long term bullish Twitter.  Buy the dips on this one for long term holdings only.  If you want to trade TWTR then I defer to others on this site better at it than myself (OA).

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Roger McNamee of Elevation Partners is concerned about the market : “It just seems to me that there is a lot of chaos in the world and the rate of chaos is increasing a lot, and to me, that just makes me incredibly nervous,” McNamee, a managing director and co-founder of venture capital firm Elevation Partners, said on “Squawk Alley.” “It doesn’t change how I feel about individual stocks. What it does is it changes how much exposure to the market I want to have.”

Chaos? Lets review what Roger is talking about.

1) Ukraine situation- CIA/State Department orchestrated coup in February to place Neo-Nazis in control.  Putin has taken issue with this turn of events and is making moves to invade Eastern Ukraine.  He is also perturbed about a possible false flag with the MH17 event and the increased sanctions from the US/EU.  Putin has decided to dedollarize as quickly as possible and to form the BRICs bank as an alternative.  This is the real reason for the US increasing sanctions.

2) ISIS- CIA/Saudi/Mossad backed rebels that have mutated from Al Qaeda Syrian freedom fighters into a crazed Christian beheading “caliphate” running through Iraq.  Their weapons were provided by the US via the Libyan embassy in Benghazi.  Now we have the usual Senators running around the Sunday talk shows talking about ISIS coming to the US and attacking us with Nukes.  More terrorist boogie men to scare us.  Apparently the trillions we have spent on DHS can’t possibly stop this or maybe as a better idea we should stop the black ops that are funding these punks.  Obama has decided to bomb ISIS.  How does one bomb a group that you are secretly funding?  Answer: very carefully.  If we wanted to take these devils out we could get the job done in about 2 days.

3) Israel/Gaza- Tribal warfare with no end in site.  Very destabilizing to the region.

4) Border Crisis- Apparently “children” (13-18 years old and mostly male) are streaming across the border and DHS is secretly flying them around the country into States that don’t want them or in many cases don’t even know they have arrived.  The influx of these illegal aliens is taxing the local and national resources and making our borders porous and very dangerous.

5) Ebola- Potential pandemic that the WHO has essentially said is getting out of control and threatens to curb travel and commerce should the governments of the world overreact.  I personally believe that much of the information we are getting from both the MSM and the alternative media is fear porn.  Reality check: Less than 3,000 deaths since 1976 from Ebola while the flu kills 200,000 to 500,000 people worldwide annually.

The powers that be would love to be able to take cover and point to one of these mostly manufactured crises and blame the coming melt down on one or all of the above.  But make no mistake the meltdown that is coming is due to the pending end of the super credit cycle.  What should scare investors the most is this chart of the growth in the debt of the US:

The banking crisis was merely transferred onto the balance sheet of Uncle Sam.  The above graph is parabolic.  All parabolic structures eventually unwind.  The timing of the unwind is unclear but some cracks are starting to appear.  Lately credit spreads have started to widen and that has been the real cause of the correction in the equity markets.  The balance sheet of Corporate America has re-levered to fund useful things like buying back stock at all time highs and I think the credit markets are starting to get a little indigestion.

Our leaders on both sides of the isle are mostly imbeciles, psychopaths and narcissists.  They will do anything to stay in power and continue the status quo.  It does not take a genius to see that the center can not hold and it is not a question of if but when the ponzi scheme implodes.  Roger is right, the rate of Chaos seems to be increasing.  The question we should all be asking is why and is it a coincidence?

In the very near term we likely rally for a week or two but I am expecting continued weakness into the Fall.  Too many people have de-risked of late so a brief rally would be in order.  54 trading days until the end of tapering!

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Near Term Low Coming Soon?

I am seeing divergences that suggest a tradable low.  However, longer term we are likely going lower.  I will be loading up on shorts as the rally unfolds.  I might even take a flyer on an index call on the dump and bounce to fund shorts later.  I would not recommend committing a lot of capital on the short side down here in the very near term.  The chances of The Top of the Market have increased and we have a better set up now than we did in April but it is two early to call just yet.  Cash is a good thing right now.  There is a chance that the market falls out of bed from here but I don’t see that happening just yet.  The Russell 2000 (IWM) topped on July 3rd and the Dow topped on July 16th.  We have had considerable damage already.  I don’t expect the rally to be long lived.  Futures are dumping on our White House Sock Puppet actually making a decision but at least he made one.  Also I expect Putin to invade Ukraine under the auspices of humanitarian relief in September.  It is better to invade before the long cold winter sets in.  As a gentle reminder QE ends in 59 trading days.

Here are some interesting facts regarding Dow cycles I mentioned to someone in my comments incase you missed them:

Since 1896 the DJIA has had what is called a four year cycle that averages 48 months from low to low. The average decline into a four year cycle low has been 34.38% since 1896. The longer the advance of the cycle (current advance is 64 months) the sharper the decline. In the secular bull market of the 80′s and 90′s the low of 4 year cycle was higher than the previous low and very shallow.  In secular bear markets the four year cycle low is lower than the previous four year cycle low.  So if we are still in a secular bear we take out the 2009 low.  If we are in a secular bull, we still have a correction and the average correction is 34%.  Either way we are due cyclically for a protracted sell off and a great buying opportunity.  This is just math not hubris or arrogance but just facts.  Do with them what you will.

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Hurricanes Coming!



Those are the views from my new home on Maui.  Unfortunately, not one but two hurricanes are coming; one tomorrow and then one on Sunday.  I got here last week and my stuff was supposed to be moved in tomorrow.  We have delayed that endeavor.  So there is a distinct possibility that my new home gets blown off the side of the volcano.  The Fly says this is, ironically, the apocalypse that I crave so much.  For the record I don’t crave doom.  I am merely a practitioner of cycles and this bull is about to end.  I don’t get emotional about these things.  We have another hurricane coming in October with the end of QE.  The set up for the top is almost complete.  My best guess is we undercut the low soon then begin a rally for a couple of weeks.  If that rally fails then we begin the correction in earnest.  I will be getting very heavy on the short side if I see the set up complete.

Currently I am mostly cash with a small DIA put, I did a starter short today in LVS courtesy ChessNwine and I am long a taste of Sept LULU calls via OA’s recommendation since I think we rally for a few weeks.  The LVS chart looks dreadful and fundamentally Macau July numbers were awful due to the fact that Chinese millionaires are getting bank debt margin calls on just about everything.  If you have not been paying attention China is in a slow motion implosion and LVS is now a confirmed way to play that viewpoint via the US markets.   I will be adding to the LVS short on weak bounces.  Getting up at 3:00 AM to trade is a little new but I am done by 10:00 and on the beach by Noon.  God willing I will not die this weekend!

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QE Ends In 62 Trading Days!

Ever since December when the Fed started tapering the $85 billion a month in security purchases the second derivative of the markets ascent has slowed.  We all know about the divergences that have appeared since March.  The question is when will the market start to discount the end of QE.  Smart institutional money is already fading this and I suspect the fade will pick up since the recent market weakness will begin to alert the dumb institutional money.  I am sure The PPT will work and we get a bounce here.  I am not disputing that fact.  The question is: do we get follow through on the bounce?  My guess is no and that we will have more weakness into the end of August since we are due for an intermediate term correction.  From that low we likely get a nice rally but due to the imminent end of the markets Crack Cocaine that rally fails and we get a nice healthy correction that will be quick in both price and time.  In the above graph notice the markets performance when previous rounds of QE ended.  This is not about fundamentals because they have not mattered for a long time.  This is about liquidity and the giant sucking sound of it being withdrawn.  Yes it is a market of stocks and I am a stock picker but at major turning points picking stocks does not matter.  The question we should be asking is: does the Fed un-taper the taper and if they don’t…why not?  Until then the path of least resistance is lower.

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BRCM Is A Long: Both Offense and Defense

Here is the three bullet point thesis (portfolio managers can’t handle any more than that due to intense ADD):

  1. Trades at a 9% free cash flow yield so it is very cheap. 
  2. Margins will improve as they shut down unprofitable baseband business so numbers on the street are too low.
  3. BRCM management has been rumored to say that at the right price they will sell the company while INTC said on their last CC that connectivity is important strategically for them (70% of BRCM’s business is connectivity).  I suspect that this company will be bought in the next 6-18 months as the semiconductor industry is in consolidation mode.

The stock also has been acting like a champ of late and was one of the only stocks up on Thursday in the big sell off.  This is a classic offense/defense play for large long only’s or hedge funds in what I think will become an increasingly difficult tape.  The stock has a beta of .91, is cheap and has a potential M&A bid underneath it so in a bear market this will outperform handsomely.  If the stock is taken out I have a $55 price target which is an 8% free cash flow yield on the improved cash flow excluding the baseband business.  That is a 44% potential return.  I like the risk reward here.

This stock is a very good way to add idiosyncratic risk to your portfolio without adding beta. Enjoy the profits.

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Ebola and Airline Stocks

What is going on in Africa is an absolute tragedy.  Unfortunately it appears as if this situation is getting out of control and now we have reports of an Ebola victim in Atlanta.  Additionally: “Our government has declared this now as a humanitarian crisis that is above the control of the national government,” Tolbert Nyenswah, Liberia’s assistant minister of health, told CBS News.  Also a good friend of mine told me today he is thinking of canceling his trip to London this October due to the Ebola news. The sector most levered to this situation is the airline industry.  The earnings leverage is immense and if people start to cancel or if governments restrict travel these stocks will get absolutely decimated.  These stocks have been home runs but they are very cyclical.  So far the charts are not indicating anything is amiss but that could change quickly.  I am not going short these stocks because it feels wrong to profit off of misery but if I was long I would be thinking of ringing the cash registrar.

FYI:  I personally think this ebola scare is nonsense.  2-5 million get the flu every year and about 200k-500k people die and we don’t ban travel or stop flights.  My fear is that governments need people to believe they are good at something so there might be a knee jerk reaction from the powers that be.   The fear imposed on joe six pack will be greater than the reality.  Bleeding from your eyes is sensational while dying in your sleep from the flu is common place.  It has been reported that the national guard has received ebola detection kits in all 50 states.  They received these kits in April.  We live in very interesting times.

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Turning Point?

As many of you know I have been bearish since arriving here in May.  I was confident then because many of my double secret probation indicators were screaming top.  That set up was erased and I was wrong in the short term.  We now have a better set up than we did then.  However, I am cautious about getting too short here because I now firmly believe the market is completely rigged by the Fed.  Someday the Fed will get overwhelmed and when they do all hell is going to break loose.  If we get follow through over the next few days then we should see a decline into August/September time frame on the order of 10-12%.  The rally out of that low should be very important.  If that rally fails to take us to new highs then THE TOP is in and get out of the way.  Until then take it day by day and stay nimble.  If the Fed negates this set up then look for a melt up top but let price be your guide.  My main point today is to warn you that the market is extremely dangerous here and things could unfold very fast. Cash is best until we get some clarity.

On a separate note 7/16 was the closing top in the DOW and also a major voodoo Bradley Turn Date.  In addition, if this is the top then it occurred in month 64 which is a fractal number in nature and happens to be the count in which many parabolic structures peak.  In no way do I use this stuff to make my decisions but it creeps me out to no end.  The DOW peaked intraday on July 17th which was the day that MH17 went down.  The market may be discounting the likely hood of War with Russia.  I have followed the situation in Ukraine since it unfolded in February.  I just want to say that what you read and hear in the MSM is not the reality.  This is a financial war that looks likely to spill over into a real war or at least an ugly proxy war.  This about the hegemony of the dollar, energy and the sovereign debt endgame.  100 years ago WWI began and the market tanked 30% and was closed for four months.  I would rather see a blow off top than War but so far the chart and cycles are telling a different story.

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Bulls and Bears Battle.

Today is very interesting.  The DOW looks like it may be breaking down.  Watch 16,900 as a close below suggests a break in trend.  Divergences are everywhere in this market.  A close below 16,805.38 (July 10 low) would really give the bears something to work with.  I am still mostly cash with small amount of DIA puts.

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Game Theory: Russia Will Annex Ukraine

Throughout most of my career geopolitical noise was something that only temporarily affected markets unless there was an actual threat of war.  I think unfortunately (I hope that I am wrong) we are very close to things going hot in the Ukraine.  I believe that the Washington power brokers have left Putin no choice but to enter the Ukraine and annex it.

Let me explain.  To all but the dimwitted, the coup in Ukraine was a joint Nato/CIA backed operation to isolate Russia and enrich the West.  Putin has held back because he has been trying to build a case with the EU that it is in their best interests to resist the overtures of the West.  He is openly telling anyone who will listen to move away from the dollar and the associated issues that come with it.  With the downing of flight MH17 the demonization process of Putin has begun.  I don’t really care who shot down the plane, the point is it has happened and the Western media has decided to try and convict Putin in the court of public opinion.  The idea is to convince the EU members to go along with our sanctions and turn up the heat.  Sanctions from the EU would hurt the already ailing Russian economy very badly.  Washington thinks they now have the upper hand against Putin.  However, Putin knows that Obama has very low approval in the US and abroad.  He also knows that we have been downsizing our military and we have extended ourselves all over the world.  The comments today from Obama were timid and weak.  Putin knows that the US people have no stomach for more war.  I think he makes his move soon and it will catch the US and the world by surprise.  The best defense is a good offense.

Obviously if this happens I think the markets tank but let the market be your guide.  It will likely sniff this out and break down in anticipation of Putin’s move.  If we start melting up then I am wrong.  Again I hope that I am wrong.  War is awful and I don’t want to see it happen.

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