18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
I hate to do this to you, but I am going to cite some valuation data from the darkest hours of 2008. Why am I partaking in such an adventure?
Because I can.
It’s hard to get an apples to apples comparison between the tech stocks of that era and today; but I will try to scare you nonetheless.
I looked at names like CRM, AKAM and AMZN. Out of the three, I think it’s fair to say CRM best embodies the scams that are traded today.
Back in 2008, CRM traded down to 4x sales, 6x p/b and 17/fcf. In other words, CRM would have to trade down by 50%, from current levels, to repeat the glory days of 2008. Now if we are to apply the same stringent valuations to FB, TWTR and YELP, well, it gets decidedly uglier. All of those stocks are trading above 15x sales. They’d need to drop by 60-70% from current levels to get down to the apocalyptic Santelli levels of 2008.
Now is that a reliable benchmark to shoot for?
Absolutely not.
But at least you now know that if YELP should trade down to $15 again, you should probably back up the truck.
In all seriousness, these tech stocks will bottom for good once mergers and acquisitions in the space smacks short sellers in the face: a YELP buyout, or maybe a LNKD merger. We need to see real companies with real earnings saying “FEYE IS RETARDO CHEAP MORONS. I’LL BUY THE ENTIRE COMPANY NOW, thank you very much.”
There are old man stocks and then there are olde man stocks. Some of you, like myself, play games in the stock market, hoping to insulate oneself against the never-ending barrage of sell orders that seem to be hitting the street of Wall–each and every day. Truth be told, our lives would be measurably easier had we just caved in and shorted everything we thought was good. Alas, one cannot live in the past. One must look towards the future.
When planning for my future, I tend to study the past, however. I like to see how sectors behaved during the hardest of times–times when good men turned to alcoholism to stop the pain, and when women did the dishes without gloves.
These are hard times, trying times: ask David Tepper. Born and raised in the disgusting and filthy city of Pittsburgh, PA, David quickly moved up the ranks at Goldman Ballsachs, then segued that success into America’s best run hedge fund. He now manages over $20 billion from the Short Hills shopping mall, where he gets nervous about things, prepares media presentations, and woks diligently on his small home in the Hamptons.
Not to take up the mantle of populism here, appealing to your inner anti-establishment hatred, but what does David Tepper know about “nervous?” Has he ever felt nervous about meeting his mortgage payment or having his car towed away for being delinquent? This is a man, mind you, who makes over $3 billion per annum. If I made $3 billion per annum, trust me when I say, I’d be completely and totally insulated from the world around me– working on spaced aged cannons and buying whole companies just to convert their offices into roaming carnivale trailers.
Do not trust David Tepper. But believe in the numbers, for they do not lie.
Let’s talk turkey. The oldest of the old man sectors is the utilities. Within that sector, EXC is the best performing stock, with a reliable dividend, liquid daily volume and mammoth market cap. For the purposes of this exercise, we will use EXC versus the worst months in the NASDAQ’s wretched history, dating back 14 years.
The Average Worst single monthly drop in the NASDAQ, since 2000: -13.07%
During those respective months, EXC was -0.19%
Conclusion: When credit was an issue, as was the case in 2008, the utilities were horrid places to hide. You’d be much better served hiding in TLT. For those of you who are members of The PPT tribal army, feel free to use our seasonality tools and compare the QQQ to TLT for the years mentioned above. I already did the grunt work for you. The utes certainly possess a defensive quality, outperforming the NASDAQ by 13%, since 2000, in some of the most horrid trading months known to mankind. I’d be interested to see how the utility ETF, XLU, performed over the same time period. Or maybe a REIT ETF.
The bottom line: EXC is for old people who do not like getting blown to smithereens in tragic NASDAQ forays. If you should find yourself in need of non-tragic waters, look towards the utes in these trying times. Everyone else may proceed to juggle pin less hand grenades inside of plutonium factories (actually, it’s not nearly as dangerous as it sounds).
A friend of mine at the podiatrist told me that the stock market was having trouble, ever since I became Federal Reserve chairwoman. She said that “Ben wouldn’t have allowed this idle downside speculation take place” under his watch. For some strange reason, the owner of this website seems to paint me as an olde grandmother, who goes out all day on shopping binges, eating “clubbed sandwiches.” That could not be further from the truth.
I am at work from 6am until midnight, each and every day, playing bridge with the other nice ladies at the Federal Reserve. Quite honestly, it’s the hardest work of my life. There isn’t much for me to do, frankly, since the TAPERINGBOT3000 has been initiated. We at the Fed, simply sit around all day, eating corned beefed sandwiches– laughing at Seinfeld re-runs. I don’t have any of my personal money in the stock market, since it’s prohibited by law for a Fed chief to have exposure. Therefore, I never really look at the market. Was it down today? Someone at the beauty salon said that I “sucked” and should “go back to brooklyn to go rob and punch a bunch of people in the face.” That man was very rude. As he left, he said he hoped I’d receive “shares of splunk, on margin, for Christmas.” Whatever that means. I guess he didn’t know that I am jewish.
Anyways, I just wanted to clear up the confusion that has been brewing about the internet, and on the Twitter, about my habits. Frankly, I believe this Fly character to be a reprehensible chauvinistic animal of a man.
With some of the cash I have left, I will be buying the NASDAQ, in all of its cancerous glory, into the bell. While it’s tempting to buy it here, seeing it bounce, I’ve been around the block a few times and know how the mysterious robot overlord powers work–often choosing to torture market inhabitants with horrendous sell imbalances.
Considering the down 200 headline, I am not fairing too bad, save FANG.
Nothing scares me anymore, not even the specter of unforgiving losses.
Off to drive around my wife. She fancies a thing to two at this very moment.
This morning’s tape is crap. Therefore, it’s a good time to look at what’s working to try to make sense of this world.
First off, you have money rushing into bonds. TLT, PHK, LQD, PCY come to mind. Everyone is talking about TLT; but PCY (emerging market debt) has performed better. My favorite bond play is high yielding PHK, paying out .12 monthly.
Then you have the annoying big cap tech flight. Naturally, CSCO is up post earnings. Then you have AAPL, SYMC, INFY, SNDK, ORCL, QCOM, T and just about every foreign telephone company traded.
ZMH, HCN, MNST, TAP, LO have all been performers. But the breadth of the good stocks has been steadily eroding to the point where it makes sense to stop trying.
The ASCO conference is ongoing, so expect to hear about some clinical trials soon. That might put a bid under the market. By no means should you delve into high growth money losers, hoping for a bounce. With breadth worsening, you risk blowing your balls off with just one trade.
I am fairing poorly this morning, off by about 0.9%.
I’m not sure betting against AMZN is a good idea. They just announced their first original series, a la NFLX, and they still continue to punch big box retailers in the face, repeatedly, at will. While it’s true, they aren’t a cash cow, per se. It’s also true that whenever Jeff Bezos retires, I am sure AMZN’s profit margins will explode. He’s a genius, but a spendthrift.
If I was shorting this market, there are dozens of other stocks worth betting against–instead of AMZN. How about some Chinese accounting frauds, or maybe a tech stock trading 20x sales instead?
Futures are soft this morning; but no one really knows what’s going on. Seriously, I can’t remember the last time so many people were confused about the near term fate of the market. Back in the Bernanke days, we knew, without a doubt, there was a bid in the market. We knew stocks would go higher. Now with this Yellen character, it’s like the Fed is a comedy show. No one takes them seriously and their tapering project is viewed by just about everyone as “tightening.” You people are out of your god damned minds. I swear, the whole lot of you are in need of a mental illness health plan.
Pardon me, as I’m just a little frustrated holding onto my big ass losses (BALs).
The big thing this time of year for people in my industry, who want to network and make friends with like-minded vultures, is the SALT conference. It’s run by some nerds, on behalf of other nerds, so that a bunch of nerds can talk and feel good about themselves.
But tonight’s news is far nerdier than I expected!
Legendary hedge fund manager (come on, the guy is Boss hog of this investment racket), David Tepper, from Appaloosa Crapital, said “I think we’re OK. But, listen, there’s times to make money and there’s times not to lose money. This is probably you’re supposed to think about preserving some of your money…I think you can still be long, but I think you’re supposed to have some cash now.”
He furthered: “I am nervous. I think it’s nervous time.”
And finally: “I think the ECB…they better ease in June. I don’t know how far they are behind the curve…We are a fairly leveraged world…I’m not so keen about deflationary forces. I’m more worried about deflation than inflation. First of all, I don’t know how to feel it out. I’ve never lived through it.If the ECB does this thing, the market’s probably OK. If they don’t do this thing, it’s no OK.”
Mr. Appaloosa was famous a few years ago for telling people to “buy anything” (something like that) in a live CNBC interview, which quickly jacked S&P futures up 10 points. I believe the market ended up 200 that day. You could scrounge around for the video on the Youtube. At the moment, I don’t feel like doing anything for you people, as I am not properly motivated or incentivized.
Oh yeah, Tepper is also famous for running $20 billion dollars.
One of the things I’ve mandated with The PPT 2.0 is for it to be very visual, aesthetically pleasing. I love the current version and consider it my 4th child, but this new version blows it out of the water.
Before you sell all of your stocks and chase that gold and silver stock that is already up 25% for the year, look at the above chart. Understand what it means. Do not base your macro-trade analysis off of it; but consider it useful insight into the seasonality of gold and silver and how it trades down nearly 70% of the time, over the past decade plus, in the month of June.
TLT is up 5 months in a row. I cannot find an occurrence when this has happened in the past. Even during the dark days of 2008, when the world was burning, there were down months. Granted, this move isn’t as fanatical as that one, taking a much more methodical approach higher. But its been a winner, nonetheless.
I hate to be that guy who says “since TLT is up 5 months in a row, it must be topping.” That’s loser group think. I like to view these outlier events pragmatically and try to understand the root cause. I’ve always felt Russian oligarch money was finding its way, ironically, into the hands of the US govt–via bonds. Ever since this Ukraine business started, bonds have held up remarkably well. So well, it has people whispering to one another in dark alley ways, trying to figure this thing out.
Truth be told, none of that matters–in the big scheme of things. Both the Dow and S&P have held up considerably well, much more than anyone would’ve anticipated, given the circumstances. Right now we have a weak tape–with 60% of stocks lower for the day. The hole is shallow, but the width is wide.
I have one stock outperforming and that is JAZZ–an absurdly cheap biotech/pharma stock that is a cash cow–yet treated like a piece of chewing gum under a school desk. Eventually, JAZZ gets acquired. Eventually, “The Fly” can string together more than 2 days of winship. And, eventually, bonds will go lower.
1. Utilities are now trading at absurd PE, p/s, p/b ratios, relative to their historical norms. Look at EIX and SRE for proof. Since when do utes trade 22x earnings?
2. Utilities do fantastic in bear markets. It’s not unusual to see them up 15% in a single month when the market gets routed.
3. Electric utilities are now +10% for the year, some are up a lot more than that.
This is an unsustainable trend. The old man sector isn’t richly valued yet. There is still room for expansion there, but not too much. I realize my holding period for the old man space is limited. But what else is there to buy? Surely, you cannot expect me to jump back into the fire-pot and vote at the annual FEYE shareholder meeting, do you? I don’t have the appetite for money losing tech anymore. However, the healthcare industry is interesting: highly profitable, favorable demographics, lenient FDA. Stocks like GILD are sure to outperform, at least that’s what I am told.
Here’s an interesting question, in which I will answer. Which profitable, liquid, large cap stocks are down more than 10% over the past three months, with FPEs under 25, that might be worth looking at?
Here is my short list. Feel free to let me know which one’s you favor, or not. Either option is entirely acceptable courses of action for me.
At some point in this cycle of ours, the above stocks might begin to be attractive to the ute crowd, the guys with burlap underwear and velcro hoodies. Simply buying electric utilities here is not-so-much-different from roasting large bundles of cash over a flaming barrels of garbage.
