Random Thoughts – 7.27.2020

Below are some random thoughts on the market, my portfolio and tech.  Still looking at earnings events as we move through the end of July and into August.

Current Portfolio Direction:

– Long Crude…an event driven play as I do not like the global macro-environment.  Too much stress in the world and something is going to break.  Just my opinion.

– Small set of core longs with equities like PG, SBUX, VZ, sold FB, keeping value plays rather than growth plays for Q3 into Q4.  The economy is just broken and the idea of a V recovery is a dream.  Just walk around or drive around.  So many businesses everywhere are closed or gone.

– Short Nasdaq…been short and will continue to be short.  A former colleague sent me this chart last week.  Charts do not predict the future, but they do help tell where we are in the journey.

– Software Names…hearing HFs are short software names.

– Semis…after INTC earnings last week, this feels like the place to put shorts to work.  It could all come together with some macro event.

– Long VOL…looking for a fiscal event here.  May not happen, but if it does, it will pay off well.

– Gold…no position but it is on fire.  Missed this one.  I still think it is a “…is in essence a short position on central bankers” and that thesis can be played better through other instruments.

– Cryptos…I own positions in many and since last week, they have been hot with gold.  Missed gold, but got cryptos correct.

Tech Thoughts:

Not a lot of tech thoughts today.  Feels like big companies are just marking time.  I think there might be some work to do with the big companies if you are a PE-Buyout player or looking to prune something away from the big players.  A couple of weeks ago there were reports that DELL was looking to spinout VMW.  I remember being in another world and another time when Joe Tucci would be asked about this subject every other earnings call.  Large cap tech companies are all kind of walled gardens.  There is a lot of value in the VMware garden, much more than the storage and compute business gardens.  I suspect VMware would grow faster apart from the hardware businesses.  Which is an interesting thought to ponder.

VMware could easily be a $3-$3.5B a quarter business making $900-1B a quarter in operating income vs the hardware business being a $20B a quarter business making $1.7B in operating income.  If I was running DELL I would undo what was done.  Spin the hardware business out or sell it to someone and find a way to pay off some of the debt.  Jump to VMware will little to no debt, better operating model and find the best software companies to add to the portfolio.  This is all very clear in their most recent earnings presentation here.  What the presentation does not show, is that the core hardware business which relies on the continuation of the existing paradigms of technology deployment is going to come under attack.  Even by their own team members and when this does, it will provide a very muddled situation.

As always, my thoughts on these matters might be completely wrong.