I have been suspecting that we would get a significant correction in the market. I will admit that it took longer to materialize than I suspected. There were several days that I said to colleagues “this market is crazy? Why is the Nazz up 1.5% on no news? This is batshit crazy!” On those days you just have to take your lumps, trim some positions and modify others. Last week I was trying to build some longs in the portfolio and for the better part of this week I was pressing shorts as the market ticked up. Today, I am taking some profits, building some cash and watching some big bets go from red to green.
I am not a big believer in correlation equals causation. I am not even a big believe in chart correlations and this is coming from someone who spent a lot of time studying technical analysis and DeMarks. Just because a chart says X or Y, does not mean it is going to happen. If charts where 60% true, then there would be no other need for any type of investment analysis. We would all sit around and just read charts about the future. For this reason, I think we need to be careful at the temple of chart worship, but we should be very aware of the real world as it has a nasty habit of getting in the way and usually at the moment, we forget the meaning of hubris.
Below the break is an update on my current portfolio positioning and some random market thoughts. I will say that the market is absolutely crazy land if you are looking at it from a historical perspective. Last week on Thursday I got up and the SPX was down 15 handles and by the time I got back from my bike ride the SPX was up 13 handles. Just your casual 27 handle move in the morning. Portfolio and market thoughts are next if you want to keep reading.
Last year I wrote this post on the changing structure of technology companies and return to vertically integrated corporate structures as well as the return to on-shore supply chains. I wrote that post in the pre-Covid-19 world, but this trend has been accelerated by Covid-19. It will have broad ramifications. The global power structures, chains of commerce and confrontation points are shifting. To understand this post, I think it will be helpful to understand how we got here and how it is being altered, which was the subject of that post from June 2019. We are transitioning way from 30 years of issue-based coalitions to moving back to a world of bi-polar coalitions. Game on.
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.
Below are some random thoughts on the market and tech. Not a lot of content, but I will be looking at more of the tech company results as we move through earnings.
V shaped recovery, flattening of the curve, second wave, travel bans, reopening plans and the new normal have all become topics of daily conversation. I have been traveling recently on planes and by car. As I see it, the world is not back to normal, but it is recovering as fear subsides. Financial people love models and predictions and from this price discovery happens. On this Saturday in July here are some thoughts I have on the next few quarters.
I spent a few years on the buy side at long/short technology focused hedge fund. I learned a lot over that time. I feel confident in saying it was the career stop in which I learned the most. I was being paid to obtain a synthetic MBA as well as learn how to build and run a portfolio. Over that time, I developed a lot of business friendships with many people smarter than me on the buy side and the sell side. Almost a decade later, I still regularly engage with analysts, PMs and strategists. It is rare for a business day to go by without a conversation of some type with a former colleague in the investment business. I still like to think that most of the sell side analysts in the networking, hardware, cloud and telecom sectors would take my call. With that said I have been riding the market wave, but I am conflicted with what I used to know and what I see today. In my tech career I always found selling in the transition space between a maturing market and an emerging market to be the most interesting and dynamic space to be in. I am beginning to think the equity markets are moving into a transition space.
35,000 feet over Utah, one glass of scotch down, ear buds in and my internal notes sent; it is time to write some VMworld 2015 impressions for the blog. In no particular order, here they are: Continue reading
I have been a known CSCO bear in the past. All you need to do is click on the CSCO category on my blog to see two years worth of postings. Recently, I have become a CSCO bull for the long term. I have been building a position in the $23-24.25 range. I did not become bullish on CSCO because I did some work on it and found some facts to fit my thesis. It was a different path that lead me to becoming bullish.
A few house keeping items to start the week…
I recently made a market call ahead of July earnings thinking that the market might crack. I have updated my SPX chart from my July Market Call posts, which you can read here and here. I am currently LONG a lot of volatility. It is currently working well and next week when the bond traders come back and we get NFP, Fed events, tapering no tapering, Syria, conference season, deficit ceiling, etc., I am happy to keep the lon vol trade on. I am also long CL1 here and some high quality large cap tech stocks on the thesis of buy backs and dividends. I have one big loser on the LONG side and that is FIO. I hope they get taken out at this point. Continue reading
My July market call did not work out. I am long some equities and long some vol (which is not working out), with a high percentage cash position. The Yen short worked. I am looking forward to the upcoming Cisco results as they will be the first to report a July month and if their guidance for enterprise spending is positive, I will go long high beta tech growth names.
Now that we have finished with confusing messages from the Fed week, we can move on and do some trading. I am covering my SPX short with a 800bps loss. The market will not turn down despite fund outflows, higher weekly claims, UPS pre neg, China GDP, earnings and guidance. I am staying long VOL through earnings. I will buy the QQQs today to increase net long SPX exposure to ~1700. Maybe I am being fooled by the B wave, but who knows. I will get some tailwind with the MS upgrade of NTAP this morning.
Ahead of the NFP, I prefer be short the SPX and YEN and long VOL. I am going to look for some stupid strong GOLD day and will short GOLD when I see it. I think GOLD is going to $1000. Regarding my prior post on the carry trade being blown up and the change from duration to economic targets and what this did for gamma…blah, blah…read this article on Bridgewater interest hedging.
Here is a link to my short term SPX chart, following up on last night’s post. I did watch the market today and that was nothing to get excited about on the long side. A few wildcards to deal with: (i) short week, (ii) NFP on Friday and (iii) earnings kick off in ~2 weeks. I updated my short terms SPX chart here. I also posted a picture of my SPX chart below. I think we will have a mini-rally into the NFP and we might continue to rally into next week as this is a holiday week.
I am going to attempt to be brief as not to bore too many readers. I have been spending the last few years fully immersed in networking and building a venture backed technology company. Every now and then something in the financial world happens that stirs up memories from 2007-2008. The last time I logged into a BBG terminal (FYI…BB journalists can independently confirm) was Feb 2011 and I am not following the markets. In fact, I have gone days without looking at the markets, but I have been trading more frequently as readers will know. For the record, I closed my shorts on GOLD and Treasuries on Friday. I am long: MS, C, INTC, MSFT, FIO, NTAP and ERIC. I took some profit in BSFT and will buy back in at a good technical entry point.
After approximately 15,000 pulled shots, I had to replace the piston the in my Pavoni home machine. I typically pull my shots ristretto style and I think over the past twelve years this abuse took a toll on the original the piston. I took apart the machine for more than a good cleaning and ordered a new brass piston to replace the molded piston that came with the machine. In the pictures to the left you can see the old piston and the new all brass piston. The old piston broke and thus the seal was gone. The good news is we are up and running and my beloved Pavoni is as good as the day it came home.
I received a number of emails, tweets and so forth regarding my last network posts. I am traveling to SFO this week and that means I will have some time to write a post or two. I was in a meeting this past week with a company who was presenting some technology to Plexxi regarding multi-flow commodity graph theory modeling of networks at scale. They did some really interesting work on the efficiencies of networks at scale and I plan to write up some of their work in a post for all the people who sent me emails about virtues of Valiant load balancing.