Yin and Yang
The duality of it all. I tried to explain this to a young trader last night that had started to doubt himself and his ability. The good with the bad. So easy to accept on the surface when one is neither riding high, nor scraping a bottom. So hard to believe at times that one has honestly not ever really "figured it all out". So difficult yet at other moments to believe that one can figure anything out. What I want you who will recognize yourself, and others who this must reckon with on some level... is to understand that this sport is rough. It always will be. You will be knocked down often, as in life itself. I will be knocked down often as well, and I am. I do not speak to you from a mountain. I do speak to you in the latter probably one-third of my life (If I'm lucky) with a broad array of experience behind me, and with a little grace, some more ahead.
This game will always be about your ability to overcome. Everybody here is smart. That will not save you in this crowd. Get up. Every single time. Lose everything? Not your work ethic. Not your moral compass. He, or she, who has never lost their honor has in the end, retained everything important. Those who rise every day with a thirst to do right, a willingness to put in the time, and the mental as well as intellectual effort, while consciously making the effort to help those to the left and to the right will remain undefeated. Forever. In a few hours I will likely make some money, or I will lose some money. Either way, I will love my wife, I will love my parents, I will love my children.... and I will love this country. I will care about, and I will help you. Code. Believe in something greater than thyself. Then believe in thyself. I ask only this. Pass that one on. Then do 50, no make that 75 push-ups. Begin.
A Very Small Place
In case you watch one of those other networks, I appeared on television on Thursday afternoon. The year 1987 came up. It quickly dawned on me that I was standing in front of a camera, only about 75 feet from where I stood on that fateful day in 1987. Only a few feet from where I started out that other fateful day in 2001. Over that time, meeting with too many heads of state, and people who thought of themselves as major celebrities to even make it special. All of this happened within the confines of a very small place. How fortunate.
As the closing bell rang on Tuesday, the Dow Jones Industrial Average ended the day with the best two month start to a calendar year since... say it with me, 1987. No cell phones. No internet. Open outcry. The Mets were actually good. Yesteryear. This despite a third consecutive day of losses for domestic equity markets. A little yin to go with that yang. The major equity indices now stand 11% higher year to date. Your favorite trader experienced the best month of his career in January. That month was only possible because this same trader had an awful December. See my point above. The only difference between the young trader and the older guy that I speak of is 30-plus years of experience. Not smarter. Just a level of experience that lends toward an increased ability to manage risk, as well as a belief in oneself. That faith is how one avoids panic in times of stress.
What changed over the past two months? The Fed decided to play ball. The Chinese economy put that nation in a weaker position than it had been on trade. The European economy continues to do it's impression of a garbage truck driving off of a cliff (See those PMIs? Whooo doggie). Cleanest shirt in a dirty hamper? Cleanest by far. Yes, Chinese, and European markets are higher this year too. For Chins, not just trade hopes but increased far greater MSCI inclusion is involved. For Europe, it's the belief that the ECB will have to turn the money machine back on. For the U.S., Q1 earnings growth will go negative... this market will rely upon it's value as safe haven simply because everyone else is burning.
Much was made of the initial Q4 GDP release on Thursday. What I noticed most, like everyone else who opined on the matter, was the increase in business investment. Unlike the other Neanderthals who write to you every day, I am going to tell you what that means to me. With Capex obviously on the rise, and with demand for labor simply screaming of late, the tax plan that had been passed in late 2017 has obviously done a lot more good than it gets credit for. Corporations are investing in themselves, which was part of the original idea. Yes, the fiscal path is truly unsustainable as Fed Chair Jerome Powell has stated... but there are silver linings.
As an investor, this increased business investment tells me to stay the course as far as investing in the cloud is concerned. This is why I am always long Salesforce (CRM) , Amazon (AMZN) , Microsoft (MSFT) and Adobe (ADBE) . This is why I flip in and out of Alphabet (GOOGL) on a semi-regular basis. This is also why Zuora (ZUO) was my pick of the year two months ago. This is why Splunk (SPLK) and Workday (WDAY) both hit for extra bases last night. The best part of this is that the space will remain volatile, creating opportunity to get in, or to add as opportunity presents. Did you watch Jim Cramer's interview with Amazon Web Services CEO Andy Jassy last night? Of course you did because we're aggressive, we're relentless, and we can't get enough, right? Jassy indicated quite simply that here in the U.S., we are still in the early stages of broad business cloud implementation, and that outside of our borders most of the planet is still 12 to 36 months behind. Hmm. Third inning of the first game of double-header is how I see it. Rock on.
Time To Short Tesla Again?
Tesla (TSLA) , the name that I both love and hate to short. Why? One reason is the adrenaline rush. The downside is that profit is never maximized on these shorts. Traders, or at least this trader, always end up covering short positions in Tesla at an unnecessary loss, or at far lesser profits than what should have been. It's always nice to book a 4% victory on a short, frustrating when the call one made was correct, and the victory should have been in the neighborhood of 15% to 25%.
I see the Tesla news that hit the tape late on Thursday as less than optimal for the firm. CEO Elon Musk does not think the firm will be profitable in the current quarter, nor the next. The firm has gone into severe cost cutting mode that will be implemented through the closing of stores, and a reduction in the sales force as they move to an on-line only method for selling vehicles. That may be genius. I like to look at vehicles by myself in quiet dealership lots before I even come close to making a decision. I also like to haggle with a human being. I am old. Perhaps, younger folks do it differently.
I am not sure how comfortable I am with the news of the new Model 3 that will be offered for a list price of $35K that also comes with announced price cuts for the Models X and S. Charley Grant at the Wall Street Journal wonders if the demand is still there. Has the backlog dried? Grant may be on to something. Does the firm need to raise cash? Right now. The firm has a $920 million convertible bond payment due this day. One has to wonder... are these moves smart, or are they desperate? Traders also have to wonder just how strong the cult will react to this negativity. Every time, Musk or this firm seems to be in a jam, they come to the rescue. This stock though tradable from the short side, is never really invest-able from the short side.
My thought is that at some time this morning, after you read this, that I will likely short a few shares. I will not however... be so bold as to short this name in size, or to carry that short over the weekend. By my count, a rough 20.7% of the float is held short. That's too large of an already clocked buy ticket for this guy to do anything more significant than day-trade this name.
Economics (All Times Eastern)
08:30 - Personal Income (Dec & Jan): Last 0.2% m/m.
08:30 - Consumer Spending (Dec & Jan): Last 0.4% m/m.
08:30 - PCE Price Index (Dec & Jan): Last 1.8% y/y.
08:30 - Core PCE Price Index (Dec & Jan): Last 1.9% y/y.
09:45 - Markit Manufacturing PMI (Feb-rev): Flashed 53.7.
10:00 - ISM Manufacturing Index (Feb): Expecting 55.6, Last 56.6.
10:00 - U of M Consumer Sentiment (March-F): Flashed 95.5.
13:00 - Baker Hughes Rig Count (Weekly): Last 853.
17:50 - Fed Speaker: Atlanta Fed Pres. Raphael Bostic.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: FL (1.40), SSP (.61)