Illegal immigrants — what San Francisco is euphemistically calling “non citizens” — can now apparently vote for Board of Education members.

Isn’t this the definition of oxymoronic?

Trump met with Russian President Vladimir Putin yesterday.

I get diplomacy, but Trump looked like he had a man-crush on Putin.

It was just weird.  John Hardwood of CNBC had the best explanation:

President Donald Trump’s stunning news conference with Vladimir Putin becomes understandable once you recognize that he was advancing his personal interests, not those of the United States.

Of course, ever insightful, late-night comedy host Jimmy Kimmel zero’ed in on something that’s probably close to the truth as well:

“If you’re wondering whether or not Vladimir Putin has incriminating video of Donald Trump, we now know, beyond a treasonable doubt, that he does.”

Maybe here’s the very weirdest part:  I didn’t care if the Russians interfered with the election… I assume they did… just as I assume the United States interferes in anything and everything we care to interfere in, too.

But that whole “summit” (if you can call it that) was so weird that now I do care about whatever the hell Trump is trying so desperately to hide.

What a backfire.

One strong step forward, one fan-boy step backward for the United States.

Yesterday was proverbial d-day for the start of the great Trade War between China and America.

It’s about time… China is aggressively and overtly protectionist… and has been for decades.

I learned this first hand in the CAD business.  It was absolutely impossible for us to sell our product in China… even though we were successfully selling our product in other areas of Asia.

Why?  Because China mandated that Chinese businesses and consumers could only buy Chinese CAD…

… even though Chinese companies were happily selling their CAD — and we were competing against their CAD — unencumbered in the U.S.

But we were a small player, so maybe you can chalk up our failure to penetrate China on our size.

But what about Autodesk, makers of AutoCAD, the #1 CAD product in the world?

Nope, they’ve been shut out for years, too.

To make matters worse, Autodesk found out a Chinese CAD company had stolen their intellectual property.  The Chinese Company vehemently denied the allegations.  Autodesk had no choice but to sue the Chinese Company in the World Court where the Chinese Company continued to vehemently deny the charges… until, facing irrefutable evidence, they finally had to admit their wrong-doing.

But it gets even worse. 

While Autodesk could have collected major damages, they realized if they did, the Chinese government would have been EXTRA punitive… so Autodesk had to voluntarily give up any settlement value in the hopes of helping the Chinese “save face” so they could have any shot at selling in the country.

That is unfair governmental manipulation at its worse.

But that is the China I know about first hand:  Competitively rotten to the core.

So I don’t care about any short-term tariff pain.  When it comes to true capitalism, China is like a big but immature bully and I am so looking forward to a much more experienced fighter punching these guys in the face.  It is well deserved and long overdue.

 

China is trying to do an end-around and create some kind of “united partnership with Europe against the U.S.”

Despite a raging battle with the Trump administration, Europe flat out turned down the Chinese overture.

From ZeroHedge:

But why does Europe – which has so staunchly publicized its disagreement with Trump’s policies – refuse to align with China?  Simple: behind closed doors it admits that Trump’s complaints about Beijing are, drumroll, spot on.

And:

… perhaps because China’s veneer of the leader of the free trade world is so laughably shallow – China was and remains a pure mercantilist power, whose grand total of protectionist policies put both the US and Europe to shamethe European Union has outright rejected any idea of allying with Beijing against Washington ahead of a Sino-European summit in Beijing on July 16-17.

And:

Europe has absolutely no belief that Beijing will ever follow through with its promises.

China is so bad that not even the, “enemy of my enemy is my friend” maxim can hold water.

Everyone seems to HATE the fact that Trump is pulling the world into a tariff war.

I think it’s great… and long overdue.

The current tariff infrastructure has its roots after WWII when the U.S., the dominant economic might in the world, was magnanimous enough to give the war-torn countries in Europe and around the world economic advantages as a way to help them get back on their feet.

Similarly, the U.S. was magnanimous enough to give developing nations — like China — an economic leg-up in their quest to transform from rural to modern economies.

But come on people, all of that was decades ago!

Trump is absolutely correct:  It’s time to have a level playing field.  Why do we impose a skinny 2.5% tariff on cars imported from China, only to see China impose a stiff 25% tariff — 10 times larger! — on cars they import from the United States?

And why can Chinese companies own 100% of a factory in the U.S., but American companies can’t even own 50% of their factories in China?

And on and on!

I’m calling B.S. along with Trump and I have no clue why EVERYONE isn’t doing the same.  China is no longer a developing nation… it has the second largest economy in the world.  It’s time China stopped taking advantage of our good will.

While not as bad as the Chinese, there certainly can be more parity with the rest of the world, too.

Similarly, Trump is absolutely correct about stolen intellectual property… because in the modern world, economic might is not just measured in current service or manufacturing ability… but in the ability to use innovation and technology to dramatically improve old industries — or completely invent new ones — and reap the rewards that go along with that.

So who cares if China can manufacture complicated devices like iPhones better than the U.S. today?  Maybe the U.S. will invent a new way to build an iPhone that doesn’t require any manufacturing?

After all, that’s what we Americans do… we innovate… that’s our strength.

Eliminating the complicated manufacturing process for iPhones would be unbelievable… and the rewards would be immense… unless, of course, China simply STEALS the new technology to do this.

And THAT’S the situation we have today… China forcing intellectual property transfer as a condition to setting up shop in their country… or, worse, flat-out stealing our IP… and the Chinese government — literally — encouraging all of this.

Fuck that.  I’m all for taking our ball and going home if other countries won’t play fairly… because at the end of the day, WE’RE the world’s biggest market…

… and I think it’s awesome that Trump is reminding the world of this.

With that said, Trump may have one thing wrong about trade:  Who cares if there are trade deficits?

To me, a trade deficit benefits us… it means our costs are lower than they would have been… which means our profits will be higher… and our stocks will perform better… and that will enrich every American that does any investing or has a 401K plan or that even gets a paycheck.

That’s pretty much the vast majority of the country.

Trump, you’re a business person, you know artificially forcing a higher cost structure on businesses and consumers is exactly the opposite of how a free market should work.  Anything artificial always ends in disaster.

I know the counter-argument that Trump loves to tout:  If we “export” all of industries overseas, we can hurt ourselves strategically… maybe even get held over a barrel in the future.  Case in point, the decline of our steel industry.  If we can’t produce our own steel, we’ll be at the mercy of foreigners for such a strategic commodity.

Poppycock.

If the U.S. steel industry can’t compete with foreign competition, then go invent a new way to make steel 10x faster and cheaper.  Don’t tell me this can’t be done, Britain did it with glass.  Stop crying and get inventing — go create new jobs in new and re-invented industries where the United States can once again be the de facto leader.

There is one exception to this “pro deficit” position, however:  While we don’t want the U.S. government to force us to buy local stuff at artificially higher prices, we also don’t want the Chinese government to force their businesses to buy from their local suppliers at higher prices, either.

Which is what the Chinese do today… things that should get bought from U.S. companies aren’t… which artificially increases our deficit because we’re not getting business we should.  That part of Trump’s deficit thinking is right on the money.

So, in summary…

… I WELCOME a trade war — short term pain and all — if the end result is a fair global playing field (especially with China!)… and a kick-in-the-butt for our industries at risk to GO RE-INVENT THEMSELVES.

That can only be good for U.S. workers and companies.  And, ultimately, for the stock market, too.

 

Apple (AAPL) reports after the bell today.

Everyone expects a miss.  Lots of people have already significantly cut iPhone and rev estimates.  The stock has already fallen about 10% (correction territory) in just the last two weeks… so a lot of negativity is already priced in.

On the other hand, what’s NOT priced in are two biggies:

(1)  Apple is going to talk about what it’s going to do with its MASSIVE repatriated cash horde.

I think this is going to be stunning… since I believe it may be the LARGEST cash repatriation EVER for a corporation.

All kinds of stock-positive things will be discussed… like significantly raising the dividend… or massively increasing buy backs… and so on.

So this will be a positive.

(2)  The market is so totally fixated on iPhone that it sometimes forgets that Apple has other massive businesses, too… like services… like Mac… like iPad… and so on.  And like the rest of tech this quarter, I think those will surprise to the upside as well.

So, my thoughts are these:

The bad news about iPhone is already mostly priced in, which I think minimizes or eliminates the downside.

The good news about repatriated cash usage and all the other Apple businesses are NOT priced in.

So I tend to think they’ll be more of an upside surprise than not.  Which is counter to the way everyone’s going into this earnings call.  As a contrarian, that’s scary but what I like as an investor.

I can almost write a book on a tech company named Longfin (LFIN), but given their unbelievably crazy trading history and corporate antics, I’m sure someone like Michael Lewis (of “The Big Short” fame) is already beating me to the punch.

Yes, this really is a Hollywood kinda story!

Sorry in advance for the long post… you shouldn’t actually read this unless you like stock stuff.  :)

Simply put, in an investment industry that’s decades and centuries old, this tech company Longfin seems to be in unchartered waters… every professional that I’ve spoken with at Schwab, Nasdaq, and even the Options Clearing Corporation (OCC) all have said they’ve never seen anything like this.

Longfin went public on Dec 13, 2017 under the ticker symbol LFIN.  The shares were priced at $5, giving it a market capitalization about $350 million, supported by an unaudited $28 million in revenues realized through the private acquisition of Stampede Tradex Pte Ltd in June of 2017.  Of note, one of the major partners in Stampede was the Longfin’s CEO, Venkat Meenavalli, an entrepreneur from India.  In all my history of reviewing offer documents, I’ve never read any CEO describe themselves as “a financial wizard” …already I’m wondering who’s advising these folks.

Longfin proudly touted itself as the first FinTech company to go public using abbreviated Nasdaq rules, a so-called “Reg A+” filing, created by the 2012 JOBS act.  Essentially, it allows smaller companies easier access to the public markets.  Reg A+ companies can also raise capital from any investor — not just accredited investors — just like bigger, more established companies.  One of the hopes is Reg A+ companies grow up to provide lots of American jobs.

Two days after Longfin went public, it acquired a cryptocurrency firm.  Smack-dab in the middle of the full-blown crypto craze, LFIN stock went crazy… from an already richly-priced $5 a share to over $140 in just a few days… a $10 billion valuation!

And, just a few months later, LFIN is headed to $0.

Here’s how we got from there to here:

*  The very first thing you notice about Longfin is buzzwords abound in all of their materials… so much so that even tech savvy folks have been scratching their heads wondering what the company really does.  The simplest description I could find was: “US-based, global FinTech company powered by Artificial Intelligence (AI) and Machine Learning.”  Best translation of that I have is that they’re mostly a commodities trading platform.

*  But there’s a problem already:  When people tried to find their U.S. office, all they found were three empty desks in an incubator space.

*  LFIN’s original accountants quit after just one month on the job (February 2017), leaving the company to operate the entire rest of the year — and go public! — with unaudited financials (that’s what first attracted my attention).

*  That may be one of the reasons why I believe they are way overstating revenue… if they are, in fact, just a trading platform, then they should recognize trading fees as revs… yet, for some reason, they’re booking the sales transaction as revenue.  This is material… it’s the difference between recognizing $66.6m in physical commodity revenues vs. $1.6m in trading fee revenues.

(I know you might be thinking, “well, then, this is obviously a scam…” and it may very well turn out to be one… but that’s what makes this story so perversely fascinating… please read on!)

*  The CEO purchased another company, a nascent cryptocurrency company — with zero revenues — just two days after LFIN went public… without any mention of the possibility of this in the offering document.  But it’s not like this wasn’t contemplated… or that this company was just any company… the CEO owned 92% of this crypto company!  This, of course, is a massive conflict of interest.

*  On December 18th, CNBC interviews CEO, which should be mega-positive given LFIN’s rocket performance, but instead it turns into a public relations fiasco.  On screen throughout the entire 12-minute segment is the overlay:  “CRYPTO STOCK OR CRYPTO SCAM?”  As if that’s not bad enough, the CNBC panelists, including Brian Kelly, who’s carving himself out as an expert investor in the crypto space, act more like velociraptors cornering prey.  I really want to say, “Not helping matters is the CEO’s thick Indian accent and manic responses,” but in a very weird way, not being able to understand most of what the CEO said actually kinda worked in his favor… in that you couldn’t tell if his answers were good OR bad.  Clearly the panelists couldn’t understand him, either, because every time they moved in for the kill… and the CEO responded… they had that puzzled, “did he just answer my question??” look on their faces.

*  Half the board of directors are employees… that’s not just bad corporate governance, but irresponsible governance.

*  On January 22nd — just a month after the company went public and still supporting a hefty $3.5 billion marketcap — LFIN literally gave their company away.  They entered into what can only be described as an awful financing agreement with notorious bad-boy financier Hudson Bay Capital, a company that had previously been busted by the SEC for short-selling violations and stock manipulation.  In the best of circumstances, this meant painful dilution for existing shareholders.  In the worst of circumstances, well, keep reading.

*  On March 16th, Longfin issues a press release that it was being added to the prestigious Russell 2000 and Russell 3000 indexes.  This is a big deal because that meant that Russell ETF’s are now required to buy the stock.

*  On March 26th — just 10 days later! — the Russell Indexing organization issues a release that it is removing Longfin from their index due to “insufficient free-floating shares”.  In other words, Longfin simply didn’t sell enough shares to the public — in fact, less than 20% of what was on their offering document — so the stock should never have been included in the first place.

*  On April 2nd, LFIN turns in its tardy 10-K annual report.  There’s a little nugget in the report that doesn’t go unnoticed:  Longfin is being investigated by the SEC!

*  This is all way, way, way too much for intelligent investors (i.e., not “pump & dump” traders).  Short-interest builds to epic proportions because, well, we all believe this may actually be THE SHORT OF THE CENTURY!

*  CNBC interviews the CEO again on April 4th, this time to address the SEC allegations.  You would think someone — anyone — would have practiced with him.  But, no.  The second interview was just as awkward and illegible as the first.  There was a slight difference, though.  In the first interview the CEO was a bit more combative… and why not, his company had just zoomed to a multi-billion valuation.  In this second interview, you got the sense that he was really trying make sense of it all as well.  Trouble is, I can’t tell whether to feel empathy for someone who is just way out of his element and maybe even caught up in something beyond his control… or anger because this guy was brazen enough to try to pull the wool over our eyes right in front of our faces.  

*  On April 5th their second accounting firm quits, after being on the job only two months (Feb and Mar 2018).

*  On April 6th, Nasdaq, which has not only grown tired of waiting for required compliance material, but maybe more importantly embarrassed by this whole situation, issues a non-compliance note… with accelerated due dates (rare)… and, more significantly, HALTS THE STOCK with a dreaded “T12” designation (the worst halt Nasdaq can issue).  No one knows when a T12 stock may trade again… it could be never.

*  On April 6th the SEC lowers the boom on LFIN, charging them with “illegal distributions and sales of restricted shares” involving the company, its CEO, and three other affiliated individuals.

*  Remember bad-boy financier Hudson Bay?  They’re baaack!  April 13th was the 5th consecutive day LFIN stock was halted, triggering one of the loan covenants with Hudson Bay.  Longfin had received an initial payment of $5 million and, subject to registering a bunch more stock, LFIN would have then received the next big traunch of money.  Well, they didn’t get that stock registered (so they didn’t get any more money)… and they didn’t trade for five consecutive days (so they violated the terms of the financing)… so, guess what?  Hudson Bay called the loan on them… BUT, it’s not just for the $5 million they received, the awful financing agreement LFIN signed gives Hudson Bay the rights to call a total of $33.6 MILLION of the financing, money they haven’t even received yet!  Payment was due on Friday, April 20th.

*  LFIN has little money left.  It appears they’ve spent their IPO funds and have chewed into the $5 million in initial financing from Hudson Bay ($1.3 million of which was spent just on “deal fees”).  So the only way they can pay $33.6 million back is to get new financing, which won’t happen (and even if it did it would mean completely washing out all shareholders), OR renegotiate with Hudson Bay, which can only mean even worse shareholder dilution than the original note.

So here we sit on Saturday, April 21st.  Presumably TONS of interesting things happened behind the scenes yesterday:

—  Did LFIN and Hudson Bay renegotiate a deal by the 4/20 deadline?  It doesn’t really matter to shareholders… either they did and shareholders get significantly diluted… or they didn’t and LFIN declares bankruptcy.

—  4/20 was also the earliest part of the Nasdaq’s response window for the original non-compliance, so did Nasdaq accept LFIN’s original non-compliance plan OR decide to proceed with delisting — essentially kicking LFIN off the Nasdaq exchange and subjecting it to the dregs of the “Pink Sheets” where only of little consequence companies — also known as “Penny Stocks” — trade?

— Was it just a coincidence that Hudson Bay’s 4/20 deadline corresponded exactly with a major options expiration date?  Will we find out that perhaps Hudson Bay is up to their old antics by playing both the long and short sides of the aisle?

Thanks for your patience thus far!  We’re now at the subject of this post.

Even if this company was stellar — which it isn’t — Longfin is still hosed because Hudson Bay Capital is either going to dilute everyone OR bankrupt the company.

But, because of the EPIC short position, there are some people that think if the company ever trades again — even on the Pink Sheets — we could see the MOTHER OF ALL SHORT SQUEEZES… given everyone has to BUY shares to close their short positions.

I know, I know, crazy but true… there’s a possibility that this halted, SEC sanctioned, all-but-bankrupt company could still be worth billions again — or tens of billions — even if for only a short period of time!

And, what about option holders?  Options have expiration dates… but the stock is halted… which means those positions can’t be closed out.  Such an expiration date — 4/20 — was yesterday, wiping out MILLIONS AND MILLIONS in trading profit.

To be SO RIGHT… and yet LOSE EVERYTHING!

But even that doesn’t tell the whole story.  Normally, option holders have the right exercise their options (and pay a hefty margin fee for the pleasure to do so)… but remember the stock is halted… and remember the extremely low number of shares in the public’s hands (that’s why the Russell index gave them the boot)… and finally remember the extreme short position in the stock… all of that means brokerage houses simply can’t get their hands on ANY shares.

Enter the OCC, the organization responsible for option fulfillment.  On 4/20 the OCC issued a memo saying it would offer brokerage houses “delayed settlement,” which essentially said, “we’ll let you exercise and it won’t count until the stock begins trading again.”

That sounds like the OCC has just rode in on a big, white steed and saved the day, right?  Uhm, maybe not.

First, not all brokers took the OCC up on their offer.  TD Ameritrade and Interactive Brokers did.  Schwab didn’t.

Second, you won’t really have a choice when to close out your position because participating brokers will buy-in or sell-out during the first trades possible.  And that’s going to be incredibly dangerous because the ONLY thing we know is that NO ONE knows what the heck LFIN will do when it resumes trading again.

SUMMARY:

LFIN turns a lot of what we know about investing on its head:

*  LFIN is essentially a washed out and/or bankrupt company that, through — and because of — absolutely normal investing mechanisms, could still be worth billions.

*  Investors that did the research and made the exact right investment call may lose everything.

Questions:

So now we’re all eagerly awaiting answers to some very specific questions:

—  How long will LFIN stay halted and will this wipe out even more options positions via expiration and/or the inability to exercise and/or the uncertainty of where the stock will open?

—  If it ever trades again, will the stock sky-rocket due to a massive, massive short squeeze and maybe even ignite a new feeding frenzy of momentum players?

—  Or will LFIN plummet because the company is essentially washed-out or bankrupt?

As the tagline of that famous tabloid magazine goes, “Inquiring minds want to know!”

(Whew!  If you stayed with me this long, bravo, you now have a front seat to a history-making trade!)

5/24/18 UPDATE:  After a long absence, LFIN started trading today… first on the grey sheets (where there is no market makers or bid/ask)… and later in the day on the pink sheets.

The answer to all the speculative questions above?  LFIN closed on April 6th at $28.19.  It opened today, May 24th, at $5.05.  I’d say that’s a big crash.

But, true to form, there just had to be some drama.

Since tickers report gains and losses off of the previous day’s results… and since LFIN was halted yesterday… tickers used the first trade today as the baseline.  Turns out LFIN closed today at $7.15… so to all the tickers out there — and many news outlets — it looked like LFIN jumped almost +42% (from $5.05 to $7.15)… even though it actually CRASHED almost -75% (from $28.19 to $7.15).

To the average investor out there, it looks like LFIN is off & running again… ugh!

 

Mark Zuckerberg, CEO and chairman of Facebook, just posted a good piece about this whole “data scandal.”

Not only does it appear that Facebook plugged up holes in their system years ago — as in, Facebook is not asleep-at-the-wheel…

… but Cambridge Analytica, the company accused of abusing the data, is categorically denying that any data was even used.

So it will be nice to find out the real story here.

With this said, the market is all about valuing in today what it thinks will happen tomorrow.

And in that regard, I think the market has overreacted about Facebook.

Because, regardless of what is actually discovered, the most likely fallout will simply be greater regulatory scrutiny… but not just affecting Facebook, but all ad platforms… and, in fact, all advertisers… which is essentially the entire business complex on the planet.

And, practically speaking, if something affects everyone, will it really affect anyone?

Businesses will still have to advertise.  Facebook will still control over 2 billion sets of eyeballs.  Unless we see a mass exodus from Facebook properties (Facebook, Instagram, WhatsApp, Oculus VR, etc), Facebook will still be raking in a lion’s share of ad dollars from advertisers desperate for any kind of targeting.

Honestly, I believe Facebook has more to fear from the changing generational preferences in sharing tools — as in, my friends use Facebook but their kids don’t — than they do from the government.

I’m still trying to figure out all this Facebook stuff.

Seems like everyone’s trying to figure out if whatever happened really did sway elections and destroy the democratic process as we know it.

Well, if it did, I guess no one cared when Obama and the democrats used Facebook data to help them win elections.

I’m just sayin’.

P.S.  If Putin did try to use social media to sway our elections, I wonder how he’s feeling about that now?  My guess is he’s probably thinking Hillary would have been a lot more predictable than Trump.  Good luck, Emperor Putin, trying to negotiate with a 4th grader!

On the 31st anniversary of “Black Monday” — where the Dow dropped 23% in one day — I have to share a great “sign of the times” quote.  I can’t find the source right now, but it went something like:

     ‘When the Dow drops 23% in one day, we call it “Black Monday.”  When Bitcoin drops 23% in one day, we call it Monday.’

;)

Last week was a helluva week:

Tariffs… almost every single person in the world screaming “THEY’RE BAD!”… yet, we have more of them now*

Quitting… Gary Cohn resigns as White House chief economic advisor… something to do with the working dynamic he had with Trump

More quitting… rumors that Trump is going to “clean house” re: his staff… after such a short time in office, that doesn’t seem quite right

Meeting… Trump and Kimmy of North Korea are going to meet… then conditions to meet seem insurmountable

Scandal… given Stormy Daniels developments, looks like Trump might have some ‘splain’ to do to Melania… and the American people

Campaigning… Trump is helping out some special election in Pennsylvania… and overtly reminds us what an immature, embarrassing, divisive 4th grader we have for a President

The market should have been roiled (I love saying that :)… but we had an interesting jobs report on Friday:  More jobs… which is good… but less pay… which apparently is also good (although it sounds counter-intuitive) because it keeps inflation in check… which may keep rising interest rates in check.

All of those things should have meant “off-setting penalties” (so to speak).  But instead we rallied sharply on Friday… almost like the market said, “who cares how screwed up our politics  are?!”

Feels more manic than normal to me.

 

*Disclaimer:  If the U.S. is really getting jerked around in international trade, then I like what Trump did.  (Here and here.)  Problem is always can you really believe Trump?

I just read something that had this quote in it:

But the government quickly mounted a propaganda push, blocking some articles and publishing pieces praising the party.

Is this a quote about the Trump Administration?

Nah, it’s just about, oh, CHINA TAKING A MASSIVE STEP BACKWARD AND ELIMINATING TERM LIMITS FOR THEIR DICTATOR, ER, I MEAN PRESIDENT.

But it’s telling — SCARY — that it’s exactly what the Trump Administration does.  EXACTLY.

 

P.S.  It’s also scary that Trump’s response was:

I think it’s great. Maybe we’ll give that a shot some day.”

People aren’t sure whether he was joking or not… it doesn’t matter… that’s something The President Of The United States — defender of the U.S. Constitution — doesn’t joke about in public… unless he wants to invite comparisons with a Chinese dictator!

Stocks were one of the things my dad and I enjoyed together.  He really got me started in trading.  I couldn’t wait for the morning paper so we could pour over — in 3-point type! — what the stocks we were following did the day before.

One of the stocks he followed — literally about 50 years ago — was Transamerica.  Probably best known for its office building (the Transamerica Pyramid in San Francisco, one of the world’s most iconic buildings), Transamerica was founded by A.P. Giannini… the guy who also founded the Bank of Italy… which turned into Bank of America… and the same guy that had his car designated as a firetruck so he could speed between business meetings.  (Now that’s intense!)

My little sister absolutely, positively believes that my dad still takes care of her from above.  She has dozens of examples of needing a bit of cash and then somehow magically finding some money in an old coat pocket, or getting a delayed commission check that she didn’t know she had coming, and so on.

I think I’m feeling a bit of that today, too.  I haven’t thought of Transamerica for a long time, and just today, I see a Transamerica ad… and, literally, I can’t remember ever seeing a Tranamerica ad… in fact, I wasn’t even sure the company was still in existence.

That, and the fact that IT’S MY DAD’S BIRTHDAY, makes me think my dad had something to do with the ADSK pop today.

Thanks, dad!  :)

 

 

Transamerica Pyramid

 

Trump is getting blasted for — all of a sudden — unilaterally — announcing he’s levying a 25% tariff on steel and 10% on aluminium.  Outside of the steel and aluminium industries, you’d be hard pressed to find anyone supporting his actions.  Heck, there are even executives within those industries that don’t support his actions.

I disclaimed in my previous post on this topic that I’m no expert on trade, but the more I hear about how the rest of the world treats us in trade, the more I continue to agree with Trump that it’s time to create a more balance playing field.

But now, I’m even liking the way he’s doing it.

Apparently many of the trade structures in place had their origins in the 40’s… for example, helping a war-torn Japan and Germany get back on their feet (and not repeating the mistakes of the aftermath of WWI), helping an embryonic China move into the modern world, and so on.

Huh?  That’s was about 80 years ago!  For the last decade I’ve watched — first hand — tech companies tip-toe around China… either burdened with requirements that make us non-competitive… or, worse, getting blocked altogether.

I’ve been writing about Autodesk recently.  It occurs to me that they can be, in fact, the poster child for this entire topic!

AutoCAD is the de facto standard technology tool for construction all around the world — except China.

Want proof?  While China is always a big topic in many companies’ earnings call, the word “China” wasn’t even mentioned in Autodesk’s last two earnings transcripts (here and here).

Why?  Because there’s a Chinese company called ZWCAD that makes an AutoCAD-clone product and guess which product the Chinese government wants sold in China?

A Chinese company, by the way, that was caught red-handed stealing AutoCAD intellectual property.

So I continue to be with Trump on this issue… and upon further reflection am happy he’s playing the “mad man” card and throwing it directly in their grill.

America is, after all, the world’s biggest market.  If we’re really getting taken advantage of, then it’s time we stopped getting taken advantage of.

I’m very surprised I’m about to say this — but maybe this one is within Trump’s wheelhouse:  His juvenile, bullying, play-ground antics may be the most effective way — may be the only way — to get everyone on the playground to play fair.

George, our closest of close friend, would have been 57-years young yesterday.  He passed 13 years ago today.

I can only imagine the hours and hours and hours of conversations we would be having… about politics (Trump!)… sports (Jimmy G!)… entertainment (Oscars!)… anything and everything.

George, my friend, you are missed.

This is the time where having atrophied social skills hurts.

No one wants a trade war.  That’s why there are a bunch of WTO (World Trade Organization) rules in place to make sure “free trade” doesn’t turn into “cheating trade.”

Now I’m no expert on trade, but we’ve all heard for years that other countries don’t play fair with the U.S.

I chalk up some of this to whinging.

Other countries processes may just be kicking our ass… that certainly happened in the auto industry… they just created a better product.

I always get a kick out of the subsidies debate, too.  We cry foul when other countries do it, yet didn’t the U.S. just bail out GM and a host of other “strategically important companies” just a few years ago?  Of course we did.

But some of it is real.

Other countries really do steal our intellectual property (i.e., our process and product inventions).  Tactically they’ll make it difficult for imports to enter their countries (i.e., port harassments and such).  And strategically they’ll artificially influence currency to be in their trade favor.

But, so what?

If Trump thinks rules are being broken, then why not use his formidable communications platform to expose these AND clearly articulate the ramifications — repercussions — for non-compliance?

That would be awesome… and something I’d be proud to support.

Instead, he went right to the “nuclear” option…

…and instead of inspiring productive, even patriotic “play fair or else” conversations, he just got everyone — even his supporters — all riled up, talking about trade wars, and running around like chaotic and contrasting chickens with their heads cut off.

That not only roiled the markets but, more importantly, DISTRACTED FROM HIS MAIN MESSAGE.  Which is a shame because it was a reasonable one.

Open mouth.  Insert foot.

Autodesk (ADSK) has its earnings call next week.

Recently Caterpillar (CAT), John Deere (DE), and The Home Depot (HD) all nicely surprised to the upside.  Could these proxies bode well for ADSK, too?

While the market was down today, ADSK was actually up most of the session and only dipped as the Nasdaq took a dive toward the close.  I think this show of strength is a positive sign as well.

I get that ADSK is expensive, in transition, etc., etc. But I used to compete against AutoCAD. They own the market.  Actually, they own a few markets, including general CAD and Hollywood animation stuff.  Both construction and Hollywood are on fuego, yet more positive indicators.

I also get that ADSK stumbled after their last earnings call.  From an all-time high, the stock tumbled some 20%.

As best as I could determine, though, it was a series of items blown out of proportion that stung them.

For example:

* They announced a layoff, which always sounds bad.

But when you listened to the conference call (and subsequent CEO interview), the layoff wasn’t a, “we’re doing badly” kinda layoff, rather, it was a, “we’re changing our business model from product to subscription so that’s going to streamline our infrastructure” thing.  In other words, it sounds like good, proactive management.

* ADSK had a few less subscribers than expected, and they lowered the top end of their subscriber projections from 675K to 650K, which also sounds bad.

But people didn’t want to hear the reason why: Because they’re finding that each subscription is worth more than they thought.

I thought the CEO was very open and positive about this… he said subscriptions is a relatively new thing for ADSK so they’re still learning how to project appropriately… and he immediately followed that up with something to the effect that while they guessed subs a bit too high (in actuality off by less than 3%), they guessed a bit too low on the value of each subscription (sub revs were up over 105.6%), which the CEO (and I!) thought was a perfectly fine trade-off.

Note they kept the low end of the range (625K) intact, which I think is also a good sign (i.e., nothing is “crumbling”).

* The headlines were wrong! Investors.com said, “… delivered disappointing fiscal third-quarter results and guidance”… yet, they beat on both the top and bottom lines and revised guidance upwards. I firmly believe that — in the rush to get out news — if the starting headlines are wrong, unfortunately everyone follows suit… in these days of instant news, there simply isn’t time to properly analyze.

Of course I’m trying to read tea leaves here… but I think ADSK could see an earnings pop… maybe amplified by what I believe was an overdone (erroneous?) pounding after last earnings release.  We’ll see next week!

 

3/7/18 UPDATE:  ADSK REPORTED EARNINGS YESTERDAY AND TODAY WAS UP ALMOST 15%.  :)

 

In June of 2016 I had the sad responsibility of taking Warrior Klay Thompson to task for wearing a f***ing Dodger hat to a Giants game.  (Here.)

Klay was there supporting his brother Trayce, who was playing for the f***ing Dodgers.  I love brotherly support, but he could have supported his brother without disrespecting 3/4’s of his fan base.  Case in point:  Steve Kerr, a big f***ing Dodger fan, was also at the game, but Steve was professional and respectful enough — i.e., wasn’t a clueless moron — not to wear f***ing Dodger blue at AT&T Park.

Over the few years, my resentment hasn’t diminished.  While I root for the Warriors, I don’t actually root for Klay any more… which makes me a bit sad since he has always seemed like a nice guy and great role model.  Unfortunately, it’s a “… other than that, Mrs. Lincoln, how did you enjoy the play” thing for me.

I heard something last night, though, that made me LAUGH OUT LOUD.  Apparently the Dodgers may release Trayce Thompson… and guess who might pick him up?  THE GIANTS!  HA HA HA, TRAYCE IN A GIANTS’ COLORS… TAKE THAT THOMPSON TWINS!

If and when Klay wears a Giants cap to a Giants game… then I will accept his apology.

That will be perfect.

I’ve often said that running a company with too little money is easier than running it with too much money.

I know that may sound counter-intuitive.  But not having money sharply clarifies what is important and forces you to focus on just the critical priorities.

In contrast, when you have too much money, the world is your oyster (so to speak)… so everything is possible… so most of the time you end up trying to do everything… regardless of how important — or unimportant — it is to the mission.

I believe that’s the problem with our military spending.  We have too much money.  We already can bury every other country in the world with thousands of nukes… yet we feel like we need to spend more… because… we can…

… because all we have to do is just rack up some more deficit spending.

What does this mean in terms of dollars and cents?  Way over half of our government’s discretionary spending goes to the military!

If that number was way smaller, I guarantee you that we’d get a lot more done simply by being forced to focus on our top priorities.

Whether you like him or hate him, Senator Rand Paul (KY) recently wrote an interesting piece that touches on this, entitled, Is Our Military Budget Too Small, Or Is Our Mission Too Large?  It’s short and well worth the read (underlining is my emphasis):

     Is our military budget too small, or is our mission too large?  Since 2001, the U.S. military budget has more than doubled in nominal terms and grown over 37% accounting for inflation. The U.S. spends more than the next eight countries combined.

It’s really hard to argue that our military is underfunded, so perhaps our mission has grown too large. That mission includes being currently involved in combat operations in Iraq, Syria, Afghanistan, Somalia, Niger, Libya, and Yemen. We have troops in over 50 of 54 African countries. The wars in Iraq and Afghanistan have cost over a trillion dollars and lasted for over 15 years.

Unfortunately, none of these wars have been authorized by Congress, and Afghanistan and Iraq have gone far beyond their original authorizations. And when all combined, these wars are draining our treasury. A country can only remain strong as long as it remains solvent.

In Afghanistan, we spend about $50 billion each year. Where does the money go? For troops and weapons, of course, but billions have also been spent on roads, bridges, and schools for Afghanistan. Seems a shame that bridges, roads, and schools crumble here while we persist in nation-building abroad. Maybe it’s time to do some nation-building at home.

Don’t get me wrong. I supported going after the jihadists who attacked us on 9/11. But that mission is long past over. We killed the plotters and their supporters. The question we need to ask is, “When will the Afghanis be able to defend themselves?”

Most conservatives believe welfare should be temporary, and that ultimately the able-bodied must stand on their own. Foreign assistance is no different. If the U.S. coddles and comforts and does all the fighting, the Afghanis will never become self-sufficient. People argue that the Taliban will take over Afghanistan. Not if the Afghanis stand and fight. We’ve given them 15 years of training and billions of dollars of the most sophisticated weapons known to man. Surely, the time for them to step up and fight is now.

Is it worth one more American life to try to build a nation for people unwilling to fight for their own country?

The recent 21% increase in the military budget will buy a lot of weapons, but it won’t win the war in Afghanistan. President Obama already tried that. Obama increased our troops to around 100,000, and, sure enough, the Taliban ran and bided their time for the inevitable troop withdrawals.

The Taliban now controls a sizeable area of Afghanistan. I just can’t, in good conscience, ask our soldiers to go back to Afghanistan to take back the same villages they’ve taken twice, first in 2002 and then again in 2010.

Candidate Trump wisely ran on a platform that the Iraq War was a mistake. But President Trump is surrounded by Generals who’ve never seen a war that they believe cannot be won. And so the wars continue.

My hope is that President Trump will remember Candidate Trump and tell the Generals who surround him: “Enough is enough. I’m bringing the boys home.”

 

And, I would add, “… so we can stop spending so much money on non-prioritized military stuff… so we have a hope of balancing our OUT-OF-CONTROL deficits!”

 

I know what you are going to think, “just take all guns away and that will stop high school gun violence.”

That’s not what I’m going to say.

Information is the key.

Certainly the community can chime in more… maybe someone heard something or saw something on social media?  I’ve always said “people on the front lines” (whether employees or students) know the most about what’s really going on.

But how do parents fit into this?  In fact, how does a parent with a troubled child know when to ask for help… or even when to turn their child into the authorities?

Most likely a parent in this situation already has their hands full just dealing with a difficult child… imagine how gut-wrenching it would be to make the leap from acknowledging your child is not only difficult but potentially a killer!

Stigma aside, I’m not sure how many parents would be so quick to make that leap… especially in this day & age where violent video games are not just standard fare but celebrated. In other words, what really is normal these days?

What I think we may need — what I think the entire country may need — is some kind of standardized “Child Assessment Test”…

… i.e., some kind of simple, multiple choice test that a parent can honestly fill out and in return get an honest, professional, and *anonymous* psychological appraisal of a child’s mental health as it relates to the potential for mass violence and such.

Having such an assessment might give a parent confidence that they are not acting alone, which would be a tremendous burden lifted.

A website could be setup with a conversational FAQ that could help answer frequently asked questions about the surveys, designed to further advise a parent whether they should seek more immediate guidance to prevent a dangerous situation to others or even the child themself.

Maybe there’s already such a thing?  If not, I think we may be reaching the point where it’s needed.

P.S.  Taking guns away from crazy people — whether student or adult — is a good thing to do, too!

For some reason, I thought shale was invincible… that is, a technology-enabled, found source of additional oil for many decades into the future.

But I just read a ZeroHedge piece — The Shale ‘Miracle’ & The Reality-Optional World Of Bizarro Finance — and apparently shale isn’t going to be the grand savior after all.

The two original big shale plays, the Bakken in North Dakota and the Eagle Ford in south Texas, have now apparently peaked and the baton has passed to the Permian Basin in west Texas. If the first two bonanzas were characteristic of shale, we can look forward not very far into the future when the Permian also craps out. There are only so many “sweet spots” in these plays.

The unfortunate part of the story is that the shale oil miracle only made this country more delusional at a moment in history when we really can’t afford to believe in fairy tales.

Let’s not give up on renewables quite yet!

 

Last week was quite a ride on Wall Street.  Unbelievably, the Dow traveled 22,253 points in one week — approaching 1x its own index value — I’d say that’s the definition of a wild ride!

Dow Travels 22,253 Points

Everyone is speculating about the trigger.

Other than the obvious reason — which is healthy markets aren’t supposed to go up 100% of the time like we have — two factors seem to have kicked things off.

One had to do with a short squeeze on an ETN (Exchange Traded Note) that tracks the inverse of volatility.  The issue itself was rather harmless in that it did not directly affect underlying securities like some ETFs (Exchange Traded Fund) can.  What wasn’t harmless, though, was it is a leveraged asset… which meant when the pendulum swung, it caused a pretty big short squeeze… which meant that people probably had to sell other assets — like stocks — to cover.  So, ultimately, it’s plausible that these did have some affect in the market last week… selling pressure is, after all, selling pressure.

The other — which people consider the bigger culprit — was a reported surge in hourly earnings reported in last Friday’s (2/2/18) jobs report.  While that signals a healthy economy, which of course is good for the stock market, it also signaled that interest rates might start rising… which, ironically enough, is actually historically good for the stock market, too, at least during the initial rising phase.

But, in last week’s case, people got flat out freaked out.  Hence, the wild ride.

But, it appears that no one asked why hourly earnings surged.  From ZeroHedge:

Well, not so fast, because as a closer look at the data reveals, the only reason why average hourly earnings rose, is because the total weekly hours worked posted a relatively steep decline, dropping from 34.5 in December to 34.3 in January, a 2.9% drop from the 34.4 last January.

What economists (and Wall Street analysts!) should care about is actual earnings power… and average weekly earnings actually declined from December to January.

Seems like no one wanted to let facts get in the way of a good panic.

 

P.S.  Investor sentiment is always the biggest wild card in the deck.  But, weekends are good circuit breakers in that regard.  More and more folks are coming to the conclusion that a lot of what is underpinning the market is still intact.  Readers of my blog know I track the price of oil… and oil has not only been behaving, but has been declining… which I believe bodes well for spending… which bodes well for corporate profits… which bodes well for the market.

I’m a big Jimmy G. fan… as is everyone in the Bay Area.

However, I can remember being a big Colin Kaepernick fan as well… as it seemed everyone was in the Bay Area, too.

And why not?  Kaep ran wild against the mighty Packers in a playoff game.  He — single-handedly — was reinventing the quarterback position.  He brought us to Conference Championships and even the first Super Bowl in many years… came within a whisper of winning it, too.

I even remember a friend posing the ultimate question:  “Would you rather have an aging Aaron Rodgers leading your team into the future… or a fresh disruptor like Kaep?”  I remember at the time it feeling very much like a toss up.  Rodgers already had one MVP under his belt, but it is impossibly to deny that we were all still punch-drunk with Kaep’s u-n-l-i-m-i-t-e-d  p-o-t-e-n-t-i-a-l.

So, when everyone asks, “what could possibly go wrong with making Jimmy G. the highest-paid football player in the league after only starting seven games?!” it’s hard not to think we were all feeling just as giddy about Kaep at one point…

… a feeling that seemed to go away as fast as it came.

P.S.  With that said, I want to say for the record that I was one of the fans at this year’s incredible Niners-Titans game screaming, “Let Jimmy kick!  Let Jimmy play D!  Let Jimmy coach!”  Certainly seems like he can do anything he puts his mind to on a football field.  :)

I remember the first Gulf War back in 1991.  The entire world was freaked out, including — especially — the financial markets.

Yet, the day we attacked, the Dow had one of its best days ever.

I remember hearing the phrase, “flight to quality.”  That is, when the going gets scary, the smart move to safe and trustworthy investments.

On that January 18th day back in 1991, it was IBM that people flocked to… IBM being, back then, the most important tech company on the planet.

Over the last few days, it’s been AAPL.

I think this puts a lot of the nitpicking criticisms of AAPL in appropriate perspective:  When the going is tough, the tough don’t hesitate to flock to Apple.

Lots of downgrades for Apple over the last few weeks.  The stock was spooked from a $180 level just two weeks ago to around $166 today.

It has nothing to do with the holiday quarter that Apple is going to report on tomorrow after the market’s close… that, people believe, will come in at record levels.

No, it has to do with how the iPhone X is selling this quarter.  Channel checks with suppliers indicate Apple is slashing its expectations of iPhone X sales this quarter… by as much as half

… which certainly seems like a huge let down given that the iPhone X is supposed to be the flagship product and the first iPhone to crack the $1,000 price barrier.

But… come on, people… did you really think a $1,000 iPhone X should sell in consumer numbers?  It’s not supposed to be a volume leader… rather, it’s supposed to be something exclusive and, quite frankly, unattainable for many.

That’s the whole point… to have a high-end iPhone entrant that (1) makes the device/technology more desirable, and (2) contributes in some way to an even higher overall iPhone family “ASP” or Average Selling Price (which is already the highest in the industry).

My guess is — since there are no negative reports on the iPhone 8 — that it’s not only selling well, but making up for any short-fall from the iPhone X… after all, if they’re not buying an iPhone X, they’re buying one of the other not-so-cheap models.

Additionally, don’t be surprised if some of Apple’s “smaller” businesses — like cloud & other services — make meaningful contributions, too.  Even the analysts that have raised flags on the iPhone X agree that last quarter should be pretty spectacular for the company.

And, finally, I always have to throw in the irrationality of the market:  Apple, one of the most stellar tech companies in the world according to any measure (even growth), has a P/E of 14.2 forward earnings… while the average company in the S&P 500 has 18.6.  If you’re looking at tech leaders, Google has a forward P/E of 28… and Amazon has — wait for it — 168.  Go figure.

AAPL has been beaten down so much by negative sentiment in the last few weeks that I think we might have a nice setup for a pop after earnings tomorrow.

At least, that’s what the contrarian in me thinks.