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The FAANG-nary In The Coal Mine

The long-awaited breakdown in sentiment is finally here
Friday, July 27, 2018, 6:48 PM

Two weeks ago, I issued a report to Peak Prosperity's premium subscribers, warning of an immiment downwards re-pricing of the FAANG stocks. I even made a rare recommendation for taking an active short position against them (one now up 18%).

That report proved quite timely. Over the past 10 days:

  • Netflix (NFLX) is down 10% after issuing disappointing subscriber growth and Q3 guidance
  • Facebook (FB) is down 20% after  delivering lower user and revenue numbers than the Street was expecting
  • Amazon (AMZN) is flat despite posting blowout Q2 EPS, offset by a revenue miss
  • Google/Alphabet (GOOGL) has managed a meager 3% rise, as earnings & revenue beats were tempered by rising costs and a record $5 billion EU anti-trust fine

This sudden weakness among key FAANG members is extremely significant. Much more so than most investors realize. » Read more

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Off The Cuff: Moral Hazard

The culprits (banks & corps) are protected from their crimes
Friday, July 20, 2018, 12:43 PM

In this week's Off The Cuff podcast, Chris and John Rubino discuss:

  • Moral Hazard
    • We've unwisely insulated the banks from the repercussions of their actions
  • The Protected Class & Rising Populist Anger
    • In many ways, the elite today are above the law. And public resentment is brewing.
  • Global Debt Is Accelerating
    • Wherever the breaking point is, we're now going to hit it sooner
  • The Coming Tech Wreck
    • Faith in the FAANGs is higher than ever. That's dangerous.

By insulating the players from the consequences of their actions, we've created the incentive to take extreme risk in the puruit of extreme profit. Why shouldn't the banks manipulate the system if their worst punishment is a weak slap on the wrist?

Click to listen to a sample of this Off the Cuff Podcast or Enroll today to access the full audio as well as all of PeakProsperity.com's other premium content.
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The Case For Starting To Build A (Small) Short Position

Why I just took on a new short trade in my portfolio
Tuesday, July 10, 2018, 3:01 PM

So, we're in the midst of (yet) another rally in the markets. But this one feels different...

For those sitting on large cash positions, it's increasingly looking like the long-overdue and long-awaiting end to the secular bull market may indeed arrive this year.

There is NOTHING wrong with remaining 100% in cash and simply letting your cash appreciate realtive to stocks/bonds/etc when the correction hits.

But, if you want to have some upside exposure to the correction, now is a good time to consider how much of your portfolio to allocate to that strategy. And what to put it in. And to start putting small positions in place.

Technically, it continues to look like something broke at the start of 2018. The ruler-straight run-up in the major stock indeces seen over the past decade suddenly stopped as the year began. Since then, we've seen more price volatility than in the past several years combined.

And despite the most recent price action, both the Dow and the S&P 500 remain below their all-time-highs set in early January. And while the NADAQ is now higher, there are many reasons to be concerened about its ability to rise much further -- a rationale I'll lay out shortly below.

Technical Red Flags

This latest rally is rising two important red flags.

The first is volume-related. This most recent rally has occured on exceptionally low volume, near the lowest levels seen over the past year.

This indicates that the optimism represented by today's buyers is not widespread across market participants (i.e., there's not a horde of buyers eager to keep pushing prices higher). This hints that the rally may soon run out of steam.

Low volume driving a rising market also suggests fewer buyers willing to step in to defend today's price levels if they start falling.

The second warning sign is that we're seeing Rising Wedge formations appearing in the major equity indices as we see in this chart... » Read more

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Off The Cuff: The Bond Market Will Have A Rude Awakening Soon

Higher interest rates will unleash a world of trouble
Thursday, February 22, 2018, 8:54 PM

In this week's Off The Cuff podcast, Chris and Wolf Richter discuss:

  • The Coming Rude Awakening For Bonds
    • Spiking yields are about to crash prices
  • Multi-TrillIon Dollar Deficits
    • The US is spending much more than it admits to
  • Kryptonite For The Housing Market
    • Higher interest rates & unfavorable tax code changes
  • Pension Woes
    • Most pension plans will soon be in a world of pain

Chris and Wolf marvel at the bond market's apparent indifference so far to rising rates. Rising rates, of course, mathematically mean bond prices should lower -- but that hasn't happened much yet. With the 10-year Treasury nearly at 3% now, that resistance can't last for long. Especially if the Fed proceeds with its declared program of quantitative tightening this year.

Wolf explains the ticking time bond in the bond market thusly...

Click to listen to a sample of this Off the Cuff Podcast or Enroll today to access the full audio and other premium content today.
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I Just Added To My Short Position

Keeping you updated on my portfolio positioning
Wednesday, August 16, 2017, 2:01 PM

Last year, I detailed out my personal investments in the report How My Portfolio Is Positioned Right Now. It turned out to be one of our most popular articles over the past few years.

In it, I mentioned that I'll do my best to update our subscribers when I make a material change to my portfolio allocation.

Well, I just did. » Read more

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Why The Markets Are Overdue For A Gigantic Bust

It's just not possible to print our way to prosperity
Friday, June 9, 2017, 7:38 PM

As much as I try, I simply cannot jump on the bandwagon that says that printing up money out of thin air has any long-term utility for an economy.

It's just too clear to me that doing so presents plenty of dangers, due what we might call 'economic gravity': What goes up, must also come down. » Read more

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Observations From The Heart Of Silicon Valley

The calm before the storm?
Thursday, May 19, 2016, 8:11 PM

Yesterday I made the 2-hour drive back to Silicon Valley, where I lived for 15 years before moving out to the country.

I rarely go back, as I miss very little about the hyper-elite scene there. When I do, though, I feel I have a useful 'insider-now-outsider' perspective that allows me to see things there more accurately than those who live in that fishbowl 24/7.

What hit me most strongly upon arriving back in the Menlo Park/Palo Alto area, is how little of the craziness has changed since I left 4 years ago. I don't mean 'unchanged' though; rather that the same craziness is there, just more extreme than ever. » Read more