Weekly Cycle: Market Outlook for 06.11.2018

Weekly Cycle: Market Outlook for 06.04.2018

Each week, we review the stock market using a specific set of information sources in order to cut through the noise generated by media publishing attention grabbing headlines. Weekly updates give e the opportunity to play trends while not overreacting on a daily basis.

 

“In our ordinary state of mind, we can only achieve ordinary things. All success comes from the ability to transcend routine”

The Unappreciated Key to Success
Brett Steenbarger, Ph.D. TraderFeed1

 

Market Performance

Performance of a handful of macro indexes, as well as index and ETFs on specific sectors of particular interest. 

Observations:

  • Homebuilders Index [$XHB] up 4% in last week
  • Tech [$QQQ, $HACK, $CQQQ] all up over 25% over last year
  • VIX “only” up 8% vs 1 year ago, which is surprising given the narrative of market volatility

 

Technical Indicators

Based on data and info from TradingView (Click for 30% off a pro subscription)

Scores based on the cumulative total of positive and negative technical indicators signals over three time horizons on Trading View. Scores are weighted by multiplying total as follows: daily (x 1) weekly (x 2), and monthly (x 3). 

Observations:

○ $SPY, $VTI still look strong
○ $MJ looks much improved fr
○ Emerging markets $VWO and $BKF much improved
○ $VIX has dropped significantly since a week ago

 

OldProf’s Risk Analysis

Each week, at the Dash of Insight blog, OldProf takes a look at a variety of sources to gauge overall market risk on both a short and long-term basis. He tracks a handful of indexes, economic indicators from respected sources, and volatility indicators. His weekly updates include a discussion of events with potential to effect markets, as well as general insight. Highly recommended reading.

This week, OldProf writes that “Short-term trading conditions continue at favorable levels, much improved from the month-ago data“, much improved from the month-ago data.”

“The market reaction suggests that most agree with my assessment: It is a problem, but not an immediate problem.2

 

StockTrader Recap

Mark Hanna publishes a weekly Market Recap full of charts and insight on news and market trends at StockTrader.

This week, Mark writes:

“Last week was much like the ones we saw throughout 2017! Up, up, up nice and slow… with little volatility.”

“Short term: The S&P 500 finally broke out of this range marked in yellow.”3

 

Articles of note

—-

“odds of a positive May – October are only slightly below the odds of a positive return from November – April”

Buy in May and Stay Invested
Charlie Bilello pensionpartners.com

“the returns from May through October are still positive, with the average May-October up 3.9% and the median up 5.3%4

 

“Uber has the biggest advantage of all: the millions of people who already have the app”

The Scooter Economy
Ben Thompson Stratechery by Ben Thompson

“What is striking about dockless scooters — at least when one is parked outside your door! — is that they make ride-sharing services feel like half-measures: why even wait five minutes, when you can just scan-and-go?
5

$WMT looking ahead – “IBEF projects ecommerce sales in India to surpass the U.S. by 2034”

What the Walmart-Flipkart Deal Means for India
Manish Dudharejia Practical Ecommerce6

“Fox News manipulated the most vulnerable people in America to the most powerful drug cocktail ever: Visceral gut feelings of existential outrage”

FEAR & UNbalanced: Confessions of a 14-Year Fox News Hitman
Medium

“Well it’s obvious now: Partisan conservative politics staged and acted out as performance art was Roger’s “gift” to America. Above all else, Roger understood and practiced the concept of “culture trolling” before the term “trolling” ever became commonly used.
7

“Each fatality of a self driving car will cut the number of VC’s likely to invest in #AI by half”

AI winter – Addendum
Piekniewski’s blog

“Same for every AI startup that quietly folds down. At the same time those who already heavily invested, will be pumping the propaganda while quietly trying to liquidate their assets. It is only once there is nobody to buy this, which is long after seed financing had dried out, when the AI winter becomes official.8

$SPLK will “deliver a “platform of engagement” that combines event management, monitoring, on-call management, and ChatOps.”

Splunk to acquire DevOps incident management platform VictorOps for $120 million
Paul Sawers VentureBeat
9

 

 

 

 

 

  1. http://traderfeed.blogspot.com/2018/06/the-unappreciated-key-to-success.html
  2. https://dashofinsight.com/weighing-the-week-ahead-do-individual-investors-face-a-pivotal-decision/
  3. https://www.stocktrader.com/2018/06/11/weekly-market-recap-jun-10-2018/
  4. https://pensionpartners.com/buy-in-may-and-stay-invested/
  5. https://stratechery.com/2018/the-scooter-economy/
  6. https://www.practicalecommerce.com/walmart-flipkart-deal-means-india
  7. https://medium.com/@tobinsmith_95851/how-roger-ailes-fox-news-scammed-americas-la-z-boy-cowboys-for-21-years-1996ee4a6b3e
  8. https://blog.piekniewski.info/2018/06/06/ai-winter-addendum/
  9. https://venturebeat.com/2018/06/11/splunk-to-acquire-devops-incident-management-platform-victorops-for-120-million/

Weekly Cycle: Market Update 05.29.2018

You can’t do the same things that other people are doing and expect to outperform them. When you do what everyone else does, you’re going to get the same results everyone else gets. But it’s not enough to be different — you also need to be correct

Second-Order Thinking: What Smart People Use to Outperform – Farnam Street Blog

Market Outlook Update for May 29, 2018

Each week, we review the stock market using a specific set of information sources in order to cut through the noise generated by media publishing attention grabbing headlines. Weekly updates give e the opportunity to play trends while not overreacting on a daily basis.

Market Performance

Performance of a handful of macro indexes, as well as index and ETFs on specific sectors of particular interest. 

Observations:

○ Volatility [VIX] has risen considerably in the last week
○ SPY and VTI have dropped slightly over last week, remain positive for last 30 days
○ Financials [VFH] and [MJ] performed worse over past week
○ Homebuilders [XHB] performed strongly over past week

Technical Indicators

Based on data and info from TradingView (Click for 30% off a pro subscription)

Scores based on the cumulative total of positive and negative technical indicators signals over three time horizons on Trading View. Scores are weighted by multiplying total as follows: daily (x 1) weekly (x 2), and monthly (x 3). 

Observations:

○ Indicators for SPY and VTI have dropped and remain positive over longer term
○ QQQ, HACK signals remain very strong
○ Signals for international markets [VEA, VEU] turned significantly worse
○ VIX has turned significantly more positive, which indicates a signal towards increased volatility

OldProf’s Risk Analysis

Each week, at the Dash of Insight blog, OldProf takes a look at a variety of sources to gauge overall market risk on both a short and long-term basis. He tracks a handful of indexes, economic indicators from respected sources, and volatility indicators. His weekly updates include a discussion of events with potential to effect markets, as well as general insight. Highly recommended reading.

This week, OldProf writes that Short-term trading conditions improved dramatically.”

He also writes that this week is a very busy week for economic news this week and believes many will be wondering it it’s still worth listening to. Our typical preference is to ignore headlines about what might happen and instead react to what we see happening.

There is an avalanche of economic news in the shortened week ahead. While this will provide plenty to talk about, I expect many to be asking:

Should investors basically ignore the daily geopolitical news?

The Pundit-in-Chief commented that the market is getting it wrong every day, mistakenly trying to trade every swing in the news flow.

Art Cashin observed that traders seem to be learning a pattern. Aggressive statements by world leaders, including the Trump Administration, followed by more moderate policies. Art sees this understanding as part of the recent reduction in volatility.

StockTrader Recap

Mark Hanna publishes a weekly Market Recap full of charts and insight on news and market trends at StockTrader.

This week, Mark writes that it was “The second week in a row of low volatility which is usually advantage bulls” and goes out to point out positive signs in the Nasdaq.

“Short term: The S&P 500 is consolidating while the NASDAQ tipped its head over this trend line connecting highs of the year.

Long term: Still very positive for the “buy and never sell” crowd.”

Technical Analysis Update

Hacked (subscription-only) publishes a weekly technical update on U.S. indices with a weekly analysis of the S&P 500, NASDAQ, and DJIA, as well as a general market outlook. Other posts include trade recommendations (stocks, crypto & forex markets), worldwide-market updates, ICO analysis, and much more.

This week, Hacked has not yet posted an update.

Articles of note

“Real Bear Markets, “The Big One” we hear so much about today is what produces excruciating, prolonged equity market declines. They have recessions attached. There is no sign of that I can find today. None.”

If You Want To See Bears, Go To The Zoo
Lloyd Clucas Seeking Alpha

“In my view we are experiencing a global economic “dead-cat bounce”. That worked for ’17 and should suffice for 2018. I hope it will be longer. But hope is not an investment strategy. Earnings have turned up and are accelerating again. How long? I have no idea. But you take what is there. [If you don’t, you can have tea with John Hussman or Jeremy Grantham.] And earnings are looking good for 2018. The tax cut for corporations is a big deal for 2018. It pushed up central value for many companies and hiked this year’s earnings estimate growth materially.”
1

“Now, with public and private funding flowing into Chinese start-ups, entrepreneurship has become an appealing alternative for a generation disillusioned with the conveyor-belt career paths of their forebears.”

How China’s Tech Revolution Threatens Silicon Valley
Alec Ash The Atlantic

“The tech revolution in China is ubiquitous in urban life. I use the messaging app WeChat for work calls and vacation bookings. I pay for a cup of coffee or a ride in a car with a scanned QR code on my phone. I go to work at a rented desk in an “experimental life space” called 5Lmeet, built in an old soy-sauce factory, which offers pop-up cuisine, a cashless, staffless convenience store, and an office space, the entrance gate to which uses face-recognition software to let me in. Every time I come out of a subway stop in Beijing, I have to fight through a mass of the cheap, rentable bicycles that have transformed transportation in the city. Dai Wei, the CEO of the leading bike-rental firm, Ofo—reportedly valued at $2 billion—is 27 years old.”
2

“Amazon had lowered prices at Whole Foods by an average of 5% over the last year. ”

Shopping at Whole Foods is finally a good deal—if you have Amazon Prime
Alison Griswold Quartz

“On May 16, Amazon announced that Prime members could get an extra 10% off sale items by downloading the Whole Foods mobile app, signing in with their Amazon account, and scanning a code at checkout. The “member deals” are available now at Whole Foods in Florida and will begin rolling out to the rest of the US this summer, Amazon said”
3

From 4 years ago and still a great read on common knowledge and where to look for big challenges

When Does the Story Break?
Epsilon Theory

” I believe that public markets today are essentially hollow, as what passes for volume and liquidity is primarily machines talking to other machines for portfolio “positioning” or ephemeral arbitrage rather than the human expression of a desire to own a fractional ownership share of a real-world company. I believe that today’s public market price levels primarily reflect the greatest monetary policy accommodation in human history rather than the real-world prospects of real-world companies. I believe that the political risks to both capital market structure and international trade (which are the twin engines of global growth, period, end of story) have not been this great since the 1930’s. Simply put, I believe we are being played like fiddles. That does NOT mean, however, that I think anything has to change next week … or next month … or next year … or next decade. The human animal is a social animal in the biological sense, and as such we are cognitively evolved to maintain our beliefs and behaviors far beyond what is “true” in an objective sense. This is, in fact, the core argument of Epsilon Theory, that there is no such thing as Truth with a capital T when it comes to the institutions and the social organizations that we create. There’s nothing more “natural” about our market behaviors than there is around, say, our fashion behaviors … the way we wear our clothes or the way we cut our hair. For 150 years everyone knew that everyone knew that gentlemen wore wigs. This was the dominant common knowledge of its day in the fashion world, absolutely no different in any way, shape or form than the dominant common knowledge of today in the investing world … everyone knows that everyone knows that it’s central bank policy that determines market outcomes. And this market common knowledge could last for 150 years, too.”
4

“This is ultimately the most important distinction between platforms and aggregators: platforms are powerful because they facilitate a relationship between 3rd-party suppliers and end users; aggregators, on the other hand, intermediate and control it.”

The Bill Gates Line

Ben Thompson Stratechery

“Third — and this is the point of this article — what Yelp seems to want will only serve to make Google stronger”

“it is suggestive of further growth in the year ahead and this should be positive for stocks, all else being equal.”

Only The Good News
David Templeton, CFA The Blog of HORAN Capital Advisors

“The purpose of this post is to highlight a number of the positive data points that one would expect to see in a strong economic environment like we are in now”

Our Take

Volatility has increased today after a few weeks of relatively low volatility. It’s still best to ignore more headlines as there appears to be more headlines than real changes.

We’re remaining mostly invested and believe there are short term opportunities. Risk has increase greatly from a year ago though no obvious reason for a general market downturn on the horizon, historically speaking.

Weekly Cycle: Stay Vigilant

In 1974, near the peak of his fame, Paul Simon started taking music lessons.

Even the best don’t know what will l happen next, and it pays to stay vigilant.

Stock Market Outlook 05.14.2018

Each week, I review the market using a specific set of information sources to gauge the stock market rather than relying on headlines from news sources looking to generate attention. Weekly checkups give me the opportunity to spot trends, while not overreacting on a daily basis.

Index Performance & Technical Indicators

weekly cycle - stock market perfornace and technical indicator scores 05.14.18

Performance Observations
  • VIX is down over 11% over last 7 days
  • MJ (cannabis) up 5% in last week
  • Cybersecurity (HACK) is up nearly 15% over last 90 days
  • China Tech (CQQQ) up nearly 35% over last year
Technical Indicators Observations

Based on data and info from TradingView (Click  for 30% off a pro subscription)

Scores based on the cumulative total of positive and negative technical indicators signals over three time horizons on Trading View. Scores are weighted by multiplying total as follows: daily (x 1) weekly (x 2), and monthly (x 3). 

  • Trading signals have turned overwhelmingly positive for nearly all indexes on list
  • BKF (BRIC index), CQQQ (China Tech), MJ (cannabis) and VFH (financials) saw biggest positive changes
  • VNQ (Vanguare REIT index) has fallen the most
OldProf’s Risk Analysis

Each week OldProf takes a look at a variety of sources to gauge overall market risk on both a short and long-term basis. He tracks a handful of indexes, economic indicators from respected sources, and volatility indicators. His weekly updates include a discussion of events with potential to effect markets, as well as general insight. Highly recommended reading.

This week, OldProf short-term conditions have improved somewhat:

Short-term trading conditions have improved. The borderline rating was almost poor enough to take our trading models out of the market. A strength of our modeling approach (Thanks, Vince!) is a touch more patience than shown by many technical systems. This has a mild cost, and can reap great rewards. This week was a good example. We continue to monitor the technical health measures on a daily basis. The long-term fundamentals and outlook are little changed.

 

He also notes that the chance of a recession has increased to 25%. While not at a worrisome level, he notes:

That said, we watch this quite closely and plan to reduce position sizes if the risk grows much larger.

 

StockTrader Recap

Mark Hanna publishes a weekly Market Recap full of charts and insight on news and market trends at StockTrader.

This week, Hanna writes that after some worrisome consolidation, short-term conditions showed improvement late last week:

The indexes were looking a bit rocky the past few weeks, with a consolidation at lower levels with no real attempt at an upthrust — but the rally late in the week certainly helped prospects.   The bulk of weekly gains came Wednesday and Thursday but Thursday’s move up helped change the complexion of the S&P 500 and Russell 2000 charts which we’ll show below.

Short term: After a lot of consolidation at lower levels – which is a concern – we saw a reversal here late in the week.

Long term: Still very positive for the “buy and never sell” crowd.

Technical Update

Hacked (subscription-only) publishes a weekly technical update on U.S. indices with a weekly analysis of the S&P 500, NASDAQ, and DJIA, as well as a general market outlook. Other posts include trade recommendations (stocks, crypto & forex markets), worldwide-market updates, ICO analysis, and much more.

This week, Hacked’s outlook is “Short- and intermediate-term bullish”, which is more positive than the previous two weeks. Still, they warn “Short- and long-term bearish whenever S&P 500 and NASDAQ break their respective intermediate-term supports. Considered less likely in the short-term after this week’s price action.”

More info on in the weekly update.

Articles of note
The Projected Improvement in Life Expectancy

Bill McBride at Calculated Risk analyzed reports from the CDC and found some interesting facts on life expectancy:

Using these stats –for those born this year (in 2018) – more than two-thirds will make it to the next century.

Also the number of deaths for those younger than 20 will be very small (down to mostly accidents, guns, and drugs).  Self-driving cars might reduce the accident components of young deaths.

An amazing statistic: for those born in 1900, about 13 out of 100,000 made it to 100.  For those born in 1950, 199 are projected to make to 100 – a significant increase.   Now the CDC is projecting that 2,111 out of 100,000 born in 2014 will make it to 100.

When Intelligence Fails Miserably

Ben Carlson writes about how intelligence can backfire, citing two well known examples in Enron and Long Term Capital Management, and includes a few lessons that can apply on a much more micro level:

It’s easier to fool yourself with complexity. Complexity in business and investing makes it easier to game your own system. Enron and Long-Term Capital were run by extremely bright people who tried to implement complicated processes to run their business activities. And these complexities allowed everyone within the organizations to be fooled by randomness or turn a blind eye to what was going on.

Warner Sells Spotify Stock

Major record labels like Sony and Warner have sold off Spotify stock, and Bob Lefsetz believes it’s another example of short-term thinking, which nearly every company is guilty outside Amazon:

This is what’s wrong with the record companies, this is what’s wrong with AMERICA! The short-term thinking.

no one in corporate America is a builder other than the founder, they’re all custodians, looking to make their bonuses, playing to Wall Street.

Except for Jeff Bezos.

Tech’s Two Philosophies

Apple and Microsoft make tools for humans to use; Google aims to replace human processes, or so writes Ben Thompson in a great piece on the difference in philosphies among tech companies:

In Google’s view, computers help you get things done — and save you time — by doing things for you. Duplex was the most impressive example — a computer talking on the phone for you — but the general concept applied to many of Google’s other demonstrations, particularly those predicated on AI: Google Photos will not only sort and tag your photos, but now propose specific edits; Google News will find your news for you, and Maps will find you new restaurants and shops in your neighborhood. And, appropriately enough, the keynote closed with a presentation from Waymo, which will drive you.

This second philosophy, that computers are an aid to humans, not their replacement, is the older of the two; its greatest proponent — prophet, if you will — was Microsoft’s greatest rival, and his analogy of choice was, coincidentally enough, about transportation as well. Not a car, but a bicycle:

He notes Steve Jobs’ bicycle analogy, which I particularly like here at Bicycles&Blazers,

But fortunately someone at Scientific American was insightful enough to test a man with a bicycle, and man with a bicycle won. Twice as good as the Condor, all the way off the list. And what it showed was that man is a toolmaker, has the ability to make a tool to amplify an inherent ability that he has. And that’s exactly what we’re doing here.

Tesla is another company that appears to want to replace humans by doing the driving for them, especially compared to other companies offering self-drive assist features. Volvo requires drivers to go no more than ~10 seconds without touching the wheel using their self-drive feature.

Should our machines sound human?

Last week, Google held a presentation where they introduced Duplex, which can have human sounding conversations. The tech is impressive and it raises a number of concerns. Jason Kottke rounds up a few links on the subject and concludes:

For now, it’s probably the ethical thing to do make sure machines sound like or otherwise identify themselves as artificial. But when the machines cross the AGI threshold, they’ll be advanced enough to decide for themselves how they want to sound and act. I wonder if humans will allow them this freedom.

Final Thoughts

There’s been a lot of concern around the short-term market conditions recently. This week there’s an improvement among technical indicators and expert analysis.

 

Weekly Cycle: A negative turn?

Stock Market Outlook 05.07.2018

Each week, I review the market using my own set of information sources to gauge the market. While I’d prefer to be long-term investors and check the markets less frequently, I believe my skills in selecting enduring businesses for long-term success are lacking those of great investors.

Instead, I use a trend following strategy with regular weekly checkups for proper diligence. A weekly outlook provides relief from overreacting on a day-to-day basis, while still allowing for relative short term moves.

Index Performance & Technical Indicators

stock market technical indicators and performance 05.07.2018

Performance
  • S&P 500 (SPY) up slightly over last week
  • Cannabis (MJ) up over 10% over last 30 days
  • Tech (QQQ) up 3.5% in past week and 5.6% in last 30 days. Similarly, cybersecurity (HACK) is up over 6% in last 30 days.
  • VIX is 50% down over last 3 months and 50% up over last year
Technical Indicators

Based on data and info from TradingView (Click  for 30% off a pro subscription)

Scores based on the cumulative total of positive and negative technical indicators signals over three time horizons on Trading View. Scores are weighted by multiplying total as follows: daily (x 1) weekly (x 2), and monthly (x 3). 

  • Trading signals have turned overwhelmingly positive for wide, general indexes including SPY, VTI, VEA.
  • Tech index (QQQ) has improved significantly since last week
  • VIX has fallen further, with a negative score indicating bearish sentiment towards volatility
OldProf’s Risk Analysis

Each week OldProf takes a look at a variety of sources to gauge overall market risk on both a short and long-term basis. He tracks a handful of indexes, economic indicators from respected sources, and volatility indicators. His weekly updates include a discussion of events with potential to effect markets, as well as general insight. Highly recommended reading.

This week, OldProf indicates a negative turn for short term trading conditions, while the long-term outlook remains unchanged.

 

Short-term trading conditions have turned negative.

The long-term fundamentals and outlook are little changed. The long-term technical health is back to strongly bullish.

This comes despite genuine positive surprises in earnings reports:

Corporate earnings continue to exceed expectations. This is especially interesting because of the unusual pattern this quarter. Expectations were not reduced significantly before the reports. These are true surprises. FactSet calls it the highest beat rate since they began compiling data in 2008.”

He also discusses how volatility effects trading vs investing, mentioning:

if stocks declined another 14%, would it tempt you to buy? If so, get your shopping list ready. The forward P/E on the S&P 500 has gone from 18.6 to 16.

Most people focus on price, not value, so these “sideways corrections” often go unnoticed.

StockTrader Recap

Mark Hanna publishes a weekly Market Recap full of charts and insight on news and market trends at StockTrader.

This week, Hanna writes that short-term conditions have further worsened, with long-term conditions remaining positive.

The indexes continue to mark time range bound at lower levels (with moderately high volatility) which should be a concern for bulls until it changes. Unlike consolidation after a move up, this is consolidation after a selloff which is not usually bullish.

Short term: A lot of consolidation at lower levels. That is a concern for bulls. More tests of the 200 day moving average – also not great.

Long term: Still very positive for the “buy and never sell” crowd.

Technical Update

Hacked (subscription-only) publishes a weekly technical update on U.S. indices with a weekly analysis of the S&P 500, NASDAQ, and DJIA, as well as a general market outlook. Other posts include trade recommendations (stocks, crypto & forex markets), worldwide-market updates, ICO analysis, and much more.

This week, Hacked’s outlook is “Neutral with a bullish bias”, which is more positive than last week’s “bearish bias.” There’s short and long term concern if SPX and QQQ break immediate term supports, yet they write “Further bullish momentum likely in the short-term.” More info on support levels in the weekly update.

Articles of note
The biggest companies focus on Customer Experience

Ben Thompson writes on the differences between Apple and Amazon, two companies closing in on $1 trillion valuations.

I mean it when I say these companies are the complete opposite: Apple sells products it makes; Amazon sells products made by anyone and everyone. Apple brags about focus; Amazon calls itself “The Everything Store.” Apple is a product company that struggles at services; Amazon is a services company that struggles at product. Apple has the highest margins and profits in the world; Amazon brags that other’s margin is their opportunity, and until recently, barely registered any profits at all. And, underlying all of this, Apple is an extreme example of a functional organization, and Amazon an extreme example of a divisional one.

Despite those differences, there is a commonality in a focus on customer experience.

Both, taken together, are a reminder that there is no one right organizational structure, product focus, or development cycle: what matters is that they all fit together, with a business model to match. That is where Apple and Amazon are arguable more alike than not: both are incredibly aligned in all aspects of their business. What makes them truly similar, though, is the end goal of that alignment: the customer experience.

More VC love for Canada

Like Brad Feld, venture capitalist (and prolific blogger) Fred Wilson is very positive on Canada.

More importantly, the talent pool in Canada is rich. Canadians are well educated and there are a number of very strong engineering schools in Canada. All of our portfolio companies that have engineering teams in Canada claim they get higher quality and retention in those teams than the ones they operate in the US.

So I’m bullish on Canada and have been since we started investing here almost ten years ago. And unlike the US, Canada has the wind behind it’s back in tech right now.

Tesla is not a tech-company

Scott Galloway writes that Tesla is an automaker and shouldn’t be considered a tech company.

Tesla has an amazing product, but has been mistaken by investors as an internet firm. Tesla lacks the frictionless networking effects of a Google or Facebook and doesn’t have the Hermés-like margins of an Apple. Yet, it’s trading at a valuation more reflective of a firm that can scale like a Facebook or generate the profits of an Apple.

His outlook for the stock isn’t good:

This means by the end of the year Tesla analysts will begin wringing their hands over liquidity concerns and dilution. This fear, coupled with rising interest rates, could spook bondholders and result in the equity being the tail of the whip as enterprise value drops.

Lumber Gains

Howard Lindzon mentioned “peak lumber” in a recent post. Here are more numbers to show the change from Bill McBride at Calculated Risk.

Here is another monthly update on framing lumber prices. Early in 2013 lumber prices came close to the housing bubble highs – and now prices are well above the bubble highs.

Final Thoughts

Reports like this make me question living the SF Bay Area.

Let’s state it plainly: The Bay Area must increase its total housing stock by 50 percent over the next 20 years to bring affordability down to a reasonable level.

That’s certainly not going to happen. Even if it did, it’s hard to imagine transit would expand to accommodate that number of people.

Apple is well-positioned, less flashy

Apple isn’t the same company it once was, and that’s ok as they seem aware of their position as market leader, rather than the upstart they once were. While they may not be overwhelming critics and consumers with new devices, they are making appropriate moves for a company in their “middle age.”

This is by no means a condemnation of Apple. Every single move I’ve described above is justified by two circumstances in particular.

First, as a general rule, challengers pursue interoperability while incumbents strive for incompatibility. This is Strategy 101: seek to fight battles where you have the greatest advantage. When Apple was making the iPod, it’s advantage was a superior device; making that device interoperable with Windows let Apple fight the portable music player battle on its terms. Today, though, Apple already has dominant market share: better to make its devices exclusive to its ecosystem, preventing rivals from bringing their own advantage (superior voice assistants, in the case of Alexa and Google Assistant) to bear.

Secondly, the high-end smartphone market — that is, the iPhone market — is saturated. Apple still has the advantage in loyalty, which means switchers will on balance move from Android to iPhone, but that advantage is counter-weighted by clearly elongating upgrade cycles. To that end, if Apple wants growth, its existing customer base is by far the most obvious place to turn.

In short, it just doesn’t make much sense to act like a young person with nothing to lose: one gets older, one’s circumstances and priorities change, and one settles down. It’s all rather inevitable.

via Apple’s Middle Age at Stratechery by Ben Thompson

Amazon Go and the Future

The economics of Amazon Go define the tech industry; the strategy, though, is uniquely Amazon’s. Most of all, the implications of Amazon Go explain both the challenges and opportunities faced by society broadly by the rise of tech.

via Amazon Go and the Future at Stratechery by Ben Thompson

More…

Keep in mind, most businesses start out in the red: it usually takes financing, often in the form of a loan, to buy everything necessary to even open the business in the first place; a company is not truly profitable until that financing is retired. Of course once everything is paid off a business is not entirely in the clear: physical objects like shelves or refrigeration units or lights break and wear out, and need to be replaced; until that happens, though, money can be made by utilizing what has already been paid for.

This, though, is why the activity that is accounted for in R&D is so important to tech company profitability: while digital infrastructure obviously needs to be maintained, by-and-large the investment reaps dividends far longer than the purchase of any physical good. Amazon Go is a perfect example: the massive expense that went into developing the underlying system powering cashier-less purchasing does not need to be spent again; moreover, unlike shelving or refrigerators, the output of that expense can be duplicated infinitely without incurring any additional cost.

As always from Stratechery, a great analysis of what Amazon Go means for the future.