My good friend Jim O’Shaughnessy is back for a third appearance on Panic with Friends. He was my very first guest on the show way back in March of 2020, right at the start of the Global Pandemic. He wasn’t panicking then, and he’s not panicking now. I wanted to check in with Jim on his spider tingly markets sense. You will really enjoy his insights.
One thing the ‘yutes’ need to keep in mind during this market turmoil is that they’re “time billionaires”. You definitely want to exchange that time for risk.
I hope you enjoy our wide-ranging conversation on life, family, investing, and the markets.
Disclaimer: All information provided is for educational purposes only and does not constitute investment, legal or tax advice, or an offer to buy or sell any security. For full disclosures: https://howardlindzon.com/disclaimer/
First things first…I watch almost all the Netflix comedy specials as they show up in my feed. Most suck. But, Hasan Minhaj’s special was incredible. So good that my ambien had no effect on me for the hour plus. It is a must watch of hilarious and unique storytelling and mixed media delivery. The best standup special and comedian since Chapelle.
I will assume the lawyers and Elon are serious this time though that is a generous stretch.
Assuming he closes in the next few weeks, what next?
He promises to keep it private, but based on all the people that texted him and promised to invest, he will have to figure out a way to pay them back so I imagine an IPO in the future.
Last year, I would have said Elon is getting a deal at this deal price.
Today, I am not so sure.
I do feel Twitter is priceless (to the right buyer and as a private company) but overvalued as a public company.
Until the courts started handing the Musk legal team losses in his Twitter ‘backout’ dance, Elon was above the law.
I assume Elon believes he is above the law and that is something a lot of his fans love about Elon.
Elon could easily run the best hedge fund in the world off just a slice of Twitter’s data…insider trading rules are for the regular people. I can’t imagine why as a private company he won’t.
I am looking forward to seeing what he does and shared (for the umpteenth time) some of my ideas on Twitter.
Rachel is here working from home for a few days as the Jewish High Holidays close out. I have my sisters Robyn and Fern visiting this week so the house is crowded. So far it has been a lot of laughs.
I have been traveling around the world the last month which forces me to consider the macro as I go fro city to city, talk to people, see prices and the streets.
The macro almost always gets me excited about opportunities and worried about the future.
If you are going to commit to a startup, the macro is not something you can control or impact so stop obsessing about it and move ahead.
The biggest problem Bill sees and I agree is the ‘memory’ of pain and we all need to do our part to get founders and investors to get their head around this new reality in the markets….
In 2001, there were a lot of nascent companies going public with, like, $1 million in revenue. That’s not the case this time around. Here, you’ve had a lot of companies with huge amounts of revenue, some with massive losses. There has been a huge volume of capital, and the scale of the companies is radically different. Some have raised $500 billion, $3 billion—there was no precedent for sums like that. And some of that money might be dead money.
Then there’s the fact that this run went on longer than people thought. That may well make the pain a little bit bigger. It also means that there’s less institutional memory.
The collective venture community needs to get its head around the new reality as fast as possible. The more people see what’s really going on, the quicker that will happen. In ’09, the response to the downturn was pretty swift. But you had the benefit that ’01 was only seven or eight years in the rearview mirror. While there’s still some institutional memory around the Valley, it’s been a very long time since 2009.
As a reminder, Marketsmith (by Investor’s Business Daily) is now a sponsor of the weekly show. All the charts you have been seeing in the videos and will continue to see are from Marketsmith. They are offering my readers a three week trial for $19.95. Click this link if you would like to try it out.
Happy Monday.
We have finally reached consensus as a nation…The FED is hated.
It seems that everyone also is in agreement that the market can only go lower.
It now feels boring to be bearish so I will not bore you further today with my bearish takes.
I will however share our Momentum Monday video (Ivanhoff and I) which walks through the carnage that is the global markets.
We are now in a war of attrition as the bear market has lasted 8 months.
The goal now is to survive with enough capital to take advantage of the next bull market.
I have no idea how long this lasts but it feels like we should be prepared fort something like the 31 month bear market of 2000-2002. Charlie has a great chart of previous bear markets here…
Here are Ivanhoff’s thoughts:
The S& P 500 finally tested its summer lows and actually closed at new year-to-date lows at 357. The next levels of potential support are 350 and 340. Typically, nothing goes down in a straight line. It is normal to see bounces along the way.
There will be an emergency FOMC meeting on Monday. I doubt it is because they want to raise rates sooner. It has come to a point when federal officials might start worrying more about financial stability than inflation. Decent odds that they might say something that will spark a short-term rally. Probably the market is expecting that and it might gap up on Monday. Or not. The market might also be too scared to bid up before the actual FOMC statement is released. There are rumors going around that a major international bank is on the brink of going under.
The trading world continues to revolve around macro. Every equity trader is keeping an eye on the US Dollar and interest rates. The recent moves in forex and bond markets have been of historic proportions. Pension funds in England were close to going under before the Bank of England stepped up to buy $65 Billion of gilts. I don’t see how all those increases in interest rates around the world don’t lead to more QE at some point next year or earlier. No wonder gold and Bitcoin have stabilized lately. When the US Dollar finally starts to really pull back, those assets are likely to outperform. I am not saying buy them now. Just keep a close eye on them and look for a setup.
In the midst of all the macro dislocations and relentless selling last week, one sector stood out. Biotech is still in a long-term downtrend and if there’s forced liquidation, can go lower from here. And yet, the few stocks that are showing up on the 52-week high list, gap up on good news, and high volume are from that sector. When this bear market subsides, biotech is shaping up to be among the leaders: APLS, SNDX, RXDX, CPRX, VRNA, REGN, PTCT, SRPT, RVNC, CYTK, AXSM, KDNY, VRTX, AMLX, PLRX, etc.
I don’t know at what stage of the bear market we are. We could be in the middle, we could be towards the end. The former is more likely. We are already seeing major companies like Nike down 54% from their 52-week highs made in November of 2021. This is a bigger correction than the one they had during the Great Recession in 2008/2009. Obviously, valuations are very different. Many companies are still trading at high P/E multiple and the one thing that characterizes a bear market is P/E multiple contractions, especially in the current environment of rising interest rates. What I am saying is don’t buy a stock blindly just because it is down 50%, 60%, or 80%. It can go lower and scare you out or it can go sideways for a very long time and wear you out. You don’t need to catch the exact bottom in order to participate in a bear market rally or new bull market. You can wait for a stock or a major index to go back above its 20-day exponential moving average and its 10dEMA to be above its 20dEMA before you participate and you can still get a nice chunk of the move at a lot lower risk.
As Ivanhoff points out today…the relative strength in the biotech sector is clearly standing out. If the market is bottoming expect some massive runs in biotech stocks.
Disclaimer: All information provided is for educational purposes only and does not constitute investment, legal or tax advice, or an offer to buy or sell any security. For full disclosures, click here.
I am in Dublin airport right now writing this post. It has already been a long day on the bus from Northern Ireland.
I have a flight from Dublin to Philly and a long layover than a flight to San Diego.
I have a ton of email and work to catch up on so I am actually looking forward to getting some work done.
As much as I do not want to talk and write about the markets, it feels like it will be consuming me for the next few months at least and on this blog.
Friday was another awful day for stocks.
Nike was the victim Friday and the stock is now down 60 percent from its highs and has shedded $200 billion in market cap.
It is no longer just tech that is being hammered.
I see McDonald’s starting to roll over now as well as Mastercard.
There is nowhere to hide as this bear market works its way through the markets.
Next week traders will be watching this chart of the S&P:
From The Chart Report on the above chart: The S&P 500 just logged its third straight quarterly loss for the first time since 2008. Matt points out that it’s currently testing its 200-week moving average for the first time since the pandemic. We actually closed slightly below it today, so buyers will need to show up soon if we’re going to have a 2011 or 2018 scenario. If we extend below it, it will be a major red flag. Either way, keep an eye on how this test plays out in the coming weeks.
I am looking for signs of a bottom but I see more signs of excess.
I don’t see how we bottom in the technology sector when the worst performing manager in growth technology – Cathie Wood – is launching a new public/private mutual fund to retail investors. A better sign would be Cathie closing up shop or being unsuccessful raising capital for this new product.
With so many technical support levels broken in technology indexes and stocks, next week could get ugly.
This vacay/adventure/regroup continues to be amazing. I am so excited to have enjoyed every moment and am very fired up to be home in Phoenix and San Diego this weekend.
Early this morning I went on an incredible 7 mile hike from the Bushmill Inn (yes the Bushmill Whiskey is excellent) over to ‘The Giant’s Causeway‘ – which I had never heard of – and was blown away by the beauty. My friend Mike Kerns pushed me to go and we had a great two hour hike. Mike is an awesome investor and operator and a partner at TCG (The Chernin Group). Mike and I love talking about investing and strategy in content and media (especially finance and sports) and TCG has had hit after hit for a long time. I am hoping to work on something with Mike and TCG one of these days. I will have him on ‘Panic With Friends’ sometime soon. Here are some photos from the hike…
Today is a day off from golf to catch up on email and Zoom calls. Yesterday was day FIVE in a row for golf at the very beautiful and difficult Port Stewart golf course in Northern Ireland. Tomorrow is our last day and we are playing Royal Portrush which was the site of the 2019 British Open. My son Max and I went to that Open and played Port Stewart (blog post here). I’m excited to actually play the course tomorrow. It is supposed to very windy and rain all day which is just part of the adventure.
I have not played golf five days in a row since college. It has been fun to just grind and survive against the elements. The walks and camaraderie have been wonderful.
Now…about the ‘moments to pay attention’…
I have been droning on and on about the ‘valuation compression’ in tech public markets and it is just now working it’s way down to seed investing which is great for my day job.
For every other part of my investing life, the world mostly sucks right now.
The US dollar is screaming and the financial media will start banging the ‘currency war’ drum soon.
The $VIX is elevated now above 30 and the financial media loves this because ‘the higher the $VIX, the more clicks‘.
You can get 4 percent in 1 year t-bills so I get the feeling there is no sense of urgency to ‘buy the dip’. The Fed’s normalization of interest rates is finally laying to rest the longest-running acronym in markets: TINA (There Is No Alternative). Charlie has a fantastic 10 chart post on a lot of this.
BUT with the $VIX high and seasonality becoming favorable, traders are definitely licking their chops to try some longs. We are at some make or break support points in some major indexes including Industrials, Semiconductors, Transports…
I loved this from The Rotation Report on whether this moment in markets is ‘descriptive or predictive’…
I think it is a bit of both.
‘Tis the season for change and I sense many will be placing bets on the end of the world and/or the resumption of some very long term trends. I have been nibbling on some of my favorite technology brands and we (Social Leverage) have been active for the first time in a year writing seed checks lately.
Last year Ellen thought it would be a good idea to refinance our home. We use First Republic and in hindsight that looks incredibly smart less than one year later. Our interest rate is in the low 2’s and today 30 year mortgage rates are 7.5 percent.
On every $100,000 in mortgage borrowing, the cost has risen approximately $500/month.
This has the markets attention and therefore my attention.
My friend Joe is a good trader and investor and he posted this yesterday…
I am not sure what happens next with rates, but a very long term downtrend has been broken (on a monthly basis). The rate of ascent is frightening and I am not sure what the chain of unintended consequences holds. I do think stocks have a ton of competition for marginal investing dollars which is a new twist /risk for the buy the dip generation.
It is considered a top 5 golf course in the world by most rankings and by many the top golf course in the world.
It is brutally tough. It is always cold and very windy. It is also spectacular.
I don’t take golf too seriously and that came in handy today as I scraped it around for a 89. The highlight for me was an 80 footer for par on the back side and a match play win with my partner. There is something about the simple competition of golf (with handicap system) that makes the game extra enjoyable.
My friend Greg organized this trip before COVID so it has been cancelled a few times. I am grateful that Ellen was understanding enough to let me stack this trip on top of my cycling trip.
I am excited to get home after a bunch of incredible golf and cycling experiences.
I also can’t wait to get back to Ireland to play again one day soon with Max.
PS – Yesterday we played Ardglass which is the best course I had never heard of. Incredible views all day despite vicious weather. Here are some photos.
