If you would like to learn more about his story, you can start here. BBC: Holocaust ‘hero’ Sir Nicholas Winton dies aged 106 We need more people like him on this rock.
Silicon Valley’s Illiquid Bubble Update.
Mark Cuban is dead on in identifying Silicon Valley’s Tech Bubble 2.0: Why This Tech Bubble is Worse Than the Tech Bubble of 2000. At the end of the day, Silicon Valley has about as mush liquidity as California’s dried up reservoirs. Something that Angel investors, venture capitalists and stock option millionaires are about to find out.
How big is this bubble? Consider the following. Uber’s valuation went from $60 Million in 2011 to $50 Billion today(not a typo). They must be making a ton of money…..right? WRONG. Bloomberg estimates that Uber showed $470 million in operating losses with $415 million in revenue last year. Plus, the company was set a major legal blow in California by requiring their drivers to be classified as employees. And as far as I am concerned, it is just a matter of time before other states and countries regulate Uber out of business to protect taxi drivers.
In other words, the valuation above is not only outrageous, it is, how should I put it, retardedly outrageous.
Back to Mark Cuban. It is now evident that most market pundits out there are dismissing Mark’s view. And while Mark talks about Angel Investors and illiquidity in that market, his analysis can just as easily be applied to today’s stock market. More about that in a second.
First, here is what most people don’t realize about Mark Cuban. After selling his first business Mark became a heck of a trader and investor in the 1990’s. His returns were so good at the time that Goldman Sachs tried to bring him in order to figure out what he was doing. This same ability helped him unload Broadcast.com for $5.7 Billion to Yahoo right at the top of the tech bubble. Here is what he thinks.
I have absolutely not doubt in my mind that most of these individual Angels and crowd funders are currently under water in their investments. Absolutely none. I say most. The percentage could be higher. Why? Because there is ZERO liquidity for any of those investments. None. Zero. Zip.
So why is this bubble far worse than the tech bubble of 2000 ?
Because the only thing worse than a market with collapsing valuations is a market with no valuations and no liquidity. If stock in a company is worth what somebody will pay for it, what is the stock of a company worth when there is no place to sell it ?
We often talk about the stock market, but we rarely look at this side of the equation. Mark is absolutely right. If you are an Angel Investors, good luck getting your money out. Especially when today’s Silicon Valley’s bubble bursts. Plus, the chances of hitting a good exit in tech are about as good as winning a lottery.
What’s more, the bubble Mark Cuban has identified in the tech industry is the same bubble I see in the stock market. The drivers behind both are the same. The only difference is the amount of liquidity available.
Is Today’s “Real” Stock Market P/E Ratio Above 30?
7/1/2015- A positive day with the Dow Jones up 158 points (+0.90%) and the Nasdaq up 26 points (+0.53%)
A massive and rather rapid stock market decline is coming later on this year. And while we won’t have a crash, considering the amount of margin debt out there, quite a few people will get wiped out. If you would like to find out exactly when this move will develop, to the day, please Click Here.
A number of quite important opinions about today’s stock market. Let’s take a look.
As the stock market climbs ever higher, professional investors are warning that companies are presenting misleading versions of their results that ignore a wide variety of normal costs of running a business to make it seem like they’re doing better than they really are.
We have talked about this before. BlackRock: Most Of Corporate Earnings Growth (If Any) Is Accounting Driven
I have said it before and I will say it again. Today’s distortions are so great that the FED’s Ponzi Finance makes Bernie Madoff look like a boy scout. But its more than that. Everyone is playing the same accounting game. Whether it is through low interest rates, share buybacks or outright accounting gimmicks.
While impossible to calculate, I would say that a more normalized environment would add 5 to 10 points to today’s P/E ratios. By the way, Shiller’s Adjusted P/E Ratio is already at 27. Turning an already expensive market into “are you freaking kidding me overpriced accident” waiting to happen.
Never before has a rally in the U.S. stock market gone on this long without a Federal Reserve interest-rate increase. Expecting valuations to keep rising once one comes is asking too much, if history is any guide.
As I have suggested before, the FED finds itself in an impossible situation. It is stuck in the corner. With all of the misallocations over the last 15-20 years about to come crashing down on them. They best they can hope for at this stage is debt monetization and run away inflation. But with bond prices possibly collapsing, they might not even have that option.
Interesting times ahead, that’s for sure.
This conclusion is further supported by my mathematical and timing work. It clearly shows a severe bear market between 2015-2017. In fact, when it starts it will very quickly retrace most of the gains accrued over the last few years. If you would be interested in learning when the bear market of 2015-2017 will start (to the day) and its internal composition, please CLICK HERE.
(***Please Note: A bear market might have started already, I am simply not disclosing this information. Due to my obligations to my Subscribers I am unable to provide you with more exact forecasts. In fact, I am being “Wishy Washy” at best with my FREE daily updates here. If you would be interested in exact forecasts, dates, times and precise daily coverage, please Click Here). Daily Stock Market Update. July 1st, 2015 InvestWithAlex.com
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It’s Hard To Be A Bear When Everyone Is Bullish. Part 4
Explanation: Being a bear while everyone else is bullish is one of the most challenging propositions in investing. For instance, ‘Short selling is an incredibly lonely proposition,’ billionaire hedge fund manager Bill Ackman says. Yet, it can pay off big time if you get your TIMING right. However, since most people, even professional investors are terrified of shorting, I will introduce a quick series about short selling, proper risk management when short selling and the best way to maximize returns. This was to be a part of my never finished book (no time to finish it)…….
Let’s now take a closer look at each one of these points to see if they hold up to scrutiny.
- Unlimited Loss Potential:
When you open up a short position you open yourself up to unlimited losses. Theoretically. Let’s assume that you have done your research and you believe that Apple’s Inc (AAPL) stock price is about to decline from $100 a share to $50 a share. By going short at $100 and presumably getting out at some point in the future at $50 a share you are planning to generate a net gain of $50 or 50%. As a result, you take a short position at $100.
Unfortunately for you, the next morning Apple goes on to announce that it had created a time machine, went into the future and brought back technology from the year 2225. What’s more, they will make this technology available over the next few months and by doing so will literally take over the world and destroy the competition. As a result, Apple’s stock price precedes to surge to $1,000 or 900% a share higher even before the market opens
Guess what just happened to your short position? That’s right; you just lost $900 a share or 900%. It now becomes your responsibility to close this trade out at a massive loss before going and crying to your mommy and daddy. That’s what most in the financial industry mean when they indicate that your losses can be unlimited when you open up a short position.
Rebuttal:
The scenario above is hypothetical at best. In reality, very few stocks open up with gap ups of 5-10% higher, let alone 100% or higher. It does happen on rare occasions, but you shouldn’t be shorting such stocks to begin with. When it does happen, it typically happens to stocks in the Bio Tech industry after their drug is approved by the FDA or stocks that might be acquired in a merger or stocks with upside earnings surprises or perhaps stocks of companies that have just reached some sort of a favorable resolution in a big legal matter, etc….. Point being, large overnight gains or “gap ups” shouldn’t come out of the blue. If you approach the process of short selling from a well researched position, as you should, you wouldn’t be shorting such stock to begin with.
In terms of your short stocks appreciating over time, if you apply proper trading rules, this shouldn’t be a problem. Just as you should have trailing stop losses with all of your long positions, you should exercise the same discipline when going short. If the marker proceeds to move against your short position, the stop loss should take you out when the time is right. Either realizing gains or limiting losses in the process. Just as it would if you where holding a long position.
In conclusion, outside of seldom “God Event” occurrences in certain stocks, equities that you shouldn’t be shorting to begin with, short selling is about just as risky as going long when proper investment rules are applied.
- The Maximum Gain Is Only 100%.
It is true, the maximum gain you can achieve when going short is just 100%. Yet, that type of a return is unusual as well. For that to happen the underlying stock price must hit zero. An occurrence most typically associated with the underlying business filing for bankruptcy or otherwise being delisted from the exchange.
The financial crisis of 2008 presents us with a perfect opportunity to illustrate just that. In the darkest days of summer of 2008, stock prices of many of the subprime lenders collapsed in a matter of 2-3 weeks. In many instances going from $50-60 share to $1-2 a share before filing for bankruptcy protection and being delisted from the exchanges. A rare occurrence, indeed.
And while your gains are limited to 100%, it is not a bad thing when you consider what our primary objective in this case is. Remember, we are not trying to identify stocks that will appreciate 1,000% or more over the next 5 years. We are simply trying to protect our existing long positions while generating extra returns on the downside. Essentially, we are trying to minimize risk while moving with the overall market or underlying security. Short selling allows us to do just that.
To Be Continued Tomorrow……
It’s Hard To Be A Bear When Everyone Is Bullish. Part 4 Google
Investment Wisdom Of The Day
How To Invest In The Next Car Revolution
Self-driving cars are expected to change the way we live, work and interact with each other. So much so that some expect this change to be in full swing by 2025. While I have my doubts, it is an important trend to follow if you are an investor.
For instance, this trend has the ability to decimate the tracking industry while other multi-billion dollar companies will seemingly appear out of nowhere. Let’s take a look at some of the other probable outcomes.
- Mind-boggling cost of overhauling our entire road system, traffic management and signposting. Or insurance regulations. Or driving tests. Or road tax. Or liability issues. Someone will make or lose a lot of money here.
- Road death is the eighth leading cause of death on the planet, with between 90% and 95% of car accidents the fault of human error. The economic cost of road accidents is estimated to be around $277bn in 2013.
- City design will change enormously, even just in the short term. With great swathes of city real estate covered in car parks, self parking cars can cut down on that dramatically.
- Fuel savings will be immense. Autonomous cars drive consistently and economically, without man’s strange insistence of moving one, righteous, car up the queue by overtaking, and aggressively lane-changing.
- Morgan Stanley projected autonomous cars could save the US $170bn in lower fuel costs, and another $138bn in congestion avoidance. And that’s just fossil fuels. Which could also be a thing of the past.
- Another option to charge your car is wireless induction charging – a primary coil is ferreted away in your garage floor, a secondary coil is incorporated into the floor of the car, and an alternating magnetic field charges the battery.
- Personal insurance will mostly likely become defunct, because as the car takes responsibility for safety, liability will shift to the manufacturers themselves, with the ABI – the Association of British Insurers telling Factor: “The key change – and the potential shift to product liability – comes when the driver is not expected to oversee or monitor the vehicle and when they have ceded full driving responsibility to the car itself.
- ‘Sleeper cars’ will become available for long journeys where you’ll simply set off at night, tuck yourself into the incorporated bed, with blacked-out windows if there are windows at all, and wake up right outside your destination, be it Land’s End to John O’Groats, or a cross-Europe trip.
- Freight will be completely automated, putting every single lorry driver out of work. Deliveries will be automated, using the highways at night when there’s no congestion and economies of scale can be greater, without pesky regulations forcing weak-bodied professional drivers to take breaks.
- Rather than own a vehicle, you’ll most likely whip out your smartphone and call an automated car, just like we would an Uber taxi today. Prod your destination into the app and off you’ll go, automatically billed at the end.
And that’s just to name a few possibilities. How all of this will shake out and how long it will take is anyone’s guess. If the human race doesn’t manage to destroy itself over the next 20 years, as per my other forecast, this change has the capability of delivering massive gains to enterprising investors. Definitely put it on your “watch list”. 
Shocking: Buy The Dip Mentality Can Lead To A Crash
6/30/2015 – A positive day with the Dow Jones up 21 points (+0.12%) and the Nasdaq up 28 points (+0.57%)
Well, that was fast. Just as predicted here yesterday, any small bounce would surely bring out perma bulls with the “this market is bulletproof and buy the dip” mentality. Mr. Cramer delivers.
Cramer: Amazing world chaos-resistant stocks
“I say you buy some very special biotechs that have refused to come down until now. That’s right, I think you use this marketwide selloff as an opportunity to pick up the speculative development stage biotech names that haven’t had a price break in ages,” the “Mad Money” host said.
Seriously….Biotech??? Biotech is the most speculative sector within the stock market. It is equivalent to where the Internet stocks were right before the 2000 crash. And while the market will bounce to at least close Monday’s gap, I wouldn’t necessarily be loading up on Biotech here.
Anyway, we are all free to make our own decision. With that in mind, I would rather listen to Bill Gross. Make sure you read his recently published statement in full.
Current concerns in the financial markets center around the absence of liquidity and the effect it might have on future market prices. In 2008/2009, markets experienced not only a Minsky moment but a liquidity implosion, as levered investors were forced to delever. Ultimately the purge threatened even the safest and most liquid of investments. Several money market funds appeared to ‘break the buck’ which in turn threatened the $4 trillion overnight repo market – the center core of our current finance-based economy.”
But shadow banking structures — unlike cash securities — require counterparty relationships that require more and more margin if prices should decline. That is why PIMCO’s safe haven claim of their use of derivatives is so counterintuitive. While private equity and hedge funds have built-in “gates” to prevent an overnight exit, mutual funds and ETFs do not. That an ETF can satisfy redemption with underlying bonds or shares, only raises the nightmare possibility of a disillusioned and uninformed public throwing in the towel once again after they receive thousands of individual odd lot pieces under such circumstances. But even in milder “left tail scenarios” it is price that makes the difference to mutual fund and ETF holders alike, and when liquidity is scarce, prices usually go down not up, given a Minsky moment. Long used to the inevitability of capital gains, investors and markets have not been tested during a stretch of time when prices go down and policymakers’ hands are tied to perform their historical function of buyer of last resort. It’s then that liquidity will be tested.
In other words and as I tend to visualize it, we are sitting on top of a 40ft containter full of TNT, with a lit fuse disappearing inside of it. We have talked about disappearing liquidity before. Plus, given today’s overvaluation levels, there is just way too much risk in our financial system.
We have faced a similar environment pre 1987 crash. That is to say, should the market correct 10-15% in a rather rapid fashion, we might have a subsequent flash crash scenario that will take us down another 25-40%. Carl Icahn, Jim Rogers and now Bill Gross are warning about this. Who else do you need?
This conclusion is further supported by my mathematical and timing work. It clearly shows a severe bear market between 2015-2017. In fact, when it starts it will very quickly retrace most of the gains accrued over the last few years. If you would be interested in learning when the bear market of 2015-2017 will start (to the day) and its internal composition, please CLICK HERE.
(***Please Note: A bear market might have started already, I am simply not disclosing this information. Due to my obligations to my Subscribers I am unable to provide you with more exact forecasts. In fact, I am being “Wishy Washy” at best with my FREE daily updates here. If you would be interested in exact forecasts, dates, times and precise daily coverage, please Click Here). Daily Stock Market Update. June 30th 2015 InvestWithAlex.com
Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!
It’s Hard To Be A Bear When Everyone Is Bullish. Part 3
Explanation: Being a bear while everyone else is bullish is one of the most challenging propositions in investing. For instance, ‘Short selling is an incredibly lonely proposition,’ billionaire hedge fund manager Bill Ackman says. Yet, it can pay off big time if you get your TIMING right. However, since most people, even professional investors are terrified of shorting, I will introduce a quick series about short selling, proper risk management when short selling and the best way to maximize returns. This was to be a part of my never finished book (no time to finish it)…….
So, which investment approach is the best for our newly enlightened investors?
We’ll get to that in a second, but before we do, there is yet another intricacy that you should be aware of. Whether it is the mutual fund industry mantra of buying and holding forever or any of the investment approaches above, they all have one thing in common. Most investment approaches are Long Centric. In other words, most investors invest only in anticipation of rising markets or higher stock prices. Completely disregarding the other half of the equation. That stocks do fall. Sometimes substantially so and sometimes they do so over extended periods of time.
A bear market of 1966 to 1982 gives us a perfect opportunity to see just that. The Dow topped in 1966 at around 1,000. Over the next 16 years the market proceeded to oscillate up and down, yielding negative results and at least three gut wrenching sell offs of 30-50%. When a bear market ended in 1982 most investors had nothing but a 25% loss to show for their efforts. That is, in the best case scenario.
Yet, this devastating loss of time and capital could have been entirely avoided if investors concentrated on both sides of the equation. Long and short. Instead of sitting and waiting for the stocks to appreciate over the long-term, investors should have moved with the market. Going both long and short as the market oscillated during that time.
The problem is, the same mutual fund industrial complex has drilled a certain thought into investor’s minds. That short selling the market or individual stocks is not only inherently more risky, it is darn un-American. In fact, every single time the market sells off or corrects, just as it did in 2000-2002 and 2007-2009, there are loud calls to either curb or outright ban short-selling. Mostly due to the misinformation that short sellers are causing the underlying collapse. In fact, financial medial oftentimes portrays short sellers as outright criminals who should be grouped together with murderers and shipped off to prison. Better yet, Siberia.
The reality couldn’t be further from the truth. In fact, before we move on to the greener pastures let’s take a closer look at short selling and some of the misconceptions associated with it. Understanding the subject matter in greater detail will allow to put together a compelling case for our new investment approach.
Wikipedia defines short selling as a practice of selling securities or other financial instruments that are not currently owned, and subsequently repurchasing them (covering) to exit the transaction. If you are not familiar with the process, it is not as complicated as it sounds. Going short or taking a short position is the exact opposite of going long or purchasing stock in anticipation of a price increase. When you go short you anticipate or you bet on the upcoming price decline. The transaction is initiated when you borrow shares of the underlying stock and immediately sell it in the open market. If your forecast proves accurate you will close the transaction at a later date by repurchasing the stock at a lower price and returning it to its rightful owner. Keeping the spread between your entry and exit points. And while it might sound complicated, the entire transaction can be done with one click. Just as if you were going long.
Now, the financial industry has done a fairly good job brainwashing the public into believing that short selling is inherently more risky than going long. Why? For a few primary reasons, when short selling is compared to taking a long position. First, the potential loss on a short sale is theoretically unlimited as compared to a 100% maximum loss when going long. Second, the maximum gain is limited to 100% while your maximum gain on going long is theoretically unlimited. Third, most markets and individual stocks are naturally long centric, increasing in value over time. Finally, there are extra costs associated with taking a short position.
Let’s now take a closer look at each one of these points to see if they hold up to scrutiny.
To Be Continued Tomorrow……
It’s Hard To Be A Bear When Everyone Is Bullish. Part 3 Google
Greek Bondholders – Investment Grin Of The Day
The Most Important Issue In The World Today
Forget gay marriage, Greece, ISIS, the FED and today’s stock market overvaluation. It is nothing but a sideshow to a circus that doesn’t matter. Over the weekend HBO’s VICE has identified, as they called it, the most important/dangerous issue the world faces today. The same issue I have been discussing here for 1.5 years.
What is it?
Relentless drive towards war with Russia and China. Let me tell you something, none of the above matters if there is a giant crater where your city used to be. Here is the latest U.S. compares China’s South China Sea moves to Russia’s in Ukraine. In short, things continue to develop exactly as I have predicted in my report Nuclear World War 3 Is Coming Soon.When, How & Why
Here is the preview of the documentary VICE did. If you have HBO you can watch at any time. If not, just search for “HBO Vice Cold War 2.0” on YouTube.