Market Musings

Here's the full text of Rudyard Kipling's "If": 

If you can keep your head when all about you
Are losing theirs and blaming it on you,
If you can trust yourself when all men doubt you,
But make allowance for their doubting too;
If you can wait and not be tired by waiting,
Or being lied about, don’t deal in lies,
Or being hated, don’t give way to hating,
And yet don’t look too good, nor talk too wise:

If you can dream—and not make dreams your master;
If you can think—and not make thoughts your aim;
If you can meet with Triumph and Disaster
And treat those two impostors just the same;
If you can bear to hear the truth you’ve spoken
Twisted by knaves to make a trap for fools,
Or watch the things you gave your life to, broken,
And stoop and build ’em up with worn-out tools:

If you can make one heap of all your winnings
And risk it on one turn of pitch-and-toss,
And lose, and start again at your beginnings
And never breathe a word about your...

Hi! 

Investing is often nuanced and so it's easy to be confused when my view isn't a simple "BUY" or "SELL." Given this perspective, I apologize if I've confused you on my position regarding Alphabet and GOOG stock. To clear up the uncertainty, here's some more detail:

I bought a little Google stock at the end of December below $90 per share because I thought the valuation was pretty compelling. It wasn't a HUGE buy so I didn't feel like it was worth making a separate public video on it. Subscribers can see the link in full here: LINK

It's NOT a STRONG CONVICTION for me personally, as we're still facing a recession and their share repurchases have been very underwhelming. Ruth Porat, the CFO, openly bought Blackstone Stock (BX) but not GOOG. Why? The emergence of OpenAI with a hypergrowth Chatbot also creates unknown challenges to their business long-term. I've been surprised by the rally in GOOG stock so far and perhaps I'm wrong to have not bought...

The Fed remains in an extremely challenging position. While Jerome Powell raised the Fed Fund rates by 0.75% today, to 1.5-1.75%, it's still woefully below the underlying inflation of nearly 9%. 

So what is the Fed going to do?  

First, the Fed NEEDS to get inflation under control because "it's very painful for people."

This makes sense: As inflation has outpaced wage growth, real purchasing power has declined!

As consumers can afford less goods and services, sentiment drops and societal unrest increases. This also increases the odds that employees will increasingly need to ask for higher wages, creating an inflationary spiral effect. 

The second reason the Fed is in a very tough spot is because much of the current inflationary outlook is attributable to supply constraints (oil, food) that the Fed has very limited control over. 

This is the set up for STAGFLATION. 

The Fed raises rates to temper demand, which hurts the economy, but...

Advertising technology stocks are getting crushed. This includes Google (GOOG), Facebook (FB), The Trade Desk (TTD), Roku (ROKU) and SNAP (down 40% today!). 

Why are they falling? 

As I discussed last week with Walmart (HERE) and Target (HERE) the U.S. consumer is facing tough choices with higher inflation. As food and energy prices spiral higher there's less spending available on discretionary items.

This means ADVERTISING for discretionary goods takes a hit.

Yesterday SNAP filed the following disclosure announcing that they were cutting their 2Q 2022 guidance:

"Since we issued guidance on April 21, 2022, the macroeconomic environment has deteriorated further and faster than anticipated. As a result, we believe it is likely that we will report revenue and adjusted EBITDA below the low end of our Q2 2022 guidance range."

This was only 33 days ago!

This suggests the economic environment is worsening RIGHT NOW and that we're facing a broader...

Walmart stock and Target stock are collapsing in response to higher inflationary pressures. 

Could this mean we're entering an imminent RECESSION? Why is HIGH INFLATION so bad for stocks?

While I just did a video on Walmart stock (HERE) and Target Stock (HERE), there's several reasons why these stocks are coming under pressure.

First, as food & oil prices sky-rocket, consumers are increasingly being forced to choose between what they NEED and what they WANT. This is putting pressure on HIGHER MARGIN, NON-ESSENTIAL goods. Target and Walmart won't be the only companies facing this challenge. 

But are we in a RECESSION?

So far Walmart & Target are NOT seeing a recession as store traffic and purchases are still growing. So why are their stocks dropping? 

Walmart and Target have seen their profit margins COLLAPSE as they haven't raised prices enough to keep up with rising labor, shipping costs, and materials costs. In the 1Q 2022 Target's...

Is Apple Stock, or AAPL stock, the NEW BIG SHORT?

Michael Burry, one of the greatest investors of all time, is betting AGAINST Apple stock. You can see his full portfolio update here: LINK

While Michael Burry isn't perfect (LINK), he does have a phenomenal track record. This feats include: 

1. Crushing the S&P 500 as it imploded following the 2000 .com mania. 

2. Making a huge bet against sub-prime mortgages before the Great Financial Crisis,

3. Calling out Cathie Wood, days before her investment ETFs peaked in 2021, as having huge downside risk,

4. Profiting off of GME (before the parabolic short squeeze). 

Given this incredible track-record, when I saw that his largest position by nominal value is short Apple stock via Put options, it got my interest. What does Michael Burry see that might drive Apple stock lower? 

You can see a video discussion on Apple's valuation and business considerations here (what might drive AAPL stock lower): LINK

While...

Disney stock is down over 40% in the last year and investors are wondering if DIS has lost its magic. I think the recent decline in Disney stock is more a function of broader market turbulence (S&P 500 is down nearly 20%) than an erosion in Disney's key assets.

Disney still owns UNRIVALED theme parks (e.g. Disneyland), content (e.g. Avengers, Frozen), and channels for distribution (e.g. Disney+, ESPN, & ABC). 

The ultimate test if an asset is truly "UNRIVALED" is an ability to raise prices and that's exactly what they've historically done. What was once a $1 ticket for Disneyland in 1955, will now cost a family of 4 over $1,000! A taste of the magical kingdom has never been so expensive, and yet, 10 years from now, I'll bet the prices will be higher! LINK

Disney has also grown and adapted to the times. In November 2019, they launched Disney+, their Direct-to-Consumer streaming option. Since then Disney+ has grown to over 137...

Unity Software, or U Stock, is down ANOTHER 30%+ today following their 1Q'22 results. Why? I just posted this videos for details: LINK

At first glace Unity continues to post very strong growth. Revenue was up 36% in the 1Q 2022. Their Content Creator subscription revenues (i.e. Create Solutions) accelerated to 65% growth as more industries beyond gaming are adapting their revolutionary tools! Unity is both winning new customers and their existing customers are spending more!

So why is the stock COLLAPSING? 

The answer is:

1. Prior Overvaluation,

2. Poor Execution, and

3. Continued Losses!

While it might seem strange to write "Poor Execution" when Unity just reported 30%+ growth, but because of a managerial oversight they expect a $110 MILLION impact to their business in 2022. I discuss this in greater length in the above video.  

Despite these headwinds, Unity still has tremendous future potential. The ability to create 3D, ultra-realistic renderings in...

Why is Upstart (UPST) stock and SOFI stock collapsing?  I just made a video, LINK, if you'd like an overview of the situation. 

Both of these companies are referred to as a "Fintech" businesses that take the latest in machine learning technology to disrupt traditional financial markets.  

For context, the loan markets that Upstart and SOFI are attempting to disrupt are HUGE. If either UPST or SOFI are successful it could potentially translate into hundreds or even thousands of percent growth in the future. 

 In addition to their core lending products, SOFI is attempting to become an EVERYTHING financial services company (e.g. infrastructure, trading platform, asset management, etc.) however they're still immensely UNPROFITABLE. 

In contrast, UPST is more narrowly focused on the huge market opportunity of disrupting loan originations and is also much more PROFITABLE. 

The challenge that both UPST and SOFI currently face is...

Earlier today I posted a video about PLTR stock (LINK). Over the last 6 months PLTR stock is down over 70% and investors are wondering: 

• What is going on?
• Will Palantir stock ever recover?

I've posted about Palantir several times as their core products (i.e. Gotham, Apollo, Foundry) appear to have a strong value proposition and they're rapidly taking market share. For example, during 1Q 2022 their commercial business grew by 54%!  The global enterprise software market is NOT growing 50%, so this suggests that Palantir is rapidly taking market share. 

Not only is Palantir successfully selling into new customers, but their existing customers are spending more with them. During the 1Q 2022 their net dollar retention was 124%. This means that even if Palantir didn't sign up any NEW customers during the quarter, their EXISTING customer base drove 24% revenue growth! 

If Palantir is so successful, why is their stock getting crushed?

My concern...