Notes and Highlights from Stocktoberfest 2013
It was a great few days last week on Coronado for Stocktoberfest 2013.
Howard Lindzon sure knows how to put on an event. He brought in some of the smartest people from tech and the markets all under one roof. Be sure to check out his wrap up post with the best quotes and superlatives.
I learned a ton about new trends, startups, and investing in general. And so did everyone else. Just check out the #stocktoberfest hastag on Twitter.
Last year I got a lot of positive feedback from people who enjoyed my Notes from Stocktoberfest post so I decided to do the same thing this year.
Note these are mostly related to the presentations about trends and investing. There were tons of great startup pitches too. And apologies in advance to all the great presentations that I didn’t get to.
Big Data is great but I prefer “small data”
Small data = price, volume, and social leverage (the people web, sentiment, etc.)
Successful people build a routine - journaling, writing ideas down, etc.
Thinking about 3-5 years out — surfers are constantly paddling and positioning so that’s what we’re doing, positioning for the next big wave
Fashology - Why wearable tech needs fashion
wearables are a “mega trend” - credit suisse says $30-50B market in 3-5 years
watches are a $60B industry
FOSL - over $3B market cap, will do $1mm in KORS sales next year
1. Branding and design as important as technology
2. the playing field is level
3. multiple winners across multiple sectors
Chart art and the power of pattern
Macro… 3 things to watch: consumers, corporations, and the gov’t (how are each doing)
Consumers & Corporations - both doing great, lowest debt in years
Bullish or Bearish is a state of mind, not a strategy
sir john templeton book recommendation: extraordinary popular delusions and the madness of crowds
300 years from now, what won’t change: fear and greed dominate human behavior
4 bull market stages - born on pessimism, grow on skepticism, mature on optimism, die on euphoria
Fed’s giant experiment - one of the biggest in mankind. No one knows how it will end, but it will lead to the greatest opportunities
10/10/10 rule - 10% size position in favorable pattern, look to sell around a 10% gain, can we do that 10 times a year (equals a 10% return on the year)
10 year treasury, interest rates doubled in the last 14 months. Best way to play it is TMF, 3x long bond fund
Emotive points: 1973 Nixon, 1987 crash, 2001 9/11, 2008 housing crash
What are technicians? Really just treasure hunters using fear and greed maps
Panel - What are the markets whispering for 2014?
Mike Bellafiore - Big money is afraid to be left behind. Institutions and hedge funds will have to jump into big growth names in order to catch up to the S&P performance. DDD, P, WLT, FB
Cole Wilcox - Long on Microsoft. Everyone focused on death of PCs and no mobile, sees MSFT the leader of enterprise, cloud computing.
Greg Harmon - Long Japan, Germany, S&P (potentially up to 1900 over next year and a half), BAC, C, F. Short TLT.
Lydia Finkley - Long emerging markets, especially Africa. *South Africa, Ghana, Uganda, Senegal, *Nigeria. Incubators and startup scenes blowing up.
Chris Perruna - Not short at all, just holding long positions for now. Watch breadth and new highs/new lows differential to get bearish. Long INVN, SPLK, V, DNKN, KORS.
11% of Gen Z think the stock market is good for investing. But the do care about brands
Likefolio built a product to company database
Enabling traders to run their business and let people follow in on the exact same trades
Top down method:
* analyze all assets across the globe (stocks, bonds, currencies)
* narrow focus to select concepts (e.g. us stocks trending higher, etc.)
* focus on the specific trades (e.g. long gold)
* risk analysis and stress test
* portfolio allocation
Need to look globally and across asset classes to stay low correlation from the S&P 500
High correlation from Berkshire to S&P
Momentum, have to look at it using RSI and bearish/bullish divergences
Use common sense when judging sentiment (e.g. mainstream news cover stories on europe right at the bottom)
Seasonality - eection year cycles - we’re entering the worst year of the cycle
Bring it all together when you can: seasonality, sentiment, price, momentum. That’s when you put on the MONSTER trade
Present market - breadth is getting worse. With every new S&P high, less stocks are participating
Long Nikkei, AAPL, TLT
Market is forward looking so equity selection is weighted to forward earnings
* trends continue a lot longer than anyone expects
* price targets are just noise
* market is forward looking, many stocks double and triple before reporting profitable earnings
* need to be willing to ride a 20% pullback if you want to have a 100% winner
* best time to buy is when indexes are 10% down
ST50 is momentum stocks so it’s a leading indicator for the market averages.
Why investors should use options in their program
3 main reasons
* risk management
wrong way to use for speculation because the option premiums are too expensive
right way to add yield:
long stock and sell puts. e.g. long 100 shares of FB at $50.65, sell puts of the Nov 60 calls
right way to leverage:
long stock, buy 1 out of money call, sell 2 out of money calls. e.g. long 100 shares of FB at $50.65, buy Nov 60/65 1x2 call spread for even money (buy 1 Nov 60 call, sell 2 Nov 65 calls)
right way to risk manage:
long stock, buy collar for even money. e.g. long 100 shares of FB at $50.65, buy Nov 47/55 collar for even money (sell 1 Nov 55 call, buy 1 Nov 55 put)
Investing in the fog
Look for waterfalls in the fog. Look for the trail markets.
"it takes a lot to sit and do nothing"
when looking at trends, don’t have to be exactly right just have to be in the right zip code
buy when nobody knows about it, when no one knows the story
if you haven’t lost $10mm in a day you haven’t live j/k
invested in elantec, the company behind lasers for CD/DVD Rom burners — bought at $3-4, sold at $160-200
started with an $11mm fund, did well and raised $80mm, then grew it to $1B
turned down Saudis/Bahrains investing for $1B (signs of the top of a market)
"nobody rings a bell at the top or the bottom of the market"
so winded down LPs because they were investing too much $$
what’s in the fog now - industries related to cheap smartphones, Wifi, digitized health, 3D printing,
Traders need to:
* avoid the non news edge
* Stick to a methodology
* Always think and ask, “what’s the big money going to do here?”
* Journal and archive your A+ trades, mirror those setups for the future
Decline of the US middle class consumer
Roughly 24mm unemployed and underemployed
Biggest area of jobs growth is in Low Wage sectors (temp workers, retail, leisure, health care)
US men over 20 are exiting the workforce at an alarming rate
US households are deleveraging, biggest area is in student loans and auto.
Housing price recovery is not supporting spending (mainly because you can’t cash out refinance anymore)
Apparel/retail stores are getting crushed as consumers slow down
Where to go for retail — dollar stores
Easiest trade for this economy - long dollar stores, long upper income earner stocks, short everything in between
"Layaway nation" - wal mart, disney, etc. are all offering layaway programs
The 1% feels great though - invest in luxury good stocks that benefit from the 1%
Ideas: long Apple (as a luxury brand), Burberry, 3D printers, USD
"Fuck investing in the fog, just write checks fast… bitch." - classic Howie
Couple areas of interest - human computer interaction, how we interact and pull information (oblong), infrastructure (sendgrid, twilio), marketplaces where there is still a lot of inefficiency (uber, airbnb)
Long GOOG, FB, NKE, AAPL
No interest in getting an angel list syndicate, not capital constrained at the moment
Combining technical analysis w/ options to control risk and enhance leverage
Why to TA? identify trends, look for opportunity, lower risk
* index analysis
* inter-market influences
* sector analysis for relative strength
Build a mosaic by layering in many different types of TA
initiates spreads often to get a 3-1 risk/reward trade
stop loss is based on the stock’s price (not option price)
Big game changer was when SEC’s website went live. Democratized filings went out to everyone at the same time, institutions weren’t getting priority access.
Will always be cases of fraud, credible news rooms are needed to suss those out
ISRG - bull analyst $515 target, bear analyst $275 target.. but both can be right in this market
Gurtin Fixed Income
"Finding value in the muni market"
Over the last year - FED is the largest owner of gov’t bonds. which pushes long term interest rates to unsustainable low levels.
Bernake has just been “inflating our way out of deflation”
Yellen slighly more dovish than Bernake
When QE3 stops, you’ll get back to fundamentals.
Outlook - fast and furious moves once Fed tapers so just have to be ready
Munis act as a derivative to treasuries, when treasuries move, munis move faster
Munis are primarily owned by retail investors, i.e. regular folks, not institutions. institutions can’t own tax free holdings
Interest rates go down, muni prices go up.
Worst state munis by far is Illinois. No competition. Chicago a mess too
California is in great shape relative to other states, $1.3T economy
Truth about women and investing
Solving the problem of women earning and retiring on less than men
But women fast catching up to men to be the primary breadwinner
Educating women on asset allocation, where there money is going, etc.
The Box - book about shipping and globalization
$35 smartphone trend, who’s the best to play it? Bullish on GOOG, changed since Larry Page came in, google platform is platform agnostic, Android should benefit the most.
AMZN - kindle books don’t scale internationally
All in all, another great event and weekend. Thanks to all who attended and hope to see you in Coronado next year!