Themes for 2019

Pets Are Great

Late last week I traded PETS twice in a single day. Caught just about the bottom penny and then sold it for about a 1% gain. Both rather small positions, but gained about a percent on each transaction. Yesterday I bought PETS once again, but got a crappy fill on the position as the price went up about a dime a share on the market order, so when I took a nap I figured I would look again when markets open today & see the stock went from a fresh 52-week low (slightly before I bought) to actually being up a fraction of a percent on the day. I’ll likely sell it on open, as the markets are up decently in pre-market & I was up 1.47% at close & it looks like it was up another half-percent in after hours trading last night. UPDATE: sold at open today.

Pets will remain a growth market as long as birth rates across the United States remain at generational lows (& near all-time lows) as some people who would like to have children but can not afford to (economically, stress, or both) have pets instead.

I don’t see *ANY* mainstream politician with a chance at winning the next presidential election who is prioritizing the concept of family. Something like 55% of children have parents who are on means tested welfare programs now during a non-recession, and as more children are born out of wedlock to people struggling to get by economically, each broken parent acts as a walking advertisement against having kids.

Trading The Dead Cat Bounce On Analyst Downgrade

I also established a small position in Western Digital (WDC) yesterday. It quickly turned up, as a -10% day on an analyst note for a stock tied to a real business that is already quite beaten down is a bit much. I sold too early (probably in part out of frustration on the crappy fill on PETS), but still profited a bit.

If the whole market turns south WDC could fall once more, as it was at a low of $33.83 on Christmas eve & now trades at $38.06 after falling 4.92% yesterday.

Broader Market & Bagholders:  Don’t  Forget  Trade

Cramer believes Christmas eve was the bottom, which means, of course, it was not.

We’ll likely retest those lows in the coming month.

As long as the US Federal government remains shut down Trump can blame any market turbulence on the obstructionist Democrats. In private tech executives support a hard stance on trade with China. If your profits come from IP of course it makes sense to dislike flagrant IP theft.

“I think it’s because the Chinese economy has never been more vulnerable than it is right now, and our economy has rarely been this strong,” he explained. “If we’re ever going to do anything about China, this is the perfect time. If we’re ever going to stop them from forcing our companies into dubious joint ventures that represent ridiculous technology transfers and often outright theft, this is the moment.”

China is willing to commit literal murder for leverage in trade deals – rushing already closed cases back through kangaroo courts a retrial to assign murder. In doing so, they give Trump more incentive to be belligerent in response. He gets to be the person carrying the torch fighting for human rights by crapping on them. That’s a really bad card to give him. And he could slow leak a lack of progress on the trade front on the Democrats to try to pass the buck, while further cratering confidence in Chinese markets & their economy.

It is literally what I would expect him to do. When he does that, Wall Street will be soooo pissed. They’ll tank the markets as a result too. 

Other Trades

About a week ago I sold out the last of my Funko (FNKO) at a small profit. Longterm I like them, but I think they’ll have a bit of a pullback as they ran from $11 and change to over $16 a share in a couple weeks. Of course they were up to $30 not long ago too, but I wanted to exit that position for macro reasons as much as anything else.

I also bought an sold a bit of New York Times (NYT) for a small profit early in the year. I think the New York Times keeps gaining subscriber share as their weaker competitors keep getting rolled up into private equity hatchet job plays. Buying NYT is basically being long formal disinformation, political partisan hackery, and the concept of hypernormalisation.

“It isn’t real, but it conforms to my political bias” is a point that sells & many will proudly pay for, provided the first part is not advertised!

I made a small gain on AT&T as well. If yield spreads start blowing out their stock could fall on the thesis their debt carrying costs will increase.

Trade Days in a Year

I haven’t been carrying much stock or doing much trading because I did a bit of quick math and have had multiple health issues early this year (actually 4 health issues in 2 weeks is a bit of a record for terrible health for me). The math I did was thinking about there being maybe 200 or so trade days in a year. So for there to be a 6-figure income out of trading you’d have to make about $500 a day on trade days (above & beyond the cost of trading). If you could pull out a half-percent a day in trading that would mean you would need to have about $100,000 invested constantly & consistently make great trades. But there are times when the market craps the bed like it did late last year & the only winning move in such markets is often sitting on your hands. So that means maybe there are only 100 or 150 decent trading days some years.

So for that to earn 6 figures you would really need to earn closer to a grand a day on any average trade day. That would mean either needing to wring a greater return out of the market or put more capital at risk. Given QT it is hard to get excited at going long the markets right now. My risk tolerance is rather low & will remain so at least until a certain criminal fraud is caged & my faith in humanity is restored. 

I am sure I could do $500 or so a day on trading if it were all I did, but being a parent who keeps getting sick & does a bunch of other things makes it a bit more challenging to have the time, focus & intensity to stay focused on it without seeing entropy eat more elsewhere.

Focused Efforts  in  Trading  vs  a  Practice  Account

How people will behave with fake money versus real money on the line is not necessarily the same. Sometimes people are willing to take limitless risk with fake money or money they have stolen from others. But it is not uncommon for people to have an emotional response to trades that go against them when it is savings from their own labor that is on the line.

The way to overcome those sort of negative emotional responses is to have conservative trade sizes to where you are not particularly emotional about the trades.

If you half-heartedly pay attention to the market but do not actively trade it there will be some obvious trades you should have made that you didn’t. But recognizing them at the time & seeing a few of them in a row will give you the confidence to return back to active traded – provided you are honest in what trade ideas you really liked & would actually execute on if in the mode.

One I liked – but was perhaps too lazy to act on at the time – was when Target’s stock got smashed down on a day Macy’s had the worst trade day in a decade on weak performance. I was in the line at the San Francisco Macy’s on Thanksgiving & my wife loved buying great baby clothes for 60% off there. It turns out a part of the reason their quarter stunk was they were too aggressive with early doorbuster deals and sort of had a leftoverish feel as Christmas came. Target also sold off as money was pulled out of the retail category on the narrative department stores are close to dying even though Target shared favorable numbers.

“Anybody who makes a living by selling somebody else’s widely available product, they are not going to be able to make their margin. They’re not going to be able to make a buck in this internet-driven economy,” Storch said.

I still see plenty of upside in Target providing there isn’t an imminent recession & the stock market doesn’t crater. As Walmart moves into online advertising as a marketplace player ultimately Google will be forced to acquire eBay and/or Target to remain competitive with Amazon in ecommerce. Google will ultimately need to buy a destination website with a separate brand beyond Google to win (or even remain competitive) in ecommerce. They’ll need a separate brand which is akin to what YouTube is to video.

General Work Philosophy

My philosophy has largely been one of bursts of effort based on results. Long ago I had a lot of success with SEO stuff & anything that moved in the right direction would get a lot more effort & investment. I don’t do as much web stuff as I used to, but the idea of focusing on whatever is moving in the right direction with intense focus & strong burst of effort seems a far better way to do anything than feeling you have to do it everyday.

If you work on something that isn’t producing results that ultimately impacts your mood & the quality of your work. If you internalize it enough it can impact every aspect of your life.

It is far easier to push on whatever is working until it stops responding & jump from project to project with intense, direct focus on it. That way you see results, stay positive & stay motivated.

I am mostly in cash, but am still holding a bit of Google (tech/web growth & AI advancement narrative), ExxonMobil (inflation hedge), & Apple (value play at current price). In a few months if everything goes well on the health front I might get more active with trading again.

Some of the higher volatility stocks I was trading last year like Yandex or Zillow could easily slide 10% if there is another big market pullback. If there isn’t a pullback and the trade war ends they could also quickly end up 30%, but I still expect more fireworks on the tradewar if China is literally murdering people for leverage.

Lower Entrepreneurship Risk

I suspect this year we will see a jump in entrepreneurship as the penalty for not carrying a crappy Obamacare policy is no longer enforced. This will remove $500 to $1,000 per month in junk fees from many young people who are not particularly risk adverse.

I quit my job when I was making $100 a month on the web & only had $900 in revenue in the whole first quarter of working on the web exclusively, but by the end of that year my rev run rate was above average. And I have had many good years in spite of a number of major setbacks including dealing with many major algorithm updates, major health issues, and a few other treats I’ll mention in due time.

The web is certainly far more saturated with competition today than it was when I started, but it is also far easier to find great information in just about any format you’d like: blogs, podcasts, forums, newsletters, Twitter, etc.

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