People are afraid of this tech rally because they remember how expensive the dotcom bubble was. Tech is just getting a makeover. It's going to take us to infinity and beyond.
There's a perfect storm of momentum breakouts and unbelievably good headlines that doesn't feel like it will stop any time soon. Maybe a natural resources trader talking about tech is the top, but I can talk you out of that idea if you read this.
Intel (NASDAQ:INTC) boosted its buyback by $10B. Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) and Amazon (NASDAQ:AMZN) slayed the quarter. Technology (and consumer discretionary) is towing the stock market higher on a sled of business optimism and consumer confidence. This is not AOL for Time Warner. Bitcoin is trading back over gold. Blockchain is revolutionizing electronic ledger technology. Self-driving cars hitting the road. Bezos/Musk headed to outer space. We're witnessing the rise of the robots. I don't know what to talk about first, but it won't be the robots, so I'll tackle the first two.
Bitcoin (XBT) rallied 120% last year. I'm amazed that it's trading over gold, as in I never thought I would see the day until I noticed how well it was behaving on every dip to moving averages. Bitcoin last traded $1,300 on March 10th when the SEC rejected the Winklevoss ETF and it briefly collapsed. Notice how fast it recovered.
Japan legalized bitcoin as payment and has regulatory framework in place to allow institutions to trade the digital currency. If you consider its massive liquidity injection and yen incineration program, you expect Japanese investors to be interested. Russia is going to legalize bitcoin next year. Millennials are quitting their jobs just to trade it. What will it mean if it rallies another 120% this year? Take your money out of the yellow currency and put it in crypto currency.
We had the "negative rate" reason to buy gold and it topped out at $1,400. Then, we had the "Trump reflation trade" reason to buy gold and it topped out at $1,300. Now I can't think of a reason to hold gold investments - unless there's a nukular war - because the global money printing scenario has been around for years now. The hot money is going into bitcoin (in China where nearly all bitcoin trading takes place), and all things blockchain.
If this article from Global Capital is accurate, and it really is the beginning of the end of negative rates, then we're back to gold buggie reasons to own gold. As they lay out the European scenario, time could be running out on the idea of charging investors to lend them money. Time is running out technically for metals & mining (NYSEARCA:GDX), which is making me nervous about my XME purchase at the 200-day moving average. One goes, they might all go.
GDX now has three peaks between $25 and $26, two failures at its 200-day moving average, its violating an ascending trend line, and if you are going to stay in this "for the long haul," own protection for the short haul.
I'm hooked on the idea of commodity merchants using blockchain as the tracking mechanism for various aspects of physical commodity trading. Non-refutable, unbreakable data - talk about disruptive technology. You can see this transformation of the basic accounting process coming, so I've got an eye out for other industries where blockchain is being applied. I need to figure out how to invest in it because it feels like a top-down, bottom-up, side-to-side takeover.
IBM (NYSE:IBM) and IGF have gotten around to addressing inventory and transaction disputes; just set the details of each order-to-delivery pipeline on blockchain and forget it. The details will all be retrievable in a more reliable fashion and nine figures of transaction dispute costs a year get reduced to zero. They're testing tracking food shipments so they can retract them if they are tainted. The entire shipping industry - from shipper to port to customs authority - is moving toward blockchain to eliminate tons of paperwork and fraud. This is an overhaul, not a bubble.
Online music streamer Spotify just bought Mediachain to build a database and protocol for registering, identifying, and tracking creative work across the Internet. We clearly need a new format for digital rights management. Broadridge Financial CEO Rich Daly thinks blockchain can "transform everything from how stock exchanges operate to how proxies are voted." The article also states firms will spend $400M annually by 2019 developing blockchain solutions, up from $75M last year. Nasdaq already began using a cloud record-keeping system called Linq to eliminate the middlemen like auditors, lawyers, accountants and consultants for the pre-IPO phase of an offering. You might be trading stocks from your Gucci blockchain wallet one day. Viva technology.
The Reserve Roastery Print
Starbucks (NASDAQ:SBUX) reported in-line earnings per share at .45c. Revenues came in at $5.3B, missing estimates of $5.42B. Sales were up only 3% for the quarter the CEO left versus guesstimates of 3.7%. The stock is off about $4 (6.5%) in the pre-market after carving a 52-week high and settling negative yesterday. SBUX may rally from this gag opening, but I think this stock is done, and I would be a seller of all rallies to $60 to exit the trade permanently.
If Howard Schultz leaving, the bell-ringing megastore opening, and the #UnicornFrappuccino being served aren't a sentiment PEAK in artisanal coffee growth, then tell me, what is?
Disclosure: I am/we are long XME. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.