MarkStCyr.com

As we celebrate the official kick-off for summer with barbeques and libations, all while remembering, honoring and giving thanks to those that made it all possible here in the U.S. There is another group of fallen “heroes” that were once at the forefront of every battle, armed with a superpower that would make an Infinity Glove® envious.

That power was the “It’s different this time!” chant-of-the-charlatans. Where any and all rational arguments for 1+1=2 math or, business ethics was sacrificed at the alter of a top line growth narrative, while reciting from the “gospels” of Tech such as: “P/E ratios of the Absurd,” “Net Profits are for Dummies,” “You’re Not Lying if You’re Never Caught” and last, but certainly not least, “Who Cares Who gets Screwed As long as I’ve Got Mine, Cha-ching!!!”

The truly funny thing about the above – is that it worked. The word “worked,” as in past tense, is where the now unfunny is rapidly becoming manifest.

I coined the term “future-hype” a while back to help encapsulate another phenom, where it seemed every-time a Silicon Valley darling found itself in trouble via a sell-off in its share prices, there would magically appear some new revelation how ___________(fill in your ticker symbol of choice here) was to transform the universe in the not so distant future, assuring one riches beyond compare.

The funny thing is that every time the “future” got closer? A new revelation appeared to fulfill what the other did.

You think I mean “did not?” As in the future thingy never materialized, so that means it was a flop. Oh, by no means did I mean such. Here’s what it did…

It did precisely what was intended. i.e., gave the narrative hope back to the next in rotation fund manager cabal true believers to sell tell their clients why they needed to (a) hold on for dear life or (b) buy more. And if lucky (c) Do both, proving that the word “sell” was, once again, banished to obscurity successfully.

Here’s how I posed it back in 2017. To wit:

What this term means is what I describe as the now near comical press releases, CEO jawboning, or anything similar that takes place right before earnings (usually a week or so, give or take) either from “The Valley” or tech space in general.

Usually what you’ll read, see, or hear (and echoed jubilantly by some next-in-rotation fund manager) is some grandiose announcement of some super-duper, sounds really awesome, coming attraction that has the potential to not only change everything, but also, to fill investor coffers with riches beyond the imagination.

All one needs to do, as to engage and embrace in this vision, is to use their own imagination, then buy into the “dream” with real legal tender, literally. Because, without those investor dollars continuing to pour in? The “dream” as they say – will be lost. Along with any earlier proceeds. Rinse, repeat.

Future-Hype Arrives Right On Cue…Again

What I was speaking directly to in that article was the latest revelation from the once lauded and seemingly unquestionable, Elon Musk. The issue then, or future-hype scenario as I like to now call it, is that people (as in, investors et al.) were, and once again, questioning the soundness of their “investment” as we’ll say.

And with that, just like clock work, another “in the future” moment appeared – to the surprise of all – that his Boring Company™ received verbal approval to build in NYC that would connect in Philadelphia, Baltimore and D.C.

The issue?

“This is news to City Hall.” “also, if you’re stopping by City Hall, please bring a copy of your proposal. That would help.”

Public rebuttal via N.Y.C.’s mayoral press secretary.

As brazing and stunning as the aforementioned is, the funny little thing as I said prior is: that it worked. All you need to do is look at a chart of Tesla-the-stock and you can see how it happened time, and time, and time again. Hint: need I remind you of this one alone? e.g., “funding secured.”

However, as I’ve also alluded, this happens everywhere across the entire tech space, whether it’s for start-ups or well established behemoths such as Facebook™ or Amazon™. i.e., the moment there’s a bit of news that could effect _______(insert ticker symbol of choice here) The future-hype scenarios appear. Another hint: “flying drones.”

And – once again – just as before, it seems Facebook wants back in on the action with none other than the mother of all future-hype canards: It’s planning (remember, I don’t call it future-hype for nothing) to launch a cryptocurrency named “GlobalCoin” with hopes for 2020.

Why now? Is it because the crypto “winter” is now officially dead as proclaimed by Tom Lee? Well, maybe that’s part of it. But I think that is secondary as to help fuel the narrative rather, than the reason for why.

“What’s the why?” you ask. Great question. Ponder this latest revelation right before the holiday weekend. To wit:

Facebook Inc. said it removed 2.2 billion fake accounts in the first quarter, a record that shows how the company is battling an avalanche of bad actors trying to undermine the authenticity of the world’s largest social network.

Facebook Removes a Record 2.2 Billion Fake Accounts (Bloomberg,com)

So, let me get this straight, they reported in Q1 they removed a number of accounts equivalent to the entirety of current users – because – they were deemed “fake.” e.g., 2.2 billion fake, as compared to 2.4 billion real.

Got that?

So, with that, let me ask you this: Why now, and why a sudden shift to roll out crypto-for-the-future when I thought the future was all about ads-for-eyeballs?

Hint: It’s different this time. i.e., No one’s buying (literally) the old narratives any longer. And by the looks of things, they might even be doing the once unconscionable: Sell.

The other tell-tale sign that may give a bit more credence to the argument that it truly is different this time, is this:

I’ll pose it using a quote from the prior referenced Bloomberg piece and ask you to do the calculating for yourself, ready? To wit:

“The vast majority are removed within minutes of being created, the company said, so they’re not counted in Facebook’s closely watched monthly and daily active user metrics.”

Now I’ll ask: Do you remember this one? Again, to wit:

“Facebook’s records also show that the impact of its miscalculation was much more severe than reported,” marketers allege in court papers filed in August, but only unsealed on Tuesday. “The average viewership metrics were not inflated by only 60%-80%; they were inflated by some 150 to 900%.”

The legal battle, which dates to 2016, stems from revelations that Facebook misreported two metrics related to its video ads. Two years ago, when the news first emerged, it was reported that Facebook inflated the average time spent viewing ad clips by 60% to 80%. The company has said its mistaken calculations did not affect billing.

Facebook Inflated Video Metrics By Up To 900%, Marketers Claim

Here’s my take: It’s different this time in the rationale that everyone’s starting to question everything. And that is not bullish for tech rather, it’s the kindling for the stock market equivalent of shouting “fire” in a crowded theater. i.e. Get out now, at any price, before this whole thing goes up in flames!

And for those of you are are thinking that’s hyperbole. Let me end with this last addition for your consideration.

Remember when anything “hyper-loop” was met with fawning and higher stock prices? Judge for yourself using the latest from none other than Mr. Musk and his own future-hype projections. To wit:

In regards to the once original idea of something like, sleds in a tunnel, it seems it’s now morphed into something that looks quite more like a glass bus on wheels (in a tunnel?) than anything else. Also, the only futuristic part of it appears to be in just how much glass it’s made from – not what it actually does.

Don’t take my word for it, here’s what the SFBART (San Francisco Bay Area Transit) said about it. (actually, more like trolled) Again, to wit:

We carry 28,000 people per hour through our Transbay Tube under the bay because of the capacity of a train. That’s nearly twice as much as cars over the bay. Why wouldn’t you prioritize something that carries far more (and safely with automatic train control) over cars?

via SFBART public Twitter™ account

Ah yes, it does seem that the once “it’s different this time” moniker that protected the tech sector, and Silicon Valley in general, with its once unquestionable superpowers has since been rendered to memorial status, where the only thing that’ll remain are the tales of Headless Unicorns and Electric Rocket-ship dreams in perpetuity.

Unlike the money that may vanish for all-time immemorial.

© 2019 Mark St.Cyr

Over the past few weeks there has been a plethora of sudden “confident calls” that the now deemed “winter” for Bitcoin™ or, crytos in general is now over, and they can get back to selling the ideas (literally) that the riches everyone lost prior are about to be made whole – and then some.

Make that “A lot some!” when listening to most of the arguments given.

That may be true and, of course, may not. As always we’re going to have to wait and see just what transpires.

I have been of the camp (and still remain) that the sudden interest in the space, once again, is via the result of a sudden panic from China and others to move their money as quickly as possible before the authorities lash everything down.

I have also argued that there has probably been some rolling for some of the recently scammed acquired IPO profits into Bitcoin or others that has helped move the needle of this seemingly left-for-dead phenom only a couple of months prior.

The issue that will help show the argument for one side or the other more conclusively (i.e., “the winter is over” or “it’s just a blip or ephemeral type move regardless of size”) should become more clear very soon, as in, where the entire space goes from here.

And since I seemed to had been the only one that correctly assumed or predicted on-the-record where it would end up last time e.g., around $4K. I thought it was only fair to “throw my hat into the ring” as they say, once again, since it appears all the others are feeling more confident to visit the open air and declare their now confident stance rather, than remain in the deep bunkers where their faces have been more prominent on milk cartons than the mainstream business/financial media shows.

So with that all said here is mine. To wit:

The above is a daily chart of Bitcoin as of this writing. As one can see I have given the “winter is over” argument quite a bit more leeway than my “it’s a blip…” argument. However, if for some reason the price suddenly jumps up and goes into the upper area, I would be hesitant to call “it’s a decided moment.” The reasoning is simple:

Everything via the trade war and global markets are now in flux and a panic situation can make things appear or, seem to be something they are not.

So with that said the above helps give clues to which argument may have more weight, because if for some reason it suddenly spikes higher into that upper zone and then falls back to re-enter that shaded channel area? The argument becomes more settled to the potential for much lower lows rather, than much higher highs.

On the other hand:

If it gets up there and stays there, and then breaks even higher? Then the potential that “winter is over” begins to make more sense.

As I always say: we shall see.

But at least I’ve put my argument out there and on the record for those who want to know.

© 2019 Mark St.Cyr

…when tech stocks get demonstrably cheap, often times, they’re on their way to zero.

Bill Fleckenstein via interview with Jim Grant on Real Vision™

What makes a stock, any stock, a “value” today? Hint: rhymes with, central bank.

So, with that said, is it fair to say that if the central banks of the world suddenly pulled all their current intervention from the capital markets, there would be an immediate repricing of everything with a ticker symbol?

Let’s take it a step further, but we’ll make it a bit easier to comprehend or digest its implications.

Using only one central bank e.g., The Federal Reserve. When they decided to alter their monetary policies, what happened to the entirety of stocks? Again, hint, rhymes with: plummeted.

Was it one stock? One sector? One geographic market? No hint needed, you already know the answer. e.g., No, everything went down, in unison.

So using the question I posed above, there appears to be an impasse to whether or not any true “value” can be calculated, correct?

After all, if the value question of any subsequent ticker symbol can be calculated effectively, then why does it appear to be at the mercy (and in actuality react) to the dictates of a cabal of policy wonks that have demonstrated time and time again, they have no idea of what they are doing except to engage the “print” button?

Remember, the “moves” I’m speaking to directly are not trifle. They are moves that have taken entire sectors, in unison, down some 20%, with some so-called “fairly valued, fairly priced” individual names down even further.

Again, in unison and not in years, but weeks, months, and for some – days. (See your own 2018 year-end statements for clues of validity.)

Since the now infamous “Sunday call from Cabo” where the Treasury Secretary called the U.S. major bank CEO’s interrupting his in-progress vacation to discuss liquidity levels on Dec. 23rd. The “markets” have not only recovered, but with the additional jawboning, then the subsequent implementation of the Fed going into full “pause” mode, they actually managed to recover recording another “never before seen in human history all time high!”

Albeit the move has been more incremental than anything else, it’s the time frame where this move really shined. So much so, that the mainstream business/financial media cadre of next-in-rotation fund-manger and associated Ivy League’s so-called “smart crowd” cabal are knocking over their own mothers to get in front of the the closest camera, microphone or keyboard to profess, “At this pace, it’s Dow 365,000 by year end!”

Over dramatic, but you get the point.

However, with this as a backdrop I would like you to revisit Mr. Fleckenstein’s observation which I started off with. The reasoning is this:

Why didn’t all the so-called “most coveted and highly valued tech stocks”(think FAANG eg. Apple™, Google™, Amazon™, Netflix™, Facebook™, etc.) recover to new highs, or at minimum, their once prior highs in unison?

Did they recover? Sure, but not as did the indexes.

This should be your first clue that something is no longer as it once was when valuing anything with a ticker symbol.

Or said differently:

When it comes to what was once seen as a “value,” it should now be looked through the prism so overly used this past decade but now represents the antithesis of what it first did. e.g., It’s different this time.

I was watching one of the television financial shows the other day when one of the hosts remarked that they were going to buy Apple, because, it was “cheap.”

Fair point if you use the metric they were, basing it upon the $215 of only the week prior to then sitting at $185 respectively. And yet…

Which is the real metric to base that value at? i.e., $185 is cheap relative to $215, so it must be a steal as compared to its prior $233 just a few months prior, right?

But then again, with all things being equal, how in the world was it ever “valued” in the $140’s in between?

See what I mean?

Google is in a similar quandary for those trying to figure out what this term “value” really represents in dollars and sense. And no, that’s not a typo.

Google reported falling metrics which should be raising concern to anyone that understands business in its latest earnings report. The stock “tanked” and so far has not only not recovered its prior highs has since, steadily, been going lower. The recommendations?

Based on the above, the “analyst” community, along with the next-in-rotation fund-manager set, have raised their outlook to the stock price not only recovering, but setting new all time highs. Imagine that, who’da thunk it?

So again, I ask: where does one calculate the “value?” From the prior highs? Or, the falling metrics?

My advice? Throw a dart, it would appear there’s really not that much difference between the two, is there not?

It would appear that the largest tech names are entering (if not already there) within the most hated window for investing in general. And that is: “the value trap.” aka dead-money.

This is when, based on all things being equal, the stock price of a company appears “cheap” compared to either its former valuation or, its metrics in relationship to others, whether it be P/E multiples, etc, etc., etc.

And it’s here the stock price, barely, if ever, moves up or down. It just sits there, forever. Hence the term “dead-money.”

But the term “value” will be used to describe this phenom over and over again, ad nauseam as to try and sell the narrative (and pocket a commission) that “it’s different this time” for ____________(insert ticker symbol of choice here) compared to other so-called “value traps.” Hint: “trap” is your first clue to what happens to the preponderance of said “value” stocks.

However, that’s if you’re one of the lucky ones. Why do I say “lucky” you ask? Great question. So, in that light, I’ll submit the following for you to decide. To wit:

On April 25th I posited the above and summarized that, from a purely technical view, there would be a moment in time coming for Tesla that could, as the title implied, be the beginning of an existential crisis. “What has transpired since?” you ask? Again, great question and again, to wit:

So with the above for context, where would you place the “value” price on owning the above? Because if you compare it to its prior prints from IPO to today, it would seem it is sitting squarely in the middle.

Yet, which end is it that constructs said “middle?” And is that the right one to use? Or is it higher, lower, or right where it is that makes it a “value?”

My intuition? Let’s just say I’m sticking with the dart analogy I used previously. But if that doesn’t sit well with you, maybe you should base it on the leaked email, only days ago, just after Tesla raised additional funding, that its current cash-burn rate – only gives them 10 more months to achieve breakeven. i.e., infer existential implications however one decides to.

And as far as “analyst” or any remaining Wall Street next-in-rotation fund-manager credibility is concerned? Here’s another “existential moment” for your consideration when it comes to whether or not I’m too hard on these people and that they really do have your best fiduciary interests at heart.

From the days-of-yore May 4, 2019. To wit:

“Tesla could go even higher than our $4000 price target,” says fund manager Cathie Wood on CNBC™.

Existential moments for value, tech and investing advice, in deed.

© 2019 Mark St.Cyr