Microsoft’s New Market Narrative

Posted on May 28, 2020 by macromon

Why Microsoft Should Be a Cornerstone In All Portfolios

By Carol K.

First, let me state unequivocally I am NOT a Microsoft (MSFT) product fangirl.  Since 2005, I have only purchased Apple (AAPL) products for myself and my children.

Nevertheless, as an investor, it would be short-sighted to ignore the radical transformation Microsoft has undergone under the stellar leadership of Satya Nadella, who succeeded Steve Balmer as Microsoft’s CEO in 2014.  I evaluate potential investments based on facts and do not allow personal preferences and tastes to distort my analysis of a company’s growth potential and future returns.

Azure

I could go on forever about Microsoft as a multinational technology company, but I digress for the sake of brevity. The well-informed investor is probably already aware of some exciting and highly relevant developments taking place in Microsoft’s Azure platform.

Azure is Microsoft’s Intelligent Cloud platform, and a growing contributor to Microsoft’s bottom line, where the company now derives approximately 35 percent of its revenues.

I am fully aware Microsoft Azure trails it’s rival, Amazon Web Services (AWS), in terms of penetrating the enterprise cloud computing segment.  However, I’ve become aware of some specific applications of Intelligent Cloud and want to share it with our readers.

AI/Machine Learning

These applications involve the power of Microsoft’s artificial intelligence (AI) and machine learning components of the Azure Intelligent Cloud, which are helping biotechnology companies trying to understand Covid-19.

One company, ImmunityBio (privately held) is utilizing Azure’s capabilities in performing computational analysis to gain insight into the complex protein structure of Covid-19. It is now able to build models in a fraction of the time,  in days, which usually took months of the routine computations and analysis.

 COVID Vaccine

Why is this important?

Any vaccine or antibody therapy will depend on this viral protein structure, and the ability to fully understand it is critical to accelerating the development of a vaccine.

Microsoft’s machine learning application is being used by Adaptive Biotechnologies (ADPT) to collect, sequence, and analyze information on the human immune response to COVID from blood samples of patients who have recovered from COVID.  This collection and analysis of immune response data will also be critical in a successful vaccine.

Valuation Issue

We do have concerns about Microsoft’s current stock valuation, however.

It is impossible to deconstruct what is currently driving the stock.  Is all of the above priced in; or is the recent price action more a reflection of America’s newly rediscovered sport of day trading, which has filled the void of this year’s NBA and NHL Playoffs, and the start of the baseball season?.

Microsoft stock is not cheap when valued by traditional metrics.

Most great companies command a premium valuation, however, and going forward, I believe Microsoft is one such company.

AAA Rating

Not only is it is well-positioned for the high-tech future, but it is also one of the best companies on the planet.  Microsoft is only one of two companies in the S&P 500, which sports a AAA credit rating from Standard and Poor’s,  Johnson & Johnson the other.

The company also has a fortress balance sheet and its CEO, Satya Nadella, is generally recognized as one of the most visionary CEOs in the world.

My opinion, which is never intended to be investment advice, is MSFT should be a core position in any stock portfolio and accumulated pullbacks

The Macro Heads at GMM believes another big sell-off is in the works before any new and real long-term bull market can commence.  I am making sure Microsoft is at the top of my buy list if, and when that occurs.

A significant correction would also provide an excellent opportunity to accumulate and build an overweight position in the stock.

If they are wrong about the market and it keeps heading higher, with commission-free trading offered at most discount brokerages, nibbling or buying a few shares at a time, will be an alternative strategy.

Posts Will Be Sporadic

Finally, let me express how thrilled and honored I am to now be part of the group at Global Macro Monitor (GMM).  I commit to doing my best in sharing what has worked for me as a private investor over the years in selecting individual stocks, which has provided considerable alpha to my portfolios in the past, and, hopefully in the coming years.

I have had a little health setback recently, but nothing this former Marine Captain can’t kick in the ass, so my posts may be a bit sporadic in the next few months.

Disclaimer

**I own full positions of MSFT and AAPL and have no plans to buy more shares or sell any shares within the next three trading days. 

The information in this post represents our own personal opinions and are not investment recommendations.  We may or may not hold positions or other interests in securities mentioned in the post or have acted upon what has been written.  

All information posted is believed to be reliable and has been obtained from public sources believed to be reliable. We make no representation as to the accuracy or completeness of such information.

Posted in Coach C, Equities, Uncategorized | Tagged | 1 Comment

Time To Fear The American Street

Posted on May 28, 2020 by macromon

I used to go home every night as a young Wall Street trader worried about how instability on the “Arab Street” would adversely impact my long unhedged positions.  If you have been a reader of the Global Macro Monitor over the past few years, you know we have been concerned about U.S. political stability.

All good traders worth their salt worry 24/7 about just about any and everything, which, by the way, was one of the first traits I would look for in hiring a new trader.  A high propensity to worry about losing money but not afraid to pull the trigger.

POTUS Gone Wild  

Now we are really getting worried

Rather than being a stabilizing force and a voice of reason and calm, the President of the United States delights in stoking the divisions and tensions in the country while spewing his conspiratorial garbage 24/7.

In the words of Anderson Cooper,  “Man, we are in trouble.”

It’s totally outrageous and moves the country closer to a critical tipping point.

November To Remember

Here’s to hoping we can limp to a fair election in November.  Let’s not let the Russian GRU and China’s MSS take a victory lap, America.

We owe it to the men and women in uniform making great sacrifices for us and what America has stood for, and, more importantly, to our children and grandchildren.

Fear The Street

It’s time for investors to fear the “American Street” or to, at the very least,  keep it on your radar.  If that is, markets are still a market and not a tool of the state, which is becoming increasingly debatable.

Stay tuned, folks

Fear the Street

What is this bullshit?  

Obama

Source:  PredictIt

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SOTD: Strange Days Indeed

Posted on May 27, 2020 by macromon

SOTD – Song of the Day

One of readers was incredibly perceptive to pick up a line in our last post, Cue The Economic Recovery, and attribute it to this Lennon song.  Gaaawd, John was good!

Hat Tip: Matthew Lamb

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Cue The Economic Recovery

Posted on May 27, 2020 by macromon

Summary

  • The Russell 2000’s relative performance is now sniffing out the economic recovery, which will be reflected in a record Q3 GDP print, a bounce from the record first-half economic collapse 
  • It is not unreasonable that we will see a record 20-30 percent GDP print in Q3
  • Atlanta Fed GDP Now is estimating a stunning 41.9 percent annualized decline in Q2, which translates into an over 12 percent Q/Q decline, almost as bad as the largest annual GDP decline during the Great Depression
  • Given the huge fiscal and monetary expansion, coupled with the massive market intervention by the Federal Reserve, markets are divorced from their fundamentals and economic reality now more than ever
  • The stock market recovery is not indicative of an impending “rip your face off” economic recovery but more a reflection the markets have been almost completely been nationalized
  • Stock market valuations are at historic and record levels
  • GDP growth will have to average an annualized 10.4 percent every quarter until Q4 2021 for U.S. real output to return to its Q 2019 level

The markets, or what’s left of them, are starting to sniff out the economic recovery.

We see this in one of the very few market signals we still have a modicum of confidence in — the Russell 2000 small-cap index relative performance to the S&P500, which bottomed in late March and, though volatile over the past two months is now starting to trend higher.

Russell_S&P

Strange Days Indeed

These are strange times for economists and market watchers.  It’s not only difficult to get a grip on how much economic damage has been done by the COVID crisis and lockdown but also to assess what the economy will look like on the other side of the pandemic and how robust the recovery will be.

Moreover, the massive fiscal and monetary expansion, coupled with the extreme financial market intervention by the Fed has rendered almost all market signals useless, in our opinion.  It is next to impossible to derive much information or economic signal from the stock market recovery, for example, because the stock market itself has now become a de facto tool of the state.

Stock Bailout

The stock market, in as macro sense, is supposed to reflect current and future discounted residual cashflows (profits) of the private sector after all liabilities are paid. The Federal Reserve’s recent, and almost blanket guarantee of those liabilities has resulted, in effect, a bailout of the stock market.  Chairman Jerome Powell didn’t have to buy one stock with the Fed’s printed “digital money” to prevent stocks from moving to a much lower level, which would better reflect a more realistic assessment of the economy and future prospects for corporate profits.  C’est la vie.

Economic Rebound

The stock market recovery, then, unless it is pricing an imminent announcement of a COVID vaccine, reflects nothing more than all of the above, in our opinion, and is not a signal of an impending  “rip your face off” economic recovery.  Our best guess is that the rebound, which will be recorded in the Q3 GDP growth number will set a modern-day record in Q/Q and annualized terms, only because of the record economic collapse in the first half.

Don’t be surprised if a 20 or 30 plus percent headline number prints in Q3.  Know thy context, however, that the record number is only the result of the unprecedented economic decline in the first half.   The economy will still have a massive uphill recovery to get back to even and beware of politicians touting “the greatest economic recovery in history.”

More Observations

We are not going into the weeds here but want to point out a few of our observations and best guesses.

  • The Atlanta Fed’s GDP Now forecast for Q2 output has been revised down to a stunning -41.9 percent, or Q/Q decline of 12.7 percent, which almost tops the Great Depression’s largest annual decline of 13.1 percent in 1932 (see chart below).  The Now forecast will change with incoming data, and will be updated tomorrow.

GDP_May27_Now

If the –41.9 percent annualized growth estimate for Q2 holds, in order for the real    output to recover fully to the Q4 2019 level:

  • by Q3 ’19 – growth would have to print at 80 percent
  • by Q4 – Q3 & Q4 2019 growth will have to average 34.5 percent
  • by Q4 2021 – GDP growth will have to print 10.4 percent for six consecutive           quarters.  Good luck with that one.

 

GDP_May27

 

Upshot

Expect a snapback in Q3, with a headline growth number printing at a record level and multiple of its prior highest.   Unless we find a vaccine sometime soon, stocks are extremely expensive, in fact, at record high valuations, but we have missed this rally and if you want or need to own stocks we refer you to someone with a better track recond,  our stock picker Coach Carol.

 

Depression

Posted in Equities, Equity, Uncategorized | Tagged , | 6 Comments

Steph Curry Is Priceless

Posted on May 26, 2020 by macromon

This is must view, folks….

Posted in Sports, Uncategorized | Tagged , | Leave a comment

One Of Our Best Trades Ever – Mike Trout

Posted on May 26, 2020 by macromon

While we are reposting, we thought we’d take a victory lap circle of the bases.  The following was originally posted on April 23, 2019, which was a victory lap of a repost from 2012, 

We’re buyers of Mike Trout’s rookie card. – GMM,  September 1, 2012

Now take a look at this recent USA Today Headline from May 21st. 

Mike Trout

Mike Trout continues to reach amazing new heights, even when he’s not on the field. 

In this case, Trout’s 2009 rookie baseball card — an autographed Bowman Draft Chrome Red Refractor — sold Wednesday at Goldin Auctions for $900,000, tying the modern record for a sports card.  — USA Today, May 21, 2020

What are the fundamentals, you ask driving the demand for Mike Trout?   It helps he won his third MVP in 2019 at a ripe old age of 28 years placing him rarefied company,

Trout joins fellow teammate Albert Pujols, Alex Rodriguez, Mike Schmidt, Mickey Mantle, Yogi Berra, Roy Campanella, Stan Musial, Joe DiMaggio and Jimmie Foxx as the only players who have won three MVP Awards. Only Foxx, DiMaggio, Berra, Mantle and Rodriguez have won three AL MVPs, and no player has ever won four. He also joins Pujols and Bonds (nine) as the only players with seven top-two finishes in MVP voting. — USA Today, May 21, 2020

Or could it be?  Ya’ think?

Does this have the whiff (pun intended) of deflation?


Originally Posted on April 23, 2019

Trout_picture.png

The first time we ever saw Mike Trout play baseball it was like watching the real-life version of The Natural,  and thought someday people will say,

There goes [Mike Trout] the best there ever was in this game – Roy Hobbes, The Natural

Moreover, the dude is such a nice and decent guy.

“What’s nice about it is Mike is such a good person,” Jim Quinn, the former mayor of Millville [Trout’s hometown], told NBC Sports. “You get some of these superstar athletes that have attitudes and aren’t really genuine, but Mike is a genuinely nice guy.” – GOODSPORTS

We began to hoard all things, Mike Trout.

We’re buyers of Mike Trout’s rookie card. – GMM,  September 1, 2012

 

Trout.png

 

QE?

We also knew QE was at our back and thought someday the Fed may begin to add baseball cards to its SOMA portfolio, especially if the POTUS collected them and would lean on the FOMC to ease monetary policy in order to inflate their prices  (note, FDR was an avid stamp collector).

 

 

We are pretty sure President Trump is not a big baseball fan as he has yet to throw out a ceremonial first pitch on opening day,

Every president since William Howard Taft, the commander in chief famously known for his particularly rotund figure, has thrown a first pitch at an MLB game…Donald Trump, for whatever reason, has yet to engage in the ceremonial practice of throwing the first pitch on Opening Day.   – Complex.com

Fundamentals

Given, no Fed buying and QE backstop we will have to depend on fundamentals — Trout’s productivity — to add value to our trade.   And the fundies are still sizzling,

Baseball has been around for about 150 years and Trout — only 27 years old — is already in discussion for one of the best to ever play the game…Since his first full year in 2012, Trout has averaged 34 homers, 26 steals and 98 walks and has hit .310/.420/.579. No player in the game’s history has racked up more WAR through their age-26 season. Basically, any metric you want to use puts Trout at the top of the game – MLB.com

I played against some of the all-time greats. Mike Trout is better than all of them. – Dale Murphy

Trout_stats

 

What We Are Buying

Mike Trout Farm Hats.  See here.

Trout_hat

We have no doubt the appreciation of the Trout Farm hat, as a collectible, will beat inflation over the years and estimate our great grandchildren will cashing these for thousands of dollars.

Looking for a big price jump when Trout is elected to the Hall of Fame circa 2037!

Upshot

Relax.  Tune out the ugly politics.  Enjoy the new stock market highs.  Watch some baseball.  Watch the Warriors win their third straight NBA championship.

Then continue to sell this strength while there’s a bid.  We think the S&P makes a nominal new high at 3025-ish before the Big Dipper sell-off or bear market.

Posted in Sports, Uncategorized | Tagged , , | 1 Comment

Get up and fight, sucker!

Posted on May 25, 2020 by macromon

Blast from the past.

We saw a lot of hits on our site today for this post from last year.  Very apropos as it time for America to get up and fight this virus and recession.   And like the Champ fought his battles,  we need a plan and strategy.

What a frickin’ great and iconic sports photo.

Originally Posted on May 25, 2018

53 years ago today, one of the most iconic photos in sport: Ali vs Liston II, captured by the brilliant Neil Leifer – @MeredithFrost

May25_Ali

 

The ending of the second Ali-Liston fight remains one of the most controversial in boxing history. Midway through the first round, Liston threw a left jab and Ali went over it with a fast right, knocking the former champion down. Liston went down on his back. He rolled over, got to his right knee and then fell on his back again. Many in attendance did not see Ali deliver the punch. The fight quickly descended into chaos. Referee Jersey Joe Walcott, a former World Heavyweight Champion himself, had a hard time getting Ali to go to a neutral corner. Ali initially stood over his fallen opponent, gesturing and yelling at him, “Get up and fight, sucker!”  – BoxRec

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Remembering The Sacrifice Of The Fallen On Memorial Day: A Harry Smith Essay

Posted on May 24, 2020 by macromon
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Going To Be A Slow August In Rhodes

Posted on May 22, 2020 by macromon

Even though,

Europe accounts for 50% of the global tourism market in terms of arrivals and has been particularly hard hit by the restrictions. Normally crowded cities such as Venice, Rome, Paris and Barcelona have stood empty.

The EU currently has recommendations in place to all its member nations that they restrict all non-essential visitors from outside. But with infection rates dropping off in some countries, this looks set to change.

Some countries, such as Greece and Italy, are already naming specific dates. On Saturday, Italy announced plans to reopen its internal borders next month, while German Chancellor Angela Merkel has said that many internal EU border restrictions would be lifted by June 15. – KSLNewsRadio

It’s all on the comfy level of the touristas to travel during the summer holiday.

Stunning chart, not unexpected, and probably one of the last sectors to recover.

Tourism

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Mall Rats Jumping Ship

Posted on May 22, 2020 by macromon

Yikes!  See how Carol nailed this in her piece in yesterday’s post, Back To Class: REITs 101.

We may have discovered a superstar.

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