PRE MARKET

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If there isnt a smoking gun in these transcripts…

Most important points:

Growth worsens. Continue to avoid growth.

Everything else fails at highs. The SOX moved to highs for the 3rd time but now seems to be rolling over in the near term.

NASDAQ/NDX now below the 50 day. Nothing good can come from that. Needs to get back above.

End of quarter week in effect. Of course, window dressing is illegal so it does not happen.

WEWORK

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WeWork is in the news. Not for anything good. Looks like some tough sledding for those who bought into the ridiculous valuation placed upon this company. We are told the last “buy” was at a $47 billion valuation. This for private buyers. Private buyers are the ones that very often make out in a big way. Currently, WeWork cannot even come public as estimates now are for a $10-$15 billion valuation. We believe that even at those levels, the valuation is insane.

We can get into the why…long term leases and short term rent, hardly recession resistant, trying to sell the company as a technology company (a laugher), self dealing, un-disciplined CEO! But for us, the simple issue is the investment banking community again tried to foist stuff onto an unwary public at valuations that are outrageous. For comparison:

IWG…formally known as Regus

$500 million profit
120 countries  3,000 locations
$3.7 billion valuation
WeWork
$1.9 billion loss
29 countries  528 locations
$10 billion – ? valuation
All one had to do was some homework and ask themselves SAY WHAT? Anyone want to pay $100 for a $20 bill?
But WeWork is just the outcome of what has been going on for the better part of the past two years. Simply put, the investment banking community has been once again, lowering the bar on the quality of what they brought public while keeping the bar ridiculously high on valuation. Estimates are that in the past year, over 80% of the companies brought public, lose money. This has caused even the supposed “no brainers” to be squashed.
UBER $45 IPO price, couldn’t get over $47 after coming public…currently trading at $31.50. Even at these levels, a $55 billion market cap on a company that admits it will continue to lose a ton and may be cutting itself thin by getting into a slew of other businesses is quite insane.
LYFT $72 IPO price…opens hot at over $88…closes same day at $78…currently $42.30. Just another company that loses a ton of money.
But these are the names that are known. How about the ones not so known? A short list:
CIFS $10 IPO…now $1.70.
JP $9.50 IPO…now $2.25.
SOGO $13 IPO…now $4.90.
NEW $17 IPO…now $9.30.
JMIA $14.50 IPO opened at $30, as high as $50…now $10.30.
FTCH $20 IPO opened at $30…now $8.75.
SDC…$23 IPO just came public 2 weeks ago…already $16.
We can list many others but for brevity, we will leave it at that. The lesson: pick your poison. The lesson: the goal of investment bankers is to get the highest price no matter what. The lesson: valuations matter. The lesson: losses matter. The lesson: do your homework. Once again, greed took over. Once again, stuff was foisted not only onto an unwary public but what is supposed to be wary and smart private equity buyer. All lost!

BERNIE GOES FULL CHAVEZ/MADURO AND THE MARKET

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So Bernie goes one up on Elizabeth. On his twitter feed, he writes: ” There should be no billionaires. We are going to tax their extreme wealth and invest in working people.”

He then proposes this YEARLY wealth confiscation:

1% above $32 mil
2% $50 mil-$250 mil
3% $250 mil-$500 mil
4% $500 mil-$1 bil
5% $1 bil-$2.5 bil
6% $2.5 bil-$5 bil
7% $5 bil-$10 bil
8% above $10 bil
So Bernie going full Chavez/Maduro but Bernie has not thought things out. Go figure! We have called the Sanders people asking for comment on a few questions. They refuse to answer.
Question #1…If you confiscate wealth from the billionaires out of existence, who are you going to have left to tax?
Question #2…What will you do when every billionaire leaves the U.S. to escape this confiscation?
Question #3…If everyone knows that at a certain point, every dime gets taken away from them, why would they continue to work and grow their business?
Unfortunately, an authoritarian, socialist, Marxist, economically illiterate person who would let the Boston bomber vote in our elections did not consider such logic!
THE MARKET
We are just letting you know that the growth area of the market continues to implode. You would not know this from just watching the big 4 indices. We ask you to pay very close attention to this as this type of action is very often a harbinger of not so thrilling things to come. When the growth areas go bye-bye and that money flows into the lower beta areas, it has many times been a signal of the big money running away from risk. When the market is turning defensive, it buys into defensive. This can only last so long. We now watch the all-important SEMICONDUCTORS as they are starting to roll over and then will be watching the big 4 as all are showing subtle distribution up at the highs. Just underneath here are the 50 day moving averages. They will need to hold. We shall alert you if those levels break. Keep in mind, we are writing this with the big 4 just a shade underneath their highs. It is the underneath the surface action that is giving us a lot of pause here. It is end of quarter window dressing week. Of course, window dressing is illegal so does not happen.

PRE MARKET

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Futures up just because….oh yeah, the administration took back what they said about China on Friday…just dont blink.

It is the end of quarter window dressing period where typically, nothing bad happens. Of course, window dressing is illegal so it does not happen.

The big 4 indices continue to trace out constructive patterns. Just need one big shot to break them out of range. Keep in mind, underneath the surface…not as good but if the big 4 break out of a big range, will be quite important heading into earnings.

And one other note…the SOX also trades constructively at the highs as it had a normal pullback at the highs. If it can break out with the big 4…big news.

PRE MARKET

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Futures down this morning but not much. A few notes:

GOLD/SILVER look like they have found support off the recent pullback. Would love to see some time put in at or near these levels.

BONDS bottomed recently after some corrective work. Lower yields on the long end have not been received well by the market…so far.

Before Friday, there were 2 churning days, especially in the NASDAQ. Friday added some decent distribution. Watching the all-important SOX as 3 times into the highs still not getting through the highs.

Growth leadership…what growth leadership? Growth aint happening right now as money flows continue to find value plays.

ROKU…when you have a chance, take a look at the feast and famine chart. Lesson: always have stops in place…and the biggest drops do often come from the biggest leaders.