Volume: 3 Issue: 185 September 23, 2019

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BUSTED STUFF

Rolling stone

Gathers no moss But leave a trail of Busted stuff

This lyric is rolling around in my head this morning as I look around the investing world trying to figure out where to add risk and where to pare risk down. It’s easy to feel a little shaky on a Monday morning. With all this busted stuff around us today though, I’m feeling blessed.

We’re more fortunate than the about-to-be-former CEO of WeWork, Adam Neumann, who woke up with a bull’s eye drawn on his forehead by everyone from Softbank to Scott Galloway. This IPO coming to a crashing halt will likely go down in history as PEAK PRIVATE EQUITY HUBRIS no matter what Softbank does to t ry to right the ship. Jason Zweig followed my theme in the journal this morning when he wrote about how the myth that private markets are superior to public markets. Jason busted that myth wide open trotting other unicorns around as examples.

Private markets have their advantages to public markets. Both, as we know, experience peaks and valleys. They’re going to put Adam Neumann’s quote that WeWork “played the private-market game to perfection” on his CEO epitaph one day. We’re fortunate not to be in his shoes.

We’re more fortunate than the 600,000 travelers who were stranded due to UK travel company Thomas Cook going bankrupt after failing to secure over $200M in emergency funding on Sunday. A headline that rhymes with rising retail bankruptcies in the first half of this year. Busted storefronts all over the place.

We could be stuck at the New York Federal Reserve this morning, prepared to weather a Tsunami of repo paper requests and wondering whether or not our mechanism is prepared to handle it after the Federal Reserve had to provide over $200B in emergency funding last week. I’m not a five alarm fire guy on this topic, nor am I an expert. I’m just pointing out that the Fed’s repo system is malfunctioning among all the other bus ted stuff out there.

We could be sitting at the office of Loop Capital going out with a call like, “Hey good morning guys, listen, Netflix is compelling here” and reaffirming our $425 price target with faux confidence and cream cheese all over our handset. Meanwhile technical jackals are preparing to ravage the stock price and rinse scores of FAANG overweight portfolios by repricing this stock closer under $225.

Alan Gould, whom I have nothing against, is aware of the subscriber growth concerns, but he believes “the macro trend of an accelerating shift from traditional TV to streaming will supersede NFLX’s competitive losses from the streaming wars.” Do you know what Alan thinks could be an upside catalyst for Netflix? The release of The Irishman – a 3 hour and 30 minute Martin Scorsese directed Tribeca films crime drama that cost $140M to make. *straight face*

If you go through this $NFLX Tweet I posted on Friday – you will see it fits Raoul Pal’s “GMI Crash Pattern” and Julian 1

Volume: 3 Issue: 185 September 23, 2019

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Brigden’s “Classic Bubble” pattern. I always enjoy seeing how someone else carves up a stock and it was cool to see how

Julien’s analysis, while quite different from my own, arrives at the same conclusion. Bernstein was out warning the stock has room to $230 before it bottoms. In my opinion, Netflix and Adam Neumann are in the same boat this week.

I see the equity volatility (VIX) dipping into my “KILL ZONE.” I Netflix breaking a major trend line with a few scary highs in the rear view mirror at $380 and $350. I see the major magnitude move of a 2.5 sigma slide on Friday and I think it’s Times Like These you want to choose some short dated PUT options struck around $225 and bid for them on retracement rallies in NFLX. I say “bid for them” because the options business is tricky. The least you can do is save yourself the spread.

This feels like one of those opportunities to have some levered risk on because I think the next 15%-20% lower in NFLX might go quick.

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Volume: 3 Issue: 185 September 23, 2019

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Euro Trash

As bond watchers that believe rates are going to retrace higher, I’ve got to stay on my toes. European data is out screwing the pooch again this morning, which is the scenario that I have been saying is the only one that can get the

Negative Yielding Vortex inhaling everything from 3-month Treasuries to Mexican High Yield at 4.5% again.

Eurozone Purchasing Managers Index fell to 50.4 in September – the weakest print in 6 years. The Eurozone economy is on the verge of stalling badly. The manufacturing sector has been getting slammed since the trade war. It feels like the dopey consumer is the only thing keeping the economy firing.

German Manufacturing PMI just let out a stink-burger heard round the world of 41.4. The factories are grinding to a halt in Europe so the bond buyers are back in force. This is a scenario where I think traders will pile happily into bonds again, convinced yields are going to pursue their path toward zero and they get hamstrung when 10Y Bunds hold support (white boxes) at -60 basis points, Treasury yields hold support at 1.6%, and both yiel ds start counter-trending higher again.

We have no risk on in credit, I’m only minding this trade as it relates to everything else.

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Volume: 3 Issue: 185 September 23, 2019

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“The older I get, the more I see a straight path where I want to go. If you’re going to hunt elephants, don’t get off the trail for a rabbit.” – RIP T. Boone Pickens

“If you wake up on a Casper mattress, hail Lyft to get to your desk at WeWork, use DoorDash to order lunch, and get an Uber home, you've spent the day interacting with companies that will collectively lose nearly $13 billion this year.”

- @DKThomp

“A plan without action is not a plan. It’s a speech.” – RIP T. Boone Pickens

“They have an app my cat could have written.” – Larry Ellison on Uber

“SoftBank was reportedly considering propping up the IPO with $750 million in share purchases at the offering price. If that’s the case, shouldn’t they want to invest billions more at the now low-low 80%-off price? Or were they simply looking to pump and dump?” – Scott Galloway, No Mercy/No Malice

“So WeWork is just the Fyre Fest version of The Office.”

– Kyle Smith

“You better live every day like your last because one day you’re going to be right.” - Ray Charles, born September 23, 1930

“If you’re going to run with the big dogs, you have to get out from under the porch.” – T. Boone Pickens was good at Monday quotes

“There are three faithful friends: an old wife, an old dog, and ready money.” - Ben Franklin

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VIEW MATRIX

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Volume: 3 Issue: 185 September 23, 2019

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