Post 2019 US/China Trade War companies for consideration

The following is a list of microchip related companies to consider once the dust settles

  • AVGO – Broadcom
  • NVDA – Nvidia
  • QCOM – Qualcomm
  • INTC – Intel
  • MU – Micron
  • AMD – Advanced micro devises
  • XLNX – Xilinx
  • MCHP – Microchip Technology Inc

The following is a list of Consumer technology companies to consider once the dust settles

  • WB – Weibo
  • BIDU – Baidu
  • TCHEY – Tencent
  • BABA – Alibaba

Key trading mistakes during execution

Mistakes

  1. Do not hold a position against general macro events like (Trade) Wars
    • Lesson learned: impact of loss aversion and reversion to mean is muted when trade war is occurring
  2. Don’t double down on your mistakes
    • Lesson learned: it is cheaper to admit mistake and cut losess
  3. Committing too much to a position leaving not much liquidity for later. This forces freeing up liquidity at a loss when new buying signals surface.
    • Lesson learned: it is cheaper to under allocate portfolio to a position upfront.
  4. Entering too late into a buy signal by more than 48 hours.
    • Lesson learned: it is cheaper to forget about it when you are late
  5. Entering too early into a buy signal.
    • Lesson learned: it is cheaper to figure out the support level before entering into position.
  6. Don’t enter into position when there are no buy signals.
    • Lesson learned: it is cheaper to wait for a wave than to get carried away by the anxiety that there will never be a buy signal again in this lifetime.
  7. Not verifying assumptions
    • Lesson learned: Seek evidences to challenge your own assumptions. Lessons could be learned when you dig deeper into pass records to for deeper insights.

Additional insights

  1. Sudden news about macro economic events (Donald Trump tweeting) does follow a lose aversion and reversion to mean pattern.
  2. Gradual news about macro economic events (US passing tariffs on China and banning Huawei) will have a long term negative impact.
  3. Price of REITs are:
    • relatively insensitive to trade wars
    • hyper sensitive to Federal Reserve (expected) interest rate changes
  4. Only execute loss aversion and reversion to mean trades on positions that exhibit bullish trends both at the individual stock level as well as at the SnP level.

Related references

Insights from dinner with Josh

Grepsr is increasingly being used in the work place by Quid.

Business people that don’t know how to code use Grepsr to pull data.

There is increasing demand for DIFFs to identify thematic trends. Themes are extracted from articles through the use of NLTK.

The proliferation of machine learning libraries and the maturing of the semantic web is democratizing the access to insights.

The legalization of online sports betting has open a fertile ground for this trend towards democratization.

NBA basketball predictive modeling should be done at the players level instead of the team level as the data becomes too lossy.

The odds of sports books at the opening lines is to encourage even bets on both side. The odds of the closing lines is a weighted average of bets (signals) from the crowd.

15th May post effects of 13th May 2019 US/China Trade war on US markets

The following is a list of 19 companies either in the tech sector or with market capitalization above USD20 billion that experienced more than 10% drop in share price on the May, 13th 2019.

Below is the breakdown in terms of price performance on May, 15th 2019.

  • 2 companies (10.5% of sample) not related to trade war
  • 2 companies (10.5% of sample) fully recovered
  • 7 companies (36.8% of sample) at least 50% recovery
  • 10 companies (52.63%) not recovered by at least 50%

Related references

Macro economic analysis on US/China 2018/2019 Trade war

The 196 pages of Chinese goods to be taxed by the US governments are spread across 6 categories. Where US manufacturers cannot find alternative sources of supplies, price increase of end product will be expected. 

Based on what was observed in December. The ability of the US government to sustain the trade war is predicated upon the Feds keeping interest rate low. 

Taxed categories include 

  • agricultural produce 
  • textiles
  • chemical compounds
  • hardware parts
  • mechanical parts
  • electronic parts

The December 2018 US market financial meltdown can be attributed to US government tariffs to reduce demand for foreign material supplies from China coupled with Feds interest rate hike to limit capital needed to boost domestic production.

The trade war seems to serve three purposes:

  • Drive up demand for domestic supplies
  • To keep inflation in check the economy grows (traditionally a role played by Fed Interest Rates)
  • Keep China in check.

Related references

Donald Trump’s 3rd May 2019 trade war tweets on stock market index around the world

Tweet was posted in May 3rd 2019 where Chinese import tax hike to 25% from 10% was proposed.

Immediate negative effects were most prominent on Hong Kong and Straits Times stock index. An observed 4.5% drop.

Immediate effects were negligible on the Shanghai index as bad news seems like it was already factored a few days prior to the tweet. An observed 6% drop prior to the tweet.

Effects on the SnP was negligible. An observed 0.45% drop. The London Stock exchange (FTSE) seems to be humming to its own rhythm.

Book summary: The Fate of Rome

Climate is both an enabler and disruptor of human endeavors. Nature balances the population it supports. Technology enables increased rate of energy extraction from environment to further human purposes.

Conducive climate results in bountiful yield and has allowed Rome to rise. Land is cleared and trade networks flourish during the rise of the empire. Clearance of wild lands unlocked microbes into the human civilization.

Microbes evolve to utilize humans and other mammals as vectors of infection. Dense population and connected trading network serve as a multiplier. The worst pandemic is the white pestilence (Black Death). This wiped out more than half of human population.

Trading network collapse as a result of the decimated population. Military rank diminishes both as a result of population decimation. Problem is further compounded by collapse of financial system which makes it difficult to sustain an army.

Grounds are fertile for spread of monotheistic dooms day religion like Christianity. Emperor Justinian converts to Christianity. Classical Greek school of thoughts gets displaced.

Climate change for the worse force nomads with superior military power to migrate westwards into Roman territory.

Roman Empire with decimated population gets further crippled.

Insights from dinner with Yuan

Conversations with Wang Ji Lei (Google)

China’s 996 practice has allowed China to close the 30 years technology gap between China and the US within the past 5 years. Some segments like cashless commerce have already surpassed US. The norm is some labor regulations are considered formalities and adherence is not necessary.

China’s distribution path starts from Beijing, 1st tier cities, 2nd tier cities, 3rd tier cities and finally remote villages. While double digits growth has been the norm over the past five years, market saturation has been achieved within the Chinese digital space and most apps are having problems growing.

Baidu’s Ads revenue model via search is increasingly being disrupted by Tic Toc. They have lost 50% ofvtheir search revenue last year. Similar trend is being observed with Google’s Ad revenue model which is bring increasingly disrupted by Amazon in the below USD75 consumer goods segment, Facebook between the USD75 and USD2000 consumer goods segment.

Tic Toc and WeChat dominate the bulk of the mobile usage bandwidth in China. Tic Toc with string positions within the short video entertainment segment while WeChat in the social conversations segment. Both companies face significant challenges encroaching into the other’s territory.

Tic Toc is the only Chinese mobile entertainment app that has made significant headway out of China. They have a well defined playbook which specialized tiger teams follow to gain traction in new territories. Maintenance is transferred to local team once penetration threshold is achieved. Due to fickle nature of users, retention remains the number 1 challenge. Position can be easily displaced by new entrants. Thebunderlyimg thesis is that city dwellers have lots of fragmented time spread across a day. Each video is restricted to 45secs to reduce anxiety that user has to stop watching between engagements. This also helps induce the habit of chipping in between engagements.

Typical engineer’s salary in Beijing is USD50,000 per year while a house cost around USD2million. While typical engineering salary in Silicon Valley is at least USD100,000 per year while house cost at least USD1 million. Wealth is mainly retained at the upper levels in China. Given the ratio of salary to house price as well as the comparative working hours, there is significant pull of talents to Silicon Valley.

Average green card waiting time for EB1 is now five since it’s been expended to include executives.

Major housing development is occurring in South Bay given huge influx of population and hiring by google (50,000 people) and other giants. Heavy recruitment is happening as Google continues to build out its cloud team.

Google cloud’s market share continues to lag with Amazon leading, Microsoft Azure in Second and AliCloud 3rd. Google cloud organization is facing an inflection point as upper management faces difficulties with zeroing in on a clear strategy. The symptoms are the dilemma between engineering culture (Google Default) versus customer culture (Amazon) and SMB versu Enterprise. Google’s traditional engineering culture has the effect of causing company to drift towards heavy engineering solutions which might be an overkill for SMB needs coupled with a lot of wastage which no one needs. This opens up a gap for customer focused companies.

Societal comparison between our current day and age versus the era of communism’s rise

In Karl Marx’s Das Kapital, I see huge similarities between the society during his time of writing and our current day. Corporations well optimized for profitability while workers work long hours without making enough to sustain themselves.

Currently, blue collared workers are either unemployed or getting paid close to minimal wage. With the growing prevalence of trend 996, where overworking gets glorified, even knowledge workers are working increasingly long hours while stuck living in areas paying ever increasing rent.

The only distinct between what is observed now and then is the promise of upward mobility through hard work, some call it the “American Dream”. Based on my observation even that is getting slaughtered.

Based on the current trajectory, I foresee a day majority of our population wakes up to realize the dream is in fact just a dream and a set of ideology similar to Karl Marx’s gain widespread popularity amongst the masses.

Related references

Insights from the week

From Connie (Edmodo)

  • the key to consulting is to organize data into high level mutually exclusive buckets to allow easy defeating by decision makers

From Tim (Edmodo)

  • Kano model

From Val (Totango)

  • Company is concerned with increasing revenue and profitability. This will drive higher valuation during further exit

From Yip (ATT)

  • Analytics from Facebook page comments and twitter hashtag
  • need to balance customer support demand and cost of running department:
    • customer support hotline
    • Direct comments from influencers  which trigger negative sentiment to support staff
  • Business analyst reads comments manually to get qualitative needs and understands business needs
  • Data scientist explores data might not know the business needs
  • business analyst have problems working with data scientist
  • tools to help business analyst get directly at the insight instead of via data scientist
  • build model to predict call support volume by category
  • build model to quantify feature demand level needs
  • correlation of weather and commodity prices