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Stock ideas from my readers. What happened when “hedge” fund Archegos blew up. Useful tech tips.

I asked for three favorite names from my readers. Names I got back included:

+ General Electric, Proctor and Gamble, Apple.

+ Microsoft, Apple and Amazon.

+ Salesforce, Ballard Power (BLDP) and Berkshire Hathaway.

+ Airlines, cruising, marijuana and about 20% in gold and silver.

+ IWN (ishares Russell 2000) and JETS ETFs.

+ MCF — Contango Oil and Gas. For more, click here.

+ Porsche Automobil Holdings — POAHY.

+ Simon Property Group, Wynn Hotels, and Park Hotels. “Bought all six months ago. Hey, I’m a real estate guy.”

+ Stink bids are happening… DIS, AAPL, SBSW, SLV will work if things keep tanking XLK, EES, ARKK….20-30% lower?

+ NVTA — Invitae Corp.

It’s wonderful that virtually all of these names have done so well recently.

What I learned from these names:

+ Your day-job really helps. You can see and feel which companies in your industry are doing well.

+ Alternatively, reading, reading and reading. But start small. There are too many gotchas lurking.

+ It’s insane to go after “hot” stocks without understanding why they’re hot and what can cause them to get cold fast.

My background is technology. That’s an industry I sort of understand. I look for companies whose products deliver a serious advantage to their customers, and, most importantly can deliver them by using the cloud. In other words, scaleability without serious incremental costs. In  short, they use AWS (Amazon Web Services) or other cloud software and service provider.

As you can see from the list of stocks we own, I favor companies I understand. And I favor companies which get constant “buzz,” e.g. Apple, Salesforce, Amazon, Microsoft, Netflix, etc. I don’t favor companies I don’t understand, like Palantir. And I don’t favor industries I don’t understand, like cannabis and bitcoin.

What went wrong at Archegos

It borrowed huge amounts of money from gullible banks to go long on several stocks, but one in particular — Viacom.

It was a good idea — until it wasn’t. Here’s three months of Viacom. It just didn’t keep going up. Shucks!

When Viacom started tanking, the banks made margin calls. Archegos couldn’t pony up the money. So the banks rushed to sell stock. They hoped to sell before the other banks who had loaned Archegos money could sell. Sort of a like a race to the bottom.

Archegos had $15 billion of capital, and borrowed $65 billion to buy a total of $80 billion of stock. Archegos didn’t buy stock as you and I know it. They bought swaps, which are sort of like derivatives.

The selling of swaps is very profitable for banks. And the greediest, dumbest of them all, Credit Suisse, figured that that business was manna from heaven. It wasn’t. They just took a $4.7 billion hit and some of the management idiots lost their jobs and their bonuses.

Banks that got involved in the Archegos debacle included all the majors — with the BIG exception of the best managed big bank around — JPMorgan Chase.

What blows me away is the people at Archegos had a seriously checkered career, including run-ins with the law. A simple Google search of  Bill Hwang would have been enough to say “We’re not lending you money so you can leverage your hedge fund six times on ridiculous gambles.”

But apparently, the banks didn’t. The swap lending business is incredibly profitable — perhaps 50 basis points — when you get paid back. Ooops, if you get paid back.

Now you understand the insanity and idiocy, read all about it in gruesome detail in the Journal and the New York Times.

Some techie news and tips

+ The Personal Data of More Than 533 million Facebook Users Has Been Posted Online.
Names, locations, and phone numbers are all available as part of this massive data leak.

In short, it’s not a good idea to put your social security number and bank account info on Facebook. Or address. Or phone number.

+ If you change batteries, you probably need to reset the water leak detector, or whatever. Push a paper clip into the little hole.

+ Emergency generators work on car batteries. The batteries should be changed every two years.

+ The new Airpods are awful. Get the older, cheaper ones.

+ 9 volt batteries are seriously dangerous. Touch them on some steel wool and you’ll start a fire.

The first daffodils have appeared.

The deer don’t eat them. They eat everything else.

I’ll update my list of stocks later today. I haven’t written much in recent days since our stocks have recently done so well.

So, to coin an old expression, “When it works, don’t f*ck with it.

See you tomorrow. — Harry Newton













New investment trends:

Everyone and their uncle …

+ … bought puppies in the Pandemic. PuppySpot says the prices for puppies in the U.S. rose by 36% after the pandemic began. I own shares in Zoetis (ZTS). I used to own chares in Chewy (CHWY), but it fell big-time. Time to buy back in?

+ … is about to buy an electric car. Michael wants to buy a Hyundai Kona EL. See Car and Driver review.

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