Every day I go through roughly 200 stocks/indices/indicators, several times per day, looking for signals, attempting to connect dots and ultimately, hoping to find risk/reward situations that create outperformance.
The title Lies, Damn Lies seems appropriate as when the markets want to reveal any kind of truth, they first do so through blatant lies. Conversely, whenever truth appears apparent, there is likely to be deception involved.
These are simply thoughts (some completely random) as I attempt to connect the dots:
- The Zillow earnings call was something to marvel. As disclosed earlier this month, we are long Z. Founder of Zillow, Rich Barton, chose this moment to come back to the company, further going on to describe the opportunity as a "short circuit," stating that what started as a small experiment with Zillow Offers became an inundation of consumer demand. As a result of what they have observed, they are essentially attempting to "Uberize" the home market with a one click and your house is sold vision. Rich Barton, for those unaware, started Expedia, Glassdoor and Zillow. He has been on the board of directors for Netflix since Netflix was a private company. In other words, Rich has seen a thing or two in the evolution of technology over the years. He described the gravity and importance of the transition in Zillow as similar to when Netflix went from mailing out DVDs to streaming. In other words, it's a high risk moment in the life-cycle of the company, but one that comes with massive rewards if they execute correctly. In the meantime, they have a solid core business that can support the big swing that is being taken with respect to Zillow Offers. For Rich Barton to come back as CEO after observing the Zillow offers experiment for a couple of quarters means that he saw something that was extremely exciting in his view. The entire team sounded excited on the call for what's ahead. I think that excitement will leak into the stock price, with the results in the next few quarters being equally exciting.
- Have taken a position in BABA recently. The stock has been performing well and it's a reasonable way to play a buy the rumor, buy the news reaction on a trade deal with China.
- Bringing me to my next topic, the US-China trade deal will be such a comprehensive piece of work that the markets will have no choice but to rally on the news. Both countries haven't postured to this point for it to be a weak document, with broad strokes. It will be bullish for both countries and that bullishness should spill over to the markets, with a continuation of the rally in equities through March.
- The strength in the housing sector is tremendous. It's one of the top three leading sectors in the entire market this year with respect to performance. A testament to what the market thinks is going to happen now that interest rates have come down, the Fed is ghost, jobs are at record levels and wages are rising. Real estate is going to be THE story of 2019. It's a large part of why we invested in Zillow.
- The Dow is less than 1,000 points away from a new all-time high. There is a distinct possibility that the Dow ends 2019 above 30,000.
- I've changed my view on interest rates in recent weeks. They have gone well past the window of a point in time when they should have rallied. It seems that interest rates will remain relatively low and more or less in the current range until past the middle of this year. Their ascent is likely put off until Q3-Q4. This gives plenty of time for the economy to gain momentum from cheap money sloshing around, especially the real estate sector.
- Further pounding the table on the real estate sector, the CEO of RDFN purchased $500,000 worth of stock on the open market this week. He hasn't done that often in the past. He was bullish on the call, basically saying that Q1 momentum looked very promising. I would think that his purchase of stock reinforces the view that the momentum is continuing unabated.
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