So. The image above is from my game project. It’s the “Saturnine Ball”. It’s a gnomish invention, basically a very depressed magic 8-ball that you might encounter in module 2, if you make the right choices. It seems appropriate at the moment.
As I wrote in my last post a month ago, the stock market was showing signs of a market top, with record numbers of moms and pops throwing money at a stock market going parabolic (vertical). I predicted a major pullback, and it has arrived.
I nibbled near the bottom of the first dip Tuesday morning, then sold back other equities late this afternoon when the market dropped again and passed the first levels, so I’m back to my initial level of investment (about 50%).
As of this afternoon, signs are pointing more towards this being a major crapstorm.
One problem of many is that everyone is still bullish. Our most recent big correction was in January 2016. That was triggered by a crash in oil. A lot of people then, including very big names, were saying to get out. Sell.
This time some of those same people, i.e. Carl Icahn, are saying no worries. This is actually very worrying, and illustrates how everyone is on the same side of the bull boat even after a week of selling.
According to Jim Cramer and others, the main cause of this market crash is leveraged investment instruments tied to volatility. Volatility exploded, and so did these investment vehicles. So big fund managers need to sell to cover their losses.
Meanwhile, the Trump administration announced they are pushing ahead towards a trade war with China in coming weeks. (I actually read the south China newspaper most days.) Rex Tillerson is getting some good street cred lately though, and he’s on the case.
There is also another government shutdown possible. I can also see Russia doing something politically horrible during the Olympics, since they were officially banned. Oil is also threatening to crash partly due to fears related to Venezuela sanctions. Shorting oil is a trade I’ve been looking at (SCO ETF). As normal, I’m too timid.
This might actually be “the big one.” This week so far is the worst since 2008 for the Dow, and since 2011 for the S&P. Milder pullbacks in 2016 took over 6 months of consolidation and fear before the market could move higher.
At the moment, I’ve taken small profits in Google and NetEase, and I’ve switched over to the Albemarle I’ve been wanting, and a half position in Redhat because I dream of a world free of Microsoft’s bloated leeching. So I’m not any more or less invested in the market since last August.
NetEase (NTES, major Chinese online game publisher and distributor), had a horrible earnings report yesterday, citing increased expenses and competition. That’s why I sold. This is basically my prediction for all of 2018 for gaming stocks – increased competition and more difficulty.
Take Two (TTWO) disappointed on earnings yesterday and was punished. The CEO, Strauss Zelnick, appeared on CNBC today for damage control. He talked up the numbers for GTA online. What? GTA: Online is ancient news, dude. I hope your sexist caveman game company dies in a fire.
Blizzard’s report today was excellent, in contrast.
NVidia crushed earnings even more than Blizzard, and is soaring today after hours. NVidia is close to my largest position, along with Alibaba and Tencent,all of which are up so much that they would have to drop another 50% before I would be concerned.
So I’m being patient right now. I’ll be looking to fill out my position in Red Hat at a lower level. I might add LabCorp(LH) to fill out my healthcare exposure. I’m also curious about Oak Tree Capital (OAK), which is getting hit hard along with all financials today. Basically stocks with very strong earnings reports, which are getting slaughtered regardless by the broad market.
Intel also looks more interesting and affordable as a gaming-related play (INTC). Chip stocks have been especially hurt (except NVidia). This is also a chance to buy Amazon or other favorite tech stocks.
Should I consider going back big into Blizzard for one more year? Or was Hearthstone and Overwatch a long-term peak, and they will need a new generation of games soon? It’s very hard for me to believe in longevity and customer loyalty in video games, enough to support these ESport leagues and therefore ongoing increases in revenues and profits.
Gamers are fickle creatures.
Square (SQ) is also interesting, but I’ve decided payments processing is just too vulnerable to long term disruption. Visa (V) may get a bump from the Olympics, but the Olympics might not be super-spectated. They always run commercials? I have no idea about the world of payments. Investing there would be just rolling dice.
Interest rates are currently rising in an uncontrolled way, which is another big problem. This is putting pressure on central bankers worldwide, putting more risk on risk assets, and also on “zombie corporations” that are only alive with massive debt on easy financing.
I’m curious about Oaktree Capital Group . It specializes in distressed debt. OAK is also an elf stock! Because “Oaktree”. Obviously.
I also still have EQIX on my long-term watchlist, which is a major data center lessor and operator. It’s under long-term pressure from rising interest rates however, because it is lumped heavily into real estate (REIT) ETFs, seemingly more than the telecoms.
It’s tempting to go all-in on the market here, but 2018 is likely going to be a long and difficult year in the stock market. I think a market drawdown of 20% is possible, especially if this fed “unwinding” of easing puts pressure on systems in unexpected and disastrous ways, which doomsayers have been predicting for quite a while now.
Gaming And Addiction
I’m so frustrated with Hearthstone. The long-awaited ranked revamp is a no-effort whatever. No game mode in Hearthstone is worth spending real-life time playing.
The rewards are trivial compared to the hours you spend making progress. In the case of arena, you actually mathematically lose gold. Meanwhile Blizzard nerfed some cards (be sure to go in and dust them), and there is an enticing new “deal” to buy 30 card packs for $20.
I’ve also tried to play some Tunnels and Trolls modules this week, for ideas and insight towards my own game project. I die every time!
Last night I was eaten by five vampire bats in Buffalo Castle! I died repeatedly in Naked Doom because I played as an elf with low Constitution! I only played for like 5 minutes. So that isn’t fun. But tonight I am back at it.
Hearthstone’s kobold dungeon has a similar brutal design principle. I wonder if brutality, hopeless suffering, and many deaths is actually addictive?
Roger MacNamee was saying on the Bill Maher show last Friday that social media is insidiously designed to addict us with articles that give a strong negative emotional reaction. Getting angry or afraid hacks our brains into creating an emotional bond through enhanced engagement.
The same concept is clearly relevant to video games.
So video game companies are creating addictive games with as many gambling mechanics as they can cram in, combined with emotion and frustration, and then shaking down kids for more and more of their lunch money, which will give better cards/gear to alleviate the pain.
The reason I can’t let go of Hearthstone, and its overly expensive costs, its absurd lack of class balance, and fumbling out-of-touch devs, probably involves various forms of addiction, sense of being too invested to quit, etc.
New Awesome MMO’s On The Way!
No. Not really. I can’t find any. Someone please make a new great fantasy MMO!
I looked at FFXIV:ARR this week. The last “news update” on their official website was from 2015. Their other official site link is an unreadable mobile-friendly eyestrain-fest. Good job, CM’s. But still, you know there are some sweet catgirls playing FFXIV.
I also looked at some Elder Scrolls gameplay on Twitch, and I just can’t do it. I’ve tried ESO a couple times, and I don’t like the interface, the lack of auction house, basically the whole MMO-designed-for-consoles thing.
So I’m looking at Pillars of Eternity II: Deadfire coming this spring, but I need to finish the first one first. It’s installed! We’ll see. Happy gaming, and thanks for reading.