Tag Archives: analysis

Mirkwood, Gaming Stocks, And Development Notes



LotRO’s recent Mirkwood update is actually really good. I’ve played through it completely with my main, and I’m working on an alt.

It’s clear the small LotRO team is working very hard, and they deserve some accolades for some of the highest quality content LotRO has seen in a long time.

The player base in general seems a little detached and apathetic, however. I’m concerned that the difficulty level of Mordor, and again of Mirkwood, may have expelled a significant number of players.

LotRO’s most recent update completely revamped the character selection panel, with overall improved results. Today I uploaded an update to my custom interface, which repairs some of the damage caused by the interface changes.


Gaming Stocks


The past month and the week before last saw record inflows into ETFs according to CNBC. I take these flows to be average people, including mom and pop, chasing this bounce. This is BEARISH, not bullish. it’s also stupid at this time of record uncertainty, risk, and rising interest rates.

These investors were face planted this week when the market crashed again due to various factors, especially Trump’s trade war with China.

Friday’s drop took the S&P index exactly to the critical level it needs to hold relative to the previous low several weeks ago.

The overall sentiment on Wall Street is that it won’t hold, which is my sentiment also. This is why I’ve been taking profits for the last month.

In my last post I bought Google and sold Albemarle. I took quick profits in Google after that. I more recently sold Nvidia (NVDA) and Tencent (TCEHY) both for 120% gains.

I’m currently as little exposed to the market as I’ve been in a very long time. I actually tried to go short the market at the recent top, but got shook out, missing a huge gain to date in inverse 2x short S&P (SDS).

In that case I broke one of my rules, which is to wait until the very end of a day before allowing myself to get shaken out on a high conviction trade.

I was distracted by real life and couldn’t deal with having that much money on the table, basically. I really need to get past that and make 2x or 3x bets.

If you’re currently in the market, then I think it’s too late to sell anything. I also think it’s too early to risk buying, but we’ll just see. Let’s break down individual equities.

NVidia (NVDA) should be watched for a buying opportunity on this pullback, but it has all sorts of issues and headwinds:

1. Amazon and Google said they will start making their own chips (i.e. so they aren’t held hostage, are more secure due to proprietary, and don’t have to pay NVidia’s 50% margins.)

2. Self-driving cars are higher risk since the fatality last week in Phoenix. Uber suspended its testing, and Uber uses NVidia chips.

3. AMD strongly asserts it will take market share this year, presumably from NVidia.

4. China says it plans to make more of its own chips, presumably to be less dependent on the U.S., which actually tends to block Chinese chips and devices for security reasons.

Tencent said this week that their mobile games sales have weakened in China. Gamers are migrating to more sophisticated, less dumb games, like the PC games offered by Netease (NTES). This is a risk across the industry.

This is good news though for people like me who hate dumbed down games. I’ve been predicting a resurgence of the PC for years due to this exact effect. I also predicted a difficult year for game developers this year, because of increased competition.

Jim Cramer was championing Activision Blizzard (ATVI) on his show last week. He said ATVI is making a new modern Disney. That’s a bold claim.

Meanwhile, Blizzard’s Hearthstone is offering ever-increasing free stuff, including a much more generous 70 packs for the expansion purchase, instead of 60.

This seems to say they need to sweeten the pot to keep their customers, who are pressuring them publicly about the expensiveness of Hearthstone.


Current Picks


Currently my only gaming stock holding is a moderate position in the GAMR ETF. NVidia and Tencent moved from the portfolio to the watch list. Other stocks on my watch list are Taiwan Semiconductor (TSM), Albemarle (ALB), Equinix(EQIX), Labcorp (LH), and Visa (V).

TSM is pressured by a very strong drawdown in the chip industry right now, but it’s a huge independent chip fabricator, so it might benefit from China vs. U.S. chip wars, especially as a subcontractor if China pushes faster to become independent of the U.S. chip makers.

Visa has strong relative strength and, while TSM is hurt right now by being a part of chip ETFs, Visa is a big part of financial ETFs, which are expected to benefit from rising interest rates.

Equinix (EQIX) is my white whale. For years I’ve missed every opportunity at this stock. At some point, the real estate ETFs (REITs), will stop being pressured by rising interest rates, which, as I understand it, hurt these companies due to the high debt these run.

It would be very profitable to have the savvy to get back into the REITs at the right time during this rising interest rate cycle.

I don’t have the experience to know when that is, but I really like investing in internet operation infrastructure, which is mostly dependent on internet bandwidth usage, and less related to sales of chips and software. Maybe I could research this in the charts going back several years to prior cycles.


Personal Project


Today and yesterday I was watching Harry Potter movies over and over on HBO Now, trying to understand why some of them (i.e. Prisoner of Azkaban) are better than others (i.e. Chamber of Secrets.)

I think it’s better characters, conflict, and lots of amazing magical things happening, but I should put my observations and writer insights into another blog topic.

I’ve also been working hard on the story and art for my game, as usual. The above image for this post is from the “evil” tavern, where the general bad guys hang out.

You know – the evil wizards, the demons, etc. I won’t say pirates because in my game the pirates are counted as good guys. They are free humans, rebels against the dark Lord whose laws say all humans must be registered slaves.

I’m also still reading about fairy magic and lore. Supposedly the power of 5 (the pentagram) is more normally used and powerful for fairies than the power of 3. Good to know, because I was going with 3.

The Harry Potter movies notably don’t have a lot of pentagrams or other provocative imagery hanging around. Harry does form a trinity with Ron and Hermione, however.

And a final thanks to the one person last month who bought a copy of one of my books. Thanks for the cheeseburger, amigo…

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Gaming Stocks Continue To Rip, But U.S. Markets Look Iffy

stock chart
Gaming companies reported excellent results this spring earning season, sending Blizzard, Electronic Arts, Sony, and NVidia yet again to all-time highs. NVidia and Netease (Blizzard’s partner in China) were both up close to 5% today.

Jim Cramer discussed NVidia at length today, noting the huge movement into artificial intelligence, and that NVidia (NVDA) is really the only pure AI investment opportunity. Google is in AI, but is much more diversified. NVidia killed earnings yet again in this quarter, and I’m up 25% already, again.

At this point, however, you may be a little too late for U.S. gaming equities in general this year. The old adage is: “sell in May and go away“.

Some indicators are showing a current slow-down in the U.S., great investor complacency ($VIX), and a narrowing market (fewer big stocks keeping it afloat), in addition to the upcoming seasonal weakness. “Bad!”

There are good opportunities for gaming stocks in Asia, however, which also avoid risks of Donald Trump insanity. Big money managers like Jeffrey Gundlach are pointing to Asia (emerging markets) as well in the last few weeks.

Sony ($SNE) and Netease ($NTES) are both breaking out as of last week, as shown in the image above, so lets look at those.

The image shows two types of buyable breakouts. Sony is breaking to an all-time high past levels the stock previously was rejected. Netease is breaking out of a three-month consolidating downtrend.

In my experience, the Netease breakout is far more reliable, which is demonstrated by the much stronger move out of the bounding trend line. Netease just reported strong earnings results, so there is less risk of a bad surprise for quite a while.

On the other hand, Netease distributes Blizzard’s games in China, while Sony has the Playstation. That’s kind of better. Sony is also more diversified and doesn’t have the threat of China’s government slapping regulations, investigations, or other problems on companies, so it’s a safer bet in many other ways.

If you look at Sony’s longer term chart below, you see the same big pullbacks as Netease current has, and then the results in the following months. The pullbacks would have been better times to buy. In my past couple years of focusing on the stock market, this pattern is gold. It works almost every time. If it doesn’t, you sell again before you take a significant loss.

stock chart

Barron’s recommends Sony. The Sony P/E ratio looks high, but Baron quotes 18 on forward-looking earnings. I bought Netease a few weeks ago as my first new investment since I re-bought NVidia a few months ago.

I still don’t think it’s too late on the Netease breakout, or I would not have made this post. I worry about over-exposure to Blizzard, but I’m not ignoring the NTES chart. I’m looking for more charts like it, actually, like the current chart for silver (SLV).

The SLV chart alone isn’t enough. The USD dollar collapsed in the past week, confirming weakness and supporting price of all commodities in $USD. Copper also has extended weakness despite some miner strikes, which pressures production. Silver production is partly a byproduct of copper production.

I’m starting to wonder if computerization of market trading (the trend towards computer programs managing investment funds) is creating self-fulfilling prophecies on these patterns that make them even more reliable. After all, traditionally, artificial intelligence tends to be very predictable. So, profit?

As far as gaming, I’m still playing Hearthstone. I made rank 15 this month much earlier than usual. I’m chipping away at golden Priest and max level Rogue.

My elf school game project is coming along very nicely. I’m not satisfied with incorporating Tolkien-style elves, or some random video game-style elf race, so I’m looking more at the Nordic tradition.

Since my game teaches Spanish/English, approaching white race issues is interesting. The game protagonist would probably be the equivalent of a ‘mudblood’ in Elfland. I’m currently reading The King of Elfland’s Daughter on Project Gutenberg.


Mighty Blizzard: Meet Stock Market Meltdown

S&P500 image
This week was one of the worst in stock market history. Major indices lost over 6%, with the Dow losing over 1000 points.

China’s growth is slowing down. The U.S. dollar is strengthening. Prices of oil and other commodities are still in decline. This brings a risk of financial triggers for countries that rely on oil and raw materials exports, which brings risk to the world financial system.

I watched oodles of CNBC this week, and I’ve never heard the Wall Street boys so defeated. Even the bullish opinions sound like slick salesman B.S. or clinging desperation. The pessimism is actually a plus. If everyone is already out, how much more money can leave the market?

More. Large U.S. outflows have been observed from foreign countries. Some analysts suggest heavy European selling. Every Joe and Jane will see their 401k funds melting, and they’ll pull their money on Monday. Today some analysts mentioned that the market never bottoms on a Friday.

Jim Cramer talked about Blizzard on Mad Money on Tuesday. He said Activision-Blizzard’s 27 billion valuation was undervalued and even “ridiculously cheap”. Cramer spoke highly of Bobby Kotick, who he knows from the old days.

Cramer also spoke highly of NVidia. I personally thought Microsoft and NVidia were played out in terms of news catalysts. I was wrong.

Microsoft popped today on an announcement of a plan to make their own SIM cards for a new phone service for Windows 10. Jim Cramer thinks there is still positive news ahead for Nvidia, at least for two more quarters.

On Wednesday, Cramer spoke on Electronic Arts. He called EA “more problematic”, and said to stick with Blizzard. This general idea was echoed in an analyst report on EA yesterday. Cowen predicted a very strong quarter for EA in mobile, however, with possibly 50% sequential revenue growth.

Cramer is not always right of course. A valid trading strategy is to do the opposite of everything he says. A year ago this month in January, he was recommending Kinder Morgan (KMI) and recommending against Valero (VLO).

Of all the bad CNBC stock advice I saw in 2015, only Karen Finerman’s repeated recommendations of SunEdison (SUNE) ended worse.


Video Game Stocks As “Sin Stocks”


I’ve heard a few Wall Street analysts recommend RJ Reynolds this week, a stock which has risen strongly this week while most other stocks fell. It has a good dividend, but I assume the real reason is because it’s a traditional “sin stock”.

Sin stocks are supposed to do well in a recession. According to the article, they are “businesses that provide an outlet for consumers”. They also have deeper margins than traditional consumer plays.

Sin stocks include alcohol, tobacco, gambling/casinos, and weapons. Really? It sounds like a new category of sin stock needs to be added, since that’s pretty much a definition of video games: addictive, with lots of gambling mechanics and as many guns as possible.

As Jim Cramer mentioned today on Mad Money, Constellation Brands (the brewer of Corona, etc.), reported a stellar quarter and the stock rocketed yesterday. I don’t see why video game stocks shouldn’t also outperform.

I sold Nvidia, Microsoft, TAN (solar ETF), and Electronic Arts in previous weeks closer to their tops. The question is when to buy them back. Yesterday I pushed 50% back into EA, but it’s important to have major patience.

The solar ETF is a trickier trap since it’s influenced so heavily by politics, oil, and having 25% of its holdings in China.

Some big name money managers are calling this another major financial crisis, on par with the 2008 Great Recession, which lasted 18 months. That seems as good as anything for a worst-case scenario timetable.

Other people are saying the severe oversold conditions are a setup for a “multi-week rally”. I don’t see why the S&P should break the “crowning top” pattern until other bearish patterns, like oil and Dow transports, are broken first, but anyway, that’s enough of that.

Happy Friday, time to stock up on sins.