Enrique, Berna, and I are hosting an event on the upcoming election and its implications for investors; Nikola Founder Trevor Milton Resigns; Has the bubble burst?; NYU's 'Dean of Valuation' Aswath Damodaran on Apple and Tesla surge; SEC Gives More Investors Access to Private Equity, Hedge Funds; Bill Gates Sr. obituary
1) You won't want to miss a special Empire Financial Research event this Wednesday, September 23 at 8 p.m. Eastern time...
I'll be joining my colleagues Enrique Abeyta and Berna Barshay to discuss the coming November election and its likely effect on the stock market.
We'll share our predictions for how the election will turn out. And more important, we'll give you tangible advice for how to position your portfolio so that you can profit from the outcome. I'm excited to share our thoughts with you.
This special streaming event is completely free to attend, but you must sign up in advance to secure your spot – you can do so by clicking here.
2) Breaking news this morning on electric-truck maker Nikola (NKLA): Nikola Founder Trevor Milton Resigns as Executive Chairman Amid Fraud Allegations. Excerpt:
Nikola founder and Executive Chairman Trevor Milton is stepping down from the electric-truck startup with immediate effect in the wake of allegations from a short seller that he and the company had made false statements to investors.
The company said Mr. Milton would be replaced by Stephen Girsky, a former General Motors (GM) executive who already sits on the truck company's board.
Nikola has come under scrutiny since short seller Hindenburg Research released a report earlier this month accusing the company and Mr. Milton of making exaggerated claims about the readiness of Nikola's technology and how much of it is proprietary.
Doubts about the company's readiness to produce vehicles and questions about its claim to own proprietary technology have prompted U.S. securities regulators and the Justice Department to investigate whether Nikola misled investors, The Wall Street Journal reported earlier this month, citing people familiar with the matter.
Here's Milton's bizarre statement, in which he concludes: "I will continue to spread love everywhere I go and hope you do as well – for blessed are the peacemakers."
It was only 11 days ago that Milton tweeted that "Cowards run, leaders stay and fight for integrity."
Good riddance to this obvious coward – and con man. No wonder NKLA shares are crashing today. If you got sucked into this fraud, thinking it was the next Tesla (TSLA), it's not too late to get out.
I'm now even more certain of what I wrote in Tuesday's e-mail:
confidently predict that General Motors will end the partnership with Nikola that it announced last week, Nikola's stock will collapse, and Milton will end up behind bars for securities fraud.
My friend Gabriel Grego of Quintessential Capital Management nailed it in this tweet:
3) The Nasdaq Composite Index and S&P 500 Index are down nearly 11% and 8%, respectively, from their all-time intraday highs they reached on September 2 (through Friday's close). Over roughly the same time period, market darlings Apple (AAPL) and Tesla (TSLA) are down 23% and 12%, respectively.
Is this just a short-term pullback? Or was September 2 the peak of a bubble that is now in the process of deflating, such that we'll look back on that day in the same way investors looked back at March 10, 2000 (the day the Internet bubble peaked)? Remember, it took more than a dozen years for the Nasdaq to surpass that high...
My friend Doug Kass of Seabreeze Partners thinks so, writing:
While the correction is only in its second week, the evidence suggests the growing possibility of a Nasdaq top and a break down in the Nasdaq.
Fueled by a revolutionary but evolving change in market structure, in which ETFs/quant strategies and products garnered large market share gains and dominance – while traders drove up call activity, pressuring a "Gamma Squeeze" – a select group of Nasdaq leaders have been responsible for an unsustainable advance in the Nasdaq which came to an abrupt halt recently in what we might call a "Gamma Peak".
The Nasdaq's price action over the last two years and the ascent during the dot.com era in 1999-2000 are eerily similar, and potentially ominous from a forward looking standpoint, as noted in the chart below:
Doug is also bearish because:
The political animus and partisanship that will surface in the fight to replace Justice Ruth Bader Ginsburg before the November election reduces the probability of a stimulus bill.
This will likely take a lot of the oxygen out of the room and will probably contribute to more market turmoil ahead.
If September 2 was the peak, the final warning flag surely was my friend's 11-year-old son begging him for $50,000 to day-trade options on Amazon (AMZN), Netflix (NFLX), Tesla, and Apple (which I wrote about in my September 1 e-mail)!
4) I enjoyed this seven-minute interview CNBC did on August 31, just two days before the recent peak: NYU's 'Dean of Valuation' Aswath Damodaran on Apple and Tesla surge. Professor Damodaran is smart and interesting...
5) Bill Gates Sr. died last week. He was a great man, whom I had the pleasure of meeting back in the mid-1990s when I was running the Initiative for a Competitive Inner City ("ICIC"), a nonprofit I co-founded with Harvard Business School Professor Michael Porter (which, I'm pleased to say, is still going strong). It was the early days of the Gates Foundation, and he was one of the ICIC's first funders.
Here's his obituary in the New York Times: Bill Gates Sr., Who Guided Billionaire Son's Philanthropy, Dies at 94. Excerpt:
In 1994, Mr. Gates was 69 and planning to retire from his prestigious law practice in a few years when, one autumn evening, he and his son, Bill, and his daughter-in-law, Melinda, went to a movie. Standing in the ticket line, Bill told his father that he was being inundated with appeals for charity but that he was far too busy running Microsoft to answer them.
His father suggested that he, Bill Sr., could sift through the paperwork and, with his son's approval, send out some checks. Bill Jr. agreed.
What Mr. Gates Sr. found later were dozens of cardboard boxes filled with requests for money, many with heartbreaking stories of need. A week later, Bill Jr. set aside $100 million to open what was initially called the William H. Gates Foundation. His father, sitting at his kitchen table, wrote the first check: $80,000 for a local cancer program.
Over the next 13 years, while Bill Gates focused primarily on Microsoft, his father managed the foundation day to day, conferring with its executives and philanthropic experts, sending his son lists of proposed grants, writing checks and shaping the charity's major goals: improving health and education and alleviating poverty in America and the third world.
"I consider Bill Gates Sr. the conscience of the Gates family," said Pablo Eisenberg, a columnist for The Chronicle of Philanthropy. "He was instrumental in not only starting the foundation but growing it, and his motive was that with all that money, you ought to do good."
And here's a great story that former Starbucks (SBUX) CEO Howard Schultz told CNBC in 2017: When a competitor tried to buy Starbucks, Howard Schultz was rescued by Bill Gates Sr. Excerpt:
Gates Sr. asked for the entire story. He then told Schultz, "We're going to take a walk."
"And I said, 'Where?'" Schultz continues. "He says, 'We're going to see the man.' My heart was racing with such anxiety, trepidation. I'm not saying the name, but he's taking me to see the competitive buyer."
Ten minutes later, they arrived at the titan's office, Schultz recalls: "Now, Bill Gates Sr. is six-foot-seven, and, in the mid-80s, he was in his prime. He was a force.
"We walked in that office and all I remember him saying is: 'You should be ashamed of yourself that you're going to steal this kid's dream. It's not going to happen. You and I both know this is not going to happen.'
"Within 10 minutes, he told him to stand down, we're walking out of this office and this kid's buying this company."
That's just what happened. In August 1987, Schultz bought Starbucks for $3.8 million. He served as CEO from 1987 to 2000, stepped down briefly and then returned to take the helm in 2008.
Today, thanks in part to Gates Sr., there are more than 25,000 Starbucks locations that employ more than 300,000 people. And Schultz, who stepped down again in April 2017, is a billionaire three times over.
Best regards,
Whitney