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Is Ambarella a household name? Among the semiconductor industry, Ambarella is fairly new. It was founded in 2004. In comparison, Intel was founded in 1968. Texas Instruments was founded in 1951. By their definition, Ambarella is the leading developer of low-power, high definition and ultra high definition compression and image processing solutions. It is an interesting company, where we can see potential in their development of image processing. However, the competition in the semiconductor field is fierce.

You Use Ambarella, But You Don’t Know It

There are four main categories that Ambarella sells into.

  1. Drone cameras. DJI and many other brands most likely use Ambarella (AMBA) in their cameras. Because of the low-power and high definition support, it is ideal for drones.
  2. Wearable cameras. More police departments in the US is requiring their officers to wear cameras while on duty. Also, many enthusiasts buy sports camera to attach while they are out, doing their thing. There are great many videos on YouTube where people are sharing their awesome experiences skiing, skateboarding, riding their motorcycle, surfing, mountain-climbing, sky-diving, and many more. With high definition in a small form factor, no wonder GoPro has become really popular.
  3. Automotive video cameras. Most police vehicles in the US have dashboard cameras. I see more people are attaching cameras in their automobiles. This is to record events that happen while driving, like accidents. In a litigious society like the US, it is prudent to record what happened for evidence in court. I have seen many videos where a person will intentionally run out and pretend to be hit by a car. Also, many funny and interesting videos are posted on YouTube, from drivers who happen to be at the right time, recording with their dash cameras.
  4. Security IP cameras. There are several benefits to having a security camera. Besides detecting intruders, one may use it to check online who is at the front door, or who is stealing your packages. Even with high-speed internet, video compression takes up a lot of bandwidth. Seeing what is going on in your house, in high definition, in real-time, will greatly ease anxiety or worry while on vacation or running errands.

Bad Drama

Citron Research conducted a review on AMBA in 2015. Citron Research is known for providing analysis on over-valued stock. After the initial report, AMBA stock reached a peak little over $115 per share. Then afterwards, it crashed below $40 within 6 months, far earlier than the 18-month price target given by Citron Research.

The crash also coincided with GoPro’s (GPRO) decline. Reporting disappointing earnings, GPRO seemed like there was lack of growth after the initial enthusiasm. Supplying to GPRO represents around 30% of Ambarella’s revenue. This could be disastrous if GPRO were to go under, severely impacting any chances for immediate growth.

Why Am I Interested in AMBA?

  1. AMBA has risen above the 200-day moving average (MA). If one were to use the 200-day MA as basis for entry signal, two weeks ago. It had a breakout in March, but fell below several days later. With stop loss rules, one who bought in March would have sold with a little loss, and waited until May for the re-entry signal.
  2. AMBA revenues are increasing in recent quarters, while operating margin and free cash flows are at all time highs. AMBA is spending more on research and development, indication of reaching out to new markets beyond GoPro.
  3. Semiconductor industry has been hot for the last couple of years. Growth will be a big factor, as more semiconductors are needed for new technologies. There may be potential to integrate Ambarella’s technology into autonomous driving, virtual reality (VR), and augmented reality (AR). AMBA technology is also used in TV broadcasting, based on a minor note on their website.
  4. AMBA has acquired VisLab in 2015. VisLab develops computer vision and intelligent automotive control systems. AMBA is becoming more serious about autonomous driving and advanced driver assistance systems (ADAS). Mobileye also develops ADAS, and is being acquired by Intel. With this in mind, I can see the possibility of AMBA being bought out, if Ambarella’s technology has significant impact to autonomous vehicles.

Conclusion

This is not a recommendation for anyone to invest in Ambarella. AMBA technology is being used in many devices, unbeknownst to many. As technology changes, semiconductor companies need to change with it in order to grow and survive. It does seem like AMBA is making steps toward new trends. Reflecting in the stock price, the stock has gone from relative recent lows of $49, and is now above $62. If one were to use the 200-day moving average as an entry or exit signal, one should take caution if AMBA drops below $59. Hopefully, the stock will continue to trend higher, as with many other technology and semiconductor stocks.

This article covers trading financial securities, such as stocks. The world of trading often comes with rises and declines of securities, and most things do not rise or fall in a straight line. By the time this article is published, circumstances involving what we mention may have changed. Often, changes in securities can be to the detriment to the traders – seldom is it beneficial. A person should only trade with money that they’re willing to lose because losses are guaranteed. By reading this post, you agree that you’ve read our disclosure.


Mick Mulvaney recently proposed a $1.8 trillion budget cut in the United States, slashing the budget of many entitlement programs. While being incorrectly reported as being proposed by others, this comes straight from the pro-bitcoin leader, Mulvaney. Considering the magnitude of this proposed budget cut, would this budget cut be a positive and should traders take this into consideration?

The Numbers

The estimated $1.8 trillion out of the national debt of $21 trillion is an 8.5% reduction in spending relative to the national debt. Mulvaney aimed big. Assuming no additional revenue through job creation occurs, this cut is significant considering the cut and the time. Mulvaney also refuted all the people complaining that no leader would ever propose big cuts: he did. Now the narrative will turn into “this isn’t possible” which proves why no leader has proposed big cuts in the past.

If this passed, this would be a significant turn-around on the balance sheet – a significant reduction in spending relative to the national debt. If the budget sees an increase in revenue, this could potentially be a positive of 10-12% relative to the national debt (8% spending cut, 4% income increase).

Many leaders, like Alan Greenspan, have correctly pointed out that one way or another entitlements will either have to be cut, or inflated away from recipients. In the case of the latter example (inflation), a person receiving a $1000 a month entitlement would see their $1000 inflated away without any adjustment. This is already happening in healthcare and food benefits, as inflation has quickly outpaced the adjustments in both.

No Shot At Passing

The mainstream media will spin this budget plan as “hurting the poor” while they have been absolutely silent on the inflation in healthcare and food that has negatively impacted the poor over the last few decades. A lower standard of living will hurt the poor even more than temporary sacrifice.

Mulvaney honored his word. He will be disliked, but he did what no leader in the last twenty years has done by proposing big cuts that would reduce the deficit and turn the United States around on its balance sheet. A country with a national debt of $21 trillion won’t be able to pay out entitlements in the long run, without using inflation to reduce benefits. People will pay and inflation with a much lower standard of living will more than likely be the way they pay. Ironically, the lower standard of living will hurt the poor even more than losing some benefits now.

Regardless, this budget won’t pass. Traders should dismiss it. Entitlements will be cut through inflation and a lower standard of living. As for the trade, long Russia, short United States.


Most likely, many may have missed the Apple boat, including myself. Even if you saw Forrest Gump in 1994 and invested back then, you would have to wait more than ten years before seeing significant growth in the shares. Apple announced earnings couple of weeks ago. The actuals were in line with estimates, with investor immediate reaction was slightly negative after hours. The stock bounced back and has been on a steady climb since the announcement.

Ten Reasons Why Apple Stock is Rising

By looking at the charts, we can see that $AAPL has continued on the path above the 200 day moving average. Besides dipping below in May of 2016, $AAPL has been reaching all time highs (ATH). It is now considered the largest U.S. company.

$AAPL Daily Chart with 50 day and 200 day moving averages


$AAPL Weekly Chart with 50 week and 200 week moving averages


Here is some ten positive news and actions taken by $AAPL:

  1. Cash on hand, or cash and cash equivalents have reached epic proportions. Fair value of $257 billion dollars. This is higher compared to GDP of some small countries. Or higher than the market cap of other technology companies.
  2. Board of directors announced increase of Capital Return Program (CRP) from $250 billion to $300 billion – 20% increase. This includes dividend payments, accelerated and open market stock repurchases, and taxes related to equity awards.
  3. Included in the increase of the CRP, quarterly dividends will be increased in the third quarter by 10.5% from $0.57 per share to $0.63 per share.
  4. Included in the increase of the CRP, share repurchases are authorized from $175 billion to $210 billion. This represents $35 billion out of the $50 billion increase in the CRP.
  5. Net sales have increased to almost $53 billion per quarter, increase of $2.5 billion from the previous year.
  6. iPhone sales have increased by 1% in revenue, year over year (YoY), probably due to higher average selling prices (ASPs) for the larger Plus phones. It is expected the new generation of iPhone will have higher ASPs at the end of 2017.
  7. Mac sales have increased by 14% in revenue YoY, despite lack up product updates on both the desktop and laptop lines.
  8. Services have increased by 18% in revenue YoY. This is the iTunes, AppleCare program, and Apply Pay services.
  9. Other products increased by 31% in revenue YoY. This includes iPod, Beats, Apple and third party accessories, and the Apple Watch.
  10. Index funds have become popular in recent years because they have been outperforming actively managed funds. Because $AAPL is the largest percentage of the S&P 500 index, as more money pours into these index funds, I believe the funds will have to purchase a larger amount of $AAPL stock to mimic the index.

I See Six Warning Signs

Here are some reasons why I am cautious about $AAPL at this time. Entry signals are tricky. One may just want to buy the stock because it is hot. It seems to go up every week, and so it is hard to know if it will drop back down for a dip buy. Trend following strategy of $AAPL would have shown an entry signal years ago. Using the 200 day moving average as part of the strategy, the signal would have come last year. As a momentum investor, the entry signals may have come every time it broke through a resistance level. We emphasize that rules are more important than entry signals. Whatever your strategy is, you have to know when to get out, either taking small losses or preserving gains with stops.

Here are six potential warning signs:

  1. There are many smart people in wall street and hedge funds that think the U.S. stock market is overvalued. Some are placing bets that there will be decline. Even $AAPL was not immune to the decline during the 2007-2008 financial crisis.
  2. Revenues may have increased on iPhone, but the unit sales have decreased. Probably due to people waiting to upgrade until the next generation iPhone is introduced. We shouldn’t expect increased iPhone unit sales for next couple of quarters.
  3. iPad revenue has decreased by 12% year over year, with unit sales decreasing by 13%. This is probably symptomatic of the overall tablet sales worldwide, but there is no longer any growth by Apple in this space.
  4. While Apple has grown in revenue in most regions, we believe China is a crucial market. This may be symptomatic of slowing growth in China. Any further decline in China revenue may cause lower revenue quarter over quarter. If China sneezes, everyone may catch a cold.
  5. In order to pay for part of the CRP, $AAPL issued commercial paper and long-term bonds. $AAPL have increased their long term liabilities to $84 billion.
  6. Although the cash and cash equivalents is very large, $AAPL has decided to put a large portion into corporate securities, mutual funds, and US treasuries. In recent months, there are unrealized losses in all three, while some are offset by unrealized gains. If interest rates rise, the treasuries may be valued less. If another economic crisis occurs, corporate securities risk losing in value quickly. Same goes for mutual funds. While it is hard to analyze with the categories given, the cash equivalents are not diversified in our opinion.

So, should I buy Apple stock now? It depends. As a trend follower, the entry point is not good, but I would buy a small amount of shares, keeping a tight stop, and risking about one to two percent of overall investment portfolio. There would be a better entry on the pullback towards the 50 day moving average. If I was a value investor, the stock seems a bit expensive with P/E over 18, in which case I would move on to a better value play. There are so many stocks that I can find. Even the best value investor like Warren Buffet and Charlie Munger have missed on several tech companies.

So far the prospects for Apple’s future hasn’t changed in the near future. Apple has great potential to offer amazing things. Even though many criticize on its lack of innovation, it can command dominance in different categories. After dropping “Computers” from its brand, Apple has proven to redefine itself. Maybe they will change again, adding more growth. Or maybe they will just take their cash and fly away in their spaceship.

This article covers trading financial securities, such as stocks. The world of trading often comes with rises and declines of securities, and most things do not rise or fall in a straight line. By the time this article is published, circumstances involving what we mention may have changed. Often, changes in securities can be to the detriment to the traders – seldom is it beneficial. A person should only trade with money that they’re willing to lose because losses are guaranteed. By reading this post, you agree that you’ve read our disclosure.


While the bitcoin ETF generates more discussion, with some bitcoinaires hoping that it appears on exchanges, the Bitcoin Investment Trust (GBTC) already exists on the OTC markets available for many investors with IRAs or brokerages. In addition, some other ETFs hold GBTC along with other technology companies, giving investors diverse exposure to technology, including bitcoin. When the bitcoin ETF generated a lot of buzz, I wrote Is It Time To Buy GBTC because traders overlooked the obvious and since that time GBTC has doubled. Like that post, we’ll look at the advantages and disadvantages of evaluating GBTC as an ETF investment.

GBTC’s 513% vs. the S&P 500’s 12.7%.

Overview of GBTC

At the time of this writing, the Bitcoin Investment Trust (GBTC) holds 0.09306347 bitcoins per share while charging a 2% annual fee. One simple look at its history will show that its price has exceeded the price of bitcoin. Since 2015, GBTC has been under $25 and over $250. Over that same period of time, bitcoin has been under $200 and over $1850.

In the case of GBTC, I see as many advantages as I do disadvantages. If a person understands the risks and trade-offs, it might give him exposure to bitcoin without some complexity. For advanced bitcoinaires, GBTC may seem unnecessary. For traders, it might be priced right for an event, like I covered in Is It Time To Buy GBTC?

Since 2009, bitcoin has only experienced 2 bad years with a current value near its all time high.

Pros

I do see some strengths of GBTC in addition to what I mentioned in the medium article:

  1. In the United States, all gains in an IRA with GBTC are tax-free. GBTC is on an OTC exchange and many IRAs can access it. Joe’s return of $50,000 from a $10,000 investment in less than 1 year is all his.
  2. Both bitcoin and GBTC have different rising and falling patterns. These patterns do not match other securities on markets, such as currency, indexes, real estate, etc. GBTC adds some diversification to a retirement portfolio.
  3. Other ETFs have purchased shares of GBTC (generally tech oriented ETFs). This has provided them with exposure to bitcoin, strengthening their portfolios. GBTC has routed the S&P 500 in its history to date.
  4. At the current time, GBTC makes a better “short” against the S&P 500 than options. If you perfect a short right, you can make a significant amount of money with leverage, but leverage amplifies your risk and possibility of loss. For an example, if you leverage $1 billion 5 multiples, the trade can put you deep into loss territory above a 100% loss, where as an investment of $1 billion can never lose more than 100%.
  5. Since GBTC is the only bitcoin ETF at the moment, it has demand for the above reasons.

Cons

Some downsides to GBTC seem obvious, others may not be:

  1. In its history, GBTC has almost always been overpriced relative to bitcoin. The tax reason listed above is one reason why. If you add the tax bonus to bitcoin’s price, GBTC has still been overvalued multiple times.
  2. Even though GBTC holds bitcoins, based on its price and history, one could make a case that this ETF isn’t really bitcoin. When I compare the price of bitcoin to GBTC and compare an iShares fund to an index, iShares does a better job of matching the index than the GBTC fund.
  3. Bitcoin never closes; GBTC does. We won’t be able to exist our bitcoin trade at any time if we need to.
  4. We are trusting that the team understands security. Most teams use popular security, even if popular security carries risk. For an example, a cold wallet still makes some security assumptions and security constantly changes, as we cover in The Millionaire Guide To Digital Security.
  5. In general, the ETF misses the point about the nature of investing. This is just as true for a gold ETF. I have very little interest in ETFs like this outside of speculation. Owning shares of a company that mines bitcoin or owns some of exchanges is an example of a business. By contrast, owning bitcoin and hoping it rises is speculation.

Summary

From its all time low to its all time high, GBTC has provided a solid return to investors. This return hasn’t been without some challenging days. For instance, yesterday we saw a 15% drop in the price – or a 40 point swing during the day. While it may provide some financial variety, it requires a person with strong risk tolerance.

Warning

The following article covers trading financial securities, such as stocks. The world of trading often comes with rises and declines of securities, and most things do not rise or fall in a straight line. By the time this article is published, circumstances involving what we mention may have changed. Often, changes in securities can be to the detriment to the traders – seldom is it beneficial. A person should only trade with money that they’re willing to lose because losses are guaranteed. By reading this post, you agree that you’ve read our disclosure.


Retire Early With Cryptocurrencies

With crypto-tokens in a bubble, when is the best time to sell? We discuss selling and timing sells in Retire Early With Cryptocurrencies over the next two weeks. These techniques apply to stocks, bonds and commodities as well.

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