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A No-Brainer Trade: Free Dating Sites Closed

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Free dating sites close down. Only paid sites remain.

You might not know this, but Congress just wiped out the casual dating scene in mid-March when they recently signed into law the Fight Online Sex Trafficking Act (FOSTA). This intent of this law is to hold websites accountable for any content on their site that may lead to illegal sex acts.

Previously, websites followed a Good Samaritan approach wherein they did their best to monitor content, block anything illegal, and report it. 

Suddenly, websites are 100% responsible for what their users post. If you consider the massive amount of postings on Craigslist and Reddit, this is an incredible burden. All it takes is one post to slip through and these websites face enormously costly fines.

The FOSTA’s primary concern is underage sex trafficking. There are no reliable statistics around the issue of whether or not the internet has increased these criminal acts, but it’s obvious that the internet makes it easier to do wrong things. It’s easier than ever to find an interested party. And it’s incredibly easy to make a post.

The targets for the law are websites where sex workers advertise. But casual dating sites are also targets because they provide excellent cover for sex workers. Rather than take any risk, Craigslist shut down their personals section. Reddit as well.

If you are single and want to meet someone, you just lost your biggest free options. With no other options for now, the millions of singles who like casual dating will turn to other sites like Match.com, OKCupid, PlentyofFish and, of course, Tinder.

And all of these sites are owned by one company: IAC.

That’s the trade. You could buy IAC outright. Or buy you could look at the 2019 calls as IAC will continue to dominate.

Sincerely,

Andrew Zatlin

Editor of Moneyball Economics

New Q2 2018 Moneyball Trading Ideas

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New Investment Ideas

I don’t usually throw out standalone investment ideas, but these are some I am considering. Here’s my thesis.

  1. Short the Turkish Lira: Turkey has over extended itself.  The economy has grown on the back of significant debt and fiscal stimulus.  If that sounds like the U.S., it does. Except that Turkey lacks a strong central bank. And they have also been engaging in some costly military adventurism. Also, I think that the Turks have antagonized the U.S. and Germany to the point these countries would like to see Erdogan stumble.
  2. Long Vietnam: Vietnam is a growing economy. With an educated and low-wage workforce, they are picking up a lot of manufacturing work from Chinese companies. The China/US trade tiff will drive even more business their way. It gives the Chinese the political cover to tell Trump that they have curtailed exports to the US.  The trade here is long the Vietnam (ETF Ticker: VNM)
  3. Long Interactive (IAC):  IAC owns Tinder, Match.com, eHarmony and many other dating sites.  That matters because Congress has effectively shut down free dating sites.  Almost 3 weeks ago, a new law was passed (FOSTA) that is intended to stop online prostitution. But it was written in a way that forced Reddit, Backpage, and Craigslist to shut down their casual dating sections.  (In fact, Backpage was then shut down entirely this week.)  Single people now have no option other than paid sites. And IAC owns the best ones. The trade here is the January 2019 $160 calls.

Sincerely,

Andrew Zatlin

Editor of Moneyball Economics

Markets Happy As It Climbs “The Wall Of Worry”

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Update: March 2018

The market is very, very happy.

The fiscal stimulus and lack of major “inflation scare” is helping keep markets steady, yet trending higher on a positive note.

So here’s the wall of worry that is getting built.

  1.  Economic growth is again topping.
  2.  Inflation could run up faster than expected
  3.  Slowdown in Europe and China could drag down US production

Each of these is real in my opinion.

Inflation is the big one that worries the market. Interest rates are rising and the pace and degree would normally be affected by the pace of inflation. I say normally because the Fed isn’t about to turn hawkish. That is, they aren’t suddenly going to undo 10 years (yep – 2008 was 10 years ago) of policy because they suddenly want to get ahead of the inflation curve. Nope. The Fed is going to be led by the market. 

Right now, the market will accept three rate hikes.

That doesn’t mean the market won’t get nervous. For example, a sudden jump in inflation will scare traders into expecting more rate hikes.

The market should worry because inflation is already here.  Consider truck rates – 70% of all goods in the US are shipped by truck. This means trucking inflation affects everything.

Trucking price inflation just surged into the double digits on a contractual basis.  But on a spot price basis, they hit 25% year-over-year.

However, the market has mostly shrugged off the recent blow-off. It’s down just 3% from its recent top. Here’s another look at the revised SouthBay Fair Value Index.

The S&P is still a bit overbought, although the gap has closed a bit thanks to the blow-off in the S&P. There’s also been an improvement in conditions for the SouthBay Index.

Now look at the S&P y/y growth rate.

Pessimism was at its peak in early 2016 when market growth slowed to -5% (actually contracting on a year-over-year basis).

With Trump elected, it surged but it has been looking toppy ever since the underlying economic data (reflected in the SouthBay Fair Value Index) started to soften.

KEY TAKEAWAY: The market rebounded with Trump and the underlying economic growth supported the reflation. Fast forward to mid-2017 and the underlying growth started to soften, and so did the market’s growth. Indeed, the surge from the tax cut does not seem to be halting the slowdown in economic fundamentals.

In other words, the divergence won’t hold. I think the S&P will be lucky to see 10% growth by year end. But that’s still great growth

 

Sincerely,

Andrew Zatlin

Editor of Moneyball Economics

Business Is Booming For This Industry

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Marijuana Goes Mainstream

In October 2015, Oregon legalized the sale of recreational marijuana. The following month I flew to Portland to gauge the market. I visited 5 stores and monitored foot traffic and sales.

The atmosphere was somewhere between furtive and matter-of-fact. The products were fairly limited: cannabis buds and smoking accessories.

Business was very hot. In a one hour period during the afternoon on week days, I counted roughly 25 visitors per hour per store, with a spend of at least $40 each. Nearly $1000 an hour, all cash.

And that was during the off-peak hours.

Two years later, in November of 2017, I again flew to Portland and visited the same shops.

The question I wanted to answer whether or not cannabis was a novelty. If so, then business would have dropped.

Instead, I saw the exact opposite: business was just as high as when it was first legalized. More interestingly, because it was close to the holidays, the stores were offering gift baskets.

The product lines had evolved: in addition to green buds, they offered oils and edibles. There were also more accessories, but of a higher quality.

Imagine a Starbucks gift basket, but for cannabis.

The gift baskets spoke to the mainstreaming of cannabis.

There were identical sample packs that offered a variety of buds (a smoke-of-the-day club experience), a mix of edibles, or a mix of different cannabis products (oils, edibles, buds). There were baskets that gifted both the cannabis and the means to imbibe. Everything was wrapped in the same happy rattan baskets.

How is this mainstream? First, ubiquity. Every store had them.

Second, visibility. These gifts of joy were being given openly, without concern that recipients or givers would be outed.

Third, price. Holiday gift giving tends to follow a price point. These were novelty items or “cheapies.” The minimum price was $50.

Fourth, popularity. Many of the baskets had been sold out.

This mainstreaming is important. At some point, high volume products like Doritos will likely add cannabis oil.

And it is that oil where the investing opportunity sits. As demand for cannabis expands, it will drive up the use of oils. The facilities that convert marijuana bud into oil will be highly profitable.

KEY TAKEAWAY: The cannabis industry is booming. More states are heading towards full legalization. Companies that convert marijuana buds into oil will be huge winners in this industry. I’ll keep a lookout for the winners and report back.

 

Sincerely,

Andrew Zatlin

Editor of Moneyball Economics

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Don’t Just Settle for a One-Fits-All Life Insurance Plan in 2018

Last May, Five Thirty Eight forecasted several changes in the health insurance industry once the GOP healthcare bill was passed. Fast-forward to today and some of these forecasts, including increased premiums for lower income individuals and lower premiums for young, healthy policyholders, have, indeed, happened.

Simply, the reality is that Americans now need to pay more to get the best health insurance possible, and this is fast becoming a concern for many, especially those who live paycheck to paycheck or are otherwise burdened financially already. Add to that burden the high cost of healthcare, which in part is due to hospitals being incentivized to be expensive as we touched on in ‘Make Sure You Avoid Healthcare Stocks’. It is thus imperative to find a value-for-your-money policy to ease the financial load of being insured. To this end, you ought to reconsider those one-fits-all life insurance plans, even though getting one might be the most convenient.

As The New York Times explains in ‘The Problem With One-Size-Fits-All Health Insurance’, this approach to insurance coverage “disproportionately hurts low-income people” because it affords people no choices other than all medically necessary healthcare interventions. Unfortunately, “necessary” in this context means any “any care that offers a clinical benefit” regardless of their cost. This means that you are more than likely to receive hi-tech medical care even if there are cheaper alternatives.

To illustrate, let us consider the same example given by The New York Times: A policyholder of a one-size-fits-all policy suffering from prostate cancer will, in all likelihood, get the highly technical yet rather expensive proton-beam therapy as a medical intervention, even though it has not been proven to be significantly better than more affordable treatment alternatives such intensity-modulated radiation therapy. Now, this setup is well and fine for people who have money to spare, but for those with lower incomes, this approach is quite burdensome, especially considering the availability of health insurance plans that allow you to say no to high-cost treatments that have little to no medical value.

Even more, why even settle for a rigidly structured policy that affords no flexibility when there are better options available? Take Health IQ, a startup in the industry which according to Venture Beat “collects data to let health-conscious people save an average of $1,238 a year on their life insurance premiums.” The company, founded by Munjal Shah, has in fact helped thousands secure a staggering $5.3 billion in life insurance coverage in a little less than 2 years.

So, how then can Health IQ help people save on their life insurance? The startup, a pioneer in the rapidly expanding InsureTech industry, requires prospective clients to take the Health IQ test, a carefully designed quiz that’s aim is to gauge not only the current health of an individual but also their lifestyle. Those who score elite in this test are presumed to be healthy and living a healthy lifestyle and are thus qualified to get the savings. Meet certain fitness thresholds in the course of your policy and you will get additional savings every year. This type of insurance is far more suited for those who follow a healthy lifestyle than the more general insurance options.

Getting value-for-your-money life insurance is not actually rocket science, but it is not that easy either. But with patience and due diligence, finding one that suits your needs is now, very possible.