China Hacks The U.S. and Elon Talks About The Matrix

Tyler here with this week’s Macro Musings.

As always, if you come across something cool during the week, shoot me an email at tyler@macro-ops.com and I’ll share it with the group.

Articles I’m reading —

The Big Hack: How China Used a Tiny Chip to Infiltrate U.S. Companies

Bloomberg Businessweek dropped this bomb of an article yesterday. It’s a riveting story about an attack by Chinese spies that reached almost 30 U.S. companies, including Amazon and Apple.

The Chinese got in at the hardware level, planting a small microchip the size of a grain of rice onto the motherboard of servers that were later shipped off for use by companies in the US. Here’s how the scheme worked according to Bloomberg:   

A Chinese military unit designed and manufactured microchips as small as a sharpened pencil tip. Some of the chips were built to look like signal conditioning couplers, and they incorporated memory, networking capability, and sufficient processing power for an attack.

The microchips were inserted at Chinese factories that supplied Supermicro, one of the world’s biggest sellers of server motherboards.

The compromised motherboards were built into servers assembled by Supermicro.

The sabotaged servers made their way inside data centers operated by dozens of companies.

When a server was installed and switched on, the microchip altered the operating system’s core so it could accept modifications. The chip could also contact computers controlled by the attackers in search of further instructions and code.

Alex thinks the government is leaking this info now to boost public support for what they’re about to do against the Chinese. That makes sense to me. Trump wants to turn up the heat in order to win this trade war. And he needs the political ammo to do it.

How to biohack your intelligence — with everything from sex to modafinil to MDMA — This is a deep dive beast of an article about how to maximize your intellectual potential and output. Topics range from supplements, drugs, blood testing, diet, workout regimes, sex, sleep and much more.

A lot of the stuff this guy’s doing isn’t for the average Joe. You need a team of doctors to help manage everything. But there’s still plenty of actionable advice that I plan on implementing. I want to start with his iPhone strategy by getting rid of all messaging and social media apps from the home screen. I feel like that will stop my mental space from getting constantly hijacked by notifications.

Chart I’m looking at —

This is a significant breakout in the US long bond and it’s important to pay attention to. Stocks and bonds constantly compete for capital. And the higher the interest rate, the more attractive bonds become relative to stocks. If rates move up too quickly from here we could see another correction in equity markets as investors start to prune equity exposure in favor of higher interest rate government bonds.

Podcast I’m Listening To —

I bet most of you have already seen this photo of Elon Musk smoking a joint on Joe Rogan’s podcast.

It intrigued me enough to start the episode and I ended up staying for all two and half hours. (Link here)

Elon and Rogan hit on all the hot topics including flamethrowers, the future of AI, Tesla’s plans, space colonization, the effects of social media on happiness, Elon’s “brain interface” company Neuralink, and the idea that we all might be living in a matrix type simulation.

Whether you love him or hate him, I think this interview is worth the listen. Elon has a lot of interesting ideas outside of Tesla and it’s a breath of fresh air to hear him talk in a casual setting.

Trade I’m considering —

ESPN released their first magazine with a pro gamer on the cover.  This reminded me to get back to work on the esports thematic and Activision Blizzard (Ticker ATVI) has so far been my favorite out of all the companies I looked into.

The company has long-running, popular franchises like Call of Duty, World of Warcraft and Overwatch — games that constantly top the best-seller charts. This gives them a massive audience of around 350 million active users.

The average user spends 50 minutes per day playing or watching Activision’s games. This allows Activision to further monetize via in-game content or pay-to-play features. This so far has translated into eight $1 billion franchises.

To top it off this company is a cash machine. They did over $2.2 billion in free cash flow over the last 12 months.

This impressive company operating in a space with a strong secular tailwind (esports) has me excited.

Quote I’m pondering —

Progress does not march forward like an army on parade; it crawls on its belly like a guerrilla. ~ Michael Lewis

That’s it for this week’s Macro Musings.

If you’re not already, be sure to follow us on Twitter: @MacroOps and on Stocktwits: @MacroOps. Alex posts his mindless drivel there daily.

Here’s a link to our latest global macro research. And here’s another to our updated macro trading strategy and education.

 

 

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Brandon Beylo

Value Investor

Brandon has been a professional investor focusing on value for over 13 years, spending his time in small to micro-cap companies, spin-offs, SPACs, and deep value liquidation situations. Over time, he’s developed a deeper understanding for what deep-value investing actually means, and refined his philosophy to include any business trading at a wild discount to what he thinks its worth in 3-5 years.

Brandon has a tenacious passion for investing, broad-based learning, and business. He previously worked for several leading investment firms before joining the team at Macro Ops. He lives by the famous Munger mantra of trying to get a little smarter each day.

AK

Investing & Personal Finance

AK is the founder of Macro Ops and the host of Fallible.

He started out in corporate economics for a Fortune 50 company before moving to a long/short equity investment firm.

With Macro Ops focused primarily on institutional clients, AK moved to servicing new investors just starting their journey. He takes the professional research and education produced at Macro Ops and breaks it down for beginners. The goal is to help clients find the best solution for their investing needs through effective education.

Tyler Kling

Volatility & Options Trader

Former trade desk manager at $100+ million family office where he oversaw multiple traders and helped develop cutting edge quantitative strategies in the derivatives market.

He worked as a consultant to the family office’s in-house fund of funds in the areas of portfolio manager evaluation and capital allocation.

Certified in Quantitative Finance from the Fitch Learning Center in London, England where he studied under famous quants such as Paul Wilmott.

Alex Barrow

Macro Trader

Founder and head macro trader at Macro Ops. Alex joined the US Marine Corps on his 18th birthday just one month after the 9/11 terrorist attacks. He subsequently spent a decade in the military. Serving in various capacities from scout sniper to interrogator and counterintelligence specialist. Following his military service, he worked as a contract intelligence professional for a number of US agencies (from the DIA to FBI) with a focus on counterintelligence and terrorist financing. He also spent time consulting for a tech company that specialized in building analytic software for finance and intelligence analysis.

After leaving the field of intelligence he went to work at a global macro hedge fund. He’s been professionally involved in markets since 2005, has consulted with a number of the leading names in the hedge fund space, and now manages his own family office while running Macro Ops. He’s published over 300 white papers on complex financial and macroeconomic topics, writes regularly about investment/market trends, and frequently speaks at conferences on trading and investing.

Macro Ops is a market research firm geared toward professional and experienced retail traders and investors. Macro Ops’ research has been featured in Forbes, Marketwatch, Business Insider, and Real Vision as well as a number of other leading publications.

You can find out more about Alex on his LinkedIn account here and also find him on Twitter where he frequently shares his market research.