(SUMMARY OF JOHN’S AUGUST 15, 2024, WEBINAR)
August 16, 2024
Hello everyone.
TITLE: The Teflon Market
PERFORMANCE:
MTD August +3.09%
Average annualized return: +51.94% for 16 years
Trailing one year return: +51.92%
Since inception: +710.36%
PORTFOLIO:
Risk On: No Positions
Risk Off: (DHI) 8/$185-$195 put spread
METHOD TO MY MADNESS:
Mad Hedge came out of the first crash of 2024 with decent positive returns in July and August.
We have covered exactly 2/3 of the crash losses right here.
Market has become ultra-sensitive to every economic data point.
Expect one more pullback unless every data point from here is perfect.
US Dollar gets dumped and could stay weak for years, while the Japanese yen puts on a spectacular show up and down.
Technology stocks will recover after a correction lasting months.
Energy gets dumped on recession fears if the Fed acts too slowly.
Buy stocks and bonds on dips, ALL sectors.
WHAT I DID RIGHT – NEVER STOP TRADING
(Seven Trade Alerts were executed on August 5)
John went into the meltdown with nine short positions in July-August, which covered most of his losses.
He only ran positions into very short August 16 option expiration, limiting damage.
Limited losses by stopping out of out-of-the-money losers quickly in (CAT), (BRK/B), and (AMZN).
Super aggressive when the Volatility Index ($VIX) hit $65, a two-year high.
He went hyper-conservative by adding four technology positions very deep 20% in-the-money in (NVDA), (META), (TSLA), and (MSFT).
He used the first 1,000-point rally to add a short position for every long, neutralizing the portfolio at the middle of the recent range and taking in a lot of extra income.
WHAT TO DO NEXT
Let the last position expire at max profit on August 16 option expiration.
Go 100% cash.
Wait for an extreme move up or down before adding new long or short positions, for the Volatility Index ($VIX) to pop above $30.
Watch for special situations, like (LRCX) where the Mad Hedge Technology Letter put out a buy on a strong earnings report. The stock immediately rocketed 25%.
Take your wife or partner out to a nice restaurant and spend the money you made.
STOCKS – IS THE BOTTOM IN?
John doesn’t think so. The valuation disparity between big tech and value is still miles wide.
$150 billion in Volatility plays were dumped on Monday.
Uncertainty reaches a maximum just before the election. A bottom for the year is coming, but not yet.
Delta loses $550 million in CrowdStrike computer crash, which lost the airline an eye-popping 7,000 flights.
No Recession here, says shipping giant Maersk, U.S. inventories are not at a level that is worrisome.
Warner Brothers wrote down $9 billion on disappearing TV business.
Super Micro (SMCI) announces 10:1 share split.
Foreign investors pull a record amount from China, $15 billion in Q2.
Buy (META) on a dip.
Buy two-year LEAPS on (CCJ)
(FCX) – double up down to $30.
Buy REITS = great yield.
BONDS – UPSIDE BREAKOUT
Market prices in 50-point basis cut for September.
Warren Buffett now owns more T-bills than the Federal Reserve. The Omaha, Nebraska-based conglomerate held $234.6 billion in short-term investments in Treasury bills at the end of the second quarter.
Cold CPI assures September interest rate cut, sends all fixed income securities soaring.
Bonds holding gains even in the face of a summer stock correction.
Buy (TLT), (JNK), (NLY), (SLRN), and REITS on dips.
FOREIGN CURRENCIES – Goodbye Yen Carry Trade
Japan’s Carry trade ends, prompted by rising interest rates that catapulted the Japanese currency by 14% in days.
For the past 30 years, hedge funds have been financing their positions through selling short the yen, which yielded zero, and investing the proceeds anywhere in the world into anything with a positive return.
They then leveraged this position times ten or more, creating a massive global market impact.
The Bank of Japan move to raise interest rates by a mere 25 basis points ended this game.
The prospect of falling interest rates means that the greenback is on the way down.
It’s all in response to the blockbuster negative CPI.
Buy (FXA), (FXE), (FXB), (FXC).
ENERGY & COMMODITIES – Recession Fears
Oil collapses to $71 a barrel, taking the rest of the commodity space down with it.
This is despite the support from multiple Middle Eastern wars.
No one wants to pay for storage during a recession, especially with the current high interest rates.
Weak Chinese economic data was the gasoline on the fire.
Replacement by EV’s and the shift out of cars into planes are big factors.
PRECIOUS METALS – New Highs
Gold - new all-time highs.
Silver takes a break from economic slowdown, and enters sideways range.
Miners have started to outperform metals for the first time in years, indicating an increase in investor leverage.
A global monetary easing is at hand.
Buy precious metals on the dip because rates have to fall eventually.
Miners are expanding their operations and ramping up production as prices for the precious metal climb to decade highs.
Buy (GLD), (SLV), and (WPM) on dips.
REAL ESTATE – A shot in the arm
A refi boom is about to begin. Mortgage rates in the high fives are now on offer.
Over 40% of existing mortgages have rates of over 6%.
It’s all driven by the monster rally in the bond market this week which took the (TLT) to $100 and ten-year US Treasury yields down to 3.65%.
Pending home sales rocketed 4.8% in June, versus 1.0% expected. The rise in housing inventory is beginning to lead to more contract signings.
Homeowners Insurance premiums rocketed by 21% last year.
Home insurers take the biggest hit in history, as the bill from climate change accelerates at an exponential rate, a $15.2 billion underwriting loss in 2023, double that in 2022.
TRADE SHEET
Stocks – buy the next big dip
Bonds – buy dips
Commodities – stand aside
Currencies – sell dollar rallies, buy currencies
Precious Metals – buy dips
Energy – avoid
Volatility – sell over $30
Real Estate – buy dips
NEXT STRATEGY WEBINAR
August 28 from Lake Tahoe, Nevada
Recording of Jacquie’s Post July 31, 2024, Zoom Meeting
https://www.madhedgefundtrader.com/jacquie-munro-meeting-replay-july-2024/
Cheers
Jacquie
