(SUMMARY OF JOHN’S DECEMBER 11, 2024, WEBINAR)
December 13, 2024
Hello everyone
TITLE “Hello Santa Claus”
PERFORMANCE
December +2.27%
Since inception +737.86%
Trailing One Year Return +77.04%
Average Annualised Return +53.87%
PORTFOLIO
Risk On
(JPM) 12/$210-$220 call spread
(NVDA) 12/$117-$120 call spread
(TSLA) 12/$230-$240 call spread
(TSLA) 12/$250-$260 call spread
(TSLA) 12/$270-$275 call spread
(MS) 12/$110-$115 call spread
(C) 12/$60-$65 call spread
(BAC) 12/$41-$44 call spread
(VST) 12/$115 - $120 call spread
(BLK) 12/$950-$960 call spread
No Risk Off
METHOD TO MY MADNESS
We are now flip flopping between policy uncertainty and earnings uncertainty.
Earnings will win out, up 10-15%.
All interest rate plays remain pariahs, including gold, silver, homebuilders, bonds, and REITS.
Deregulation and end of antitrust plays will continue to be bought, including banks, brokers, money managers, nuclear, and Tesla.
US dollar rockets at higher rates for longer.
Technology stocks fade on threats to international business and slowing growth rates.
Energy gets dumped on coming overproduction and oil glut.
Buy the election winners, sell the losers.
THE GLOBAL ECONOMY – PREPARING FOR THE WORST
Fed to lower interest rates by 25bps on December 17.
Nonfarm payroll reports beat slightly, up 227,000 versus an expected 224,000.
The headline unemployment rate edged higher to 4.2%, as expected.
Unemployment hits 6.8% in Canada, an eight-year high, opening the way for a 50-basis point interest rate cut.
US GDP stays at a moderate 2.8%, giving it the strongest economy in the industrialized world.
OECD warns of global growth hit from trade war.
Core PCE rises to 2.8%, with robust disposable income gains pointing to resilient spending.
STOCKS – CHASING THE WINNERS
Chasing winners and dumping losers will be the trading strategy for the rest of 2024.
Watch out for profit-taking in January that defers profits into 2025 and taxes into 2026.
Investment banks looking for M&A boom in 2025, driving by the end of antitrust. Investment banking income could leap to $316 billion globally next year, a jump of about 5.7% in 2024.
Money is pouring out of Asia as the certainty of a harsh trade war looms. Foreigners net withdrew $15.88 billion out of equity markets.
SEC Levies a record $8.2 billion in fines in 2024. The SEC filed 583 enforcement actions in the year that ended in September, down 26% from a year earlier.
Governor of Texas Orders State agencies to stop investing in China.
(If called away on one of your option positions, John suggests exercising your long to cover your short so you can get out of the position at max profit).
BONDS – TOP OF RANGE
Is this the top in Bond Yields and the bottom in prices?
December 18 25bps Fed cut is in the price.
A 4.50% yield could define the new trading range for ten-year US Treasury bond prices (TLT), especially with another 25bps cut in overnight rates by the Fed in three weeks.
Bond yield has rocketed 100 bps since September
National debt tops record $36 trillion.
Municipal Bonds are about to take a big hit if the Tump tax cuts get renewed. That lowers the after-tax value of tax dodges like Munis, which are exempt for local, state, and federal taxes.
FOREIGN CURRENCIES
Dollar hits two-year high on rising US interest rates. Ten-year US Treasuries have risen from 3.55% to 4.50%.
Higher for longer interest rates mean higher for longer US dollar.
Don’t sell the US dollar until the next recession is on the horizon.
Russian Ruble hits 100 to the dollar. It was 1:1 when John was in Moscow 40 years ago.
Avoid (FXA), (FXE), (FXB), (FXC), and (FXY).
ENERGY & COMMODITIES – NO FRIENDS
Stabilizing the Middle East and the end of the Syrian civil war is hugely negative for oil prices.
China ratchets up the Trade War, banning the export of crucial metals essential for all tech applications.
Oil fall on Israeli peace deal talks, taking crude down 2%.
Strategic Petroleum Reserve at multi-year lows, but Biden has stepped in as a buyer.
Blame a weak China, lost OPEC discipline, and overproduction by Iraq.
Avoid the worst-performing asset class in the market.
US Oil Production hits an all-time high.
Unlimited new drilling and opening of federal lands will crash oil prices.
PRECIOUS METALS – DEAD IN THE WATER
Interest rates higher for longer are keeping precious metals under pressure, with gold down 8.3% since November 5.
The opportunity cost of owning gold is about to rise sharply.
Gold is up 40% in a year, so it was ripe for profit taking.
$600 million in selling of gold ETF’s last week.
Gold has become the only way the average Chinese can save as they can no longer speculate in real estate or copper and don’t trust the Chinese Yuan, so there is support lower down.
Central banks in emerging market countries are continuing to buy gold, with 693 metric tonnes of buying, or $5.3 billion this year.
Avoid (GLD), (SLV), (AGQ), and (WPM).
REAL ESTATE – MIXED BAG
US home equity hits an all-time high, casting a spotlight on homeowners’ willingness to tap this wealth as expected rate cuts make equity utilization more affordable.
Americans with mortgages held $17.2 trillion in home equity at the end of Q3 2024, or $11.2 trillion of tappable equity – the amount homeowners can borrow against while maintaining a healthy 20%equity stake in their home.
Mortgage demand jumps by 6% as interest rates hit a one-month low.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased to 6.69% from 6.86%.
Pending home sales climbed 2% in October on a signed contract basis.
New Home Sales hit a two-year low, down 28% in October.
Existing Home Sales jump 3.4% in October.
TRADE SHEET
Stocks – buy the next big dip
Bonds – sell rallies
Commodities – stand aside
Currencies – stand aside
Precious metals – stand aside
Energy – buy nuclear dips
Volatility – sell over $30
Real estate – stand aside
NEXT STRATEGY WEBINAR
12:00 EST Wednesday, January 15, 2025.
Cheers
Jacquie
