Global Market Comments
August 1, 2022
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, OR A BOMBSHELL FROM WASHINGTON)
(SPY), (TLT), ($TNX), (TSLA), (META), (MSFT), (WMT), (GM), (F)
I am writing this from the balcony of my corner suite at the historic Danieli Hotel overlooking the Grand Canal in Venice, Italy.
Every conceivable watercraft imaginable are passing by in large numbers; water taxis, Vaporettos, and even the traditional gondolas. Outside my window, I see two pilots are heatedly arguing over who should enter the side canal first.
This will be my last stay at the Danieli for a while as the 200-year-old hotel cobbled together for three 700-year-old palaces has been sold to the Four Seasons and will imminently close for a three-year gutting and remodeling.
Until Thursday, the market was reaching the top of a three-month range and was ripe to roll over for an August summer correction. Then the Democrats dropped a bombshell. They announced a blockbuster $739 billion stimulus package that will be voted on as early as this week. All of a sudden, the Biden agenda is back on just at one-third its original size.
The package breaks down as follows:
Commits $369 billion to Climate change
Renews a $7,500 tax credit for electric vehicles
Allows Medicare to negotiate prices
Adds a 15% Corporate alternative minimum tax
Reduces the Deficit by $300 billion
It all amounts to a massive stimulus package just as the US economy is entering the most modest of recessions. It also represents a Hail Mary for the Democrats to maintain congressional control.
It just might work.
Who is the biggest victim of the stimulus package? Big oil companies where an alternative minimum neatly sidesteps the oil depletion allowance which enabled them to dodge most taxes since it was passed in 1913.
Who is the biggest winner? Tesla (TSLA), which accounted for 80% of global EV production and benefits enormously from a $7,500 tax credit, is made available for low-income earners purchasing electric cars. It also allows tax credits for the purchase of used EVs for the first time. That is important for the economy as a whole, as both General Motors (GM) and Ford (F) plan to have more than 50% of their production in EVs by 2030.
Traders seemed to know this, taking Tesla shares up 50% from the June bottom and minting several new Mad Hedge millionaires along the way.
The market seemed to sense that something was in the works, even though the meetings were held in secret in a windowless basement room in the Capitol Building. The markets seemed to know something was coming. July posted the best market performance in two years, with the Dow Average up 7.69%.
This is a classic example of markets sensing major events we mere humans are blind to. My favorite example of this is the Battle of Midway, where the Japanese lost a disastrous four aircraft carriers and 350 planes, which ended on June 7, 1942. Even though the outcome was top secret and withheld from the public for months, a 20-year bull market ensued and didn’t end until the 1962 Cuban Missile Crisis.
You may have noticed that I have pulled back from my aggressive shorting of the bond market. That’s because the US budget deficit is seeing the largest decline in American history. Throw in the $300 billion promised by this week’s stimulus package, and the deficit will plunge by a staggering $1.5 trillion in 2022.
That will pay off 37.5% of the $4 trillion deficit run up by the Trump administration. As a result, ten-year US Treasury yields have plunged an eye-popping 90 basis points, from 3.5% to 2.6% in only six weeks. No wonder stocks have been so hot during the same time period.
The Fed Makes Its Move, and the market loved it, taking stocks up 436 points. Notice that the market is not letting anyone in. An increasing number of investors are coming over to my view that the S&P 500 is headed over to $4,800 by yearend. The bottom for this cycle is in. The overnight rate is now 2.25%-2.5%. The Fed is rapidly catching up with the curve. Powell left the door open to raising only 0.50% next time. The futures market is betting that we hit 3.3% this year.
The US is Officially in Recession, after reporting a slight 0.9% decline in Q2. That makes two back-to-back quarters following the 1.6% decline in Q1. The big question is are we already out, given the incredible demand seen in some sectors of the economy, like airlines, hotels, and resorts? It also looks like a big spending bill is about the pass congress.
Weekly Jobless Claims Hit 256,000, down 5,000 from the previous week. Is the recession already over?
IMF Cuts GDP Forecast, cutting its 2022 forecast from 3.6% to 3.2%. 2023 gets a haircut from 3.6% to 2.9%. The IMF is always a deep lagging indicator. Inflation, a China slowdown, and the Ukraine War are the reasons. I think largest are about to start discounting a growth resurgence.
Russia and Ukraine Sign Grain Deal, opening up the Black Sea ports for wheat exports. It’s hard to imagine how this is going to work. Two countries at war but continuing international trade? Indeed, one Russian missile hit Odessa the next day with two others shot down. Still, it was enough to drop wheat prices.
Space X Breaks Launch Record, sending 32 reusable Falcon 9’s aloft so far in 2022. The Starlink ramp-up is responsible, Elon Musk’s effort to build a global satellite WIFI network. You can already become a Starlink beta tester in the US at competitive prices.
The S&P Case Shiller National Home Price Index Sees Another Drop, from 20.6% to 19.7% in May. The closely watched figure saw only its second drop in three years. Tampa (36.1%), Miami (34%), and Dallas (30.8%) brought in the strongest gains. These are still incredible mains, meaning high mortgage interest rates have yet to make a serious dent in prices.
Pending Home Sales Fell a Staggering 20% in June, on a signed contracts basis, says the National Association of Realtors. It’s the slowest pace since June 2011. The roll-over of the real estate market has just begun, in volume, if not in price. The hottest cities like Phoenix, Tampa, and Boise are seeing the sharpest falls.
Lumber Prices are Still in Free-Fall, with lumber sales down 25% in June. Commodities are still falling, showing that the end of inflation is near. Some 10.8% of orders have been cancelled and inventories are building. Construction costs are falling too.
Russia Seizes all Foreign Leased Aircraft and re-registers them as Russian. Some 515 leased aircraft worth $10 billion are trapped in the country and are not allowed by sanctions to get spare parts. Ireland is taking the biggest hit, with 40% owned there. Why insurance covers accidents and not theft as large commercial aircraft are so rarely stolen. And 515 at once! This will be a legal headache for the ages.
Walmart Gets Crushed, with the founding Walton family taking $11.4 billion in personal losses on the $13 or 10% drop in the stock suffered yesterday. Low-end retail is not what you want to own if you think a recession is headed our way. That’s on an expected 13% decline in EPS expected for the year. Sam Walton would be rolling over in his grave.
Microsoft Misses Slightly, but the stock jumps 5% anyway as the long term buyers come in. A strong dollar punches foreign earnings in the nose. The crucial azure cloud hosting and storage business is still growing at 40% a year. Buy (MSFT) on dips and sell short the puts.
Meta (META) Post First Loss Ever in Q2, with ever weaker forecasts as Market Zuckerberg’s money machine grinds to a halt. It will take 3-5 years for the metaverse to mature to the point where the world’s largest social media platform is making money again. The required investment is overwhelming. Avoid (META).
The Wealthiest 100 Americans Lost $622 Billion Since November when the stock market topped. But they are still richer than pre-pandemic. Who was the biggest loser? My friend Elon Musk, whose stock dropped 50% from $1,200 in the first half, costing him a neat $170,000 billion personally. But it created a spectacular buying opportunity for the stock for the rest of us.
My Ten-Year View
When we come out the other side of pandemic and the recession, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With oil peaking out soon, and technology hyper-accelerating, there will be no reason not to. The Dow Average will rise by 800% to 240,000 or more in the coming decade. The America coming out the other side will be far more efficient and profitable than the old. Dow 240,000 here we come!
With some of the greatest market volatility in market history, my July month-to-date performance exploded to +3.98%.
My 2022 year-to-date performance ballooned to 54.83%. The Dow Average is down -11.23% so far in 2022. It is the greatest outperformance on an index since Mad Hedge Fund Trader started 14 years ago. My trailing one-year return maintains a sky-high 77.02%.
That brings my 14-year total return to 567.39%, some 2.40 times the S&P 500 (SPX) over the same period and a new all-time high. My average annualized return has ratcheted up to 44.79%, easily the highest in the industry.
We need to keep an eye on the number of US Coronavirus cases at 91 million, up 300,000 in a week and deaths topping 1,030,000 and have only increased by 2,000 in the past week. You can find the data here.
On Monday, August 1 at 7:00 AM, the ISM Manufacturing PMI for July is released. Activision Blizzard (ATVI) announces earnings.
On Tuesday, August 2 at 7:00 AM, the JOLTS Job Openings for July are out. Caterpillar (CAT) and Airbnb (ABNB) announce earnings.
On Wednesday, August 3 at 7:00 AM, ISM Manufacturing PMI for July is published. MGM Resorts (MGM) announces earnings.
On Thursday, August 4 at 8:30 AM, Weekly Jobless Claims are announced. Amgen (AMGN) and Lyft (LYFT) announce earnings.
On Friday, August 5 at 8:30 AM, the Nonfarm Payroll Report for July is disclosed. Berkshire Hathaway (BRKB) announces earnings. At 2:00 the Baker Hughes Oil Rig Count is out.
As for me, I have met many interesting people over a half-century of interviews, but it is tough to beat Corporal Hiroshi Onoda of the Japanese Army, the last man to surrender in WWII.
I had heard of Onoda while working as a foreign correspondent in Tokyo. So, I convinced my boss at The Economist magazine in London that it was time to do a special report on the Philippines and interview president Ferdinand Marcos. That accomplished, I headed for Lubang island where Onoda was said to be hiding, taking a launch from the main island of Luzon.
I hiked to the top of the island in the blazing heat, consuming two full army canteens of water (plastic bottles hadn’t been invented yet). No luck. But I had a strange feeling that someone was watching me.
When the Philippines fell in 1945, Onoda’s commanding officer ordered the remaining men to fight on to the last man. Four stayed behind, continuing a 30-year war.
As a massive American military presence and growing international trade raised Philippine standards of living, the locals eventually were able to buy their own guns and kill off Onoda’s companions one by one. By 1972 he was alone, but he kept fighting.
The Japanese government knew about Onoda from the 1950s onward and made every effort to bring him back. They hired search crews, tracking dogs, and even helicopters with loudspeakers, but to no avail. Frustrated, they left a one-year supply of the main Tokyo newspaper and a stockpile of food and returned to Japan. This continued for 20 years.
Onoda read the papers with great interest, believing some parts but distrusting others. His world view became increasingly bizarre. He learned of the enormous exports of Japanese automobiles to the US, so he concluded that while still at war, the two countries were conducting trade.
But when he came to the classified ads, he found the salaries wildly out of touch with reality. Lowly secretaries were earning an incredible 50,000 yen a year, while a salesman could earn an obscene 200,000 yen.
Before the war, there was one Japanese yen to the US dollar. In the hyperinflation that followed, the yen fell to 800, and then only recovered to 360. Onoda took this as proof that all the newspapers were faked by the clueless Americans who had no idea of true Japanese salary levels.
So he kept fighting. By 1974, he had killed 17 Filipino civilians.
After I left Lubang island, a Japanese hippy named Norio Suzuki with long hair, beads, and sandals followed me, also looking for Onoda. Onoda tracked him as he had me but was so shocked by his appearance that he decided not to kill him. The hippy spent two days with Onoda explaining the modern world.
Then Suzuki finally asked the obvious question: what would it take to get Onoda to surrender? Onoda said it was very simple, a direct order from his commanding officer. Suzuki made a beeline straight for the Japanese embassy in Manila and the wheels started turning.
A nationwide search was conducted to find Onoda’s last commanding officer and a doddering 80-year-old was turned up working in an obscure bookstore. Then the government custom-tailored a prewar Imperial Japanese Army uniform and flew him down to the Philippines.
The man gave the order and Onoda handed over his samurai sword and rifle, or at least what was left of it. Rats had eaten most of the wooden parts. You can watch the surrender ceremony by clicking here on YouTube.
When Onoda returned to Japan, he was a sensation. He displayed prewar mannerisms and values like filial piety and emperor worship that had been long forgotten. Emperor Hirohito was still alive.
When I finally interviewed him, Onoda was sympathetic. I had by then been trained in Bushido at karate school and displayed the appropriate level of humility, deference, mannerisms, and reference.
I asked why he didn’t shoot me. He said that after fighting for 30 years, he only had a few shells left and wanted to save them for someone more important.
Onoda didn’t last long in the modern Japan, as he could no longer tolerate modern materialism and cold winters. He moved to Brazil to start a school to teach prewar values and survival skills where the weather was similar to that of the Philippines. Onoda died in 2014 at the age of 91. A diet of coconuts and rats had extended his life beyond that of most individuals.
Onoda wasn’t actually the last Japanese to surrender in WWII. I discovered an entire Japanese division in 1975 that had retreated from China into Laos and just blended in with the population. They were prized for their education and hard work and married well.
During the 1990s, a Japanese was discovered in Siberia. He was released locally at the end of the war, got a job, married a Russian woman, and forgot how to speak Japanese. But Onoda was the last to stop fighting.
The Onoda story reminds me of a fact about journalists very early in their careers. You can provide all the facts in the world to someone. But if they conflict with deeply held beliefs, they won’t buy them for a second. The debate over the 2020 election outcome is a perfect example. There is no cure for this disease.
Stay healthy,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Hiro Onoda Surrenders
Budding Journalist John Thomas
Global Market Comments
July 29, 2022
Fiat Lux
Featured Trade:
(MY MAD HEDGE ZERMATT STRATEGY SESSION REVIEW)
I am always impressed when a guest descends from the Matterhorn summit to attend my Mad Hedge Zermatt Strategy Seminar.
That was the case when Marc, a thirty-something hedge fund manager from the Czech Republic triumphantly marched into the meeting in his heavy socks and burnt face. The hotel asked him to leave his boots at the door. He had summited at 8:00 AM, and after a brief respite at the Hornli Hut, made it down by the Schwartzee gondola.
The event was well attended, with wealth managers, hedge fund players, and high net worth individuals making their annual pilgrimage to Zermatt. My usual Russian oligarch went missing this year for obvious reasons.
When I told them I thought I had a shot at a 100% gain this year, up from 56% so far in 2022, one guest ordered a round of schnapps for all.
There were more than the usual number of Americans in Zermatt. With the US dollar at parity against the Swiss franc for the first time in 20 years, how can they afford not to come to the idyllic mountain community? The Chinese were mostly absent, the 50-strong tour groups are a thing of the past.
The Russians were also gone, but not their money. Switzerland has been the weak link in the Russian sanctions. As a result, there is an unprecedented building boom underway in Zermatt, with ten hotels under construction, financed by Vladimir Putin’s buddies.
And there was the usual handful of Japanese, who I always take pleasure in shocking by asking them in their language who they are.
The verdant Alpine village suffered its hottest summer in history, with temperatures regularly topping 80 degrees. That's better than the 110 seen in London or the 115 in France.
The high mountain glaciers were melting at an unprecedented rate. The little creek outside my chalet rose some five feet to a raging torrent by the afternoon. Rivers in town came within a foot of breaching their banks. Indeed, there is talk that the ice holding the Matterhorn may melt, causing the majestic peak to crumble.
Making my rounds on the steep trails, I sadly learned that several of my favorite mountain restaurants did not make it through the pandemic and were shuttered. The bratwurst mit zwiebelsauce, weinerschnitzel mit pommes frites, and fine Valais chardonnays would have to wait.
The Swiss and cantonal governments provided the same sorts of stimulus we did here in the US. But with the borders sealed for two years, they couldn’t get the cheap foreign workers to make a go.
Indeed, it was a visit to the past for a lot of Swiss businesses, only catering to the much smaller market of their own countrymen.
I took off an afternoon to try something new. I hired a pilot and paraplane to jump off the Matterhorn base to glide 3,000 feet down to Zermatt, from 9,000 feet to 6,000 feet. The weather was ideal, the scenery spectacular, and our wing partially collapsed only once. My pilot skillfully steered clear of the many gondola cables and transmission towers along the way.
To watch the full unedited video please click here at https://www.madhedgefundtrader.com/mhft-para-zermatt/
The wind died at the last minute so we had a crash landing. No broken bones this time.
Building Boom
There Will Always be a Switzerland
Didn’t Make it Through the Pandemic
There Will Always be a McDonald's
Gliding Off the Matterhorn
“Climb if you will, but remember that courage and strength are nought without prudence, and that a momentary negligence may destroy the happiness of a lifetime. Do nothing in haste; look well to each step; and from the beginning think what may be the end,” said Edward Whymper, the first man to climb the Matterhorn, in 1865. Four of the seven members of his party died in the descent and were never found.
Global Market Comments
July 28, 2022
Fiat Lux
Featured Trade:
(WHY YOU MUST AVOID ALL EV PLAYS EXCEPT TESLA),
(TSLA), (GM)
Global Market Comments
July 27, 2022
Fiat Lux
Featured Trade:
(HOW TO GAIN AN ADVANTAGE WITH PARALLEL TRADING),
(GM), (F), (TM), (NSANY), (DDAIF), BMW (BMWYY), (VWAPY),
(PALL), (GS), (EZA), (CAT), (CMI), (KMTUY),
(KODK), (SLV), (AAPL)
Global Market Comments
July 26, 2022
Fiat Lux
Featured Trade:
(COFFEE WITH RAY KURZWEIL), (GOOG)
Global Market Comments
July 25, 2022
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or WHEN IS BREAKOUT TIME?),
(TSLA), (TLT)
This will be my last week of writing from the balcony of my chalet in Zermatt. I’ll try to bag a few more peaks over the weekend, then it is a long train ride with transfers in Visp, through the 12-mile stretch of the 125-year old Simplon Tunnel, then on to Milan and my Venice Strategy Luncheon.
Swiss trains run right on time, Italian ones not so much.
Stock markets have been trapped in a tedious range for three months now, from (SPX) 3,600 to 4,200, and are dead in the middle of that range. Earnings widely forecast to be awful came in moderate. With 20% of the S&P 500 reporting, revenues were up 10.5% and profit up 5%. These are not the torrid numbers seen in years past but are positive nonetheless.
This is not what recessions are made of.
Are we about to break out to the upside, downside, or do nothing?
I know the answer but it will take some ‘splanin to get you to understand how and why. I think this has all been one long bottoming process and what follows will be exciting, if not enthralling.
Everyone is hoping for one more capitulation selloff to buy into. The problem is that if too many people wish for something, it never happens.
The primary destroyer of markets this year has been energy-driven inflation. But oil prices peaked at $132 and have been falling ever since and are now off 35%. Oil is now the same price as when the Ukraine War started.
Gasoline has fallen too, some 15% since mid-June, lagging on the downside, as it always does.
Some long-sighted investors, like me, have already read the memo and have been buying. As a result, modest earnings shortfalls have allowed multiple expansion for six weeks now. ALL of the gains since then have come from multiple expansion, meaning the outlook for companies is now improving.
The only question now is whether we get one more selloff in August giving us another chance to load the boat. We could get a short-term peak this week when big tech reports, especially if they come up short. Terms like “hiring freeze”, “slowing revenues”, and “disappointing” might become commonplace.
Another peak could come at 8:30 AM on August 10 when the July CPI Report comes out. Even a modest gain will prompt a round of profit-taking. A decline and it could be a big one, and it’s off to the races.
The end result will be a massive yearend rally that could take the S&P 500 up 20% to 4,800. Individual high-growth stocks, like Tesla (TSLA) could rise by 50% or more.
Happy days will be back again.
The biggest threat to the markets right now may be coming from Europe, where things are clearly falling apart. There is a continuing war in Ukraine that could last for years. A Russian cutoff of natural gas threatens to trigger a deep recession.
Inflation in the UK hit 9.4%, a 40-year high. Heat-induced shutdowns are becoming common. Governments are falling like ten pins, such as in the UK and Italy. Currencies everywhere are in free fall.
Not our problem you may say. But some 30% of S&P 500 earnings come from Europe, especially for technology companies, which with a greenback at a 20-year high are shrinking by the day. Disaster in Europe could cut your retirement portfolio off at the knees, so you better help throw them a rope…. again.
Tesla Earnings Were a Mixed Bag, with revenues up to $16.93 billion for the quarter, a gain of 42% YOY, making it the fastest growing large car maker in the world. Solar energy and services also grew nicely. But margin is down from 33% to 27% QOQ due to high startup costs of the Berlin and Austin factories. That’s still 2.2 times better than the 12% margins seen at Big Three automakers and why it is still a long term “BUY.” The shares popped $100, clearly taking a “glass half full” view. Elon sold 75% of his Bitcoin, taking an implied $350 million paper loss from the top. Buy (TSLA) on dips.
Bonds Hit Two-Week High, boosted by Europe’s 50 basis point rate rise, the first in 11 years. Bonds and the US Dollar are starting to lose some of their yield advantage over the Euro. Recession fears continue to light a fire under bonds, as they have done since early June, taking yields down to 2.73 today.
Weekly Jobless Claims Hit 251,000, giving another recessionary hint, the highest since November. The trend remains up.
Nordstream One is Back Online, delivering 40% of its maximum capacity of natural gas to Germany, the prewar level. It had been down ten days for maintenance. But for how long? The German and the European economies are on a knife edge, and it’s the Russians who decide which way things go. Natgas prices sold off by 4.2%, thankfully.
The Euro Could Hit 90 Cents, a 20-year low, as the Russian gas cutoff hits hard before American supplies arrive on the scene in time. Talk of a 100-basis point Fed rate hike next week is pouring flames on the fire. It will certainly make US vacationers happy, who are seeing prices drop by the day.
Ukraine Sells $12 Billion in Gold, to finance the war with Russia. No wonder the barbarous relic has been trading so poorly.
Russia is Losing the War. I just spoke with the chairman of the British Chiefs of Staff Committee, their Joint Chiefs of Staff, and the one organization with the best read on Russian losses in the Ukraine War so far.
Russia has lost an incredible 2,000 tanks out of their initial 2,800 initial operational ones, and a further 4,000 armored vehicles. Russia has lost one-third of its army since February through deaths or injury, some 50,000 men.
Russia is now unable to defend itself from an attack from the West. Putin is assuming that we are nicer people than we actually are, always a fatal mistake. I can’t tell you why I know this, only that I do. All I can say is that the Internet, advanced hardware, encryption, and artificial intelligence are amazing things.
US Gasoline Prices Hit Two-Month Low, at $4.44 a gallon, suggesting that inflation is in retreat. But notice that they are falling faster than they rose, which is always the case in a rigged market. Prices have fallen for a record 35 consecutive days in a row. Credit recession fears and the administration release of one million barrels a day from the Strategic Petroleum Reserve.
Housing Starts Come in Weak, down 2% in June at 1.55 million seasonally adjusted. Housing Permits were weak at 0.6%, the lowest in ten months. Homebuilder Sentiment saw the biggest decline since the data started where firms are dropping prices. We are starting to see single-digit price drops in almost all markets. Phoenix is seeing the sharpest falls, followed by Austin, which saw the most speculative “flipping” activity.
Existing Home Sales Dive 5.4% in May, and down 14.2% YOY, reflecting the rising tide of woes affecting the housing market. Median prices are still rising, to $416,000, up 13.4% YOY. Some 5.12 million used homes were sold in May. Inventories rose for the first time in three years to a three-month supply.
Real Estate Prices Peaked Simultaneously all Over the World, for the first time ever. The frothiest markets in New Zealand and Australia have already seen a 13% fall. Of course, global interest rates moving up in synch is the cause. Matters were made worse in the land of the kiwis by a flood of Chinese money that abruptly ended with the pandemic. New Zealand has only 5 million residents, smaller than greater San Francisco.
China US Treasury Holdings Drop to a 12-Year Low of under $1 trillion. Few know that China is the world’s largest owner of US government debt, followed by Japan. Is this a political move, or have they simply turned bearish on bonds? My experience is that the Middle Kingdom is pretty good at making calls like this. They have a lot of friends in the market.
My Ten-Year View
When we come out the other side of pandemic and the recession, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With oil peaking out soon, and technology hyper-accelerating, there will be no reason not to. The Dow Average will rise by 800% to 240,000 or more in the coming decade. The America coming out the other side will be far more efficient and profitable than the old. Dow 240,000 here we come!
With some of the greatest market volatility in market history, my July month-to-date performance maintained a healthy +2.01%.
My 2022 year-to-date performance maintained 52.86%. The Dow Average is down -13.5% so far in 2022. It is the greatest outperformance on an index since Mad Hedge Fund Trader started 14 years ago. My trailing one-year return maintains a sky-high 73.07%.
That brings my 14-year total return to 565.42%, some 2.55 times the S&P 500 (SPX) over the same period and a new all-time high. My average annualized return has ratcheted up to 44.93%, easily the highest in the industry.
We need to keep an eye on the number of US Coronavirus cases at 90.4 million, up 300,000 in a week and deaths topping 1,027,000 and have increased by 9,000 in the past week. You can find the data here.
On Monday, July 25 at 8:30 AM, the Chicago Fed National Activity Index for June is released.
On Tuesday, July 26 at 6:00 AM, the S&P Case Shiller National Home Price Index for May is out. New Home Sales for June are also released. Microsoft (MSFT) reports earnings.
On Wednesday, July 27 at 11:00 AM, the Federal Reserve is expected to raise interest rates by 75 basis points. A closely watched press conference follows. Meta (META) reports earnings.
On Thursday, July 28 at 8:30 AM, Weekly Jobless Claims are announced. We also get the initial read of Q2 GDP growth. Apple (AAPL) and Amazon (AMZN) report earnings.
On Friday, July 29 at 8:30 AM, the Personal Income & Spending are disclosed. At 2:00 the Baker Hughes Oil Rig Count are out.
As for me, it has been a lifetime desire of mine to fly a Supermarine Spitfire, the Royal Air Force fighter that won the 1940 Battle of Britain.
When I lived in London 40 years ago, there were only 15 flying examples in the world owned by the RAF and a handful of British billionaires who only flew them themselves. They were just too valuable to lend out.
By comparison, there were over 200 American P51 Mustangs, which you could buy from the government for scrap for $500 after the war ended.
Now in 2022, there are 70 flying Spitfires. A global network of warbird enthusiasts has rescued them from bogs, jungles, and scrap yards around the world and restored them to flying condition. It helped that the market value of these planes has shot up from $1 million to $5 million since 1982.
So when a Mad Hedge Concierge member Peter offered me his Spitfire for a day, I couldn’t wait to return to England.
There are very few people in the world who can fly prewar tailwheel configured airplanes. I have flown over a dozen different types. They are prone to ground loops, nose overs, scraping wing tips, and crashes. The airframes are usually made of Norwegian spruce and Irish linen and the wings can fall off at any time.
No wonder the fatality rate was so high in the old days. It helped that I went armed with my old British Aerobatics license along with a phalanx of American civilian and military licenses.
It was a cool and blustery afternoon when I showed up at Biggin Hill south of London, one of the top RAF fighter stations during WWII, and told Peter “Major John Thomas reporting for duty, sir.” He laughed and set about giving me my preflight briefing. Flying 80-year-old airplanes can be deadly. 70-year-old pilots are even more dangerous.
I was cautioned to move the stick gently as the controls are famously sensitive, thanks to the plane’s unique elliptical wing tips. No rudder was needed at all.
If the engine failed, I had the choice of parachuting out or risking a hard landing. I chose the latter, as Southern England is basically one big grass landing strip. Plus, I’ve had plenty of practice with this kind of maneuver.
For good measure, I brought along a safety pilot. They’ve moved the London control zone around a bit over the years, and I wanted to make sure you keep receiving Mad Hedge newsletter for the indefinite future. We took off, banked right, and headed for the English Channel.
While the plaque on the control panel read “DO NOT FLY OVER 350 MPH”, I dared not go faster than 250 MPH given the age considerations of both the plane and the pilot. Another plaque reading “EMERGENCY BOOST PUMP” was wired shut. The Merlin V-12 1,250 horsepower engine purred. Later versions of the plane with the 2,000 horsepower Griffin engine flew over 450 MPH.
The Spitfire could outmaneuver any plane the German Luftwaffe threw up against it. When Hitler asked my late acquaintance Luftwaffe General Adolph Galland what he needed to win the Battle of Britain, he replied, “A squadron of Spitfires.” German losses in the battle topped 2,000 planes versus 900 for the British.
But German crew losses were ten times that of the British. That meant an RAF pilot could get shot down and be in another plane in hours. That is what decided the Battle of Britain. The pilots were worth more than the planes. In the end, the British shot down two-thirds of the German Air Force, a loss from which they never recovered.
We found a clear piece of sky over the White Cliffs of Dover between two big fluffy cumulus clouds and commenced a full-on aerobatic flight test. Pilots always want to see what I can do in these old planes and this time was no different.
I executed multiple loops, barrel rolls, chandelles, lazy eights, Immelmann turns, and wingovers, careful never to exceed 1G lest, yes, the wings fall off. Spitfires can dive like crazy. We dropped from 8,000 feet to 2,000 feet in seconds.
While I was limited to one-inch moves of the stick, wartimes diaries speak of full right, full left, and steep dives to escape marauding Messerschmitt 109's and Focke Wulf 190's where pilots suffered 10G’s of force or more. The punishment those kids took was amazing.
The plane carried only two hours of fuel so after I passed my test with flying colors, it was back to Biggin Hill. Spitfires lacked IFR instruments because in 1938 they hadn’t been invented yet, so we were careful to avoid clouds. I made a perfect three-point landing on runway 27, as usual, and taxied up to the hanger where Peter greeted me.
Back at the hanger it took two men to haul me out of the plane, stinking, drenched with sweat, and elated. I felt like I had just done 15 rounds with Mike Tyson, but it was worth it.
Then it was off to the nearest pub for a well-earned pint of Guinness, as has long been the tradition of the RAF. The walls were adorned with the pictures of wartime Spitfire pilots who never made it back, some looking no older than teenagers, which they were.
That’s another bucket list item off the list. The time to get them all is running out, and I keep adding new ones, so I better get a move on.
I’ll be back next summer, for sure, because the commanding general of the RAF has invited me back to fly their sole surviving WWII Avro Lancaster four-engine bomber. It’s part of the Battle of Britain Memorial Flight, the fruit of contacts made during my NATO military duties. It is a national treasure.
It seems they’re short of pilots.
To watch a two-minute video of my epic flight, please click here.
Stay healthy,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
A 1943 Supermarine Spitfire Mark IX
Flying Upside Down Over the White Cliffs of Dover
Mission Accomplished
Back at the Pub for a Pint
Avro Lancaster Bomber
