Global Market Comments
February 10, 2022
Fiat Lux
Featured Trades:
(THEY’RE NOT MAKING AMERICANS ANYMORE)
You can count on a bear market hitting some time in 2038, one falling by at least 25%.
Worse, there is almost a guarantee that a financial crisis, severe bear market, and possibly another Great Depression will take place no later than 2058 that would take the major indexes down by 50% or more.
No, I have not taken to using an Ouija board, reading tea leaves, nor examine animal entrails in order to predict the future. It’s much easier than that.
I simply read the data just released from the National Center for Health Statistics, a subsidiary of the federal Centers for Disease Control and Prevention (click here for their link).
The government agency reported that the US birth rate fell to a new all-time low for the third year in a row, to 11.99 births per 1,000 women of child bearing age. A birth rate of 12.5 per 1,000 is necessary for a population to break even. The absolute number of births is the lowest since 1987. In 2017, women had 500,000 fewer babies than in 2007.
These are the lowest number since WWII when 17 million men were away in the military, a crucial part of the equation.
Babies grow up, at least most of them. In 20 years, they become consumers, earning wages, buying things, paying taxes, and generally contributing to economic growth.
In 45 years, they do so quite substantially, becoming the major drivers of the economy. When these numbers fall, recessions and bear markets occur with absolute certainty.
You have long heard me talk about the coming “Golden Age” of the 2020s. That’s when a two-decade-long demographic tailwind ensues because the number of “peak spenders’ in the economy starts to balloon to generational highs. The last time this happened during the 1980s and 1990s, stocks rose 20-fold.
Right now, we are just coming out of two decades of demographic headwind when the number of big spenders in the economy reached a low ebb. This was the cause of the Great Recession, the stock market crash and the anemic 2% annual growth since then.
The reasons for the maternity ward slowdown are many. The great recession certainly blew a hole in the family plans of many Millennials. Falling incomes always lead to lower birth rates, with many Millennial couples delaying children by five years or more. Millennial mothers are now having children later than at any time in history.
Burgeoning student debt, which just topped $1.5 trillion, is another. Many prospective mothers would rather get out from under substantial debt before they add to the population.
The rising education of women is another drag on childbearing and is a global trend. When spouses become serious wage earners, families inevitably shrink. Husbands would rather take the money and improve their lifestyles than have more kids to feed.
Women are also delaying having children to postpone the “pay gaps” that always kick in after they take maternity leave. Many are pegging income targets before they entertain starting families.
As a result of these trends, one in five children last year were born to women over the age of 35, a new high.
This is how Latin Americans moved from eight to two-child families in only one generation. The same is about to take place in Africa, where standards of living are rising rapidly, thanks to the eradication of several serious diseases.
The sharpest falls in the US have been with minorities. Since 2017, the birthrates for Hispanics has dropped by 27% from a very high level, African Americans 11%, whites 5%, and Asian 4%.
Europe has long had the same problem with plunging growth rates but only much worse. Historically, the US has made up for the shortfall with immigration, but that is now falling, thanks to the current administration policies. Restricting immigration now is a guaranty of slowing economic growth in the future. It’s just a numbers game.
So watch that growth rate. When it starts to tick up again, it’s time to buy….in about 20 years. I’ll be there to remind you with this newsletter.
As for me, I’ve been doing my part. I have five kids aged 15-36, and my life is only half over.
Where did you say they keep the Pampers?
I'm Doing My Part
Global Market Comments
February 9, 2022
Fiat Lux
Featured Trades:
(WHY TESLA IS TAKING OVER THE WORLD)
(TSLA), (GM), (TM)
(TESTIMONIAL)
It was another typical Elon Musk earnings call.
Tesla is evolving into the world’s preeminent robotics and AI company.
It is building the largest neural network in history, which means all the Tesla’s ever made are talking to each other, some four million by the end of this year.
When the US goes all electric in a decade, the size of the power grid is going to triple (buy copper), or else brownouts and outages will become constant. Every home in the country is going to need solar roofs to meet the demand.
Demand for cars is the greatest Tesla has ever seen, far beyond their ability to produce them, and Q1 is the slow quarter for the auto industry. I just tried to buy a new Model X and the waiting list is one year. In fact, I can sell my existing 2018 Model X on eBay for more than I paid for it….new.
Elon never fails to amaze.
As for the stock, you have to get used to the idea that the world’s greatest company has annual 45% drawdowns. That’s how Tesla has always traded. It's either going to zero or infinity, depending on who you talk to.
My decade target is still $10,000 per share. We just had a $420, 35% pullback, so we may take one more run at the lows before we go to new Highs. But I have only been trading Tesla shares for 11 years. What do I know?
I’ll never forget my first tour of the Fremont factory in 2010, right after they bought it for stock from Toyota (TM) out of the General Motors (GM) bankruptcy (Toyota owned half). Tesla then occupied only a tiny corner of the gigantic 50,000 square foot space.
But you know what? There were virtually no humans on the assembly line, just a long row of red German-made robots. There was just the occasional guy shooting oil into automatic joints.
It was a vision into the future.
I knew I was on the right track when the salesman told me that the customer who just preceded me for a Tesla Model X P100D SUV was the Golden Bay Warriors star basketball player, Steph Currie.
Well, if it’s good enough for Steph, then it’s good enough for me.
So, when I received a call from Elon Musk’s office to test the company’s self-driving technology embedded in their new vehicles for readers of the Diary of a Mad Hedge Fund Trader.
I did, and prepare to have your mind blown!
I was driving at 80 MPH on CA-24, a windy eight-lane freeway that snakes its way through the East San Francisco Bay Area mountains. Suddenly the salesman reached over a flicked a lever twice on the left side of the driving column.
The car took over!
There it was, winding and turning along every curve, perfectly centered in the lane. As much as I hated to admit it, the car drove better than I ever could. It does especially well at night or in fog, a valuable asset for senior citizens whose night vision is fading fast.
All that was required was for me to touch the steering wheel every minute to prove that I was not sleeping.
The cars do especially well in rush hour driving, as it is adept at stop-and-go traffic. You can just sit there and work on your laptop, read a book, call some customers, or watch a movie on the built-in 5G WIFI HD TV.
When we returned to the garage the car really showed off. When we passed a parking space, another button was pushed, and we perfectly backed 90 degrees into a parking space, measuring and calculating all the way.
The range is 300 miles, which I can recharge at home at night from a standard 220-volt socket in my garage in seven hours. When driving to Lake Tahoe, I can stop halfway at get a full charge in 30 minutes at a Tesla supercharging station.
The new chargers operate at a blazing 400 miles per hour. That’s enough time to walk to the subway next door and get a couple of sandwiches.
The chassis can rise as high as eight inches off the ground so it can function as a true SUV.
The “ludicrous mode,” a $12,000 option, take you from 0 to 60
mph in 2.9. However, even a standard Tesla can accelerate so fast that it will make the average passenger carsick.
Here’s the buzzkill.
Tesla absolutely charges through the nose for extras.
The 22-inch wheels, the third row of seats to get you to seven passengers, the premium sound, the leather seats, and the self-driving software can easily run you $30,000-$40,000.
A $750 tow hitch will accommodate a ski or back rack on the back. There is a $1,000 delivery charge, even if you pick it up at the Fremont factory.
It’s easy to see how you can jump from an $84,990 base price to a total cost of $162,500, including taxes, for the ultra-luxury Performance model, as I did.
As for “drop dead’ curb appeal, nothing beats the Model X. When I first started driving Tesla’s I used to get applause at stoplights. It took a while to realize they were cheering the car, not me.
Even after driving one of these for 11 years, I still get notes with phone numbers from young women asking for rides. And they don’t even offer that as an option!
My original split-adjusted cost for my Tesla shares is $3.30.
It’s still true that if you buy the shares, you get the car for free.
I got three.
Thank You, Elon!
Global Market Comments
February 8, 2022
Fiat Lux
Featured Trades:
(WHY TECHNICAL ANALYSIS NEVER WORKS)
(FB), (AAPL), (AMZN), (GOOG), (MSFT), (VIX)
Global Market Comments
February 7, 2022
Fiat Lux
Featured Trades:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or CASH IS KING),
(SPY), (TLT), (TBT), (MSFT), (AAPL), (TSLA), (BRKB)
“Cash is king.”
That is the sage piece of advice I learned from my father about what to do during stock market corrections. Pop wasn’t a professional investor, but he had been through enough bear markets to know the value of a dollar at a market bottom.
This week will go down in history of the week of the “Zuck Shock”, when “Meta,” the newly renamed Facebook (FB), ran up a $250 billion loss in market capitalization, the largest in history.
It turns out that China’s Tik Tok has been eating their lunch for quite some time now. Apple’s new IOS privacy settings cost them another $10 billion.
What was the worst trade of 2021? CEO Mark Zuckerberg buying back $33 billion worth of his own stock in the second half of 2021 at the highs.
It gets worse.
If you think (FB) is a bargain down here, off 40% from its recent peak and at a discount to S&P 500 earnings multiples, think again.
(FB) is one of the largest holdings of the hedge fund community. Horrible January performance is about to be followed by even worse February numbers. That means any rally in (FB) will be slammed by enormous selling.
It couldn’t happen to a nicer guy.
But (FB) is not going away. With 3.6 billion users, how could they? But they are not returning as the wellspring of new fortunes anytime soon either.
Of course, the other big development of the week was the breakout by ten-year US Treasury bond yields to new two-year highs at 1.93%. Some forecasts now see 1.75% in rate rises by the end of the year.
If you are not already triple short the bond market, then you haven’t been reading this letter. We’ll know more when the next inflation data comes out on Thursday, February 10. The blockbuster January Nonfarm Payroll Report suggests they will be horrible. We currently have the hottest economy in 50 years.
And the good times are only just getting started. The Fed has delayed rate rises for so long that they risk much higher highs in interest rates in the future and a possible recession. That puts a half-point rise squarely on the table in March. The mere threat of that will keep rates high and stocks low until then.
So, how low is low? The (SPY) 50-day moving average at $460 may be a top for the short term. The recent low at $420 may be the bottom. We could be stuck in this range for a while.
Quite honestly, we haven’t been punished enough for our excesses of a year ago, when SPACs, crypto, and cannabis stocks ruled supreme. Liquidity was so great that markets were creating whole new asset classes out of thin air just to absorb it.
So, until interest rates stabilize, I’ll be selling every tech rally with both hands until it eventually costs me money. You should too.
The Nonfarm Payroll Report Comes in Hot, at 467,000 when many were expecting negative numbers due to omicron. The Headline Unemployment Rate rose to 4.0%. Manufacturing was up 13,000. Average hourly earnings were up a whopping 0.7% in January and 5.7% YOY. The U-6 “discouraged worker” unemployment rate fell to 7.1%. The numbers crashed to the bond market to a new multi-year low at a 1.93% yield, dragging stocks down with them. It definitely puts a Fed half-point hike on the table for March. It makes you wonder how hot employment would be without omicron.
The Bond Vigilantes are Back, as the monetary tightening goes global, but this time, with a German Accent. Ten-year bund yields hit a three-year high and two-year yields a five-year high, Britain has already raised rates twice, and the ECB’s Christine Lagarde has turned from dove to hawk. European rates rising faster than ours is knocking the stuffing out of the US dollar. JGB yields hit a six-year high.
Weekly Jobless Claims Fall to 238,000, down 23,000 on the week. Continuing claims drop 44,000 to 1.628 million. The light at the end of the tunnel for omicron?
US National Debt Tops $30 Trillion, the end result of 20 years of deficit spending. Clinton was the last president to run a surplus, when closing of the US Treasury bond market was discussed for lack of supply. $6 trillion for tax cuts for the wealthy, $6 trillion for Covid relief, and $4 trillion for the war in Iraq, it adds up. Without the pandemic, we were on schedule to hit $30 trillion by 2025. If interest rates ever go up, the US will really be in trouble.
Alphabet Announces 20:1 Share Split, which will take the price down from $3,000 to $150. The goal is to make the shares available to the masses. The earnings were great too. The company bought back $13.5 billion worth of its own stock as well. Taking profits on my call spread right here.
Facebook Crashes 25% on Huge Earnings Miss, in Q4. Total revenues came in at $32.8 billion and operating income at $15.9 billion. The newly renamed Meta says falling ad rates and volume are to blame. It couldn’t happen to a nicer guy. Apple’s new privacy settings delivered another dent.
PayPal Crashes 20% on horrific earnings. “Buy now, pay later” turned out to be “Buy now, pay never,” with a crushing 7% default rate. Supply chain problems, covid, reduced travel all conspired to kill off this company. The shares are off 60% from the summer high. This was my biggest loss of 2021.
Snapchat Snaps, soaring 60% on spectacular earnings, the first to ever show a profit. Avoid (SNAP) as it's too superheated. This is becoming a single stock picker’s market in the extreme.
Borrowers Stampede to Get the Last of the Low Interest Rate loans, with mortgage applications up 18% in a week. The 30-year fixed rate soared to 3.78%. Eventually, borrowers are going to have to switch to 5-year adjustables to afford a home purchase, taking on the interest rate risk.
My Ten-Year View
When we come out the other side of pandemic, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With interest rates still at zero, oil cheap, there will be no reason not to. The Dow Average will rise by 800% to 240,000 or more in the coming decade. The American coming out the other side of the pandemic will be far more efficient and profitable than the old. Dow 240,000 here we come!
With near-record volatility continuing, my February month-to-date performance rocketed to a blistering 4.25% in only four days. My 2022 year-to-date performance ended at 18.84%. The Dow Average is down -3.34% so far in 2022. It is the great outperformance on an index since Mad Hedge Fund Trader started 14 years ago.
With 28 trade alerts issued so far in 2022, there was too much going on to describe here. Check your inboxes.
That brings my 13-year total return to 531.40%, some 2.00 times the S&P 500 (SPX) over the same period. My average annualized return has ratcheted up to 43.68% easily the highest in the industry.
We need to keep an eye on the number of US Coronavirus cases at 76 million and rising quickly and deaths topping 902,000, which you can find here.
On Monday, February 7 at 1:00 PM EST, the total Vehicle Sales for January are out. Amgen (AMGN) reports.
On Tuesday, February 8 at 8:30 AM, the US Balance of Trade for December is released. Pfizer (PFE) reports.
On Wednesday, February 9 at 7:00 AM, the Wholesale Inventories for December are printed. Disney (DIS) reports.
On Thursday, February 10 at 8:30 AM, the Weekly Jobless Claims are disclosed. The big number of the week is US Core Inflation. Twitter (TWTR) reports.
On Friday, February 11 at 7:00 AM, the University of Michigan Consumer Sentiment for February is released.
At 2:00 PM, the Baker Hughes Oil Rig Count is out.
As for me, to say that I was an unusual hire for Morgan Stanley back in 1983 was an understatement, a firm known as being conservative, white-shoed, and a paragon of the establishment. They normally would not have touched me with a ten-foot pole, except that I spoke Japanese.
Of 1,000 employees, there were only three from California. The other two were drop-dead gorgeous Stanford grads, daughters of the president of the Philippines, hired to guarantee the firm’s leadership of the country’s biannual bond issue.
When the book Liar’s Poker was published, many in the company thought I wrote it under the pen name of Michael Lewis. Today, the real Michael lives a few blocks away from me and I kid him about it whenever I bump into him at Whole Foods.
At one Monday morning meeting, the call went out, “Does anyone have a connection with the Teamsters Union? I raised my hand, mentioning that my grandfather was a Teamster while working for Standard Oil of California during the Great Depression (it was said at the time that there was never a Great Depression at Standard Oil. It was true).
It turned out that I was virtually the only person at Morgan Stanley that didn’t have an Ivy League degree or an MBA.
My boss informed me, “You’re on the team.”
At the time, the US Justice Department had seized the Teamsters Pension Fund because the Mafia had been running it for years, siphoning off money at every opportunity. I made the pitch to the Justice Department, a more conservative bunch of straight arrows you never saw, all wearing dark suits and white business shirts.
It was crucial that we won the deal as Barton Biggs was just starting up the firm’s now immensely profitable asset management division, and a big mandate like the Teamsters would give us instant credibility in the investment community.
We won the deal!
Once the papers were signed, the entire Teamsters portfolio was dumped in my lap and I was ordered to fly to Las Vegas to investigate. It didn’t hurt that I was Italian. It was thought that the Teamsters might welcome me.
The airport was still a tiny, cramped affair, but offered slot machines. Steve Wynn was building The Mirage Hotel on the strip. Howard Hughes was still holed up in the penthouse of the Desert Inn. Tom Jones, Frank Sinatra, Siegfried & Roy, Wayne Newton, and Liberace had star billing.
It turned out that the Teamsters Pension Fund owned every seedy whorehouse, illegal casino, crooked bookie, and drug dealer in town. If you wanted someone to disappear, they could arrange that too.
I returned to New York and wrote up my report. I asked Barton to sign off on it and he said, “No thanks, you own this one.”
So it was with a heavy heart that I released a firmwide memo stating that employees of Morgan Stanley were no longer allowed to patronize the “Kit Kat Lounge”, the “Bunny Farm”, the “Mustang Ranch” and 200 other illicit businesses in Nevada.
I never lived down that memo.
I actually knew about some of these places a decade earlier because they were popular with the all-male staff of the Nuclear Test Site where I had once worked an hour north of town as a researcher and mathematician.
Then later in the early 2000s, I had to drive my son from Lake Tahoe to the University of Arizona and we drove right past the entrance to the Nuclear Test Site. The “Kit Kat Lounge”, the “Bunny Farm” were long gone, but the Site access had improved from a dusty, potholed dirt road to a four-lane superhighway.
That’s defense spending for you.
Even today, 40 years later, my old Morgan Stanley friends kid me if I know where to have a good time in Vegas, and I laugh.
But when I ride the subway in New York, I still get on at the front of the train, just to be extra careful. Accidents happen.
Stay Healthy.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
February 4, 2022
Fiat Lux
Featured Trades:
(FEBRUARY 2 BIWEEKLY STRATEGY WEBINAR Q&A),
(PYPL), (PLTR), (BRKB), (MS), (GOOGL), (ROM), (MSFT), (ABNB), (VXX), (X), (FCX), (BHP), (USO), (TSLA), (EDIT), (CRSP)
Below please find subscribers’ Q&A for the February 2 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Incline Village, Nevada.
Q: Thoughts on Palantir Technologies Inc. (PLTR)?
A: Well, we got out of this last summer at $28 because the CEO said he didn’t care what the share price does, and when you say that, the market tends to trash your stock. But Palantir is also in a whole sector of small, non-money-making, expensive stocks that have just been absolutely slaughtered. And of course, PayPal (PYPL) takes the prize for that today, down 25% and 60% from the top. So, we’re giving up on that whole sector until proven otherwise. Until then, these things will just keep getting cheaper.
Q: Given the weakness in January, do you think we still have to wait until the second half of the year for a viable bottom?
A: Definitely, maybe. If things are going to happen, they are going to happen fast; we got the January selloff, but that’s nowhere near a major selloff of 20%. And the fact is, the economy is still great so that’s why this is a correction, not a bear market. At some point, you want to buy into this, but definitely not yet; I think we take another run at the lows again sometime this month. We just have to let all the shorts come out and take their profits so they can reestablish again.
Q: Why are bank stocks struggling?
A: A lot of the interest rate rises that we’re getting now were already discounted last year—banks had a great year last year—so they were front running that move, which is finally happening. To get more moves out of banks, you’re going to have to get more interest rate rises, which we will get eventually. We still like the banks long term, we still like financials of every description, but they are taking a break, especially on the “sell everything” index days. A lot of the recent selling was index selling—banks have a heavy weighting in the index, about 15%. So, they will go down, but they will also be the ones that come back the fastest. We’re seeing that in some of the financials already, like Berkshire Hathaway (BRKB) and Morgan Stanley (MS) which are both close to all-time highs now.
Q: What about the situation with Russia and Ukraine?
A: It’s all for show. This is a situation where both the US and Russia need a war, or threat of a war, because the leaders of both countries have flagging popularity. Wars solve those problems—that’s why we have so many of them by the United States. We’ve been at war essentially for most of the last 40 years, ever since Ronald Reagan came in.
Q: I didn’t exit my big tech positions before the crash, should I just hang onto them at this point?
A: The big ones—yes. The Apples (AAPL), the Googles (GOOGL), the Amazons (AMZN) —they’re only going to drop about 20% at the most, maybe 25%, and then they’ll go to new highs, probably before the end of the year. If you’re good enough to get out and get back in again on a 20% move, go for it. But most people can’t do that unless they’re glued to their screens all day long. So, if you have stock, keep the stock; if you have options, get out of the options, because there the time decay will wipe you out before a turnaround can happen. This is not an options environment, unless you’re playing on the short side in the front month, which is what we’re doing.
Q: When you send out the trade alerts, I have a hard time getting them executed. How do you advise?
A: Move the strike price, go out in maturity, and you can get our prices at slightly higher risk. Or, just leave it and, quite often, people’s limit orders get done at the end of the day when the algorithms have to dump their positions at the close because they’re not allowed to carry overnight positions. Also, even if you get half of my trade alerts, you’re doing pretty good—we’re running at a 23% rate in 6 weeks, or 200% annualized. And remember, when I send out a trade alert, you’re not the only one trying to get in there, so you can even go onto a similar security. If I recommend Alphabet (GOOGL), consider going over to Microsoft (MSFT), because they all tend to move together as a group.
Q: I am sitting on a 16% profit in the ProShares Ultra Technology (ROM), which you recommended. Should I take the money and run, and get back in at a lower price?
A: Yes, this is just a short covering rally in a longer-term correction, and you make the money on the volume. You win games by hitting lots of signals, not hanging on to a few home runs where people usually strike out.
Q: You said inflation will be short lived, so why would there be 9 interest rates after the initial 4?
A: It’s going to take us 8 interest rates just to get us back to the long-term average interest rate. Remember the last 2% is totally artificial and only happened because there was a financial crisis 13 years ago. So, to normalize rates you really need to get overnight rates back up to about 3.0%. And that means 12 interest rate hikes. If you don’t do that, you risk inflation going from controllable to uncontrollable, and that is the death of the Fed. So, that’s why I expect a lot more interest rate rises.
Q: Will the tension between Russia and the Ukraine affect the market?
A: No, it hasn’t so far and I don’t expect it to. Although, it’s hard to imagine going through all of this and not seeing a shot fired. When that one shot gets fired, then maybe you get a down-500-point day, which it then makes back the next day.
Q: Anything to do with Alphabet (GOOGL) announcing its 20 to one split?
A: No, it’s too late. We had a trade alert out on a Google 20 call spread which we actually took profits on this morning. So, nice win for the Mad Hedge Technology Letter there. There’s nothing to do with these splits, it’s not like they’re going to un-announce it, this isn’t a risk-arbitrage situation where there’s always an antitrust risk hovering over the deal that may crash it. This is pretty much a done deal and doesn’t even happen until July 1. People think bringing the share price from $3,000 down to $150 makes it available for a lot more potential retail buyers, which it does. It also makes call spreads on the options a lot cheaper too. When we put out these alerts, we can only do one or two contracts, even tying up $10,000—divide that by 20 and all of a sudden your cheapest Google call spread cost $500 instead of $10,000.
Q: Can you speak about the liquidity on your strikes? Sometimes we’re trading against strikes that have no open interest.
A: Whenever you put in an order for one strike, even if there’s nothing outstanding on that strike, algorithms will arbitrage against that strike—where your order is—against all the other strikes on the whole options chain. So, don’t worry if you have limited open interest or no open interest on our trade alerts. They will get done, and it may get done by some algorithm or some market maker taking more of another strike, that’s how these things get done. It’s all thanks to the magic of computers.
Q: Do you have thoughts about Freeport-McMoRan (FCX)? I have some profitable LEAP positions open.
A: It’ll go higher, keep them. And I like the whole commodity space, which means iron ore (BHP), copper, steel (X), etc.
Q: Would you trade Barclays iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX) at this point?
A: No, because we’re dead in the middle of the recent range. That’s a horrible place to enter—you only enter (VXX) on extremes on the upsides and the downside.
Q: What should I do about Airbnb (ABNB) at this price? They’ve been profitable for 2-3 years, with revenues rising.
A: I think Airbnb is one of the best run companies in the world, and I expect their earnings to keep growing like crazy, especially once we get out of the pandemic. I am also a very frequent Airbnb user, having stayed in Airbnb’s in at least 10 countries, so I’m a big fan of them. The stock just got dragged down by the small tech bust but it will come back. This is a “throwing the baby out with the bathwater” situation.
Q: Are there any good LEAPS candidates now?
A: I’m not doing any LEAPS until we reach the final cataclysmic selloff of the correction. Otherwise, the time value will run against you enormously; I’d rather wait for better prices.
Q: Do you see a cataclysmic selloff?
A: Yes, I do. Maybe in a few more weeks, and maybe next week if we get a really hot 8%+ inflation rate—that would really kill the market.
Q: What will tell you if inflation is ending or slowing labor?
A: Labor is 70% of the inflation calculation. So, when these huge pay awards slow down, that's when inflation slows down. By the way, a lot of pay increases that are happening now are catch-up from the last 40 years of no pay increases for American workers in real inflation adjusted terms. So, a lot of this is catch-up—once that’s done, you can forget about inflation. Also, the long-term pressure of technology on prices is downwards, so allow that to reignite deflation, and that will be your bigger issue over the long term.
Q: What should I do about Editas Medicine Inc (EDIT) or CRSPR Therapeutics AG (CRSP)?
A: Don’t touch the sector, it’s out of favor. Let this thing die a slow death. When they come up with profitable products, that’s when the sector recovers. So far, everything they have works in labs but there are no mass-produced Crispr products, they’re trying for mass production on sickle cell anemia and a couple of other things, but still very early days in CRSPR technology.
Q: When will this recording be posted?
A: In two hours, it will be posted on the website. Go to “My Account” and you’ll find the last 13 years of recorded webinars.
Q: What do you mean by “stand aside from Foreign Exchange”?
A: The volatility in the foreign exchange market is just so low compared to equities and bonds, it’s not worth trading right now. When you can trade everything in the world—foreign exchange is at the bottom of the list. If I see a good entry point, I’ll do a trade; but do I trade Tesla (TSLA) with a volatility of 100%, or foreign exchange with a volatility of 5%? Those are the choices.
Q: Should I do any short plays in oil (USO)?
A: Generally, you don’t want to short any commodity unless you're a professional; I say that having been short beef futures when Mad Cow Disease hit in 2003 and you had three limit-up days in a row in the futures market. That happens in the commodity areas—liquidity is so poor compared to stocks and bonds that if you get caught in one of these one-way moves, you can’t get out. So that is the risk; and I’ve known people who have gone bust trading oil both long and short, so this is for professionals only. With stocks you get vastly more data and information than you do in the commodity markets where industry insiders have a much bigger advantage.
To watch a replay of this webinar with all the charts, bells, whistles, and classic rock music, just log in to www.madhedgefundtrader.com, go to MY ACCOUNT, click on GLOBAL TRADING DISPATCH, then WEBINARS, and all the webinars from the last ten years are there in all their glory.
Good Luck and Stay Healthy!
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
The Aga Sophia Mosque in Istanbul
Global Market Comments
February 3, 2022
Fiat Lux
Featured Trades:
(WATCH OUT FOR THE COMING COPPER SHOCK)
(FCX), ($COPPER)