“The French have more fun in one year than the English do in 10,” said John Adams, America’s second president, and one-time ambassador to Paris and London.
Global Market Comments
August 23, 2018
Fiat Lux
Featured Trade:
(WHY THE DOW IS GOING TO 120,000),
(X), (IBM), (GM), (MSFT), (INTC), (DELL),
($INDU), (NFLX), (AMZN), (AAPL), (GOOGL),
(THE MAD HEDGE CONCIERGE SERVICE HAS AN OPENING),
(TESTIMONIAL)
For years, I have been predicting that a new Golden Age was setting up for America, a repeat of the Roaring Twenties. The response I received was that I was a permabull, a nut job, or a conman simply trying to sell more newsletters.
Now some strategists are finally starting to agree with me. They too are recognizing that a ganging up of three generations of investment preferences will combine to drive markets higher during the 2020s, much higher.
How high are we talking? How about a Dow Average of 120,000 by 2030, up another 465% from here? That is a 20-fold gain from the March 2009 bottom.
It’s all about demographics, which are creating an epic structural shortage of stocks. I’m talking about the 80 million Baby Boomers, 65 million from Generation X, and now 85 million Millennials. Add the three generations together and you end up with a staggering 230 million investors chasing stocks, the most in history, perhaps by a factor of two.
Oh, and by the way, the number of shares out there to buy is actually shrinking, thanks to a record $1 trillion in corporate stock buybacks.
I’m not talking pie in the sky stuff here. Such ballistic moves have happened many times in history. And I am not talking about the 17th century tulip bubble. They have happened in my lifetime. From August 1982 until April 2000 the Dow Average rose, you guessed it, exactly 20 times, from 600 to 12,000, when the Dotcom bubble popped.
What have the Millennials been buying? I know many, like my kids, their friends, and the many new Millennials who have recently been subscribing to the Diary of a Mad Hedge Fund Trader. Yes, it seems you can learn new tricks from an old dog. But they are a different kind of investor.
Like all of us, they buy companies they know, work for, and are comfortable with. During my Dad’s generation that meant loading your portfolio with U.S. Steel (X), IBM (IBM), and General Motors (GM).
For my generation that meant buying Microsoft (MSFT), Intel (INTC), and Dell Computer (DELL).
For Millennials that means focusing on Netflix (NFLX), Amazon (AMZN), Apple (AAPL), and Alphabet (GOOGL).
That’s why these four stocks account for some 40% of this year’s 7% gain. Oh yes, and they bought a few Bitcoin along the way too, to their eternal grief.
There is one catch to this hyper-bullish scenario. Somewhere on the way to the next market apex at Dow 120,000 in 2030 we need to squeeze in a recession. That is increasingly becoming a topic of market discussion.
The consensus now is that an impending inverted yield curve will force a recession sometime between August 2019 to August 2020. Throwing fat on the fire will be a one-time only tax break and deficit spending that burns out sometime in 2019. These will be a major factor in U.S. corporate earnings growth dramatically slowing down from 26% today to 5% next year.
Bear markets in stocks historically precede recessions by an average of seven months so that puts the next peak in top prices taking place between February 2019 to February 2020.
When I get a better read on precise dates and market levels, you’ll be the first to know.
To read my full research piece on the topic please click here to read “Get Ready for the Coming Golden Age.”
Dow 1982-2000 Up 20 Times in 18 Years
Dow 2009-Today Up 4.3 Times in 9 Years So Far
I am pleased to announce that I have a rare opening for the Mad Hedge Fund Trader Executive Concierge Service, a program that is aimed at our most valued clients.
This is the first time an opening has become available since the service was initiated in November.
The goal is to provide high net worth individuals with the extra degree of assistance they may require in managing diversified portfolios. Tax, political, and economic issues will all be covered.
The service comes at $10,000 a year.
It is also the ideal service for the small- and medium-sized hedge fund that lacks the resources to support their own in-house global strategist full time.
The service includes the following:
1) A risk analysis of your own personal portfolio with the goal of focusing your investment in the highest return sectors for the long term.
2) A monthly phone call from John Thomas to update you on the current state of play in the global financial markets.
3) Personal meetings with John Thomas anywhere in the world once a year to continue your in-depth discussions.
4) A subscription to all Mad Hedge Fund Trader products and services. The cost for this highly personalized, bespoke service is $10,000 a year.
5) Think of it as an investment 911. If you require an instant read on the markets or a possible business venture, you will always have my personal cell phone number.
To best take advantage of Mad Hedge Fund Trader Executive Service, you should possess the following:
1) Be an existing subscriber to the Mad Hedge Fund Trader PRO who is already well aware of our strengths and limitations.
2) Have a liquid net worth of more than $5 million.
3) Possess a degree of knowledge and sophistication of financial markets. This is NOT for beginners.
It is my intention to limit the number of Concierge subscribers to 10. When a black swan comes out of the blue, I have to be able to call all of you within the hour and tell you the immediate impact on your portfolio, as I did last night in the wake of the Washington convictions.
A short note to thank John for great information and insight. Listening to John’s ideas is awesome, and I have committed to myself to keep following his research and trade ideas because the performance has been outstanding.
Regards
Dallas,
Melbourne, Australia
Global Market Comments
August 22, 2018
Fiat Lux
Featured Trade:
(WHY DOCTOR COPPER IS WAVING A RED FLAG),
($COPPER), (FCX), (USO),
(HANGING OUT WITH THE WOZ),
(AAPL)
One of my responsibilities as a global strategist is to talk about how cheap stocks are at market bottoms, and how expensive they are at market tops. In all honesty I have to tell you that 9 ½ years into a bull market, we are now much closer to a top than a bottom.
If Dr. Copper has anything to say about it the global economy is already in a recession. Since the June peak, trade wars have taken the red metal down a gut-punching 22.7%. The world’s largest copper producer Freeport-McMoRan (FCX), a Carl Icahn favorite, is off an eye-popping 30.6% during the same period.
Should we be running around with our hair on fire? Is it time to throw up on our shoes? I don’t think so…not yet anyway.
Dr. Copper achieved its vaunted status as a leading indicator of economic cycles for the simple reason that everyone uses copper. Building and construction took up 43% of the supply in 2017, followed by electronics (19%) and transportation equipment (17%).
China is far and away the world’s largest consumer of copper. In 2017, it bought 48% of total world output. However, red flags there are flying everywhere.
Back in the 2000s, when China was building a “Rome a Day,” demand for copper seemed limitless. Since then, Chinese construction has fallen to a low ebb as the greatest infrastructure build-out in history came to completion.
China has steadily moved from an export-oriented to a services-driven economy, further eroding the need for copper. I warned investors of this seven years ago. That is why the Mad Hedge Fund Trader has issued virtually NO commodities-based Trade Alerts since then.
Before the last financial crisis Chinese banks accepted copper ingots as collateral for business loans. That practice is now banned.
In the second quarter, nonperforming loans at Chinese banks notched their biggest rise in more than a decade, according to research from Capital Economics. Corporate bond defaults are on the rise, and earlier this week, official reports showed Chinese investment growth, which has long been a driver of the economy, fell to its lowest level since the late 1990s.
The pressure on the Chinese economy is beginning to take its toll in other places, too. China’s currency, the renminbi, has fallen more than 9% against the dollar in the past six months, and China’s CSI 300 index of blue chip stocks is off 19% this year.
The net effect of all of this has been to dilute the predictive power of copper. Copper may no longer deserve its PhD in economics, perhaps only a master’s degree or an associate of arts.
Copper is not alone in predicting imminent economic disaster. Oil (USO) has also been shouting the same. Texas tea has fallen by 15.8% since copper began its swan dive two months ago.
For sure, oil has been falling for its own reasons. Iran has sidestepped American sanctions by selling its oil directly to China, and there is nothing the U.S. can do about it. Every year, global GDP growth needs less oil to grow than before thanks to alternative energy sources and conservation. A recent bout of OPEC quota cheating hasn’t helped either.
As any market strategist will tell you, falling copper and oil prices are not what sustainable bull markets in stocks are made of. I’m not saying a crash will happen tomorrow.
Personally, I believe that the bull market should spill into 2019. But when corporate earnings growth downshifts from 26% to 5% YOY, as it will in Q1 2019, watch out below!
The Big Trade War Victim
I first spoke to Steve Wozniak via HAM radio when I was 12 years old and he was the 14-year-old president of the Homestead High School Radio Club in Cupertino, California.
With seven children, my dad was pretty stingy with allowance money. But when it came to electronic parts, I had an unlimited budget, as that is where he saw the future.
So, while other kids collected baseball cards, I stocked up on tubes, resistors, capacitors, and rheostats. This was back when you could buy WWII surplus parts from Radio Shack for pennies a pound.
Then the transistor came out, and building projects, like simple computers programmed with basic '1's' and '0's' suddenly became possible.
By junior high school, I had gained my radio license, learning Morse code at the required five words per minute, and a path opened that eventually led me to Woz.
Whenever I had a design problem, Woz always had a solution. He seemed to know everything about electronics.
I planned to attend De Anza College in the San Francisco Bay Area to collaborate with Woz, but then the State of California dropped a big fat scholarship to the University of Southern California in my lap, and we parted ways.
That's government for you. The state thought I was smarter than Woz. Ha!
The last thing he taught me was this really cool way to make long distance phone calls for free with something called a 'blue box.'
I later heard that Woz went to work for some kind of fruit company designing computers, which sounded stupid to me at the time, but Woz was always a guy who marched to a different drummer.
A decade later, I was an ambitious young vice president at Morgan Stanley, and ran into Woz again while escorting Steve Jobs around to big institutional investors hawking an Apple (AAPL) shares back when they were $1 on a split adjusted basis.
By then he had gained a lot of weight. He fascinated me with stories about how he had gone from scrounging around for a bootleg $12 chip, to making $100 million on the Apple IPO in just three years.
The phrase "only in America" has to come to mind.
We bought our planes at the same time, me a Cessna 340 twin, and he a Beechcraft Bonanza. When I heard he totaled his in a crash in Santa Cruz a few years later, I sent flowers to his hospital room, even though he was in a coma and wasn't expected to live.
In later years we moved into the same philanthropic circles at the San Francisco Ballet, the Computer Museum, and local art museums. To me, Woz always stood out at the social events as the only one who was not an inveterate social climber, the kind of which I tired of long ago.
That was vintage Woz. He just didn't care.
When I finally stumbled across his autobiography, iWoz, I grabbed it and devoured the pages in a couple of days.
The tome filled in the holes about what I knew about the man: the wives, the rock concerts, his universal remote-control idea, and the early days at Apple.
You also learn a lot about electronics and basic computer hardware and software design.
While there are a lot of fifth-grade science teachers who wish they were billionaires, there is only one billionaire who aspired to teach fifth-grade science. That is what Woz did for 10 years after he left Apple.
Despite the billions, Steve is still an all-right guy. With Apple stock having touched $218 last week he must be worth an unimaginable amount. He won’t tell anyone how much he still owns, and he doesn’t even have his own rocket program. To buy the book of his engaging and entertaining story, please click here at click here.
Global Market Comments
August 21, 2018
Fiat Lux
Featured Trade:
(DON’T MISS THE AUGUST 22 GLOBAL STRATEGY WEBINAR),
(PROFITING FROM AMERICA’S DEMOGRAPHIC COLLAPSE)
Demographics is destiny.
If you ignore it as an investor, you will be constantly behind the investing curve wondering why your performance is so bad.
Get ahead of it, and people will think you are a genius.
I figured all this out when I was about 20.
I realized then, back in 1972, that if I could just get ahead of the baby boomer generation everything magically seemed to work.
Buy what boomers want to buy next, and the world will be your oyster.
That strategy is still working today.
Back then, that meant buying residential real estate in California and New York, which has since risen in value 100-fold, and more once the generous tax breaks of home ownership are added in.
Now it means investing in health care and big pharma.
Except now, there is a new crowd in town: The Millennials.
As a long-term observer of America’s demographic picture, I was shocked to hear of a recent report from the U.S. Census Bureau (click here for the link).
The U.S. population grew by a scant 0.72% in 2012, the lowest since 1942.
You can’t start or expand a family when an essential partner in the process is off fighting WWII, and there were 17 million of them back then.
This is far below the 2.09% replacement rate that the country was holding onto only a few years ago.
At the end of 2016, there were 323.1 million Americans. This accounts for 4.3.08% of the global population of 7.5 billion, which was up 1.1%.
This places American population growth at the bottom of the international sweepstakes, down with Italy (0.32%), Germany (0.11%), and Poland (0.02%).
According to the World Bank, 22 countries suffered population declines, such as Portugal (-0.29%) and Japan (-0.20%) (click here for the link).
The tiny Sultanate of Oman, one of my old stomping grounds as a military pilot, enjoys the planet’s highest growth rate at 9.13%.
But then it helps if you have four wives.
The obvious cause here of America’s demographic dilemma was the recent weakness of the U.S. economy. There is a high correlation between economic health and fertility a year later.
So, we can only hope that the improvement in the economy this year sent more to the maternity ward.
If it doesn’t, it could be great news for your investment portfolio. Fewer births today translate into a shortage of workers in 20 years. That brings rising wages, flying inflation, and rapid price hikes. And stock markets love inflation because companies can pass costs onto consumers, while bond holders can’t.
Corporate profits go through the roof, as do share prices. It also produces fewer relying on government services in 40 years, which makes it easier for the government to balance the budget.
This Goldilocks scenario is already scheduled for the coming decade of the 2020s, when a 15-year demographic headwind flips to a tailwind, thanks to the coming demise of the “baby boomer” generation, now a big cost to the economy.
Demise, that is, except for me. As long as I hike 10 miles a day I’ll probably live forever.
The new data suggest that the coming “roaring twenties” could extend well into the 2030s and beyond.
California was the most populous state, with more than 39 million, followed by Texas and New York. Two states saw population declines, Maine and West Virginia, where the collapse of the coal industry is sucking the life out of local businesses.
Parsing through the report, it is clear that predictions of population trends are becoming vastly more complicated, thanks to the increasingly minestrone-like makeup of the U.S. people.
By 2040 no single racial group will be in a majority in the U.S. That is already the case for the entire state of California now. Hispanics now account for 38% of the population of the Golden State, followed by Caucasians at 37%.
America will come to resemble other, much smaller multiethnic societies, such as Singapore, South Africa, England, and Israel. This explains much about the current state of politics in the U.S. today.
Texas saw the greatest increase in population, with a jump of 387,397, to 26,020,000, as people flock in to take advantage of the big increase in local government hiring there.
Some 80% of new Texans were Hispanic and black, confirming my belief that the Lone Star State will become the next battleground in presidential elections.
This no doubt explains the recent rise of the white nationalist movement and the election of Donald Trump.
Single ethnic groups historically will only lose their majority with a fight.
This is why gerrymandering (redistricting) is such a big deal there, with the white establishment battling to hang onto power at any cost.
Further complicating any serious analysis is the rapid decline of the traditional American nuclear family, where married parents live with their children.
With a vast concentration of wealth at the top, and a long-term decline of middle-class earnings, this is increasingly becoming a luxury of a prosperous elite.
As a result, the country’s birthrate has declined by half since 1960.
Those who do are having fewer kids, the average family size dropping from three to two. In 1964, the final year of the baby boom, 36% of Americans were under the age of 18.
Today, that figure is just 23.5%, and is expected to fall to 21% by 2050. Only 80% of women have children now, compared to 90% in the 1970s.
One possible explanation is that the full, end-to-end cost of child-rearing has soared to $241,080 per child now.
I was a bargain as a kid, costing my parents only a tenth of that. Rocketing college costs are another barrier, with 70% of high school grads at least starting some higher education.
I went to Boy Scouts and Little League baseball, each of which cost $1 a month. A full scholarship covered my college expenses.
When I look at the checks I have written for my own children for ski lessons, soccer, youth sailing, braces, international travel, and assorted master’s degrees and PhDs, I recoil in horror.
Fewer women are following that old adage of “marriage before carriage.” Some 41% of children are born out of wedlock, up 400% in 40 years.
It is definitely an education and class driven divide. Only 10% of college-educated mothers are still single, compared to 57% for those with a high school education or less.
It is a truism in the science of demographics that educated women have fewer children. It makes possible careers that enable them to bring home paychecks instead of babies, which husbands prefer.
Blame Roe versus Wade, the Equal Rights Act, and Title Nine, but every social reform benefiting women of the past half-century has helped send the birthrate plummeting.
More women wearing the pants in the family hurts the fertility rate as well, as they are unable, or unwilling, to bear the large families of yore. The share of families where women are the primary breadwinners has leapt from 11% to 40% since 1960.
When couples do marry, they are sometimes of the same sex, now that gay marriage is legal, further muddying traditional data sources.
Some 2 million children are now being raised by gay parents. In fact, there is a gay baby boom underway, which those in the community call the “gayby” boom.”
All female couples have produced 1 million children over the past 30 years, 95% of whom select for blond-haired, blue eyed, Aryan sperm donors who are over six feet tall ($40 a shot for donors if you guys are interested and live walking distance from UC Berkeley).
I’m told by the sources that know that water polo players are particularly favored.
The numbers are so large that it is impacting the makeup of the U.S. population.
There was a time when I could usually identify the people standing next to me on San Francisco cable cars. That time has long passed. Now I don’t have a clue.
Whenever we go to war, we become our enemy to a modest degree, both as a people and a culture.
After WWII, 50,000 German and 50,000 Japanese wives were brought home as war prizes. Sushi, hot tubs, Toyotas, and Volkswagens quickly followed.
The problem is that the U.S. has invaded another 20 countries since 1945 and is now maintaining a military presence in 140. That generates a hell of a lot of green cards.
This has spawned sizeable Korean, and later, Iranian communities in Los Angeles, a Vietnamese one in Louisiana, a Somali enclave in Minneapolis, and large minority of Afghans in San Jose.
The fall of the Soviet Union in 1992 unleashed another dozen Eastern European ethnic groups and languages on the U.S. Haven’t you noticed the proliferation of Arab fast food restaurants in your neighborhood since we sent 20 divisions to the Middle East?
What all this means is that the grand experiment called the United States is entering a new phase.
Different ethnic, racial, religious, and even political groups are blending with each other to create a population unseen in the history of the world, with untold economic consequences.
It is also setting up an example for other countries to follow.
Get your investment portfolio out in front of it, and you could prosper mightily.
