Below, please find subscribers’ Q&A for the February 12 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Incline Village, NV.
Q: Can Nvidia (NVDA) go to $200 in the next three years?
A: I would imagine probably, yes. They still have a fabulous business—enormous orders and record profits. But it's not going to happen in the next six months. You need to get us out of the current stock market malaise before anything moves dramatically one way or the other, except for META, which is at an all-time high. Their basic business is still great, and the threat posed by DeepSeek is wildly overblown.
Q: Why is McDonald's (MCD) seeing declining sales?
A: Partly, it's because they have been cutting prices. So, of course, that automatically feeds into declining sales. Also, I think the weight loss drugs Mounjaro or Ozempic are having an impact. People just don't go in and eat three Big Macs for lunch anymore. They may not need any Big Macs at all. And forget about the fries and the super-size high fructose corn syrup drink. When these drugs first came out, it was speculated that fast food companies would be the number one victim of these drugs, and that is turning out to be true. Some 15.5 million people in the United States suddenly aren't hungry anymore; they just take one bite of a meal and then push their food around the plate with their fork. That’s better than taking amphetamines, which people like Judy Garland used to take to lose weight. I think that will affect not only McDonald's, but all fast-food companies which I avoid like the plague anyway because my doctor says I shouldn't eat that food.
Q: Should I buy First Solar (FSLR) based on the revised higher sales outlook?
A: I don't want to touch alternative energy anything right now. I think the government will eliminate all subsidies for all alternative energy—be it solar, windmills, hydrogen, nuclear, whatever—and turn us back into an all-oil and coal economy. That is the announced goal of the new administration. So that eliminates the subsidies for sure. It certainly will be a blow to the earnings of all solar-type companies. If you are going to do an energy form, I would do nuclear, which benefits from deregulation, if that ever happens.
Q: Do price caps fix supply problems? Because Europe is thinking about capping energy prices in the short term.
A: Price caps never work, nor does any other attempt to artificially control prices, because all it does is dry up supply. If you cap the prices, and therefore the profits that energy companies can make, they'll quit. They'll abandon the energy business, or they'll pare it down, or they won't expand. One way or the other, you reduce the return on capital. Capital is like water; it will go where it gets the highest return, and price caps certainly are not part of that formula. But what do I know? I only drilled for natural gas for six years.
Q: What's your top AI choice?
A: Well, I would say it's Nvidia (NVDA) still, and the big AI users which include Meta (META), Google (GOOG), and Amazon (AMZN). Nothing has changed here.
Q: Is there any chance that Ford Motors (F) will be bought out anytime soon or never?
A: My view of all of the legacy car companies, including Stellantis, which is the old Chrysler, Ford (F), and General Motors (GM), is that they are basically giant mountains of scrap metal and only have a scrap metal value, which is about 5 cents on the dollar. That's what they fell to in the 2008 financial crisis, and all of them except for Ford went bankrupt. So I am not a big fan of the legacy auto industry now. And now, they have a trade war. They happen to be one of the biggest victims of trade wars because to stay competitive with Tesla, they moved a lot of their production to Canada and Mexico, and now those plans are going up in flames. So it seems like they're damned if they do and they're damned if they don't. I'm happy driving my Tesla, but I'm wondering if my next car is a BYD. Prices are so low, it might even be worth paying 100% duty just to get a cheaper car that has better self-driving capability. But the future is unknown, to say the least.
Q: Is the next big rotation out of Silicon Valley and into Chinese tech stocks?
A: Over the long term, that may happen, but with the current administration and China (the number one target in restraint of trade and trade wars), I don't want to touch anything Chinese. There are too many better things to do in the U.S. Imagine you buy a Chinese stock, and then the administration announces a total cutoff of trade with China the next day. Not good. Chinese stocks are incredibly cheap. Most of the big ones are now single-digit multiples compared to multiples in the 20s, 30s, and 40s for our stocks. But they come with a very high political risk, and that has been true for several years now. There are better fish to fry than in China. I'd rather buy Europe than China right now if you really do want to go international. But I have no idea why they're going up unless they're discounting an end to the Ukraine War.
Q: Are junk bonds (JNK) and (HYG) a good play?
A: I would say yes. Their default risk has always been over-exaggerated thanks to their unfortunate name. They're yielding 6.54% and change, but it's a very slow mover. If we do get any improvement, any economy without inflation junk will go to $100. It's currently around $96. And you know, yield is a nice thing to have these days since the capital gain side seems to have dried up and turned into dust on almost any asset class.
Q: How can I decide when to sell the stocks that we bought on your recommendations?
A: Well, our trade alerts always have a buy recommendation and a sell recommendation or an expiration date. If you bought the stocks and kept it, just read Global Trading Dispatch for an updated market view. Watch our Mad Hedge Market Timing Index. When we get up into the 70s and 80s, that is definitely sell territory. It's hard for individuals to have an economic view going out to the rest of the year, but even the people who are economists have no idea what's going to happen right now. As I said, uncertainty is at an 8-year high, and that is being reflected in the market. So nothing beats cash, especially when you can earn 4.2% on 90-day US treasury bills. No one ever got fired for taking a profit.
Q: Can Intel (INTC) make a comeback this year?
A: No. I'm sorry, but they won’t. They had a horrible manager. They dumped him after a couple of disastrous years. I knew he was a horrible manager. I fought off all the pressure to buy Intel. So far, that's working. I mean, the stock has been terrible, so it is very cheap, but there is no guarantee that they will ever recover and, in fact, may get taken over by somebody else. So—too many better things to do. I'd rather be buying more Nvidia right now at these prices than sticking my neck out and praying for a miracle at Intel.
Q: A couple of years ago, I bought a bunch of Palantir (PLTR) on your recommendation for the next 10 bagger. I now have a 10 bagger. What should I do?
A: You know, we did recommend Palantir about 10 years ago, and it did nothing for the longest time. And then last year, it just took off like a rocket—I think it's up 400% last year. Price-earnings multiples are insanely high now. So what I would do is sell half your position. That way, the remaining half is all profit. You're playing with the house's money, and you're reducing your risk in a high-risk environment. Sell half, keep the other half. If it looks like it's starting to roll over and die, then you sell your remaining half.
Q: What's your favorite currency this year, and what should we do about it?
A: My favorite currency is the US dollar. If we're not going to get any interest rate cuts this year, the dollar will remain the highest-yielding currency in the world, and then everybody wants to buy it. It's really that simple. It’s all about interest rate differentials. Everybody else in the world has low interest rates, so stick with the dollar and don't touch the foreign currencies yet.
Q: Inflation expectations have exploded higher in view of today's number. Do you expect it to get worse?
A: If the trade war continues, it will absolutely get worse. 25% price increases are inflationary—period. End of story. A price increase is the definition of inflation, and right now, we are increasing the number of countries subject to high punitive tariffs, not decreasing them. You can expect markets to worry about that. And even if they put a temporary hold on these, people are raising prices now. They are not waiting for the actual tariff to hit; they are front-running that right now. So if you don't believe me, go to the grocery store where prices are through the roof. I actually went to a grocery store the other day, and I couldn't believe what things cost.
Q: I'd like to hedge my Nvidia (NVDA) position with a covered call. Which one should I do?
A: Well, it's not actually a hedge. What a covered call does is reduce your cost price and increase income. Right now, we have NVDA at $135. If you shorted something like the February $145 calls, you might get a dollar for that. That reduces your average price by a dollar. If you shorted the March $145 calls, that'll bring in probably $5, reduce your costs by $5, or bring in an extra $5 in income. And if you keep doing this every month and Nvidia stays stuck in a range, you can end up taking $10, $20, or even $30 in premium income over the next six months. And I have a feeling that will be the winning strategy for the first half of this year, using rallies to sell covered calls. You really could get your average cost down quite a lot; that way, if we have a massive sell-off, a lot of that loss will already be covered. If we get a massive rally, your stock just gets called away, and you buy it back on the next dip. The only negative here is the tax consequences of taking capital gains on the call-aways.
Q: You mentioned that the US has a demographic problem coming up; how will that affect the market in the short term?
A: It doesn't affect the market in the short term. Demographics are a long-term game. You have to think in terms of a generation being the round lot, which is about 20 years. Suffice it to say, when demographics go against you, like they did in Japan for 30 years, markets are horrible. Demographics are going against China now, and you're getting horrible markets. Demographics are good now in the US because we have millennials just entering their peak spending years, and that's when economies boom, and that should continue up to 2030. That is how to play demographics, and we keep updated here, although the government has suddenly ceased making available all demographic data to the public—I don't know why, but it's going to make the science of demographics much more difficult to follow without the government data. I don't know why they did that. I don't know what they hope to gain by clouding the demographic picture. Maybe it has to do with the allocation of congressional seats to the states or something like that.
Q: Do you have information on how to place a LEAPS order?
A: Just go to www.madhedgefundtrader.com, go to the search box, put in LEAPS in all caps, and you will find an encyclopedia of information on how to do LEAPS or Long Term Equity Anticipation Securities.
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, TECHNOLOGY LETTER, or JACQUIE'S POST, then WEBINARS, and all the webinars from the last 12 years are there in all their glory.
Good Luck and Good Trading,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
February 13, 2025
Fiat Lux
Featured Trade:
(REVISITING THE GREAT DEPRESSION),
(EXPLORING MY NEW YORK ROOTS)
When I first arrived on Wall Street during the early 1980s, some of the old veterans who worked through the 1929 stock market crash were just retiring and passed their stories on to me before they left.
One was my old friend, Sir John Templeton, founder of the Templeton funds, who often hosted me for dinner at his antebellum-style mansion at Lyford Cay in the Bahamas. John told me he was really excited when hired in ‘29 to handle the surge of brokerage business. After that, things got really boring for a decade.
The volatility we are experiencing now has many similarities to that epic event. In some ways, it's far worse. The 1929 downturn was spread over 34 months.
We all know about the Roaring Twenties, with flappers, bathtub gin, and a soaring stock market. Then, individuals could buy on ten to one margin. The high-flying tech stocks of the day, like RCA Radio, General Motors (GM), and Ford (F), soared. From 1921 to 1929, the Dow Average rocketed six-fold. The working class was sucked in.
Industry followed suit, taking the sign of rising stocks as proof of an economic boom. They massively boosted production in all sectors. That meant they went into the Great Depression loaded to the gills with inventory.
The Dow Average peaked on September 3, 1929, at 381. A slow burn of profit-taking ensued. Suddenly, a cascading waterfall of SELL orders hugely accelerated on “Black Monday” when the Dow plunged by 13%. It was followed by “Black Tuesday” when stocks lost another 13%.
Margin calls triggered a run on the banks as investors tried to withdraw cash to cover rampant cash calls. This spawned a financial crisis where eventually 4,000 banks went under.
By November, the Dow had fallen by 48% to 198. JP Morgan stepped in to stabilize the market, prompting a short-term rally. It was to no avail, with many retail investors seeing this as their last chance to sell. The market continued its slide, eventually hitting bottom at 41, or down an astonishing 89% from the top by July 8, 1932. The market then moved sideways in a wide 150-point range until the outbreak of WWII. It didn’t recover its 1929 peak until 1959.
A few years ago, I had lunch with the former governor of the Federal Reserve (click here), who did his PhD dissertation on the causes of the Great Depression. The big mistake the Fed made then was to raise interest rates to damp down stock speculation. They ended up destroying the economy, inadvertently making the depression far deeper and longer.
The world has learned a lot about central banking since those dark days. For a start, the theory of Keynesianism has been adopted whereby governments borrow and spend during economic downturns and run balanced budgets or surpluses during good times.
The modern Fed won’t be making the same mistake twice. During the last bear market, the Fed almost immediately took interest rates down to zero. Our central bank has also responded with monetary stimulus that is a large multiple of what we saw in 2008-09, essentially buying everything that was out there in fixed-income land.
My grandfather never participated in the stock boom of the 1920’s. He never found a broker he could trust. When the market crashed, he had to finish his basement in Brooklyn, New York, so that several relatives who had lost their homes could move in. We lost many equity investors for good in the 2008-09 crash. No doubt we will lose many more in this cycle.
What did Grandpa do with his money? He poured it all into real estate, including the land on which the Bellagio Hotel was eventually built, which he picked up for $500 an acre. His estate sold it in the 1970’s for $10 million.
Grandpa never bought a stock during his entire life.
Grandpa on Right
While in New York waiting to board Cunard’s Queen Mary 2 to sail for Southampton, England, a few years ago, I decided to check out the Bay Ridge address near the Verrazano Bridge where my father grew up. I took a limo over to Brooklyn and knocked on the front door.
I told the owner about my family history with the property, but I could see from the expression on his face that he didn’t believe a single word. Then I told him about the relatives moving into the basement during the Great Depression.
He immediately let me in and gave me a tour of the house. He told me that he had just purchased the home and had extensively refurbished it. When they tore out the walls in the basement, he discovered that the insulation was composed of crumpled-up newspapers from the 1930s, so he knew I was telling the truth.
I told him that grandpa would be glad that the house was still in Italian hands. Could I enquire what he had paid for the house that sold in 1923 for $3,000? He said he bought it as a broken-down fixer upper for a mere $775,000. After he put $500,000 into the property, it is now worth $2 million.
I’ll recite one story that took place at this address which has been passed down through the generations. By the end of 1945, the family had not seen my father for nearly four years, who was off fighting in the Pacific with the Marine Corps.
Then a telegram arrived informing the family of the date of my father’s return after a five-day train ride from Los Angeles. As only two daughters remained at home, he warned everyone not to cry.
Then the doorbell rang and there was Dad, 40 pounds lighter with a yellowish tinge to his skin from malaria but smiling. My grandfather burst into tears and wouldn’t stop bawling for an hour.
As I passed under the Verrazano Bridge on the Queen Mary II later that day, I contemplated how much smarter grandpa became the older I got.
I hope the same is true with my kids.
Queen Mary II Passing Under the Verrazano Bridge
“Lower yields, for longer, and lingering. I don’t think we’re going to get to an end for some period of time. The money that has been pumped into the system is going to keep equities high,” said Mark Grant, managing director of Hilltop Securities.
Global Market Comments
February 12, 2025
Fiat Lux
Featured Trade:
(THE ABC’s OF THE VIX),
(VIX), (VXX), (SVXY)
“It’s easier to get out of Cuba than to get out of Facebook,” said a market analyst.
Global Market Comments
February 11, 2025
Fiat Lux
SPECIAL VOLATILITY ISSUE
Featured Trade:
(TESTIMONIAL)
(MAKING VOLATILITY YOUR FRIEND),
(VIX), (VXX), (XIV)
Global Market Comments
February 10, 2025
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD or BACK TO BOOT CAMP)
(SPY), (EWG), (EWU), (TSLA), (NVDA), (VST)
I have a new outlook for the US stock markets.
The current government's economic policy reminds me a lot about the Marine Corps boot camp. Through harsh treatment and rigorous training, the Marines seek to destroy incoming recruits. They then spend 13 weeks rebuilding a new soldier from scratch who is obedient, respectful, follows orders, and is in much better physical condition. He is also a pretty good shot.
Since Trump inherited an almost perfect economy, with 3% real GDP growth, 2.8% inflation, and 4% unemployment, he has to break it first. Then he can spend the next four years rebuilding it and take credit for the recovery.
It looks like we are going to get more on the destruction front this week, with the US announcing European tariffs, which tanked stocks on Friday. We could remain in the destruction phase for the rest of the year. It sets up nicely at least a 20% correction sometime in 2025. Oh, and never buy on a Friday. All of the “shock and awe” announcements are occurring on the weekends. Wait for the Monday morning opening and buy the collapse.
It’s pretty clear that markets hate all things tariff-related. Can we please talk more about deregulation, which markets love? The reality is that markets don’t know how to price in Trump, swinging back and forth between euphoria one moment to Armageddon another. Best case, markets flat line. Worst case, they crash.
Here are some additional causes for concern. Big Tech was the only stock market sector that saw net inflows in 2024. It was also the only down sector in January. It just so happens to be the most overweight sector among almost all individuals and institutions, including yours. Big Tech now accounts for 35% of stock market capitalization. It is a concentration on steroids. So when we finally DO get a correction, it will be a big one, easily more than 10%.
Looking at stock market performance around the world since the 2008-09 financial crisis, it’s easy to see where the idea of American exceptionalism comes from. Since 2010, the German stock market (EWG) is up by 142% and the UK (EWU) by 112%. During the same 15-year period, the S&P 500 (SPY) soared by 1,112%, an outperformance of an eye-popping 8:1.
Since the beginning of 2025, the German stock market (EWG) is up by 12.7% and the UK (EWU) by 9%. In the meantime, the S&P 500 has managed a mere 3.5% gain. What has happened? Has something changed? Is American exceptionalism a thing of the past? If so, it would be terrible news for stocks.
In the rest of the world, 26% of corporate cash flow is reinvested in the company. In the US, it’s 42%, and for the Magnificent Seven, it’s 57%. This is American Exceptionalism distilled by a single driver. If this continues, that’s great. If rampant uncertainty drives US companies into hiding, it won’t. 90-day US Treasury bills yielding a risk-free 4.2% look pretty good in this new chaotic world, especially if you are still sitting on the gigantic profits of the past two years.
This is why Foreigners have been pouring money into the US as fast as possible and has been a major factor in our price appreciation until now. Foreign investors now own $23 trillion worth of American debt, equities, and real estate today versus only $8 trillion in 2017.
As I mentioned last week, when I suggest a European investment idea to a European, they tell me I am out of my mind and beg for more US investment ideas. I know this because about one-third of the Mad Hedge subscribers are aboard in 134 countries.
And this is why markets are so jittery. Some 23% of all the completed cars sold in the US are actually made in Mexico and Canada. For auto parts, the figure is more than 50%. The US sold 3.7 million vehicles made in Mexico and Canada. The new 25% tariff will increase prices by $6,300 per vehicle. Average car prices are now at $50,000 and are already at all-time highs. That works out to a $22.7 billion tax on the buyers of new cars who are mostly middle class.
My bet? That the prices of used cars soar, which aren’t subject to any such taxes.
Turn off the TV. Ignore the noise. Buy the down days and sell the up days. It’s no more complicated than that. If you want to play headline ping pong with the president, be my guest. But you’ll lose your shirt.
February has started with a breakeven +0.57% return so far.
That takes us to a year-to-date profit of +6.25% so far in 2025. My trailing one-year return stands at +83.45% as a bad trade a year ago fell off the one-year record. That takes my average annualized return to +5.23% and my performance since inception to +757.12%.
I used the weakness in Tesla to double up my long there. That tops up our portfolio to a long in (TSLA), a short in (TSLA), and longs in (NVDA) and (VST).
Some 63 of my 70 round trips, or 90%, were profitable in 2023. Some 74 of 94 trades have been profitable in 2024, and several of those losses were really break-even. That is a success rate of +78.72%.
Try beating that anywhere.
My Ten-Year View – A Reassessment
We have to substantially downsize our expectations of equity returns in view of the election outcome. My new American Golden Age, or the next Roaring Twenties, is now looking at multiple gale force headwinds. The economy will completely stop decarbonizing. Technology innovation will slow. Trade wars will exact a high price. Inflation will return. The Dow Average will rise by 600% to 240,000 or more in the coming decade. The new America will be far more efficient and profitable than the old.
My Dow 240,000 target has been pushed back to 2035.
On Monday, February 10, nothing of note takes place.
On Tuesday, February 11, at 8:30 AM EST, the NFIB Business Optimism Index is released.
On Wednesday, February 12 at 8:30 AM, the Core Inflation Rate is printed.
On Thursday, February 13 at 8:30 AM, the Weekly Jobless Claims are disclosed.
On Friday, February 14 at 8:30 AM, the Producer Price Index is announced. At 2:00 PM the Baker Hughes Rig Count is printed.
As for me, it was with a heavy heart that I boarded a plane for Los Angeles to attend a funeral for Bob, the former scoutmaster of Boy Scout Troop 108.
The event brought a convocation of ex-scouts from up and down the West coast and said much about our age.
Bob, 85, called me two weeks ago to tell me his CAT scan had just revealed advanced metastatic lung cancer. I said, “Congratulations Bob, you just made your life span.”
It was our last conversation.
He spent only a week in bed and then was gone. As a samurai warrior might have said, it was a good death. Some thought it was the smoking he quit 20 years ago.
Others speculated that it was his close work with uranium during WWII. I chalked it up to a half-century of breathing the air in Los Angeles.
Bob originally hailed from Bloomfield, New Jersey. After WWII, every East Coast college was jammed with returning vets on the GI bill. So he enrolled in a small, well-regarded engineering school in New Mexico in a remote place called Alamogordo.
His first job after graduation was testing V2 rockets newly captured from the Germans at the White Sands Missile Test Range. He graduated to design ignition systems for atomic bombs. A boom in defense spending during the fifties swept him up to the Greater Los Angeles area.
Scouts I last saw at age 13 or 14 were now 60, while the surviving dads were well into their 80s. Everyone was in great shape, those endless miles lugging heavy packs over High Sierra passes obviously yielding lifetime benefits.
Hybrid cars lined both sides of the street. A tag-along guest called out for a cigarette, and a hush came over a crowd numbering over 100.
Apparently, some things stuck. It was a real cycle of life weekend. While the elders spoke about blood pressure and golf handicaps, the next generation of scouts played in the backyard or picked lemons off a ripening tree.
Bob was the guy who taught me how to ski, cast rainbow trout in mountain lakes, transmit Morse code, and survive in the wilderness. He used to scrawl schematic diagrams for simple radios and binary computers on a piece of paper, usually built around a single tube or transistor.
I would run off to Radio Shack to buy WWII surplus parts for pennies on the pound and spend long nights attempting to decode impossibly fast Navy ship-to-ship transmissions. He was also the man who pinned an Eagle Scout badge on my uniform in front of beaming parents when I turned 15.
While in the neighborhood, I thought I would drive by the house in which I grew up, once a modest 1,800 square foot ranch-style home to a happy family of nine. I was horrified to find that it had been torn down, and the majestic maple tree that I planted 40 years ago had been removed.
In its place was a giant, 6,000-square-foot marble and granite monstrosity under construction for a wealthy family from China.
Profits from the enormous China-America trade have been pouring into my hometown from the Middle Kingdom for the last decade, and mine was one of the last houses to go.
When I was class president of the high school here, there were 3,000 white kids and one Chinese. Today, those numbers are reversed. Such is the price of globalization.
I guess you really can’t go home again.
At the request of the family, I assisted in the liquidation of his investment portfolio. Bob had been an avid reader of the Diary of a Mad Hedge Fund Trader since its inception, and he had attended my Los Angeles lunches.
It seems he listened well. There was Apple (AAPL) in all its glory at a cost of $21. I laughed to myself. The master had become the student, and the student had become the master.
Like I said, it was a real circle of life weekend.
Scoutmaster Bob
1965 Scout John Thomas
The Mad Hedge Fund Trader at Age 11 in 1963
Stay Healthy,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader