Below, please find subscribers’ Q&A for the October 23 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Lake Tahoe, Nevada.
Q: What the heck is happening with the iShares 20+ Year Treasury Bond ETF (TLT)? It keeps dropping even though interest rates are dropping. It seems to be an anomaly.
A: It is. What’s happening is that bonds are discounting a Trump win, and Trump has promised economic policies that will increase the national debt by anywhere from $10 to $15 trillion. Bonds don’t like that—you borrow more money through bonds, and the price goes up. Interest rates could go as high as 10% if we run deficits that high (at least the bond market may go that low.) On the other hand, stocks are discounting a Harris win. Stocks went up 60% over the last four years. I did roughly double that. And a Harris win would mean basically four more years of the same. So stocks have been trading at new all-time highs almost every day until this week when the election got so close that the cautious money is running to the sidelines. So what happens if there's a Harris win? Bonds make back the entire 10 points they lost since the Fed cut interest rates. And what happens if Trump wins? Bonds lose another 10 points on top of the 10 points they've already lost. Someone with a proven history of default doesn't exactly inspire confidence in the bond market. So that is what's going on in the bond market.
Q: Will the US dollar continue its run into year-end?
A: No, I have a feeling it’s going to completely reverse in two weeks and, give up all of its gains, and resume a decade-long trend to new lows. So, I think everything reverses after election day. Stocks, bonds, commodities, precious metals—the only thing that doesn't is energy, and that keeps going down because of global oversupply that even a Middle Eastern war can’t support.
Q: Are you expecting a major correction in 2025?
A: I am, actually. We basically postponed all corrections into 2025 and pulled forward all performance in 2024. So, I think we could get at least a 10% correction sometime next year, and that is normal. Usually, we get a couple of them. This year, we only got the one in July/August. So, back to normal next year, which means smaller returns from the stock market. In fact, smaller returns from everything except maybe gold and silver. This is why they're going up so much now.
Q: Are you discounting a huge increase in the deficit under Biden-Harris?
A: No, the huge increase in the deficit is behind us because we had all the pandemic programs to pay for, and if anything, technology inflation should go down because of accelerating technology. We're already seeing that in many industries now, so I don't think there'll be any policy changes under Harris, except for little tweaks here and there. All the big policies will remain the same.
Q: What is a dip?
A: A dip is different for every stock and every asset class. It depends on the recent volatility of the underlying instrument. You know, a dip in something like McDonald's (MCD) or Berkshire Hathaway (BRK/B) might be 5%, and a dip in Nvidia (NVDA) might be 15 or 20%. So, it really depends on the volatility of the underlying stock, and no two volatilities are alike.
Q: What are your top picks on nuclear?
A: Well, we've been in Cameco (CCJ), the Canadian uranium company, since the beginning of the year, and it has doubled. Vistra Corp (VST) is another one, and there are many more names after that.
Q: What are your thoughts on Toyota (TM)?
A: I love Toyota for the long term. The fact that they were late into EVs is now a positive since the EV business is losing money like crazy. They're the ones who really pioneered the hybrid business, and I’ve toured many of their factories in Japan over the years. Great company, but right now, they're being held back by the slow growth of the Japanese economy.
Q: Market timing index says get out. We're heading into the seasonally bullish time of the year. Should we be in or out over the next two months?
A: I would be in as long as you can handle some volatility around the stock market. When the market timing index is at 70, that means any new trades that you initiate have a 30% chance of making money. Now, they can sit at highs sometimes for months, and it actually did that earlier this year. Markets can get overbought and stay overbought for months, and that is a really difficult time to trade. If you're a long-term investor, you just ignore all of this and just stay in all the time.
Q: Silver has broken out; what's next?
A: Silver had had a massive run since the beginning of September—some 30%. We're up to about $31/oz. The obvious target for silver is the last all-time high, which I think we did 40 years ago, and that was at $50/oz. So there's another easy 60% of upside in silver. That's why I put out a LEAPS on the 2x long silver play (AGQ), and people are already making tons of money on that one. I think Silver will be your big performer going forward.
Q: Too late to invest in Chinese stocks?
A: No, it's selling off again. IT Could retest the lows, especially if the government sits on its hands for too long with more stimulus packages.
Q: Is big tech still a good bargain buy?
A: I would take “bargain” out of that. The rule on tech investing is you're always buying expensive stuff because the future always has a spectacular outlook. So, tech investing is all about buying something expensive that gets more expensive. This is exactly what tech stocks have been doing for the last 50 years, so it's not exactly a new concept. I know tons of people who never touched Nvidia (NVDA) or Tesla (TSLA) because it was too expensive. (NVDA) was too expensive when it was $2, and now it's even more expensive at $140 or, in Tesla's case, $260.
Q: Will Tesla (TSLA) go up or down tonight?
A: I have no idea. Anybody else who says they have an idea is lying. You go to timeframes that short, and you are subjecting yourself to random chance; even the weather could affect your position by tomorrow.
Q: How uncomfortable is the stem cell extraction?
A: Extremely uncomfortable. If they say it won't hurt a bit, don't believe them for a second. They take this giant needle hammer it into your backbone to get your spinal fluid (and I count the hammer blows.) Last time, I think I got up to 50 before I couldn't take the pain anymore, and they extracted the spinal fluid to get the stem cells. So, for those who don't tolerate pain very well, this is absolutely not for you.
Q: Why is Intel (INTC) stock doing so badly this year?
A: Low-end products, no new products, poor manager. Whenever a salesman takes over a technology company, you want to run a mile. That's what happened at Intel because they have no idea how the technology works.
Q: Should I sell my Philip Morris (PM) stock? It's just had a huge run-up.
A: No. For dividend holders, this is the dream come true. They pay a 4.1% dividend. This was a pure dividend play ever since the tobacco settlement was done 40 years ago. Then they bought a Swedish company that has these things called tobacco pouches, and that has been a runaway bestseller. So, all of a sudden, the earnings at Philip Morris are exploding. The dividend is safe. I think Philip could go a lot higher, so buy PM on dips. And I will dig into this story and try to get some more information out of it. I love high growth high dividend plays.
Q: What's the best play for silver?
A: I'm doing the ProShares Ultra Silver (AGQ), which is a 2x long silver and has gone from $30 to $50 since the beginning of September. If you want to sleep at night (of course, I don't need to), then you just buy the iShares Silver Trust (SLV), which is a 1x long silver play and that owns physical silver. I think it's held in a bank vault in London.
Q: Time to sell Copper (FCX)?
A: Short term, yes, as China weakens. Long-term, hang on because we are coming into a global copper shortage, and that'll take the price of copper up to $100 or (FCX) up to $100. So yes, love (FCX) for the long term. Short term, it has a China drag.
Q: Will inflation come back in 2025?
A: No, it won't. Technology is accelerating so fast, and AI is accelerating so fast it's going to cut costs at a tremendous rate. And that's why you're seeing these big tech companies laying off people hundreds at a time; it's because the low-end jobs have already been replaced by AI. There is a lot more of that to come. I'm not worried about inflation at all.
Q: Do you disagree with Tudor Jones on inflation?
A: Yes, I disagree with him heartily. Tudor Jones is talking his own book, which means he doesn't want to get a tax increase with a Harris administration. So he's doing everything he can to talk up Trump, and that isn't helping me with my investment strategy whatsoever. By the way, Tudor Jones is often wrong, you know; he made most of his money 30 years ago. And before that, it was when he was working for George Soros. So, yes, I agree with the man from Memphis. He’s in the asset protection business. You’re in the wealth creation business, a completely different kettle of fish.
Q: Do you hold the ProShares Ultra Silver (AGQ) overnight?
A: I've been holding my (AG for four months, and the cost of carry-on that is actually quite low because silver doesn't pay any dividend or interest. There really isn't much of a contango in the precious metals anyway—it's not like oil or natural gas. It’s a 3X plays that you really shouldn’t hold overnight.
Q: Where is biotech headed?
A: Up for the long term, sideways for the short term. That's because, after the election, risk on will go crazy. We could have a melt-up in stocks, and when that happens, people don't want to buy “flight to safety” sectors like Biotechs and healthcare; they want to buy more Nvidia. Basically, that's what happens. More Nvidia (NVDA), more Meta (META), and more Apple (APPL). They want to buy all the Mag7 winners. Well, let's call them the Mag7 survivors, which are still going up after a ballistic year.
Q: Any suggestions on where to park cash for five to six years?
A: 90-day T-Bills are yielding 4.75%. That would be a safe place to put it. And you might even peel off a little bit of that—maybe 10% — and put that into a junk fund, which is yielding 6%. You're still getting a lot of money for cash—but not for much longer. The golden age of the 90-day T-bill is about to end.
Q: BlackRock (BLK) keeps growing, trillions after trillions. Why is the stock so great at building value?
A: Because you get a hockey stick effect on the earnings. As the stock market goes up, which it always does over time, their fees go up. Plus, their own marketing brings in new money. So, you have multiple sources of income rising at a rapid pace. I'm kicking myself for not buying the stock earlier this year.
Q: How does any antitrust action by the government affect stock prices?
A: Short-term, it caps them. Long term, it doubles them because when you break up these big companies, the individual pieces are always worth a lot more than the whole. We saw that with AT&T (T), where you're able to sell the individual seven pieces for really high premiums. So, that's why I'm never worried about antitrust.
Q: Do dividend stocks provide little upward appreciation since they're paying investors already?
A: To some extent, that's true because low-growth companies like formerly Philip Morris (PM) and Altria (MO) had to pay high dividends to get people to buy their stock because the industries were not growing. AT&T is another classic example of that—high dividend, no growth. But that does set you up for when a no-growth company can become a high-growth company, and then the stocks double practically overnight. And that's what's happening with Philip Morris.
Q: Are you buying physical gold (GLD) and silver (SLV)?
A: I bought some in the 1970s when it was $34/oz for gold, and the US went off the gold standard, and I still have them. It's sitting in a safe deposit box in a bank I will not mention. The trouble with physical gold is high transaction costs—it costs you about 10% or more to buy and sell. It can be easily stolen—people who keep them hidden at home or have safes at home regularly get robbed. And what if the house burns down? You really can't insure gold holdings accept with very high premiums. So, I've always been happy buying the gold ETFs. The tracking error is very small unless you get into the two Xs and three Xs. Gold coins are good for giving kids as graduation presents—stuff like that. I still have my gold coins for my graduation a million years ago (and that was a really great investment! $34 up to, you know, $2,700.)
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 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
2015 in Italy
