Keeping up with the Joneses – that’s what Amazon is doing with its foray into generative artificial intelligence.
Its cloud division AWS is building a $100 million AI center to go toe to toe with increasing competition in cloud infrastructure services
The upcoming AWS Generative AI Innovation Center will become the heart and soul of Amazon experts in AI and machine learning.
This is a seismic strategic move for Amazon whom we have heard very little about in the generative AI sphere so far.
However, most people in the know understand that Amazon wouldn’t let this get away from them and use time wisely to concoct something worthy enough to show they have some skin in the game.
Unsurprisingly, AMZN shares were up relative to other big tech companies in a down week last week on the Nasdaq.
AMZN shares haven’t had quite the mojo that stocks like Tesla or Microsoft have had this year and this call to action is an aggressive step towards the vanguard of technological development.
I highly applaud the management at AMZN for this chess move.
In generative AI, algorithms are used to create new content, such as audio, code, images, texts, simulations, and videos.
Amazon said Highspot, Twilio, Ryanair, and Lonely Planet will be among the first users of the innovation center. With the new center, the company expects to hijack additional cloud services amidst increasing competition in the cloud infrastructure market.
Enterprise spending on cloud solutions reached $63 billion worldwide in the first quarter of 2023, up 20% from the same quarter last year.
Microsoft and Google had the strongest year-over-year growth rates, gaining 23% and 10% in worldwide market share, respectively. Amazon, the leader in cloud infrastructure, kept its 32% market share in Q1.
Amazon recently debuted Bedrock, an AI solution that allows customers to build out their own ChatGPT-like models.
The company also announced the upcoming Titan, which includes two new foundational models developed by Amazon Machine Learning.
Tech is largely downsizing staff and firing diversity officers and other woke positions, but the one area that is pushing for greater numbers is artificial intelligence data scientists and a bevy of LinkedIn posts show they are on the lookout to poach talent.
Amazon, who crushed Microsoft and Google in the business of renting out servers and data storage to companies and other organizations, enjoys a commanding lead in the cloud infrastructure market.
However, those rivals are early into generative AI, even though Amazon has drawn broadly on AI for years to show shopping recommendations and operate its Alexa voice assistant.
Amazon also failed to create the first popular large language model that can enable a chatbot or a tool for summarizing documents.
One challenge Amazon currently faces is in meeting the demand for AI chips. The company chose to start building chips to supplement graphics processing units from Nvidia (NVDA), the leader in the space. Both companies are racing to get more supply on the market.
At a technical level, Amazon shares and the rest of tech shares are quite overbought in the short term.
Last week was a modest pullback between 1-2% in the Nasdaq and I view that as highly bullish because of its orderly nature and lack of volume.
No panic selling is what we want for the markets to optimize the next bullish entry point.
After the modest price action digests fully, I do expect another dip-buying shopping spree for tech shares.
Stay patient and stay hungry.
https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png00Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2023-06-26 14:02:032023-06-27 00:48:19Amazon Joins the Party
I just received a call from the Marine Corps to go on emergency standby. This is not something the Corps does lightly.
The word is that there may be a coup d'etat underway in Russia and the entire US military has gone to a heightened alert status.
The Wagner group is Marching on Moscow with the intent of overthrowing the government, or at least the military. Putin took off in a plane which then disappeared radar, meaning he has either been shot down, or is flying low level to keep his destination secret.
This thing could go nuclear very easily, but only in Russia. It also could mean the end of the Ukraine War. There is nothing to do here as intelligence pours in over the weekend. We have ample satellites overhead and human intel on the ground.
Expect market volatility today. The markets are ripe for a black swan-inducted selloff, which a Mad Hedge Market Timing Index at 82 was screaming at us.
I will be monitoring the situation closely.
My view that the markets were topping was vindicated last week. The “Magnificent Seven” which gained a record 25% in market capitalization in only eight weeks led the downturn, as they always do. But the AI surge that prompted the fastest equity creation in history is only just getting started.
This is against a backdrop of savage cost-cutting by Big Tech, which has had the effect of boosting earnings by an impressive 7% in only three months. My cleaning lady, gardener, dry cleaner, and shoe shine boy have started giving me stock tips yet, as they did in 2000, 2008, and 2020….but they are thinking about it.
While attention is focused elsewhere, one should not underestimate the importance of India Prime Minister Modi’s meeting with Joe Biden in Washington.
It signifies a major geopolitical shift out of the Russian orbit into the US one. Decades ago, India obtained all its weapon systems and nuclear power plants from Russia and was a major trading partner.
Now partnering up with Apple (AAPL), Google (GOOGL), Microsoft (MSFT), and General Electric (GE) is a much more attractive option. It is gaining a $2.7 billion factory from Micron Technology (MU) and presents a major market for its products. Amazon (AMZN) is investing $13 billion in cloud infrastructure there. The subcontinent graduates some 2.5 million STEM graduates a year and they need to be put to work in the global economy. It shows how limited Russia’s future really is. It’s a major win for the US.
So far in June, we are up +0.47%. My 2023 year-to-date performance is still at an eye-popping +62.52%. The S&P 500 (SPY) is up only a respectable +14.00% so far in 2023. My trailing one-year return reached +96.63% versus +21.52% for the S&P 500.
That brings my 15-year total return to +659.71%. My average annualized return has blasted up to +48.56%, another new high, some 2.59 times the S&P 500 over the same period.
Some 42 of my 46 trades this year have been profitable. Only 23 of my last 24 consecutive trade alerts have been profitable.
The Mad Hedge December 6-8 Summit Replays are Up. Listen to all 28 speakers opine on the best strategies, tactics, and instruments to use in these volatile markets. It is a true smorgasbord of investment strategies. Find the best one to suit your own goals. The product discounts offered last week are still valid. Start, stop, and pause the videos at your leisure. Best of all, access to the videos is FREE. Access them all by clicking here and then choosing the speaker of your choice. We look forward to working with you.The next summit is scheduled for September 12-14.
$2 Billion Fled Stock Market Last Week, according to a Bank of America survey, in what it calls a “Baby Bubble.” The markets are showing all the signs of an interim top, with either a 10% correction or a three-month flat line ahead of us. Time to strap on those Buy Writes for long-term shareholders.
Short Bets on US stocks Hit $1 trillion, the highest since April 2022. Shorts have so far lost $101 billion in 2023, with much of this hedged. The market is way overdue for a correction so these guys may finally be right. Even a broken clock is right twice a day.
Germany Signs Massive US Natural Gas Contract, in a major move to end reliance on Russian natural gas. Venture Global LNG will supply EnBW with 1.5 million tons a year of LNG starting in 2026. The 20-year sales and purchase agreement is Germany’s first binding deal with a US developer since the government announced ambitious plans to begin importing the super-chilled fuel. The move does a lot to eliminate the glut of gas in the US currently plaguing producers. Buy (UNG) LEAPS on dips. When China comes back on line, watch out!
Volatility Index ($VIX) Hits the $12 Handle, in a new multiyear low. At the high for the year in the S&P 500, complacency is running rampant. Time to add some downside hedges.
Copper Should be a “Critical Metal”, says billionaire Robert Friedland. A looming structural shortage is the reason, with the world going to an all-electric auto fleet and doubling of the electrical grid to accommodate it. Buy more (FCX) LEAPS on dips.
Leading Economic Indicators Down 0.7% for the 15th consecutive negative month. We are approaching the bottom of the trough in this cycle. I’ll focus on the half of the economy that is growing.
Distressed Commercial Property Debt is Exploding, up 10% to Q1 to $64 billion. Another $155 billion is waiting in the wings. This will go away when interest rates start to drop in six months.
My Ten-Year View
When we come out the other side of the recession, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. The economy decarbonizing and technology hyper-accelerating, creating enormous investment opportunities. The Dow Average will rise by 800% to 240,000 or more in the coming decade. The new America will be far more efficient and profitable than the old.
Dow 240,000 here we come!
On Monday, June 26 at 8:30 AM EST, the Dallas Fed Manufacturing Index is out.
On Tuesday, June 27 at 6:00 PM, S&P Case-Shiller National Home Price Index is published.
On Wednesday, June 28 at 7:30 AM, the Fed Governor Jay Powell speaks.
On Thursday, June 29 at 8:30 AM, the Weekly Jobless Claims are announced. The Final Report for Q1 US GDP is printed.
On Friday, June 30 at 8:30 AM, Personal Income and Spending is announced.
As for me, when I first met Andrew Knight, the editor of The Economist magazine in London 45 years ago, he almost fell off his feet. Andrew was well known in the financial community because his father was a famous WWII Battle of Britain Spitfire pilot from New Zealand.
At 34, he had just been appointed the second youngest editor in the magazine’s 150-year history. I had been reporting from Tokyo for years, filing two stories a week about Japanese banking, finance, and politics.
The Economist shared an office in Tokyo with the Financial Times, and to pay the rent I had to file an additional two stories a week for them as well. That’s where I saw my first fax machine, which then was as large as a washing machine even though the actual electronics would fit in a notebook. It cost $5,000.
The Economist was the greatest calling card to the establishment one could ever have. Any president, prime minister, CEO, central banker, or war criminal was suddenly available for a one-hour chart about the important affairs of the world.
Some of my biggest catches? Presidents Gerald Ford, Jimmy Carter, Ronald Reagan, George Bush, and Bill Clinton, China’s Zhou Enlai and Deng Xiaoping, Japan’s Emperor Hirohito, terrorist Yasir Arafat, and Teddy Roosevelt’s oldest daughter, Alice Roosevelt Longworth, the first woman to smoke cigarettes in the White House in 1905.
Andrew thought that the quality of my posts was so good that I had to be a retired banker at least 55 years old. We didn’t meet in person until I was invited to work the summer out of the magazine’s St. James Street office tower, just down the street from the palace of then Prince Charles.
When he was introduced to a gangly 25-year-old instead, he thought it was a practical joke, which The Economist was famous for. As for me, I was impressed with Andrew’s ironed and creased blue jeans, an unheard-of concept in the Wild West where I came from.
The first unusual thing I noticed working in the office was that we were each handed a bottle of whisky, gin, and wine every Friday. That was to keep us in the office working and out of the pub next door, the former embassy of the Republic of Texas from pre-1845. There is still a big white star on the front door.
Andrew told me I had just saved the magazine.
After the first oil shock in 1973, a global recession ensued, and all magazine advertising was cancelled. But because of the shock, it was assumed that heavily oil-dependent Japan would go bankrupt. As a result, the country’s banks were forced to pay a ruinous 2% premium on all international borrowing. These were known as “Japan rates.”
To restore Japan’s reputation and credit rating, the government and the banks launched an advertising campaign unprecedented in modern times. At one point, Japan accounted for 80% of all business advertising worldwide. To attract these ads the global media was screaming for more Japanese banking stories, and I was the only person in the world writing them.
Not only did I bail out The Economist, I ended up writing for over 50 business and finance publications around the world in every English-speaking country. I was knocking out 60 stories a month, or about two a day. By 26, I became the highest paid journalist in the Foreign Correspondents’ Club of Japan and a familiar figure in every bank head office in Tokyo.
The Economist was notorious for running practical jokes as real news every April Fool’s Day. In the late 1970s, an April 1 issue once did a full-page survey on a country off the west coast of India called San Serif.
It warned that if the West coast kept eroding, and the East coast continued silting up, the country would eventually run into India, creating serious geopolitical problems.
It wasn’t until someone figured out that the country, the prime minister, and every town on the map were named after a type font that the hoax was uncovered.
This was way back, in the pre-Microsoft Word era, when no one outside the London Typesetter’s Union knew what Times Roman, Calibri, or Mangal meant.
Andrew is now 84 and I haven’t seen him in yonks. My business editor, the brilliant Peter Martin, died of cancer in 2002 at a very young 54, and the magazine still awards an annual journalism scholarship in his name.
My boss at The Economist Intelligence Unit, which was modeled on Britain’s MI5 spy service, was Marjorie Deane, who was one of the first women to work in business journalism. She passed away in 2008 at 94. Today, her foundation awards an annual internship at the magazine.
When I stopped by the London office a few years ago I asked if they still handed out the free alcohol on Fridays. A young writer ruefully told me, “No, they don’t do that anymore.”
Sometimes, change is for the worse, not the better.
Good Luck and Good Trading
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
https://www.madhedgefundtrader.com/wp-content/uploads/2021/09/john-thomas-economist-e1664802946349.png285500Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2023-06-26 09:02:572023-06-26 12:08:01The Market Outlook for the Week Ahead, or Is there a Coup Underway in Russia?
Europe is reeling and now it is becoming Silicon Valley’s playground.
The evidence is all over Europe and quite clear-cut at this point.
The royal 7 from the likes of Tesla (TSLA) and Apple (APPL), who have been responsible for most of the stock market gains this year, are leading the charge to cherry-pick the best tech companies in Europe.
The Ukraine military conflict was a godsend for American big tech, as many European companies are now waving the red flag amid commercial electricity costs spiking 100% in many Western European countries.
The unrelenting electricity increase has caused a mad rush to relocate the best European talent to the United States.
Or, if they don’t relocate out of their own will, many are buy-out targets just like yesterday’s news of British online grocer Ocado.
They are on the verge of tasting the sweet hand of acquisitive cash from Amazon (AMZN).
Poached or not poached – Silicon Valley is dominating.
Ocado Group shares jumped as much as 47% - the most in more than five years.
Even with today’s gains, shares in Ocado have still lost about two-thirds of their value since the end of 2021 amid a selloff in growth stocks.
The stock soared in 2018 on a landmark deal to build warehouses and license software to US supermarket chain Kroger Co., boosting the grocer’s credentials as a technology company. Ocado has partnerships with several grocers, but investor focus has shifted to profitability as demand for automated warehouses slows.
I’m not surprised to hear about Amazon’s interest in Ocado.
Ocado has developed, leading automated warehouse technology that could be of great use to Amazon if it tried to take over the supermarket industry in Europe, which it might.
Many American tourists might experience how outdated and obsolete many European supermarkets are these days.
On the corporate side, when I talk to many European workers on the ground in Milan and Brussels, the consensus is that finding a job at an American big tech firm is considered the proverbial golden paycheck.
European counterparts are mired in inefficiency, unproductivity, and the politicians who exist as 27 European Joe Bidens are ruthlessly driving the industry into the ground by taxing and regulating the hell out of them.
European workers also take 2 months of vacation every year along with 15 to 20 federal holidays per year.
When I read the tea leaves, the next expansion of Silicon Valley is to gobble up anything of perceived value in Europe and anything in any European Union country is fair game.
This buying spree could trigger another leg up to big tech and expand margins.
American tech possesses the powerful balance sheets to wield around the world and dominating the European supermarket industry would add to the top line.
Amazon has already forayed into the food industry with Whole Foods in America so this should be viewed as something similar to that.
Look for big tech to enter strategic European industries and eventually buy something like Manchester United or any other high-quality asset.
https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png00Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2023-06-23 15:02:212023-06-26 15:52:27Poaching Foreign Tech
What gets my heart racing about Wall Street's wild rodeo is its capricious personality. This unpredictable creature weaves a tapestry of inflated possibilities, stretching across a vibrant spectrum of asset classes. It's like being at an all-you-can-eat financial buffet; every day, there's a fresh plate of opportunities to dig into.
Just last year, for instance, we saw a grand opportunity to pack our portfolios with tech titans like Amazon (AMZN) and Microsoft (MSFT) when the market was frolicking after cash-flush pharmaceutical stocks, allured by their pricing power and inflation defense.
But oh, how the pendulum swings. Today, we find the market donning its risk-taking garb again, pursuing high-growth stocks and leaving value stocks eating its dust.
This brings us to Amgen (AMGN).
Amgen, a trailblazer in the biotech industry since its inception in 1980, has earned its stripes, boasting membership in the esteemed Dow Jones Industrial Index and Nasdaq 100. Over the past year, AMGN churned out an impressive $26 billion in total revenue.
The company proudly displays a well-rounded product portfolio experiencing a strong global thirst. This is echoed by the hearty 14% YoY volume growth in the first quarter.
Notably, much of this surge was fueled outside U.S. borders, with the Asia Pacific region flexing a muscular 47% volume growth. Credit this partly to the rapidly aging populations in Japan and China, where medicines like Amgen’s Repatha and Prolia are enjoying a burgeoning demand.
However, we're not getting the complete picture from these favorable metrics.
Amgen is embarking on a journey into a period filled with question marks, marked by stiff competition from biosimilars for its aging blockbusters, pushback from the Federal Trade Commission over its proposed acquisition of Horizon Therapeutics (HZNP), and valid doubts surrounding the rationale behind this hefty $28 billion buyout.
The firm has had a tough time finding a true growth engine in recent years, despite launching several new drugs for high-value indications such as lung cancer, cardiovascular disease, and migraine headaches. Can Amgen sail past these patent headwinds?
While most in the industry are betting on Amgen to win its legal battle to acquire Horizon, this move carries its own set of hitches.
The spotlight is on Horizon's primary growth engine, Tepezza, which is dealing with recent commercial setbacks.
In Q1 2023, Tepezza sales took an 18% sequential dip from Q4 2022 and were down 19% YoY.
Horizon blamed seasonality for this significant sales dip, which is disheartening for a drug slated to hit $4 billion in annual sales.
If Tepezza is the mainstay behind the proposed merger with Amgen, the biotech could set itself up for a rocky journey.
And remember, Amgen's previous attempts at value creation via business development haven't always been home runs.
Take the 2013 acquisition of Onyx's cancer drug Kyprolis. Despite initial excitement, Kyprolis has underperformed expectations, illustrating that Amgen's $28 billion bid for Horizon may not be a guaranteed solution to its patent woes.
Furthermore, Amgen's clinical pipeline isn't bursting with potential stars.
Its metabolic disorder candidate AMG 133 has been flagged as a potential blockbuster by some analysts, but the obesity treatment market is heating up. The same applies to Amgen's various candidates in hematology and immunology. Therefore, its current pipeline might not be the panacea to its legacy medicine challenges.
So, what's the play for investors?
The silver lining here is that Amgen isn't predicted to suffer a sharp drop in annual sales anytime soon, irrespective of the Horizon deal or its internal pipeline.
The main concern lies with the drugmaker's potential to resurrect robust top-line growth in the latter part of the decade. Given its low trailing-12-month payout ratio of 54%, the dividend appears to be on solid ground, which is a tick-in-the-box for its prospects as an income stock.
Overall, this stock could be a top pick for income investors considering its ample yield coverage, substantial margins, and double-digit average dividend growth.
Although the top line may seem a little shaky, buybacks should help keep EPS growth on track. Given its resilience, the stock presents an attractive opportunity for income investors. Just don't hold your breath waiting for a sudden surge.
In fact, if you're on a DRIP (Dividend Reinvestment Plan), you'd rather want the shares to slump for a bit.
After all, Amgen has the makings of a SWAN (Sleep Well At Night) stock. So, keep those midnight snacks handy.
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Below please find subscribers’ Q&A for the June 7 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Lake Tahoe, NV.
Q: Do you ever trade the CBOE Volatility Index ($VIX)?
A: No, I used to, but I got hit a few times. That’s because 95% of the year is spent seeing the ($VIX) go down, and then the other 5% basically doubles overnight. It’s a short play only. With a long ($VIX), the time decay is enormous, and it’s just not worth owning. The only way to make money in ($VIX) is to buy it right before a giant VIX spike. And the floor traders in Chicago have a huge inside advantage in that market. So, I finally gave up and decided there's better things to do.
Q: Buy the price dip for Tesla (TSLA)?
A: I’d have to look at the charts, but if it gets back down to $200, I would start hoovering it up again. The fundamentals are really arriving for Tesla big time, as is the long-term bull case.
Q: With the debt crisis over, how low will the iShares 20 Plus Year Treasury Bond ETF (TLT) go in the short term?
A: Well, we know they have to issue a trillion dollars of 90-day T-bills in the next few weeks. The debt ceiling crisis stopped Treasury bill issuance for several months and now they have a lot of catch-up to do. So, best case scenario, the (TLT) drops to $95, then you load the boat for the rest of your life in (TLT) LEAPS, like a $95-$100 2024 LEAPS. And that should double about every year.
Q: Are you concerned about commodities given the weakness in the Chinese economy?
A: Yes, it’s definitely slowing the commodities recovery, but is also giving you a fantastic opportunity to get into things like Freeport McMoRan (FCX) at a cheaper price, where it was just a couple of weeks ago. All of the commodities look like they’re bottoming now, it’s time to buy them.
Q: It seems like you really love the Russell 2000 (RUT).
A: I hate the Russell. You only want to own big money stocks because that's where the big money goes first. Big money doesn’t go into the Russell, and as long as there's any doubt of a recession coming, they’ll perform poorly.
Q: Coinbase (COIN) is getting sued by the SEC, should I buy on the dip?
A: No, the whole crypto infrastructure is getting sued out of existence and disappearing. They went after Binance also. It seems like the SEC just doesn’t like crypto very much. That kind of shrinks the whole industry back down to hot wallets, where you slowly have direct control of your bitcoin on the network and you don't use any outside brokers to buy and sell it because there may not be any left shortly.
Q: Should we still hold the Apple (AAPL) bull call spread?
A: Yes, I think we have enough room on our call spread in the next 7 trading days to take max profit. However, if you have any doubts, no one ever gets fired for taking a profit.
Q: Is the ProShares Ultra Technology ETF (ROM) a buy at this time?
A: No, if anything, ROM is a sell. It almost had a near-double move. So no, wait for a 20% or 30% correction this summer in ROM and then go in. It has actually led most tech because it's a 2X long ETF. Sometimes I just want to shoot myself. You buy before stocks double, not afterwards.
Q: What will trigger a correction this summer?
A: The risk of a further rise in interest rates, which we may get. Other than that, the market is running out of negatives.
Q: What is the risk of US currency not being the world reserve?
A: Zero. I have been asked this question every day for the last 50 years and so far, I have been right. What would you rather keep your savings in Chinese Yuan, Russian rubles, or Euros? I would say none of those. And US currency will remain the reserve currency for this century, easily, until a digital US dollar comes out.
Q: Do you want to buy the cellphone companies?
A: No, not really. They weren’t very interesting before—it's a low margin, highly competitive cutthroat business—and now you have one of the world's largest companies, Amazon (AMZN), potentially offering phones for free? I think I'll pass on that one.
Q: Do you have any interest in pairs trading?
A: No, they blow up too often.
Q: Did you say you sent out a one-year LEAPS on Freeport McMoRan (FCX), the $35-$38?
A: Yes, if you didn’t get it, email customer support.
Q: Are investing in 90-day Treasury bills until the next one or two Fed meetings are over a good idea?
A: Yes, that is a good idea. Cash has a high-value night now. Remember, a dollar at a market top is worth $10 at a market bottom, and we now have a rare opportunity to get paid 5.2% or 5.3% while we wait. That hasn’t happened in almost 20 years.
Q: Will the new Apple VR headset be a boon to the stock price?
A: Yes, adding 10% to your earnings is always good, but it won’t happen immediately. You need a few thousand third-party app developers to come through with services before the earnings really get going. That's what happened with iTunes when the iPhone came out. Growth was slow when Apple only allowed its in-house apps to be sold—when they opened to the public, the business went up 100 times. That's maybe what will happen with the virtual headset.
Q: PayPal (PYPL) has dropped a lot, should I buy it here?
A: No, cutthroat competition in the sector is destroying the share price. There are too many other better things to buy.
Q: Why do so many professional analysts say the market will go down this year, but it goes up every day?
A: Professional analysts are just that—they're analysts, not traders. And often these days, to save money, your professional analyst is 26 years old, so they don’t have much market experience. I like to think that 50 years of trading experience backed with algorithms helps.
Q: Do you think oil could hit $100 a barrel next year?
A: Yes, definitely. Especially if we get a decent economic recovery and Saudi Arabia doesn’t immediately bring back 3 million barrels a day that they’ve cut.
Q: Should I chase NVIDIA (NVDA) here?
A: No, better to own cash here than Nvidia. Buy Nvidia on the next dip, or another Nvidia wannabe company, which will almost certainly arrive shortly.
Q: When will we get peace in Ukraine?
A: Within a year, I would say. Russia has literally run out of ammunition, and Ukraine is getting more. Ukraine is also getting F16s, our older fighter planes, and many other advanced weapons and parts—those are a big help. They can beat anything the Russians throw up.
Q: Is Global X Copper Miners ETF (COPX) a good copper play?
A: Yes it is, but you don’t get the leverage that you do with an FCX LEAP. I don’t know how far the top will go, but that would be a great trade one to two years out.
Q: Can you explain why there is a short squeeze in copper?
A: There are 200 pounds of copper needed for each EV, and EV production is exploding both here and in China. Tesla is expected to make 2 million EVs this year, especially with the $33,000 price point. China manufactures this many EVs as well. Four million EVS and 200 pounds of copper per EV equals the entire annual production of copper right now. At some point, people will notice that and they’ll take copper as much as they took lithium up last year.
Q: What do you mean when you say LEAPS one or two years?
A: It really depends on your risk. When you buy a two-year LEAPS, you usually get the extra year for free or almost nothing, and if you get a rapid increase in the underlying share price, the two-year LEAP will go up almost as much as the one year. So for most people who don’t want to watch the market every day, the two-year LEAPS is probably a better choice.
Q: Why did you buy only one LEAPS contracts?
A: All of my LEAPS recommendations are only for one contract. It is up to you to decide what your risk tolerance and experience level is, whether you buy 1, 100, or 1,000 contracts, so I leave the size up to you because it can vary tremendously depending on the person. Also, one contract makes the math really easy for people to understand.
Q: At what point do you sell your LEAPS?
A: Well, if you get a rapid 500% profit, which happened with many of the LEAPS that we did in October as well as the ones we did in March, I would take it. However, the goal on these is to go for the 10 baggers, or the 100% return in a year, and you usually need to hold it for the full year to get that. But, if the stock takes off like a rocket, I would take the profit. How many times in your life do you get a 500% profit in a month or two? I would say none. So, when you get that with these LEAPS recommendations, take it and run like a madman, move to a different country, and change your name.
Q: With the ($VIX) this low and many great companies for the second half down, would you buy single LEAPS instead of spreads?
A: I would; the problem with the call spread strategy is that it’s not the best thing to do at big market bottoms, down 20%, 30%, and 40%. The better thing to do is the LEAPS, but the LEAPS is a one- or two-year position, and I have to be sending out trade alerts every day. At market bottoms, you definitely want to get the most market leverage possible on the upside, and LEAPS does that for you in spades. They essentially turn your stock into a synthetic futures contract with a 10x leverage.
Q: When do we expect China (FXI) to take over Taiwan?
A: Never, because if they invade Taiwan, China loses its food supply from the US, which cannot be replaced anywhere. They also lose their international trade, so they won’t have the profits with which to buy food elsewhere. I’ve been in China when millions died during a famine and let me tell you, there is NO substitute for food. Not all the money in the world can buy it when it just plain isn’t available. But China will keep threatening and bluffing as they have done for 74 years.
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 or TECHNOLOGY LETTER then WEBINARS, and all the webinars from the last 12 years are there in all their glory.
Good Luck and Stay Healthy,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Sometimes the Market Can be Tough to Figure Out
https://www.madhedgefundtrader.com/wp-content/uploads/2023/06/john-thomas-mourning.jpg177171Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2023-06-09 09:02:352023-06-09 14:38:45June 7 Biweekly Strategy Webinar Q&A
Followers of the Mad Hedge Fund Trader alert service have the good fortune to own a deep in-the-money options position that expires on Friday, June 16, and I just want to explain to the newbies how to best maximize their profits.
This involves the Tesla (TSLA) June 2023 $120-$130 in-the-money vertical bull call debit spread. Provided that we don’t have another 80-point move down in Tesla in ten trading days, this position should expire at its maximum profit point.
So far, so good.
Your profit can be calculated as follows:
Profit: $10.00 expiration value - $8.80 cost = $1.20 net profit
(12 contracts X 100 contracts per option X $1.20 profit per option)
= $1,440 or 13.63% in 25 trading days.
Many of you have already emailed me asking what to do with these winning positions.
The answer is very simple. You take your left hand, grab your right wrist, pull it behind your neck, and pat yourself on the back for a job well done.
You don’t have to do anything.
Your broker (are they still called that?) will automatically use your long position to cover your short position, canceling out the total holdings.
The entire profit will be credited to your account on Monday morning, June 19 and the margin freed up.
Some firms charge you a modest $10 or $15 fee for performing this service.
If you don’t see the cash show up in your account on Monday, get on the blower immediately and find it.
Although the expiration process is now supposed to be fully automated, occasionally machines do make mistakes. Better to sort out any confusion before losses ensue.
If you want to wimp out and close the position before the expiration, it may be expensive to do so. You can probably unload them pennies below their maximum expiration value.
Keep in mind that the liquidity in the options market understandably disappears, and the spreads substantially widen, when a security has only hours, or minutes until expiration on Friday. So, if you plan to exit, do so well before the final expiration at the Friday market close.
This is known in the trade as the “expiration risk.”
One way or the other, I’m sure you’ll do OK, as long as I am looking over your shoulder, as I will be, always. Think of me as your trading guardian angel.
I am going to hang back and wait for good entry points before jumping back in. It’s all about keeping that “Buy low, sell high” thing going.
I’m looking to cherry-pick my new positions going into the next quarter end.
Take your winnings and go out and buy yourself a well-earned dinner. Just make sure it’s take-out. I want you to stick around.
Well done, and on to the next trade.
You Can’t Do Enough Research
https://www.madhedgefundtrader.com/wp-content/uploads/2019/09/john-and-girls.png322345Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2023-06-02 10:02:202023-06-02 17:09:18How to Handle the Friday May 16 Options Expiration
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