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The Market Outlook for the Week Ahead, or Welcome to the Rolling Recession

The airline business is booming but homebuilders are in utter despair. Hotel rooms are seeing extortionate 56% YOY price increases, while residential real estate brokers are falling flat on their faces.

It’s a recession that’s here, there, and nowhere.

Welcome to the rolling recession.

If you are lucky enough to work in a handful of in-demand industries, times have never been better. If you aren’t, then it’s Armageddon.

Look at single industries one at a time, as the media tends to do, business conditions are the worst since the Great Depression and pessimism is rampant. Look at Tesla, where there is a one-year wait to get a Model X, and there is either a modest recession on the menu, or simply slowing growth at worst.

Notice that a lot of commentators are using the word “normally”. News Flash: nothing has been normal with this economy for three years.

Which leaves us with dueling yearend forecasts for the S&P 500. It will either be at 3,900, where it is now, or 4,800. A market that is unchanged, worst case, and up 20% best case sounds like a pretty good bet to me. The prospects for individual stocks, like Tesla (TSLA), Microsoft (MSFT), or NVIDIA (NVDA) are even better, with a chance of 20% of downside or 200% of upside.

I’ll sit back and wait for the market to tell me what to do. In the meantime, I am very happy to be up 60% on the year and 90% in cash.

An interesting thing is happening to big-cap tech stocks these days. They are starting to command bigger premiums both in the main market and in other technology stocks as well.

That is because investors are willing to pay up for the “safest” stocks. In effect, they have become the new investment insurance policy. Look no further than Apple (AAPL) which, after a modest 14% decline earlier this year, managed a heroic 30% gain. Steve Jobs’ creation now boasts a hefty 28X earnings multiple. Remember when it was only 9X?

Remember, the stock sells off on major iPhone general launches like we are getting this week, so I’d be careful that my “insurance policy” doesn’t come back and bite me in the ass.

Nonfarm Payroll Report Drops to 315,000 in August, a big decline, and the Headline Unemployment Rate jumps to 3.7%. The Labor Force Participation Rate increased to 62.4%. The “discouraged worker” U-6 unemployment rate jumped to 7.0%. Manufacturing gained 22,000. Stocks loved it, but it makes a 75-basis point in September a sure thing.

Jeremy Grantham Says the Stock Super Bubble Has Yet to Burst, for the seventh consecutive year. If I listened to him, I’d be driving an Uber cab by now, commuting between side jobs at Mcdonald's and Taco Bell. Grantham sees stocks, bonds, commodities, real estate, precious metals, crypto, and collectible Beanie Babies as all overvalued. Even a broken clock is right twice a day unless you’re in the Marine Corps, which uses 24-hour clocks.

Where are the Biggest Buyers on the Dip? Microsoft (MSFT), Salesforce (CRM), and Disney (DIS), followed by Visa (V), and Boeing (BA). Analysts see 20% of upside for (MSFT), 32% for (CRM), and 21% for (DIS). Sure, some of these have already seen big moves. But the smart money is buying Cadillacs at Volkswagen prices, which I have been advocating all year. Take the Powell-induced meltdown as a gift.

The Money Supply is Collapsing, down for four consecutive months. M2 is now only up less than 1% YOY. This usually presages a sharp decline in the inflation rate. With a doubling up of Quantitative Tightening this month, we could get a real shocker of a falling inflation rate on September 13. Online job offers are fading fast and used cars have suddenly become available. This could put in this year’s final bottom for stocks.

California Heads for a Heat Emergency This Weekend, with temperatures of 115 expected. Owners are urged to fully charge their electric cars in advance and thermostats have been moved up to 78 as the electric power grid faces an onslaught of air conditioning demand. The Golden State’s sole remaining Diablo Canyon nuclear power plant has seen its life extended five years to 2030. This time, the state has a new million more storage batteries to help.

Oil (USO) Dives to New 2022 Low on spreading China lockdowns. Take the world’s largest consumer offline and it has a big impact. More lows to come.

NVIDIA (NVDA) Guides Down in the face of new US export restrictions to China. The move will cost them $400 million in revenue. These are on the company’s highest-end A100 and H100 chips which China can’t copy. (AMD) received a similar ban. It seems that China was using them for military AI purposes. The shares took a 9% dive on the news. Cathie Wood’s Ark (ARKK) Funds dove in and bought the lows.

Weekly Jobless Claims Plunge to 232,000, down from 250,000 the previous week for the third consecutive week. No recession in these numbers.

First Solar (FSLR) Increases Output by 70%, thanks to a major tax subsidy push from the Biden Climate Bill. The stock is now up 116% in six weeks. We have been following this company for a decade and regularly fly over its gigantic Nevada solar array. Buy (FSLR) on dips.

Home Prices Retreat in June to an 18% YOY gain, according to the Case Shiller National Home Price Index. That’s down from a 19.9% rate in May. Tampa (35%), Miami (33%), and Dallas (28.2%) showed the biggest gains. Blame the usual suspects.

Tesla (TSLA) Needs $400 Billion to expand its vehicle output to Musk’s 20 million units a year target. One problem: there is currently not enough commodity production in the world to do this. That sets up a bright future for every commodity play out there, except oil.

Bitcoin (BTC) is Headed Back to Cost, after breaking $20,000 on Friday. With the higher cost of electricity and mining bans, spreading the cost of making a new Bitcoin is now above $17,000. It doesn’t help that much of the new crypto infrastructure is falling to pieces.

My Ten-Year View

When we come out the other side of pandemic and the recession, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With oil prices and inflation now rapidly declining, and technology hyper-accelerating, there will be no reason not to. The Dow Average will rise by 800% to 240,000 or more in the coming decade. The America coming out the other side will be far more efficient and profitable than the old. Dow 240,000 here we come!

With a very troublesome flip-flopping market, my August performance still posted a decent +5.13%.

My 2022 year-to-date performance ballooned to +59.96%, a new high. The Dow Average is down -13.20% so far in 2022. It is the greatest outperformance on an index since Mad Hedge Fund Trader started 14 years ago. My trailing one-year return maintains a sky-high +71.90%.

That brings my 14-year total return to +572.52%, some 2.60 times the S&P 500 (SPX) over the same period and a new all-time high. My average annualized return has ratcheted up to +44.90%, easily the highest in the industry.

We need to keep an eye on the number of US Coronavirus cases at 94.7 million, up 300,000 in a week and deaths topping 1,047,000 and have only increased by 2,000 in the past week. You can find the data here.

On Monday, September 5 markets are closed for Labor Day.

On Tuesday, September 6 at 7:00 AM, the ISM Non-Manufacturing PMI for August is out.

On Wednesday, September 7 at 11:00 AM, the Fed Beige Book for July is published.

On Thursday, September 8 at 8:30 AM, Weekly Jobless Claims are announced.

On Friday, September 9 at 2:00 the Baker Hughes Oil Rig Count is out.

As for me, the first thing I did when I received a big performance bonus from Morgan Stanley in London in 1988 was to run out and buy my own airplane.

By the early 1980s, I’d been flying for over a decade. But it was always in someone else’s plane: a friend’s, the government’s, a rental. And heaven help you if you broke it!

I researched the market endlessly, as I do with everything, and concluded that what I really needed was a six-passenger Cessna 340 pressurized twin turbo parked in Santa Barbara, CA. After all, the British pound had just enjoyed a surge again the US dollar so American planes were a bargain. It had a range of 1,448 miles and therefore was perfect for flying around Europe.

The sensible thing to do would have been to hire a professional ferry company to fly it across the pond. But what’s the fun in that? So, I decided to do it myself with a copilot I knew to keep me company. Even more challenging was that I only had three days to make the trip, as I had to be at my trading desk at Morgan Stanley on Monday morning.

The trip proved eventful from the first night. I was asleep in the back seat over Grand Junction, CO when I was suddenly awoken by the plane veering sharply left. My co-pilot had fallen asleep, running the port wing tanks dry and shutting down the engine. He used the emergency boost pump to get it restarted. I spent the rest of the night in the co-pilot’s seat trading airplane stories.

The stops at Kansas City, MO, Koshokton, OH, Bangor, ME proved uneventful. Then we refueled at Goose Bay, Labrador in Canada, held our breath and took off for our first Atlantic leg.

Flying the Atlantic in 1988 is not the same as it is today. There were no navigational aids and GPS was still top secret. There were only a handful of landing strips left over from the WWII summer ferry route, and Greenland was still littered with Mustang’s, B-17’s, B24’s, and DC-3’s. Many of these planes were later salvaged when they became immensely valuable. The weather was notorious. And a compass was useless, as we flew so close to the magnetic North Pole the needle would spin in circles.

But we did have NORAD, or America’s early warning system against a Russian missile attack.

The practice back then was to call a secret base somewhere in Northern Greenland called “Sob Story.” Why it was called that I can only guess, but I think it has something to do with a shortage of women. An Air Force technician would mark your position on the radar. Then you called him again two hours later and he gave you the heading you needed to get to Iceland. At no time did he tell you where HE was.

It was a pretty sketchy system, but it usually worked.

To keep from falling asleep, the solo pilots ferrying aircraft all chatted on frequency 123.45 MHz. Suddenly, we heard a mayday call. A female pilot had taken the backseat out of a Cessna 152 and put in a fuel bladder to make the transatlantic range. The problem was that the pump from the bladder to the main fuel tank didn’t work. With eight pilots chipping in ideas, she finally fixed it. But it was a hair-raising hour. There is no air-sea rescue in the Arctic Ocean.

I decided to play it safe and pick up extra fuel in Godthab, Greenland. Godthab has your worst nightmare of an approach, called a DME Arc. You fly a specific radial from the landing strip, keeping your distance constant. Then at an exact angle you turn sharply right and begin a descent. If you go one degree further, you crash into a 5,000-foot cliff. Needless to say, this place is fogged 365 days a year.

I executed the arc perfectly, keeping a threatening mountain on my left while landing. The clouds mercifully parted at 1,000 feet and I landed. When I climbed out of the plane to clear Danish customs (yes, it’s theirs), I noticed a metallic scraping sound. The runway was covered with aircraft parts. I looked around and there were at least a dozen crashed airplanes along the runway. I realized then that the weather here was so dire that pilots would rather crash their planes than attempt a second go.

When I took off from Godthab, I was low enough to see the many things that Greenland is famous for polar bears, walruses, and natives paddling in deerskin kayaks. It was all fascinating.

I called into Sob Story a second time for my heading, did some rapid calculations, and thought “damn”. We didn’t have enough fuel to make it to Iceland. The wind had shifted from a 70 MPH tailwind to a 70 MPH headwind, not unusual in Greenland. I slowed down the plane and configured it for maximum range.

I put out my own mayday call saying we might have to ditch, and Reykjavik Control said they would send out an orange bedecked Westland Super Lynch rescue helicopter to follow me in. I spotted it 50 miles out. I completed a five-hour flight and had 15 minutes of fuel left, kissing the ground after landing.

I went over to Air Sea rescue to thank them for a job well done and asked them what the survival rate for ditching in the North Atlantic was. They replied that even with a bright orange survival suit on, which I had, it was only about half.

Prestwick, Scotland was uneventful, just rain as usual. The hilarious thing about flying the full length of England was that when I reported my position in, the accents changed every 20 miles. I put the plane down at my home base of Leavesden and parked the Cessna next to a Mustang owned by a rock star.

I asked my pilot if ferrying planes across the Atlantic was also so exciting. He dryly answered “Yes.” He told me that in a normal year, about 10% of the planes go missing.

I raced home, changed clothes, and strode into Morgan Stanley’s office in my pin-stripped suit right on time. I didn’t say a word about what I just accomplished.

The word slowly leaked out and at lunch, the team gathered around to congratulate me and listen to some war stories.

Stay healthy,

John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader

Flying the Atlantic in 1988

Looking for a Place to Land in Greenland

Landing on a Postage Stamp in Godthab, Greenland

No Such a Great Landing

Flying Low Across Greenland

Gassing Up in Iceland

Almost Home at Prestwick

Back to London in 1988

September 6, 2022/by Mad Hedge Fund Trader

August 15, 2022

Diary, Newsletter, Summary

Global Market Comments
August 15, 2022
Fiat Lux

Featured Trade:

(MARKET OUTLOOK FOR THE WEEK AHEAD,
or WHAT THE MARKET IS REALLY DISCOUNTING NOW),
(SPY), (TLT), (AAPL), (AXP), (KO), (XOM). (TBT), (SNOW), (NFLX), (ARKK), (ETHE),
(NLR), (CCR), CORN), (WEAT), (SOYB), (DBA), (UUP), (FXA), (FXC), (BA), (TSLA)

August 15, 2022/by Mad Hedge Fund Trader

The Market Outlook for the Week Ahead, or What the Market is Really Discounting Now

Diary, Newsletter

After a half-century in the markets, I have noticed that it is the investors with the correct long-term views who make the biggest money. My favorite example is my friend, Warren Buffet, who doesn’t care if an investment turns good in five minutes or five years.

Buffet’s Berkshire Hathaway (BRKB) is the largest outside investor in Apple (AAPL). And guess what his cost has been? By the time you add up the compounded dividends he has collected since he started buying the stock in 2011, it's zero. The value today? $15.5 billion.

Buffet didn’t buy Apple for its hardware, iPhone, or iTunes. He bought it for the brand, which has improved astronomically. Look at Berkshire’s portfolio and it is packed with brands, like American Express (AXP), Coca-Cola (KO), and Exxon (XOM).

When did Buffet last buy Apple? In May when it hit $130.

That’s why Warren Buffet is Warren Buffet and you are you.

While the inflation news last week has been great and it is likely to get better, I believe that investors are missing the bigger, more important long-term picture.

The fact is that markets are now discounting an earlier than expected end to the Ukraine War, much earlier.

I get constant updates on the war from the Joint Chiefs of Staff, Britain’s Defense Committee, and NATO headquarters and I can tell you that the war has taken a dramatic turn in Ukraine’s favor just in the last two weeks.

Russian casualties have topped 80,000, nearly half the standing army. They have lost 2,200 of their 2,800 operational tanks. Some 120 front line aircraft have been destroyed. This week, Ukraine attacked the principal Russian air base in Crimea, leaving the smoking ruins of seven more aircraft there.

Russia is in effect fighting a modern digitized war with 50-year-old Cold War weapons and it isn’t working. Its generals have no experience fighting wars against determined opposition. Putin would do better listening to the retired generals on CNN for military advice.

America’s High HIMARS (the M142 High Mobility Artillery Rocket System) has become the Stinger missile of this war. The Lockheed Martin (LMT) factory in Camden, Arkansas that makes these missiles is running 24/7 on doubled orders.

The sanctions against Russia have been wildly successful. The Russian economy is utterly collapsing. What oil they are selling now is at half price. Aircraft are being cannibalized for parts to keep others flying. Much of the educated middle class has fled the country. Draft dodging is rampant.

What does all this mean for you and me?

The commodity price spike the war prompted has ended and most are now in steep downtrends. Gold (GLD), where the Russians were major buyers, has been flat as a pancake. This has put our inflation numbers into freefall. Interest rate fears peaked in June and are now in the rear-view mirror.

As is always the case, markets have seen these developments and correctly ascertained their consequences far before we humans did (except for maybe me). It has been no surprise that they have been tracking the Russian defeat day by day and have been on an absolute tear since June 15.

Even small techs suffering 18-month bear markets have now begun major recoveries, with companies like Snowflake (SNOW), up 50%, Netflix (NFLX), up 39%, and Cathie Wood’s Innovation Fund (ARKK) up 57%. Even crypto has returned from the grave, with Ethereum (ETHE) up an eye-popping 105%.

But don’t go gaga over stocks just yet.

The Fed ramps up quantitative tightening in September to $95 billion a month and will deliver another interest rate hike. That's why I am running a double short in the bond market (TLT), (TBT) once again.

We also have the midterms to worry about which, with recent developments, promise to be more contentious than ever. Look for another round of tiring new election fraud claims.

That’s great because these events will give us good entry points lower down for trade alerts, not the short-term top we are looking at right now.

It helps that with ten-year US Treasury yields at 2.80%, it has an effective price earning multiple of 37, while stocks growing earnings at 10% a year boast a price earnings multiple of only 16. That sets up a massive, long stock/short bond trade which Mad Hedge will be pushing well on into 2023.

And you know what?

The smart guys I know in the hedge fund community are starting to model for the next Fed interest rate CUT. Markets will love it and discount this far in advance.

If you want to get on the train with me before it leaves the station, just keep reading this newsletter.

Yes, markets are now being driven by rate cuts and peace prospects, not rate rises and war!

Your retirement fund will love it.

I just thought you’d like to know.

CPI Dives to 8.5%, down 0.6% in July. The peak is in, and stocks rallied 500. Look for another drop in August, with gasoline prices falling daily. The 800-pound gorilla in the room has exited.

The Producer Price Index Dives 0.5%, confirming last week’s weak CPI number. And many core prices are indicating that we will get another drop when the August numbers are reported in September. It was worth another 300-point rally in the Dow Average, which is getting seriously overbought.

Consumer Inflation Expectations dive to 6.2% for the coming year and only 3.2% for three years. according to a New York Fed Survey. Expectations for food costs saw the largest decline. The CPI is out on Wednesday. No doubt a media onslaught over a coming recession has a lot to do with it.

Elon Musk Sells $6.9 billion worth of Tesla (TSLA) Stock, explaining the $100 drop in the shares last week. Ostensibly, this is to pay for Twitter if he loses his court case. Musk clearing took advantage of a 60% rise in (TSLA) to head off distress sales in the future. Musk also opened the door to share buy backs in the future. Buy (TSLA) on dips.

85,000 IRS Agents are Headed Your Way, but only if the government can hire them and only if you are a billionaire or a profitable large oil company. The rest of us will be ignored by this unpublicized portion of the Biden inflation bill.

US Dollar (UUP) Takes a Hit on CPI Report, which effectively showed that the US saw deflation in July. The greenback is pulling back the 20-year highs which gave you the cheapest European vacation in your lives. The prospect of interest rates rising at a slower pace is dollar negative. Buy (FXA) and (FXC) on dips.

Boeing (BA) Delivered its First 787 Dreamliner in a year, after long-awaited regulatory approval. The monster 30% rise in the shares off the June low predicted as much. A global aircraft shortage helps. Airbus is going to have to start earnings its money again. Keep buying (BA) on dips.

Weekly Jobless Claims Pop 12,000 to 262,000, a new high for the year. It’s not at concerning levels yet but is definitely headed in the wrong direction. Maybe it’s just a summer slowdown? Maybe not.

Shipping Container Charges are Plunging Everywhere, except in the US, which currently has the world’s strongest economy. It’s a sign that global supply chain problems are easing. But the US leads the world in demurrage, or delays, with New York the worst, followed by Long Beach.

Import Prices are Plunging, thanks to a super strong dollar, taking more pressure off of inflation. They fell 1.4% in July according to the Department of Labor. Easing supply chain problems are helping. Biden has had the run of the table for months now

My Ten-Year View

When we come out the other side of pandemic and the recession, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With oil prices now rapidly declining, and technology hyper accelerating, there will be no reason not to. The Dow Average will rise by 800% to 240,000 or more in the coming decade. The America coming out the other side will be far more efficient and profitable than the old. Dow 240,000 here we come!

My August performance climbed to +2.14%. My 2022 year-to-date performance ballooned to +56.97%, a new high. The Dow Average is down -7.0% so far in 2022. It is the greatest outperformance on an index since Mad Hedge Fund Trader started 14 years ago. My trailing one-year return maintains a sky-high 74.76%.

That brings my 14-year total return to 569.53%, some 2.56 times the S&P 500 (SPX) over the same period and a new all-time high. My average annualized return has ratcheted up to 44.96%, easily the highest in the industry.

We need to keep an eye on the number of US Coronavirus cases at 93 million, up 300,000 in a week and deaths topping 1,037,000 and have only increased by 2,000 in the past week. You can find the data here.

On Monday, August 15 at 8:30 AM EDT, the New York Empire State Manufacturing Index for August is released.

On Tuesday, August 16 at 8:30 AM, the Housing Starts for July are out.

On Wednesday, August 17 at 8:30 AM, Retail Sales for July are published. At 11:00 AM the Fed Minutes from the last meeting are printed.

On Thursday, August 18 at 8:30 AM, Weekly Jobless Claims are announced. Existing Home Sales for July are announced.

On Friday, August 19 at 2:00 the Baker Hughes Oil Rig Count is out.

As for me, while we’re all waiting for the dog days of August to end, it is time to reminisce about my old friend George Schultz who passed away last year at the age of 101.

My friend was having a hard time finding someone to attend a reception who was knowledgeable about financial markets, White House intrigue, international politics, and nuclear weapons.

I asked who was coming. She said Reagan’s Treasury Secretary George Shultz. I said I’d be there wearing my darkest suit, cleanest shirt, and would be on my best behavior, to boot.

It was a rare opportunity to grill a high-level official on a range of top-secret issues that I would have killed for during my days as a journalist for The Economist magazine. I guess arms control is not exactly a hot button issue these days.

I moved in for the kill.

I have known George Shultz for decades, back when he was the CEO of the San Francisco-based heavy engineering company, Bechtel Corp in the 1970s.

I saluted him as “Captain Schultz”, his WWII Marine Corp rank, which has been our inside joke for years. Now that I am a major, I guess I outrank him.

Since the Marine Corps didn’t know what to do with a PhD in economics from MIT, they put him in charge of an anti-aircraft unit in the South Pacific, as he was already familiar with ballistics, trajectories, and apogees.

I asked him why Reagan was so obsessed with Nicaragua, and if he really believed that if we didn’t fight them there, would we be fighting them in the streets of Los Angeles as the then-president claimed.

He replied that the socialist regime had granted the Soviets bases for listening posts that would be used to monitor US West Coast military movements in exchange for free arms supplies. Closing those bases was the true motivation for the entire Nicaragua policy.

To his credit, George was the only senior official to threaten resignation when he learned of the Iran-contra scandal.

I asked his reaction when he met Soviet premier Mikhail Gorbachev in Reykjavik in 1986 when he proposed total nuclear disarmament.

Shultz said he knew the breakthrough was coming because the KGB analyzed a Reagan speech in which he had made just such a proposal.

Reagan had in fact pursued this as a lifetime goal, wanting to return the world to the pre nuclear age he knew in the 1930s, although he never mentioned this in any election campaign. Reagan didn’t mention a lot of things.

As a result of the Reykjavik Treaty, the number of nuclear warheads in the world has dropped from 70,000 to under 10,000. The Soviets then sold their excess plutonium to the US, which has generated 20% of the total US electric power generation for two decades.

Shultz argued that nuclear weapons were not all they were cracked up to be. Despite the US being armed to the teeth, they did nothing to stop the invasions of Korea, Hungary, Vietnam, Afghanistan, and Kuwait.

Schultz told me that the world has been far closer to an accidental Armageddon than people realize.

Twice during his term as Secretary of State, he was awoken in the middle of the night by officers at the NORAD early warning system in Colorado to be told that there were 200 nuclear missiles inbound from the Soviet Union.

He was given five minutes to recommend to the president to launch a counterstrike. Four minutes later, they called back to tell him that there were no missiles, that it was just a computer glitch projecting ghost images on a screen.

When the US bombed Belgrade in 1989, Russian president Boris Yeltsin, in a drunken rage, ordered a full-scale nuclear alert, which would have triggered an immediate American counter-response. Fortunately, his generals ignored him.

I told Schultz that I doubted Iran had the depth of engineering talent needed to run a full-scale nuclear program of any substance.

He said that aid from North Korea and past contributions from the AQ Khan network in Pakistan had helped them address this shortfall.

Ever in search of the profitable trade, I asked Schultz if there was an opportunity in nuclear plays, like the Market Vectors Uranium and Nuclear Energy ETF (NLR) and Cameco Corp. (CCR), that have been severely beaten down by the Fukushima nuclear disaster.

He said there definitely was. In fact, he was personally going to lead efforts to restart the moribund US nuclear industry. The key here is to promote 5^th generation technology that uses small, modular designs, and alternative low-risk fuels like thorium.

Schultz believed that the most likely nuclear war will occur between India and Pakistan. Islamic terrorists are planning another attack on Mumbai. This time, India will retaliate by invading Pakistan. The Pakistanis plan on wiping out this army by dropping an atomic bomb on their own territory, not expecting retaliation in kind.

But India will escalate and go nuclear too. Over 100 million would die from the initial exchange. But when you add in unforeseen factors, like the broader environmental effects and crop failures (CORN), (WEAT), (SOYB), (DBA), that number could rise to 1-2 billion. This could happen as early as 2023.

Schultz argued that further arms control talks with the Russians could be tough. They value these weapons more than we do because that’s all they have left.

Schultz delivered a stunner in telling me that Warren Buffet had contributed $50 million of his own money to enhance security at nuclear power plants in emerging markets.

I hadn’t heard that.

As the event ended, I returned to Secretary Shultz to grill him some more about the details of the Reykjavik conference held some 36 years ago.

He responded with incredible detail about names, numbers, and negotiating postures. I then asked him how old he was. He said he was 100.

I responded, “I want to be like you when I grow up”.

He answered that I was “a promising young man.” I took that as encouragement in the extreme.

Stay healthy,

John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader

We’re Getting Pretty High

August 15, 2022/by Mad Hedge Fund Trader

March 25, 2022

Diary, Newsletter, Summary

Global Market Comments
March 25, 2022
Fiat Lux

Featured Trade:

(THE MAD HEDGE TRADERS & INVESTORS SUMMIT VIDEOS ARE UP!)
(MARCH 23 BIWEEKLY STRATEGY WEBINAR Q&A),
(QQQ), (TSLA), (BA), (DEER), (CAT),
(AAPL), (SLV), (FCX), (TLT), (TBT)

March 25, 2022/by Mad Hedge Fund Trader

March 23 Biweekly Strategy Webinar Q&A

Diary, Newsletter

Below please find subscribers’ Q&A for the March 23 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Silicon Valley.

Q: What is the best way to keep your money in cash?

A: That’s quite a complicated answer. If you leave cash in your brokerage account, they will give you nothing. If you move it to your bank account they will, again, give you nothing. But, if you keep the money in your brokerage account and then buy 2-year US Treasury bills, those are yielding 2.2% right now, and will probably be yielding over 3% in two years, so we’re actually being paid for cash for the first time in over ten years. And, as long as it’s in your brokerage account, you can then sell those Treasury bonds when you’re ready to go back into the market and buy your stock, same day, without having to perform any complicated wire transfers, which take a week to clear. Also, if your broker goes bankrupt and you hold Treasury bills, they are required by law to give you the Treasury bills. If you have your cash in a brokerage cash account, you lose all of it or at least the part above the SIPC-insured $250,000 per account. And believe me, I learned that the hard way when Bearings went bankrupt in the 1990s. People who had the Bearings securities lost everything, people who owned Treasury bills got their cashback in weeks.

Q: Is the pain over for growth stocks?

A: Probably yes, for the smaller ones; but they may flatline for a long time until a real earnings story returns for them. As for the banks, I think the pain is over and now it’s a question of just when we can get back in.

Q: Why did you initiate shorts on the Invesco QQQ Trust Series (QQQ) and SPDR S&P 500 ETF Trust (SPY) this week, instead of continuing with the iShares 20 Plus Year Treasury Bond ETF (TLT) shorts?

A: We are down 27 points in 10 weeks on the (TLT); that is the most in history. And every other country in the world is seeing the same thing. That is not shorting territory—you should have been shorting above $150 in the (TLT) when I was falling down on my knees and begging you to do so. Now it’s too late. If we get a 5-point rally, which we could get any time, that’s another story. It is so oversold that a bounce of some sort is inevitable. I’d rather be in cash going into that.

Q: Do you think Tesla (TSLA) has put in a bottom, or do you still see more downside? Is it time to buy?

A: The time to buy is not when it is up 50% in 3 weeks, which it has just done. The time to buy is when I sent out the last trade alert to buy it at $700. This was a complete layup as a long three weeks ago because I knew the German production was coming onstream very shortly; and that opens up a whole new continent, right when energy prices are going through the roof—the best-case scenario for Tesla. And the same is happening in the US—it’s a one-year wait now to get a new Model X in the US. In fact, I can sell my existing model X for the same price I paid for it 3 years ago, if I were happy to wait another year to get a replacement car.

Q: Will the Boeing (BA) crash in China damage the short-term prospects? And as a pilot, what do you think actually happened?

A: Boeing has been beat-up for so long that a mere crash in one of its safest planes isn’t going to do much. It could have been a maintenance issue in China, but the fact that there was no “mayday” call means only two or three possibilities. One is a bomb, which would explain there being no mayday call—the pilots were already dead when it went into freefall. Number two would be a complete structural failure, which is hard to believe because I’ve been flying Boeings my entire life, and these things are made out of steel girders—you can’t break them. And number three is a pilot suicide—there have been a couple of those over the years. The Malaysia flight that disappeared over the south Indian Ocean was almost certainly a pilot suicide, and there was another one in Germany and another in Japan about 20 years ago. So, if they come up with no answer, that's the answer. It’s not a Boeing issue, whatever it is.

Q: Is John Deer (DEER) or Caterpillar (CAT) a better trade right now?

A: It’s kind of six of one, half a dozen of the other. Caterpillar I’ve been following for 50 years, so I’m kind of partial to CAT, and Caterpillar has a much bigger international presence, but that could be a negative these days in a deglobalizing world.

Q: Apple (AAPL) has really caught fire past $170. Should I chase it here or wait until it’s too overbought?

A: I never liked chasing. Even a small dip, like we’re having today, is worth getting into. So always buy on the dips.

Q: Is Silver (SLV) still a good long-term play?

A: Yes, because we do expect EV production to ramp up as fast as they can possibly do it. Too bad the American companies don’t know how to make electric cars—they just haven’t been able to get their volumes up because of production problems that Tesla solved 12 years ago. So, long term, I think it will do better, but right now the risk-on move is definitely negative for the precious metals.

Q: How low will the iShares 20 Plus Year Treasury Bond ETF (TLT) go in April before the next Fed meeting?

A: I think we’re bottoming for the short term right around here. That’s why I had on that $127-$130 call spread in the (TLT) that I got stopped out of. And I may well end up being right, but with these call spreads, once you break your upper strike, the math goes against you dramatically. You go from like a 1-1 risk profile to like a 10-1 against you. So, you have to get out of those things when you break your upper strike, otherwise, you risk writing off the entire position with 100% loss. As long as Jay Powell keeps talking about successive half-point rate cuts, we will get lower lows, and my 2023 target for the TLT is $105, or about $20.00 points below here.

Q: Do you think we retest the bottoms?

A: Absolutely, yes; it just depends on where the test is successful—with a double bottom or with a retrace of half the recent moves. Keep in mind that stocks go up 80% of the time over the last 120 years, and that includes the Great Depression when they hardly went up at all for 10 years, so selling short is a professional’s game, and I wouldn’t attempt it unless you had somebody like me helping you. You're betting against the long-term trend with every short position. That said, if you’re quick you can make decent money. Most of the money we’ve made this year has been in short positions, both in stocks and in bonds.

Q: Where can we find this webinar?

A: The recording for this webinar will be posted on the website in about two hours. Just log into your account and you’ll find them all listed.

Q: When should I sell my tradable ProShares UltraShort 20+ Year Treasury ETF (TBT)?

A: You don’t have an options expiration to worry about, so I would just keep in until we hit $105 in the (TLT). If you do want to trade, I’d take a little bit off here and then try to re-buy it a couple of points lower, maybe 10% lower.

Q: What do you think of a Freeport McMoRan (FCX) $55-$60 vertical bull call spread?

A: The market has had such a massive move, that I’m reluctant to do out of the money call spreads from here unless we get a major dip. So, don’t reach for the marginal trade—that’s where you get your head handed to you.

Q: Will yield curve inversions matter this time and foretell a recession?

A: I think no, because corporate earnings are still growing, and by the summer, we probably will have a yield curve inversion.

Q: There seems to be some huge breakthrough in battery technology where batteries could be recharged within four minutes. I believe it’s the Chinese who have the tech, if so how will that impact on Tesla?

A: Every day of the year someone presents Tesla with a revolutionary new battery technology. It either doesn’t work, can’t be mass-produced, or is wildly uneconomical. So, I’ll confine my bet that Tesla will be able to eventually mass produce solid state batteries and get their 95% cost reduction that way.

To watch a replay of this webinar with all the charts, bells, whistles, and classic rock music, just log in to www.madhedgefundtrader.com, go to MY ACCOUNT, click on GLOBAL TRADING DISPATCH, then WEBINARS, and all the webinars from the last ten years are there in all their glory.

Good Luck and Stay Healthy.

John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader

March 25, 2022/by Mad Hedge Fund Trader

March 4, 2022

Diary, Newsletter, Summary

Global Market Comments
March 4, 2022
Fiat Lux

Featured Trade:

(MARCH 2 BIWEEKLY STRATEGY WEBINAR Q&A),
(QQQ), (TSLA), (FCX), (JPM), (BAC), (MS), (TLT),
(TBT),(BA), UPS (UPS), (CAT), (DIS), (DAL),
(GOLD), (VIX), (VXX), (CAT), (BA)

March 4, 2022/by Mad Hedge Fund Trader

March 2 Biweekly Strategy Webinar Q&A

Diary, Newsletter

Below please find subscribers’ Q&A for the March 2 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Incline Village, Nevada.

Q: Do you think Vladimir Putin will give up?

A: He will either be forced to give up, run out of resources/money, or he will suddenly have an accident. When the people see their standard of living go from a per capita income of $10,000/year today to $1,000—back to where it was during the old Soviet Union—his lifespan will suddenly become very limited.

Q: Would you be buying Invesco Trusts (QQQs) on dips?

A: I think we have a few more horrible days—sudden $500- or $1,000-point declines—but we’re putting in a bottom of sorts here. It may take a month or two to finalize, but the second buying opportunity of the decade is setting up; of course, the other one was two years ago at the pandemic low. So, do your research, make your stock picks now, and once we get another absolute blow-up to the downside, that is your time to go in.

Q: Materials have gone up astronomically, are they still a buy?

A: Yes, on dips. I wouldn't chase 10% or 20% one-week moves up here—there are too many other better trades to do.

Q: Is it time to go long aggressively in Europe?

A: No, because Europe is going to experience a far greater impact economically than the US, which will have virtually none. In fact, all the impacts on the US are positive except for higher energy prices. So, I think Europe will have a much longer recovery in the stock market than the US.

Q: Would you take a flier on a Russian ETF (RSX)?

A: No, most, if not all, of them are about to be delisted because they have been banned or the liquidity has completely disappeared. The (RSX) has just collapsed 85%, from $26 to $4. Virtually all of Russia is for sale, not only stocks, bonds, junk bonds, ETFs, but also joint ventures. ExxonMobil, Shell and BP are all dumping their ownership of Russian subsidiaries as we speak.

Q: Time for a Freeport-McMoRan (FCX) LEAP?

A: No, November was the time for an (FCX) LEAP—we’ve already had a massive run now, up 66% in five months, so wait for the next dip. The next LEAPS are probably going to be in technology stocks in a few months.

Q: My iShares 20 Plus Year Treasury Bond ETF (TLT) call $130 was assigned, What should I do?

A: Call your broker immediately and tell them to exercise your 127 to cover your short in the 130. They usually charge a few extra fees on that because they can get away with it, but you’ve just made the maximum profit on the position. If you haven’t been exercised yet, that 127/130 call spread will expire at max profit in 10 days.

Q: What if I get my short side called away on a position?

A: Use your long side calls to execute immediately to cover your short side. These call spreads are perfectly hedged positions, same name, same maturity, same size, just different strike prices. If your broker doesn’t hear from you at all, they will just exercise the short call and leave you long the long call, and that can lead to a margin call. So the second you get one of these calls, contact your broker immediately and get out of the position.

Q: Is it safe to put 100% of your money in Tesla (TSLA) for the long term?

A: Only if you can handle a 50% loss of your money at any time. Most people can't. It’s better to wait for Tesla to drop 50%, which it has almost done (it’s gotten down to $700), and then put in a large position. But you never bet all your money on one position under any circumstances. For example, what if Elon Musk died? What would Tesla’s stock do then? It would easily drop by half. So, I’ll leave the “bet the ranch trades” for the younger crowd, because they’re young enough to lose all their money, start all over again, and still earn enough for retirement. As for me, that is not the case, so I will pass on that trade. You should pas too.

Q: Do you foresee NASDAQ (QQQ) being up 5-10% or 10-20% by year-end?

A: I do actually, because business is booming across tech land, and the money-making stocks are hardly going down and will just rocket once the rotation goes back into that sector.

Q: We could see an awful earnings sequence in April, which could put in the final bottom on this whole move.

A: That is right. We need one more good capitulation to get a final bottom in, and then we’re in LEAP territory on probably much of the market. We know we’re having a weak quarter from all the anecdotal data; those companies will produce weak earnings and the year-on-year comparisons are going to be terrible. A lot of companies will probably show down turns in earnings or losses for the quarter, that's all the stuff good bottoms are made out of.

Q: What should we make of the Russian threats of WWIII going Nuclear?

A: I think if Putin gave the order, the generals would ignore it and refuse to fire, because they know it would mean suicide for the entire country. Mutual Assured Destruction (MAD) is still in place, and it still works. And by the way, it hasn’t been in the media, but I happen to know that American nuclear submarines with their massive salvos of MIRVed missiles, have moved much closer to Russian waters. So, you're looking at a war that would be over in 15 minutes. I think that would also be another scenario in which they replace Putin: if he gives such an order. This has actually happened in the past; people without top secret clearance don’t know this but Boris Yeltsen actually gave an order to launch nuclear missiles in the early 90s when he got mad at the US about something. The generals ignored it, because he was drunk. And something else you may not know is that 95% of the Russian nuclear missiles don’t work—they don’t have the GDP to maintain 7,000 nuclear weapons at full readiness. Plutonium is one of the world’s most corrosive substances and very expensive to maintain. Only a wealthy country like the US could maintain that many weapons because it’s so expensive. So no, you don’t need to dig bomb shelters yet, I think this stays conventional.

Q: Banks like (JPM), (BAC), AND (MS) are at a low—are they a buy?

A: Yes, but not yet; wait for more shocks to the system, more panic selling, and then the banks are absolutely going to be a screaming buy because they are on a long-term trend on interest rates, strong economy, lowering defaults—all the reasons we’ve been buying them for the last year.

Q: Should I short bonds or should I buy Freeport up 60%?

A: Short bonds. Next.

Q: Should I buy Europe or should I short bonds?

A: Short bonds. That should be your benchmark for any trade you’re considering right now.

Q: How much and how quickly will we see a collapse in defense stocks?

A: Well, you may not see a collapse in defense stocks, because even if Russia withdraws from Ukraine, they still are a newly heightened threat to the West, and these increases in defense spending are permanent. That’s why the stocks have gone absolutely ballistic. Yeah sure, you may give up some of these monster gains we’ve had in the last week, but this is a dip-buying sector now after being ignored for a long time. So yes, even if Russia gives up, the world is going to be spending a lot more on defense, probably for the rest of our lives.

Q: Just to confirm, LEAP candidates are Boeing (BA), UPS (UPS), Caterpillar (CAT), Disney (DIS), Delta Airlines (DAL)?

A: I would say yes. You may want to hold off, see if there’s one more meltdown to go; or you can buy half now and half on either the next meltdown or the melt-up and get yourself a good average position. And when I say LEAPS, I mean going out at least a year on a call spread in options on all of these things.

Q: Is $143 short safe on the (TLT)?

A: Definitely, probably. In these conditions, you have to allow for one day, out of the blue, supers pikes of $3 like we got last week, or $5 trins week, only to be reversed the next day. The trouble is even if it reverses the next day, you’re still stopped out of your position. So again, the message is, don’t be greedy, don’t over-leverage, don’t go too close to the money. There’s a lot of money to be made here, but not if you blow all your profits on one super aggressive trade. And take it from someone who’s learned the hard way; you want to be semi-conservative in these wild trading conditions. If you do that, you will make some really good money when everyone else is getting their head handed to them.

Q: Would you go in the money or out of the money for Boeing (BA) and Caterpillar (CAT)?

A: It just depends on your risk tolerance. The best thing here is to do several options combinations and then figure out what the worst-case scenario is. If you can handle that worst-case scenario without stopping out, do those strikes. These LEAPS are great, unless you have to stop out, and then they will absolutely kill you. And usually, you only do these with sustained uptrends in place; we don’t have that yet which is why I’m saying, watch these LEAPS. Don’t necessarily execute now, or if you do, just do it in small pieces and leg in. That is the smart answer to that.

Q: What’s the probability that the CBOE Volatility Index (VIX) makes a new high in the next 2 weeks?

A: I give it 50/50.

Q: Call options on the VIX?

A: No, that’s one of the super high-risk trades I have to pass on.

Q: How low can the VIX go down this month?

A: High ten’s is probably a worst-case scenario.

Q: LEAPS on Barrick Gold Corporation (GOLD)?

A: No, that was a 3-month-ago trade. Now it’s too late, never consider a LEAP at an all-time high or close to it.

Q: Time to short oil?

A: Not yet. We have some spike top going on in oil. It’s impossible to find the top on this because, while bottoms are always measurable with PE multiples and such, tops are impossible to measure because then you’re trying to quantify human greed, which can’t be done. So yeah, I would stand by; it’s something you want to sell on the way down. This is the inverse of catching a falling knife.

To watch a replay of this webinar with all the charts, bells, whistles, and classic rock music, just log in to www.madhedgefundtrader.com , go to MY ACCOUNT, click on GLOBAL TRADING DISPATCH, then WEBINARS, and all the webinars from the last ten years are there in all their glory.

Good Luck and Stay Healthy.

John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader

March 4, 2022/by Mad Hedge Fund Trader

August 27, 2021

Diary, Newsletter, Summary

Global Market Comments
August 27, 2021
Fiat Lux

Featured Trade:

(AUGUST 25 BIWEEKLY STRATEGY WEBINAR Q&A),
(ROM), (EEM), (FXI), (DIS), (AMZN), (NFLX), (CHPT), (TLT), (TBT), (AAPL),
(GOOG), (WPM), (GOLD), (NEM), (GDX), (X), (SLV), (FCX), (BA), (HOOD), (USO)

August 27, 2021/by Mad Hedge Fund Trader

August 25 Biweekly Strategy Webinar Q&A

Diary, Newsletter, Research

Below please find subscribers’ Q&A for the August 25 Mad Hedge Fund Trader Global Strategy Webinar broadcast from The Atlantis Casino Hotel in Reno, NV.

Q: How does a 2X ProShares Ultra Technology ETF (ROM) February 2022 vertical bull call spread on the ROM look? Would you do $110-$115 or $115-$120?

A: I would do nothing here at $112.50 because we’ve just gone up 10 points in a week. I’d wait for some kind of pullback, even just $5 or $10 points, and then I would do the $110-$115. I’m leaning towards more conservative LEAPS these days—bets that the market goes sideways to up small rather than going ballistic, which it has done for the last 18 months. Think at-the-money strikes, not deep out-of-the-money on your LEAPS from here on for the rest of this economic cycle. The potential profits are still enormous. The only problem with (ROM) is that the longest maturities on the options are only six months.

Q: How do you recommend entering your long-term portfolio?

A: I would use the one-third rule: you put on ⅓ now, ⅓ higher or lower later on, and ⅓ higher or lower again. That way you get a good average price. Long term, everything goes up until we hit the next recession, which is probably several years off.

Q: I keep reading that the Delta variant is a market risk, but I don’t think that investors will look through this. Is Delta already priced into the shares?

A: Yes, what is not priced into the shares is the end of Delta, the end of the pandemic—and that will lead to my “everything” rally that I’ve been talking about for a month now. And we have already seen the beginning of that, especially with the price action this week. So yes, Delta in: dead market; Delta out: roaring market.

Q: Do you think there will eventually be a rotation into emerging markets (EEM), or has the virus battered these markets too much to even consider it?

A: Sometime in our future—not yet—the emerging markets will be our core holding. And the trigger for that will be the collapse of the dollar, which is hitting an interim high right now. When the greenback rolls over and dies, you can expect emerging markets, especially China, to take off like a rocket. That’s going to be our next big trade. I don't know if it will be this year or next year but it’s coming, so start doing your emerging market research now, and keep reading my newsletter.

Q: Is the coming tax hike a problem for the stock market?

A: No, I don’t think so. First off, I don’t think they’re going to do a tax bill this year; they don’t want anything to interfere with the 2022 election, so it may be next year’s business. Also, any new taxes are going to be overwhelmingly focused on billionaires, carried interest, offshoring, and large corporations. The middle class, people who make less than $400,000 a year, will not see any tax hike at all, possibly even getting some tax cuts via restored SALT deductions. So, I don't really see it affecting the stock market at all.

Q: What do you think about Chinese stocks (FXI)?

A: Long-term they’re okay, short term possibly more downside. Interestingly, the bigger risk may not be China itself and how the government is beating up its own tech companies, but the SEC. It has indicated they don’t really like these offshore vehicles that have been listed on the New York Stock Exchange, and they may move to ban them. I’m not rushing into China right now, only because there are just so many better opportunities in the US stock market for the time being. I may go back in the future—it’s a case where I’d rather buy them on the way up than trying to catch a falling knife on China right now.

Q: Do you expect any market impact from the Jackson Hole meeting?

A: Yes, whatever J Powell says, even if he says nothing, will have a market impact. And it will have a bigger impact on the bond market than it will on the stock market, which is down a full point this morning. So yes, but not yet. I imagine we’ll hear something very soon.

Q: September and October tend to be volatile; do you see us having a 5% or 10% pullback in those months?

A: I don’t see any more than 5%, with the hyper liquidity that we have in the system now. There just aren’t any events out there that could trigger a pullback of 10%—no geopolitical events, and the economy will be getting stronger, not worse. So yes, an “everything rally” doesn’t give you many long side entry points, so I just don’t see 10% happening.

Q: What about a Walt Disney (DIS) January 2022 $180-$220 LEAPS?

A: I would do the $180-$200. I think you can afford to be tighter on your spread there, take some more risk because I think it’s just going to go nuts to the upside once we get a drop in COVID cases. By the way, Disney parks are only operating at 70% capacity, so if you go back up to 100% that's a near 50% increase in profits for the company. And it’s not just Disney, but Netflix (NFLX), Amazon (AMZN), and everybody else that’s about to have the greatest number of blockbuster movies released of all time. They’re holding back their big-ticket movies for the end of the pandemic when people can go back into theaters. We’ll start seeing those movies come out in the last quarter of this year, and I’m particularly looking forward to the next James Bond movie, a man after my own heart.

Q: Are EV car charging companies like ChargePoint Holdings (CHPT) going to do as well as the car companies?

A: No. They’re low margin business, so it’s not a business model for me. I like high-profit margins, huge barriers to entry, and very wide moats, which pretty much characterizes everything I own. The big profits in EVs are going to be in the cars themselves. Charging the cars is a very capital-intensive, highly regulated, and low-margin business.

Q: Would a Fed taper cause a 10% pullback?

A: Absolutely not; in fact, I think a taper would make the market go up because Jay Powell has been talking it into the market all year. And that’s his goal, is to minimize the impact of a taper so when they finally do it, they say ho-hum and “okay you can take that risk out of the market.” That’s the way these things work.

Q: What is your yearend target for United States Treasury Bond Fund (TLT)?

A: $132. Call it bold, but I'm all about bold. I think the first stop will be at $144, then $138, then bombs away!

Q: What will it take for (TLT) to dip below $130?

A: Another year of hot economic growth, which Congress seems hell-bent on delivering us.

Q: What are your ProShares Ultra Short 20+ Year Treasury ETF (TBT) targets?

A: When we were at 1.76% on the 10-year bond, the (TBT) made it all the way back to 22 ½. Next year we go higher, probably to $25, maybe even $30.

Q: What’s your 10-year view on the (TBT)?

A: $200. That’s when you get interest rates back to 10% in 10 years on the 10-year bond. So yes, that’s a great long-term play.

Q: How long can we hold (TBT)?

A: As long as you want. Ten years would be a good time frame if you want to catch that $17 to $200 move. The (TBT) is an ETF, not an option, therefore it doesn’t expire.

Q: Are you working on an electrification stock list?

A: I am not, because it’s such a fragmented sector. It’s tough to really nail down specific stocks. I think it’s safe to say that the electric power grid is going to change beyond all recognition, but they won’t necessarily be in high margin companies, and I tend to prefer high-profit-margin, large-moat companies which nobody else can get into, like Apple (AAPL) or Google (GOOG).

Q: What about gas pipelines with high yields?

A: They have a high yield for a reason; because they’re very high risk. If you're going to a carbon-free economy, you don’t necessarily want to own pipelines whose main job is moving carbon; it’s another buggy whip-type industry I would avoid. I’ve seen people get wiped out by these things more times than I could count. If you remember Master Limited Partnerships, quite a few of them went bankrupt last year with the oil crash, so I would avoid that area. These tend to be very highly leveraged and poorly managed instruments.

Q: Best play on silver (SLV)?

A: Wheaton Precious Metals (WPM) is the highest leveraged silver play out there, and a great LEAPS candidate. Go out 2 years and triple your money.

Q: Geopolitical oil (USO) risks?

A: No, nobody cares about oil anymore—that’s why we’re giving up on Afghanistan. China is buying 80% of the Persian Gulf oil right now. We don’t really need it at all, so why have our military over there to protect China’s oil supply?

Q: What about Freeport McMoRan (FCX)?

A: I absolutely love it. Any big economic recovery can’t happen without copper, and you have a huge tailwind there from electric cars which need 200 pounds of copper each, as opposed to 20 pounds in conventional cars.

Q: I see AMC Entertainment Holdings (AMC) is up 20% today; should everyone be chasing this stock?

A: No, absolutely not. (AMC) and all the meme stocks aren’t investments, they’re gambling, and there are better ways to gamble.

Q: Should I buy the lumber dip?

A: Yes. I think the slowdown on housing is temporary because it will take 10 years for supply and demand in the housing market to come back into balance because of all the millennials entering the housing market for the first time. So, that would be a yes on lumber and all the other commodities out there that go into housing like copper, steel, and aluminum.

Q: Should I put money into Canadian Junior Gold Miners (GDX)?

A: No, I would rather go out and take a long nap first. These are just so high risk, and they often go bankrupt. The liquidity is terrible, and the dealing spreads are wide. I would stick with the bigger precious metal plays like Newmont Mining (NEM), Barrick Gold (GOLD), and Wheaton Precious Metals (WPM).

Q: Is Boeing (BA) a buy here?

A: Yes, we’re back at the bottom end of the trading range for the stock. It’s just a matter of time before they get things right, and the 737 Max orders are rolling in like crazy now that there’s an airplane shortage.

Q: What do you think about Robinhood (HOOD)?

A: I like it quite a lot; I got flushed out of my long position on Friday with a 10% down move. Of course, 90% of my stop losses end up expiring at their maximum profit points, but I have to do it to keep the volatility of the portfolio down. So yes, I’ll try to buy it again on the next dip. The trouble is it’s kind of a quasi-meme stock in its own right, hence the volatility; so I would say on the next 10% down day, you go into Robinhood, and I probably will too.

Q: How are the wildfires around Tahoe?

A: They’re terrible and there are three of them. I did a hike two days ago there, and out of a parking lot with 100 spaces, I was the only one there. It’s the only time I’d ever seen Tahoe deserted in August. With visibility of 500 yards, it's just terrible. Fortunately, I was able to hike without coughing my guts out—it’s not so thick that you can’t breathe.

Q: What do you think of US Steel (X)?

A: I like it, I think the whole industrial commodity complex rallies like crazy going into the end of the year.

Q: As a new member, where is the best place to start? It’s just kind of like drinking from a fire hose.

A: Wait for the trade alerts; they only happen at sweet spots and you may have to wait a few days or weeks to get one since we only like to enter them at good points. That’s the best place to enter new positions for the first time. In the meantime, keep reading all the research, because when these trade alerts do come out, they’re not surprises because I’m pumping out research on them every day, across multiple fronts. Be patient— we are running a 93% success rate, but only because we take our time on entering good trades. The services that guarantee a trade alert every day lose money hand over fist.

Q: If they do delist Chinese stocks, will US investors be left holding the bag?

A: Yes, and that will be the only reason they don’t delist them, that they don’t want to wipe out all current US investors.

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 (whichever applies to you), then select WEBINARS and all the webinars from the last ten years are there in all their glory.

Good Luck and Stay Healthy.

John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader