Global Market Comments
April 1, 2025
Fiat Lux
Featured Trade:
(REVISITING THE FIRST SILVER BUBBLE),
(SLV), (SLW)
Posts
Global Market Comments
March 31, 2025
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or STAGFLATION IS ON!)
(COST), (BRK/B), (GS), (MS), (NVDA), (AMZN), (TLT), (GLD), (GM), (TSLA)
Global Market Comments
March 3, 2025
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or ARMAGEDDON)
(JPM), (IBKR), (TSLA), (NVDA), (TLT), (GS), (BRK/B), (PRIV), (GLD), (FXI)
Armageddon is not a word I use lightly. But this weekend, every technical service I subscribed to warned that the recent damage to the market was immense. It’s time to raise cash, hedge your positions, or otherwise position for a bear market.
I have noticed over the past half-century that the best technicians spend a lot of time reading up on fundamentals, and the best fundamentalists spend a lot of time looking at charts. When both go to hell in a handbasket, as they are now, it’s time to head for the hills.
The only way Armageddon can be avoided, or at least postponed, is if the trade war, which is about to cut S&P 500 (SPY) earnings by half, suddenly ends. Only one person knows if that is going to happen, and he isn’t sharing any of his cards with me.
If the trade war continues or expands, the math here becomes very simple. The shares of companies that earn less money are worth less.
You learn in flight school that accidents aren’t usually the result of a single problem but several compounding ones. I know this too well because I have crashed three planes, in the Austrian Alps, in Sicily, and in Paris. First, the gyroscope blows up, then the radio goes out, and then you lose an engine when the weather turns bad. It doesn’t help when someone is shooting at you, either.
The problem for stock owners now is that there isn’t just one thing going wrong with the investment landscape right now; there are several compounding ones, like inflation, immigration, taxes, the deficit, the Ukraine War, and the end of American leadership of the West.
Loss of confidence in the top, which took a quantum leap downward in the wake of the dumpster fire at a White House Zelinski meeting, has consequences. At this point, every businessman in America is asking himself if he can survive the current regime.
With a scant one-seat majority in Congress, a budget can’t pass by March 14, when a government shutdown begins. It means that there will be no new tax cuts by year-end. Chaos ratchets up. Businessmen hate chaos.
It also means that the 2017 tax cuts extension isn’t going to happen, which adds $5 trillion in new taxes on the country just when the economy is slowing dramatically. Uncertainty runs rampant.
Here's the problem for investors with that. Confident markets trade at big premiums, as we saw for the last three years. Uncertain markets trade at big discounts. If I’m right, that discount will be 20%. If I’m wrong, it's 50%.
Ceding America’s leadership of the West comes at a heavy price. It started 80 years ago with the end of WWII. American stock markets have done pretty well during this time, rising by 435 times. Why anyone would want to give up such a system is beyond me.
For example, the US dollar would lose its reserve currency status. There is no way the national debt could have risen to $36 trillion, half of which was bought by foreigners, and all of which was used to stimulate the economy, without reserve currency status. Take that away, and economic growth goes elsewhere. So do higher stock prices, which we have already seen this year in China and Europe.
There is a fundamental repricing of the market taking place, and we are only just at the beginning.
About that economy thing. On Friday, the Atlanta Fed predicted that the US economy SHRANK by -1.5% in Q1. It would be easy to say, “There goes the Atlanta Fed again,” whose model is always prone to extreme predictions. But it is safe to say that the economy is either not growing or growing at a dramatically slowing rate.
The problem for investors? Reliable growing economies, which we have had since the Pandemic five years ago, support high stock multiples. Non-growing or shrinking economies can only support low earnings multiple. Remember back in 2009, the S&P 500 traded at a lowly multiple of only 9X, against today’s 25X.
This isn’t just me howling at the moon. With a meteoric $10 rally this year, the bond market is starting to warn of a coming recession. Ten-year US Treasury bond yields have cratered from 4.80% to 4.20%. This is in the face of massive bond issuance in 2025, some $1.7 trillion worth, the product of the 2017 Trump tax cuts. Almost all new government policies are anti-economy and anti-growth.
The DOGE campaign is sucking massive amounts of money out of the economy. The yield curve has inverted, meaning that short-term interest rates are higher than long-term ones, indicating that the recession risk is real.
The dividend yield on the S&P 500 is at 1.2%. It was 2% only a couple of years ago. That is not much yield competition.
As I have been warning my Concierge members for weeks, get rid of all the stocks and asset classes you have been dating and only keep the ones you are married to. And what you keep should be hedged, such as through selling short call options against your longs, buying the (SDS), the 2X short S&P 500 ETF. And then there are 90-day US Treasury bills yield 4.2%, where nobody has ever lost money.
I learned something interesting the other day about your largest holding.
Some 70% of Nvidia is now held by indexes like the S&P 500. That’s because it has become an index proxy. It means that the shares have become an index hedge for hedge funds against which they can trade a myriad of options. This is why the (NVDA) options have implied volatilities four times those of the (SPY). It is a great arbitrage.
I watch closely the launch of new ETFs and write about the most interesting ones. I have been inundated by requests for private credit investments, which, by definition, are not available to the public.
Now, we will soon have the SPR SSGA Apollo IG Public & Privat Credit ETF (PRIV) out soon (https://www.ssga.com/us/en/intermediary/etfs/spdr-ssga-apollo-ig-public-private-credit-etf-priv ).
The fund will launch with an initial $50 million, and the minimum investment is $100,000. The fund essentially offers daily liquidity for illiquid long-duration loans. The yield should be in line with private illiquid debt, or about 10%-12%.
How they pull this off is anybody’s guess. Past funds that tried to do this closed their doors during times of economic distress, known as “gating, “so beware of gating when market conditions turn less than ideal. The fund promises to hold up to 35% of its funds in private credit and the rest in a mix of junk bonds. No word yet on the yield, but it will be much higher than the leading junk bond fund (JNK), which is offering 6.48%.
February has started with a respectable +2.25% return so far. That takes us to a year-to-date profit of +9.46% so far in 2025. My trailing one-year return stands at a spectacular +81.87% as a bad trade a year ago fell off the one-year record. That takes my average annualized return to +49.83% and my performance since inception to +761.36%.
I saw the market breakdown coming a mile off and used my 90% cash to pile into new very short-term longs in JP Morgan (JPM), Interactive Brokers (IBKR), Tesla (TSLA), and Gold (GLD). I poured into new short positions with Tesla (TSLA), Nvidia (NVDA), and the United States US Treasury Bond Fund (TLT). This is in addition to an existing long in Goldman Sachs (GS). Last week, I leapt from 90% cash to 40% long, 40% short, and 20% cash.
Some 63 of my 70 round trips, or 90%, were profitable in 2023. Some 74 of 94 trades have been profitable in 2024, and several of those losses were really break-even. That is a success rate of +78.72%.
Try beating that anywhere.
Core PCE Price Index Comes in Line. The personal consumption expenditures price index, the Federal Reserve’s preferred inflation measure, increased 0.3% for the month and showed a 2.5% annual rate. Excluding food and energy, core PCE also rose 0.3% for the month and was at 2.6% annually. Fed officials more closely follow the core measure as a better indicator of longer-term trends. Personal income posted rose 0.9% against expectations for a 0.4% increase. However, the higher incomes did not translate into spending, which decreased by 0.2%, versus the forecast for a 0.1% gain.
Retail Investors Market Sentiment Hit All-Time Bearish Highs. Options activity has also taken a big swing towards put buying. Dump all the stocks you were dating. Both Nvidia (NVDA) and Tesla (TSLA), the two most widely traded stocks in the market, broke their 200-day moving averages today. This is a very negative medium-term indicator. Only keep the ones you’re married to, not the ones you’re dating. This is not the rose garden we were promised.
US Margin Debt Hits All-Time High, at $937 billion as of January. That’s up 33% from $701 billion in January 2024. Over the same period, the S&P 500 gained 24.7%. Speculation on credit is running rampant. Margin trading, in which investors borrow funds from their brokerage firms in order to buy stocks, can amplify returns.
Weekly Jobless Claims Jump to 242,000, up 22,000, as the government firings kick in. In Washington, D.C., new claims totaled 2,047, an increase of 421, or 26%, the largest number for the city since March 25, 2023.
Nvidia Beats (NVDA) even the most optimistic expectations. The company forecasted higher first-quarter revenue, signaling continued strong demand for artificial intelligence chips, and said orders for its new Blackwell semiconductors were "amazing." The forecast helps allay doubts around a slowdown in spending on its hardware that emerged last month, following DeepSeek's claims that it had developed AI models rivaling Western counterparts at a fraction of their cost. Nvidia's outlook for gross margin in the current quarter was slightly lower than expected, though, as the company's Blackwell chip ramp-up weighs on Nvidia's profit. Nvidia forecast first-quarter gross margins will sink to 71%, below the 72.2% forecast by Wall Street, according to data compiled by LSEG.
Gold ETFs (GLD) Have Become a Hot Commodity, with $4.5 billion pouring into (GLD) — with around half of that inflow occurring during Friday’s stock market selloff. The flight to safety bid is on. Those moves come as gold prices are at all-time highs in early 2025, boosted by trade uncertainty and inflation concerns. Buy (GLD) on dips.
Chinese Inflation (FXI) Hits 20-Year Lows, as the economy continues in free fall. Beijing is also expected to release its plans for spending on defense and technological development in the year ahead, along with details on private sector support. Last year, the inflation rate came in at only 0.2%.
Pending Homes Sales Hit All-Time Low, in January down 4.6% MOM and 5.2% YOY. Inventories are rising, but affordability is at record lows. Exceptionally cold weather was a factor. Homebuilder Sentiment plummeted to 42, a two-year low, and tariff concerns. Our drywall comes from Mexico, and our lumber comes from Canada. Avoid all real estate plays like the plague.
Home Prices are Still Rising, according to the S&P Case Shiller National Home Price Index. House prices rose 0.4%. They increased 4.7% in the 12 months through December. The strong increase in prices was despite rising housing supply, which is being driven by ebbing demand amid higher mortgage rates. New York showed the biggest gain at 7.2% YOY, followed by Chicago at 6.6% and Boston at 6.35%. Washington, DC, was the only city showing a loss at -1.1%.
Consumer Confidence Collapses to a Four-Year Low, down 7 points from 105 to 98, as tariff-driven inflation fears ramp up. The Conference Board’s Consumer Confidence Index for February, released Tuesday morning, fell to 98.3, falling for the third-straight month and marking the largest monthly decline since August 2021. Technology stocks sold off hard. Bonds are starting to discount a recession.
Berkshire Hathaway (BRK/B) Builds Record Cash, at $334 billion, up $9 billion in December alone. The Oracle of Omaha has been selling huge chunks of Apple (AAPL) and Bank of America (BAC) and putting the money into US Treasury Bills. Warren earned an eye-popping $47 billion in 2024, up 27% YOY. A price earnings multiple at a record 25X for the S&P 500. If Warren Buffet is selling, should you be buying?
Jamie Dimon Sells 30% of JP Morgan Stock, yet another indicator of a market top. Jamie is famous for loading up on (JPM) at the absolute market bottom in 2009. Does he know something we don’t? Banks have been the lead sector in the market since the summer.
Existing Homes Sales Crater, on a closing contract basis, down 4.9% in January to 4.09 million units. Terrible weather was a factor. Inventories are up 17% YOY and 3.5% for the month. Al cash sales hit 29%. The average price of a home is at an all-time high at $396,800, up 4.5% YOY.
My Ten-Year View – A Reassessment
We have to substantially downsize our expectations of equity returns in view of the election outcome. My new American Golden Age, or the next Roaring Twenties, is now looking at multiple gale force headwinds. The economy will completely stop decarbonizing. Technology innovation will slow. Trade wars will exact a high price. Inflation will return. The Dow Average will rise by 600% to 240,000 or more in the coming decade. The new America will be far more efficient and profitable than the old.
My Dow 240,000 target has been pushed back to 2035.
On Monday, March 3 at 8:30 AM EST, the ISM Manufacturing PMI is announced.
On Tuesday, March 4 at 8:30 AM, the API Crude Oil Stocks is released.
On Wednesday, March 5 at 8:30 AM, the ADP Employment Index is printed.
On Thursday, March 6 at 8:30 AM, the Weekly Jobless Claims are disclosed.
On Friday, March 7 at 8:30 AM, the Nonfarm Payroll Report for February is announced, as well as the headline Unemployment Rate. At 2:00 PM, the Baker Hughes Rig Count is printed.
As for me, I’ll never forget when my friend Don Kagin, one of the world’s top dealers in rare coins, walked into my gym one day and announced that he had made $1 million that morning. I enquired. “How is that, pray tell?”
He told me that he was an investor and technical consultant to a venture hoping to discover the long-lost USS Central America, which sunk in a storm off the Atlantic Coast in 1857, heavily laden with gold from the California gold fields. He just received an excited call that the wreck had been found in deep water off the US east coast.
I learned the other day that Don had scored another bonanza in the rare coins business. He had sold his 1787 Brasher Doubloon for $7.4 million. The price was slightly short of the $7.6 million that a 1933 American $20 gold eagle sold for in 2002.
The Brasher $15 doubloon has long been considered the rarest coin in the United States. Ephraim Brasher, a New York City neighbor of George Washington, was hired to mint the first dollar-denominated coins issued by the new republic.
Treasury Secretary Alexander Hamilton was so impressed with his work that he appointed Brasher as the official American assayer. The coin is now so famous that it is featured in a Raymond Chandler novel where the tough private detective, Phillip Marlowe, attempts to recover the stolen coin. The book was made into a 1947 movie, “The Brasher Doubloon,” starring George Montgomery.
This is not the first time that Don has had a profitable experience with this numismatic treasure. He originally bought it in 1989 for under $1 million and has made several round trips since then. The real mystery is who bought it last. Don wouldn’t say, only hinting that it was a big New York hedge fund manager who adores the barbarous relic. He hopes the coin will eventually be placed in a public museum.
Mad Hedge followers should start paying more attention to gold, which I believe just entered another decade-long bull market, thanks to falling US interest rates. You can’t go wrong buying LEAPS in the top two miners, Barrack Gold (GOLD) and Newmont Mining (NEM).
Who says the rich aren’t getting richer?
Good Luck and Good Trading,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
February 28, 2025
Fiat Lux
Featured Trade:
(FEBRUARY 26 BIWEEKLY STRATEGY WEBINAR Q&A),
(BTC), (NVDA), (TSLA), (BRK/B), (JNK), (TLT), ($WTIC)
Below, please find subscribers’ Q&A for the February 26 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Incline Village, NV.
Q: Isn’t this just a cyclical thing? Don’t all bull markets come to an end?
A: Yes, they do. But this time around, it looks like the market is being pushed off a cliff. I guess you have to say that uncertainty is the new element here. Depending on who you talk to, uncertainty is either at a 5-year high, a 30-year high, or a 96-year high (the 1929 crash). Suffice it to say that with the election results being so close (it was the 3rd closest election in history), that means essentially half of all voters are going to be pissed off no matter what happens. It’s a no-win situation. Plus, you go in with multiples at—depending on how you measure them—30-year highs or 96-year highs and dividend yields at all-time lows. A lot of these stocks have gotten stupidly expensive and are begging for a selloff. That is not a good environment to ratchet off the uncertainty.
Q: Should I buy Bitcoin (BTC) on the dip since it’s down about 15 or 20% from the highs?
A: Absolutely not. If you’re going to take a flyer, it was when it was at $6,000, not at $90,000. You can always tell when an asset class is topping because suddenly, I get a bunch of people asking if they should buy it. I've been getting that from Bitcoin all year, and the answer is absolutely not. We're looking for value here, and there's no value to be found anywhere. With Bitcoin, the question you really have to ask is: What happens when Trump leaves office? Does Bitcoin become regulated again? The answer is probably yes, so if the entire rally from $50,000 to $108,000 was based on deregulation, what happens when you re-regulate? So, no thank you, Bitcoin.
Q: Should I sell Tesla (TSLA) and Nvidia (NVDA) LEAPS?
A: It depends on your strike prices, if you're still deep in the money, I would hang on. I think the worst case is Nvidia drops to maybe $100 and Tesla drops to maybe $250. What you should have done is take profits 3 months ago when these things were at all-time highs. I did. Whenever you get up to 80% or 90% of the maximum potential profit on profit LEAPS, you should take that, especially if you have more than a year to run to expiration, because they will go to money heaven if you get a correction like this. Leave the last 10% for the next guy. So yes, I would be de-risking, you know, give all your portfolios a good house cleaning and get rid of whatever you’re not happy to keep for the next several years.
Q: What about LEAPS on financials?
A: I do think financials will come back; it’s just a question of how far they’ll drop first, and you can see I put my money where my mouth is with two financial LEAPS for the short term.
Q: Apple (APPL) expects to increase its dividends. Should I buy the stocks?
A: Actually, Apple has gone down the least out of any of the magnificent 7, but they all tend to trade as a bunch. Apple’s had a terrific run since last summer. Those are the ones that will get paired back the most. So it’s nice to get a dividend, but it’s no reason to buy a stock because you can wipe out a year’s worth of a dividend in a single day’s negative trading.
Q: What do you think of Chinese tech stocks?
A: I think they’re peaking out here; the same with Europe—they’ve had this tremendous rally this year NOT because of the resurgence of Chinese or European economies. It’s happening because of the uncertainty explosion in the United States and the fact that these European and Chinese stocks all got insanely cheap—well into single-digit price-earnings multiples. So, people are just readjusting a decade and a half long short positions in these areas. I don’t see a sustainable bull market in China or Europe based purely on fundamentals. This is just a trading play, which you’ve already missed, by the way—the big move has happened.
Q: Doesn’t it seem like the unemployment claim numbers are being told more truthfully now?
A: Nothing could be further from the truth. The unemployment claims are collected by the states and then collated by the federal government—the Bureau of Labor Statistics. I've been hearing for 50 years that the government rigs the statistics it publishes. The way you'll see that is when you get a major divergence between government data and private sector data, which we have a lot of. When they diverge, you'll know the government is fudging the data. I have a feeling they may be faking the inflation data in the not-too-distant future.
Q: Should I buy Tesla (TSLA) on the dip?
A: Absolutely not. There is no indication that the rot at the top of Tesla has ended. You basically have a company that’s leaderless and rudderless, with falling sales in China and Europe and a boycott going on in Europe against all Tesla products. Sales down 50% year on year isn't an economic thing, it’s a political thing. Suddenly, Europe doesn't like Elon Musk's politics since he’s advocating the destruction of their economies and interfering in their elections. This is why CEOs of public companies should NEVER get involved in politics—once you voice an opinion, you lose half of your customers automatically. But at a certain point, no amount of money you lose can move the needle with Elon Musk; he’s too rich to care about anything and has said as much.
Q: How much cash should I have?
A: It depends on the person. I am watching the markets 12 hours a day. I can go 100% cash and be 100% invested tomorrow. You, I'm not so sure. A lot of you have heavy index exposures, so it really is different for each person. How much do you want to sleep at night? That's what it really comes down to. Are we going to have a big recession or not? That is the question plaguing investors right now.
Q: What are your thoughts on Berkshire Hathaway (BRK/B)?
A: Buy the dips. I mean it's, you know, 50% cash right now, so it's a great place to hide out if you're a conventional money manager who isn't allowed to own cash or more than 5% cash. So yeah, I think we could go higher. Just expect a 5% correction when Warren Buffet dies. He’s 95.
Q: Why buy SPDR Bloomberg High Yield Bond ETF (JNK) and not iShares 20+ year Treasury Bond ETF (TLT)?
A: JNK has a yield that is now almost 2.3% higher than the (TLT), and that gives you a lot of downside protection, you know, a 6.54% yield. That is the reason you buy junk.
Q: Why have you changed your opinion on the markets when you've been bullish for the last many years?
A: I have a Post-it note taped to my computer monitor with a quote from John Maynard Keynes: “When the facts change, I change. What do you do, sir? The answer is very simple: the principal story of the market up until the end of last year was the miracle of AI and how it was going to make us all rich. Now, the principal story of the market is the destruction of government spending, the chaos in Washington, and tariffs. That is not an investor-friendly backdrop on which to invest. The government is 25% of the GDP, and if you cut back even a small portion of that, even just 5%, that is called a recession, ladies and gentlemen, and nobody wants to own stocks in a recession. And this is all happening with valuations at all-time highs, so it is a very dangerous situation. Suffice it to say, the Trump that campaigned and the Trump we got are entirely different people with far more extreme politics. The market is just figuring that out now, and the conclusion is the same everywhere: sell, sell, go into cash, hide. Certain markets trade at rich premiums, while uncertain markets trade at deep discounts. Guess what we have now.
Q: Isn’t $65-$77 a barrel the new trading range for crude oil ($WTIC)?
A: This has recently been true, but if we go into recession, that breaks down completely, and we probably go to the $30s or $40s, and a severe recession takes us to zero. So that is a higher risk play than you may realize; that is where the charts can get you into big trouble if you ignore the fundamentals.
Q: Do you expect interest rates to drop?
A: No, they have dropped 50 basis points this year on a weak dollar and declining confidence, and the US Treasury has issued almost no long-term bonds this year. So that has created a bond shortage, which has created a temporary shortage and a fall in long-term interest rates. That will change as soon as the new budget is passed, and the earliest that can happen is March 14th. After that, we may get a new surge in interest rates as the government becomes a big seller of bonds once again, which will drive up interest rates massively. The Treasury has to issue $1.8 trillion in new bonds this year just to break even, and now it has only 10 months to do it. So there may be a great short setting up here in the (TLT), and of course, we’ll let you know when we see that.
To watch a replay of this webinar with all the charts, bells, whistles, and classic rock music, just log in to www.madhedgefundtrader.com, go to MY ACCOUNT, click on GLOBAL TRADING DISPATCH, then WEBINARS, and all the webinars from the last 12 years are there in all their glory.
Good Luck and Good Trading,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
August 5, 2024
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD or DID JAY POWELL BLOW IT?) and CHASING EARNEST HEMINGWAY),
($VIX), (INTC), (CCI), (TLT), (COPX), (BHP), (USO) (NVDA), (SLV), (FXY), (CAT), (IWM), (IBKR), (AMZN), (GLD), (BRK/B), (DE)
Global Market Comments
July 29, 2024
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or THE GREAT ROTATION LIVES), or (FLYING THE 1929 TRAVELAIRE D4D),
(NVDA), (TSLA), (JPM), (CCI), (CAT),
(DHI), (SLV), (GLD), (BRK/B), (DE)
I am writing this from the famed Hornli Hut on the north ridge of the Matterhorn at 10,700 feet. I’m not here to climb the iconic mountain one more time. Seven summits are enough for me. What left do I have to prove? It is a brilliant, clear day and I can see Zermatt splayed out before me a mile below.
No, I am here to inhale the youth, energy, excitement, and enthusiasm of this year’s batch of climbers, and to see them off at 1:00 AM after a hardy breakfast of muesli and strong coffee. My advice for beginners is liberally handed out for free.
Each country in Europe has its own personality. Observing the great variety of Europeans setting off I am reminded of an old joke. What is the difference between Heaven and hell?
In Heaven, you have a French chef, an Italian designer, a British policeman, a German engineer, and a Swedish girlfriend, and it is all organized by the Swiss.
In hell you have an English chef, a Polish designer, a German policeman, a Spanish engineer, no girlfriend, and it is all organized by the Italians.
When I recite this joke to my new comrades, I get a lot of laughs and knowing nods. Then they give me better versions of Heaven and hell
The stock market as well might have been organized by the Italians last week with the doubling of volatility and extreme moves up and down. Some 500 Dow points suddenly became a round lot, up and down. Tesla down $40? NVIDIA off 25%? Instantly, last month’s heroes became this month’s goats. It was a long time coming.
The Great Rotation, ignited by the July 11 Consumer Price Index shrinkage lives on. We are only two weeks into a reallocation of capital that could go on for months. Tech has nine months of torrid outperformance to take a break from. Interest sensitives have years of underperformance to catch up on.
Using a fund manager’s parlance, markets are simply moving from Tech to interest sensitives, growth to value, expensive to cheap, and from overbought to ignored.
A great “tell” of future share price performance is how they deliver in down markets. Last week, the Magnificent Seven (TSLA), (NVDA), got pummeled on the bad days. Interest sensitives like my (CCI), (IBKR), industrials (DE), (CAT), (BRK/B), precious metals (GLD), (SLV), and Housing (DHI) barely moved or rose.
Sector timing is everything in the stock market and those who followed me into these positions were richly rewarded. My performance hit a new all-time high every day last week.
Only the industrial metals have not been reading from the same sheet of music. Copper, (FCX), (COPX), Iron Ore (BHP), Platinum (PPLT), Silver (SLV), uranium (CCJ), and Palladium (PALL) have all suffered poor months.
You can blame China, which has yet to restart its sagging economy. I blame that on 40 years of the Middle Kingdom’s one-child policy, which is only now yielding its bitter fruit. That means 40 years of missing Chinese consumers, which started hitting the economy five years ago.
And who knows how many people they lost during the pandemic (the Chinese vaccine, Sinovac, was found to be only 30% effective). This is not a short-term fix. You can’t suddenly change the number of people born 40 years ago.
I warned Beijing 50 years ago that the one-child policy would end in disaster. You can’t beat the math. The leadership back then only saw the alternative, a Chinese population today of 1.8 billion instead of the 1.4 billion we have. But they ignored my advice.
It is the story of my life.
Eventually, US and European growth will make up for the lost Chinese demand, but that may take a while. Avoid all Chinese plays like a bad dish of egg foo young. They’re never going back to the 13% growth of the 2000’s.
So far in July, we are up a stratospheric +11.82%. My 2024 year-to-date performance is at +31.84%. The S&P 500 (SPY) is up +14.05% so far in 2024. My trailing one-year return reached +xx.
That brings my 16-year total return to +xx. My average annualized return has recovered to +708.47.
I used the market collapse to take a profit in my shorts in (NVDA) and (TSLA). Then on the first rally in these names, I slapped new shorts right back on. I used monster rallies to take profits in (JPM) and (CCI). I added new longs in interest sensitives like (CAT), (DHI), and (SLV). This is in addition to existing longs in (GLD), (BRK/B), and (DE), which I will likely run into the August 16 option expiration.
That will take my year-to-date performance up to an eye-popping 43.77% by mid-August.
Some 63 of my 70 round trips were profitable in 2023. Some 45 of 53 trades have been profitable so far in 2024, and several of those losses were break-even. That is a success rate of 84.91%.
Try beating that anywhere.
One of the great joys of hiking around Zermatt is that you meet happy people from all over the world. The other morning, I was walking up to Mount Gornergrat when I ran into two elementary school teachers from Nagoya, Japan. After recovering from the shock that I spoke Japanese I told them a story about when I first arrived in Japan in 1974.
Toyota Motors (TM) hired me to teach English to a group of future American branch sales managers. A Toyota Century limo picked me up at the Nagoya train station and drove me up to a training facility in the mountains. As we approached the building, I witnessed 20 or so men in dark suits, white shirts, and thin ties lined up. One by one they took a baseball bat and savagely beat a dummy that lay prostrate on the grass before them.
I asked the driver what the heck they were doing. He answered that they were beating the competition. A decade later, Japan had seized 44% of the US car market, with Toyota taking the largest share.
I like to think that a superior product did that and not my language instruction abilities.
US Q2 GDP Pops, up 2.8% versus 2.1% expected. The US still has the strongest major economy in the world. Consumer spending helped propel the growth number higher, as did contributions from private inventory investment and nonresidential fixed investment. Goldilocks Lives!
Personal Consumption Expenditure Drops, a key inflation indication for the Fed, up only 0.1%in June and 2.5% YOY. Core inflation, which excludes food and energy, showed a monthly increase of 0.2% and 2.6% on the year, both also in line with expectations. Personal income rose just 0.2%, below the 0.4% estimate. Spending increased 0.3%, meeting the forecast, while the personal savings rate decreased to 3.4%.
Leveraged NVIDIA Bets Cause Market Turmoil. Great when (NVDA) is rocketing, not so much when it is crashing, with (NVDA) plunging 25.7% in a month. (NVDA) is now the largest holding in 500 traded ETF’s. I already made a nice chunk of money on an (NVDA) and will go back for another bight on the smallest rally.
The US Treasury Knocks Out a Blockbuster Auction, shifting $180 Billion worth of 7 ear paper, taking yields down 5 basis points. Foreign demand was huge. Bonds are trading like interest rates are going to be cut. Stock rallied an impressive 800 points the next day.
Durable Goods Get Slammed, down 6.6% versus an expected +0.6% in June. More juice for the interest rate cut camp.
Tesla Bombs, with big earnings and sales disappointments, taking the stock down 15%. Thank goodness we were short going into this. The EV maker put off its Mexico factory until after the November election. Adjusted earnings fell to 52 cents per share in the three months ended in June, missing estimates for the fourth consecutive quarter. Tesla will now unveil robotaxis on Oct. 10, and the cars shown will only be prototypes. Cover your Tesla Shorts near max profit.
Home Sales Dive, in June, off 5.4%. Inventory jumped 23.4% from a year ago to 1.32 million units at the end of June, coming off record lows but still just a 4.1-month supply. The median price of an existing home sold in June was $426,900, an increase of 4.1% year over year.
Oil Glut to continue into 2025, thanks to massive tax subsidies creating overproduction. Morgan Stanley said it expects OPEC and non-OPEC supply to grow by about 2.5 million barrels per day next year, well ahead of demand growth. Refinery runs are set to reach a peak in August this year, and unlikely to return to that level until July 2025, it said. Avoid all energy plays until they bottom.
Homebuilders Catch on Fire, with the prospect of falling interest rates. The US has a structural shortage of 10 million homes with 5 million Millennial buyers. Homebuilders have been underbuilding since the 2008 Great Financial Crisis, seeking to emphasize profits and share buybacks over to development land purchases. Buy (DHI), (LEN), (PMH), (KBH) on dips.
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 600% 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, July 29 at 9:30 AM EST, the Dallas Fed Manufacturing Index is out.
On Tuesday, July 30 at 9:30 AM, the JOLTS Job Openings Report is published. The Federal Reserve Open Market Committee (FOMC) meeting begins
On Wednesday, July 31 at 2:00 PM, Jay Powell announced the Fed’s interest rate decision.
On Thursday, August 1 at 8:30 AM, the Weekly Jobless Claims are announced.
On Friday, August 2 at 8:30 AM, the July Nonfarm Payroll Report is released. At 2:00 PM, the Baker Hughes Rig Count is printed.
As for me, I am reminded as to why you never want to fly with Major John Thomas
When you make millions of dollars for your clients, you get a lot of pretty interesting invitations. $5,000 cases of wine, lunches on superyachts, free tickets to the Olympics, and dates with movie stars (Hi, Cybil!).
So it was in that spirit that I made my way down to the beachside community of Oxnard, California just north of famed Malibu to meet long-term Mad Hedge follower, Richard Zeiler.
Richard is a man after my own heart, plowing his investment profits into vintage aircraft, specifically a 1929 Travel Air D-4-D.
At the height of the Roaring Twenties (which by the way we are now repeating), flappers danced the night away doing the Charleston and the bathtub gin flowed like water. Anything was possible, and the stock market soared.
In 1925, Clyde Cessna, Lloyd Strearman, and Walter Beech got together and founded the Travel Air Manufacturing Company in Wichita, Kansas. Their first order was to build ten biplanes to carry the US mail for $125,000.
The plane proved hugely successful, and Travel Air eventually manufactured 1,800 planes, making it the first large-scale general aviation plane built in the US. Then, in 1929, the stock market crashed, the Great Depression ensued, aircraft orders collapsed, and Travel Air disappeared in the waves of mergers and bankruptcies that followed.
A decade later, WWII broke out and Wichita produced the tens of thousands of the small planes used to train the pilots who won the war. They flew B-17 and B-25 bombers and P51 Mustangs, all of which I’ve flown myself. The name Travel Air was consigned to the history books.
Enter my friend Richard Zeiler. Richard started flying support missions during the Vietnam War and retired 20 years later as an Army Lieutenant Colonel. A successful investor, he was able to pursue his first love, restoring vintage aircraft.
Starting with a broken down 1929 Travel Air D4D wreck, he spent years begging, borrowing, and trading parts he found on the Internet and at air shows. Eventually, he bought 20 Travel Air airframes just to make one whole airplane, including the one used in the 1930 Academy Award-winning WWI movie “Hells Angels.”
By 2018, he returned it to pristine flying condition. The modernized plane has a 300 hp engine, carries 62 gallons of fuel, and can fly 550 miles in five hours, which is far longer than my own bladder range.
Richard then spent years attending air shows, producing movies, and even scattering the ashes of loved ones over the Pacific Ocean. He also made the 50-hour round trip to the annual air show in Oshkosh, Wisconsin. I have volunteered to copilot on a future trip.
Richard now claims over 5,000 hours flying tailwheel aircraft, probably more than anyone else in the world. Believe it or not, I am also one of the few living tailwheel-qualified pilots in the country left. Yes, antiques are flying antiques!
As for me, my flying career also goes back to the Vietnam era as well. As a war correspondent in Laos and Cambodia, I used to hold Swiss-made Pilatus Porter airplanes straight and level while my Air America pilot friend was looking for drop zones on the map, dodging bullets all the way.
I later obtained a proper British commercial pilot license over the bucolic English countryside, trained by a retired Battle of Britain Spitfire pilot. His favorite trick was to turn off the fuel and tell me that a German Messerschmidt had just shot out my engine and that I had to land immediately. He only turned the gas back on at 200 feet when my approach looked good. We did this more than 200 times.
By the time I moved back to the States and converted to a US commercial license, the FAA examiner was amazed at how well I could do emergency landings. Later, I added additional licenses for instrument flying, night flying, and aerobatics.
Thanks to the largesse of Morgan Stanley during the 1980’s, I had my own private twin-engine Cessna 421 in Europe for ten years at their expense where I clocked another 2,000 hours of flying time. That job had me landing on private golf courses so I could sell stocks to the Arab Prince owners. By 1990, I knew every landing strip in Europe and the Persian Gulf like the back of my hand.
So, when the first Gulf War broke out the following year, the US Marine Corps came calling at my London home. They asked if I wanted to serve my country and I answered, “Hell, yes!” So, they drafted me as a combat pilot to fly support missions in Saudi Arabia.
I only got shot down once and escaped with a crushed L5 disk. It turns out that I crash better than anyone else I know. That’s important because they don’t let you practice crashing in flight school. It’s too expensive.
My last few flying years have been more sedentary, flying as a volunteer spotter pilot in a Cessna-172 for Cal Fire during the state’s runaway wildfires. As long as you stay upwind there’s no smoke. The problem is that these days, there is almost nowhere in California that isn’t smokey. By the way, there are 2,000 other pilots on the volunteer list.
Eventually, I flew over 50 prewar and vintage aircraft, everything from a 1932 De Havilland Tiger Moth to a Russian MiG 29 fighter.
It was a clear, balmy day when I was escorted to the Travel Air’s hanger at Oxnard Airport. I carefully prechecked the aircraft and rotated the prop to circulate oil through the engine before firing it up. That reduced the wear and tear on the moving parts.
As they teach you in flight school, it is better to be on the ground wishing you could fly than being in the air wishing you were on the ground!
I donned my leather flying helmet, plugged in my headphones, received a clearance from the tower, and was good to go. I put on max power and was airborne in less than 100 yards. How do you tell if a pilot is happy? He has engine oil all over his teeth. After all, these are open-cockpit planes.
I made for the Malibu coast and thought it would be fun to buzz the local surfers at wave top level. I got a lot of cheers in return from my fellow thrill seekers.
After a half hour of low flying over elegant sailboats and looking for whales, I flew over the cornfields and flower farms of remote Ventura County and returned to Oxnard. I haven’t flown in a biplane in a while and that second wing really put up some drag. So, I had to give a burst of power on short finals to make the numbers. A taxi back to the hangar and my work there was done.
There are old pilots and there are bold pilots, but there are no old, bold pilots. I can attest to that.
Richard’s goal is to establish a new Southern California aviation museum at Oxnard airport. He created a non-profit 501 (3)(c), the Travel Air Aircraft Company, Inc. to achieve that goal, which has a very responsible and well-known board of directors. He has already assembled three other 1929 and 1930 Travel Air biplanes as part of the display.
The museum’s goal is to provide education, job training, restoration, maintenance, sightseeing rides, film production, and special events. All donations are tax-deductible. To make a donation please email the president of the museum, my friend Richard Conrad at
rconrad6110@gmail.com
Who knows, you might even get a ride in a nearly 100-year-old aircraft as part of a donation.
To watch the video of my joyride please click here.
Good Luck and Good Trading
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Where I Go My Kids Go
Global Market Comments
May 31, 2024
Fiat Lux
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