Global Market Comments
November 27, 2023
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or MELT UP),
(MSFT), (NLY), (BRK/B), (CCJ), (CRM), (GOOGL), (SNOW), (CAT), (XOM), (TLT)
Posts
If you think the market performance for the past month has been spectacular, you have seen nothing yet. We have two major positive catalysts that are about to hit stock prices.
On December 10, we will see a lower-than-expected Consumer Price Index, driving yet another stake through the heart of inflation. On December 13, we will also be greeted with a Federal Reserve decision to keep interest rates unchanged, as they will do over the next several meetings.
“Higher for shorter” is about to become the new market mantra.
That will give the market the shot in the arm it needs to reach my $4,800 yearend target, which was precisely the goal I laid out on January 1. Caution has been thrown to the wind and hedging downside risks has become a distant memory. One of the fastest market melt-ups in 100 years will do that. Complacency is the order of the day.
Equity-oriented mutual funds have seen $43 billion in inflows so far in November. Commodity Trading Funds, or CTA’s, have seen a breathtaking $60 billion piled into long equity strategies.
Hedge funds flipped from short to long and now have the most aggressively bullish positions in 22 years, mostly in big tech. All of this has taken the Volatility Index (VIX) down to a subterranean $12 handle. Bears are suddenly lonely….and afraid.
Yes, 55 years of practice makes this easy.
On October 28, it turns out that we reached a decade-high peak in bond investment when Treasuries were flirting with new highs in yields. With perfect rear-view mirror hindsight that’s when many investors cut stock holdings to the bone. They will spend the next several months desperately trying to get back in.
Oh yes, and Company buybacks are about to surge as companies race to pick up their own stocks before the yearend deadline. Apple is the top buyback stock followed by Alphabet (GOOGL) and Microsoft (MSFT). Heard these names before?
And while big tech is starting to look expensive, they are cheap when you factor in the trillions of dollars in profits that are headed their way over the next decade.
That’s what always happens.
What could pee on my victory parade? Ten-year US treasury bonds revisiting a 5.08% yield, crude oil popping back up to $100 a barrel, oil another new blacking swan alighting out of the blue, like a Chinese invasion of Taiwan, or Russia retaking the Baltic states. That’s all.
Avoid these and stocks will continue to rise, as will your retirement funds.
The Magnificent Seven will continue to lead, as will big financials, which are still at bargain-basement levels. Energy and commodities are already posting January sale prices, discounting a 2024 recession that isn’t going to happen. This is fertile LEAPS territory.
Weekly Jobless Claims Drop 24,000, to 209,000 in one of the sharpest declines this year. It makes last week’s jump look like an anomaly.
Consumer Inflation Expectations Rise, to 3.2%, a 12-year high. They are counting on a 4.5% in 2024. They are now looking at gasoline prices. There’s your mismatch. Any decline in inflation will be viewed as a shocker and drive share prices to new all-time highs.
US Gasoline Prices Hit Three-Year Low, on recession fears and replacement concerns by EVs. Energy stocks are tracing the downside tic for tic, pulling down all other commodities. Don’t buy this dip.
Pending Home Sales Plunge to 13-Year Low, down 4.1% in October, on a signed contracts basis. Sales were down 14.6% year over year. The median price of an existing home sold in October was $391,800, an increase of 3.4% from October 2022. These are the last poor sales numbers before the collapse in interest rates. At the end of October, there were 1.15 million homes for sale, down 5.7% from a year earlier. This is about half as many homes as were available for sale pre-Covid. At the current sales pace, that represents a 3.6-month supply. A six-month supply is considered a balanced market between buyer and seller.
Monster Pay Hikes Will Lead to Strong Japanese Yen, with whiskey maker Suntory offering 7% pay hikes. The prospect of falling US interest rates adds fuel to the fire. Buy (FXY) on dips.
Starship Two Blows Up, two minutes or 92 miles after launch. The test fire of the 33-engine spacecraft was considered a success. The massive 397-foot tall, 30-foot-wide rocket, the largest ever built, is crucial for the NASA moon launch in 2025 and the SpaceX Mars trip further down the road.
NVIDIA (NVDA) Beats, with a profit triple, but that stock sells off 6% on the news. It was a classic buy the rumor, sell the news move. Future earnings increases will not be as big. Keep "buy (NVDA) on dips" as a must-own.
Famed Short Seller Jim Chanos shut down after a massive short in Tesla shares blew up. His funds under management have plunged from $6 billion to $200 million since (TSLA) went public. Chanos had a few big wins, notably Enron in 2001. But he was also seen as a hedge against other long positions.
So far in November, we are up +12.62%. My 2023 year-to-date performance is still at an eye-popping +78.79%. The S&P 500 (SPY) is up +19.73% so far in 2023. My trailing one-year return reached +81.00% versus +18.91% for the S&P 500.
That brings my 15-year total return to +675.98%. My average annualized return has exploded to +48.57%, another new high, some 2.49 times the S&P 500 over the same period.
I am 100% fully invested, with longs in (MSFT), (NLY), (BRK/B), (CCJ), (CRM), (GOOGL), (SNOW), (CAT), and (XOM). I have one short in the (TLT).
Some 66 of my 61 trades this year have been profitable.
My Ten-Year View
When we come out the other side of the recession, we will be perfectly poised to launch into my new American Golden Age or the next Roaring Twenties. The economy decarbonizing and technology hyper-accelerating, creating enormous investment opportunities. The Dow Average will rise by 800% to 240,000 or more in the coming decade. The new America will be far more efficient and profitable than the old.
Dow 240,000 here we come!
On Monday, November 27, at 8:30 AM EST, the New Home Sales are out.
On Tuesday, November 28 at 2:30 PM, the S&P National Home Price Index is released.
On Wednesday, November 29 at 8:30 AM, the Q2 GDP Growth Rate is published.
On Thursday, November 30 at 8:30 AM, the Weekly Jobless Claims are announced.
On Friday, December 1 at 2:30 PM, the October ISM Manufacturing Index is published. At 2:00 PM the Baker Hughes Rig Count is printed.
As for me, When I landed in Tokyo in 1974, there were very few foreigners in the country. The WWII occupation forces had left, but the international business community had yet to arrive. You met a lot of guys who used to work for Douglas MacArthur.
There was only one way to stay more than 90 days on the standard tourist visa. That was to get another visa to study “Japanese culture.” There were only two choices: flower arranging or karate.
Since this was at the height of Bruce Lee’s career, I went for karate.
It was not an easy choice.
World War II was not that distant, and there were still hundreds of army veterans missing limbs begging for money under railroad overpasses. Some back then were still fighting on remote Pacific islands.
Many in the karate community believed that the art was a national secret and should never be taught to foreigners. So those who entered this tight-knit community paid the price and had the daylights beaten out of them. I was one of those.
To this day, I am missing five of my original teeth. There is nothing like taking a kick to the mouth and watching your front teeth fly across the dojo, skittering on the teak floor.
We trained three hours a day, five days a week. It involved punching a bloody hardwood makiwara at least 200 times. The beginners were paired with black belts who thoroughly worked us over. Then the entire class met up at a nearby public bath to soak in a piping hot ofuro. You always hurt.
During the dead of winter, we ran five miles around the Imperial Palace in our karate gi’s barefoot in freezing temperatures daily. Then we were hosed down with cold water and trained for three hours.
During this time, I was infused with the spirit of bushido, the thousand-year-old Japanese warrior code. I learned self-discipline, stamina, and concentration. In the end, karate is a form of meditation.
Knowing you’re indestructible and unassailable is not such a bad thing, especially when you’re traveling in some of the harsher parts of the world. When muggers in bad neighborhoods see me late at night, they cross the street to avoid me. I am not a guy to mess with. Utter fearlessness is a great asset to possess.
The highlight of the annual training schedule was the All-Japan Karate Championship held in the prestigious Budokan, headquarters of all Japanese martial arts near the ghostly Yasukuni Jinja, Japan’s National Cemetery. By my last year in Japan, I had my black belt, and my instructor, Higaona Sensei, urged me to enter.
Because I had such a long reach, incredibly, I made it to the finals. I was matched with a very tough-looking six-footer who was fighting for Japan’s national prestige, as no foreigner had ever won the contest.
I punched, he kicked, fist met foot, and foot won. My left wrist was broken. My opponent knew what happened and graciously let me fight on one hand for another minute to save face. Then he knocked me out on points.
The crowds roared.
It’s all part of a full life.
Losing the All-Japan National Karate Championship
1974 Higaona Sensei
Stay Healthy,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
November 17, 2023
Fiat Lux
Featured Trade:
(NOVEMBER 15 BIWEEKLY STRATEGY WEBINAR Q&A),
(TLT), (AMD), (SPY), (FXA), (WYNN), (MGM), (RCL), (CCL), (TSLA), (SCHW), (BLK), (JPM), (XHB), (TSLA), (FXI), (FCX)
Below please find subscribers’ Q&A for the November 15 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Incline Village, NV.
Q: I was a little surprised that you closed the (TLT) $79-$82 vertical bull call spread so early. Why not wait longer?
A: I took an 84% profit in only four trading days and skipped the last 16% which I would have had to wait another month to get. I was much better off putting on another position and making another 100%. In this kind of market, you want to take quick profits and then roll them into new positions as fast as you can. That’s where you make the big money, and that's what we’ve been doing. You have to strike when the iron is hot.
Q: November’s results are phenomenal!
A: Yes they are, 55 years of practice makes it easy.
Q: Thoughts on Advanced Micro Devices (AMD)?
A: It’s going higher. I think the whole semiconductor sector is the leading sector in the market; we have seen that with these gigantic 30-40% moves in the semis. That will continue, and then it will spread out to the rest of big tech (which it’s already done), and eventually, we get to the industrials and commodities in the second half of 2024 when the big economic growth returns. So that is the script for the coming year.
Q: Will the upcoming Fed interest rate cuts crash the dollar, and which emerging currency should I buy?
A: Yes and yes. It will crush the dollar–we could be entering a new decade of a falling U.S. dollar. The number one currency to buy is the Australian dollar (FXA). It has the most leverage for a global economic recovery. And you can see when we get to the currency section of today’s webinar that the currencies are already starting to move. Whatever currency has falling interest rates is always the weakest, and the U.S. dollar is about to become just that.
Q: What’s the deal with casino stocks lately like Wynn Resorts (WYNN) and MGM Resorts International (MGM)?
A: These companies took on massive amounts of debt during the pandemic to stay in business, so they are now highly sensitive to interest rates. If you look at the collapse of these stocks in the last four months, it is almost perfectly in sync with rising interest rates, and that’s why the stocks performed so poorly. By the way, the same is true for all the cruise companies like Royal Caribbean (RCL), and Carnival (CCL). The flip side of that is when interest rates start to go down these stocks do great, and they are falling interest rate plays, so you probably should be buying the casinos, the cruise lines, and the hotel stocks here because they are all suffering from massive debt loads, the cost of which is about to decline sharply.
Q: Should we roll up the expiration of LEAPS to 2026?
A: Probably not a bad idea, because we may get weakness in commodities for the next several months before we enter a massive new bull market. If you have the 2025, you’ll probably make money on that, but to be ultra-safe you could roll it forward to 2026. We know there’s a global copper shortage developing because of EVs, but right now EV sales are slow, so you don’t want to be piling onto the leverage plays on that too soon. That’s also why I am not in Tesla (TSLA) for the Moment.
Q: What will happen if the Fed cuts interest rates and there’s no recession? Won’t prices of everything from houses to butter go wild?
A: They won’t go wild, but they will go up at a 2% inflation rate, which is what the Fed wants. And house prices, which have been flat for the last year, will rise. And they may rise greater than the inflation rate of 2%; they may rise more like 5%. Falling interest rates mean falling mortgages; we’ve already seen mortgage rates drop from 8 to 7.4%. It's one of the sharpest drops in history, and more drops bring more first-time home buyers into the market. And don’t forget that the Fed could also raise interest rates down the road. If the economy gets too hot again, they may raise again, but I think we’ll see a lot of cuts first.
Q: Do you think financial stocks will go up or fall with potential rate decreases?
A: Banks always go up during falling interest rates because their cost of funds goes down and the default rate on their loans also goes down, so they get a hockey stick effect on earnings; that’s why you’re seeing such monster moves in stocks like JP Morgan (JPM) and the brokers (SCHW) as well as the money managers like BlackRock (BLK).
Q: Does the bull market keep going since unemployment still hasn’t made a dent, meaning consumers are fueling the rise in stocks?
A: Yes, consumer spending is still doing well. People seem to be getting the money from somewhere and it seems to be rising wages. But I expect wage gains to drop by half; people will still get wage increases, but not the peak levels that the UAW got in their deal with Detroit. Is a Goldilocks economy that is setting up, and the economy keeps growing We never do get a recession, and all risk assets rise as a result. That is the outlook!
Q: Bullish on Berkshire Hathaway (BRK/B)?
A: I completely agree, it’s one of the best-run companies in the world. 93-year-old Warren Buffet and 99-year-old Charlie Munger have delivered double the performance of the S&P 500 over the last three years.
Q: When does the IPO market come back to life, and which industries will benefit the most?
A: AI and Technology will benefit the most. There are several AI companies in the wings waiting to go public, and they will be the first out the door with the highest multiples, and then the IPO business will broaden out from there.
Q: Will a worsening Chinese property market blow up the U.S. Stock rally or is it just a fake risk I shouldn’t worry about?
A: The Chinese (FXI) real estate market is detached from the global economy. There is no international implication, and it’s also typical of emerging markets to overbuild and then have a financial collapse. Nobody I know has suffered anything in China in a long time, and if anything, they’re liquidating what little they have left. It doesn’t affect us at all. It’s interesting reading about it in the newspapers, and that’s about it.
Q: What are some stocks we should consider day trading these days?
A: None. Most people who try day trading lose money doing it; some people pull it off but they have many years of experience. Algorithms from big brokers have essentially taken over the day trading business with high-frequency trading. You do better on a one-month view, which I do on my front-month options. Most 2023 Stock Gains Happened in only eight days, up some 14% since January 1, and only seven stocks accounted for most of the increase. If you are a day trader, you most likely missed all of this because most of the moves were on gap openings.
Q: Home builders (XHB) have just had a great run, is this an area too short?
A: “Short” is a term you need to remove from your language! You don’t want to short a big bull move like this. If anything, wait until May when the summer seasonals start to favor short positions, and it depends on how high the market runs up until then. Don’t ever think about shorting the very beginning of a new bull market in stocks–not for housing, not for anything! And the outlook for housing over the long term looks fantastic; there’s still an overwhelming supply and demand in favor of the home builders. Some 85 million new Millennials need to buy first-time homes.
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, select your subscription (GLOBAL TRADING DISPATCH, TECHNOLOGY LETTER, or Jacquie's Post), then click on WEBINARS, and all the webinars from the last 12 years are there in all their glory.
Good Luck and Stay Healthy,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
2023 Kherson Ukraine – Ha Ha Missed Me! It was a dud.
Global Market Comments
August 15, 2023
Fiat Lux
Featured Trades:
(THE TOP SIX CHINESE RETALIATION TARGETS),
(AAPL), (GM), (WMT), (TGT), (BA), (SBUX), (CAT),
(AND MY PREDICTION IS….)
CLICK HERE to download today's position sheet.
Global Market Comments
August 10, 2023
Fiat Lux
Featured Trades:
(WEDNESDAY, SEPTEMBER 6, 2023 SAN DIEGO, CALIFORNIA GLOBAL STRATEGY LUNCHEON)
(HOW TO GAIN AN ADVANTAGE WITH PARALLEL TRADING),
(GM), (F), (TM), (NSANY), (DDAIF), BMW (BMWYY), (VWAPY),
(PALL), (GS), (EZA), (CAT), (CMI), (KMTUY),
(KODK), (SLV), (AAPL)
CLICK HERE to download today's position sheet.
One of the most fascinating things I learned when I first joined the equity trading desk at Morgan Stanley during the early 1980s was how to parallel trade.
A customer order would come in to buy a million shares of General Motors (GM) and what did the in-house proprietary trading book do immediately?
It loaded the boat with the shares of Ford Motors (F).
When I asked about this tactic, I was taken away to a quiet corner of the office and read the riot act.
“This is how you legally front-run a customer,” I was told.
Buy (GM) in front of a customer order, and you will find yourself in Sing Sing shortly.
Ford (F), Toyota (TM), Nissan (NSANY), Daimler Benz (DDAIF), BMW (BMWYY), or Volkswagen (VWAPY), are no problem.
The logic here was very simple.
Perhaps the client completed an exhaustive piece of research concluding that (GM) earnings were about to rise.
Or maybe a client's old boy network picked up some valuable insider information.
(GM) doesn’t do business in isolation. It has tens of thousands of parts suppliers for a start. While whatever is good for (GM) is good for America, it is GREAT for the auto industry.
So through buying (F) on the back of a (GM) might not only match the (GM) share performance, it might even exceed it.
This is known as a Primary Parallel Trade.
This understanding led me on a lifelong quest to understand Cross Asset Class Correlations, which continue to this day.
Whenever you buy one thing, you buy another related thing as well, which might do considerably better.
I eventually made friends with a senior trader at Salomon Brothers while they were attempting to recruit me to run their Japanese desk.
I asked if this kind of legal front running happened on their desk.
“Absolutely,” he responded. But he then took Cross Asset Class Correlations to a whole new level for me.
Not only did Salomon’s buy (F) in that situation, they also bought palladium (PALL).
I was puzzled. Why palladium?
Because palladium is the principal metal used in catalytic converters, which remove toxic emissions from car exhaust, and has been required for every U.S. manufactured car since 1975.
Lots of car sales, which the (GM) buying implied, ALSO meant lots of palladium buying.
And here’s the sweetener.
Palladium trading is relatively illiquid.
So, if you catch a surge in the price of this white metal, you would earn a multiple of what you would make on your boring old parallel (F) trade.
This is known in the trade as a Secondary Parallel Trade.
A few months later, Morgan Stanley sent me to an investment conference to represent the firm.
I was having lunch with a trader at Goldman Sachs (GS) who would later become a famous hedge fund manager and asked him about the (GM)-(F)-(PALL) trade.
He said I would be an IDIOT not to take advantage of such correlations. Then he one-upped me.
You can do a Tertiary Parallel Trade here through buying mining equipment companies such as Caterpillar (CAT), Cummins (CMI), and Komatsu (KMTUY).
Since this guy was one of the smartest traders I ever ran into, I asked him if there was such a thing as a Quaternary Parallel Trade.
He answered “Abso******lutely,” as was his way.
But the first thing he always did when searching for Quaternary Parallel Trades would be to buy the country ETF for the world’s largest supplier of the commodity in question.
In the case of palladium, that would be South Africa (EZA), the world's largest non-sanctioned producer, which together accounts for 74% with Russia of the world’s total production.
Since then, I have discovered hundreds of what I can Parallel Trading Chains, and have been actively making money off of them. So have you, you just haven’t realized it yet.
I could go on and on.
If you ever become puzzled or confused about a trade alert I am sending out (Why on earth is he doing THAT?), there is often a parallel trade in play.
Do this for decades as I have and you learn that some parallel trades break down and die. The cross relationships no longer function.
The best example I can think of is the photography/silver connection. When the photography business was booming, silver prices rose smartly.
Digital photography wiped out this trade, and silver-based film development is still only used by a handful of professionals and hobbyists.
Oh, and Eastman Kodak (KODK) went bankrupt in 2012.
However, it seems that whenever one Parallel Trading Chain disappears, many more replace it.
You could build chains a mile long simply based on how well Apple (AAPL) is doing.
And guess what? There is a new parallel trade in silver developing. For whenever someone builds a solar panel anywhere in the world, they are using a small amount of silver for the wiring. Build several tens of millions of solar panels and that can add up to quite a lot of silver.
What goes around comes around.
Suffice it to say that parallel trading is an incredibly useful trading strategy.
Ignore it at your peril.
Sometimes Markets are Hard to Figure Out
Global Market Comments
June 23, 2023
Fiat Lux
Featured Trades:
(JUNE 21 BIWEEKLY STRATEGY WEBINAR Q&A),
(AAPL), (ABNB), (GLD), (BA), (CAT), (DE), (X), (PYPL), (SQ), (MSFT), (GD), (GE), (INDA), (META) (GOOGL), (CCI), (NVDA), (ABNB), (SNOW), (PLTR), (TSLA)
CLICK HERE to download today's position sheet.
Below please find subscribers’ Q&A for the June 21 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Lake Tahoe, NV.
Q: When do we buy Nvidia (NVDA) and Tesla (TSLA)?
A: On at least a 20% dip. We have had ballistic moves—some of the sharpest up moves in the history of the stock market for large stocks—and certainly the greatest creation of market caps since the market was invented under the Buttonwood Tree in 1792 at 68 Wall Street. Tesla’s almost at a triple now. Tripling one of the world's largest companies in 6 months? You have to live as long as me to see that.
Q: Is it a good time to invest in Bitcoin?
A: No, absolutely not. You only want to invest in Bitcoin when we have an excess of cash and a shortage of assets. Right now, we have the opposite, a shortage of cash and an excess of assets, and that will probably continue for several years.
Q: Should I short Apple (APPL)?
A: Only if you’re a day trader. It’s hugely overbought for the short term, but still in a multiyear long-term uptrend. I think we could see Apple at $300 in the next one or two years.
Q: Is it better to focus on single stocks or ETFs?
A: Single stocks always, because a single stock will outperform a basket that's in an ETF by 2 to 1 or even 3 to 1. That's always the case; whenever you add stocks to a basket, it diversifies risk and dilutes the performance. Better to just own Tesla, and if you want to diversify, diversify to Nvidia, but then I live next door to these two companies. That's what I tell my friends. You only diversify if you don’t know what is going to happen, which is most investors and financial advisors.
Q: Is the bottom of the housing market in, and are we due for a spike in home prices when interest rates can only go lower?
A: Yes, absolutely. In fact, we will enter a new 10-year bull leg for housing because we have a structural shortage of 10 million homes and 82 million millennials desperately trying to buy them at any price. I just got a call from my broker and she is panicking because she is running out of inventory. Even the lemons are starting to move.
Q: When do you think energy will rise?
A: Falling interest rates could be a good key because it sets the whole global economy on fire and increases energy demand.
Q: Outlook for the S&P 500 (SPY) second half of the year?
A: We hit 4,800 at least, maybe even higher. That's about a little more than 10% from here, so it’s not that much of a stretch, not like it was at the beginning of the year when it needed to rise 25% to reach my yearend target.
Q: Best time to invest from here on?
A: Either a 10% pullback in the market, or a sideways move of 3 months—that's called a time correction. It usually counts as a price correction because of course, over 3 months, earnings go up a lot, especially in tech.
Q: I’m seeing grains (WEAT) in rally mode.
A: Yes, that's true. They are commodities, and just like copper’s been rallying, and it’s yet another signal that we may get a much broader global commodity rally in everything: iron ore, coal, energy, gold, silver, you name it.
Q: Will inflation drop to 2%, causing stocks to go on another epic run?
A: The answer is yes, I do see inflation dropping to 2% —maybe not this year, but next year; not because of any action the Fed is doing, but because technology is hyper-accelerating, and technology is highly deflationary. The tech product you bought two years ago is now half the price, and they offer you twice as much functionality with an auto-renew for life. So, that is happening across the entire technology front and feeds into the inflation numbers big time, including labor. There's going to be a lot of labor replacement by machines and AI in the coming years.
Q: Is Airbnb (ABNB) a good stock to buy?
A: Well, if we’re going into the most perfect travel storm of all time, which is this summer, and which is why I’m going to remote places only like Cortina, Italy. Airbnb is the perfect stock to own. It’s a well-run company even in normal times.
Q: Should I buy gold here on the pullback?
A: Yes, you should. Gold is also highly sensitive to any decline in interest rates, and by the way: buy silver, it always moves 2.5x as much as the barbarous relic.
Q: How can inflation not go up if commodities and wage demands are going up due to state and federal unions? What about farm equipment and truck supplies? Costs keep rising, should we buy John Deere (DE)?
A: There are three questions here. Inflation will not go up because, though commodities will rise, they are only 0.6% of the $100 trillion global economy, or $660 billion in 2022. That will be more than offset by technology cutting prices, which is 30% of the stock market. You have to realize how important each individual element is in the global picture. And regarding wage demands going up caused by state and federal unions, less than 11.3% of the workforce is now unionized and that figure has been declining for 40 years. Most growth in the economy has been in non-unionized technology firms which largely depend on temporary workers, by design. What IS unionized is mostly teachers, the lowest paid workers in the economy, so incremental pay rises will be small. Unions were absolutely slaughtered when 25 million jobs were offshored to China during the Bush administration. Buy farm equipment and trucks? Absolutely, buy John Deere (DE) and buy Caterpillar (CAT) on the next dip. I was actually looking at Caterpillar for the next LEAPS the other day, but it’s already had a big run; I'm going to wait for a pullback before I get CAT and John Deere. So, again, people see headlines, see union wage headlines—I say focus on the 89% and not on the 11% if you want to make good decisions.
Q: Is Boeing (BA) a buy on the dip?
A: Yes, they got 1,000 new aircraft orders and the stock hasn't moved. So yes, if you get any kind of selloff down to $200, I'd be hoovering this thing up.
Q: Can you please explain how the profit predictor works?
A: It’s a long story; just go to our website, log in and do a search for “profit predictor,” and you’ll get a full explanation of how it works. It’s actually where Mad Hedge has been using artificial intelligence for 11 years, which is why our performance has doubled. Just for fun, I'll run the piece next week.
Q: Gold (GLD) is having a hard time going up because Russia is being squeezed by other governments. Since they need cash, they may be either selling their gold or stop buying new gold.
A: That is a good point, but at the end of the day, interest rates are the number one driver of all precious metals—period, end of story. We’re long gold too, I’ve got lots of gold coins stashed around the world in various safe deposit boxes, and I'm keeping them. I’ve got even more silver coins, which take up a lot of space.
Q: Do you like India (INDA) long term?
A: Yes, it’s the next China. But as Apple is finding out it is very difficult to get anything done there. A radical reforming Prime Minster Modi may be changing things there with his recent Biden visit and (GE) contract to build jet engines.
Q: What do you think of General Dynamics Corp (GD)?
A: I like General Dynamics because I think defense spending is in a permanent long term upcycle as a result of the Ukraine war. And it won’t end with the Ukraine war—the threat will always be out there, and the buying is done by not only us but all the other countries that think Russia is a threat.
Q: Do you like MP Materials Corp (MP)?
A: Yes, I do. The whole commodities space is ready to take off and go on fire.
Q: What about Square (SQ)?
A: The only reason I’m not recommending Square right now is huge competition in the entire sector, where all the stocks including PayPal (PYPL) are getting crushed. I will pass on Square for now, especially when I can buy US Steel (X) at close to its low for the year.
Q: If you had to pick one: Nvidia (NVDA), Tesla (TSLA), Microsoft (MSFT), Meta (META), and Google (GOOGL), which is the best to buy for next year?
A: All of them. Diversify. If I have to pick the top performer, it’s going to be either Tesla or Nvidia, probably Nvidia. But you need at least a 10% correction before you do anything. Actually, the split-adjusted price for our first (NVDA) recommendation eight years ago was $2 a share.
Q: Do you like Crown Castle International (CCI)?
A: Yes, I like it very much—it has very high dividend yield at 5.5%. The reason it hasn’t moved yet is that as long as interest rates are high, any REIT structure will suffer, and (CCI) has a REIT structure. Sure, it’s in a great sector—5G cell towers—but it is still a REIT nonetheless, and those will start to recover when interest rates go down; that’s why we did a 2.5-year LEAPS on CCI. For sure interest rates are going to go down in the next 2.5 years, and you will double your money on (CCI). That’s why we put it out.
Q: Which mid cap will do best over the long term: Airbnb (ABNB), Snowflake (SNOW), or Palantir (PLTR)?
A: That’s easy: Snowflake. They have such an overwhelming technology on the database and security front; I would be buying Snowflake all day long. Even Warren Buffet owns Snowflake, so that’s good enough for me.
Q: Could you comment on the pace of EV adoption/potential for (TSLA) robot fleet acceleration and implications for oil investments in holding pattern till the eventual collapse to near 0?
A: Yes, oil may collapse to near zero, but it may take twenty years to do it—that’s how long it takes to transition an energy source. That’s how long it took the move from horses and hay to gasoline-powered cars at the beginning of the 20th century. A national robot fleet of taxis with no drivers at all is a couple of years off. There are about 1,000 of them working in San Francisco right now, but they still have more work to do on the software. When it gets foggy, they often congregate at intersections causing traffic jams. Suffice it to say that eventually Tesla shares go to $1,000 and after that, $10,000—that’s my bet. By the way, my Tesla January 2025 $595-$600 LEAPS are starting to look pretty good.
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Good Luck and Stay Healthy,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
2018 in Australia
Global Market Comments
June 5, 2023
Fiat Lux
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