Global Market Comments
March 24, 2025
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD or THE SPECIAL NO CONFIDENCE ISSUE)
(GM), (SH), (TSLA), (NVDA), (GLD), (TLT), (LMT), (BA), (NVDA), (GOOGL), (AAPL), (META), (AMZN), (PANW), (ZS), (CYBR), (FTNT), (COST)
(AMGN), (ABBV), (BMY), (TSLA), GM), (GLD), (BYDDF)
It’s official: Absolutely no one is confident in their long-term economic forecasts right now. I heard it from none other than the chairman of the Federal Reserve himself. The investment rule book has been run through the shredder.
It has in fact been deleted.
That explains a lot about how markets have been trading this year. It looks like it is going to be a reversion to the mean year. Forecasters, strategists, and gurus alike are rapidly paring down their stock performance targets for 2025 to zero.
When someone calls the fire department, it’s safe to assume that there is a fire out there somewhere. That’s what Fed governor Jay Powell did last week. It raises the question of what Jay Powell really knows that we don’t. Given the opportunity, markets will always assume the worst, that there’s not only a fire, but a major conflagration about to engulf us all. Jay Powell’s judicious comments last week certainly had the flavor of a president breathing down the back of his neck.
It's interesting that a government that ran on deficit reduction pressured the Fed to end quantitative tightening. That’s easing the money supply through the back door.
For those unfamiliar with the ins and outs of monetary policy, let me explain to you how this works.
Since the 2008 financial crisis, the Fed bought $9.1 trillion worth of debt securities from the US Treasury, a policy known as “quantitative easing”. This lowers interest rates and helps stimulate the economy when it needs it the most. “Quantitative easing” continued for 15 years through the 2020 pandemic, reaching a peak of $9.1 trillion by 2022. For beginners who want to know more about “quantitative easing” in simple terms, please watch this very funny video.
The problem is that an astronomically high Fed balance sheet like the one we have now is bad for the economy in the long term. They create bubbles in financial assets, inflation, and malinvestment in risky things like cryptocurrencies. That’s why the Fed has been trying to whittle down its enormous balance sheet since 2022.
By letting ten-year Treasury bonds it holds expire instead of rolling them over with new issues, the Fed is effectively shrinking the money supply. This is how the Fed has managed to reduce its balance sheet from $9.1 trillion three years ago to $6.7 trillion today and to near zero eventually. This is known as “quantitative tightening.” At its peak a year ago, the Fed was executing $120 billion a month quantitative tightening.
By cutting quantitative tightening, from $25 billion a month to only $5 billion a month, or effectively zero, the Fed has suddenly started supporting asset prices like stocks and increasing inflation. At least that is how the markets took it to mean by rallying last week.
Why did the Fed do this?
To head off a coming recession. Oops, there’s that politically incorrect “R” word again! This isn’t me smoking California’s largest export. Powell later provided the forecasts that back up this analysis. The Fed expects GDP growth to drop from 2.8% to 1.7% and inflation to rise from 2.5% to 2.8% by the end of this year. That’s called deflation. Private sector forecasts are much worse.
Just to be ultra clear here, the Fed is currently engaging in neither “quantitative easing nor “quantitative tightening,” it is only giving press conferences.
Bottom line: Keep selling stock rallies and buying bonds and gold on dips.
Another discussion you will hear a lot about is the debate over hard data versus soft data.
I’ll skip all the jokes about senior citizens and cut to the chase. Soft data are opinion polls, which are notoriously unreliable, fickle, and can flip back and forth between positive and negative. A good example is the University of Michigan Consumer Confidence, which last week posted its sharpest drop in its history. Consumers are panicking. The problem is that this is the first data series we get and is the only thing we forecasters can hang our hats on.
Hard data are actual reported numbers after the fact, like GDP growth, Unemployment Rates, and Consumer Price Indexes. The problem with hard data is that they can lag one to three months, and sometimes a whole year. This is why by the time a recession is confirmed by the hard data, it is usually over. Hard data often follows soft data, but not always, which is why both investors and politicians in Washington DC are freaking out now.
Bottom line: Keep selling stock rallies and buying bonds and gold (GLD) on dips.
A question I am getting a lot these days is what to buy at the next market bottom, whether that takes place in 2025 or 2026. It’s very simple. You dance with the guy who brought you to the dance. Those are:
Best Quality Big Tech: (NVDA), (GOOGL), (AAPL), (META), (AMZN)
Big tech is justified by Nvidia CEO Jensen Huang’s comment last week that there will be $1 trillion in Artificial Intelligence capital spending by the end of 2028. While we argue over trade wars, AI technology and earnings are accelerating.
Cybersecurity: (PANW), (ZS), (CYBR), (FTNT)
Never goes out of style, never sees customers cut spending, and is growing as fast as AI.
Best Retailer: (COST)
Costco is a permanent earnings compounder. You should have at least one of those.
Best Big Pharma: (AMGN), (ABBV), (BMY)
Big pharma acts as a safety play, is cheap, and acts as a hedge for the three sectors above.
March is now up +2.92% so far. That takes us to a year-to-date profit of +12.29% in 2025. That means Mad Hedge has been operating as a perfect -1X short S&P 500 ETF since the February top. My trailing one-year return stands at a spectacular +82.50%. That takes my average annualized return to +51.12% and my performance since inception to +764.28%.
It has been another busy week for trading. I had four March positions expire at their maximum profit points on the Friday options expiration, shorts in (GM), and longs in (GLD), (SH), and (NVDA). I added new longs in (TSLA) and (NVDA). This is in addition to my existing longs in the (TLT) and shorts in (TSLA), (NVDA), and (GM).
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%.
UCLA Andersen School of Business announced a “Recession Watch,” the first ever issued. UCLA, which has been issuing forecasts since 1952, said the administration’s tariff and immigration policies and plans to reduce the federal workforce could combine to cause the economy to contract. Recessions occur when multiple sectors of the economy contract at the same time.
Retail Sales Fade, with consumers battening down the hatches for the approaching economic storm. Retail sales rose by less than forecast in February and the prior month was revised down to mark the biggest drop since July 2021.
This Has Been One of the Most Rapid Corrections in History, leaving no time to readjust portfolios and put on short positions.
The rapid descent in the S&P 500 is unusual, given that it was accomplished in just 22 calendar days, far shorter than the average of 80 days in 38 other examples of declines of 10% or more going back to World War II.
Home Builder Sentiment Craters to a seven-month low in March as tariffs on imported materials raised construction costs, a survey showed on Monday. The National Association of Home Builders/Wells Fargo Housing Market Index dropped three points to 39 this month, the lowest level since August 2024. Economists polled by Reuters had forecast the index at 42, well below the boom/bust level of 50.
BYD Motors (BYDDF) Shares Rocket, up 72% this year, on news of technology that it claims can charge electric vehicles almost as quickly as it takes to fill a gasoline car. BYD on Monday unveiled a new “Super e-Platform” technology, which it says will be capable of peak charging speeds of 1,000 kilowatts/hr. The EV giant and Tesla rival say this will allow cars that use the technology to achieve 400 kilometers (roughly 249 miles) of range with just 5 minutes of charging. Buy BYD on dips. It’s going up faster than Tesla is going down.
Weekly Jobless Claims Rise 2,000, to 223,000. The number of Americans filing new applications for unemployment benefits increased slightly last week, suggesting the labor market remained stable in March, though the outlook is darkening amid rising trade tensions and deep cuts in government spending.
Copper Hits New All-Time High, at $5.02 a pound. The red metal has outperformed gold by 25% to 15% YTD. It’s now a global economic recovery that is doing this, but flight to safety. Chinese savers are stockpiling copper ingots and storing them at home distrusting their own banks, currency, and government. I have been a long-term copper bull for years as you well know. New copper tariffs are also pushing prices up. Buy (FCX) on dips, the world’s largest producer of element 29 on the Periodic Table.
Boeing (BA) Beats Lockheed for Next Gen Fighter Contract for the F-47, beating out rival Lockheed Martin (LMT) for the multibillion-dollar program. Unusually, Trump announced the decision Friday morning at the White House alongside Defense Secretary Pete Hegseth. Boeing shares rose 5.7% while Lockheed erased earlier gains to fall 6.8%. The deal raises more questions than answers, in the wake of (BA) stranding astronauts in space, their 737 MAX crashes, and a new Air Force One that is years late. Was politics involved? You have to ask this question about every deal from now on.
Carnival Cruise Lines (CCL) Raises Forecasts, on burgeoning demand from vacationers, including me. The company’s published cruises are now 80% booked. Cruise lines continue to hammer away at the value travel proposition they are offering. However, the threat of heavy port taxes from the administration looms over the sector.
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 24, at 8:30 AM EST, the S&P Global Flash PMI is announced.
On Tuesday, March 25, at 8:30 AM, the S&P Case Shiller National Home Price Index is released.
On Wednesday, March 26, at 1:00 PM, the Durable Goods are published.
On Thursday, March 27, at 8:30 AM, the Weekly Jobless Claims are disclosed. We also get the final report for Q1 GDP.
On Friday, March 28, the Core PCE is released, and important inflation indicator. At 2:00 PM, the Baker Hughes Rig Count is printed.
As for me, I received calls from six readers last week saying I remind them of Ernest Hemingway. This, no doubt, was the result of Ken Burns’ excellent documentary about the Nobel Prize-winning writer on PBS last week.
It is no accident.
My grandfather drove for the Italian Red Cross on the Alpine front during WWI, where Hemingway got his start, so we had a connection right there.
Since I read Hemingway’s books in my mid-teens I decided I wanted to be him and became a war correspondent. In those days, you traveled by ship a lot, leaving ample time to finish off his complete work.
I visited his homes in Key West, Cuba, and Ketchum Idaho.
I used to stay in the Hemingway Suite at the Ritz Hotel on Place Vendome in Paris where he lived during WWII. I had drinks at the Hemingway Bar downstairs where war correspondent Ernest shot a German colonel in the face at point-blank range. I still have the ashtrays.
Harry’s Bar in Venice, a Hemingway favorite, was a regular stopping-off point for me. I have those ashtrays too.
I even dated his granddaughter from his first wife, Hadley, the movie star Mariel Hemingway, before she got married, and when she was also being pursued by Robert de Niro and Woody Allen. Some genes skip generations and she was a dead ringer for her grandfather. She was the only Playboy centerfold I ever went out with. We still keep in touch.
So, I’ll spend the weekend watching Farewell to Arms….again, after I finish my writing.
Oh, and if you visit the Ritz Hotel today, you’ll find the ashtrays are now glued to the tables.
As for last summer, I stayed in the Hemingway Suite at the Hotel Post in Cortina d’Ampezzo Italy where he stayed in the late 1940’s to finish a book. Maybe some inspiration will run off on me.
Good Luck and Good Trading
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
I knew the letter from the IRS sitting in my mailbox was bad news just from the color of the paper.
It was not light green, the color of a refund check from the United States Treasury. Instead, it was white, warning that it contained some sort of demand, audit notice, or threatened legal action.
In fact, it was far worse than that.
In the most stilted, bureaucratic language possible, I was informed that my $100,000 tax refund for 2016 had been already been paid out to someone else.
Another party, using my name and social security number but a different address, had already filed a 2016 return for me.
In order to get my money back, I would have to file a new return and include hard copies of every single piece of supporting documentation. It was, in effect, a full paper audit. Then, I would have to wait 60 days.
This was three months ago.
I informed my accountant immediately. I heard him shout across the room to his partner, “Hey Joe, I’ve got another one.”
He told me that half of his clients had had their refund checks stolen this year, and as a result, the IRS was now demanding automatic audits on all refund requests into four figures or more.
It gets worse. Budget cuts at the despised government agency mean that huge delays are occurring in almost all interactions. Even routine requests can sit on a bureaucrat’s desk for two years. The number of standard audits has fallen substantially.
The ones that take place are just a quick pass over, often conducted by mail, rather than the in-person, full proctologic examinations of the past.
Furthermore, the government didn’t have the money to pay for the latest upgrade of QuickBooks Pro.
This means it is unable to use the online accounting service’s spreadsheets during audits when the taxpayer’s accountant has upgraded, greatly increasing the time required for each audit while decreasing its effectiveness.
As a result, QuickBooks is seeing the fastest and most widespread adoption of its latest software version in history.
You can’t make this stuff up.
I asked my accountant how long it would really take for me to collect my 2016 refund.” Better count on a year,” he said.
Then, the news flash came out that hackers had stolen the tax returns of 100,000 individuals, including their personal information. I was clearly one of those victims.
Not only did the crooks discover my name and social security number, they also knew that my high school team name was the “Apaches,” my first car was a “Volkswagen,” and that I was married in “Tokyo.”
I bet they know my inside leg measurement as well (I’m not telling!).
It all reminds me that it is once again time to revisit Palo Alto Networks (PANW). I have been recommending this cyber security name for the past three years, issuing Trade Alerts on each opportunistic dip.
The near destruction of Sony (SNE) by North Korean hackers has certainly put the fear of God into corporate America.
Apparently, they have no sense of humor whatsoever north of the 38th parallel.
I saw The Interview the other day on a plane, the film making fun of Supreme Leader Kim Jong-un that so pissed them off, and it totally sucked.
As a result, there is a generational upgrade in cyber security underway, with many potential targets boosting spending by multiples.
It’s not often that I get a stock recommendation from an army general. That is exactly what happened the other day when I was speaking to a three-star about the long-term implications of the Iran peace deal.
He argued persuasively that the world would probably never again see large-scale armies fielded by major industrial nations. Wars of the future will be fought online, as they have been silently and invisibly over the past 15 years.
All of those trillions of dollars spent on big ticket, heavy-metal weapons systems are pure pork designed by politicians to buy voters in marginal swing states.
The money would be far better spent where it is most needed, on the cyber warfare front. Needless to say, my friend shall remain anonymous.
The problem is that when wars become cheaper, you fight more of them, as is the case with online combat. Cyber wars are now happening every day, all the time, 24/7, and everywhere.
You probably don’t know this, but during the Bush administration, the Chinese military downloaded the entire contents of the Pentagon’s mainframe computers at least seven times.
This was a neat trick because these computers were in stand-alone, siloed, electromagnetically shielded facilities, not connected to the Internet in any way.
In the process, they obtained the designs of all of our most advanced weapons systems, including our best nukes. What have they done with this top-secret information?
Absolutely nothing.
Like many in senior levels of the US military, the Chinese have concluded that nuclear weapons are a useless waste of valuable resources.
Far better value for money is more hackers, coders, and servers, which the Chinese have pursued with a vengeance.
You have seen this in the substantial tightening up of the Chinese Internet through the deployment of the Great Firewall, which blocks local access to most foreign websites.
Some Mad Hedge Fund Trader subscribers in the Middle Kingdom have told me they can no longer access their US-based online brokerage accounts, which are blocked by mainland “porn” filters.
“Porn” is defined as anything the Chinese government doesn’t agree with.
Try sending an email to someone in the Middle Kingdom with a Gmail address. It is almost impossible. This is why Google (GOOG) closed their offices five years ago.
As a member of the Joint Chiefs of Staff recently told me, “The greatest threat to national defense is wasting money on national defense.”
Although my brass-hatted friend didn’t mention the company by name, the implication is that I need to go out and buy Palo Alto Networks (PANW) right now.
Palo Alto Networks, Inc. is an American network security company based in Santa Clara, California, just across the water from my Bay area office.
The company’s core products are advanced firewalls designed to provide network security, visibility, and granular control of network activity based on application, user, and content identification.
Palo Alto Networks competes in the unified threat management and network security industry against Cisco (CSCO), FireEye (FEYE), Fortinet (FTNT), Check Point (CHKP), Juniper Networks (JNPR), and Cyberoam, among others.
The really interesting thing about this industry is that there are no losers.
That’s because companies are taking a layered approach to cyber security, parceling out contracts to many of the leading firms at once, looking to hedge their bets.
To say that top management has no idea what these products really do would be a huge understatement. Therefore, they buy all of them.
This makes a basket approach to the industry more feasible than usual.
You can do this by buying the $070 million capitalized PureFunds ISE Cyber Security ETF (HACK), which boasts Cyberark Software (CYBR) and Infoblox (BLOX) as its three largest positions. (HACK) has been a hedge fund favorite since the Sony attack.
For more information about (HACK), please click here.
As for my tax refund, I am still waiting.
I Have Some Bad News for you, Mr. Thomas
Global Market Comments
November 15, 2023
Fiat Lux
Featured Trade:
(TESTIMONIAL),
(THE IRS LETTER YOU SHOULD DREAD),
(PANW), (CSCO), (FEYE),
(CYBR), (CHKP), (HACK), (SNE)
Global Market Comments
May 5, 2023
Fiat Lux
Featured Trade:
(THURSDAY, MAY 18, 2023 TAMPA, FLORIDA STRATEGY LUNCHEON)
(THE IRS LETTER YOU SHOULD DREAD),
(PANW), (CSCO), (FEYE),
(CYBR), (CHKP), (HACK), (SNE)
CLICK HERE to download today's position sheet.
Global Market Comments
April 15, 2021
Fiat Lux
Featured Trade:
(CYBERSECURITY IS ONLY JUST GETTING STARTED),
(PANW), (HACK), (FEYE), (CSCO), (FTNT), (JNPR), (CYBR)
Global Market Comments
April 6, 2021
Fiat Lux
Featured Trade:
(THE IRS LETTER YOU SHOULD DREAD),
(PANW), (CSCO), (FEYE),
(CYBR), (CHKP), (HACK), (SNE)
(FB), (AAPL), (NFLX), (GOOGL), (MSFT), (TSLA), (VIX)
(TESTIMONIAL)
Global Market Comments
May 28, 2020
Fiat Lux
Featured Trade:
(THE IRS LETTER YOU SHOULD DREAD),
(PANW), (CSCO), (FEYE),
(CYBR), (CHKP), (HACK), (SNE)
Mad Hedge Technology Letter
October 9, 2019
Fiat Lux
Featured Trade:
(WHAT’S BEHIND THE CHINESE TECH BLACKLIST)
(FTNT), (PANW), (CRWD), (CYBR)
The administration banning 8 Chinese tech companies screams one thing – American cybersecurity will become more important than ever before.
Interestingly enough, most of the entry list included Chinese own version of cybersecurity companies which usually participate in heavy-handed censorship including facial recognition startups Sensetime, Megvii and Yitu, video surveillance specialists Hikvision and Dahua Technology, iFlyTek, Xiamen Meiya Pico Information Co and Yixin Science and Technology Co.
All of these companies have “borrowed” American source code while applying American designed semiconductors to create a business aiding the interests and model of the Chinese Communist Party.
As the stakes become higher, American companies too will have to grow cybersecurity budgets, and instead of budgeting for mass authoritarian censorship, American companies will need to spend to protect the technology and networks they develop from getting pillaged from totalitarian regimes.
If American tech companies renege on the Faustian bargain of doing business in China for their technology, then it will force the Chinese to acquire this sensitive technology by any means possible and that doesn’t involve sitting on the emperor’s chair in Beijing.
What does this mean for the broader trade war?
Even if we get a mini deal, it won’t address that the main guts of the trade conflict entails killing off Chinese tech in the way we know it now.
Being able to agree on some sort of enforceable mechanism is a pipe dream, even if an enforceable mechanism is agreed on, who will enforce the enforceable mechanism?
That’s how tricky it is for corporates doing business in China and now the NBA (National Basketball Association) has received a small sampling of the trade war with one innocuous quote by Houston Rockets General Manager Daryl Morey who tweeted then deleted his democratic support for the Hong Kong freedom movement.
The ban of these 8 Chinese companies means they will no longer be able to purchase U.S.-made technology parts to use as inputs of a censorship business model that goes against democratic values.
The trigger for the blacklist was the way these technologies were used to imprison ethnic Muslim minorities in Chinese Xinjiang province paving the way for China to lash out again against the U.S for the ban.
Not only has China applied the technology to Chinese nationals, they have exported this technology to African states and are allowed access to the data which could theoretically be exploited for additional economic and political gain about which they essentially have no qualms.
Chinese foreign ministry spokesman Geng Shuang has characterized this move as “interfering in China’s internal affairs” and as you probably believe, he expressed great unsatisfaction with this move as Chinese and American delegations plan to meet shortly to hash out their differences.
The 8 banned companies will need to source alternative tech in the same way that Huawei Technologies has done.
Huawei was banned this past April under national security premises blocking access to US-made software for its handsets and devices, such as Google’s Android operating system and Microsoft’s Windows.
This will hurt certain semiconductor manufacturers like Nvidia who sell artificial intelligence chips for video surveillance to Hikvision and semiconductor stocks have sold off hard on this news.
Washington’s move has laid bare the fierce struggle for technology supremacy and America’s refusal to allow Chinese technology companies to reign supreme off of ill-gotten intellectual property and American semiconductor chips.
It could be the final straw in corporate America funding China to take down itself or at least another step to disengaging with the Sino cash cow.
And this new episode is almost guaranteed to usher in a flight of capital to American cybersecurity companies as Chinese hackers open up a new frontier to hack the best of America’s intellectual property.
I envision the likes of Palo Alto Networks, Inc. (PANW), Fortinet, Inc. (FTNT), CrowdStrike Holdings, Inc. (CRWD), and CyberArk Software Ltd. (CYBR) as good long term buy and holds that offer quality exposure to the cybersecurity story and the future growth of it.
