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January 6 Biweekly Strategy Webinar Q&A

Below please find subscribers’ Q&A for the January 6 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Incline Village, NV.

Q: Any thoughts on lithium now that Tesla (TSLA) is doing so well?

A: Lithium stocks like Sociedad Qimica Y Minera (SQM) have been hot because of their Tesla connection. The added value in lithium mining is minimal. It basically depends on the amount of toxic waste you’re allowed to dump to maintain profit margins—nowhere close to added value compared to Tesla. However, in a bubble, you can't underestimate the possibility that money will pour into any sector massively at any time, and the entire electric car sector has just exploded. Many of these ETFs or SPACs have gone up 10 times, so who knows how far that will go. Long term I expect Tesla to wildly outperform any lithium play you can find for me. I’m working on a new research piece that raises my long-term target from $2,500 to $10,000, or 12.5X from here, Tesla becomes a Dow stock, and Elon Musk becomes the richest man in the world.

Q: Won’t rising interest rates hurt gold (GLD)? Or are inflation and a weak dollar more important?

A: You nailed it. As long as the rate rise is slow and doesn't get above 1.25% or 1.50% on the ten-year, gold will continue to rally for fears of inflation. Also, if you get Bitcoin topping out at any time, you will have huge amounts of money pour out of Bitcoin into the precious metals. We saw that happen for a day on Monday. So that is your play on precious metals. Silver (SLV) will do even better.

Q: What are your thoughts on TIPS (Treasury Inflation Protected Securities) as a hedge?

A: TIPS has been a huge disappointment over the years because the rate of rise in inflation has been so slow that the TIPS really didn’t give you much of a profit opportunity. The time to own TIPS is when you think that a very large increase in inflation is imminent. That is when TIPS really takes off like a rocket, which is probably a couple of years off.

Q: Will Freeport McMoRan (FCX) continue to do well in this environment?

A: Absolutely, yes. We are in a secular decade-long commodity bull market. Any dip you get in Freeport you should buy. The last peak in the previous cycle ten years ago was $50, so there's another potential double in (FCX). I know people have been playing the LEAPS in the calendars since it was $4 a share in March and they have made absolute fortunes in the last 9 months.

Q: Is it a good time to take out a bear put debit spread in Tesla?

A: Actually, if you go way out of the money, something like a $1,000-$900 vertical bear put spread, with the 76% implied volatility in the options market one week out, you probably will make some pretty decent money. I bet you could get $1,500 from that. However, everyone who has gone to short Tesla has had their head handed to them. So, it's a high risk, high return trade. Good thought, and I will actually run the numbers on that. However, the last time I went short on Tesla, I got slaughtered.

Q: Any thoughts on why biotech (IBB) has been so volatile lately?

A: Fears about what the Biden government will do to regulate the healthcare and biotech industry is a negative; however, we’re entering a golden age for biotech invention and innovation which is extremely positive. I bet the positives outweigh the negatives in the long term.

Q: Oil is now over $50; is it a good time to buy Exxon Mobil (XOM)?

A: Absolutely not. It was a good time to buy when it was at $30 dollars and oil was at negative $37 in the futures market. Now is when you want to start thinking about shorting (XOM) because I think any rally in energy is short term in nature. If you’re a fast trader then you probably can make money going long and then short. But most of you aren't fast traders, you’re long-term investors, and I would avoid it. By the way, it’s actually now illegal for a large part of institutional America to touch energy stocks because of the ESG investing trend, and also because it’s the next American leather. It’s the next former Dow stock that’s about to completely disappear. I believe in the all-electric grid by 2030 and oil doesn't fit anywhere in that, unless they get into the windmill business or something.

Q: With Amazon buying 11 planes, should we be going short United Parcel Service (UPS) and FedEx (FDX)?

A: Absolutely not. The market is growing so fast as a result of an unprecedented economic recovery, it will grow enough to accommodate everyone. And we have already had huge performance in (UPS); we actually caught some of this in one of our trade alerts. So again, this is also a stay-at-home stock. These stocks benefited hugely when the entire US economy essentially went home to go to work.

Q: Should we keep our stay-at-home stocks like DocuSign (DOCU), Zoom (ZM), and UPS (UPS)?

A: They are way overdue for profit-taking and we will probably see some of that; but long term, staying at home is a permanent fixture of the US economy now. Up to 30% of the people who were sent to work at home are never coming back. They like it, and companies are cutting their salaries and increasing their profits. So, stay at home is overdone for the short term, but I think they’ll keep going long term. You do have Zoom up 10 times in a year from when we recommended it, it’s up 20 times from its bottom, DocuSign is up like 600%. So way overdone, in bubble-type territory for all of these things.

Q: Are telecom stocks like Verizon (VZ) and AT&T (T) safe here?

A: Actually they are; they will benefit from any increase in infrastructure spending. They do have the 5G trend as a massive tailwind, increasing the demand for their services. They’re moving into streaming, among other things, and they had very high dividends. AT&T has a monster 7% dividend, so if that's what you’re looking for, we’re kind of at the bottom of the range on (T), so I would get involved there.

Q: Should we sell all our defense stocks with the Biden administration capping the defense budget?

A: I probably would hold them for the long term—Biden won’t be president forever—but short term the action is just going to be elsewhere, and the stocks are already reflecting that. So, Raytheon (RTX), United Technologies (UT), and Northrop Grumman (NOC), all of those, you don’t really want to play here. Yes, they do have long term government contracts providing a guaranteed income stream, but the market is looking for more immediate profits, or profit growth like you have been getting in a lot of the domestic stocks. So, I expect a long sideways move in the defense sector for years. Time to become a pacifist.

Q: Is it safe to buy hotels like Marriott (MAR), Hyatt (H), and Hilton (HLT)?

A: Yes, unlike the airlines and cruise lines, which have massive amounts of debt, the hotels from a balance sheet point of view actually have come through this pretty well. I expect a decent recovery in the shares, probably a double. Remember you’re not going to see any return of business travel until at least 2022 or 2023, and that was the bread and butter for these big premium hotel chains. They will recover, but that will take a bit longer.

Q: How about online booking companies like Expedia (EXPE) and Booking Holdings Inc, owner of booking.com, Open Table, and Priceline (BKNG)?

A: Absolutely; these are all recovery stocks and being online companies, their overhead is minimal and easily adjustable. They essentially had to shut down when global travel stopped, but they don’t have massive debts like airlines and cruise lines. I actually have a research piece in the works telling you to buy the peripheral travel stocks like Expedia (EXPE), Booking Holdings (BKNG), Live Nation (LYV), Madison Square Garden (MSGE) and, indirectly, casinos (WYNN), (MGM) and Uber (UBER).

Q: What about Regeneron (REGN) long term?

A: They really need to invent a new drug to cure a new disease, or we have to cure COVID so all the non-COVID biotech stocks can get some attention. The problem for Regeneron is that when you cure a disease, you wipe out the market for that drug. That happened to Gilead Sciences (GILD) with hepatitis and it’s happening with Regeneron now with Remdesivir as the pandemic peaks out and goes away.

Q: What about Chinese stocks (FXI)?

A: Absolutely yes; I think China will outperform the US this year, especially now that the new Biden administration will no longer incite trade wars with China. And that is of course the biggest element of the emerging markets ETF (EEM).

Q: Will manufacturing jobs ever come back to the US?

A: Yes, when American workers are happy to work for $3/hour and dump unions, which is what they’re working for in China today. Better that America focuses on high added value creation like designing operating systems—new iPhones, computers, electric cars, and services like DocuSign, Zoom—new everything, and leave all the $3/hour work to the Chinese.

Q: What about long-term LEAPS?

A: The only thing I would do long term LEAPS in today would be gold (GOLD) and silver miners (WPM). They are just coming out of a 5-month correction and are looking to go to all-time highs.

Q: What about your long-term portfolio?

A: I should be doing my long-term portfolio update in 2 weeks, which is much deserved since we have had massive changes in the US economy and market since the last one 6 months ago.

Q: Do you have any suggestions for futures?

A: I suggest you go to your online broker and they will happily tell you how to do futures for free. We don’t do futures recommendations because only about 25% of our followers are in the futures market. What they do is take my trade alerts and use them for market timing in the futures market and these are the people who get 1,000% a year returns. Every year, we get several people who deliver those types of results.

Q: Will people go back to work in the office?

A: People mostly won’t go back to the office. The ones who do go back probably won't until the end of the summer, like August/September, when more than half the US population has the Covid-19 vaccination. By the way, getting a vaccine shot will become mandatory for working in an office, as it will in order to do anything going forward, including getting on any international flights.

Q: What is the best way to short the US dollar?

A: Buy the (FXE), the (FXY), the (FXA), or the (UUP) basket.

Q: Silver LEAP set up?

A: I would do something like a $32-$35 vertical bull call spread on options expiring in 2023, or as long as possible, and that increases the chance you’ll get a profit. You should be able to get a 500% profit on that LEAP if silver keeps going up.

Q: What about agricultural commodities?

A: Ah yes, I remember orange juice futures well, from Trading Places, where I also once made a killing myself. Something about frozen iguanas falling out of trees was the tip-off. We don’t cover the ags anymore, which I did for many years. They are basically going down 90% of the time because of the increasing profitability and efficiency of US farmers. Except for the rare weather disaster or an out of the blue crop disease, the ags are a loser’s game.

Q: Can we view these slides?

A: Yes, we load these up on the website within two hours. If you need help finding it just send an email or text to our ever loyal and faithful Filomena at support@madhedgefundtrader.com and she will direct you.

Q: Do you have concerns about Democrats regulating bitcoin?

A: Yes, I would say that is definitely a risk for Bitcoin. It is still a wild west right now and there are massive amounts of theft going on. It is a controlled market, with bitcoin miners able to increase the total number of points at any time on a whim.

Good Luck and Stay Healthy

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

January 8, 2021/by Mad Hedge Fund Trader

July 17, 2020

Diary, Newsletter, Summary

Global Market Comments
July 17, 2020
Fiat Lux

Featured Trade:

(JULY 15 BIWEEKLY STRATEGY WEBINAR Q&A),
(EEM), (GLD), (GDX), (NEM), (GOLD), (UUP), (FXA), (FXE), (FXY), (AMZN), (AAPL), (GOOGL), (FB), (BIDU), (TLT), (TBT), (IBB), (ROM)

July 17, 2020/by Mad Hedge Fund Trader

July 15 Biweekly Strategy Webinar Q&A

Diary, Newsletter

Below please find subscribers’ Q&A for the July 15 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Lake Tahoe, NV with my guest and co-host Bill Davis of the Mad Day Trader. Keep those questions coming!

Q: Do you expect foreign equities to begin to outperform US equities sometime soon?

A: I expect them to outperform imminently simply because Europe did their shutdown properly, a total shutdown, and got rid of the virus, so their economy and schools are opening. We did a partial shutdown, some states did not shut down at all, and as a result, the epidemic is on fire here, and our shutdown will have to last an extra six months to a year. So that means you’ll probably want to be rotating out of US stocks and into emerging stocks, and the (EEM) is the ETF to go with there.

Q: Would you buy gold LEAPS at this point?

A: Normally, I say only buy LEAPS on capitulation selloffs like we had in March. We actually put out 25 LEAP recommendations on the long side in tech and biotech in March and they all proved spectacular winners. However, at this point, gold is just short of an all-time high; if you break the high you could get a $500 or $1,000 move very quickly to the upside. If you want to do LEAPS, I would go out one year, I would go fairly close to the money, something like a $200-$210 LEAP in the (GLD) ETF. Your much bigger bang, by the way, would be to do LEAPS on the individual stocks; go 10% or 20% out of the money, you might make 100%-200% on those and the stocks to do there would be Newmont Mining (NEM) and Barrick Gold (GOLD).

Q: Would the US or any other country consider backing their currency with gold?

A: Absolutely not. We went off the gold standard in 1972 for a reason. That’s because they're not making it anymore; there isn't enough gold to support growth in a global economy. On the other hand, a supply of paper is unlimited, and that's why we've had such terrific economic growth since we’ve gone off the gold standard.

Q: I’m seeing some really great deals in energy. Should I get involved?

A: Absolutely not. Don’t confuse “gone down a lot” with “cheap.” We think the oil business is long term going out of business. It can't compete with alternatives and electric cars; the economics for investing in a non-scalable energy form just are not there. It’s like asking an analog adding machine to compete with a computer.

Q: Is it too late to sell the US dollar or the Invesco DB US Dollar Index Bullish Fund ETF (UUP)?

A: No, we’re only in the very early stages of the collapse of the US dollar, so you want to be buying all of the nondollar ETFs like the Australian dollar (FXA), the euro (FXE), and the Japanese yen (FXY). Massive over issuance of currency will destroy its value, that’s one of the seminal lessons of currency markets. The US is not immune to that.

Q: Biotech is getting overheated here—should I buy the rumor, sell the news?

A: We’re also just in the opening stages of the biotech golden age. Even if they cure corona tomorrow, there are another 100 diseases they will cure over the next 10 years using all of the new advanced technology that has just been developed, like gene editing, monoclonal antibodies, and quantum computers. It’s another reason to subscribe to the Mad Hedge Biotech and Healthcare Letter for $1,500 a year (click here).

Q: I see Bill Gross is bullish on value stocks—would you go with that view?

A: No, leave the value stocks for Bill Gross. He's semi-retired and hasn’t been as good on the stock market lately as he used to be, as much as he is a dear friend. This is a chasing-a-winner type market. I would wait for value stocks. You could die a long horrible death by the time value stocks turn around so I would avoid them. Go for earnings growth, that’s the only thing that counts in the future.

Q: What would you recommend as a portfolio starter?

A: I would recommend 100% cash. I know you don’t want to hear that you should keep cash if you just bought an expensive trade alert service, but the fact is the risk now is the highest it’s been in years. I only add new trade at market sweet spots, and you don’t get those every day of the year. I will send you an alert if I see a low-risk high-return trade. Wait for the summer correction—that will set up another bet-the-ranch opportunity. Don’t worry about trade alerts, we’ll be doing about 400 of them this year, but they do tend to come in bunches at market bottoms and market tops.

Q: Do American companies have much of a chance against Chinese tech?

A: The US has an overwhelming lead, which will probably increase at an exponential rate. I think the threat of Chinese tech is vastly overstated by the administration. They needed an enemy to protect us from to stick around. The reality is that the US is so far ahead it’s unbelievable; that’s the reason they steal our technology. And they only have leads in very specific areas, such as surveillance of large populations. I wouldn’t worry too much about tech—if the Chinese really had a lead on tech, would Amazon (AMZN), Apple (AAPL), Alphabet (GOOGL), Facebook (FB) all be going to new highs every day, while Baidu (BIDU) lagged?

Q: Should we close out the Regeneron call spread?

A: At this point, we’re so far in the money I would just wait two more days and it will expire at its maximum $10 value, and you can avoid all the fees. You’ll end up making $1,600 or 16.28% 15 trading days.

Q: Presidential candidate Joe Biden has just had a huge surge in the polls in battleground states. Will he be damaging to the market?

A: No, ever since he started his rise in the polls, the stock market has been rising almost every day, and that’s even after announcing in advance that he’s going to raise corporate taxes from 21% to 28%. He’s also going to eliminate the carried interest, which should have been eliminated a long time ago. I imagine there will be some super punitive Roosevelt style 90% tax on net taxable income over a billion dollars—a real billionaire’s punishment tax, as they’ve basically made all the money for the last 30 years. The stock market is voting with confidence for the future Biden government, who am I to disagree? The market is always right.

Q: Will gold hit a new high?

A: Yes, I think we will have a new high in a couple of weeks. That's why I said it’s a rare case when you actually buy LEAPS in a rising market, especially if you go one or two years out. Guess where gold will be in two years? My bet is $3,000, so a $200/$210 LEAP in the (GLD) could bring in a 1,000% return, The overwhelming fundamentals are in favor of gold. I'll keep hammering away at that in the newsletter.

Q: I only trade stocks; how can I take advantage of your recommendations?

A: First of all, buy the stocks. Second, you can buy stocks on margin, which gives you double exposure. Third, there are many 2X ETFs on the stocks or sectors we recommend, like the (TBT), which you can also trade in a stock account. For example, for biotech, you can get your exposure there through the (IBB), and through tech, you can buy the 2X (ROM); but I wouldn’t buy it today because it is too high. In fact, only about 25% of our followers do options, the rest trade stocks or use it to manage their own long-term portfolios.

Q: Will we hit 0% yielding US Treasuries (TLT)?

A: Probably not, that move is behind us. We got down to a 31 basis points yield at the lows. Now, massive oversupply from the US government will be the primary factor dictating Treasury prices, and that means going down a lot.

Good Luck and Stay Healthy

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

July 17, 2020/by Mad Hedge Fund Trader

July 13, 2020

Diary, Newsletter, Summary

Global Market Comments
July 13, 2020
Fiat Lux

Featured Trade:

(MARKET OUTLOOK FOR THE WEEK AHEAD, or HERE COME HERD IMMUNITY),
(INDU), (TSLA), (SPY), (GLD), (JPM), (IBB), (QQQ), (AAPL), (MSFT), (DCUE), (NVDA)

July 13, 2020/by Mad Hedge Fund Trader

The Market Outlook for the Week Ahead, or Here Comes Herd Immunity

Diary, Newsletter

The US passed a single-day record of 70,000 new cases for Covid-19 over the weekend, with Florida bringing in an astounding 15,300.

We missed a chance to stop the epidemic in January because we were blind. Then we missed again in April because we were lazy, when New York City was losing nearly 1,000 souls a day and ignored the lessons therein.

So, we relentlessly continue our march towards herd immunity, when two-third of the population gets the disease, protecting the remaining one third. That’s about a year off.

That implies total American deaths will reach 2.2 million, more than we have lost from all our wars combined.

The faster people die, the closer we are to the end of the plague, which is good news for everyone.

And the stock market keeps going up every day, the worse the news, the faster. That may be happening because the more severe the shock to the system, the faster companies must evolve to survive, making them ever more profitable.

Out with the Old America, in with the new. The future is happening fast.

We here at Mad Hedge Fund Trader have just delivered the most astonishing quarter in our 13-year record, up some 41.98% from the March 16 low.

That makes me cautious. Things never stay that good for long. Just because I can’t see the next black swan doesn’t mean it isn’t going to happen.

If stocks rise when corona cases are exploding, what do they do when cases fall? Do they fall too, or do they rise even faster?

That’s above my pay grade. I’m only a captain, not a general.

So, I will be moving to a 100% cash position in coming days and then let the next black swan tell me what to do. If we suffer a severe dive, and 10%-20% is entirely possible, then I’ll jump back in with my “BUY” hat on. That means testing the lower up of my six-month (SPX) 2,700-$3,200 range.

If we suddenly surge to far greater heights and new all-time highs, then I will be selling short as fast as I can write the trade alerts.

In the meantime, we have Q2 earnings to look forward to in the coming week, which will certainly be one for the history books. The bullish view is that they will be down only 44% from a dismal Q1. The bearish view is far worse. Banks (JPM) kick off on Tuesday.

NASDAQ (QQQ) hit a new high at 10,622, with Apple (AAPL) and Microsoft (MSFT) leading the charge. Elon Musk is now looking at another $1.7 billion payday with his shares touching $1,500. I’m moving to 100% cash, peeling off one profitable position a day as each option play reaches its maximum profit. I just had the best quarter in a decade, up an eye-popping 40%, and I’m just not that smart to keep it going. Humility always wins in the long-term.

Goldman Sachs chopped its growth forecast in the face of soaring Covid-19 cases, paring their Q3 prediction from +33% to +25%. Political campaign rallies are spreading the disease faster than expected. Q1 most likely came in at negative -5%. Expect worse to come. If the stock market can’t break at 135,000 corona deaths, it will at 260,000 or 520,000, which is certainly coming.

NVIDIA topped Intel as most valuable chip company. No surprise here. High-end graphics cards are worth a lot more money than plain commodity processors. Keep buying dips on (NVDA) which we’ve been loading the boat with now for four years. There’s an easy double from here.

Warren Buffet bought Dominion Energy (DCUE), in one of the only distressed sales available this year, thanks so much to government support. With natural gas prices at all-time lows, the big boys are throwing in the towel. Immense public pressure is forcing public utilities to abandon fossil fuels. Warren will sell all of his newfound energy in the $10 billion deal to China. It’s the beginning of the end for carbon. Buy (TSLA) on dips.

Dividend Cuts will drive stock trading in H2. Energy, airline, cruise lines, casinos, movie theaters, and hotels are most at risk, while big technology companies like Apple are the safest. Currently, the S&P 500 is yielding 2.0%, while the ten-year US Treasury bond is paying out 0.65%. Room for a cut?

Tesla to reach $100 billion in annual revenue by 2025, says San Francisco-based JMP Securities. The logic goes that if they can produce 90,000 vehicles a quarter during a pandemic, 140,000 a quarter should be no problem by yearend. The news delivered a move in the shares to a new all-time high of $1,549. Inclusion of (TSLA) in the S&P 500 would also deliver a lot of forced institutional buying, which might take the shares up 40% more. The future is happening fast. Keep buying (TSLA) on dips for a 2021 target of $2,500. If this keeps up, we may see it next week. Remember, I traded Tokyo in 1989. Nothing is impossible.

US student visas were canceled in ostensibly an administration coronavirus-fighting measure, but really in the umpteenth measure to shut foreigners out. “America first” is turning into “America only.” Midwestern schools in particular will be hurt by the loss of 400,000 full tuition-paying international students, especially when state education budgets are getting cut to the bone. That’s down from 800,000 three years ago. If they’re already here, how does this help us? Most colleges are moving to online-only models to limit infections.

When we come out the other side of this, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With interest rates still at zero, oil cheap, there will be no reason not to. The Dow Average will rise by 400% or more in the coming decade.

My Global Trading Dispatch enjoyed another blockbuster week, up an astounding +2.28. It was a week when everything worked in the extreme….again.

My eleven-year performance rocketed to a new all-time high of 381.74%. A triple weighting in biotech and a double weighting in gold were a big help. A foray into the banks proved immediately successful. I seem to have the Midas touch these days.

That takes my 2020 YTD return up to an industry-beating +25.83%. This compares to a loss for the Dow Average of -8.8%, up from -37% on March 23. My trailing one-year return popped back up to a record 66.22%, also THE HIGHEST IN THE 13-YEAR HISTORY of the Mad Hedge Fund Trader. My eleven-year average annualized profit recovered to a record +36.07%, another new high.

The only numbers that count for the market are the number of US Coronavirus cases and deaths, which you can find here. It’s jobs week and we should see an onslaught of truly awful numbers.

On Monday, July 13 at 10:00 AM EST, the June Inflation Expectations are out.

On Tuesday, July 14 at 7:30 AM EST, US Core Inflation for June is published

On Wednesday, July 15, at 7:30 AM EST, US Industrial Production for June is announced. At 10:30 AM EST, the EIA Cushing Crude Oil Stocks are out.

On Thursday, June 16 at 8:30 AM EST, Weekly Jobless Claims are announced. At 7:30 AM, US Retail Sales for June is printed.

On Friday, June 17, at 7:30 AM EST, the US Housing Starts for June are released.

The Baker Hughes Rig Count is out at 2:00 PM EST.

As for me, I am training hard for my upcoming 50-mile hike with the Boy Scouts, knocking off 10 miles a day at 9,000 feet on the Tahoe Rim Trail. I have to confess that I’m feeling the knees like never before.

As they used to say in the Marine Corps, “Pain is fear leaving the body.” More than knowledge comes with age. Pain is there as well.

Marine Corps to Boy Scout leader. It’s been a full life.

Stay healthy.

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

The Years Have Not Been Kind

July 13, 2020/by Mad Hedge Fund Trader

July 7, 2020

Diary, Newsletter, Summary

Mad Hedge Technology Letter
July 7, 2020
Fiat Lux

Featured Trade:

(JULY 1 BIWEEKLY STRATEGY WEBINAR Q&A),
(TSLA), (VIX), (TLT), (GLD), (IBB), (QQQ), (SPY), (NEM)
(TESTIMONIAL)

July 7, 2020/by Mad Hedge Fund Trader

July 1 Biweekly Strategy Webinar Q&A

Diary, Newsletter, Uncategorized

Below please find subscribers’ Q&A for the July 1 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Silicon Valley, CA with my guest and co-host Bill Davis of the Mad Day Trader. Keep those questions coming!

Q: You obviously do well with deep-in-the-money call and put spreads, but I struggle to get your prices.

A: Raise the strike prices or raise the price that you’re bidding for them closer to my limit. It’s really hard to keep current prices in this market with such extreme volatility (VIX), especially when you’re having melt-ups going on in Tesla (TSLA) and so on. Our trade alerts are just a starting point to get you going in the right direction in the right stock. The people who make the most money with the trade alert service are those who use my market timing to buy futures, either at the money risk reversals on stocks (long the call and short the put), or outright futures in gold (GLD), currencies (FXE), and bonds (TLT).

Q: How high can Tesla go?

A: My immediate target is $1200 (which has already been hit), and the rumors I'm hearing is that they will be good if you factor in the two months that the Fremont factory was closed. And after that, it’s $2,500 and then there's Ron Baron’s target of $5,000, who’s been in the stock himself since it was at $100 a share. Ron was a little late in finding my research on the company. I first got in at $16.50 after I toured the Fremont factory.

Q: Is it possible there will be a national mandate to wear masks, which could boost stocks?

A: Not under this president. Do not expect help from this administration on this pandemic. They've figured out they can’t beat it so they are just walking away and leaving the states to figure out what they can. You’ll have to wait for another president to get a national mask mandate if we’re still alive by that time. I am getting a lot of emails from Europe complaining that the United States is extending the pandemic by having so many people refusing to wear masks here or admit that the disease even exists. They are horrified.

Q: What do you think about the biotech ETF (IBB)?

A: I’d be buying it with both hands. Even without the pandemic, a new bull market started last September in biotech because the fundamentals long term were fantastic. But you had to be a scientist to see it back then. They really had the highest earnings growth with the lowest price earnings multiples in the entire stock market. The pandemic just gave it a supercharger. That’s why I started the Mad Hedge Biotech & Healthcare Letter (click here).

Q: Which ETF should I use for biotech?

A: The iShares NASDAQ Biotechnology ETF (IBB). It's a basket of the top 20 global biotech firms but will underperform single biotech stock picks by half, as any basket does.

Q: What about the long-term portfolio?

A: I will get to it. It seems like our long-term portfolio is changing every week, so it’s difficult to really look at anything in the long term. These days, long term is a week with all the volatility we’re getting. I imagine I’d be getting rid of any energy stocks on this rally though. I see oil going back to zero.

Q: You say stay long NASDAQ (QQQ) and short S&P 500 (SPY) for the rest of the year, but you project new highs for the S&P 500?

A: Yes, both can go up, but NASDAQ will go up faster, and that’s what hedge funds are doing. That gives you a market neutral position, sucks a lot of the risk out of that position, and it’s even crash-proof as we saw in the winter when the markets were melting down. And like hedge funds, you can leverage that up 5 or 10 times. So yes, that trade will work all day long, even if both indexes go to new highs. I imagine NASDAQ will outperform on the upside relative to SPY by a factor of two or three to one.

Q: Is there a good substitute to use versus your deep-in-the-money alerts if you have a smaller account?

A: You can just buy the stocks. Or, you can just buy the stocks on margin, which is 2 to 1—50% margin requirement there. There are many ways to skin a cat. The call spreads actually give you the most bang per buck because you get a lot of leverage with a small dollar amount upfront and limited risk.

Q: I heard that hedge funds have huge shorts. Is this setting up another short squeeze? Will they eventually be right?

A: Yes, that may have been what happened on Monday and Tuesday, a squeeze on the shorts driving prices much higher. They will eventually be right a little bit, but you’re certainly not going to get the major declines we saw in February/March because of all the QE and government support. The pandemic is no longer a surprise.

Q: Will COVID-19 fears keep volatility elevated until there is a vaccine?

A: Absolutely, yes. That’s great news for our options strategy, which is why we’re 100% invested almost all the time these days because higher volatility doubles the premiums you get for options. My current strategy is that once a position hits 90% of its maximum profit, I dump it and put on another position to take in an extra $1,500-$2,000. I did that with Tesla and gold (GLD) last week. This is the golden age of the in-the-money put and call spread strategy and we are better at executing it than anyone else.

Q: What do you have to say about the jobs report?

A: The entire US economic data system is breaking down because we’re seeing such immense swings month to month. Reporting lags are getting amplified one hundredfold. The June Nonfarm Payroll Report showed an increase of 4.8 million jobs and an unemployment rate of only 11.1% (I never thought I’d ever say “only 11.1%”). However, the state jobless claims are indicating an unemployment rate of at least 22%. Go walk down the Main Street of any town and you’ll see that the state figures are right. All the forecasting is relatively pointless. How can we get a fall in unemployment when nothing is open?

Q: Are you recording this webinar?

A: Yes, we usually post the recorded webinar on the site 2 hours after we finish so our many international subscribers don’t have to stay up until the middle of the night to watch it. That’s how long it takes to convert the webinar into a video format we can post online.

Q: When setting up LEAPS (Long Term Equity Participation Securities), do you buy straight calls at-the-money or in-the-money?

A: You buy deep, out-of-the-money spreads. Let's say you bought a (TSLA) $1,500/$1,550 deep-in-the-money call spread, and it expires at the maximum profit point with the stock over $1,550. You’ll make about a 500% return on that because it’s so far out of the money; the leverage is enormous. Will Tesla close over $1,550 in two years? Probably.

Q: How do I get into Tesla?

A: Close your eyes and buy at market, and hope we get $1,200 tomorrow on great Q2 sales numbers. Or, wait for another one of these huge selloffs—Tesla does have a history of selling off 50% at any given time, and then you go into a LEAPS there and get a 500% return. Most investors prefer the latter if they know about LEAPS. Remember, our last “BUY” into Tesla was a year ago when the stock was at $180. By the way, a lot of the shorts in Tesla stock were financed by big oil money and when oil crashed, they lost the ability to post more margin. So, they were forced to cover their shorts at gigantic losses, creating this super spike in the share price. Elon Musk, who owns 20% of the company, is laughing all the way to the bank.

Q: How do we pick the best strike prices for long-term LEAPS?

A: Go 30% out-of-the-money. There you get your 500% return. If you really want to be aggressive and you think the stock has 50% of upside, then go 50% out-of-the-money. There your return will be about a 1,000% profit over 2 years.

Q: How long are these trades for? I haven’t received any trade alerts.

A: Please contact customer support and we’ll find out if they are being filtered out by your spam folder. Global Trading Dispatch is sending out trade alerts virtually every day for all asset classes, so you should have received several of them by now. The Mad Hedge Technology Letter sends out fewer because they are confined to a narrow part of the market.

Q: What is your favorite stock in the gold space?

A: Newmont Mining (NEM). They have the strongest balance sheet of the major gold companies because they engage in fewer takeovers than the other big gold companies.

Good Luck and Stay Healthy

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

July 7, 2020/by Mad Hedge Fund Trader

June 22, 2020

Diary, Newsletter, Summary

Global Market Comments
June 22, 2020
Fiat Lux

Featured Trade:

(MARKET OUTLOOK FOR THE WEEK AHEAD, OR THE FED RIDES AGAIN),
(TLT), (SPY), (TSLA), (IBB), (AMGN), (GILD), (ILMN)

June 22, 2020/by Mad Hedge Fund Trader

The Market Outlook for the Week Ahead, or The Fed Rides Again

Diary, Newsletter, Summary

The free Fed put was tested once again last week, and once again it held. It seems that the line in the sand is $300 for the (SPY), and if that doesn’t hold, $270 will do. At least, for a month.

How long this game will last is anyone’s guess. $14 trillion is a lot of money to throw at the problem. But then so are US Covid-19 deaths approaching 1,000 a day. Who knows what Jay Powell has up his sleeve? Probably quite a lot.

A large chunk of the US economy has gone missing and is never coming back, especially the portion represented by small companies. Whether stock investors will notice this will be the big bet for the remainder of 2020. My bet is they will if the spread of the epidemic can’t be stopped. I give it a 50/50 chance.

If the worst-case scenario happens, get ready to load the boat of LEAPS once again, for we have a Roaring Twenties and second American Golden Age ahead of us, if you can live to see it. We are one wonder drug discovery away from that starting tomorrow morning at 9:00 AM.

We got encouraging news last week with the commonplace steroid dexamethasone, which reduces deaths by 30%. Publishing the Mad Hedge Biotechnology & Health Care Letter, I can tell you there are hundreds more drugs like this under rapid development. Click here.

There is no doubt that biotech stocks (IBB) are breaking out to the upside. Take a look at the ten largest components of the iShares NASDAQ Biotechnology ETF and you’ll see they all have virtually the same chart (click here), stocks like Amgen (AMGN), Gilead Sciences (GILD), and Illumina (ILMN)

The trillions of dollars pouring into Covid-19 research is a big driver. In the meantime, past headaches have magically gone away, like the threat of a nationalization and drug price controls. No one feels like regulating drug companies in this environment. Almost all impediments to research have been tossed away. Relative to the rest of the superheated stock market, biotech shares are still cheap.

The Fed is to starting to buy individual bonds, in another unprecedented expansion of quantitative easing. They are clearly worried about exploding Corona cases, as I am. US Treasury bonds (TLT) dove two points on the news as this may represent a diversion of Fed buying from that market. Stocks soared 1,000 points.

The big message is more QE to come. Another election play? It is called “QE Infinity” for a reason. It’s a great level to trade against. I hope you loaded up on tech LEAPS at the bottom, as I begged you to do.

The Fed balance sheet soars, from $4 trillion to $7 trillion this year, says Fed governor Jay Powell. It is the fastest debt blow up in history. That’s $18,750 per taxpayer in four months. It could be $10 trillion by yearend. If you received less than this stimulus money, you got screwed. This always ends in stagflation….high inflation and slow growth, like we saw after the Vietnam War. Your grandkids are going to have to take side jobs driving for Uber to pay off this bill.

Reopening states see corona cases explode, tossing the “V” shaped economic recovery out the window. Some 25 states are seeing a rapid rise in new cases. Is this the second wave or an extension of the first? The green shoots have been squashed. Stocks won’t like it. The free pass is over.

Stocks pop on miracle steroid drug that reduces Covid-19 death rates. Dexamethasone is the drug in question, normally used for arthritis treatments. It’s just in time as Beijing is closing down schools again in the wake of a second wave.

A US dollar crash is a sure thing, says my old Morgan Stanley colleague, Steven Roach. I couldn’t agree more. Steve is expecting a 35% swan dive for Uncle Buck. A negative savings rate combined with a retreat from Globalization is a toxic combo. A 1970s type stagflation could ensue.

Weekly Jobless Claims are still sky-high, at 1.51 million, far above estimates. The Dow gave up 300 points at the opening, then quickly clawed it back. Walk down Main Street these days and they are still filled with empty storefronts. Many companies are simply running out of money, unable to wait for a recovery. In the meantime, Corona cases are hitting new records every day. Florida cases are off the charts. Things will get worse before they get better.

Retail Sales posted record pop, up 17.7% in May. You are going to see a lot of these record data points because we are coming off a near-zero base. It will actually take years to get to January business levels. I’m sorry, but the higher the free Fed put drives the stock market, the worse the long-term outlook for the economy is going to be.

Homebuilder Confidence is off the charts, with Sales Expectations jumping 22 points to 68. It’s a positive perfect storm, with record-low 2.90% 30-year fixed rate mortgage, Fed buying of mortgage securities and a massive Millennial tailwind that I have been calling for years. A sudden Corona-driven urban flight is sending customers into the arms of suburban builders. Get into Lennar Homes (LEN), KB Homes (KBH), and Pulte Homes (PHM) on dips if you can.

Tesla (TSLA) to open the second US factory this year, somewhere in the southwest as demand overwhelms supply for electric vehicles, exacerbated by the two-month Corona shutdown. The tax break bidding war has already begun, with Texas and Oklahoma slugging it out. The factory comes with 5,000 jobs. Tesla got its first factory for free, giving stock to Toyota for $10 a share. It was the best investment Toyota ever made.

The Mad Hedge June 4 Traders & Investors Summit recording is up. For those who missed it, I have posted all 9:15 hours of recordings of every speaker. This is a collection of some of the best traders and investors I have stumbled across over the past five decades. To find it, please click here.

When we come out on the other side of this, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With interest rates still at zero, oil cheap, there will be no reason not to. The Dow Average will rise by 400% or more in the coming decade.

My Global Trading Dispatch performance nicely recouped the pasting we took last week, taking in a nice 7%, bringing June in at +1.21%. With the June options expiration, we managed to cash in on the accelerated time decay in seven positions for Global Trading Dispatch and another three for the Mad Hedge Technology Letter. My eleven-year performance stands at a new all-time high of 367.44%.

That takes my 2020 YTD return up to a more robust +11.53%. This compares to a loss for the Dow Average of -9.2%, up from -37% on March 23. My trailing one-year return popped back up to 51.92%. My eleven-year average annualized profit recovered to +34.99%.

The only numbers that count for the market are the number of US Coronavirus cases and deaths, which you can find here. On the economic front, some low-grade inflation numbers are published.

On Monday, June 22 at 11:00 AM EST, the May Existing Home Sales are out.

On Tuesday, June 23 at 11:00 AM EST, May New Home Sales are published.

On Wednesday, June 24, at 8:15 AM EST, the National Home Price Index is printed. At 10:30 AM EST, the EIA Cushing Crude Oil Stocks are published.

On Thursday, June 25 at 8:30 AM EST, Weekly Jobless Claims are announced. Also out it the final figure for Q1 GDP.

On Friday, June 26, at 10:00 AM EST, the Baker Hughes Rig Count is out. At 11:00, we get the University of Michigan Inflation Expectations.

As for me, I’ll spend the weekend modernizing my camping equipment, some pieces of which are WWII surplus, or are at least 50 years old. Since all of the Boy Scout summer camps for the year have been cancelled, such a Philmont and Catalina Island, I’m creating my own.

We’re going on a 50-mile hike around California’s High Sierra Desolation Wilderness, a part of Northern California my family has been fishing at for a hundred years.

We’ll be trekking on the Pacific Crest Trail featured in the film Wild. I’ll try to regale you with pictures on my return and wild fish stories.

It’s easier said than done, for there is a national camping boom going on. It can be difficult to get simple things, like maps, without an August delivery date. Some of my WWII stuff may have to suffice after all.

Stay healthy.

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