Global Market Comments
November 4, 2024
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD or TRADING ONE UNCERTAINTY FOR ANOTHER plus RECOLLECTIONS OF A MARINE),
(NVDA), (DHI), (LEN), (KBH), (PHM), (TOL), (JPM)
Posts
Here I am holed up in a mountaintop retreat.
I have six months of canned food, one month of water, and a year supply of ammo. There is an AR-15 and 12 gauge shotgun at the front door. There is a 45 caliber Colt Peacemaker and a Browning 45 at the backdoor. I sleep with a 9mm Glock 17 under my pillow and a baseball bat next to the bed. There are empty tin cans strung from the shrubbery to sound the alarm for any unexpected intruders.
Let the election begin!
Actually, I think the big surprise will be how little violence takes place. The violence threatened by one political party will fail to show. It was all talk, no substance, and just one big con. That alone should be worth a thousand-point rally in the Dow Average.
Of course, the passing of the election isn’t going to end the uncertainty for the stock market. All we are really doing is trading one kind of uncertainty for another. If Harris wins, will she be able to govern from the middle and how much will she be able to keep her party’s left wing at bay?
If Trump is elected, how many of his threats will be carried out, or was it all just talk? And how much will the courts allow him to carry out extreme policies? Then, there is the issue of who has control of the House and the Senate.
It will all add up to increased market volatility, which I love as a trader. Volatile markets yield much higher returns.
Buy this year’s winners and sell the losers. That is what every professional money manager will be doing on Wednesday morning. They want to window dress their holdings for yearend and harvest tax losses, mostly in energy. That makes the post-election rally really very easy to play.
In one of the most curious market timings in history, Dow Jones announced that it is adding Nvidia (NVDA) to their 30-strong stock market average on Friday, November 8, just three days after the presidential election, and possibly when the outcome is not yet known.
The Dow Jones Industrial Average was the only major US equity benchmark that didn't hold Nvidia. Intel (INTC) will be taken out to the woodshed, which just announced a massive $16 billion loss and has shrunk to a mere $100 billion in market cap. (INTC) is a mere shadow of its former self with a caricature of a CEO.
The normal reaction by the market is a 5-10% pop in the new Dow entrants and a similar 5-10% decline in the shares of the banished company. This is good news for followers of the Mad Hedge Fund Trader because virtually everyone now has (NVDA) as their largest holding, either by selection or capital appreciation.
The 19th century Dow has been playing catchup in gaining exposure to the largest technology companies. The Dow became 30 stocks in 1928. The DJIA was originally created by Charles Dow in 1896 and contained just 12 stocks. The number of stocks in the DJIA increased to 20 in 1916.
The move will increase the volatility of the Dow by adding a stock that is up 170% this year while removing one that has fallen 50%. It will lead to higher highs and then lower lows. Remember, (NVDA) fell 40% in July. It also continues to technology drift of the Dow to keep up with its main competitor, NASDAQ. The last company to join the Dow was Amazon.
When you do the hard work and perform your research well, all surprises tend to be happy ones.
A number of readers have expressed concern over DH Horton’s (DHI) disappointing results. But if anything, the bull case for the industry is stronger than ever. An imminent post-election rally in the bond market and drop in interest rates is about to cause the industry to explode to the upside.
The US new homes market is massively underbuilt. We are short anywhere from 10-20 million homes. Normal inventory is 6 months, and we are currently at 3 months. We went into the pandemic short of homes and then demand exploded. The average home price is now $420,000 against an average income of $75,000, requiring $130,000 in annual income to qualify for a conventional 30-year fixed rate loan.
If you want to live in San Jose, CA you need to earn $463,000 a year. Half of the new homes built this year are in only ten cities, with four in Texas as Americans continue a century-long trend of moving from north to south and from the coasts to the southwest. Building permits are actually falling, down 7% this year.
Concentration of the industry, and therefore the elimination competition, has continued at an incredible pace. Only ten firms control 50% to 80% of new home construction, making it difficult for new entrants. That’s up from only 10% 30 years ago. As a result, the number of floor plan options has shrunk dramatically.
Vice President Harris is proposing a $25,000 tax credit for first-time buyers if elected. She has also suggested subsidies to build 3 million affordable housing units. You always buy a sector that is about to see a big inflow of government largess. Buy (LEN), (KBH), (PHM), (TOL), and (DHI) on dips.
In October, we have gained a breathtaking +7.68%. My 2024 year-to-date performance is at an amazing +52.92%. The S&P 500 (SPY) is up +19.92% so far in 2024. My trailing one-year return reached a nosebleed +65.56. That brings my 16-year total return to +729.55%. My average annualized return has recovered to +52.42%.
I am going into the election as cautious as possible, with 80% in cash and 20% long. When you’re up this much you don’t take chances. I maintained two longs in (DHI) and (JPM) that are well in the money.
Some 63 of my 70 round trips, or 90%, were profitable in 2023. Some 63 of 82 trades have been profitable so far in 2024, and several of those losses were really break-even. Some 22 out of the last 23 trade alerts were profitable. That is a success rate of +76.82%.
Try beating that anywhere.
My Ten-Year View
When we come out the other side of the recession, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. The economy decarbonizing and technology hyper accelerating, creating enormous investment opportunities. The Dow Average will rise by 600% to 240,000 or more in the coming decade. The new America will be far more efficient and profitable than the old.
Dow 240,000 here we come!
On Monday, November 4 at 8:30 AM EST, the US Factory Orders are published.
On Tuesday, November 5 at 6:00 AM, the US Presidential Elections take place. The last polls close in Hawaii at 1:00 AM EST.
On Wednesday, November 6 at 11:00 AM, the MBA Mortgage rate is printed.
On Thursday, November 7 at 11:00 AM, the Federal Reserve announces its interest rates decision. A 25-basis point cut is in the bag. A press conference follows at 11:30 AM.
On Friday, November 8 at 8:30 AM, the University of Michigan Consumer Sentiment is announced. At 2:00 PM the Baker Hughes Rig Count is printed.
As for me, as the son of a Marine who served on Guadalcanal in 1942, I had an unusual childhood. The memories all came flooding back to me as the HBO program, The Pacific, which aired once again over last Memorial Day weekend.
Every scene in the ten-hour series I had already heard about around campfires, at veteran’s reunions, or in officers clubs around the world. At five, I learned how to open a coconut by tapping around the three eyes with a bayonet. At ten, I could shinny up a palm tree with a belt wrapped around my ankles.
I learned that you can shoot down a Japanese zero fighter by leading with four hand widths and aiming high. A tank can be disabled by ramming a log into its tracks. There was the survival training; practicing how to find water in the desert, setting a snare trap to catch small animals to eat, and starting a fire with only flint and steel. All the sniper training was fun but was fortunately never put to use.
I can still thrill the kids by hitting a quarter taped to a tree 50 feet away with a Winchester lever action 30-30. We outfitted ourselves with surplus WWII equipment from the “Supply Sergeant” for camping trips, which you could buy for a couple of dollars. Now, you only find these things in museums. We ate leftover C-rations.
Perhaps it was dad’s explanation of how to make highly alcoholic hooch out of canned peaches that led to my degree in biochemistry. In the end, I had my own Marine career as a combat pilot in Desert Storm, and many tasks that followed. There you learn the true meaning of “gung ho.”
At 73, I stay in boot camp shape. In my free time, I hike 100 miles in the High Sierras over 8,000 feet in eight days. I am carrying a 50-pound pack, and living on only 500 calories a day entirely composed of fruit and nuts. I love every minute of it.
Watching the series, I was reminded how feeble and meaningless my profession is, toiling away all year just to create a spreadsheet full of numbers, and how the men of eight decades ago were made of sterner stuff. Buying a dip on a bad day just doesn’t equate to “taking out that machine gun.”
How times have changed. Fall down on your knees and give thanks for your simple life.
You can buy the Hugh Ambrose book the series was based on by clicking here. You can purchase the DVD by clicking here.
Good Luck and Good Trading,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
October 28, 2024
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or HERE IS YOUR POST-ELECTION PORTFOLIO
plus THE LAST SILVER BUBBLE)
(NVDA), (META), (CRM), (TLT), (JNK), (CCI), (DHI), (LEN), (PHM),
(GLD), (SLV), (NEM), (FXE), (FXB), (FXA), (TSLA), (JPM), (BAC), (GS)
Global Market Comments
October 21, 2024
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD or COMPLACENSE IS RUNNING RAMPANT)
(JPM), (TSLA), (AMZN), (FXA), (FXE), (FXB), (FXY), (NEM), (DHI), (NFLX), (AAPL), (GLD), (AGQ), (SLV), (AAPL), (NVDA), (MS), (CCJ). (VST), (AVGO), (ASML), (MU), (LRCX), (DHI), (PHM), (LEN), (CCJ), (VST), (CEG), (BWXT), (OKLO)
We are now nearly three months into an almost straight-up move in the stock market, and money managers everywhere are scratching their heads. We are now only 136 points or 2.32% from my yearend (SPX) target of 6,000, which is starting to look pretty conservative. The price-earnings multiple for the S&P 500 is now 21X, the Magnificent Seven 28X, and NVIDIA 65X.
I’ve seen all this before.
We are about as close to a perfect Goldilocks scenario as we can get. Interest rates and inflation are falling. A 3% GDP growth rate means the US has the strongest major economy and is the envy of the world. We have entered the euphoria stage of the current market move in almost all asset glasses. Gold (GLD) has gone up almost every day. Some big tech remains on fire. Energy prices are in free fall. Even bonds (TLT) are trying to put in a bottom.
Complacence is running rampant.
So, how the heck do we trade a market like this? You play the laggard trade.
The biggest risk to the gold trade is that it has gone up 40% in a year. So, what do you do? The response by traders has been to move into lagging silver (SLV) (AGQ), which has been on a tear since September.
Had enough with the Mag Seven? Then, rotate in the sub $1 trillion part of the market with Broadcom (AVGO), ASML Holdings NV (ASML), Micron Technology (MU), and Lam Research (LRCX).
Tired of watching your DH Horton (DHI) go up every day? Then, flip into smaller homebuilders like Pulte Homes (PHM) and Lennar (LEN).
And then there is the biggest laggard of all, the nuclear trade, which is just crawling out of a 40-year penalty box. With news that Amazon (AMZN) was planning to order up to eight Small Modular Reactors to power its AI efforts, all uranium plays continue to go ballistic. The proliferation of power-hungry data centers is driving the greatest growth of power needs since WWII and the Manhattan Project.
Fortunately, I got in early. This is a trend that could become the next NVIDIA, as the public stocks involved are coming off such a low base. I have personally interviewed the founders and examined Nuscale’s plans with a fine tooth come and consider them genius. The company is, far and away, the overwhelming leader in the sector. The puzzle for the pros who understand the technology is why it took so long. Buy (CCJ), (VST), (CEG), (BWXT), and (OKLO) on dips.
It's like everything is racing towards a key, even with an unknown outcome. There happens to be a big one coming up: the US presidential elections on November 6.
Speaking of elections, I took the time to participate in the first day of voting in Nevada on Saturday, October 19, at the Incline Village Public Library. I waited in line for two hours in a brisk and breezy 40 degrees. I wore my Marine Corps cap and Ukraine Army ID just to confuse people. Some got so tired of waiting in the cold that they went home, retrieved their mail-in ballots, and returned to the polls to drop them off.
I looked back on the line, and women outnumbered the men by three to one. Where did all these women come from? There used to be such a shortage of women at Lake Tahoe that it was impossible to get a date. Hunting, fishing, long-distance backpacking, and skiing weren’t used to attract such large numbers of the female gender. Maybe now they do? But now they’re driving up in Mercedes AMG’s and Range Rovers.
When I finally arrived at the front of the line, I was asked to sign an agreement with my finger, acknowledging that I knew it was illegal to vote twice. The poll worker noticed my ID. When I explained what it was in the Cyrillic alphabet, she burst into tears, apologized, and said she had goosebumps all over.
It was another blockbuster week, up over 6%. So far in October, we have gained +4.89%. My 2024 year-to-date performance is at +50.13%. The S&P 500 (SPY) is up +22.43% so far in 2024. My trailing one-year return reached a nosebleed +65.90. That brings my 16-year total return to +726.76%. My average annualized return has recovered to +52.56%.
With my Mad Hedge Market Timing Index at the 70 handles for the first time in five months, I am remaining cautious with a 70% cash and 30% long. I look for a small profit in (TSLA) to reduce risk. Two of my positions expired at their maximum profit point for (NEM) and (DHI) on Friday, October 18 options expiration.
Some 63 of my 70 round trips, or 90%, were profitable in 2023. Some 60 of 80 trades have been profitable so far in 2024, and several of those losses were really break-even. Some 16 out of the last 19 trade alerts were profitable. That is a success rate of +75.00%.
Try beating that anywhere.
Risk Adjusted Basis
Current Capital at Risk
Risk On
(TSLA) 11/$165-$175 call spread 10.00%
(JPM) 11/$195-$205 call spread 10.00%
(GLD) 11/230-$235 call spread 10.00%
Risk Off
NO POSITIONS 0.00%
Total Net Position 30.00%
Total Aggregate Position 30.00%
Netflix Soars on Blockbuster Earnings, up 11% at the opening on a 5 million gain in subscribers. The company posted earnings per share of $5.40 for the period ended Sept. 30, higher than the $5.12 LSEG consensus estimate.
Crucially, Netflix saw momentum in its ad-supported membership tier, which surged 35% quarter over quarter. The streaming wars are over, and (NFLX) won. Buy (NFLX) on dips.
Silver is Ready to Break Out to the Upside after a year-long-range trade. The white metal is a predictor of a healthy recovery and a solar rebound. It’s a long overdue catch-up with (GLD). Buy (AGQ) on dips.
Apple China Sales Jump 20% on the new iPhone 16 launch. Both Apple and Huawei's (HWT.UL) latest smartphones went on sale in China on Sept. 20, underscoring intensifying competition in the world's biggest smartphone market, where the U.S. firm has been losing market share in recent quarters to domestic rivals. Buy (AAPL) on dips.
Taiwan Semiconductor Soars on Spectacular Earnings, dragging up the rest of the chip sector with it. The world's largest contract chipmaker raised its expectation for annual revenue growth and said sales from AI chips would account for mid-teen percentage of its full-year revenue. U.S.-listed TSMC shares rose nearly 9%, and if gains hold, the company's market capitalization would cross $1 trillion. Buy (NVDA) on dips.
Weekly Jobless Claims Fall. Initial claims for state unemployment benefits dropped 19,000 last week to a seasonally adjusted 241,000 for the week ended Oct. 12, the Labor Department said on Thursday. Economists polled by Reuters had forecast 260,000 claims for the latest week. Claims jumped to more than a one-year high in the prior week, attributed to Helene, which devastated Florida and large swathes of the U.S. Southeast in late September.
Morgan Stanley Announces Blowout Earnings, fueling a 32% profit jump for the third quarter. Revenue from the trading business rose 13%. That followed gains recorded by its biggest rivals as the market business lifted fortunes across the industry, and a steady rebound in investment banking fees increased dealmaking. The wealth unit generated revenue of $7.27 billion, higher than analysts’ expectations, with $64 billion in net new assets. The unit boosted its pretax margin to 28%, driven by growth in fee-based assets. Buy (MS) on dips.
Global EV Sales Up 30% in September, with the largest gains in China. Gains in the U.S. market have been lagging in anticipation of the Nov. 5 election. Chinese carmakers are seeking to grow their sales in the EU despite import duties of up to 45% and amid cooling global demand for electric cars. Chinese and European automakers were going head-to-head at the Paris Car Show on Monday. Buy (TSLA) on dips.
Dollar Hits Two Month High on rising US interest rates. Ten-year US Treasuries have risen from 3.55% to 4.12% since the September Nonfarm Payroll Report. A string of U.S. data has shown the economy to be resilient and slowing only modestly, while inflation in September rose slightly more than expected, leading traders to trim bets on large rate cuts from the Fed. Buy all foreign currencies on dips (FXA), (FXE), (FXB), (FXY).
S&P 500 Value Gain Hits $50 Trillion, since the 1982 bottom, which I remember well and is up 50X. The index hit a record high Wednesday and is trading Thursday at around 5770, up 21% so far in 2024. The index’s value is up sixfold since it stood at $8 trillion at year-end 2008, near the depth of the bear market during the financial crisis.
JP Morgan Delivers Blowout Earnings. Its stock, trading around $223, was on course for its biggest daily percentage gain in 1-1/2 years.
(JPM)'s investment-banking fees surged 31%, doubling guidance of 15% last month. Equities propelled trading revenue up 8%, exceeding an earlier 2% forecast. These earnings are consistent with the soft-landing narrative of modest U.S. economic growth. Buy (JPM) on dips.
My Ten-Year View
When we come out the other side of the recession, we will be perfectly poised to launch into my new American Golden Age or the next Roaring Twenties. The economy is decarbonizing, and technology hyper accelerating, creating enormous investment opportunities. The Dow Average will rise by 600% to 240,000 or more in the coming decade. The new America will be far more efficient and profitable than the old.
Dow 240,000, here we come!
On Monday, October 21 at 8:30 AM EST, nothing of note takes place is out.
On Tuesday, October 22 at 6:00 AM, the Richmond Fed Manufacturing Index is out.
On Wednesday, October 23 at 11:00 AM, the Existing Home Sales is printed.
On Thursday, October 24 at 8:30 AM, the Weekly Jobless Claims are announced. We also get New Homes Sales.
On Friday, October 25 at 8:30 AM, the US Durable Goods Orders are announced. At 2:00 PM, the Baker Hughes Rig Count is printed.
As for me, I am headed out for early voting in Nevada this morning. It’s been a year since I came back from Ukraine badly wounded, so I thought I would recall my recollections from that time.
You know you’re headed into a war zone the moment you board the train in Krakow, Poland. There are only women and children headed for Kiev, plus a few old men like me. Men of military age have been barred from leaving the country since the Russians Invaded. That leaves about 8 million to travel to Ukraine from Western Europe to visit spouses and loved ones.
After a 15-hour train ride, I arrived at Kiev’s magnificent Art Deco station. I was met by my translator and guide, Alicia, who escorted me to the city’s finest hotel, the Premier Palace on T. Shevchenka Blvd. The hotel, built in 1909, is an important historic site as it was where the Czarist general surrendered Kiev to the Bolsheviks in 1919. No one in the hotel could tell me what happened to the general afterward.
Staying in the best hotel in a city run by Oligarchs does have its distractions. Thanks to the war, occupancy was about 10%. That didn’t keep away four heavily armed bodyguards from the lobby 24/7. Breakfast was well populated by foreign arms merchants. And for some reason, there are always a lot of beautiful women hanging around with nothing to do.
The population is definitely getting war-weary. Nightly air raids across the country and constant bombings take their emotional toll. Kiev’s Metro system is the world’s deepest and, at two cents a ride, the cheapest. It’s where the government hid out during the early days of the war. They perform a dual function as bomb shelters when the missile attacks become particularly heavy.
My Look Out Ukraine has duly announced every incoming Russian missile and its targeted neighborhood. The buzzing app kept me awake at night, so I turned it off. Let the missiles land where they may. For this reason, I reserved a south-facing suite and kept the curtains drawn to protect against flying glass.
The sound of the attacks was unmistakable. The anti-aircraft drones started with a pop, pop, pop until they hit a big 1,000-pound incoming Russian cruise missile, then you heard a big kaboom! Disarmed missiles that were duds are placed all over the city and are amply decorated with colorful comments about Putin.
The extent of the Russian scourge has been breathtaking, with an epic resource grab. The most important resource is people to make up for a Russian population growth that has been plunging for the last century. The Russians depopulated their occupied territory, sending adults to Siberia and children to orphanages to turn them into Russians. If this all sounds medieval, it is. Some 19,000 Ukrainian children have gone missing since the war started.
Everyone has their own atrocity story, almost too gruesome to repeat here. Suffice it to say that every Ukrainian knows these stories and will fight to the death to avoid the unthinkable happening to them. There will be no surrender.
It will be a long war.
Touring the children’s hospital in Kiev is one of the toughest jobs I ever undertook. Kids are there shredded by shrapnel, crushed by falling walls, and newly orphaned. I did what I could to deliver advanced technology and $10,000 in cash, but their medical system is so backward, maybe 30 years behind our own, that it couldn’t be employed. Still, the few smiles I was able to inspire made the trip worth it. This is the children’s hospital that was bombed a few months ago.
The hospital is also taking the overflow of patients from the military hospitals. One foreign volunteer from Sweden was severely banged up, a mortar shell landing yards behind him. He had enough shrapnel in him, some 250 pieces, to light up an ultrasound and had already been undergoing operations for months. It was amazing he was still alive.
To get to the heavy fighting, I had to take another train ride a further 15 hours east. You really get a sense of how far Hitler overreached in Russia in WWII. After traveling by train for 30 hours to get to Kherson, Stalingrad, where the German tide was turned, is another 700 miles east!
I shared a cabin with Oleg, a man of about 50 who ran a car rental business in Kiev with 200 vehicles. When the invasion started, he abandoned the business and fled the country with his family because they had three military-aged sons. He now works at a minimum-wage job in Norway and never expects to do better.
What the West doesn’t understand is that Ukraine is not only fighting the Russians but a Great Depression as well. Some tens of thousands of businesses have gone under because people save during war and also because 20% of their customer base has fled.
I visited several villages where the inhabitants had been completely wiped out. Only their pet dogs remained alive, which roved in feral starving packs. For this reason, my major issued me my own AK47. Seeing me heavily armed also gave the peasants a greater sense of security.
It’s been a long time since I’ve held an AK, which is a marvelous weapon. It’s it’s like riding a bicycle. Once you learned, you never forget.
I’ve covered a lot of wars in my lifetime, but this is the first fought by Millennials. They post their kills on their Facebook pages. Every army unit has a GoFundMe account where doners can buy them drones, mine sweepers, and other equipment.
Everyone is on their smartphones all day long, killing time, and units receive orders this way. But go too close to the front, and the Russians will track your signal and call in an artillery strike. The army had to ban new Facebook postings from the front for exactly this reason.
Ukraine has been rightly criticized for rampant corruption, which dates back to the Soviet era. Several ministers were rightly fired for skimming off government arms contracts to deal with this. When I tried to give $10,000 to the Children’s Hospital, they refused to take it. They insisted I send a wire transfer to a dedicated account to create a paper trail and avoid sticky fingers.
I will recall more memories from my war in Ukraine in future letters, but only if I have the heart to do so. They will also be permanently posted on the home page at www.madhedfefundtrader.com under the tab “War Diary”.
Donating $10,000 to the Children’s Hospital
On the Front at Crimea with a Dud Russian Missile
A Gift or Piroshkis from Local Peasants
One of 2,000 Destroyed Russian Tanks
The Battle of Kherson with my Unit
This Blown Bridge Blocked the Russians from Entering Kiev
Good Luck and Good Trading,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
September 13, 2024
Fiat Lux
Featured Trade:
(The Mad SEPTEMBER traders & Investors Summit is ON!)
(SEPTEMBER 13 BIWEEKLY STRATEGY WEBINAR Q&A),
(USO), (UUP), (FXA), (FXE), (FXC), (FXB), (DJT), ($INDU), (JPM), (BRK), (TSLA), (NVDA), (IBM), (CCJ), (BRK/B)
Below please find subscribers’ Q&A for the September 11 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Lake Tahoe Nevada.
Q: Will the Fed cut by 50 basis points at their next meeting?
A: The probability of that happening actually dropped by about half with the warm CPI report this morning with core CPI at 0.3%. That may have pushed the Fed from a 50% basis point rate cut back down to only 25%. I think if we only get 25%, the market will sell off. So that’s Wednesday next week. Mark that on your calendars—the market may well be on hold until then.
Q: Is $50/barrel oil (USO) coming by the end of this year?
A: No, but I think $60 is in the works. And that may be the bottom of this cycle because after that we expect an economic recovery, greater demand for oil, and rising prices in 2025. Until then, overproduction both in the US and in the Middle East is knocking prices down.
Q: Will the US dollar (UUP) continue its terrible performance through the end of the year?
A: Yes, and in fact, it may be for the next 10 years that the US dollar is weak—certainly 5—so any rally or dips you get in the currencies (FXA), (FXE), (FXC), and (FXB) I’d be buying with both hands.
Q: Where are you hiding at the moment?
A: 90-day T-bills, which are yielding 4.97%. You can buy and sell them any time you want, and the interest is only payable when you sell them.
Q: Is September 18th the selloff?
A: It depends on how much we do before then. Obviously, we’re making good progress today with the Dow ($INDU) down 700 points, so we shall see. However, the market is flip-flopping every other day, making it untradable—you can’t get any position and hold on to it long enough to make money, so it’s better just to stay out. There’s no law that says you have to be in the market every day of the year, and this is a day not to be in the market for sure.
Q: How will the presidential debate reaction affect the market?
A: There’s only one stock you have to follow for that and that’s the (DJT) SPAC, and that’s Trump’s own personal ETF, and it is down 13% today to a new all-time low. I believe that’s well below its IPO price, so anyone who’s touched that stock is losing money unless they got out at the top. That is a good signal.
Q: JP Morgan (JPM) stock had a steep pullback to $200/share—is it a buy here?
A: No, but we’re getting close. If we can get (JPM) close to its 200-day moving average at $188 on high volatility, that would be a fantastic buy, because (JPM) will benefit enormously from falling interest rates, and it is the world's quality banking play.
Q: Is it too soon on Berkshire Hathaway (BRK) and Tesla (TSLA)?
A: Yes on both. It’s too soon for anything right now. I wouldn’t touch anything before the interest rate cut unless you have a really special situation, and there are some out there.
Q: Do you think Nvidia (NVDA) could test $90 again?
A: It could very easily; it got within $10 of that last week. So, it just depends on how bad the news is and how scared people get in September.
Q: Is the end of carry trade affecting the market?
A: No, we had a big deleveraging there. Although people are going back in again now, it’s not enough to hurt the market.
Q: I heard Putin is threatening over raw materials. What do we get from Russia, and what stocks or ETFs would be impacted?
A: We get nothing from Russia anymore. We used to get a lot of commodities and oil from them, and that has ceased. Russia has essentially exited the global economy because of the sanctions and the war in Ukraine, so they can’t really hurt anyone at this point.
Q: What about Russia doing an end-run around with direct trade? BRICS block is going to make the dollar even more worthless in the future.
A: I don’t buy that at all. I’ve been covering sanctions for 50 years; they always work, but they always take a long time. You could always do black market trade through the back door, but the volumes are way down, and the profits are much less because people only buy sanctioned goods at big discounts. The oil that China is buying from Russia is something like a 30% discount to the market. They execute a high cost of doing business, and nobody wants to be in sanctions if they can possibly do avoid. That said, when the war ends, the sanctions may end. That could be some time next year when Russia completely runs out of tanks and airplanes.
Q: Should I buy Nvidia (NVDA) call options now?
A: It's not just a matter of Nvidia. It's what the general market is doing, and tech is doing. And tech is not doing that well—even on the up days. So I would hold off a bit on Nvidia.
Q: Why is Warren Buffet (BRK/B) unloading so much of his equity portfolio?
A: He thinks the market is expensive, and he has thought it has been expensive for years and he's been unloading stocks for years. He has something like $250 billion in cash now so he can buy whole companies in the next recession. Whether he'll live long enough to see that recession is another question, but his replacement staff is already at work and running the fund, so Berkshire will continue running on autopilot even after he’s gone.
Q: Is IBM an AI play?
A: (IBM) wants to think that it’s an AI play. They haven’t disclosed enough to the public to make the stock a real AI investment, so I would say it probably is, but we don’t know enough at this point, and there are probably too many other candidates to buy in the meantime.
Q: How do I invest in green energy stocks, and do you have any names for me?
A: Well here’s one right here and that’s the Canadian uranium producer Cameco (CCJ). There is a nuclear renaissance going on. China just announced an increase in their plants under construction from 100 to 115. You have the new modular technology ready to take off in the US, and it uses uranium alloys, or uranium aggregates, so it’s impossible for a plant to go supercritical. You also have other countries reactivating nuclear plants that have been closed, and California even delayed its Diablo Canyon shutdown by 5 years. So Nuclear is back in play, and we have an absolute bottom in the stock here and it just dropped 37%, in case you needed any more temptation. So this would be a very attractive alternative energy play for the long term right here.
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 Good Trading,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
1942 Grumman Wildcat on Guadalcanal
After the worst week of the year, we get the best. If you are confused by all of this, so am I.
On the one hand, the downside was firmly rejected by the $8 trillion sitting under the market that has been trying unsuccessfully to get into the market all year. The upside was rejected as well and who knows why? Did it run too far, too fast? Did valuations get overblown? Or was it simply time to take a summer vacation?
Who knows? All three were true.
I don’t really care. I am up 2.67% in August and am 100% in cash. I’m waiting for the market to tell me what to do next. If we get another crash, I’ll buy. I’m selling the next melt-up as well. The only thing I’m really confident in is my 6,000 target for the S&P 500 by year-end which appears right on schedule.
London certainly has become the most internationally diverse city in the world. Last week my tablemates in pubs included two women from Japan who nearly fell out of their chairs when they heard me speak Japanese. A business consultant from Milan was visiting London for the first time. The head of international marketing for Industrial Light & Magic from Mill Valley, CA, filled me in on the latest developments in the digital arts.
Two Arabic-speaking ladies from Oxford University were working for a charity getting food into Gaza. One bartender was headed for Sandhurst, England’s West Point. The other was from China, and I had to explain to him what Bushmills was (it’s an Irish whiskey). Oh, and my barber was from Syria and my cleaning lady was from Barbados.
All seven of my languages were given a thorough workout. There are 56 countries in the British Commonwealth, and it seems like all of them are here at once.
This summer’s crash down, then up offered many lessons and I want to make sure you catch them all. Let every loss be a learning experience, lest you be doomed to repeat it. Of the 20 great single-day losses in the S&P 500 (SPX) since 1923, I have traded through nine. The other 11 took place in the aftermath of the 1929 crash where the market eventually dropped by 90%. But I had many friends who traded all of those. Click here for details.
For a start, it helps a lot if you see a crash coming. This market had been begging for a crash during May and June and I positioned accordingly. I went into the meltdown with nine short positions in July-August, which covered most of my losses. And I only ran positions into very short August 16 option expiration, thus greatly limiting damage incurred by the losers.
I limited losses by stopping out of out-of-the-money losers quickly in (CAT), (BRK/B), and (AMZN), right at the August 5 opening in most cases. I then became super aggressive when the Volatility Index ($VIX) hit $65, a 2-year high. I also went hyper-conservative by adding four technology positions very deep 20% in-the-money in (NVDA), (META), (TSLA), and (MSFT), which instantly became money makers.
I used the first 1,000-point rally to add a short position for a very long, thus neutralizing the portfolio at the middle of the recent range and taking in a lot of extra income.
I did ALL of this while traveling in England, Switzerland, Lithuania, Poland, Austria, and Slovakia, from assorted airport business lounges, hotels, and Airbnb’s. The travel actually helped because the New York market doesn’t open until 3:30 PM each day, giving me plenty of time to plan the day’s strategy.
Now all we have to do is figure out what the Volatility Crash ($VIX) from $65 to $14 in 9 days means, the fastest in history by a huge margin. It usually takes 170 days to make this kind of move. Could it mean that our lives are about to become boring beyond tears once again?
I doubt it.
In July we ended up a stratospheric +10.92%. So far in August, we are up by +2.67%. My 2024 year-to-date performance is at +33.61%. The S&P 500 (SPY) is up +16.14% so far in 2024. My trailing one-year return reached +52.25.
That brings my 16-year total return to +710.24. My average annualized return has recovered to +51.97%.
I spent the entire week taking profits. I cashed in on my longs in (GLD) and (DHI) and covered shorts in (TSLA), (JPM), (AAPL), and (DHI). I am now 100% in cash and boy does it feel good.
Some 63 of my 70 round trips, or 90%, were profitable in 2023. Some 49 of 66 trades have been profitable so far in 2024, and several of those losses were really break-even. That is a success rate of 74.24%.
Try beating that anywhere.
The “Soft Landing” is Back, or so says Goldman Sachs after the meteoric rise in share prices of the last ten days. The extreme concerns about the U.S. economy that have re-emerged over the past month appear overblown and investors shouldn’t get too defensive. The recent spike of market volatility had more to do with positioning than a real scare about economic growth and that investors should “keep the faith” that the U.S. avoids a recession, while also avoiding a revival in inflation.
Now it’s Volatility That’s Crashing, down a record 49 points from $65 to $16 in 9 trading days, suggesting that investors may be returning to strategies that bank on low stock volatility despite a near-meltdown in equities early this month. The ($VIX) long-term median level is $17.6. Similar reversions in the so-called fear gauge have, on average, taken 170 sessions to play out.
Consumer Price Index is a Snore, at 0.2% MOM and 2.9% YOY, below the long-term average. Ebbing inflation aligns with anecdotes from businesses that consumers are pushing back against high prices, through bargain hunting, cutting back on purchases, and trading down to lower-priced substitutes. Stock was a snore as well.
Consumer Sentiment Drops, to an eight-month low according to the University of Michigan. It was revised higher to 66.4 in July 2024 from a preliminary reading of 66.
The Yen Carry Trade is Back, with hedge funds piling back into positions they baled on only two weeks ago. It’s just a matter of math, now that the Bank of Japan has given up on raising interest rates anytime soon. What this means is more leverage, risk, and volatility for global financial markets. I love it!
New Home Construction Dives, in July to the lowest level since the aftermath of the pandemic as builders respond to weak demand that’s keeping inventory levels high. Total housing starts decreased 6.8% to a 1.2 million annualized rate last month, dragged down the biggest decline in single-family units since April 2020
Global EV Sales Jump 21% YOY, in July thanks to a large rise in China. In the European Union MG Motor, owned by China's SAIC Motor Corp, expects to be hit hardest by provisional imposed on EVs imported from China. Europe is not going to give away its core industry, especially Germany’s. EVs - whether fully electric (BEV) or plug-in hybrids (PHEV) - sold worldwide were at 1.35 million in July, of which 0.88 million were in China, where they were up 31% year-on-year.
Refi’s Rocket 35% in a Week, the result of falling inflation and a monster rally in the bond market. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) fell slightly to 6.54% from 6.55%. The refinance share of mortgage activity increased to 48.6% of total applications from 41.7% in the previous week
US Producer Price Index Fades, coming in at a weak 0.1%, and giving the interest rate cut crown a high five. Stocks took off like a scalded chimp. Treasury yields fell on Tuesday as wholesale inflation measures came in softer than expected. The yield on the ten-year US Treasury was lower by about 4 basis points at 3.867%.
Foreign Investors Pull Record Amount from China, $15 billion in Q2. Chinese firms invest a record $71 billion overseas at the same time. It’s why the Chinese yuan has been so weak. The glory days are never coming back. Avoid (FXI).
Weekly Jobless Claims totaled 227,000, a decrease of 7,000 from the previous week and lower than the estimate for 235,000.
My Ten-Year View
When we come out the other side of the recession, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. The economy decarbonizing and technology hyper accelerating, creating enormous investment opportunities. The Dow Average will rise by 600% to 240,000 or more in the coming decade. The new America will be far more efficient and profitable than the old.
Dow 240,000 here we come!
On Monday, August 19 the Meeting of Central Bankers at Jackson Hole begins. Traders will peruse the tea leaves looking for clues about future interest rates policy. All the major countries of the world have already started cutting rates except the US.
On Tuesday, August 20 nothing of note is released.
On Wednesday, August 21 at 8:30 PM EST, the Minutes from the last FOMC meeting are released.
On Thursday, August 22 at 8:30 AM, the Weekly Jobless Claims are announced.
On Friday, August 16 at 8:30 AM, Federal Reserve Chairman Jay Powell speaks. Also, New Home Sales are disclosed. At 2:00 PM the Baker Hughes Rig Count is printed.
As for me, when a Concierge member invited me to spend a week in Lithuania, I jumped at the chance. I had never been to this miniscule country of 3 million, formerly a part of the Soviet Union. The last time I spent any appreciable amount of time in Eastern Europe was in 1968, at the height of the Cold War.
My friend grew up in the old USSR. He remembers as a child having to go to school in the snow wearing worn-out shoes repaired with duct tape because there weren’t any in the stores.
I remember the old Soviet Union and it was grim beyond belief. Standards of living were sacrificed for military spending in the extreme. I remember I swapped my Levi’s for a worn-out pair plus $50 because they were unobtainable.
My friend cashed in on the collapse of the Soviet Union and the mass privatizations that followed. As a trader in Gazprom shares, he made millions. Now he lives a life of leisure, taking occasional potshots at the market with my assistance. He has been with me since 2011.
Knowing I was an avid pilot he treated me to a day at the local glider club. Introduced as a Top Gun instructor who had flown everything from RAF Spitfires to F-18s, and whose grandfather had worked for Orville Wright, the club pilots were somewhat in awe. I was asked to sign logbooks, which is a great honor among pilots.
I donned my parachute with ease, and everyone relaxed. A tow plane took us up to 2,500 feet, we pulled the release from the cable and suddenly were floating over the endless green forests of Eastern Europe.
I took the stick and performed some light aerobatics, careful not to scare the daylights out of my co-pilot. The thing that really impresses you about gliders is the complete silence. No earplugs inside your headphones here, just the whooshing of the wind. We headed for the nearest clouds in search of uplifting thermals.
I was informed that birds knew more about thermals than any of us, and sure enough, we found a flock and followed them right in. We immediately picked up a few hundred feet, our electronic altimeter whining all the way.
Flying with the birds on a perfect day, how cool is that?
We could have stayed up for hours but I had a lunch appointment. So we yanked on the speed brakes and plummeted down towards the field. At 50 feet, wind shear hit us from the side and we fell like a ton of bricks, bouncing hard. My left elbow smashed against the side of the cockpit inflicting a big gash.
The glider club rushed the aircraft expecting the worst, but I gave them a thumbs up. Any landing you walk away from is a good landing. I later learned that the previous day another pilot broke both legs executing the same maneuver.
When the Soviet Union broke up in 1991, we thought it would take 100 years to integrate the former republics with the West. Although Lithuania is still one of the cheapest countries in Europe, the improvement in the standard of living has been enormous. Old Towns in Europe are usually prime real estate with the most expensive accommodation. Here it’s so cheap that you see a lot of young families with kids in strollers on the sidewalks and in the parks.
They have adopted our vices too, with elaborate tattoos commonplace and teenagers vaping on every street corner.
In the capital city of Vilnius, I developed a work schedule that was tolerable. I spent my mornings walking the Old Town, visiting palaces, castles, baroque churches, museums, and art galleries. Then when the New York Stock Exchange opened up at 4:30 PM I was at my computer banging out my trade alerts as fast as I could write them. The market closed at 11:00 PM. Thank goodness the bars were still open.
Of course, the language is a challenge. Usually, I can understand half of what is going on in Europe. But Lithuanian is a direct descendant of Sanskrit so I couldn’t understand a single word. Everyone under 40 speaks English so I was thankfully able to do my grocery shopping with some assistance.
Every year, I like to return to all my favorite countries, plus add one or two new ones. Where will next year’s new countries be? I’m already scheduled to visit Nicaragua, Columbia, Panama, Costa Rica, and Curacao before yearend. Estonia, Argentina, Latvia, Brazil, Tahiti, who knows?
Ask me in 2025.
To watch a short video of my Lithuanian glider flight, please click here.
Good Luck and Good Trading
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
August 12, 2024
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD or THE ROUND TRIP TO NOWHERE), plus (A VISIT TO TRINITY),
(ROM), (TQQQ), ($VIX), (TLT), (SLRN), (CAT), (AMZN), and (BRK/B). (NVDA), (TSLA), (AAPL), and (META), ($INDU), (TSLA), (DHI), (DE), (AAPL), (JPM), (DE), (GLD), (DHI)
I am writing this to you from the airport in Vilnius, Lithuania, which is under construction. The airport is packed because people are flying all planes to Paris to catch the closing ceremony of the 2024 Olympics. There is also the inflow of disappointed Taylor Swift fans returning from three concerts in Vienna, Austria that had been canceled due to terrorist threats. Some 150,000 tickets had to be refunded.
It is hard to focus on my writing because every 30 seconds, a beautiful woman walks by.
And I am told at my age I am not supposed to learn. I should know better.
Well, that was some week!
If you had taken a ten-day cruise to Alaska, you would wonder what all the fuss was about, for last week the stock market was basically unchanged. The worst day in two years, down 3%, followed by the best, up 2 ½% amounts to a big fat nothing burger.
It all reminds me of one of those advanced aerobatics classes I used to take. I was busier than a one-armed paper hanger, sending out some 13 trade alerts in all.
And while the volatility is certainly not over, it is probably at least two-thirds over, meaning that we can step out for a cup of coffee and NOT expect a 1,000 move in the Dow Average by the time we get back.
Is the Bottom IN?
I don’t think so. The valuation disparity between big tech and value is still miles wide. Uncertainty reaches a maximum just before the US presidential election. A bottom for the year is coming, but not quite yet. When it does, it will be the buying opportunity of the year. Watch this space! And watch (ROM) and (TQQQ) too.
The average drawdown per year since 2020 stands at 15%, so with our 10% haircut, the worst is over. What will remain in high volatility? After staying stuck at $12 for most of 2024 and then spiking to $65 in two days, the $20 handle should remain for the foreseeable future.
That is a dream come true and a license to print money for options traders because the higher options prices effectively double the profit per trade. So, expect a lot of trade alerts from the Mad Hedge Fund Trader going forward. That is, until the ($VIX) returns to $36, then the potential profit triples.
Up until July, I had been concerned that the market might not sell off enough to make a yearend rally worth buying into. There was still $8 trillion in cash sitting under the market buying even the smallest dips.
The Japanese took care of that in a heartbeat with a good old-fashioned financial crisis. In hours trillions of dollars’ worth of yen carry trades unwound, creating an unprecedented 14% move UP in the Japanese currency and a 26% move DOWN in the Japanese stock market.
Suddenly, the world was ending. Or at least the financial media thought it was.
Some hundreds of hedge funds probably went under as their leverage is so great at 10X-20X. But we probably won’t know who until the redemption notices go out at yearend.
It couldn’t happen to a nicer bunch of people.
Don’t expect the Fed to take any emergency action, such as a surprise 50 basis point rate cut, to help us out. Things are just not bad enough. The headline Unemployment Rate is still a low 4.3%. Corporate profits are at all-time highs. We are nowhere near a credit crisis or any other threats to the financial system. The US still has the strongest major economy in the world.
Of course, if you followed my advice and went heavy into falling interest rate plays, as I have been begging you to do for months, last week was your best of the year. The United States US Treasury Bond Fund (TLT) rocketed to a year high at $100. Junk bonds (JNK), REITS (CCI), BB-rated loan ETFs (SLRN), and high-yield stocks (MO) went up even more.
It's still not too late to pile into yield plays because the Fed hasn’t actually cut interest rates YET.
Volatility Index ($VIX) Hits Four-Year High at $65, the most since the 2020 pandemic. That implies a 2% move in the S&P 500 (SPX) every day for the next 30 days, which is $103.42 (SPX) points or $774 Dow ($INDU) points. No doubt, massive short covering played a big role with traders covering shorts they sold in size at $12. Spikes like this are usually great long-term “BUY” signals.
$150 Billion in Volatility Plays were Dumped on Monday. Volatility-linked strategies, including volatility funds and equities trend-following commodity trading advisers (CTAs), are systematic investment strategies that typically buy equities when markets are calm and sell when they grow turbulent. They became heavy sellers of stocks over the last few weeks, exacerbating a market rout brought on by economic worries and the unwind of a massive global carry trade.
Weekly Jobless Claims Drop to 233,000, sparking a 500-point rally in the market. It’s a meaningless report, but traders are now examining every piece of jobs data with a magnifying glass.
Commercial Real Estate Has Bottomed, which will be great news for regional banks. Visitations are up big in Manhattan, with Class “A” properties gaining the most attention. New leasing is now exceeding vacations.
Warren Buffet Now Owns More T-Bills than the Federal Reserve. The Omaha, Nebraska-based conglomerate held $234.6 billion in short-term investments in Treasury bills at the end of the second quarter. That compared with $195.3 billion in T-bills that the Fed owned as of July 31. The Oracle of Omaha wisely unloaded $84 billion worth of Apple at the market top.
No Recession Here says shipping giant Maersk. U.S. inventories are not at a level that is worrisome says CEO Vincent Clerc, as fears of a recession in the world’s largest economy mount. Chinese exports have helped drive overall container demand in the most recent quarter reported a decline in year-on-year underlying profit to $623 million from $1.346 billion in the second quarter and a dip in revenue to $12.77 billion from $12.99 billion.
A Refi Boom is About to Begin. Mortgage rates in the high fives are now on offer. Over 40% of existing mortgages have rates of over 6%. It’s all driven by the monster rally in the bond market this week which took the (TLT) to $100 and ten-year US Treasury yields down to 3.65%.
Google (GOOG) Gets Hit with an Antitrust Suit, a Federal judge ruling that the company has a monopoly in search, with a 92% market share. The smoking gun was the $20 billion a year (GOOG) paid Apple (AAPL) to remain their exclusive search engine. Apple is the big loser here, which I just sold short.
In July we ended up a stratospheric +10.92%. So far in August, we are up by +2.51% My 2024 year-to-date performance is at +33.45%. The S&P 500 (SPY) is up +7.34% so far in 2024. My trailing one-year return reached +51.92.
That brings my 16-year total return to +710.08. My average annualized return has recovered to +51.94%.
I used the market crash to stop out of three STOP LOSS positions in (CAT), (AMZN), and (BRK/B). When the ($VIX) hit $65 I then made all the losses back when I piled on four new technology longs in (NVDA), (TSLA), (AAPL), and (META). After the Dow Average ($INDU) rallied 2,000 points and volatility was still high I then pumped out short positions in (TSLA), (DHI), (DE), (AAPL), and (JPM). I stopped out of my position in (DE) at breakeven.
This is in addition to existing longs in (GLD) and (DHI), which I will likely run into the August 16 option expiration.
Some 63 of my 70 round trips, or 90%, were profitable in 2023. Some 48 of 66 trades have been profitable so far in 2024, and several of those losses were really break-even. That is a success rate of 72.73%.
If you were wondering why I was sending out so many trade alerts out last week it is because we were getting months’ worth of market action compressed into five days. Make hay while the sun shines and strike while the iron is hot!
Try beating that anywhere.
My Ten-Year View
When we come out the other side of the recession, we will be perfectly poised to launch into my new American Golden Age or the next Roaring Twenties. The economy decarbonizing and technology hyper accelerating, creating enormous investment opportunities. The Dow Average will rise by 600% to 240,000 or more in the coming decade. The new America will be far more efficient and profitable than the old.
Dow 240,000 here we come!
On Monday, August 12 at 8:30 AM EST, the Consumer Inflation Expectations is out.
On Tuesday, August 13 at 9:30 AM, the Producer Price Index is published.
On Wednesday, August 14 at 8:30 AM, the new Core Inflation Rate is printed.
On Thursday, August 15 at 8:30 AM, the Weekly Jobless Claims are announced. Retail Sales are also printed.
On Friday, August 16 at 8:30 AM, Building Permits are disclosed. We also get the University of Michigan Consumer Sentiment. At 2:00 PM, the Baker Hughes Rig Count is printed.
As for me, with the overwhelming success of the Oppenheimer movie, I thought I’d review my long and fruitful connection with America’s nuclear program.
When the Cold War ended in 1992, the United States judiciously stepped in and bought the collapsing Soviet Union’s entire uranium and plutonium supply.
For good measure, my client George Soros provided a $50 million grant to hire every Soviet nuclear engineer. The fear then was that starving scientists would go to work for Libya, North Korea, or Pakistan, which all had active nuclear programs. They ended up here instead.
That provided the fuel to run all US nuclear power plants and warships for 20 years. That fuel has now run out and chances of a resupply from Russia are zero. The Department of Defense attempted to reopen our last plutonium factory in Amarillo, Texas, a legacy of the Johnson administration.
But the facilities were deemed too old and out of date, and it is cheaper to build a new factory from scratch anyway. What better place to do so than Los Alamos, which has the greatest concentration of nuclear expertise in the world?
Los Alamos is a funny sort of place. It sits at 7,320 feet on a mesa on the edge of an ancient volcano so if things go wrong, they won’t blow up the rest of the state. The homes are mid-century modern built when defense budgets were essentially unlimited. As a prime target in a nuclear war, there are said to be miles of secret underground tunnels hacked out of solid rock.
You need to bring a Geiger counter to garage sales because sometimes interesting items are work castaways. A friend almost bought a cool coffee table which turned out to be part of an old cyclotron. And for a town designing the instruments to bring on the possible end of the world, it seems to have an abnormal number of churches. They’re everywhere.
I have hundreds of stories from the old nuclear days passed down from those who worked for J. Robert Oppenheimer and General Leslie Groves, who ran the Manhattan Project in the early 1940s. They were young mathematicians, physicists, and engineers at the time, in their 20’s and 30’s, who later became my university professors. The A-bomb was the most important event of their lives.
Unfortunately, I couldn’t relay this precious unwritten history to anyone without a security clearance. So, it stayed buried with me for a half century, until now.
Some 1,200 engineers will be hired for the first phase of the new plutonium plant, which I got a chance to see. That will create challenges for a town of 13,000 where existing housing shortages already force interns and graduate students to live in tents. It gets cold at night and dropped to 13 degrees F when I was there.
I was allowed to visit the Trinity site at the White Sands Missile Test Range, the first visitor to do so in many years. This is where the first atomic bomb was exploded on July 16, 1945. The 20-kiloton explosion set off burglar alarms for 200 miles and was double to ten times the expected yield.
Enormous targets hundreds of yards away were thrown about like toys (they are still there). Half the scientists thought the bomb might ignite the atmosphere and destroy the world but they went ahead anyway because so much money had been spent, 3% of US GDP for four years. Of the original 100-foot tower, only a tiny stump of concrete is left (picture below).
With the other visitors, there was a carnival atmosphere as people worked so hard to get there. My Army escort never left me out of their sight. Some 78 years after the explosion, the background radiation was ten times normal, so I couldn’t stay more than an hour.
Needless to say, that makes uranium plays like Cameco (CCJ), NextGen Energy (NXE), Uranium Energy (UEC), and Energy Fuels (UUUU) great long-term plays, as prices will almost certainly rise and all of which look cheap. US government demand for uranium and yellow cake, its commercial byproduct, is going to be huge. Uranium is also being touted as a carbon-free energy source needed to replace oil.
At Ground Zero in 1945
What’s Left of a Trinity Target 200 Yards Out
Playing With My Geiger Counter
Atomic Bomb No.3 Which was Never Used on Tokyo
What’s Left from the Original Test
Good Luck and Good Trading,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
