Global Market Comments
April 7, 2025
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or TRUMP DECLARES WAR ON THE WORLD),
(SPY), (TLT), (META), (GOOGL), (MSFT), (CRM),
(COST), (NVDA), (NFLX), (NVDA), (TSLA), (GLD)
Global Market Comments
April 7, 2025
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or TRUMP DECLARES WAR ON THE WORLD),
(SPY), (TLT), (META), (GOOGL), (MSFT), (CRM),
(COST), (NVDA), (NFLX), (NVDA), (TSLA), (GLD)
Mad Hedge Technology Letter
March 26, 2025
Fiat Lux
Featured Trade:
(TECH FIRMS COULD BE OVERSPENDING)
(BABA), (MSFT)
I get it that there is a massive AI craze sweeping the tech industry and that these are the shovels to the potential gold rush in which could induce a revenue waterfall.
There have been many promises and like the fate of many promises – they aren’t kept.
Personally, I have not been convinced yet that this AI revolution will turn into some transformative movement.
Then there is the issue of whether humans will just revolt against AI once they begin to understand we are essentially training software to replace human interaction.
Talking to software engineers, the avalanche of firings in Silicon Valley has woken up their cohort.
Coders thought for a long time they were immune from firings and the gift that kept giving would continue unabated.
Now, software engineers are being terminated at record levels, and management has decided to pour money into building AI data centers.
Even China is getting in on the act.
Alibaba (BABA) itself — which in February declared it was going all-in on AI — plans to invest more than 380 billion yuan ($52 billion) over the next three years. Server farms are springing up from India to Malaysia.
Critics have also pointed out the persistent dearth of practical, real-world applications for AI.
Alibaba is mounting a comeback in 2025 thanks in part to the recent popularity of its Qwen-based AI platform, which it envisions boosting Alibaba’s core commerce business as well as cloud services.
American tech companies have already spent close to half a trillion dollars on AI data centers and there hasn’t been much revenue follow-through parallel to it.
Co-founder of Alibaba Joseph C. Tsai has said that American companies are overspending on AI data centers and less money can be spent than what is necessary to get the same result.
He said, “I’m still astounded by the type of numbers that are being thrown around in the United States about investing into AI.”
The latest news comes from Microsoft (MSFT).
They have quit new data center projects in the US and Europe that had been set to consume 2 gigawatts of electricity.
Microsoft’s retrenchment in the last six months included lease cancellations and deferrals.
Microsoft has said it will spend about $80 billion building out AI data centers this year, and that the pace of growth should begin to slow after that.
If investors don’t see anything meaningful in revenue possibilities soon, people will start to think this is beginning to feel like the Chinese ghost city problem.
China is usually not the type to overspend, and watching their development of AI for a fraction of the price is fascinating.
What does this all mean?
After a brutal correction in tech stocks in February, it could mean another leg down for tech stocks.
If it proves to be true in the short-term, tech stocks won’t deserve the premium they are fetching if they are in fact overspending on AI data centers.
Then throw into the blender that the government is fighting about trade, and there is a severe limit on what we can do in the short-term.
Global Market Comments
March 21, 2025
Fiat Lux
Featured Trade:
(THE MAD HEDGE MARCH TRADERS & INVESTORS SUMMIT REPLAYS ARE UP)
(MARCH 19 BIWEEKLY STRATEGY WEBINAR Q&A),
(SH), (SDS), (COST), (PANW), (FTNT), (ZS), (MSFT), (GOOGL), (NVDA), (GLD), (AMZN), (BAIDU), (BABA), (LNG), (FXA), (FXE), (FXC), (FXB)
Below please find subscribers’ Q&A for the March 19 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Incline Village, NV.
Q: I tried to get into ProShares Short S&P500 (SH), it seems pretty illiquid. How did you get in?
A: Well, before I actually sent out the trade alert, I tested the liquidity of the SH seeing if you could get anything done. This is an easy thing to buy on up days in the market when others are taking profits. It is a really difficult thing to get into on down days in the market because you have so many long-only mutual funds trying to hedge their exposure through buying the (SH). We literally had just one up day at the beginning of the month, and I was able to increase my position tenfold and had no trouble getting my price on the LEAPS at $0.50. If you waited one day, you would have had to pay $0.60 for the same position, and that’s because the volatility explodes on this thing. If you look at the charts, the 1x short play has actually delivered enormous returns, as well as the 2x. It’s outperforming 2 to 1. So you have to buy when other people are selling, that’s the only way to get in and out of the (SH). Of course, I’m buying these things with the intention of running these to expiration.
Q: Is it time to sell US stocks?
A: Yes but only on the up days like today. Don’t sell into a pit, don’t sell into bottoms—wait for rally days like today. That's a good place to reduce risk and add some short positions like the ProShares Short S&P500 (SH) and the ProShares UltraShort S&P500 (SDS).
Q: How did you miss the rotation to Europe and China in emerging markets?
A: Very simple—if you ignore something for 15 years, it’s easy to miss a turn. I also missed the turn in Japan, which I ignored for 35 years. The real reason though is that I underestimated the extremity of this government, its economic policies, and the chaos it would create. I think almost everyone underestimated what the new government would actually do and how it would affect the stock market. If I knew ahead of time that the government would adopt recessionary policies, I would have done everything to get my money out of the US and into Europe and China, but this kind of unfolded with a shock a day, sometimes a shock an hour, and markets don’t like shocks and surprises, so they sold off. The more a stock had gone up in the last six months, the more it went down when the new government came into office.
Q: What are your downside targets for the market?
A: Now that we are in recession, I think any 5% rally off the recent low at 5500, you want to sell. The market could rally 3-5% off the bottom—that would be half of the recent loss. Then you’d want to get rid of more longs, cut your portfolio down to a few very high-quality positions, and add downside protection by buying the ProShares Short S&P500 (SH), the ProShares UltraShort S&P500 (SDS), doing buy rights on the calls and buying outright puts. That would be my recommendation. Eventually I see the S&P 500 falling to 5,000 by the summer, and if I’m wrong, it’s going down 30% to 4,500. That is a deep recession scenario, which we are on the track for unless the government suddenly reverses its draconian policies. This is the most extreme government in American history.
Q: Are you going to use the selloff to get into Costco (COST) after a 20% selloff?
A: Absolutely. I’ve been trying to get into Costco for years and it’s just always been too expensive. They keep increasing earnings every year —investors are willing to pay very high multiples for that. This time around, I am going to get into Costco because they are an absolutely outstanding company. By the way, my mentor at Morgan Stanley was a guy named Barton Biggs, who created the asset management division some 40 years ago. He was close friends with Sam Walton, the founder of Walmart, and Sam Walton was a huge admirer of Costco, which was just starting up then. I’m surprised they never took over the company, which is too big to take over now.
Q: What to buy at the bottom?
A: You want to buy what was leading right before we went into this collapse. Those are financials, and the highest quality profit making of the Mag7 which include Nvidia (NVDA), Amazon (AMZN), Alphabet (GOOGL), Meta (META), as well as cybersecurity stocks like Palo Alto Networks (PANW), Fortinet (FTNT), Zscaler (ZS) and so on.
Q: Why are you making your recession call when we have no evidence of that fact?
A: If you wait for proof of recession, that often is the market bottom. And that could be August of this year. You know, I talk to hundreds of businessmen around the world, and everyone is saying business is slowing. Companies stop making decisions. Customers stop buying. Everyone's afraid of the tariffs. Nobody knows what's going to happen next. Business confidence is terrible. That adds up to a recession, but data tends to move very slowly, so we won't see it in the data for months. If you're a stock trader, you don't have the luxury of waiting for confirmation of the data. By the time you get it, the move is over. But if you cut half of government spending or 12% of GDP, the recession outcome is guaranteed. It's not a speculation. That is the government's goal: to cause a recession, so they can have a recovery going into the next election to take credit for.
Q: If Alphabet (GOOGL) is broken up, what will happen to the company?
A: With all of these big tech breakups, the parts will be worth a lot more than the whole. The individual pieces can be sold off at much bigger premiums creating new companies with more stock liquidity. This is what happened with AT&T (T) in 1982. I participated in that, and the parts were worth more than the original AT&T was within two years. I expect that to happen to Alphabet, and I expect that to happen if Amazon (AMZN) is broken up— eventually, these companies become so big, they become too big to manage. And if the management sees they can get 100% premium on a spinoff, they'll take it so fast it makes your head spin.
Q: None of the 90% gain in stock prices during the Biden administration was a result of his policies.
A: That's absolutely correct. He stayed out of the way, which is the best thing that governments can do—get the hell out of the way. American capitalism on its own will innovate and create profits far faster than any other economic system in history. Biden did quite a good job of staying away.
Q: Why are credit spreads still okay to do in this environment?
A: Because the implied volatility on the options are so high, you can get insane amounts of money—in the money like 30% or 40% —and get trades done and have a 0% chance of taking a loss on that. Suddenly you're being paid double to take risks on these option trades. The classic example is the $88-$90 call spread in Nvidia (NVDA), which we have expiring on Friday, March 21. We never even got close to $90, but the implied volatility on the day we added that trade was a ridiculous 75%. So, it's almost impossible to lose money when you put on trades with implied volatility in the options of 75%.
Q: What's your long-term target on gold now that your last long-term target of 3,000 finally got hit?
A: Yes, we've been recommending gold (GLD) for seven years now. In that time, it's doubled: $1,500 to $3,000. I'm now looking for $5,000 in gold by 2030, in five years. I got a feeling that flight-to-safety plays are going to be very popular in the world going forward. And by the way, people who did look for Bitcoin to protect them in any downturns: Bitcoin actually went down three times faster than the S&P 500 in the last month.
Q: Will stocks rise if the Fed cuts interest rates?
A: No, they won't, because the only reason the Fed will cut interest rates is if inflation falls, and right now, inflation is about to see a big upturn as those import duties of 25% or 50% work their way through the system. A lot of companies are front-running price increases before they even pay the tariffs and try to carve out some extra margin for themselves in advance. On Wednesday, Jay Powell said he expects inflation to rise from 2.5% to 2.8% by yearend and this will prove to be a low number. That is his “president breathing down the back of his next” forecast.
Q: What are your favorite Chinese stocks?
A: Well, a lot of these leading stocks have already gone up 50% or more since the beginning of the year as capital flees the United States and goes abroad. But if you held a gun to my head and said you had to buy two, I would buy Baidu (BIDU), and I would buy Alibaba (BABA). Those would be my Chinese picks. Alibaba is the closest thing you get to an Amazon in China.
Q: Has the dollar hit its lows this year?
A: No. Risk of the next Fed rate move is an interest rate cut. That is going to hang over the dollar and the currency markets for the entire year. And I don't see any recovery in the dollar this year. In fact, it's easy to see much lower lows, and higher highs in the foreign currencies. Buy (FXA), (FXE), (FXC), and (FXB) on dips.
Q: How do you feel about natural gas?
A: I would not be a buyer here. I think we've had a terrific run off of extreme cold weather—believe me, we got some of that in Nevada too—and that is starting to fade now. This is historically when that gas starts to fade for the year. Long term, my view on gas is bullish because of increased exports to China. We have a very pro-energy administration here; that means taking off the export restraints on natural gas, which can only be good for the gas companies and the gas price. China has basically told us they'll take all the natural gas they can get from us because every shipload of gas they buy (LNG) means less coal they have to burn.
To watch a replay of this webinar with all the charts, bells, whistles, and classic rock music, just log in to www.madhedgefundtrader.com, go to MY ACCOUNT, click on GLOBAL TRADING DISPATCH, then WEBINARS, and all the webinars from the last 12 years are there in all their glory.
Good Luck and Good Trading
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Mad Hedge Technology Letter
March 14, 2025
Fiat Lux
Featured Trade:
(TECH SECTOR HEADING TO A NEW SPACE)
(DBX), (MCHP), (META), (MSFT)
Anyone out there who has children in high school or college, the best piece of advice to give them to prepare for a highly lucrative career in technology is that their path will most likely start outside of the United States.
Why?
In one fell swoop, Big Tech and other smaller tech firms have decided that American salaries are not worth the money and have accelerated a full-on position migration to the rest of the world.
The salary arbitrage is something that gets missed in corporate America but is also a reason why these American tech companies keep beating earnings results.
Everyone knows the biggest expensive line item to a tech firm isn’t the software, but the salaries.
Every executive I talk to has widespread plans to cut jobs, whether it be in Seattle, Washington, or Los Angeles, California, and install them in places like India, Moldova, or even notorious Ukraine.
This is happening quietly, but the trend has picked up pace in 2025.
The early numbers in the United States are portending poorly for US employment and many good tech jobs will be reinstalled in cheaper countries and paid 5X lower than what it once was.
Since 2017, the United States has created 0 jobs for native born Americans, and this is part of the reason why.
Compounding the situation, in a global survey, some 61% of tech companies worldwide said they expected to reduce their workforces over the next five years because of the rise of artificial intelligence.
Tech firms such as Dropbox and IBM have previously announced job cuts related to AI. Tech jobs in big data, fintech, and AI are meanwhile expected to double by 2030.
The digital-financial-services company Ally is firing roughly 500 employees, or 7% of staff.
Ally made a similar level of cuts in October 2023, the Charlotte Observer reported.
Jeff Bezos's rocket company, Blue Origin, is sacking about 10% of its workforce, a move that could affect more than 1,000 employees.
Meta CEO Mark Zuckerberg told staff he "decided to raise the bar on performance management" and will act quickly to "move out low-performers." On just recently, the company had laid off more than 21,000 workers since 2022.
Microchip Technology is cutting its head count across the company by around 2,000 employees, the semiconductor company said a few days ago.
Last year, Microchip announced it was closing its Tempe, Arizona facility because of slower-than-anticipated orders. The closure begins in May 2025 and is expected to affect 500 jobs.
Microsoft cut an unspecified number of jobs in January based on employees' performance.
If anyone thinks this is a blip on the radar, then check your head again.
Once the WFH (work from home) movement started during 2020, there was no going back from there.
Tech companies don’t need warm bodies in offices anymore, so physical location doesn’t matter for lower-level employees.
95% of Silicon Valley will now be outsourced, and all “entry-level” jobs will originate in low-cost-of-living countries.
This is the new American tech sector. Ownership will still be mostly American, but workers will be offshore.
What is the result of this?
Tech stocks will stay higher for longer because of the massive cost savings in wages, which will allow management to beat earnings quarter after quarter.
It gives the balance sheet a reprieve allowing tech to hire more workers elsewhere for less money even if they aren’t an equal replacement.
It also opens the opportunities to deliver more value back to shareholder in the form of dividends or stock splits.
Tech firms won’t die off, but balance sheets will be financially engineered to the max to the benefit of executive management and to the chagrin of the American tech worker.
Once the macroeconomic backdrop calms, it will be time again to jump into tech stocks.
Mad Hedge Technology Letter
February 28, 2025
Fiat Lux
Featured Trade:
(BITCOIN PRICE A SCARE)
(MSFT), (META), ($BTCUSD)
It’s fascinating that Bitcoin was supposed to be the new currency of the Trump administration, and under those conditions, one might believe the price of Bitcoin will double and triple pretty soon.
The results have been dire since the new President took over, with the price of Bitcoin cratering to $77,000 per coin from $107,000.
These devastating results have caught traders off guard, and many have lost their shirts in the quiet storm.
I don’t really care about Bitcoin personally, and I’m usually not in the business of recommending the product, but I do care what it signals about liquidity and the risk on/off sentiment.
The tariffs are starting to scare investors, and we see it in the price of Bitcoin.
Liquidity being pulled can create a cascading effect where nobody knows where the floor is.
Bitcoin could fall a lot further, considering many could just not be bothered to fight through the tariffs and can’t stomach it.
Nobody ever went bankrupt from taking a profit, right?
With all-time highs in many asset classes, it is almost as if Trump thinks he is playing with house money to push through aggressive strategies that put enormous trade pressure on other countries.
It’s a political calculus that fosters uncertainty, and many know that markets hate uncertainty, especially tech stocks.
On the heels of a good Nvidia earnings report, we have received a sell on the news price action, and that is very negative to the overall tech sector.
Year to date, we stand 3.5% in the red, but looking to March expiration, I believe this is a short 3-week buying opportunity until the next bevy of geopolitical chaos.
I recommend keeping your portfolio small for the time being and let the trade rhetoric pass through until you go big.
I did execute 2 more bullish positions in Palantir and Microsoft today.
A rout in Bitcoin deepened forced money to the sideline in the face of the most popular Trump trades.
Alt coins also did poorly too with Ether, Polkadot, and XRP all dropping more than 7% in one day.
Remember in 2022 during the crypto winter, when prices plummeted amid rising interest rates and industry woes.
Trump said Thursday that 25% tariffs on Canada and Mexico would come into force from March 4, undermining hopes he might reverse course after a previous delay. He also said Chinese imports would face a further 10% levy, prompting officials in Beijing to promise “all necessary measures” in response.
The selloff underscores a swift change of fortunes for what was previously one of the most popular Trump trades in global markets: buying Bitcoin on the expectation that the president’s crypto-friendly approach would lead to a broad rally.
Traders are still waiting for Trump to come up with concrete steps for the sector, including a Bitcoin stockpile.
Trump has already made a few changes that have pleased crypto bulls, including putting crypto advocates in key positions. The Securities and Exchange Commission, which embarked on a year-long crackdown under former Chair Gary Gensler, has also closed investigations into several crypto outfits in recent weeks.
Readers shouldn’t get too rattled by the geopolitics.
More often than not, the bluster serves as a good entry point into tech stocks.
I do believe 2025 will be the year of volatility, and buying on these big dips is a big part of our benefit to it.
Mad Hedge Biotech and Healthcare Letter
February 18, 2025
Fiat Lux
Featured Trade:
(A TALE OF TWO SHOTS)
(GILD), (MSFT)
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