No matter how you look at it, the stock market is definitely facing serious volatility these days. How long this uncertainty will last and whether it’s a sign of a looming market crash or correction is anybody’s guess.
On a positive note, the current situation will not cause panic to long-term investors. After all, it’s not right to base stock-buying decisions on the market’s behavior over the course of a few days, weeks, or even months.
Meanwhile, if a major bear market is on the horizon, then this could present a good opportunity to add resilient and recession-proof stocks to your portfolio.
In the biotechnology and healthcare sector, one stock comfortably fits the mold, and that's Johnson & Johnson, JNJ.
In terms of market capitalization, JNJ is one of the biggest—if not the biggest—pharma companies in the world, weighing in at roughly $450 billion.
It also holds an undisputed status as a Dividend King, which is a title granted to those companies that increase their payouts annually and consistently over the course of 50 years.
Actually, JNJ’s dividend-hiking streak has stretched to 59 straight years—and it doesn’t seem to be ending anytime soon.
To date, its quarterly dividend per share jumped by 5% from $1.01 to reach $1.06.
That’s why it comes as no surprise that it’s one of the stocks that investors come running to for safety and stability during periods of volatility.
In its first quarter earnings report in 2021, JNJ showed off by outperforming revenue expectations of $21.98 billion to record $22.32 billion instead.
Its EPS also beat estimates of $2.34 and instead reported $2.59. Despite the less-than-stellar condition of the US economy in the past months, JNJ still managed to boost its sales in the first quarter and increased its sales by 7.9% year-over-year.
All of JNJ’s core business segments also expanded their revenues this quarter.
For instance, its Janssen pharmaceutical arm, which was in charge of its COVID-19 vaccine, saw a 9.6% year over year increase in sales to reach $12.19 billion.
Even its medical devices segment experienced an improved performance with a 7.9% bump to record $6.57 billion for this quarter alone.
Looking at the programs in its pharmaceutical division, it’s clear that JNJ has a strong focus on six areas: cardiovascular, pulmonary hypertension, immunology, neuroscience, metabolism, and, of course, oncology.
In fact, three of JNJ’s pharmaceutical treatments raked in more than $4 billion in sales in 2020.
The list was topped by Stelara, which is a drug for Crohn’s disease, psoriasis, ulcerative colitis, and psoriatic arthritis, at $7.7 billion.
It was followed by multiple myeloma treatment Darzalex at $4.2 billion.
The product of its collaborative work with AbbVie (ABBV), blood cancer drug Imbruvica, rounds up the list at $4.1 billion.
The sheer size and financial power of JNJ offer the company extensive M&A opportunities—and it’s definitely taking advantage of that to continue boosting its revenue streams.
In August 2020, amid the COVID-19 pandemic, JNJ acquired Momenta Pharmaceuticals for $6.5 billion. This all-cash transaction added a slew of drug candidates that enhanced JNJ’s immune-mediated and rare disease pipeline programs.
Jumping into the telehealth bandwagon, JNJ has invested in Madison Thirty around the same time last year as well.
Much like Teladoc (TDOC), this small telehealth company has also attracted attention since it started and thus far raised $70 million in funding.
Boosting its presence in the merging world of technology and medicine, JNJ recently revealed its six-armed robotic surgical assistant, Ottava.
Basically, Ottava will be a high-tech guidance system and assistant to surgeons in operating rooms.
Throughout its history, JnJ has proven itself to be a top biopharmaceutical stock —full stop.
A global leader in the healthcare industry, JNJ is one of only two corporations that hold an AAA credit rating from Standard & Poor. The other company is Microsoft (MSFT).
It has been generating record profits and boosting its dividends. More importantly, investors can expect JNJ stock to serve as a healthy long-term wealth generator.
It prides itself on a strong triad of business segments that continuously drive growth: consumer health, pharmaceuticals, and medical devices.
https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png00Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2021-05-27 15:00:462021-05-31 15:56:52A Safe Stock for Your Peace of Mind
High multiple tech stocks often overshoot on the way up and overshoot on the way down.
This is predominately driven by uncontrolled momentum as investors and traders resort to margin to borrow money and add leverage to positions and trends that seem to be working at the time.
Since the start of the year, technology has had to come to grips with a sudden rerating of valuations.
For example, a bellwether stock for the future success of tech, Tesla (TSLA) has corrected 20% year-to-date after more than 700% move up in 2020.
Reliable big-cap tech has been more steadfast in 2021 such as the likes of Apple (AAPL) who have only experienced a less than 2% year-to-date decline in shares.
The biggest winner so far of big-cap tech has to be Alphabet (GOOGL) whose shares have risen around 25% since the beginning of the year.
Even with sky-high expectations, Google is hitting it out of the ballpark and then some.
Simply meeting or doing a nudge over expectations this past earnings season has proved not enough for underlying shares to surge on the results meaning we are fully priced.
Naturally, the more speculative business has felt the worst of the carnage with SPACs down half from their peaks and “artisanal” tech down 30%-50%.
This doesn’t mean tech is over.
Hardly so – It’s just resting.
But readers and investors will need to traverse through a period of multiple contraction and consolidation as high-priced tech stocks are re-rated lower until we reach appetizing multiples.
Simply put, we got ahead of ourselves and there is only so much leverage that can be taken out to chase the rainbows and feed off the momentum.
Microsoft (MSFT) has been another stout stock that is up around 12% year-to-date and a great place to hide out during the consolidation phase.
The cause of the rerating derives specifically from upper management guiding down future revenue and profitability targets.
I have read countless earnings reports that describe a comprehensive dilemma in which the overall structure of the company couldn’t be healthier yet beating prior years’ Covid performance is impossible on a year-to-year basis.
Readers need to understand this year is still priced as a Covid year, but tech companies won’t nearly do as well because the conditions that engulfed Covid like work-from-home and the absence of a vaccine are not here anymore.
There is a health solution in the U.S. and in parts of Europe there are partial solutions and certainly, no lockdown as the Chief of the CDC signals masks are not needed for the vaccinated in public.
The tech market needs to readjust its expectations that will hand off to more of a normalized metric environment and that will happen naturally as we move closer to 2022 and into it.
On a calculation basis, comparing data from 2022 and 2021 will strip out the volatility from the 2020 and 2021 comparisons.
Remember that management uses the prior year as reference points for performance and that phenomenon is now hurting the appearance of relative outperformance.
A top executive at a fintech company had this to say, “The pandemic has accelerated a digital wave of change across almost every industry by three to five years, unleashing a profound and permanent structural transformation.”
I’ll take a 5-year digital transformation in one year if the second year is a time that is needed for earnings’ expectations to consolidate for half a year or so.
I would take that deal anytime if it was my company.
The data also suggests how breathtaking companies like Google and Microsoft are if their future guidance is immune to any expectation.
They are beating whatever consensus is in a Covid year or not.
Take a look at some of the darlings of tech in the height of pandemic like Teladoc (TDOC), and shares are off around 33% year-to-date and even went through a 40% drop from mid-February to the beginning of March.
Avoid those now!
Even if it's not related to cloud software stocks, the dearth of semiconductor chips is beginning to cause pain in every nook and cranny of the global economy catalyzing many firms to delay or even cancel production let alone roll out new models.
This adds to the global malaise of a supply chain that many managements describe as “topsy-turvy.”
Not only is the bottleneck happening as we speak, but it appears as though it could last at least 2 or more years.
When the Fed talks about “transitory” inflationary pressures, at least as it relates to tech, I am not sure what they are smoking.
There has been no concrete data in which they have offered to suggest that it will be transitory unless they have a different definition of transitory from mine.
The accumulation effect of these pressures is why the tech-heavy Taiwan stock market, FTSE TWSE Taiwan 50 Index, comprised of tech stalwarts like Taiwan Semiconductor Manufacturing (TSM) and Hon Hai Precision Industry, declined over 2% today after losing over 8% last week.
Ultimately, investors are moving to higher ground and seeking predictable profitability and raw size over elevated growth rates and loss-making EPS figures.
When the goalposts move, we must move with them and that is what has happened.
Tech investors are more conservative than last year and until the goalposts widen a bit as I expect as we move into Q3 and Q4, we need to be aware of the new rules of the game or who gets penalized for them.
https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png00Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2021-05-17 11:02:502021-05-25 02:20:07Multiple Contradiction
The 19th century humorist and writer, Mark Twain, said, “History never repeats itself, but it rhymes.” This is certainly one of those rhyming times.
Remember back in 2011 when the Dow hit a short-term peak at $12,300 in May of 2011? The Cassandras had a heyday. The bull market was over, stocks were imminently going to crash, and the next stop for the Dow was $3,000. Gold and bonds were the only safe places.
Those who drank the Kool-Aid missed the greatest investment opportunity of the century and are now driving for Uber cars to earn their crust of bread. Those who drank the Kool-Aid twice sold their homes as well ahead of the greatest real estate boom of all time.
Not that a correction wasn’t sorely needed, we needed to scare money out of what I call the “super liquidity” investments like Bitcoin, SPACS, and tech companies selling at 100 times sales with failing business models.
We also needed to put the fear of god into newbie day traders by teaching them that stocks go down as well as up. We’ve already made good progress on this front. With many of the “meme” stocks down by half or more since February, we are already making good progress on that front.
What will power the Dow to my now very prescient looking $40,000 target by yearend? The unwind of the 40-year-old bull market in bonds has barely just begun. Ten-year US Treasury bond yields ($TNX) have only appreciated from 0.32% to 1.68%, compared to 5.6% at the last 2007 peak. That means there are still many tens of trillions of dollars to shift out of bonds (TLT) and INTO STOCKS!
Once the current correction ends, money will pour back into the recent leaders, the economic cyclicals, including financials, commodities, industrials, and commodities.
Technology will stay in the penalty box for the foreseeable future until they become under-owned and cheap again. The good news here is that tech earnings are growing at such a prolific rate that the sector is losing two price earnings multiple points a month and will return to the bargain basement in the not-too-distant future.
The long term view here is that you want to rent growth, but own tech, which still has double the growth rate of everything else.
It all makes my 2021 $40,000 Dow Average target look like a piece of cake, and my 2030 goal of $120,000 positively conservative, cautious, and circumspect.
Notice that our 2,000 point-swan dive in the Dow last week lasted only three days, and then delivered the sharpest fall in the Volatility Index (VIX) in history, from $29 to $19 in only 24 hours. The writing is still on the wall. People want to BUY.
Inflation explodes, with the Consumer Price Index posting a ballistic 4.2% YOY rate, the fastest gain since 2009. The Fed believes this is a temporary surge, the markets not so much. Bonds take it on the nose. Keep selling rallies in the (TLT). We’re making a fortune here.
Volatility Index (VIX) soars to $29, almost doubling in a week. Call me when it tops $30. That’s the usual signal for a short-term stock market bottom. I’m relaxed because I’m going into this with 80% cash and have just made a huge fortune on bond shorts. Value and cyclicals are still the Big Play. That was the message of the stock market on Friday’s wild day which saw an 11-basis point trading range in the ten-year US treasury bond. If you think the next big move in rates is up, then Cyclicals will roar, and techs will fade.
It’s all about buying what people are underweight and selling what they are overweight. I’m looking for cyclicals that have recently corrected. Stay tuned to this station.
US Inventories see solid gains as retailers load the boat for the biggest economic recovery of all time. March was up 1.3%. One of an endless series of data points pointing to the best business conditions in a century.
The Home Buying Frenzy continues, with the median price for a single-family home soaring by 16.2% to $319,200 in Q1, according to the National Association of Realtors. Record high prices are hitting all markets. The perfect upside storm continues.
Weekly Jobless Claims come in at 473,000, a new post-Covid low. Continuing claims fall to 3,655,000. The greatest economic recovery of all time continues.
Producer Prices leap in April, up 0.6% following a 1% gain in March. It is a natural follow-on from the hot CPI. The PPI tracks changes in production costs, and supply bottlenecks and shortages tied to the pandemic recovery have caused commodity prices to soar. Temporary or continuing, that is the big debate. Watch the bond market for clues.
Stanley Druckenmiller says Bonds are Toast, and The Dollar is Worse. I couldn’t agree more with my old friend and trading counterparty. Current Fed policies are now the most extreme in history and threaten the reserve status of the US dollar. Sell all rallies in the (TLT) and the (UUP). My Ten Year View
When we come out the other side of pandemic, 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% to 120,000 or more in the coming decade. The American coming out the other side of the pandemic will be far more efficient and profitable than the old. Dow 120,000 here we come!
My Mad Hedge Global Trading Dispatch profit reached 3.83% gain so far in May on the heels of a spectacular 15.67% profit in April. That leaves me 30% invested and 70% cash.
My 2021 year-to-date performance soared to 63.59%. The Dow Average is up 13.47% so far in 2021.
During the stock market meltdown, my hedges with shorts in the S&P 500 (SPY), NASDAQ (QQQ), and the United States Treasury Bond Fund (TLT) performed spectacularly well, leaving me up on the week. I managed to limit myself to only two stop losses, in Microsoft (MSFT) and Delta Airlines (DAL).
While everyone else was running around like chickens with their heads cut off, I was as relaxed as ever. Our worst case for May is that we will be only up single digits, instead of the double-digit gains of the past six months. That is not a bad “worst case” to have.
That brings my 11-year total return to 486.14%, some 2.00 times the S&P 500 (SPX) over the same period. My 11-year average annualized return now stands at an unbelievable 42.45%, easily the highest in the industry.
My trailing one-year return exploded to positively eye-popping 127.09%. I truly have to pinch myself when I see numbers like this. I bet many of you are making the biggest money of your long lives.
We need to keep an eye on the number of US Coronavirus cases at 33million and deaths topping 586,000, which you can find here.
The coming week will be a weak one on the data front.
On Monday, May 17, at 9:45 AM, the New York Empire State Manufacturing Index for May will be out
On Tuesday, May 18, at 10:00 AM, the Housing Starts for April are announced.
On Wednesday, May 19 at 2:00 PM, Minutes from the last Federal Reserve FOMC Meeting are published.
On Thursday, May 20 at 8:30 AM, the Weekly Jobless Claims are published.
On Friday, May 21 at 10:00 AM, Existing Homes Sales for April are announced. At 2:00 PM, we learn the Baker-Hughes Rig Count.
As for me, we had a big 4.7 earthquake at Lake Tahoe last week. The healthy live trees vibrated and swayed. But all of the brittle dead trees killed by pine beetles during the draught snapped at the base and fell over.
Those blocked all the fire roads, so every emergency and public service organization on the lake was called up and sent up into the mountains with chain saws. That included me, a member of Lake Tahoe Search and Rescue.
I hiked up to 9,000 feet with a 50-pound load and went to work. We cut these enormous 100-foot conifers into one-foot rounds and then rolled them off the road. Everyone else on the job was under 40.
After a day of heavy lifting, I hiked down the mountain and collapsed into bed. I slept for 12 hours, which is why the Monday letter was late. They say 70 is the new 40. I am the proof of that.
So can 100 be the new 60? One can only hope.
How was your weekend?
Stay healthy.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
https://www.madhedgefundtrader.com/wp-content/uploads/2021/05/jtfootlog.jpg484433Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2021-05-17 10:02:372021-05-17 10:22:00The Market Outlook for the Week Ahead, or Why History Rhymes
The tech sector and the U.S. government are poised to engage in a more transactional relationship than ever before after the cybersecurity attack on Colonial Pipeline and the U.S. President’s executive order that followed it.
This doesn’t mean just servicing an email account, but this will incorporate broad-based networking cloud infrastructure from the top-down and the bits in between.
Technology is just getting too good, too fast, and applicable to the point that it allows nefarious actors to wield it in a way that could damage and permanently set back sovereign nations and global business.
Don’t get me wrong, this was already in the works, and U.S. President Joe Biden has signaled his intent to ramp up the IT spent, but this cyberattack that is causing gas hoarding in parts of South Eastern United States is just the event to really kick this initiative into overdrive.
Colonial Pipeline paid the almost $5 million ransom payment that will encourage similar type of behavior in the long-term.
The Cyberattack also means that the relationship between U.S. tech and government could swerve from net negative of a relentless anti-monopoly narrative to one in which big tech will be anointed as the saviors to the foreign cyber-criminals and paid handsomely to defend the operations of private and state U.S. business.
The latter sounds much better to Silicon Valley than the former and the bigwigs in Silicon Valley might ostensibly push this marketing dynamic of internet protection to save their bacon and get the regulatory heat off their back.
Polarizing figures such as U.S. Senator Elizabeth Warren have made it a point to bash big tech whenever she sees fit which is more often than not.
CEOs like Facebook’s Mark Zuckerberg have tried a disingenuous approach of blaming China’s marginal data privacy policies as a way to protect its Instagram business and prevent growth monster TikTok, a Chinese app, from cannibalizing its cash cow business.
The origin of the Colonial Attack is purportedly to be Russian which would offer more fuel to the fire and create a ready-made reason for U.S. government to pour incremental billions into Silicon Valley and its array of almost multi-trillion dollar heavy hitters while protecting their business moat.
This event also means Tesla is toast in China.
Officials in China banned Tesla vehicles from military bases and housing compounds amid concerns that potentially sensitive data from its onboard cameras could be collected and stored on Tesla servers.
Once the data privacy genie is out of the bottle, it’s hard to contain the fallout and Tesla will need to adopt a whack-a-mole strategy in China which often proves futile in the long-term.
The United States faces persistent and increasingly sophisticated malicious cyber campaigns that threaten the public sector, the private sector, and ultimately the American people’s security and privacy.
This is all just the beginning, a little taste of what’s on the menu.
Collaborating with U.S tech companies to improve its efforts to identify, deter, protect against, detect, and respond to these actions and actors is now a must.
The Federal Government must also carefully examine what occurred during any major cyber incident and apply lessons learned.
Incremental improvements will not offer the security Americans need; instead, the Federal Government needs to make bold changes and significant investments in order to defend the vital institutions that underpin the American way of life.
It’s the authorities’ job and to offer resources to protect and secure its computer systems, whether they are cloud-based, on-premise, or hybrid.
The scope of protection and security must include systems that process data (information technology (IT)) and those that run the vital machinery that ensures our safety (operational technology (OT)).
Contracts will be signed with IT and OT service providers to conduct an array of day-to-day functions on Federal Information Systems. These service providers, including cloud service providers, have unique access to and insight into cyber threat and incident information on Federal Information Systems.
Increasing the sharing of information about such threats, incidents, and risks, and enabling more effective defense of agencies’ systems and of information collected, processed, and maintained by or for the Government are necessary steps to accelerating incident deterrence, prevention, and response efforts.
The executive order signed by Biden shows that within 60 days, the Director of the Office of Management and Budget will hash out “language for contracting with IT and OT service providers and recommend updates.”
The U.S. must take decisive steps to modernize its approach to cybersecurity and must increase the Federal Government’s visibility into threats while protecting privacy and civil liberties.
Money will be spent to accelerate movement to secure cloud services, including Software as a Service (SaaS), Infrastructure as a Service (IaaS), and Platform as a Service (PaaS); centralize and streamline access to cybersecurity data to drive analytics for identifying and managing cybersecurity risks; and invest in both technology and personnel to match these modernization goals.
Prioritizing money spent on addressing “critical software” will translate into huge paydays to many cloud providers and not just the big guys.
Most recently, The Central Intelligence Agency awarded its long-awaited Commercial Cloud Enterprise, or C2E, contract to five companies—Amazon Web Services (AMZN), Microsoft (MSFT), Google (GOOGL), Oracle (ORCL), and IBM (IBM).
No doubt they will be vying for more government procurement contracts since they already have one hand in the honey jar.
At a lower level, readers should consider buying cybersecurity companies Fortinet (FTNT), Palo Alto Networks, Inc. (PANW), and CrowdStrike Holdings, Inc. (CRWD), but these smaller names come with more volatility.
This event really anoints the impending future as the golden era of IT cybersecurity spend and it will never go back to what it once was.
Paying for IT protection is here for the long haul and this goes for private companies and public institutions.
Nearly 80% of senior IT and IT security leaders believe their organizations lack sufficient protection against cyberattacks despite increased IT security investments made in 2020 to deal with distributed IT and work-from-home challenges, according to a new IDG Research Services survey commissioned by Insight Enterprises.
There will be a huge boom in IT cybersecurity spend because CEOs don’t want to be the idiot that allowed cybercriminals to hijack their whole business.
That’s the fastest way to end a management career.
Last time I checked, it’s a hard slog up the corporate ladder to land a prime CEO gig and it’s not getting any easier.
https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png00Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2021-05-14 15:02:252021-05-21 00:04:48The Golden Era of Cybersecurity Spend
During my senior year in High School, I had the good fortune to date the daughter of Richard Knerr, the founder of Wham-O, the inventor of Hula Hoops, Silly Putty, Super Balls, Frisbee’s, and Slip & Slides (click here).
At six feet, she was the tallest girl in the school, and at 6’4” I was an obvious choice.
After the senior prom and wearing my tux, I took her to the Los Angeles opening night of the new musical Hair. In the second act, the entire cast dropped their clothes onto the stage and stood there stark naked. The audience was stunned, shocked, embarrassed, and even gob-smacked.
Those were the reactions I saw on Friday, when the April Nonfarm Payroll Report was released showing a gain of only 266,000 jobs. A million had been expected.
So, how does that work? Red hot ADP private jobs and a year low in Weekly Jobless Claims, but a horrific monthly Payroll report?
They say economic data can be “noisy”. This time it was positively cacophonous. The fact is that these data points were never created to handle times like this, the most disruptive in history.
When the data are useless, all you have to do is take a walk down Main Street. There are “Help Wanted” signs at virtually every business.
The data dissonance created a wild day in the markets on Friday. Bonds soared, causing ten-year yields to dive to 1.48%. Then they rallied all the way back up to 1.58%.
That was seen as the end of the two-month long rally in bonds, so stock took off like a rocket. Essentially everything went up, both cyclicals, banks, AND tech. All those bond shorts you have been nursing since March? They are about to explode to the upside. The next leg down in the year-old bear market in bonds is about to begin.
And what about that 266,000-payroll report? If you didn’t get a million jobs print in April, then you’ll almost certainly get it in May. Stocks could well keep rally until then. That’s how traders are seeing it.
Just another reason to buy.
By the way, I learned one of the great untold business stories from Richard Knerr. When the Hula Hoop was first launched in 1957, sales went ballistic. Some 25 million were sold in the first four months.
The Hula Hoop was made of a plastic tube stapled together with an oak cork made in England. Since demand seemed infinite, Wham-O ordered 50 million corks. Then the republican party claimed the toy was a communist conspiracy to destroy the youth of America as the swiveling of hips was deemed obscene. This was at the tail end of the McCarthy period.
Sales of Hula Hoops collapsed.
They cancelled the order for 50 million oak corks, which were thrown overboard mid-Atlantic. They are still floating out there somewhere today. Wham-O almost went bankrupt from the experience but was eventually saved by the Frisbee.
Richard Knerr died in 2008 at the age of 82. Wham-O was taken over by Mattel in 1995. For his obituary, please click here.
April Nonfarm PayrollReport is a huge disappointment, at 266,000 when up to one million was expected. April’s hiring boom goes bust. March was revised down massively, from 916,000 to 770,000. The headline Unemployment Rate rose to 6.1%. It was one of the most confusing reports in recent memory. Bonds rocketed, interest rates crashed, and tech stocks took off like a scalded chimp. Inflation expectations have been shattered. Leisure & Hospitality kicked in at 331,000. But Professional & Business Services collapsed by 111,000. The two million businesses that went under last year aren’t hiring. Much of the return to work has been by people who already have jobs.
Weekly Jobless Claims plunged to 488,000, one of the sharpest drops on record at 100,000. Go down any Main Street today and instead of a sea of plywood, it is plastered with “Help Wanted” signs. Productivity is soaring, while average labor costs are actually falling.
ADP Private Employment Report soars, up by 742,000 in April, the biggest gain since September. It makes the coming Friday Nonfarm Payroll Report look outstanding. The jobs market is booming, but competition for the top jobs is also fierce.
Europe’s Q1 GDP falls by 0.6%. That’s better than expected, but disastrous when compared to America’s spectacular 6.4% print. Blame the bumbled slow-motion vaccine rollout. European governments wasted time negotiating on price like it was just another government program, while the US poured billions into vaccine makers, no questions asked. European vaccines, like Astra Zeneca’s, were flawed. It’s amazing that a big government continent can’t perform a big government task, even when millions of lives depend on it.
US Factory Orders gain, up 1.1% in March, providing more evidence that stimulus is working. Most economists are expecting double-digit growth in Q2. Driving up to Lake Tahoe, the number of trucks on the road has doubled in the last month.
Personal Income Explodes, up 21.1% in March, the most since 1945 according to the Bureau of Economic Analysis. What the heck happened in 1945? $1,400 stimulus checks are clearly burning holes in the pockets of consumers. Expect all numbers to hit lifetime highs in the coming months. The sun, moon, and stars are all lining up and standard of living is soaring.
Chicago PMI rockets to a 40-year high, up to 72.1 versus an expected 65. It seems everyone is already trying to buy what I am trying to buy. My bet is that the stock market is wildly underestimating the coming onslaught of economic numbers and will go to new highs once it figures out the game.
Lumber Prices are becoming a big deal, soaring 70% in two months and a staggering 340% in a year, igniting inflation fears. It’s only a tiny fraction of our tiny spending but is adding $36,000 to the cost of a new home. Someone in four homes sold today are newly built, the highest ratio ever. Punitive Trump lumber tariffs against Canada years ago shut down a lot of production and now that we need it, it isn’t there.
IBM brings out the 2-Nanometer Chip, taking semiconductor technology to the next evolutionary level. Any smaller and electrons will be too big to squeeze through the gates. The current battle is over 7 nm technology. It promises to bring much faster computing at a lower price and will act as a temporary bridge to lightening quantum computing. When we come out the other side of pandemic, 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% to 120,000 or more in the coming decade. The American coming out the other side of the pandemic will be far more efficient and profitable than the old. Dow 120,000 here we come!
My Mad Hedge Global Trading Dispatch profit reached 2.38% gain during the first week of May on the heels of a spectacular 15.67% profit in April.
I took profits in my long in Goldman Sachs (GS) and my short in the United States Treasury Bond Fund (TLT). I then plowed the cash into a new June short position in the (TLT) and a new short in the S&P 500 (SPY). That gave me a heart attack on my bond shorts when bond prices soared and then an immediate rebirth when they collapsed two points in the afternoon.
That leaves me 100% invested, as I have been for the last six months.
My 2021 year-to-date performance soared to 62.14%. The Dow Average is up 14.45% so far in 2021.
That brings my 11-year total return to 484.89%, some 2.00 times the S&P 500 (SPX) over the same period. My 11-year average annualized return now stands at an unbelievable 42.45%, easily the highest in the industry.
My trailing one-year return exploded to positively eye-popping 127.09%. I truly have to pinch myself when I see numbers like this. I bet many of you are making the biggest money of your long lives.
We need to keep an eye on the number of US Coronavirus cases at 32.7million and deaths topping 581,000, which you can find here. New cases are in free fall, with only 12 here in Washoe County Nevada out of a population of 500,000. We could approach zero by the summer.
The coming week will be weak on the data front.
On Monday, May 10, at 9:45 AM, the April ISM New York Index is out. Roblox (RBLX) and BioNTech (BNTX) report earnings.
On Tuesday, May 11, at 10:00 AM, the NFIB Small Business Optimism Index for April is released. Palantir reports results (PLTR).
On Wednesday, May 12 at 2:00 PM, the US Core Inflation Rate for April is published. Softbank (SFTBY) reports results.
On Thursday, May 13 at 8:30 AM, the Weekly Jobless Claims are published. Walt Disney (DIS), Airbnb (ABNB), and Alibaba (BABA) report results.
On Friday, May 14 at 8:30 AM, Retail Sales for April are indicated. At 2:00 PM, we learn the Baker-Hughes Rig Count.
As for me, I’ve found a new series on Amazon Prime called Yellowstone. It is definitely NOT PG-rated, nor is it for the faint of heart. But it does remind me of my own cowboy days.
When General Custer was slaugherted during his last stand in Montana at the Little Big Horn in 1876, my ancestors spotted a great buying opportunity. They used the ensuing panic to pick up 50,000 acres near the Wyoming border for ten cents an acre.
Growing up as the oldest of seven kids, my parents never missed an opportunity to farm me out with relatives. That’s how I ended up with my cousins near Broadus, Montana for the summer of 1967.
When I got off the Greyhound bus in nearby Sheridan, I went into a bar to call my uncle. The bartender asked his name and when I told him “Carlat” he gave me a strange look.
It turned out that My uncle killed someone in a gunfight in the street out front a few months earlier, which was later ruled self-defense. It was the last public gunfight seen in the state, and my uncle hadn’t been seen in town since.
I was later picked up in a beat-up Ford truck and driven for two hours down a dirt road to a log cabin. There was no electricity, just kerosene lanterns and a propane-powered refrigerator.
Welcome to the 19th century!
I was hired on as a cowboy, lived in a bunkhouse with the rest of the ranch hands, and was paid the princely sum of a dollar an hour. I became popular by reading the other cowboys' newspapers and their mail since they were all illiterate. Every three days, we slaughtered a cow to feed everyone on the ranch. I ate steak for breakfast, lunch, and dinner.
On weekends, my cousins and I searched for Indian arrowheads on horseback, which we found by the shoebox full. Occasionally, we got lucky finding an old rusted Winchester or Colt revolver just lying out on the range, a remnant of the famous battle 90 years before. I carried my own six-shooter to help reduce the local rattlesnake population.
I really learned the meaning of work and had callouses on my hands in no time. I had to rescue cows trapped in the mud (stick a burr under their tail), round up lost ones, and saw miles of fence posts. When it came time to artificially inseminate the cows with superior semen from Scotland, it was my job to hold them still. It was all heady stuff for a 16-year-old.
The highlight of the summer was participating in the Sheridan Rodeo. With my uncle, one of the largest cattle owners in the area, I had my pick of events. So, I ended up racing a chariot made from an old oil drum, team roping (I had to pull the cow down to the ground), and riding a Brahma bull. I still have a scar on my left elbow from where a bull slashed me, the horn pigment clearly visible.
I hated to leave when I had to go home and back to school. But I did hear that the winter in Montana is pretty tough.
It was later discovered that the entire 50,000 acres was sitting on a giant coal seam 50 feet thick. You just knocked off the topsoil and backed up the truck. My cousins became millionaires. They built a modern four-bedroom house closer to town with every amenity, even a big screen TV. My cousin built a massive vintage car collection.
During the 2000s, their well water was poisoned by a neighbor’s fracking for natural gas, and water had to be hauled in by truck at great expense. In the end, my cousin was killed when the engine of the classic car he was restoring fell on top of him when the rafter above him snapped.
It all did give me a window into a lifestyle that was then fading fast. It’s an experience I’ll never forget.
Stay healthy.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
https://www.madhedgefundtrader.com/wp-content/uploads/2021/05/annualized-may10.png484864Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2021-05-10 09:02:262021-05-10 12:02:34The Market Outlook for the Week Ahead, or the Sushi Hits the Fan
Legal Disclaimer
There is a very high degree of risk involved in trading. Past results are not indicative of future returns. MadHedgeFundTrader.com and all individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein. Affiliates of MadHedgeFundTrader.com may have a position or effect transactions in the securities described herein (or options thereon) and/or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies.
We may request cookies to be set on your device. We use cookies to let us know when you visit our websites, how you interact with us, to enrich your user experience, and to customize your relationship with our website.
Click on the different category headings to find out more. You can also change some of your preferences. Note that blocking some types of cookies may impact your experience on our websites and the services we are able to offer.
Essential Website Cookies
These cookies are strictly necessary to provide you with services available through our website and to use some of its features.
Because these cookies are strictly necessary to deliver the website, refuseing them will have impact how our site functions. You always can block or delete cookies by changing your browser settings and force blocking all cookies on this website. But this will always prompt you to accept/refuse cookies when revisiting our site.
We fully respect if you want to refuse cookies but to avoid asking you again and again kindly allow us to store a cookie for that. You are free to opt out any time or opt in for other cookies to get a better experience. If you refuse cookies we will remove all set cookies in our domain.
We provide you with a list of stored cookies on your computer in our domain so you can check what we stored. Due to security reasons we are not able to show or modify cookies from other domains. You can check these in your browser security settings.
Google Analytics Cookies
These cookies collect information that is used either in aggregate form to help us understand how our website is being used or how effective our marketing campaigns are, or to help us customize our website and application for you in order to enhance your experience.
If you do not want that we track your visist to our site you can disable tracking in your browser here:
Other external services
We also use different external services like Google Webfonts, Google Maps, and external Video providers. Since these providers may collect personal data like your IP address we allow you to block them here. Please be aware that this might heavily reduce the functionality and appearance of our site. Changes will take effect once you reload the page.
