Global Market Comments
November 22, 2024
Fiat Lux
Featured Trade:
(WEDNESDAY, JANUARY 22, 2025 ST AUGUSTINE FLORIDA STRATEGY LUNCHEON)
(NOVEMBER 20 BIWEEKLY STRATEGY WEBINAR Q&A),
(NVDA), (TSLA), (TLT), (OXY), (SLB), (MSTR), (USO), (PLTR), (SMCI), (KRE), (SMR), (UUP)
Below, please find subscribers’ Q&A for the November 20 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Lake Tahoe, Nevada.
Q: What are your stock recommendations for the end of the first quarter of 2025?
A: I say run with the winners. Dance with the girl who brought you to the dance. I think portfolio managers are going to be under tremendous pressure to buy winners and sell losers. And, of course, you all know the winners—they’re the stocks I have been recommending all year, like Nvidia (NVDA), Tesla (TSLA), and so on. And they're going to sell losers like energy to create the tax losses to offset their gains in the technology area. That could continue well into next year. Although, we’ve probably never entered a new administration with more uncertainty at any time in history, except maybe during the Civil War. I don’t think it will get as bad as that, but it could be bad.
Q: Is Putin bluffing about nuclear war?
A: Yes. First of all, Russia has 7,000 nuclear weapons, but only maybe 200 of those work. If he does use nuclear weapons, Ukraine will use its nuclear weapons in retaliation. During the Soviet Union, where did the Soviet Union make all their nuclear weapons? In Ukraine. That's where they had the scientists. They certainly have the Uranium—that's the hard part. You could literally put one together in days if you had the right expertise around. This will never go nuclear, and Putin has always been all about bluffing. There's a reason why the world's greatest chess masters are all Russian; it's all about the art of bluffing. So that doesn't worry me at all.
Q: Will Russia sacrifice a higher and higher percentage of its population in the war?
A: Yes, that is the military strategy: keep throwing bodies at your enemy until they run out of bullets.
Q: What is your prediction for 30-year US Treasury yields (TLT)?
A: They go higher. Higher for longer certainly includes the 30-year. The 30-year will be the most sensitive to long-term views of interest rates. If you get a return of inflation, which many people are predicting, the 30-year gets absolutely slaughtered. Adding a potential $10 trillion to the national debt, taking it to $45 trillion, is terrible for debt instruments everywhere.
Q: Should we be exiting the LEAPS that you put out on Occidental Petroleum (OXY) and Schlumberger (SLB)?
A: For Occidental, I would say maybe; it’s already at a low. The outlook for oil prices is poor, with massive new production coming on stream. Regarding Schlumberger, they make their money on the volume of oil production—that probably is going to be a big winner.
Q: What do you think interest rates will do as we go into the end of Powell's term in 18 months?
I have no idea. It just depends on how fast inflation returns. My guess is that we'll get an out-of-the-blue sharp uptick in inflation in the next couple of months, and when that happens, stocks will get slaughtered. People assume that inflation just keeps going up forever after that.
Q: Crude oil (USO) has been choppy at around $70 a barrel. Where do you see it going next year?
A: My immediate target is $60, and possibly lower than that. It just depends on how fast deregulation brings on new oil supplies, especially from the federal lands that have been promised to be opened up. As it turns out, the federal government owns most of the western United States—all the national forests and so on. If you open that up to drilling, it could bring huge supplies onto the market. That would be deflationary. It would be death for oil companies, but it would be a death for OPEC as well. Every cloud has a silver lining. OPEC has been a thorn in my side for the last 60 years.
Q: I'm tempted to buy stocks that are flying up, like Palantir (PLTR) and MicroStrategy (MSTR). What would be an experienced investor trade in these situations?
A: Don't touch them with a 10-foot pole. You buy stocks before they fly up, not afterwards. By the way, if anyone knows of an attorney who is an expert at recovering stolen Crypto, please contact me. I have several clients who've had their crypto accounts cleaned out. Oh, and by the way, the heads of every major crypto exchange have been put in jail in the last three years. Imagine if the heads of Goldman Sachs, Morgan Stanley Fidelity, and Vanguard were all put in jail for fraud and theft? How many stocks would you want to buy after that? Not a lot.
Q: Your recommendations for AI and chips?
A: I think you get a slowdown. In order to buy the new plays in banks, brokers, and money managers, you need to sell the old plays. Those are going to be technology stocks and AI stocks—AI itself will keep winning. They will keep advancing, but the stocks have become extremely expensive. And everyone is waiting to see how anti-technology the new administration will be. Some of the early appointments have been extremely anti-technology, promising to rein in big tech companies. If you rein in big tech companies, you rein in their stock prices, too. I am being very cautious here. The next spike up in Nvidia (NVDA) might be the one you want to sell.
Q: Do you think the uranium play will continue under the new administration?
A: Absolutely, yes. Restrain the Nuclear Regulatory Commission, and costs for the new nuclear starts up like (SMR) go way down.
Q: What do you think of NuScale Power Corp (SMR)?
A: I love it. Again, deregulation is the name of the game—and if you lose a city by accident, tough luck. Let's just hope it happens somewhere else. It's only happened three times before… Three Mile Island, Chernobyl, and Fukushima.
Q: Super Micro Computer (SMCI), what do you think?
A: Don't touch it. There's never just one cockroach. Hiring a new auditor to find out how much money they misrepresented is not a great buy argument to buy the stock. I'm sorry. Very high risk if you get involved.
Q: If Nvidia (NVDA) announces great earnings but sells off anyway, what should I do?
A: Get rid of it and get rid of all your other technology stocks because this is the bellwether for all technology. Tech always comes back over the long term, but short term, they may continue going nowhere as they have done for the last six months, which correctly anticipated a Trump win. Trump is not a technology guy— he hates California. Any California-based company can't expect any favors except for Tesla.
Q: Is there any reason why you prefer in-the-money bull call spreads?
A: Well, there are lots of reasons. Number 1, it's a short volatility play. Number 2 it's a time decay play, which is why I only do front months because that's when the time decay is accelerated. Thirdly, it allows you to increase your exposure to the stock by tenfold, which brings in a much bigger profit when you're right. If you look at our trade alerts, we make 15% to 20% on every trade, and 200 trades a year adds up to a lot of money. You can see that with our 75% return for this year. And it's a great risk management tool; the day-to-day volatility of call spreads is low because you're long one call option short the other. So, the usual day-to-day implied volatility on the combination is only about 8% or 9%. The biggest problem with retail investors is the volatility scares them out of the market at market lows and scares them back in at market highs. So, call spread reduces the volatility and keeps people from doing that. The risk-reward is overwhelmingly in your favor if you have somebody like me with an 80% or 90% success rate making the calls on the stocks. And, of course, having done this for almost 60 years, nothing new ever happens in the stock market—you're just getting repetitions of old stuff. All I have to do is figure out is this the 1970s story, the 1980s story, the 1990s, the 2000s, 2010s story? I have to figure out which pattern is being repeated. People who have been in the market for one year, or even 10 years, don't have that luxury.
Q: I’m having trouble getting filled on your orders.
A: You put out a spread of orders. So if I put in an order to buy at $9.00, split your order up into five pieces: at $9.00, $9.10, $9.20, $9.30, $9.40; and one or all of those orders will get filled. Another hint is that algorithms often take my trade alerts to the maximum price. Don't pay more than that price immediately, but they have to be out by the end of the day, so if you just enter good-till-cancel orders, you have an excellent chance of getting filled by the end of the day or at the opening tomorrow.
Q: Should I purchase SPDR S&P Regional Banking ETF (KRE)?
A: I'd say yes. That probably is a good buy with deregulation, making all of these small banks takeover targets.
Q: What should we be looking for in the fear and greed index?
A: When we get to the high end, like in the 70s, start taking profits. When we get to the low end, like the 20s, start buying and adding LEAPS and more long-term leverage option plays.
Q: What are we looking for to go short?
A: Much higher highs and a bunch of other monetary and technical indicators flashing warning signals, which are too many to go into here. Suffice to say, we did make good money on the short side this year, a couple of times on Tesla (TSLA), including a pre-election short that we covered in Tesla, and we were short a whole bunch of technology stocks going into the July meltdown. So, you know, we do both the long side and the short side, but it's been a long play—11 months this year and a short play for a month.
Q: Is the euro going back up eventually, or does the dollar (UUP) rule?
A: Sorry, but as long as the US dollar has the highest interest rates in the developing world and the prospect of even higher rates in the future, it's going to be a dollar game for the next couple of years.
Q: Will a ceasefire in the Middle East affect the markets?
A: No. The U.S. interest in geopolitical data ends at the shores—all three of them. So if the war of the last couple of years doesn't change the market—and it's been an absolutely horrific war with enormous civilian casualties—why should the end of it affect markets?
Q: What stock market returns do you see for the next four years?
A: About half of what they were for the last four years, which will be about 90% by the time Biden leaves office. You're going to have much higher interest rates and much higher inflation, and while the new administration is very friendly for some industries, it is very hostile for others, and the net could be zero. So, enjoy the euphoria rally while it lasts.
Q: What about crypto?
A: Well, I did buy some crypto for myself at $6,000, and I'm now thinking of selling it at $96,000. Would I recommend it to a customer? Not on pain of death—not at this level. You missed the move. Wait for the next 95% decline, which is a certainty in the future. And, by the way, absolutely nobody in the industry can tell you when that is.
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
Mad Hedge Technology Letter
November 15, 2024
Fiat Lux
Featured Trade:
(ACCOUNTING STANDARDS COULD TAKE DOWN SUPERMICRO)
(SMCI), (NVDA)
Super Micro Computer (SMCI) has some dubious management and accounting methods and it is coming back to haunt them with the potential boot from the Nasdaq index.
In fact, they are really cutting it close to secure their existence inside the index, because they haven’t offered any clear updates yet.
It is hard to believe they have loitered around not making any decisions to replace their accounting firm.
The optics is terrible because it appears as if no reputable accounting firm is willing to take their account.
There is fudging the numbers and then there is outright fraud and the situation at SMCI suggest the latter.
Remember, the world is still waiting to hear when SMCI will file their 2024 year-end report with the Securities and Exchange Commission, and why it was late.
That report is something many expected would be filed alongside the company’s June fourth-quarter earnings but was not.
The company’s auditor, Ernst & Young, stepped down in October, and Super Micro said last week that it was still trying to find a new one.
A public tech company that can’t find an auditor, because their accounting practices are so toxic, nobody wants to touch it with a 10-foot pole.
Even though the company sells a great chip wanted by many other companies, the stock has crashed by almost 90%.
Getting delisted from the Nasdaq could be next if Super Micro doesn’t file a compliance plan by the Monday deadline or if the exchange rejects the company’s submission. Super Micro could also get an extension from the Nasdaq, giving it months to come into compliance. The company said Thursday that it would provide a plan to the Nasdaq in time.
The Nasdaq says it looks at several factors when evaluating a plan of compliance, including the reasons for the late filing, upcoming corporate events, the overall financial status of the company and the likelihood of a company filing an audited report within 180 days. The review can also look at information provided by outside auditors, the SEC or other regulators.
Between 2015 and 2017, Super Micro misstated financials and published key filings late, according to the SEC. It was delisted from the Nasdaq in 2017 and was relisted two years later.
In the short term, the bigger worry for Super Micro is whether customers and suppliers start to bail.
It’s hard to crash a stock when sales more than doubled last year to nearly $15 billion and many analysts believe they can do $25 billion in sales in 2025.
The mismanagement is on an extreme level here to the point where if you buy stock in this company, they might be delisted and it will be hard to get a refund on that stock.
Then there is the real hit to the reputation because vendors must think that if SMCI’s accounting practices are so bad, then what perhaps customers should be worried about the chip products too.
Where there is smoke – there is fire.
It’s nothing good for SMCI and the optics keep going from bad to worse.
Luckily, Nvidia has said that doesn’t really affect them and so any sort of contagion risk is confined.
The trading around the chip stocks have been incredibly volatile with the surge after the election then the profit taking this week.
Chip stocks would be a great buy the dip coming up.
Global Market Comments
September 3, 2024
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD or THE HIDDEN AI IN YOUR LIFE),
(SPX), (NVDA), (CSCO), (LEN), (DHI), (KBH), (SMCI), (BRK/B), (META), (AAPL), (GOOGL), (TSLA), (JNK), (HYG), (FXA), (FXE), (FXB), (FXC), (EEM), (IWM)
It's great to be back in California, even just temporarily.
Driving down to visit a Concierge client, the weather is hot and dry, the scenery is spectacular. What were once endless hills of dry grass are now countless miles of vineyards. Boy, has the Golden State changed a lot since 1952.
The vines are heavy with grapes. I stopped by and picked a purple bunch to test out the fruit. The grapes were rich and sweet. It looks like 2024 is going to be a good vintage. No wonder there is a wine glut.
It's going to be a vintage year for Mad Hedge performance as well. We picked up a welcome +3.74% in the testing month of August, +33.61% so far in 2024, and +711.32% since inception.
The harder I work, the luckier I get.
Which raises the most important question of the day: Did September just happen in August? The price action we saw last month is certainly reminiscent of many recent faith-testing Septembers and Octobers.
If that is the case, then it could be off to the races from now. Except this time, it won’t be just a Magnificent Seven rally. It will be an everything rally as the bull broadens out to include all interest rate sectors, which is almost everything.
(SPX) 6,000 by yearend looks like a piece of cake.
The bottom line for all of this is that investors and the markets are still wildly underestimating the impact artificial intelligence will have on our futures, and therefore stock prices. Publishing the Mad Hedge AI Letter three times a week (click here for the link), I can see AI sneaking into every aspect of our lives without our knowledge.
I visited my doctor the other day and they asked for my Medicare card. I didn’t have it because there is no use for this US government ID in Europe from where I just returned. The receptionist said, “Don’t worry, may I have your phone please?” She went into my photos app, searched for “Medicare” and there it appeared instantly. Apple had surreptitiously installed an AI search function on my phone without even telling me.
Try it!
What we are witnessing is the greatest capital spending binge since WWII 83 years ago, when in three short years, the US produced 297,000 aircraft, 193,000 artillery pieces, 86,000 tanks, and two million army trucks. It also double-tracked all east-west rail lines and created from scratch four atomic bombs.
And you want to short that???
The indexes certainly have plenty of room to run. Since the 2020 pandemic bottom, virtually all money has gone into big tech and out of the rest of the market, generating net outflows out of equities and into bonds. What happens when you get net inflows into big tech AND the rest of the market? Markets go up a….lot.
Dow 240,000 here we come.
Now for the challenging chore of sector picking.
Bonds (TLT) are usually the first pick at the beginning of any interest rate-cutting cycle. However, this has been the best telegraphed interest rate cut in history so most of the juice has already been squeezed out of this one. The (TLT) has moved a prolific $18 off the $82 bottom with no interest rate cuts at all. So there might be $5 or $10 of upside left this year, but no more.
Derivative high-yield plays have much more to offer. Those would include junk bonds (JNK), (HYG), BB-rated loans (SLRN), and REITS like the Vornado Realty Trust (VOR), my favorite Crown Castle International (CCI), and Health Properties (DOC).
Utilities usually do well in falling interest rate cycles as they are such big borrowers. In this basket, you can throw NextEra Energy (NEE), Southern Company (SO), and Duke Energy (DUK).
Falling rates also reliably deliver a weak US dollar, so buy every foreign currency play out there (FXA), (FXE), (FXB), (FXC). Also, buy foreign stock markets like the (EEM).
And then there are always big borrowing small caps (IWM), poor performers for the last decade which can always use the life jackets of falling interest rates. Keep in mind that 40% of small caps are regional banks and another 40% are money losers.
And then there are the old reliables. Any of the Magnificent Seven will probably work if you can get them on any selloff like we had on August 5.
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 +18.23% 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 +51.91%.
I executed no trades last week and am maintaining a 100% cash position. I’ll text you next time I see a bargain in any market. Now there are none. I am running one short in Tesla (TSLA).
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.
NVIDIA Dives on Fabulous Earnings, one of the greatest “Buy the rumor, sell the news” moves of all time. The stock dropped to $25, or 17.85% off its all-time high. Production snags with its much-awaited Blackwell chips are to blame. The company’s quarterly met or beat analysts’ estimates on nearly every measure. But Nvidia investors have grown accustomed to blowout quarters, and the latest numbers didn’t qualify. Buy (NVDA) on this dip.
PCE Rises a Modest 02% in July. That is the so-called core personal consumption expenditures price index, which strips out volatile food and energy items, according to Bureau of Economic Analysis data out Friday. On a three-month annualized basis — a metric economists say paints a more accurate picture of the trajectory of inflation — it advanced 1.7%, the slowest this year
Pending Home Sales Drop 5%, and 8.5% YOY, on a signed contracts basis. Many buyers are waiting until after the presidential election to make a move. Pending home sales fell in all four regions last month. The positive impact of job growth and higher inventory could not overcome affordability challenges and some degree of wait-and-see related to the upcoming U.S. presidential election.
Sales of new U.S. single-family homes rocketed by 10.6%, their highest level in more than a year in July. A drop in mortgage rates boosted demand, offering more evidence that the housing market is recovering. Sales reached a seasonally adjusted annual rate of 739,000 units last month, the highest level since May 2023. It was also the sharpest increase in sales since August 2022. New home sales are counted at the signing of a contract. Buy homebuilders on dips (LEN), (DHI), (KBH).
US GDP Reaccelerates to 3.0% Growth in Q2, up from the previous estimate of 2.8%, according to the Bureau of Economic Analysis. Stronger consumer spending more than offset other categories. Can’t beat the USA.
Weekly Jobless Claims Remain Unchanged at 231,000, down 2,000. After being inflated by weather and seasonal factors in July, initial jobless claims in August are stabilizing at a slightly lower level, another indication that layoffs remain low.
Is Costco (CSCO) the Next Stock Split? Costco, which has risen nearly 40% since the start of 2024, is a potential candidate. Given the company’s share price—over $900 as of Tuesday—and the trend among other retailers with similarly high prices to split.
Hindenburg Research Attacks Super Micro, alleging "accounting manipulation" at the AI server maker, the latest by the short seller whose reports have rocked several high-profile companies. Close ties with chip giant Nvidia have allowed Super Micro, known for its liquid cooling technology for high-power semiconductors, to capitalize on the surge in demand for AI servers.
Though revenue has surged, margins have taken a hit recently due to the rising costs of server production and pricing pressure from rivals including Dell. Avoid (SMCI).
Berkshire Hathaway Tops $1 Trillion Market Cap, a long-time Mad Hedge recommendation. It’s the first nontech company ever to do so, even though (BRK/B) has a major holding in Apple (AAPL). Keep buying the big dips. The stock has rallied this year on strong insurance results and economic optimism. The Omaha, Nebraska-based company joins the ranks of a small group to crack the milestone, dominated by technology giants like Alphabet Inc. (GOOGL), Meta Platforms Inc. (META) and Nvidia Corp. (NVDA).
S&P Case Shiller Hits New All-Time High in June. Prices nationally rose 5.4% in June from the year prior. An index measuring prices in 20 of the nation’s large metropolitan areas gained 6.5% from the year prior. On an unadjusted basis, it was the national index’s fourth consecutive all-time high. Prices in New York, San Diego, and Las Vegas grew the most, with year-over-year gains ranging from 8.5% and 9%, while those in Portland, Ore., Denver, Colo., and Minneapolis grew the least.
Canada Imposes 100% Tariff on Chinese EVs. The problem for Tesla is that they had been supplying the Canadian market from their China factory. The supply can be replaced with US-made cars but at a much higher cost. Tesla sold off $8 on the news. Sell rallies in (TSLA).
Is the US Tipping into Recession? A continued drop in job openings will translate into faster increases in unemployment, an argument in favor of the Fed beginning to cut interest rates to guard the labor market. The next jobs reports could be crucial. Policymakers face the dilemma of two risks: being too slow to ease policy, potentially causing a 'hard landing' with high unemployment ... or cutting rates prematurely, leaving the economy vulnerable to rising inflation
Yield Chasers Post Record Demand for Junk Bonds. That’s helped make 2024 the busiest year for the issuance of new corporate high-yield bonds, with $357 billion sold so far, since the easy money days during the pandemic. Issuance of US leveraged loans, meanwhile, is running at its fastest pace on record. Buy (JNK) and (HYG).
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, September 2 we have Labor Day. All US markets will be closed.
On Tuesday, September 3 at 6:00 AM EST, the ISM Manufacturing PMI is released.
On Wednesday, September 4 at 7:30 PM, the JOLTS Job Openings Report is printed.
On Thursday, September 5 at 8:30 AM, the Weekly Jobless Claims are announced. We also get the ADP Employment Report.
On Friday, September 6 at 8:30 AM, the August Nonfarm Payroll Report is released. At 2:00 PM, the Baker Hughes Rig Count is printed.
As for me, having visited and lived in Lake Tahoe for most of my life, I thought I’d pass on a few stories from this historic and beautiful place.
The lake didn’t get its name until 1949 when the Washoe Indian name was bastardized to come up with “Tahoe”. Before that, it was called the much less romantic Lake Bigler after the first governor of California.
A young Mark Twain walked here in 1863 from nearby Virginia City where he was writing for the Territorial Enterprise about the silver boom. He described boats as “floating in the air” as the water clarity at 100 feet made them appear to be levitating. Today, clarity is at 50 feet, but it should go back to 100 feet when cars go all-electric.
One of the great engineering feats of the 19th century was the construction of the Transcontinental Railroad. Some 10,000 Chinese workers used black powder to blast a one-mile-long tunnel through solid granite. They tried nitroglycerine for a few months but so many died in accidents they went back to powder.
The Union Pacific moved the line a mile south in the 1950s to make a shorter route. The old tunnel is still there, and you can drive through it at any time if you know the secret entrance. The roof is still covered with soot from woodfired steam engines. At midpoint, you find a shaft to the surface where workers were hung from their ankles with ropes to place charges so they could work on four faces at once.
By the late 19th century, every tree around the lake had been cut down for shoring at the silver mines. Look at photos from the time and the mountains are completely barren. That is except for the southwest corner, which was privately owned by Lucky Baldwin who won the land in a card game. The 300-year-old growth pine trees are still there.
During the 20th century, the entire East Shore was owned by one man, George Whittell Jr., son of one of the original silver barons. A man of eclectic tastes, he owned a Boing 247 private aircraft, a custom mahogany boat powered by two Alison aircraft engines, and kept lions in heated cages.
Thanks to a few well-placed campaign donations, he obtained prison labor from the State of Nevada to build a palatial granite waterfront mansion called Thunderbird, which you can still visit today (click here ). During Prohibition, female “guests” from California crossed the lake and entered the home through a secret tunnel.
When Whittell died in 1969, a Mad Hedge Concierge Client bought the entire East Shore from the estate on behalf of the Fred Harvey Company and then traded it for a huge chunk of land in Arizona. Today the East Shore is a Nevada State Park, including the majestic Sand Harbor, the finest beach in the High Sierras.
When a Hollywood scriptwriter took a Tahoe vacation in the early 1960s, he so fell in love with the place that he wrote Bonanza, the top TV show of the decade (in front of Hogan’s Heroes). He created the fictional Ponderosa Ranch, which tourists from Europe come to look for in Incline Village today.
In 1943, a Pan Am pilot named Wayne Poulson who had a love of skiing bought Squaw Valley for $35,000. This was back when it took two days to drive from San Francisco. Wayne flew the China Clippers to Asia in the famed Sikorski flying boats, the first commercial planes to cross the Pacific Ocean. He spent time between flights at a ranch house he built right in the middle of the valley.
His wife Sandy bought baskets from the Washoe Indians who still lived on the land to keep them from starving during the Great Depression. The Poulson’s had eight children and today, each has a street named after them at Squaw.
Not much happened until the late forties when a New York Investor group led by Alex Cushing started building lifts. Through some miracle, and with backing from the Rockefeller family, Cushing won the competition to host the 1960 Winter Olympics, beating out the legendary Innsbruck, Austria, and St. Moritz, Switzerland.
He quickly got the State of California to build Interstate 80, which shortened the trip to Tahoe to only three hours. He also got the state to pass a liability limit for ski accidents to only $2,000, something I learned when my kids plowed into someone, and the money really poured in.
Attending the 1960 Olympic opening ceremony is still one of my fondest childhood memories, produced by Walt Disney, who owned the nearby Sugar Bowl ski resort.
While the Cushing group had bought the rights to the mountains, Poulson owned the valley floor, and he made a fortune as a vacation home developer. The inevitable disputes arose and the two quit talking in the 1980’s.
I used to run into a crusty old Cushing at High Camp now and then and I milked him for local history in exchange for stock tips and a few stiff drinks. Cushing died in 2003 at 92 (click here for the obituary)
I first came to Lake Tahoe in the 1950s with my grandfather who had two horses, a mule, and a Winchester. He was one-quarter Cherokee Indian and knew everything there was to know about the outdoors. Although I am only one-sixteenth Cherokee with some Delaware and Sioux mixed in, I got the full Indian dose. Thanks to him I can live off the land when I need to. Even today, we invite the family medicine man to important events, like births, weddings, and funerals.
We camped on the beach at Incline Beach before the town was built and the Weyerhaeuser lumber mill was still operating. We caught our limit of trout every day, ten back in those days, ate some, and put the rest on ice. It was paradise.
During the late 1990’s when I built a home in Squaw Valley I frequently flew with Glen Poulson, who owned a vintage 1947 Cessna 150 tailwheel, looking for untouched high-country lakes to fish. He said his mother had been lonely since her husband died in 1995 and asked me to have tea with her and tell her some stories.
Sandy told me that in the seventies she asked her kids to clean out the barn and they tossed hundreds of old Washoe baskets. Today Washoe baskets are very rare, highly sought after by wealthy collectors, and sell for $50,000 to $100,000 at auction. “If I had only known,” she sighed. Sandy passed away in 2006 and the remaining 30-acre ranch was sold for $15 million.
To stay in shape, I used to pack up my skis and boots and snowshoe up the 2,000 feet from the Squaw Valley parking lot to High Camp, then ski down. On the way up I provided first aid to injured skiers and made regular calls to the ski patrol.
After doing this for many winters, I finally got busted when they realized I didn’t have a ski pass. It turns out that when you buy a lift ticket you are agreeing to a liability release which they absolutely had to have. I was banned from the mountain.
Today Squaw Valley is owned by the Colorado-based Altera Mountain Company, which along with Vail Resorts owns most of the ski resorts in North America. The concentration has been relentless. Last year Squaw Valley’s name was changed to the Palisades Resort for the sake of political correctness. Last weekend, a gondola connected it with Alpine Meadows next door, creating the largest ski area in the US.
Today there are no Washoe Indians left on the lake. The nearest reservation is 25 miles away in the desert in Gardnerville, NV. They sold or traded away their land for pennies on the current value.
Living at Tahoe has been great, and I get up here whenever I can. I am now one of the few surviving original mountain men and volunteer for North Tahoe Search & Rescue.
On Donner Day, every October 1, I volunteer as a docent to guide visitors up the original trail over Donner Pass. Some 175 years later the oldest trees still bear the scars of being scrapped by passing covered wagon wheels, my own ancestors among them. There is also a wealth of ancient petroglyphs, as the pass was a major meeting place between Indian tribes in ancient times.
The good news is that residents aged 70 or more get free season ski passes at Diamond Peak, where I sponsored the ski team for several years. My will specifies that my ashes be placed in the Middle of Lake Tahoe. At least I’ll be recycled. I’ll be joining my younger brother who was an early Covid-19 victim and whose ashes we placed there in 2020.
Stay Healthy,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
The Ponderosa Ranch
The Poulson Ranch
At the Reno Airport
Donner Pass Petroglyphs
Global Market Comments
September 2, 2024
Fiat Lux
Featured Trade:
( AUGUST 28 BIWEEKLY STRATEGY WEBINAR Q&A),
(SMCI), (QQQ), (CRWD), (NVDA), (TSLA), (GOLD), (BRK/B), (BAC), (AAPL)
Below please find subscribers’ Q&A for the August 28 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Santa Barbara, CA.
Q: What is your opinion on Supermicro (SMCI)?
A: I can tell you that all fund managers have the same reaction as I do when they hear the words “accounting irregularities” ….run. So, if you haven’t, I would get out. If you’re looking to get in, there’s probably a great opportunity somewhere, but not here. Their product isn’t that high-tech, cooling racks for artificial intelligence servers. But it did have the letters “AI” attached, so it went up 50-fold. But Hindenburg is occasionally right on their research reports, although they’re wildly exaggerated to enhance their short positions. I would stay out of the way on that one for now.
Q: Are there any startup companies worth investing in on the public market right now?
A: No, because new listings are always overhyped. They come in usually double their true value. This happened with Tesla (TSLA)—I think Tesla came out at $32, I waited for the 50% selloff and all the marketing hype to wear off and I bought it at $16, and of course, that's probably about 60 cents now on a split-adjusted basis. So, I don't play the IPO game. If an IPO really is hot, chances are your broker won’t give it to you anyway; he'll give it to his largest clients. That's probably not you. So, I don't get involved in that game, I look at the aftermath. And in hot markets, there is no aftermath, you just watch them go up. The answer to that is a firm no.
Q: Home prices just hit new all-time highs, according to the S&P Case-Shiller. How do the prices keep rising with high interest rates?
A: Because people expect interest rates to fall, and they are doing so dramatically. If you look at all the interest-sensitive sectors which I've been recommending for the last four months, they've all been on fire. So if the cost of your mortgage is about to drop by half, housing prices should double, and we are starting to see that double now.
Q: Should we buy a put on the (QQQ) based on Nvidia (NVDA) earnings?
A: Nobody knows what the Nvidia earnings are going to be, so if you're willing to make a bet on a coin toss, go ahead and do it. I don't make bets on coin tosses. I make bets when there's a 90% chance that I'm going win, and there are no 90% chance trades out there anywhere in any asset class right now. It's better to watch and wait for the next opportunity. If Nvidia sells off 10% on a weak guidance, then I would be in there with both hands buying, because Nvidia is still cheap relative to the rest of the sector and the rest and of the market. And if Nvidia goes up 20%, I might even sell it short. I have shorted Nvidia this year a couple of times this year, and made money both times, so that is the trade. But right here we're in the middle of the next likely range, so no trade there at all.
Q: Will CrowdStrike (CRWD) have a financial liability for the problem it created by crashing the world's travel computers?
A: Yes, and that will no doubt be the subject of litigation for the next 10 years, which I would rather not get involved in.
Q: The tech industry keeps cutting white-collar jobs, and they have been for some time. At which point does this subside, and won’t this crush employment in Silicon Valley?
A: Well, it’s already crushed employment by about 300,000 in Silicon Valley, but artificial intelligence is now starting to soak up those employees, and they certainly are soaking up the office space, which is why the smart money that is now pouring into San Francisco buying up office buildings for pennies on the dollar. They see an employment recovery. In the meantime, buy the Magnificent Seven stocks, because they’re creating profits by cutting the excess staff which they always used to keep.
Q: When you talk about Tesla (TSLA) losing ground in the EV market, do you see the company broadening out its technologies, and growing the company down other avenues?
A: Absolutely, yes. They have a very fast-growing solar panel business, an industrial-scale battery business, and of course, they're basically running the charging network for the entire United States and the entire world. They also have new batteries under development that have the potential to increase car ranges 20 times at zero cost. Elon always has at least a dozen or so other projects underway, many of which he keeps secret. What you have to keep track of is how many of these accrue to Tesla, and how many accrue earnings to his other companies, like SpaceX, Neuralink, and xAI. SpaceX is going gangbusters right now because guess what? They're planning an IPO in the near future and should get a big multiple. xAI just raised $6 billion in a VC round.
Q: How can Nvidia (NVDA) go higher tonight if it disappoints?
A: It won't. It will drop about 10%. I'm just saying you can go higher into next year on 50% earnings growth, but we may have to give back 10%, 20%, or in the case of August 5th, 40% before we can go forward.
Q: Whatever happened to the commercial real estate problem? How is that taken care of so tightly by private capital?
A: It's a play on falling interest rates. A lot of buildings were going for 10 cents on the dollar in Manhattan and in San Francisco, so these guys know bargains, and they're long-term players, and that's how they always make money in that business. I've been watching it for 50 years, and their market timing is excellent.
Q: What will the effects of de-dollarization mean to the long-term health of the stock market?
A: Nothing, because de-dollarization isn't going to happen. It's more or less an internet conspiracy theory. There's no serious move whatsoever to replace the US Dollar, and Bitcoin or crypto in general never got to more than 1% of the total value of US dollars out there, and plus it's had its problems. So I don't think de-dollarization is going to happen in my lifetime.
Q: Why is Warren Buffett (BRK/B) unloading shares in Apple (APPL) and Bank of America (BAC)?
A: He thinks the whole market is expensive, and I would agree with him. He likes having a lot of cash during recessions or during major market crashes, so he can swoop in and buy whole companies. So that is the answer. He's thought the market has been expensive for years now, but that doesn't seem to stop them from making money.
Q: Should we take profit on the LEAPS in Barrick Gold (GOLD) expiring in January?
A: Yes, you should take the profit here. You make maybe 20% or 30% and then wait for the next sell-off, and then go back into (GOLD), but add an extra year to the expiration date. Do a 2026 instead of a 2025, because we're getting kind of short on time on all the January 2025 expirations. So that would be the smart thing to do, is to take profits on all your January 25 LEAPS, raise cash, and go back in into an 18-month LEAP on the next sell-off, and I will be reminding you to do exactly that when it happens.
Q: Should we wait until after the election to invest?
A: No. The market will start running before the election, especially if the election outcome becomes more and more certain. So that kind of sets up an October bottom for the market, and maybe even a September one—who knows? We will just have to see how the polls go, even though they are usually wrong. So that's what I would do on that.
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
Mad Hedge Technology Letter
August 28, 2024
Fiat Lux
Featured Trade:
(NOT SUPER BY SUPER MICRO)
(SMCI), (NVDA)
Mad Hedge Technology Letter
August 21, 2024
Fiat Lux
Featured Trade:
(SPEND UNTIL REVENUE COMES)
(NVDA), (SMCI), (AVGO)