Global Market Comments
December 4, 2023
Fiat Lux
Featured Trade:
Featured Trade:
(The Mad Hedge December Traders & Investors Summit is ON!)
(MARKET OUTLOOK FOR THE WEEK AHEAD, or GOLDILOCKS IS BACK!),
(TLT), (FCX), (CAT), (JNK), (HYG), (NLY), (GM), (MSFT), (NLY), (BRK/B), (CCJ), (GOOGL), (SNOW), (XOM), (CRM)
After too long of an absence, Goldilocks has moved back in once again. She arrived with Santa Claus too, a month ahead of schedule.
Can life get any better than that, Goldilocks and Santa Claus?
Santa confused Thanksgiving with Christmas this year. I saw it coming a mile off, and it’s not because my failing eyesight has suddenly improved.
Since October 26, Mad Hedge followers have earned an impressive 25%. We are on track to top an 86.5% profit for 2023, the best in the 15-year history of the service.
Concierge members who own our substantial LEAPS portfolio, now at 33 names, are up much more.
I hate to boast but let me take my victory lap. I earned it.
Stocks and bonds should continue rising but at a much slower rate. More likely is the diversification of the rally from Big Tech and big bonds (TLT) to medium tech, commodities (FCX), industrials (CAT), junk bonds (JNK), (HYG), and REITS (NLY).
Buy everything on dips.
And here are your assumptions. Collapsing energy prices will lead the inflation rate down to the Fed’s well-publicized 2% inflation rate target in the coming months. Accelerating technology and AI will reign in this year’s runaway wage increases, if not reverse them.
The UAW’s 25% salary increase over four years will only hasten the demise of General Motors (GM), as well as their own. Interest rates have to take a swan dive, supercharging all risk assets.
Goldilocks is not moving in for a fling, but a long-term relationship. Your retirement funds will love it.
Last spring, with 75 feet of snow over the winter, the rivers pouring out of the High Sierras were at record levels. That brought the solo hobbyist gold miners out in force.
It is widely believed that the 1849 gold rush extracted only 10% of the gold in the mountains and the remaining 90% is still up there. Heavy rainfalls like we received last winter flushed out some of the rest.
Rounding a turn in the river, I spotted a group of modern-day 49ers equipped with shoulder-high waders and inner tubes floating pumps and sluice boxes. So I parked the car and waded out in the freezing, fast-running water to get an update on this market.
One man proudly showed off a one-ounce gold nugget that he had found only that morning worth about $1,800. Nuggets are worth more than spot gold because they attract a collector’s market.
A record eight-ounce nugget was discovered in a river near Merced the week earlier. This year, the state government in Sacramento issued a record number of gold mining licenses.
I explained to my newfound friend that he should hang on to his gold because it would be worth a lot more the following year. Inflation was falling and that would eventually induce the Federal Reserve to cut interest rates sharply.
That meant less interest rate competition for gold and silver, which yielded nothing taking prices upward. Personally, I think this gold could hit $3,000 an ounce and silver $50 an ounce in 2025.
In addition, there was a constant bid from Russia, China, and North Korea looking to dodge financial sanctions. Money managers are also picking up the yellow metal as a hedge against any unanticipated volatility in 2024.
My friend looked at me quizzically, wondering if perhaps I was some kind of nutjob who had waded out mid-river to rob him of his prized nugget.
I’ll do anything to gain a trading edge, even freezing off my cajones.
It was a tough week for 90- and 100-year-olds with the passing of Charlie Munger, Henry Kissinger, and Supreme Court Justice Sandra Day O’Connor. I had the privilege of knowing all three.
I was in the White House Press Room one day when the press secretary James Brady asked if any of the press could ride a horse. Sheepishly, I was the only one to raise a hand.
I was ordered to pick up my riding boots and report to the White House Stables on 17th Street. I had no idea why. Back then, even the press didn’t ask some questions.
When I arrived, I understood why. Supreme Court Justice Sandra Day O’Connor was already there kitted out ready to ride. It turns out that the justice from Arizona rode weekly with Ronald Reagan. This week, an international crisis prevented the president from doing so. I was the fill-in escort.
We talked about growing up in the Colorado Desert, and pre-air conditioning, as we enjoyed a peaceful ride along the Potomac River. A security detail kept a safe distance.
A lot of history is being in the right place at the right time.
The clock is ticking.
November closed out at +15.54%. My 2023 year-to-date performance is still at an eye-popping +81.71%. The S&P 500 (SPY) is up +19.73% so far in 2023. My trailing one-year return reached +80.80% versus +18.19% for the S&P 500.
That brings my 15-year total return to +678.90%. My average annualized return has exploded to +52.26%, another new high, some 2.48 times the S&P 500 over the same period.
I am 90% fully invested, with longs in (MSFT), (NLY), (BRK/B), (CCJ), (GOOGL), (SNOW), (CAT), and (XOM). I have one short in the (TLT). I took profits on (CRM) on Friday.
Some 56 of my 61 trades this year have been profitable this year.
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 800% 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, December 4, at 8:30 AM EST, the US Factory Orders are out.
On Tuesday, December 5 at 2:30 PM, the JOLTS Job Openings Report is released.
On Wednesday, December 6 at 8:30 AM, the ADP Private Employment Report is published.
On Thursday, December 7 at 8:30 AM, the Weekly Jobless Claims are announced.
On Friday, December 8 at 2:00 PM the Baker Hughes Rig Count is printed and at 2:30 PM, the November Nonfarm Payroll Report is published.
As for me, back in the early 1980s, when I was starting up Morgan Stanley’s international equity trading desk, my wife Kyoko was still a driven Japanese career woman.
Taking advantage of her near-perfect English, she landed a prestige job as the head of sales at New York’s Waldorf Astoria Hotel.
Every morning we set off on our different ways, me to Morgan Stanley’s HQ in the old General Motors Building on Avenue of the Americas and 47th street and she to the Waldorf at Park and 34th.
One day, she came home and told me this little old lady living in the Waldorf Towers needed an escort to walk her dog in the evenings once a week. Back in those days, the crime rate in New York was sky-high, and only the brave or the reckless ventured outside after dark.
I said “Sure” “What was her name?”
Jean MacArthur.
I said THE Jean MacArthur?
She answered “Yes.”
Jean MacArthur was the widow of General Douglas MacArthur, the WWII legend. He fought off the Japanese in the Philippines in 1941 and retreated to Australia in a dramatic night PT Boat escape.
He then led a brilliant island-hopping campaign, turning the Japanese at Guadalcanal and New Guinea. My dad was part of that operation, as were the fathers of many of my Australian clients. That led all the way to Tokyo Bay where MacArthur accepted the Japanese in 1945 on the deck of the battleship USS Missouri.
The MacArthur then moved into the Tokyo embassy where the general ran Japan as a personal fiefdom for seven years, a residence I know well. That’s when Jean, who was 18 years the general’s junior, developed a fondness for the Japanese people.
When the Korean War began in 1950, MacArthur took charge. His landing at Inchon Harbor broke the back of the invasion and was one of the most brilliant tactical moves in military history. When MacArthur was recalled by President Truman in 1952, he had not been home for 13 years.
So it was with some trepidation that I was introduced by my wife to Mrs. MacArthur in the lobby of the Waldorf Astoria. On the way out, we passed a large portrait of the general who seemed to disapprovingly stare down at me taking out his wife, so I was on my best behavior.
To some extent, I had spent my entire life preparing for this job.
I had stayed at the MacArthur Suite at the Manila Hotel where they had lived before the war. I knew Australia well. And I had just spent a decade living in Japan. By chance, I had also read the brilliant biography of MacArthur by William Manchester, American Caesar, which had only just come out.
I also competed in karate at the national level in Japan for ten years, which qualified me as a bodyguard. In other words, I was the perfect after-dark escort for Midtown Manhattan in the early eighties.
She insisted I call her “Jean”; she was one of the most gregarious women I have ever run into. She was grey-haired, petite, and made you feel like you were the most important person she had ever run into.
She talked a lot about “Doug” and I learned several personal anecdotes that never made it into the history books.
“Doug” was a staunch conservative who was nominated for president by the Republican party in 1944. But he pushed policies in Japan that would have qualified him as a raging liberal.
It was the Japanese that begged MacArthur to ban the army and the navy in the new constitution for they feared a return of the military after MacArthur left. Women gained the right to vote on the insistence of the English tutor for Emperor Hirohito’s children, an American Quaker woman. He was very pro-union in Japan. He also pushed through land reform that broke up the big estates and handed out land to the small farmers.
It was a vast understatement to say that I got more out of these walks than she did. While making our rounds, we ran into other celebrities who lived in the neighborhood who all knew Jean, such as Henry Kissinger, Ginger Rogers, and the UN Secretary-General.
Morgan Stanley eventually promoted me and transferred me to London to run the trading operations there, so my prolonged free history lesson came to an end.
Jean MacArthur stayed in the public eye and was a frequent commencement speaker at West Point where “Doug” had been a student and later the superintendent. Jean died in 2000 at the age of 101.
I sent a bouquet of lilies to the funeral.
Kyoko passed away in 2002.
In 2014, Chinas Anbang Insurance Group bought the Waldorf Astoria for $1.95 billion, making it the most expensive hotel ever sold. Most of the rooms were converted to condominiums and sold to Chinese looking to hide assets abroad.
The portrait of Douglas MacArthur is gone too. During the Korean War, he threatened to drop atomic bombs on China’s major coastal cities.
Good Luck and Good Trading,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
December 1, 2023
Fiat Lux
Featured Trade:
(NOVEMBER 29 BIWEEKLY STRATEGY WEBINAR Q&A),
($VIX), UNG), (PANW), (SNOW), (HACK), (MSFT), (AAPL), (FCX), (TSLA), (F), (GM), (LLY), (CVX), (XOM), (RIVN), (TLT)
Below please find subscribers’ Q&A for the November 29 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Silicon Valley, CA.
Q: How much longer can the United States Natural Gas Fund (UNG) remain at such low levels?
A: They call this contract “The Widow Maker” for a reason. As long as the weather is warmer than usual, which has been a problem, (UNG) will remain cheap. We actually got up to $8 in the UNG a month ago and have since come back to $5.50. There are no signs of an energy shortage anywhere right now with the collapse of oil prices from $96 down to $70, so this could be the worst thing in the world if global warming continues. But I'm keeping my position. It’s basically worthless now anyway, but that has been a real shocker this year in the energy community—how cheap natural gas has gotten. And that is after supplying all on Germany’s Natgas needs with no notice.
Q: I still have Palo Alto Networks (PANW) open, what should I do?
A: You’re pretty much at a maximum profit now, so you might as well run it into the expiration because, at a Volatility Index ($VIX) of $12, there just aren’t many other attractive trades to put on right now. You’ll see that when we go through the charts. Everything has just had a massive move in our favor. It’s actually the sharpest move up in market history, so you don't want to go chasing things, and you certainly don't want to go short because that is against the long, medium, and short-term trends.
Q: Which of your positions would you suggest we can still buy right now?
A: None, except for two-year US treasury Bills to lock in high-interest rates at 4.8%. Everything is just wildly expensive on a short-term basis.
Q: When do you expect Freeport McMoRan (FCX) and the other commodities to rise?
A: Towards the middle of the year, the market will shift entirely out of technology and into domestic industrials and commodities, and we should expect exponential moves in those areas also as the economy recovers and interest rates fall. We are going to start putting LEAPS out on those pretty soon because those are the bargain of the century prices right now.
Q: I’m new to the program, and I noticed all of the trades are done as options spreads. What are the benefits of doing it in this way versus owning the underlying?
A: You get a leverage of 10X versus owning the underlying with limited risk. You also make money when markets do nothing because you are also short volatility when you do an options spread. In fact, every trade alert we send out gives you three choices usually: buy the stock, buy the options spread, or buy the ETF. So that way, you can cater your trading to your level of experience and risk tolerance. And if you want to know more, just go to our website, log in, and search for call spreads—there will be a vast library talking about the benefits of doing call spreads and how to execute them.
Q: What’s your favorite sector for next year?
A: Always a popular question for this time of the year, and that’s an easy answer.
Number one: cybersecurity. That means Palo Alto Networks (PANW), which we’re long, Snowflake (SNOW), which we’re also long, and Nvidia (NVDA), which we were long in October before it went completely nuts—it turns out that cyber security has a huge appetite for the high-end processors that Nvidia makes. There’s also an ETF on that—HACK, if you want lower volatility; so there’s three or four names for you right there. If I had to pick a single stock, the safest stock, I’d pick Microsoft (MSFT) right here; they have a 70% market share in PC operating systems worldwide, they are ramping up their efforts in AI with the ownership of ChatGPT, and it's really literally the safest stock in the market—likely to go up 30% next year. So if you can handle 30% plus a 0.80% dividend, Microsoft is your pick, but you might want to think about selling it mid-year when Freeport McMoRan (FCX) becomes my number one pick of the year.
Q: Is it too late to buy Microsoft (MSFT)?
A: Yes, wait for either a pullback of 10% or a flat line move sideways for a month, which is also called a time correction.
Q: I have several large companies I deal with that have all been hacked in the last couple of months. Several have been locked out of their systems or shut down for a month.
A: Yes, that’s absolutely going on everywhere. Also, governments have become favorite targets for hacking because they have the least amount of money to spend on cybersecurity. They are also the least sophisticated. So again, cybersecurity is a great business to be in; and by the way, I think we’re having gigantic moves in the cyber sector today. Palo Alto Networks (PANW) is up $11.61—who can beat that? That’s nice, watching your longs going up in double digits every day.
Q: Is Apple (APPL) going into the banking business now that they and Goldman are going through a divorce?
A: Yes, Apple has been slowly sneaking into the banking business for years. Look no further than Apple Pay. They have several advantages they can bring to bear here, like all of you personal information they could possibly imagine.
Q: I don’t like General Motors (GM) even though they’ve announced buybacks and dividend increases—too concerned about EV slack, market, and labor costs.
A: I couldn’t agree with you more; I think (GM) goes under in 10 years. They’ll never catch up on EVs, and basically, the company will either sell Teslas under license or be sold for scrap metal like they were back in 2008. And it really is the height of hubris to announce a 17% share buyback, which is enormous—10 billion dollars—right after they pleaded poverty with the unions to get them to agree to only a 25% wage increase. So it just absolutely fails the smell test on every front.
Q: Do you see healthcare making a big move as larger companies are really beaten down?
A: You’ll have rallies in healthcare, but basically, they’re a defensive sector and the last thing in the world that you want in a runaway bull market is a defensive sector. You will get single stock moves like Eli Lilly (LLY) from people who are specifically playing hot areas like weight loss drugs and other companies developing cancer cures with AI. That’ll be another big story next year.
Q: Any chance for Ford (F) at this point?
A: Not in the long term; again, you go back to that market share chart I showed you—Ford is only at a 7% market share in EVs and 14 years behind Tesla (TSLA), which has a 52% share. I don’t think anybody has a chance. What may happen is Tesla will take over Ford at some point, just to get at the factories; but again it will be a “pennies on the dollar” offer.
Q: What about Toyota (TM); how long can their hybrid push last?
A: A long time, because for a lot of people, hybrids are the right solution—especially people who have to go long distances and don't have time to recharge or don't have access to recharging. The hybrids that they have now are really great. They run the first 50, 60, or 70 miles solely on battery power. And I know people who have hybrids with short commutes who still have the original tank of gas the car came with when they bought it new a year ago. All-electric isn't perfect for everyone; hybrids will catch what's left of that market. Also, hybrids have thousands more parts than electric cars do. So the profit margin will never be what it is on an EV.
Q: Will Chevron (CVX) and ExxonMobil (XOM) go up?
A: Oil does absolutely, you can expect 20-30% gains on any recovery in oil, and that’s why we own them. But it’s a 2024 story.
Q: What do you think about Rivian (RIVN) here?
A: It's a long-term play; we have the LEAPS in them. The stock is just about recovered to our costs and they're increasing production. If anyone else is going to make it in the EV sector, it will be Rivian, who is run by some genius from MIT. So yeah, I would be buying dips in Rivian but I wouldn't chase.
Q: How will the iShares 20 Plus Year Treasury Bond ETF (TLT) perform in the next few months?
A: Kind of late for the LEAPS. That was really an October play, but any $ 5-point pullback and I will be in there with LEAPS because I think (TLT) hits $120 next year.
Q: Please explain the demise of Crypto.
A: Crypto did great when we had a cash surplus and an asset shortage like in 2019-2021. We now have the opposite—a cash shortage and an asset oversupply. Crypto doesn't do well in that situation. On top of that, the guys who runs every major crypto platform are looking at prison time now because of massive widespread theft. Although you do see crypto has gone up nearly a hundred percent this year, that doesn't back out all the Crypto losses from theft. It would be interesting to find out what the true performance of Crypto would be if you included the 50% that was stolen by the Crypto custodians in one way or the other. So Crypto is great when stocks were too expensive, but now they're all cheap and they pay dividends. So, much better fish to fry these days as opposed to the last market top.
Q: Do you think the election will have any effect on the stock market next year?
A: Absolutely not. Even a government shutdown won't have an effect because the fundamentals are now so powerful. We're basically discounting falling interest rates for the next 5 years. Your retirement funds will absolutely love that.
To watch a replay of this webinar with all the charts, bells, whistles, and classic rock music, just log on 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 Stay Healthy,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
November 27, 2023
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or MELT UP),
(MSFT), (NLY), (BRK/B), (CCJ), (CRM), (GOOGL), (SNOW), (CAT), (XOM), (TLT)
If you think the market performance for the past month has been spectacular, you have seen nothing yet. We have two major positive catalysts that are about to hit stock prices.
On December 10, we will see a lower-than-expected Consumer Price Index, driving yet another stake through the heart of inflation. On December 13, we will also be greeted with a Federal Reserve decision to keep interest rates unchanged, as they will do over the next several meetings.
“Higher for shorter” is about to become the new market mantra.
That will give the market the shot in the arm it needs to reach my $4,800 yearend target, which was precisely the goal I laid out on January 1. Caution has been thrown to the wind and hedging downside risks has become a distant memory. One of the fastest market melt-ups in 100 years will do that. Complacency is the order of the day.
Equity-oriented mutual funds have seen $43 billion in inflows so far in November. Commodity Trading Funds, or CTA’s, have seen a breathtaking $60 billion piled into long equity strategies.
Hedge funds flipped from short to long and now have the most aggressively bullish positions in 22 years, mostly in big tech. All of this has taken the Volatility Index (VIX) down to a subterranean $12 handle. Bears are suddenly lonely….and afraid.
Yes, 55 years of practice makes this easy.
On October 28, it turns out that we reached a decade-high peak in bond investment when Treasuries were flirting with new highs in yields. With perfect rear-view mirror hindsight that’s when many investors cut stock holdings to the bone. They will spend the next several months desperately trying to get back in.
Oh yes, and Company buybacks are about to surge as companies race to pick up their own stocks before the yearend deadline. Apple is the top buyback stock followed by Alphabet (GOOGL) and Microsoft (MSFT). Heard these names before?
And while big tech is starting to look expensive, they are cheap when you factor in the trillions of dollars in profits that are headed their way over the next decade.
That’s what always happens.
What could pee on my victory parade? Ten-year US treasury bonds revisiting a 5.08% yield, crude oil popping back up to $100 a barrel, oil another new blacking swan alighting out of the blue, like a Chinese invasion of Taiwan, or Russia retaking the Baltic states. That’s all.
Avoid these and stocks will continue to rise, as will your retirement funds.
The Magnificent Seven will continue to lead, as will big financials, which are still at bargain-basement levels. Energy and commodities are already posting January sale prices, discounting a 2024 recession that isn’t going to happen. This is fertile LEAPS territory.
Weekly Jobless Claims Drop 24,000, to 209,000 in one of the sharpest declines this year. It makes last week’s jump look like an anomaly.
Consumer Inflation Expectations Rise, to 3.2%, a 12-year high. They are counting on a 4.5% in 2024. They are now looking at gasoline prices. There’s your mismatch. Any decline in inflation will be viewed as a shocker and drive share prices to new all-time highs.
US Gasoline Prices Hit Three-Year Low, on recession fears and replacement concerns by EVs. Energy stocks are tracing the downside tic for tic, pulling down all other commodities. Don’t buy this dip.
Pending Home Sales Plunge to 13-Year Low, down 4.1% in October, on a signed contracts basis. Sales were down 14.6% year over year. The median price of an existing home sold in October was $391,800, an increase of 3.4% from October 2022. These are the last poor sales numbers before the collapse in interest rates. At the end of October, there were 1.15 million homes for sale, down 5.7% from a year earlier. This is about half as many homes as were available for sale pre-Covid. At the current sales pace, that represents a 3.6-month supply. A six-month supply is considered a balanced market between buyer and seller.
Monster Pay Hikes Will Lead to Strong Japanese Yen, with whiskey maker Suntory offering 7% pay hikes. The prospect of falling US interest rates adds fuel to the fire. Buy (FXY) on dips.
Starship Two Blows Up, two minutes or 92 miles after launch. The test fire of the 33-engine spacecraft was considered a success. The massive 397-foot tall, 30-foot-wide rocket, the largest ever built, is crucial for the NASA moon launch in 2025 and the SpaceX Mars trip further down the road.
NVIDIA (NVDA) Beats, with a profit triple, but that stock sells off 6% on the news. It was a classic buy the rumor, sell the news move. Future earnings increases will not be as big. Keep "buy (NVDA) on dips" as a must-own.
Famed Short Seller Jim Chanos shut down after a massive short in Tesla shares blew up. His funds under management have plunged from $6 billion to $200 million since (TSLA) went public. Chanos had a few big wins, notably Enron in 2001. But he was also seen as a hedge against other long positions.
So far in November, we are up +12.62%. My 2023 year-to-date performance is still at an eye-popping +78.79%. The S&P 500 (SPY) is up +19.73% so far in 2023. My trailing one-year return reached +81.00% versus +18.91% for the S&P 500.
That brings my 15-year total return to +675.98%. My average annualized return has exploded to +48.57%, another new high, some 2.49 times the S&P 500 over the same period.
I am 100% fully invested, with longs in (MSFT), (NLY), (BRK/B), (CCJ), (CRM), (GOOGL), (SNOW), (CAT), and (XOM). I have one short in the (TLT).
Some 66 of my 61 trades this year have been profitable.
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 800% to 240,000 or more in the coming decade. The new America will be far more efficient and profitable than the old.
Dow 240,000 here we come!
On Monday, November 27, at 8:30 AM EST, the New Home Sales are out.
On Tuesday, November 28 at 2:30 PM, the S&P National Home Price Index is released.
On Wednesday, November 29 at 8:30 AM, the Q2 GDP Growth Rate is published.
On Thursday, November 30 at 8:30 AM, the Weekly Jobless Claims are announced.
On Friday, December 1 at 2:30 PM, the October ISM Manufacturing Index is published. At 2:00 PM the Baker Hughes Rig Count is printed.
As for me, When I landed in Tokyo in 1974, there were very few foreigners in the country. The WWII occupation forces had left, but the international business community had yet to arrive. You met a lot of guys who used to work for Douglas MacArthur.
There was only one way to stay more than 90 days on the standard tourist visa. That was to get another visa to study “Japanese culture.” There were only two choices: flower arranging or karate.
Since this was at the height of Bruce Lee’s career, I went for karate.
It was not an easy choice.
World War II was not that distant, and there were still hundreds of army veterans missing limbs begging for money under railroad overpasses. Some back then were still fighting on remote Pacific islands.
Many in the karate community believed that the art was a national secret and should never be taught to foreigners. So those who entered this tight-knit community paid the price and had the daylights beaten out of them. I was one of those.
To this day, I am missing five of my original teeth. There is nothing like taking a kick to the mouth and watching your front teeth fly across the dojo, skittering on the teak floor.
We trained three hours a day, five days a week. It involved punching a bloody hardwood makiwara at least 200 times. The beginners were paired with black belts who thoroughly worked us over. Then the entire class met up at a nearby public bath to soak in a piping hot ofuro. You always hurt.
During the dead of winter, we ran five miles around the Imperial Palace in our karate gi’s barefoot in freezing temperatures daily. Then we were hosed down with cold water and trained for three hours.
During this time, I was infused with the spirit of bushido, the thousand-year-old Japanese warrior code. I learned self-discipline, stamina, and concentration. In the end, karate is a form of meditation.
Knowing you’re indestructible and unassailable is not such a bad thing, especially when you’re traveling in some of the harsher parts of the world. When muggers in bad neighborhoods see me late at night, they cross the street to avoid me. I am not a guy to mess with. Utter fearlessness is a great asset to possess.
The highlight of the annual training schedule was the All-Japan Karate Championship held in the prestigious Budokan, headquarters of all Japanese martial arts near the ghostly Yasukuni Jinja, Japan’s National Cemetery. By my last year in Japan, I had my black belt, and my instructor, Higaona Sensei, urged me to enter.
Because I had such a long reach, incredibly, I made it to the finals. I was matched with a very tough-looking six-footer who was fighting for Japan’s national prestige, as no foreigner had ever won the contest.
I punched, he kicked, fist met foot, and foot won. My left wrist was broken. My opponent knew what happened and graciously let me fight on one hand for another minute to save face. Then he knocked me out on points.
The crowds roared.
It’s all part of a full life.
Losing the All-Japan National Karate Championship
1974 Higaona Sensei
Stay Healthy,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
November 3, 2023
Fiat Lux
Featured Trade:
(NOVEMBER 1 BIWEEKLY STRATEGY WEBINAR Q&A),
(BRK/B), (TSLA), (LLY), (SNOW), (BIB), (BIB), (CCJ), (FXA), (FXB), (FXE), (EEM), (GLD), (SLV) (UNG), (LNG)
Below please find subscribers’ Q&A for the November 1 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Boca Raton.
Q: Earlier you said that the bull market should start from here—are you sticking to that argument?
A: Yes, there are all kinds of momentum and cash flow indicators that are flashing “buy right now.” The market timing index got down to 24—couldn’t break below 20. Hedge fund shorts: all-time highs. Quant shorts: all the time highs, creating a huge amount of buying power for the market. And, of course, the seasonals have turned positive. So yes, all of that is positive and if bonds can hold in here, then it’s off to the races.
Q: Do you have a year-end target for Berkshire Hathaway (BRK/B)?
A: Up. They have a lot of exposure to the falling interest rate trade such as its very heavy weighting in banks; and if interest rates go down, Berkshire goes up—it’s really very simple. You can’t come up with specific targets for individual stocks for year-end because of the news, and things can happen anytime. I love Berkshire; it's a very strong buy here.
Q: Tesla (TSLA) is not doing well; what's the update here?
A: It always moves more than you think, both on the upside and the downside. Last year, we thought it would drop 50%, it dropped 80%. Suffice it to say that, with the price war continuing and Tesla determined to wipe out the 200 other new entrants to the EV space, they’ll keep price cutting until they basically own that market. While that’s great for market share, it’s not great for short-term profits. Yes, Tesla could be going down more, but from here on, if you’re a long-term investor in Tesla, as you should be, you should be looking to add positions, not sell what you have and average down. Also, we’re getting close to Tesla LEAPS territory. Those have been huge winners over the years for us and I’ll be watching those closely.
Q: Any trade on the Japanese yen?
A: We broke 150 on the yen—that was like the make-or-break level. I’m looking at a final capitulation selloff on the yen, and then a decade-long BUY. The Bank of Japan is finally ending its “easy money” zero-interest-rate policy, which it’s had for 30 years, and that will give us a stronger yen when it happens, but not until then. So watch the yen carefully, it could double from here over the long term, especially if it’s the same time the US starts cutting its interest rates.
Q: What do you think about Eli Lilly (LLY)?
A: We love Eli Lilly; they’re making an absolute fortune on their weight loss drug, and they have other drugs in the pipeline being created by AI. This is really the golden age for biotech because you have AI finding cures for diseases, and then AI designing molecules to cure the diseases. It’s shortened the pipeline for new drugs from 5-10 years to 5-10 weeks. If you’re old and sick like me, this is all a godsend.
Q: Do you like Snowflake (SNOW)?
A: Absolutely, yes—killer company. Warren Buffet loves it too and has a big position; I’d be looking to buy SNOW on any dip.
Q: Would you do LEAPS on Netflix (NFLX)?
A: I would, but I would go out two years, and I would go at the money, not out of the money, Even then you’ll get a 100-200% return. You’ll get a lot even on just a 6-month call spread. These tech stocks with high volatility have enormous payoff 3-6 months out.
Q: Projection for iShares 20 Plus Year Treasury Bond ETF (TLT) in the next 6 months?
A: It’s up. We could hit $110, that would be my high, or up $25 points or so from here.
Q: Would you buy biotech here through the ProShares Ultra Nasdaq Biotechnology (BIB)?
A: Probably, yes. The long-term story is overwhelming, but it’s not a sector you want to own when the sentiment is terrible like it is now. I guess “buy the bad news” is the answer there.
Q: What did you learn from your dinner with General Mattis?
A: Quite a lot, but much of it is classified. When you get to my age, you can’t remember which parts are classified and which aren't. However, his grasp of the global scene is just incredible. There are very few people in the world I can go one on one with in geopolitics. Of course, I could fill in stuff he didn’t know, and he could fill in stuff for me, like: what is the current condition of our space weaponry? If I told you, you would be amazed, but then I would get arrested the next day, so I’ll say nothing. He really was one of the most aggressive generals in American history, was tremendously underrated by every administration, was fired by both Obama and Trump, and recently is doing the speaker circuit which is a lot of fun because there’s no question he doesn’t know the answer to! We actually agreed to do some joint speaking events sometime in the future.
Q: I have some two-year LEAPS now but I’m worried about adding too much. Could we get a final selloff in 2024?
A: The only way we could get another leg down in the market is number one if the Fed raises interest rates (right now, we’re positioned for a flat line and then a cut) or number two, another pandemic. You could also get some election-related chaos next year, but that usually doesn’t affect the market. But for those who are prone to being nervous, there are certainly a lot of reasons to be nervous next year.
Q: What iShares 20 Plus Year Treasury Bond ETF (TLT) level would we see with a 5.2% yield?
A: How about $79? That’s exactly why I picked that strike price. The $76-$79 vertical bill call spread in the (TLT) is a bet that we don’t go above 5.20% yield, and we only have 10 days to do it, so things are looking better and then we’ll see what’s available in the market once our current positions all expire at max profit.
Q: The first new nuclear power plant of 30 years went online in Georgia. Do you see more being built in the future?
A: It’s actually been 40 years since they’ve built a new plant, and it wasn’t a new plant, it was just an addition to an existing plant with another reactor added with an old design. I think there will be a lot more nuclear power plants built in the future, but they will be the new modular design, which is much safer, and doesn’t use uranium, by the way, but other radioactive elements. If you want to know more about this, look up NuScale (SMR). They have a bunch of videos on how their new designs work. That could be an interesting company going forward. The nuclear renaissance continues, and of course, China’s continuing to build 100 of the old-fashioned type nuclear power reactors, and that is driving global uranium demand.
Q: Would you hold Cameco Corp (CCJ) or sell?
A: I would keep it, I think it’s going up.
Q: How to trade the collapse of the dollar?
A: (FXA), (FXB), (FXE), and (EEM). Those are the quick and easy ways to do it. Also, you buy precious metals—gold (GLD) and silver (SLV) do really well on a weak dollar.
Q: Conclusion on the Ukraine war?
A: It will go on for years—it’s a war of attrition. About half of the entire Russian army has been destroyed as they’re working with inferior weapons. However, it’s going to be a matter of gaining yards or miles at best, over a long period of time. So, they will keep fighting as long as we keep supplying them with weapons, and that is overwhelmingly in our national interest. Plus, we’re getting a twofer; if we stop Russia from taking over Ukraine, we also stop China from invading Taiwan because they don’t want to be in for the same medicine.
Q: If more oil is released from the strategic petroleum reserve, what is our effect on security?
A: Zero because the US is a net energy producer. If our supplies were at risk, all we’d have to do is cut off our exports to China and tell them to find their oil elsewhere—and they’re obviously already trying to do that with the invasion of the South China Sea and all the little rocks out there. So, I am not worried. And also remember, every year as the US moves to more EVs and more alternatives, it is less and less reliant on oil. I would advise the administration to get rid of all of it next time we go above $100 a barrel. If you’re going to sell your oil, you might as well get a good price for it. If you look at the US economy over the last 30 years, the reliance of GDP on oil has been steadily falling.
Q: Are US exports of Cheniere Energy (LNG) helping to drive up prices here?
A: I would say yes, it’s got to have an impact on prices. We’re basically supplying Germany with all of its natural gas right now. We did that starting from scratch at the outset of the Ukraine war, and it’s been wildly successful. That avoided a Great Depression in Europe. Europe, by the way, is the largest customer for our exports. That was one of the arguments for us going into the United States Natural Gas (UNG) LEAPS in the first place.
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 Stay Healthy,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
2023 Krakow Poland
Global Market Comments
August 18, 2023
Fiat Lux
Featured Trades:
(WEDNESDAY, SEPTEMBER 6, 2023 SAN DIEGO, CALIFORNIA GLOBAL STRATEGY LUNCHEON)
(TESTIMONIAL)
(AUGUST 16 BIWEEKLY STRATEGY WEBINAR Q&A),
(SNOW), (PANW), (AMZN), (FCX), (WPM), (CCI), (GOLD), (WEAT), (JNK), (TLT), (X), (XOM), (HD), (AA), (UNG), (TSLA)
CLICK HERE to download today's position sheet.
Below please find subscribers’ Q&A for the August 16 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Silicon Valley, CA.
Q: Did you hear that Michael Burry was putting on a big short (the guy who made a fortune shorting housing in 2009)?
A: Yes, I heard that, but I never, ever trade-off of those kinds of comments. First of all, I think he’s wrong; and often, what happens in those situations is you hear about them going into the trade, but you never hear about them getting out, which might be tomorrow or next week. Also, there’s a nasty habit of big hedge fund managers telling you the opposite of what they’re actually doing. We hear big hedge fund traders like Bill Ackman getting super bearish at market bottoms, and then a few months later learn that they were buying with both hands, as was the case with the pandemic bottom. Be careful about other people’s opinions—they can be hazardous to your wealth. Just look at the data and the facts. That’s what I do.
Q: Would you buy Snowflake (SNOW) around current prices?
A: Yes—first of all Snowflake is a Warren Buffet favorite, which I always tend to follow. However, Warren can wait 5 years for a stock to work, and you can’t. So, I would wait for a bigger dip before getting into SNOW. So far, we are down 25% from the recent peak. One thing’s for sure, cybersecurity is a long-term winner, as seen by the ballistic move in Palo Alto Networks (PANW) since we started recommending it about 8 years ago.
Q: Why are US consumers so strong, and will that hold up for the rest of 2023?
A: US consumers are so strong because they banked so much money during 10 years of QE and all the pandemic stimulus, that they have a lot saved. They are now happy to spend to make up for the spending they couldn’t do during the pandemic. They’re basically in spending catch-up mode or revenge spending.
Q: How far do you see the iShares 20 Plus Year Treasury Bond ETF (TLT) go?
A: My worst-case scenario has it going to $90 down from $94—that’s a yield of about 4.50%. And that's where a lot of bond investors see fair value, and will start piling in. But as long as the momentum is against it, I’m not touching it. As soon as I am convinced there is a real bottom in the (TLT), I’m going to jump in with both hands and buy long-term LEAPS, where you can get a 100% or 200% return pretty quickly.
Q: Time to buy the Tesla (TSLA) dip?
A: We’re getting close. My guess is you might get a spike down to $200 from the recent $300 high. That’s also going to be LEAPS territory for us because the long-term outlook for this company is spectacular.
Q: What do you think of Freeport McMoRan (FCX), Silver (WPM), and United States Natural Gas Fund (UNG)?
A: I think they are all strong buys; I have LEAPS out on all of them. I think we start to get a big move in the 4th quarter of this year that’ll go well into next year—so big money just sitting on the table begging for you to take it.
Q: What are we to make of the crash of the Chinese Yuan?
A: The Chinese economy is weak and looks like it’s getting weaker. They still have a pandemic hangover. We don’t know what their real pandemic numbers are—they adopted our pandemic policy 2 years after we did, and they’re suffering as a result. They also insist on using their own vaccine, Sinovac, for nationalist reasons which is only 30% effective. But, when the Chinese economy does come back on stream, that’ll be the gasoline on the fire for the global economy, and that’s why we like commodities, industrials, energy, and so on.
Q: What does an 8% mortgage rate mean for the housing sector?
A: It is a disaster. I don’t think prices will drop very much—it’ll just cease all new buying because nobody qualifies for an 8% mortgage. They are going to either be only cash buyers out there or people waiting for the next drop in interest rates, and we’re already seeing that with the mortgage rate at 7.24%. If we do get a move up to 8%, it’ll just be a short-term spike that won’t last very long.
Q: Aren’t high-interest rates pushing rents higher?
A: Yes, absolutely. Since people can’t afford to buy houses, they are renting until they can, which pushes rental prices up and adds to the inflation numbers.
Q: When do you think the tech sector will rebound? It’s had a really bad three weeks.
A: End of August or sometime in September. I think. When people come back from the beach, they’re going to look at the long-term future of these companies and think “holy smokes,” why don’t I own more of these?” And we may even be doing LEAPS at high prices, which I almost never do, but the growth rate in tech next year is looking to be spectacular, and I think if we do a conservative at-the-money, we should at least double our money in a few months, similar to how US Steel (X) LEAPS did.
Q: Is Amazon (AMZN) a buy? They’re starting to develop their pharmacy rather well.
A: Yes, Amazon is on the buy list—it’s already up 50% this year. Jassy, the new CEO, is doing a great job. They also have a massive investment in AI which they can monetize anytime they want, and online pharmacies are a great place to start. They’ve been talking about doing that for at least 10 years.
Q: Are gold (GLD), wheat (WEAT), and precious metals a buy?
A: Yes, those are all strong buys on the dip.
Q: What about Tesla (TSLA) LEAPS?
A: Yes Tesla is definitely a LEAPS candidate $30 down from where it is now.
Q: What about Crown Castle International (CCI)?
A: CCI took a major hit from Verizon, canceling a contract with them (which is their biggest customer), so I want to wait for that to digest before I do anything yet. However, we are definitely approaching “BUY” territory; I think the yield is up to about 6.5% now.
Q: Should I take profits on the next jump up in United States Steel Corporation (X)?
A: Yes, it’s not worth hanging on 16 more months to maturity when there’s only 30% of the profit left. And, if all the takeover bids fail for some reason, the stock goes back to $20, and then your LEAPS becomes worthless. So, I would take profits; 100% profit in 2 months is nothing to turn up your nose at.
Q: How confident are you in (TLT) going to $110 by the end of the year?
A: Very confident; by then we will start seeing more hints of Fed interest rate cuts, inflation should be lower, and Goldman Sachs is in fact forecasting that the first rate cut will happen in March. So you’ll certainly start discounting that in the (TLT) by December. We could see the high in yields and the low in prices at the central bankers conference in Jackson Hole next week.
Q: What do you think about cruise lines and hotels right now?
A: The business is great, they’re all packed. However, during the pandemic, these sectors had to take on massive amounts of debt to keep from going under when their ships were tied up with zero revenue for two years; same with the hotels. So, the balance sheets are terrible in all of these areas including airlines. That’s why I’ve been avoiding them, too many better plays. Don’t go away from your core trades looking for trouble.
Q: When do we finally start seeing the Fed stop raising rates?
A: I think they already have; I think the most recent rate rise was the last one. If I’m wrong, they’ll do one more quarter—it’s totally dependent on the numbers.
Q: Won’t falling rates be bullish for bonds and gold?
A: Yes, that's why we’re buying them; but I’m waiting on the bond LEAPS—I want to see a firm bottom before getting back in there. 2024 will be all about falling interest rates plays.
Q: What’s causing the volatility in the United States Natural Gas Fund (UNG)?
A: A Strike in Australia, collapsing supplies in Europe (where prices are up 40%), and expectation of a global economic recovery in China. Ultimately, it’ll be China that takes this thing up to $10, $12, or $14 for the UNG, but you need them to recover first. That’ll probably happen next year, which is why we have the two-year LEAPS on there.
Q: With junk (JNK), have we seen the high rates?
A: Yes. If not, we’re very close, so it’s worth starting to scale in here.
Q: Should I short Home Depot (HD), as US consumers are holding back on home upgrades?
A: No, you should not short anything because you’re going against a long-term bull market trend that probably continues for another 10 years. So, any shorts should be measured in days and not weeks.
Q: Should I start chasing oil, because it’s been on quite a run, and should I buy Exxon (XOM)?
A: Yes, if we get an economic recovery next year, oil goes over 100 easily and will take all the oil companies up with it.
Q: Is (UNG) a domestic or foreign gas ETF?
A: It’s mostly domestic, and it’s a mix of the top natural gas producers in the US.
Q: Are the BRIC countries going to bring down the dollar?
A: You’ve got to be out of your mind. Would you rather store your money in China and Indonesia or the US? That’s your choice. I know there’s a lot of internet conspiracy theories out there—I get about a question a day on this. It’s Never going to happen; not in my lifetime. But it does attract internet traffic, which is the purpose of putting out these ridiculous stories like a BRIC-engineered digital currency replacing the dollar as a reserve currency. It’s just clickbait.
Q: Why is there a short squeeze in copper?
A: EV production is going from 2 million to 10 million a year in 2030, and every EV needs 200 pounds of copper. By the way, there are now 527 EV models on the market, but only one company makes money doing this, and that’s Tesla (TSLA).
Q: We’ve been waiting for a recession in the US for years, and US consumers are still going strong. What gives? I want rates to drop so I can invest in real estate again.
A: Well, yes. This recession has been predicted for 2 years. The problem is we have a certain political party telling us every day that the economy is the worst it’s ever been when, in actuality, the health of the economy is amazingly strong, and certainly the strongest economy in the world. So, I don't think we get a real recession until well into the 2030s because of massive technological development and a huge demographic tailwind—that’s an absolute winning combination, last seen in the 1990s. Plus, now we have AI accelerating everything. So, look at the numbers; don’t listen to opinions. Opinions can be fatal to your wealth.
Q: Does the use of an adjustable-rate loan make sense for the purchase of a second home?
A: Yes, it does. During the great interest rate spike of the 1980s, I bought my home in New York with an adjustable-rate loan. The initial interest rate was 18%, but when rates dropped to 11%, the value of the home tripled. Not a bad trade—and I bet the same kind of opportunity is out there now, provided you can get another adjustable-rate loan. By the way, in Europe, they only have adjustable-rate loans. The 30-year fixed anomaly only exists in the US and Canada because you have the US government as the unlimited buyer of last resort for 30-year fixed mortgages.
Q: Thoughts on other steel companies and aluminum?
A: I like them all. The country needs 200,000 miles of new long-distance transmission lines to accommodate the electrification of the economy, and those are all made out of aluminum except for the last mile—most people don’t know that. Buy Alcoa (AA).
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 Stay Healthy
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
