Global Market Comments
March 13, 2023
Fiat Lux
Featured Trade:
(THE MAD HEDGE TRADERS & INVESTORS SUMMIT IS ON MARCH 14-16)
(MARKET OUTLOOK FOR THE WEEK AHEAD, or WASHED UP ON THE BEACH)
(SPY), (TLT), (TSLA), (NVDA), (BRK/B)
CLICK HERE to download today's position sheet.
Sometime in the next week, the following headline will cross the wires: “Body of Silicon Valley Bank Risk Manager Washes up on California Beach.” It will be noted that the face was severely bruised, and not from the pounding it took from coastal rocks or some fish.
This was no suicide but in many respects, it was. To invest the bank’s principal assets from 1982 onward into long-dated Treasury bonds from 1982 to 2020 was a great idea when prices soared, and yields plunged from 13% to 0.33%. It was positively suicidal from March of 2020 when the (TLT) dove from $180 to $92.
I always wondered which sucker was buying all those billions of dollars worth of bonds I had been selling short all those years.
Now I know.
If you had guessed why Silicon Valley Bank might go under someday, you might have thought the extension of loans to too many fragile and untested technology and biotech startups was the cause. This was not the case. It was pure bad management by the bank, which deservedly wiped out all the equity investors in a mere 48 hours.
This is not a systemic risk, nor will it lead to a financial contagion. You can thank Dodd-Frank for that which assured that America’s top banks are as solid as the Rock of Gibraltar, with leverage ratios under 10.
The FDIC is currently holding an auction of (SVB) and the outcome will be announced Sunday night. A hundred banks would love to take over (SVB)’s franchise. The $175 billion in deposits will be made who immediately, most of whom are not insured because they exceed the FDIC ceiling of $250,000 per account. The incident will be shortly forgotten about.
But when you’re in combat and a bullet passes so close to your face that you can feel the heat and the sound of an angry bee, you don’t dismiss it lightly. Maybe next time, you won’t be so lucky.
I have been inundated by calls all weekend from subscribers on what to do about Silicon Valley Bank. If the sale goes through as planned, stocks should be up 500 points on Monday morning and you should do nothing but watch in awe. If the sale fails, stocks will plunge 1,000 points and you should be loading the boat with new longs, especially banks, which will be on fire sale.
Panic, crisis, I love it. The debacle even took Berkshire Hathaway (BRK/B) down on Friday because of its copious holdings of big bank shares. It all gives me a reason to get up in the morning.
However, this does put a serious dent in stock market psychology. When the country’s 17th largest bank goes bust, it doesn’t exactly spur you to bet the ranch on growth stocks with your retirement funds.
A test of the December market low is now firmly on the table, if not the October low. That’s especially true if Fed governor Jay Powell wants to go with the full 50 basis point rate rise on March 22.
At least the crisis finally got the Volatility Index ($VIX) out of the sub $20 doldrums, at one point pegging an intraday of $29 on Friday. We also got the Mad Hedge Market Timing Index to a six-month low of 17.
That means it is now the time to explore the wonderful world of 90-day Treasury bills, whose yields are now pushing 5.0%. That’s pretty competitive in a world where stocks yield on 2% and the potential principal risk is real.
These are issued every Wednesday with 17-week maturities and are backed by the full faith and credit of the US government. It’s as close to safety and a guaranteed return you will ever get. You buy them at a discount, and they mature at par.
If you buy a T-bill today at $98.75, it matures at $100 in three months, you get an effective annualized yield of 5.0%. You can buy these directly from the US Treasury, from your local banks, or securities houses.
Brokers never recommend T-bills because the commission is nil. They want you to keep your money in their bank which might pay 1%....or nothing at all and involve real credit risk. Just ask former MF Global customers who had to wait three years to get their money back.
Don’t expect to get a bond in the mail like you used to. All government securities have been digital since 2011. To learn more about T-bills, please click here.
I am told by the insiders who know that platinum (PPLT) could be the big precious metals play of 2023. The white metal has become the principal metal used in the manufacture of catalytic converts for conventional internal combustion cars of which 15 million a year are still made in the US.
There is rising demand from hydrogen fuel cells and the green hydrogen movement. The world’s second largest producer of platinum is Russia, whose supplies have been cut off. As a result, there is expected to be a 556,000-ounce shortage this year after two years of surpluses.
Just thought you’d like to know.
While markets crashed, investors have been jumping out of windows, and the world appeared to be ending, and the rain continuing incessantly, Mad Hedge continued on up tear with March up +3.37%.
My 2023 year-to-date performance is now at an eye-popping +29.23%. The S&P 500 (SPY) is up +1.56% so far in 2023. My trailing one-year return maintains a sky-high +85.09% versus -13.13% for the S&P 500.
That brings my 15-year total return to +626.32%, some 2.98 times the S&P 500 (SPX) over the same period. My average annualized return has recovered to +47.56%, another new high.
My short positions in (TSLA) and (NVDA) kicked in big time last week, even though some said I was “Mad” to do these. In the meantime, my longs barely budged. That leaves me 20% long, 40% short, and 40% in cash.
Nonfarm Payroll Report hot at 311,000. The Headline Unemployment Rate rose from 3.5% to 3.6%, still at a 53-year low. The broader U-6 “discouraged worker” came in at 6.8%. Leisure & Hospitality were up 175,000, and Health Care 54,000. Revisions for the past two months were -34,000. All in all, the market viewed this as a slightly positive report. That’s one big number off our backs with the inflation report due on Tuesday.
Jay Powell Lays an Egg, at least if you own stocks. Say goodbye to the soft landing and a 50 basis point hike is now looking like a sure thing. Good thing all my longs are double-hedged.
JOLTS Jolts, at 10.8 million for February, much hotter than expected. That's how many job openings remained unfilled, some 7% of the total workforce. It sets up a potentially frightening Nonfarm Payroll Report on Friday.
ADP Comes in Hot, creating 242,000 private sector jobs in February. Leisure & Hospitality led with 83,000, followed by Financials at 62,000. Brace yourself for Friday.
Some 60% of Stocks Above 200-Day Moving Average, proving that we are already six months into a new bull market. The next big dip is the one you buy. Give this selloff another week and I will start looking for more long side plays to max out my portfolio. The Armageddon crowd is going to be driving Uber cans by summer.
The Great Retirement Flight Inland is Continuing. Retirees on the coasts are selling homes and buying new ones for cash in the Midwest and south and still have enough money left over to never work again. Those in the top 10% of income earners can save $347,000 with the “retire and relocate” strategy. The problem is that locals are getting prices out of their own markets. The trend is turning red states into purple ones, as has already happened in Nevada and Arizona, which are no longer cheap.
Used Car Prices are Soaring Again, up 4.3% in January and February, the largest such gain in 2009, according to Cox Automotive. Is this setting up a scary inflation print for March 14? The stock market thinks so.
China Set’s Hot 5% Growth Target for 2023, as “zero covid” ends and herd immunity takes over. It may cost 4 million lives, but it’s worth it. Most importantly, China announced hope for a peaceful reunification with Taiwan, which takes war off the table for this decade. It’s another nail in the coffin of American underbears proclaiming a lost decade.
Oil Companies are Playing the Short Game, milking their companies for all the profits they can get at the expense of long-term capital investment, and ignoring massive tax subsidies to do so. Last year oil companies reaped a stunning $128 billion in profits, juiced by the Ukraine War which took Texas tea prices to $132 a barrel. That’s what you do when your industry may disappear in a decade. But if there is no US recession and China’s reopening accelerates, we may have to visit $100 a barrel. Buy (UNG) on dips, up 40% in two weeks.
EV Makers Running Up Against Supply Shortages. To meet ambitious production forecasts metals production has to triple quickly. I’m talking copper, aluminum, silver, chromium, and lithium. Tesla has already locked up much of the existing long-term supply because it knew ten years ago it would be someday producing 20 million cars a year. The others didn’t.
Tesla Cuts Prices Again, for the second time in a month, dropping the Model X below $100,000 for the first time. The goal is to drive EV competition out of business before they gain a foothold on Tesla’s 64% market share. What Tesla loses in profits, it can make up in volume.
Tesla Is Remaking the Car Insurance Market, charging drivers on their actual driving history, which they collect already. If you drive like a little old lady, it can run as little as $180 a month. If you drive like Mad Max, it’s more, but not as much as a conventional car insurance company. Rates change monthly depending on your driving record. Parked in a garage gives you a perfect score of 90 and it drops from there. It’s all about reducing the total cost of a Tesla car. Not such a bad deal if you let their computer do all the driving. What will Tesla disrupt next?
Was Q4 2022 the Bottom of the Real Estate Market? That’s what Compass CEO Robert Reffkin thinks. Bidding wars came back with a vengeance in January and a lot of markets were cleaned out of inventory. Mortgage interest rates losing an unusual 200 basis point premium over US Treasuries would really set this market on fire.
Biden Budget Rattles Wall Street Cage, proposing to take capital gains up from 20% to 35% and tanking the market. It’s a total unwind of the Trump tax cuts and then some, which added $2 trillion to the national debt. Most of this is a pipe dream and I would be amazed if it rose above 22%. Most interesting is the Defense spending rise to $880 billion, which is nearly the GDP of Russia, causing them to sweat bullets there. During the last 40 years, $50 trillion in wealth has moved from the bottom 80% to the top 1% according to a Rand Corporation think tank study mostly tax free, the largest and fastest such wealth transfer in human history.
Can I please get my local real estate tax deduction back, which Trump picked from my pocket in 2018?
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, March 13 at 7:00 AM EST, Consumer Inflation Expectations are out.
On Tuesday, March 14 March 14 at 8:30 AM EST, the Core Inflation Rate and CPI for February are announced.
On Wednesday, March 15 at 7:00 AM EST, the Producer Price Index and Retail Sales are released.
On Thursday, March 16 at 8:30 AM EST, the Weekly Jobless Claims are announced. So are February Building Permits.
On Friday, March 17 at 8:30 AM EST, the University of Michigan Consumer Sentiment Indicator is released.
As for me, working in Japan as a journalist during the early 1970s a lot of the principal figures of WWII were still living and I got to meet some pretty amazing people.
One of the most fascinating was Tokyo Rose, whose real name was Iva Toguri, and who I was invited to interview during a book tour of Japan for her memoirs. By then, she was in her 60s and the weight of the years had clearly shown upon her.
Tokyo Rose was notorious as the radio personality who broadcast propaganda on radio to US troops in the Pacific to demoralize them and encourage them to stop fighting.
Both my dad and uncle Mitch were regular listeners on Guadalcanal and Bougainville. I can testify that even today, entertainment choices on these remote islands are still minimal. The men said they listened because the music was good, which our own Armed Forces Radio lacked.
Toguri was a second-generation Nisei born in California to Japanese immigrant parents. She graduated from UCLA intending to become a medical doctor. When a relative in Japan became ill, she traveled there to care for her. The Japanese attacked Pearl Harbor shortly after she arrive and she was trapped.
Initially, she was harassed by the secret police as a potential spy as she refused to give up her American citizenship. She couldn’t even speak Japanese or use chopsticks. Locals threw rocks at her. Even her parents couldn’t help because they had been sent to an internment camp at Gila Bend, Arizona.
It was starvation that drove her to respond to an ad in the newspapers looking for a native English speaker for NHK, the Japanese national broadcast radio.
It wasn’t long before the highly educated and intelligent Toguri had her own one-hour program broadcast nightly called “Zero Hour.” Along with the latest jazz records, she announced American ships sunk, planes shot down, battles lost, and anything else to show the futility of war with Japan.
The show was so popular that NHK ramped it up to a major effort. They hired a dozen “Tokyo Roses” and broadcast on multiple high-powered frequencies from Tokyo, Manila, and Shanghai.
When US troops landed in Tokyo after the war, she was one of the first arrested. In and out of jail, she wasn’t allowed to return to the US until 1949. On arrival, she was promptly arrested by the FBI for treason. The radio commentator Walter Winchell had launched a national campaign against her with backing from the American Legion and from former US POWs in order to boost ratings.
After a lengthy trial, she became only the seventh person convicted of treason in US history and was sentenced to 10 years in prison. She was released in 1955.
She received a presidential pardon from President Gerald Ford in 1976 after it was shown that most of the evidence presented against her at trial had been fabricated by the US government. She had been the victim of inflamed postwar emotions. Tokyo rose was more a concept than a real person, and the term was never actually broadcast on Japanese radio.
I have met a lot of people like Iva Toguri over the years, in the wrong place at the wrong time, or just plain unlucky. She was used and abused by the establishments in both Japan and the US. It’s a lesson on the capriciousness of life.
Iva Toguri passed away in 2002 in Los Angeles at the age of 90.
Good Luck and Good Trading,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Tokyo Rose then and Later When I met Her
Global Market Comments
March 10, 2023
Fiat Lux
Featured Trade:
(THE MAD HEDGE TRADERS & INVESTORS SUMMIT IS ON MARCH 14-16)
(MARCH 8 BIWEEKLY STRATEGY WEBINAR Q&A),
(SPY), (TLT), (UUP), (FXY), (FXB), (FXE), (FXA), (UNG), (BOIL), (AAPL), (TSLA), (WW), (BHP), (NVDA), (RIVN), (FCX)
CLICK HERE to download today's position sheet.
Below please find subscribers’ Q&A for the March 8 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Incline Village, CA.
Q: Do you think the US dollar will drop this year?
A: Absolutely it will drop; in fact, the drop started in October last year. We’re actually six months into a bear market for the US dollar (UUP), and bull market for the yen (FXY), the British pound (FXB), the euro (FXE), and the Australian dollar (FXA). However, the rate-cutting scenario is on vacation, and when it comes back from that vacation, then we will see very sharply dropping interest rates, soaring bond prices, and a weak dollar. That scenario is certain to happen by year-end, probably by 10 or 20% —quite a lot. If you just want to buy the basket for foreign currencies, you can sell short the Invesco DB US Dollar Index Bullish Fund (UUP).
Q: Can stocks (SPY) and bonds (TLT) go up at the same time?
A: Well, they shouldn’t, and usually they don’t. But this time it’s different now because we’re all beholden to the interest rate decisions of the Fed. All asset classes are moving together like synchronized swimmers, which means that on days when the market believes that Powell is finished raising rates, you get big bull moves in stocks, bonds, commodities, precious metals, and beanie baby collectibles. And on the bad days like yesterday, where Powell really reiterates how tough his stance is on inflation is unchanged, everything falls in unison. It’s really become a liquidity/confidence/inflation on-off type market. We have been playing that like a maestro for the last six months and have made a ton of money. I hope it continues that way. “If it’s working, don’t fix it” is my philosophy on trading, which is constantly changing.
Q: Do small caps underperform or overperform in a rising rates era?
A: They always do poorly because small caps have fewer cash reserves, more leverage, and more exposure to interest rates, as opposed to large caps which, in the tech area, don’t borrow at all. They’re actually net creditors to the system so they make more money when interest rates go up. I imagine the interest income at Apple this year has to be absolutely gigantic. That said, small caps always lead recoveries because of their excess leverage, so that's why people are piling into small caps on dips right now. Going from terrible to just bad often generates the best stock returns.
Q: How long will “steering wheel falling off” news tank Tesla?
A: Well, it was worth a $6 dollar drop today in an otherwise weak market. First of all, if there are any actual problems with Tesla, they fix them immediately for free, and most of the fixes can be done with a software upgrade which they do at midnight the day of the recall. Second, a lot of these stories about Tesla problems are false, planted there by the oil industry, trying to head off their own demise. Third, when you go from making several thousand to several million cars a year, scaling up to mass production always uncovers some sort of manufacturing flaws. Tesla can fix them faster than anyone else. I remember when the first Model S came out 13 years ago, we had a hot day and all the sealants on the windows melted. They said they didn’t know because it doesn’t get that hot in Fremont California where they build the cars. They sent out a truck the next day and installed all new sealants on our windows. So that is part of living with Tesla, which seems bent on taking over the world. And I’m working on a major update on Tesla report. I listened to the whole 3.5-hour investors day, and I'll get that out when I get all the snow shoveled. Full disclosure: Elon Musk personally gave me a free $12,800 Tesla Powerwall three years ago. It’s the red one.
Q: I just bought the United States Natural Gas Fund (UNG) 14/15 2025 LEAP for $0.20 with UNG down 3%.
A: I’m going to share that LEAPS with all the Global Trading Dispatch members tomorrow. So far, only the Mad Hedge Concierge members have seen it. We’ll go into great detail in tomorrow’s letter about why you want to buy natural gas here and how you want to play it.
Q: It seems the Fed won’t be happy unless there’s a recession; am I reading this wrong?
A: I think Powell is striving for perfection—killing off inflation and lowering interest rates without a recession. I actually am hoping for a recession myself, even if it’s just for one quarter because that greatly increases market volatility and makes my bond long look like a stroke of genius. And let’s see if he can pull it off. He’s coming facing so many unprecedented challenges to the economy, like the pandemic, the end of liquidity, and the extreme worker shortage. It’ll be really interesting to see what happens. Multiple PhD theses in economics begging to be addressed in there.
Q: Will artificial intelligence cause another bubble?
A: Absolutely, yes. And if you’ve been in the market long enough, you become a bubble collector like me. Just off the top of my head, 3D printing, cold fusion, bitcoin, portfolio insurance, Nifty 50, eyeballs,—if I spent more time, I could come up with an endless list. And this is how Wall Street makes their money—they create bubbles by manufacturing compelling, irresistible stories that can be sold to the masses. Some of these like cold fusion, I know immediately won’t work for 20 years because of my physics background, and definitely not now. Some of these other ones are just flashes in the pan and never work. You just get used to an endless series of bubbles. AI is new only if you haven’t been watching. The share prices of Google, Amazon, Apple, have already had gigantic moves in the last 20 years, largely because of their use of artificial intelligence. So those are your plays—those and (NVDA), which provides the essential chips for artificial intelligence, and we’re active in all of these, both on the long and short side.
Q: Is climate change a hoax or a bubble?
A: If you think it’s a hoax, will you please come over to Incline Village and get the 12 feet of snow off my damn roof before the house collapses. I already can’t close any doors in the house because the weight of the snow is buckling the house and bending the door frames. If you finish the roof, then you can get to work on my deck which also has about 8 ft of snow and is at risk of collapsing, like many in town already have. This has never happened before. The climate has changed.
Q: How come there’s never mention of demographic shift in other parts of the world when there is in the US?
A: The US is the only country in the world where you can earn enough money to retire early. If you live on the coasts, you can sell your house for cash, move inland and never work again, no matter your age. There is no other country where you can do that. Maybe there will be in the future, but definitely not right now. People who complain about how awful the economy is here forget that this is the best economy in the world and has been so for a very long time. I go with the Warren Buffet outlook on this, which is “Never bet against America.”
Q: How about an Entry point for Freeport McMoRan (FCX)?
A: It’s lower. You don’t want to touch it while the entire commodity sector is selling off in fears of higher interest rates in a recession. Once that’s over it goes to $100.
Q: What is the best way to play Natural Gas?
A: I’ll send an extended report tomorrow, but the short answer is United States Natural Gas Fund (UNG) and ProShares Ultra Bloomberg Natural Gas (BOIL), which is a 2x long day trading NatGas ETF.
Q: Are we entering LEAPS territory for Rivian (RIVN)?
A: Yes, just wait for the current selloff to end and then go to the longest possible expiration. This thing will have a multiple move 2x, 3x, or a 10x out the other side of any recession. The CEO is brilliant and people love the cars.
Q: What happens to housing prices when interest rates on mortgages are at 7%?
A: Well, they should go down 10-20%. What they’re actually doing is going sideways, and they’re still going up in the cheaper neighborhoods because of the structural shortage of 10 million houses in the US. The all-cash buyers are still out there buying. There is tremendous inventory shortage in the housing market now; every broker I know got cleaned out of all their inventory in January when we had a brief 100 basis point dip in rates back then, which has since gone away. I think we go sideways in housing until the end of the year, and then big interest rate cuts will be obvious by then, and the market takes off and we have another 10-year bubble. If you think housing is expensive now, go visit Sydney Australia or Shanghai, China and you’ll see how expensive housing can really get.
Q: How how high would Fed funds have to get to cause a real recession?
A: My guess is 6%. We might actually get there in the second quarter. That might trigger enough of a recession to start unemployment rising just enough to let them cut interest rates. My attitude is: rip the Band-Aid off, raise by 75 basis points on March, and get it over with. But Jay Powell is a very gradualist type of guy, even though he’s brought the sharpest interest rate rise in history.
Q: Should I chase Apple (AAPL) here at $150 a share?
A: In this kind of market, you never chase anything. Only buy Apple at $150 if you think happy days are here again and you think we’re going up forever. To me on the chart it looks like we’re double topping and may actually get a lower low, which you then buy. You may even want to do a LEAPS on Apple if we get down into the $130s or $120s again.
Q: Isn’t it hard for the economy to really tank when seniors and savers are now generating income again for their retirement, giving them more income to spend?
A: Well not only that but workers have had 10-20% pay increases also, and they have more money to spend. It’s really hard to see a severe recession in any kind of scenario, barring another pandemic, and that’s why we’re saying buy the dips—we are in fact in a new bull market that started in October. When you get these market reversals, you often don’t get confirmation on the charts for up to a year, and we’re in one of those periods now. That's why there are still a lot of non-believers in the bull scenario and no confidence.
Q: Would you buy Tesla LEAPS?
A: Yes, under $150 on Tesla shares. And, given its record of volatility, we may actually get there, because this is a $1,000 stock easily in 5 years. I'll send you a report giving you all the details of why. Detroit is basically screwed, someday it’ll just be reduced to building Teslas under license from Tesla and painting them different colors and giving them different names or something like that.
Q: What’s a buy-on-dip?
A: Sorry, but no easy answer here. It’s unique to every stock depending on the historic volatility and ranges of the stock. It’s going to be 1% for a stock, it can be 10% for an option, it could be 20% for a stock like Tesla. It’s vague but it really is unique to every single stock. A good rule of thumb is that after you execute a trade and then throw up on your shoes you’ve just done a great trade.
Q: I see from your pictures that you lost weight? How do you do it?
A: I got COVID last May. I lost 20 pounds in two weeks because I couldn’t eat while I was sleeping 20 hours a day. I just woke up long enough to send out trade alerts. All of a sudden, a 40-year collection of expensive designer pants fit. My kids now call me Captain Fancy Pants. When I go through airport security now and take my belt off they fall down so I’m always careful to wear my best underwear, the ones with the dollar sing all over them.
Q: What’s the best way to play obesity drugs?
A: Unfortunately, There is no pure play on obesity drugs. It will be a $150 billion market that will grow very quickly. I will talk about it at length next week in the summit at the Biotech & Health Care webinar, which you’ll get registration links for tomorrow. Weight loss drugs are small pieces of very large drug companies, so the effect gets diluted by everything else they’re doing. The purest play may be Weight Watchers (WW). If you just need to go to Weight Watchers just to get a shot, that could be really good for them. The stock just doubled in one day on this.
Q: Commodity-based foreign stocks are the best bet on inflation protection; should I get involved?
A: Yes, use the current selloff to get into the whole commodity space (except for maybe food) because not only are they a commodity play, they’re a weak dollar play and that way you get a combined double leverage effect on prices, which I've seen happen many times in my life. So yes, look at foreign-type commodity stocks, and of course, the biggest one out there is Broken Hill Proprietary (BHP), which I always watch very closely. It’s the largest stock in Australia owned by virtually everybody in Australia who has any money, with great volatility, and which has recently just had a selloff.
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, or TECHNOLOGY LETTER, 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
2015 in Ouarzazate Morocco
Global Market Comments
March 6, 2023
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or A WEEK WITH JOHN THOMAS)
(SPY), (TLT), (TSLA), (NVDA), (WEAT)
CLICK HERE to download today's position sheet.
In 1942, after the First Marine Division won the battle of Guadalcanal and my Uncle Mitch won his Medal of Honor, they were shipped to Melbourne, Australia for six months of rest and relaxation.
Since their uniforms were in rags and many men were barefoot, they were handed scratchy WWI surplus wool uniforms. That’s all the Aussies had, as their army was off fighting Rommel in North Africa.
All 8,000 men lived in the Melbourne Cricket Ground, and the government delivered a truckload of beer barrels every day. Whenever the men went outside, they were invited by local families off the street to have dinner. After four months, they were fat and happy.
Then one day, they were placed on a train with full battle gear, taken 50 miles out of town, and told to walk back with no food and a canteen of water. They were retraining for the next battle, which would be in New Guinea.
When economic data flip-flops, so does the market.
The red-hot January Nonfarm Report with the Unemployment Rate at a 50-year low of 3.5% gave the bulls every reason to buy stock. So stocks can’t fall.
But a strong jobs market means the Fed will keep interest rates higher for longer gives plenty of fodder for the bears. So stocks can’t rise.
My Mad Hedge Market Timing Index is equally confused at 55. You can’t get any closer to 50, which means you should do absolutely nothing.
Notice that the S&P 500 (SPY) bounced off the 200-day moving average at $390.95 to the penny and rallied, a perfect symptom of this disease. When the fundamentals are confused, technicals win.
At this late age, the only one I take orders from is named Mr. Market. Ignore his instructions at your own peril and expense. Everyone else can get lost.
That leaves us nothing to do but to wait for the next events of market consequence, the March 14 CPI and the December 22 Fed interest rate decision. We might as well twiddle our thumbs and watch the clock until then.
So I will stick to my market-neutral strategy as long as I must take in enough money to keep the lights on. I keep doing this knowing full well that the last time I do will lose money.
This could go on for months.
In the meantime, I will keep researching the long term, which continues to look better and better. The dross ends in months. It’s the next decade we need to focus on now.
It's time to polish our armor, sharpen our weapons, and get back in shape, just as the First Marine Division did 81 years ago.
Remember that we are in the “what’s next” business. Whatever you buy now has to be discounting the following coming trends:
Falling interest rates
A weak dollar
Rising commodity prices
Rising energy prices
Reaccelerating tech earnings
A new boom in real estate
Precious metals going to record highs
Strong emerging markets
A Ukraine win leading to global peace
America’s principal adversary is rendered impotent
A second peace dividend ensues
Every trade alert I send you this year will be taking of one or more of these trends. It’s just a matter of time before they begin if they haven’t already.
We had a really great last two days of February, pushing me back in the green for February, taking me up +3.41% on the month. March has so far come in at +0.80%.
My 2023 year-to-date performance is still at the top at +26.56%. The S&P 500 (SPY) is up +6.36% so far in 2023. My trailing one-year return maintains a sky-high +85.51% versus -5.66% for the S&P 500.
That brings my 15-year total return to +623.75%, some 2.72 times the S&P 500 (SPX) over the same period. My average annualized return has recovered to +47.37%, still the highest in the industry.
Nothing Happens Until March 14, at 8:30 AM EST when the next big inflation read, the Core CPI comes out. It’s all about inflation right now. Look for a flat line until then. That’s why it’s a good time to run short strangles and own lots of cash. A dollar at a market bottom is worth $10 at a market top.
S&P Case Shiller Gains 5.7% in December, YOY according to its National Home Price Index. That’s a quarter of the gains seen a year ago. Miami (15.9%), Tampa (13.9%), and Atlanta (10.4%) showed the biggest gains. High mortgage interest rates are still a big drag and will continue for another six months.
Pending Home Sales Soar 8.7% in January on a signed contract basis. It is the second straight month of gains and the biggest in 2 ½ years. See what a 1.5% drop in mortgage rates can do? While rates are back up now it shows how much demand is building up in the residential real estate market. I think this market explodes to the upside by yearend.
Mortgage Rates Jump to 6.65%, snuffing out the green shoots that briefly appeared in January. Mortgages are still maintaining an unprecedented 200 basis point premium to 30-year Treasury bond rates, which should disappear by yearend. The seeds of the next housing boom are germinating.
Tesla Tanks Semiconductor Shares, after Elon Musk announced that he plans to cut silicon carbide chips by 75%. Improved new designs will also slash the number of chips needed for EVs, whose supply and prices are notoriously volatile. New chip designs will appear in the $25,000 model 2 due out in 2025.
Ark’s Dirty Little Secret. Cathy Woods’ ARK Innovation Fund (ARKK) is one of the top-performing funds so far in 2023, up 24%. But strip out the performance of Tesla (TSLA) and the five-year return has been precisely zero. Good thing (TSLA) is up 110% this year. Maybe its cheaper just to buy (TSLA) and skip the dross and high management fees at Ark? Elon Musk thinks it’s going to $1,000 a share and so do I. Oh, and they just dropped the price of their top end Model X by $20,000.
Stellantis (STLA) Buys a Copper Mine, taking a 14.2% stake in Argentina’s McEwen Copper mine. Gee, do you think the owner of the Chrysler brand is going into EVs? They also laid off 2,000 because with 80% fewer parts EVs require far less workers. Buy Copper and Freeport McMoRan (FCX) on dips. The global copper shortage is imminent.
China Manufacturing PMI Hits 11-Year High, at 52.6 in a surprising comeback from the end of covid lockdowns. The news hit the bond market, worried about rising inflation prospects. Supply chain problems in the US should ease as a result.
Wheat Prices Crash, seeing a 6% dive in February. What always follows a food shortage? A food glut, as farmers overplant to cash in on generous government subsidies, creating a bumper crop. It’s only a 100-year cycle. Prices will stay low as long as Ukraine can keep exporting.
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, March 6 at 7:00 AM EST, US Factory Orders are out.
On Tuesday, March 7 January 31 at 7:00 AM EST, the Federal Reserve Governor Jerome Powell testifies in front of congress.
On Wednesday, March 8 at 7:00 AM EST, the JOLTS Job Opening Report is released.
On Thursday, March 9 at 8:30 AM EST, the Weekly Jobless Claims are announced.
On Friday, March 10 at 8:30 AM EST, the Nonfarm Payroll Report for February is released.
As for me, while I was in Hawaii the other week, I took the opportunity to meet up with my old friend, David, who reminded me of the week to end all week 25 years ago.
I first met David at a Tokyo karate dojo in 1974 when he was 16 and his dad was the Associated Press Bureau Chief.
As we were about the same size, Higaona Sensei paired is off as sparing partners. But to fight, David had to take off his glasses. It wasn’t long before I saw my front teeth flying across the room and skittering across the teak floorboards.
I next met David at Morgan Stanley when I was a London director, and he was a junior trader in Tokyo. After that, I took off to start my own hedge fund.
When Morgan ordered him to meet with their traders in Zurich, Switzerland, I saw the perfect excuse for an adventure. Starting in London, we first dropped off our wives for a week of shopping in Paris, flying my twin Cessna 340.
I used my old trick of getting permission to fly over the center of Paris so I could waggle my wings at the tourists as we passed the top of the Eiffel Tower.
In Zurich, I got in a fight with the tower because they ordered me into a parking stand that was still under construction. I left David to his meetings, thus enabling us to bill the entire trip to Morgan Stanley, aviation fuel, five-star hotels, three-star restaurants, and all. If you did that today at (MS) you’d probably get fired.
I then flew off to pick up a couple of cases of first-growth French wines from the owners in Bordeaux to kill time.
When I picked up David the next day, we headed south. It was a clear day, so I thought it might be a good time to visit the Matterhorn summit. As we circled, the day’s successful climbers waved their ice axes. Then it was up the Rhone River Valley, threading an Alpine valley.
When I realized that I couldn’t climb fast enough to escape the valley, I executed a quick Immelman turn. You’re never supposed to do this in a twin because there is a risk of entering a flat spin (watch the Top Gun movie to see what this is).
But I had my British Aerobatics license, my Swiss Alpine license, plenty of speed, and an oversupply of confidence, so I figured we’d be OK. I performed the first half of a loop, then at the top, I flipped the plane 180 degrees, thus righting it and heading in the opposite direction. But I think we singed the rear ends of a few mountain goats on the way.
Needless to say, this caught David’s attention.
When I popped out of the top of the Alps, I was immediately intercepted by a Mirage fighter from the Swiss Air Force. I was now in military air space. He took a few runs at me at just under Mach 1, using me for target practice. Once I was identified he went on off his merry way.
Now I was lost.
All the maneuvering put me too low to intercept any European navigational aids. So we just looked out the window. Eventually, we noticed that to roof tiles of the city below us were red, which meant we had to be over Italy. I correctly identified it as Bolzano. From there I calculated a direct track to the airfield at St. Moritz in Switzerland.
We stayed at the legendary Badrutt’s Palace Hotel. The next day, we took a cable car to the highest peak. While American ski resorts offer cheeseburgers or pizza, Swiss ones have Michelin Three Star Restaurants. We enjoyed the meal of a lifetime.
When the Tokyo stock market crashed, Morgan Stanley let go of most of its Tokyo staff. David landed on his feet, taking over as the head of trading at Lehman Brothers. He later moved on to a hedge fund, cashing in its Lehman stock well before he went under.
David later retired to the North Share of Oahu in Hawaii, and I visit whenever I’m in town. He is very proud of his tropical fruit orchard. When the 50-foot waves crash at nearby Waimea Bay, the ground shakes.
Whenever I see David, he reminds me of our “lost week” over the Alps. It was the most exciting week of his life. And I always respond, “But David, every week is like that for me.”
When I visit Bolzano this summer to research the battles there in WWI in which my great uncle perished, I’ll ask the residents if they noticed a lost airplane overhead 25 years ago.
Good Luck and Good Trading
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
The First Marine Division in the Melbourne Cricket Ground in 1942
Higaona Sensei in 1974
Badrutt’s Palace Hotel in St. Moritz
Refueling my Cessna 340 in 1988
Global Market Comments
February 27, 2023
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or MAKING A SILK PURSE FROM A SOW’S EAR)
(META), (GOOGL), (MSFT), (AAPL), (AMZN), (NFLX), (TSLA), (SPY), (TLT), (ENPH), (UUP), (GLD), (SLV), (EEM)
CLICK HERE to download today's position sheet.
Call this the Dr. Jekyll and Mr. Hyde market.
On the up days, we see the kindly ministrations of Dr. Jekyll.
On the down days, we suffer from the evil hand of Mr. Hyde.
To say that traders are confused would be an understatement. Many seasoned pros have told me that this is one of the most difficult markets they have ever seen.
Fridays have been particularly treacherous when weekly options expire. Some 56% of all options trading now takes place with expirations of five days or less. Trading before 4:00 PM sees billions of dollars of hot money trying to force closing prices just in or out of the money for key at-the-money strike prices.
What is especially disturbing is that some 80% of the gain in the S&P 500 (SPY) this year has been in just seven names, Meta, (META), Alphabet (GOOGL), Microsoft (MSFT), Apple (AAPL), Amazon (AMZN), Netflix (NFLX) and Tesla (TSLA). Most other stocks went nowhere….or down. That much concentration means that any rallies lack confidence and will fail….for now.
Remember these names because when we finally do get a real upside breakout, they will be the leaders. You can take that to the bank.
Thanks to turmoil in the House of Representatives intent on a national default, bonds have given up 70 of the 120-basis point drop in yields since October. That deprives us of one of our biggest money makers of 2022, our long bond trades.
That means were are also seeing the automatic flip side of the bond trade, a strong US Dollar (UUP), and weak precious metals, (GLD) and (SLV), and emerging markets (EEM).
This too shall end.
If it was excess liquidity that caused stocks to rocket for 13 years, then maybe we should be focusing on what little liquidity is left. That would be the font of government money pouring into infrastructure and alternative energy plays.
Some $370 billion I know available for investment in ESG, would most of it going into the battery industry for the burgeoning electric vehicle industry. Even foreign firms like Finland’s Neste is moving to the US to cash in on federal munificence, converting an old US oil refinery to produce diesel fuel out of animal and vegetable fat (click here for the link).
Probably the best bet here is in California-based Enphase Energy (ENPH), which makes a 40% gross profit margins on microinverters for solar panels and has just seen a 42% dive in its share price. That makes (ENPH) a BUY. Hint: solar stocks always follow the price of oil to which it is tied, which has lately been down.
Some nimble and aggressive trading managed to push me back in the green for February, taking me up +0.93% on the month. That’s a dramatic improvement of +5.48% from a week ago.
You might even call it making a silk purse from a sow’s ear.
My 2023 year-to-date performance is still at the top at +23.28%. The S&P 500 (SPY) is up +4.32% so far in 2023. My trailing one-year return maintains a sky-high +86.58% versus -12.97% for the S&P 500.
That brings my 15-year total return to +620.47%, some 2.78 times the S&P 500 (SPX) over the same period. My average annualized return has recovered to +46.83%, still the highest in the industry.
Last week, I piled on a Tesla (TSLA) March $155-$260 short strangle betting that the stock can stay within a $95 range for 19 trading days. I also added a deep in-the-money long in the bond market for the first time in six weeks. Both positions turned immediately 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!
Q4 GDP Dips, from 3.9% to 2.7% in the October-December quarter. Consumption took a dive, which is amazing over the holidays. This is nowhere near a recession.
Fed Minutes Show More Hikes to Come, with the emphasis on the plural. That could take the overnight borrowing rate to a 5.40% high. It certainly pees on the parade for the falling interest rates crowd.
The Tail is Wagging the Dog, with short, dated options, often same-day expiration dominating trading every Friday. Billions of dollars are battling around key strike prices attempting to force expirations in or out of the money. No place for the little guy. Better to take Fridays off.
Netflix Slashes Prices in 30 countries, taking the stock down a modest 3%. (NFLX) is still the leader in the sector with 231 million subscribers, followed by Amazon (200 million), Disney Plus (162 million, HBO Max (95 million, Peacock (18 million), and Hulu 47 million). Buy (NFLX) and (AMZN) on dips.
Individual 401k’s Lost 23% in 2022, according to a study from Fidelity. High inflation is shrinking the remaining purchasing power even faster. A rising number of workers are also borrowing against their 401k’s to make ends meet. Such loans can go up to 50% of the principal. Better start making up the losses or you’ll be spending your golden years working at Taco Bell.
Apple to Add Glucose Monitor on its Watches, to aid diabetic clients. Some 38 million Americans have diabetes and given the obesity epidemic that figure is certain to rise. It highlights Big Tech’s move into the low-hanging fruit in health care.
Existing Home Sales Dive 0.7% in January, to a 4 million annualized rate, the weakest since October 2010. That makes 12 consecutive months of falling sales. The Median Home Price sold rose to $359,000. An imminent national debt crisis and spiking interest rates is not a great environment in which to sell your home.
Biden Ukraine Visit Tanks Gas and Oil Prices, cutting Russia’s chances of a win and eventually leading to a flood of oil on the market. Biden’s visit is sending the message to Putin that there’s no chance of a win here. Energy is hitting two-year lows across the board. Only energy stocks are staying high. Energy is getting so cheap it might be worth a trade.
Germany Accelerates Move Towards Alternatives, permanently cutting all ties with Russia energy. Europe’s biggest economy, and the fourth largest in the world, hopes to get 80% of its electricity from solar and wind by 2030. Hydrogen is also entering the picture. Other countries will follow.
On Monday, February 27 at 8:30 AM EST, US Durable Goods are out.
On Tuesday, February 28 at 9:00 AM, the S&P Case Shiller National Home Price Index for December is released.
On Wednesday, March 1 at 10:00 AM, the ISM Manufacturing PMI is printed.
On Thursday, March 2 at 8:30 AM, the Weekly Jobless Claims are announced.
On Friday, March 3 at 8:30 AM, the ISM Non-Manufacturing PMI. At 2:00 the Baker Hughes Oil Rig Count is out.
As for me, I usually get a request to fund some charity about once a day. I ignore them because they usually enrich the fundraisers more than the potential beneficiaries. But one request seemed to hit all my soft spots at once.
Would I be interested in financing the refit of the USS Potomac (AG-25), Franklin Delano Roosevelt’s presidential yacht?
I had just sold my oil and gas business for an outrageous profit and had some free time on my hands so I said, “Hell Yes,” but only if I get to drive. The trick was to raise the necessary $5 million without it costing me any money.
To say that the Potomac had fallen on hard times was an understatement.
When Roosevelt entered the White House in 1932, he inherited the presidential yacht of Herbert Hoover, the USS Sequoia. But the Sequoia was entirely made of wood, which Roosevelt had a lifelong fear of. When he was a young child, he nearly perished when a wooden ship caught fire and sank, he was passed to a lifeboat by a devoted nanny.
Roosevelt settled on the 165-foot USS Electra, launched from the Manitowoc Shipyard in Wisconsin, whose lines he greatly admired. The government had ordered 34 of these cutters to fight rum runners across the Great Lakes during Prohibition. Deliveries began just as the ban on alcohol ended.
Some $60,000 was poured into the ship to bring it up to presidential standards and it was made wheelchair accessible with an elevator, which FDR operated himself with ropes. The ship became the “floating White House,” and numerous political deals were hammered out on its decks. Some noted guests included King George VI of England, Queen Elisabeth, and Winston Churchill.
During WWII Roosevelt hosted his weekly “fireside chats” on the ship’s short-wave radio. The concern was that the Germans would attempt to block transmissions if broadcast came from the White House.
After Roosevelt’s death, the Potamac was decommissioned and sold off by Harry Truman, who favored the much more substantial 243-foot USS Williamsburg. The Potamac became a Dept of Fisheries enforcement boat until 1960 and then was used as a ferry to Puerto Rico until 1962.
An attempt was made to sail it through the Panama Canal to the 1962 World’s Fair in Seattle, but it broke down on the way in Long Beach, CA. In 1964 Elvis Presley bought the Potomac so it could be auctioned off to raise money for St. Jude Children’s Research Hospital. It sold for $65,000. It then disappeared from maritime registration in 1970. At one point there was an attempt to turn it into a floating disco.
In 1980 a US Coast Guard cutter spotted a suspicious radar return 20 miles off the coast of San Francisco. It turned out to be the Potomac loaded to the gunnels with bales of illicit marijuana from Mexico. The Coast Guard seized the ship and towed it to the Treasure Island naval base under the Bay Bridge. By now the 50-year-old ship was leaking badly. The marijuana bales soaked up the seawater and the ship became so heavy it sank at its moorings.
Then a long rescue effort began. Not wanting to get blamed for the sinking of a presidential yacht on its watch the Navy raised the Potomac at its own expense, about $10 million, putting its heavy lift crane to use. It was then sold to the City of Oakland, Ca for a paltry $15,000.
The troubled ship was placed on a barge and floated upriver to Stockton, CA, which had a large but underutilized unionized maritime repair business. The government subsidies started raining down from the skies and a down-to-the-rivets restoration began. Two rebuilt WWII tugboat engines replaced the old, exhausted ones. A nationwide search was launched to recover artifacts from FDR’s time on the ship. The Potomac returned to the seas in 1993.
I came on the scene in 2007 when the ship was due for a second refit. The foundation that now owned the ship needed $5 million. So, I did a deal with National Public Radio for free advertising in exchange for a few hundred dinner cruise tickets. NPR then held a contest to auction off tickets and kept the cash (what was the name of FDR’s dog? Fala!).
I also negotiated landing rights at the Pier One San Francisco Ferry Terminal, which involved negotiating with a half dozen unions, unheard of in San Francisco maritime circles. Every cruise sold out over two years, selling 2,500 tickets. To keep everyone well-lubricated I became the largest Bay Area buyer of wine for those years. I still have a free T-shirt from every winery in Napa Valley.
It turned out to be the most successful fundraiser in the history of NPR and the Potomac. We easily got the $5 million and then some. The ship received a new coat of white paint, new rigging, modern navigation gear, and more period artifacts. I obtained my captain’s license and learned how to command a former coast guard cutter.
It was a win-win-win.
I was trained by a retired US Navy nuclear submarine commander, who was a real expert at navigating a now thin-hulled 73-year-old ship in San Francisco’s crowded bay waters. We were only licensed to cruise up to the Golden Gate bridge and not beyond, as the ship was so old.
The inaugural cruise was the social event of the year in San Francisco with everyone wearing period Depression-era dress. It was attended by FDR’s grandson, James Roosevelt III, a Bay area attorney who was a dead ringer for his grandfather. I mercilessly grilled him for unpublished historical anecdotes. A handful of still-living Roosevelt cabinet members also came, as well as many WWII veterans.
As we approached the Golden Gate Bridge, some poor soul jumped off and the Coast Guard asked us to perform search and rescue until they could get a ship on station. No body was ever found. It certainly made for an eventful first cruise.
Of the original 34 cutters constructed only four remain. The other three make up the Circle Line tour boats that sail around Manhattan several times a day.
Last summer I boarded the Potomac for the first time in 14 years for a pleasant afternoon cruise with some guests from Australia. Some of the older crew recognized me and saluted. In the cabin, I noticed a brass urn oddly out of place. It contained the ashes of the sub-commander who had trained me all those years ago.
Good Luck and Good Trading,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Captain Thomas at the Helm
Global Market Comments
February 24, 2023
Fiat Lux
Featured Trade:
(FEBRUARY 22 BIWEEKLY STRATEGY WEBINAR Q&A)
(SPY), (BA), (CCI), (HD), (TLT), (TSLA), (PPLT), (PALL),
(JPM), (NVDA), (AAPL), (GOOGL), (META), (AMZN)
CLICK HERE to download today's position sheet.
Below please find the subscribers’ Q&A for the February 22 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Silicon Valley in California.
Q: Will Russia use nuclear weapons on Ukraine?
A: No, they won’t. If you’re trying to take over a country, you don’t exactly want to drop atomic bombs on it first and render it useless. If they do, Ukraine will retaliate in kind with the nukes they have. Most of the nuclear weapons the old Soviet Union had were assembled in Ukraine and the machinery is still there. We know Ukraine has four nuclear power plants and hundreds of tons of fuel so they have uranium. You only need to increase the purity from 80% to 93% and then convert it to plutonium to get weapons-grade and you only need 20 pounds to make a small bomb. At the very least, they could build a dirty truck bomb and make Moscow uninhabitable for 100 years. If the Russians did explode a nuke, the fallout cloud would blow back on them the next day, China in three days, the US in 10 days, and back on Russia again in two weeks. If Ukraine doesn’t remember how to make nuclear weapons, they can just ask me. I do have “Nuclear Test Site” on my resume.
Q: What would be the impact on the markets of a government debt default?
A: Bonds would collapse, causing interest rates to spike, and taking down stocks big time. Higher interest rates would crash the real estate market. You also can’t do real estate closings during a shutdown because Fannie Mae and Freddie Mac aren’t there to buy the debt. Commodities would fall sharply on recession fears. Even gold and silver do poorly on a massive liquidity squeeze. Government payments would cease, including Social Security, Medicare, and military salaries. Air traffic control would stop unless they are happy to work for free. The only place to hide is cash under your mattress since US Treasury bills and commercial banks will also be at risk. This is what the House Republicans are risking. It really depends on how long the shutdown lasts. Every time Georgia representative Marjorie Taylor Greene shouted “liar” at the State of the Union address you could see bond prices ticking down. She is one of the people who has to agree to a rise in the debt ceiling and she didn’t inspire a lot of confidence in bondholders. All that said, a $10 dip is a good place to buy the (TLT).
Q: Would you buy Boeing up here?
A: I loved Boeing at $100 and we did a could trades down there. At $220 not so much. It’s more than doubled off the October low and all the best-case scenarios have happened. The 737 MAX, which crashed twice due to an AI issue, got back in the air. The 787 Dreamliner is selling well. The company now has a two-year order backlog. And Air India followed up with the biggest aircraft order in history, some 450 planes over ten years. If Boeing dips $50 that would be another story because I think it hits a new all-time high at $450 in a couple of years. By the way, I took a 737 MAX on my flight back from Hawaii last weekend and the crew loved it. There are no screens on the seats. Instead, they broadcast the 800 greatest movies of all time on free WIFI.
Q: How do we know if your trade alert is for the stock, the ETF, or another underlying position?
A: Look at the ticker symbol—it always tells you exactly which security we are working in.
Q: With Bullard signaling a 50 basis-point rate hike, will the S&P (SPY) go down in the near term and how much?
A: Well Bullard is only one guy out of nine, so he doesn’t have the final say. It really depends on what Jay Powell wants. And if the data continues hot and inflation keeps rising, we will get a 50 basis point rise, and that should take the index down 10% from the recent high, or give up half of its recent year-to-date gains, so that’s a good rule of thumb. As long as we’re waiting for bad news, (which we won’t get until March 22) the markets will do nothing until then.
Q: What do you think about Crown Castle International (CCI), the cell tower company, taking a big hit with the bond market?
A: It pretty much moves in sync with the bond market, which has just dropped 10 points, so you probably want to be buying or doubling up on (CCI) right here, because it will be the first thing to recover once we see a negotiated increase in the debt ceiling which has to happen before the summer. The 5G buildout continues unabated.
Q: Would you recommend buying Tesla (TSLA) shares again?
A: Yes, but at least $50 lower, which we may get. Or at least $50 off the $217 top. I think Tesla goes to $1,000 sometime in the next couple of years and so does Elon Musk. All of the factors that could drive the stock that high are in progress. I know it’s happening over there, and that’s easily a $1,000 stock once their current breakthroughs go mass-market.
Q: Any interest in Iron Condors?
A: It is the same as Strangles, with more limited risk with four legs, a call spread and a put spread because you stop out your losses at much lower levels. But they are very trading-intensive, commission-intensive trades, and it’s really too much for most beginners to handle. However, if you’re a professional, you might consider doing iron condors on these positions. Iron Condors also max profits when nothing moves, and lately, no move is a pretty rare event. We’re going to get it for the next couple of months, but don’t count on that being a frequent trade.
Q: Any iShares 20 Plus Year Treasury Bond ETF (TLT) LEAPS to buy now?
A: Yes I've been kind of sitting on my hands waiting to see if this bottom here holds at 99 before I put out LEAPS, but we’re so close it really almost makes no difference. And if I were to do a LEAPS here it probably would be the $100-$105 one-year out. That might get you about a 100% profit in a year. That’s a very safe LEAPS, and I’ll get the numbers out when I get a chance.
Q: What’s your opinion on Home Depot (HD)?
A: I like it for the long term. Clearly, their disastrous earnings report shows that the economy for home repair is not as strong as we thought it was, so it may go lower first. I would hold off until we get a real capitulation selloff in those stocks.
Q: Are gold and silver possible candidates for LEAPS?
A: Yes, especially in view of the recent correction in these metals. And we did put these out last October at the market bottom. I probably will be updating that sometime in the next few weeks.
Q: How much longer will the Ukraine/Russia war last?
A: The general consensus among the military now is that this goes on for several more years, and both sides will just keep pouring troops into the meat grinder until they get exhausted.
Q: Any way to play Platinum (PPLT) or Palladium (PALL)?
A: Yes, there are ETFs on each of them.
Q: Any thoughts on the crypto industry?
A: I have given up on the crypto industry because it has been shown that so many of these trading platforms were stealing from their customers. Once you lose the confidence of a customer on trust, you never get it back in the financial industry. Also, crypto was interesting a couple of years ago when it was going up and everything else in the world was too expensive, but now you have all the best stocks trading not far from multi-year lows, and that makes quality stocks much more attractive than a crypto where you really don't know what’s going to happen. Crypto could be another Nikkei, which after 32 years still hasn’t reached its old highs. That is unless it gets taken over by big banks like (JPM) and regains respectability that way.
Q: Any thoughts on investing in the AI trend?
A: AI has suddenly become what crypto was 2 years ago, and what 3D printing was 15 years ago. It’s just the theme of the day, and something to promote. There are no pure AI plays. Basically, all companies have been using it for 10 or 15 years, it’s not a new thing. In fact, AI is already in every aspect of your life, you just might not know it yet. NVIDIA (NVDA) is probably the purest AI play out there whose chips everyone needs to execute AI. Beyond that, the biggest AI users are Apple (AAPL), Alphabet (GOOGL), Meta (META), and Amazon (AMZN). When Amazon makes ten more recommendations on books you might like or movies you might watch, that is AI.
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 or TECHNOLOGY LETTER, 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
With Medal of Honor Winner Colonel Mitchel Paige
