Global Market Comments
September 26, 2022
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or HOW TO TRADE THE 4TH QUARTER)
(SPY), (TLT), (AAPL), (TSLA), (RIVN)
Posts
In a mere six months, the Federal Reserve has morphed from Dr. Jekyll into Mr. Hyde.
It has changed from the stock market’s best friend to its worst enemy. Not only has the punch bowl been taken away, but it has also been smashed on the floor in a thousand pieces. A regime change has taken place in risk.
Welcome to a hostile Fed, one that utterly hates the stock market and loves cash. In fact, it loves cash so much it has raised its bid for overnight money from nothing to 4.2% in only six months. It is the fastest rise in interest rates in history.
To say that conditions have changed for the stocks would be the understatement of the century. This makes stocks less valuable, especially anything connected with growth, like technology stocks, and big borrowers, such as cruise lines.
Which raises the important question of the day: How the HECK are we going to trade the stock market in Q4?
It was in September of 2020 when 34 of my clients became millionaires buying TESLA at precisely the right time…
Well, the stars have aligned once again!!!!
In my TESLA free report, I list 10 reasons I’d tell my grandmother to mortgage her house and go all in.
Go to madhedgeradio.com and download my “Tesla Takes Over the World” free report.
Let me give you the good news first.
Q4 is likely to establish the final low for the bear market in stocks for this cycle. I don’t buy the endless years of suffering or the “lost decade” theories. Technology is just evolving too fast. It really makes no difference whether that low is at (SPX) $3,600, $3,300, or even $3,000. The best entry point for stocks in a decade will soon be at hand.
Keep in mind that with an (SPX) at $3,000 the market will be down a horrific 37.5% in a year. That is a worst-case scenario. A collapse this rapid has not happened since 1929.
This is for an economy that has seen no financial stresses whatsoever, except in crypto. This time, there are no banks going under, brokers going bust, housing crashes, or other similar stresses that drove the (SPX) down 52% by 2009.
There is nowhere near the misallocation of capital and malinvestment that we saw 15 years ago. Down 37.5% sounds like a screaming bargain to me.
The early “tell” that we are approaching the end came on Friday when the Volatility Index (VIX) hit $32.31. With any luck, it could top $40 in the coming weeks. Friday, when the Dow Average was down 800 points, we saw the largest put option buying in market history.
At that point, it will be possible for me to construct positions for you that are mathematically impossible to lose money with and offer the upside potential return of 10:1.
Once a handful of other technical indicators kick in, we’re there. This is what you should be looking for:
The (VIX) tops $40
Volume spikes
Down stocks top up ones by 90:10
The put:call ratio hits 2:1
A big intraday reversal that closes higher, like down $100 for the (SPX), up $150
Technology stocks, the most volatile sector in the market, also deliver a major turnaround
We get a dramatically lower report for the Consumer Price Index (and the next one is out October 13)
The Mad Hedge Market Timing Index falls below 10
So, what to buy this time?
With the Midterm elections now only 43 days away on Tuesday, November 8, it’s time to contemplate the implications for your retirement portfolio. The play of the decade is setting up.
Let me give you the good news first.
Whoever wins, and at this point, it really could be anyone, markets will rally after the election and power on until the end of 2022, some 10%-20%. The mere fact that the election is over is a huge market positive.
That’s the easy part.
But what if the election was held today?
The polls are telling us that the Democrats could pick up 2-3 seats in the Senate. The House now looks like a 50/50 split. Control could literally hinge on a handful of battleground states.
Suburban housewives now appear to be the great deciders.
So, what happens if the Democrats keep control of both houses, and the status quo is maintained?
For a start, taxes will be going up a lot, especially for the wealthy. Carried interest might finally make the ultimate sacrifice after coming back from the dead countless times. SALT taxes might get a break, but it is not likely. Once the government gets its hands on a revenue stream, it is loath to give it up.
It’s spending where we will see some important changes. Think more of the last two years, but in larger amounts.
Support for the Ukraine War will continue. So far, the US is getting great value for money. To eliminate the major military threat to the US and Europe for only $50 billion is the deal of the century. I’d pay ten times that.
So far, the Ukrainians are doing all the dying and we only write the checks. I greatly prefer that to a Vietnam-style commitment that bleeds us white (and by the way, I did some of that bleeding). Believe me, I’m doing everything I can to help by advising the Joint Chiefs of Staff.
The real game changer will be an alternative energy bill much larger than the last $733 billion bill. The goal will be to accelerate the decarbonization of the US, and ultimately the global economy. Of course, the free market will drive this anyway. No major automaker will be building internal combustion engines after 2030. What the government can do is to make it happen fast.
A year ago, climate change was an “it might happen someday after I’m long gone” kind of possibility. After a summer of 116 degrees in California and 114 degrees in France, “someday” has become “Yikes, it’s happening now!”
The last bill was truly misnamed as the “Inflation Reduction Act.” It really should have been called the “Tesla Shareholder Enrichment Bill”. Virtually every aspect of the bill somehow impinges on Elon Musk’s creation positively, which has been an overwhelming market leader in national electrification, enhanced EV subsidies, mass construction of charging stations, solar panels, and power walls, and decarbonization.
Since I am a major shareholder in (TSLA) and have been since the shares traded at $2.35, that’s fine with me. That probably explains why the shares are in the process of engineering a major upside breakout well before the election.
It isn’t just Tesla that will cash in. There is a broadening new leadership developing for the market to replace my technology stocks. Call it the “decarbonization sector”.
It includes EVs like Tesla (TSLA) and Rivian (RIVN), commodity stocks like copper miner Freeport McMoRan (FCX), uranium stocks like Cameco (CCJ) and the Uranium ETF (URA), solar companies like First Solar (FSLR) and SunPower (SPWR), alternative utilities like NextEra Energy (NEE), the world’s largest generator of electricity from wind and the sun, and silver plays like the iShares Silver Trust (SLV) and Wheaton Precious Metals (WPM), essential for high-efficiency wiring.
I will be adding more names to this list as I find them. Watch your research inbox.
Of course, 43 days in the political world is a couple of lifetimes in the real world, so anything can happen. A boatload of October surprises is probably just around the corner.
As for me, I’m putting more of my money into Tesla.
It all raises a new risk that we haven’t dealt with before.
What if the US government can’t afford to pay its own debt? When the last financial crisis and recession began in 2007, the US national debt was only a paltry $9 trillion, or 60% of GDP. It has since risen to $30 trillion, or 140% of GDP. Holy smokes!
That was all well and good while interest rates were dropping from 7% to zero. What happens when rates go back up from zero to 7.0%? The cost of carry for the US Treasury more than doubles as well, taking a much bigger bite of government spending, more than it can afford.
Just thought you’d like to know.
My Ten-Year View
When we come out the other side of pandemic and the recession, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With oil peaking out soon, and technology hyper-accelerating, there will be no reason not to. The Dow Average will rise by 800% to 240,000 or more in the coming decade. The America coming out the other side will be far more efficient and profitable than the old. Dow 240,000 here we come!
With some of the greatest market volatility in market history, my September month-to-date performance maintained at +1.68%.
I used last week’s extreme volatility to add shorts in Apple (AAPL), the S&P 500 (SPY), and the United States US Treasury bond fund (TLT). That takes me to 30% long, 30% short, and 40% cash. I am holding back my cash for a truly cataclysmic market selloff.
My 2022 year-to-date performance ballooned to +61.64%, a new high. The Dow Average is down -18.48% so far in 2022. It is the greatest outperformance on an index since Mad Hedge Fund Trader started 14 years ago. My trailing one-year return maintains a sky-high +72.06%.
That brings my 14-year total return to +574.20%, some 2.86 times the S&P 500 (SPX) over the same period and a new all-time high. My average annualized return has ratcheted up to +44.74%, easily the highest in the industry.
On Monday, September 26 at 8:30 AM, the Chicago Fed National Activity Index for August is released.
On Tuesday, September 26 at 7:00 AM, the Durable Goods Index for August is out. New Home Sales are also printed.
On Wednesday, September 28 at 7:00 AM, Pending Home Sales for August are published.
On Thursday, September 29 at 8:30 AM, Weekly Jobless Claims are announced. We also learn the final report for US Q2 GDP.
On Friday, September 30 at 7:00 AM, the Personal Income and Spending are disclosed. At 2:00 the Baker Hughes Oil Rig Count is out.
As for me, I’ve found a new series on Amazon Prime called 1883. It is definitely NOT PG rated, nor is it for the faint of heart. But it does remind me of my own cowboy days.
When General Custer was slaughtered during his last stand at the Little Big Horn in 1876 in Montana, my ancestors spotted a great buying opportunity. They used the ensuing panic to pick up 50,000 acres near the Wyoming border for ten cents an acre.
Growing up as the oldest of seven kids, my parents never missed an opportunity to farm me out with relatives. That’s how I ended up with my cousins near Broadus, Montana for the summer of 1966.
When I got off the Greyhound bus in nearby Sheridan, I went into a bar to call my uncle. The bartender asked his name and when I told him “Carlat”, he gave me a strange look.
It turned out that my uncle had killed someone in a gunfight in the street out front a few months earlier, which was later ruled self-defense. It was the last public gunfight seen in the state, and my uncle hasn’t been seen in town since.
I was later picked up in a beat-up Ford truck and driven for two hours down a dirt road to a log cabin. There was no electricity, just kerosene lanterns and a propane-powered refrigerator.
Welcome to the 19th century!
I was hired as a cowboy, lived in a bunk house with the rest of the ranch hands, and was paid the princely sum of a dollar an hour. I became popular by reading the other cowboys newspapers and their mail since they were all illiterate. Every three days we slaughtered a cow to feed everyone on the ranch. I ate steak for breakfast, lunch, and dinner.
On weekends, my cousins and I searched for Indian arrowheads on horseback, which we found by the shoe box full. Occasionally, we got lucky finding an old rusted Winchester or Colt revolver just lying out on the range, a remnant of the famous battle 90 years before. I carried my own six-shooter to help reduce the local rattlesnake population.
I really learned the meaning of work and developed callouses on my hands in no time. I had to rescue cows trapped in the mud (stick a burr under their tail and make them mad), round up lost ones, and sawed miles of fence posts. When it came time to artificially inseminate the cows with superior semen imported from Scotland, it was my job to hold them still. It was all heady stuff for a 15-year-old.
The highlight of the summer was participating in the Sheridan Rodeo. With my uncle being one of the largest cattle owners in the area, I had my pick of events. So, I ended up racing a chariot made from an old oil drum, team roping (I had to pull the cow down to the ground), and riding a brahman bull. I still have a scar on my left elbow from where a bull slashed me, the horn pigment clearly visible.
I hated to leave when I had to go home and back to school. But I did hear that the winters in Montana are pretty tough.
It was later discovered that the entire 50,000 acres were sitting on a giant coal seam 50 feet thick. You just knocked off the topsoil and backed up the truck. My cousins became millionaires. They built a modern four-bedroom house closer to town with every amenity, even a big screen TV. My cousin also built a massive vintage car collection.
During the 2000s, their well water was poisoned by a neighbor’s fracking for natural gas, and water had to be hauled in by truck at great expense. In the end, my cousin was killed when the engine of the classic car he was restoring fell on top of him when the rafter above him snapped.
It all gave me a window into a lifestyle that was then fading fast. It’s an experience I’ll never forget.
Stay healthy,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
September 23, 2022
Fiat Lux
Featured Trade:
(SEPTEMBER 21 BIWEEKLY STRATEGY WEBINAR Q&A),
(SPY), (INTC), (NVDA), (AMD), (MU) (TBT), (TLT), (AMGN),
(VIX), (CHPT), (TSLA), (GS), (BAC), (MS), (JPM), (USO), (TLT)
Below please find subscribers’ Q&A for the September 21 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Silicon Valley in California.
Q: What would cause you to look for a lower bottom than $330 on the (SPY)?
A: Nuclear war with Russia would certainly do the trick—they’re now threatening to use tactical nuclear weapons in Ukraine—and higher-than-expected interest rates. If we get another 75 basis points after this one today, then I think you’re looking at new lows, but we won’t find that out until November 2. So, the market may just bounce along the bottom here for a while until it sees what the Fed is going to do, not on this rate hike but the next one after that. Other than that, a few dramatically worse earnings from corporations would also allow us to test a lower low.
Q: Is it time to nibble on Nvidia Corporation (NVDA)?
A: Nvidia is one of the most volatile stocks in the market. You don’t want to go into it until you’re absolutely sure the bottom is in. If that means you miss the first 10% of the following move up, that’s fine because when this thing moves, you get a double or triple out of it. I would wait for the indecision in the market to resolve itself before you get too aggressive on the most volatile stocks in the market. The same is true for the rest of the semiconductor sector.
Q: What does a final capitulation look like?
A: The Volatility Index (VIX) ever $40. We’ve had a high of VIX at $37 so far this year. If really get over $40, that would be a new high for the year. That would signal people that are throwing in the towel, giving up the market, selling everything—of course that is always the best time to buy.
Q: How do we get LEAPS guidance?
A: We send our LEAPS recommendations first to our concierge members—we only have a small number of those—and then after that, they go out to all subscribers to the Mad Hedge Global Trading Dispatch. Everyone gets exposure to the LEAPS. By the way, with LEAPS, you can take up to a month to execute a position. What I do is literally buy 1 contract a day, so I get a nice average over the period of a month when the market is most likely bottoming.
Q: Do you see Intel Corporation (INTC) as a good candidate for a Taiwan invasion hedge?
A: Well, first of all, China’s not going to invade Taiwan. I’ve been waiting for this for 70 years and it’s not going to happen. Also, Intel’s new management has yet to prove itself. You have a salesman running the company; I never like companies run by a salesman. I’d prefer to have an engineer run an engineering company. The court is still out on Intel and whether they can turn that company around or not; so, I would much rather buy the market leaders, Nvidia (NVDA), Advanced Micro Devices (AMD), and Micron Technology (MU) in the semiconductor space.
Q: You talked dollar/cost averaging before. Should we pause on averaging in?
A: No, that's why I say buy one contract a day and put it in order to buy at the bid side of the market. That way, any sudden swoosh down in the market and you’ll get filled. The spreads on these LEAPS are quite wide, so you want to try to buy as close to the middle or bottom end of the spread, and putting in single contract orders over a month, of course, will do that to you.
Q: Does that mean it’s time to sell the ProShares UltraShort 20+ year Treasury Yield (TBT)?
A: I would say yes; (TBT) hit $30.30 yesterday, which is a new multi-year high. I would be taking profits on that because on the next turnaround in bonds, you could get a very rapid move in (TBT) from $30 back down to $20. I’d rather have you keep that profit than try to squeeze the last dollar out of it. Remember, the (TBT) has a negative cost of carry now of 8% a year and that is a big nut to cover.
Q; Market outlook for mid-2023?
A: We could hit my $4,800 target by mid-2023; that is up 28% from here.
Q: Can we buy LEAPS on Amgen (AMGN)?
A: Absolutely yes, you can. Go for the highest listed strike prices on the call side with the longest possible maturity. I would do the January 17, 2025 $350-$360 vertical bull call spread which you can buy now for $1.00. That gives two years and four months to get a tenfold return. That’s enough time for a full-bore recession to happen and then a recovery where markets take off like a rocket. The call spread you bought for $1.00 becomes worth $10.00.
Q: Is there a long position on the beneficiary of government plans to build EV charging stations?
A: There is, but I'm not recommending EV charging stations because it’s a low value-added business. You buy electric power from the local utility, add 10 cents and resell it. The margins are small, the competition is heating up. There are much smarter ways to play EVs than the charging station. ChargePoint (CHPT) is certainly one of them, but it’s not a great investment idea. Look at how ChargePoint (CHPT) has performed over the last six months compared to Tesla (TSLA) and you see what I mean.
Q: Given the very poor investor sentiment, why don’t we get a testing of the lows and result in a (VIX) pop?
A: Absolutely yes—that is what everybody in the market is waiting for. And it could happen as soon as this afternoon. If it doesn’t happen this afternoon, allow for a little rally and then a meltdown on the next piece of bad news.
Q: I’m not able to get an email response from customer support.
A: Try emailing filomena@madhedgefundtrader.com. If that doesn’t work, you can try calling at (347) 480-1034. Filomena will always be happy to take care of you.
Q: What maturity of US Treasury securities would you buy now?
A: I would buy the 30-year. You’re getting close to a 4% yield on that—that is starting to look attractive to people who don’t want to work for a living picking stocks on a daily basis. We are about to see the rebirth of bond investing.
Q: What about banks?
A: Banks will be a screaming buy and a three-year double once recession fears end, which could be in a couple of months. We now have sharply rising interest rates, which banks love, but the bear market in stocks has killed off the IPO business, credit risk is rising, and of course, the Bitcoin business has gone to zero also. So, I would wait for fears of credit quality to end, and then you’ll get a double in the banks very quickly, and notice how they’re all flatlining at a bottom, they’re not actually going down anymore.
Q: Which banks are good choices?
A: Goldman Sachs (GS) and Bank of America (BAC) are two great ones, along with Morgan Stanley (MS) and JP Morgan (JPM).
Q: Do you think the market will bottom by the midterms?
A: I do, I think we will bottom a few weeks before the midterms, or the day after. Sometimes that’s the way it goes, and then it will be off like a rocket for the rest of the year. If we can do this from a much lower level in the SPYs, so much the better. Remember, the next Fed meeting is six days before the election. Yikes!
Q: If OPEC cuts production (USO), won’t the supply/demand cause oil prices to start rising again, increasing inflation and people’s prices at the pump?
A: Yes, but OPEC needs the money. Not necessarily Saudi Arabia, but all the other members of OPEC are starved for cash, and that is always how these shortages end. The smaller members cheat on quotas and bust the price. That's clearly what’s driven us down $50 since the February high, small member cheating. And that will continue. It is a cartel with some serious internal conflicts that will never resolve.
Q: Does it cost $17,000 to mine a Bitcoin?
A: It did four months ago. My guess is it’s more expensive now because of the higher cost of electricity around the world. We may even be up to $20,000 cost, which is why it tends to hang around the $20,000 level on the low side. Below that, miners lose money and the supply dries up, just like you see in the gold market.
Q: Do you have an opinion on Real Estate Investment Trusts (REIT)?
A: Yes; credit risk is rising, as are the yields. In a real estate recession, you start to get more defaults on REITS, but the yields on them are very high; so if you are going to play, buy a basket to spread your risk.
Q: Would you buy ProShares UltraShort 20+ year Treasury Yield (TLT) calls spreads now?
A: Yes, but I would go farther in the money, like the mid $90s, because I don’t think we’ll get that low in this cycle. I would also go out another month; instead of a one-month call spread in the mid $90s, I would do a two-month maturity. You could probably take in about $2,000 on a $10,000 position in the mid $90s.
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
Back at Lake Tahoe
Global Market Comments
September 19, 2022
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or THE FART HEARD ROUND THE WORLD)
(SPY), (TLT), (TSLA), (RIVN), (FDX), (FCX)
It was the fart heard around the world.
Every investor was positioned for inflation to crater and stocks to soar. We got the opposite instead with the Dow delivering its worst day since the pandemic lows 2 ½ years ago.
But every trader I know thought the recent rally smelled of three-day old fish and was poised for a selloff. I was expecting the latter and went into a rare 100% cash position. I have probably had 100% cash positions maybe six days over the last 15 years.
A lot of traders who only trade the CPI got flushed out of the market on Wednesday at the lows because they were the wrong way.
I attended karate school in Japan for ten years, and besides learning a fearsome attitude and losing my front teeth I also picked up a valuable lesson. ALWAYS kick a man when he is down because that is when he is least likely to hit you back.
The market got that second kick-in with the FedEx earnings on Friday indicating that the economy is in much worse shape than traders realize. Not only did (FDX) crater by 23%, the entire technical structure of the market broke down.
A double bottom in the (SPY) at $362 is now not only a possibility, but a probability and a cycle final low of (SPY) $330 is now on the table, if only for seconds. The latter would give us a top to bottom bear market of $150, or 31.25%. This is “screaming buy” territory.
It’s an old market that has seen the stock market discount 12 of the last six recessions. This is one of those “non-recessions.” Tuesday saw only 1% of stocks up on the day. Whenever this happens the return for the following 12 months averages 15.6%. Sell here at your peril.
The next major market event will be a Fed interest rate rise of 75 basis points on September 21. That will probably be the last hike of this magnitude this decade. After that, we’re dealing with quarter-point rate rises at worst and cuts at best.
Inflation expectations are falling. Consumers are morphing from “I’ll take it whatever the price” to “can you give me a deal.” Price competition is returning after a long absence. Supply chain problems have disappeared. All those ships in the harbor have gone.
Competition from imports is also increasing, thanks to a super strong US dollar. Look how fast they turned the lights out in the residential real estate market.
I have been in the market for 54 years and can tell you that when inflation peaks, stocks bottom. That means you should start scaling into your favorite positions right now.
With my Mad Hedge Market Timing Index gaping down to 32, I decided to dip my toe in the water with what will probably be the lead sector in the market for the next decade. You may not have noticed, but we have just entered the golden age of the electric vehicle, thanks to climate change and massive government support.
That draws me to Tesla (TSLA), the overwhelming leader and Rivian (RIVN), the top up and comer, or should I say it, the next Tesla.
Of course, whenever a report defies expectations like the CPI, naysayers come out of the woodwork decrying its validity. My old friend, Dr. Jeremy Siegel of Wharton School of Business, says the CPI is overreading inflation by employing an arcane method of calculating housing costs that make up half the index.
The result is a read on real estate costs which is 18 months out of date. The CPI says home costs are still rising sharply, while any real estate broker in the country will tell you it’s in free fall.
My own agent has six homes for sale and expects to get another seven this month. The only people showing up for her open houses are neighborhood gawkers. Actual buyers are a thing of yesterday and prices have easily dropped 10% in six months and that’s being charitable.
And here is the bet that you are going long here. In 2021, technology stocks, the overwhelming lead sector in the market, saw earnings increase by 30%. In 2022, they will probably come in at 6%. In 2023, they will likely bounce back to 10-12%. Here, today, the market has not yet discounted next year’s bounce. If there is a recession, it is a small one and is already fully backed into prices.
I have been fighting off requests for LEAPS (Long Term Equity Anticipation Securities) all year. Well, start checking your inbox because my LEAPS alerts are going to start coming hot and heavy. I sent out LEAPS for Tesla (TSLA) and Rivian (RIVN) last week and there are more to come. Hint: watch the price of copper with an eagle eye.
Consumer Price Index Came in at a hot 8.3% in August, much higher than expected. Stocks dropped 500 points in a heartbeat. It’s not what traders wanted to hear, up from 8.2% last month. It guarantees a 75-basis point rate hike next week. Is 100 basis points now on the table? Good thing I’m 100% cash.
Yikes! That’s Going to Leave a Bruise after the worst day in the markets since the pandemic low 2 ½ years ago. Investors were perfectly positioned for falling inflation. Tech stocks led the charge to the downside, with NASDAQ off 5%. Bitcoin crashed 10%. Bonds almost hit my 2022 target with a 2.43% yield. The US Dollar (UUP) soared. Get the Volatility Index (VIX) over $30 and I will start adding call spreads from my 100% cash position.
Are US Treasury Bonds Now a “BUY” with yields approaching my 2022 target of 3.50%? Even allowing for overshoot, you can start adding longs close to here. Notice how the (TLT) opened low and then rallied all day, despite despicable trading conditions. We all know that inflation will be back to 2% in a year.
Google gets hit with a $4.1 Billion fine in Europe over antitrust concerns where it controls 92% of the online advertising market. It’s the largest fine in corporate history, but it’s like water off a duck's back with a $1.67 trillion market capitalization. Just a cost of doing business. Buy (GOOGL) on dips.
It’s Like They Shut the Lights Out in the real estate market, which flipped from the offer to the bid side of the market in weeks. A 30-year fixed at 5.89% hasn’t helped. Open Houses are now clogged with gawking neighbors and few buyers. Six months ago, you needed an appointment. No More. It’s a global problem. I can get you a great deal on a mansion.
British Pound Hits 37-Year Low at $1.14 to the US dollar. Traders cite a lack of confidence in the new prime minister Liz Truss. The real reason is the structural toll taken by Brexit, the consequences of which will take a half-century to play out. It means a weak economy, falling standards of living, and a much lower British pound.
US Oil Reserves Hit 38-Year Low at 434 million barrels, down 39% from maximum capacity. That is about 22 days of consumption. Capping oil prices to save consumers has its price.
Weekly Jobless Claims Come in at 213,000, down 5,000 and lower for the fifth consecutive week according to the Department of Labor. The data gives ample room for a 75-basis point Fed rate hike next week.
Rail Strike Averted at the last possible minute after an all-night session. Biden clearly called in his IOUs with the unions to get a deal done. A rail strike would have been a complete disaster for the economy and demolished his election hopes.
Ether Dives on the Merge, down 6%, with the short sellers piling in at the highest possible prices. The merge involved the transition from a proof-of-work to proof-of-stake model. Avoid all crypto while the winter continues, especially (ETHE). Looks like a great head-and-shoulders top on the charts to me.
My Ten-Year View
When we come out the other side of pandemic and the recession, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With oil peaking out soon, and technology hyper-accelerating, there will be no reason not to. The Dow Average will rise by 800% to 240,000 or more in the coming decade. The America coming out the other side will be far more efficient and profitable than the old. Dow 240,000 here we come!
With some of the greatest market volatility in market history, my September month-to-date performance clawed its way up to +2.45%. My 2022 year-to-date performance ballooned to +62.41%, a new high.
I used the monster selloff to add my first new longs in a while, in EV makers Tesla (TSLA) and Rivian (RIVN).
The Dow Average is down -18.26% so far in 2022. It is the greatest outperformance on an index since Mad Hedge Fund Trader started 14 years ago. My trailing one-year return maintains a sky-high +74.75%.
That brings my 14-year total return to +574.97%, some 2.66 times the S&P 500 (SPX) over the same period and a new all-time high. My average annualized return has ratcheted up to +44.84%, easily the highest in the industry.
We need to keep an eye on the number of US Coronavirus cases at 95.6 million, up 100,000 in a week and deaths topping 1,053,000 and have only increased by 1,000 in the past week. You can find the data here.
On Monday, September 19 at 8:30 AM, the NAHB Housing Market Index for September is released.
On Tuesday, September 20 at 7:00 AM, the Housing Starts and Building Permits for August are out.
On Wednesday, September 21 at 7:00 AM, Existing Homes Sales for August are published. At 11:00 AM EDT, we get the Fed interest rate decision where they are likely to raise by 75 basis points.
On Thursday, September 22 at 8:30 AM, Weekly Jobless Claims are announced.
On Friday, September 23 at 7:00 AM, the S&P Global Flash PMI for September is disclosed. At 2:00 the Baker Hughes Oil Rig Count is out.
As for me, I am reminded of my own summer of 1967, back when I was 15, which may be the subject of a future book and movie.
My family summer vacation that year was on the slopes of Mount Rainer in Washington state. Since it was raining every day, the other kids wanted to go home early. So my parents left me and my younger brother in the hands of Mount Everest veteran Jim Whitaker to summit the 14,411 peak (click here for his story). The deal was for us to hitchhike back to Los Angeles when we got off the mountain.
In those days, it wasn’t such an unreasonable plan. The Vietnam war was on, and a lot of soldiers were thumbing their way to report to duty. My parents figured that since I was an Eagle Scout, I could take care of myself.
When we got off the mountain, I looked at the map and saw there was this fascinating country called “Canada” just to the north. So, we were off to Vancouver. Once there, I learned there was a world’s fair going on in Montreal some 2,843 away, so we hit the TransCanada Highway going east.
Crossing the Rockies, the road was closed by a giant forest fire. The Mounties were desperate and were pulling all abled-bodied men out of the cars to fight the fire. Since we looked 18, we were drafted, given an ax and a shovel, and sent to the front line for a week, meals included.
We ran out of money in Alberta, so we took jobs as ranch hands. There we learned the joys of running down lost cattle on horseback, working all day at a buzz saw, inseminating cows with a giant hypodermic, and eating steak three times a day.
I made friends with the cowboys by reading them their mail, which they were unable to do. There were lots of bills due, child support owed, and alimony demands. Now I know where all those country western lyrics come from.
In Saskatchewan, the roads ran out of cars, so we hopped on a freight train in Manitoba, narrowly missing getting mugged in the rail yard in the middle of the night. We camped out in a box car occupied by other rough sorts for three days. There’s nothing like opening the doors and watching the scenery go by with no billboards and the wind blowing through your hair!
When the engineer spotted us on a curve, he stopped the train and invited us to up to the engine room. There, we slept on the floor, and he even let us take turns driving! That’s how we made it to Ontario, the most mosquito-infested place on the face of the earth.
Our last ride into Montreal offered to let us stay in his boat house as long as we wanted, so there we stayed. Thank you, WWII RAF bomber pilot Group Captain John Chenier!
Broke again, we landed jobs at a hamburger stand at Expo 67 in front of the imposing Russian pavilion. The pay was $1 an hour and all we could eat. At the end of the month, Madame Desjardin couldn’t balance her inventory, so she asked how many burgers I was eating a day. I answered 20, and my brother answered 21. “Well, there’s my inventory problem” she replied.
And then there was Suzanne Baribeau, the love of my life. I wonder whatever happened to her?
I had to allow two weeks to hitchhike home in time for school. When we crossed the border at Niagara Falls, we were arrested as draft dodgers as we were too young to have driver’s licenses. It took a long conversation between US Immigration and my dad to convince them we weren’t.
Then they asked Dad if we should be arrested and sent back on the next plane. He replied, “No, they can make it on their own.”
We developed a clever system where my parents could keep track of us. Long-distance calls were then enormously expensive. So, I called home collect and when my dad answered, he asked what city the call was coming from. When the operator gave him the answer, he said he would not accept the call. I remember lots of surprised operators. But the calls were free, and dad always knew where we were.
We had to divert around Detroit to avoid the race riots there. We got robbed in North Dakota, where we were in the only car for 50 miles. We made it as far as Seattle with only three days left until school started.
Finally, my parents had a nervous breakdown. They bought us our first air tickets ever to get back to LA, then quite an investment.
I haven’t stopped traveling since, my tally now topping all 50 states and 135 countries.
And I learned an amazing thing about the United States. Almost everyone in the country is honest, kind, and generous. Virtually every night our last ride of the day took us home and provided us with an extra bedroom or a garage to sleep in. The next morning, they fed us a big breakfast and dropped us off at a good spot to catch the next ride.
It was the adventure of a lifetime and am a better man for it.
Stay healthy.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Summit of Mt. Rainier 1967
McKinnon Ranch Bassano Alberta 1967
American Pavilion Expo 67
Hamburger Stand at Expo 67
Picking Cherries in Michigan 1967
Global Market Comments
September 12, 2022
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or STUCK IN THE MIDDLE)
(SPY), (TSLA), (TLT), (USO), (VIX), (AAPL)
Buy fear, sell greed.
That is what has been my magic formula for making money over the past 50 years.
But what happens if you get nothing?
What happens if you are stuck in a big fat middle of a range? That seems to be the case now that the market is nailed to the (SPY) 4,000 level, which it turns out is exactly the middle of a four-month trading range.
The market fought the Fed for two months from June and won. It has lost since Jackson Hole. The market has only seen that degree of whipsaw four times since 1950.
It now appears that it is front running a very weak number for the Consumer Price Index on September 13. After that, we get a 75-basis point rate rise on September 20. Good cop first, then bad cop.
That leaves me twiddling my thumbs along with everyone else, waiting for the market to throw up on its shoes. We were almost getting there last week when the Volatility Index (VIX) clawed its way back to $27. Then it gave it all up, falling back to $22. Some $5 is just not enough spread with which to make a living, or worth executing a trade.
And here is the key to the market right now.
You’re not buying stocks for headlines you are seeing today, which are universally dire, cataclysmic, and predicting Armageddon.
You are buying for the headlines that will appear in a year. This will include:
Russia loses the Ukraine War
The price of oil (USO) collapses below $50 a barrel
The European energy crisis ends
Gasoline prices fall below $2.00 a gallon
Inflation falls below 4%
Interest rates stabilize around 3.50%-4.00%
Corporate earnings reaccelerate
We get another $1 trillion in corporate share buybacks
That sounds like one heck of a market to buy into. Why not buy now when everything is on sale, rather than in a year when it is expensive once again?
You don’t have to bet the ranch today. Just scale in, buying 10% of a position a day in your favorite names until you are fully invested. That way, you’ll get an average close to a bottom. You’ll at least get a seat on the train and won’t be left behind waving goodbye from the platform.
That means adding technology stocks to your portfolio, which will be the top-performing sector for the rest of this century.
The other thing you can do is to start getting rid of your defensive names. If you think oil is going below $50 in a year as I do, you don’t want to have a single oil name in your portfolio.
You want to own boring stocks in falling markets and exciting ones in rising markets.
You can’t get THE bottom. I can’t do it, so how are you going to?
There is one other factor that I guarantee you no one is looking at. Do you know anyone who bought a spec home for a quick flip lately? I bet not.
That means there is a lot of speculative capital looking for a new home and I bet that a lot of it is going into the stock market. The same is true with bitcoin.
I just thought you’d like to know.
Apple Rolls Out Next-Gen iPhone. The focus will be on larger phones with faster processors and a better camera. There may also be an inflationary $100 price increase. A new watch and Airpods are also expected. Buzz kill: every two years, this event usually marks a six-month high in the stock. Apple may no longer be the safest stock in the market.
Russia Cuts Gas Supplies to Europe until Ukraine sanctions are lifted. That took the Euro to a 20-year low of under 99 cents. You get into bed with the devil, and you pay the consequences. Russia must desperately need that trade with Europe.
Germany Fights Russia with Coal. Coal is enjoying a renaissance in Germany where it is being used to replace the total cut-off in Russian natural gas. In 2022, coal has jumped from 27% to 33% of electricity production, while gas has plunged from 18% to 11.7%. It goes against the country’s strong environmental principles and will only be used as a bridge towards greatly accelerated alternative energy efforts. Importing all the natural gas they can from the US also helps. It will greatly help Europe hold together this winter to face down the Russian energy war.
Home Equity is Shrinking, down $500 billion from the $11.5 trillion peak. It means less money is available to go into stocks. But we are nowhere near a crash, like we saw in 2008, when home equity nearly went to zero. No liar loans, exaggerated appraisals, or financial crisis this time. This housing recession will be about ice, not fire. There won’t be much of a housing crash when we’re still short 10 million homes. If you sell, your new mortgage will have double the interest rate. Ergo, don’t sell.
Weekly Jobless Claims Hit 3-Month Low, down 6,000 to 222,000. This number is not even close to an economic slowdown. In the wake of the decent nonfarm payroll report last week, it shows that employment is anything but slowing.
Tesla (TSLA) Triples China Deliveries after expanding the Shanghai factory. Elon Musk seems able to accomplish what others can’t, increasing production and sales in the face of rolling Covid lockdowns, heat waves, and materials shortages. Buy (TSLA) on dips.
California Sets a $22 Minimum Wage for fast food workers starting from 2023. It’s a catch-up with minimum wages that haven’t changed for 20 years and represents a broader issue for the rest of the country. Think this may be inflationary? Count on all of this going straight into product price rises. It may become cheaper to make your cheeseburgers at home.
The Bond Market Crashes, with ten-year US Treasury bond soaring 20 basis points to a 3.35% yield. The (TLT) hit a new 2022 low at $107.49. Bonds are reading the writing on the wall from Jackson Hole, even if stocks aren’t. Avoid (TLT).
Oil Crashes $4 on recession fears. Most Russian sales are now taking place 20% below the market to China and India. We may be approaching an interim low as winter approaches unless the Ukraine war ends.
A US Rail Strike Threatens as wage talks stall. A recession could be the result. Negotiators have until September 16 to reach a deal for 115,000 workers. A strike would also spike inflation. This could be our next black swan.
My Ten-Year View
When we come out the other side of pandemic and the recession, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With oil in a sharp decline, inflation falling, and technology hyper-accelerating, there will be no reason not to. The Dow Average will rise by 800% to 240,000 or more in the coming decade. The America coming out the other side will be far more efficient and profitable than the old. Dow 240,000 here we come!
With markets now a snore, my September month-to-date performance ground up to +1.02%. I took profits in my last long in Microsoft (MSFT) going into a rare 100% cash position awaiting the next market entry point.
My 2022 year-to-date performance improved to +60.98%, a new high. The Dow Average is down -12% so far in 2022. It is the greatest outperformance on an index since Mad Hedge Fund Trader started 14 years ago. My trailing one-year return maintains a sky-high +73.65%.
That brings my 14-year total return to +573.54%, some 2.48 times the S&P 500 (SPX) over the same period and a new all-time high. My average annualized return has ratcheted up to +44.98%, easily the highest in the industry.
We need to keep an eye on the number of US Coronavirus cases at 95.2 million, up 300,000 in a week and deaths topping 1,050,000 and have only increased by 2,000 in the past week. You can find the data here.
On Monday, September 12 at 8:30 AM, US Consumer Inflation Expectations for August is released.
On Tuesday, September 13 at 8:30 AM, the US Core Inflation Rate for August is out.
On Wednesday, September 14 at 7:00 AM, the Producer Price Index for August is published.
On Thursday, September 15 at 8:30 AM, Weekly Jobless Claims are announced. We also get Retail Sales for August.
On Friday, September 16 at 7:00 AM, the University of Michigan Consumer Sentiment is disclosed. At 2:00 the Baker Hughes Oil Rig Count are out.
As for me, when you’re 6’4” and 180 pounds, there is not a lot of things that can seriously toss you around. One is a horse, and another is a wave.
It was the latter that took me down to Newport Beach, CA to a beachfront house for my annual foray into body surfing. Newport Beach has some of the best waves in California.
This is the beach that made John Wayne a movie star.
John, whose real name was Marion Morrison, grew up in a Los Angeles suburb and won a football scholarship to the University of Southern California. While still a freshman in 1925, he went bodysurfing at Newport Beach with a carload of buddies. A big wave picked him up and smashed him down on the sand, breaking his right shoulder.
At football practice, there was no way a big lineman could block and tackle with a broken shoulder, so he was kicked off the team and lost his scholarship.
He still had to eat, so he resorted to the famed student USC jobs bulletin board, which I have taken advantage of myself (it’s where I got my LA coroner’s job).
The 6’4” Wayne was hired as a stagehand by up-and-coming movie director John Ford, himself also a former college football star. In 14 years, Wayne worked himself up from gopher, to extra, to a leading man in 1930, and then his breakout 1939 film Stagecoach.
During WWII, Wayne, too old, was confined to entertainment for the USO shows and making propaganda films while the rest of his generation was at the front. He never recovered from that humiliation and spent the rest of his life as a super patriot.
I saw John Wayne twice. My uncle Charles, who was the CFO of the Penn Central Railroad in the 1960s, made a fortune selling short the stock right before it went bankrupt (maybe that was legal then?). He bought a big beach house on California Balboa’s Island right next door to John Wayne’s.
One day, the family was cruising by Wayne’s house, and he was sitting on his front patio in a beach chair. Then one of our younger kids shouted out “he’s bald” which he was. Wayne laughed and waved.
The second time was in the early 1970s. I was walking across the lobby of the Beverly Hills Hotel with the movie star and Miss America runner-up Cybil Shephard on my arm. He walked right up to us and with a big smile said, “hello gorgeous”. He wasn’t talking to me.
I learned a lot about Wayne from my uncle, Medal of Honor winner Mitchell Paige, who was hired as the technical consultant for the 1949 film Sands of Iwo Jima and spent several months working closely with him. The lead character, Marine Sargent John Striker, was based on Mitch.
Film critics complained that Wayne couldn’t act, that he was just himself all the time. But I knew my uncle Mitch well, a humble, modest, self-effacing man, and Wayne absolutely nailed him to a tee.
The Searchers, made in 1958, and directed by John Ford, is considered one of the finest movies ever made. I show it to my kids every Christmas to remind them where they came from because we have an ancestor who was kidnapped in Texas by the Comanches and survived.
John Wayne was a relentless chain smoker, common for the day, and lung cancer finally caught up with him. His first bout was in 1965 when he was making In Harm’s Way, the worst war movie he ever made. His last film, The Shootist, made in 1978, was ironically about an old gunslinger dying of prostate cancer.
John Wayne hosted the 1979 Academy Awards rail thin, racked by chemotherapy and radiation treatments. He died a few months later after making an incredible 169 movies in 50 years.
John Wayne was one of those people you’re lucky to run into in life. He was a nice guy when he didn’t have to be.
As for those waves at Newport Beach, I can vouch they are just as tough as they were 100 years ago.
Stay healthy,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
August 29, 2022
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or IT’S TIME FOR PAIN)
(SPY), (QQQ), (TLT), (VIX), (TSLA)
Please don’t call me anymore.
I don’t want to hear from you, not even for a second!
I’ve deleted your email from my address book, unfriended you from Facebook, and already forgotten your telephone number.
For you have committed the ultimate sin.
You have asked me if the market is going to crash in September one too many times. This is for a market that over the last 100 years has gone up 80% of the time.
I wouldn’t mind if it were just you. But hundreds of you? Really?
Hardly an hour goes by without me getting an email, text message, or phone call telling me that you just heard from another guru saying that we are going into another Great Depression, 1929-style stock market crash, and financial Armageddon.
Enough already!
These permabear gurus have been the bane of my life for the last 54 years, even 60 years if you count the time I traded stocks in my dad’s brokerage account when I was a paper boy.
First, there was Joe Granville (RIP), the first Dr. Doom, who in 1982 predicted that the Dow Average would crater from 600 to 300. Instead, it went up 20 times to 12,000. Joe never did change his mind.
Next came one-hit wonder Elaine Gazarelli at Lehman Brothers who accurately predicted the 1987 crash, which delivered a one-day 20% haircut for the Dow. She kept on endlessly predicting crashes after that which never showed up. In the end, the Dow went up 18 times. At least Elaine’s Lehman Brothers stock went to zero.
Then we got another Dr. Doom, Dr. Nouriel Roubini, who turned bearish going into the 2008-2009 Great Recession when the Dow took a 54% hickey. Did the eminent doctor ever turn bullish? Not that I’ve heard, and the Dow went up 6X from that bottom.
So, here we are today. Fed governor Jay Powell has just suggested that he may keep interest rates higher for longer and that we may be in for some pain. That took the Dow down 1,000, with high-growth technology stocks leading the charge to the downside.
And what do I get, but an email from a subscriber saying he just heard from another guru saying that Powell’s comments confirm that we are not headed for a Roaring Twenties but a whimpering twenties, and that the Dow is plunging to 3,000.
Give me a break!
I have a somewhat different read on Powell’s comments.
Not only will they bring a PEAK in interest rates much sooner, but they also move forward the first CUT in interest rates in three years as well. That is what long term investors and hedge funds are looking for, not the last move in the current trend, but the first move in the next trend.
That’s what all the long-term money is doing, which accounts for 90% of market ownership.
That’s what the smart money is doing.
The Volatility Index (VIX) rocketed to $26 on Friday. Call me when it gets to $30. Then I might get interested.
In the meantime, the dumb money is selling.
It helps a lot that the principal drivers of Powell’s high interest rate are rolling over fast. Residential real estate is in the process of becoming a major drag on the economy. Used car have gone from an extreme shortage to a glut in two months. I never did sell that 1968 Chevy Corvair. The online jobs market has suddenly gone from bid to offered.
I am praying that Powell’s comments bring us a 4,000 Dow point selloff and a double bottom at (SPY) $362. For that will set up another 20%-30% worth of money-making opportunities by yearend.
If that happens, I am going to book the Owner’s Suite on the Queen Mary II for a Transatlantic cruise, the Orient Express, and a week at the Cipriani Hotel in Venice.
But wait!
I’ve already booked the owners suite on the Queen Mary II, the Orient Express, and the Cipriani Hotel, thanks to this summer’s Tesla (TSLA) trades.
How do you upgrade Q1 class?
I guess I’ll just have to get creative.
Fed Governor Powell pees on Stock Market Parade from the greatest possible height, giving an extremely hawkish speech at Jackson Hole. “Some Pain” is ahead. The market took the hint and sold off 1,000 points in a heartbeat ending at the lows, with technology taking the greatest hit. That puts a 75-basis point rate hike back on the table for September together with a major market correction. Have a nice flight back to DC Jay. That leaves me quite happy with my one put spread in the (SPY) and 90% cash.
Inflation is in Free Fall. It’s not just gasoline, but every product that uses energy. That has rapidly cut the prices of airline tickets, rental cars, butter, and even chicken breasts. Used cars have gone from a shortage to a glut in months. New job offers are fading rapidly. I’m looking for a 4% inflation rate by year-end….and a soaring stock market.
California Bans Internal Combustion Engine Sales by 2035. It’s a symbolic gesture because the market will move beyond them well before 13 years. Both (GM) and Ford (F) said they’re going all EV. I went all-EV in 2010 and saved a bundle.
QT Accelerates Next Thursday to $95 billion a month and you may wonder why stock markets aren’t crashing. QT will come to 1% of the outstanding $9 trillion Fed balance sheet per month and continue at that rate for the indefinite future. At that rate, the Fed balance sheet won’t be unwound until 2032. Many more factors will arrive to move stocks up or down before then. In order words, the Fed is trying to take $9 trillion out of the system with no one noticing. They may succeed.
Biden Cancels $10,000 in Student Debt per Borrower, and $20,000 for Pell Grants. Some 9 million borrowers will have their loans wiped clean. It is a positive for the economy and minimally inflationary as a lot of these college graduates went into low-paying jobs like teaching or government service. Biden is delivering for the people who voted for him. What a shocker! Too bad I already paid my loan in full. How much did a four-year education cost me? $3,000! It’s my most rapidly appreciating asset.
Pending Home Sales Dive 1% in July on a signed contract basis and are down 19.9% YOY. Only the west saw an increase. Some eight of nine months have shown declines. Homes are sitting on the market longer and sellers are pulling back. Anyone who sells now loses their 2.75% mortgage and won’t get it back.
US Vehicle Prices Hit Record High, despite soaring interest rates. The average transaction price rose to $46,259, up 11.5% YOY. Inventory shortages continue to limit sales, with August expected to reach 980,000 units, down 2.6% YOY. It makes big-ticket EVs even more competitive.
Toll Brothers Orders Plunge 60% in Q2, as demand for luxury homes vaporize. It expects to be down 15% for the full year. It could take 18 months for these dire numbers to be in the general economy. Tol (TOL) dominates in the “move up market” where prices average $1 million or more and is especially dependent on home mortgages.
New Home Sales Crash 12.6%, in July, the worst number since the Great Recession 2008 level. The housing recession is here for sure, but how bad will it get when we have a shortage of 10 million homes?
OPEC+ Maneuvers for Supply Cut to halt the dramatic 35% price decline. The futures market is discounting much greater declines, which the Saudis describe as “broken.” You are on the other side of this trade.
My Ten-Year View
When we come out the other side of pandemic and the recession, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With oil prices and inflation now rapidly declining, and technology hyper-accelerating, there will be no reason not to. The Dow Average will rise by 800% to 240,000 or more in the coming decade. The America coming out the other side will be far more efficient and profitable than the old. Dow 240,000 here we come!
With some of the market volatility (VIX) now dying, my August month-to-date performance appreciated to +4.87%.
My 2022 year-to-date performance ballooned to +59.70%, a new high. The Dow Average is down -12.8% so far in 2022. It is the greatest outperformance on an index since Mad Hedge Fund Trader started 14 years ago. My trailing one-year return maintains a sky-high +73.75%.
That brings my 14-year total return to +572.26%, some 2.56 times the S&P 500 (SPX) over the same period and a new all-time high. My average annualized return has ratcheted up to +44.83%, easily the highest in the industry.
We need to keep an eye on the number of US Coronavirus cases at 94 million, up 300,000 in a week and deaths topping 1,043,000 and have only increased by 2,000 in the past week. You can find the data here.
On Monday, August 29 at 8:30 AM EDT, the Dallas Fed Manufacturing Index for August is released.
On Tuesday, August 30 at 7:00 AM, the S&P Case Shiller National Home Price Index for August is out. The monthly cycle of job reports starts with JOLTS at 7:00 AM.
On Wednesday, August 31 at 7:15 AM, ADP Private Sector Employment for July is published.
On Thursday, September 1 at 8:30 AM, Weekly Jobless Claims are announced. US GDP for Q2 is released.
On Friday, September 2 at 7:00 AM, the Nonfarm Payroll Report for August is disclosed. At 2:00 the Baker Hughes Oil Rig Count is out.
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 there was this little old lady living in the Waldorf Towers who 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 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 Missouri.
The MacArthurs 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.
