Global Market Comments
January 12, 2021
Fiat Lux
Featured Trade:
(MAD HEDGE 2020 PERFORMANCE ANALYSIS),
(SPY), (TLT), (TBT), (TSLA), (GLD),
(SLV), (V), (AAPL), (VIX), (VXX)
(TESTIMONIAL)
Posts
Global Market Comments
December 7, 2020
Fiat Lux
FEATURED TRADE:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or A DICEY LANDING)
(SPY), (TLT), (AMZN), (TSLA), (CRM), (JPM), (CAT), (BABA),
(FCX), (GLD), (SLV), (UUP), (FXE), (FXA), (FXB), (FXY), (FXI), (EWZ), (THD), (EPU)
Landing my 1932 de Havilland Tiger Moth biplane can be dicey.
For a start, it has no brakes. That means I can only land on grass fields and hope my tail skid catches before I run out of landing strip. If it doesn’t, the plane will hit the end, nose over, and dump a fractured gas tank on top of me. Bathing in 30 gallons of 100 octane gasoline with sparks flying is definitely NOT a good long term health plan.
The stock market is starting to remind me of landing that Tiger Moth. On Friday, all four main stock indexes closed at all-time highs for the first time since pre-pandemic January. A record $115 billion poured into equity mutual funds in November. This has all been the result of multiple expansion, not newfound earnings.
Yet, stocks seem hell-bent on closing out 2020 at the highs.
And there is a major factor that the market is completely ignoring. What if the Democrats win the Senate in Georgia?
If so, Biden will have the weaponry to go bold. The economy goes from zero stimulus to maybe $6 trillion raining down upon it over the next six months. That will go crazy, possibly picking up another 10%, or 3,000 Dow points on top of the post-election 4,000 points we have seen so far.
That is definitely NOT in the market.
The other big decade-long trend that is only just starting is the weak US dollar. Lower interest rates for longer were reaffirmed by the appointment of my former economics professor Janet Yellen as Treasury Secretary.
A feeble dollar brings us a fading bond market, as half the buyers are foreigners. A sickened greenback also provides the launching pad for all non-dollar assets to take off like a rocket, including commodities (FCX), precious metals (GLD), (SLV), Bitcoin, and the currencies (UUP), (FXE), (FXA), (FXB), (FXY), and emerging stock markets like China (FXI), Brazil (EWZ), Thailand (THD), and Peru (EPU).
All of this is happening in the face of a US economy that is clearly falling apart. Weekly jobless claims for November came in at 245,000, compared to a robust 638,000 in October, taking the headline unemployment rate down to 6.9%. The real U6 unemployment rate stands at an eye-popping 12.0%, or 20 million.
Some 10.7 million remain jobless, 900,000 higher than in February. Transportation and Warehousing were up 140,000, Professional & Business Services by 60,000, and Health Care 46,000. Retail was down 35,000 as stores shut down at a record pace.
OPEC cuts a deal, adding 500,000 barrels a day to the global supply. The hopes are that a synchronized global recovery can take additional supply. Texas tea finally busts through a month's long $44 cap, the highest since March. Avoid energy. I’d rather buy more Tesla, the anti-energy.
Black Friday was a disaster, with in-store shopping down 52%. Long lines and 25% capacity restrictions kept the crowds at bay. If you don’t have an online presence, you’re dead. In the meantime, online spending surged by 26%.
Amazon (AMZN) hires 437,000 in 2020, probably the greatest hiring binge since WWII, and is continuing at the incredible rate of 3,000 a week. That takes its global workforce to 1.2 million. Most are $12 an hour warehouse and delivery positions. The company has been far and away the biggest beneficiary of the pandemic as the world rushed to online commerce.
Tesla’s (TSLA) full self-driving software may be out in two weeks, instead of the earlier indicated two years. The current version only works on freeways. The full street to street version could be worth $8,000 a car in upgrades. Another reason to go gaga over Tesla stock.
Goldman Sachs raised Tesla target to $780, the Musk increased market share to a growing market. No threat from General Motors yet, just talk. Volkswagen is on the distant horizon. In the meantime, Tesla super bear Jim Chanos announced he is finally cutting back his position. He finally came to the stunning conclusion that Tesla is not being valued as a car company. Go figure. Short interest in Tesla has plunged from a peak of 35% in March to 6% today. It’s learning the hard way.
The U.S. manufacturing sector pauses, activity in the U.S. manufacturing sector barely ticked up in November as production and new orders cratered, data from a survey compiled by the Institute for Supply Management showed on Tuesday. The ISM Manufacturing Report on Business PMI for November stood at 57.5, slipping from 59.3 in October.
Salesforce (CRM) overpays for workplace app Slack, knocking its stock down 9%. This is worth a buy the dip trade in the short-term and this is still a great tech company which is why the Mad Hedge Tech Letter sent out a tech alert on Salesforce on the dip.
Weekly Jobless Claims dive, with Americans applying for unemployment benefits falling last week to 712,000 down from 787,000 the week before. The weakness is unsurprising as we head into seasonal Christmas hiring.
The end of the tunnel for Boeing (BA) as they bring to an end an awful 2020. Irish-based airline Ryanair Holdings placed a large order for a set of brand new Boeing 737 MAX aircraft, giving the plane maker a shot in the arm as the single-aisle jet comes off an unprecedented 20-month grounding.
Ryanair, Europe’s low-cost carrier, has 135 Boeing 737 MAX jets on order and options to bring the total to 200 or more. Hopefully, they won’t crash this time around. My fingers are crossed.
Dollar Hits 2-1/2 Year Low. With global economies recovering, the next big-money move will be out of the greenback and into the Euro (FXE), the Aussie (FXA), the Looney (FXC), the Japanese yen (FXY), the British pound (FXB), and Bitcoin. Keeping interest rates lower for longer will accelerate the downtrend.
When we come out the other side of this pandemic, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With interest rates still at zero, oil cheap, there will be no reason not to. The Dow Average will rise by 400% to 120,000 or more in the coming decade. The American coming out the other side of the pandemic will be far more efficient and profitable than the old. Dow 120,000 here we come!
My Global Trading Dispatch catapulted to another new all-time high. December is up 5.34%, taking my 2020 year-to-date up to a new high of 61.78%.
That brings my eleven-year total return to 417.69% or double the S&P 500 over the same period. My 11-year average annualized return now stands at a nosebleed new high of 38.00%. My trailing one-year return exploded to 64.56%. I’m running out of superlatives, so there!
I managed to catch the 50%, two-week Tesla melt-up with a 5X long position, which is always nice for performance.
The coming week will be a slow one on the data front. We also need to keep an eye on the number of US Coronavirus cases at 14.5 million and deaths at 285,000, which you can find here.
When the market starts to focus on this, we may have a problem.
On Monday, December 7 at 4:00 PM EST, US Consumer Credit is out.
On Tuesday, December 8 at 11:00 AM, the NFIB Business Optimism Index is published.
On Wednesday, December 9 at 8:00 AM, MBA Mortgage Applications for the previous week are released.
On Thursday, December 10 at 8:30 AM, the Weekly Jobless Claims are published. At 9:30 AM, US Core Inflation is printed.
On Friday, November 11, at 9:30 AM EST, the US Producer Price Index is announced. At 2:00 PM, we learn the Baker-Hughes Rig Count.
As for me, at least there is one positive outcome from the pandemic. Boy Scout Christmas tree sales are absolutely through the roof! We took delivery of 1,300 trees from Oregon for our annual fundraiser expected to sell them in two weeks. We cleared out our entire inventory in a mere six days!
We sold trees as fast as we could load them. With the scouts tying the knots, only one fell onto the freeway on the way home. An “all hands on deck” call has gone out to shift the inventory.
It turns out that tree sales are booming nationally. The $2 billion a year market places 21 million trees annually at an average price of $8 and are important fundraisers for many non-profit organizations. It seems that people just want something to feel good about this year.
Governor Gavin Newsome’s order to go into a one-month lockdown Sunday night inspired the greatest sales effort I have ever seen, and I worked on a Morgan Stanley sales desk! We shifted the last tree hours before the deadline, which was full of mud with broken branches and had clearly been run over by a truck at a well-deserved 50% discount.
I can’t wait until next year!
Stay healthy.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
November 30, 2020
Fiat Lux
FEATURED TRADE:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or SANTA COMES EARLY),
(SPY), (TLT), (TSLA), (JPM), (CAT), (BABA)
Everyone has been expecting a Santa Claus rally this year, but it looks like the jolly old man arrived early.
The holiday-shortened month was the best for stocks in 37 years. If you owned Tesla, like we did, it was even better. Elon Musk’s miracle creation shot up an incredible 60% this month.
At $600 a share, the company’s market capitalization expanded by an eye-popping $363 billion to $580 billion, the fastest wealth creation in history. The gain alone would rank it as the 55th largest company in the S&P 500. Similarly, Elon himself earned $100 billion this year, or $17 million an hour, the speediest wealth accumulation since capitalism begin.
These are numbers for the ages.
It’s all proof that if you live long enough, you see everything. OK, all of you who thought the Dow would soar by 12,000 points, or 67% in eight months, please raise your hands. Yes, I didn’t think I’d see many.
Which all raises some concerns for me. But then I’m always concerned. That’s why I’m still alive. That’s why I still have two nickels to rub together. My Mad Hedge Market Timing Index shouting “EXTREME SELL” urges further caution.
Rising at this meteoric pace, the market is pulling forward a big chunk of gains from 2021. Make hay while the sun shines because we may suffer long periods of boredom next year, when the Volatility Index (VIX) drops down to $10 and stays there.
It all reminds me of the Plaza Accord in 1987, when Japan agreed to a doubling of the yen against the US dollar in exchange for continued access to the US car market.
We all knew this would eventually demolish the Japanese stock market, but not for a while. I remember at the time, an old Japanese folk expression became popular. “The fool may be dancing, but the greater fool is watching.” The Nikkei Average doubled in three years before it crashed. Portfolio managers who only watched were left to pull rickshaws for a living. (This was before Uber).
This is why I have been urging followers to realize their biggest profits, as in Tesla, so they have dry powder with which to buy the next inevitable dip. And you don’t want to be left pulling a rickshaw.
The US Treasury delivered a hit for stocks, as outgoing Secretary Mnuchin cancels all remaining stimulus programs, sucking $459 billion out of the economy. It has so far prompted a $740-point dive in the Dow Average and a $7 rally in the TLT. It’s the ultimate scorched earth strategy that will prolong the recession. Use this move to buy more stocks (SPY) and sell short more bonds (TLT).
Janet Yellen was appointed the new Treasury Secretary in the incoming Biden administration. My old Berkeley economic professor wins again. She is probably the most qualified secretary ever appointed and as academic and former Fed governor. It looks like I may serve as an informal consultant on financial and monetary affairs like I did last time. I drove by her house last week and the vans were already loading up. The markets love her, with the Dow up 500 points and hitting 30,000. Janet is the Queen of Ease and the Master of QE, running a hyper-accommodative policy for five years.
Money is pouring into Asia. First into the pandemic, China was first out. With the most draconian lockdown yet seen, the Middle Kingdom was able to cap total deaths at 4,000. The US is now losing that number of people every two days….with one fourth the population. As a result, China now has the world’s strongest economy, growing at a 6.6% annual rate. The incoming Biden administration will lead to a major improvement in trade relations, bringing us back to a return of globalization. All of this is hugely positive for China.
Tesla tops $580 billion in market cap with a ballistic 37% move since its S&P 500 listing was announced two weeks ago. Look like Elon is due for another $20 billion bonus. Mad Hedge went into this with an aggressive 40% long weighting, making it the best trade of 2020, if not the decade. Tesla is my next trillion-dollar company.
Bitcoin crashed, down nearly $4,000 in 24 hours, or almost 20%. As is always the case with an asset with no fundamentals, nobody knows why as the cryptocurrency tests $16,000, down from $20,000. Fears of increased US regulation may be a factor.
New Home Sales exploded, up 41% YOY to 999,000, and gaining 1.5% in October. It’s the hottest since 2006. Homes sold but still under construction are up 60% YOY. Inventories plunged to 3.5 months and prices are rising due to shortages of labor and materials. This is where inflation begins.
Weekly Jobless Claims leaped to 778,000. The Coronavirus is felling people in the labor force in large numbers. Workers are losing jobs, benefits, and health care just as the pandemic goes exponential.
When we come out the other side of the pandemic, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With interest rates still at zero, oil cheap, there will be no reason not to. The Dow Average will rise by 400% to 120,000 or more in the coming decade. The American coming out the other side of the pandemic will be far more efficient and profitable than the old. Dow 120,000 here we come!
This has been the best week, month, and year in the 13-year history of the Mad Hedge Fund Trader, and the week was only three and a half days long!
My Global Trading Dispatch catapulted to another new all-time high. November is up 22.06%, taking my 2020 year-to-date up to a new high of 58.09%.
That brings my eleven-year total return to 414.00% or double the S&P 500 over the same period. My 11-year average annualized return now stands at a nosebleed new high of 37.63%. My trailing one-year return exploded to 64.91%. I’m running out of superlatives, so there!
I managed to catch the 50%, two-week Tesla melt-up with a rare quadruple long position, which is always nice for performance.
The coming week will be all about jobs. We also need to keep an eye on the number of US Coronavirus cases at 13 million and deaths 270,000, which you can find here.
When the market starts to focus on this, we may have a problem.
On Monday, November 30 at 11:00 AM EST, Pending Home Sales for October are released.
On Tuesday, December 1 at 11:00 AM, The ISM Manufacturing Index for November is out.
On Wednesday, December 2 at 9:15 AM, the ADP Private Employment Report is printed.
On Thursday, December 3 at 9:30 AM, the Weekly Jobless Claims are published.
On Friday, December 4 at 8:30 AM, the Nonfarm Payroll Report for November is called. At 2:00 PM, we learn the Baker-Hughes Rig Count.
As for me, it’s Christmas tree season for the Boy Scouts again, so I just spent the morning unloading 700 conifers from a semi-truck that just arrived from Corvallis, Oregon. The scouts sell them to raise money for camping trips for the upcoming year. Some of the trees were 12 feet high and two men had to struggle to get them in place.
Last week, I took the scouts to Hendy State Park in northern Mendocino county. We were the only ones camping among the 2,000 year old giant redwoods, but all the RV sites were full. I realized then that tens of thousands are riding out the pandemic and the Great Depression in the California State Park system, rotating locations every two weeks to keep from being kicked out. These are our modern-day “Hooverville’s.”
It’s a sign of the times.
Stay healthy.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
November 27, 2020
Fiat Lux
FEATURED TRADE:
(NOVEMBER 25 BIWEEKLY STRATEGY WEBINAR Q&A),
(TSLA), (CRM), (CRSP), (CVS), (SQ), (CRSP), (LUV), (GLD). (SLV), (SPY), (TMO), (UUP), (TAN), (FXA), (FXE), (FXY), (FXB), (CYB)
Below please find subscribers’ Q&A for the November 25 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Silicon Valley, CA with my guest and co-host Bill Davis.
Q: Is gold (GLD) still a hold?
A: Long term yes; short term no. Short term, cash is being drained out of gold in order to buy Bitcoin, just like silver. And once Bitcoin peaks, which could be today or tomorrow when it hits 20,000, then you could get a round of profit-taking and a nice little pop in gold. So, it's basically moving totally counter-cyclically to Bitcoin and the other cryptocurrencies right now.
(Note: since this webinar, Bitcoin has crashed by $3,000)
Q: A competitor of yours claims that asymptomatic transmission of COVID does not occur.
A: I would bet money that person does not have a medical degree. Asymptomatic transmission occurs in almost all diseases, so why COVID would be an exception is beyond me. I suggest that somebody is trying to sell newsletters at your expense with zero knowledge about the topic. Ask him to kiss a Covid victim. This is common in my industry where 99% of the people are crooks. This is also an example of the vast amounts of information that have been spread during an election year.
Q: Will you take a vaccine when it’s out or will you let others try it first?
A: Actually, by the time the public gets the vaccine, more than a million people will have already tried it, so I think it will be fairly safe. I am probably already the most vaccinated person on the planet; I've had flu shots every year for 40 years, so I will happily try it out. At my age, I have little to lose. And I would like to travel again, and that’s going to be a requirement for international travel. I am worried there could be long term side effects that we’ve seen with other drugs in the past, like all future children being born without arms and legs, which is what happened in the 1950s with Thalidomide.
Q: If the Senate flips to the Democrats, how do you see it affecting the market?
A: It doesn’t really affect the market overall; what it will do is affect sector reallocation. Solar, alternative energy and ESG companies do a lot better in A Democratic Senate, and energy oil companies do a lot worse. All you do is short the losers and buy the winners; it really makes no difference who wins. Most of the big conflicts over issues these days are social ones that don’t affect the market.
Q: Where do you see Tesla (TSLA) by the end of the year?
A: Well, this morning, it’s at an all-time high of $565. It looks like it wants to take a run at $600, and then we will be up 50% from where the news was announced that it was joining the S&P 500. That seems to me like a heck of a move on no real fundamental news. During this news, the market completely ignores a Model X recall and a Model Y pan from Consumer Reports. I would be inclined to take profits there or at least roll the strikes up on my options positions.
Q: What’s a good stock to play a commodity recovery?
A: You can’t do any better than Freeport-McMoRan (FCX), which I’ve been following for almost 50 years since I covered it for the Australian Financial Review newspapers.
Q: Will Salesforce (CRM) hold?
A: Yes, it’s just a matter of time before we break out to substantial new highs, and this is a stock that could double next year.
Q: What brokers do you suggest?
A: I would pick tastyworks, owned by my friend Tom Sosnoff who will be speaking at the Mad Hedge Traders & Investors Summit next week and will be answering all your questions. Click here for their site. To register for the summit, click here.
Q: Is CVS (CVS) a good buy?
A: I would say yes; a billion Covid-19 vaccine doses will need to be distributed next year. You can't do that without all the drug companies participating big time.
Q: Does Trump have a chance to win in his lawsuits?
A: It’s more likely that I will be elected the next Miss America; so, I wouldn’t place any bets on that. Some 30 consecutive Republican judges ruling against him does not augur well for his future.
Q: Would you buy any LEAPS here (Long Term Equity Participation Securities)?
A: Only in special one-off situations in the domestic stocks that haven’t moved in ten years. There are a lot of those out there now that I have been recommending. Those are all fertile territory for LEAPs, especially going out 2 years where you get the maximum bang for the buck and a 1,000% return. Don’t touch LEAPs in technology stocks here, and don’t touch Tesla in LEAPs.
Q: What’s your outlook on Southwest Air (LUV)?
A: I like it; it’s one of the healthiest domestic airlines most likely to come back.
Q: Are you going to update your long-term portfolio?
A: Yes, but I only update it twice a year and my next turn is on January 22. If you bought the last update on July 22, you made a fortune getting into Freeport McMoRan at $12 (it’s now $23), CRISPER Therapeutics at $80 (CRSP) (it’s now $110), and Square (SQ) at $110 (the current is $212). You can find it by logging into www.madhedgefundtrader.com, going to My Account, clicking on Global Trading Dispatch, on the drop-down menu, click on the Long-Term Portfolio tab and then clicking on the red tab for the Long-Term Portfolio. That lets you download an excel spreadsheet.
Q: Do you have any LEAPS to suggest now?
A: I only put out portfolios of LEAPS at giant market bottoms like we had in March. Then I put out lists and lists of LEAPS. At all-time highs, it’s not good LEAPS territory, except for specific names. So, if you want to get involved in that on a regular basis, I suggest you sign up for our Mad Hedge Concierge Service. There they are making millions of dollars a week right now.
Q: Where does the US dollar (UUP) go from here?
A: Straight down; the outlook for the buck couldn't be worse. I would be selling short the US dollar like crazy right now except that there are much better trades in US equities.
Q: Just to be clear, there’s no voter fraud?
A: There’s probably never been an election in US history without voter fraud on all sides; it’s just a question of who’s better at it. In the 1948 Texas Democratic Party runoff, back when the party owned Texas, Lyndon Johnson won by 87 votes out of 988,295 cast. It was later found that in five Hispanic-dominated counties that bordered Mexico, everyone had voted 100% for Johnson ….in alphabetical order. Johnson then took the seat with a 66% margin and went on to dominate the US Senate. I remember in the 1960 election, all the military absentee votes were sent flying around in circles over the Atlantic so Kennedy would win; that’s a story that’s been out there for a long time.
Q: You said stay away from other EVs except for Tesla?
A: A few have gone crazy this week, but that doesn’t mean they can actually make a car. So, you might get lucky on a quick trade on some of these, but long term, I don’t think any of the other non-Tesla EV companies are going to make it except for General Motors, which is plowing $27 billion into the sector. Even if (GM) may be able to put out a lot of cars, but they won’t be able to make very much money at it because they’re nowhere near the neighborhood of Tesla with the software where all the money is made.
Q: As the dollar gets weaker, will you expand your international stock picks?
A: Yes, we put out the first one in a long time, Ali Baba (BABA), on Monday, and we’ll be adding to that a bunch. I think the dollar could be weak for 5 or 10 years, a lot like it was in the 1970s.
Q: What’s your outlook for silver (SLV)?
A: Same as for gold (GLD). Quiet for the short term, double for the long term.
Q: Favorite names in biotech?
A: For that, you really need to subscribe to the biotech letter; we’re giving you two names a week there and all of them have done great. But another one might be Thermo Fisher (TMO), which seems to double every time I recommend it. It’s a great takeover target too.
Q: Is there any possibility of a 30% dip in the market (SPY) in 2021?
A: No, I don’t see more than a 10% dip in 2021. The tailwinds now are gale-force, generational, and will run for a decade.
Q: How do you sell the US dollar rally?
A: You buy all the ETFs that we cover in our foreign exchange sections. Those are the Australian dollar (FXA), the Euro (FXE), the Japanese Yen (FXY), the British pound (FXB), and the Chinese Yuan (CYB). Those are five ETFs that will do well on a weak dollar for the next several years.
Q: What about the Invesco Solar ETF TAN?
A: We have been recommending (TAN) for many years and it has done spectacularly well. I still love it long term, but it’s had one heck of a run; it’s up 300% from the March low. I think the entire country is about to have a solar explosion because the costs are now quite simply less than for oil. It’s an economic question. We are going to an all-Electric America.
Q: What do you think about LEAPS on gold?
A: It’s not really LEAPs territory yet, but on a two-year view, you’d have to do well on gold LEAPs.
Q: Is the Invesco DB US Dollar Index Bullish Fund (UUP) good to buy?
A: You should be looking to short the UUP. It’s a long dollar basket which we think will do terribly.
Good Luck and Stay Healthy.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
November 23, 2020
Fiat Lux
FEATURED TRADE:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or THE VACCINE PUT IS IN),
($INDU), (SPY), (TLT), (GLD), (TSLA)
Global Market Comments
November 16, 2020
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or RAIDING THE PIGGY BANK),
(SPY), ($INDU), (JPM), (CAT), (UNP), (UPS), (SLV), (TLT), (TSLA)
I remember the last time that the market went up 10% in ten days.
In the fall of 1982, I was in the office of Carl Van Horn, the chief investment officer of JP Morgan Bank. I was interviewing him about the long-term prospects for the stock market with the Dow Average at 600 and gurus like Joe Granville predicting Dow 300 by yearend.
The odd thing about the interview was that he kept ducking out of the room for a minute at a time and then coming back in. I finally asked him what he was doing. He answered, “Oh, I had to go out and buy $100 million worth of stock.”
And that was back when $100 million actually bought you something!
Over the last two weeks, the Dow Average has tacked on a historic $4,000 points. For a few fleeting second, it actually touched 30,000. Cassandras everywhere are tearing their hair out.
The monster rally began a few days before the election and has continued unabated. In my view, this is the second leg of a 20-fold move that started in 2009 when the Dow was at 6,000 and will continue all the way up to 120,000 by 2029.
No wonder investors are so bullish! It seems that recently, quite a few have come over to my way of thinking.
And how could they not be so bovine-inclined?
The most contentious election in history over. The pandemic is about to end. In a year we’ll, all have our Covid-19 vaccinations, at least those who want them. I’m planning on getting all six.
The greatest burst of economic growth in history is about to be unleased. Consumption wasn’t destroyed, just deferred into 2021 and 2022, unless you’re in the cruise, airline, or restaurant business. The exponential profit growth unleashed by the pandemic isn’t even close to being discounted.
This hasn’t been just any old rally. Stocks left for dead years ago, the old-line industrials and cyclicals have sprung back to life. Union Pacific (UNP) has exploded. JP Morgan Chase (JNP) has gone off to the races. Caterpillar (CAT) is in orbit.
The great thing about these moves is that it is very early days. They could run for years. But where will the money come from to pay for these? How about raising the big tech piggy bank, which has been leading markets for years and is now wildly overvalued.
However, $4,000 points is a lot. So, we may get some back and fill and a sideways “time” correction before we attempt higher highs by yearend. The only thing that could upset this scenario is if Covid-19 cases explode, which they are now doing.
Where will the market care? Who knows, but like stock prices, US Corona cases have doubled in ten days to 160,000.
Covid-19 is cured! News that Pfizer (PFE) has discovered a Covid-19 vaccine that is 90% effective has sent stocks soaring to new all-time highs! The Dow futures were up $1,800 at the highs pre-market. The Great Depression is over. Recovery stocks like banks, cruise ships, restaurants, energy, and railroads are exploding to the upside, with stay-at-home stocks such as couriers, precious metals, and streaming companies in free fall. Some 500,000 health care workers have priority in getting the two-shot regime. The US Army will begin national distribution almost immediately, but you may not get it until the summer.
Market volatility crashed, with the Volatility Index (VIX) down from $41 last week to $18. Happy times are here again, at least says the market, this minute. I told you to go short last week!
Walt Disney is the best recovery play in the market. With theme parks, hotels, and cruise ships, it had the most exposure of any blue-chip company to the pandemic. It is also best positioned for any recovery. The stock was up 26% at the highs this morning. Only its rock-solid balance sheet gets this company alive. My 2021 target is $200 a share. Back to waiting in lines for hours, packing shoulder to shoulder on rides, and paying $20 for hamburgers.
The end of the depression may be in sight, but the US still faces a massive loan default wave that could erode confidence in the economy. A full economic recovery in a year will be too late for millions of businesses, especially small ones. The Fed says the risks are “severe,” and Disneyland is still laying off workers. Just when you think we are risk-free; we are not.
A big recovery in dividend stocks is coming after sitting in the doghouse for years while big tech hogged the limelight. Phillip Morris (PM) at a 6.7% yield? AbbVie (ABBV) at 5.5%? Williams Co (WMB) at 8.3%? They certainly will draw some buyers in this near-zero interest rate world. High yields REITs are also in for some joy now that a vaccine is on the horizon.
Home Prices are soaring at the fastest rate in seven years. Ultra-low interest rates and a structural shortage create the perfect storm for higher prices. Houses are now seen as “safe” since they didn’t crash 40% like the stock market did in the spring. Mortgage brokers are so overloaded it takes three months to get a refi done. This could continue for another decade.
China’s “Single’s Day” breaks all records, bringing in an eye-popping $116 billion in sales for Alibaba (BABA). US customers were the biggest buyers, eclipsing our “Black Friday” by a huge margin. I told you (BABA) was a “BUY”.
Biden could lock down the economy for 4-6 weeks if new cases keep growing at their current rate. That would knock the pandemic on the nose for good, but is it worth the price? That is an idea making the rounds in the incoming Biden administration. Cases could be peaking at 250,000 a day right around the inauguration. I may not go this year.
Stocks may Go up for years. That’s is what the Volatility Index (VIX) is telling us down here at $22. If we break below $20 and stay there, then the long-term Bull market becomes a sure thing. Stocks are now discounting the end of the pandemic.
When we come out the other side of pandemic, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With interest rates still at zero, oil cheap, there will be no reason not to. The Dow Average will rise by 400% to 120,000 or more in the coming decade. The American coming out the other side of the pandemic will be far more efficient and profitable than the old. Dow 120,000 here we come!
My Global Trading Dispatch exploded to another new all-time high last week. November is up 12.31%, taking my 2020 year-to-date up to a new high of 48.34%. That brings my eleven-year total return to 404.25% or double the S&P 500 over the same period. My 11-year average annualized return now stands at a new high of 37.03%.
It was a week of profit-taking on the fully invested portfolio I piled on just before the election. My one new long was in the silver ETF (SLV) and my one new short was in (TLT), both of which turned immediately profitable. I used the one dip of the week to cover a short in the (SPY) close to cost.
It worked in spades.
The coming week will be a sleeper compared to the previous one. We also need to keep an eye on the number of US Coronavirus cases and deaths, now over 10 million and 240,000, which you can find here.
When the market starts to focus on this, we may have a problem.
On Monday, November 16 at 9:30 AM EST, the Empire State Manufacturing Index is out.
On Tuesday, November 17 at 9:30 AM, US Retail Sales are published.
On Wednesday, November 18 at 9:30 AM, US Housing Starts for October are released.
On Thursday, November 19 at 8:30 AM, the Weekly Jobless Claims are announced. At 11:00 AM, the big Existing Home Sales for October are announced.
On Friday, November 13, at 2:00 PM we learn the Baker-Hughes Rig Count.
As for me, I’ll be cleaning off the grime from the last Boy Scout trip of the year up to the giant redwoods of north Mendocino County. I haven’t been up there in 13 years and boy has it changed. The vineyards have ground enormous and entire new exurbs have been constructed. There are only a few apple farms left, where I picked up some nice cider, pie, and bags of fresh apples.
There are still a few bits of the old California left.
Stay healthy.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
