Global Market Comments
February 22, 2021
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or TIME FOR A BREAK)
(GME), (TLT), (FB), (AMZN), (AAPL), (XME), (FCX), (MS), (GS), (BLX), (KO), (AMD)
Posts
I know you’re not going to want to hear this. I might as well be trying to pull your teeth, lead you down a garden path, or sell you a high-priced annuity.
But there is nothing to do in the market right now. Nada, diddly squat, bupkis, and for all you Limey’s out there, bugger all.
For during the first six weeks of 2021, we have pretty much squeezed all there is out of the market.
Not only did we nail the timing and the direction, we also got the lead sectors, financials, brokers, chips, and short bonds (MS), (GS), (BLK), (AMD). We also chased the Volatility Index (VIX) down from $38 to a lowly $20, baying and protesting all the way.
That enabled us to extract a 28.29% profit so far in 2021, the best return in the 13-year history of the Mad Hedge Fund Trader. The only other time you see numbers this high is when Ponzi schemes get busted. And not a dollar of this was earned from the really marginal plays like Bitcoin, SPAC’s, GameStop (GME), or pot stocks.
If I feel like I did a year’s worth of work during the first seven weeks of 2021, it’s because I have, issuing 60 trade alerts since January 1.
However, bonds (TLT) are reaching the end of their current leg down. The 1.34% yield we saw on Friday is suspiciously close to the 1.36% yields we saw during the 2012 and 2017 market double bottom.
So, there may be some wood to chop around these, levels, possibly for weeks or months.
This is important because a collapsing bond market has been the principal driver of the winning trades of 2021, such as in banks, brokers, money managers, and other domestic recovery plays.
And when one side of the barbell goes dead, what do you do? You buy the other side. FANGs are just completing a six-month “time” correction where they have gone absolutely nowhere. So, Facebook (FB), Amazon (AMZN), and Apple (AAPL) may be getting ready for a roll.
One other sector that might keep running is the SPDR Mining & Metals ETF (XME), and Freeport McMoRan (FCX). That’s because it's not just us buying metals to front-run a recovery, it’s the entire world. What do you think a $2 trillion infrastructure budget will do to this area?
New lows for bonds, as the ten-year US Treasury yield hits 1.26%, up 38 basis points since January 1 and a one-year high. 1.50% here we come! Ever hear the expression “Don’t fight the Fed”? All financials are off to the races, where we were 60% long. Biden’s $1.9 trillion rescue package will be 100% borrowed and take total US borrowing to a back-breaking 55% of GDP. I hate to sound like a broken record but keep selling rallies in the (TLT), buy (JPM), (BAC), (GS), (MS), and (BRK/B) on dips.
Volatility index hit a one-year Low, which is what you’d expect at the dawn of a decade-long bull market in stocks. The (VIX) may flat line here for a while before the next out-of-the-blue spike.
The Nikkei Stock Average topped 30,000, for the first time in 31 years, Yes, it’s been a long haul. I was heavily short in the initial 1990 meltdown from 39,000 to 20,000 and many fortunes were made. The top marked the end of the Japanese company’s ability to copy their way into leadership. After that, rapidly advancing technology made copying too slow to compete in a global economy.
A midwest storm upended energy markets, with oil popping $8 to $67 and gas deliveries spiking from $4 to $999. It would have gone higher, but the software only provided for three digits. Electricity prices are all over the map. Some 4 million Texas customers are without power. Fracking has ground to a halt. Windfarms are frozen solid. If you are a net producer (as I am), you are in heaven. The turmoil is expected to be gone by the weekend. It’s another high price paid for ignoring global warming.
Weekly Jobless Claims soared, to 861,000, casting a dark cloud over the economic recovery. The news took a 300-point bite out of the Dow. Illinois and California saw the biggest gains. We are not out of the woods yet.
SpaceX was valued at $74 Billion, according to an $850 billion venture capital fundraising round this week. However, Elon Musk’s rocket company won’t go public until men are landed on Mars. The company is also the launching pad for its Starlink global WIFI project, which will cost at least $10 billion to build out. Blowing up rockets is not a good backdrop for an IPO.
Cash is still pouring off the sidelines, with equity mutual funds attracting some $7.8 billion last week. As long as this is the case, which could be for years, any market corrections will be limited. Strangely, bond funds are still pulling in money too, some $5.7 billion. It’s called a liquidity-driven market, silly!
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 Mad Hedge Global Trading Dispatch earned an amazing 17.27% so far in February after a blockbuster 10.21% in January. The Dow Average is up a trifling 2.92% so far in 2021.
This is my fourth double-digit month in a row. My 2021 year-to-date performance soared to 27.28%. After the February 19 option expiration, I am now 80% in cash, with a single long in Tesla (TSLA) left.
That brings my 11-year total return to 450.03%, some 2.05 times the S&P 500 (SPX) over the same period. My 11-year average annualized return now stands at an Everest-like new high of 40.30%.
My trailing one-year return exploded to 94.09%, the highest in the 13-year history of the Mad Hedge Fund Trader. We have earned 109.00% since the March 20, 2020 low.
We need to keep an eye on the number of US Coronavirus cases at 28 million and deaths approaching 500,000, which you can find here. We are now running at a heart breaking 3,000 deaths a day. But that is down 35% from the recent high.
The coming week will be a boring one on the data front.
On Monday, February 22, at 8:30 AM EST, the Chicago Fed National Activity Index is out. Zoon (ZM) reports.
On Tuesday, February 23 at 9:00 AM, the S&P Case-Shiller National Home Price Index for December is announced. Square (SQ) and Intuit (INTU) report.
On Wednesday, February 24 at 8:30 AM, New Home Sales for January are printed. NVIDIA (NVDA) reports.
On Thursday, February 25 at 9:30 AM, Weekly Jobless Claims are printed. US Durable Goods for January and Q4 GDP are out. Salesforce (CRM), (Moderna (MRNA), and Airbnb (ABNB) report.
On Friday, February 26 at 8:30 AM, US Personal Income and Spending are published. DraftKings (DKNG) reports. At 2:00 PM, we learn the Baker-Hughes Rig Count.
As for me, if you want to see what it is like to work at Amazon, watch the movie Nomadland. It’s an artsy Francis McDormand film made with a $4 million budget about the end of life, which I caught over the weekend on Hulu.
It covers a contemporary trend in US society where retirees with no savings move into RVs and live off the grid, working occasionally to earn gas money. They raved about it in Europe.
If I don’t keep those trade alerts coming, that could be me in a couple of years.
Stay healthy.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
February 9, 2021
Fiat Lux
Featured Trade:
(ON EXECUTING MY TRADE ALERTS),
(TEN REASONS WHY STOCKS CAN’T SELL OFF BIG TIME),
(SPY), (INDU), ($COMPQ), (IWM), (TLT), (GME)
Global Market Comments
February 8, 2021
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or THE SWEET SPOT CONTINUES),
(INDU), (SPY), (SLV), (GME), (TLT), (JPM), (BAC), (C), (BLK)
We just completed the best week in the 13-year history of the Mad Hedge Fund Trader.
Kudos have been coming in from all over the world, with stories of retirements financed, mortgages paid off, and college educations paid for. Some Mad Hedge Concierge clients are reporting windfall profits of $1 million a day.
The key was calling the GameStop (GME) fiasco the one hit wonder that it was, and using it as an opportunity to go 100% long, pedal to the metal, and bet the ranch. When the market gives you a gift, you grab it with both hands as if your life depended on it and don’t let go.
It worked.
That’s what 50 years of practice gets you, the ability to spot the gold coins lying on the street ignored by everyone else and pocket them immediately.
A record $4.2 billion poured into technology stock funds last week as investors call the end of the six-month big tech correction. The barbell approach is working like a charm, with buying bouncing back and forth like a ping pong ball between domestics, technology, or both sectors go up at the same time. It’s better than owning a printing press for $100 bills.
The Mad Hedge Technology Letter also spotted which way the gale force winds were blowing and piled on the longs as well. (AMZN), (QCOM), and (CRWD), it’s all music to my ears. My old friend Jeff retired, paving the way for another doubling in his stock (AMZN).
We now are getting a clearer picture of how 2021 will play out in the stock market. Periods of sideways action will be followed by big gaps up, eventually taking us to a Dow Average of 40,000.
The sweet spot continues. As low as interest rates and inflation remain low and a tidal wave of new money is pouring into the economy, you have a rich uncle writing you a check every month from the stock market.
We have not had a correction of more than 4% since October. This could go on for years.
Where will the next surprise come from?
When Joe Biden gets his full $1.9 trillion in upfront rescue spending. With the grim tidings of three disastrous monthly jobs reports out, it couldn’t go any other way. The cost of waiting is just too high, especially for the 18 million U-6 unemployed and millions of small businesses hanging on by their fingernails.
The Nonfarm Payroll Report came in very weak, at 49,000 in January. The headline Unemployment Rate was at 6.3%, a decline as more people are leaving the workforce. The U-6 broader “discouraged worker” unemployment rate is still at 11%. December was revised down to an even bigger 227,000 loss. Construction was down 10,000, Retail down 37,000, and Government Jobs were up 43,000. It’s the third disappointing month in a row so a double-dip recession is still on the table. We have a very long road to recovery.
Weekly Jobless Claims improved, dropping to 779,000, the lowest since November. The correlation with falling Covid-19 cases is almost perfect, which have declined by 35% in two weeks. Is the stock market getting ready to roar?
US GDP fell by 3.5% in 2020, wiping out all of 2019 and a good chunk of 2018 as well. The last quarter of 2020 came in at -4.8%, much worse than expected, and further downward revisions are coming, according to the Bureau of Economic Analysis. The economy won’t recover pre-pandemic levels until late 2022 or 2023. The biggest drags on the economy were dramatic falls in consumer spending, nonresidential fixed investment, and a trade war-induced plunge in exports.
Pending Home Sales fell, 0.3% in December, but are still up a staggering 21.4% YOY. It is the highest December reading on record, but the fourth straight month of declines. A historic shortage of supply is the main reason.
The short squeeze play moved to silver, with prices hitting an eight-year high. Many local dealers are seeing business rise tenfold over the weekend and are running out of inventory. The white metal was up 35% in two days. It’s the largest one-day volume every. This time, the kids may have got it wrong, since all short positions in the options market are fully hedged with long positions in silver futures or silver bars. The GameStop players only saw the short side. Long term, I love (SLV) for industrial demand from electric cars and solar panels and see it going from today’s $28 to $50, but not today.
Apple (AAPL) is boosting share buybacks and is borrowing to do it. It’s issuing $14 billion in bonds out to 40 years in maturity at 95 basis points above Treasuries. If Apple is so aggressive in buying its own stock, maybe you should too.
The Apple car is moving forward, as incredible as it may seem. The company is in talks with South Korea’s Hyundai to produce autonomous self-driving electric vehicles that will be available by 2024. I’ll believe it when I see it. I’ve seen Apple self-driving cars in the Bay Area for years. It’s an interesting combination: Apple software, a South Korean design, and non-union Georgian metal bashing combined. Sounds like a winner to me.
The GameStop (GME) game ends. Back to selling used video games in shopping malls. Millions were lost in the crash from $483 to $49. Back to buying real stocks with the systemic threat to the main market over.
Jeff Bezos retired, putting the operation of Amazon into the hands of Andy Jassy, the inventor and head of the cloud unit AWS. No move in the stock beyond the first few seconds. Jassy has been there since the beginning. If I were the second richest man in the world, after Elon Musk, I’d take some time off too. Now, maybe my former Morgan Stanley colleague will have drinks with me. Buy (AMZN) on dips. My two-year target is $5,000.
Bombs away for the bond market, as the (TLT) hits a new 2021 low, taking ten-year yields up to 1.13%. I’m taking profits on the last of my bond shorts and piling money into financials, which love higher interest rates. Buy (JPM), (BAC), (C), and (BLK) on dips. A 1.50% yield on the ten-year US Treasury bond here we come! This is the quality trade of 2021.
The ADP Private Employment recovered, up 174,000 in January after a 74,000 plunge in December. Leisure & Hospitality is the big variable.
PayPal transactions were up 25% in 2020, showing the incredible extent of the online migration of the economy. Keep going with Fintech. There’s another double in (PYPL).
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!
My Mad Hedge Global Trading Dispatch earned an amazing 14.15% during the first week of February after a blockbuster 10.21% in January. The Dow Average is up 3.47% so far in 2021. This is my fourth double-digit month in a row. My 2021 year-to-date performance soared to 24.36%.
I absolutely nailed the market bottom created by the GameStop fiasco, which I didn’t expect to last any more than days. I went 100% leveraged long, which enabled me to achieve the astounding numbers I am reporting today.
Not only did I get the market right, I picked the perfect sectors as well. I jumped 60% into financials, 20% in Tesla, 10% for commodities, and 10% in chips. I used the bond market meltdown to cover the last of my bond shorts. But all of my financial longs are essentially bond shorts.
That brings my 11-year total return to 446.81%, some 2.08 times the S&P 500 over the same period. My 11-year average annualized return now stands at an Everest-like new high of 40.02%.
My trailing one-year return exploded to 87.85%, the highest in the 13-year history of the Mad Hedge Fund Trader. We have earned 105.58% since the March 20, 2020 low.
We need to keep an eye on the number of US Coronavirus cases at 27 million and deaths 465,000, which you can find here. We are now running at a heartbreaking 3,000 deaths a day. But that is down 35% from the recent high.
The coming week will be a boring one on the data front.
On Monday, February 8 at 11:00 AM EST, Consumer Inflation Expectations for January are out. Softbank (SFTBY) and KKR & Co. (KKR) report.
On Tuesday, February 9 at 6:00 AM, the NFIB Business Optimism Index is released. Cisco Systems (CSCO) and Twitter (TWTR) report.
On Wednesday, February 10 at 8:30 AM, the US Core Inflation Rate is announced. Coca-Cola (KO) and Uber (UBER) report.
On Thursday, February 11 at 9:30 AM, Weekly Jobless Claims are printed. Walt Disney (DIS) and AstraZeneca (AZN) report.
On Friday, February 12 at 2:00 PM, we learn the Baker-Hughes Rig Count. As we have a three day weekend following, option volatility should collapse. Moody’s (MCO) reports.
As for me, I went into Reno last week to replace the windshield on my Toyota Highlander, my Tahoe car, which below zero temperatures had cracked. One-third of the town was shut down and boarded up, while what remained was booming. A giant shopping mall near downtown has resumed construction, but with less retail and more residential. Reno is the third fastest-growing city in the US and has become a metaphor for the entire country.
Still waiting for my Covid-19 vaccination. I’m at the top of four lists. Even the military can’t get enough. With any luck, I’ll have it in weeks.
Stay healthy.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Markets Can Be Tricky
Global Market Comments
February 2, 2021
Fiat Lux
Featured Trade:
(MY NEWLY UPDATED LONG-TERM PORTFOLIO),
(PFE), (BMY), (AMGN), (CELG), (CRSP), (FB), (PYPL), (GOOGL), (AAPL), (AMZN), (SQ), (JPM), (BAC), (MS), (GS), (BABA), (EEM), (FXA), (FCX), (GLD), (SLV), (TLT)
I am really happy with the performance of the Mad Hedge Long Term Portfolio since the last update on July 21, 2020. In fact, not only did we nail the best sectors to go heavily overweight, we also completely dodged the bullets in the worst-performing ones.
For new subscribers, the Mad Hedge Long Term Portfolio is a “buy and forget” portfolio of stocks and ETFs. If trading is not your thing, these are the investments you can make, and then not touch until you start drawing down your retirement funds at age 72.
For some of you, that is not for another 50 years. For others, it was yesterday.
There is only one thing you need to do now and that is to rebalance. Buy or sell what you need to reweight every position to its appropriate 5% or 10% weighting. Rebalancing is one of the only free lunches out there and always adds performance over time. You should follow the rules assiduously.
Despite the seismic changes that have taken place in the global economy over the past nine months, I only need to make minor changes to the portfolio, which I have highlighted below.
To download the entire new portfolio in an excel spreadsheet, please go to www.madhedgefundtrader.com, log in, go “My Account”, then “Global Trading Dispatch”, then click on the “Long Term Portfolio” button.
Changes
I am cutting back my weighting in biotech from 25% to 20% because Celgene (CELG) was taken over by Bristol Myers (BMY) at a 110% profit compared to our original cost. We also earned a spectacular 145% gain on Crisper Therapeutics (CRSP). I’m keeping it because I believe it has more to run.
My 30% weighting in technology also gets pared back to 20% because virtually all of my names have doubled or more. These have been in a sideways correction for the past six months but are still an important part of any barbell portfolio. So, take out Facebook (FB) and PayPal (PYPL) and keep the rest.
I am increasing my weighting in banks from 10% to 20%. Interest rates are finally starting to rise, setting up a perfect storm in favor of bank earnings. Loan default rates are falling. Banks are overcapitalized, thanks to Dodd-Frank. And because of the trillions in government stimulus loans they are disbursing, they are now the most subsidized sector of the economy. So, add in Morgan Stanley (MS) and Goldman Sachs (GS), which will profit enormously from a continuing bull market in stocks.
Along the same vein, I am committing 10% of my portfolio to a short position in the United States Treasury Bond Fund (TLT) as I think bonds are about to go to hell in a handbasket. I rant on this sector on an almost daily basis, so go read Global Trading Dispatch.
I am keeping my 10% international exposure in Chinese Internet giant Alibaba (BABA) and the iShares MSCI Emerging Market ETF (EEM). The Biden administration will most likely dial back the recent vociferous anti-Chinese stance, setting these names on fire.
I am also keeping my foreign currency exposure unchanged, maintaining a double long in the Australian dollar (FXA). The Aussie has been the best performing currency against the US dollar and that should continue.
Australia will be a leveraged beneficiary of the synchronized global economic recovery, both through strong commodity prices and gold which has already started to rise, and the post-pandemic return of Chinese tourism and investment. I argue that the Aussie will eventually make it to parity with the US dollar, or 1:1.
As for precious metals, I’m baling on my 10% holding in gold (GLD), which delivered a nice 20% gain in 2020. From here, it is having trouble keeping up with other alternative assets, like Bitcoin, and there are better fish to fry.
Yes, in this liquidity-driven global bull market, a 20% return is just not enough to keep my interest. Instead, I add a 5% weighting in the higher beta and more volatile iShares Silver Trust (SLV), which has far wider industrial uses in solar panels and electric vehicles.
As for energy, I will keep my weighting at zero. Never confuse “gone down a lot” with “cheap”. I think the bankruptcies have only just started and will stretch on for a decade. Thanks to hyper-accelerating technology, the adoption of electric cars, and less movement overall in the new economy, energy is about to become free. You are looking at the next buggy whip industry.
My ten-year assumption for the US and the global economy remains the same. I’m looking at 3%-5% a year growth for the next decade.
When we come out the other side of this, 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% or more in the coming decade. The America coming out the other side of the pandemic will be far more efficient, productive, and profitable than the old.
You won’t believe what’s coming your way!
I hope you find this useful and I’ll be sending out another update in six months so you can rebalance once again.
Stay healthy.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
February 1, 2021
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or GAMBLERS HAVE ENTERED THE MARKET),
($INDU), (TSLA), (TLT), (BA), (JPM), (MS), (GME), (STBX), (GE), (MRNA)
At long last, the 10% correction I have been predicting is happening. No, it wasn’t caused by the usual reasons, like a bad economic data point, an earnings disappointment, or a geopolitical event.
The market delivered the worst week since October because gamblers have entered the stock market. Perish the thought!
It turns out that if a million kids buy ten shares each of a $4 stock, they can wipe out even the largest hedge funds on their short positions. It also turns out they can wipe out their brokers, with infinite capital calls triggered by massive order flows.
If Chicago’s Citadel had not stepped in with a $1 billion bailout, Robin Hood would have gone under last week. Citadel buys Robin Hood’s order flow and is their largest customer. That’s where systemic risk enters the picture.
And it’s not like there was really any systemic risk. Markets have an inordinate fear of the unknown, and no one has ever seen a bunch of kids in a chat room like Redditt wipe out major hedge funds.
Fortunately, there are only a dozen small illiquid stocks that could be subject to such ‘buyers raids”. So, the spillover to the main market is very limited, probably no more than a week or two.
And the regulations to reign in such a practice are already in place. Whenever a broker gets more business than it can handle, it will simply shut it down. Robin Hood did that on Friday when it has limited purchases in 20 stocks to a single share, including Starbucks (STBX), Moderna (MRNA), and General Electric (GE).
What all this does is set up an excellent buying opportunity for you and me, of which there have been precious few in recent months. By ramping up the Volatility Index to $38, it is almost impossible to lose money on front month call options spreads. We are the real winners of the (GME) squeeze.
Stocks would have to fall another 10%-20% on top of existing 10%-20% declines, and that is not going to happen in 13 trading days to the February 19 options expiration with $20 trillion about to hit the economy and the stock markets. That breaks down to $10 trillion in stimulus and $10 trillion worth of global quantitative easing.
My own long, hard-won experience is that a (VIX) at $38 earns you about 20% a month in profits. Options prices are so elevated that scoring winners now is like shooting fish in a barrel. So, join the party as fast as you can.
On Friday, I was taking profits on exiting positions and shipping out new trade alerts in the best quality names as fast as I could write them. Where is that easy, laid back retirement I was hoping for!
Keep at the barbell portfolio. The big tech names are finishing up a six-month sideways “time” corrections. Their earnings are catching up with valuations at a prolific rate. The domestic recovery names have just given back 10%-20% and are ripe for another leg up. All of these are good candidates for 2023 options LEAPS.
After all, if an insurrection and the sacking of the capitol can’t take the market down more than 1%, GameStop (GME) is certainly not going to take it down more than 10%.
GameStop (GME) posted record volatility, up from $4 a month ago to $483. Even the biggest hedge funds can’t stand up to a million kids buying ten shares each at market. All single name shorts in the market are getting covered by hedge funds in fear of getting “Gamestopped”, producing a 700-point Dow rally.
Several brokers banned trading in the name and the SEC is all over this like a wet blanket. Trading is halted due to an excess of sell orders. The problem is that funds are selling real stocks to cover the losses we own, like JP Morgan (JPM) and Tesla (TSLA) and short (TLT).
In the meantime, the action has moved over the American Airlines (AA), which has soared by 50%. AMC Entertainment Holdings (AMC) saw a 400% pop, but I haven’t seen anyone rushing back into theaters to watch Wonder Woman. Blame Jay Powell for flooding the financial system with mountains of cash seeking a home. There is so much money in circulation that traders are invented asset classes to put it into. This can’t last. Buy the dip.
Here are the best short squeeze targets with the greatest outstanding short interests. GameStop (GME) tops the list with an eye-popping 139% short interest, followed by Bed Bath & Beyond (BBBY) (67%) and Ligand Pharmaceutical (LGND) (64%). National Beverage (FIZZ), The Macerich Company (MAC), and Fubo TV (FUBO) bring up the rear. These are all failed companies in some form or another, which is why hedge funds had such large short positions.
New Home Sales disappointed in December, up only 1.6% to 842,000 units. This is on a signed contract basis only. Affordability is the big issue caused by high prices. Who buys a house at Christmas anyway?
Case Shiller soared by 9.5% in November, the fastest home price appreciation in history. Phoenix (13.8%), Seattle (12.7%), and San Diego (12.3) were the big movers. Blame a long-term structural housing shortage, a huge demographic push from Millennials, near-zero interest rates, and a flight from the cities to larger suburban homes. The Pandemic is keeping millions of homes off the market.
US GDP may reach pre-pandemic high by end of 2021, it the vaccine gets distributed to every corner of the nation and aggressive stimulus packages pass congress. Growth should come in at a minimum of 5% or higher this year, wiping out last year’s disaster. Keeping interest rates near zero will be a big help, as Treasury Secretary Yellen is determined to do. China and India are already there.
Share Buybacks have returned, the catnip of share prices. Q4 saw a jump to $116 billion from $102 billion in Q2, and this year, banks now have free reign to buy back their own shares. That’s still below the $182 billion seen in Q4 2019. It can only mean that share prices are rising further.
California lifts stay-at-home regulations, enabling restaurants to open after a nearly two-month shutdown. It’s the first ray of hope that the pandemic will end by summer. It will if Biden hits his 1.5 million vaccinations a day target.
Tesla posts sixth consecutive profit quarter, taking the stock down $60 in the aftermarket momentarily on a classic “buy the rumor, sell the news” move. The once cash-starved company now has an eye-popping $19.4 billion in reserves. Revenues reached a massive $10.7 billion, better than expected. Gross margins reached 19.2%. Looking for 50% annual growth for several years. Shanghai, Berlin, and Austin will make their first deliveries this year. Cash flow is at $19.4 billion, enough to build six more factories. No short sellers left here. It’s a perfect entry point for a LEAP. Buy the March 2023 $1,150-$1,200 call spread for a ten bagger.
Space X rocket carries 143 spacecraft into space. The Falcon 9 rocket set a new record with new satellites launched at once. Yes, you too can put 200kg into orbit for only $1 million. Many are from small tech startups selling various types of data. Elon Musk’s hobby, now worth $20 billion according to its government contracts, could be his next IPO. Don’t pass on this one!
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 Mad Hedge Global Trading Dispatch earned a blockbuster 10.21% in January, versus a Dow Average that is now down in 2021. This is my third double-digit month in a row.
I used the market selloff to take substantial profits in my short (TLT) holdings and buy new longs in Boeing (BA) and Morgan Stanley (MS). I rolled the strikes down on my JP Morgan (JPM) long by $10.
That brings my eleven-year total return to 432.76%, some 2.15 times the S&P 500 over the same period. My 11-year average annualized return now stands at a nosebleed new high of 38.85%, a new high.
My trailing one-year return exploded to 75.28%, the highest in the 13-year history of the Mad Hedge Fund Trader. We have earned 91.43% since the March 20 2020 low.
We need to keep an eye on the number of US Coronavirus cases at 26 million and deaths at 440,000, which you can find here. We are now running at a staggering 3,800 deaths a day.
The coming week will be all about the monthly jobs data.
On Monday, February 1 at 9:45 AM EST, the Markit Manufacturing PMI for January is out. Caterpillar (CAT) announces earnings.
On Tuesday, February 2 at 7:00 AM, Total Vehicle Sales for January are published. Alphabet (GOOG) and Amgen (AMGN) report.
On Wednesday, February 3 at 8:15 AM, the ADP Private Employment Report is published. QUALCOMM (QCOM) reports.
On Thursday, February 4 at 9:30 AM, Weekly Jobless Claims are printed. Gilead Sciences (GILD) reports.
On Friday, February 5 at 9:30 AM, the January Nonfarm Payroll Report is announced. At 2:00 PM, we learn the Baker-Hughes Rig Count.
As for me, I am often kept awake at night by painful arthritis and a collection of combat injuries and I usually spend this time thinking up new trade alerts.
However, the other night, I saw a war movie just before I went to bed, so of course, I thought about the war. This prompted me to remember the two happiest people I have met in my life.
My first job out of college was to go to Hiroshima Japan for the Atomic Energy Commission and interview survivors of the first atomic bomb 29 years after the event. There, I met Kazuko, a woman in her late forties who was attending college in Fresno, California in 1941 and spoke a quaint form of English from the period. Her parents saw the war and the internment coming, so they brought her back to Hiroshima to be safe.
Her entire family was gazing skyward when a sole B-29 bomber flew overhead. One second before the bomb exploded, a dog barked and Kazuko looked to the right. Her family was permanently blinded, and Kazuko suffered severe burns on the left side of her neck, face, and forearms. A white summer yukata protected the rest of her, reflecting the nuclear flash. Despite the horrible scarring, she was the most cheerful person I had ever met and even asked me how things were getting on in Fresno.
Then there was Frenchie, a man I played cards with at lunch at the Foreign Correspondents Club of Japan every day for ten years. A French Jew, he had been rounded up by the Gestapo and sent to the Bergen-Belson concentration camp late in the war. A faded serial number was still tattooed on his left forearm. Frenchie never won at cards. Usually, I did because I was working the probabilities in my mind all the time, but he never ceased to be cheerful no matter how much it cost him.
The happiest people I ever met were atomic bomb and holocaust survivors. I guess, if those things can’t kill, you nothing can, and you’ll never have a reason to be afraid again. That is immensely liberating.
Stay healthy.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
January 25, 2021
Fiat LuxFeatured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or HERE COMES THE SUPERHEATED ECONOMY),
(SPY), ($INDU), (TLT), (TBT), (TSLA)
