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Tag Archive for: (TSLA)

Mad Hedge Fund Trader

May 24 Biweekly Strategy Webinar Q&A

Diary, Newsletter, Research

Below please find subscribers’ Q&A for the May 24 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Silicon Valley, CA.

Q: Should I roll over my $55-$60 Freeport-McMoRan (FCX) 2024 LEAPS?

A: Yes, move it from the January 2024 expiration to January 2025—that gives you a full 18 months for the stock to recover from a recession (which it’s now discounting) and then double, which is where you make the really big money on our LEAPS.

Q: What's your year-end price prediction for Freeport-McMoRan (FCX)?

A: $50, this year’s high.

Q: If there’s a default, do members of Congress get paid?

A: No, they don’t, no money is no money, the cupboard is bare. Nothing gets paid. And the Treasury will have to choose who gets paid last because when they run out of money there's no money to pay anybody, which then leads to a default and a 50% stock market correction.

Q: Why do you buy in-the-money bull call spreads instead of selling credit spreads?

A: They’re easier to understand for beginners. It’s easier for people to understand that if you buy something and it goes up, you make money. It’s harder for people to understand that if you sell short something and it goes down, you make money. And it’s basically six of one and half a dozen of the other in terms of profit. I get that question constantly and that is always going to be the answer.

Q: What do you think about artificial intelligence; how will it affect stock prices?

A: It’ll be what takes the Dow average ($INDU) from $32,000 to $240,000 over the next 10 years. What AI does is it automatically triples the value of any company using it, even though now it may take years for the stock market to catch up. On top of that, companies will have their regular earnings growth from their traditional businesses.

Q: How far will Nvidia (NVDA) stock go up?

A: Well the consensus between fund managers is it goes up 7 times from here, to well over 1,000. It's at 300 today, so it sounds like 2,100 is the final target, assuming we don't have any more recessions. And by the way, we did recommend NVDA on a split adjusted basis around $2, so NVDA has gone up 175 times already from our initial recommendation 7 years ago when it was just a gaming play. The (NVDA) January 2025 LEAPS I recommended on September 29 at 50 cents is now worth $6.25 and expires worth $10, up 20-fold!

Q: How can companies be selling AI prediction services for traders, as no one can predict the future?

A: Well that is accurate, no one person can predict the future. However, algorithms can take patterns in the past, project them in the future, and they're often accurate as long as a black swan doesn’t happen. AI is getting so sophisticated now—not only do we have index predictions which we’ve been using now for almost 10 years to great success, but Mad Hedge is now services with single stock recommendations. They will say in 30 days (AMZN) will be at $X, and they’re right 90% of the time. This is getting very advanced very quickly, and we are at the absolute cutting edge of this (and have been for a long time), and that’s why we’re getting such spectacular results—it's me plus my algorithm.

Q: Are money market funds at risk if the US defaults? 

A: If the US defaults and stays defaulted, then yes. Nothing anywhere is safe except gold bricks under the bed. If the US does default, they’ll get defaulted probably in days. And that's what happened last time, 12 years ago. So, I don't expect the world to end.

Q: What is the best strategy for a long-term retirement account?

A: If you're already retired like over 70, I would go 100% into fixed income, and spread out your fixed income exposure to 10-year treasuries which is now yielding 3.75%, to junk which is yielding 8.5%. And you might throw in a couple high dividend stocks like (CCI). Over age 70 you basically are looking for a 100% income portfolio, because you’re too old to go back to work at Taco Bell if you lose all your money. And believe me, I’ve been to Taco Bell and seen the 70-year-olds working there who did lose all their money, so you don’t want to do that. Equities are for younger kids like me, who are going to live forever.

Q: What about iShares 20 Plus Year Treasury Bond ETF (TLT)?

A: We’re watching very closely. We will do LEAPS, but I’m waiting for a capitulation selloff triggered by inaction in Washington to get there. Also, when they do reach a deal, it unleashes a bunch of bond selling by the government. The US Treasury is going to have to sell 700 billion dollars’ worth of bonds immediately, because they’re behind on their bills, how about that? They’re not paying military contractors. So yes, the initial move of a debt deal could be down for bonds—that's the move I'm waiting for. 

Q: Are you buying at the money’s or out of the moneys on LEAPS?

A: At the money if you’re a conservative old fogie like me, and out of the money like 20% or 30% where you get like a 400% return for younger people so they still will live long enough to earn back all the money if they lose it. 

Q: What do you think the next move on CBOE Volatility Index ($VIX) is?

A: Up, and I think we could see VIX at $30 sometime in June or July when our 10% selloff happens.

Q: Would you buy the ProShares UltraShort S&P 500 (SDS) now for protection?

A: Yes, I’d be buying some as a hedge against your long-term positions.

Q: Do you prefer one or two year LEAPS?

A: Two years is the more conservative maturity because it gives you two years to go into recession and get back out. If you think there isn’t going to be a recession and we reaccelerate from here, then you only want to do one year. With Treasuries bonds, I’m inclined to do one year because I think once the rise in prices happens it’ll happen very quickly. If you’re not happy with a 100% return in a year maybe you should consider another line of business.

Q: Is the housing market going to crash because of 7% mortgage rates?

A: No, one third of all the buyers now are cash buyers, who are spending their savings and will refinance when mortgages get back to 3% or 4%. Until then, housing prices go sideways because there is a severe shortage of housing nationwide, which is getting worse.

Q: How do I get my wife used to regenerative braking in Tesla (TSLA)?

A: Just take your foot off the acceleration pedal; as the car slows down, each of the four wheels perform as generators and recharge the battery. That means when you drive from Lake Tahoe at 7,000 ft down to the Central Valley at sea level, your power consumption is zero. You’re getting a free ride because you’re gravity powered, the wheels are recharging the battery the whole time. All you have to do is take your foot off the acceleration and the regenerative braking kicks in instantly. Teslas only use actual use brake shoes when they slowdown from five miles an hour down to zero.

Q: Which level is more likely this year in oil: $50 a barrel or $100?

A: Well, if we do get the recession or something close to it, we’ll see the $50 first, and then we’ll see the $100 on the recovery. That is what’s going to happen.

Q: When is the economic recovery going to be this year?

A: In the 4th quarter, starting in October, and the stock market will start discounting that in July or August. That is my view.

Q: What’s a better investment: stocks or real estate?

A: It depends on the person. At this level, stocks will probably deliver bigger returns than real estate. But real estate allows you 5-1 leverage. If you have an 80% mortgage, and that’s more leverage than most people can get in the stock market. The other thing about homes is that you don’t get to see the price every day in the newspaper and then panic and sell at the bottom. That's the other great thing about houses.

Q: Will this recording be available?

A: Yes we post it in about two hours on the website. You can look at all the charts and the commentary then.

Q: How would you hedge a 100% equity portfolio?

A: I would buy deep out of the money puts on the S&P 500, maybe 10% out of the money on puts—something like a 360 put on the SPY with a 2 month maturity. That gets you through the summer, gets you through any debt crisis, and certainly will reduce the volatility of your portfolio.

Q: Would you be buying Alibaba (BABA) down here?

A: No, I don’t want to get involved in China in anything—too much political risk.

To watch a replay of this webinar with all the charts, bells, whistles, and classic rock music, just log in to www.madhedgefundtrader.com , go to MY ACCOUNT, click on GLOBAL TRADING DISPATCH or TECHNOLOGY LETTER, then WEBINARS, and all the webinars from the last 12 years are there in all their glory

Good Luck and Stay Healthy,

John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader

 

A Senior Citizen Teach Me the Computer at Taco Bell

 

 

 

 

 

https://www.madhedgefundtrader.com/wp-content/uploads/2023/05/taco-bell-lady.jpg 324 432 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2023-05-26 09:02:292023-05-26 11:45:51May 24 Biweekly Strategy Webinar Q&A
Mad Hedge Fund Trader

May 24, 2023

Tech Letter

Mad Hedge Technology Letter
May 24, 2023
Fiat Lux

Featured Trade:

(START-UP EV INDUSTRY WISHES FOR A MIRACLE)
(RIDE), (TSLA)

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2023-05-24 16:04:142023-05-24 17:30:05May 24, 2023
Mad Hedge Fund Trader

Start-up EV Industry Wishes For A Miracle

Tech Letter

Not all of the current tech companies have that cushy position at the top of the ivory tower.

The likes of Google, Microsoft, and Apple are just a few of a handful of privileged companies that are too big to fail and have a direct line to Congress if anything starts to go haywire.

Not every tech firm has that luxury and, to be more precise, they are usually start-ups and lesser-known, which makes sense.

In the case of the tech sector, the grass truly is greener on the other side between the haves and have-nots.

Just look at the EV sub-sector that is emblematic of this larger trend.

Lordstown Motors (RIDE) is barely keeping its head above water after the company announced a 1-for-15 reverse stock split.

Investors holding Lordstown stock should see fewer shares at a higher price in their brokerage accounts.

Lordstown has about 243 million shares outstanding. Following the reverse split, the number will be roughly 16 million.

Investors typically like conventional stock splits that reduce the price of shares while increasing the number of shares outstanding. Stock splits can make shares more affordable to retail investors and can signal that management is optimistic about the future. No one would split a stock they expect to go down.

Reverse splits typically happen after a period of hardship. Coming into Tuesday trading, Lordstown stock is down 90% over the past 12 months.

The company has struggled to produce trucks and needs more cash. Lordstown has produced 56 pickup trucks since the start of production.

RIDE is also running out of money fast and the company will need more than $200 million for the remainder of 2023 if the company is to ramp up production.

Lordstown has received a delisting notice from the exchange. It has until mid-October to remedy the situation. The threat of delisting was also a concern to partner Foxconn.

Foxconn owns the factory that produces RIDE’s EVs.

RIDE may be forced to cease operations and file for bankruptcy after manufacturing giant Foxconn told the electric-vehicle company that it’s prepared to pull out of a production partnership.

The deal with Foxconn Technology Group could unravel after the Taiwanese company threatened to withhold funding.

This quickly souring situation could rapidly destabilize the other start-ups in the EV market.

Just about eight months ago, Foxconn agreed to invest as much as $170 million in Lordstown and take two board seats. The deal gave the EV maker much-needed capital while offering Foxconn, the Taiwanese manufacturer best known as the maker of Apple Inc.’s iPhone, a firmer foothold in automotive production.

In January, Lordstown asked Foxconn to suspend production because the cost of making the Endurance battery-powered pickup exceeded the targeted sale price of $65,000 — and said it would need another partner beyond Foxconn's share costs.

RIDE finds itself in quite a pickle. Unlike many of the big tech behemoths, they can’t just make a call to the higher-ups to sort it out and they don’t have the balance sheet nor the clout to get things their way.

Essentially, fighting upstream is not an advantageous proposition and when Tesla started heavily discounting new Teslas, what consumer would opt for an untested brand for the same price?

If readers want to get into EV stocks, buy Tesla on the dip or nothing at all.

 

lordstown

 

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2023-05-24 16:02:112023-05-25 20:18:50Start-up EV Industry Wishes For A Miracle
Mad Hedge Fund Trader

May 24, 2023

Diary, Newsletter, Summary

Global Market Comments
May 24, 2023
Fiat Lux

Featured Trades:

(JULY 19 LONDON STRATEGY LUNCHEON)
(TESTING TESLA’S SELF-DRIVING TECHNOLOGY),
(TSLA)
(TESTIMONIAL)

 

CLICK HERE to download today's position sheet.

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2023-05-24 09:08:532023-05-24 17:49:53May 24, 2023
Mad Hedge Fund Trader

Testing Driving Tesla’s Self Driving Technology

Diary, Newsletter

I knew I was on the right track when the salesman told me that the customer who just preceded me for a Tesla Model X P100D SUV was the Golden Bay Warriors star basketball player, Steph Currie.

Well, if it’s good enough for Steph, then it’s good enough for me.

Last week, I received a call from Elon Musk’s office to test the company’s self-driving technology embedded in their new vehicles for readers of the Diary of a Mad Hedge Fund Trader.

I did, and prepare to have your mind blown!

I was driving at 80 MPH on CA-24, a windy eight-lane freeway that snakes its way through the East San Francisco Bay Area mountains. Suddenly the salesman reached over and flicked a lever on the left side of the driving column.

The car took over!

There it was, winding and turning along every curve, perfectly centered in the lane. As much as I hated to admit it, the car drove better than I ever could. It does especially well at night or in fog, a valuable asset for senior citizens whose night vision is fading fast.

All that was required was for me to touch the steering wheel every two minutes to prove that I was not sleeping.

The cars do especially well in rush hour driving, as it is adept at stop-and-go traffic. You can just sit there and work on your laptop, read a book, or watch a movie on the built-in 4G WIFI HD TV.

When we returned to the garage, the car really showed off. When we passed a parking space, another button was pushed, and we perfectly backed 90 degrees into a parking space, measuring and calculating all the way.

The range is 290 miles, which I can recharge at home at night from a standard 220-volt socket in my garage in seven hours. When driving to Lake Tahoe, I can stop halfway at get a full charge in 30 minutes. The new chargers operate at a blazing 450 miles per hour.

The chassis can rise as high as eight inches off the ground so it can function as a true SUV.

The “ludicrous mode,” a $10,000 option, takes you from 0 to 60 mph in 2.9. However, even a standard Tesla can accelerate so fast that it will make the average passenger carsick.

Here’s the buzz kill.

Tesla absolutely charges through the nose for extras.

The 22-inch wheels, the third row of seats to get you to seven passengers, the premium sound, the leather seats, and the self-driving software can run you $15,000.

A $750 tow hitch will accommodate a ski or back rack on the back. There is a $1,000 delivery charge, even if you pick it up at the Fremont factory.

It’s easy to see how you can jump from an $84,990 base price to a total cost of $162,500, including taxes, for the ultra-luxury Performance model, as I did.

My company will be purchasing the car under Section 179 of the International Revenue Code. The car qualifies because it weighs over 6,000 pounds and is therefore a truck under the new tax law.

This allows me to deduct the entire $162,500 cost of the vehicle upfront, plus the maintenance and insurance costs for the entire life of the car. However, I will have to maintain a mileage log as a hedge against any future IRS audits.

Ironically, Section 179 was enacted as a subsidy for consumer purchases of the eight miles-per-gallon Hummer, which was originally built by AM General and owned by General Motors (GM).

After several attempts to sell, the division failed, and production was permanently shut down. However, the tax subsidies live on for any like-designed vehicle.

It looks like I’ll have to buy two Teslas this year.

With 4 million Teslas now on the road, a few flaws have come through. The big one is “ghost braking”, where the car suddenly stops for no apparent reason. It appears that when a Tesla in, say, Florida turns right, the Tesla in California will see that car as immediately in front of it and slow down.

I’ve been telling Tesla this may be a byproduct of running the largest AI neural net ever built. Musk may be moving beyond the known physics of electrons without knowing about it. As long as you know about it, you just tap the brakes to turn off the self-driving, then turn it back on.

As for “drop dead’ curb appeal, nothing beats the Model X. Buy the stock on every 20% dip. 

It’s another way of saying “buy the shares and you get the car for free.”

 

Thanks for Your Subscription!

 

https://www.madhedgefundtrader.com/wp-content/uploads/2014/04/Wile-E.-Coyote-TNT.jpg 365 496 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2023-05-24 09:04:592023-05-24 17:48:51Testing Driving Tesla’s Self Driving Technology
Douglas Davenport

Short Selling School 101

Diary, Newsletter

With the market now scraping the absolute top of the 2023 trading range, it’s time to revisit Short Selling School.

We are also solidly into the high-risk, low-return time of the year from May to November. Historically, the total return for the time of year or the past 70 years is precisely zero.

I, therefore, think it is timely to review how to make money when prices are falling. I call it Short Selling School 101

There is nothing worse than closing the barn door after the horses have bolted or hedging after markets have crashed.

No doubt, you will receive a wealth of short selling and hedging ideas from your other research sources and the media right at the next market bottom.

That is always how it seems to play out.

So I am going to get you out ahead of the curve, putting you through a refresher course on how to best trade falling markets now, while stock prices are still rich.

Markets could be down 10% or more by the time this is all over.

There is nothing worse than fumbling around in the dark looking for the matches and candles after a storm has knocked the power out.

I’m not saying that you should sell short the market right here. But there will come a time when you will need to do so.

Watch my Trade Alerts for the best market timing. So here are the best ways to profit from declining stock prices, broken down by security type:

Bear ETFs

Of course the granddaddy of them all is the ProShares Short S&P 500 Fund (SH), a non-leveraged bear ETF that is supposed to match the fall in the S&P 500 point for point on the downside. Hence, a 10% decline in the (SPY) is supposed to generate a 10% gain in the (SH).

In actual practice, it doesn’t work out like that. The ITF has to pay management operating fees and expenses, which can be substantial. After all, nobody works for free.

There is also the “cost of carry,” whereby owners have to pay the price for borrowing and selling short shares. They are also liable for paying the quarterly dividends for the shares they have borrowed, around 2% a year. And then you have to pay the commissions and spread for buying the ETF.

Still, individuals can protect themselves from downside exposure in their core portfolios through buying the (SH) against it (click here for the prospectus). Short selling is not cheap. But it’s better than watching your gains of the past seven years go up in smoke.

Virtually all equity indexes now have bear ETFs. Some of the favorites include the (PSQ), a short play on the NASDAQ (click here for the prospectus), and the (DOG), which profits from a plunging Dow Average (click here for the prospectus).

My favorite is the (RWM), a short play on the Russell 2000, which falls 1.5X faster than the big cap indexes in bear markets (click here for the prospectus).

Leveraged Bear ETFs

My favorite is the ProShares UltraShort S&P 500 (SDS), a 2X leveraged ETF (click here for the prospectus). A 10% decline in the (SPY) generates a 20% profit, maybe.

Keep in mind that by shorting double the market, you are liable for double the cost of shorting, which can total 5% a year or more. This shows up over time in the tracking error against the underlying index. Therefore, you should date, not marry this ETF, or you might be disappointed.

 

 

3X Leveraged Bear ETF

The 3X bear ETFs, like the UltraPro Short S&P 500 (SPXU), are to be avoided like the plague (click here for the prospectus).

First, you have to be pretty good to cover the 8% cost of carry embedded in this fund. They also reset the amount of index they are short at the end of each day, creating an enormous tracking error.

Eventually, they all go to zero and have to be periodically redenominated to keep from doing so. Dealing spreads can be very wide, further adding to costs.

Yes, I know the charts can be tempting. Leave these for the professional hedge fund intraday traders for which they are meant.

Buying Put Options

For a small amount of capital you can buy a ton of downside protection. For example, the April (SPY) $182 puts I bought for $4,872 on Thursday allows me to sell short $145,600 worth of large cap stocks at $182 (8 X 100 X $6.09).

Go for distant maturities out several months to minimize time decay and damp down daily price volatility. Your market timing better be good with these because when the market goes against you, put options can go poof and disappear pretty quickly.

That’s why you read this newsletter.

Selling Call Options

One of the lowest risk ways to coin it in a market heading south is to engage in “buy writes.” This involves selling short call options against stock you already own but may not want to sell for tax or other reasons.

If the market goes sideways or falls, and the options expire worthless, then the average cost of your shares is effectively lowered. If the shares rise substantially they get called away, but at a higher price so you make more money. Then you just buy them back on the next dip. It is a win-win-win.

 

 

Selling Futures

This is what the pros do, as futures contracts trade on countless exchanges around the world for every conceivable stock index or commodity. It is easy to hedge out all of the risk for an entire portfolio of shares by simply selling short futures contracts for a stock index.

For example, let’s say you have a portfolio of predominantly large cap stocks worth $100,000. If you sell short 1 June, 2016 contract for the S&P 500 against it, you will eliminate most of the potential losses for your portfolio in a falling market.

The margin requirement for one contract is only $5,000. However, if you are short the futures and the market rises, then you have a big problem, and the losses can prove ruinous.

But most individuals are not set up to trade futures. The educational, financial, and disclosure requirements are beyond mom-and-pop investing for their retirement fund.

Most 401Ks and IRAs don’t permit the inclusion of futures contracts. Only 25% of the readers of this letter trade the futures market. Regulators do whatever they can to keep the uninitiated and untrained away from this instrument.

That said, get the futures markets right, and it is the quickest way to make a fortune if your market direction is correct.

Buying Volatility

Volatility (VIX) is a mathematical construct derived from how much the S&P 500 moves over the next 30 days. You can gain exposure to it through buying the iPath S&P 500 VIX Short-Term Futures ETN (VXX) or buying call and put options on the (VIX) itself.

If markets fall, volatility rises, and if markets rise, then volatility falls. You can therefore protect a stock portfolio from losses through buying the (VIX).

I have written endlessly about the (VIX) and its implications over the years. For my latest in-depth piece with all the bells and whistles, please read “Buy Flood Insurance With the (VIX)” by clicking here.

 

 


Selling Short IPOs

Another way to make money in a down market is to sell short recent initial public offerings. These tend to go down much faster than the main market. That’s because many are held by hot hands, known as “flippers,” don’t have a broad institutional shareholder base.

Many of the recent ones don’t make money and are based on an, as yet, unproven business model. These are the ones that take the biggest hits.

Individual IPO stocks can be tough to follow to sell short. But one ETF has done the heavy lifting for you. This is the Renaissance IPO ETF (click here for the prospectus). So far, a 6% drop in the main indexes has generated a 20% fall in (IPO).

 


Buying Momentum

This is another mathematical creation based on the number of rising days over falling days. Rising markets bring increasing momentum while falling markets produce falling momentum.

So, selling short momentum produces additional protection during the early stages of a bear market. Blackrock issued a tailor-made ETF to capture just this kind of move through its iShares MSCI Momentum Factor ETF (MTUM). To learn more, please read the prospectus by clicking here.

 

 

Buying Beta

Beta, or the magnitude of share price movements, also declines in down markets. So, selling short beta provides yet another form of indirect insurance. The PowerShares S&P 500 High Beta Portfolio ETF (SPHB) is another niche product that captures this relationship.

The Index is compiled, maintained, and calculated by Standard & Poor's and consists of the 100 stocks from the (SPX) with the highest sensitivity to market movements, or beta, over the past 12 months.

The Fund and the Index are rebalanced and reconstituted quarterly in February, May, August, and November. To learn more, read the prospectus by clicking here.

 

 

Buying Bearish Hedge Funds

Another subsector that does well in plunging markets is publicly listed bearish hedge funds. There are a couple of these that are publicly listed and have already started to move.

One is the Advisor Shares Active Bear ETF (HDGE) (click here for the prospectus). Keep in mind that this is an actively managed fund, not an index or mathematical relationship, so the volatility could be large.

 

 

Oops, Forgot to Hedge

https://www.madhedgefundtrader.com/wp-content/uploads/2014/04/Wile-E.-Coyote-TNT.jpg 365 496 Douglas Davenport https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Douglas Davenport2023-05-23 09:02:462023-05-23 15:36:55Short Selling School 101
Mad Hedge Fund Trader

May 22, 2023

Diary, Newsletter, Summary

Global Market Comments
May 22, 2023
Fiat Lux

Featured Trades:

(MARKET OUTLOOK FOR THE WEEK AHEAD,
or CONCENTRATION OF WEALTH AT THE TOP)
(AAPL), (GOOGL), (AMZN), (MSFT), (NVDA), (TSLA), ($VIX), (JPM), (BAC), (C)

 

CLICK HERE to download today's position sheet.

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2023-05-22 09:04:282023-05-22 15:47:04May 22, 2023
Mad Hedge Fund Trader

The Market Outlook for the Week Ahead, or Concentration of Wealth at the Top

Diary, Free Research, Newsletter

As I write this to you, I am flying at 30,000 feet over the red clay of Georgia. The azure blue of the Gulf of Mexico is on the left and the Golden State of California lies straight ahead.

I am returning from a five-day whirlwind tour of Florida, which saw me speak at three Strategy Luncheons and countless private meetings.

It was a blast!

Not only did I learn the local lay of the land, I often pick up some great trading ideas.

I first hitchhiked across the Sunshine State in 1967. Except for a few small towns on the coasts, there was nobody there. The entire inland of the state was covered with small cattle ranches and the odd tourist trap (mermaids, alligator wrestling, snake shows etc).

People thought the extensive freeway system was only built because the state was just 90 miles away from Cuba, then a Cold War flash point (it is officially called the “Dwight D. Eisenhower National System of Interstate and Defense”). Suddenly,  somebody secretly started buying up land around Orlando. The locals thought General Motors (GM) was going to build a car plant there.

Then Walt Disney Corp (DIS) swept in and announced they were building a second Disneyland to cater to the east coast, creating an astonishing 70,000 jobs and the freeways started to fill up (click here for the video).

Today, driving around the state is a dystopian nightmare. The US population has doubled since the first Interstates were built in the 1950s, and the US GDP has increased by ten times, a byproduct of the Interstates. That means ten times more heavy truck traffic which has been mercilessly beating the life out of the roads. In Florida, the population has risen by more than fourfold as well, from 5 million to 22.2 million so you get the picture.

You lurch from one traffic jam to the next, even in the middle of the night. Whatever time Google Maps says it will take to get somewhere, triple it. The only consolation is that the traffic is worse in California.

I loved Key West where a very happy Concierge member made available an 1859 mansion close to the waterfront, restored and modernized down to the studs. By this time of the year, anyone with money has decamped for New England leaving only the retirees and beach bums.

I made the pilgrimage to Earnest Hemmingway’s home where he produced 70% of his published writings in only seven years. Another two boxes of manuscripts were discovered in the basement of his favorite bar last year.

It’s ironic that this state is now known for banning books that include sex and violence. Steinbeck’s work has already hit the dustbin, so old Earnest can’t be far behind.

What’s next? The Bible? It has lots of sex and violence.

As for me, Hemingway’s granddaughter, Mariel, stands out as the only Playboy cover girl I ever dated (April, 1982, I think). She is now happily married with three grown kids.

And yes, I did prove that it is possible to eat Key Lime Pie four days in a row.

As for the stock market last week, there really isn’t much to say. The concentration of wealth at the top continues unabated, as it is in the rest of the country. Stocks are still discounting a soft landing, while commodities, energy, and bonds expect a recession.

Go figure.

The top five stocks continues to suck all the money out of the rest of the market, (AAPL), (GOOGL), (AMZN), (MSFT), and (NVIDIA), the early beneficiaries of AI, accounting for 80% of this year’s market gains. Of the other 495 stocks, 250 are below their 200-day moving averages, meaning they are still in bear markets.

This is what has crushed volatility, taking the ($VIX) from $34 down to $15. The last time volatility was this low was just before the Long Term Capital Management fiasco where it languished around $9 (read Liar’s Poker by my friend Michael Lewis). When LTCB went bust, volatility rocketed to $40 overnight and stayed there for two years.

Options traders made fortunes.

Mad Hedge has nailed every trend this year. We bought tech and Tesla (TSLA) in January when we should have. We shorted ($VIX) every time it approached $30. Then we bought the banking bottom in March (JPM), (BAC), (C) and carried those positions into April.

We’ve been shorting Tesla strangles every month. And now we are 80% in cash waiting for the world to end one more time in Washington DC so we can load the boat with LEAPS and replay the movie one more time.

By the way, Mad Hedge has issued 25 LEAPS over the past year and 24 made money with an average profit of about 300%. Our sole loser has been with Rivian (RIVN), but even it still has 18 months to run. Never own an EV stock during a price war.

So far in May I have managed a modest 2.43% profit. My 2023 year-to-date performance is now at an eye-popping +64.18%. The S&P 500 (SPY) is up only a miniscule +9.00% so far in 2023. My trailing one-year return reached a 15-year high at +113.84% versus +10.87% for the S&P 500.

That brings my 15-year total return to +661.37%. My average annualized return has blasted up to +48.99%, another new high, some 2.74 times the S&P 500 over the same period.

Some 41 of my 44 trades this year have been profitable. My last 22 consecutive trade alerts have been profitable.

I closed out only one trade last week, a long in the (TLT) just short of max profit a day before expiration. That just leaves me with a long in Tesla and a short in Tesla, the “short strangle”. I now have a very rare 80% cash position due to the lack of high return, low risk trades.

There’s a 1,000 Point Drop in the Market Begging to Happen. That’s what happens when the market rallies on a Biden McCarthy debt ceiling deal, which McCarthy’s own party then votes down. After all, it took McCarthy 15 votes to get his job. Just watch volatility, it’s a coming.

Weekly Jobless Claims Fall to 242,000, down from 264,000. It’s a surprise slowdown. The rumor is that last week’s highpoint was the result of a surge in fraudulent online claims in Massachusetts.

NVIDIA Could Rise Fivefold in Ten years, say fund managers. I think that’s a low number. The Silicon Valley company makes the top performing GPU’s in the industry selling up to $60,000 each. (NVDA) is seeing a perfect storm of demand from the convergence of AI and Internet growth. The shares have already tripled off of the October low.

Tesla is Considering an India Factory, as part of its eventual build out to 10 plants worldwide. The country’s 100% import duty on cars has been a major roadblock. India is now pushing a “Made in India” initiative. Good luck getting anything done in India.

Homebuilder Sentiment Up for 10th Straight Month, as it will be for the next decade. There is no easy escape from a demographic wave. New homebuilders have figured out the new model.

India’s Tata to Build iPhones for Apple, in an accelerating diversification away from China. Apple has had too many of its eggs in one basket, especially given the recent political tensions between the US and the Middle Kingdom.

US Dollar Soars to Three Month High, as investors flee to safe haven short term investments. Rapidly worsening economic data is sparking recession fears. Ten consecutive months of falling inflation is another indicator of a slowdown.

My Ten-Year View

When we come out the other side of the recession, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. The economy decarbonizing and technology hyper-accelerating, creating enormous investment opportunities. The Dow Average will rise by 800% to 240,000 or more in the coming decade. The new America will be far more efficient and profitable than the old.

Dow 240,000 here we come!

On Monday, May 22 there is nothing of note to report.

On Tuesday, May 23 at 4:00 PM EST, the inaugural launch of Mad Hedge Jacquie’s Post takes place. Please click here to attend this strategy webinar. The Federal Reserve Open Market Committee minutes are out at 2:00 PM.

On Wednesday, May 24 at 2:00 PM, the Federal Reserve Open Market Committee minutes are out.

On Thursday, May 25 at 8:30 AM, the Weekly Jobless Claims are announced. The US GDP Q2 second estimate is also published.

On Friday, May 26 at 2:00 PM, the University of Personal Income & Spending and Durable Goods are released.  

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 Rainier 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 firm hands of Mount Everest veteran Jim Whitaker to summit the 14,411 peak (click here for this story ). The deal was for us to hitchhike back to Los Angeles as soon as 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 anywhere.

When we got off the mountain, I looked at the map and saw there was this fascinating-sounding country called “Canada” just to the north. So, it was 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.

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, artificially inseminating cows, and eating steak three times a day.

I made friends with the cowboys by reading them their mail, which they were unable to do since they were all illiterate. There were lots of bills due, child support owed, and alimony demands.

In Saskatchewan, the roads ran out of cars, so we hopped a freight train in Manitoba, narrowly missing getting mugged in the rail yard. 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 the engine. 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 Command pilot Group Captain John Chenier!

Broke again, we landed jobs at a hamburger stand at Expo 67 in front of the imposing Russian pavilion with the ski jump roof. 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 answer 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. It wasn’t the last time my dad had to talk me out of jail.

We developed a system where my parents could keep track of us across the continent. 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. At least he had a starting point to look for the bodies.

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 high 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 tops 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, garage, barn or tool shed 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 I profited enormously from it. As a result, I am a better man.

As for my brother Chris, he died of covid in early 2020 at the age of 65, right at the onset of the pandemic. Unfortunately, he lived very close to the initial Washington State hot spot.

People often ask me what makes me so different from others. I answer, “My parents taught me I could do anything with my life, and I proved them right.”

Good luck and good trading.

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

 

 

 

 

 

 

 

https://www.madhedgefundtrader.com/wp-content/uploads/2023/05/hamburger-stand.jpg 970 983 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2023-05-22 09:02:142023-05-22 15:47:30The Market Outlook for the Week Ahead, or Concentration of Wealth at the Top
Mad Hedge Fund Trader

May 16, 2023

Diary, Newsletter, Summary

Global Market Comments
May 16, 2023
Fiat Lux

Featured Trades:

(LAST CHANCE TO ATTEND THE THURSDAY, MAY 18, 2023 TAMPA FLORIDA STRATEGY LUNCHEON)
(LOOKING AT THE LARGE NUMBERS)
(TLT), (TBT) (BITCOIN), (MSTR), (BLOK), (HUT)

 

CLICK HERE to download today's position sheet.

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2023-05-16 09:06:072023-05-16 18:39:55May 16, 2023
Mad Hedge Fund Trader

May 14, 2023

Diary, Newsletter, Summary

Global Market Comments
May 14, 2023
Fiat Lux

Featured Trades:

(MARKET OUTLOOK FOR THE WEEK AHEAD, or I’M GOING ON STRIKE!)
(TSLA), (TLT), (AAPL), (BRK/B), (BA), (GOOGL)

 

CLICK HERE to download today's position sheet.

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