Global Market Comments
February 5, 2021
Fiat Lux
Featured Trade:
(FEBRUARY 3 BIWEEKLY STRATEGY WEBINAR Q&A),
(MRNA), (PFE), (JNJ), (AMZN), (SLV), (GME), (GLD), (CLDR), (SNOW), (NVDA), (X), (FCX),
(AAPL), (TSLA), (FEYE), (PANW), (SWI), (WYNN), (MGM), (LVS)
Below please find subscribers’ Q&A for the February 3 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Incline Village, NV.
Q: Is there a big difference between COVID-19 vaccines?
A: The best vaccine is the one you can get. It’s better than being dead. But there are important differences. The Pfizer (PFE) and Moderna (MRNA) vaccines are RNA vaccines, they’re very safe, and getting similar results. But the evidence shows that about 15% of Moderna recipients are coming down with flu-like symptoms on their second shot. Nobody knows why, as the two are almost biochemically identical. AstraZeneca is a killed virus type vaccine, which means if they have a manufacturing error, you end up giving the disease to people by accident, as with the original polio vaccine. So that's the less safe vaccine. So far, that one has only been used in Europe and Australia, as it is made in England. There isn’t enough data about the John & Johnson (JNJ) single-shot vaccine.
Q: Is Moderna (MRNA) a long term buy?
A: The trouble with all the vaccine plays is that we’re heading for a global vaccine glut in about 4 months when we’ll have something like 12 companies around the world making them. The rush for everyone to get a vaccination as soon as possible is leading to inevitable overproduction and falling stock prices. Moderna is already a 12 bagger for us. I’m not really looking to overstay my welcome, so to speak. Time to cash in and say, “Thank you very much, Mr. Market.” There will be another cycle down the road for (MRNA) as its technology is used to cure cancer, but not yet.
Q: Would you recommend a silver (SLV) LEAP?
A: Yes, silver was run up 35% for a day by the GameStop (GME) crowd and crashed the next day, which was to be expected because there are no short positions in silver. Everything was just hedged to look like there were short positions because the big banks had huge open short options positions that were public and hedges in the futures and silver bars that were private. The (GME) people only saw the public short positions. Long term, I would go for a $30-$32 vertical call spread expiring in 2023. Go out 2 years, and I think you could get silver at $50. So, a good LEAP might get you a 1000% return in two years. Those are the kinds of trades I like to do.
Q: What do you think of Amazon now that Jeff Bezos is retiring?
A: Buy the daylights out of it. That was the great unknown overhanging the stock for years, Jeff’s potential retirement. Now it's no longer unknown, you want to buy (AMZN). Even before the retirement, I was targeting $5,000 a share in two years. Now we have everybody under the sun raising their targets to $5,000 or more— we even had one upgrade today to $5,200. There are at least half a dozen businesses that Amazon can expand into, like healthcare, which will be multibillion-dollar earners. And then if you break it up because of antitrust, it doubles in value again, so that's a screaming buy here. We have flatlined for six months, so this could be a trigger for a long-term breakout.
Q: Is there anything else left after GameStop? Another short play?
A: Well, this was the worst short squeeze in 25 years, and everyone else covered their other shorts because they don't want to get wiped out like the one Melvin Capital. There were only around a dozen potential single-digit heavily shorted stocks out there, and those are mostly gone. So, the GameStop crowd will have to roll up their sleeves and do some hard work finding stocks the old fashion way—by doing research. I’m guessing that GameStop was a one-hit-wonder; we probably won’t be surprised again. At the same time, you should never underestimate the stupidity of other investors.
Q: What do you think of the cloud plays like Cloudera and Snowflake?
A: I love cloud plays and there will be more coming. The entire US economy is moving on to the cloud. But everyone else loves them too. Snowflake (SNOW) doubled on its first day, and Cloudera (CLDR) doubled over the last three months, so they're incredibly expensive and high risk. But you can't argue with their business models going forward—the cloud is here to stay.
Q: Would you buy LEAPS in financials?
A: Absolutely yes; go out two years for your maturity and 30% on your strike prices, you will get a ten bagger on the trade. If I’m wrong, it only goes to zero.
Q: Is US Steel (X) a buy?
A: Yes. They are being dragged up by the global commodity boom triggered by the global synchronized recovery. (X) took a hit today because they just priced a $700 million secondary share issue which the flippers dumped like a hot potato. If given the choice, I’d rather do a copper play with Freeport McMoRan (FCX) which is seeing much more buying from China. I bought it on Monday.
Q: Any chance you can include one-, three-, and five-year price targets?
A: No chance whatsoever. I’ve never heard of a fund manager that could do that and be right. Stocks are just too imprecise an instrument with all the emotion that’s involved. But for the better stocks, you can with confidence predict at least a double. And by the way, all my predictions for the last 13 years have been way, way on the low side, so I tend to be conservative. Like, remember when Amazon was at $10? I said it would go to $20. Boy was I right!
Q: How can you say the next four years will be good for the stock market?
A: Well, $10 trillion in fiscal stimulus, $10 trillion in QE; stocks tend to like that. Oh, and technology exponentially accelerating on all fronts and far more broadly than what we saw in the 1990s. Also, there is a certain person who is no longer president, so add about 10-20% on top of all stock valuations. Companies can finally do long term planning again, after being unable to do so for four years because policies were anti-trade, anti-business, and flip-flopping every other day. So yes, I think that's enough to make the next 4 four years good; and actually, I think the next 8 years could be good—I'm predicting Dow 120,000 by 2030, if you recall.
Q: When do you expect the next 5% correction if there is one? February is always very volatile.
A: With an unlimited liquidity market like we have, it is really tough to see negatives of any kind. What kind of negatives are out there? The pandemic doesn’t stop—that's the main one. There’s another one people aren't talking about: the reason we got all these vaccines so fast is they took all regulation and threw it out the window. What if one of these vaccines kill off a million people? That would be pretty negative for the market. Interest rates could rocket faster than expected. But I’m always short there so that would be a moneymaker. But these are pretty out there possibilities, and that is why the market is not backing off, and when it does, it only gives us 5%.
Q: Is the Fed stimulating the economy too much?
A: The bond market says no with a ten-year yield of 1.10%, and the bond market is always the ultimate arbiter of when the stimulus ends. That’s because the Fed can’t directly control bond market interest rates, only overnight rates. But when we get bonds up to, say, a 3% yield (which is probably 2 or 3 years off), that’s when we’re getting too much stimulus, and we’ll probably take our foot off the pedal way before then. I know Janet Yellen and she agrees with me on this point. She’ll be throttling back well before we see a 3% yield in the Treasury market.
Q: Do you manage other people’s money?
A: No, because it costs a million dollars in legal fees to set up even a small fund these days. When I set up my hedge fund 30 years ago, there were no regulatory costs because no one knew what a hedge fund was; they all thought they were doing something illegal, so they didn't have to register for anything. That’s why it’s changed now.
Q: What is your target on NVIDIA (NVDA), and will it split?
A: It’s an easy double, with a global chip shortage running rampant. They make the best graphics cards in the world, bar none. These big tech companies tend not to split until they get share prices into the thousands, which is what Apple (AAPL) and what Tesla (TSLA) did three or four times.
Q: If we get 3.25% in bonds, is that going to hurt gold?
A: Yes, and that’s one of the reasons I bailed on my gold positions a couple of weeks ago. It effectively turned into a bond long. A sharp rise in interest rates is bad for gold because we all know that gold yields to zero.
Q: What about Fireye (FEYE)?
A: Yes, we also love Fireye in addition to Palo Alto Networks (PANW) because there is a near-monopoly—there are only about six players in the entire cybersecurity industry and hacking is getting worse by the day. Look at the Solar Winds (SWI) fiasco and the national Russian hack there.
Q: What about copper as a recovery play?
A: Well, I voted with my feet on Monday when I bought a position in Freeport McMoRan, after it just sold off 15%. I think (FCX) could double at some point in the coming economic recovery. So, copper is an absolute winner, and when having to choose between copper and steel, I’ll pick copper all day long.
Q: What do you recommend for gold (GLD)?
A: Gold is a trading range for the time being. Buy the dips, sell the rallies; you won’t get more than about 10% or 15% range on that. And there are just better fish to fry right now, like financials, which benefit from rising interest rates as opposed to being punished. Bitcoin is stealing gold’s thunder and the markets keep creating more Bitcoins.
Q: Should high-frequency trading be banned?
A: I don’t think it should be. It does create liquidity; the effect on the market is wildly overexaggerated. They’re basically trading for pennies or tenths of pennies, so they do provide buying on selloffs and selling at huge price spikes. They do have a positive effect and they’re probably only taking about $10 or $20 billion in profit a year out of the market.
Q: Should I buy Wynn Resorts (WYNN) here?
A: Buy the dips for sure; this is a major recovery play. We here in Nevada are expecting an absolute tidal wave of people to hit the casinos once the pandemic ends, and (WYNN), (MGM), and (LVS) would be a great play in those areas.
Good Luck and Stay Healthy.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
February 1, 2021
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or GAMBLERS HAVE ENTERED THE MARKET),
($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 27, 2021
Fiat Lux
Featured Trade:
(A NEW THEORY OF TESLA, or WHY I’M RAISING MY TARGET TO $10,000),
(TSLA)
Mad Hedge Biotech & Healthcare Letter
January 26, 2021
Fiat Lux
FEATURED TRADE:
(EMERGING COVID-19 ALLIANCES)
(CVAC), (PFE), (MRNA), (TSLA), (NVAX), (JNJ), (SNY), (GSK), (BAYN)
Tesla (TSLA) has been sizzling hot for months now, and it looks like its Midas touch has reached the biotechnology world.
It seems that almost everything linked to Tesla achieves success. That could indicate terrific news for a particular biotech: CureVac (CVAC).
CureVac, an under-the-radar biotech stock, is closing in on the leading COVID-19 vaccine developers today.
A differentiating factor it has from the likes of Pfizer (PFE), BioNTech (BNTX), and Moderna (MRNA) is its bonafide tie-in with Tesla. Although it sounds like quite a stretch for an electric car company to have any involvement with a biotech stock, the connection actually makes sense.
Like Moderna and BioNTech, CureVac has also been working on utilizing messenger RNA (mRNA) technology to develop various vaccines and other treatments. If all goes well, this could even lead to finding a way to immunize people against cancer.
Where does Tesla come in?
It all started in 2019 when CureVac was awarded $34 million in funding by the Coalition for Epidemic Prepared Innovations (CEPI).
The goal was to create and eventually build a prototype of an mRNA “printer.” This high-tech tool would be used to produce mRNA doses in areas that suffer from viral outbreaks. It could be used by hospitals to create personalized medicines.
Having an mRNA printer would be groundbreaking in fighting off viral diseases, particularly in remote regions. As expected, this project faced many technology obstacles along the way.
Here’s where Tesla can offer a solution since one of the companies it acquired in the past years is Grohmann Engineering, which specializes in automated manufacturing.
This makes Tesla Grohmann Automation the logical partner for CureVac to turn for help in building its mRNA printer prototype.
What we know so far is that the two companies have been working closely on the project.
It’s only a matter of time before we find out if Tesla’s magic would once again blow our expectations out of the water and we are presented with yet another breakthrough.
Other than its alliance with Tesla in the mRNA race, CureVac has forged another partnership to transform itself into a stronger candidate in the COVID-19 vaccine competition.
CureVac has tapped into the global reach of Bayer (BAYN) to help it distribute its vaccine once it gains approval.
In terms of its own COVID-19 vaccine candidate, CureVac is anticipated to release positive results.
This is because its technology closely mirrors that used by Moderna and BioNTech, which strongly indicates that the efficacy levels could be just as good.
However, CureVac’s vaccine candidate offers a competitive advantage over the others: it doesn’t require cold storage.
This means it would be easier and more convenient to distribute it compared to Moderna’s and Pfizer’s.
It also requires a much smaller dose compared to Moderna’s COVID-19 vaccine candidate. This translates to cheaper manufacturing costs.
CureVac has secured a deal with the EU to deliver an initial 405 million doses for half of the year plus 300 million doses more in 2021 alone. It also agreed to produce 600 million doses in 2022.
Meanwhile, its alliance deal with Bayer indicates that it has secured a powerful distribution partner.
Therefore, we could expect CureVac to leverage Bayer’s global supply network to deliver its vaccines worldwide.
However, CureVac and Bayer are thinking way ahead of 2022.
The alliance formed by the two companies sees to it that the CureVac vaccine candidate would become the strongest contender in the post-pandemic years.
As per Bayer’s projection, the companies estimate 12 billion to 14 billion vaccine doses just to bring this pandemic under control.
Considering that COVID is expected to become an endemic disease, annual or even bi-annual vaccination programs would become the norm.
While Pfizer, Moderna, and AstraZeneca have been well ahead of the vaccine race, the door is still firmly open for other developers like Novavax (NVAX), Johnson & Johnson (JNJ), GlaxoSmithKline (GSK), Sanofi (SNY), and, of course, CureVac to launch their own COVID-19 vaccines.
Only going public in August 2020, this German biotech company already has $18.2 billion in market capitalization.
Its public offering of 15.3 million shares sold at $16 each generated $245.3 million for the company back in August.
By early December 2020, CureVac shares were already being traded somewhere around $150 as investors quickly began to realize the value proposition.
If I am to look to invest in a COVID-19 vaccine developer at this point, CureVac would surely be one of my choices.
Global Market Comments
January 25, 2021
Fiat LuxFeatured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or HERE COMES THE SUPERHEATED ECONOMY),
(SPY), ($INDU), (TLT), (TBT), (TSLA)
The US economy is in the worst condition in a century. The U6 Unemployment rate stands at 20 million today. Main streets everywhere are boarded up. Millions of businesses have gone under. Some 4,500 people a day are dying from a dreaded virus.
All of this means that you should rush out and buy and stocks, as many as possible, with both hands, and by the bucket load. It’s time to take out that home equity loan and pour it into stocks, damn the torpedoes.
For things are about to get better for the US economy, a whole lot better, better beyond anyone’s wildest imagination, and for you individually.
Speaking to CEOs, fund managers, and hedge fund strategists, it is clear that most are wildly underestimating the strength of the 2021 recovery. People haven’t really added up all the stimulus and quantitative easing that is about the hit, which could reach $20 trillion. The total market value of US stock markets is only $51 trillion.
I hate to engage in some simplistic calculations here, but if you increase the amount of capital going into the economy by nearly 50% in two years, stocks just might go up by nearly 50% in two years. It’s no more complicated than that.
In fact, economic conditions are about to improve so fast that the Federal Reserve may have to break its promise about not raising interest rates for three years and instead start nudging them up by the end of 2021.
Needless to say, this is terrible news for the bond market (TLT), where I am lining up to go from a double to a triple short.
You are already starting to see other analysts ratchet up their overcautious yearend S&P 500 target. By November, they may reach my own outsized goal of 4,800, bringing in a total gain in stocks of 35%.
All of this explains why stocks just absolutely refuse to go down, even a little bit. Each one-day decline seems to be met with a wall of buying. The memo is out: you absolutely have to get into this market, whether you are an individual, hedge fund, institution, or outright bet the ranch gambler.
Of course, if you think I’m so bullish because I made 90% on my money since the April bottom, you’d be right.
Just keep your discipline and observe the basic rules of trading: 1) Don’t buy a position that is so big that it can’t handle a normal 10% correction, 2) Don’t accumulate a position that is so big that you can’t sleep at night, 3) No calling John Thomas in the middle of the night and asking “I have a 3X position in this and their trading down in Asia, what should I do?”
If you have to ask the question, your position is too big.
Biden’s economic plan boosts growth forecasts, according to Goldman Sachs. Prospects have jumped from 6.4% to 6.6%, the highest in a half-century, on the back of a massive Covid-19 package.
Treasury Secretary Janet Yellen says “GO BIG” or go home to the Senate Finance Committee. She was there to get confirmation and push for Biden’s $1.9 trillion stimulus package. Markets are underestimating the extent of the stimulus headed our way, which could reach $10 trillion in addition to another $10 trillion in quantitative easing. Buy dips.
Index Funds are getting trashed, substantially trailing the S&P 500, as single-story stocks dominate the market. It’s become a stock pickers market in the extreme, with no more obvious example that (TSLA), up 1,000% in 9 months. Small caps, IPOs, and cyclical are getting all the action, leaving the (SPX) in the dust.
Tesla delivered its first Chinese Model Y, which will add 250,000 units to sales in 2021. It’s all part of Elon’s quest to take over the global automobile market. He plans to boost sales from 500,000 last year to 20 million in a decade. If so, the stock today still looks cheap. But is the quality the same?
Tesla Q4 registrations soar by 63%, in California, its largest market. It’s due to the runaway success of the Model Y small SUV. The stock is taking a long-overdue rest with a sideways “time” correction. It’s still true that if you buy the stock, you get the car for free.
Weekly Jobless Claims are still sky-high at 900,000. It’s a decline on the week but still horrifically high. The stock market may be starting to notice, with stocks moving sideways for two weeks.
Existing Home Sales soared to a 15-year high, up an amazing 22% YOY in December to a seasonally adjusted 6.76 million units. In the meantime, inventories hit all-time lows at only 1.9 months as they can’t build them fast enough. Sales of $1 million-plus homes are up an incredible 94%. The hottest markets were in Austin, TX, Tampa, FL, and Phoenix, AZ. New York was the worst, followed by San Francisco. The market is on fire and could continue for another decade. Pending tax breaks from the new tax bill will give homeownership another big push.
US Housing Starts jump 5.8%, to 1.7 Million units. Single-family homes are up 12% YOY, driven by the pandemic. Notice the enormous supply/demand gap which assures that home prices will keep rising for years. Rising mortgage interest rates so far have had no effect.
US Manufacturing PMI hits 14-Year high, according to Markit, their index jumping from 57.1 to 59.1. The performance would have been better if it weren’t for rampant parts shortages nationwide. It’s another argument for the long-term bull case.
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 shot out of the gate with an immediate 7.25%so far in January. That is net of a 4% loss on a Tesla short which I added one day too soon. Given the great heights of the market, I have trimmed my book to just a long in Tesla and a Short in US Treasury bonds.
That brings my eleven-year total return to 430.30% double the S&P 500 over the same period. My 11-year average annualized return now stands at a nosebleed new high of 38.80%. My trailing one-year return exploded to 74.44%, the highest in the 13-year history of the Mad Hedge Fund Trader. We have earned 90% since the March low.
The coming week will be a big one for big tech earnings.
We also need to keep an eye on the number of US Coronavirus cases at 25 million and deaths at 420,000, which you can find here. We are now running at a staggering 4,500 deaths a day.
When the market starts to focus on this, we may have a problem.
On Monday, January 25 at 9:30 AM EST, we get the Chicago Fed National Activity Index for December. Phillips (PSX) and Kimberly Clark (KMB) report.
On Tuesday, January 26 at 10:00 AM, we learned the new S&P Case Shiller National Home Price Index. Microsoft (MSFT), Johnson & Johnson (JNJ), and American Express (AMEX) report.
On Wednesday, January 27 at 10:00 AM, US Durable Goods for December are published. Apple (AAPL), Facebook (FB) and Tesla (TSLA) report.
On Thursday, January 28 at 9:30 AM, the first look at US GDP for Q4 is announced. McDonald’s (MCD), American Airlines (AA), and Visa (V) report.
On Friday, January 29 at 9:30 AM, US Personal Income and Spending for December is published. Ely Lilly (LLY) and Caterpillar (CAT) report. At 2:00 PM, we learn the Baker-Hughes Rig Count.
As for me, I have never been big on the “meme” thing, but you have to love the one that has been circulating about Bernie Sanders. Suddenly, he showed up on every transit system in the country. Clearly, the country was dying for a laugh. I include several pictures below. Hopefully, I won’t end up like him someday.
Stay healthy.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
January 15, 2021
Fiat LuxFeatured Trade:
(BETTER BATTERIES HAVE BECOME BIG DISRUPTERS)
(TSLA), (XOM), (USO)
