When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
Global Market Comments
February 18, 2022
Fiat Lux
Featured Trades:
(FEBRUARY 16 BIWEEKLY STRATEGY WEBINAR Q&A),
(NVDA), (MSFT), (VIX), (ROM), (TSLA), (GOOGL), (TLT), (TBT), (IWM), (QQQ), (FCX)
Below please find subscribers’ Q&A for the February 16 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Incline Village, Nevada.
Q: Is it a mistake to try to be nimble with the ProShares UltraShort 20+ Year Treasury ETF (TBT), or is it better just to hold it through the rest of the year?
A: You should do both; have a core long position which you keep through the end of the year, and you also have a second position that you trade. A good example is how I just took profits on the short iShares 20+ Year Treasury bond ETF (TLT) even though it had a month to run because we had 91.67% of the profit in hand. So, when you get way in the money and still have a lot of time duration left, there’s no point in continuing with these put spreads to catch the last 5 or 10% in the position. The risk/reward is no good.
Q: The iShares 20+ Year Treasury bond ETF (TLT) seems washed out.
A: There is a risk of that, which is why I went long the (TLT) $127-$130 March vertical bull call spread. I think even if we get down to $130, it will take us at least a month to get down that far. There will be several short-covering rallies along the way that we can run out the clock with, and I think even my 3/$127-$130 should expire at max profit.
Q: Should we buy puts or spreads?
A: When you get the CBOE Volatility Index (VIX) over 30, it’s only because you get a very sharp collapse in stocks, and there you’re looking at very deep in the money call spreads— 10-20% in the money can still make you $1,000 or $2,000 a month. And if you get extreme selloffs with (VIX) up to $40, then you’re really looking for long-term LEAPS, one-year call spreads on your favorite stocks, like Tesla (TSLA), NVIDIA (NVDA), and Microsoft (MSFT), and so on.
Q: Is it time to enter Tesla (TSLA) now?
A: I’m waiting for one more final selloff—if we get that, we could get back into the low 800s or even the 700s in Tesla. That's the figure I’m hanging on for, and that's where you get into Tesla LEAPS because Tesla is clearly expanding beyond just the electric car business. SpaceX is now worth $100 billion dollars, and the boring company could be worth just as much if they get more contracts for building underground mass transit. There is also Solar City to consider plus some other stuff they haven’t even announced yet.
Q: What are your thoughts on Google (GOOGL)?
A: The 20 to 1 split is in the price already. But any selloff and I would go back into there with call spreads because Google is a fantastic company and a legal monopoly which I love owning.
Q: What about the ProShares Ultra Technology ETF (ROM)?
A: Yes, I’m watching very closely. It had a huge dive in January, then made back nearly half its losses. So again, I'm waiting for another dip to go back into (ROM) with lots of leverage.
Q: Do we get Volatility Index (VIX) over $30 within 2 months?
A: Yes, I think we probably will. We’re pretty close to it now; we got up to $26 this morning. So yes, I’d be a buyer of that.
Q: Is a (TLT) $128-$131 call spread for March still ok?
A: Yes, I kind of like that. I don’t think we’ll get down below $131 in four weeks, and at the very least we’ll get one rally of several points, and that’ll be your chance to get out of that position.
Q: Is it too early for (TLT) LEAPS?
A: No, it’s too late for TLT LEAPS. You should have been doing put LEAPS in November, and everybody who did that got profits of nearly 100% on that position. I don’t see a call side LEAPS in TLT for at least 5 to 10 years when interest rates get up over 6% on 10 year US Treasury bonds. We are a long way from a (TLT) call LEAP.
Q: Are we at a Bitcoin bottom?
A: Possibly, 50/50 chance we go back and retest the lows. We’ll just have to see how Bitcoin behaves in a rising interest rates scenario because ever since Bitcoin was invented, interest rates have been falling. Rising rates are a new thing for Bitcoin and no one knows what that will look like.
Q: When will you update your long-term portfolio?
A: Soon; things have been kind of busy issuing 30 trade alerts a month.
Q: How high will the ProShares UltraShort 20+ Year Treasury bond fund (TBT) go?
A: Looking for $26 from current levels, so yes, much higher to go. And we have a double in three months on (TBT) at the $28 level.
Q: If one believes in the war in Ukraine happening soon, what companies or sectors do you invest in for the short term?
A: None; if we actually do get a war, everything gets absolutely slaughtered, and then you’re looking for the buy. And that will be buys in tech especially. I don’t think there’s going to be a war in Ukraine, but the only things that go up in a Ukraine war scenario are energy stocks (USO), oil companies, and so on.
Q: Do you like China EV stocks?
A: No, I don’t. I visited BYD Motors 15 years ago and they just don’t have the technology, the battery lengths are poor, and they tend to catch on fire. They have never been able to reach American quality standards on any of their cars, not only the EVs but also the conventional internal combustion engines as well..
Q: Which index will outperform in the second half, the Invesco QQQ Trust (QQQ) or iShares Russell 2000 ETF (IWM)?
A: I vote (QQQ). I think we have a technology-led bull market in the second half, and the Russel will be lagging.
Q: What’s better, copper or copper miners?
A: You always go for the miners like Freeport McMoRan (FCX)—they will outperform the physical metal by at least three or four to one, to the upside. That’s also true with gold miners and other derivative plays; the miners always outperform the metals.
Q: What is a bond vigilante?
A: That is a term we heard from the ‘70s and ‘80s when you would get enormous selling of bonds on even the slightest negative piece of economic data or inflation data. They called the bond traders the bond vigilantes because they just crushed the bond market for the slightest transgression on the inflation/economic front. And they are back, by the way, hugely punishing the market as we have seen ($20 points in two months is a lot of punishment) on even the slightest increase in inflation.
Q: Do you have a yearend price for Freeport McMoRan (FCX)?
A: Over $50—just rallied from $30 in September.
Q: Isn’t inflation wildly understated?
A: Yes, you can find individual items that are up 30 or 50%, but the inflation calculation is actually based on 105 different items, and some of them are going down in price. For example, you had an enormous increase in used car prices in December, but they actually went down last month. So, whenever you get a basket this big, eight groups of 80,000 items, you get smaller moves. As anyone will tell you who trades baskets of stocks against the individual stocks, the same mathematical effect happens in the calculation. And while it is being wildly understated now, it’ll be wildly overstated in a few months when we get back to the 3% level, which I am expecting.
Q: What is your TLT prediction after the next 3 or 4 interest rate hikes?
A: Remember, the interest rate hikes only affect the overnight rate. TLT is a 10 to 20-year basket of bonds, so they don’t trade one for one. We may reach a bottom by the end of the year in the (TLT) somewhere in the $120s, but it’s not going to 100 this year and it’s not going to zero like some people are predicting.
Q: The inflation measure is a joke.
A: Yes, it has always been a joke. Any collection of data among 330 million people is going to be inaccurate, late, and have huge lags—but you trade the data you have, not what you wish you had, and that is the real world. I've been trading economic data for 50 years and that is my conclusion.
Q: Martial Law was declared in Canada— is there anything to trade off of that news?
A: No; even a major international event only gets a stock market reaction of usually one day or two at the most. Whatever’s happening on a bridge in Canada, nobody here really cares.
Q: Are you doing a cruise?
A: Yes, I’m doing a Norwegian cruise. Just go to the lunches section on the madhedgefundtrader.com website, and you can still buy tickets. We would love to have you for lunch on the Queen Victoria, a Norwegian Fjord cruise. We’re coming up to payment time on the tickets.
Q: Will there be earnings disappointment in April?
A: Yes, the year-on-year comparisons are going to be difficult. That will be another problem for the market in the spring in addition to the Fed.
Q: What happens with the FOMC out today at 2:00?
A: It will show a heightened fear of inflation and a greater urgency to raise interest rates.
To watch a replay of this webinar with all the charts, bells, whistles, and classic rock music, just log in to www.madhedgefundtrader.com , go to MY ACCOUNT, click on GLOBAL TRADING DISPATCH, then WEBINARS, and all the webinars from the last ten years are there in all their glory.
Good Luck and Stay Healthy.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
1932 De Havilland Tiger Moth
“If you’re not bullish stocks here for the longer run, you are short the massive firepower of the US government and every scientist and biotech company who’s working on a vaccine,” said John Spallanzani of the Miller Value Funds.
Mad Hedge Biotech and Healthcare Letter
February 17, 2022
Fiat Lux
Featured Trade:
(IS THIS THE SOLUTION TO ANTI-VAXXERS?)
(NVAX), (MRNA), (PFE), (BNTX), (SNY)
One of my old friends, a 45-year-old teacher, has long held the belief that getting vaccinated against COVID-19 is a terrible idea.
Despite the growing number of people getting jabbed, he still felt uneasy over the new mRNA technology applied in the two most widely used shots, Moderna (MRNA) and Pfizer (PFE) / BioNTech (BNTX).
His anxiety worsened when his neighbor was sent to the hospital following his second shot, especially after the doctors said that the official cause of the heart muscle inflammation was the vaccine.
No amount of convincing could change his mind regardless of how many times I explained that the condition was a rare and relatively mild side effect.
However, things seemed to have changed when he heard about the Novavax (NVAX) vaccine, Nuxavoxid.
Since Nuxavoxid uses a decades-long pre-existing protein-based platform instead of a novel approach, more and more people like my friend are starting to take interest and considering signing up for the vaccine.
Actually, this reaction can be observed not only in the US but also across the globe. Data suggest that previously wary individuals now feel more confident over a more established technology.
Novavax’s vaccine uses a recombinant protein technology, which has been around since the mid-1980s.
In fact, this has become the go-to or standard platform used in developing vaccines against Hepatitis B, cervical cancer, and even meningitis.
What does this mean for Novavax?
Considering that over half of the global population has already been inoculated, it’s safe to say that Novavax is late to the party.
However, recent reports showed that a fourth vaccine does not show any significant antibody increase. This isn’t particularly promising especially in light of the Omicron variant.
Moreover, the EMA warned that "repeat boosters every four months might actually weaken people's immune systems. Boosters can be done once, or maybe twice, but it's not something that we can think should be repeated constantly.”
This can be good news for the newcomer Novavax.
Since Novavax uses a recombinant nanoparticle technology, this approach might be considered more effective as a booster shot instead of using the same mRNA technology for a fourth jab.
So far, this is presumed as one of the major reasons for Israel’s—one of the leading countries in vaccine administration—decision to place an order for an alternative COVID-19 vaccine last January.
Instead of reordering from Pfizer or Moderna, Israel opted to get 5 million doses, with an option to add 5 million more, of Novavax vaccine to serve as the fourth booster for its population.
Given that Israel is ordering for its 9.4 million citizens, this deal would serve as an excellent source of real-life data for Novavax’s candidate and whether it can become the go-to choice for booster shots across the globe.
Before this development, Novavax’s projected 2022 revenue was at $4.94 billion. However, the recent regulatory approvals from various nations and advanced orders have the company adjusting this projection.
Needless to say, the possibility of Nuxavoxid practically monopolizing the booster shot market has dramatically bolstered expectations.
On top of these, Novavax has been simultaneously working on a flu vaccine, Nanoflu, that can rival Sanofi’s (SNY) FluZone.
Given that the market size for influenza is expected to grow from $6.5 billion in 2022 to $10.73 billion by 2028, and the fact that Nanoflu easily outperformed the leading product by 40% in clinical trials, it’s safe to say that this is yet another promising revenue stream for Novavax.
Overall, I think Novavax is a good long-term play. It’s important to remember, though, that Novavax’s profile is very close to Moderna and BioNTech.
That means investors interested in this stock must have boundless patience and a strong stomach for the volatility in the following months.
Looking at its excellent potential, it’s clear that the stock is undervalued. Hence, it would be wise for interested investors to buy the dip.
Mad Hedge Bitcoin Letter
February 17, 2022
Fiat Lux
Featured Trade:
(ANOTHER 130 MILLION PEOPLE JUMP ON THE CRYPTO WAGON)
(BTC), (AMZN), (GOOGL), (MSFT)
First Turkey and now Ukraine.
Yes, these are two sovereign currencies, the lira and the hryvnia, that have absolutely lost any credibility whatsoever.
We forget that there are many of these banana republics out there that might as well adopt some sort of alternative currency.
El Salvador anointed Bitcoin their national currency and now that isn’t as bizarre as it first seemed.
Americans sometimes forget that the pandemic ripped through emerging nations like a hot knife through butter and there were no stimuli or handouts, let alone handouts for corporations, and there has never been a longer queue for U.S. green cards.
Well, Russia is on Ukraine’s doorstep and the threat of it crowding the Ukraine border means that no foreign capital or investment will penetrate Ukraine for the foreseeable future.
Every Ukrainian under 40 years old is now making a mad dash for higher ground to the European Union or if they can, the United States, United Kingdom, or Canada.
The Ukrainian hryvnia has lost 10% of its value in a few days and this could be a beginning of a much bigger collapse in purchasing power for Ukrainians who don’t leave.
It could trigger a vicious cycle all the way to zero where like a hot potato, Ukrainian citizens try to rid themselves of local currency as fast as possible.
Like I said, there are others out there, pretty much every ex-Soviet republic not in the European Union of the likes of Georgia, Kazakhstan, Moldova, Azerbaijan, and Armenia of the South Caucasus.
When you add up the population of the likes of Uzbekistan and such, then that totals roughly 130 million people.
These 130 million people, like El Salvadoreans, would be foolish not to adopt Bitcoin if they can’t secure US dollars.
For people who haven’t traveled to these esoteric places, US dollars are in high demand and hard to find and families hold on to them for dear life.
So if the choices are Bitcoin or worthless paper, then between those two, the decision is rather straightforward.
Ukrainians are slowly coming to the realization that these are their options.
Don’t think that any one of these similar countries is immune to political strife or war either.
Georgia has already given up a sliver of their country to Russia already.
And in an incredible set of events, the Government of Ukraine has passed a law that legalizes Bitcoin and other cryptocurrencies.
The law grants legal status to virtual assets. The law not only grants users the right to operate cryptocurrencies but also defines the clear rights and duties of all market participants.
The Ukraine’s government also approved the law on cloud services as a whole. The bill’s goal is to create conditions for the processing and protection of data when using cloud computing technology, as well as providing cloud services and determining the specifics of public authorities’ use of cloud services, as well as more efficient use of public resources through the introduction of new technologies.
The new law will expedite the entry in Ukraine of the world’s top cloud service providers – Microsoft (MSFT), Amazon Web Services (AMZN), and Google (GOOGL) Cloud – and encourage the construction of data centers.
The Ministry of Digital Development has previously said that it planned to expand the market for “virtual assets.”
Virtual assets are divided into two categories in the draught law: secured and unsecured virtual assets.
A secured VA is an asset that verifies property or non-property rights, such as the right of claim on other objects like stable coins, and is secured by fiat currency, securities, or any sort of offline asset.
All other sorts of cryptocurrencies and crypto-based assets, such as non-stable coins like Bitcoin, non-fungible tokens, and so on, are classified as unsecured VAs.
Therefore, it’s not surprising to find out in the latest data that adoption into Bitcoin and other crypto in Ukraine has skyrocketed.
Non-profit donors looking for donations are also being paid via Bitcoin.
The rapid legislation of course would not have occurred if not for the Russian situation, but either way, adoption is adoption and add another 50 million or so Ukrainians to Bitcoin’s growth story.
Eventually, Africa and South America will join the adoption phase as they also preside over rapidly depreciating fiat currency.
I’m shocked that Argentina hasn’t ventured this way yet, put them down for the next country in the crypto queue.
Even if Bitcoin is suffering a bout of weakness due to exogenous shocks, the long-term price trajectory is well above $100,000.
