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
November 18, 2022
Fiat Lux
Featured Trade:
(NOVEMBER 16 BIWEEKLY STRATEGY WEBINAR Q&A),
(TSLA), (JNK), (HYG) or (TLT), (UUP), (FXE), (FXC), (FXA), (ALB), (FCX), (PYPL), (FXI), (GLD), (CCJ), (BHP), (RCL)
Below please find subscribers’ Q&A for the November 16 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Silicon Valley in California.
Q: What do you see Tesla (TSLA) moving to from here until next year?
A: Not much; I mean if you’re lucky, Tesla won’t move at all. The problem is Twitter is looking like a disaster of huge proportions—firing half the staff on day one? Never good for building a business. Tesla has also been tied to the rest of big tech, which has been in awful condition and may not see a continuous move upward until the Fed actually starts lowering interest rates in the second quarter of next year. Tesla could be dead money here for a while; eventually, a company growing at 50% a year will go up—especially when it’s just had a 50% decline in the share price. As to when that is, I don’t know, and asking me 15 more times will get you just the same answer.
Q: Should we start piling into iShares 20 Plus Year Treasury Bond ETF (TLT) longs now or wait?
A: You go now. Every day you waited meant paying one point more in TLT. I think the bottom is in; we have a 20-30 point move ahead of us. Everybody in the world is now trying to get into this trade, just like I spent all this year trying to get out of it. And if anything, November CPI could be a long term-term top in inflation, especially if we came in with another cold number. So, I would start scaling in now, even though we’re over $100 in the (TLT) today and I first recommended this around $95.
Q: If the Fed keeps raising interest rates, will the US Treasury market fall?
A: Probably not because the Fed only has control of overnight interest rates—the discount rate, the interbank rate—whereas the (TLT) is a 10-to-20-year maturity bond. No matter what short term rates do, the inversion will just keep getting bigger, but in fact, the bond market itself was yielding 4.46%, yielding 8% with junk, has bottomed and will probably start going up from here. So that is the difference between the Fed and what the actual market does.
Q: Do you prefer Junk (JNK), (HYG), or (TLT)?
A: I always go for the highest risk. Junk has about an 8% yield here compared to 3.75% for the TLT. By the way, if you want to do one trade and go to sleep, buy the junk on 2 to 1 margin, get your 16% yield next year, and just take a one-year vacation. That’s what some people do.
Q: When you say the dollar is going to go down what do you mean?
A: I mean the US dollar, while Canadian (FXC) and Australian dollars (FXA) will go up.
Q: What is the best time to buy US dollars?
A: Maybe in five years, as it could go down for five or 10 years from here, now that it’s going to imminently give up its yield advantage.
Q: What's the forecast for casinos?
A: I think casinos do better. Las Vegas was absolutely packed, you couldn’t get into the best hotels—people are spending money like crazy.
Q: What’s the best way to play (TLT)?
A: With a one-year LEAP. I put out the $95/$100 last week for my concierge members. Here, you probably want to do the $100/$105; that’ll still give you a one-year return of 100%.
Q: How do you short the dollar?
A: There are loads of short dollar ETFs out there, or you can just sell short the Invesco DB US Dollar Index Bullish Fund (UUP), which is the dollar basket, or buy the (FXA) or (FXE).
Q: Freeport McMoRan (FCX) just went from 25 to 38; is it time to take a profit and re-enter at a lower point?
A: Short term yes, long term no. My long-term target for (FCX) is $100 because of the exponential growth of copper demand caused by EV production going from 1.5 million to 20 million a year in the next 10 years. Each EV needs 200 pounds of copper, so by 2030, annual copper demand for EVs only will be 20 billion pounds. In 2021, the total annual global copper production was 46.2 billion pounds. In order words, global copper production has to double in eight years just to accommodate EV growth only.
Q: Do you think there’ll be a rail worker strike?
A: I have no idea, but it will be a disaster if there is. There’s your recession scenario.
Q: What strike prices do you like for a Tesla LEAP?
A: Anything above here really. You could be cautious and do something like a $200/$210 two years out—that has a double in it. Or you could be more adventurous and go for a 400% return with like a $250/$260 in two years. I’m almost sure that we’ll have a major recovery in Tesla within two years.
Q: What’s your opinion on PayPal (PYPL) and Albemarle (ALB)?
A: I’m trying to stay away from the fintech area, partly because it’s tech and partly because the banks are recapturing a lot of the business they were losing to fintech a couple of years ago by moving into fintech themselves. That is the story and we’re clearly seeing that in the share prices of both banks and PayPal. I like Albemarle because the demand for lithium going forward is almost exponential.
Q: What’s your thought on the Australian dollar (AUD)?
A: Buy it with both hands as it is going to parity. Australia is a great indirect play on trade with China (FXI), gold (GLD), uranium (CCJ), and iron ore (BHP). It’s a great play on the recovery of the global economy, which will start next year.
Q: What do you think about Royal Caribbean Cruises Ltd (RCL)?
A: Probably a buy but remember all the cruise lines will be impaired to some extent by the massive debts they had to take on to survive two years of shutdown with the pandemic. I took the Queen Victoria last July on their Norwegian Fjord cruise, and it had not been operated for two years. None of the staff had any idea what to do. I had to show them.
Q: Will big tech have a good second half?
A: Probably, but it’s going to be a slow first quarter, and I think if we start getting actual cuts in interest rates, then it’s going to be off to the races for tech and they’ll all go to all-time highs as they always do.
Q: How come you haven’t issued any trade alerts yet on the currencies?
A: Calling a five-year turnaround is a big job. Now that we have the turnaround in play, we’re in dip-buying mode. So, you will see these in the future. But I also have to look at what currency trades are offering compared to other trades in other asset classes. And for the last year or two, the big opportunities have all been in stocks. You had volatility constantly visiting the mid $30s, you didn’t get that in the currencies, and more money was to be made in stock trades than foreign currency trades. That is changing now; let's see if we have a sustainable trend and if we get a good entry point. There’s a lot that goes into these trade alerts that you don’t always get to see. We only get a 95% success rate by being very careful in sending out trade alerts and that means long periods of doing nothing when the risk/reward is mediocre at best, which is right now. The services that guarantee you a trade alert every day all lose money.
Q: What is the recommended minimum portfolio size to amortize the cost of the concierge service?
A: I tell people to have a half a million in assets because we want people who are financially sophisticated to understand what we’re telling them. That said, we do have people with as little as 100,000 in the concierge service and they usually make the money back on the first trade. This is a very sophisticated high-return, very active service. You get my personal cell phone number and all that, plus your own dedicated website, and specific concierge-only research. It’s a much higher level of service. It’s by application only and we currently have no places available for new concierge members. However, if you’re interested, we can put you on the waitlist so that when another millionaire retires, we can open up a space.
Q: Despite recent moves, the algo looks bearish. There are lots of mixed signals.
A: Yes, it does. And yes, that’s often the case when the market timing index hangs around 50.
Q: Do concierges go for short term moves?
A: No, concierges are looking for the big, long-term trades that they can just buy and forget about. That is where the big money is made. At least 90% of the people that try day trading lose money but make all the brokers rich.
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
“Something everyone knows isn’t worth knowing,” said Bernard Baruch, one of the greatest stock traders of all time and advisor to President Franklin Roosevelt.
Mad Hedge Biotech and Healthcare Letter
November 17, 2022
Fiat Lux
Featured Trade:
(A QUALITY BEATEN-DOWN STOCK)
(ZTS), (ELAN)
Always focus on the bright side. Not only does that perspective get you in a better mood, but it can also work as good advice when it comes to making money. This becomes especially effective with the downturn of the stock market.
It’s pretty easy to discover beaten-down stocks in today’s environment. However, finding businesses that are worth your money at current levels and holding on to them for a long time is an entirely different story. Long-term stocks are not your run-of-the-mill companies, especially since many businesses with declining shares are better left alone.
While it didn’t suffer as much as the other sectors, the biotech and healthcare industry still has some beaten-down stocks that are worth buying. One of them is Zoetis (ZTS).
It has been a particularly rough year for Zoetis, with shares of this animal health company falling by over 40%. Things didn’t get better when it disclosed its third-quarter earnings report for 2022.
Going direct to the point, neither Zoetis’ earnings nor updated guidance. Zoetis dialed down its full-year guidance for 2022, estimating its initial expected revenue, which was between $8.225 billion and $8.325 billion, to fall to $8.08 billion instead.
As expected, the market reacted negatively to these figures, with the stock declining by 11%.
Although this might not appear to be a substantial drop in comparison to how other companies are performing this earnings season, it’s still a significant one-day drop for Zoetis. For context, this latest drop was the company’s second-biggest one-day decline in the past 10 years—only second to the one they recorded when COVID struck.
Reviewing the “numbers” section of Zoetis’ earnings report, one of the major causes of the lower-than-anticipated growth was supply constraints. This issue affected both US and international markets, albeit involving the former more.
Actually, “supply” was the most important issue discussed during the earnings call—so much so that the term “supply” was uttered a whopping 62 times.
It wasn’t just Zoetis that suffered from supply-related issues. These concerns affected practically the entire animal health sector this year, including another major competitor, Elanco (ELAN).
Knowing the root of the issue behind Zoetis’ recent decline is key to determining whether this remains a good stock. It always helps if we can understand the factors in play that led to the earnings report and add some context around the figures presented.
After all, the figures at times portray one thing and miss out on what is under the surface—the things that we need to understand and know about to interpret the results better.
At this point, Zoetis can still be considered an excellent company that needs to deal with some supply issues. When these are resolved, it will do just fine as a long-term investment.
Moreover, the animal health market has an incredibly bright future ahead.
This industry is projected to record a compound annual growth rate of 10% through 2030.
Pet ownership has climbed notably during the pandemic and is projected to sustain its upward trajectory in the years to come.
In addition, population growth will result in an increased demand for protein-rich food sources like livestock. That would translate to an expanded revenue stream for animal health companies, which offer products geared towards these demands.
With a market capitalization of $69.11 billion and a broad reach both in the US and across the globe, Zoetis is well-positioned to profit from this projected growth.
Moreover, this company is currently recognized as the market leader in animal health for cattle, swine, companion animals, and fish, while it ranks #5 in the global poultry market.
Overall, Zoetis is worth adding to your portfolio. While it’s facing some short-term challenges, this animal healthcare business is a pretty solid buy.
Thursday morning
November 17, 2022
Hello everyone,
I hope you are well and having a great week.
This will be a summary of John’s latest webinar, which was done yesterday.
Title: Flip Flop
The summary within the summary is here:
Stocks: buy the dips at the bottom of the range
Bonds: buy dips
Currencies: sell dollar rallies
Precious metals: buy dips
Real estate: buy dips
Energy: stand aside
Commodities: buy dips
Volatility: short over $30
The next major move in interest rates is likely to be down. But there are no guarantees.
John has no positions currently.
75.53% trailing one-year return.
There are no guarantees that the market will continue to go up. We could flatline until the next CPI on Dec 13.
We are 11 months into a 12–18-month bear market.
Inflation is falling, but the Fed needs to see several deflationary data points to ease up.
Bull market in Bonds – the trade for 2023.
CPI dives 7.7% - a 1% decline from the previous month.
Fed raises interest rates .75% but language is slightly more accommodative.
Nonfarm Payroll – a hot 261,000 in October.
Unemployment rate 3.7% - highest since Feb.
Consumer confidence dives – University of Michigan
Auto Loan delinquencies are soaring.
FTX bankruptcy - $9.5 billion missing. Could be as much as $50 billion. (I read that FTX corporate was buying homes for employees). Not really the thing to do with corporate funds. And it seems that Bankman-Fried mixed up customers’ money with his own and then lost it according to Bloomberg. (What was he thinking????)
Start scaling into TLT long trades.
100-105 TLT – one year out.
Looking for a move to 120.
Also look at Junk Bonds (8% yield).
FCX target is $100.
Tesla is still a buy, but it could go sideways for a time.
Emerging markets – buy the dips.
Sell the U.S.$.
Buy the Pound (FXB), Euro (FXE), Aussie (FXA), Yen (FXY)
2023 and 2024 will be a trader’s paradise. There will be lots of money-making opportunities. Get off the platform and jump on the train.
FTX has bombed the crypto industry. John now sees crypto in a winter season for several years. The fall out is starting to hit other exchanges, such as Gemini and Genesis among others. I took all my funds out of Gemini on Monday. Since then, they have halted withdrawals. Hopefully, this crisis will purge the weak and unprofessional businesses and tidy up the industry. It's very much needed.
Look out for short trades in the S&P 500 and in Apple.
Wishing you all the best for the rest of the week.
Cheers,
Jacque
"The bad news is time flies. The good news is you’re the pilot." - Michael Altshuler
Global Market Comments
November 17, 2022
Fiat Lux
Featured Trade:
(WATCH OUT FOR THE COMING COPPER SHOCK)
(FCX), ($COPPER)
You remember the two oil shocks, don’t you? The endless lines at gas stations, soaring prices, and paying close attention to OPEC’s every murmur?
Now we are about to get the 2020’s environmentally friendly, decarbonizing economy version: the copper shock.
For copper is about to become the new oil.
The causes of the coming supply crunch for the red metal are manifold.
If you take all of the commitments to green energy made by the Paris Climate Accord, which the US just reentered, they amount to demand for copper about three times current world production.
Oops, nobody thought of that.
Copper is needed in enormous quantitates to build millions of electric cars, solar panels, batteries, windmills, and long-distance transmission lines for a power grid that is going to have to triple in size. Lift a 50-pound rotor from a Tesla wheel as I have and most of the weight is in the copper.
You basically don’t have a green movement without copper.
In addition, existing copper miners seem utterly clueless about the coming shortage of their commodities. Capital spending has been deferred for decades and maintenance delayed.
New greenfield mines are scant and far between. Copper inventories are at a ten-year low. Mines were closed for months in 2020 thanks to a shortage of workers caused by the pandemic.
Copper is the last of the old-school commodities that are still actively traded. It takes 5-10 years at a minimum to bring new mines online. By the time potential sites are surveyed, permits obtained, heavy equipment moved on-site, rail lines laid, water supplies obtained, and bribes paid, it can be a very expensive proposition.
That’s why near-term prospects are only to be found in Chile, Peru, and South Africa, not your first choices when it comes to political stability.
Copper is the single best value-for-money conductor of electricity for which there are very few replacements. Aluminum melts and corrodes. And then there is silver (SLV), right below copper of the periodic chart, which gangster Al Capone used to wire his bulletproof 1928 Cadillac so electricity could move faster. Below silver is gold (GLD), a fine conductor of electricity but is somewhat cost-prohibitive.
As a result, base metal copper prices could more than quadruple from here to $15,000 a metric tonne or more. The last time the price was that high was in 1968, when the Vietnam War was in full swing, as the military needs a lot of copper to fight wars. The economy was then booming.
You can’t have a synchronized global economic recovery without a bull market in commodities, and the mother of all recoveries is now in play according to the latest economic data. Phoenix, AZ Freeport-based McMoRan (FCX) is one of the world’s largest producers of copper and a long-time Mad Hedge customer.
The stock has been on a tear for a month. (FCX) has soared from a 25 low in October to near $39 at the recent high. I believe this move will continue for years with a final target of $100. The old high for the stock in the last cycle was $50.
Short term, the demand for copper will be driven by Chinese real estate constructions, with all the Covid lockdowns now weak.
Long term it will be driven by EV production, which will soar from 1.5 million units this year to 20 million by 2030. Each EV required 200 pounds of copper.
I’ll let you do the math.
These Tesla Copper Rotors Weigh About 50 Pounds Each
