May 2023

The Market Outlook for the Week Ahead, or I’m Going on Strike!

I think it’s time for me to go out on strike. I’m downing my tools, tearing up my punch card, and manning a picket line.

I get up at 5:00 AM every morning, well before the sun rises here on the west coast, looking for great low-risk high return trades. But for the last several weeks, there have been none, nada, bupkiss.

I have gotten spoiled over the last few years. The financial crisis, pandemic, recovery, and banking crisis provided me with an endless cornucopia of trading opportunities which doubled my average annualized return from 24% to a nosebleed 48.94%.

Part of the problem is that with a success rate of 90%, so much of the market is now copying my trades so that they are getting harder to execute. That wasn’t a problem when markets were booming. It is when trading volumes have shrunk dramatically, as they have done this year.

At The Economist magazine in London whenever plagiarism was discovered, they used to say that “Imitation is the sincerest former of flattery.”

There is no doubt that the economy is weakening, as the data has definitively shown over the last two weeks. It appears that after 500 basis points in interest rate rises in a year, the Fed’s harsh medicine is finally starting to work. The debt ceiling crisis, and regional banking crisis are scaring more investors further to the sidelines.

Notice how every stock market rally has become increasingly short-lived? Which all raises a heightened risk of recession.

Economies are like families. All are happy for the same reasons but are unhappy in myriad different ways.

In fact, they provide a generous helping of alphabet soup. If you look very closely, you can find some bay leaves, oregano, black pepper, and lots of V’s, W’s, U’s, and L’s.

Now, let’s play a game and see who can pick the letter that most accurately portrays the current economic outlook.

Here is a code key:

V – The very sharp collapse we saw in 2008 and again in 2020 is followed by an equally sharp recovery. I think it is safe to say we can now toss that one out the window. With technology hyper-accelerating, it is safe to write off the “V” recovery scenario.

W – The sharp recovery that began in October 2022 fails and we see a double dip back to those lows.

U – The economy stays at the bottom for a long time before it finally recovers.

L – The economy collapses and never recovers.

The question is, in which of these forecasts should we invest our hard-earned cash?

For a start, you can throw out the “L”. Every recession flushes out a lot of financial Cassandras who predict the economy will never recover. They are always wrong. Usually, they know more about marketing newsletters than economics.

I believe what we are seeing play out right now is the “W” scenario. This is the best possible scenario for traders, as it calls for a summer correction in the stock market when we can load the boat a second time. If you missed the October low you will get a second bite of the Apple (AAPL), both literally and figuratively.

If I’m wrong, we will get a “U”, a longer recovery. This cannot be dismissed lightly as the unemployment rate is clearly about to rise.

If I limited the outlook to only four possible scenarios, I’d be kidding you. The truth is far more complicated.

Each industry gets its own letter of the alphabet. Technology, some 27% of total stock market capitalization, gets no letter at all because it is thriving, thanks to the explosion of AI applications. That explains the single-minded pursuit of big tech by investors since January.

Someone asked me last week how long I would continue trading and I cited the example of Warren Buffett, who at 92 is 21 years older than me.

I have since found a better example.

Former Secretary of State under Nixon, Henry Kissinger, turns 100 this week, the only man in the world who President Biden, Vladimir Putin, and President Xi Jinping would immediately take a call from.

During the shuttle diplomacy between Israel and Egypt in 1974, I rode with the Secretary on Air Force One, then an antiquated Boeing 727, which is now in a museum in Seattle. For the rest of that story see below.

He gave me “Henry” privileges, while everyone else had to address him as “Mr. Secretary” because my knowledge of history exceeded that of anyone else then in the White House Press Corps, even those who had degrees in the subject.

It also helped that at that point I had already had six years of experience on the ground in the Middle East. It was all heady stuff for a journalist who at 22 was just starting out.

So, that sets the bar higher for me. The good news for you is that I’ll be sending out my wit, wisdom, and trade alerts for at least another 29 years.

So far in May, I have managed a modest +1.70% profit. My 2023 year-to-date performance is now at an eye-popping +63.45%. The S&P 500 (SPY) is up only a miniscule +8.15% so far in 2023. My trailing one-year return reached a 15-year high at +122.11% versus +6.70% for the S&P 500.

That brings my 15-year total return to +660.64%. My average annualized return has blasted up to +48.94%, another new high, some 2.80 times the S&P 500 over the same period.

Some 41 of my 44 trades this year have been profitable. My last 21 consecutive trade alerts have been profitable.

I initiated only one new trade last week, a long in Tesla (TSLA). That leaves me with my two remaining positions. Those include longs in Tesla and the bond market (TLT), which expires this coming Friday. I now have a very rare 80% cash position due to the lack of high-return, low-risk trades.

Treasury Secretary Yellen Warns of Economic Catastrophe, if the debt ceiling is not raised. Congress has voted 98 times to raise the debt ceiling to $31 trillion over 106 years to pay for money already spent. One-third of this was under the previous president who back then warned that he would default. It’s a grasp for power the House just doesn’t have. There really isn’t such a thing as a debt ceiling which has gained an importance far beyond its original housekeeping intention.

Boeing Lands Blockbuster 300 Plane Order, from Ireland’s Ryan Air worth $40 billion. Europe’s Top budget air carrier is loading up on the once troubled 737 MAX. Keeping buying (BA) on dips, now the world’s largest aircraft manufacturer.

CPI Hits 4.9% YOY, after the 0.40% report for April. It’s still headed in the right direction as far as the Fed is concerned and puts a September cut on the table. Eggs were the leader, up 21.4%, while fuel oil is the laggard, down 20.2%. My own 4% inflation rate forecast by yearend is starting to look conservative. Perish the thought!

The Oil Collapse is Signaling a Recession, as is weakness in all other commodities, even lithium. Texas tea has plunged 22% I three weeks to a new two year low at $62. It’s one of the worst performing asset classes of 2023. Widespread EV adoption is finally making a big dent, as are the price wars there. OPEC Plus production cuts were unable to stem the decline. Buy (USO) on dips as an economic recovery play.

Is a Bank Short Selling Ban Coming? The Feds could bar hedge funds from launching raids on small regional bank shares with the aim of taking them to zero. Such a ban was enforced for all banks in 2008.

Elon Musk Appoints New Twitter CEO, removing a major management distraction. Linda Yaccarino is the new CEO of Twitter, poached from her from online advertising at NBC. This is a positive for Tesla, as it frees up the heavy burden of turning around Twitter from Musk, allowing him to devote more time to Tesla. It also reduced the risk that Musk will sell more Tesla shares to finance said turnaround. Guess who just got the worst job in the world? Buy (TSLA) on dips.

Weekly Jobless Claims jump to 264,000, a new 18 month high, providing another recession indicator.

US Budget Deficit Shrinks to $1.5 Trillion, down from a $3 trillion peak during the previous administration. Government Bond selling will drop by a similar amount. That’s still up $130 billion from 2022. Increased tax revenues from a recovering economy is the reason. Buy (TLT) on every dip.

Google Ramps Up AI Effort, launching a new suite of AI tools at its annual developer conference. With a 93% market share in online search (GOOGL) has a lot to defend. The stock popped 4% on the news.

FANGS to Rise 50% by Yearend, says Fundstrat’s ultra-bull Tom Lee. I think he’s right, once the debt ceiling debacle gets out of the way. The contribution of AI is being vastly underestimated.

Berkshire Hathaway (BRK/B) Earnings Soar, with operating earnings up 12.6% in Q1, but Warren Buffet expects business to slow. Many companies now have to unwind big pandemic inventories with aggressive sales, crimping inflation. That’s why Berkshire owns $130 billion in cash and Treasury bills.

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 15 at 7:30 AM EST the NY Emore State Manufacturing Index is out.

On Tuesday, May 16 at 6:00 AM, Retail Sales are announced.

On Wednesday, May 17 at 11:00 AM the US Building Permits are printed.

On Thursday, May 18 at 8:30 AM, the Weekly Jobless Claims are announced. We also get the Producer.

On Friday, May 19 at 2:00 PM the University of Baker Hughes Rig Count is released.

As for me, Egypt and I have a long history together. However, when I first visited there in 1974, they tried to kill me.

I was accompanying US Secretary of State Henry Kissinger on Air Force One as part of his “shuttle diplomacy” between Tel Aviv and Cairo. Every Arab terrorist organization had vowed to shoot our plane down.

When we hit the runway in Cairo, I looked out the window and saw a dozen armored personnel carriers chasing us just down the runway. All on board suddenly got that queasy, gut-churning feeling, except for Henry.

When the plane stopped, they surrounded us, then turned around, pointing their guns outward. They were there to protect us.

The sighs of relief were audible. In a lifetime of heart-rending landings, this was certainly one of the most interesting ones. Those State Department people are such wimps! Henry was nonplussed, as usual.

As a result of the talks Israel eventually handed back Sinai in return for an American guarantee of peace which has held to this day. Egyptian president Anwar Sadat was assassinated by his own bodyguard for his efforts shortly afterwards.

Israel was so opposed to the talks that when I traveled to Tel Aviv, El Al Airline security made sure my luggage got lost. So the Israeli airline gave me $25 to buy replacement clothes until my suitcase was delivered. On that budget, all I could afford were the surplus Israeli army fatigues at the Jerusalem flea market.

A week later, my clothes still had not caught up with me when I boarded the plane with Henry. That meant walking the streets of Cairo in my Israeli army uniform. It would be an understatement to say that I attracted a lot of attention.

I was besieged with offers to buy my clothes. Egypt had lost four wars against Israel in the previous 30 years, and war souvenirs were definitely in short supply.

By the time I left the country, I was stripped bare of all Israeli artifacts, down to my towels from the Tel Aviv Hilton, and boarded the British Airways flight to London wearing a cheap pair of Russian blue jeans I had taken in trade.

Levi Strauss never had a thing to worry about.

The bewitching North African country today is still a prisoner of a medieval religion that has left its people stranded in the Middle Ages. While its GDP has doubled in the last 70 years, so has its population, to 110 million, meaning there has been no improvement per capital income at all in a half century. That is a staggering number for a country that is mostly desert.

In 2019, I took my two teenaged daughters to Egypt to visit the pyramids and ride camels as part of an impromptu trip around the world. My logic then was that at the current rate of climate change, this trip might not be possible in five years.

As it turns out, it was not possible in six months when the pandemic started.

We were immediately picked up by Egyptian Intelligence right at the gate who remembered exactly who I was. It seems they never throw anything out in Egypt.

After a brief interrogation where I disclosed my innocent intentions, they released us. No, I wasn’t working for The Economist anymore. Yes, I was just a retired old man with his children. They even gave us a free ride to the Nile Hilton where I spent my first honeymoon in 1977.

Some people will believe anything! And I never did get that suitcase back.Good luck and good trading!

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

2019 Over Sinai

May 12, 2023

Jacque's Post

(THE BIGGEST FINANCIAL POWERHOUSE ON EARTH IS…THE CATHOLIC CHURCH)

May 12, 2023

Hello everyone,

I’ve just been looking into Avro Manhattan’s book called The Vatican Billions, which gives us a glimpse of the true financial worth of the catholic church.

My goodness! They do have quite a few bucks tucked away in various assets around the world.

Let’s see. There are large investments with the Rothchilds of Britain, France, and America, with the Hambros Bank, and with the Credit Suisse in London and Zurich. In the United States, it has large investments with the Morgan Bank, the Chase-Manhattan Bank, the First National Bank of New York, the Bankers Trust Company, and others.

Then there are investments in commodities. They have billions of shares in corporations such as Gulf Oil, Shell, General Motors, Bethlehem Steel, General Electric, International Business Machines, T.W.A, etc.

A member of the New York Catholic Conference believes that “his church probably ranks second only to the United States Government in total annual purchase.”

The Vatican, independently of each successive pope, has been increasingly orientated towards the U.S. The Wall Street Journal said that the Vatican’s financial deals in the U.S. alone were so big that very often it sold or bought gold in lots of million or more dollars at a time.

The Vatican’s treasure of solid gold has been estimated by the United Nations World Magazine to amount to several billion dollars. A large bulk of this is stored in gold ingots with the U.S. Federal Reserve Bank, while banks in England and Switzerland hold the rest.

But this is just a small portion of the wealth of the Vatican, which in the U.S. alone, is greater than that of the five wealthiest giant corporations of the country. When you add real estate, property, stocks, and shares abroad, then the staggering accumulation of wealth of the Catholic church almost defies rational assessment.

Mr Manhattan asks some serious questions in the book.

Jesus was poor and it is claimed Roman Catholicism was His Church. How can the richest organisation or corporation in the world – the Catholic Church – represent Jesus, who was the poorest of the poor?

The Church has the power to stop wars, create social programs to end famine on Earth, invest in “green technology” to create an Eco-friendly planet. Is it financially savvy for them to do this?

These are the questions that Manhattan poses.

For an organisation that has been rocked by many sexual abuse scandals and financial corruption, it appears immune to the consequences of such crimes. Any other organisation would probably collapse under the weight of its peoples’ crimes.

So, if you are interested in the Catholic Church and its Wealth, this is an interesting book to read. Another book is listed below.

Wishing you all a great weekend.

Cheers,

Jacque

May 12, 2023

Tech Letter

Mad Hedge Technology Letter
May 12, 2023
Fiat Lux

Featured Trade:

(GOOGLE ENTERS THE A.I. GAME)
(GOOGL), (UBER), (MSFT)

Google Enters the A.I. Game

Tech Letter

Google rolling out a catalog of artificial intelligence products delivered a nice boost to its share price.

I was expecting this at some point and after getting caught off guard by the strategic moves that Microsoft (MSFT) made, I am not surprised they rolled this out so quickly.

Alphabet, the parent company of Google, was up over 4% yesterday.

This is just the beginning of the A.I. revolution and CEO Sundar Pichai has figured out how to keep GOOGL’s share price going up.

All you need to do is keep saying “A.I.” and investors will back up the truck to load as much stock as possible.

This tactic has worked awfully well because if you strip out the stock gains related to A.I. in 2023, the Nasdaq would most likely be down this year.

Tech being as it is, only a handful of companies are able to take advantage of this structural change in the sector.

Personally, I am not so sold on OpenAI’s ChatGPT.

Of course, I can change my mind, but it hasn’t impressed me yet.

I asked a few test questions myself and one of the answers to my question about making a fortune quickly was disappointing.

ChatGPT told me I should become an Uber driver, rent out a single room in my house, and complete online surveys. It then rounded out the answer by telling me to sell my old stuff on eBay.

These are answers that I doubt many would consider ways to make fortunes.

I can see how replacing clerical white-collar jobs could be applicable with this technology, and that means a lot of jobs.

However, the jobs that require using data to make forecasts are not replaceable by A.I. simply because back-tested data can’t just be regurgitated for the future.

Some of the recent hype is nothing more than marketing chutzpah which Silicon Valley is good at.

But I do still think Google is going in the right direction and investors will coalesce around this A.I. love fest without even doing due diligence if the tech works well or not.

Google is attempting to reclaim its crown as the leader in artificial intelligence with PaLM 2, a “next-generation language model” that the company says outperforms other leading systems on some tasks.

Revealing the cutting-edge AI at its annual I/O conference, alongside a foldable Pixel phone and a new tablet, Google said it would be built in to 25 new products and features, as the company moved ahead of competitors after years of producing AI research but few products.

The most obvious way to interact with PaLM 2 will be in Google’s own chatbot, Bard, which is opening up to the general public for the first time and rolling out globally.

Utilizing PaLM 2’s multilingual capabilities, Bard is also available in Japanese and Korean, as well as English, and the company intends to support 40 languages in time.

The key question is Google able to follow through to carry the stock through a recession?

The A.I. pivot won’t get Google through alone because there is no meaningful revenue coming from A.I. yet.

I would most likely believe that Google shares will consolidate if a recession comes to pass at the end of 2023.

The job market at 3.4% has continued to be resilient and big tech has become more efficient by firing all the fake jobs with high salaries.

Even on a strongly red day, Google has still held the day mostly in the green showing readers how effective spinning the A.I. story can be. That should continue until the next big disruptor.

Buy GOOGL on the dip.

Quote of the Day - May 12, 2023

Tech Letter

“Failure can teach you something, and as long as you're moving very, very quickly, you're going to start piling up the wins. Speed gives you the luxury to be able to fail.” – Said Current CEO of Uber Dara Khosrowshahi

Trade Alert - (TSLA) May 12, 2023 - BUY

Trade Alert

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

May 12, 2023

Diary, Newsletter, Summary

Global Market Comments
May 12, 2023
Fiat Lux

Featured Trades:

(THURSDAY, MAY 16, 2023 KEY WEST, FLORIDA STRATEGY LUNCHEON)
(MAY 10 BIWEEKLY STRATEGY WEBINAR Q&A),
(SCHW), (AAPL), (TLT), (BITCOIN), (FXA), (USO), (FCX), (LLY), (PYPL)

CLICK HERE to download today's position sheet.

SOLD OUT - Tuesday, May 16, 2023 Key West, Florida Global Strategy Luncheon

Diary, Lunch, Luncheon, Newsletter

Come join me for lunch at the Mad Hedge Fund Trader’s Global Strategy Update, which I will be conducting in Key West, Florida at 12 PM on Tuesday, May 16, 2023. An excellent meal will be followed by a wide-ranging discussion and an extended question-and-answer period.

I’ll be giving you my up-to-date view on stocks, bonds, currencies, commodities, precious metals, and real estate. And to keep you in suspense, I’ll be throwing a few surprises out there too. Tickets are available for $285.

I’ll be arriving on time and leaving late in case anyone wants to have a one-on-one discussion, or just sit around and chew the fat about the financial markets.

The lunch will be held at a private club in a historic restaurant in downtown Key West. The precise location will be emailed with your purchase confirmation.

I look forward to meeting you, and thank you for supporting my research.

To purchase tickets for this luncheon, please click here or click on the Buy Now! above.

May 10 Biweekly Strategy Webinar Q&A

Diary, Newsletter

Below please find subscribers’ Q&A for the May 10 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Incline Village, NV.

Q: Why is the market down on such great inflation data?

A: Yes, a 4.9% annualized inflation rate is a big improvement from 9.1% nine months ago. The market only cares about the debt ceiling debacle right now. I’ve been teaching people about the stock market for about 55 years, and I can tell you that all investors have one great fear, and it's not the fear of losing money—that they can handle. It’s the fear of looking stupid. And if they load the boat with stock now, and the US government defaults and the market drops 25%, they will look really stupid. This is not a black swan. It has probably been the most advertised market negative in history. We’ve known about the debt default since December when the Democrats chose not to raise the debt ceiling because they thought they could gain a political advantage by letting the Republicans fumble the issue, and they are reaping such advantages by the bucketload. So, even though everyone knows that this will be settled, it has settled 98 consecutive times in the last 106 years, and they don’t want to do anything before a deal. And by the way, this was only put into place during WWI to meter the rate of government borrowing during the war, so I would say it’s lost its purpose. However, it's hard to make any changes at all in the government these days. What that does do, is create big gaps up in the market when they are resolved, and big gaps down when they are not resolved. That’s why we’re doing nothing.

Q: Do you like regional banks here—are they a buy? And do you like the Schwab LEAPS?

A: Yes on the Charles Schwab LEAPS (SCHW), because you have two years for that to work out. With regional banks as a stock buy here, you’re really buying a lottery ticket because if they do get attacked by short sellers, you get wiped out practically overnight (as has happened 4 times.) On the other hand, if the US Treasury or the FCC makes selling bank shares or lending bank shares illegal, then you’ll have the regional banks just roar, because the sellers will be gone. There are too many better things to do than to make a high-risk trade on bank shares, especially after the debt ceiling is resolved.

Q: Is Apple (APPL) trade a long?

A: Yes, on any pullback. I think big tech leads for the next 10 years once we get out of our current quagmire. So it’s a question of how much pain you’re willing to take in the meantime. My target for Apple this year is $200.

Q: iShares 20 Plus Year Treasury Bond ETF (TLT) is up today; would it be worth selling out of the money call spreads with the same expiration date as our long position?

A: No, it is not. At $104, it’s not a great short, or otherwise, I’d do it myself. When we get up to $109, then you want to go short like with the $114 puts or $115 puts. But down here if you’re shorting say, the $109s, and we go to $109 the next day or week, then you get stopped out. Remember any shorts of bonds here is now a long-term counter-trend trade—you’re betting that your position expires in the money before a long-term trend to the upside reasserts itself. So no, that’s why I’m not doing any shorts right here. Also, we’re not low enough to buy it yet. You get down to $101 or $102, I’ll look at buying call spreads, but here in the middle is never a good place to trade.

Q: Are you still expecting a correction in May?

A: May isn’t over yet. When they say “Sell in May and go away,” they don’t tell you if it’s May 1st or May 30th, so I’m happy where I am. There’s no law that says you have to get every trade of the year. I think doing nothing is the best solution right now, especially with a 62% profit already in the bank this year.

Q: Is it too late for bank LEAPS?

A: I would say, on a two-year view, no. I’m looking for these shares to double in two years, so a bet that it’s unchanged or higher right now is a pretty good bet, I would say—especially if it gives you a 100% return in one or two years. So yes, all the big bank LEAPS are still good, and with small banks, too much is unknown right now for a highly leveraged bet in that sector.

Q: What do you mean when you say one-year LEAPS is a call spread?

A: When I say one year LEAP, I mean at the money, and then short the next strike higher, and that gives you the maximum leverage. Something like 20:1 leverage when you go that aggressive. But now is the time to be aggressive; that's when these LEAPS are all on sale.

Q: Near-term iShares 20 Plus Year Treasury Bond ETF (TLT) move?

A: Sorry to say, sideways. That's why I'm doing nothing. I’m waiting for the market to tell me what to do. If it goes down, I want to buy it, if it goes up, I want to sell it, if it goes sideways, I want to go on vacation—very simple trading strategy.

Q: What about commercial real estate?

A: I don’t want to touch it, and the Real Estate Investment Trusts (REITs) on those have been horrible. Maybe later in the year when the REITs are at bankruptcy levels, it might be worth a buy. But you have to be careful on your REITs; there are good REITs and there are bad REITs, and you don’t want to be anywhere near the commercial ones. With things like cell phone towers, assisted care living facilities—you know, dedicated LEAPS in safe areas would be a good place. And the yields, by the way, are very high, if they pay.

Q: If the US defaults, what would you buy?

A: Everything, because everything will be at a low for the year; so that’s an easy one. By the way, when we got the banking crisis in March, I adopted an everything strategy then: buy all big banks and brokers—and it turned out to be the best trade of the year. The same is going to happen with the debt default.

Q: How long will it take for the regional bank construction to play out?

A: I think the regional banks have completely separated themselves out from the big banks. You only want to own the big banks because you get big returns on those, and the risk/reward ratio is overwhelmingly in favor of big banks, unlike with small banks. Therefore, you only buy the big banks in that situation. If you feel like buying a lottery ticket on your local bank because it’s down 80%, go ahead and do so, but remember that's what it is—a lottery ticket, with a big payoff if you win.

Q: Bitcoin has recently been weak off its top. Do you expect another leg up in Bitcoin prices?

A: I do not. Bitcoin was the perfect asset to have when we had a huge oversupply of cash and a shortage of assets. Now, is the opposite: we have an oversupply of assets and a shortage of cash, and that may remain true for another 10 years or so. So, if you have Bitcoin, I’d be unloading any positions you have now and falling down on your knees, thanking goodness you were able to recover this much of your loss. The other problem is you now have a lot of the intermediaries going bankrupt or shut down by the SEC or the US Treasury. So, that is an additional risk, which you don’t have buying JP Morgan (JPM), for example, or the Australian dollar (FXA), or oil (USO), or copper (FCX). It’s just so far out there on the risk/reward basis. Only large institutions and miners are in the market now—most individuals have been scared away for life.

Q: Would you buy PayPal (PYPL) on the dip? The earnings were terrible.

A: Yes, I would. It is now discounting a recession. If you don't get a recession, you get a big recovery in PayPal.

Q: Do you think that a Ukraine-Russia war will end soon?

A: I would doubt that the Russia-Ukraine war lasts more than a year, and when it ends, it will create the biggest global economic stimulus since the Marshall Plan. Also, American companies will be at the front of the line on the reconstruction deals because we supplied a lot of the weapons and intelligence. Looking at the Marshall Plan in modern terms: $17 billion in 1947 money would be on the order of a $1 trillion today—you basically have to rebuild an entire country. And guess who’s good at building countries? We are. We have all the big engineering companies to do it. Buy Caterpillar (CAT) for sure. By the way, I’ll be spending my summer vacation working on the Ukraine War for the US Marine Corps and NATO. At least the Belgians have better food.

Q: What do you think about pharmaceuticals like Eli Lilly (LLY)?

A: We’ve been recommending them in the Mad Hedge Biotech & Health Care letter for literally years. They’re absolutely kicking butt with their weight loss drug Mounjaro—to the extent that there are shortages of supplies, a black market, and big price increases coming, so it’s all about the weight loss boom. I hate to think of what the combined overweightness of America is, but it’s got to be somewhere in the millions of tons (and I am one of the guilty parties myself.)

Q: There's talk that EVs put out a lot of sulfur that increases climate change issues. What do you think?

A: Absolutely not true, as there is no sulfur in an EV. I don't know where they would come out of an electric engine running on a lithium battery. It’s just another bit of fake news coming out of the oil industry, which is pretty much around us all day, every day. You just have to get used to that. Conventional international combustion engines do emit a lot of sulfur in the form of sulfur dioxide and the big three have been sued over this for at least 50 years.

Q: When will the debt ceiling negotiations end?

A: There are two indicators you look for in predicting the end of a debt ceiling crisis (the last one of which was 12 years ago): #1. When the government announces it can’t send out social security checks anymore because they have no more money, and #2. A big drop in the stock market that scares all the billionaires, cuts their wealth, and makes them threaten to withdraw funding from the politicians who are blocking this thing. Another big indicator is when the Department of Defense announces they have no more money to pay military salaries. Almost all military presence in the United States is in red states and is a major support for economies. And the reason is that's where land was cheapest during WWI, which was when we did a very rapid buildup in the number of military bases. So, watch for those indicators and look for a massive rally when this happens. The US government is basically a giant recycling machine. It takes money off the coast, where all the wealth and taxes are paid, and spends it inland, where all the infrastructure and military have to be paid for. The only military spending on the coasts is in Hawaii, cyber warfare in California, and shipbuilding on the east coast. Anything that interferes with the process of moving money off the coasts and inland is doomed to fail for sure. That’s my one-minute analysis on the cash flows inside the US economy.

Q: I read that the clarity of Lake Tahoe is the best ever. Is this true?

A: Yes, it is. It is an example of a major effort to save the environment that succeeded, but you had to live 70 years to see it. The biggest factor was improving gas mileage for cars. The average fuel economy for new model cars has increased from 12 miles per gallon in 1950 to 35 today. Notice that cars have gotten a lot smaller too. That cuts by two-thirds the carbon dioxide going into the atmosphere which can combine with nitrogen to make nitric acid which fell into the lake. Several big development projects were stopped in their tracks. So was a planned freeway around the lake. Some 17 golf courses are now banned from using fertilizer. Sewage is now piped out of the valley instead of into the lake. A record 70 inches of rainfall this year helped dilute the water. Finally, an ill-conceived freshwater shrimp farming industry ended when the shrimp all starved to death when the lake became too clear, eliminating their poop from the picture. There is now a campaign to clean garbage off the bottom which I help fund. We even found “Fredo’s” body from The Godfather! As a result, the lake clarity has improved from 50 feet in 1970 to 115 feet, the same as when Mark Twain first visited Lake Tahoe in 1861.

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 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