Global Market Comments
June 12, 2023
Fiat Lux
Featured Trades:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or THE BULL MARKET IS BACK!)
($VIX), (X), (FCX), (TSLA)
CLICK HERE to download today's position sheet.
It's becoming increasingly obvious to me that there is a single great trade shaping up.
S&P 500 (SPY) gains this year have been delivered by just seven stocks, which by now you all know well.
What happens next? The other 493 start to rise.
It just so happens that these troubled 493 stocks are close to their 2023 lows, with many of these the cheapest stocks in the market.
What kind of stocks are these?
Domestic industrial, commodity, and energy stocks have already discounted a deep recession. If the recession arrives, they are fairly priced. If we get only a modest recession, they should rise by 30%-50% reasonably quickly.
In fact, we have already seen recessions play out in broad swaths of the economy, including residential and commercial real estate, and you guessed it, industrials, commodities, and energy.
It gets better.
These sectors are usually the top performers when the stock market shifts from bear to bull. And guess what happened last week? The stock market rose 20% off its October low, officially moving from bear to bull market.
In fact, this bear lasted a depressing 248 days, making it the longest since 1948, or 75 years. This means that we now have the best entry point for domestic recovery stocks in 75 years.
You can see that individual stocks are starting to sense that the all-clear signal has sounded. Last week, they edged out small, tentative gains as if to see if the coast was clear. I also started sending out my first LEAPS for this cycle, those for Freeport McMoRan (FCX) and US Steel (X).
As a pioneer and very early investor in technology, you have not seen many recommendations from me to buy US Steel. I normally don’t look at industries that are besieged by foreign competition, undercut by cheap imports, bedeviled by union problems, are major polluters, and whose principal product has declined in output by 32% since 1970, from 140 million tons a year to only 94.7 million tons.
Yet, here it is.
It gets better still.
The collapse of the Volatility Index ($VIX) from $31 to $13 in three months has suddenly made trading front month call spreads tricky. However, it has made two-year LEAPS (Long Term Equity Anticipation Securities) the bargain of the century.
Two years LEAPS in sectors just coming off multiyear bottoms just as the Fed is about to reverse a harsh interest rate policy and igniting an economic revival sounds like the trade of the year, if not the decade, to me.
The sun, moon, and stars have aligned.
Now, here comes the turbocharger, the gasoline on the fire, the force multiplier.
I was playing around with our database last week in preparation for the launch of our Mad Hedge AI Service and drew some astonishing conclusions (see chart below).
Mad Hedge has been using AI now for 11 years, longer than almost anyone in the market. The longer the AI runs and the more data it accumulates, the smarter it gets. This is manifested in rapidly improving trading performance, which this year went ballistic. It is unbelievable to see this, but the numbers don’t lie.
Read it and weep.
So far in June, we are up +0.37%. My 2023 year-to-date performance is still at an eye-popping +62.12%. The S&P 500 (SPY) is up only a miniscule +12.63% so far in 2023. My trailing one-year return reached +101.03% versus +10.08% for the S&P 500.
That brings my 15-year total return to +659.31%. My average annualized return has blasted up to +48.83%, another new high, some 2.64 times the S&P 500 over the same period.
Some 42 of my 46 trades this year have been profitable. 23 of my last 24 consecutive trade alerts have been profitable.
I executed no trades last week. Concierge members received a LEAPS trade on US Steel (X), which regular subscribers should receive shortly. My longs in Tesla (TSLA) and Freeport McMoRan are now at max profit, which I will easily run into the June 16 option expiration this week. I now have a very rare 80% cash position due to the lack of high-return, low-risk short-term trades.
Tesla Model Y Became World’s Top Selling Car, in Q1, the first EV to do so. Some 267,200 Ys were shifted, edging out Toyota’s Corolla by 10,800 units, which led the field for decades. Elon Musk’s price-cutting volume play is working to the competition’s chagrin. The Model Y is on track to top one million sales this year. Buy (TSLA) on dips.
Tesla Drops Model 3 Price to $33,000, net of $7,500 federal EV tax credit. That helped it become the world’s top-selling car. Late to the market EV makers are getting killed, hemorrhaging cash. That took the shares up to a new 2023 high of $231. Keep buying (TSLA) on dips.
General Motors Adopts Tesla’s Charging System, essentially giving a near monopoly to Elon Musk. (GM) is joining Ford’s (F) capitulation from two weeks ago. This should grow into a $20 billion-a-year profit item for Tesla. All my outrageous forecasts are coming true. Buy (TSLA) on dips.
US to Send Another $2 Billion Worth of Advanced Missiles to Ukraine. The package includes advanced Raytheon (RTX) Himars and Lockheed (LMT) Patriot 3 missiles. Buy both (RTX) and (LMT) on dips as both missiles now have order backlogs extending for years.
Weekly Jobless Claims Jump to 261,000, an increase of 28,000, as the deflationary effects of high-interest rates take hold.
Europe Enters a Recession, with a -0.1% GDP print in Q1. Sharp rises in Euro interest rates get the blame.
Volatility Index Hits 3 ½ Year Low, at $14.26. Complacency with the S&P 500 is running rampant, which always ends in tears. The level implies a maximum up-and-down range of only 8.2% for 30 days.
Airline Profits to Double in 2023, as service sharply deteriorates with revenge travel accelerating. Looks for this summer to be a perfect travel storm. Low fuel costs are another plus.
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 is 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, June 12 at 8:00 AM EST, the Consumer Inflation Expectations are out.
On Tuesday, June 13 at 8:30 PM, Core Inflation Numbers are released. The Fed begins a two-day Open Market Committee Meeting.
On Wednesday, June 14 at 5:30 AM, the US Producer Price Index is published. At 11:00 AM, the Fed interest rate decision is announced. The press conference follows at 11:30 AM.
On Thursday, June 15 at 8:30 AM, the Weekly Jobless Claims are announced. US Retail Sales are also out.
On Friday, June 16 at 7:00 AM, the University of Michigan Consumer Sentiment Index is published. At 2:00 PM, the Baker Hughes Rig Count is printed.
As for me, the call from Washington DC was unmistakable, and I knew what was coming next.
“How would you like to serve your country?” I’ve heard it all before.
I answered, “Of course, I would.”
I was told that for first the first time ever, foreign pilots had access to Russian military aircraft, provided they had enough money. The Russian Air Force was so broke, they couldn’t afford the fuel to allow their pilots to maintain minimum flight hours. They needed foreign pilots to pay for the fuel.
You see, in 1992, everything in the just-collapsed Soviet Union was for sale. All they needed was someone to masquerade as a wealthy hedge fund manager looking for adventure.
No problem there.
And can you fly a MiG-29?
“Probably.”
A month later, I was wearing the uniform of a major in the Russian Air Force, my hair cut military short, sitting in the backseat of a black Volga limo, sweating bullets.
“Don’t speak,” said my driver.
The guard shifted his Kalashnikov and ordered us to stop, looked at my fake ID card, and waved us on. We were at Russia’s Zhukovky Airbase 100 miles north of Moscow, home of the country’s best interceptor fighter, the storied Fulcrum, or MiG-29.
I ended up spending a week at the top-secret base. That included daily turns in the centrifuge to make sure I was up to the G-forces demand by supersonic flight. Afternoons saw me in ejection training. There in my trainer, I had to shout “eject, eject, eject,” pull the right-hand lever under my seat, and then get blasted ten feet in the air, only to settle back down to earth.
As a known big spender, I was a pretty popular guy on the base, and I was invited to a party every night. Let me tell you that vodka is a really big deal in Russia, and I was not allowed to leave until I had finished my own bottle, straight. My memory of what happened after 8:00 PM every night is pretty foggy.
After being taught to fear Americans for their entire lives the Russians were fascinated to actually meet one in person.
In 1993, Russia was realigning itself with the West, and everyone was putting on their best face going forward. I had been warned about this ahead of time and judiciously downed a shot glass of cooking oil every evening to ward off the worst effects of alcohol poisoning. It worked.
Preflight involved getting laced into my green super-tight gravity suit, a three-hour project. Two women tied the necessary 300 knots, joking and laughing all the while. They wished me a good flight.
Next, I met my co-pilot, Captain A. Pavlov, Russia’s top test pilot. He quizzed me about my flight experience. I listed off the names: Laos, Cambodia, Thailand, Israel, Croatia, Serbia, Bosnia, Kuwait, Iraq, and Saudi Arabia. It was clear he still needed convincing.
Then I was strapped into the cockpit.
Oops!
All the instruments were in the Cyrillic alphabet….and were metric! They hadn’t told me about this, but I would deal with it.
We took off and went straight up, gaining 50,000 feet in two minutes. Yes, fellow pilots, that is a climb rate of an astounding 25,000 feet a minute. They call them interceptors for a reason. It was a humid day, and when we hit 50,000 feet the air suddenly turned to snowflakes swirling around the cockpit.
Then we went through a series of violent spins, loops, and other evasive maneuvers (see my logbook entry below). Some of them seemed aeronautically impossible. I watched the Mach Meter carefully; it was frequently dancing up to the “10” level. Anything over ten is invariably fatal, as it ruptures your internal organs. For a few seconds, I thought Pavlov was trying to kill me.
Then Pavlov said, “I guess you are a real pilot, and he handed the stick over to me. I put the fighter into a steep dive, gaining the maximum handbook speed of March 2.5, or 2.5 times the speed of sound, or 1,918 miles per hour in seconds. Let me tell you, there is nothing like diving a fighter from 90,000 feet to the earth at 1,918 miles per hour.
Then we found a wide river and buzzed that at 500 feet just under the speed of sound. Fly over any structure over the speed of sound and the resulting shock wave shatters concrete.
I noticed the fuel gages were running near empty and realized that the Russians had only given me enough fuel to fly an hour. That’s so I wouldn’t hijack the plane and fly it to Finland. Still, Pavlov trusted me enough to let me land the plane; no small thing in a $30 million aircraft. I made a perfect three-point landing and taxied back to base.
I couldn’t help but notice that there was a MiG-25 Foxbat parked in the adjoining hanger and asked if it was available. They said “yes”, but only if I had $10,000 in cash on hand, thinking this was an impossibility. I said, “No problem” and whipped out my American Express gold card.
Their eyes practically popped out of their heads, as this amounted to a lifetime of earnings for the average Russian. They took a picture of the card, called in the number, and in five minutes I was good to go.
Thank you American Express!
They asked when I wanted to fly, and as I was still in my gravity suite I said, “How about right now?” The fuel truck duly backed up and in 20 minutes I was ready for takeoff. Pavlov, once again, my co-pilot. This time, he let me do the takeoff AND the landing.
The first thing I noticed was the missile trigger at the end of the stick. Then I asked the question that had been puzzling aeronautics analysts for years. “If the ceiling of the MiG-25 was 90,000 feet and the U-2 was at 100,000 feet how did the Russians make up the last 10,000 feet?
“It’s simple,” said Pavlov. Put on full power, stall out at 90,000 feet, then fire your rockets at the apex of the parabola to make up the distance. There was only one problem with this. If your stall forced you to eject, the survival rate was only 50%. That is because when the plane in free fall hits the atmosphere at 50,000 feet it’s like hitting a wall of concrete. I told him to go ahead, and he repeated the maneuver for my benefit.
It was worth the risk to get up to 90,000 feet. There you can clearly see the curvature of the earth, the sky above is black, you can see stars in the middle of the day, and your forward vision is about 400 miles. We were the highest men in the world at that moment. Again, I made another perfect three-point landing, thanks to flying all those Mustangs and Spitfires over the decades.
After my big flights, I was taken to a museum on the base and shown the wreckage of the U-2 spy plane flown by Francis Gary Powers shot down over Russia in 1960. After suffering a direct hit from a missile there wasn’t much left of the U-2. However, I did notice a nameplate that said, “Lockheed Aircraft Company, Los Angeles, California.”
I asked “Is it alright if I take this home? My mother worked at this factory during WWII building bombers.” My hosts looked horrified. “No, no, no, no. This is one of Russia’s greatest national treasures,” and they hustled me out of the building as fast as they could.
It's a good thing that I struck while the iron was hot as foreigners are no longer allowed to fly any Russian jets. Perhaps that’s why I have suddenly become very popular in Washington DC once again.
My MiG 25 in Russia
Russian Test Pilot A. Pavlov
Good Luck and Good Trading,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
(QUANTUM COMPUTING AND CYBERSECURITY)
June 9, 2023
Hello everybody.
Do you have security on your laptop? Do you ever worry about your information being stolen?
Encryption on our computers keeps our information safe for now. However, the impact of
quantum computing on cybersecurity is game-changing.
Quantum computing holds great promise in many areas, such as medical research, artificial intelligence, weather forecasting, etc. But it also poses a significant threat to cybersecurity, to the extent that it will require a change in how we encrypt our data. Even though quantum computers don’t technically have the power to break most of our current forms of encryption yet, we need to stay ahead of the threat and come up with quantum-proof solutions now. If we wait until those powerful quantum computers start breaking our encryption, it will be too late.
Security of our information is paramount. The only way to ensure the security of information, particularly information that needs to remain secure well into the future, is to safeguard it now with quantum-safe key delivery.
The potential of quantum computing is far beyond the average person’s imagination. Quantum computers will be able to solve problems that are far too complex for classical computers to figure out. I mean, can the average person figure out the computers we have now?
Quantum computers (QC) will be able to solve the algorithms behind encryption keys that protect our data and the internet’s infrastructure. That really sounds scary and very futuristic. So, will anything be safe online?
Today’s encryption is based on mathematical formulas that would take today’s computers an impractically long time to decode. To simply do this, think of two large numbers, for example, and multiply them together, it’s easy to come up with the product, but much harder to start with the large number and factor it into its two prime numbers. A quantum computer, however, can easily factor those numbers and break the code.
Today’s RSA encryption, a widely used form of encryption, particularly for sending sensitive data over the internet, is based on 2048-bit numbers. Experts estimate that a quantum computer would need to be as large as 70 million qubits to break that encryption. Considering the largest quantum computer today is IBM’s 53-qubit quantum computer, it could be a long time before we’re breaking that encryption.
As the pace of quantum research continues to accelerate, though, the development of such a computer within the next 3-5 years cannot be discounted. For instance, earlier this year, Google and KTH Royal Institute of Technology in Sweden reportedly found “a more efficient way for quantum computers to perform the code-breaking calculations, reducing the resources they require by orders of magnitude.” Their work, highlighted in the MIT Technology Review, showed that a 20 million-qubit computer could break a 2048-bit number – in a mere 8 hours. What that shows, is that continued breakthroughs like this will keep pushing the timeline up.
The greatest risk is the vulnerability of information that needs to retain its secrecy well into the future, such as national security-level data, banking data, privacy act data, etc. Those are the kind of secrets that really need to be protected with quantum-proof encryption now, particularly in the face of corrupt individuals/groups, who are stealing it while they wait for a quantum computer that can break the encryption.
Researchers have been working hard in the last several years to develop “quantum-safe” encryption. One thing is for certain, however, when it comes to the impact of quantum computing on cybersecurity, it will pose a threat to cybersecurity and our current forms of encryption. To mitigate the threat, we need to change how we keep our data secure and start doing it now. We need to approach the quantum threat as we do other security vulnerabilities: by using defence-in-depth approach, one characterised by multiple layers of quantum-safe protection. Security organisations focused on the future understand this need for crypto agility and are seeking crypto-diverse solutions like those offered by QantumXchange to make their encryption quantum-safe now, and quantum-ready for tomorrow’s threats.
We can’t afford to let our guard down in this critical area. The good actors need to outpace the bad actors in this space and make sure our security measures are impenetrable.
Wishing you all a great weekend.
Cheers,
Jacquie
Quantum computing and cybersecurity
White House launches plan to safeguard US infrastructure against quantum computing.
Hacking activity – we need to outsmart the bad actors first.
Difference between Classical computing and Quantum Computing
The mystery of quantum computers.
Mad Hedge Technology Letter
June 9, 2023
Fiat Lux
Featured Trade:
(SHOULD YOU BUY CARVANA?)
(CVNA)
The biggest takeaway I took from the used car platform Carvana’s (CVNA) latest earnings report is: who is dumb enough to buy an old car and get fleeced for $6k?
Apparently, $6k is what CVNA earns per unit in gross terms now.
But hey, if paying a broker $6k is what it takes to buy a used car then so be it.
The problem I have with the $6k gross per unit is how much further can that number go?
My bet is not much.
How much higher broker fees can Americans absorb?
My bet is not much more.
Just doing simple math means that for a $20,000 used car purchase, adding on the Carvana service would mean it costs $26,000 to the end buyer.
Sure, for some people like me and you it’s not a big deal, but I don’t believe this can scale well or efficiently as a tech platform.
That being said, it’s quite a corporate achievement for such gaudy margins and one that meant CVNA’s share exploded to the upside rising 44% on the news.
The stock is down 18% today highlighting the volatile nature of the stock.
Revenue fell 25% to $2.6 billion, but total gross profit rose 14% to $341 million.
The update helped reassure investors that the stock would be able to avoid bankruptcy after plunging as much as 99% from its peak in 2021 on slowing growth and mounting losses, especially as interest rates rise and used car prices fell for much of last year.
Carvana didn’t give guidance for net income but said adjusted earnings before interest, taxes, depreciation and amortization would be $50 million in the current quarter — way above the consensus analyst estimate of a $3.6 million loss — and gross profit per unit would be a record of more than $6,000.
Carvana’s $8.7 billion debt load as of March 31 has been a big problem for the company, which recently scrapped a debt exchange offer that would have reduced its burden because creditors held out for a better deal.
The interest on Carvana’s debt cost the company more than $2,000 per car in the first quarter, which is one reason it reported a loss of $286 million despite gross profit per vehicle sold of more than $4,000.
From peak to trough, Carvana lost 99% of its value as used car prices fell, the company made an ill-timed acquisition of the ADESA auction business, and creditors began preparing for a bankruptcy.
Although in the short term the stock is having a nice bounce, that doesn’t mean the stock’s appreciation is sustainable in the long run.
I do believe the bounce is just the proverbial dead cat bounce and ok for a quick trade and quick profit.
In a world where big tech is really crushing it, small tech needs that extra little bit of juice or special sauce to navigate the iron clad balance sheets of Silicon Valley.
Selling used cars is hard to digitize and I believe this platform will continue to burn cash on the road to a never ending feedback of explaining why it can’t be profitable.
Sell this one on the bounce.
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
Global Market Comments
June 9, 2023
Fiat Lux
Featured Trades:
(JUNE 7 BIWEEKLY STRATEGY WEBINAR Q&A),
($VIX), (TSLA), (TLT), (FCX), (RUT), (COIN), (AAPL),
(ROM), (AMZN), (PYPL), (NVDA), (COPX), (FXI)
CLICK HERE to download today's position sheet.
Below please find subscribers’ Q&A for the June 7 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Lake Tahoe, NV.
Q: Do you ever trade the CBOE Volatility Index ($VIX)?
A: No, I used to, but I got hit a few times. That’s because 95% of the year is spent seeing the ($VIX) go down, and then the other 5% basically doubles overnight. It’s a short play only. With a long ($VIX), the time decay is enormous, and it’s just not worth owning. The only way to make money in ($VIX) is to buy it right before a giant VIX spike. And the floor traders in Chicago have a huge inside advantage in that market. So, I finally gave up and decided there's better things to do.
Q: Buy the price dip for Tesla (TSLA)?
A: I’d have to look at the charts, but if it gets back down to $200, I would start hoovering it up again. The fundamentals are really arriving for Tesla big time, as is the long-term bull case.
Q: With the debt crisis over, how low will the iShares 20 Plus Year Treasury Bond ETF (TLT) go in the short term?
A: Well, we know they have to issue a trillion dollars of 90-day T-bills in the next few weeks. The debt ceiling crisis stopped Treasury bill issuance for several months and now they have a lot of catch-up to do. So, best case scenario, the (TLT) drops to $95, then you load the boat for the rest of your life in (TLT) LEAPS, like a $95-$100 2024 LEAPS. And that should double about every year.
Q: Are you concerned about commodities given the weakness in the Chinese economy?
A: Yes, it’s definitely slowing the commodities recovery, but is also giving you a fantastic opportunity to get into things like Freeport McMoRan (FCX) at a cheaper price, where it was just a couple of weeks ago. All of the commodities look like they’re bottoming now, it’s time to buy them.
Q: It seems like you really love the Russell 2000 (RUT).
A: I hate the Russell. You only want to own big money stocks because that's where the big money goes first. Big money doesn’t go into the Russell, and as long as there's any doubt of a recession coming, they’ll perform poorly.
Q: Coinbase (COIN) is getting sued by the SEC, should I buy on the dip?
A: No, the whole crypto infrastructure is getting sued out of existence and disappearing. They went after Binance also. It seems like the SEC just doesn’t like crypto very much. That kind of shrinks the whole industry back down to hot wallets, where you slowly have direct control of your bitcoin on the network and you don't use any outside brokers to buy and sell it because there may not be any left shortly.
Q: Should we still hold the Apple (AAPL) bull call spread?
A: Yes, I think we have enough room on our call spread in the next 7 trading days to take max profit. However, if you have any doubts, no one ever gets fired for taking a profit.
Q: Is the ProShares Ultra Technology ETF (ROM) a buy at this time?
A: No, if anything, ROM is a sell. It almost had a near-double move. So no, wait for a 20% or 30% correction this summer in ROM and then go in. It has actually led most tech because it's a 2X long ETF. Sometimes I just want to shoot myself. You buy before stocks double, not afterwards.
Q: What will trigger a correction this summer?
A: The risk of a further rise in interest rates, which we may get. Other than that, the market is running out of negatives.
Q: What is the risk of US currency not being the world reserve?
A: Zero. I have been asked this question every day for the last 50 years and so far, I have been right. What would you rather keep your savings in Chinese Yuan, Russian rubles, or Euros? I would say none of those. And US currency will remain the reserve currency for this century, easily, until a digital US dollar comes out.
Q: Do you want to buy the cellphone companies?
A: No, not really. They weren’t very interesting before—it's a low margin, highly competitive cutthroat business—and now you have one of the world's largest companies, Amazon (AMZN), potentially offering phones for free? I think I'll pass on that one.
Q: Do you have any interest in pairs trading?
A: No, they blow up too often.
Q: Did you say you sent out a one-year LEAPS on Freeport McMoRan (FCX), the $35-$38?
A: Yes, if you didn’t get it, email customer support.
Q: Are investing in 90-day Treasury bills until the next one or two Fed meetings are over a good idea?
A: Yes, that is a good idea. Cash has a high-value night now. Remember, a dollar at a market top is worth $10 at a market bottom, and we now have a rare opportunity to get paid 5.2% or 5.3% while we wait. That hasn’t happened in almost 20 years.
Q: Will the new Apple VR headset be a boon to the stock price?
A: Yes, adding 10% to your earnings is always good, but it won’t happen immediately. You need a few thousand third-party app developers to come through with services before the earnings really get going. That's what happened with iTunes when the iPhone came out. Growth was slow when Apple only allowed its in-house apps to be sold—when they opened to the public, the business went up 100 times. That's maybe what will happen with the virtual headset.
Q: PayPal (PYPL) has dropped a lot, should I buy it here?
A: No, cutthroat competition in the sector is destroying the share price. There are too many other better things to buy.
Q: Why do so many professional analysts say the market will go down this year, but it goes up every day?
A: Professional analysts are just that—they're analysts, not traders. And often these days, to save money, your professional analyst is 26 years old, so they don’t have much market experience. I like to think that 50 years of trading experience backed with algorithms helps.
Q: Do you think oil could hit $100 a barrel next year?
A: Yes, definitely. Especially if we get a decent economic recovery and Saudi Arabia doesn’t immediately bring back 3 million barrels a day that they’ve cut.
Q: Should I chase NVIDIA (NVDA) here?
A: No, better to own cash here than Nvidia. Buy Nvidia on the next dip, or another Nvidia wannabe company, which will almost certainly arrive shortly.
Q: When will we get peace in Ukraine?
A: Within a year, I would say. Russia has literally run out of ammunition, and Ukraine is getting more. Ukraine is also getting F16s, our older fighter planes, and many other advanced weapons and parts—those are a big help. They can beat anything the Russians throw up.
Q: Is Global X Copper Miners ETF (COPX) a good copper play?
A: Yes it is, but you don’t get the leverage that you do with an FCX LEAP. I don’t know how far the top will go, but that would be a great trade one to two years out.
Q: Can you explain why there is a short squeeze in copper?
A: There are 200 pounds of copper needed for each EV, and EV production is exploding both here and in China. Tesla is expected to make 2 million EVs this year, especially with the $33,000 price point. China manufactures this many EVs as well. Four million EVS and 200 pounds of copper per EV equals the entire annual production of copper right now. At some point, people will notice that and they’ll take copper as much as they took lithium up last year.
Q: What do you mean when you say LEAPS one or two years?
A: It really depends on your risk. When you buy a two-year LEAPS, you usually get the extra year for free or almost nothing, and if you get a rapid increase in the underlying share price, the two-year LEAP will go up almost as much as the one year. So for most people who don’t want to watch the market every day, the two-year LEAPS is probably a better choice.
Q: Why did you buy only one LEAPS contracts?
A: All of my LEAPS recommendations are only for one contract. It is up to you to decide what your risk tolerance and experience level is, whether you buy 1, 100, or 1,000 contracts, so I leave the size up to you because it can vary tremendously depending on the person. Also, one contract makes the math really easy for people to understand.
Q: At what point do you sell your LEAPS?
A: Well, if you get a rapid 500% profit, which happened with many of the LEAPS that we did in October as well as the ones we did in March, I would take it. However, the goal on these is to go for the 10 baggers, or the 100% return in a year, and you usually need to hold it for the full year to get that. But, if the stock takes off like a rocket, I would take the profit. How many times in your life do you get a 500% profit in a month or two? I would say none. So, when you get that with these LEAPS recommendations, take it and run like a madman, move to a different country, and change your name.
Q: With the ($VIX) this low and many great companies for the second half down, would you buy single LEAPS instead of spreads?
A: I would; the problem with the call spread strategy is that it’s not the best thing to do at big market bottoms, down 20%, 30%, and 40%. The better thing to do is the LEAPS, but the LEAPS is a one- or two-year position, and I have to be sending out trade alerts every day. At market bottoms, you definitely want to get the most market leverage possible on the upside, and LEAPS does that for you in spades. They essentially turn your stock into a synthetic futures contract with a 10x leverage.
Q: When do we expect China (FXI) to take over Taiwan?
A: Never, because if they invade Taiwan, China loses its food supply from the US, which cannot be replaced anywhere. They also lose their international trade, so they won’t have the profits with which to buy food elsewhere. I’ve been in China when millions died during a famine and let me tell you, there is NO substitute for food. Not all the money in the world can buy it when it just plain isn’t available. But China will keep threatening and bluffing as they have done for 74 years.
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
Sometimes the Market Can be Tough to Figure Out
Mad Hedge Biotech and Healthcare Letter
June 8, 2023
Fiat Lux
Featured Trade:
(THE AI INFUSION)
(MDT), (NVDA), (GEHC), (LLY)
Curious about the true potential of AI to drive earnings growth in the healthcare industry?
Let me paint you a picture of how AI's transformative power is set to revolutionize medical products and services. Imagine cutting-edge devices that can detect diseases at their earliest stages, leading to increased adoption by healthcare facilities.
And what does that mean for the companies behind these remarkable tools? More revenue, of course.
It is no surprise that experts predict exponential growth for AI in the healthcare market. This sector is projected to skyrocket at a compound annual growth rate of 47%, reaching a staggering $100 billion by 2030.
One company that has embraced this inevitable shift is Medtronic (MDT), a leading player in the medical device industry.
With a robust portfolio of innovative products, Medtronic has witnessed steady revenue growth over the years.
In fact, in its most recent fiscal year, the company invested a whopping $2.7 billion, equivalent to 8.6% of its sales, in research and development (R&D) to fund over 200 clinical trials. These trials cover a wide range of medical conditions, from diabetes management to a host of other ailments.
Thanks to its extensive product lineup, this Ireland-based medical device giant impacts the lives of approximately 76 million patients annually.
In recent times, however, Medtronic has faced a significant challenge: a lack of substantial growth. Hence, the company has taken decisive measures to address this issue by streamlining its operations and making strategic acquisitions to unlock future revenue potential.
This is undoubtedly encouraging news. But there's an additional factor that has everyone buzzing with excitement these days: artificial intelligence (AI).
Thus far, Medtronic has successfully implemented AI across its diverse platforms, revolutionizing how it caters to patients, from delivering precise insulin dosages to individuals using their continuous glucose monitoring systems to refining the outcomes of intricate spinal surgeries.
The company's endeavors in the field of AI have even garnered accolades.
Actually, Medtronic's groundbreaking AccuRhythm AI algorithm technology recently secured the prestigious "best new monitoring solution" award from MedTech Breakthrough. This remarkable innovation significantly enhances the quality of data derived from cardiac monitors, benefiting individuals with abnormal heart rhythms.
Moreover, Medtronic recently forged a partnership with NVIDIA (NVDA).
This collaboration aims to enhance the capabilities of Medtronic's GI Genius endoscopy tool, which already employs AI to detect pre-cancerous tissue.
By enabling third-party developers to train and test AI models that could eventually be integrated into the GI Genius, this strategic alliance holds immense potential for future advancements in the field.
Recognizing the transformative impact of AI, Medtronic envisions it as a pivotal element in the future of healthcare. The company considers AI to be the linchpin of personalized medicine, and this belief holds considerable merit.
Evidently, AI's remarkable capacity to predict and anticipate medical issues or outcomes on an individualized basis aligns seamlessly with the very essence of personalized medicine.
Naturally, Medtronic isn't the sole player in this groundbreaking realm of investment.
Take, for instance, GE Healthcare (GEHC), which recently obtained approval for its revolutionary deep-learning technology aimed at enhancing PET/CT scan images. Major pharmaceutical giants like Eli Lilly (LLY) have also joined forces with AI technology companies to expedite their drug-discovery endeavors.
When you consider the extensive integration of AI within Medtronic's operations, though, the company emerges as a frontrunner in this field. Its AI initiatives have already contributed to notable growth in specific sectors.
Just look at its gastrointestinal (GI) business, which experienced a remarkable 16% increase in the latest quarter, thanks to the strong adoption of the innovative GI Genius technology. Additionally, Medtronic's neuroscience division, encompassing its spine surgery products, witnessed a respectable 6% growth.
This success story doesn't end there.
With its recent dividend increase marking the 46th consecutive year of such a move, Medtronic is on the verge of achieving Dividend King status.
What's even more enticing is the current valuation of Medtronic's stock, trading at a modest 16 times forward-earnings estimates. This presents a compelling opportunity for investors, considering the company's significant advantages.
For one, even if overall growth may not be skyrocketing at the moment, Medtronic continues to generate impressive billion-dollar earnings. On top of that, and perhaps most intriguingly, Medtronic has positioned itself at the forefront of a potentially game-changing new market.
Taking all of this into account, there has never been a better time to consider investing in Medtronic. I suggest you buy the dip.
