June 2023

The Mad Hedge Trader’s and Investors Summit is On

The debt ceiling has been raised. Inflation is falling. And tech stocks are on fire! What should you do about it? Attend the Mad Hedge Traders & Investors Summit during June 13-15. Learn from 28 of the best professionals in the market with decades of experience and the track records to prove it. Every strategy and asset class will be covered, including stocks, bonds, foreign exchange, precious metals, commodities, energy, and real estate. Best of all, by signing up you will automatically have a chance to win up to $100,000 in prizes. Usually, access to an exclusive conference like this costs thousands of dollars. You can attend for free!

Listening to this webinar will change your life! To register, please, click here.

Get Ready to Take a Leap Back into LEAPS

Diary, Newsletter

Just as every cloud has a silver lining, every stock market crash offers generational opportunities.

The September and October 2022 are now behind us, for the past 100 years, the two worst trading months of the year. That means they are also the best months for entering spectacular trades with LEAPS.

What are LEAPS you make ask?

This is the best strategy with which to cash in on the gigantic market swoons, which have become a regular feature of our markets, especially in 2022.

LEAPS, or Long Term Equity Anticipation Securities, is just a fancy name for a stock option spread with a maturity of more than one year.

You execute orders for these securities on your options online trading platform, pay options commissions, and endure option-like volatility.

Another way of describing LEAPS is that they offer a way to rent stocks instead of buying them, with the prospect of enjoying years’ worth of stock gains for a fraction of the price.

While these are highly leveraged instruments, you can’t lose any more money than you put into them. Your risk is well-defined. But you get 10X or more exposure to the stock. They are kind of like synthetic futures on individual stocks.

And there are many companies in the market where LEAPS are a very good idea, especially on those gut-wrenching 1,000-point down days.

Interested?

Currently, LEAPS are listed all the way out until June 2025.

However, the further expiration dates will have far less liquidity than near-month options, so they are not a great short-term trading vehicle. That is why limit orders in LEAPS, as opposed to market orders, are crucial.

These are really for your buy-and-forget investment portfolio, defined benefit plan, 401k, or IRA.

Because of the long maturities, premiums can be enormous. However, there is more than one way to skin a cat, and the profit opportunities here can be astronomical.

Like all options contracts, a LEAPS gives its owner the right to "exercise" the option to buy or sell 100 shares of stock at a set price for a given time.

LEAPS have been around since 1990, and trade on the Chicago Board Options Exchange (CBOE).

To participate, you need an options account with a brokerage house, an easy process that mainly involves acknowledging the risk disclosures that no one ever reads.

If a LEAPS expires "out-of-the-money" – when exercising, you can lose all the money that was spent on the premium to buy it. There's no toughing it out waiting for a recovery, as with actual shares of stock. Poof and your money is gone.

LEAPS are also offered on exchange-traded funds (ETFs) that track indices like the Standard & Poor's 500 index (SPY) and the Dow Jones Industrial Average (INDU), so you could bet on up or down moves of the broad market.

One of my most profitable trades in 2021 was the (TLT) December 2022 $$150-$155 vertical bear put LEAPS, which generated a 100% profit for everyone who got into it. Those who bought the more aggressive (TLT) December 2022 $$140-$145 vertical bear put LEAPS made 200%.

I see you’re still interested. For example, the highly popular ProShares 2X Ultra Technology ETF (ROM) only offers maturities out only six months so it is not possible to do a proper LEAPS. No one is willing to take the risk on the other side of this highly volatile security.

Not all stocks have options, and not all stocks with ordinary options also offer LEAPS.

Note that a LEAPS owner does not vote proxies or receive dividends, because the underlying stock is owned by the seller, or "writer," of the LEAPS contract until the LEAPS owner exercises.

Despite the Wild West image of options, LEAPS are actually ideal for the right type of conservative investor.

They offer more margin and more efficient use of capital than traditional broker margin accounts. And you don’t have to pay the usurious interest rates that margin accounts usually charge.

And for a moderate increase in risk, they present outsized profit opportunities.

For the right investor they are the ideal instrument.

Let me go through some examples to show you their inner beauty.

By now, you should all know what vertical bull call spreads are. If you don’t, then please click there link for a quickie video tutorial at
https://www.madhedgefundtrader.com/ltt-vbcs/
(you must be logged in to your account).

Let’s go back to February 9, 2018 when the Dow Average plunged to its 23,800 low for the year. I then begged you to buy the Apple (AAPL) June 2018 $130-$140 call spread at $8.10, which most of you did. A month later, that position is worth $9.40, up some 16.04%. Not bad.

Now let’s say that instead buying a spread four months out, you went for the full year and three months, to June 2019.

That identical (AAPL) $130-$140 would have cost $5.50 on February 9. The spread would be worth $9.40 today, up 70.90%, and worth $10 on June 21, 2019, up 81.81%.

So, by holding a 15 month to expiration position for only a month you get to collect 86.67% of the maximum potential profit of the position.

So, now you know why we leap into LEAPS.

When the melt down comes, and that could be as soon as next week, use this strategy to jump into longer term positions in the names we have been recommending and you should be able to retire early.

Now you know why I like LEAPS so much. Please play around with the names and the numbers and I’m sure you will find something you like. But remember one thing. LEAPS are only a trade to consider at long time market bottoms, not tops!

They are also the perfect positions to own if you believe we have just entered a second Roaring Twenties and a second American Golden Age, as I do.

Time to Leap Into LEAPS

Testimonial

Diary, Newsletter, Testimonials

Dear John,

I hope you remember me. We once met at a luncheon in Paris a number of summers ago.

Thank you for the suggestion you made during the January 31 webinar about the launch of the Mad Hedge Technology Letter. After the first issue, I bought Micron Technology (MU).

I bought two July $39 Calls for $7.80 and two January 2019 $37 Calls for $11.40. On February 26, I sold one of the July calls for $11.00 (+40.7%), and today the second for $15.70 (+100.0%) for a total profit of $1,105.51.

I still have an unrealized profit of $1,718 on the January 2019 calls. So, if I sell those now, I will have earned $2000 with this trade.

We once met at a very scarcely attended luncheon in Paris a number of summers ago.

Kind regards,

Dirk
Belgium

John Thomas reply: Good work Dirk! Let’s meet in Paris again for lunch this July.

June 15, 2023 - Quote of the Day

Diary, Newsletter, Quote of the Day

“Markets will overvalue what you can quantify,” said Ann Lamont at Oak Investment Partners, referring to the extreme high prices for public companies versus the discount valuations of private ones.

June 14, 2023

Jacque's Post

(COPPER AND THE GREEN ENERGY REVOLUTION)

June 14, 2023

Hello everyone,

Today I thought I would venture into the world of copper, look at a bit of history, and understand why it is so valuable today, what we use it for and why there may be an impending shortage in the future.

Copper has played a big role in the world economy for thousands of years.

In the Bronze Age, blacksmiths worked out how to forge copper and tin. The continual refinement of copper, both in its combination with other metals and the extraction process, transformed the world by improving tools, construction, and weaponry.

The Middle Ages and the Age of Discovery saw copper applied in new and exciting ways. Copper became a part of artistic expressions in Renaissance canvases and sculptures and later in styles such as daguerreotype photography. (For those who don’t know, daguerreotype was the first commercially successful photographic process (1839 – 1860) in the history of photography. The daguerreotype is a direct-positive process, creating a highly detailed image on a sheet of copper plated with a thin coat of silver without the use of a negative.) Copper has also played a large role in international relations and affairs. It lined the hulls of Christopher Columbus’s seafaring fleet to prevent the ships from sustaining damage from salt water and biological agents. Furthermore, the Statue of Liberty, France’s gift to the fledging United States, incorporates more than 200,000 pounds of copper (but her green tint comes from years of oxidation).

One of the most significant moments in copper history occurred in 1977, when technology giant IBM adopted oxidized copper interconnects, replacing the aluminum standard. The result was fast, smaller, and thinner computers and gadgetry due to copper’s malleability and ability to conduct electricity with 40% less resistance than aluminum.

So, we find that copper is used in electrical and heating equipment because its chemical properties make it such a useful conductor. Today it is used in car motors, household pipes, washing machines, all sorts of things we use every day. Furthermore, we can’t forget to mention all the different copper alloys that are mixed into other metals and items. Significantly, the metal is so easily recyclable that most of the copper on earth remains in the ground. In fact, only 12% of all copper on Earth has been mined throughout history and nearly all of it remains in circulation.

Some of the copper in circulation right now could once have been jewelry or armor in ancient Egypt. In fact, the International Copper Association estimates that an incredible 75% of the copper produced since 1900 is still in use.

In May 2021, analysts at Goldman Sachs called copper “the new oil.”

So, why are some people, including commodity analysts at Goldman Sachs warning about a copper shortage with dire consequences for the economy?

In short, it is about the mining and recycling infrastructure being unable to meet the potential demand from these industries.

In May 2021, leading on from “the new oil” comment, analysts at Goldman Sachs suggested that copper could rise in value in the next few years from $9,000/ton to $20,000/ton.

With this in mind, we need to position now for long-term demand in green technology. I’m not saying this rise is going to happen next year, but it will in the next 5-7 years.

People are just starting to realize the magnitude of copper’s presence throughout the economy.

Mind you, we call it Dr. Copper because we see it as having a Ph.D. in economics. When economic activity increases demand for copper increases and copper prices rise. In that sense, the copper market becomes a barometer for global economic growth – a leading indicator.

But Dr. Copper does not always provide a certain diagnosis. Sometimes, the connection between copper prices and economic growth breaks down.

Copper is important for a lot of local economies as well. You may be wondering where it comes from.

In the last 50 years, South America has become important. Peru and Chile really dominate. Arizona is the leading copper producer in the U.S. Zambia in Africa has a significant copper belt. There is also a large mine in Mongolia.

The copper industry is bracing for a boom in demand. Governments and companies around the world are preparing for a green energy revolution. We will witness entire new power grids using solar, wind and water to power turbines and feed electricity into copper wires. What’s more, EVs need much more copper than their gas-powered counterparts. Take a look at the graph here and compare the quantity of copper used in each vehicle.

There is basically three and a half times more copper in EVs than in gas-powered cars. You need to account for the motors in the batteries – more electronics.

Solar has a similar story. With conventional energy, we normally would use one metric ton of copper per megawatt of generating capacity. When you look at renewable energies, you are looking at four to six times that amount of copper.

Solar installation could be something like 9,000 lbs/megawatt.

Wind farms could be as much as 15 million lbs. of copper.

In individual wind turbines, there would be about 800 lbs. of copper.

So, as we move to a decarbonized economy, we are basically replacing C in the periodic table with CU.

Higher copper prices may have a silver lining. It will cause mining companies to break ground on more new projects since extracting copper will have a bigger payoff. There’s also new technology springing up to extract copper. For more information there, investigate Jetti Resources. This company is now able to extract copper from low-grade material – that is, material that was once dumped in the rubbish.

It's interesting to note that 65% of all unearthed copper is used by the electronics industry.

The global copper market reached USD 241780 million in 2021-2022. This market is expected to reach the value of USD 343900 million by the end of 2030.

Start positioning for the future growth of this market.

The life cycle of copper is infinite

Environmental benefits of secondary copper from primary copper

Wishing you all a great week.

Cheers,

Jacquie

Mad Hedge Jacquie’s Post

June 14, 2023

Tech Letter

Mad Hedge Technology Letter
June 14, 2023
Fiat Lux

Featured Trade:

(ANOTHER ONE TO ADD TO THE AI BANDWAGON)
(ORCL)

Another One to Add to the AI Bandwagon

Tech Letter

We are starting to get to the overhype stage of AI in the short term because the sub-sector has gone too far too fast in such a short period of time.

Software company Oracle (ORCL) needs to be mentioned as another AI participant chomping at the bit.

ORCL has been quite the laggard for some time as their warehouse cloud system was considered behind the times.

It’s fair to say that the stock has benefited the most from the AI hype simply because its stock was priced so cheaply before it caught the AI bid.

Now they have finally told us how they will integrate generative AI into their products and this has triggered strong interest in the stock.

Oracle is offering its enterprise customers a way to build their own generative AI apps leveraging a company that is similar to OpenAi called Cohere.

Oracle will be embedding Cohere's generative AI technology into a bevy of its products and Cohere will be using Oracle's cloud to train, build, and deploy its generative AI models.

Cohere doesn't have an exclusivity contract with Oracle. Fellow investor Salesforce, for instance, already offers a service that embeds Cohere's chat capabilities into Salesforce. This is just one of the many AI tools Salesforce offers customers.

Oracle does have some of its own homegrown AI technology and uses it for features like its "autonomous" database where its cloud software detects and automatically solves problems.

Cohere is the only partner Oracle announced to power its generative AI services for customers.

Perhaps the main reason Cohere has emerged as an alternative to OpenAI is that it was founded by Aidan Gomez.

He was a research intern at Google Brain in 2017 when he co-authored a paper on a way of training AI models to improve their abilities to understand language.

His sharp ideas have become the basis for the generative AI tech that has so engulfed the industry today, including some models used by OpenAI.

Along with cofounders and fellow AI experts Nick Frosst and Ivan Zhang, Gomez founded Cohere in 2019 to bring Google-quality AI to the masses.

Oracle said that Cohere’s large language models will be directly integrated into Oracle’s cloud applications.

The company will add generative AI features not only to its flagship enterprise resource planning software, but also to applications for human resources, supply chain management, and customer experience management.

The tsunami of AI short-term hot money diving into stocks has been a boon for the tech this year.

The Nasdaq has gone from strength to strength and outpacing the other indices has meant it’s been the only game in town in 2023.

With the likes of Tesla in the green for 13 straight sessions, it’s hard to see when this pandemonium ends.

Surely, there will be a pullback at some point but the good news keeps getting shoved in my face and traders are inclined to buy.

The regional bank crisis also provided an extra swath of liquidity that was largely pumped into the stock market and the Fed’s quantitative tightening dramatically curtailed.

Even though tech stocks are oversold including Oracle, my analysis has shown that traders are waiting for any and every dip to add to their long tech positions.

Put ORCL down as another tech stock to buy on the dip.

oracle

Quote of the Day - June 14, 2023

Tech Letter

“If you're offered a seat on a rocket ship, don't ask what seat.”- Said Former Chief Operating Officer of Facebook Sheryl Sandberg

Welcome to Mad Hedge AI!

Mad Hedge AI

Welcome to the inaugural launch of Mad Hedge AI. We will be posting articles on Mondays, Wednesdays and Fridays, every week. Going forward we will include charts and various topics related directly to AI and how it can be used to influence your trades and your lives - thank you!

The Breadcrumb Trail From the Digital Era to Modern AI

I remember the first audio CDs that arrived on the market, the concept of using a digital copy of the music in 1s and 0s amazed me. I waited for a year or more to buy anything to do with the technology, just in case… but when the time arrived, I confess I did not think further ahead than that moment as I listened to my first audio CD - a remastered release of the album El Dorado by ELO playing on my old stereo with a brand new Pioneer CD player and not one scratchy sound!

That was the early 80s and within 10 years the digital camera, desktop publishing, and the first MP3 players were upon us and we began the slow acceptance of everything in the rest of our world besides our computers, going digital. Every year was about doubling capacity, features, and products that consumed memory, technology, and innovation. We were ripe to create this industry that was marching toward the current trends in AI.

And long after the early smartphones and primitive social media put an indelible mark on us, we adopted neural networks and algorithms to do a lot of our harder work. We did not birth AI all at once into the world - we grew it slowly from the slimy, digital puddles of our human ingenuity, from the collateral of other “tech” and the existential need to find solutions to solving all our complex problems.

We are still not at the stage where you can tell “AI” to go to your parent-teacher meeting for you or to pack your suitcase for your trip to Barbados, but it’s not
that far away…

Traders have been familiar with and applying AI to the market for a time now, but lately, AI is moving into everything far past the math that only the programmer and tech heads understood - into autonomous driving, the written word, art, medicine, and music. All of them now are within its scope which is still currently gathering speed using the wealth of information from other AI models, the internet, and tons of data, as well as the frenzied consumer-driven demand. The technology is about to depart from our current model of AI into something else - the larger focus of the full AI gaze of our near and incredible future.

Midjourney prompt: “The functional combination of an MP3 player, CD player, smartphone,
and Fitbit, photorealistic”

Ask ChatGPT: “Explain how AI might help the individual investor”

AI has the potential to assist individual investors in various ways, providing them with tools and insights to make more informed investment decisions. Here are some ways AI could help individual investors:

1. Data Analysis and Pattern Recognition: AI can analyze vast amounts of financial data, including historical market data, company financials, news articles, and social media sentiment, to identify patterns and trends. This can help investors make better predictions about market movements and identify investment opportunities.

2. Automated Trading: AI-powered trading algorithms can execute trades based on predefined rules and market conditions. These algorithms can quickly process large volumes of data, monitor market movements in real-time, and execute trades with reduced latency. Automated trading can help individual investors take advantage of market opportunities and execute trades more efficiently.

3. Portfolio Optimization: AI algorithms can assist in optimizing investment portfolios by considering factors such as risk tolerance, investment goals, and market conditions. By analyzing historical performance data and simulating various scenarios, AI can suggest optimal asset allocations to maximize returns while managing risks.

4. Risk Assessment and Management: AI can help investors assess and manage risks associated with their investment portfolios. Machine learning models can analyze historical data and identify potential risk factors specific to an individual's portfolio. AI can also simulate stress tests to evaluate how a portfolio might perform under different market conditions, assisting investors in making risk-aware decisions.

5. Sentiment Analysis: AI can analyze news articles, social media posts, and other sources of information to gauge market sentiment towards specific stocks, industries, or market segments. By understanding public opinion and sentiment, investors can make more informed decisions about their investments and potentially predict market movements.

6. Financial Advice and Education: AI-powered virtual assistants or chatbots can provide personalized financial advice to individual investors. These assistants can answer questions, provide insights, and help investors navigate complex financial concepts. AI can also offer educational resources, tutorials, and interactive tools to enhance investors' financial knowledge and decision-making abilities.

7. Market Monitoring and Alerts: AI algorithms can continuously monitor markets and provide real-time alerts to investors. These alerts can include price movements, news updates, and significant events that may impact investment decisions. By staying informed about market changes, investors can react promptly and make timely investment choices.

It's worth noting that while AI can provide valuable support to individual investors, it's essential to combine AI-driven insights with human judgment and critical thinking. AI is a tool that enhances decision-making, but investors should consider their own investment goals, risk tolerance, and conduct thorough due diligence before making investment decisions.

Midjourney prompt:“Silver robot in a business suit and hat holding an umbrella in one hand and
walking along Wall Street in the rain on the way to his day trading job