Hi John,
I have been a Mad Hedge member for 3 years and a Concierge member for just over 1 year. I have taken many successful trades during this time. The most recent trade in US Steel (X) was the fastest to achieve this large percentage profit. In less than 3 months, it went from $1.08 to $2.60. I took most of this, as I got out yesterday. I hope you enjoy the success we are having following your trades.
Happy trading,
Jim
Oklahoma
Ordering Lunch in Bratislava
Below please find subscribers’ Q&A for the August 16 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Silicon Valley, CA.
Q: Did you hear that Michael Burry was putting on a big short (the guy who made a fortune shorting housing in 2009)?
A: Yes, I heard that, but I never, ever trade-off of those kinds of comments. First of all, I think he’s wrong; and often, what happens in those situations is you hear about them going into the trade, but you never hear about them getting out, which might be tomorrow or next week. Also, there’s a nasty habit of big hedge fund managers telling you the opposite of what they’re actually doing. We hear big hedge fund traders like Bill Ackman getting super bearish at market bottoms, and then a few months later learn that they were buying with both hands, as was the case with the pandemic bottom. Be careful about other people’s opinions—they can be hazardous to your wealth. Just look at the data and the facts. That’s what I do.
Q: Would you buy Snowflake (SNOW) around current prices?
A: Yes—first of all Snowflake is a Warren Buffet favorite, which I always tend to follow. However, Warren can wait 5 years for a stock to work, and you can’t. So, I would wait for a bigger dip before getting into SNOW. So far, we are down 25% from the recent peak. One thing’s for sure, cybersecurity is a long-term winner, as seen by the ballistic move in Palo Alto Networks (PANW) since we started recommending it about 8 years ago.
Q: Why are US consumers so strong, and will that hold up for the rest of 2023?
A: US consumers are so strong because they banked so much money during 10 years of QE and all the pandemic stimulus, that they have a lot saved. They are now happy to spend to make up for the spending they couldn’t do during the pandemic. They’re basically in spending catch-up mode or revenge spending.
Q: How far do you see the iShares 20 Plus Year Treasury Bond ETF (TLT) go?
A: My worst-case scenario has it going to $90 down from $94—that’s a yield of about 4.50%. And that's where a lot of bond investors see fair value, and will start piling in. But as long as the momentum is against it, I’m not touching it. As soon as I am convinced there is a real bottom in the (TLT), I’m going to jump in with both hands and buy long-term LEAPS, where you can get a 100% or 200% return pretty quickly.
Q: Time to buy the Tesla (TSLA) dip?
A: We’re getting close. My guess is you might get a spike down to $200 from the recent $300 high. That’s also going to be LEAPS territory for us because the long-term outlook for this company is spectacular.
Q: What do you think of Freeport McMoRan (FCX), Silver (WPM), and United States Natural Gas Fund (UNG)?
A: I think they are all strong buys; I have LEAPS out on all of them. I think we start to get a big move in the 4th quarter of this year that’ll go well into next year—so big money just sitting on the table begging for you to take it.
Q: What are we to make of the crash of the Chinese Yuan?
A: The Chinese economy is weak and looks like it’s getting weaker. They still have a pandemic hangover. We don’t know what their real pandemic numbers are—they adopted our pandemic policy 2 years after we did, and they’re suffering as a result. They also insist on using their own vaccine, Sinovac, for nationalist reasons which is only 30% effective. But, when the Chinese economy does come back on stream, that’ll be the gasoline on the fire for the global economy, and that’s why we like commodities, industrials, energy, and so on.
Q: What does an 8% mortgage rate mean for the housing sector?
A: It is a disaster. I don’t think prices will drop very much—it’ll just cease all new buying because nobody qualifies for an 8% mortgage. They are going to either be only cash buyers out there or people waiting for the next drop in interest rates, and we’re already seeing that with the mortgage rate at 7.24%. If we do get a move up to 8%, it’ll just be a short-term spike that won’t last very long.
Q: Aren’t high-interest rates pushing rents higher?
A: Yes, absolutely. Since people can’t afford to buy houses, they are renting until they can, which pushes rental prices up and adds to the inflation numbers.
Q: When do you think the tech sector will rebound? It’s had a really bad three weeks.
A: End of August or sometime in September. I think. When people come back from the beach, they’re going to look at the long-term future of these companies and think “holy smokes,” why don’t I own more of these?” And we may even be doing LEAPS at high prices, which I almost never do, but the growth rate in tech next year is looking to be spectacular, and I think if we do a conservative at-the-money, we should at least double our money in a few months, similar to how US Steel (X) LEAPS did.
Q: Is Amazon (AMZN) a buy? They’re starting to develop their pharmacy rather well.
A: Yes, Amazon is on the buy list—it’s already up 50% this year. Jassy, the new CEO, is doing a great job. They also have a massive investment in AI which they can monetize anytime they want, and online pharmacies are a great place to start. They’ve been talking about doing that for at least 10 years.
Q: Are gold (GLD), wheat (WEAT), and precious metals a buy?
A: Yes, those are all strong buys on the dip.
Q: What about Tesla (TSLA) LEAPS?
A: Yes Tesla is definitely a LEAPS candidate $30 down from where it is now.
Q: What about Crown Castle International (CCI)?
A: CCI took a major hit from Verizon, canceling a contract with them (which is their biggest customer), so I want to wait for that to digest before I do anything yet. However, we are definitely approaching “BUY” territory; I think the yield is up to about 6.5% now.
Q: Should I take profits on the next jump up in United States Steel Corporation (X)?
A: Yes, it’s not worth hanging on 16 more months to maturity when there’s only 30% of the profit left. And, if all the takeover bids fail for some reason, the stock goes back to $20, and then your LEAPS becomes worthless. So, I would take profits; 100% profit in 2 months is nothing to turn up your nose at.
Q: How confident are you in (TLT) going to $110 by the end of the year?
A: Very confident; by then we will start seeing more hints of Fed interest rate cuts, inflation should be lower, and Goldman Sachs is in fact forecasting that the first rate cut will happen in March. So you’ll certainly start discounting that in the (TLT) by December. We could see the high in yields and the low in prices at the central bankers conference in Jackson Hole next week.
Q: What do you think about cruise lines and hotels right now?
A: The business is great, they’re all packed. However, during the pandemic, these sectors had to take on massive amounts of debt to keep from going under when their ships were tied up with zero revenue for two years; same with the hotels. So, the balance sheets are terrible in all of these areas including airlines. That’s why I’ve been avoiding them, too many better plays. Don’t go away from your core trades looking for trouble.
Q: When do we finally start seeing the Fed stop raising rates?
A: I think they already have; I think the most recent rate rise was the last one. If I’m wrong, they’ll do one more quarter—it’s totally dependent on the numbers.
Q: Won’t falling rates be bullish for bonds and gold?
A: Yes, that's why we’re buying them; but I’m waiting on the bond LEAPS—I want to see a firm bottom before getting back in there. 2024 will be all about falling interest rates plays.
Q: What’s causing the volatility in the United States Natural Gas Fund (UNG)?
A: A Strike in Australia, collapsing supplies in Europe (where prices are up 40%), and expectation of a global economic recovery in China. Ultimately, it’ll be China that takes this thing up to $10, $12, or $14 for the UNG, but you need them to recover first. That’ll probably happen next year, which is why we have the two-year LEAPS on there.
Q: With junk (JNK), have we seen the high rates?
A: Yes. If not, we’re very close, so it’s worth starting to scale in here.
Q: Should I short Home Depot (HD), as US consumers are holding back on home upgrades?
A: No, you should not short anything because you’re going against a long-term bull market trend that probably continues for another 10 years. So, any shorts should be measured in days and not weeks.
Q: Should I start chasing oil, because it’s been on quite a run, and should I buy Exxon (XOM)?
A: Yes, if we get an economic recovery next year, oil goes over 100 easily and will take all the oil companies up with it.
Q: Is (UNG) a domestic or foreign gas ETF?
A: It’s mostly domestic, and it’s a mix of the top natural gas producers in the US.
Q: Are the BRIC countries going to bring down the dollar?
A: You’ve got to be out of your mind. Would you rather store your money in China and Indonesia or the US? That’s your choice. I know there’s a lot of internet conspiracy theories out there—I get about a question a day on this. It’s Never going to happen; not in my lifetime. But it does attract internet traffic, which is the purpose of putting out these ridiculous stories like a BRIC-engineered digital currency replacing the dollar as a reserve currency. It’s just clickbait.
Q: Why is there a short squeeze in copper?
A: EV production is going from 2 million to 10 million a year in 2030, and every EV needs 200 pounds of copper. By the way, there are now 527 EV models on the market, but only one company makes money doing this, and that’s Tesla (TSLA).
Q: We’ve been waiting for a recession in the US for years, and US consumers are still going strong. What gives? I want rates to drop so I can invest in real estate again.
A: Well, yes. This recession has been predicted for 2 years. The problem is we have a certain political party telling us every day that the economy is the worst it’s ever been when, in actuality, the health of the economy is amazingly strong, and certainly the strongest economy in the world. So, I don't think we get a real recession until well into the 2030s because of massive technological development and a huge demographic tailwind—that’s an absolute winning combination, last seen in the 1990s. Plus, now we have AI accelerating everything. So, look at the numbers; don’t listen to opinions. Opinions can be fatal to your wealth.
Q: Does the use of an adjustable-rate loan make sense for the purchase of a second home?
A: Yes, it does. During the great interest rate spike of the 1980s, I bought my home in New York with an adjustable-rate loan. The initial interest rate was 18%, but when rates dropped to 11%, the value of the home tripled. Not a bad trade—and I bet the same kind of opportunity is out there now, provided you can get another adjustable-rate loan. By the way, in Europe, they only have adjustable-rate loans. The 30-year fixed anomaly only exists in the US and Canada because you have the US government as the unlimited buyer of last resort for 30-year fixed mortgages.
Q: Thoughts on other steel companies and aluminum?
A: I like them all. The country needs 200,000 miles of new long-distance transmission lines to accommodate the electrification of the economy, and those are all made out of aluminum except for the last mile—most people don’t know that. Buy Alcoa (AA).
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
“Just because you paid more for a company doesn’t mean it’s earning more,” said Oracle of Omaha Warren Buffet.
Mad Hedge Biotech and Healthcare Letter
August 17, 2023
Fiat Lux
Featured Trade:
(TAPPING INTO THE EVERGREEN POWERHOUSE)
(ABT)
Allow me to administer a momentary proverbial pinch on the arm.
Ever had that feeling where you gaze upon a stock that's embedded in an industry as evergreen as the ancient trees? In the world of investing, there's a niche that stands as firm and unshakable as a century-old oak. You guessed it right – it's the healthcare industry.
Now, why does healthcare have such an eternal appeal? Simple – as long as we're breathing, we need healthcare. It's not a fleeting trend but a perennial necessity. This is the very lifeblood that ensures a higher quality of life.
Enter Abbott Laboratories (ABT).
Glance at the earnings numbers released last month, and you may think it's just another healthcare giant. But wait until you see the ripples beneath the surface.
Though COVID testing sales are receding, there's growth flourishing elsewhere, even leading to some optimistic nudges from analysts. A 1% dip in share price this year? That's merely a disguise. So the real question is, could Abbott be your golden ticket?
Take a look at the Q2 2023. The juggernaut showed robust organic sales growth across three main segments: medical devices, established pharmaceuticals, and nutrition. Recovery from the pandemic-induced slump, coupled with strong demand for FreeStyle Libre, Abbott's continuous glucose monitoring franchise, has fueled this impressive ascent.
But don't take this surge for granted. Abbott's double-digit organic sales growth for the year is not just another feat; it's a majestic leap for a company with a more moderate growth history.
A detailed dig into the numbers reveals revenues of just under $10 billion for the period ended June 30, an 11% decline YoY.
The COVID testing inflated diagnostics sales have dwindled, pulling down the overall figure. But let's shift the spotlight to Abbott's medical device business.
A growth rate of nearly 14% to a staggering $4.3 billion. In diabetes care alone, a 19% YoY rise. Sounds promising? Indeed, it does.
The company didn't stop at this.
With the acquisition of Cardiovascular Systems and strong results in nutrition and pharmaceutical segments, Abbott is growing into a multifaceted marvel in healthcare.
Look at the kaleidoscope of sales posted by Abbott Laboratories across four business segments in 2022.
Diagnostics, medical devices, nutrition, established pharmaceuticals - a dizzying $43.7 billion sales figure.
A 27.5% rise in non-GAAP diluted EPS is expected by 2026. A 1.9% dividend yield surpassing the S&P 500 index's 1.5%. A below-average forward P/E ratio of 22.9. Analysts targeting a 12-month share price of $125. It all screams "BUY!"
However, let's not get carried away.
A 24-times multiple of the company's future earnings might look lofty, considering the industry average is less than 19. It might seem too rich unless you're betting big on a healthcare recovery or Abbott's Libre 3 device.
Growth investors may shrug it off, but dividend enthusiasts, sit up.
With an above-average dividend yield of 1.9% and a royal status as a Dividend King, Abbott could be a charming buy. It's not just an investment but a long-term relationship where the recurring income grows over time, all while cushioned by diverse operating segments.
Abbott might not give you a thrill ride, but it's a rock-solid healthcare foundation to fortify your portfolio, especially if you prefer a steady hand and a dependable dividend.
Needless to say, this business is an excellent addition to your portfolio. After all, Abbott Laboratories is not a flash in the pan. It's a beacon in the healthcare universe that could either be a hidden treasure or a prudent safeguard, depending on your strategy.
In the grand chessboard of investment, it might just be your masterstroke.
Global Market Comments
August 17, 2023
Fiat Lux
Featured Trades:
(TESTIMONIAL)
(MY NEW ECONOMIC INDICATOR)
CLICK HERE to download today's position sheet.
Our latest performance run for the ages has delivered unintended consequences once again.
One of my Concierge clients bought the bottom of the recent banking crisis crash to load the boat with bank stocks.
As a result, he never has to work again, not bad for someone who is only 45. No need for a Mad Hedge Concierge Service here.
I seem to have a recurring problem.
People make so much money from my concierge service that they retire early, and I never hear from them again.
No surprise with my eye-popping 2023 performance now at an eye-popping +46.38%.
That means I have a new opening for the Mad Hedge Concierge Service. I limit the service to only ten clients at any one time and entry is by application only.
The goal is to provide high net worth individuals with the extra degree of assistance they may require in managing diversified portfolios. Tax, political, and economic issues will all be covered.
It is also the ideal service for the small and medium-sized hedge fund that lacks the resources to support their own in-house global strategist full-time.
The service includes the following:
1) Emergency access to John Thomas 24/7 through his personal cell phone number so he can act as your investment 911.
2) A risk analysis of your own personal portfolio with the goal of focusing your investment in the highest return sectors for the long term.
3) A monthly phone call from John Thomas to update you on the current state of play in the global financial markets.
4) Personal meetings with John Thomas anywhere in the world once a year to continue our in-depth discussions.
5) Early releases of strategy letters and urgent trading information.
6) More detailed and early recommendations on LEAPS, or two-year call options on the best high-growth names.
7) Access to a dedicated Concierge website listing complete All LEAPS investment portfolios.
The cost for this highly personalized, bespoke service is $12,000 a year.
To best take advantage of my Mad Hedge Fund Trader Concierge Service, you should possess the following:
1) Be an existing subscriber the Mad Hedge Fund Trader who is already well aware of our strengths and limitations.
2) Have a liquid net worth of over $250,000.
3) Possess a degree of knowledge and sophistication of financial markets. This is NOT for beginners.
To subscribe to Mad Hedge Fund Trader Concierge Service please email Filomena at customer support at support@madhedgefundtrader.com. Please put “Concierge Candidate” in the subject line.
I look forward to hearing from you.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
(CRUNCHING THE NUMBERS ON HOUSE RENOVATIONS)
August 16, 2023
Hello everyone,
Has anyone ever bought a fixer-upper house? Did you flip it?
Are you looking to buy your first home?
Are you thinking of buying a fixer-upper house as an investment and a long-term hold?
So, how much do you think you should put into it?
Let’s do some numbers.
If you need a mortgage, then the size of the mortgage should be no larger than three times your annual salary. So, if the household makes $150k per year, then it is probably not a good idea to shop for houses that sell for more than $450k.
The monthly mortgage payments should stay under 28% of your gross monthly income. Let’s say you make $5k per month (before taxes), then your monthly mortgage should not be more than $1400.
You should then be looking for a home that needs renovating for less than the difference to your budget. So, if $400,000 is a hard budget, then you would be looking for a $350,000 house that needs $50,000 in renovations.
How much should I renovate?
As a person who has done renovations on a home, I can tell you that estimates and actual costs rarely match. That’s why it is vitally important to leave room in your budget for all the surprises that will inevitably appear.
If the house is in a great position, but the problems will be extremely costly to repair, you should probably pass. For example, problems with foundations, an outdated electrical system, a broken plumbing system, or a leaky roof are kinds of repairs that can lead to a more costly and time-consuming situation where you don’t see the yield on that return on the sale as opposed to redoing the kitchen, redoing the bathrooms, and just painting the house and doing aesthetic items. Generally, owners and buyers are willing to pay a premium for the aesthetic items as opposed to those structural items that keep the house running and from falling apart. When I renovated my house, I concentrated on the kitchen(s) and the living area and the bathrooms. I also had the house painted. Before I started renovating, the walls in the kitchen were painted yellow and every bedroom had different coloured walls. The kitchen floor was linoleum with a very bright pattern. So, I had that ripped out and replaced it with board floors.
Is this house going to be your home or is it an investment property?
Be careful how much you put into any home, whether it is your own or an investment property. If it is your home and you intend on staying there for decades, then the pot of funds you spend on the property can be a little larger than average. If it is an investment property, be very mindful of how much you spend and where in the house those funds are directed. It is also important to think about the area where the house is situated. What are the re-sale prices in the neighbourhood? If you put more into a house than the median sales values are, you will have trouble selling the property. It is probably a good rule of thumb not to renovate a fixer-upper above 10-12% of the median sales price in your area. However, if you are patient, some renovations will prove beneficial when it comes time to sell. Kitchens and bathrooms should always be the first areas you renovate as they are the first areas a prospective buyer looks at.
Financing your home renovations
The best home improvement loans (U.S.)
Best overall: LightStream Personal Loans
Best for borrowing smaller amounts: PenFed Personal Loans
Best for lower credit scores: Upstart Personal Loans
Best for long repayment terms: SoFi Personal Loans
Best for fast funding: Discover Personal Loans
Enjoy the home improvement journey. Expect hiccups and take them in your stride. It will all be worth it in the end.
Cheers,
Jacquie
Mad Hedge Technology Letter
August 16, 2023
Fiat Lux
Featured Trade:
(CORD CUTTING IS TAKING OVER)
(NFLX), (GOOGL), (AMZN), (CMCSA), (DIS)
Cord-cutting is going into overdrive as linear TV viewership has just fallen below 50% nationally in July for the first time.
Big changes are about to happen.
This has major ramifications for not only the tech sector but for the broader economy, society, and geopolitics.
We are here to talk about the tech and the sinking of linear TV does mean relative gains for online streamers.
Broadcast and cable each hit a new low of 20% and 29.6% of total TV usage, respectively, to combine for a linear television total of 49.6%.
Has the quality of linear TV channels soured in quality or what is the deal?
It could be a functional reason, as Baby Boomers are watching linear tv because they haven’t figured out the streaming thing yet.
The ease of flipping on the tv with a remote cannot be understated.
In the future, the result is that linear tv penetration will be down to 20% level in around 20 years.
The players that will begin advancing further center stage into the national consciousness are YouTube (GOOGL), Netflix (NFLX), and Amazon Prime Video (AMZN).
They saw month-over-month viewership increases of 5.6%, 4.2%, and 5%, respectively, in July.
Don’t expect a rebound, because linear tv is bleeding viewers reflecting how bad TV channels have become.
Ad revenue across our media network coverage fell 13% on average in Q2, down from -8% in 1Q, which included the Super Bowl.
That being said, certain streamers haven’t exactly cracked the code either, as Peacock, Disney+, Hulu, ESPN+, Paramount+, Max and Discovery+ were down by about 500,000 combined.
However, on the whole, subscriber growth was 8.5% year-over-year with highlights like Netflix adding 5.9 million subscribers in the second quarter.
Comcast's Peacock (CMCSA) was able to grow its subscriber base 84% year-over-year to 24 million, up from the prior 13 million, as the streamer works to catch up to its peers amid a significant lag.
Direct-to-consumer advertising (DTC) grew 27% on average across media companies including Disney (DIS), Comcast, Warner Bros. Discovery (WBD), and Paramount (PARA). That's double from the 13% growth posted in the first quarter.
Comcast is the farthest behind, as only 14% of its estimated revenues are expected to come from DTC in 2024 with the other 85% stemming from its linear networks. Disney is the farthest along, with DTC revenue expected to surpass linear network revenue for the first time in 2024.
As linear tv is headed to the dustbin of history, streaming is also getting more expensive.
Personally, that is what I have seen as many platforms are starting to push the $100 plus per month level.
Many might remember when streaming was $20-$40 per month.
Therefore, I am not surprised to see single-digit growth for streaming as high prices crimps demand.
It’s true that mass media is fracturing into different niches and communities and that isn’t so fantastic for big media corporations as it could mean higher costs and a smaller total addressable audience.
I still do believe there is growth in streaming but not at the elevated levels like the 20% or 30% range.
Customer acquisition will also become more difficult and expensive as people really need to be convinced to move platforms or online channels.
The golden age of streaming growth is over and now each inch will be fought tooth and nail by more competition.
In the short term, I believe a dip in CMCSA should be bought, as they are still driving users to the Peacock platform. NFLX is still worth a trade on the dip as well, but I would avoid DIS until they structurally upgrade the company.
