When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
Mad Hedge Technology Letter
January 10, 2024
Fiat Lux
Featured Trade:
(LITHIUM CRATERS)
(TSLA), (NIO), (RIVN), (LCID)
EVs were the darling of tech until the hype ran out.
How do I know this?
The price of lithium has nosedived.
The lack of interest is undermining projects, nixing deals, and triggering a scramble for cash that has put a damper on the EV industry.
If anyone thought that EVs would really move the needle for tech, then think again because tech is over-reliant on AI to save the day in 2024. Throw in the Fed pivot too.
Lithium has dropped by 80% in price since the end of 2022 signaling a dramatic slowdown in the electric vehicle market.
The demand for this product isn’t what it used to be.
Sure, there are those (TSLA) lovers in big coastal cities who can’t get enough of the product, but these types max out at 3 Teslas and sit on them until an upgrade a few years later.
With inflation wreaking havoc in every part of American society, this promises to elongate the refresh cycle for tech products like iPhones and Teslas.
Nickel and cobalt have also tumbled, weighed down by an influx of new production amid concerns that the shift to EVs may not be as smooth and quick as predicted.
It’s a dramatic reversal from the froth of recent years that sent prices soaring and sparked a rush by some of the auto industry’s biggest players to secure future supply.
Chemaf Resources Ltd. last year put itself up for sale after a slump in the cobalt price left it struggling to finish key projects in the Democratic Republic of Congo, and London-based Horizonte Minerals Plc scaled back work on its Brazilian nickel mine as it searches for funds to complete construction, and announced an emergency $20 million financing late last year.
Building new mines takes years and sometimes decades, and stalled projects can often be hard to restart. And while most crucial battery markets are now in surplus, shortages are already forecast toward the end of the decade as the greening of the economy accelerates.
In the case of lithium — a once-tiny commodity market that has been catapulted into the global spotlight due to its vital role in EV batteries — the extreme boom and bust of the last few years shows the difficulties in trying to forecast future supply-demand balances and prices, for both producers and their investors.
Yet supply charged ahead as demand growth underwhelmed, and the price won’t come back for years.
It’s highly possible that lithium could be in a drought until close to 2030.
Cobalt has lost two-thirds of its value since a recent peak in 2022, with top-two supplier Glencore Plc forced to build stockpiles of the metal.
Nickel tumbled 45% last year, weighed down by a flood of low-cost supply from Indonesia, where new techniques to produce battery-grade material are threatening to completely upend the industry.
Jumping off the EV bandwagon, the consumers aren’t impressed as much, and snagging the next incremental EV buyer has become hard.
The bad is out there for everybody to see such as the annoyance of running out of electricity and not getting those software updates properly.
Consumers are starting to remove those rose-tinted glasses and look at Ev's dark side too.
This explains why Tesla was discounting its vehicles so aggressively because management sensed the lack of desire from new buyers.
Unfortunately, this could be a bust year for Tesla as they give way to software companies to carry the load. Smaller EV firms like Rivian (RIVN) and Lucid (LCID) are some that I would avoid. Nio (NIO) is another EV company in free fall. I would say stay away from the EV sector in the short term.
(SENSIBLE INVESTING TIPS BY BUFFETT TO START THE NEW YEAR)
January 10, 2024
Hello everyone,
I want to sink into your psyche today some investing advice by Buffett. You would do well to write these on a piece of paper and stick that on the wall above your computer or your desk and read it every day.
We might know the hard and fast rules of investing, but life has a habit of tipping the scales sometimes, where we temporarily lose our balance and are not thinking clearly, and these are the times we sometimes slip up in our ability to stick to the plan and the rules.
So, let’s jump into those tips.
1. Design a broad portfolio. The goal of the non-professional investor is not to pick winners – but rather own a cross-section of businesses that in the aggregate are bound to do well. This is why Buffett always advises investors to invest in a low-cost S&P 500 index fund, which will achieve this goal. He suggests checking out Vanguard. Interestingly, Buffett revealed 10 years ago that he would direct 10% of the cash to go into short-term government bonds and 90% to a low-cost, S&P500 index fund.
2. Steer clear of the financial salesperson. Professional money managers and advisors (on Wall Street or indeed anywhere) are incentivized to recommend various securities. The fact is that they rarely beat the market. Buffett’s words here: “You just have to recognize you’re dealing with an industry where it pays to be a great salesperson…There’s a lot more money in selling than in managing…if you look to the essence of investment management.” (I learned this lesson the hard way and am now very wary). And please note, that more than 95% of financial newsletters are rubbish, written by people with no investing experience.
3. You don’t need to be a Math genius. Buffett says you don’t need to excel at technical analysis or mathematical calculations to find great stocks. Buffett comments that “if you need to use a computer or a calculator to make the calculation, you shouldn’t buy it” (the stock).
4. When you buy a stock, you own part of the business. Buffett only buys something when he grasps the intrinsic value of an asset, or the discounted value today of the cash that a business generates in the future.
5. Market action is largely driven by emotions. Fear and greed should guide investors on when to buy and sell. Buy when there is fear and sell when there is greed. Simple as that. (For long-term investors, just average in and stick the investment in the bottom compartment of your cupboard). Buffett reminds us of the fact that math and a high IQ don’t necessarily help. So, leave the ego boxed up if you topped your class in Math – it may get in the way here... Buffett’s words: “Higher mathematics may be dangerous, and it will lead you down pathways that are better left untrod.” He goes on to remind us that “we do not sit with spreadsheets…we just see something that obviously is better than anything else around, that we understand. And then we act.”
6. After a loss, move on. Look forward. No extra detail is needed here.
7. Steer clear of declining businesses. When Buffett started on his investing journey, he used to buy cheap, failing businesses that he called “cigar butts.” But that strategy is not beneficial in the long run. Real money is going to be made by being in growing businesses, and that’s where the focus should be. Buffett is now known for seeking out wonderful businesses that he could buy at fair prices. He transformed Berkshire Hathaway from a small, failing textile mill into a near-$800 billion multifaceted juggernaut.
The Marina in Mackay
My son, Alex, at the Mackay Marina
Cheers,
Jacquie
Global Market Comments
January 10, 2024
Fiat Lux
Featured Trade:
(THE TWO CENTURY DOLLAR SHORT), (UUP)
Any trader will tell you the trend is your friend, and the overwhelming direction for the US dollar (UUP) for the last 242 years has been down.
Our first Treasury Secretary, Alexander Hamilton, found himself constantly embroiled in sex scandals. Take a ten-dollar bill out of your wallet and you’re looking at a world-class horn dog, a swordsman of the first order.
When he wasn’t fighting scandalous accusations in the press and the courts, he spent much of his six years in office orchestrating a rescue of our new currency, the US dollar.
Winning the Revolutionary War bankrupted the young United States, draining it of resources and leaving it with huge debts.
Hamilton settled many of these by giving creditors notes exchangeable for then-worthless Indian land west of the Appalachians.
As soon as the ink was dry on these promissory notes, they traded in the secondary market for as low as 25% of face value, beginning a centuries-long government tradition of stiffing its lenders, a practice that continues to this day.
My unfortunate ancestors took him up on his offer, the end result being that I am now writing this letter to you from California—and am part Cherokee, Delaware, and Sioux.
It all ended in tears for Hamilton, who, misjudging former Vice President Aaron Burr’s true intentions in a New Jersey duel, ended up with a bullet in his back that severed his spinal cord.
Since Bloomberg machines weren’t around in 1782, we have to rely on alternative valuation measures for the dollar then, like purchasing power parity, and the value of goods priced in gold.
A chart of this data shows an undeniable permanent downtrend, which greatly accelerated after 1933 when FDR banned private ownership of gold and devalued the dollar.
Today, going short the currency of the world’s largest borrower, running the greatest trade and current account deficits in history, with a diminishing long-term growth rate is a no-brainer.
But once it became every hedge fund trader’s free lunch, and positions became so lopsided against the buck, a reversal was inevitable.
We seem to be solidly in one of those periodic corrections, which began a few years ago and could continue for months, or even years more.
The euro has its own particular problems, with the cost of a generous social safety net sending EC budget deficits careening. Add to that the gargantuan cost of a burgeoning refugee crisis.
Use this strength in the greenback to scale into core long positions in the currencies of countries that are major commodity exporters, boast rising trade and current account surpluses, and possess small consuming populations.
I’m talking about the Canadian dollar (FXC), the Australian dollar (FXA), and the New Zealand dollar (BNZ), all of which will eventually hit parity with the greenback once again.
Think of these as emerging markets where they speak English, best played through the local currencies.
For a sleeper, buy the Chinese Yuan ETF (CYB) for your backbook. A major revaluation by the Middle Kingdom is just a matter of time as long as the economy is growing at 6% a year or more.
I’m sure that if Alexander Hamilton were alive today, he would counsel our modern Treasury Secretary, Steven Mnuchin, to talk the dollar up, but to do everything he could to undermine the buck behind the scenes, thus over time depreciating our national debt down to nothing through a stealth devaluation.
Given Mnuchin’s performance so far regarding the dollar, I’d say he studied his history well.
Hamilton must be smiling from the grave.
A 242-Year Chart of the US Dollar priced in Hard Goods
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
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