Global Market Comments
June 17, 2024
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or THE THREE HORSE RACE) plus
(HITCHIKING TO ALASKA)
(AAPL), (MSFT), (NVDA), (TLT), (MCD), (VZ), (GLD), (NLY)
We have a three-horse race underway in the stock market right now between Apple (AAPL), Microsoft (MSFT), and NVIDIA (NVDA). One day, one is the largest company in the world, another day a different company noses ahead.
And here’s the really good news: this race has no end. Sure, (NVDA) has far and away the most momentum and it should hit my long-term target of $1,400 this year, giving it a market capitalization of $3.44 trillion. (MSFT) and (AAPL) will have to stretch to make another 20% gain by year-end.
Who will really end this three-year race? You will, as the benefits of AI, hyper-accelerating technology, and deflation rains down upon you and your retirement portfolio.
Here is the reality of the situation. The Magnificent Seven has really shrunk to the Magnificent One: NVIDIA. (NVDA) alone has accounted for 32% of S&P 500 gains this year. There are now 400 ETFs where (NVDA) is the biggest holding, largely through share price appreciation. These dislocations in the market are grand. This will end in tears….but not yet.
Dow 240,000 here we come!
After six months of grief, pain, and suffering last week, my (TLT) LEAPS finally went into the money last week.
Remember the (TLT)?
On January 18, I bought the United States Treasury Bond Fund (TLT) January 17, 2025, $95-98 at-the-money vertical Bull Call spread LEAPS at $1.25 or best. On Friday, they nudged up to $1.35. But I kept averaging down with the $93-$96’s and the $90-$93’s which are now at a max profit.
We lost six months on this trade thanks to a hyper-conservative which is eternally fighting the last battle. A 9.2% peak certainly put the fear of God in them and they persist in thinking a return to higher inflation rates is just around the corner.
Markets, however, have a different view. They are now discounting a 25-basis point cut in September followed by another in December. That will easily take the (TLT) up to $100. This is why we go long-dated on LEAPS. There is plenty of room for error….lots of room, even room for the Fed’s error. If you wait long enough, everything goes up.
With THIS Fed fighting it seems to pay off. That is what happened when Jay Powell waited a full year until raising rates for a super-heated economy. He now risks tipping the US into recession by lowering rates too slowly, when virtually all data points are softening. I guess that’s what happens when you have a Political Science major as Fed governor.
And here is what the Fed is missing. AI is destroying jobs at a staggering rate, not just minimum wage ones but low-end programming ones as well. That’s what the 300,000 job losses over the last two years in Silicon Valley have been all about.
It’s unbelievable the rate at which AI is replacing real people in jobs. If you want a good example of that, I had to call Verizon (VZ) yesterday to buy an international plan, and I never even talked to a human once. They listed three international plans in a calm, even, convincing male voice, and I picked one.
Or go to McDonalds (MCD) where $500 machines are replacing $40,000 a year workers. This is going on everywhere at the same time at the fastest speed I have ever seen any new technology adopted. So buy stocks, that’s all I can say.
It is not just the (TLT) that is having a great month. The entire interest rate-sensitive sector has been on fire as well. My favorite cell phone tower REIT, Crown Castle International with its generous 6.28% dividend yield, has jumped 15%. Distressed lender Annaly Capital Management (NLY) with its spectacular 13.08% dividend, has appreciated by 11%.
So far in June, we are up +1.04%. My 2024 year-to-date performance is at +19.39%. The S&P 500 (SPY) is up +13.83% so far in 2024. My trailing one-year return reached +36.31%.
That brings my 16-year total return to +696.02%. My average annualized return has recovered to +51.56%.
As the market reaches higher and higher, I continue to pare back risk in my portfolio. I stopped out of my near-money gold position (GLD) at close to breakeven because we were getting too close to the nearest strike price.
Some 63 of my 70 round trips were profitable in 2023. Some 29 of 38 trades have been profitable so far in 2024, and several of those losses were really break-even.
Fed Leaves Rates Unchanged at 5.25%-5.5% but reduces the cuts by March from three to one, citing an inflation rate that remains elevated. The projections were very hawkish, and the markets sold off on the news.
CPI Comes in Cool, unchanged MOM and 3.4% YOY. The May Nonfarm Payroll Report out Friday was an anomaly. It’s game on once again.
Europe Imposes Stiff Tariff on Chinese EVs, up to 38.1%. Daimler Benz, BMW, and Fiat have to be protected or they will go out of business.
The Gold Rush Will Continue through 2024, as much of Asia is still accumulating the yellow metal. Asia lacks the stock market we here in the US enjoy. A global monetary easing is at hand.
Broadcom (AVGO) Announces a 10:1 Split, and the shares explode to the upside. Earnings were also great. I actually predicted this in my newsletter last week and again at my Wednesday morning biweekly strategy webinar. The split takes place on July 15. Split fever continues. Buy (AVGO) on dips.
Apple (AAPL) Soars to New All-Time High, over $200 a share for the first time. However, it is now only the third largest company in the world, losing first place to (NVDA) and (MSFT). Analysts piled up the benefits of pitching AI to one billion preexisting customers. Just don’t tell Elon Musk.
Dollar Hits One Month High, on soaring interest rates spinning out from the super-hot May Nonfarm Payroll Report. This may be your last chance to sell at the highs. Never own a currency with falling interest rates. Just look at the Japanese yen.
Stock Buybacks Hit $242 Billion in Q1, but a new 1% tax may slow down the activity. The tax was passed as part of the Inflation Reduction Act in 2022 and is retroactive to January 1, 2023. (AAPL), (DIS), (CVX), (META), (GS), (WFC), and (NVDA) were the big buyers.
Home Equity Hits All-Time High at $17 Trillion according to CoreLogic. About 60% of homeowners have a mortgage. Their equity equals the home’s value minus outstanding debt. Total home equity for U.S. homeowners with and without a mortgage is $34 trillion. That is a lot of cash that could potentially end up in the stock market.
Home Prices to Keep Rising says Redfin CEO. While experts are forecasting more homes will be available, they said the boost in supply is not enough to solve affordability issues for buyers. Interest rates are expected to come down, but not by enough to counteract high prices.
Elon Musk Wins his $56 Billion Pay Package after a shareholder vote where retail investors came to his rescue. Institutional investors like CalPERS were overwhelmingly against it. It didn’t help that Elon moved Tesla to Texas. State pension funds always show a heavy bias in favor of local companies. Luck for California teachers includes (NVDA), (AAPL), (GOOGL), and (SMCI). (TSLA) rose 4% on the news.
The Gold Rush Will Continue through 2024, as much of Asia is still accumulating the yellow metal. Asia lacks the stock market we here in the US enjoy. A global monetary easing is at hand.
US Homes Sales Fall, down 1.7% month-over-month in May on a seasonally adjusted basis and dropped 2.9% from a year earlier. Median home sale price rose to a record high of $439,716, up 1.6% month-over-month and 5.1% year-over-year.
My Ten-Year View
When we come out the other side of the recession, we will be perfectly poised to launch into my new American Golden Age or the next Roaring Twenties. The economy decarbonizing and technology hyper accelerating, creating enormous investment opportunities. The Dow Average will rise by 800% to 240,000 or more in the coming decade. The new America will be far more efficient and profitable than the old.
Dow 240,000 here we come!
On Monday, June 17, the New York Empire State Manufacturing Index is released.
On Tuesday, June 18 at 7:00 AM EST, Retail Sales are published.
On Wednesday, June 19, the first-ever Juneteenth holiday where the stock market is closed. Juneteenth celebrates the date when the slaves in Texas were freed in 1866, the last to do so.
On Thursday, June 20 at 8:30 AM, the Weekly Jobless Claims are announced. We also get Building Permits.
On Friday, June 21 at 8:30 AM, the Existing Home Sales are announced.
At 2:00 PM the Baker Hughes Rig Count is printed.
As for me, as I am about to embark on Cunard’s Queen Elisabeth from Vancouver Canada on the Mad Hedge Seminar at Sea, I thought I’d recall some memories from when I first visited there 54 years ago.
Upon graduation from high school in 1970, I received a plethora of scholarships, one of which was for the then astronomical sum of $300 in cash from the Arc Foundation, whoever they were.
By age 18, I had hitchhiked in every country in Europe and North Africa, more than 50. The frozen wasteland of the North and the Land of Jack London and the northern lights beckoned.
After all, it was only 4,000 miles away. How hard could it be? Besides, oil had just been discovered on the North Slope and there were stories of abundant high-paying jobs.
I started hitching to the Northwest, using my grandfather’s 1892 30-40 Krag & Jorgenson rifle to prop up my pack and keeping a Smith & Wesson .38 revolver in my coat pocket. Hitchhikers with firearms were common in those days and they always got rides. Drivers wanted the extra protection.
No trouble crossing the Canadian border either. I was just another hunter.
The Alcan Highway started in Dawson Creek, British Columbia, and was built by an all-black construction crew during the summer of 1942 to prevent the Japanese from invading Alaska. It had not yet been paved and was considered the great driving challenge in North America.
One 20-mile section of road was made out of coal, the only building material then available, and drivers turned black after transiting on a dusty day. I’ll never forget the scenery, vast mountains rising out of endless green forests, the color of the vegetation changing at every altitude.
The rain started almost immediately. The legendary size of the mosquitoes turned out to be true. Sometimes, it took a day to catch a ride. But the scenery was magnificent and pristine.
At one point a Grizzley bear approached me. I let loose a shot over his head at 100 yards and he just turned around and lumbered away. It was too beautiful to kill.
I passed through historic Dawson City in the Yukon, the terminus of the 1898 Gold Rush. There, abandoned steamboats lie rotting away on the banks, being reclaimed by nature. The movie theater was closed but years later was found to have hundreds of rare turn-of-the-century nitrate movie prints frozen in the basement, a true gold mine. Steven Spielberg paid for their restoration.
Eventually, I got a ride with a family returning to Anchorage hauling a big RV. I started out in the back of the truck in the rain, but when I came down with pneumonia, they were kind enough to let me move inside. Their kids sang “Raindrops keep falling on my head” the entire way, driving me nuts. In Anchorage they allowed me to camp out in their garage.
Once in Alaska, there were no jobs. The permits required to start the big pipeline project wouldn’t be granted for four more years. There were 10,000 unemployed.
The big event that year was the opening of the first McDonald’s in Alaska. To promote the event, the company said they would drop dollar bills from a helicopter. Thousands of homesick showed up and a riot broke out, causing the stand to burn down. It was rumored their burgers were made of much cheaper moose meat anyway.
I made it all the way to Fairbanks to catch my first sighting of the wispy green contrails of the northern lights, impressive indeed. Then began the long trip back.
I lucked out by catching an Alaska Airlines promotional truck headed for Seattle. That got me free ferry rides through the inside passage. The driver wanted the extra protection as well. The gaudy, polished cruise destinations of today were back then pretty rough ports inhabited by tough, deeply tanned commercial fishermen and loggers who were heavy drinkers and always short of money. Alcohol features large in the history of Alaska.
From Seattle, it was just a quick 24-hour hop down to LA. I still treasure this trip. The Alaska of 1970 no longer exists, as it is now overrun with summer tourists. It now has 27 McDonald’s stands.
And with runaway global warming the climate is starting to resemble that of California than the polar experience it once was. Permafrost frozen for thousands of years is melting, causing the buildings among them to sink back into the earth.
It was all part of life’s rich tapestry.
The Alcan Highway Midpoint
The Alaska-Yukon Border in 1970
Good Luck and Good Trading,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
(NVDA), (MSFT), (JNJ), (SSMNY), (ICAD), (GEHC)
Today, let’s spotlight the inner workings of our bodies. And let me tell you, it's not always a pretty picture.
Think about it: you're going about your day, feeling like a million bucks, thinking everything is hunky-dory.
But little do you know, there could be a ticking time bomb inside you, just waiting to go off. It could be a sneaky cancer, a bulging aneurysm, or a heart attack waiting to happen.
In fact, 70% of all heart attacks come out of nowhere, like a sucker punch to the gut. No warning signs, no red flags, just bam! You're down for the count.
It's the same story with cancer. The ones that end up being a death sentence are usually the ones that we don't routinely test for. Pancreatic cancer, and brain cancer - they're like silent assassins, lurking in the shadows until it's too late.
Don't even get me started on Parkinson's. By the time you start shaking like a leaf, 50% of your brain cells have already kicked the bucket.
It's enough to make you want to stick your head in the sand and pretend everything is fine. But trust me, that's not the way to go. You're going to find out eventually, and it's better to know sooner rather than later.
The good news is, thanks to some seriously cool AI tech, we might finally have a way to catch these sneaky diseases before they can do too much damage.
First up, we've got NVIDIA (NVDA). These guys are the kings of AI, and they're not messing around when it comes to healthcare.
They've got a platform called Clara that's all about using AI to detect cancer and heart disease early. And with a market cap of over a trillion bucks, you know they mean business.
Next in line is Microsoft (MSFT). They may be known for Windows and Office, but they're also making big moves in healthcare AI. Their Azure platform is like a Swiss army knife for doctors, helping them analyze medical images, crunch data, and even predict who's at risk for certain diseases.
But it's not just the tech giants getting in on the action. Healthcare heavyweights like Johnson & Johnson (JNJ) and Siemens Healthineers (SMMNY) are also betting big on AI. They're leveraging it to develop new cancer therapies, improve surgical outcomes, and even personalize treatment plans.
The global AI in healthcare market is set to explode like a supernova, shooting up to a jaw-dropping $187.95 billion by 2030. And guess what's leading the charge? You got it - cancer diagnostics.
You know how cancer screenings can sometimes be like the boy who cried wolf, with false alarms left and right?
Well, AI algorithms are here to save the day. They're like the superhero that swoops in and reduces those pesky false positives, which means fewer unnecessary biopsies and procedures. It's a win-win for everyone.
Aside from the heavyweights in AI and healthcare, there are also some lesser-known names working in this field.
There’s iCAD (ICAD), who’s like the king of the castle when it comes to AI-powered cancer detection, especially in the breast health arena.
Their ProFound AI software is like a trusty sidekick for radiologists, helping them interpret mammograms like a pro. It's like having a cheat code for earlier and more accurate cancer diagnoses.
Another name working on this is Zebra Medical Vision. They're like the pioneers of the Wild West, blazing trails in AI-based medical imaging analysis. Their AI algorithms are like a bunch of little detectives, scouring medical scans for any signs of trouble - breast cancer, heart disease, fatty liver, you name it.
And while Zebra Medical isn’t traded publicly (yet), they're rubbing elbows with the bigwigs in healthcare. Keep an eye out for these guys - they might just pull off an IPO or get scooped up by one of the big players.
Then, there’s GE Healthcare (GEHC). They're like the 800-pound gorilla in the room when it comes to medical tech.
But don't let their size fool you - they're all about the AI game these days. Their Edison platform? It's like a magic wand that integrates AI into all sorts of medical imaging and diagnostic tools, with a special knack for sniffing out cancer and keeping hearts ticking.
So how does all this AI magic work? Well, it's all about teaching computers to think like humans. Researchers at the Beckman Institute in Illinois have developed an AI model that can spot tumors and diseases in medical images like a pro.
But here's the really cool part: it can also explain its thought process, like a medical Sherlock Holmes.
The model creates a visual map that highlights the areas it thinks are most suspicious. It's like a treasure map for doctors, leading them straight to the problem spots.
And if a patient asks how the AI made its diagnosis, the doc can just point to the map and say, "Here's your answer, plain as day."
The researchers tested their model on a bunch of different medical images, from mammograms to retina scans to chest X-rays. And you know what? It held its own against the existing AI systems out there.
We're talking accuracy rates of up to 99% in some cases.
And here's the real game-changer: this model isn't just a one-trick pony. The researchers think it could be used to detect all kinds of abnormalities all over the body, from head to toe.
Now, I know you're all wondering: when is this AI revolution going to take over cancer and heart disease detection?
Well, there's no crystal ball, but it's safe to say it's already happening. In the short term - I'm talking the next 1-3 years - expect to see AI-powered tools for image analysis and risk assessment really take off, especially in areas like breast cancer and heart disease.
We're also going to see more of these AI solutions getting the green light from the powers that be, and a whole lot of brainpower and cash flowing into early detection and personalized medicine.
But in the medium to long haul - I'm talking 5-10+ years down the line - that's when things are really going to get interesting.
We're going to see AI really start to shake things up in clinical workflows across the board. It's going to be like having a super-smart robot assistant in every specialty.
So here's my take: if you're not using AI to keep tabs on your health, you're missing out. It's like having a team of super-smart doctors working around the clock, just for you.
And if you're looking to get in on the action, keep your eyes on the companies I mentioned. They're the ones leading the charge in healthcare AI, and I have a feeling they're just getting started.
Mad Hedge Technology Letter
June 14, 2024
Fiat Lux
Featured Trade:
(ON BOARD THE AI TRAIN TO UNCERTAINTY)
(AAPL), (MSFT)
Apple (AAPL) has been on a one-way street to nowhere lately with their China business falling into the backstreet dumpster.
They had to do something before desperation took hold in the Cupertino headquarters.
It’s not like they could turn to Steve Jobs to figure this all out.
Tim Cook is an operations manager masquerading as the CEO and has little vision if any.
Announcing something AI was not a shocker as even legacy firms like Oracle and Dell had done the same with great success. But this isn’t data center stuff, the AI here will affect the Apple iPhone software.
Out the window goes privacy on your little iPhones – do people still even care about that?
Privacy was handed over to Sam Altman’s OpenAI.
Doing a deal like this opens up Pandora’s box and ensures that the Apple of the future will look a lot different than the one today.
Not everyone will like it, but that is tough. It is business.
The CEO of Apple, Tim Cook announced an unexpected and deep cooperation with the company OpenAI, which develops the chatbot ChatGPT, and the biggest loser has to be Microsoft.
MSFT usually doesn’t lose at its own game so this one is a bit of a surprise.
Apple has so far only flirted with the idea of its integration. The company surprised and took many people's breath away.
It is a paradox that the biggest investor in OpenAI is its rival Microsoft. The cooperation agreement took place behind closed doors to the dismay of Microsoft CEO Satya Nadella.
Thanks to artificial intelligence, Siri will be able to access all data stored in the user's phone and cloud through a secure channel.
Siri will no longer have a problem understanding the wider context of your question, connecting the answer with previous questions, or deciphering what you wanted to say if you accidentally mixed up the words.
CEO of OpenAI Altman now has fulfilled a longtime dream by striking a deal with Apple to use OpenAI’s conversational artificial intelligence in its products.
MSFT thought it had a big lead in AI over its peers and apparently, OpenAI, being the newest hottest thing in tech, has decided to sleep with everyone in bed instead of just picking one. MSFT has a right to be angry when they handed over $13 billion to OpenAI and that perceived lead in AI has evaporated.
It will be quite funny to see the software and the algorithms in these firms slowly merge into one product backed by the same AI company.
It screams of too many mouths to feed with just one nipple.
OpenAI has taken full advantage to entrench itself as the preeminent force at the forefront of technological modernity. They are the biggest winner here.
Right away, I wouldn’t say that Apple hit a home run even though the price action in their share price suggests so.
They are simply just boarding a train to uncertainty with the rest of big tech, and this maneuver looks highly defensive in nature.
Since Apple has stated they committing no money to the deal then it has to be coined as a win. It's $13 billion less spent and at a risk the software could turn clunky and unusable.
At that point, they could just terminate the relationship. This move was highly controversial inside of Apple headquarters, but management thought it was worth the risk.
Apple stock has most likely reached a short-term peak.
Lastly, I found it interesting that the Former head of the National Security Agency, retired Gen. Paul Nakasone has joined OpenAI which could mean that OpenAI will also be integrated into the Armed Forces. Apple won’t have much of a say in OpenAI going forward so we will see how it pans out.
(SUMMARY OF JOHN’S JUNE 12, 2024 WEBINAR)
June 14, 2024
Hello everyone,
TITLE
Reversal of Fortune
PERFORMANCE
June +1.94% MTD
Since inception 696.94%
Average annualized return +51.53% for 16 years.
Trailing one year return 36.44%
PORTFOLIO
Risk On
(AMZN) $160-$170 call spread (10%)
Risk Off
(GLD) $200-$205 call spread (10%)
(SLV) $23 - $25 call spread (10%)
Total Aggregate Position 30.00%
METHOD TO MY MADNESS
Nvidia has split. Which stock is next?
The next focus is on the first interest rate cut in five years, no matter how long it takes.
The general downside is limited to 5%-8% with $8 trillion in cash on the sidelines and a further $26.8 trillion in short-term US treasury bills.
Technology stocks won’t crash, just have a sideways “time” correction.
All economic data is globally slowing. The May Nonfarm Payroll report was an anomaly.
Interest rates are higher for longer, but September is back on the plate in view of recent date releases.
Interest rates are higher for longer, but September is back on the plate in view of recent date releases.
Buy stocks and bonds on dips.
THE GLOBAL ECONOMY – FLIP-FLOPPING
May Nonfarm Payroll report comes in hot at 272,000, double expectations.
The headline unemployment rate reached 4.0%, a 21/2 year high.
Job gains were concentrated in health care, government, and leisure and hospitality, consistent with recent trends.
The Fed’s favourite inflation gauge cooled by 0.2% in April, with the PCE, or the Personal Consumer Inflation Expectations Price Index.
ADP Private Payrolls drop to only 152,000, a sharp drop from last month’s 188,000
JOLTS Job Openings Report dive in April, down 296,000 to 8.059 million, a three-year low.
Europe cuts Interest Rates, for the first time in five years.
Money supply rises for the first time in more than a year.
STOCKS – THE BULL LIVES
Goldman Sachs sees “Wall of Money” flooding the stock market this summer.
Since 1928, the first 15 days of July have been the best two-week trading period of the year for equities, and they tend to fade after July 17.
Cruise lines are suddenly offering great deals because more vessels are flooding into the popular Caribbean and Alaskan destinations as they reroute ships away from Red Sea destinations due to the ongoing conflict between Israel and Hamas.
AMD launches new AI chips and details its plan to develop AI chips over the next two years in a bid to challenge industry leader Nvidia.
Roaring Kitty is back, after publicizing a $289 million long position in GameStop (GME). Avoid (GME).
American Airlines gets slaughtered, down 15% yesterday, and will slash its capacity growth in the second half of the year.
AMZN Trade Suggestion: Jan 2025, 195/200, LEAPS.
AMD and PANW are other LEAPS candidates.
CAT – go long at 200-day MA
FCX – buy now. Target is $100.
TLT – LEAPS candidate.
BONDS – CUT OFF AT THE KNEES
Hot Nonfarm Payroll reports slam bonds. Earlier rallies were based on weak economic data.
Funds are pouring into corporate bonds at four-year highs.
Global investors hoovered up $3.6 billion into investment-grade corporate bond funds in the week to Wednesday in the 31st straight week of inflows, the longest streak since 2019.
Bonds are becoming respectable again after a long winter. Buy (TLT) on dips.
FOREIGN CURRENCIES – DOLLAR CATCHES A BID
Red hot May Nonfarm Payroll Report gives dollar a new bid.
Right-wing wins in European elections deliver currencies a second punch on economic destabilization fears.
Japanese yen still looking for a bottom at Y160.
Bank of Japan intervened with a $62 billion yen buy, dollar sell. Avoid (FXY)
Chinese Yuan remains weak. International trade is collapsing
Higher for longer rates mean higher for the longer greenback.
Rates falling = a falling dollar for 2024.
ENERGY & COMMODITIES – OUT OF FAVOUR
AI creating a nuclear power demand surge, with its voracious demand for power
OPEC maintains production caps into 2025, with US production hitting a 2024 high at 19.9 million barrels/day.
AT&T’s copper is worth more than the company, and with plans to convert half its copper network to fiber by 2025 could free up billions of tons of the red metal to sell on the market.
Copper prices have doubled over the past two years, and they could double again by next year.
Conoco Phillips buys Marathon Oil for $22.5 billion, in a further consolidation of the oil industry.
Porsche goes for a hybrid, bringing out a new model for $164,900, the last to do so. Look for a 20-year death spiral for oil prices.
PRECIOUS METALS – REALITY CHECK
Red hot May Nonfarm Payroll Report kills gold trade.
When the Chinese enter a trade, the volatility increases, and this is a perfect example.
Higher for longer interest rates mean lower for longer gold and silver.
Buy precious metals on the dip because rates have to fall eventually.
Miners are expanding their operations and ramping up production as prices for the precious metal climb to decade highs.
Buy (GLD), (SLV), and (WPM) on dips.
REAL ESTATE – TRENDING UP
US Construction spending falls, off 0.1% after slipping 0.2% in March.
Pending Home Sales dive, down 7.7% in April, the worst since the COVID market three years ago.
AI is soaking up San Francisco Office Space faster than you think.
S&P Case Shiller jumps to a new all-time high, with its national Home Price Index.
The index rose by 6.5% YOY, the fastest growth since April 2023. All 20 major metro cities were up.
Home Equity hits an all-time high at $17 trillion according to CoreLogic.
Total home equity for U.S. homeowners with and without a mortgage is $34 trillion. There is a lot of cash that could potentially end up in the stock market.
TRADE SHEET
Stocks – buy any dips.
Bonds – buy dips.
Commodities – buy dips.
Currencies – sell dollar rallies, buy currencies.
Precious metals – buy dips.
Energy – buy dips.
Volatility – buy $12.
Real Estate – buy dips.
QI CORNER
Cheers,
Jacquie
Global Market Comments
June 14, 2024
Fiat Lux
Featured Trade:
(TESTIMONIAL),
(JUNE 12 BIWEEKLY STRATEGY WEBINAR Q&A),
(NVDA), (AVGO), (ARM), (GM), (TSLA), (SQM), (FMC), (ALB), (AAPL), ($VIX), (AMZN), (MO), (NFLX), (ABNB)
Hi John and Maddies,
Catching up on the most compelling view of the year, your June Mad Hedge Summit reviews. You sold yourself a bit short on the NVIDIA example. You gave (NVDA) a strong buy in October 2022. I might have missed the absolute bottom but was happy to get in at $150.
Approaching a ten bagger in two years.
Amazing.
Wishing you good health AND longevity.
Malcolm
Author’s note: I actually first recommended (NVDA) at a split adjusted 60 cents in 2016. It is up 214 times since then. Here is the link:
Below please find subscribers’ Q&A for the June 12 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Incline Village, NV.
Q: How will Nvidia (NVDA) trade post-split?
A: Well, it’ll probably keep going up, because I think the year-end target—the old $1400, which is now $140—is still good. And I have a whole bunch of LEAPS, which are post-split $40, $50, $60 in-the-money, and I’m just keeping those. It’s a good cash management tool to have. So, even $500 points in the money, you’re still looking at about 20% returns by the end of the year on a January LEAPS. If you can buy the January 2025 $70-$71 LEAPS for 83 cents that’s a 20.48% profit at expiration in six months. So if you want a safe, very high return, that is the best way to do it in the financial markets, is to go way in the money. LEAPS will still pay you a lot of money amazingly. This trade will disappear someday but it’s there now and I’m taking it. Screw 90-day T-bills—I’m going into $500 in-the-money LEAPs on Nvidia, which pays four times as much.
Q: Is Broadcom Inc (AVGO) the next Nvidia?
A: There is no next Nvidia—the next Nvidia is Nvidia. Buy Nvidia on a 20% decline, which I think we may get sometime this summer. That’s a dip you want to buy for a year-end run to $140. Also, Broadcom isn’t exactly undiscovered at this point. It has doubled since October, while Nvidia is up 4 times. So if the bargain in the market for you is double in six months, I’m not sure you should be in the market. That said, I put out a report on split candidates last week and (AVGO) is very high on the list.
Q: What’s the best way to trade split candidates?
A: I actually just wrote a newsletter about this last week. There are in fact 36 high-priced, good money-earning split candidates, and I listed them all. You can buy really any of those if you’re looking for a high-priced stock that is growing. And management has a huge incentive to do splits because it makes the stock go up faster, and they’re all paid in stock options. So that is another reason you go into these. The best way to trade splits is buying the candidates because the biggest move is on the announcement of the split—you usually get 10%, 15%, or even 20% returns on the announcement.
Q: How do you envision AI in 10 years?
A: Well, it’s unimaginable. I can tell you from experiencing a lot of these big technology changes—it’s always tremendously underestimated by the markets, and you can safely bet on that. It’ll go up a lot more than you realize. That’s what happened when we jumped from six track tapes to cassettes, Betamax to VHS, teletypes to faxes, and faxes to emails. I thought Steve Jobs was crazy when he introduced the iPhone. Nobody makes money in handsets. But he proved me wrong. That makes my $240,000 DOW by 2030 projection completely reasonable.
Q: What will inflation do for the rest of the year, and how will it affect stocks?
A: Inflation will go flat to down for the rest of the year. And that is being driven by artificial intelligence—the greatest deflationary product ever created in the history of the economy. It’s unbelievable the rate at which AI is replacing real people in jobs. If you want a good example of that, I had to call Verizon yesterday to buy an international plan, and I never even talked to a human. They listed out three international plans in a calm, even male voice, and I picked one. Or go to McDonald's where $500 machines are replacing $40,000 a year workers. This is going on everywhere at the same time at the fastest speed I have ever seen any new technology adopted. So buy stocks, that’s all I can say.
Q: What’s your opinion on Arm Holdings (ARM)?
A: I love it. There are very few serious companies in the chip area, and this is one of them.
Q: Do you expect gold mining stocks to continue upward?
A: Yes, but the better play here is the metal. Gold and silver aren't being held back by inflation while the miners are. Plus, the main buyers in the market now are the Chinese, and they don’t buy gold miners—they buy gold, silver, copper, platinum, and uranium outright.
Q: What about Tesla (TSLA) long-term? Kathy Woods's target is $2000 long-term.
A: I think Kathy Woods is right. But we have to get through the nuclear winter in the EV space first, where suddenly the market got saturated. I think Tesla is the only one who could come out of this alive by cutting costs and advancing technology, as they have always done. When I bought my first Tesla Model S1 in 2010, the battery cost $32,000. Now it’s $6,000, and you get a lot more range. Did (GM) offer an equivalent cost improvement with internal combustion engines? So, yes, never bet against Elon Musk—that’s a good 25-year lesson on my part, and should be for you too.
Q: Can you elaborate on the lithium trades?
A: I listed three names in my letter last week, (SQM), (FMC), (ALB), and the only thing you know for sure is that they’re cheap now. They could stay cheap for another six or 12 months. But when you get a turnaround in the global EV market and the manufacturers start screaming for more lithium, and all of the lithium stocks will double, or triple and they’ll do it fairly quickly. You can’t beat a market bottom for getting involved. Just look at my above (NVDA) trade. Not only would they be good stocks buy, but it would be a good LEAPS buy down here because then you could get 4 or 5 times your money on a small move.
Q: Can you suggest Amazon (AMZN) LEAPS?
A: January 2025 $195-200 just out of the money, should give you a return of about 120% over the next 6 months. That gets you the annual yearend run-up. And that’s my conservative position. My aggressive ones are all in Nvidia.
Q: Do you think zero-day options have permanently forced the Volatility Index ($VIX) to the $12 handle?
A: Yes, I do; it’s killed that market. Something like 40% of all the option traders on the CBOE were trading the ($VIX) from the short side. Shorting the ($VIX) now would be madness. That has to bring tough times for that whole industry. Trading call spreads at a $12 volatility, you’re better off buying the LEAPS because the LEAPS give you much bigger returns with much less risk. And a $12 ($VIX) means you’re getting your LEAPS at half the historic price. I’m just waiting for a new market low to start pumping out the LEAPS recommendations. All the more reason to sign up for the Mad Hedge Concierge Service to get an early read into the LEAPS recommendations. For more information on that, contact support at support@madhedgefundtrader.com
Q: What will happen to Apple (AAPL) after the 11% surge?
A: It goes to $250 by the end of the year. Now that it has the kiss of AI on it, people will pour into it.
Q: Why is value lagging?
A: Because AI is entirely a growth story, and you look at all the domestic value stocks, they’re going absolutely nowhere. Value has been in the dog house for years and I’m in no hurry to get in there.
Q: What is the best dividend stock I can invest in right now?
A: That’s an easy one. Altria (MO) has a 9% dividend—you can’t beat that. But you have to hold your nose when you buy this stock because they are in the cigarette business. However, their big growth now is in Asia ex-Japan where the government has a monopoly on tobacco, particularly China. Note that this is not an undiscovered idea; lots of people like a 9% dividend stock and (MO) has already gone up 20% this year, but I think there is still some money to be made here.
Q: How can we subscribe to get early LEAPS recommendations?
A: That would be the Concierge Service. Contact Filomena at customer support, and they will get you taken care of right away.
Q: What about the small nuclear plays?
A: I actually happen to know quite a lot about nuclear plant design, having worked for the Atomic Energy Commission in my youth, and the new designs address every major issue that held back nuclear power with the old 1950s designs. For example, building them underground and eliminated the need for these giant billion-dollar four-foot-thick reinforced concrete containment structures that dot the horizon. Not using pure Uranium alloys that can’t go supercritical is another great idea. So I like them. Are they good stock plays? Not right now. It takes a long time to introduce a new energy technology. Bill Gates is financing a new plant built by Terrapower in Wyoming, and it looks like a fantastic plant, but only Bill Gates could invest at this stage and expect to make money on it. He has very long-term money and you don’t. I would wait until you get a working model plant in the United States before going into these things, but potentially you’re looking at a 10 to 100 times return on your money if it works.
Q: Should I invest in Airbnb (ABNB) because of increased international travel?
A: Yes, we like Airbnb. Especially since they will get a push with the Paris Olympics next month. Not only does that get people to Paris, but it gets people to all of Europe because they usually add on additional trips to a visit to the Olympics.
Q: What would you do in Netflix (NFLX), and what strikes would you use?
A: I would do a LEAPS. Wait for a correction, at least 10%, preferably 20%, and then I would go at the money one year out and that would get you about 100% return. So, that’s the way to do that. This is not LEAPS territory right here —all-time highs are not LEAPS territory. You want to put on LEAPS when everyone else is throwing up on their shoes; the last time they did that was October 26.
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