In short, MSFT are building what the market wants, and what the market wants are AI data centers.
The stock price should be rewarded if they can deliver these new AI data centers to the market.
The data center increase shows no signs of slowing down and I do believe this puts a floor under tech stocks.
To be honest, there has been a lot of bad energy surrounding the current tech business models because many of them are getting stale.
Why upgrade to the next iPhone when there isn’t much of an upgrade?
The refresh cycle data shows people are standing pat and using their own tech longer and that is bad news for tech software and hardware companies.
So instead of trying to squeeze the remaining juice out of a stale model, beefy balance sheet tech companies are driving full force into AI investment even though this investment doesn’t reciprocate with any sort of revenue stream.
It’s a little bit of a build it and it will come mentality which I do believe is quite risky and at some point, we are due for a heavy selloff.
That selloff could get triggered if the US 10-year interest rate blows past 5.5%, then all bets are off.
Microsoft says it plans to spend $80 billion on building AI data centers this year.
Microsoft has poured billions of dollars over the last two years into Anthropic, as well as Elon Musk’s startup xAI.
Advances by these firms would not have been possible without new partnerships founded on large-scale infrastructure investments that serve as the essential foundation of AI innovation and use.
The $80 billion would reflect a significant increase on the $53 billion capex spend Microsoft made in 2023.
Documents leaked last April revealed it had more than 5GW of capacity at its disposal, with plans to add an additional 1.5GW in the first half of 2025. It is possible this has since been revised upwards as it looks to provide compute power to OpenAI to run ChatGPT and its other AI services, as well as supporting its own Azure public cloud platform.
Part of this is definitely the management at OpenAI namely CEO Sam Altman. He is seen as the avant-garde of AI and the leader of the whole movement. He is demanding a massive build out and investors have largely taken him at this word. Nobody has really questioned him and that stems partly from no one really knows where this AI thing is headed in the future, but we are convinced that buckets of data space are needed for whatever comes next.
My issue is what if the thing that comes next is a cataclysmic letdown, then where do tech stocks head?
Most likely they would head for the gutter.
So we give the benefit of the doubt to this gargantuan AI infrastructure build-out and it feels like we are flying blind in a snowstorm, but that is what the market is telling us and the market is always right until it is not.
Sometimes tech does figure it out, and we are really hoping there is something of great value at the end of the build-out.
Buy the dip in MSFT until the AI infrastructure story is killed off.
https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png00april@madhedgefundtrader.comhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngapril@madhedgefundtrader.com2025-01-08 14:02:282025-01-08 16:11:25Buy The Microsoft Dip
(This is a brief look into the work of Lawrence McDonald’s text How to Listen When MarketsSpeak:Risk, Myths, and Investment Opportunities in a Radically Reshaped Economy. We learn what some of his research shows, and this piece here is via his blog, The Bear Traps Report.
Over the last 250 years or so, all American political parties have played “games” at the closing stage of each administration.Take 2000, for instance, when the incoming George W. Bush team discovered that every keyboard in the White House and other administrative officers was missing the “W” key.
The outgoing Clinton staff had removed all the “W” keys to annoy the new administration after an extremely contentious election.
The damage was no big deal – around $15,000.
The outgoing Biden administration will be no different.But their mischievous acts may be a little more unpalatable.Under the existing budget, Bien is opening the floodgates with spending.
Spending for 2025 is expected to exceed $2 Tr by the time Biden leaves DC on January 20th.This is over 30% of the annual budget, and Trump will have to cut spending for the rest of the year to stay within the limits of the allocated budget.This could mean a notable slowdown in GDP growth in the first quarters of 2025.
The government’s fiscal year started on October 1st, and Biden could be on course to spend almost $2TR by the end of December and a deficit that may exceed $800bl (+60%y/y).
So, when Trump steps in on January 20th, he has three-quarters left of the government’s fiscal year; by then Biden has possibly spent more than 30% of the total allocated budget.
Lunatics – as Usual – on Capitol Hill
Congress, in its usual fashion, has failed to agree on the next budget, so the government is currently operating under a “continuing resolution” (CR). This continuing resolution means the government is allowed to spend the same amount of money they spent last year, which is $6.75TR. The government’s fiscal year started on October 1st, and Biden is on a run rate to spend almost $2TR by the end of December and a deficit that may exceed $800bl (+60% y/y). So, when Trump comes in on January 20th, he has three quarters left of the government’s fiscal year, but by then, Biden has spent more than 30% of the total allocated budget.This forces Trump to cut spending right off the bat. We estimate spending could drop by $500bl quarter over quarter, or 25% from Q4 to Q1. This is an estimate, and the timing of spending can change. But the fact is that Biden is emptying the coffers before Trump gets in. Every week, more money and weapons are sent to Ukraine, more subsidies are given to semiconductor makers to build plants in the US, and more government employees are hired.
US Yields Surge While Others Languish
Since September, US Yields have surged over 20% on Biden’s sugar high, while Canadian and German yields are down since then, Chinese yields have collapsed, and UK yields are only modestly above the September level.
Government Job Growth Twice the Rate of the Private Sector
Private sector job growth has lagged government job growth significantly in the last year as the government keeps hiring people.
Why is this so Bad?
We believe that this spending deluge by Biden on his way out is partially to blame for the surge in bond yields in Q4. Some may say it’s because of Trump and his promised tax cuts, but the Republican House majority is so slim that it’s unclear how much of a fiscal stimulus Trump is actually able to get through Congress. Also, the incoming Senate majority leader Thune (R, SD) has said he will only get one bill through reconciliation in FY 2025 and another one in FY2026. His priority is on immigration and energy legislation, so a fiscal spending bill might not come until late 2025 or early 2026 if anything. But if yields are being pushed up by all this spending in Q4, then what will happen if spending falls back in early 2025? And what will happen to GDP growth? A $500bl drop in government spending from Q4 to Q1 is the equivalent of 1.7ppt of growth. So, if Q4 nominal growth comes in at 5.7% annualized, this could drop to 4% in Q1 if government spending slows down accordingly.
Treasury’s Reliance on Short-Term Debt Exploded in Recent Years
Election Rigging? We are witnessing a Covid era like spending in 2024 without a pandemic. The Treasury Department has come to rely on short-term bills to fund the government. But with $36Tr of debt, the Treasury has to issue bills almost every dayto keep funding the government and to refund maturing debt.
*CBO data, Bloomberg. The average weighted coupon on the U.S. debt load is about 2.7% vs. over 4.5% for 10-year U.S. Treasuries. As bonds mature, they get refinanced at much higher yields.
$10Tr of Debt Refinancing Next Year
In 2024 Treasury faced around $10Tr of maturing debt. To refinance this debt, it issued a whopping $26Tr of bills and bonds. More than 84% of that paper was short-term bills with a maturity of 6 months or less. Treasury keeps re-issuing bills with a maturity of 4 to 8 weeks or 3,4 to 6 months, which are the most popular maturities in a continuing, ever-increasing roll down of the debt, day after day, month after month.
Apple Long-Term Bonds and Interest Rates
ALERT– By issuing nearly a colossal load of extremely short-term bills, Janet Yellen succeeded in suppressing bond volatility in an election year and, in our view, strategically placing that bond market volatility into 2025 after the election. You can “why” see above, she wanted LESS long-term paper in circulation markets in the election year. Now, in 2025 – this paper has to be rolled over and termed out into longer-dated bonds. The USA is behaving like a financially trapped emerging market country. Living on the “front end” of the yield curve is a VERY dangerous game.The Apple AAPL 2.55% bonds due 2060 are trading down at 57 cents on the dollar. If long-term bond yields go to 6%, take a guess where this bond will trade. Near 47 cents on the dollar? Now think of the trillions of USD loans issued in 2017-2021 on bank balance (commercial real estate, mortgages, corporate debt outstanding). Losses are in the trillions of dollars with higher incoming interest rates.
Interest Rates UP – Bond Prices DOWN
Never, ever forget that 6% today is equivalent to the destructive capacity of 10% twenty years ago. Interest rates up, mean bond prices down. A 1% move in interest rates higher today is an entirely different, far more lethalequation.
Incoming Stress Points
In 2025 the U.S. Treasury faces $9.6Tr of maturities in their so-called publicly held debt. In Q1 alone — the government faces $5.58Tr of maturities (bonds coming due, redemption), but 86% of those are short-term bills that the Treasury department rolls over into new 4-week, 8-week, 3,4, or 6-month bills, among others. As a result, almost daily bill auctions are coming to a theater near you, as the Treasury Department mindlessly keeps pushing new paper into the market to pay back the colossal amount of maturing debt.
Is There Any Reason to Buy Treasuries?
The new Treasury department under Scott Bessent may reduce bill issuance a bit and increase coupon paying issuance, just to alleviate some of the pressure on the bills market and extend the duration of outstanding US debt. Now that the big slush fund that bought all these bills, the so-called Reverse Repo Facility (RRP), is close to being depleted, it will be harder to sell all that short-term paper. In addition, Goldman Sachs expects that the Federal Reserve will stop the run-off of treasuries from its balance sheet by the end of January and begin buying treasuries again with the proceeds of the maturing MBS on its balance sheet. As such, the Fed becomes a modest buyer of treasuries next year, which allows the Treasury to increase coupon issuance without disrupting the long end.
One big bullish catalyst for treasuries would be a regulatory change to exempt treasuries from the Supplemental Leverage Ratio (SLR). It is unclear if and when this would be implemented, although Bessent was hinting at regulatory relief for banks to boost banks’ treasury holdings. Exempting treasuries allows banks to hold more Treasuries on their balance sheets without needing to hold additional capital against them, freeing up the capacity for banks to participate more actively in the Treasury market. It’s unclear how much treasury demand that would create, but in 2021 when the temporary SLR exemption was reinstated after COVID, prime dealers reduced their Treasury holdings from $250bl to $125bl in 2 months. A change in the SLR ratio may come but is going to take months before the rules are changed. A phase-out of QT for treasuries would be a more immediate, albeit more modest, relief for the bond market. According to this timeline, the Fed will end up buying $100bl of treasuries in 2025, a big change from the $500bl of treasury sales in 2024.
We have been very critical of Yellen’s term at the Treasury, but upon some further reflection, we think it’s really the case that Yellen’s only real issue was acting in the short-term interests of her boss and her party as opposed to thinking longer-term about how the government finances itself on a sustainable basis.
Her decision to fund the government with T-bills over duration securities and violate long-standing Treasury Department “norms” was incredibly short-sighted, but as someone who works for the President, ORDERS to follow.
Many have been super critical of her for these decisions because she should know what they would lead to and how really what she (and Powell together) has done is favor asset owners and the wealthy over everyone else in America, exacerbating wealth inequality to precarious levels in this country while still not bringing inflation back down to target. So ultimately, her decisions got her team knocked out of office anyway.
Looking forward, though, the issue is that there is no one in the government who is really thinking about and acting on behalf of the longer-term interests of the country when it comes to how much debt we are raising and how we are financing the government. The myopia about these decisions to get the existing political party in control through the next election is incredibly concerning.
The Fed has said this is not their lane; however, they are elected to 14-year terms and are supposed to be above politics. There are things they could have done to offset the politicization of the Treasury. They chose not to, they continue to protect asset holders and the Treasury market, decisions that really just make them become political as well. They could have better neutralized Treasury’s political decisions through more active QT, actually selling securities instead of just rolling them off, not adding to their duration holdings such that the weighted average maturity (WAM) of their positions is longer than Treasury’s own WAM. Powell’s Fed needs to be getting way more criticism than they are currently about these decisions which have made it harder to bring inflation down for the average American.
So, if the Treasury is not going to think long-term and the Fed is not going to either (the Fed actually is complicit because they don’t allow any real treasury market dysfunction to exist, which would be the way to deal with these long-term issues by having the market/bond vigilantes do their thing), then who will? This is a problem, the bond market is starting to figure it out, term premiums are starting to normalize, and the new administration will have to make some big decisions early on in their term.
Maybe @elonmusk and @DOGE can look into this as well. Someone has to!
QI CORNER
NVIDIA just dropped Project DIGITS, a $3,000 personal AI supercomputer that looks like a Mac Mini but packs 1,000x the power of your average laptop
Powered by the Nvidia GB10 Superchip and based on the NVIDIA Grace Blackwell architecture, this supercomputer can run AI models with up to 200 billion parameters.
The crazy part? You can link two units to handle 405B parameter models.
From this perspective, OpenAI’s GPT-4o is around 200B parameters while Grok-1 by xAI has 314B parameters.
Jensen Huang is single-handedly bringing data center-class AI computing to individual users.
I am once again writing this report from a first-class sleeping cabin on Amtrak’s legendary California Zephyr.
By day, I have a comfortable seat next to a panoramic window. At night, they fold into two bunk beds, a single and a double. There is a shower, but only Houdini can navigate it.
I am anything but Houdini, so I foray downstairs to use the larger public hot showers. They are divine.
We are now pulling away from Chicago’s Union Station, leaving its hurried commuters, buskers, panhandlers, and majestic great halls behind. I love this building as a monument to American exceptionalism.
I am headed for Emeryville, California, just across the bay from San Francisco, some 2,121.6 miles away. That gives me only 56 hours to complete this report.
I tip my porter, Raymond, $100 in advance to make sure everything goes well during the long adventure and to keep me up to date with the onboard gossip. The rolling and pitching of the car is causing my fingers to dance all over the keyboard. Microsoft’s Spellchecker can catch most of the mistakes, but not all of them.
Chicago’s Union Station
As both broadband and cell phone coverage are unavailable along most of the route, I have to rely on frenzied Internet searches during stops at major stations along the way, like Omaha, Salt Lake City, and Reno, to Google obscure data points and download the latest charts.
You know those cool maps in the Verizon stores that show the vast coverage of their cell phone networks? They are complete BS.
Who knew that 95% of America is off the grid? That explains so much about our country today.
I have posted many of my favorite photos from the trip below, although there is only so much you can do from a moving train and an iPhone 16 Pro.
Somewhere in Iowa
The Thumbnail Portfolio
Equities – buy dips, but sell rallies too Bonds – avoid Foreign Currencies – avoid Commodities – avoid Precious Metals – avoid Energy – avoid Real Estate – avoid
1) The Economy – Cooling
I expect a modest 2.0% real GDP growth with a 4.0% inflation rate, giving an unadjusted shrinkage of the economy of negative -2% for 2025. That is down from 0% in in 2024. This may sound discouraging, but believe me, this is the optimistic view. Some of my hedge fund buddies are expecting a zero return over the next four years.
Virtually all independent economists expect the new administration’s economic policies will be a drag on both the US and global economies. Trade wars are bad for everyone. When your customers are impoverished, your own business turns south. This is a big deal, since the Magnificent Seven, which accounted for 70% of stock market gains last year, get 60% of their profits from abroad.
The ballooning National Debt is another concern. The last time Trump was in office, he added $10 trillion to the deficit through aggressive tax cuts and spending increases. If this time, he adds another $10-$15 trillion, the National Debt could reach $50 trillion by 2030.
There are two issues here. For a start, Trump will find it a lot harder and more expensive to fund a National Debt at $50 trillion than $20 trillion. Second, borrowing of this unprecedented magnitude, double US GDP, will send interest rates soaring, causing a recession.
The only question then is whether this will be a pandemic-style recession, which took stocks down 30% and recovered quickly, or a 2008 recession which demolished stocks by 52% and dragged on for years.
Hope for the best but expect the worst, unless you want to consider a future career as an Uber driver.
The outlook for stocks for 2025 is pretty simple. You are going to have to work twice as hard to make half the money you did last year with twice the volatility. You will not be able to be as nowhere near aggressive in 2025 as you were in 2024It’s a dream scenario for somebody like me. For you, I’m not so sure.
It’s not that US companies aren’t growing gangbusters. I expect 2% GDP growth, 15% profit growth, and 12% net margin growth in 2025. But let’s face reality. Stocks are the most expensive they have been in 17 years and we know what happened after 2008. Much of the stock market gain achieved last year was through hefty multiple expansions. This is not good.
Big tech companies might be able to deliver 20% gains and are still the lead sector for the market. Normally that should deliver you a 15%, or $800 gain in the S&P 500 (SPX). We might be able to capture this in the first half of 2025.
Financials will remain the sector with the best risk/reward, and I mean the broader definition of the term, including banks, brokers, money managers, and some small-cap regional banks. The reason is very simple. Their income statements will get juiced at both ends as revenues soar and costs plunge, thanks to deregulation.
No passage of new laws is required to achieve this, just a failure to enforce existing ones. The hint for this is a new SEC chair whose primary interest is promoting the Bitcoin bubble. Buy (GS), (MS), (JPM), (BAC), (C), and (BLK).
However, this is anything but a normal year. Uncertainty is at an eight-year high, thanks to an incoming administration. If the promised policies are delivered, inflation will soar and interest rates will rise, as they already have. We could lose half or all of our stock market gains by the end of 2025.
The big “tell” for this was the awful market performance in December, down 5%. The Dow Average was down ten days in a row for the first time in 70 years. Santa Claus was unceremoniously sent packing. People Are clearly nervous. But then they should be with a bull market that is approaching a decrepit five years in age.
There is a bullish scenario out there and that has Trump doing absolutely nothing in 2025, either because he is unwilling or unable to take action. After all, if the economy isn’t actually broken, why fix it? Better yet, if you own an economy it is better not to break it in the first place.
Nothing substantial can pass Congress with a minuscule one-seat majority in the House of Representatives. There will be no new presidential action through tariffs and only a few token, highly televised deportations, not enough to affect the labor market.
Stocks will not only hold, but they may add to the 15% first-half gains for the year. I give this scenario maybe a 50% probability.
The first indication this is happening is when the presidential characterization of the economy flips in a few months from the world’s worst to the world’s best with no actual change in the numbers. Trump will take all the credit.
You heard it here first.
Frozen Headwaters of the Colorado River
3) Bonds (TLT), (TBT), (JNK), (PHB), (HYG), (MUB), (LQD) Amtrak needs to fill every seat in the dining car to get everyone fed on time, so you never know who you will share a table with for breakfast, lunch, or dinner.
There was the Vietnam Vet Phantom Jet Pilot who now refused to fly because he was treated so badly at airports. A young couple desperately eloping from Omaha could only afford seats as far as Salt Lake City. After they sat up all night, I paid for their breakfast.
A retired British couple was circumnavigating the entire US in a month on a “See America Pass.” Mennonites returned home by train because their religion forbade travel by automobiles or airplanes.
The big question to ask here after a 100-basis point rise in bond yields in only three months is whether the (TLT) has suffered enough. The short answer is no, not quite yet, but we’re getting close. Fear of Trump policies should eventually take ten-year US Treasury bond yields to 5.00%, and then we will be ready for a pause at a nine-month bottom. After that, it depends on how history unfolds.
If Trump gets everything he wants, inflation will soar, bonds will crash, and 5.00% will be just a pit stop on the way to 6.00%, 7.00%, and who knows what? On the other hand, if Trump gets nothing he says he wants, then both bonds stocks and bonds will rise, creating a Goldilocks scenario for all balanced portfolios and investors.
That also sets up a sweet spot for entry into (TLT) call spreads close to 5.00% yields. A politician campaigning on one policy, then doing the opposite once elected? Stranger things have happened. The black swans will live.
If your basic assumption for interest rates is that they stay flat or rise, then you have to love the US dollar. Currencies are all about expected interest rate differentials and money always pours into the highest-paying ones. Tariffs will add fat to the fire because any reduction in international trade automatically reduces American trade deficits and is therefore pro-dollar.
This means that you should avoid all foreign currency plays like the plague, including the Euro (FXE), Japanese yen (FXY), British Pound (FXB), Canadian dollar (FXE), and Australian dollar (FXA).
A strong greenback comes with pluses and minuses. It makes our exports expensive and less competitive and therefore creates another drag on the economy. It demolishes traditional weak dollar plays like emerging markets and precious metals. On the other hand, it attracts substantial foreign investments into US stocks and bonds, which has been continuing for the past decade.
Above all, be happy you are paid in US dollars. My foreign clients are getting crushed in an increasingly expensive world.
5) Commodities (FCX), (BHP), (RIO), (VALE), (DBA) Look at the chart of any commodity stock and you see grim death. Freeport McMoRan (FCX), BHP (BHP), and Rio Tinto (RIO), they’re all the same. They’re all afflicted with the same disease, over-dependence on a robustly growing China, which isn’t growing robustly, if at all.
I firmly believe that this will continue until the current leadership by President Xi Zheng Ping ends. He has spent the last decade globally expanding Chinese interests, engaging in abusive trade practices, hacking, and attacking American allies like Taiwan and the Philippines.You can only wave a red flag in front of the US before it comes back to bite you. A trade war with the US is now imminent.
This will happen sooner than later. The Chinese people don’t like being poor for very long. This is why I didn’t get sucked in on the Chinese long side in the fall, as many hedge funds did.
If China wants to go back to playing nice, as they did in the eighties and nineties, China should return to return to high growth and commodities will look like great “Buys” down here. If they don’t, American growth alone should eventually pull commodities up, as our economy is now growing at a long-term average gross unadjusted 6.00% rate. So the question is how long this takes.
It may pay to start nibbling on the best quality bombed-out names now, like those above.
Snow Angel on the Continental Divide
6) Energy (DIG), (USO), (DUG), (UNG), (USO), (XLE), (LNG), (CCJ), (VST), (SMR) Energy was one of the worst-performing sectors in the market for the second year in a row and 2025 is looking no better. New supplies are surging, while demand remains stuck in the mud, with the US now producing an incredible 13.5 million barrels a day. OPEC is dead.
EVs now make up 10% of the US auto fleet, and much more in other countries, are making a big dent. Some 50% of all new car sales in China, the world’s largest market, are EVs. The number of barrels of oil needed to increase a unit of American GDP is plunging, as it has done for 25 years, through increased efficiencies. Remember your old Lincoln Continental that used to get eight miles per gallon? Now it gets 27.
Worse yet, a major black swan hovers over the sector. If the Ukraine War somehow ends, some ten million barrels a day of Russian oil will hit the market. Oil prices should plunge to $50 a barrel.
There are always exceptions to the rule, and energy plays not dependent on the price of oil would be a good one. So is natural gas, which will benefit from Cheniere Energy’s (LNG) third export terminal coming online, increasing exports to China. Ukraine cutting off Russian gas flowing to Europe will assure there is plenty of new demand.
But I prefer investing in sectors that have tailwinds and not headwinds. Better leave energy to the pros who have the inside information they need to make money here.
If someone is holding a gun to your head tell you that you MUST invest in energy, go for the new nuclear plays like (CCJ), (VST), and (SMR). We are only at the becoming of the small modular reactor trend, which could accelerate for decades.
The train has added extra engines at Denver, so now we may begin the long laboring climb up the Eastern slope of the Rocky Mountains.
On a steep curve, we pass along an antiquated freight train of hopper cars filled with large boulders.
The porter tells me this train is welded to the tracks to create a windbreak. Once, a gust howled out of the pass so swiftly, that it blew a passenger train over on its side. In the snow-filled canyons, we saw a family of three moose, a huge herd of elk, and another group of wild mustangs. The engineer informs us that a rare bald eagle is flying along the left side of the train. It’s a good omen for the coming year. We also see countless abandoned 19th-century gold mines and the broken-down wooden trestles leading to huge piles of tailings, relics of previous precious metals booms. So, it is timely here to speak about the future of precious metals.
We certainly got a terrific run on precious metals in 2025, with gold at its highs up 33% and silver up 65%. The miners did even better. Even after the post-election selloff, it was still one of the best-performing asset classes of the year.
But the heat has definitely gone out of this trade. The prospect of higher interest rates for longer in 2025 has sent short-term traders elsewhere. That’s because the opportunity cost of owning precious metals is rising since they pay no interest rates or dividends. And let’s face it, there was definitely new competition for hot money from crypto, which doubled after the election.
The sector is not dead, it is resting. Central bank buying of the barbarous relic continues unabated, especially among sanctioned countries, like Russia and China. Gold is still the principal savings vehicle for many Chinese. They are not going to recover confidence in their own currency, banks, or government anytime soon. And there is still slow but steadily rising industrial demand from solar sectors.
Gold supply has also been falling for years, while costs are rising at least at double the headline inflation rate. So it’s just a matter of time before the supply/demand balance comes back in our favor. Where the final bottom is anyone’s guess as gold lacks the traditional valuation parameters of other asset classes, like dividends or interest paid. We’ll just have to wait for Mr. Market to tell us, who is always right.
Give (GLD), (SLV), (GDX), (GOLD), and (WPM) a rest for now but I’ll be back.
Crossing the Great Nevada Desert Near Area 51
8) Real Estate (ITB), (LEN), (KBH), (PHM), (DHI)
The majestic snow-covered Rocky Mountains are behind me. There is now a paucity of scenery, with the endless ocean of sagebrush and salt flats of Northern Nevada outside my window, so there is nothing else to do but write.
My apologies in advance to readers in Wells, Elko, Battle Mountain, and Winnemucca, Nevada. It is a route long traversed by roving bands of Indians, itinerant fur traders, the Pony Express, my own immigrant forebearers in wagon trains, the Transcontinental Railroad, the Lincoln Highway, and finally US Interstate 80, which was built for the 1960 Winter Olympics at Squaw Valley, California. Passing by shantytowns and the forlorn communities of the high desert, I am prompted to comment on the state of the US real estate market.
Real estate was a nice earner for us in 2024 in the new homes sector. The election promptly demolished this trade with the prospect of higher interest rates for longer. Expect this unwelcome drag to continue in 2025.
I am not expecting a housing crash unless interest rates take off. More likely it will continue to grind sideways on low volume. That’s because the market has support from a structural shortage of 10 million homes in the US, the debris left over from the 2008 housing crash. That’s why there is still a Millennial living in your basement. Homebuilders now prioritize profit margins over market share.
I expect this sector to come back someday. New homebuilders have the advantage of offering free upgrades and discounted in-house financing. Avoid for now (DHI), (KBH), (TOL), and (PHM).
Crossing the Bridge to Home Sweet Home
9) Postscript We have pulled into the station at Truckee amid a howling blizzard.
My loyal staff have made the ten-mile trek from my estate at Incline Village to welcome me to California with a couple of hot breakfast burritos and a chilled bottle of Dom Perignon Champagne, which has been cooling in a nearby snowbank. I am thankfully spared from taking my last meal with Amtrak.
After that, it was over legendary Donner Pass, and then all downhill from the Sierras, across the Central Valley, and into the Sacramento River Delta.
Well, that’s all for now. We’ve just passed what was left of the Pacific mothball fleet moored near the Benicia Bridge (2,000 ships down to six in 80 years). The pressure increase caused by a 7,200-foot descent from Donner Pass has crushed my plastic water bottle. Nice science experiment!
The Golden Gate Bridge and the soaring spire of Salesforce Tower are just coming into view across San Francisco Bay.
A storm has blown through, leaving the air crystal clear and the bay as flat as glass. It is time for me to unplug my MacBook Pro, iPad, and iPhone, pick up my various adapters, and pack up.
We arrive in Emeryville 45 minutes early. With any luck, I can squeeze in a ten-mile night hike up Grizzly Peak tonight and still get home in time to watch the ball drop in New York’s Times Square on TV.
I reach the ridge just in time to catch a spectacular pastel sunset over the Pacific Ocean. The omens are there. It is going to be another good year.
I’ll shoot you a Trade Alert whenever I see a window open at a sweet spot on any of the dozens of trades described above, which should be soon.
Good luck and good trading in 2025!
John Thomas
The Mad Hedge Fund Trader
The Omens Are Good for 2025!
https://www.madhedgefundtrader.com/wp-content/uploads/2013/01/Zephyr.jpg342451april@madhedgefundtrader.comhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngapril@madhedgefundtrader.com2025-01-08 09:00:172025-02-20 12:40:412025 Annual Asset Class Review
If you’d told me a decade ago that I’d be writing about hundred-year-olds’ blood cells holding the secret to eternal youth, I would’ve thought you’d been reading too much science fiction.
Yet here I am, staring at data from a revolutionary new stem cell bank that’s making immortality hunters drool and investors’ wallets itch.
But let’s ground this exciting idea in the real world for a moment.
Let me back up a bit. Last week, while having dinner with a biotech analyst friend – let’s call her Sarah – she couldn’t stop talking about a groundbreaking new collection of stem cells derived from centenarians.
These remarkable individuals have done more than just reach triple digits – they’ve managed to dodge the usual buffet of age-related diseases that claim most of us long before we hit 100. But what makes this discovery particularly intriguing for us is how it bridges cutting-edge science with immediate market potential.
“These people aren’t just old,” Sarah explained, jabbing her fork at me for emphasis, “they’re biologically younger than their birth certificates suggest.” The data backs her up – these super-agers are clocking in at an average of 6.55 years younger than their chronological age. It’s like finding a 1960 Corvette with the engine of a 2017 model.
And this biological time warp isn’t just a scientific curiosity – it’s becoming a goldmine for biotechnology companies looking to unlock the secrets of healthy aging.
Scientists can now take these centenarians’ blood cells and reprogram them into induced pluripotent stem cells (iPSCs), creating a renewable source of cellular youth. Think of it as cellular time travel – these cells can become virtually any type of cell in the body, from heart muscle to brain neurons.
This versatility is precisely why the global stem cell therapy market has swelled to $11.8 billion and is projected to reach $31 billion by 2032.
Still, the field isn’t without its volatility – funding swings from $1.2 billion in late 2022 to $233 million in early 2023 show just how quickly investor sentiment can shift in this space.
The investment landscape here is particularly fascinating because it spans both established players and innovative upstarts. Lineage Cell Therapeutics (LCTX) is targeting neurodegenerative diseases with cell-based therapies, while Athersys (ATHXQ) pushes forward with its MultiStem technology.
These companies are betting big on cellular solutions to age-related diseases, though we should watch trial results as carefully as they monitor their retirement accounts.
What sets these centenarian-derived cells apart is their unique genetic profile. Their immune cells show shifts and genetic variants that seem to protect against diseases that usually send most of us to the great beyond decades earlier.
Some male centenarians even show mosaic loss of the Y chromosome – a genetic quirk that might contribute to their longevity. This isn’t just fascinating biology. It’s practically a roadmap for developing new therapeutics.
The real game-changer is how these cells can serve as “disease-in-a-dish” models. Want to study Alzheimer’s? Transform these cells into neurons. Curious about heart disease? Make some cardiac cells.
This capability is revolutionizing drug development, allowing companies to test new treatments more efficiently and potentially reduce the astronomical costs of bringing new drugs to market.
For those eyeing this space, the demographic trends are compelling. The world’s population isn’t getting any younger, and healthcare systems are groaning under the weight of age-related diseases.
That means companies that can leverage these iPSC lines for drug screening or biomarker development might strike it rich before anyone finds the fountain of youth.
The open-source nature of this iPSC resource is accelerating progress across the entire field. Like the early days of Linux, it’s not about one company holding all the cards, but rather a collaborative rush toward breakthroughs.
This shared knowledge base is already helping researchers validate findings and refine therapeutic strategies, potentially shortening the timeline from discovery to approved treatment.
Looking ahead, we’re set to watch as cellular biology and big data converge in ways we never imagined. So, the question now isn’t if this field will transform medicine, but when – and more importantly for us, who will lead the charge.
Just remember, in biotech as in life, patience isn’t just a virtue – it’s a necessity. These breakthroughs move at their own pace, usually somewhere between “glacial” and “watched pot never boils.” But when they hit? Well, that’s when fortunes are made and medical textbooks are rewritten.
Now, if you’ll excuse me, I need to check on my portfolio of longevity stocks. After all, I’m planning to live long enough to see how this all plays out – and maybe even long enough to benefit from these breakthrough treatments myself.
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It isn’t a shocker that the first deal to go through in 2025 is in digital sports streaming.
This sub-sector is scorching hot.
It was only just a few days ago when Netflix rolled out its debut in streaming NFL during Christmas when they broadcasted 2 games.
Live American football – not the European variant – is the holy grail of digital content and the beefiest of marketers with the deepest of pockets will cough up to place their ads in these commercial slots.
Disney (DIS) will combine its Hulu + Live TV business with sports streamer FuboTV (FUBO) in the first major media dealmaking move of 2025.
Disney will control 70% of Fubo. Shareholders of the sports streamer will own the remaining 30% of the combined business, which will operate under the Fubo publicly traded company name.
Disney is struggling in many parts of their business, for example, is underperforming in their theme parks.
Their movies also suck.
Pro football is the last bastion of premium content and even the woke employees at Disney understand that.
Disney stock has essentially halved since 2021 with shareholders furious about their lack of strategic vision.
The acquisition of Fubo gives Disney a chance to restart in a sub-sector that has a glowing future.
Cord cutters are exploding and since last year’s Presidential election, the trust in legacy media has never been at such a low ebb, and rightly so with the poor level of content quality.
The combination of the two businesses will form one of the largest digital pay-TV providers as consumers search for cable alternatives amid increased cord-cutting.
Fubo, which offers users access to live TV channels over the internet, has primarily focused on sports.
Hulu + Live TV, categorized as a cable replacement option — similar to YouTube TV — allows users to stream from about 100 live TV channels across sports, news, and entertainment.
As a much smaller player, Fubo struggled with high content costs and the ability to curb subscriber churn and adequately compete in the marketplace — hence the lawsuit’s inception.
The three companies first announced the joint venture last year, with an expected price point of $42.99 a month. The service will bring together their respective slates of sports rights and comes as media companies face pressure from investors to scale their streaming services and achieve profitability.
I’m not saying that digital streaming of pro sports is easy.
We aren’t in the early innings.
Content costs are astronomically high and subscriber churn can be a problem in the offseason.
The nightmare could end up like the NBA.
Look at sports like pro basketball (NBA, viewership is down 50% this season as subscribers flee the sinking ship.
The basketball commissioner created a model where most teams make the playoffs meaning the 82 game schedule has been deemed irrelevant causing their best stars to sit out games.
It’s just one example of the management of pro sports going down the drain and pro football isn’t immune to bad management too.
As it stands, I highly support Disney’s foray into Fubo and Fubo would be a great stock to pick up and hold at $4.80.
The stock is up from $1.44 this morning.
Live pro sports still fetches a premium and I don’t believe that will change any time soon.
Jump into tech stocks that have big investments planned in American football.
Much of the big growth opportunities have been saturated and I do believe the tech market will become more of a zig-zag trading market in 2025.
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(IN 2024, THE TRADITIONAL SANTA RALLY DIDN’T APPEAR, SO WHAT DOES 2025 AND BEYOND LOOK LIKE?)
January 6, 2025
Hello everyone
Happy New Year!Wishing you all good things for 2025.
I’m back on deck for a new year.I hope you are all well-rested and ready for another year navigating the markets.
So, what can we expect for 2025?
In Australia, economists indicate that 2025 offers no solutions to the economic problems of the past year.However, we can expect an easing of interest rates and inflation.
China’s sluggish economy has the potential to weigh down Australia.
US President-elect Donald Trump will be inaugurated for a second term later in January, with the full extent of his promised tariffs a key factor for the economic outlook.
He’s pledged the mass deportations of migrant workers and a huge reduction in government regulation of different industries.
For the economy, the biggest impact will likely be from tariffs imposed on goods from foreign countries, including steep taxes on Mexico, Canada, and China.
It is yet unknown whether Trump will follow through on the announced rate of tariffs on these countries.
(DOGE) leader Elon Musk could trim the fat in government departments, making the system work more efficiently.
Unemployment begins to rise in 2025.
Interest rates are finally cut in Australia in the first half of the year.
In the last two decades, in Australia, migration increased to about 60 percent of growth in an average year and natural increases were the other proportion – about 40 percent.
Migration is now up to 83 percent of our growth … so, record population increases in Australia.
Demographer, Mark McCrindle, believes Australia’s population could reach 50 million by the 2050’s.
He also points out, that Australia is not keeping up with a heightened population demand on critical infrastructure such as housing.
McCrindle argues that the “population growth is greater than the built environment growth and that’s really what’s driving the housing affordability challenges, that demand is exceeding supply.”
So, as you can imagine, no relief yet on Australia’s housing crisis.(It is a similar story in the U.S.)
People will continue to move to regional areas away from the big cities – Sydney & Melbourne – to look for affordable living options with flexible working conditions.
Globally, McCrindle predicts the population will grow as high as 10 billion by the 2080’s, before stabilizing.He said the world was already experiencing increased rates of population contraction – meaning fewer people are being born annually – and this trend was likely to continue.
We will continue to see technological innovations.AI technology is on our doorstep, but Australians appear to be slow to take up new technologies.An attitude of distrust seems to be an issue.The AI “big brother” lens is not palatable for everyone.Nevertheless, AI will no doubt increase efficiency and cut costs in many sectors & industries, which will likely be passed on to the consumer. The chip industry and the main heavyweights will continue to do well as demand will not go away.Quantum computing is not far away.
Geopolitical conflicts have been increasing in intensity in the last few years.Strategic Analysis Australia founder, Michael Shoebridge, argues there is a credible scenario “There could be a global war this decade and that can be because of the rise of nationalism we’re seeing, particularly in places like Russia and China.”
Shoebridge comments that just like before World War I, the world in 2025 is witnessing a “revolution in warfare” with newly innovated weaponry, and leaders like Russian President Vladimir Putin, Chinese President Xi Jinping, and the United States president-elect Donald Trump blindly moving closer to a full-scale war.
S&P500
2024 was a stellar year for stocks, but in 2025 Equities may pause for a period this year before another major rally takes place.
Over a period of 6-9 months, the S&P500 could possibly fall towards $4,800, or even lower, but will then rally in the final part of the year.2026 and 2027 could be good years for the market.
If the markets do take the bear path, FANG stocks could fall 20% or more.
Of course, these predictions depend, somewhat, on what Donald Trump actually does when he enters the White House.If nothing changes, then a rally could well take place, and stocks could rise into nosebleed territory.Time will tell.
PRECIOUS METALS
Gold and silver will remain financial safe havens.As confidence in fiat currencies erodes amidst economic instability, gold, silver, and cryptocurrencies are emerging as pillars of financial security.With geopolitical tensions rising, central banks hoarding reserves, and inflation fears mounting, many analysts project gold could rally toward $3,500 per ounce – and possibly higher.Unlike fiat money, gold isn’t tied to the whims of governments or central banks, making it a trusted store of value during crises.
I see gold and silver continuing to range in the first instance this year and then, possibly, gradually moving lower towards $2,400 and even $2,200 is possible.In the second half of the year, we could see a rally towards $3,000.Late last year I suggested selling calls on gold and silver stocks.At the moment this is still a good play.
THE CRYPTO REVOLUTION
Crypto should shine this year.The election of Donald Trump has shaken up the markets, particularly in the cryptocurrency space.His administration has swiftly installed crypto-friendly leaders in key positions, including Vice President JD Vance, National Security Advisor Michael Waltz, Commerce Secretary Howard Lutnick, Treasury Secretary Scott Bessent, SEC Chairman Paul Atkins, FDIC Chair Jelena McWilliams, Dept of Govt Efficiency (DOGE) leader Elon Mush, and HHS Secretary RFK Jr., who has become the face of the MAHA (Make America Healthy Again) movement. These appointments signal the end of anti-crypto policies while positioning Bitcoin and other digital assets as strategic components of the U.S. economy.
Bitcoin is expected to rally well this year.With increasing institutional adoption, corporate treasuries diversifying into Bitcoin, and even nation-states taking on board the idea, Bitcoin could easily reach $150,000 and beyond this year.Some are even predicting $250,000 by December.
Why is this happening now?
Many factors:
Greater regulatory clarity, the launch of Bitcoin exchange-traded products (ETPs), and institutional players continuing to pour large amounts of capital into Bitcoin.These developments not only seem to set Bitcoin’s position as a store of value but signal that it’s well on its way to becoming a dominant force in the global economy.
Bitcoin isn’t the only crypto that will rally this year.Investors and/or traders should also be looking at Ethereum.This coin has a valuable ecosystem of decentralized applications (d’Apps) and smart contracts.The introduction of Ethereum 2.0, which promises faster transactions and a more energy-efficient proof-of-stake mechanism, combined with Ethereum’s role at the heart of decentralized finance (DeFi), may well incentivise mass adoption.With more institutions and businesses adopting Ethereum-based platforms, the token could rally strongly, riding the wave of growing trust in blockchain technology.There is potential for Ethereum to rally towards $8000.
Another coin that could have a bright future is Ripple.Some experts are predicting that XRP could hit $10 in 2025. Faster, cheaper transactions offer banks and corporations a more efficient way to process payments across borders, making it a preferred choice for many in the financial world.Further igniting its popularity is the endorsement by high-profile figures like Elon Musk, who recently mentioned XRP in the context of his support for decentralized technologies. Musk’s influence could boost XRP’s visibility and attract new investors and institutional partners.As blockchain technology continues to reshape the global financial landscape, Ripple’s XRP could become the backbone of cross-border payments, setting its place as a key player in the future of global finance.
Utility coins, too, are gaining acceptance and popularity.These coins go beyond mere speculations, offering real-world value by supporting initiatives and candidates committed to preserving liberty and individual rights.For example, USA Unity Coin (UUC) empowers Americans to back pro-freedom political leaders while participating in a decentralized financial ecosystem.Coins like UUC are providing a unique opportunity to drive change.UUC, in particular, is on a mission to safeguard the principles of freedom in the digital age.
ENERGY
Energy was one of the worst-performing sectors last year.Will it be the same this year?Much depends on supply and demand, and the ongoing conflicts around the world.
Geopolitical risks threaten investment, environmental regulations, and infrastructure.
In 2025 oil prices could keep ranging for a period before the market finds a low and a bullish move begins.
Hold on to traditional energy stocks like (XOM)Exon Mobil, (CVX) Chevron, and (OXY)Occidental Petroleum.They should do well in the future.
By 2030, the use of renewables will probably increase by over 430%.Nuclear energy and hydroelectricity will expand by 54.5% and 48.5% respectively.
So, nuclear energy stocks should definitely be on your list.Look at (CCJ) Cameco Corp. (VST) Vistra Energy (a good buy now- scale in), (CEG) Constellation Energy, (SMR) Nu-Scale Power Corporation (A good buy now –scale in)
Santa didn’t deliver at the close of 2024
In contrast to what had been a very strong 2024 performance, the year ended without any fanfare at all.The S&P500 rose more than 23% last year but ran out of puff at year’s end.Does the absence of a Santa rally mean a lacklustre market or a period of underperformance lies ahead for stocks?Some analysts believe the returns may not be as robust as in years when we did enjoy a Santa rally. On average then, we can expect around a 6.5% return.At any rate, January usually sets the tone for the rest of the year, so we need to take note and see what markets are telling us.History reminds us that when January is positive, the S&P500 averages a 6.9% gain on a six-month forward basis.When it’s negative, the index falls 0.6%.
The December jobs report is released this Friday.And with inflation data released later this month, we could get a much clearer picture of the path of interest rates going forward.A slowdown in job growth is expected.This week will be a good test for the dollar, with employment statistics and Fed speeches.
WEEK AHEAD CALENDAR
Monday Jan. 6
9:45 a.m. PMI Composite final (December)
9:45 a.m. S&P PMI Services final (December)
10:00 a.m. Durable Orders final (November)
10:00 a.m. Factory Orders (November)
Tuesday Jan.7
8:30 a.m. Trade Balance (November)
10:00 a.m. ISM Services PMI (December)
10:00 a.m. JOLTS Job Openings (November)
9:00 a.m. Euro Area Inflation Rate
Previous:2.2%
Forecast: 2.4%
Wednesday Jan. 8
8:15 a.m. ADP Employment Survey (December)
8:30 a.m. Jobless Claims (week ending 12/28)
2:00 p.m. FOMC Minutes
3:00 p.m. Consumer Credit (November)
Thursday Jan 9
10:00 a.m. Wholesale Inventories final (November)
NYSE is closed to mourn the death of President Jimmy Carter.
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
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