The Global Trade War has gone ballistic in a short amount of time and, tech stocks haven’t had time to digest this type of news.
Today’s sell-off at the time of this writing is over 5% intraday and around 10% over the past 5 days.
It is bad for everyone and accelerates an era of deglobalization that is picking up around the world.
China has hit back at new U.S. tariffs with sweeping levies of its own on American products, sharply escalating the trade war between the world's two biggest economies.
China's finance ministry said on Friday a 34% tariff will be imposed on all U.S. imports after the U.S. did the same to China.
Remember that many tech products are produced in China which is why the price of iPhones is only $1,000.
If iPhones are to be produced in the U.S., I expect a price of around $4,000 per iPhone.
The truth of the matter is that the U.S. onshoring manufacturing won’t make prices lower for average Americans.
Escalating trade rules between your biggest trading partners is a high-risk high-reward strategy.
It could easily backfire for the United States whose government also promises lower prices on tech devices and groceries.
In the short term, I don’t understand how lower consumer tech prices are on the table. There is no path to achieve that. In almost every model I play out, prices will go higher for almost everything.
This will be difficult for tech firms to pass on the costs to the end consumer. The consumer will simply not buy, kind of like a silent protest.
China's commerce ministry said it is adding 16 U.S. entities to an export control list, banning them from acquiring Chinese products designated as dual-use, for civilian and military purposes.
China’s economy is weakening and it will be fascinating to see what this does to the Chinese tech sector. The only guarantee is that Chinese factory workers who make American products face losing jobs in mass quantities.
Uncertainty is what the market hates and politics is delivering us a big dose of it.
In the short term, I see more volatility with governments escalating the fight further and getting entrenched in some of their positions.
Clearly, countries in Europe and China see the way they do business as normal, and having such a relative tax advantage has always helped foreign companies compete in the U.S.
The strategy is so good that American companies also began offshoring work to cheaper countries.
Almost every tech company publicly traded on the markets has the bulk of employees stationed outside of America.
At the same time, big tech companies are automating jobs and really shrinking their balance sheet to endure the turmoil.
Workers have lost negotiating leverage, and tech companies, in many cases, require 5 days per week in-office work.
What does this mean for tech?
Nothing good in the short-term.
Revenue targets will get slashed.
American jobs will be aggressively cut.
Management will force less workers to do more work for less pay while middle managers will get fired.
Expectations of less revenue have become more normalized in management circles in Silicon Valley.
Tariffs causing the cost of living to explode will mean less money on the table for tech.
For the time being, this will negatively impact the price of tech stocks. Brace yourself.
“The only way to do great work is to love what you do.” – Said Apple Co-Founder Steve Jobs
https://www.madhedgefundtrader.com/wp-content/uploads/2025/04/steve-jobs.png486302april@madhedgefundtrader.comhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngapril@madhedgefundtrader.com2025-04-04 14:00:052025-04-04 16:04:35April 4, 2025 - Quote of the Day
$700 billion tax increase starts today – the biggest in 85 years.The depressing effects on the economy will be immense.
The US economy is now in recession.How long it will last, nobody knows.
Interest rate plays like bonds are back in favour as recession fears drive rates down.
Gold hits new highs on a major upside breakout.
US dollar enters free fall with declining rates cutting it off at the knees.
Big technology was the most expensive and saw the biggest falls.
Energy gets a rare rally after hitting four-year lows.
Cash is king - $1 at the market top is worth $10 at the bottom.
THE GLOBAL ECONOMY – DYING ON THE VINE
Stagflation Accelerates, with a hot 0.4% increase in the Consumer Price Index and a tepid 0.1% increase in Consumer Spending, the worst since the Pandemic.One year inflation expectations have shot up to 5.0%
Fed leaves interest rates unchanged at 4.25%, cuts quantitative tightening from $25 billion a month to $5 billion a month, to head off a coming recession.
US GDP grows 2.4%, during the October-December quarter.These may be the last positive numbers we see for a while as the country heads into recession.
Equipment rentals fall 7% in February.
Consumer Confidence Plunges, by the most in five years.
Weekly Jobless Claims Rise 2,000 to 223,000.
UCLA Anderson School of Business Announces, “Recession Watch,” the first ever issued.
STOCKS – SELL ALL RALLIES
Stocks are oversold so expect a 3%-5% rally.
But sell on any rally as much lower lows beckon.
All long-term technical indicators have rolled over, meaning that the bear market could continue until summer at the earliest and next year at the latest.
Hedge Funds are still dumping technology stocks as they still command big premiums to the main market.
Vaccine stocks get nailed, as the FDA moves to eliminate the vaccine establishment.
Travel demand is collapsing as consumer rush to cut back discretionary spending.
This has been one of the most rapid corrections in history.
The Volatility Index peaked at $25, this time but there are higher highs to come.
Tesla's brand has been damaged.Nobody buys cars in recessions.
THE ULTIMATE HEDGE – Defensive stocks only go down at a slower rate.
90-day US Treasury Bills (Warren Buffet owns $300 billion)
Government Guaranteed principal
Endless liquidity – trade like water
100% collateral value for margin
Lock in guaranteed income
Can be sold at any time to earn full interest
Will survive any bear market
Ask your broker how to buy
THE WORST-CASE SCENARIOS
The Bull Case
We are now in a recession that will probably cost us -6% - 7% over 2-3 quarters and then ends with a renewal of a $5 trillion tax cut for 2026 (SPY) down 20%-30%, (SPY) multiple drips from 22X to 19X last seen in 2018.
OR
THE BEAR CASE
No tax cut means we enter a depression and lose 25% of GDP over four years.(SPY) down 60% if (SPY) PE falls from 22X to 9X, 240% of stock gains since 2009 have been multiple expansion.
BONDS – RECESSION BOOST
Bonds rocket with a stock market crash prompting a run into safe assets.
Moody’s downgrades the United States, saying Trump’s trade tariffs could hamper the country’s ability to cope with a growing debt pile and higher interest rates.Recession risks are rising.
Rising recession risks put bonds back in the spotlight.
During the pandemic recession, the (TLT) rose to $165.
Shocking CPI at 5.0% annualized gives bonds a boost.
It means that the next Fed move will be a raise, not a cut.
Buy (TLT), (JNK), (NLY), (SLRN) and REITS on dips.
FOREIGN CURRENCIES – DEAD DOLLAR
Prospect of falling interest rates is demolishing the US dollar.
Yen carry-trade unwind sends Japanese currency soaring.
Expected interest rate differentials are the principal foreign currency driver.
Recession fears are bringing forward Fed interest rate cuts.
The Trump economy is forcing investors to flee all US assets, including stocks and currency.
Massive cash flight is running away from the US and into Europe and China.
Buy (FXA), (FXE), (FXB), (FXC), and (FXY)
ENERGY & COMMODITIES – RARE RALLY
Trump threatens a 25% tariff against anyone who buys Russian oil, same with Venezuela.
That gives oil a rare rally to sell into.
US Drillers cut back on new rigs as the country is glutted with over-production, according to Baker Hughes data out today.Recession fears are the gasoline on the fire.Unemployment will rise in the oil-producing states.
Copper hits a new all-time high at $5.02 a pound.The red metal has outperformed gold by 25% to 15% YTD.
The Oil market is in turmoil, with crude prices bouncing off a four-year low.
A global recession is looming large.
PRECIOUS METALS – NEW HIGH
Gold is over-extended and due for a correction.
But long-term targets are getting raised across the board.
No upside resistance above $3,200 - setting up a possible melt-up.
Falling interest rates have given gold a new lease on life.
Gold Stocks in Comex Warehouses hit record highs, due to the risk of import tariffs curtailing shipments to the United States from other countries.
Will import duties divide the gold market into American and foreign gold?
REAL ESTATE – GREEN SHOOTS?
US Mortgage Rates Drop to 6.65% for 30-year fixed-rate loans.Recession fears have driven interest rates from over 7.30% down a full 10.65%.Recession fears have been driving rates down.
Pending Home Sales Rise, based on signed contracts.
Pending Home Sales decreased 3.6% from a year earlier.
US Home Sales rise, but the stocks still look awful, increasing 1.8% to 676,000 units last month.The sales pace for January was revised up to a rate of 664,000 units from the previously reported 657,000 units.
Homebuilder Sentiment craters to a seven-month low in March as tariffs on imported materials raised construction costs.
Existing Home Sales Jumped in February with a decent push from falling interest rates, increasing 4.2% from the annual rate of 4.26 million.
TRADE SHEET – THE RECESSION TRADE
Stocks – sell rallies
Bonds – buy dips
Commodities – stand aside
Currencies – buy dips
Precious Metals – buy dips
Energy – stand aside
Volatility – sell over $30.
Real Estate – stand aside
NEXT STRATEGY WEBINAR
12:00 EST Wednesday, April 16, 2025, from Incline Village, NV.
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
https://www.madhedgefundtrader.com/wp-content/uploads/2016/02/Alert-e1457452190575.jpg135150april@madhedgefundtrader.comhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngapril@madhedgefundtrader.com2025-04-04 11:13:192025-04-04 11:13:19Trade Alert - (NVDA) April 4, 2025 - STOP LOSS - SELL
Below please find subscribers’ Q&A for the April 2 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Incline Village, NV.
Q: Why are there days when both bonds and interest rates are going up?
A: Well, there is a tug-of-war going on in the bond market. When recession fears are the dominant theme of the day, interest rates go down and bond prices go up. Remember, it's an inverse relationship. When the deficit and inflation are the big fears and you get those on the inflation announcement days—we get three or four of those a month—then interest rate goes up and bonds go down. That will be a big driver of stock prices because they are very sensitive to interest rates always.
Q: Do you think Tesla (TSLA) has hit bottom?
A: I don't think so. I think the declining sales continue. I think the Tesla brand has been severely damaged as long as Elon Musk stays in politics. Also, no one buys cars in recessions—sorry, but that is the last thing that people or companies want to buy is a brand-new car.
Q: What will happen to the smaller EV makers?
A: They will all go bankrupt. You know, unless they have a very rich uncle like Lucin Group (LCID) does—Saudi Arabia can keep pumping money in there forever. Amazon owns a big piece of Rivian Motors (RIVN) I don't think any of the small EV makers will make it because they now have Tesla to compete against.
Q: Do you have any way to short restaurant stocks as an industry?
A: I don't know of a single industry ETF for restaurants only. Restaurants are not an industry I have spent a lot of time studying because the margins are so low. I prefer a 70% margin to a 3% margin ones. There are a lot of things like consumer discretionary, so you just have to go shopping in the ETF world. There are more than 3,000 listed ETFs these days in every conceivable subsector of the economy, more than there are listed stocks, so there might be something out there somewhere. Yes, you are correct in wanting to short restaurants going into a recession as well as airlines, rental car companies, and hotels, but these things are already down a lot—you know, 40% or so. So, be careful shorting after these things have already had enormous declines in a very short time.
Q: Will the recession cause Democrats to win midterm elections?
A: If I were a betting man—and of course I'm not, I only go after sure things, —I would say yes. But, you know, 18 months might as well be 18 years in the political world. So, who knows what will happen? Suffice it to say that yesterday's election results were overwhelmingly positive for the Democrats and represent a very strong “no vote” for Trump policies and Musk policies. Even in Florida where they won, the victory margin shrank from 35% six months ago to 12%. That is an enormous swing in the electorate away from Republicans, and that's why the Republicans are very nervous about any election. That's why the Texas governor is blocking a by-election there. He’s afraid he’ll lose.
Q: Is Tesla (TSLA) toast for good?
A: If Elon Musk went back to Silicon Valley and just managed Tesla and kept his mouth shut on non-Tesla issues, I bet the stock would double from these levels over the medium term. So yes, it just depends on how much Elon Musk wants his $200 billion back. That's how much he's lost on the stock depreciation since December.
Q: Is it time to short Delta Air Lines (DAL)?
A: You kind of missed the boat. No point in closing the barn door after the horses have bolted. This was a great short in February, and the same with hotels and rail companies. So be careful of your biggest recession indicators; they have all already collapsed and are more likely to bounce along the bottom.
Q: What are the probabilities that the tariff war could backfire, and we end up with massive job losses and a shortage of goods?
A: Actually, that is the most likely outcome. In my humble opinion, we know big layoffs are coming already. Prices are going to go up, so people will buy less. And prices will go up a lot because of the tariffs, so it's the perfect, perfect economy destruction strategy. And of course, that all feeds directly into the stock market.
Q: Do you think a 10% decline is enough to reflect all of that?
A: Absolutely not. More like down 20% or down 30% to discount the destruction of the economy—some say by half. So, that's an easy question to answer.
Q: Do you think Palantir (PLTR) will recover from this dip?
A: Only when government spending resumes. That could happen sooner once we get some clarity on where the government is actually going to spend its money. Palantir claims they can save masses of money for the government by getting it just to use their software, and a lot of companies are making that claim, like Arthur Anderson, who also had all their contracts axed. So, we don't know. “We don't know” is the most commonly heard expression in the country today. We just don't know what's going to happen.
Q: And is Palantir (PLTR) cheap after a 40% sell-off?
A: No. It's still incredibly expensive and that is the concern.
Q: Is crypto a good short-term bet in this type of high volatility?
A: No, it's not. It's a horrible bet. A 10% decline in the S&P 500 delivered a 30% decline in crypto. If we drop another 10%, you can expect crypto to drop another 30%. You know, it's like a 3x long NASDAQ ETF. That's how it's behaving. So, I watch it very carefully as a risk indicator. If we get a substantial rally, I'm looking to short the big players in crypto, which would be MicroStrategy (MSTR) and ProShares Bitcoin Strategy ETF (BITO). Looking for a good short there or at least to write calls. The call premiums are extremely high on all these crypto plays—sometimes they're 84%.
Q: How much more inflation can the economy handle before we are in a deep recession?
A: Well, I think we're in recession now. Almost every inflation indicator is pointing to lots of upside and, of course, the tariffs haven't even started yet. They start today, and it'll take at least a month or two to see what the actual impact of the tariffs will be on local prices.
Q: Why do you think the tariffs will be damaging to the economy?
A: Virtually every economist in the world has agreed that the trade wars of the 1930s were a major cause of the Great Depression, but not the sole cause. The only economists that have changed their minds now are the ones that have just gotten Trump appointments. I mean, that's it, clear and simple. You raise the price, you get less demand—basic supply and demand economics. I'm not inventing anything new here. It’s basic economics 101.
Q: Here's a good question that has puzzled people for a century: If Copper is up, why is Freeport McMoRan (FCX) down?
A: Freeport is a stock first and a commodity producer second. When stocks crash, people flee to commodities, and that is what is happening. Chinese are buying up copper ingots as a gold alternative, and people are dumping Freeport because it's in an index. Some 80% of all the selling is index selling. So if you're in that index, your stock goes down regardless of your individual fundamentals. Whether it's a good company or not, whether your earnings are expanding or not, I'm seeing this happen in lots of other great companies.
Q: Is gold (GLD) subject to 25% import duties? What will that do to the pricing of gold?
A: Physical gold got an exemption, so it is not. However,gold stocks in COMEX warehouses in New York hit record highs as the managers rushed to bring in gold to beat the tariffs to meet the ETF demand in the United States. So there’s a lot of turmoil in that market, as there are in all markets now—people trying to beat the tariffs. By the way, I bought all the computer equipment my company needs for the rest of this year in order to beat the tariff increases because all my Apple (AAPL) stuff comes from China and they're looking at 60% tariffs.
Q: If the silver (SLV) does go to a new all-time high, does that mean the S&P 500 is going to an all-time high?
A: No, if anything (SPY) goes to a multi-year low. We may be losing a generation of stock investors here. That puts silver within easy range at $50.
Q: Will biotech stocks shift because of the policy changes?
A: They're losing their government research funding, the authorization process for new drug approvals has had sand thrown at it. Time delays have been greatly extended on new approvals and suffice to say, the leadership does not have the confidence of the industry, and biotech stocks are doing horribly. You know, when you appoint someone to head a department whose main job is to dismantle that department, that's generally really horrible for the industry, especially when the industry is dependent so much on government grants for research. We are losing a generation of new scientists. That puts off any cures for cancer, Alzheimer’s, or diabetes into the far future.
To watch a replay of this webinar with all the charts, bells, whistles, and classic rock music, just log in to www.madhedgefundtrader.com, go to MY ACCOUNT, click on GLOBAL TRADING DISPATCH, TECHNOLOGY LETTER, or JACQUIE'S POST, then WEBINARS, and all the webinars from the last 12 years are there in all their glory.
Good Luck and Good Trading,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline.Read more
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline.Read more
Last Thursday, I found myself trapped in an elevator with the former head of R&D at one of Boston's leading life sciences companies – a guy I've known since my Tokyo days in the late '70s.
After we established that neither of us knew how to hack the elevator controls (disappointing, since he has three engineering degrees from MIT), he leaned in and whispered, "You know what's crazy? Everyone's obsessing over AI stocks while Danaher is sitting there at nearly a 30% discount to historical valuations."
The elevator started moving before I could press him for details, but his comment sent me down a research rabbit hole that kept me up until 3 AM.
My old friend wasn't wrong. Danaher (DHR) has quietly become one of the most compelling value opportunities in the life sciences sector.
While lesser investors are chasing the latest semiconductor hype, DHR is trading at 26.9x forward earnings – a substantial discount to its five-year average multiple of 30.2x – all while positioning itself for what looks like a significant rebound in 2026.
I've been tracking Danaher since their earliest acquisition days in the late 1990s, and their current setup reminds me of late 2018 when they were preparing to acquire GE's biopharma business.
Back then, short-term concerns created a buying opportunity that delivered a 150% return over the next three years.
Today's discount stems from China's Volume-Based Procurement initiative and lower respiratory testing revenues at Cepheid – both temporary headwinds that mask the company's extraordinary long-term potential.
What most market participants are missing is that Danaher's core growth engine – its Biotechnology segment – is showing undeniable signs of life.
Their latest quarterly orders grew over 30% year-over-year, marking the sixth consecutive quarter of high single-digit sequential growth.
After two years of inventory destocking that felt like watching paint dry (if the paint cost $10,000 per gallon), the bioprocessing business has returned to positive growth territory.
The company's Life Sciences segment also turned positive last quarter, benefiting from Chinese stimulus funding that took longer than expected to materialize – sort of like waiting for your teenager to clean their room, but with billions of dollars at stake.
While Q1 will face tough year-over-year comparisons due to a large energy project last year, management expects growth to accelerate through 2025, culminating in a major Pall customer project in Q4.
Now, Danaher does face legitimate near-term challenges. Their Diagnostics segment is battling headwinds from China's VBP initiative, which accelerated unexpectedly in late 2024.
Management now estimates a $150 million impact for 2025 on top of the $50 million already absorbed in 2024. They've also guided for respiratory testing revenue to drop from $1.95 billion to $1.7 billion this year.
But here's where things get interesting. The flu season is turning out to be significantly more severe than anticipated – one of the worst in 15 years according to CDC data I reviewed yesterday.
This suggests management's respiratory testing guidance could prove conservative. Meanwhile, their non-respiratory portfolio is growing at mid-teens rates, with their women's health multiplex vaginitis panel increasing by over 20%.
What truly separates sophisticated investors from the herd is understanding that Danaher's management team rarely sits idle during challenging periods.
True to form, they've implemented a cost reduction program targeting at least $150 million in annual savings, focused specifically on offsetting the VBP impact in China and the Diagnostics segment.
This isn't their first rodeo with margin pressure – they've maintained their remarkable 30-year track record of operational improvement through far worse conditions.
The long-term growth thesis remains rock solid. The bioprocessing business is perfectly positioned to capitalize on biologics and biosimilar adoption as major patents expire in coming years.
According to management, there are approximately 600 FDA-approved biologics today with over 20,000 in the pipeline. Their Cytiva business supports over 90% of global monoclonal antibody manufacturing volumes – a stunning competitive position in one of healthcare's fastest-growing segments.
For perspective, it's like owning the only company that makes drill bits during a massive oil boom.
I've analyzed Danaher's forward P/E ratio across multiple market cycles, and the current valuation represents a compelling entry point for patient investors.
At 24x 2026 earnings estimates, the stock is pricing in virtually zero multiple expansion despite the company's historical premium to the market. The consensus expects EPS to grow from $7.66 in 2025 to $8.58 in 2026 – a 12% increase that looks conservative given the margin expansion potential as revenues recover.
I've started building a position at these levels, with plans to add on any further weakness. While timing the absolute bottom is a fool's errand (believe me, I've tried and have the investment scars to prove it), the current valuation provides a meaningful margin of safety.
I'm targeting a return to at least 28-30x forward earnings over the next 18-24 months as growth visibility improves, which would translate to approximately 25-30% upside from current levels.
As a veteran of both market crashes and faulty elevators, I've learned one crucial lesson: the key difference between being stuck in an elevator and stuck in an undervalued stock is that only one of them lets you press the “up” button when you've reached the bottom.
And if Danaher delivers as expected, I might just start hanging out in more broken elevators looking for my next investment idea.
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.com2025-04-03 12:00:202025-04-03 12:32:03Mind The Gap
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