June 2025 Archive - Mad Hedge Fund Trader

June 11 Biweekly Strategy Webinar Q&A

Below, please find subscribers’ Q&A for the June 11 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Incline Village, NV.

Q: Will the LA riots have any impact on the market?

A: So far, they have not. The demonstrations have been confined to just a two-block area around the federal building—although on TV, it looks like the entire city is engulfed. The press coverage has been wildly exaggerated. They now have the problem of: where do you put 6,700 troops? So far, they’ve been sleeping on concrete in the Federal Building underground parking lot, but if you add more troops in there, where are they going to stay? I doubt they’re going to move into the Ritz-Carlton. I have talked to Marine division commanders down there, and the whole thing is a cluster…. No planning, no coordination. And it cost $134 million, which will have to be added to the deficit.

Q: What kind of market are you expecting this summer?

A: I expect we’ll peak out pretty soon and then go flat for the rest of the summer, and then attempt another year-end rally up maybe 10% from here, unless we get bad news on the trade front or inflation takes off. If we do get another supply shocker on the trade front, we could give up at least half of the recent gains and go down to 5,500 in the S&P 500. The new range for 2025 might be $5,500 – $6,500 for the S&P 500 (SPX).

Q: What is your favorite agricultural commodity stock to invest in?

A: Well, John Deere (DE) is the best play in the sector, and they are moving from a sales to a subscription model. They have a new software app that lets farmers predict when best to harvest their crops, and they’re selling that on a subscription basis, so it’s turning it into a technology stock. It’s already had great runs this year. If we get any more market selloffs, pick up John Deere (DE). If you assume the trade war with China ends someday, pick up (SOYB) as a pure ag play. The Chinese are the biggest buyers.

Q: Inflation seems to be easing up. Do you expect the Fed to cut 25 basis points later this year?

A: The answer is No, I do not. As long as you have the unknown of tariffs out there, the main concern of the Fed will be possible future inflation, which means no cuts. The longer these negotiations with China drag out, the more uncertain we are about the level of interest rates, and that’s going to cause the Fed to do nothing, which is their favorite thing to do. So, you may not get any interest rate cuts for a year. Employment seems to be holding up, but there are some chinks on the armor there, as I’ll show you in the numbers.

Q: Is the Fed likely to lower interest rates once the new Fed governor is appointed next year?

A: Absolutely, you can count on the next Fed government being hired specifically for the purpose of taking interest rates to zero. So, you can expect a half-point cut on the first day of the new Fed governor in June next year, and many successive cuts after that. Of course, if there is inflation at that time, it’ll cause it to take off and really catch on fire. We could get up to the 5%, 6%, 7% inflation rates very quickly if they do that.

Q: What is the best way to invest in oil other than directly in the futures?

A: Well, most people are not registered to trade futures, that’s why we don’t make specific futures recommendations. You can always buy the United States Oil Fund ETF (USO) that tracks fairly closely with oil itself, but the real bang for buck in the oil industry is buying oil companies, because they have a lot of upside leverage to the price of oil. My favorites there are going to be Occidental Petroleum (OXY) and Exxon Mobil (XOM), for the dividend.

Q: If foreigners boycott the US Treasury bond auctions, where are they deploying their U.S. Dollars (UUP)?

A: The answer is, foreigners are buying their own bonds—they’re buying Eurobonds or bringing the money back into Europe to the Euro, which is an appreciating currency now against the U.S. dollar. Remember, from the European point of view, everything American is depreciated by 20% just on the currency, and that includes our bonds.

Q: Do you recommend investing in the Australian dollar (FXA)?

A: I do. I think the weak dollar will continue for years—possibly as long as the current administration remains in power, which has a very vocal weak dollar policy. You could get another 10%-20% rise in the Australian dollar and the other currencies like (FXE), (FXY), (FXB) very easily.

Q: They are selling off the market, but I don’t really understand why. I haven’t heard any news.

A: It could be a sell-the-news on the end of the Chinese trade talks, or people getting out of the way ahead of tomorrow’s bond auction—the expectations are not great. We have NASDAQ down 16 on the day, (QQQ)’s are negative on the day now, and people are moving into precious metals. By the way, we took profits on our last gold trade first thing this morning.

Q: Why did Netflix (NFLX) suddenly sell off 10%?

A: If the London trade negotiations with Chinese hint at the end of the trade war, why do you need a trade war-proof stock like (NFLX)? Plus, the stock is up 50% in two months, so there’s pure profit taking and reallocation.

Q: With the U.S. economy slowing, do you see that corporate earnings will increase?

A: No, I do not. Corporate earnings grew at a 14% rate in Q1. I expect the growth rate to fall to zero by Q4, and that is another reason why stocks are very risky here. You don’t want to be paying up all-time-high prices for stocks that are seeing their earnings growth go to zero—not a good combination.

Q: Is there a chance the Chinese Yuan (CYB) will take over the dollar as a world currency?

A: Absolutely not—not in a million years. The Chinese yuan is at the very bottom of the list of currencies that would take over from the dollar. It is a manipulated currency, controlled by a dictatorship, and heavily dependent on international trade. It lacks the depth of a financial system to handle large amounts of international transactions, and all of their reserves are secret. We don’t know how much gold they really own. So, no transparency at all, whereas the United States has all the transparency in the world (or at least it used to.) So, that is a very safe statement to make.

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

2021 Camping at Yosemite

June 13, 2025 – Quote of the Day

Diary, Newsletter, Quote of the Day

“The bulls have the run of the table here on oil,” said John Kilduff from Again Capital Partners.

Trade Alert – (BA) June 12, 2025 – BUY

Trade Alert

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

June 12, 2025

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
June 12, 2025
Fiat Lux

Featured Trade:

(HOW TO SELL ONE MOLECULE TWO WAYS AND MAKE BILLIONS)

(NVO), (PFE), (HIMS), (LFMD), (CVS), (LLY)

How To Sell One Molecule Two Ways And Make Billions

Biotech Letter

Did you know Novo Nordisk’s (NVO) Ozempic and Wegovy are basically twins separated at birth?

Both contain the same molecule — semaglutide — yet Wegovy costs three times more simply because it moonlights as a weight-loss drug instead of a diabetes treatment.

That, my friends, is pharmaceutical sorcery so profitable it would make Merlin jealous.

And yet, despite sitting on what might be the most lucrative molecule since Pfizer’s (PFE) little blue pill rewrote bedroom history, Novo’s stock has taken a noticeable hit.

Timing, as they say, is everything. And sometimes, the market’s sense of timing is like a GPS with a dead battery: lost and confused.

While others were looking elsewhere, I’ve kept a close eye on this Danish giant. Contrarian? Maybe.

But when a company revolutionizing chronic disease care for 46 million patients starts trading at a discount to its peers, it certainly earns a place on my watchlist.

Let’s talk numbers. Novo’s Q1 FY2025 earnings came in strong: $11.8 billion in revenue, up 25.84% year-over-year, and earnings of $0.99 a share, up 20.7%. And yes, they crushed Wall Street’s expectations with a 6.88% earnings surprise.

The real fireworks, though, are in their Obesity Care segment, where Wegovy sales popped 65%.

Even the dependable Diabetes Care unit — think Ozempic and Rybelsus — clocked in with a healthy 11% gain.

This isn’t just steady growth. It’s exponential, global-scale, paradigm-shifting growth. In biotech terms, that’s like finding penicillin in your lunchbox.

Sure, there are clouds. The specter of compounded GLP-1 products has been eating into Novo’s market share like termites in a wooden house.

These copycat versions, often sold at lower prices, gained a foothold when branded Wegovy and Ozempic were on the FDA’s drug shortage list. It’s the pharmaceutical equivalent of knockoff Rolex watches flooding the market when the real Swiss timepieces are backordered.

But the party’s over. As of February 2025, semaglutide is off the shortage list, and compounding pharmacies are legally benched unless it’s an emergency.

Novo’s not playing defense either. They’ve rolled out a direct-to-patient program with Wegovy at $499 a month — and a tasty $199 for first-timers.

They’re also teaming up with telehealth players like Hims & Hers Health (HIMS) and LifeMD (LFMD), expanding access faster than its competitors.

Then there’s CVS (CVS), the 800-pound gorilla of pharmacy benefits, naming Wegovy the only obesity drug on its national formulary come July 1. That’s not just market share — that’s an exclusive VIP section with velvet ropes.

As for political bogeymen, President Trump’s “Most Favored Nation” pricing order looms, but enforcement looks about as aggressive as a paper tiger.

U.S. cash-pay pricing sits at $499, Denmark at $350, and the UK around $270 — not exactly the stuff of pricing scandals.

Here’s where the rubber meets the road. Assuming a conservative 45% EBITDA margin, which is below their trailing 50.5%, Novo could post $26.48 billion in EBITDA.

Slap a modest 15x EV/EBITDA multiple on that for FY2026, subtract $11.19 billion in net debt, and you’re looking at more than 15% upside. Not bad for a “boring” drugmaker, eh?

And let’s not forget, this isn’t just any drugmaker. The global GLP-1 receptor agonist market is projected to hit $268.37 billion by 2034, expanding at a 17.5% compound annual growth rate.

Those are technology-sector-like growth rates in a healthcare setting.

With a CEO transition looming — always a potential wildcard in PharmaLand — Novo keeps the dividends flowing, currently yielding around 2.52%, with more hikes likely.

Oh, and they’re trading at about half the EV/EBITDA multiple of Eli Lilly (LLY). You do the math.

Novo Nordisk is what I call a stealth juggernaut: undervalued, misunderstood, and quietly gobbling market share while the crowd is distracted. It’s an opportunity gift-wrapped by market myopia. I suggest you buy the dip with both hands.

June 12, 2025

Diary, Newsletter, Summary

Global Market Comments
June 12, 2025
Fiat Lux

Featured Trade:

(HERE IS YOUR NEXT DECADE LONG PLAY),
(CAT), ($COPPER), (FCX), (BHP), (RIO),
(TESTIMONIAL)

Here is Your Next Decade Long Play

Diary, Homepage Posts, Newsletter

The urgent question of the day is, WHICH stocks do you buy and forget about for good?

The answer is very simple. You buy cheap ones. And what are the cheapest stocks out there?

Commodity stocks.

My friend, Jim Umpleby, said that we are just entering a ten-year super cycle in commodities.

Jim should know. He is the CEO of Caterpillar (CAT), a company I have been following for 50 years. I even have one of their cool, worn yellow baseball caps from years past.

Needless to say, the global commodity shortage has created a stampede to buy the company’s heavy machinery.

Industrial commodities are, in fact, the perfect sector to buy right now. Take a look at the long-term chart for copper prices, which are a great bellwether for the entire industry. They are imminently poised to make another long-term upside breakout.

Copper last peaked at the beginning of 2011, when the Chinese infrastructure build-out suddenly outdrew to a juddering halt. Prices cratered from $4.60 a pound to a lowly $1.90. Mines were sold off, mothballed, or permanently closed at a record rate.

Copper prices fell so low that the US Mint finally started making a profit on pennies they struck.

Then a funny thing happened.

Copper prices were assisted by the global synchronized economic recovery that resumed in 2023. The share prices of copper and other major commodity producers have gone ballistic.

Freeport McMoran (FCX), the world’s largest copper producer (whose management is a long-time reader of this letter), has just seen its stock jump from $33.50 a share to $38.49. I expect it to someday reach $100.

You may think that it’s too late to get into the commodities space, but you’d be wrong. Having covered the sector for nearly half a century, there is one thing you learn quickly. While you can shut down a mine in a matter of weeks, it can take years to bring it back on line.

As for developing a new mine from scratch, that can take a decade by the time you get design, permits, infrastructure, equipment, and labor in place.

My Australian readers tell me that (BHP) is flying young skilled workers from Brisbane an incredible 2,000 miles to work in Northwest mines in a six-week-on, six-week-off work schedule and paying them $200,000 a year to do it. And they’re making a profit doing this!

The bottom line here is that a short squeeze has developed for industrial commodities, which will last for years.

Oh, and that global economic recovery? It is on vacation until investors get a sniff of the first interest rate cut in five years. That could happen in a few months.

At least you have something to buy now.

Commodities Are In Our Blood

Testimonial

Diary, Homepage Posts, Newsletter, Testimonials

Hey John and the MAD Team,

You really nailed and keep nailing great reversals and trends that are just beginning to deserve a watchful eye.

I’m still a bit stuck on futures, but I realize the safety in your spreads is a lot smarter…Thx for all you know and for all you do.

Rod,

Alberta, Canada

June 12, 2025 – Quote of the Day

Diary, Newsletter, Quote of the Day

“It’s hard not to root for America and democracy when you’re part of the system,” said hedge fund manager Brad Gerstner.

Meta’s AI Leap: Zuckerberg’s $14 Billion Bet on Scale AI and Alexandr Wang

Mad Hedge AI

In a monumental move that underscores the intensifying artificial intelligence arms race, Meta Platforms, under the leadership of CEO Mark Zuckerberg, is reportedly finalizing a nearly $14 billion investment in Scale AI. This colossal deal would grant Meta a significant 49% stake in the leading data labeling and annotation company. Adding to the strategic depth of the acquisition, Alexandr Wang, Scale AI’s visionary founder and CEO, is set to join Meta to spearhead a new, ambitious AI research lab. This aggressive play signals Zuckerberg’s deep-seated frustration with Meta’s perceived lag in the AI frontier and reflects an unwavering commitment to position the social media giant at the vanguard of artificial general intelligence (AGI) development.

For months, whispers of Zuckerberg’s dissatisfaction with Meta’s AI progress have echoed through Silicon Valley. While Meta has poured substantial resources into AI infrastructure, including plans for tens of billions in capital expenditures for 2025 and a massive new data center, and has released its Llama AI models, the company has seemingly struggled to keep pace with rivals like OpenAI, Google, and Microsoft in developing foundational AI models and, more critically, in deploying compelling consumer-facing applications. The muted reception of Meta’s Llama 4 and reported delays in its more advanced “Behemoth” model have only amplified the pressure. This $14 billion investment in Scale AI isn’t just a financial transaction; it’s a strategic course correction, a massive “acqui-hire” designed to inject critical expertise and accelerate Meta’s AI roadmap. By acquiring a near-controlling stake in Scale AI, Meta gains direct access to the lifeblood of advanced AI development: high-quality, meticulously labeled data—the foundational fuel for training powerful AI models. Scale AI has built an impressive reputation as a vital partner for major tech players, including even Meta’s direct competitors.

At just 28 years old, Alexandr Wang has guided Scale AI to become an indispensable component of the AI ecosystem. Founded in 2016, the company specializes in providing the crucial data infrastructure required to train sophisticated AI systems. This includes everything from annotating images and videos to generating vast datasets for large language models. With a global network of over 100,000 contractors, Scale AI has been the quiet force enabling many of the breakthroughs seen in autonomous vehicles, robotics, and generative AI. The company’s impressive growth speaks volumes about its importance, having generated $870 million in revenue in 2024 and projecting to more than double that to $2 billion in 2025. Its valuation has also soared, reaching $13.8 billion in its Series F funding round in May 2024, and is expected to catapult well past $28 billion with Meta’s investment. This financial leap highlights the premium now placed on companies that provide the foundational elements for AI development. By bringing Scale AI’s expertise in-house, Meta is effectively future-proofing its AI pipeline. A consistent supply of high-quality, specialized data will be instrumental in developing more robust and competitive AI models, supporting not only Meta’s consumer-facing products but also its broader AI ambitions.

The hiring of Alexandr Wang is arguably as significant as the investment itself. Wang, a prodigy who dropped out of MIT, has a reputation as an ambitious leader with a deep understanding of AI’s technical complexities and the acumen to build a successful business around it. His appointment to lead a new “superintelligence” lab at Meta signals a profound shift in Zuckerberg’s approach to AI leadership. Historically, Zuckerberg has favored promoting loyal insiders to top positions. The personal recruitment of an external founder of Wang’s caliber underscores the urgency and critical nature of this AI push. Wang’s new lab will be tasked with accelerating Meta’s development of Artificial General Intelligence (AGI)—a theoretical form of AI capable of matching or surpassing human cognitive abilities across a wide range of tasks. Beyond AGI, Zuckerberg has even hinted at “superintelligence,” a hypothetical AI that exceeds human capabilities. This ambitious mandate underscores Meta’s determination to not only catch up but to eventually lead the global race towards truly intelligent AI. Wang is expected to bring a team of his colleagues from Scale AI, further bolstering Meta’s internal AI talent pool, an area where the company has reportedly faced challenges with high turnover and project delays.

Meta’s decision to take a substantial minority stake in Scale AI rather than an outright acquisition is a shrewd strategic move. This approach mirrors the strategies adopted by other tech giants, such as Microsoft’s investment in OpenAI and Google/Amazon’s stakes in Anthropic. By opting for a significant stake rather than a full takeover, Meta potentially helps to sidestep intense regulatory battles that have plagued previous large acquisitions. This allows Meta to gain significant influence and access to Scale AI’s resources without triggering the same level of antitrust scrutiny. Furthermore, this deal also reflects a broader trend in the AI industry: the increasing importance of securing foundational AI infrastructure. The race for AI supremacy is not just about developing the best algorithms; it’s equally about controlling the data and the talent required to train and deploy these models. Meta’s investment in Scale AI is a clear signal that the company recognizes this crucial aspect of the AI landscape.

Despite the immense potential, this high-stakes bet comes with its own set of challenges. One immediate question revolves around Scale AI’s future leadership, with reports suggesting Chief Strategy Officer Jason Droege is in discussions for the CEO role. There are also concerns about the impact of this deep partnership on Scale AI’s existing relationships with other AI labs, some of whom are Meta’s direct competitors. This could potentially benefit Scale AI’s rivals like Turing and Surge AI. Moreover, the ethical implications of AI development continue to be a significant concern. As AI technologies become more sophisticated and integrated into daily life, questions about data privacy, bias in algorithms, and the potential for misuse become increasingly pressing. Meta’s advancements in AI will undoubtedly attract increased scrutiny from regulatory bodies and the public.

However, the long-term implications of Meta’s monumental investment in Scale AI and the strategic hiring of Alexandr Wang are vast and potentially transformative. By positioning itself at the forefront of AI research and development, Meta aims to enhance its product offerings across Facebook, Instagram, WhatsApp, and its burgeoning metaverse initiatives. Personalized content, more efficient advertising, and even advanced virtual assistants integrated into devices like Ray-Ban smart glasses are just some of the potential outcomes. This investment is not merely about technological advancement; it’s about Meta’s fundamental future. In a world increasingly shaped by artificial intelligence, Mark Zuckerberg’s biggest AI bet signals a new era for Meta, one where the company is determined to lead, innovate, and redefine the boundaries of human-computer interaction. The coming years will reveal whether this bold gamble pays off, but one thing is clear: Meta is all-in on AI.