April 4, 2025
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(SUMMARY OF JOHN’S APRIL 2, 2025, WEBINAR)
April 4, 2025
Hello everyone
TITLE Trade Terrors
TRADE ALERT PERFORMANCE
2025 YTD: +14.44%
Since inception: +766.33%
Trailing One Year Return: +81.35%
Average Annualized Return: +49.82%
PORTFOLIO REVIEW
Risk On
(NVDA) $90-$95 call spread 10%
(COST) 4/$840-$850 call spread 10%
(TSLA) 4/$160-$170 call spread 10%
Risk Off: No positions
THE METHOD TO MY MADNESS
$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.
Cheers
Jacquie
