Diary Archives - Mad Hedge Fund Trader

The Market Outlook for the Week Ahead, or the United States of Debt

There is only one number traders and fund managers need to know that came out of the US budget for fiscal 2026, which starts on October 1, 2025: $5.0 trillion.

This is the new debt ceiling increase that was signed into law on Friday and is guaranteed to take the National Debt from $37 trillion to $42 trillion by the end of 2026, or 150% of GDP. We have become the United States of Debt.

What about the mere $3.5 trillion deficit last week’s budget promised? On top of that, you have to add $1.5 trillion in maturing debt that has to be rolled over by the end of next year. The government is rolling over bonds with 0.64% coupons and reissuing ones with 4.4% interest rates. This will increase America’s debt service at a tremendous rate, which already stands at over $1 trillion a year. It is a perfect money-destruction machine. Only a government could do this.

And here is the big problem.

No large country has ever tried to borrow this amount of money before, not in all of human history. Smaller ones have, like Argentina, which saw their borrowing binge trigger inflation topping 200% and render the currency worthless, and Zimbabwe, which saw inflation reach millions of percent.

What will happen when borrowing reaches 150% of GDP in the United States? No one really knows. We are in uncharted territory, terra incognita.

It gets worse.

The government is going to try and sell this $5 trillion in debt when the US dollar is collapsing, down 20% so far this year. And that is when dollar interest rates are among the highest in the world, with a 90-day T-bill rate of 4.40%. What happens when US interest rates fall, which they almost certainly will do no later than May next year? The government is going to try to unload this massive amount of debt just when our long-term debt has become the pariah of international markets.

Another problem that Congress failed to notice in its pell-mell rush to pass the budget at all costs is that the growth assumptions are necessary to service this gargantuan level of debt. Their calculations were based on a 3.0% annual growth rate. In reality, the economy is currently shrinking at a -1.0% annual growth rate.

Growth may improve next year when the aforementioned interest rates fall and tariffs become less opaque. But I doubt we’ll see a 3.0% growth rate anytime during this administration. I can only assume that the people in Washington are terrible at math, as they are mostly lawyers and entertainers.

Experts in the debt markets who are far more knowledgeable and experienced than I are predicting that a 13.5% increase in the National Debt from these levels in 18 months will lead to a super spike in borrowing costs that will take interest rates easily up to double digits, crashing the economy. If that occurs, you can count on stocks to give back half of their current values, as they did in 2008-2009. A stock market crash is a sure thing.

I am not so sure.

My half-century in the markets tells me that usually, the world doesn’t end. I am but a dilettante in the bond world. I am only there when there is easy money to be made. There are usually far more fruitful and frequent pickings in the stock markets. I do know that hedge funds and institutions aren’t chasing this rally. “Discretion is the better part of valor”, said William Shakespeare in Henry IV.

If by some miracle the US Treasury is able to borrow more than the GDP of Germany over the next 18 months with no market consequences, stocks will continue to grind up to new all-time highs, lured by the vision of AI. The price-earnings multiple will rise to 24X, 25X, and 26X, but who cares? What will happen then?

The government will borrow another $5 trillion, taking the National Debt from $42 trillion to $47 trillion. That’s what the current administration did the last time it was in office when, shockingly, tax cuts failed to pay for themselves. Then, you really need to look out below.

On a happier note, one question I get from clients several times a day is how AI will affect the stock market and society as a whole. It has been revolutionary for my own business, which has seen our own Mad Hedge AI Market Timing Index double our trading performance since 2013, and it keeps improving. It gets smarter every year.

I couldn’t function without it. I believe over time, AI will create more jobs than it destroys, should add 1% a year in GDP growth per year, and continuously take the stock market to new highs.

But lately, the growth of AI has vastly accelerated, and it has also become more aggressive. Wives are complaining that their husbands have been kidnapped by Grok or ChatGPT, as they spend all day on it. The person who transcribed my biweekly Global Strategy Webinar was out last week, so we asked Zoom to do the job for us instead. See the results below.

Q: What is your range for the S&P 500 (SPY) this year?

A: I see us stuck in the 5,500 to 6,500 range. Best-case scenario, we get a low single-digit return for the year. But with tariffs, inflation, and political dysfunction, the risks are tilted to the downside.

Q: Which tech names are you watching?

A: NVIDIA (NVDA), Microsoft (MSFT), Meta (META), Snowflake (SNOW), Alphabet (GOOGL), and Advanced Micro Devices (AMD). I’ve traded them all. But many are overbought — I’ll be looking to sell calls or wait for dips before going long again.

Unknown to me, Zoom recently added an AI function to their transcription app and as a result, it tried to enhance my answers. I never actually said the answers highlighted red above, certainly never used the word dysfunction, and didn’t even recommend (AMD). AI added that name because it saw (AMD) as the natural logical progression from the previous six names.

Maybe I should buy (AMD)?

MIT did some interesting research on AI lately. It had two groups of students write an SAT-style essay. One did it on their own. The second used AI apps to assist them. It was found that the brain activity in the AI-using group was far lower than the original writing group.

AI is creating a lot of boring, anodyne, uninspiring, and average answers. There is no originality or creativity. I can spot AI writing a mile away. Are we headed for a boring, anodyne, uninspiring, and average world?

The good news is that humans will still be in demand for the rest of my life. As for yours, I’m not so sure. I am also getting about five new AI-generated job offers a day. It’s nice to be in demand in my old age. Apparently, I am overqualified to do everything.

And because you can never get enough steam engines in your life, here are links to videos I took last week at Golden Spike National Historic Park. They were ordered in 1969 for the 100-year anniversary of the Golden Spike ceremony completing the Transcontinental Railroad.

They were completed in 1979 at a cost of $4 million each in today’s money and just completed a 45-year rebuild. Some 156 years ago, the original 119 steamed all the way out from New York, while the more ornately decorated Jupiter rolled in from Sacramento, California, crossing the High Sierras. They run every day at 1:00 PM Mountain Time. And no, they won’t let you drive the engine no matter how much money you offer them. I tried. (I went to steam engine school in Birmingham, England 40 years ago).

Click here and then hit the PLAY arrow and here.

Another drag on the economy is the resumption of student loan repayments. This will remove 10 million consumers because it will eat up their disposable income. They came from the economy as they had been suspended since the pandemic. The new 2025 budget resumes collections as part of the administration’s wide-ranging war against higher education. Student loans at $1.8 trillion are now the single largest source of consumer borrowing, exceeding credit cards and auto loans. Some 21% of student loans are now in default. They grew from 10% of consumer debt in 2010 to 33% by 2010.

My July performance started off with a bang, with a +2.22% gain, taking us to new all-time highs on all metrics. That takes us to a year-to-date profit of +47.39%. My trailing one-year return exploded to a record +102.63%. That takes my average annualized return to +51.29%, and my performance since inception to +799.28%. These are all non-compounded numbers.

It was a week when the market ground up every day except for Friday. I doubled up my short position in Tesla since the sales decline was worse than I expected. I added a new long in Amgen (AMGN), which looks like it is bottoming out. That leaves me 70% cash, 20% short, and 10% long.

Some 63 of my 70 round trips in 2023, or 90%, were profitable. Some 74 of 94 trades were profitable in 2024, and several of those losses were really break-even. That is a success rate of +78.72%.

Try beating that anywhere.

Nonfarm Payroll Report Delivers Upside Surprise, at 114,000. The headline Unemployment Rate dropped to 4.1%. No case for interest rate cuts here.

Powell Says Inflation to Surge this Summer. He also admitted he would have to cut rates by now before tariffs injected massive uncertainty into the Economy. I think he’s telling us no interest rate cuts this year.

June ADP Collapses. Private payrolls lost 33,000 jobs in June, the first decrease since March 2023. Economists polled by Dow Jones forecast an increase of 100,000 for the month. The May job growth figure was revised even lower to just 29,000 jobs added from 37,000. I hate to state the obvious, but this is another recession indicator.

US Dollar Plunging to Four-Year Low. The $5 trillion debt ceiling increase in the Budget bill is the main reason, which would take the National Debt from $37 trillion to $42 trillion. Pay for that European vacation now before it gets too expensive to go.

US Manufacturing Says We’re Still in Recession. The Institute for Supply Management (ISM) said on Tuesday that its manufacturing PMI nudged up to 49.0 last month from a six-month low of 48.5 in May. It was the fourth straight month that the PMI was below the 50 mark, which indicates contraction in the sector that accounts for 10.2% of the economy.

Tesla US Sales Dive 13% in Q2, on a YOY basis. Global sales declined 13% to 384,122 vehicles in the last three months. The company’s sales were expected to be boosted by the redesigned Model Y, but its otherwise stale lineup is losing ground to competitors in China and the US electric-car market. Most analysts now expect Tesla to report its second consecutive annual decline in vehicle sales, with an average projection of 1.65 million vehicles in 2025, an 8% drop from last year. I hate to state the obvious, but this is another recession indicator. Tesla (TSLA) rallies.

Budget Bill Kills Effort to Restore Strategic Petroleum Reserve, cutting the funding by 90%. Former President Joe Biden conducted several sales from the SPR, including 180 million barrels at $100 a barrel, the most ever, after Russia invaded Ukraine. The sales left the SPR at its lowest level in 40 years when the U.S. was far more dependent on oil imports. This explains why the Iran War rally faded so quickly.

Constellation Wiped out by Tariffs on Aluminum. The stock has shed more than 20% of its value this year, fueled by concerns about how the higher duties would affect demand for its beer. Did you know that their Modelo is the number one-selling beer in the US? At least Mexican beer is getting in.

Q1 GDP is Revised Down, shrinking from 0.2% to -0.5%. It’s further proof that we are in a recession that is accelerating. That’s why bonds (TLT) have enjoyed a five-week, $6.0 rally.

My Ten-Year View – A Reassessment

We have to substantially downsize our expectations of equity returns in view of the election outcome. My new American Golden Age, or the next Roaring Twenties, is now looking at multiple gale-force headwinds. The economy will completely stop decarbonizing. Technology innovation will slow. Trade wars will exact a high price. Inflation will return. The Dow Average will rise by 600% to 240,000 or more in the coming decade. The new America will be far more efficient and profitable than the old. My Dow 240,000 target has been pushed back to 2035.

On Monday, July 7, nothing of note takes place.

On Tuesday, July 8, at 7:30 AM EST, the Consumer Price Index is announced.

On Wednesday, July 9, at 8:30 AM, we get the Producer Price Index.

On Thursday, July 10, we get Weekly Jobless Claims. We also get US Retail Sales.

On Friday, July 11, at 8:30 AM, we get Housing Starts and Building Permits.

As for me, as you may imagine, the most interesting man in the world is impossible to shop for when it comes to Christmas and birthdays.

So, it was no surprise when I opened a box last December 25 and found a DNA testing kit from 23 and Me. I spat into a small test tube to humor the kids, mailed it off and forgot about it.

I have long been a keeper of the Thomas family history and legends, so it would be interesting to learn which were true and which were myths.

A month later, what I discovered was amazing.

For a start, I am related to Louis the 16^th, the last Bourbon king of France, who was beheaded after the 1789 revolution.

I am a direct descendant of Otzi the Iceman, who is 5,000 years old and was recently discovered frozen high in an Alpine glacier. He currently resides in mummified form in a museum in Bolzano, Italy. So my love of the mountains and hiking is in my genes.

Oh, one more thing. The reason I don’t have any hair on my back is that I carry 346 gene fragments that I inherited directly from a Neanderthal. Yes, I am part caveman, although past wives and girlfriends suspected as much.

There were other conclusions.

I have a higher-than-average probability of getting prostate cancer, advanced macular degeneration (my mother had it), celiac disease, and melanoma. I immediately booked a physical with my doctor.

The service also offered to introduce me to 1,107 close relatives around the world whom I didn’t know about, mostly in New York, California, and Florida.

The French connection, I already knew about. During the 16^th century, my ancestors rebelled against the French kings over the non-payment of taxes and were exiled to Louisiana.

Fleeing a malaria epidemic, they moved up the Mississippi River to St. Louis and stayed there for 200 years. When gold was discovered in California in 1849, they joined a wagon train headed west. It only got as far as Kansas, where it was massacred by Cherokee Indians.

I am half-Italian and have birth certificates going back to 1800 to prove it. But 23 and Me says that I am only 40.7% Italian (see table below). It turns out that your genes show not only where you came from, but also who invaded your home country since the beginning of time.

In Italy’s case, that would include the ancient Greeks, Vikings, Arabs, the Normans, French, Germans, and the Spanish, thus making up my other 9.3%. Your genes also reflect the slaves your ancestors owned, for obvious reasons, as well as many of the servants who may have worked for them.

It gets better.

All modern humans are descended from a single primordial “Eve” who lived in Eastern Africa 180,000 years ago. Of the thousands of homo sapiens who probably lived at that time, the genes of no other human-made it into the modern age. We are also all descended from a single “Adam” who lived 275,000 years ago. Obviously, the two never met, debunking some modern conventions. Living 95,000 apart must have made dating difficult.

Around 53,000 years ago, my intrepid ancestors crossed the Red Sea to a lush jungle in the Sinai Peninsula, probably pursuing abundant game. 11,000 years ago, they moved onto the vast grasslands of the Central Asian Steppes. As the last Ice Age retreated, they moved into the warmer climes of South Europe. We have been there ever since.

23 and Me was founded in 2006 by Anne Wojcicki, wife of Google founder Sergei Brin. It is owned today by her and a few other partners. Its name is based on the fact that humans’ entire DNA code is found on 23 pairs of chromosomes.

23 and Me and other competitors like Ancestry.com, MyHeritage, and Living DNA have sparked a DNA boom that has led to once-unimagined economic and social consequences. DNA promises to be for the 21^st century what electricity was to the 20^th century. The investment consequences are amazing.

Talk about unintended consequences with a turbocharger.

A common ancestor going back to the early 1800s enabled Sacramento police to capture the Golden State Killer. Unsolved for 40 years, it took a week for them to find him after a DNA sample was sent to a database.

Thirty and 40-year-old cold cases are now being solved on a weekly basis. Long ago, kidnapped children were being reunited with their parents after decades of separation.

California froze all executions. That’s because DNA evidence showed that approximately 30% of all capital case convictions were of innocent men. That was enough for me to change my own view on the death penalty. The error rate was just too high. Dozens of men around the country have been freed after new DNA evidence surfaced, some after serving 30 years or more in prison.

23 and Me had some medical advice for me as well. They strongly recommended that I get tested for diabetes and high blood pressure, as these maladies are rife among my ancestors. They even name the specific guilty gene and haploid group.

This explains why major technology companies, like Amazon (AMZN) and Apple (AAPL) are pouring billions of dollars into genetic research.

I have long had a personal connection with DNA research. I worked on the team that sequenced the first-ever string of DNA at UCLA in 1974. It was groundbreaking work. We obtained our raw DNA from Dr. James Watson of Harvard, who, along with Francis Crick, was the first to discover its three-dimensional structure. As for my UCLA professor, Dr. Winston Salser, he went on to found Amgen (AMGN) in 1980 and became a billionaire.

The developments that are taking place today seem to us like science fiction that was set hundreds of years into the future. To see the paper created by this work, please click here.

As research into DNA advances, it is about to pervade every aspect of our lives. Do you have a high probability of getting a disease that costs a million dollars to cure, and are you counting on getting health insurance? Think again. That may well bring forward single-payer national health care for the US, as only the government could absorb that kind of liability.

And if you can only hang on a few years, you might live forever. That’s when DNA-based monoclonal antibodies and gene editing are about to cure all major human diseases. DNA is about to become central to your physical health and your financial health as well.

To learn more about 23 and Me, please click here to visit their website.

Maybe the next time I visit the Versailles Palace outside of Paris, I should ask for a set of keys, now that I’m a relative? Unfortunately, it’s much more likely that I’ll get the keys to my Neanderthal ancestor’s cave.

Good Luck and Good Trading,

John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader

My Ancestor

July 7, 2025 – Quote of the Day

Diary, Newsletter, Quote of the Day

“Send us your freaks,” said an Amazon human resources executive to a temp agency during its early days.

July 3, 2025

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Global Market Comments
July 3, 2025
Fiat Lux

Featured Trade:

(JULY 2 BIWEEKLY STRATEGY WEBINAR Q&A)
(SPY), (NVDA), (MSFT), (META), (SNOW), (GOOGL), (DHI), (LEN), (KBH), (FXE), (FXA), (FXY), (FXY), (GLD), (SLV), (PPLT), (ALB), (SQM), (NEM), (ABX)

July 2 Biweekly Strategy Webinar Q&A

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Below, please find subscribers’ Q&A for the July 2 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Incline Village, NV.

Q: What kind of market are we in right now?

A: We’re in what I call a “Looking Glass Market” — everything you see is the reverse of reality. Despite extreme volatility, the broader market is flat year-to-date. Meanwhile, Mad Hedge Fund Trader is up 45.17% thanks to disciplined risk management and aggressive short positioning when volatility spikes.

Q: Is a recession already underway?

A: Absolutely — depending on your sector. Agriculture, construction, restaurants, and anything tied to real estate are already in recession. If you’re in Bitcoin or banking, you’re in boom times. It’s a bifurcated economy, and I’ve been calling this recession since January. This explains why only 50 stocks in the S&P 500 are up this year. We currently have the most concentrated new all-time high in market history.

Q: Are mass layoffs, like Microsoft’s, good or bad for the stock?

A: They’re good. Replacing 9,000 jobs with higher-skilled AI hires improves efficiency and cost structure. These companies will likely create even more jobs downstream. My own daughter is graduating with an AI degree in a year and already has a job offer at a fantastic salary. That tells you where the trend is headed.

Q: How bad is inflation, really?

A: It’s worse than reported. Tariffs of 20–100% are just part of the story. Add a collapsing dollar, and you’re effectively looking at 40–120% increases in the cost of imported goods. Fed governor Jay Powell says inflation will surge this summer — and he’s right.

Q: Will the Fed hold or cut rates this year?

A: I don’t expect any changes this year unless inflation data forces their hand. If inflation comes in hot, we’ll see a 10% selloff. If it stays muted, we might get a small year-end rally. Either way, I’m preparing for both outcomes.

Q: What’s your projected S&P 500 range for the rest of 2025?

A: I see us stuck in the 5,500 to 6,500 (SPY) range. Best-case scenario, we get a low single-digit return. But with tariffs, inflation, and political dysfunction, the risks are tilted to the downside.

Q: Is this a good time to buy stocks?

A: No — in fact, it’s the worst day in five years to buy. We’ve had a 26% rally in under three months. The price earnings multiple has just risen from 18X to 23X, the fastest ever. This is the time to sell rallies, not chase them.

Q: What sectors do you like for long-term growth?

A: Big Tech, cybersecurity, and financials. These three sectors will account for 90% of U.S. corporate profits over the next five years. Buy them on dips.

Q: Are REITs a good buy right now?

A: Yes. They’ve been crushed on interest rate fears, but when rates finally drop, REITs will come roaring back. Many have yields of 6–10% down here. I’m accumulating selectively. The latest that rate cuts can happen in May 2026, but institutions are starting to buy now.

Q: What’s your current cash position and why?

A: I’m 80% cash, 20% short — including a double short in Tesla. I’m parking capital in 90-day T-bills yielding 4.2%. In this market, cash is king. A dollar at a market top is worth $10 at a market bottom.

Q: Why are you short Tesla?

A: Sales are collapsing in Europe and China, down 13% YOY as of this morning. Competition from BYD is eating their lunch. I’m using vertical bear put spreads, and they’ve already gone deep in the money. It’s been one of my best trades this year.

Q: Which tech names are you watching?

A: NVIDIA (NVDA), Microsoft (MSFT), Meta (META), Snowflake (SNOW), and Alphabet (GOOGL). I’ve traded them all. But many are overbought — I’ll be looking to sell calls or wait for dips before going long again.

Q: What’s your outlook on energy stocks and oil?

A: Bearish. Oil failed to hold gains even after the Iran spike. The SPR won’t be refilled any time soon — the new Budget bill cuts funding by 90%. Costs are high, and demand is weak. I’m selling energy rallies and steering clear of producers. President Biden sold off half of the oil at $100 a barrel during the Ukraine war to cap prices, making him the best oil trader in history.

Q: Is Apple still a good investment?

A: Apple’s a public utility now. Revenue growth from iPhones is weak, and they still haven’t made a meaningful AI move. I’m selling calls against my position — the rallies are shallow and the upside is capped.

Q: What’s happening with housing and homebuilders?

A: Housing is on life support. High rates, oversupply in rentals, and weak starts. But I do think homebuilders will bottom soon. Stocks like (DHI) and (LEN) will become buys as we get closer to rate cuts in 2026.

Q: Where are foreign investors moving their money if they’re not buying U.S. bonds?

A: They’re going home — buying Eurobonds and investing in appreciating currencies. With the dollar down 20%, U.S. assets aren’t as attractive for them right now.

Q: Are there any currency trades worth making?

A: Yes. The euro (FXE), Australian dollar (FXA), Japanese yen (FXY), and British pound (FXY) are all buys. I’ve been saying it all year — the weak dollar trend will continue as long as the current administration is in office.

Q: What’s your view on precious metals?

A: I’m long-term bullish. Gold will hit $5,000 by 2028. As stocks peak, gold is finding a floor. Miners like Barrick Gold (ABX) and Newmont (NEM) are back on my shopping list.

Q: Any favorite lithium stocks right now?

A: Albemarle (ALB) is my top pick. (SQM) in Chile is another. Lithium has bottomed out, and demand will only grow — even if EVs stall. It’s a long-term bet I’m making again.

Q: What’s the game plan for summer?

A: Sell strength in stocks and bonds. Stay long cash, buy dips in quality sectors, and get ready for better entry points. We’re halfway through a volatile year, and patience will be rewarded.

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

July 3, 2025 – Quote of the Day

Diary, Newsletter, Quote of the Day

“The next leg of the bull market is going to have to be a fundamental leg, not a liquidity leg, and investors are in a little bit of a malaise trying to figure that out,” said Anthony Scaramucci of Skybridge Capital.

July 2, 2025

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Global Market Comments
July 2, 2025
Fiat Lux

SPECIAL ISSUE ABOUT THE FAR FUTURE

Featured Trade:
(PEAKING INTO THE FUTURE WITH RAY KURZWEIL),
(GOOG), (INTC), (AAPL), (TXN)

Peeking Into the Future with Ray Kurzweil

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This is the most important research piece you will ever read, bar none. But you have to finish it to understand why. So, I will get on with the show.

I have been hammering away at my followers at investment conferences, webinars, and strategy luncheons this year about one recurring theme. Things are good, and about to get better, a whole lot better.

The driver will be the exploding rate of technological innovation in electronics, biotechnology, and energy. The 2020s are shaping up to be another roaring twenties, and asset prices are going to go through the roof.

To flesh out some hard numbers about growth rates that are realistically possible and which industries will be the leaders, I hooked up with my old friend, Ray Kurzweil, one of the most brilliant minds in computer science.

Ray is currently a director of Engineering at Google (GOOG), heading up a team that is developing stronger artificial intelligence. He is an MIT grad with a double major in computer science and creative writing. He was the principal inventor of the CCD flatbed scanner, the first text-to-speech synthesizer, and the commercially marketed large-vocabulary speech recognition.

When he was still a teenager, Ray was personally awarded a science prize by President Lyndon Johnson. He has received 20 honorary doctorates and has authored 7 books. It was upon Ray’s shoulders that many of today’s technological miracles were built.

His most recent book, The Singularity is Near: When Humans Transcend Biology, was a New York Times best seller. In it he makes hundreds of predictions about the next 100 years that will make you fall out of your chair.

I met Ray at one of my favorite San Francisco restaurants, Morton’s on Sutter Street. I ordered a dozen oysters, a filet mignon wrapped in bacon, and drowned it all down with a fine bottle of Duckhorn Merlot. Ray had a wedge salad with no dressing, a giant handful of nutritional supplements, and a bottle of water. That’s Ray, one cheap date.

The Future of Man

A singularity is defined as a single event that has monumental consequences. Astrophysicists refer to the Big Bang and black holes in this way. Ray’s singularity has humans and machines merging to become single entities, partially by 2040 and completely by 2100.

All of our thought processes will include built-in links to the cloud, making humans super smart. Skin that absorbs energy from the sun will eliminate the need to eat. Nanobots will replace blood cells, which are far more efficient at moving oxygen. A revolution in biotechnology will enable us to eliminate all medical causes of death.

Most organs can now be partially or completely replaced. Eventually, they all will become renewable by taking one of your existing cells and cloning it into a completely new organ. We will become much more like machines, and machines will become more like us.

The first industrial revolution extended the reach of our bodies, and the second is extending the reach of our minds.

And, oh yes, prostitution will be legalized and move completely online. Sound like a turn off? How about virtually doing it with your favorite movie star? Your favorite investment advisor? Yikes!

Ironically, one of the great accelerants towards this singularity has been the war in Iraq. More than 50,000 young men and women came home missing arms and legs (in Vietnam, these were all fatalities, thanks to the absence of modern carbon fiber body armor).

Generous government research budgets have delivered huge advances in titanium artificial limbs and the ability to control them only with thoughts. Quadriplegics can now hit computer keystrokes merely by thinking about them.

Kurzweil argues that exponentially growing information technology is encompassing more and more things that we care about, like health care and medicine. Reprogramming of biology will be the next big thing and is a crucial part of his “singularity.”

Our bodies are governed by obsolete genetic programs that evolved in a bygone era. For example, over millions of years, our bodies developed genes to store fat cells to protect against a poor hunting season in the following year. That gave us a great evolutionary advantage 10,000 years ago. But it is not so great now, with obesity becoming the country’s number one health problem.

We would love to turn off these genes through reprogramming, confident that the hunting at the supermarket next year will be good. We can do this in mice now, which, in experiments, can eat like crazy, but never gain weight.

The happy rodents enjoy the full benefits of caloric restriction, with no hint of diabetes or heart disease. A product like this would be revolutionary, not just for us, health care providers, and the government, but, ironically, for fast food restaurants as well.

Within the last five years, we have learned how to reprogram stem cells to rebuild the hearts of heart attack victims. The stem cells are harvested from skin cells, not human embryos, ducking the political and religious issue of the past.

And if we can turn off genes, why not the ones in cancer cells that enable them to pursue unlimited reproduction, until they kill their host? That development would cure all cancers and is probably only a decade off.

The Future of Computing

If this all sounds like science fiction, you’d be right. But Ray points out that humans have chronically underestimated the rate of technological innovation.

This is because humans evolved to become linear-thinking animals. If a million years ago we saw a gazelle running from left to right, our brains calculated that one second later it would progress ten feet further to the right. That’s where we threw the spear. This gave us a huge advantage over other animals and is why we became the dominant species.

However, much of science, technology, and innovation grows at an exponential rate, and it is where we make our most egregious forecasting errors. Count to seven, and you get to seven. However, double something seven times and you get to a billion.

The history of the progress of communications is a good example of an exponential effect. Spoken language took hundreds of thousands of years to develop. Written language emerged thousands of years ago, books in a 100 years, the telegraph in a century, and telephones 50 years later.

Some ten years after Steve Jobs brought out his Apple II personal computer, the growth of the Internet went hyperbolic. Within three years of the iPhone launch, social media exploded out of nowhere.

At the beginning of the 20^th century, $1,000 bought 10 X-5th power worth of calculations per second in our primitive adding machines. A hundred years later, a grand got you 10 X 8^th power calculations, a 10 trillion-fold improvement. The present century will see gains many times this.

The iPhone itself is several thousand times smaller, a million times cheaper, and billions of times more powerful than computers of 40 years ago. That increases the price per performance by the trillions. More dramatic improvements will accelerate from here.

Moore’s law is another example of how fast this process works. Intel (INTC) founder Gordon Moore published a paper in 1965 predicting a doubling of the number of transistors on a printed circuit board every two years. Since electrons had shorter distances to travel, speeds would double as well.

Moore thought that theoretical limits imposed by the laws of physics would bring this doubling trend to an end by 2018, when the gates become too small for the electrons to pass through. For decades, I have read research reports predicting that this immutable deadline would bring an end to innovation and technological growth and bring an economic Armageddon.

Ray argues that nothing could be further from the truth. A paradigm shift will simply allow us to leapfrog conventional silicon-based semiconductor technologies and move on to bigger and better things. We did this when we jumped from vacuum tubes to transistors in 1949, and again in 1959, when Texas Instruments (TXN) invented the first integrated circuit.

Paradigm shifts occurred every ten years in the past century, every five years in the last decade, and will occur every couple of years in the 2020s. So fasten your seatbelts!

Nanotechnology has already allowed manufacturers to extend the 2018 Moore’s Law limit to 2022. On the drawing board are much more advanced computing technologies, including calcium-based systems, using the alternating direction of spinning electrons, and nanotubes.

Perhaps the most promising is DNA-based computing, a high research priority at IBM and several other major firms. I earned my own 15 minutes of fame in the scientific world 40 years ago as a member of the first team ever to sequence a piece of DNA, which is why Ray knows who I am.

Deoxyribonucleic Acid makes up the genes that contain the programming that makes us who we are. It is a fantastically efficient means of storing and transmitting information. And it is found in every single cell in our bodies, all 10 trillion of them.

The great thing about DNA is that it replicates itself. Just throw it some sugar. That eliminates the cost of building the giant $2 billion silicon-based chip fabrication plants of today.

The entire human genome is a sequential binary code containing only 800 MB of information, which, after you eliminate redundancies, has a mere 30-100 MB of useful information, about the size of an off-the-shelf software program, like Word for Windows. Unwind a single DNA molecule, and it is only six feet long.

What this means is that, just when many believe that our computer power is peaking, it is in fact just launching into an era of exponential growth. Supercomputers surpassed human brain computational ability in 2012, about 10 to the 16^th power (ten quadrillion) calculations per second.

That power will be available on a low-end laptop by 2020. By 2050, this prospective single laptop will have the same computing power as the entire human race, about 9 billion individuals. It will also be small enough to implant in our brains.

The Future of the Economy

Ray is not really that interested in financial markets, or, for that matter, making money. Where technology will be in a half century and how to get us there are what get his juices flowing. However, I did manage to tease a few mind-boggling thoughts from him.

At the current rate of change, the 21^st century will see 200 times the technological progress that we saw in the 20^th century. Shouldn’t corporate profits, and therefore share prices, rise by as much?

Technology is rapidly increasing its share of the economy and its influence on other sectors. That’s why tech has been everyone’s favorite sector for the past 30 years and will remain so for the foreseeable future. For two centuries, technology has been eliminating jobs at the bottom of the economy and creating new ones at the top.

Stock analysts and investors make a fatal flaw in estimating future earnings based on the linear trends of the past, instead of the exceptional growth that will occur in the future.

In the last century, the Dow appreciated from 100 to 10,000, an increase of 100 times. If we grow at that rate in this century, the Dow should increase by 10,000% to 1 million by 2100. But so far, we are up only 6%, even though we are already 14 years into the new century.

The index is seriously lagging, but will play catch-up in a major way during the 2020s, when economic growth jumps from 2% to 4% or more, thanks to the effects of massively accelerating technological change.

Some 100 years ago, one-third of jobs were in farming, one-third were in manufacturing, and one-third were in services. If you predicted that in a century farming and manufacturing would each be 3% of total employment and that something else unknown would come along for the rest of us, people would have been horrified. But that’s exactly what happened.

Solar energy use is also on an exponential path. It is now 1% of the world’s supply but is only seven doublings away from becoming 100%. Then we will consume only one 10,000^th of the sunlight hitting the Earth. Geothermal energy offers the same opportunities.

We are only running out of energy if you limit yourself to 19th-century methods. Energy costs will plummet. Eventually, energy will be essentially free when compared to today’s costs, further boosting corporate profits.

Hyper-growth in technology means that we will be battling with deflation for the rest of the century, as the cost of production and price of everything fall off a cliff. That makes our 10-year Treasury bonds a steal at a generous 2.60% yield, a full 460 basis points over the real long-term inflation rate of negative 2% a year.

US Treasuries could eventually trade down to the 0.40% yields seen in Japan only a couple of years ago. This means that the bull market in bonds is still in its early stages and could continue for decades.

The upshot for all of these technologies will rapidly eliminate poverty, not just in the US, but around the world. Each industry will need to continuously reinvent its business model or disappear.

The takeaway for investors is that stocks, as well as other asset prices, are now wildly undervalued, given their spectacular future earnings potential. It also makes the Dow target of 1 million by 2100 absurdly low, and off by a factor of 10 or even 100. Will we be donning our “Dow 100 Million” then?

Other Random Thoughts

As we ordered dessert, Ray launched into another stream of random thoughts. I asked for Morton’s exquisite double chocolate mousse. Ray had another handful of supplements. Yep, Mr. Cheap Date.

The number of college students has grown from 50,000 to 12 million since the 1870s. A kid in Africa with a cell phone has more access to accurate information than the president of the United States did 15 years ago.

The great superpower, the Soviet Union, was wiped out by a few fax machines distributing information in 1991.

Company offices will become entirely virtual by 2025.

Cows are very inefficient at producing meat. In the near future, cloned muscle tissue will be produced in factories, disease-free, and at a fraction of the present cost, without the participation of the animal. PETA will be thrilled.

Use of nano materials to build ultra-light but ultra-strong cars cuts fuel consumption dramatically. Battery efficiencies will improve by 10 to 100 times. Imagine powering a Tesla Model S1 with a 10-pound battery! Advances in nanotube construction mean the weight of the vehicle will drop from the present 3 tons to just 100 pounds, but it will be far safer.

Ray is also on a scientific advisory panel for the US Army. Uncertain about my own security clearance, he was reluctant to go into detail. Suffice it to say that the weight of an M1 Abrams main battle tank will shrink from 70 tons to 1 ton, but it will be 100 times stronger.

A zero tolerance policy towards biotechnology by the environmental movement exposes their intellectual and moral bankruptcy. Opposing a technology with so many positive benefits for humankind and the environment will inevitably alienate them from the media and the public, who will see the insanity of their position.

Artificial intelligence is already far more prevalent than you understand. The advent of strong artificial intelligence will be the most significant development of this century. You can’t buy a book from Amazon, withdraw money from your bank, or book a flight without relying on AI.

Ray finished up by saying that by 2100, humans will have the choice of living in a biological or in a totally virtual, online form. In the end, we will all just be files.

Personally, I prefer the former, as the best things in life are biological and free!

I walked over to the valet parking, stunned and disoriented by the mother load of insight I had just obtained, and it wasn’t just the merlot talking, either! Imagine what they talk about at Google all day.

To buy The Singularity is Near at discount Amazon pricing, please click here. It is worth purchasing the book just to read Ray’s single chapter on the future of the economy.

Did You Say “BUY” or “SELL”

The Future is Closer than You Think

July 2, 2025 – Quote of the Day

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“The future ain’t what it used to be,” said the former New York Yankees baseball manager, Yogi Berra.

July 1, 2025

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July 1, 2025
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Featured Trade:

(THE NEXT COMMODITY SUPER CYCLE HAS ALREADY STARTED),
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The Next Commodity Supercycle Has Already Started

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When I closed out my position in Freeport McMoran (FCX) near its max profit earlier this year, I received a hurried email from a reader asking if he should still keep the stock. I replied very quickly:

“Hell, yes!”

When I toured Australia a couple of years ago, I couldn’t help but notice a surprising number of fresh-faced young people driving luxury Ferraris, Lamborghinis, and Porsches.

I remarked to my Aussie friend that there must be a lot of indulgent parents in The Lucky Country these days. “It’s not the parents who are buying these cars,” he remarked, “It’s the kids.”

He went on to explain that the mining boom had driven wages for skilled labor to spectacular levels. Workers in their early twenties could earn as much as $200,000 a year, with generous benefits.

The big resource companies flew them by private jet a thousand miles to remote locations where they toiled at four-week on, four-week off schedules.

This was creating social problems, as it is tough for parents to manage offspring who make far more than they do.

The Great Commodity Boom has started, and in fact, we are already years into a prolonged super cycle.

China, the world’s largest consumer of commodities, is currently stimulating its economy on multiple fronts, including generous corporate tax breaks and relaxed reserve requirements. Get a trigger like the impending settlement of its trade war with the US, and it will be off to the races once more for the entire sector.

The last bear market in commodities was certainly punishing. From the 2011 peaks, copper (COPX) shed 65%, gold (GLD) gave back 47%, and iron ore was cut by 78%. One research house estimated that some $150 billion in resource projects in Australia were suspended or cancelled.

Budgeted capital spending during 2012-2015 was slashed by a blood-curdling 30%. Contract negotiations for price breaks demanded by end consumers broke out like a bad case of chicken pox.

The shellacking was reflected in the major producer shares, like BHP Billiton (BHP), Freeport McMoran (FCX), and Rio Tinto (RIO), with prices down by half or more. Write-downs of asset values became epidemic at many of these firms.

The selloff was especially punishing for the gold miners, with lead firm Barrack Gold (GOLD) seeing its stock down by nearly 80% at one point, lower than the darkest days of the 2008-9 stock market crash.

You also saw the bloodshed in the currencies of commodity-producing countries. The Australian dollar led the retreat, falling 30%. The South African Rand has also taken it on the nose, off 30%. In Canada, the Loonie got cooked.

The impact of China cannot be underestimated. In 2012, it consumed 11.7% of the planet’s oil, 40% of its copper, 46% of its iron ore, 46% of its aluminum, and 50% of its coal. It is much smaller than that today, with its annual growth rate dropping by more than half, from 13.7% to 2.3% in 2020.

What happens to commodity prices if China recovers the heady growth rates of yore? It boggles the mind. If China doesn’t step up, then India certainly will.

The rise of emerging market standards of living will also provide a boost to hard asset prices. As China goes, so do its satellite trading partners, who rely on the Middle Kingdom as their largest customer. Many are also major commodity exporters themselves, like Chile (ECH), Brazil (EWZ), and Indonesia (IDX), are looking to come back big time.

As a result, Western hedge funds will soon be moving money out of paper assets, like stocks and bonds, into hard ones, such as gold, silver (SIL), palladium (PALL), platinum (PPLT), and copper.

A massive US stock market rally has sent managers in search of any investment that can’t be created with a printing press. Look at the best-performing sectors this year, and they are dominated by the commodity space.

The bulls may be right for as long as a decade thanks to the cruel arithmetic of the commodities cycle. These are your classic textbook inelastic markets.

Mines often take 10-15 years to progress from conception to production. Deposits need to be mapped, plans drafted, permits obtained, infrastructure built, capital raised, and bribes paid in certain countries. By the time they come online, prices have peaked, drowning investors in red ink.

So a 1% rise in demand can trigger a price rise of 50% or more. There are not a lot of substitutes for iron ore. Hedge funds then throw gasoline on the fire with excess leverage and high-frequency trading. That gives us higher highs, to be followed by lower lows.

I am old enough to have lived through a couple of these cycles now, so it is all old news for me. The previous bull legs of super cycles ran from 1870-1913 and 1945-1973. The current one started for the whole range of commodities in 2016. Before that, it was down for seven years.

While the present one is short in terms of years, no one can deny how business cycles will be greatly accelerated by the end of the pandemic.

Some new factors are weighing on miners that didn’t plague them in the past. Reregulation of the US banking system has forced several large players, like JP Morgan (JPM) and Goldman Sachs (GS), to pull out of the industry completely. That impairs trading liquidity and widens spreads— developments that can only accelerate upside price moves.

The prospect of falling US interest rates is also attracting capital. That reduces the opportunity cost of staying in raw metals, which pay neither interest nor dividends.

The future is bright for the resource industry. While the gains in Chinese demand are smaller than they have been in the past, they are off a much larger base. In 20 years, Chinese GDP has soared from $1 trillion to $14.5 trillion.

Some 20 million people a year are still moving from the countryside to the coastal cities in search of a better standard of living and improved prospects for their children.

That is the good news. The bad news is that it looks like the headaches of Australian parents of juvenile high earners may persist for a lot longer than they wish.

Buy all commodities on dips for the next several years.