Global Market Comments
October 27, 2021
Fiat Lux
Featured Trade:
(A NEW THEORY OF TESLA, or WHY I’M RAISING MY TARGET TO $10,000),
(TSLA)
Global Market Comments
October 26, 2021
Fiat Lux
Featured Trade:
(CHINA’S COMING DEMOGRAPHIC NIGHTMARE)
Global Market Comments
October 25, 2021
Fiat Lux
Featured Trade:
(TESTIMONIAL),
(MARKET OUTLOOK FOR THE WEEK AHEAD, or TAKING A BREAK)
(MS), (GS), (BAC), (TLT), (TSLA), (AAPL), (AMZN), (GOOGL), (FB)
When I ran the international equity trading desk at Morgan Stanley during the 1980s, there was always one guy I was trying to recruit and that was David Tepper at Goldman Sachs. Whenever we did a trade with David, we lost money.
If we sold David a stock it usually took off like a rocket. If we bought a stock from him it plummeted like a stone. Eventually, unable to lure David over with a monster salary, I had to ban trading with him as it was such a loser for us.
David never did get pried away from Goldman until he left to start his own firm, Appaloosa Management, after he was mistakenly passed over for partner two years in a row. After that, he racked up an annualized return of over 40%, near my own results.
But David was doing it with $20 billion in real money, while I was doing it with newsletters. In 2012, David received a $2.2 billion performance bonus from his fund, one of the largest in history. I bet the partners at Goldman are kicking themselves.
So, I thought it timely to check in with David, now the owner of the Carolina Panthers football team, to see what he thought about the market. The S&P 500, the Dow, Ten-year bond yields, and Bitcoin all simultaneously hit all-time highs last week, and we were long all of them.
David was phlegmatic at best. “There are times to make money and there are times to not lose money, and this is definitely time to make money.” However, nothing is cheap. There are no screaming buys here or screaming shorts. He did expect stocks to keep rising through the end of 2021.
Keep in mind that David is a trader just like me and rarely has a view beyond six months. His last 13F filing on June 30 showed that his five largest positions were T-Mobile (TMUS), Amazon (AMZN), Facebook (FB), Google (GOOG), and Uber (UBER). Uber was the only new buy.
David is not alone in his views.
Up 89.20% so far in 2021, I am sitting here dazed, shocked, and pinching myself. This has been far and away my best year in a 53-year career. I know a lot of you made a lot more. I stared down every correction this year, loaded the boat, and won.
It’s not always like this.
So I think we are in for a few weeks of profit-taking, sideways chop, and minimal action. I call this the “counting your money” time. Traders have visions of Ferraris dancing in their eyes. Then once we form a new base, it will become the springboard for a new yearend rally.
I don’t think stocks will fall enough to justify selling here. And you might miss the next bottom.
Until then, I’m thinking of taking up the banjo.
That brings me to the foremost question in your collective minds. Can I top an astonishing 100% profit this year? Only if we get another great entry point with a 5% correction.
I’m sure that when the financial history of our era is written something in the future, this will be known as the week that Bitcoin went mainstream. That was prompted by the SEC approval of the first futures ETF, the ProShares Bitcoin Futures ETF (BITO).
By giving this approval, which had been sought for years, unlocks $40 trillion worth of assets owned by 100 million shareholders managed under the Investment Company Act of 1940 to go into Bitcoin. The possibilities boggle the mind. The consensus year-end target for Bitcoin is now $100,000, or up 65%.
It’s not too late to subscribe at the founder's rate of $995 a year for the Mad Hedge Bitcoin Letter by clicking here. After that, the price goes up….a lot.
Morgan Stanley (MS) Announces Stellar Earnings, with profits at $3.71 billion, up 36.4%. Morgan Stanley Asset Management sucked in an amazing $300 billion so far in 2021, bringing their total assets to $4.5 trillion.
Goldman Sachs (GS) announces blockbuster earnings, and we are laughing all the way to the bank. Profits soared an eye popping 63% to $5.28 billion.
Existing Home Sales soar by 7% in September to a seasonally adjusted 6.29 million units. First time buyers accounted for only 28%, the lowest since 2015. A brief drop in interest rates is the reason. There are only 1.29 million homes for sale, only a 2.4 month supply.
Housing Starts fall by 1.6% in September. Higher materials and labor costs, rising land expenses, and soaring energy costs are the culprit. A pop in interest rates may mean that the slowdown could last through the winter.
Single Family Rents are surging especially for the top end of the market. Nationally, rents rose 9.3% in August year over year, up from a 2.2% year-over-year increase in August 2020, according to CoreLogic. Buy homebuilders on dips like (KBH), (LEN), and (PHM)
If the Rescue Package passes in whatever size, it will trigger a massive new surge in risk prices, including stocks and Bitcoin. Don’t act surprised when it happens. $3.5 trillion, $1.5 trillion who cares? That’s a ton of money to be dumped into the economy ahead of the 2022 elections.
Tesla profits smash records in Q3, reporting a shocking $1.62 billion profit on $13.76 billion in revenues. A 30.5% profit margin blew people away. Imagine how much they’ll earn when they make 25 million cars a year in ten years. Buy (TSLA) on big dips.
Weekly Jobless Claims dive to 290,000, a new post-pandemic low. Delta is in fast retreat. A pre-pandemic normal level of 225,000 is coming within range.
Rising Interest rates are tagging the Real Estate Market, with the 30-year fixed rate hitting 3.23%. Refis are off 7% on the week. The Fed taper is looming large, especially if the 30-year hits 4.0%, which it should, taking affordability down.
My Ten-Year View
When we come out the other side of pandemic, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With interest rates still at zero, oil cheap, there will be no reason not to. The Dow Average will rise by 800% to 240,000 or more in the coming decade. The American coming out the other side of the pandemic will be far more efficient and profitable than the old. Dow 240,000 here we come!
My Mad Hedge Global Trading Dispatch saw a heroic +9.60% gain so far in October. My 2021 year-to-date performance soared to 89.20%. The Dow Average is up 16.60% so far in 2021.
After the recent ballistic move in the market, I am continuing to run my longs and those include (MS), (GS), (BAC), and a short in the (TLT). All are approaching their maximum profit point and we have nothing left but time decay to capture. So, I am going to run these into the November 19 expiration in 14 trading days. It’s like having a rich uncle write you a check once a day.
That brings my 12-year total return to 512.75%, some 2.00 times the S&P 500 (SPX) over the same period. My 12-year average annualized return now stands at an unbelievable 43.75%, easily the highest in the industry.
My trailing one-year return popped back to positively eye-popping 120.15%. I truly have to pinch myself when I see numbers like this. I bet many of you are making the biggest money of your long lives.
We need to keep an eye on the number of US Coronavirus cases approaching 46 million and rising quickly and deaths topping 736,000, which you can find here.
The coming week will be slow on the data front.
On Monday, October 25 at 8:30 AM, the Chicago Fed National Activity Index is out. Facebook (FB) earnings are released.
On Tuesday, October 26 at 10:00 AM, the S&P Case-Shiller National Home Price for August Index is released. Alphabet (GOOGL) and Microsoft (MSFT) earnings are out at 5:00 PM.
On Wednesday, October 27 at 7:30 AM, Durable Goods Orders for September are printed. McDonald’s (MCD) earnings are out.
On Thursday, October 28 at 8:30 AM, Weekly Jobless Claims are announced. The first read on Q3 GDP is announced. Apple (AAPL) and Amazon (AMZN) earnings are out.
On Friday, October 29 at 8:45 AM, the US Personal Income & Spending for September is published. At 2:00 PM, the Baker Hughes Oil Rig Count is disclosed.
As for me, when I went to college in Los Angeles, the local rivalries between universities were intense.
UCLA and USC had a particularly intense rivalry, and I went to both. It was traditional to steal Tommy Trojan’s sword prior to each homecoming game and then paint the statue blue. USC had a mascot, a mixed breed dog called “Old Tire Biter.” Prior to one game, UCLA kidnapped the dog.
At halftime, the kidnappers appeared midfield, tied the dog to a helium-filled weather balloon, and let him waft away somewhere over the city. Enraged USC fans stormed the field only to find that the real dog was hidden in a nearby truck. The dog headed for the stratosphere was actually a stuffed one.
Of course, the greatest prank of all time was carried out by the California Institute of Technology in the 1961 Rose Bowl, which didn’t have a football team, on the Washington Huskies. Washington was famous for its elaborate card tricks, which spelled out team names and various corporate sponsors and images.
On the night before a game, imaginative mathematically-oriented Caltech students snuck into the stadium and changed the instructions on the back of each card packet sitting in the seats. When it came time to spell out an enormous “WASHINGTON”, “CALTECH: displayed instead. The incident was broadcast live on national TV ON NBC.
At Caltech, where I studied math, they are still talking about it today.
Stay healthy.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
October 22, 2021
Fiat Lux
Featured Trade:
(OCTOBER 20 BIWEEKLY STRATEGY WEBINAR Q&A),
(DIS), (TLT), (TBT), (FXI), (BABA), (BIDU), (JD), (USO), (JPM), (MS), (GS), (BITO), ($BTCUSD)
Below please find subscribers’ Q&A for the October 20 Mad Hedge Fund Trader Global Strategy Webinar broadcast from the safety of Silicon Valley.
Q: Why are stocks so high? Won’t inflation hurt companies?
A: Inflation hurts bonds (TLT), not companies, which is why we are short the bond market and have been short for most of this year. Inflation actually helps companies because it allows them to raise prices at a faster rate. The ability to raise prices is the best that it’s been in 45 years, and that is enabling them to either maintain or increase profit margins.
Q: Where is all this liquidity coming from to drive the stocks high after the Fed ends Quantitative easing?
A: In the last 20 years, the liquidity of the US has gone from 6% of GDP to 47% of GDP. That is an enormous increase, and most of that money has gone into stocks and real estate, which is why both have been on a tear for the last 11 years. And I expect that to continue; the Fed isn’t even hinting at taking liquidity out of the system until well into 2023. On top of that, you have corporate profit exploding from $2 trillion last year to $10 trillion this year, adding another $8 trillion to the system, and outpacing any Fed taper by a five to one margin. Corporations alone are using these profits to buy back more than $1 trillion of their own stock this year.
Q: I’m hearing so much about the supply chain problems these days. Is that just a short-term fixable problem or a long-term structural one?
A: Absolutely it’s short-term. This actually isn’t a pandemic-related problem but a private capital investment one. It’s being caused by the record growth of the US economy which is sucking in more imports than it has ever seen before. We’ve actually exceeded pre-pandemic levels of imports a while ago. Import infrastructure isn’t big enough to handle it. If it was there wouldn’t be enough truckers to handle it. We had a shortage of 50,000 truckers before the pandemic, now we’re short 100,000. Some of these guys are making up to $100,000 a year, not bad for a high school level education. Expect it to get worse before it gets better, but it will get better eventually. That is why Amazon is having trouble, because supply chain problems may bring a weak Christmas, which is the most profitable time of year for them. If we get any big selloff at Amazon for this reason, you want to buy that bottom because it’ll double again in 3 years.
Q: Walt Disney (DIS) has pretty much sideways the whole year around $70, is this going down or should I buy?
A: I would look to buy but I would buy an in-the-money LEAPS, like a $150-$170 one year out. Disney’s been hit with a lot of slowdowns lately, slowdowns with park reopening, movie releases, new streaming customers. But these are all temporary slowdowns and will pick up again next year. Disney is the classic reopening play, so you will get another bite at the apple with a second reopening. Maybe “bite of the mouse” is a better metaphor.
Q: Global growth is down because of China (FXI) with their PMI under 50; do you think they will drag down the entire global economy in 2022?
A: No, if we recover, their largest customer, they will recover too. Remember their pandemic cases are only a tiny fraction of what ours were, some 4,000 or so, and their economy is still export-driven. You can't have major port congestion in Los Angeles and a weak economy in China, those are just two ends of one chain. I would look for a recovery in China next year. As for the stocks, I don’t know because that’s an entirely political issue; Baidu (BIDU), (JD), and Alibaba (BABA) are still getting beaten like a redheaded stepchild. We don’t know when that’s going to end; it’s an unknown. So, stand aside on Chinese plays, especially when the stuff at home is so much better with all these financials and tech stocks to invest in.
Q: What do you think about meme stocks?
A: I think you should avoid them like the plague. When there are so many good quality stocks with long term uptrends, why bother dumpster diving? You’re better off buying a lottery ticket.
Q: Which US bank should I invest in?
A: If you want the gold standard, you buy JP Morgan (JPM) which just announced blowout earnings. If you want a broker, go for Morgan Stanley (MS), which also just announced blowout earnings last week. And I want you to make my monthly pension payment secure, as it comes from Morgan Stanley. Keep those checks coming!
Q: Are we headed to $150 oil (USO)?
A: No, what we’re seeing here is a short-term spike in prices due to supply chain problems, OPEC discipline, a booming economy, and Russia trying to squeeze Europe on energy supplies. I don’t see it continuing much per year as the stocks could be popping out, so avoid oil and energy plays. The solar plays, like (TAN), (FSLR), and (SPWR) on the other hand, all look like they have miles to go.
Q: You said in your Webinar that you can still get a 50% Return on the United States Treasury Bond Fund (TLT) LEAPS. Can you give me the specifics?
A: If you went a year out on Tuesday when I recorded this webinar, you could buy the (TLT) October 2022 $150-$150 vertical bear put spread for $3.40 for a maximum profit on expiration at $5.00 of $47%. That’s where you buy the $155 put and sell short the $150 put against it. Since then, bonds have fallen by $3.00, and it is now trading at $3.60 giving you a 39% return. Try to establish this position on the next (TLT) rally.
Q: What is your yearend target for Bitcoin?
A: Now that we have broken the old high at $66,000, we should be able to make it to $100,000 by January. The SEC approving that new ProShares Bitcoin Strategy ETF (BITO) ETF unlocks trillions of dollars which can now go into Bitcoin, those regulated by the Investment Company Act of 1940. Crypto is now the fastest-growing segment of the financial markets. It’s inflation that driving this, and the Fed is throwing fuel on the fire by taking no action in the face of a red hot 5.4% Consumer Price Index. Even if the Fed does taper, the action will be more than offset by the massive $8 trillion increase in corporate profits. Companies are not only buying their own stocks, they are also using these profits to buy Bitcoin. I see this as a Bitcoin node myself. Be sure to dollar cost average your position by putting in a little bit of money every day because Bitcoin is wildly volatile, up 140% since August 1. By the way, it’s not too late to subscribe to the Mad Hedge Bitcoin Letter, which we are taking down from the store on Monday for a major upgrade by clicking here. We are raising prices after that.
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 the paid service you are currently in (GLOBAL TRADING DISPATCH, TECH LETTER, or BITCOIN LETTER), then select WEBINARS, and all the webinars from the last ten years are there in all their glory.
Good luck and stay healthy.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
October 21, 2021
Fiat Lux
Featured Trade:
(MY 20 RULES FOR TRADING IN 2022)
Global Market Comments
October 20, 2021
Fiat Lux
Featured Trade:
(THE HARD TRUTH BEHIND BUYING IN NOVEMBER)
(NOTICE TO MILITARY SUBSCRIBERS)
To the dozens of subscribers in Afghanistan, Somalia, and Iraq, and the surrounding ships at sea, thank you for your service!
I think it is very wise to use your free time to read my letter and learn about financial markets in preparation for an entry into the financial services when you muster out.
Nobody is going to call you a baby killer and shun you, as they did when I returned from Southeast Asia five decades ago. In fact, employers have been given fantastic tax breaks and other incentives to hire you.
I have but one request. No more subscriptions with .mil addresses, please. The Defense Department, the CIA, the NSA, Homeland Security, and the FBI do not look kindly on private newsletters entering the military network, even the investment kind, even ones from veterans like me.
If you think civilian spam filters are tough, watch out for the military kind! And no, I promise that there are no secret messages embedded with the stock tips. “BUY” really does mean “BUY.” “Sell” means “Sell” too.
If I did not know the higher-ups at these agencies, as well as the Joints Chiefs of Staff, I might be bouncing off the walls in a cell at Guantanamo by now wearing an orange jumpsuit.
It also helps that many of the mid-level officers at these organizations have made a fortune with their meager government retirement funds following my advice. All I can say is that if the Baghdad Stock Exchange ever becomes liquid, I'm going to own it.
Where would you guess the greatest concentration of readers The Diary of a Mad Hedge Fund Trader is found? New York? Nope. London? Wrong. Chicago? Not even close.
Try a ten-mile radius centered on Langley, Virginia, by a large margin.
The funny thing is, half of the subscribing names coming in are Russian. I haven't quite figured that one out yet.
Did we hire the entire KGB at the end of the cold war? If we did, it was a great move. Those guys were good. That includes you, Yuri.
So, keep up the good work, and fight the good fight. But please, only subscribe to my letter with personal Gmail, Yahoo, or Hotmail addresses. That way my life can become a lot more boring.
Oh, and by the way, Langley, you're behind on your bill. Please pay up, pronto, and I don't want to hear whining about any damn budget cuts!
I Want My Mad Hedge Fund Trader!
Global Market Comments
October 19, 2021
Fiat Lux
SPECIAL BITCOIN ISSUE
Featured Trade:
(WHERE DOES BITCOIN GO FROM HERE?)
($BTCUSD), (ETH), (CRPT), (BLOK), (MSTR)
