Here is the game-changer that everyone is missing.

Everyone knows that the pandemic pulled forward demand on a monumental scale. What they don’t know is that adoption has also been pulled forward, of new products and services, apps, technology, business organization by years, if not a decade. And while the pull forward in demand is temporary, the pull forward in adoption is permanent.

All this means is that stocks and markets are wildly undervalued, the bull market will last for not weeks or months but 7-10 years, and a Dow Average of 120,000 is the most conservative 2020s target I can come up with.

It's more likely now that the Dow will reach 240,000 in a decade, and that my 120,000 print could come as soon as 2025 or 2026.

The best is yet to come!

Here is the next market top, at least for the short term.

That’s because for the last year, stocks had a nasty habit of selling off after quarterly earnings reports, which are just around the corner. Announcement dates for the FANGS are below. For the short term, you want to sell days before the reports. For the long term, you want to keep them, as I expect all to double or more in the next three years.

Facebook (FB) is July 28

Alphabet (GOOGL) - Jul 25, 2021

Apple (AAPL) Jul 27

Amazon (AMZN) Jul 26, 2021

Netflix (NFLX) Jul 20, 2021

Microsoft (MSFT) - Jul 28, 2021

If you are a chronic worrywart, and I am, you have to be concerned about the crash in defaults in the junk bond market, from 9.5% a year ago to 2% now and 1% in a year. The leverage of issuers is collapsing, and earnings are soaring, causing fundamentals to improve dramatically. Junk bonds have been dragged up kicking and screaming all the way by the monster rally in the bond market, now yielding only a 3.26% yield. That’s an awful lot of risk for very little return. Is this a giant market-topping signal for bonds? Markets certainly looked so on Friday, when bond markets dove two full points.

Double up your short in the (TLT).

Fed Minutes turn dovish, citing that the “Standard of subnational progress in the economy has not been met.” It’s pretty substantial in my neighborhood where hiring and spending is almost impossible. Ten-year US Treasury Bonds (TLT) soared in anticipation of the news to a 1.30% yield, and the dollar sold off in the aftermath.

The $40 billion a month in mortgage-backed securities buying will clearly be the first taper target. Tech stocks certainly like the news. The most likely taper target is after Jackson Hole in late August-early fall. Expect bonds to crash and interest rates to soar then. Sell rallies in the (TLT) now.

Weekly Jobless Claims rise to 373,000, but the major trend continues down. Slowing gains on vaccinations could keep elevated longer than hoped for.

Tokyo Bans Olympic Spectators on Covid delta variant fears. The news was bad enough to knock 500 points off the Dow Average….temporarily. The US may be nearly out of the pandemic, but the rest of the world isn’t, raising risk for a recovery of the global economy. I skipped the event when I learned that only participants and families could attend the opening event. Still, it would be nice to visit the old neighborhoods. The public baths are gone, but the sushi is still great.

Pentagon Cancels Microsoft Jedi Cloud Deal. The $10 billion Joint Enterprise Defense Infrastructure deal intended to modernize the Defense Department’s antiquated IT will instead now be evenly split between market leader Amazon (AMZN) and second rung (MSFT). The contract had been subject to bitter litigation. Trump steered the contract away from (AMZN) because Jeff Bezos also owned the Washington Post, which was constantly critical of the former president. (AMZN) shares soared, while (MSFT) dumped, even though it’s good news for both companies. Buy (AMZN) and (MSFT) on dips.

100 Million EVs by 2040, 25 million by 2026, compared to only 1 million now, says EVGO (EVGO) CEO Cathy Zoi. Electrification of US transportation will be a seminal investment theme of our generation, just like electrification was during the 1930s. Biden plans to accelerate the process by creating incentives to build 500,000 charging stations, with 100,000 of these fast chargers that can top you up in 15 minutes. Copper per car will jump from 20 to 400 pounds, and aluminum demand will soar as 200,000 miles of long-distance transmission lines are built out. Buy (FCX) and (AA) on dips.

OPEC battle spikes oil, sending prices up to $75 a barrel, a six-year high. A 400,000 b/d increase was agreed to for two years, then reneged on by the UAE, as is the way at OPEC. The micro country was angry because it felt it was carrying an unfair share of the burden. No deal means much higher prices and even an oil shock. It was enough to knock the Dow Average down 400.

Pfizer to launch Covid Booster in August to bring out more firepower against the many variants. It can raise protection tenfold for the original two shots. It will become an annual shot as with the flu. I’ll be the first in line. Buy (PFE) on dips.

US Hotel Occupancy returns to Pre Covid-Levels, at least the ones that are still in business. It’s all leisure and no business, which is unlikely to return until next year. Avoid (HLT), (H), and (MAR) for now as the good news is already in the price the stocks have already recovered.

Fed ends Emergency Commercial Paper Program, turning it back to the private sector. Is this a stealth taper? Is the real taper around the corner? If so, you must be selling the daylights out of the (TLT), which is begging for a 15-point plunge.
 

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 profit reached a 1.79% gain so far in July. My 2021 year-to-date performance appreciated to 70.39%. The Dow Average is up 13.21% so far in 2021.

I spent the week sitting in 80% cash, waiting for a better entry point on the long side. That leaves me with a long in JP Morgan (JPM) and a short on the (TLT). Up this much this year, there is no reason to reach for the marginal trade, the maybe instead of the certainty. I’ll leave that for the Millennials.

That brings my 11-year total return to 492.84%, some 2.00 times the S&P 500 (SPX) over the same period. My 12-year average annualized return now stands at an unbelievable 42.56%, easily the highest in the industry.

My trailing one-year return exploded to positively eye-popping 111.20%. 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 at 33.85 million and deaths topping 607,000  which you can find here.

The coming week will be a weak one on the data front.

On Monday, July 12 at 8:00 AM, US Consumer Inflation Expectations for June are published.

On Tuesday, July 13, at 8:30 AM, the US Core Inflation Rate is released.

On Wednesday, July 14 at 8:30 AM, the US Producer Price Index for June is printed.

On Thursday, July 15 at 8:30 AM, Weekly Jobless Claims are disclosed. We also get the Philadelphia Fed Manufacturing Index for June.

On Friday, July 16 at 8:30 AM US Retail Sales for June are released.

At 2:00 PM, we learn the Baker-Hughes Rig Count.

As for me, I have always been applauded for my iron discipline, which is crucial for all traders. I got mine from a decade of learning karate in Japan.

When I landed in Tokyo in 1974, there were very few foreigners in the country. The WWII occupation forces had left, but the international business community had yet to arrive. You met a lot of guys who used to work for Douglas MacArthur.

There was only one way to stay more than 90 days on the standard tourist visa. That was to get another visa studying “Japanese culture.” There were only two choices: flower arranging or karate.

Since this was at the height of Bruce Lee’s career, I went for karate.

It was not an easy choice.

World War II was not that distant, and there were still hundreds of army veterans missing limbs begging for money under railroad overpasses. Some back then were still fighting on remote Pacific islands.

There were many in the karate community who believed that the art was a national secret and should never be taught to foreigners. So those who entered this tight-knit community paid the price and had the daylights beaten out of them. I was one of those.

To this day, I am missing five of my original teeth. There is nothing like taking a kick to the mouth and watching your front teeth fly across the dojo, skittering on the teak floor.

We trained three hours a day, five days a week. It involved punching a bloody hardwood makiwara at least 200 times. The beginners were paired with blackbelts who thoroughly worked us over. Then the entire class met up at a nearby public bath to soak in a piping hot ofuro. You always hurt.

During the dead of winter, we ran five miles around the Imperial Palace in our karate gi’s barefoot in freezing temperatures daily. Then we were hosed down with cold water and trained for three hours.

During this time, I was infused with the spirit of bushido, the thousand-year-old Japanese warrior code. I learned self-discipline, stamina, and concentration. In the end, karate is actually a form of meditation.

Knowing you’re indestructible and unassailable is not such a bad thing, especially when you’re traveling in some of the harsher parts of the world. When muggers in bad neighborhoods see me late at night, they cross the street to avoid me. I am not a guy to mess with.  Utter fearlessness is a great asset to possess.

The highlight of the annual training schedule was the All-Japan Karate Championship held in the prestigious Budokan, headquarters of all Japanese martial arts near the ghostly Yasukuni Jinja, Japan’s National Cemetery. By my last year in Japan, I had my black belt, and my instructor, Higaona Sensei, urged me to enter.

Because I had such a long reach, incredibly, I made it to the finals. I was matched with a very tough-looking six-footer who was fighting for Japan’s national prestige, as no foreigner had ever won the contest.

I punched, he kicked, fist met foot, and foot won. My left wrist was broken. My opponent knew what happened and graciously let me fight on one-handed for another minute to save face. Then he knocked me out on points.

The crowds roared.

It’s all part of a full life.

Stay healthy.

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

 

Losing the All-Japan National Karate Championship

 

 

 

 

 

 

 

John, I couldn’t be happier with your service, and the way you operate your business. I love it! And I recommend you to my relatives and my good friends when appropriate. I feel very grateful and blessed to have been introduced to your information and your person even though not in person.  

I’m in Tesla (TSLA), Advanced Micro Devices (AMD), NVIDIA (NVDA), Boeing Aircraft (BA), and Apple (AAPL).

I paid $500,000 down for a million-dollar home in Anthem, CA with my profits and it is now worth $1.5 million.  We have remodeled it into our dream home, and I have my own golf cart in the garage.

I couldn’t feel more fortunate to have come across you. I read your Mad Hedge Hot Tips and diary every day and I feel you keep me in the know with how the market is moving. 

I took the opportunity when it came last year and went all-in under your guidance. It has changed my and my wife and five children’s lives for the better. 

Here is a pic of our Model Y and Tesla solar on our new 4,000’ Executive home. Peace and all the best, and best of luck with your daughters and Boy Scouts. 

Greg
Anthem, CA

Below please find subscribers’ Q&A for the June 30 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Lake Tahoe, NV.

Q: How long will the tech rally last (QQQ)?

A: Short term we are overheated, but long term it’s still a buy. I think tech will lead for the next several years. Look for the next 10% correction, load the boat again with at-the-money LEAPS, and you’ll get almost as rich as I am, because I've been doing that for years.

Q: What is driving tech? Why is it suffering when interest rates rise, and they have such big cash balances?

A: I agree with you; that makes absolutely no sense for tech to fall when rates rise. Big tech actually makes more money when interest rates go up, because they’re all sitting on cash balances of up to $250 billion, as is the case with Apple (AAPL). The answer is that the modeling that stock analysts use is highly sensitive to interest rates and affects companies the most with the highest growth rates. That would be big tech which is averaging about 40% of growth right now. Industrials are less affected because they are slower growers, if at all. This is strictly a modeling question; I think long-term the market figures this out. And in fact, the recent price action has been immune to interest rate moves.

Q: Are you worried about the Tesla (TSLA) recall?

A: No. In fact, they did the recall like they do all the recalls; it happens overnight when you’re asleep. The software upgrade does it all and you end up with a new car in the morning with a lot more functionality. That just means you have to figure out how to use your new car about once a month. But that’s how they did it, and the fact is that Tesla is so much farther ahead in technology than all of their Chinese competitors, that Chinese electric companies will never grow outside of China, whereas Tesla takes over the world.

Q: What LEAP would you buy on Tesla?

A: I would buy the June 2023 $750/$800 vertical bull call spread for $18, and as long as Tesla shares are over $800 in two years, that will be worth $50 dollars giving you a return of 177% profit. If that’s not enough profit for you in two years, you are in the wrong business and should consider becoming a rock singer, drug dealer, or Bitcoin miner—one of these other really high return alleged professions.

Q: What’s happening with mergers and acquisitions? As a stock driver do you expect it to speed up or slow down?

A: Well I expect M&A to slow down because prices are so high. And notice that Warren Buffet has done virtually nothing in a year because in his world nothing really got cheap, even at last year’s lows. He’s been buying his own shares instead in (BRKB). But you still have backdoor M&A as I call it, and that’s share buybacks, which are returning with a vengeance. Last week, all the banks in financials were allowed to start their own buybacks for the first time in a year and four months, so that makes all of them buys. And I'm talking about JP Morgan (JPM), Bank of America (BAC), Citibank (C), Goldman Sachs (GS), and Morgan Stanley (MS) (where they’re also doubling dividends). Corporate buybacks I expect to top the previous record of $1.2 trillion, which we set right before the pandemic.

Q: I have a number of tech mutual funds with heavy weighting in (AMZN), (FB), (MSFT), (GOOG), and (NVDA) for my basic portfolio which I bought on your advice.  Should I be cute and sell for the waiting 10% pullback or maintain a buy and hold?

A: The answer 99% of the time is just hold. We think tech goes up for ten more years. With mutual funds and ETFs you have no expiration dates like you do with options. And if you’re one of these guys that sits in front of a screen 24 hours a day with 30 years of experience, you can sell now and buy them back cheaper. But most people don’t have the training or discipline to pull that off. And the retail individuals who try this actually end up buying high and selling lower. I would say if you’re happy with your ETF tech funds, just keep them.

Q: I don’t trade options spreads—how much am I killing my returns? I’m having trouble with options trading.

A: Actually, over the long term, it’s the equity owners who make the most money. On an aggressive front month trading strategy in options, you’re only making 1% or 2% a month per position; whereas over time, the equities we’re picking are going up anywhere from 100% to 1,000% (295X for Tesla). I refer you to the Mad Hedge Hall of Fame list of ten baggers, of which we probably have over 30 now. The only people who would beat outright stock ownership are LEAPS players where you can regularly make 100% every 6 months if you have the right setup, the right timing, and so on. We’ve actually never lost money on LEAPS. Someone asked earlier whether I could tell you how to take profits on LEAPS, and the answer is no, you don’t have to do anything because they expire at max profit and you make a ton of money. So, LEAPS are the only area you’re missing out on. I recommend learning how to do LEAPS and I would be happy to teach you.

Q: When do you update your long-term portfolio?

A: Twice a year. I did it in January, so I guess I'm due for July.

Q: Is it time to buy LEAPS on Skyworks?

A: No, wait for a 10% correction. LEAPS are something you do at short term bottoms, not short-term tops; otherwise, it will cost you some money and you’ll miss the other 100% profit.

Q: I’m looking at ESG stocks (environmental, social & governance). Are they legit?

A: Yes, they attracted $2 trillion in asset allocations last year; however, a lot of them went ballistic discounting a Biden presidency, which happened, and they’re now up close to 400% year on year. I wouldn't chase them too much here, especially the ones that don’t have earnings yet. They became a mania at one point. So, I would wait for some decent pullback to get involved in any of the ESG plays.

Q: When will you deploy your cash?

A: I’m kind of waiting for my own market timing index to get back into the 20s, if we can get that; and we might sometime in July. But if we don’t, I’ll have to go back into the market in August, because then you’re front running very positive seasonals from October onwards, and August is usually our biggest month of the year.

Q: Is Amazon a good spot to load up on some more LEAPS, or should we wait?

A: The time to do this was when I sent out the LEAPS recommendation three weeks ago. Since then, we gave gained 25%. I would wait; don’t chase marginal trades ever, especially when you’re up 60% on the year—I would wait for a pullback, and I would run what you already own. Buy the pullbacks elsewhere, like in banks, financials, industrials, US steel (X), Freeport McMoRan (FCX), commodity plays, etc. Buy low, sell high; it’s a revolutionary new concept that I’ve invented.

Q: Why is oil (USO) at $74?

A: Global economic recovery. It’s a short-term move; eventually, we’re going back to zero in oil, but with the US growing at a 10% annual rate, the world's largest oil consumer, anything the US uses goes up. Any plays in oil will be short-term, and if you have things like NVIDIA going up 80% in two months, why the heck are you even looking in oil? Don’t make excuses to go into these really long-term downtrends—unless you work in the industry and I know a lot of you do.

Q: What is the NASDAQ (NASD) year-end target?

A: I’m looking at 18,000, or about 23% higher than here. That would give you a full-year return of about 39%.

Q: I'm a subscriber to Global Trading Dispatch, but don’t get trade alerts for LEAPS.

A: Well actually you do—three weeks ago I did send out a newsletter giving you 3 LEAPS in Amazon (AMZN), Microsoft (MSFT) and Apple (AAPL) and told you to buy all the LEAPS down there. Those are up anywhere from 10% to 30% since then. We do send those out occasionally to Global Trading Dispatch members just to show you what is doable. The way to get more constant LEAPS alerts is signing up for the Mad Hedge Concierge Service, which is by application only.

Q: Are you bullish on Bitcoin even though the Chinese government is against it?

A: Yes, but this is a pure technical play and I’m not really sure what I'm buying, so I'm only going to get in at my price which will be at $10,000 or $20,000. A big chunk of the mining industry literally moved over a weekend from China to the US or other unregulated domiciles like Kazakhstan. And how much confidence do you want to have on a monetary instrument based in Kazakhstan? Not much.

Q: What are the economic conditions that would trigger the expected 10% pullback?

A: There are none, because I expect the superheated growth in the economy to continue for two more years, and the only short-term pullbacks we’re getting are triggered by rises in interest rates. Interest rates will fluctuate, but just buy every dip and keep loading the boat on your equity longs and our favorite sectors and you will be glad that you heard of Mad Hedge Fund Trader.

Q: Is it worth looking at electric grid stocks?

A: Excellent question, and I promise to do more work on that. Yes, absolutely, because the grid has to triple in size in order to accommodate the move to a green economy and that means we have to build 200,000 miles of aluminum long-distance transmission lines. The copper going into a new car will jump from 20 pounds for the old internal combustion engines to 400 pounds. So that's why I say, Freeport McMoRan (FCX)—it’s not a question of if or when you get in; they are seeing a generational upgrade in demand for copper. Same is true for electric cars.

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, then 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

 

There is at Least 100 Pounds of Copper in this One Rotor