Global Market Comments
March 30, 2021
Fiat Lux
Featured Trade:
(HOW THE MAD HEDGE MARKET TIMING ALGORITHM TRIPLED MY PERFORMANCE)
Global Market Comments
March 29, 2021
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or THE WEEK THAT NEVER WAS),
(SPY), (TLT), (TBT), (TSLA), (CSCO), (ORCL), (INTC)
Of course, WWII historians know well the man who never was, the popular name for Operation Mincemeat.
In 1943, British intelligence found a homeless man who died on the streets of London, dressed him up as a Royal Marine Major William Martin, and released his body from a submarine off the coast of Spain, a German ally.
Handcuffed to his wrist was a briefcase with highly detailed plans for the allied invasion of Greece and the Balkans. The Germans shifted ten divisions to defend the region.
When the allies invaded Sicily instead, it came completely out of the blue. The invading American and British forces found the island almost undefended and inadequately manned and supplied by Italian troops. The allies planned for three months to capture Sicily. Instead, they did it in a mere 38 days. Allied losses came in at a tenth of those expected, thanks to Royal Marine Major William Martin.
The analogy here is that last week, we witnessed the market that never was. Stocks went down, then up. Bonds went up, then down. Even Tesla was virtually unchanged. It all ended up as a big fat zero for traders.
What all of this means for us investors is a subject of heated discussion among strategists. Of course, the Cassandras are always out there arguing that this is all proof that markets are peaking and that the mother of all stock market crashes is just ahead of us.
I take a different tack.
I think we are well into a long-overdue “time” correction whereby stocks go sideways for weeks or months before resuming their heroic assault on new highs. The timing will be dictated by the frantic reversal of the bond market at a ten-year Treasury yield of 2.00%.
Investors will rotate from the newly expensive recovery plays like banks into the newly cheap, such as technology stocks. Notice the sudden recent interest in legacy companies like Oracle (ORCL), Intel (INTC), and Cisco Systems (CSCO), which completely missed the great 2020 tech rally.
All of this sets up perfectly for the barbell portfolio which I have been advocating all year.
If there is a selloff, it will be by things that normal people don’t own. Those include SPACS, anything the Reddit crowd chases, stay-at-home stocks, and very high-priced tech stocks with no earnings.
Much focus has been placed on the Taiwanese-owned Ever Given stuck in the Suez Canal. As a Middle Eastern war correspondent for many years, I spent endless hours debating with my compatriots over what closure of the canal would mean.
What hasn’t been mentioned was that the accident was not caused by a Chinese captain, but Egyptian pilot ships are required to take on to raise revenues, and bribes, for the impoverished country. This all happened in the middle of a sandstorm where visibility is near zero.
I can tell you right now that they won’t get the Ever Given off there until they start to unload containers and lift off some weight so the 200,000-ton ship can rise of its own accord. Good luck with that in the middle of the Sinai Desert. Why not just sell all the contents on Amazon and have them deliver it for free as part of their prime membership?
This is a debacle that will last weeks, if not months, and will cost $9 billion a day in international trade until it’s over. In the meantime, commercial shippers have asked for protection from pirates from the US Navy as they navigate the unfamiliar water around the tip of Africa.
The Mad Hedge Summit Videos are Up, from the March 9,10, and 11 confab. Listen to 27 speakers opine on the best strategies, tactics, and instruments to use in these volatile markets. The product discounts offered last week are still valid. Start, stop, and pause the videos at your leisure. Best of all, access to the videos is FREE. Access them all by clicking here, click on CURRENT SUMMIT REPLAYS in the upper right-hand corner, and then choose the speaker of your choice.
Weekly Jobless Claims dive by 100,000, to 684,000, a one-year low. The decline was led by Illinois and Ohio. Labor shortages are popping up around the country in skilled areas, but bars and restaurants are still lagging severely.
Huge Office Cuts are coming, with execs planning a permanent 20% cut. Better to give the money to shareholders. Downtowns across the country will change beyond all recognition. How do you turn an office into an apartment?
CP Rail buys Kansas City Southern, for $25 billion, further concentrating the north American rail industry. It’s a steal because an economy entering a decade-long boom moves lots of stuff. It’s also a great North/South international trade play, which is recovering strongly with the exit of our last president. I used to ride box cars on the old Canadian Pacific back in the sixties (you can’t hitch hike where there are no cars), and occasionally the engineers would let me drive. It suddenly makes Norfolk South (NSC) and Union Pacific (UNP) look very tempting.
Another Tesla $3,000 Target was issued by Ark’s Cathie Wood, an early investor. Cathie’s Ark Innovation Fund ETF was up 180% last year largely on the strength of a massive Tesla (TSLA) holding. Her bear case is a low of $1,500 by 2025, nearly triple the current price. She has only one more triple to go to get to my own $10,000 forecast.
Biden has $3 Trillion More to Spend on top of the just passed $1.9 trillion rescue package. It's all rocket fuel for the stock market, not so much for bonds. The money will be spent on a mix of old-line freeway and bridge repair along with new spending on decarbonizing the power grid and social measures. It will be financed by tax hikes on those earning over $400,000. Remember, Roosevelt hiked the maximum tax rate to 90% on the wealthy, where it stayed for 30 years, and Biden is old enough to remember.
Daily Air Travelers top 1.5 Million, for the first time in a year. The pandemic low was 200,000 a day. It’s an indication of how anxious Americans have become to travel, and how strong the imminent economic boom will be.
Intel to build two chip fabs for $20 billion in Arizona to address the current severe shortage. US construction is a positive as it helps reduce reliance on foreign supplies. Too bad it will still leave them five years behind (AMD), but it’s a major move in the right direction. It deals with everything investors wanted to hear and moves them solidly into the 10nm architecture market. Buy (INTC) on dips.
New Home Sales Dive, off 18.2% in February, now that the free money train has left the station. Weather was blamed as a factor, with giant snowstorms slamming much of the country. Shortage of supply is another big issue. Some big builders are basically out of inventory and are reduced to selling floor plans with extended completion dates.
US Dollar (UUP) hits a four-month high, with a major assist from rising US bond interest rates. Expect the rally to continue until ten-year yields hit 2.00%, then sell the daylights out of it. With the US money supply growing at a near exponential 30% annual rate, there’s no way the dollar strength can continue. When you increase the supply, you decrease the value, simple supply and demand. My first pick is to buy the Aussie (FXA) a call option on a global synchronized economic recovery.
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 400% to 120,000 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 120,000, here we come!
It’s amazing how well patience can help your performance. My Mad Hedge Global Trading Dispatch profit reached a super-hot 18.61% so far in March on the heels of a spectacular 13.28% profit in February.
It was a go-nowhere week in the market, so I limited myself to a single trade all week, a double short in the bond market (TLT) on top of a welcome $5 rally. The position turned immediately profitable.
I still have a deep in-the-money call spread Tesla (TSLA) that is profitable and expires in 14 trading days. That leaves me with 70% cash and a barrel full of dry powder.
This is my fifth double-digit month in a row. My 2021 year-to-date performance soared to 42.10%. The Dow Average is up 9.9% so far in 2021.
That brings my 11-year total return to 464.65%, some 2.08 times the S&P 500 (SPX) over the same period. My 11-year average annualized return now stands at an unbelievable 41.30%.
My trailing one-year return exploded to positively eye-popping 119.39%. 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 Corona virus cases at 30.2 million and deaths topping 550,000, which you can find here.
Thankfully, death rates have slowed dramatically, but Obituaries are still the largest sector in the newspaper. At this point, some 47% of the US population has achieved immunity through vaccination or catching the disease. Herd immunity is near.
The coming week is a big one for jobs data.
On Monday, March 29, at 9:00 AM, the Dallas Fed Manufacturing Index for March is released.
On Tuesday, March 30, at 9:00 AM, the S&P Case Shiller National Home Price Index for January is published.
On Wednesday, March 31 at 8:15 AM, the ADP Challenger Private Employment Report for March is out. Pending Home Sales for February are indicated at 9:00 AM.
On Thursday, April 1 at 8:30 AM, the Weekly Jobless Claims are published.
On Friday, April 2 at 8:30 AM we get the Nonfarm Payroll Report for March. At 2:00 PM, we learn the Baker-Hughes Rig Count.
As for me, tax time is coming up and let me tell you, I have absolutely the best IRS story of all time.
It comes from my late, dear friend, Al Pinder, who I sat next to for ten years at the Foreign Correspondents of Japan in Tokyo, pounding away on antiquated Royal typewriters until our shoulders were as stiff as boards. Al then was the shipping correspondent for the New York Journal of Commerce newspaper.
Al was a colorful character, to say the least.
In the run up to WWII, Al took an extended vacation in Japan where he toured and photographed the country’s beaches, looking for the best landing sites for the US military in case war broke out.
To sneak the top-secret pictures out of the country, he bought a large steamer trunk and placed them a false bottom. Then he went to Tokyo’s red-light district in Yoshiwara, bought a dubious sex toy, an inflatable life-sized Japanese doll, and placed it on top.
When the trunk was searched, the customs officials found the doll, had a good laugh and passed him on. Al’s photos were the basis of Operation Olympic, the 1945 US invasion of Japan, made unnecessary by the dropping of the atomic bomb.
When the war broke out, Pinder parachuted into western China, where he acted as the liaison with Mao Zedong’s guerilla forces in Hunan province. In 1944, Al received a coded message from headquarters ordering him to intercept a top-secret airdrop from a DC3 in the middle of the night.
Knowing he would be mercilessly tortured by the Japanese if caught, he set up three signal fires in a triangle in a remote part of the desert and managed to find the parachute. Dodging enemy patrols all the way, he returned to his hideout in a mountain cave and opened the package.
In it was a letter from the IRS asking why he had not filed a tax return for the past three years.
I told this story at Al’s wake a few years ago and everyone had a good laugh. Al went on to run CIA operations in Japan during the fifties and sixties. When he passed away, there was a frantic search for a safe deposit box by American intelligence officials containing records of all CIA payoffs to Japan’s leading conservative party.
When the box was finally found, there was an enormous sigh of relief at the embassy. I still miss Al.
Stay healthy.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
March 26, 2021
Fiat Lux
Featured Trade:
(PLAYING THE SHORT SIDE WITH VERTICAL BEAR PUT SPREADS)
(TLT)
Global Market Comments
March 25, 2021
Fiat Lux
Featured Trade:
(HOW TO EXECUTE A VERTICAL BULL CALL SPREAD)
(AAPL)
(TESTIMONIAL)
(DINING WITH THE BOTTOM 20%)
Your article on “The Ten Baggers on Solar Energy” is the best, well-informed, educated piece of literature I have read in a long time.
Thank you for your honest and well-informed article. I am going to be 86 years YOUNG in coming November and appreciate a simple jewel in this money-chasing jungle.
I would like to follow you and learn more new stuff in this fast-going and changing world. Thank you.
Lisa
Ontario, Canada
Occasionally, you have to tear yourself away from your screens and get involved in the real world.
So, a recent Saturday found me driving a carload of Boy Scouts to the Oakland Food Bank, a local distributor of free meals for the poor and homeless.
I learned a long time ago that nonprofits can be the most efficient participants in an economy. They have to or die because they can’t afford to pay anyone. Look no further than the Boy Scouts which runs a million-man national organization off of the $2 a month dues contributed by its juvenile members.
The Oakland Food Bank did not disappoint.
After a brief training video, I was ushered into a vast warehouse and bluntly asked “Corn or potatoes.” No management role here. I opted for potatoes, as my somewhat large hands were ideal for picking up several spuds at once.
What I ended up doing was breaking open 50-pound bags of potatoes fresh from the farm in Idaho and repackaging them into ten-pound carriers ideal for a single family. Others were inspecting sweet potatoes, corn, and peas. My task was made all the easier by a sound system blasting vintage sixties rock music.
It is amazing that the demand for free food is so great just across the bay, or one BART stop away from the world’s wealthiest and highest paid city. The Oakland Food Bank feeds 20% of Alameda County, or about 320,000 people a day. When the federal government shut down in January, the Oakland Food Bank was there sending truckloads of meals to the nearest base to feed military families.
I learned at the recent SALT conference in Las Vegas that 50% of the country could not pay an emergency expenditure of $500. This is where the food was going.
Certainly, the organization has grown a lot since the summer of love in 1967 when I stood in long lines to get doled a cup of stew of indeterminate origin by an organization then known as the “Diggers.” San Francisco was inundated by 100,000 kids that year, camping out in Golden Gate Park and totally swamping local services.
The Oakland Food Bank is now a massive outfit bringing together 17,000 volunteers donating 103,000 hours last year to feed the hungry. Even at minimum age, the value of that labor was $824,000. Semis from throughout the west were unloading thousands of pallets of food from farms, stores, and manufacturers.
A lot of the vegetables I saw were fine, they just did not conform to the picture-perfect version that Safeway requires for its produce aisles.
A market has sprung up to meet this. The food bank buys substandard potatoes direct from farmers at ten cents a pound, versus the $1.16 a pound in supermarkets. The China trade war has also made available millions of tons of foodstuffs available at throwaway prices, from rice to almonds, or corn and soybeans.
The work became more tedious when the music shifted to contemporary pop and I was sorting my 10,000 potatoes. But then the morning shift mercifully ended, and I was left to collect my far-flung scouts.
On the way out, our organizers told us we 60 volunteers had created 15,000 meals. Everyone cheered and headed for the door. I reminded my kids that if they didn’t go to college, they too would be doing this all day, every day….for $8 an hour and no benefits. They gave me a sober look.
We’ll be back again next month. I can’t wait to see what I get to sort next.
Global Market Comments
March 24, 2021
Fiat Lux
Featured Trade:
(FIVE TECH STOCKS TO BUY AT THE BOTTOM),
(AAPL), (AMZN), (SQ), (ROKU), (MSFT)
I have prudently ignored investing in tech stocks for the past seven months, and justly so.
Tech has been peddling hard on the business front, but the shares have been going nowhere in a hurry. Many of the leading names are down 30%-50% from their peak prices.
As a result, they are rapidly approaching value territory. When growth becomes cheap and value gets expensive, it’s time to shift from one side of the barbell strategy to the other.
I’m not saying that tech stocks have bottomed. But we are getting close, perhaps within 10% in the best names. It’s now time to lists of stocks to pounce on when the big turn inevitably comes.
Fortunately, Arthur Henry’s Mad Hedge Technology Letter has already done that job for you. See below his list of recommendations.
By the way, if you want to subscribe to Arthur’s groundbreaking, cutting-edge service, please click here.
It’s the best read on technology investing in the entire market.
You don’t want to catch a falling knife, but at the same time, diligently prepare yourself to buy the best discounts of the year.
Here are the names of five of the best stocks to slip into your portfolio in no particular order when the next downside whoosh occurs.
Remember, tech ALWAYS comes back.
Apple
Steve Job’s creation is weathering the gale-fore storm quite well. Apple has been on a tear reconfirming its smooth pivot to software services tilted tech company. The timing is perfect as China has enhanced its smartphone technology by leaps and bounds.
Even though China cannot produce the top-notch quality phones that Apple can, they have caught up to the point local Chinese are reasonably content with its functionality.
That hasn’t stopped Apple from vigorously growing revenue in greater China 20% YOY during a feverishly testy political climate that has their supply chain in Beijing’s crosshairs.
The pivot is picking up steam and Apple’s revenue will morph into a software company with software and services eventually contributing 25% to total revenue.
They aren’t just an iPhone company anymore. Apple has led the charge with stock buybacks and will gobble up a total of $200 billion in shares by the end of 2021. Get into this stock while you can as entry points are few and far between.
Oh, and their 5G phones are selling like hotcakes. Some one billion need to be replaced to bring consumers into the new high-speed 5G world.
Amazon (AMZN)
This is the best company in America hands down and commands 5% of total American retail sales or 49% of American e-commerce sales. The pandemic has vastly accelerated the growth of their business.
It became the second company to eclipse a market capitalization of over $1 trillion. Its Amazon Web Services (AWS) cloud business pioneered the cloud industry and had an almost 10-year head start to craft it into its cash cow. Amazon has branched off into many other businesses since then oozing innovation and is a one-stop wrecking ball.
The newest direction is the smart home where they seek to place every single smart product around the Amazon Echo, the smart speaker sitting nicely inside your house. A smart doorbell was the first step along with recently investing in a pre-fab house start-up aimed at building smart homes.
Microsoft (MSFT)
The optics in 2021 look utterly different from when Bill Gates was roaming around the corridors in the Redmond, Washington headquarter and that is a good thing.
Current CEO Satya Nadella has turned this former legacy company into the 2nd largest cloud competitor to Amazon and then some.
Microsoft Azure is rapidly catching up to Amazon in the cloud space because of the Amazon-effect working in reverse. Companies don’t want to store proprietary data to Amazon’s server farm when they could possibly destroy them down the road. Microsoft is mainly a software company and gained the trust of many big companies especially retailers.
Microsoft is also on the vanguard of the gaming industry taking advantage of the young generation’s fear of outside activity. Xbox-related revenue is up 36% YOY, and its gaming division is a $10.3 billion per year business.
Microsoft Azure grew 87% YOY last quarter. The previous quarter saw Azure rocket by 98%. Shares are cheaper than Amazon and almost as potent.
Square (SQ)
CEO Jack Dorsey is doing everything right at this fin-tech company blazing a trail right to the doorsteps of the traditional banks.
The various businesses they have on offer make me think of Amazon’s portfolio because of the supreme diversity. The Cash App is a peer-to-peer money transfer program that cohabits with a bitcoin investing function on the same smartphone app.
Square has targeted the smaller businesses first and is a godsend for these entrepreneurs who lack immense capital to create a financial and payment infrastructure. Not only do they provide the physical payment systems for restaurant chains, but they also offer payroll services and other small loans.
The pipeline of innovation is strong with upper management mentioning they are considering stock trading products and other bank-like products. Wall Street bigwigs must be shaking in their boots.
Roku (ROKU)
Benefitting from the broad-based migration from cable tv to online steaming and cord-cutting, Roku is perfectly placed to delectably harvest the spoils.
This uber-growth company offers an over-the-top (OTT) streaming platform along with the necessary hardware and picks up revenue by selling digital ads.
Founder and CEO Anthony Woods owns 21 million shares of his brainchild and insistently notes that he has no interest in selling his company to a Netflix or Apple.
Viewers are reaffirming the obsession with on-demand online streaming content with hours streamed on the platform increasing 58% to 5.5 billion.
The Roku platform can be bought for just $30 and is easy to set-up. Roku enjoys the lead in the over-the-top (OTT) streaming device industry controlling 37% of the market share leading Amazon’s Fire Stick at 28%.
The runway is long as (OTT) boxes nestle cozily in only 40% of American homes with broadband, up from a paltry 6% in 2010.
They are consistently absent from the backbiting and jawboning the FANGs consistently find themselves in partly because they do not create original content and they are not an offshoot from a larger parent tech firm.
This growth stock experiences the same type of volatility as Square.
“No one is line dancing over the fact that the market is at 4,000. No one feels good about it. The market likes to climb a wall of worry, and the stonemason has been hard at work. So, I think we continue to grind higher,” said Jason Trennert, chief investment strategist at Strategas Research Partners.