Come join me for lunch at the Mad Hedge Fund Trader’s Global Strategy Luncheon, which I will be conducting in Brisbane, Australia on Monday, February 3, 2020 at 12.30 PM.
An excellent meal will be followed by a wide-ranging discussion and a question-and-answer period. I’ll be giving you my up-to-date view on stocks, bonds, currencies, commodities, precious metals, energy, and real estate.
I also hope to provide some insight into America’s opaque and confusing political system. And to keep you in suspense, I’ll be throwing a few surprises out there too.
Tickets are available for $234.
The lunch will be held at an exclusive hotel in downtown Brisbane, the location of which will be emailed with your purchase confirmation.
I look forward to meeting you and thank you for supporting my research. To purchase tickets for this luncheon, please click here.
https://www.madhedgefundtrader.com/wp-content/uploads/2019/05/brisbane.png352629Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2020-01-21 10:04:352020-02-03 17:42:12SOLD OUT - Monday, February 3 Brisbane, Australia Global Strategy Luncheon
My forecast for the Dow Average for 2030 is 120,000, which I have been predicting since the market bottomed in March, 2010, up 313% from here.
My problem is that so many people have recently come over to my own line of thinking that it has become impossible for me to take advantage of it.
The only chance you had to get into the market in 2020 was when the president ordered the execution of an Iranian general. Even then, the Dow dropped only 400 points, a miniscule 1.4%, and the Mad Hedge Market Timing Index backed off a smidgen, from 93 to 87. It then took off again like a scalded chimp.
Every professional trader I know to a man and woman is out of the market, stunned by euphoria run amok. We all know this ends in tears. The only question is how many pennies you can pick up before the steamroller runs you over. Option implied volatilities are at five-year lows, never a good place to trade.
I’ve been telling big hedge funds to give control of their funds over to their youngest, least experienced, and dumbest traders. It is only they who can make money in this environment, those who have never seen markets go down. I gave the same advice in 2007, 1999, and 1987. Before that, nobody cared what I thought.
So there is nothing left for us to do here but exercise rock-solid discipline, while many others are dancing on the tables. You can take solace in the knowledge that those buying stocks here will be puking them back out when markets are down 5%-10%. Whether that takes place next week or next month is anyone’s guess.
US stocks have risen 40% in 12 months on falling earnings, taking earnings multiples from 14 to 20. And the Volatility Index (VIX) stands at a near-decade low of $12. Am I missing something?
Risk is extreme, with Wharton’s Uber bull, Jeremy Siegal expecting the Dow Average to hit 30,000 in the next ten days. The top five stocks are posting most of the gains. With the Mad Hedge Marketing Timing Index at a lofty 93 last week, how many pennies can you pick up in front of the steamroller? I’m staying in cash with a small long volatility position I bought at a half-decade low.
It’s Q4 Earnings Season, with the big banks kicking off on Tuesday, generally bringing in satisfying result. Will aggregate earnings be flat or show a small gain? Most companies have already cut forecasts enough so 80% will beat predictions. The problem is how much is in the price?
Tesla hit $550, as the stock continues its parabolic run. It’s definitely getting overcooked here with a nonstop $320 run since June. Look for a Q1 sales pullback as the steroids of the rush to beat the 2019 end of federal subsidies wears off. That will be your next chance to buy. My decade target is $2,500 a share.
The Big biotech & healthcare conference last week in San Francisco organized by JP Morgan usually marks an interim top for this sector. If you need short term profits, better now than never. Some of our names have doubled and many are up 25% since the launch of the Mad Hedge Biotech & Healthcare Letter in September. Click here to subscribe.
US Consumer Prices rose in December, up 0.2%, following hotter months. The CPI is up a miniscule 2.3% YOY. With inflation moderating, Goldilocks lives!
Blackrock says climate change will remake investment. The $7 trillion manager is rolling out a new line of ETFs focusing on ESG, or Environmental, Social, and Governance investing. ESG has risen from 1% to 3.6% of all funds in a year. Investing in traditional carbon-based companies is essentially banned.
The Trade wars are still costing us money, with the World Bank cutting growth forecasts for 2020 and 2021. Almost every economic data point is weaker than two years ago. Only jobs remain robust. The Fed says that manufacturing has been hardest hit. How long will the pain continue?
Student debt tops $1.6 trillion making it the next subprime crisis. Most borrowers are only paying monthly interest and not a penny towards principal. That’s millions of consumers that are out of the economy and not spending. I paid off my loans 40 years ago with a single check. The loan officer asked, “You want to do what!?”
Housing starts soared to a 13-year high, up a blockbuster 16.9% in December to 1.608 million units. The industry is cashing in on massive Fed expansion of the monetary base and ultra-low interest rates. Buyers recently enrich by rocketing stock prices are stepping up as the “wealth effect” explodes.
My Global Trading Dispatch performance held steady at +356.91% for the past ten years, an all-time high. My 2019 year-to-date came in at a final +55.86%. We closed out December with a market beating +4.97% profit. My ten-year average annualized profit ground back up to +35.28%.
Option values are at five years low, making the call and put spreads I usually do the least attractive since 2015. My true risk-free trades take place when the Volatility Index (VIX) rises above $20. It has been hugging $12 for the past two weeks.
You don’t need me, or any other advisor, when markets rise every day. When they don’t, you financial life depends on me.
The coming week will be pretty dismal on the data front, with a national holiday and some other minor releases.
On Monday, January 20, market was closed for Martin Luther King Day.
On Tuesday, January 21, no data releases of note take place.
On Wednesday, January 22, at 8:00 AM, Existing Home Sales for December are out, the most important housing number of the month.
On Thursday, January 23 at 8:30 AM, Weekly Jobless Claims are announced.
On Friday, January 24, The Baker Hughes Rig Count is released at 2:00 PM.
As for me, I spent Saturday hiking 12 miles around San Francisco with 20 Boy Scouts, instructing them on the finer points of navigating by compass. I found a lot of lesser sights I had never seen before and stumbled across several charming postage stamp-sized community parks. We ended up at Ghirardelli Square where we consumed a celebratory hot fudge sundae.
And what did we come across during our explorations? A naked man with a selfie stick walking down the Embarcadero making a YouTube video!
Only in San Francisco.
Good Luck and Good Trading
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
https://www.madhedgefundtrader.com/wp-content/uploads/2020/01/john-thomas-blue.png727520Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2020-01-21 10:02:182020-05-11 14:14:14The Market Outlook for the Week Ahead or Dow 120,000 Here We Come
I am always watching for market-topping indicators and I have found a whopper. The number of new IPOs from technology mega unicorns is about to explode. And not by a little bit but a large multiple, possibly tenfold.
Some 220 San Francisco Bay Area private tech companies valued by investors at more than $700 billion are likely to thunder into the public market next year, raising buckets of cash for themselves and minting new wealth for their investors, executives, and employees on a once-unimaginable scale.
Will it kill the goose that laid the golden egg?
Newly minted hoody-wearing millionaires are about to stampede through my neighborhood once again, buying up everything in sight.
That will make 2020 the biggest year for tech debuts since Facebook’s gargantuan $104 billion initial public offering in 2012. The difference this time: It’s not just one company but hundreds that are based in San Francisco, which could see a concentrated injection of wealth as the nouveaux riches buy homes, cars and other big-ticket items.
If this is not ringing a bell with you, remember back to 2000. This is exactly the sort of new issuance tidal wave that popped the notorious Dotcom Bubble.
And here is the big problem for you. If too much money gets sucked up into the new issue market, there is nothing left for the secondary market, and the major indexes can fall by a lot. Granted, probably only $100 billion worth of stock will be actually sold, but that is still a big nut to cover.
The onslaught of IPOs includes home-sharing company Airbnb at $31 billion, data analytics firm Palantir at $20 billion, and FinTech company Stripe at $20 billion.
The fear of an imminent recession starting sometime in 2020 or 2021 is the principal factor causing the unicorn stampede. Once the economy slows and the markets fall, the new issue market slams shut, sometimes for years as they did after 2000. That starves rapidly growing companies of capital and can drive them under.
For many of these companies, it is now or never. They have to go public and raise new money or go under. The initial venture capital firms that have had their money tied up here for a decade or more want to cash out now and roll the proceeds into the “next big thing,” such as blockchain, healthcare, or artificial intelligence. The founders may also want to raise some pocket money to buy that mansion or mega yacht.
Or, perhaps they just want to start another company after a well-earned rest. Serial entrepreneurs like Tesla’s Elon Musk (TSLA) and Netflix’s Reed Hastings (NFLX) are already on their second, third, or fourth startups.
And while a sudden increase in new issues is often terrible for the market, getting multiple IPOs from within the same industry, as is the case with ride-sharing Uber and Lyft, is even worse. Remember the five pet companies that went public in 1999? None survived.
Some 80% of all IPOs lost money last year. This was definitely NOT the year to be a golfing partner or fraternity brother with a broker.
What is so unusual in this cycle is that so many firms have left going public to the last possible minute. The desire has been to milk the firms for all they are worth during their high growth phase and then unload them just as they go ex-growth.
Also holding back some firms from launching IPOs is the fear that public markets will assign a lower valuation than the last private valuation. That’s an unwelcome circumstance that can trigger protective clauses that reward early investors and punish employees and founders. That happened to Square (SQ) in its 2015 IPO.
That’s happening less and less frequently: In 2019, one-third of IPOs cut companies’ valuations as they went from private to public. In 2019, that ratio has dropped to one in six.
Also unusual this time around is an effort to bring in more of the “little people” in the IPO. Gig economy companies like Uber and Lyft have lobbied the SEC for changes in new issue rules that enabled their drivers to participate even though they may be financially unqualified. They were all hit with losses of a third once the companies went public.
As a result, when the end comes, this could come as the cruelest bubble top of all.
https://www.madhedgefundtrader.com/wp-content/uploads/2019/03/unicorn.png402402Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2020-01-16 11:02:172020-05-11 14:13:47Will the Unicorns Kill the Bull Market?
Come join me for lunch at the Mad Hedge Fund Trader’s Global Strategy Update, which I will be conducting in Honiara in the Solomon Islands at 12:30 PM on Friday, January 31, 2020.
An excellent meal will be followed by a wide-ranging discussion and an extended question-and-answer period.
I’ll be giving you my up-to-date view on stocks, bonds, currencies, commodities, precious metals, energy, and real estate.
And to keep you in suspense, I’ll be throwing a few surprises out there too.
Tickets are available for $299.
The lunch will be held at the only decent hotel in the Solomon Islands, one of the poorest countries in the world. Malaria is endemic, so bring your Malaria pills (start taking them three days before departure). Typhoid shots will also be helpful.
If you have any questions about the Guadalcanal luncheon, please email me at support@madhedgefundtrader.com. Just put “Guadalcanal Luncheon” in the subject line.
I look forward to meeting you and thank you for supporting my research. To purchase tickets for this luncheon, please click here.
When the Commandant of the Marine Corps asks for a favor, you say “Yes Sir” without hesitating. So when General David H. Berger called me and asked to represent him at the 78th annual memorial service for the 1942 Battle of Guadalcanal, I started booking my flight.
It seems I’m the only living Corps veteran who had both a father and an uncle fight at Guadalcanal, who also speaks Japanese. That will enable me to sympathize with the Japanese families attending the service who lost loved ones.
I have acted as a diplomatic representative for the Marine Corps for many decades. Over the years, I have met presidents, Medal of Honor winners, and Navaho code talkers. My favorite was always the annual D-Day memorials at the Normandy beaches where I usually participated in a flyover. For a history buff like me, it’s a dream come true. Plus, Normandy had better food.
Guadalcanal was the decisive battle of WWII. The Americans lost 7,000 men, 25 ships, and 175 planes. The Japanese lost 30,000 men, 25 ships, including a major battleship, and 450 planes. Before Guadalcanal, the Japanese had never lost a battle. After Guadalcanal, they never won. If the US had lost Guadalcanal, WWII would have continued until 1948 or 1949.
https://www.madhedgefundtrader.com/wp-content/uploads/2019/12/John-Thomas-senior.png377535Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2020-01-15 10:04:092020-01-27 11:45:13SOLD OUT - Friday, January 31, 2020 Guadalcanal Strategy Luncheon
What if instead of being in the 11th year of a bull market, we are actually in the first year, which has another decade to run? It is not only possible, it is probable. Personally, I give it a greater than 50% chance.
There is a possibility that the bear market that everyone and his brother has been long predicting and that the talking heads assure you is imminent, has already happened.
It took place during the fourth quarter of 2018, when the Dow Average plunged a heart-rending 20%. How could this be a bear market when historical ursine moves down lasted anywhere from six months to two years?
Blame it all on hyperactive algorithms, risk parity traders, and hedge funds, which adjust portfolios with the speed of light. If this WAS a bear market and you blinked, then you missed it.
It certainly felt like a bear market at the time. Lead stocks like Amazon (AMZN), Apple (AAPL), Facebook (FB), and Alphabet (GOOGL) were all down close to 40% during this hellacious three-month period. High beta stocks like Roku (ROKU), one of our favorites, was down 67% at the low. It has since risen by 600%.
In my experience, if it walks like a duck and quacks like a duck, then it is a bear. If true, then the implications for all of us are enormous.
If I’m right, then my 2030 target of a Dow Average of $125,000, an increase of 331% no longer looks like the mutterings of a mad man, nor the pie in the sky dreams of a permabull. It is in fact eminently doable, calling for a 15% annual gain until then, with dividends.
What have we done over the last ten years? How about 13.08% annually with dividends reinvested for a total 313% gain.
For a start, from here on, we should be looking to buy every dip, not sell every rally. Institutional cash levels are way too high, and bearishness is rampant.
It all brings into play my Golden Age scenario of the 2020s, a repeat of the Roaring Twenties, which I have been predicting for the last ten years. This calls for a generation of 85 million big spending Millennials to supercharge the economy. Anything you touch will turn to gold, as they did during the 1980s, the 1950s, and well, the 1920s. Making money will be like falling off a log.
If this is the case, you should be loading the boat with technology stocks and biotech stocks at every opportunity. Although stocks look expensive now, they are still only at one-fifth peak valuations of the 2000 summit.
Let me put out another radical, out-of-consensus idea. It has become fashionable to take the current red-hot stock market as proof of a Trump win in the 2020 election.
What if the opposite is true? What if, in fact, the market is discounting a Trump defeat? It makes economic sense. It would bring an immediate end to our trade war with the world, which is currently costing us 1% a year in GDP growth. Take Trump out of the picture and our economy gets that 1% back immediately, leaping from 2% to 3% growth a year.
The last Roaring Twenties started with doubts and hand wringing similar to what we are seeing now. Everyone then was expecting a depression in the aftermath of WWI, now that the big-time military spending was ending. After a year of hesitation, massive reconstruction spending in Europe and a shift from military to consumer spending won out, leading to the beginning of the Jazz Age, flappers, and bathtub gin.
I know all this because my grandmother regaled me with these tails, an inveterate flapper herself. This is the same grandmother who owned the land under the Bellagio Hotel in Las Vegas until 1978 and then sold it for $10 million.
It all sets up another “Roaring Twenties” very nicely. You will all look like geniuses.
https://www.madhedgefundtrader.com/wp-content/uploads/2020/01/dancers.png318358Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2020-01-15 10:02:462020-05-11 14:12:41A Radical View of the Markets
"Where a calculator on the Eniac is equipped with 18,000 tubes and weighs 30 tons, computers in the future may have only 1,000 vacuum tubes, and weigh 1.5 tons," said Popular Mechanics magazine in 1949.
https://www.madhedgefundtrader.com/wp-content/uploads/2014/05/Ticker-Tape.jpg225401DougDhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngDougD2020-01-15 10:00:302020-01-15 09:41:30Quote of the Day - January 15, 2020
(FRIDAY JANUARY 27, 2020 FIJI STRATEGY LUNCHEON)
(SHOPPING FOR FIRE INSURANCE IN A HURRICANE),
(VIX), (VXX), (XIV),
(THE ABC’s OF THE VIX),
(VIX), (VXX), (SVXY)
https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png00Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2020-01-14 11:08:552020-01-14 10:34:17January 14, 2020
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