February 28, 2025
(SUMMARY OF JOHN’S FEBRUARY 26, 2025 WEBINAR)
February 28, 2025
Hello everyone
TITLE
The Last Glass of Kool-Aide
THE HIGHLIGHTS
A five-year bull market is coming to an end.
Economic growth will slow in 2025, and risks rise.
Inflation is about to rear its ugly head once again.
Interest rate cuts are over, and the next Fed move may be a rise.
Stock valuations are at a 26-year high, and uncertainty is exploding …a toxic combination.
We may have a few more months of the bull left. After that, look out below.
Even bear markets can produce winners. Let Mad Hedge show you where they are.
WINNERS & LOSERS
Winners
Energy
Financials – Banks & Brokers
Domestic Manufacturing
Crypto
Tesla
Losers
All interest rate plays
All bonds
Housing
Real Estate
Construction
Importers
Precious Metals
US automakers
Pharmaceuticals
Agriculture
Restaurants
Cruise lines
Retailers
TRADE ALERT PERFORMANCE
February MTD = +0.96%
Since inception = +758.65%
Trailing One Year Return = +83.45%
Average Annualized Return = +49.92%
PORTFOLIO REVIEW
Risk On
(GS) 3/$580-$590 call spreads
(JPM) 3/$235-$245 call spread
Risk Off
NO POSITIONS
THE METHOD TO MY MADNESS
2025 has lost all gains.
Market has gone from low risk to high risk overnight, with the leading names like (NVDA) and Tesla (TSLA) taking the biggest hits.
All interest rate plays remain dead in the water – homebuilders, bonds, and REITS.
Deregulation plays will continue to be bought, including banks, brokers, and money managers.
US dollar finally takes a break on falling rates.
Big technology stocks get crushed by Deep Seek and trade wars.
Energy sells off on Deep Seek as well – no power needed.
Buy financial as the only sure thing this year.
THE GLOBAL ECONOMY – ROLLING OVER
Government shutdown on March 14
Economic data has flipped from mixed to universally bad.
Core Inflation rate comes in red hot at 0.50%.
PPI comes in hot.
Consumer sentiment nosedives to a 30-year low.
Early recession indicators are collapsing, like FedEx, down 7% today.
Washington DC's economy is in recession. Unemployment claims are up 400%
U.S. Retail Sales dropped sharply.
U.S. Manufacturing Production unexpectedly fell.
STOCKS – NEW JITTERS
Technology stocks destroyed on rapidly deteriorating economic data. NASDAQ is now down in 2025.
Market confidence is eroding by the day.
Momentum has died, and the market has been over-rewarding momentum stocks.
Biggest de-grossing in two years has started, cutting back of total positions – longs and shorts.
Nvidia tells all with earnings on Wednesday – watch for selloff on great earnings.
Morgan Stanley warns customers to cut stock exposure.
The Cruise business gets crushed on warnings of new taxes.
Lockheed Martin (LMT) dives 8% on a cautious outlook spurred by our new government, with defence spending to be cut in half.
EV and hybrid sales reach a record 20% of US vehicle sales in 2024, but subsidies are about to disappear.
Tesla is currently adrift amidst falling sales with no leader.
John suggests cleaning out your portfolio and build cash.
Walmart is a good economic indicator. Watch this stock.
THE ULTIMATE HEDGE – Defensive stocks only go down at a slower rate
90-day US T-bills (Warren Buffet owns $300 billion)
Government guaranteed principal
Endless liquidity, trade like water
100% collateral value for margin
Lock in guaranteed income
Can be sold at any time to earn full interest
Will survive any bear market
Ask your broker how to buy
JOHN’S S&P 500 DOWNSIDE TARGETS
$595 = -5.0% 1st support
$565 = -8.8% 2nd support
$535 = -17.1% 3rd support
THE BENEFITS OF DEREGULATION
Cuts Costs
Increases profits
Opens up new markets
Grows the industry
Increases innovation
Drives stock prices high
However, deregulation has costs:
It increases misrepresentations and fraud
Increases theft
Increases bankruptcies
Consumers are left holding the bag
Don’t forget to sit down when the music stops playing – it’s every man for himself.
BONDS – TOAST
The deficit is the big election loser – all government actions so far will increase the deficit.
The National debt is about to explode, from $35 trillion to $45 trillion.
Interest payments on the national debt already top $1 trillion per year and will become the largest budget item, topping Social Security at $1.2 trillion.
Government borrowing will become much more difficult than the last time Trump was President, when the deficit was only $20 trillion.
It all depends on inflation, which is likely to rise sharply in response to increased spending, tax cuts, labour shortages, and trade wars.
So the best case for bonds is that the (TLT) chops around here.
The worst case is that we retest new multiyear lows at $79.
Avoid (TLT), (JNK), (NLY), (SLRN), and REITS
FOREIGN CURRENCIES – TAKING A VACATION
Dollar backs off two year- high, on falling US interest rates. Ten-year US Treasuries have dropped from 4.88% to 4.40%.
But the greenback is coming back.
Higher for longer interest rates mean higher for longer US dollar.
Don’t sell the UD dollar until the next recession is on the horizon.
Avoid (FXA), (FXE), (FXB), (FXC), and (FXY)
ENERGY & COMMODITIES
Deep Seek shock trashes all nuclear energy plays on fears that the new orders will be cancelled, as the extra power will no longer be needed.
New AI programming uses 1% of the chips and, therefore, 1% of the power.
Nothing could be further from the truth. Buy all nuclear plays on this dip.
Bank lifted on new natural gas export facilities in four years, reversing a Biden-era climate initiative.
Many analysts expect an oversupplied oil market this year after demand growth slowed sharply in 2024 in the top-consuming nations: the U.S. and China.
The EIA said it expects Brent crude oil prices to fall 8% to an average $74 a barrel in 2025, then fall further to $66 a barrel in 2026.
PRECIOUS METALS – A NEW LEG
Falling interest rates have given gold a new lease on life.
The opportunity cost of owning gold has fallen sharply.
Central bank buying never stopped.
Now, silver is starting to play catch-up.
Gold is still the favoured saving means by Chinese who don’t trust their own currency, banks, or government.
That’s why the metals have outperformed the miners, which the Chinese don’t buy.
Buy (GLD), (SLV), (AGQ), and (WPM) on dips.
REAL ESTATE – STAY AWAY
Existing Home Sales crater, on a closing contract basis, was down 4.9% in January to 4.09 million units.
Terrible weather was a factor.
Inventories are up 17% YOY and 3.5% on the month.
All cash sales hit 29%.
The average price of a home is at an all-time high at $396,800, up 4.5% YOY.
Homebuilders are panicking over tariff prospects.
US Q4 profits hit three year - high.
U.S. Retail Sales dropped sharply.
TRADE SHEET
Stocks – buy the next big dip, sell rallies
Bonds – sell rallies
Commodities – stand aside
Currencies – stand aside
Precious Metals – buy dips
Energy – buy nuclear dips
Volatility – sell over $30
Real Estate – stand aside
NEXT STRATEGY WEBINAR
12:00 EST Wednesday, March 12, 2025
Cheers
Jacquie
