Below please find subscribers’ Q&A for the September 21 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Silicon Valley in California.
Q: What would cause you to look for a lower bottom than $330 on the (SPY)?
A: Nuclear war with Russia would certainly do the trick—they’re now threatening to use tactical nuclear weapons in Ukraine—and higher-than-expected interest rates. If we get another 75 basis points after this one today, then I think you’re looking at new lows, but we won’t find that out until November 2. So, the market may just bounce along the bottom here for a while until it sees what the Fed is going to do, not on this rate hike but the next one after that. Other than that, a few dramatically worse earnings from corporations would also allow us to test a lower low.
Q: Is it time to nibble on Nvidia Corporation (NVDA)?
A: Nvidia is one of the most volatile stocks in the market. You don’t want to go into it until you’re absolutely sure the bottom is in. If that means you miss the first 10% of the following move up, that’s fine because when this thing moves, you get a double or triple out of it. I would wait for the indecision in the market to resolve itself before you get too aggressive on the most volatile stocks in the market. The same is true for the rest of the semiconductor sector.
Q: What does a final capitulation look like?
A: The Volatility Index (VIX) ever $40. We’ve had a high of VIX at $37 so far this year. If really get over $40, that would be a new high for the year. That would signal people that are throwing in the towel, giving up the market, selling everything—of course that is always the best time to buy.
Q: How do we get LEAPS guidance?
A: We send our LEAPS recommendations first to our concierge members—we only have a small number of those—and then after that, they go out to all subscribers to the Mad Hedge Global Trading Dispatch. Everyone gets exposure to the LEAPS. By the way, with LEAPS, you can take up to a month to execute a position. What I do is literally buy 1 contract a day, so I get a nice average over the period of a month when the market is most likely bottoming.
Q: Do you see Intel Corporation (INTC) as a good candidate for a Taiwan invasion hedge?
A: Well, first of all, China’s not going to invade Taiwan. I’ve been waiting for this for 70 years and it’s not going to happen. Also, Intel’s new management has yet to prove itself. You have a salesman running the company; I never like companies run by a salesman. I’d prefer to have an engineer run an engineering company. The court is still out on Intel and whether they can turn that company around or not; so, I would much rather buy the market leaders, Nvidia (NVDA), Advanced Micro Devices (AMD), and Micron Technology (MU) in the semiconductor space.
Q: You talked dollar/cost averaging before. Should we pause on averaging in?
A: No, that's why I say buy one contract a day and put it in order to buy at the bid side of the market. That way, any sudden swoosh down in the market and you’ll get filled. The spreads on these LEAPS are quite wide, so you want to try to buy as close to the middle or bottom end of the spread, and putting in single contract orders over a month, of course, will do that to you.
Q: Does that mean it’s time to sell the ProShares UltraShort 20+ year Treasury Yield (TBT)?
A: I would say yes; (TBT) hit $30.30 yesterday, which is a new multi-year high. I would be taking profits on that because on the next turnaround in bonds, you could get a very rapid move in (TBT) from $30 back down to $20. I’d rather have you keep that profit than try to squeeze the last dollar out of it. Remember, the (TBT) has a negative cost of carry now of 8% a year and that is a big nut to cover.
Q; Market outlook for mid-2023?
A: We could hit my $4,800 target by mid-2023; that is up 28% from here.
Q: Can we buy LEAPS on Amgen (AMGN)?
A: Absolutely yes, you can. Go for the highest listed strike prices on the call side with the longest possible maturity. I would do the January 17, 2025 $350-$360 vertical bull call spread which you can buy now for $1.00. That gives two years and four months to get a tenfold return. That’s enough time for a full-bore recession to happen and then a recovery where markets take off like a rocket. The call spread you bought for $1.00 becomes worth $10.00.
Q: Is there a long position on the beneficiary of government plans to build EV charging stations?
A: There is, but I'm not recommending EV charging stations because it’s a low value-added business. You buy electric power from the local utility, add 10 cents and resell it. The margins are small, the competition is heating up. There are much smarter ways to play EVs than the charging station. ChargePoint (CHPT) is certainly one of them, but it’s not a great investment idea. Look at how ChargePoint (CHPT) has performed over the last six months compared to Tesla (TSLA) and you see what I mean.
Q: Given the very poor investor sentiment, why don’t we get a testing of the lows and result in a (VIX) pop?
A: Absolutely yes—that is what everybody in the market is waiting for. And it could happen as soon as this afternoon. If it doesn’t happen this afternoon, allow for a little rally and then a meltdown on the next piece of bad news.
Q: I’m not able to get an email response from customer support.
A: Try emailing filomena@madhedgefundtrader.com. If that doesn’t work, you can try calling at (347) 480-1034. Filomena will always be happy to take care of you.
Q: What maturity of US Treasury securities would you buy now?
A: I would buy the 30-year. You’re getting close to a 4% yield on that—that is starting to look attractive to people who don’t want to work for a living picking stocks on a daily basis. We are about to see the rebirth of bond investing.
Q: What about banks?
A: Banks will be a screaming buy and a three-year double once recession fears end, which could be in a couple of months. We now have sharply rising interest rates, which banks love, but the bear market in stocks has killed off the IPO business, credit risk is rising, and of course, the Bitcoin business has gone to zero also. So, I would wait for fears of credit quality to end, and then you’ll get a double in the banks very quickly, and notice how they’re all flatlining at a bottom, they’re not actually going down anymore.
Q: Which banks are good choices?
A: Goldman Sachs (GS) and Bank of America (BAC) are two great ones, along with Morgan Stanley (MS) and JP Morgan (JPM).
Q: Do you think the market will bottom by the midterms?
A: I do, I think we will bottom a few weeks before the midterms, or the day after. Sometimes that’s the way it goes, and then it will be off like a rocket for the rest of the year. If we can do this from a much lower level in the SPYs, so much the better. Remember, the next Fed meeting is six days before the election. Yikes!
Q: If OPEC cuts production (USO), won’t the supply/demand cause oil prices to start rising again, increasing inflation and people’s prices at the pump?
A: Yes, but OPEC needs the money. Not necessarily Saudi Arabia, but all the other members of OPEC are starved for cash, and that is always how these shortages end. The smaller members cheat on quotas and bust the price. That's clearly what’s driven us down $50 since the February high, small member cheating. And that will continue. It is a cartel with some serious internal conflicts that will never resolve.
Q: Does it cost $17,000 to mine a Bitcoin?
A: It did four months ago. My guess is it’s more expensive now because of the higher cost of electricity around the world. We may even be up to $20,000 cost, which is why it tends to hang around the $20,000 level on the low side. Below that, miners lose money and the supply dries up, just like you see in the gold market.
Q: Do you have an opinion on Real Estate Investment Trusts (REIT)?
A: Yes; credit risk is rising, as are the yields. In a real estate recession, you start to get more defaults on REITS, but the yields on them are very high; so if you are going to play, buy a basket to spread your risk.
Q: Would you buy ProShares UltraShort 20+ year Treasury Yield (TLT) calls spreads now?
A: Yes, but I would go farther in the money, like the mid $90s, because I don’t think we’ll get that low in this cycle. I would also go out another month; instead of a one-month call spread in the mid $90s, I would do a two-month maturity. You could probably take in about $2,000 on a $10,000 position in the mid $90s.
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 12 years are there in all their glory.
Good Luck and Stay Healthy,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Back at Lake Tahoe
Global Market Comments
September 22, 2022
Fiat Lux
Featured Trade:
(THE MAD HEDGE SEPTEMBER 13-15 SUMMIT REPLAYS ARE UP),
(TESTIMONIAL)
Dear John Thomas,
I want to thank you for getting me and my portfolio through this stressful year. Through the use of breathing techniques, listening (and relistening) to your biweekly webinars, and reading your letters, I managed to have a monster year - up 600% YTD.
I look forward to your thoughtful insights and money printing trade alerts in the years ahead.
Sincerely,
Justin in Santa Rosa
“Don’t ever hire an optimistic money manager,” said Scott Minerd, fund manager at Guggenheim Partners.
Global Market Comments
September 21, 2022
Fiat Lux
Featured Trade:
(EXPLORING THE WORLD OF EXTREME LEAPS),
(TSLA)
Global Market Comments
September 20, 2022
Fiat Lux
Featured Trade:
(EXPLORING THE WORLD OF EXTREME LEAPS),
(TSLA)
I sent out a trade alert last week to my concierge members to buy Tesla LEAPS. What came back surprised me. I wasn’t taking on enough risk, there wasn’t enough leverage. In short, I wasn’t being extreme enough.
So, I thought “OK, I can do leverage. You want leverage? Here is an extreme LEAPS.
I sent them back the following trade alert:
Trade Alert - (TSLA) – BUY
BUY the Tesla (TSLA) January 2025 $600-$610 out-of-the-money vertical Bull Call spread LEAPS at $2.00 or best
Opening Trade
9-16-2022
expiration date: January 17, 2025
Number of Contracts = 1 contract
If you are looking for a lottery ticket, then here is a lottery ticket.
While the chance of winning a real lottery is something like a million to one, this one is more like 2:1 in your favor. And the payoff is 14:1. That is the probability that Tesla shares will double over the next two years and four months.
You may not have noticed, but we have just entered the golden age of the electric vehicle, thanks to climate change and massive government support.
Tesla is the world’s largest electric vehicle manufacturer and will produce over 1.4 million cars this year. Demand is overwhelming supply, with the waiting list for the Model X stretching out over a year. The company is growing at 40% a year and plans to boost annual production to 20 million units by 2030.
Tesla is a far and away the most profitable automaker in the world with 30% profit margins, compared to only 10% for its competitors. Lithium-ion batteries are about to see a 20-fold improvement in cost per mile as the company moves towards solid-state technology. The effects on profits should be the same.
To learn more about the company (and to order a car), please visit their website at https://www.tesla.com
I am therefore buying the Tesla (TSLA) January 2025 $600-$610 very deep out-of-the-money vertical Bull Call spread LEAPS at $0.65 or best
Don’t pay more than $1.00 or you’ll be chasing on a risk/reward basis.
January 2025 is the longest expiration currently listed. If you want to get more aggressive with more leverage, use a pair of strike prices higher up. This will give you a larger number of contracts at a lower price.
Please note that these options are illiquid, and it may take some work to get in or out. Start at my price and work your way up until you get done.
Look at the math below and you will see that a 101% rise in (TSLA) shares will generate a 1,438% profit with this position, such is the wonder of LEAPS. That gives you an implied leverage of 14.4:1 across the $600-$610 space.
Only use a limit order. DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES. Just enter a limit order and work it.
You don’t need to buy your entire position on day one. The day-to-day volatility of LEAPS is miniscule as the time value at two years plus is so great, so you have the luxury of picking up a new position over days, if not weeks.
I tend to buy just one or two a day every day until I have a full position. That way, I won’t get THE bottom, but I will get close to the bottom.
This is a bet that Tesla will not fall below $610 by the January 17, 2025 options expiration in 2 years and 4 months.
Here are the specific trades you need to execute this position:
Buy 1 January 2025 (TSLA) $600 calls at………….………$50.00
Sell short 1 January 2025 (TSLA) $610 calls at………..…$49.35
Net Cost:………………………….………..…………............….....$0.65
Potential Profit: $10.00 - $0.65 = $9.35
(1 X 100 X $9.35) = $935 or 14.35% in 2 years and 4 months.
If you are uncertain about how to execute an options spread, please watch my training video by clicking here.
The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you. The difference between the bid and the offer on these deep-in-the-money spread trades can be enormous.
Don’t execute the legs individually or you will end up losing much of your profit. Spread pricing can be very volatile on expiration months farther out.
Keep in mind that these are ballpark prices at best. After the alerts go out, prices can be all over the map.
A New Theory of Tesla, or Why I’m Raising My Target to $1,000
I’ve been battling shorts in Tesla for a decade….and you won.
Look at the price of Tesla shares today and I have to laugh. From the $2.35 I paid for the shares after its IPO bombed in 2010, the price is up more than 100 times. Back then, even Elon Musk gave the company only a 10% chance of surviving.
My first Tesla, chassis no 125, was scrapped for parts a long time ago, thanks to a drunk driver in a GM Silverado on Christmas Eve. A lot of people talk about Tesla, but few have completely taken them apart, as I have…. twice.
Yes, it’s still true that if you buy the stock, you get the car for free, possibly a fleet of them.
I set my target at $1,000 a decade ago. My assumption was that the company would take over a large part of the global car market, about 90 million vehicles a year, and 15 million in the US alone. Tesla’s own plans have it manufacturing about 20 million units a year by 2030.
Add in an eye-popping $15,000 upgrade for fully autonomous street-to-street driving, and Tesla should be making tons of money by then.
That looks on track to happen and is already reflected in the current share price. But what if there is more to Tesla? A lot more?
In fact, after making the rounds in Silicon Valley, it’s clear that Tesla is just getting started. Tesla will become the largest publicly listed company in the world, surpassing Apple, and account for an important share of US GDP.
It might even become the world’s first $10 trillion company.
Yes, it will even grow larger than Saudi Aramco, which manages the kingdom’s oil riches. The irony is rich.
Let’s say that it reaches its ambitious 2030 goal of 20 million units. Then what?
For a start, when Tesla goes solid-state, battery efficiencies will increase 20-fold, costs will drop by 95%, and vehicle ranges will double. This could happen in as soon as two years. They already have the solid-state batteries. All they need now is to understand economical mass production.
The company has already said it is dropping the price of its cars to $25,000 in three years, but much more is possible.
Converting the car bodies from aluminum to carbon fiber, which the wheel wells are made of now, will further cut costs, increase ranges, and improve safety. Carbon fiber is five times stronger than steel at one-tenth the weight.
To reach that goal, the total Tesla fleet will have grown from 1.5 million units today to 100 million by 2030 and account for one-third of all the cars on the road. Those cars are going to need one heck of a lot of electricity to run.
Step in Tesla.
The company already has 20,000 superchargers in the US and that figure is doubling every year. No place in the country today is more than 100 miles away from a supercharger.
A Tesla Model 3 with a 100W battery pack driving 20,000 miles a year costs $720 to power at current prices. The entire fleet would cost $54 billion a year to run at a national average price of 12 cents/kWh.
Ring the cash register for Tesla….again.
Let’s say that rather than paying for electricity at an external charger at some distant shopping mall, you’d rather get the power at home for free.
Enter Tesla.
Finally, after a decade of waiting, Solar City, a Tesla subsidiary, is manufacturing cost-competitive solar roof tiles, or photovoltaic tiles. I have several readers already installing them at this moment. With a 15-year head start in silicon and battery technology, there is no reason why Tesla shouldn’t dominate in this industry as it already has with cars.
To keep the calculations simple, if 75 million homeowners buy solar roofs at an average of $36,000 each, the gross sales would reach $2.7 trillion. Kaching! To get a quote for your new solar roof, please click here.
To get the most out of your solar roof, you really need to buy a couple of 13.5W Tesla Powerwall storage batteries which would cost $25,000 installed. That way, the solar tiles will charge the batteries during the day, which will then power your house at night. You will become grid independent forever, as I have been for years.
Where do Powerwalls come from? Not the stork. They are recycled batteries from old Tesla cars. You can recycle silicon. You can’t recycle CO2.
That will protect you from soaring electric power costs driven by coming cascading bankruptcies of public utilities around the country, all caused by global warming. You also have your own power supply for the ten days a year the grid is down from wildfires on the west coast, or hurricanes on the east coast.
When the neighborhood lights go out, I charge my neighbors a bottle of wine for a cell phone charge. It’s not a bad racket, but I’m getting more than I can drink. In fact, I am producing enough excess electricity to power my entire neighborhood, about 20 houses.
Under the current law, the federal government will pay for 30% of your cost with alternative energy tax credits.
Naturally, you are going to want highspeed WIFI so all of the elements of your integrated solar solution can talk to each other and upgrade whenever they want. So, you’re going to need a Tesla Starlink satellite connection. The system now in beta testing will eventually deliver a 500 megabyte a second WIFI connection anywhere in the world. Starlink is already running the Internet in Ukraine….for free.
The global WIFI market is expected to grow to $7.2 trillion by 2025 (click here for the link). Give half of that to Tesla and you get another $3.6 trillion in sales. Oh, and if you want to sign up as a beta tester for Starlink, please click here.
Did I mention that Musk also owns a rocket company, Space X, which can launch satellites into space at one-tenth the cost of all competitors? Elon’s goal is to cut costs 100-fold. Musk has already taken over a lot of launch business from Europe which used to go to Russia.
Looking at Elon’s big picture as an engineer and scientist, I am amazed to find so many 10X and 100X improvements going on all at the same time!
Add all this together and you might get a market capitalization for Tesla of $10 trillion. Elon Musk would become worth $2 trillion. Then he really can afford that trip to Mars.
This prompts me to raise my target for Tesla shares to $1,000.
That’s not a particularly bold prediction. It’s only 3.6X the current share price, compared to the 117X gain seen since the IPO.
Hey, I got the last 117X right, what’s another 3.6X?
Nobody ever accused me of thinking small.
And if Tesla really does become a $10 trillion company, you’d be right to raise antitrust concerns. But as anyone who has done the math on breaking up these big companies can tell you, such a move would double their value. Tesla at $2,000 a share, anyone?
And as incredible as it may seem, Elon Musk outlined all of his grand global vision to me personally in great detail when I first met him in 1999 pitching me for an investment in X.com, which later became PayPal (PYPL).
Then the bright-eyed, fresh-faced overconfident kid was only 27 and worth a mere $10 million. But he had a nice car, a million-dollar 618 hp McLaren F-1 with a V-12 engine.
A pittance really.
I passed, which is why I am still working today.
No kidding.
Tesla’s Solid State Batter Design
What its Modeled After
Chassis No. 125….R.I.P.
My Latest Set of Wheels
Like-Minded Found in Chicago
At the Pebble Beach Car Show
Going All-Electric
13.5 kWh Powerwall, Enough Juice to Run My House for a Day
This Lot of 300 Cars in Fremont Gets Filled and Emptied Out Three Times a Day
Back in 2010, the First Tesla They Had Ever Seen
“In the next recession, the US will be the worst-performing stock market in the world. We won’t see new highs again in my lifetime,” said Doubleline Capital’s Jeffrey Gundlach.
Global Market Comments
September 19, 2022
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or THE FART HEARD ROUND THE WORLD)
(SPY), (TLT), (TSLA), (RIVN), (FDX), (FCX)
It was the fart heard around the world.
Every investor was positioned for inflation to crater and stocks to soar. We got the opposite instead with the Dow delivering its worst day since the pandemic lows 2 ½ years ago.
But every trader I know thought the recent rally smelled of three-day old fish and was poised for a selloff. I was expecting the latter and went into a rare 100% cash position. I have probably had 100% cash positions maybe six days over the last 15 years.
A lot of traders who only trade the CPI got flushed out of the market on Wednesday at the lows because they were the wrong way.
I attended karate school in Japan for ten years, and besides learning a fearsome attitude and losing my front teeth I also picked up a valuable lesson. ALWAYS kick a man when he is down because that is when he is least likely to hit you back.
The market got that second kick-in with the FedEx earnings on Friday indicating that the economy is in much worse shape than traders realize. Not only did (FDX) crater by 23%, the entire technical structure of the market broke down.
A double bottom in the (SPY) at $362 is now not only a possibility, but a probability and a cycle final low of (SPY) $330 is now on the table, if only for seconds. The latter would give us a top to bottom bear market of $150, or 31.25%. This is “screaming buy” territory.
It’s an old market that has seen the stock market discount 12 of the last six recessions. This is one of those “non-recessions.” Tuesday saw only 1% of stocks up on the day. Whenever this happens the return for the following 12 months averages 15.6%. Sell here at your peril.
The next major market event will be a Fed interest rate rise of 75 basis points on September 21. That will probably be the last hike of this magnitude this decade. After that, we’re dealing with quarter-point rate rises at worst and cuts at best.
Inflation expectations are falling. Consumers are morphing from “I’ll take it whatever the price” to “can you give me a deal.” Price competition is returning after a long absence. Supply chain problems have disappeared. All those ships in the harbor have gone.
Competition from imports is also increasing, thanks to a super strong US dollar. Look how fast they turned the lights out in the residential real estate market.
I have been in the market for 54 years and can tell you that when inflation peaks, stocks bottom. That means you should start scaling into your favorite positions right now.
With my Mad Hedge Market Timing Index gaping down to 32, I decided to dip my toe in the water with what will probably be the lead sector in the market for the next decade. You may not have noticed, but we have just entered the golden age of the electric vehicle, thanks to climate change and massive government support.
That draws me to Tesla (TSLA), the overwhelming leader and Rivian (RIVN), the top up and comer, or should I say it, the next Tesla.
Of course, whenever a report defies expectations like the CPI, naysayers come out of the woodwork decrying its validity. My old friend, Dr. Jeremy Siegel of Wharton School of Business, says the CPI is overreading inflation by employing an arcane method of calculating housing costs that make up half the index.
The result is a read on real estate costs which is 18 months out of date. The CPI says home costs are still rising sharply, while any real estate broker in the country will tell you it’s in free fall.
My own agent has six homes for sale and expects to get another seven this month. The only people showing up for her open houses are neighborhood gawkers. Actual buyers are a thing of yesterday and prices have easily dropped 10% in six months and that’s being charitable.
And here is the bet that you are going long here. In 2021, technology stocks, the overwhelming lead sector in the market, saw earnings increase by 30%. In 2022, they will probably come in at 6%. In 2023, they will likely bounce back to 10-12%. Here, today, the market has not yet discounted next year’s bounce. If there is a recession, it is a small one and is already fully backed into prices.
I have been fighting off requests for LEAPS (Long Term Equity Anticipation Securities) all year. Well, start checking your inbox because my LEAPS alerts are going to start coming hot and heavy. I sent out LEAPS for Tesla (TSLA) and Rivian (RIVN) last week and there are more to come. Hint: watch the price of copper with an eagle eye.
Consumer Price Index Came in at a hot 8.3% in August, much higher than expected. Stocks dropped 500 points in a heartbeat. It’s not what traders wanted to hear, up from 8.2% last month. It guarantees a 75-basis point rate hike next week. Is 100 basis points now on the table? Good thing I’m 100% cash.
Yikes! That’s Going to Leave a Bruise after the worst day in the markets since the pandemic low 2 ½ years ago. Investors were perfectly positioned for falling inflation. Tech stocks led the charge to the downside, with NASDAQ off 5%. Bitcoin crashed 10%. Bonds almost hit my 2022 target with a 2.43% yield. The US Dollar (UUP) soared. Get the Volatility Index (VIX) over $30 and I will start adding call spreads from my 100% cash position.
Are US Treasury Bonds Now a “BUY” with yields approaching my 2022 target of 3.50%? Even allowing for overshoot, you can start adding longs close to here. Notice how the (TLT) opened low and then rallied all day, despite despicable trading conditions. We all know that inflation will be back to 2% in a year.
Google gets hit with a $4.1 Billion fine in Europe over antitrust concerns where it controls 92% of the online advertising market. It’s the largest fine in corporate history, but it’s like water off a duck's back with a $1.67 trillion market capitalization. Just a cost of doing business. Buy (GOOGL) on dips.
It’s Like They Shut the Lights Out in the real estate market, which flipped from the offer to the bid side of the market in weeks. A 30-year fixed at 5.89% hasn’t helped. Open Houses are now clogged with gawking neighbors and few buyers. Six months ago, you needed an appointment. No More. It’s a global problem. I can get you a great deal on a mansion.
British Pound Hits 37-Year Low at $1.14 to the US dollar. Traders cite a lack of confidence in the new prime minister Liz Truss. The real reason is the structural toll taken by Brexit, the consequences of which will take a half-century to play out. It means a weak economy, falling standards of living, and a much lower British pound.
US Oil Reserves Hit 38-Year Low at 434 million barrels, down 39% from maximum capacity. That is about 22 days of consumption. Capping oil prices to save consumers has its price.
Weekly Jobless Claims Come in at 213,000, down 5,000 and lower for the fifth consecutive week according to the Department of Labor. The data gives ample room for a 75-basis point Fed rate hike next week.
Rail Strike Averted at the last possible minute after an all-night session. Biden clearly called in his IOUs with the unions to get a deal done. A rail strike would have been a complete disaster for the economy and demolished his election hopes.
Ether Dives on the Merge, down 6%, with the short sellers piling in at the highest possible prices. The merge involved the transition from a proof-of-work to proof-of-stake model. Avoid all crypto while the winter continues, especially (ETHE). Looks like a great head-and-shoulders top on the charts to me.
My Ten-Year View
When we come out the other side of pandemic and the recession, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With oil peaking out soon, and technology hyper-accelerating, there will be no reason not to. The Dow Average will rise by 800% to 240,000 or more in the coming decade. The America coming out the other side will be far more efficient and profitable than the old. Dow 240,000 here we come!
With some of the greatest market volatility in market history, my September month-to-date performance clawed its way up to +2.45%. My 2022 year-to-date performance ballooned to +62.41%, a new high.
I used the monster selloff to add my first new longs in a while, in EV makers Tesla (TSLA) and Rivian (RIVN).
The Dow Average is down -18.26% so far in 2022. It is the greatest outperformance on an index since Mad Hedge Fund Trader started 14 years ago. My trailing one-year return maintains a sky-high +74.75%.
That brings my 14-year total return to +574.97%, some 2.66 times the S&P 500 (SPX) over the same period and a new all-time high. My average annualized return has ratcheted up to +44.84%, easily the highest in the industry.
We need to keep an eye on the number of US Coronavirus cases at 95.6 million, up 100,000 in a week and deaths topping 1,053,000 and have only increased by 1,000 in the past week. You can find the data here.
On Monday, September 19 at 8:30 AM, the NAHB Housing Market Index for September is released.
On Tuesday, September 20 at 7:00 AM, the Housing Starts and Building Permits for August are out.
On Wednesday, September 21 at 7:00 AM, Existing Homes Sales for August are published. At 11:00 AM EDT, we get the Fed interest rate decision where they are likely to raise by 75 basis points.
On Thursday, September 22 at 8:30 AM, Weekly Jobless Claims are announced.
On Friday, September 23 at 7:00 AM, the S&P Global Flash PMI for September is disclosed. At 2:00 the Baker Hughes Oil Rig Count is out.
As for me, I am reminded of my own summer of 1967, back when I was 15, which may be the subject of a future book and movie.
My family summer vacation that year was on the slopes of Mount Rainer in Washington state. Since it was raining every day, the other kids wanted to go home early. So my parents left me and my younger brother in the hands of Mount Everest veteran Jim Whitaker to summit the 14,411 peak (click here for his story). The deal was for us to hitchhike back to Los Angeles when we got off the mountain.
In those days, it wasn’t such an unreasonable plan. The Vietnam war was on, and a lot of soldiers were thumbing their way to report to duty. My parents figured that since I was an Eagle Scout, I could take care of myself.
When we got off the mountain, I looked at the map and saw there was this fascinating country called “Canada” just to the north. So, we were off to Vancouver. Once there, I learned there was a world’s fair going on in Montreal some 2,843 away, so we hit the TransCanada Highway going east.
Crossing the Rockies, the road was closed by a giant forest fire. The Mounties were desperate and were pulling all abled-bodied men out of the cars to fight the fire. Since we looked 18, we were drafted, given an ax and a shovel, and sent to the front line for a week, meals included.
We ran out of money in Alberta, so we took jobs as ranch hands. There we learned the joys of running down lost cattle on horseback, working all day at a buzz saw, inseminating cows with a giant hypodermic, and eating steak three times a day.
I made friends with the cowboys by reading them their mail, which they were unable to do. There were lots of bills due, child support owed, and alimony demands. Now I know where all those country western lyrics come from.
In Saskatchewan, the roads ran out of cars, so we hopped on a freight train in Manitoba, narrowly missing getting mugged in the rail yard in the middle of the night. We camped out in a box car occupied by other rough sorts for three days. There’s nothing like opening the doors and watching the scenery go by with no billboards and the wind blowing through your hair!
When the engineer spotted us on a curve, he stopped the train and invited us to up to the engine room. There, we slept on the floor, and he even let us take turns driving! That’s how we made it to Ontario, the most mosquito-infested place on the face of the earth.
Our last ride into Montreal offered to let us stay in his boat house as long as we wanted, so there we stayed. Thank you, WWII RAF bomber pilot Group Captain John Chenier!
Broke again, we landed jobs at a hamburger stand at Expo 67 in front of the imposing Russian pavilion. The pay was $1 an hour and all we could eat. At the end of the month, Madame Desjardin couldn’t balance her inventory, so she asked how many burgers I was eating a day. I answered 20, and my brother answered 21. “Well, there’s my inventory problem” she replied.
And then there was Suzanne Baribeau, the love of my life. I wonder whatever happened to her?
I had to allow two weeks to hitchhike home in time for school. When we crossed the border at Niagara Falls, we were arrested as draft dodgers as we were too young to have driver’s licenses. It took a long conversation between US Immigration and my dad to convince them we weren’t.
Then they asked Dad if we should be arrested and sent back on the next plane. He replied, “No, they can make it on their own.”
We developed a clever system where my parents could keep track of us. Long-distance calls were then enormously expensive. So, I called home collect and when my dad answered, he asked what city the call was coming from. When the operator gave him the answer, he said he would not accept the call. I remember lots of surprised operators. But the calls were free, and dad always knew where we were.
We had to divert around Detroit to avoid the race riots there. We got robbed in North Dakota, where we were in the only car for 50 miles. We made it as far as Seattle with only three days left until school started.
Finally, my parents had a nervous breakdown. They bought us our first air tickets ever to get back to LA, then quite an investment.
I haven’t stopped traveling since, my tally now topping all 50 states and 135 countries.
And I learned an amazing thing about the United States. Almost everyone in the country is honest, kind, and generous. Virtually every night our last ride of the day took us home and provided us with an extra bedroom or a garage to sleep in. The next morning, they fed us a big breakfast and dropped us off at a good spot to catch the next ride.
It was the adventure of a lifetime and am a better man for it.
Stay healthy.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Summit of Mt. Rainier 1967
McKinnon Ranch Bassano Alberta 1967
American Pavilion Expo 67
Hamburger Stand at Expo 67
Picking Cherries in Michigan 1967
