Below please find subscribers’ Q&A for the March 17 Mad Hedge Fund Trader Global Strategy Webinar broadcast from frozen Incline Village, NV.
Q: I’ve heard that the COVID-19 cases are being understated by 16 million. Do you think this is true?
A: Yeah, I've always argued that the previous government's numbers were vastly underestimating the true number of cases out there for political purposes, but we are on the downslide regardless, so that’s good.
Q: When are tech stocks going to bottom out and when can I buy them?
A: I knew I would get this question. This is the question of the day. Picking bottoms is always tough because these are momentum plays and not valuation plays. I’ll give you a couple of levels though. The tech (QQQ) multiple is now at 25X earnings and the S&P 500 (SPY) is at 22X, so your first bottom will be down about 10% from here, or a 22X multiple. And I don’t think we will get much lower than that because tech stocks are growing at 20-25% a year, versus the (SPY) growing at maybe 10%, and I don’t think tech goes to much of a discount in that situation. So, you’re just waiting for interest rates to top out and start to go down, which will be the other indicator of a tech bottom. We had a slowdown in the rise of rates for just a couple of days this week, and tech stocks took off like a rocket. Those are your two big signals.
Q: With the Fed announcement, are you still in the Invesco QQQ Trust NASDAQ ETF (QQQ) bear put spread?
A: Yes, one of them expires in two days so that’s a piece of cake. The other one expires in a month, but it is way out-of-the-money—the April $240-$245 bear put spread, so I’ll keep that for a real meltdown day. But if it looks like we’re getting a breakout, I will come out of that short position so fast it will make your head spin.
Q: Do you like Palantir (PLTR)?
A: Absolutely yes—screaming LEAP candidate. It traded all the way down to $20 two weeks ago and is trading around $25 now. It’s a huge data firm, lots of CIA and defense work, huge government contracts extending out for years, cutting edge technology, and run by a nut job, so yes screaming buy at this level.
Q: Freeport McMoRan (FCX) is taking some pain here, is this still a buy and hold?
A: Yes, it’s taking the pain along with all the other domestic stocks, which is natural. In their case though, it’s up almost 10x from its bottom a year ago where we recommended it, so yeah I'd say time for a rest. So I’m still a buyer of the metals and (FCX) on dips, but like all other metals, it did get overextended. EV manufacturing is doubling this year, which uses a ton of copper. The same is true with solar panels and Chinese industrial recovery. When all your major markets are doubling in size, it’s usually good for the stock. I peaked at $50 in the last cycle and could touch $100 in this one.
Q: What are your thoughts about the Lucid EV SPAC, Churchill Capital IV (CCIV)?
A: Don’t touch it with a ten-foot pole. They only have 1 or 2 concept vehicles for high-end investors to test drive. The rumor is that their main factory will be in Saudi Arabia where the bulk of the seed capital came from. They’ll never catch up with Tesla (TSLA) on the technology. There's always going to be a few niche $250,000 cars out there, and they have no proof they can actually make these things. When they get to a million vehicles a year, then I might be interested. But they haven't done the hard part yet, which is mass-producing battery packs for a million cars. They've only done the easy part which is designing one sexy prototype to raise money. So, stay away from Lucid, I don’t think they’re going to make it.
Q: What about oil?
A: I am avoiding oil plays like the plague.
Q: When do you anticipate your luncheons to be back?
A: Maybe in 2023. I don’t want to scare off my customers by inviting them to a lunch where they all get COVID-19. If I did have a lunch, I’d have a vaccine requirement and a temperature gun to hit them at the door like everywhere else. I really miss meeting subscribers in person.
Q: Should I buy banks like JP Morgan (JPM) at this level?
A: I would say no. That ship has sailed. Wait for a steeper selloff or just let it run. We’ve already had an enormous move and you don’t want to chase it with a low discipline trade, which is what that would be.
Q: What do you think of silver (SLV)?
A: It’s a buy long term, short term it’s in the grim spiral of death along with the other precious metals, which absolutely hate rising interest rates. A silver long here is the equivalent of a bond (TLT) long. When you do go into silver, buy Wheaton Precious Metals (WPM) for the leveraged long play.
Q: Is 3M (MMM) going to extend the upside?
A: Probably yes, that's a classic American industrial play and a great company. I have friends who work there. How could we live without Post-it notes, Scotch Tape, and Covid-19 N-95 masks?
Q: What about Square (SQ)?
A: I love it in the long term, buy on the dips and buy it through LEAPS (long term equity anticipation securities).
Q: Should I unwind my leveraged financial ETF?
A: I’d say take a piece off, yeah; you never get fired for taking a profit. And they have had a tremendous move. Plus of course, the flip side of taking profits on domestic recovery stocks is to buy tech with that money. And eventually, that's what the entire market will do, it just may still be a little bit early.
Q: What’s a good target for LEAPS for CRISPR (CRSP) and Palantir (PLTR)?
A: Put your first strike 30% higher than today’s stock price and go 2 years out in maturity. I noticed on some names, the June 2023’s are starting to trade, but they’re highly illiquid. But if you put a bid in there and you get a market meltdown, you will get hit.
Q: If the long-term future for oil (USO) is so bad, why is it $65?
A: A few reasons. #1, huge short covering action. #2, economy recovery faster than people expected because of the stimulus. #3, a lot of people, mostly in Texas, Oklahoma, and Louisiana, don’t believe that there will be an all-electric grid in 20 years and think that oil will be in demand forever, including the entire oil industry, so they’re in there buying. And #4, the Saudis have held back with production increases to push the price up, so they’re letting it run so they can sell at a higher price. When they do sell, oil crashes again.
Q: Can we re-watch this presentation?
A: Yes, we post it about 2 hours later on the website so all our people in about 135 countries can access it whenever they like. 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.
Q: How often do you have these webinars?
A: Every two weeks, and if you need help accessing it on your account page, email customer support at support@madhedgefundtrader.com.
Q: Is it time to initiate short positions on oil companies?
A: Not yet but keep it in the back of your mind. When some of the super-hot economic data come out after Q2, that may be your short in oil—then we may get into the $70’s a barrel. But not yet, there’s still too much upward momentum.
Q: Do you think we will see the 30-year fix below a 3.00% yield again?
A: Yes, in the next recession, which may be 5 or 10 years off because we’re starting at such a low base.
Q: Regarding copper, EV motors require a ton of copper. Doesn’t that make the metals a BUY?
A: That is true, and why we recommended Freeport McMoRan at $4 a year ago and recommended buying every dip. Each one of these rotor motors on each wheel of a Tesla weighs about 100 lbs—I’ve lifted them. Remember I tore apart a Tesla once just to see what made it tick, and they’re really heavy, and they use a lot of copper, and silver as well. So that has always been the bull market case for copper, as well as the fact that China re-emerged as a major buyer for their industrial buildout. That’s why we had a long in the SPDR S&P Metals and Mining ETF (XME).
Q: Do you foresee a good opportunity to go heavy into margin again?
A: Maybe if we get a decent selloff this summer, but you’ll never get the opportunity we had a year ago when you really wanted to put 100% of your portfolio into 2-year LEAPS. The people who did that made many tens of millions of dollars, which is why I get a free bottle of Bourbon every month. That was a once in 20 years event.
Q: What is your 2021 target for the S&P 500 (SPX)?
A: $4,860. It’s in my strategy letter which I sent out on January 6th, and that is all still posted on the website, click here for it.
Q: How do I renew my subscription with your company, and how do I figure out what I bought?
A: Email customer support at support@madhedgefundtrader.com and they will answer you immediately.
Q: Do you follow the iShares IBoxx High Yield Corporate Bond ETF (HYG)?
A: Yes, that is the high yield junk bond fund, but I have been avoiding long bond plays, as you may have noticed with my screaming short of the past year. We list (HYG) in these slides in the Bonds section.
To watch a replay of this webinar, just log in to www.madhedgefundtrader.com , go to MY ACCOUNT, click on GLOBAL TRADING DISPATCH or TECHNOLOGY LETTER (as the case may be), 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
“The moment you think you have the key to the market, they change the locks,” says an old Wall Street proverb.
Global Market Comments
March 18, 2021
Fiat Lux
Featured Trade:
(LEARNING THE ART OF RISK CONTROL)
Global Market Comments
March 17, 2021
Fiat Lux
Featured Trade:
(THE MAD HEDGE TRADERS & INVESTORS SUMMIT VIDEOS ARE UP)
(THE MAD HEDGE DICTIONARY OF TRADING SLANG)
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, select CURRENT SUMMIT REPLAYS in the upper right-hand corner, and then choose the speaker of your choice.
Global Market Comments
March 16, 2021
Fiat Lux
Featured Trade:
(WHY A US HOUSING BOOM WILL CONTINUE),
(LEN), (PHM), (KBH)
(WHY SENIORS NEVER CHANGE THEIR PASSWORDS)
Global Market Comments
March 15, 2021
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or LISTEN TO THE (VIX),
(SPY), (IWM), (QQQ), (TLT), (VIX), (DAL), (BA), (ALK)
I decided to take a day off over the weekend and see what was happening in the real economy.
As I drove over the Bay Bridge, I spotted over 30 very large container ships from China loaded to the gills. They were diverted from Los Angeles where the delay to unload ships has extended to two months.
The San Francisco farmers market was jammed with a mask-wearing crowd. Standing in front of me in the line to buy lavender salt was former 49ers quarterback Joe Montana, who took his team to the Super Bowl four times. He was in great shape, looking at least 30 pounds lighter than in his heyday.
Leaving Half Moon Bay after picking up some driftwood for my garden, the traffic to get into town was at least an hour long.
It all underlies a theme for the economy and the markets that I have been expounding upon for the last year.
The Roaring Twenties have begun, the number of consumers and investors who believe this is increasing every day, and the impact on business and stocks is still being wildly underestimated.
You can see this in the Volatility Index (VIX), which has made a rare two roundtrips over the past month, and that means two possible things. Markets are undecided. When they make up their minds, they will either crash, or make a new leg up.
I vote for the latter.
I keep especially close attention on the (VIX) these days because it tells me when I can turn on or off my printing press for $100 bills. Anywhere over a (VIX) of $30 and I can strap on “free money” trades where the chances of losing money are virtually nil.
You can see this in my performance this year, where 40 roundtrips trade alerts in 11 weeks generated 38 wins and only two losses. That’s a success rate of an unprecedented 95%.
The indecision in the markets is obvious in the charts below. The large cap S&P 500 (SPX) and the small cap Russell 2000 (IWM) clawed their way to new highs last week, but the tech heavy NASDAQ (QQQ) made a feeble, halfhearted effort at best. Technology alone is being punished for rising interest rates as the ten-year US Treasury yield hit 1.62%.
This makes absolutely no sense as the larger tech companies are massive cash generators, run huge cash balances, and are enormous let lenders to the financial system. That means they make millions in interest payments from rising rates. What they are really being punished for is doubling from the pandemic low a year ago.
But never argue with Mr. Market.
Biden signs, with a record $1.8 trillion hitting the economy immediately. Money could start hitting your bank account this weekend if you are signed up for electronic payments with the IRS. Let the party begin! I already spent my money a long time ago. The Fed is forecasting a 10% GDP growth rate in Q2. Money is about to come raining down upon the economy….and the stock market. The big question is how much of this is already in the market. “Buy the rumor, sell the news”. Given the wild swings in the market, and multiple visits to a $32 (VIX), it’s clear that markets don’t know….yet.
The Next Battle is over infrastructure, which the democrats want to have an environmental. “green” slant. Look for a big gas tax rise to pay for it. They may get what they want with Senate control. Look for a September target. The economy needs $2 trillion a year in new government spending to keep the stock market rising and it will probably happen.
Nonfarm Payroll comes in at a blockbuster 379,000 in February, far better than expected. It's a preview of explosive numbers to come as the US economy crawls out of the pandemic. That’s with a huge drag from terrible winter weather. The headline Unemployment Rate is 6.2%. The U-6 “discouraged worker” rate of still a sky high 11%, those who have been jobless more than six months. Leisure & Hospitality were up an incredible 355,000 and Retail was up 41,000. Government lost 86,000 jobs. See what employers are willing to do when they see $20 trillion about to hit the economy?
Weekly Jobless Claims dive to 712,000 has pandemic restrictions fall across the country, the lowest since November. However, ongoing claims still stand at an extremely high 4.1 million. Total US joblessness still stands at 18 million. Will the pandemic come back to haunt us from these early reopenings?
California Disneyland (DIS) to reopen April 1, lifting a very dark cloud and huge expenses off the company. Cases on the west coast have fallen so dramatically that the state feels it can get away with this. Maybe this is an effort to derail the recall movement against the government. Stock is up 2% in the after-market, which Mad Hedge followers are long. Time to dig out my mouse ears. Keep buying (DIS) on dips.
Oil (USO) soars 3% on an attack on Saudi oil facilities and a building US economic recovery. $69 a barrel is printed. This is setting up as a great short. High prices in a decarbonizing economy have no future. A (USO) $34-$36 put LEAP with a January 2023 maturity might make all the sense in the world here.
Boeing (BA) announced Fist Positive Deliveries, in 14 months, finally turning around the mess with the 737 MAX. United Airlines was the biggest buyer. The perfect storm is finally over. And Boeing is about to snag another giant order, this time from Southwest (LUV). This comes on the heels of similar big order from Alaska Air (ALK). Keep buying (BA) on dips. An upside breakout is imminent.
Consumer Price Index Comes in at 0.4%, and 0.1% ex food and energy. It’s still at a nonexistent level. Rising gasoline prices were a factor, but airline ticket prices remain at all-time lows. I’ll worry about inflation when I see the whites of its eyes. Commodity prices have doubled in a year but show nowhere in the inflation numbers. With a headline Unemployment Rate at 6.1% and a U-6 at 18 million, it's unlikely we’ll see wage any time soon, which is 70% of the inflation calculation.
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 selling tops and buying bottoms can help your performance. My Mad Hedge Global Trading Dispatch profit reached a super-hot 16.32% during the first half March on the heels of a spectacular 13.28% profit in February. The Dow Average is up a miniscule 8.2% so far in 2021.
It was a total rip your face off rally in the markets last week, so I took off my hedged and covered shorts in the S&P 500 (SPY) and the NASDAQ (QQQ). That leaves me to run my seven remaining profitable positions into the March 19 options expiration.
I also had my hands full running the three-day Mad Hedge Traders & Investors Summit, introducing some 27 speakers to a global audience of 10,000. The speakers’ videos go up on Tuesday at www.madhedge.com.
This is my fifth double-digit month in a row. My 2021 year-to-date performance soared to 39.81. That brings my 11-year total return to 465.36%, some 2.12 times the S&P 500 (SPX) over the same period. My 11-year average annualized return now stands at an unbelievable 41.09%. I am concerned because numbers any higher than this will look fake.
My trailing one-year return exploded to 122.6%, the highest in the 13-year history of the Mad Hedge Fund Trader. 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 29.5 million and deaths topping 535,000, which you can find here. Thankfully, death rates have slowed dramatically, but Obituaries are still the largest sector in the newspaper.
The coming week will be a boring one on the data front.
On Monday, March 15, at 7:30 AM EST, the New York Empire State Manufacturing Index for March is released.
On Tuesday, March 16, at 8:30 AM, US Retail Sales for February are published.
On Wednesday, March 17 at 8:30 AM, we learn Housing Starts for February. At 2:00 PM we get the Federal Reserve interest rate decision and press conference.
On Thursday, March 18 at 8:30 AM, Weekly Jobless Claims are out. We also obtain the Philadelphia Fed Manufacturing Index.
On Friday, March 19 at 2:00 PM, we learn the Baker-Hughes Rig Count.
As for me, I was saddened to learn of the death of George Schultz, Treasury Secretary and Secretary of State under president Ronald Reagan. He was 101.
George graduated from Yale at the outbreak of WWII and immediately joined the US Marine Corps (Semper Fi) where he used his ample math background to become an anti-aircraft officer. He issued my dad’s unit the useful advice to always lead an attacking Zero fighter by four plane lengths to hit the engine with a machine gun. It’s simple ballistics.
After the war, he used the GI bill to get a PhD from MIT, and later worked for President Eisenhower. He then became the Dean of the Chicago Business School.
I first met George when The Economist magazine sent me to interview him in San Francisco as the CEO of Bechtel Corp, a major engineering and construction company in 1982. The following week, he was drafted by the incoming Reagan administration, where he stayed for eight years. We kept in touch ever since.
When the Soviet Union collapsed in 1991, Schultz as Secretary of State was instrumental in managing the event so that it stayed peaceful….and moved forward. I later flew to Berlin to watch the Russian Army pull its troops out of my former home.
In his later years, George was very active in the Marines Memorial Association where I got to know him very well, he often was wearing his full-dress blues looking as new as if they came out of the factory that day, bringing a fascinating series of military speakers.
As Schultz got older, he couldn’t remember what he knew was top-secret or classified, and what wasn’t. I benefited greatly from that, but kept my mouth shut. However, I learned some amazing things.
He was also very active in arms control and flew to Moscow as recently as 2019. In recent years, I help him to the podium, George grasping my arm and walking his slow shuffle.
George Schultz was a great example of the best leaders that American can produce. He will be missed.
Stay healthy.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
March 12, 2021
Fiat Lux
Featured Trade:
(WHAT ABOUT ASSET ALLOCATION?)
(DECODING THE GREENBACK),
(TESTIMONIAL)
I watched John Thomas for a year before jumping in, and I should have done it earlier when he phenomenally traded that awful year, 2011, that whipsawed so many investors including myself.
He again outperformed the market in 2012, 2013, 2014, and so far he has shown amazing skill once more in navigating treacherous markets with deep-in-the-money call and put spreads.
You can not exactly replicate his numbers 100% of the time for many different reasons, some of them strictly technical in nature. But you will get most of them, or you use his trade alerts just directionally to help you determine where you should put your money and how to allocate your dollars risk on vs. risk off.
I am up 20% a year trading with John since October 2014. I also like John's in-depth charts, market insights, and his educational webinars that have become the cornerstone of my market evaluations.
One should never put all eggs in the same basket but subscribing to the Mad Hedge Fund Trader is a smart way to enhance the performance of your stock portfolio.
Christian
Austin, Texas