Archive
Hot Tips
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April 16, 2024
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Housing Starts Plunge,
down 14.5% in March. Permits for future construction of single-family houses fell to a five-month low. Residential investment rebounded in the second half of 2023 after contracting for nine straight quarters, the longest such stretch since the housing market collapse in 2006. But the recovery appears to be losing steam.
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Goldman Sachs Blows Out Earnings,
on a surge in bond trading, likely from the short side. The bank said profit jumped 28% to $4.13 billion, or $11.58 per share, from the year-earlier period, thanks to a rebound in capital markets activities. Trading profits are unpredictable and highly volatile. But (GS) is still a buy as the bull market will continue after a summer dip.
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Lockheed Wins $17 Billion Defense Contract,
to develop the next generation of missiles. These interceptors would guard the United States against an intercontinental ballistic missile attack. The interceptor program is aimed at defeating current ballistic missile threats and future technological advances from countries including North Korea and Iran. Buy (LMT) on dips. This is not just a short-term boost to defense spending.
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China Surprises with Q1 GDP Growth at 5.3%,
but who knows how real these numbers really are. They don’t line up with individual data like international trade. Peak China is behind us.
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Morgan Stanley Beats,
on surge in investment banking business, up 16% YOY. Fixed-income underwriting did well for a second quarter in a row, driven by higher bond issuance. The Wall Street giant's wealth and investment management divisions also benefited from surging client assets.
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April 15, 2024
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Mad Hedge Hits New All-Time High.
So far in April, we are up +5.20%. My 2024 year-to-date performance is at +14.47%. The S&P 500 (SPY) is up +7.22% so far in 2024. My trailing one-year return reached +46.01% versus +36.12% for the S&P 500. That brings my 16-year total return to +691.20%. My average annualized return has recovered to +51.84%. Some 20 of 26 trades have been profitable so far in 2024.
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Volatility Index ($VIX) Hits Six-Month High,
on threats of a new Iran war, oil supply cut-offs, and topping stocks. It’s been a long and dry desert crossing, but we are finally back to reaching the $20 handle. The volatility trade is back. For a double bonus, the Mad Hedge Market Timing Index also dropped below 50 for the first time since October. Options traders will love it!
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Biden Boosts the Cost of Alaska Oil Drilling Leases,
from $10,000 to $160,000, the first increase since 1920. There is also a bump in the royalty on extracted oil, from 12.25% to 16.27%. The government is no longer giving away oil found on its land for free. Coddling of the oil companies is over. Oil companies will no longer bid for cheap oil leases with the intention of sitting on them for decades. The US is currently the largest oil-producing country in history at 13 million barrels/day and hardly needs any subsidies, which date back to the Great Depression. Buy energy stocks on dips, like (XOM) and (OXY), which are posting record profits.
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US Retail Sales Come in Hot,
up 0.7% in March. February was revised higher. So-called control-group sales — which are used to calculate gross domestic product — jumped 1.1%, the most since the start of last year. That likely bodes well for first-quarter GDP, especially after the February reading was revised higher.
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Tesla Cuts 10% of Workforce,
in a bid to survive the current nuclear winter in EV sales. Tesla shares have taken a bruising in recent months, falling 31% year-to-date. While electric vehicle sales are still gaining popularity worldwide, their sales growth rate has slowed especially for Tesla. The company now faces more competition than ever.
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April 11, 2024
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PPI Comes in Cold at 0.2% for March.
On a 12-month basis, CPI rose 2.1%, the biggest gain since April 2023, indicating pipeline pressures that could keep inflation elevated. Stocks rallied 200 points
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Europe Sticking to a June Rate Cut,
demanded by a weaker economy taking Europe. Germany is in full recession. What’s the difference between Europe and the US? We’ve seen a million immigrants a year for 80 years, there have been almost none except for one-offs like Syria and Ukraine.
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NVIDIA Rallies in a Terrible Market.
NVIDIA is so far ahead of the competition that no one will catch up for years. What the (NVDA) bears don’t get is that the company has a moat so wide it is impossible to cross. Their enormous lead in software is the result of crucial platform decisions made 20 years ago. The key staff are all looked up with ultra-cheap equity options with strike prices around $1-$2. Buy (NVDA) on a dip.
Virtually everyone has now raised their upside targets for the stock over $1,000/share. That’s because with a price earnings multiple of 30X, it is still the biggest Big Tech stock in the market. By comparison, its biggest customers, (META) is at 34X, AI Leader (MSFT) is at 38X, and (AMZN) is at 63X. Efforts by Alphabet to break into the AI chip business are feeble at best.
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China’s Economy Slows,
with analysts cutting forecasts to 4.6% against a government target of 5%. The old 13% a year Chinese is never coming back. The first-quarter growth forecast compares to 5.2% in the previous three months and is the lowest since the January-March quarter in 2023, underlining the strains in the economy despite stronger-than-expected January-February data on factory output and retail sales, as well as exports. Avoid (FXI).
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Cocoa Hits New All-Time High,
up 2.9% yesterday alone and triple since October. How did we miss this one? A global shortage of cocoa has caused futures to soar above $10,000 per ton — more than double the level at the start of the year — and hit a record earlier this month. The surge has begun to pressure some traders while encouraging growers to return to the market. Halloween is going to be expensive this year.
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April 10, 2024
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CPI Comes in Hot at 0.4% for March,
the same rate as in February according to the Bureau of Labor Statistics, knocking stocks down 500 points. Housing and transportation were the big badges. Hopes of a June interest rate cut have been dashed. September is now the earliest. Avoid (TLT).
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FAA Caps Boeing at 38 Deliveries per Month,
until the quality issue is solved. This is a disaster for (BA). The outgoing CEO clearly destroyed the long-held culture of precision and quality. Will the bad news never end?
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Small Business Optimism Index Hits 11-Year Low,
at 88.5, down nearly a point from February to the lowest since December 2012. A quarter of all respondents cited inflation and in particular, higher input and labor costs, as their most pressing issue.
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US Dollar Rockets on Hot CPI,
hitting a new 34-year high against the Japanese yen at ¥151.55. Bank of Japan's intervention to support the yen is expected. Yen shorts in the futures market hit a five-month high. Avoid (FXY).
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Starlink to Boost Low Earth Orbit Satellites,
from the current 5,000 to 40,000. As a result, Starlink speeds are improving, especially in rural areas. Starlink caters to 2.6 million customers in countries lacking modern networks, including Ecuador….and Ukraine. They are also favorites with cruise lines like Carnival (CCL) and Royal Caribbean (RCL), which until now charged high fees for molasses slow Internet access. SpaceX has blanketed the world with a cheap satellite network at only 2,000 km, versus 36,000 km for traditional geostationary satellites. I was amazed when I did my own installation, I was ordered to point my dish north.
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April 9, 2024
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Fed Not to Cut Interest Rates in 2024.
At least that is the assumption we have to make from a trading point of view for the medium term. While this represents a worst-case scenario, I don’t expect bonds to drop much from here, maybe a couple of points, as future interest rate cuts are a certainty. At some point, there will be a great bond trade out there, but definitely not yet!
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Gold Derivatives are Now Wagging the Dog.
There are 187,000 metric tonnes of gold above ground worth a mere $14.4 billion which price is 50 times that figure in paper derivatives, like ETFs, futures contracts, and options. A metric tonne of gold today is worth $77 million. That increases the barbarous relic’s volatility once it breaks out of long-term trading ranges, which it has just done. With new volatility eventually, some bodies have to float to the surface. The bad news is that this may also be a signal that China will invade Taiwan.
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Blackstone Bets on Higher Real Estate Prices,
agreeing to acquire Apartment Income REIT, known as AIR Communities, in an all-cash deal for $10 billion. The takeover is Blackstone’s latest housing bet, following its $3.5 billion deal to take single-family landlord Tricon private earlier this year. The company is stepping up its hunt for deals as prices fall in commercial property markets. It’s really a big play on falling interest rates.
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US Consumer Inflation Expectations Remain Flat for March,
according to the Federal Reserve Bank of New York. They increased to 2.9% from 2.7% at the three-year-ahead horizon and decreased to 2.6% from 2.9% at the five-year-ahead horizon. Labor market expectations were also mixed. While expectations about earnings growth and the mean probability that the U.S. unemployment rate will be higher one year from now remained essentially unchanged, respondents’ perceived probability of finding a job decreased to 51.2% in March from 52.5% in February, the lowest reading in almost three years.
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Ely Lilly Builds $2.5 Billion German Weight Loss Drug Factory,
to meet overwhelming demand in the US and meet severe shortages. Backlogs for Mounjaro orders are stretching out to months. The factory will open in 2027 and ship worldwide. Buy (LLY) on dips.
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