(SUMMARY OF JOHN’S APRIL 16, 2024, WEBINAR)

April 19, 2024

 

Hello everyone.

 

TITLE:  Volatility is back.

TRADE ALERT PERFORMANCE:

April: 5.2% MTD

Average annualized return:  +51.82% for 16 years.

Trailing One Year Return:  +46.01%

PORTFOLIO:

(FCX) 4/$37 - $40 call spread

(XOM) 4/$100 - $105 call spread

(OXY) 4/$59-$62 call spread

(WPM) 4/$39-$42 call spread

(GLD) 4/$194- $197 call spread

(NVDA) 5/$740-$740 call spread

(NVDA) 5/$710 - $720 call spread

(TLT) 5/$82-$85 call spread

(FCX) 5/ $42-$45 call spread

 

THE METHOD TO MY MADNESS

A short-term top for all risk assets is in, but John believes the downside is limited to 5%-8% with $8 trillion in cash on the sidelines and a further $26.8 trillion in short-term US treasury bills.

Technology stocks will only have a time correction, not a crash.

All economic data is globally slowing, except for the U.S. with the only good economy in the world.

We now understand that interest rates are higher for longer and there may be no rate cuts in 2024.

Buy stocks and bonds but only after substantial dips.

 

THE GLOBAL ECONOMY – THE ONE BRIGHT LIGHT

Nonfarm payroll jumped by 303,000 in March, almost double what was expected.

The headline unemployment rate drops 0.1% to 3.8%.

CPI comes in hot at 0.4% for March, the same rate as in February.  Hopes of a June interest rate cut have been dashed.  John thinks September is now the earliest.

PPI comes in cold at 0.2% for March.  On a 12-month basis, CPI rose 2.1%, the biggest gain since April 2023.

US Consumer Sentiment fades in April.

Europe sticking to a June rate cut, demanded by a weaker economy.

China’s international trade collapses.  Exports from China slumped 7.5% YOY.

The UK remains mired in recession – only seeing 0.1% growth.

 

STOCKS – CORRECTION TIME

Investors are piling into cash, with money-market funds getting $82 billion in the week through Wednesday.

Investors are still flocking to cash funds, and history suggests redemptions won’t begin buying stocks again until after the Federal Reserve starts cutting interest.

JP Morgan misses on earnings, tanking the shares by $10.

NVIDIA rallies in a terrible market.  Large margin between it and other companies.

China’s economy slows, with analysts cutting forecasts to 4.6% against a government target of 5%.

Starlink to boost low earth orbit satellites, from the current 5,000 to 40,000.

Ely Lilly builds a $2.5 billion German weight loss drug factory to meet overwhelming demand in the US and meet severe shortages.

(CAT) a great buy setting up here.

(FCX) target $100 by 2025.

(V) buy setting up soon.

BRK/B soon be time to buy.

Spreads are driven by volatility of the stock.

Do 5% in the money if low volatility and 20% in the money if volatile.

 

BONDS – BREAKDOWN

Fed not to cut interest rates in 2024, which is a medium-term trading view.

Bonds break down to 2024 lows but only have a couple of points of downside left.

While this represents a worst-case scenario, I don’t expect bonds to drop much from here.  Perhaps 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 not yet!

90-day T-bills are still yielding 5.36% and 180 days the same.

Europe and Japan are still on target for rate cuts.

(JNK) good play here.

 

FOREIGN CURRENCIES – NEW DOLLAR HIGHS

US$ surges on hot CPI hitting a new 34-year high against the Japanese yen at 154.

Bank of Japan's intervention to support the yen is expected. Yen shorts in the futures market hit a five-month high.  Avoid (FXY).

Chinese Yuan crashes, suffering worst day in two months.  International trade is collapsing. 

Declining exports, collapsing foreign investment, and minimal population growth – all add up to a weaker Chinese currency.

All due to 40 years of one child only policy.  Avoid (FXI).

Higher rates for longer = higher for the longer greenback.

Falling interest rates guarantee a falling dollar for 2024.

 

ENERGY & COMMODITIES – NEW HIGHS

Oil spikes on new Iran war threats sending Brent to $92, a new 2024 high.

Oil continues to bubble of tight supplies, supported by geopolitical tensions in the Middle East, concerns over tightening supply, and expectations about demand growth as economies improve.

Biden boosts the cost of Alaska Oil drilling leases, from $10,000 to $160,000, the first increase since 1960.  There is also a bump in the royalty on extracted oil, from 12.25% to 16.27%.

Buy energy stocks on dips, like (XOM) and (OXY), which are posing record profits.

A global commodity rally has also dragged oil up.

US continues to dominate markets with 13 million barrels/day production.

Electrification of the US economy will continue to be a driving theme.

Lithium is to stay in the dumps as long as EVs are suffering a nuclear winter on sales.

(CCJ) strong buy – long-term prospect.

 

PRECIOUS METALS – GEOPOLITICAL FEARS

Gold hits new all-time high on fears of Iran war.

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 50 times that figure in paper derivatives, like ETFs, futures contracts, and options.

A metric tonne of gold today is worth $77 million.

 

REAL ESTATE – FOLLOW THE BIG MONEY

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.

US Construction Spending Falls, 0.3% in February.

(CCI) waiting for a bottom in price.

 

TRADE SHEET

Stocks – buy any dips.

Bonds – buy dips.

Commodities – buy dips.

Currencies – sell dollar rallies, buy currencies.

Precious Metals – buy dips.

Energy – buy dips.

Volatility – buy $12.

Real Estate – buy dips.

 

NEXT STRATEGY WEBINAR

Wednesday, May 1 @ 12:00 EST

From Key West, Florida

 

Quite Interesting (QI) Corner

 

 

 

Cheers,

Jacquie

 

(GEOPOLITICAL EVENTS TAKE CENTRE STAGE)

April 15, 2024

 

Hello everyone,

The calendar this week

Earnings this week will see US banks and leading streaming companies report.

 

Monday, April 15

8:30 a.m. Empire State Index (April)

8:30 a.m. Retail Sales (March)

10 a.m. Business Inventories (February)

10 a.m. NAHB Housing Market Index (April)

Earnings:  Goldman Sachs, Charles Schwab, M&T Bank

 

Tuesday, April 16

8:30 a.m. Building Permits preliminary (March)

8:30 a.m. Housing Starts (March)

9:15 a.m. Capacity Utilization (March)

9:15 a.m. Industrial Production (March)

9:15 a.m. Manufacturing Production (March)

Earnings:  J.B. Hunt Transport Services, United Airlines, Morgan Stanley, Johnson&Johnson, Bank of America, Bank of New York Mellon, UnitedHealth Group.

Wednesday, April 17

2:00 p.m. Fed Beige Book

Earnings:  Las Vegas Sands, CSX, Discover Financial Services, Prologis, U.S. Bancorp, Citizens Financial Group

 

Thursday, April 18

8:30 a.m. Continuing Jobless Claims (04/06)

8:30 a.m. Initial Claims (04/13)

8:30 a.m. Philadelphia Fed Index (April)

10 a.m. Existing Home Sales (March)

Earnings:  Blackstone, D.R. Horton, KeyCorp

 

Friday, April 19

Earnings:  American Express, Procter&Gamble, Fifth Third Bancorp, Schlumberger NV, Procter & Gamble (before the bell)

April is the correction month. On Friday several catalysts came together to plunge the market down 475.  Inflation fears rattled investors, who have now seen three months in a row of hot inflation reports. So, investors have had to digest the reality that rate cuts will not happen in the near term.  The expectation now is for two rate cuts later in the year. And maybe even no rate cuts.  Multiple signals are showing that the Fed still has a long way to go.  Of course, the bright spot for the Fed is that the economy has been able to tolerate high rates, with little impact on the employment landscape or growth at the macro level, but it is doubtful that this picture has longevity as there are a few signs that cracks are starting to appear in the labour market.  And this trend could escalate as we head into the second half of the year.

On Friday also it became apparent that Iran planned to attack Israel in the next couple of days.   Geopolitical events may well influence the markets in the near term, and we could see some more volatility.

On Saturday, we heard that Iran launched drone attacks on Israel, and this has now escalated the long-standing tensions between these two nations. Airspace has been closed around the Middle East, and I have also heard that Qantas has canceled flights from Perth to London.  Prior to the drone attack, Iran’s Revolutionary Guards seized a cargo ship in the Strait of Hormuz saying the vessel was linked to Israel.  The drone attack on Israel is in retaliation for an April 1 Israeli strike on an Iranian consulate in Damascus, Syria, which killed seven members of the Islamic Revolutionary Guard Corps.  This escalation in conflict has the potential to erupt into a regional war. 

Biden is yet to show his hand in how he will respond.  But it may involve economic, diplomatic and cyberspace tactics.

Meanwhile in Australia on Saturday, we were shocked to see the deaths of five people after a man went on a rampage with a knife in a crowded Sydney shopping centre (Westfield) in Bondi Junction. (It is now six as another person – A Chinese national who was studying in Australia has also died).   Several people are in hospital with critical stab wounds.   A female police officer fatally shot the attacker when he raised his knife and threatened her.  Witnesses say the man would have continued his killing spree if the officer had not taken the action she did. It is still unsure whether this was terror-related.

 

 

The male victim shown above was from Pakistan and had left his home country a year ago to seek refuge from persecution.  It was his first day on the job at the shopping centre as a security guard.

The lady shown to the left of the man was a first time Mother.  Her nine-month-old baby was also stabbed but survived.

The young lady pictured above the man was the daughter of a millionaire businessman in Australia and was shopping for her wedding that was in a few months.

The lady at the top in the middle of the picture was an architect, and the woman to her left was an artist simply enjoying a day out.

Mass killings are very unusual in Australia.  The last major attack occurred on the 28^{th of} April 1996, when Martin Bryant killed 35 people and wounded 23 others.  It was Australia’s worst mass murder and it led to stricter gun controls, notably a near-ban on all fully automatic or semiautomatic firearms. The federal government also brought in a gun-buy-back program, which resulted in the surrender of some 700,000 firearms.  Gun-rights advocates criticised the new rules, but the government’s action saw gun-related deaths drop dramatically. Martin Bryant was sentenced to 35 life terms.

Volatility has returned to the market and has given investors and traders an opportunity to start making a shopping list.

 

Brief Market Update

S&P 500 – we are now in correction mode.  We may see 5050 or even 5000.

Gold – should see a correction or consolidation.  Support around $2,250

Bitcoin – corrective consolidation.  Support around $59,300.

The Quite Interesting (QI) corner

 

 

 

Cheers,

Jacquie

 

 

 

(INVESTORS ARE SPINNING ON EMPTY AS THEY COME TO GRIPS WITH ECONOMIC DATA)

April 10, 2024

 

Hello everyone,

Have you invested in Gold Bars?  Look who is selling them.

But I’m sure your portfolio already has quality gold and silver stocks. Right?

 

Let’s pause for a moment and consider where we are.

I’m not speaking philosophically. 

I’m talking about where we are in the economic cycle, by using an analogy of washing machine cycles.

Let me briefly explain.

For the last few years, we have been in the wash cycle, and that cycle was definitely not the one we use for Delicates or Woollens. 

We have been washed up, rinsed, tossed around, and radically tested.

There was great cost and disruption associated with this cycle, so the world saw a flush of funds and then an acceleration of costs – inflation.

We are moving into the spin cycle now, where everything seems chaotic, and you can’t seem to get your bearings or make sense of the world.  Disconcerting, to say the least.

 How long will the spin cycle last? – not sure yet.

 

Markets have rebalanced.  While the tech sector is resting, energy, commodities, and the metals have taken centre stage and have risen steadily.

Jamie Dimon, CEO of J.P. Morgan commented recently on the economic outlook and emphasised the need for investors to stay overweight on commodities with a focus on energy to hedge against inflation as he believes interest rate cuts may arrive much later than originally forecast.

According to Marko Kolanovic, J.P. Morgan’s chief market strategist “we are not out of the woods yet on inflation, and the current backdrop of above-trend growth raises the risk that inflation will re-emerge as a problem for both central banks and markets.”

In recent months, inflation has risen in both the U.S. and Western Europe, most particularly in the services sector.  Due to stronger economic growth, JPMorgan has revised its global growth upward by 0.5% in the first half of this year.

The investment bank now expects the Fed to start cutting interest rates in July – and right now it still sees 75 basis points of cuts through year-end.

However, this forecast is tied to data related to growth and inflation and so the Fed could easily pull back from pulling the trigger on the expected number of rate cuts.  And it is a possibility we may not get any at all.

The crude rally is impacting the global economy at the same time as the conflict in the Red Sea disrupts shipping and demand puts upward pressure on prices.

JPMorgan expects Brent prices could rise to $100 a barrel by September. 

Why?

Russia is slashing production and Ukraine is escalating drone attacks against Russia’s energy infrastructure.

Ukraine has hit 18 Russian oil refineries so far with a total annual capacity of 3.9 million barrels per day.  An estimated 670,000 barrels per day of Russian refining capacity is currently shuttered, according to JPMorgan.  What this means is that Ukraine’s attacks could force Russia to cut production further and ban gasoline exports.

The U.S. could act here and become a fall-back measure by tapping the strategic petroleum reserve as a countermeasure if the situation escalates and deteriorates further.

Interesting times, to say the least.

 

 

 

Cheers,

Jacquie

 

(SUMMARY OF JOHN’S APRIL 3, 2024 WEBINAR)

April 5, 2024

 

Hello everyone.

TITLE

The Three Margarita Webinar

PERFORMANCE

April – 2.00% MTD

Average annualized return: +51.40 for 16 years.

Trailing one-year return: +46.58%

PORTFOLIO

Risk On

(FCX) 4/$37-$40 call spread 10%.

(XOM) 4/$100-$105 call spread 10%.

(OXY) 4/$59-$62 call spread 10%.

(WPM) 4/$39-$42 call spread 10%.

(TSLA) 4/$140-$150 call spread 10%.

(GLD) 4/$194-$197 call spread 10%.

Risk Off

No positions.

 

THE METHOD TO MY MADNESS

We are now moving out of big tech into commodities, precious metals and energy.

Technology will have a “time correction”.

Bonds and other falling interest plays are being blindsided by a heating economy.

All economic data is globally slowing, except for the US, with the only good economy in the world.

US $ approaches multiyear high on rising rates.

Buy stocks and bonds but only after substantial dips.

 

WHY ARE COMMODITIES SO HOT

Traders are not chasing big tech.  Instead, they are rotating into laggard sectors.

Commodities, precious metals, and energy have not moved for a year. 

Traders are betting on the falling interest rate narrative.

These sectors are also great plays on a recovering global economy, and a falling dollar, pressured by rising US debt, now at $35 trillion.

 

THE GLOBAL ECONOMY – A ONE-HIT WONDER

ADP show 184,000 private sector job gains in March.

Fed Chair Jay Powell promises three interest rate cuts this year – 25 basis points each.

PCE comes in hot at 0.3% for February, and 2.8% YOY.

ISM Manufacturing PMI soars, reaching an 18-month high.

The final read of the Q2 US GDP is revised up, to a 3.4% annual rate.

Leading economic indicators rise for the first time in two years according to the Conference Board.

Fed to dial back quantitative tightening, or QT from the current $120 billion a month.

 

STOCKS – COMMODITIES LOVEFEST

It’s been four years since the COVID low, and stocks have averaged a 25% a year return since then.

China bans AMD and Intel processors, for government use in retaliation for the ban on high-performing NVIDIA chips.

Boeing CEO resigns.  David Calhoun learned the hard way that you can’t cost-cut your way to prosperity.

Chipotle announces a 50:1 stock split, prompting a 3.5% rally in the stock.

Shell is moving into the charging business, which has much higher margins than selling gasoline.

Reddit deal blows out, in the first big IPO of 2024 – up 35% at the opening.

 

BONDS – SLAP IN THE FACE

Rising inflation and heating economy cut bond support off at the knees.

Higher for longer seems to be the new Fed mantra.

However, Jay Powell still promising three rate cuts this year, but they will be closer to year-end.

So, bonds will remain weak but may only have $2 of downside left.

US National Debt is rising by $1 trillion every 100 days. 

 

FOREIGN CURRENCIES – US DOLLAR POWERS ON

Japanese yen hits a new 34-year low at 151.97 to the US$ with the Bank of Japan suggesting that interest rates will stay lower for longer.

Last week the central bank raised rates for the first time in 17 years.  Japanese stocks applauded.

Chinese Yuan crashes, suffering worst day in two months.

Declining exports, collapsing foreign investment, minimal population growth, it all adds up to a weaker Chinese currency.

It’s the bitter fruit of 40 years of one child-only policy.  Avoid (FXI).

Eventual falling interest rates guarantee a falling dollar for 2024.

 

ENERGY & COMMODITIES – NEW HIGHS FOR THE YEAR

A global commodity rally has dragged oil up.

US continues to dominate markets with 13 million barrels/day production.

In the meantime, coal has plunged from 50% to 19% of US electricity output in 20 years.

Electrification of the US economy will continue to be a driving theme.

The Uranium shortage is getting extreme, with yellow cake up 112% in a year.  Owners of abandoned mines are restarting operations to capitalize on the rising demand for nuclear fuel.

AI is finding New Copper Deposits.

 

PRECIOUS METALS – NEW ALL-TIME HIGHS

Precious metals have a great week on flight to safety.

Gold looking forward to falling interest rates later in 2024.

Miners are playing catch-up.

Investors are picking up gold as a hedge for 2024 volatility.

Gold headed for $3,000 by 2025.

Silver will also rally.

Russia and China are also stockpiling gold to sidestep international sanctions.

 

REAL ESTATE- HOTTEST SPRING IN YEARS

Existing home sales soar 9.7% in February to 4.38 million units.

A still low 2.9-month supply at the current sales pace.

Median prices are up 5.7% from the year before to $384,500.

US Construction spending falls 0.3% in February according to the Commerce Department.

Construction spending increased 10.7% year-on-year in February.

New Home Sales drop 0.3% in February in a surprising decline at a 662,000 annual rate on a signed contract basis.

A spike in mortgage rates to 7.0% gets the blame.

There was a 7.5% drop in the prices of new homes sold to $405,000.

 

TRADE SHEET

Stocks – buy any dips.

Bonds – buy dips.

Commodities – buy dips.

Currencies – sell dollar rallies, buy currencies.

Precious metals - buy dips.

Energy – buy dips.

Volatility – buy $12.

Real Estate – buy dips.

 

RECORDING OF JACQUIE’S POST-MARCH MONTHLY ZOOM MEETING

Apologies for any errors.  I was still jet lagged when I held this meeting.

https://www.madhedgefundtrader.com/jp-meeting-replay-march-2024/

 

 

Cheers,

Jacquie