(THE MACRO DATA AND PEOPLE’S REALITY)

October 9, 2023

 

Hello everyone,

Welcome to a new week in October.  I believe October and November will be interesting months in the markets.

So, what do we have coming up this week?

Monday: Australia Consumer Confidence Chg.

Previous – 1.5%

Time: 7:30pm ET

Tuesday: US Consumer Inflation Exp.

Previous: 3.6%

Time: 11:00am ET

Wednesday: US PPI MoM.

Previous: 0.7%

Time: 8:30am ET

Thursday:  US Core Inflation.

Previous:  4.3%

Time: 8:30am ET

Friday:  US Consumer Sentiment

Previous: 68.1

Time: 10:00am ET

THE MARKETS

S&P 500

In the past few weeks, sentiment has turned from bullish to bearish, and the market is entering a “seasonably favourable” period ahead.  Friday’s strong employment number gave the market every chance to resume its decline but instead it strengthened.   Therefore, there is opportunity for the bulls to regain control.  Whilst holding last week’s 4,216 low, it may be possible to interpret the S&P as having commenced its 5^th Elliott Wave advance onto new highs for the year (before a significant reversal occurs).  The market has much to prove.

Important resistance levels include:  4335, 4400/4430 & key 4510/4540.

GOLD

Gold recorded a bullish “outside reversal day” on Friday, to enable a recovery to now occur.   Such a recovery can test the $1860-$1880 resistance area over coming days.  However, unless gold can clear resistances at $1884 and then $1905, there is risk this potential bounce gives way to a deeper sell-off below $1804 support – toward the $1700 level in the weeks ahead.

CONFLICT IN THE MIDDLE EAST

Palestinian militants Hamas attacked Israel on the weekend.  Oil prices jumped 4% following the surprise attack which is now in its third day.  At dawn on Saturday during a major Jewish holiday, Palestinian militant group Hamas launched a multi-pronged infiltration into Israel – by land, sea and air using paragliders.  The attack came hours after thousands of rockets were sent form Gaza into Israel.  At least 700 Israelis have reportedly been killed according to NBC news.  The Palestinian Health Ministry has recorded 313 deaths so far.  The conflict sits at the doorstep of a key oil producing and export region for global consumers.  Oil rich Iran looms large as the market’s immediate concern.   Should the conflict escalate regionally, there could be quite a dramatic effect on the oil market with prices jumping back into the 90’s.

RECORDING OF JACQUIE’S POST MONTHLY ZOOM MEETING 09/27/23

https://www.madhedgefundtrader.com/jp-meet-sep2023/

DATA AND REALITY

Friday’s jobs report showed a strong resilient economy.

But people’s perception of their economic outlook is still gloomy.

Why?

Inflation, although slowly heading lower, is still far more than most people can tolerate.

Statistics and numbers in a book do not reflect what is being experienced in the real world.  In other words, people’s experience doesn’t transition into less hardship because the numbers move down.   

Numbers and reality are two different beasts.

A healthy jobs picture does not equate to a positive consumer sentiment. 

All the extras we have become used to are being removed.  It might appear subtle at first, but as you tally all findings together, it really becomes very clear.

Let’s see.  Do you still get free drinks with children’s meals anymore?  At some places, no.

The size of the product you buy at the grocer is smaller but has the same tagged price.  That packet of laundry soap I buy is smaller as is the dishwashing liquid, but the price is the same.  In Australia, a pound of butter went up a dollar a few weeks ago. Not 25 cents, not 50 cents, but a whole dollar.

The cost of housing has gone through the roof. In the aftermath of Covid, house prices surged, which pushed people out of the big cities into regional areas.   The median home sales price has risen 27% since the end of 2019, and this makes home ownership particularly difficult for younger buyers such as millennials. And it’s not just house prices. 

Higher interest rates are a problem too.   30-year fixed mortgages are running at an average 7.83% loan rate.  Financial markets are a bit jumpy because of the possibility that the Fed could take rates even higher if inflation doesn’t pull back.

While the consumer price index may show inflation running at a 3.7% annual rate now, it’s about 20% higher than it was since early in the pandemic. 

The CPI number for September will be released Wednesday.

Wishing you all a wonderful week.

Cheers

Jacquie

 

 

 

It doesn’t look like interest rates will be moving down in the short to medium term.  We have had low rates for a very long time.  In Australia, 2025 may be the earliest we could see a shift in rates.

 

(SUMMARY OF JOHN’S OCTOBER 4, 2023, WEBINAR – CHAOS REIGNS)

October 6, 2023

Hello everyone.

LUNCHES

October 6, 2023 – Frankfurt, Germany

October 13, 2023- Kiev, Ukraine

October 20, 2023- London, England

October 30, 2023- Sarasota, Florida

October 31, 2023- Miami, Florida

PERFORMANCE

61% on the year.

83.85% trailing one year return.

657.99% since inception.

48.15% average annualised return.

POSITIONS

Risk On

TSLA 10 $200-$210 call spread

NVDA 10 $370-$380 call spread

Risk Off

TLT 10 $89-$92 put spread.

THE METHOD TO MY MADNESS

The market is discounting a worst-case scenario – no budget deal until we get a new congress in January 2025.

Technically, we are without a government now.

The markets will refocus on the possibility of a shutdown as November 17 draws near.

The tech sell-off will be brief.  Too many people are trying to get into accelerating long term earnings.

Bonds breakdown to new 2023 lows.

Fall will present the best buying opportunities of the year.

Precious metals take a hit. But they should certainly be at the top of any “BUY” list to cash in on an economic recovery.

Patience. Let the market come to you.

A year-end rally may be compressed into a short-term time frame. If we get a shut-down, we can write off any rally.

THE GLOBAL ECONOMY – UNCHANGED RATE

Fed leaves interest rates unchanged.

John says that the most important things that Powell didn’t say in the Fed press conference is that quantitative tightening or QT continues. And that drains $1 trillion a year from the financial system through bond sales until 2031 to get the Fed balance sheet down to zero.

Soft Commodity prices are soaring, from orange juice to live cattle, which are complicating the inflation picture.

Personal Consumption rose 3.9% YOY and only 0.1% in August alone.

Personal Spending was up only 0.4% versus 0.9% in July, a three-year low.

Are we going to be hit with another rate rise in November?

If inflation goes up to 4%, we may be able to have a soft landing, but if inflation goes above 4% the Fed is looking at tightening more, raising interest rates, which could be enough to tip us over into recession, which according to John, will be short in timeframe.

  

After 150 days, the Hollywood Screenwriters Guild strike is over. The strike probably cost the U.S. economy around $5 billion. 

STOCKS – LOOKING FOR LOWS

Stocks probing a 10% correction.  We can thank the Oil price rise, inflation rate rise, Fed rate rise, Bond market collapse.

Government shutdown is adding extra fuel to the fire.

Hedge Funds have been cutting risk at their fastest pace since 2020.

Biggest week-on-week decline in portfolio leverage since the depths of the pandemic bear market.

A Nobel Prize in chemistry is presented to Moderna (MRNA).

Rite-Aid will file for bankruptcy – it plans to close 500 of its 2,100 stores.

If we have more bad news, we could get down to 4000 on the S&P.

PANW – holding up well. If we get close to the 200MA enter a trade.

CAT and FCX – buy on the dip. FCX is a great LEAP opportunity going out two years.

BRKB – has fallen along with everything else. If the stock moves toward the 200MA, it is a great buy.

BONDS – SEARCHING FOR A NEW NORMAL

The Treasury Bond Freefall continues as long-term yields probe new highs. New issue of $134 billion this week didn’t help.  Nothing can move – risk is heightened – until rates top out. May have to wait until 2024.

Ten Year Treasury yields hit new 16 year high, at 4.70%.

Government shutdown is a new negative, even when it’s delayed by 45 days.

Moody’s warns of further U.S. government downgrades.

The U.S. budget deficit is climbing once again increasing bond sales.

Falling interest rate/rising bond price trade has been delayed for six months. There has been hotter than expected economic growth at 2.40% for Q2 and more Fed rate rises are possible.

Keep buying 90-day T-bills, now pushing a 5.48% risk free yield.

Junk bond ETF’s (JNK) and (HYG) are holding up extremely well with a 6.5% yield.

Stand aside from (TLT) until we find the new floor.

FOREIGN CURRENCIES - NEW DOLLAR HIGHS

The Fed message “higher for longer” has rocketed the U.S.$ to new 2023 highs.

The possibility of a government shutdown is also adding fuel to the dollar’s rally as it has become a flight to safety bid.

Collapse of the dollar is now a 2024 story.

The Aussie dollar collapse has been prompted by a slowing Chinese economy – no demand for Aussie energy or commodities.

Put the following on your shopping list before the U.S.$ turns down from its rally.  (FXE), (FXB), (FXA), (FXY).

ENERGY AND COMMODITIES – NEW 2023 HIGHS

Saudi Arabia continues Oil supply squeeze into Q4.

A cold winter will see demand for oil rise.

Russia bans all diesel exports, partly to meet its own military needs but also to squeeze the price up.

Strike ends at Australian export facilities.

Electrification will be the big theme of this century.

The power grid must increase fivefold in size to accommodate the electrifications projects already underway.

(My input here) The OPEC Secretary General, Haitham Al Ghais, argues that oil underinvestment is endangering the energy sector. He points out that the world will require at least 12 trillion of new investment globally for the oil industry until 2045. Of significance is the fact that by 2030 over ½ billion people will move into cities globally. Ghais argues that there is no way we can meet this future demand by relying on renewables alone. Thirty years ago, fossil fuel consumption was 80% globally. And thirty years on today, it is still at 80% or over 80%. So, if we project into the future – say 2030 – how far do you think we will be with our transition to a renewable energy world? Five or six years is not a long time. If we consider the challenges that are facing the introduction of electric vehicles, penetration of EV’s globally, availability of critical minerals globally, the supply chain and logistical issues, then we start to comprehend that the sheer size and volume of electrification required globally to be able to move to an electric world is a monumental challenge.

PRECIOUS METALS

The Fed’s stance on interest rates pushes precious metals to new 2023 lows.

Costco has started selling gold bars, and they are selling out within hours.

Gold Target = $3000 by 2025.

Silver is the better play with a higher beta.

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

REAL ESTATE

New U.S. Home mortgage rates hit 17- year high and have virtually ground to a halt.

Homebuilder sentiment turns down for the first time in seven months in August to 45.

S&P Case Shiller rises to new all-time high for sixth consecutive month as inventory shortages drove up competition housing.

In July the index increased 0.6% month over month and 1% over the last 12 months, on a seasonally adjusted basis.

July’s movement reached a new high for the nationwide home index, surpassing the record set in June 2022.

The median home price for existing homes rose to 1.9% to $406,700 according to the National Association of Realtors (NAR).

The robust housing market suggests that while some buyers pulled back due to high borrowing costs, demand continues to outweigh supply.

 

 

 

Wishing you all a great weekend.

Cheers

Jacquie

 

(AUSTRALIA AND THE CHINESE TOURIST)

October 2, 2023

 

Hello everyone,

Welcome to a new month. Halloween, Thanksgiving and Christmas/New Year are all looming. Are you planning anything special for these occasions?

Let’s see if the U.S. consumer is keen to spend and travel during these events.

Before I get to the content of the title, let’s digest a brief lowdown on the market:

Labor (we spell it labour) market data arrives this week: job openings on Tuesday and Nonfarm Payrolls on Friday. The Reserve Bank of Australia meets on Tuesday (Australian time) to decide on interest rates with a backdrop of the Aussie $ at year-to-date lows.

Is the Nasdaq & the S&P 500 primed for a rally? Let’s see how it handles the last-minute 45-day funding bill agreement to keep the government open. And if history is our guide, a September sell-off usually sees a fourth quarter rally. Will 2023 be any different?

Look for Oil to stay in the high 80’s and 90’s and possibly rally past $100.

The U.S.$ appears set to be stronger for longer with the prospect of higher interest rates, and rates possibly staying at an elevated level for longer. The U.S.$ short may be a 2024 story.

Gold has fallen below 1895, and we could now see gold fall towards 1800 or even lower. Buy small parcels on the way down (GOLD), (SLV), (SIL), (WPM). 

Bond yields are headed towards 4.90%. Then we should see a medium-term pullback. 

Buy 90-day T-bills.

The full impact of the interest rate rises is probably yet to be felt.

==============================================

Australia is presently enjoying a warmer-than-usual springtime, and summer is just around the corner. Forecasters say we are in for a very hot summer. But most Aussies don’t mind, as there is always the ocean nearby where you can take a dip to cool off.

 

 

Many businesses and tourism operators depend on an influx of visitors during the spring/summer months.  And for Australia, Chinese visitors usually take the number one spot by volume.  Of course, over the past three years, during COVID-19, these numbers were slashed, and many Australian businesses suffered and eventually folded due to their reliance on tourist traffic.   Before Covid, China was Australia’s largest and most lucrative inbound tourism market with visitors spending $2 billion in 2019.   Pre-pandemic, approximately 1.4 million Chinese visitors traveled down under.

Now that countries, like Australia, have opened their borders to tourists again, Australia is starting to see tourists return.   Borders between the two nations re-opened earlier this year and this week the federal government announced it would recommence approving visas for group travel from China.  But will it be like pre-pandemic times?

Some Aussie businesses fear that global factors will interfere with the rebound.  The cost of air travel has gone up significantly, and group packages to Australia have also risen considerably.  Furthermore, concerns about the overall health of the Chinese economy, largely due to the ailing property sector, have added further uncertainty to tourism businesses attaching their hopes on a Chinese comeback.

More flights from China have resumed, but different routes are needed.  Last month, China Southern Airways announced the resumption of four flights per week between Guangzhou and Brisbane from November. However, internationally, and domestically, more flights are needed for the post-covid recovery to gain full traction.  A greater network of flights into Australia should include the northern parts of Australia, like the Cairns and Townsville areas, the Whitsundays, which are close to the Great Barrier Reef and hinterland rainforest wilderness.  The Gold Coast, (where I live) which has its own airport, is primed and ready for the influx of visitors.

Have a great week.

Cheers,

Jacquie

 

 

(MINATURE AI WILL BE BIG IN THE FUTURE)

September 27, 2023

 

Hello everyone,

We are living in the era of Artificial Intelligence (AI), and it will change our lives in many ways. 

Within AI there is currently a large focus on Tiny AI or Minature AI which aims to improve the sustainability of artificial intelligence, thereby reducing its high carbon footprint.   This emerging technology compresses the size of artificial intelligence algorithms - which use far less computing power - especially those that use large quantities of data and computational power. What this means is that this technology – Minature AI, can fit and run within microprocessors on consumer or the Internet of Things (IoT)-enabled devices.   For instance, we can point to natural language processing (NLP) models like Google’s BERT. The larger version of BERT has 340 million data parameters and training it just once costs enough electricity to power a U.S. household for 50 days.   In another example, we learn that a single training session of GPT-3, a popular language that produces human-like text, has the same carbon footprint as traveling 700,000 kilometers by car.

Tiny AI is a power saver and addresses the carbon footprint of artificial intelligence.   It aims to reduce the amount of power needed by building algorithms into hardware at the periphery of a network, where they can perform data analytics at low power, avoiding the need to send data back to the cloud for processing.  This improves latency as well as power consumption and enables Tiny AI to run on devices like our mobile phones, increasing their functionality but also improving our privacy as the data stays on the device.

As AI keeps popping up in our everyday lives, it raises several privacy concerns.  Do you ever get the feeling that you are being constantly monitored in some way, or your privacy is being compromised?  Smart home devices use AI to personalize the experience for each user.  However, they store large amounts of data that is not particularly relevant for their applications, on the cloud – making it vulnerable to hacking.  There is a demand now for on-device AI which enhances both privacy and safety for Smart Home Devices.  The Tiny AI algorithms would run on consumer phone hardware, eliminating the need to analyse data on the cloud, thus reducing a significant amount of energy.  Furthermore, it would also ensure ultra-low latency.  Think about Google Assistant, the voice assistant on Google’s phone and smart home devices.  After Google trimmed down its code so that it runs on-device rather than sending data to the cloud for processing, it processes requests a lot faster than it did before.

Tiny/miniature AI will impact all industries.  This technology will facilitate the running of machine learning (ML) models to the smallest of chips and a diverse range of devices.  This allows devices to be smart without connecting to the internet.  Think for a moment about an autonomous car that doesn’t need to connect to the cloud or simply use a mobile phone to diagnose diseases in remote areas without the internet.  Along with better algorithms, advances in embedded devices are advancing the trend.  This allows for the development of devices that consume very little power and run for months or years.  Now that’s a win-win for people and the environment.

Happy Wednesday

Cheers Jacquie

 

 

 

Tiny Machine Learning: The Next AI Revolution

 

(SUMMARY OF JOHN’S WEBINAR ON SEPTEMBER 20, 2023)

September 22, 2023

 

Hello everyone.

Today I will provide you with a summary of John’s latest webinar which was done on Wednesday, September 20.

Webinar Title:  Comatose

Lunches:

September 29 Zermatt, Switzerland

October 6 – Frankfurt, Germany (Dinner)

October 13 – Kiev, Ukraine

October 20 – London, England

October 31 – Miami, Florida

 

Trade Alert Performance: 

No Trades/Positions

2023 year to date +60.80%

Average annualized return +48.15% for 15 years

+83.85% trailing one-year return.

Waiting for a better risk-reward before we enter any trades.

 

Method to My Madness

Big tech flatlines, leading to a comatose market.

Government shutdown is a new drag on all risk assets.  But the tech sell-off will be brief.  Too many people are trying to get into accelerating long-term earnings. 

Bonds probing lows on rising interest rate fears.

Fall will present the best buying opportunities of the year.

Precious metals should be at the top of the buy list to cash in on an economic recovery.

Patience is key here.  Let the market come to you.

 

The Global Economy - Best House in a Bad Neighbourhood

The U.S. has the strongest major economy in the world, while Europe, China and Russia are in recession.

United Auto Workers go on strike, bring the Big 3 Detroit automakers to grinding halt.

U.S. Wholesale Prices jump 0.7% in August.

Consumer Price Index Rises 0.6% in August – the hottest read in 18 months.

U.S. jobless claims fall again to 220,000 – a drop of 5,000.  The economy is reigniting again.

Beige Book shows consumer spending slowing.  Rate Hikes will drag on the economy for at least a decade, as the Fed $8.24 trillion balance sheet unwinds.

Australian economy surges, as the return of Asian tourists and infrastructure spending kick in.

Fed will start cutting interest rates next year.  Market discounts events 6-9 months in advance as they are forward looking.

Mad Hedge Profit predictor at 53 = no trades.

Thank you for all the donations to my Ukraine humanitarian mission. Much appreciated.

 

Stocks – Going Nowhere

Stocks are chopping around in a narrow range on low volume with a slight downward tilt.

Government shutdown prospect is pouring water on any spark.  Government runs out of money on September 30.

Salesforce beats with revenue up 11% YOY.

Raytheon takes a hit from Jet Engine problems.

Arm Holdings jump 25% on first day of trading.  Masayoshi Sohn is happy because he still owns the remaining 90% of the company.  This is where the hot money is going.

Caesars Entertainment and MGM suffer major hack.  They have paid 15 million to end the issue.

Oracle disappoints on fading cloud growth in the recent quarter.

Vinfast IPO burns latecomers, as the money losing Vietnamese EV maker crashes after launch, down 83%.

No short-term trades here.

Buy the dip in Homebuilders.  S&P should go to new highs by year end.  Tech stocks continue to move side-ways for now.

TSLA target is $300-$400 by the end of the year.

NVDA is a screaming buy at $400.

BA is a good buy here.  Also, a good LEAPS candidate.  Enter 200-210 LEAPS and you’ll get a 100% return on your money in a year.

All the banks are good buys here as this sector is cheap and will roar back on an economic recovery.

 

Bonds

10-year Treasury Yield hit new 16-year high at 4.38%.

Government shutdown is new negative.

The U.S. Budget deficit is climbing once again increasing treasury bond sales.

The whole falling interest rate, rising bond price trade have been delayed for six months thanks to Fitch downgrade and hotter-than-expected economic growth at 2.40% for Q2.

Keep buying 90-day T-bills now pushing a 5,48% risk-free yield.

Still looking like a 3.50% 10-year yield by the end of 2023.

Junk Bonds ETFs (JNK) and (HYG) are holding up extremely well with a 6.5% yield.

Bonds (TLT) still likely to hit $110 by year-end.

Scale into Bonds now – beneficiary of falling interest rates and an economic recovery.

RE: TSLA trade idea:  scale in on a one-month basis.  You need to work out how much you want to buy, and then buy 1/30^th of that amount every day for a month.  You won’t get the absolute bottom, but when the turnaround happens then it goes up 50-100%.  That’s the way to play TSLA.

Saudi Arabia created a short squeeze in oil by taking 5 million barrels off the market with Russia.  That got prices up.  Saudis tend to back off when oil gets to $100 as it adversely affects their investments in Europe and the U.S.  After topping $100, Saudis may start bringing supply back on.

You can take the option of taking profits if you did the oil trade in June.

We are waiting for a capitulation in Bonds (TLT).

An 85-90 call spread is then offering you 100% one year out.

I recommend 4 months T-Bills which expire in January as it takes advantage of the cash squeeze you always get in the new year.

Returns on 4 months T-bills are much higher than 3, 2, or 1-month T-bills.

For me to do a trade now, it must have a very low risk and a 20% return.  The market is not offering this, so no trades.  Instead buy T-bills which give you a guaranteed return.

 

Foreign Currencies:

Fed gives an adrenaline shot to the U.S.$.

Long of the year may be setting up in the Yen.  This could spell the end of a zero-interest rate policy in the Land of the Rising Sun, the last country to use it.

Collapse of the U.S.$ is a 2024 story.

Aussie $ collapse prompted by slowing Chinese economy – not buying their energy or commodities.

Buy (FXE), (FXB), (FXA), (FXY).

 

Energy and Commodities

Saudi production cutback is now at 4 million barrels/day, a 20-year high, squeezing prices to a new 2023 high.

Biden may counter with a release from the Strategic Petroleum Reserve on SPR.

Gas prices jump 10% in Europe, as a long-threatened strike ensues at Australia export facilities.  Chevron used the strike to cancel contracts in anticipation of long-term falling gas demand.

Electrification will be the big theme of this century.

The power grid has to increase fivefold in size to accommodate the electrification projects already underway.

 

Precious Metals

Fed knocks precious metals markets for the short term.  But gold is headed for $3000 by 2025. The driver will be falling interest rates.  Silver is the better play here.  Russia and China are still stockpiling to sidestep international sanctions.

 

Real Estate – A Slow Awakening

New U.S. Home mortgages hit 27-year low and have virtually ground to a halt.  A 30-year fixed rate at 7.27% is the cause, which no one can qualify for.  Yet, home prices are going up.  Climate risk is a growing factor in home selection.  Home builder sentiment turns down for the first time in 7 months in August to 45.  High mortgage rates are taking their pound of flesh. Home builder incentives are making a comeback.

Crown Castle International (CCI) – great LEAPS opportunity right here at $96.97.

Home Construction (ITB) at $81.88.  Let it fall a little more and buy it.

Next Strategy Webinar from Zermatt, Switzerland on October 4, 2023.

Cheers,

Jacquie

 

John’s journey starts in London, then Switzerland, Frankfurt, Poland, Ukraine, and back to London.

 

September 21, 2023

 

September 21, 2023