(IS THE AI WAKE UP CALL FROM CHINA A STORM IN A TEACUP OR SOMETHING BIGGER?)
February 7, 2025
Hello everyone
China and Australia are having a spat, or Is China & the world having a spat?
Australia has moved to ban the Chinese AI company Deep Seek from all its government systems and devices on national security grounds.Australia joins Taiwan and the U.S. state of Texas, which have similar Deep Seek restrictions on government phones.One European country – Italy – has gone even further.It has banned Deep Seek entirely by forcing its removal from app stores.
China has accused Australia of ideological discrimination and following in the footsteps of the U.S., which is also approaching the app with caution.
In the U.S., both NASA and the Pentagon have ordered staff to steer clear of Deep Seek.
I think there could be further shocks to the market from the AI corner.
Palantir has catapulted itself into the clouds
I recommended Palantir on March 20, 2024, when it was $23.00.
We are still holding this stock.At its closing price on Thursday at $111.28, we have made 383% on this stock.So, you would be wise to take some profits off the table.
Shares of the government contractor and artificial intelligence play are trading at a 62 forward price-to-sales ratio, the highest of any company in the S&P500.The next closest nonfinancial stock in terms of forward price-to-sales is Texas Pacific Land Corp, at 32 times estimates for sales over the next year, according to FactSet data.
Palantir’s valuation comes after a 24% jump in its shares last Tuesday as the company reported a 36% increase in sales for the last quarter and raised its sales forecast for the full year.
Analysts agree that Palantir’s stock price is not sustainable even if it does become a primary contractor for the U.S. government that is looking to modernize processes and increase efficiency.
Jefferies software analyst Brent Thill notes that although the stock’s fundamentals are strong, PLTR would have to raise growth to 50% for 4 years and trade at 13.5x CY28E revenue just to hold its stock price.Thill’s stock price target is $28.00.Palantir closed at $111.28 on Thursday.
Could this rally be typical of retail trader enthusiasm, which often represents late-stage bull markets?
(WHERE DOES AUSTRALIA STAND IN RELATION TO THE U.S. AND TRUMP 2.0)
February 5, 2025
Hello everyone
The United States makes more from Australia than Australia makes from the United States in terms of trade and investment. The United States is Australia’s largest economic partner.
TRADE
In 2023, Australia exported $12.59 billion to the United States.
The United States has a trade surplus with Australia, with the surplus in goods and services favouring the United States.
The United States is Australia’s third largest trading partner for goods.
The United States is the third most popular tourist destination for Australian residents.
INVESTMENT
The United States is Australia’s largest foreign investment destination.
At the end of 2023, the United States had invested $1.17 trillion in Australia.
Below is a list of the top twenty exports to the United States.
This is by no means everything on the list.
The prospect of an international trade war with the U.S. now must be factored into the realm regarding inflation and interest rates in Australia.The likely downward trajectory of inflation and interest rates has been complicated by Trump’s “bull at a gate” mentality over tariffs on goods from many countries.
Vowing to stick to his election promise, Trump wants the U.S. to return to a “golden age” of U.S. manufacturing.China has been loud and clear that countermeasures are coming.And Canada has already responded by slapping a 25% tariff on a range of U.S. imports.Certain provinces have indicated that they will no longer buy American goods, so public influence will spin the tables against Trump’s actions.
Mexico, too, has indicated that it will also levy retaliatory duties on American goods.
It was initially understood that Trump’s rationale for threatening tariffs on Canada and Mexico was to force these countries to stem the flow of fentanyl and illegal immigrants across the border into the U.S.But it seems they have become more than a bargaining chip and look certain to be locked into place to protect America and make it great again, even though it may be a painful journey.
Trump has also drawn attention to his intention to impose tariffs as early as mid-February on imports from all countries of computer chips, pharmaceuticals, steel, aluminum, copper, oil, and gas into the U.S.
The implications for Australia’s open and export-oriented economy, which greatly benefits from free trade, are two-fold.
Australia risks importing higher inflation. And, secondly, Australian exports to the U.S. risk getting caught up in the trade war.For instance, blood plasma made by biotech giant, CSL, is among the $1.7 billion a year pharmaceutical exports that are at risk of being hit by Trump’s tariffs if they are imposed on Australia.
The potential hit to costs and sales for Australian companies that do business in the U.S. is significant.The Albanese government will need to act swiftly to negotiate an agreement with the U.S. to minimize the potential damage from Trump’s trade war.
There are many other effects too.Disruptions to international trade that slow the world economy would drag on Australia’s 0.3 annual rate of GDP.Effects could include the acceleration of the economic slowdown in China, which is Australia’s main trading partner.
The looming trade war has consequences not only for inflation and interest rates but also for economic growth.
Trump’s latest expansionist tendency includes wanting to take over the Gaza Strip. He wants to transform it into the “Riviera of the Middle East.” This is on top of wanting Greenland, and the Panama Canal.
Instability on the geopolitical front could go from amber to red.
(SPECIAL ISSUE: TAKING PROFITS AND SLIMMING DOWN OUR PORTFOLIO)
February 4, 2025
Hello everyone
Today, I’m listing stocks I’m recommending you sell. Sell at best price.
If you are reluctant to sell out of the whole stock, then look at selling between 50% - 75% of the stock.
Update on tariffs:China has issued retaliatory tariffs – up to 15% -against the U.S.They are due to take effect on February 10.Next week should be interesting.
Here’s the List of Stocks
1/ Johnson & Johnson (JNJ)
Purchase Date:10/25/23
Purchase Price:$150.00
Sell Date:02/03/25
Sell Price:$151.87
+/- +$ 1.87
+/-% +1.87%
2/ Snowflake (SNOW)
Purchase Date:11/24/23
Purchase Price:$171.33
Sell Date:02/03/25
Sell Price:$182.54
+/- +$ 11.21
+/-% +6.54%
3/Palo Alto Networks (PANW)
Purchase Date:01/06/23
Purchase Price:$315.00
Sell Date:02/03/25
Sell Price:$182.79
+/- -$132.21
+/- % -41.97%
4/ Advanced Micro Devices (AMD):
Purchase Date:01/06/23
Purchase Price:$150.00
Sell Date:02/03/25
Sell Price:$114.27
+/- -$35.73
+/-% - 23.82%
5/ Arista Networks (ANET)
Purchase Date:01/06/24
Purchase Price:$62.00 (Stock split June 6, 2024)
Sell Date:02/03/25
Sell Price:$111.50
+/- +$53.50
+/- % +86.29%
6/ Black Rock (BLK)
Purchase Date:01/08/24
Purchase Price: $782.00
Sell Date: 02/03/25
Sell Price:$1,013.75
+/- +$231.75
+/-% +29.63%
7/ Realty Group (O)
Purchase Date:02/21/24
Purchase Price:$52.00
Sell Date:02/03/25
Sell Price:$54.49
+/- +$2.49
+/- % + 4.78%
8/Prologis (PLD)
Purchase Date:02/21/24
Purchase Price: $134.00
Sell Date: 02/03/25
Sell Price:$117.84
+/- -$16.16
+/- % -12.05%
9/ Caterpillar (CAT)
Purchase Date:04/22/24
Purchase Price:$354.56
Sell Date: 02/03/25
Sell Price:$361.55
+/- +$6.99
+/- % +1.97
10/ Eaton Corporation (ETN)
Purchase Date:04/22/24
Purchase Price: $303.02
Sell Date: 02/03/25
Sell Price: $315.55
+/- +$12.39
+/- % +4.08%
11/ General Motors (GM)
Purchase Date:05/15/24
Purchase Price:$45.03
Sell Date:02/03/25
Sell Price:$47.90
+/- +$2.87
+/- % +6.37%
12/ Apple (AAPL)
Purchase Date: 11/24/23
Purchase Price:$190.00
Sell Date: 02/04/25
Sell Price:$228.01
+/- +$38.01
+/- % +20%
13/ Microsoft (MSFT)
Purchase Date:01/05/24
Purchase Price:$372.00
Sell Date:02/03/25
Sell Price:$410.92
+/- +$38.92
+/-% +10.46%
14/ iShares Biotechnology ETF (IBB)
Purchase Date:01/31/24
Purchase Price:$137.49
Sell Date:02/03/25
Sell Price:$137.85
+/- +$0.36
+/- % +0.26%
15/ SPDR S&P Biotech ETF (XBI)
Purchase Date:01/31/24
Purchase Price:$90.80
Sell Date:02/03/25
Sell Price:$91.42
+/- +$0.62
+/- % +0.28%
Percentage gain/loss = + 94.69%
Dollar gain/loss = + $211.86 (if you had bought one stock/share of each of the above)
Earnings: Apollo Global Management, KKR & Co, PayPal, PepsiCo, Merck & Co, Regeneron Pharmaceuticals, Marathon Petroleum, The Estee Lauder Companies, Pfizer, Advanced Micro Devices, Alphabet, Match Group, Prudential Financial, Simon Property Group, Electronic Arts, Enphase Energy, Mondelez
WEDNESDAY FEB. 5
8:30 a.m. Trade Balance (December)
9:45 a.m. PMI Composite final (January)
9:45 a.m. S&P PMI Services final (January)
10:00 a.m. U.S. Services PMI (January)
Previous: 54.1
Forecast: 54.3
Earnings:Walt Disney Co., Emerson Electric, Stanley Black & Decker, Boston Scientific, Uber Technologies, Yum! Brands, T. Row Price Group, MetLife, Align Technology, Qualcomm, Ford Motor, Allstate, O’Reilly Automotive.
THURSDAY FEB. 6
7:00 a.m. UK Rate Decision
Previous: 4.75%
Forecast: 4.50%
8:30 a.m. Continuing Jobless Claims (01/25)
8:30 a.m. Initial Claims (02/01)
8:30 a.m. Unit Labor Costs preliminary (Q4)
8:30 a.m. Productivity preliminary (Q4)
Earnings: Hilton Worldwide, Air Products & Chemicals, Honeywell International, Eli Lilly & Co, Tapestry, ConocoPhillips, Fastenal, Hershey, Ralph Lauren, Microchip Technology, Take-Two Interactive Software, Amazon.com, Expedia Group, Monolithic Power Systems, Fortinet.
FRIDAY FEB. 7
8:30 a.m. Hourly Earnings preliminary (January)
8:30 a.m. Average Workweek preliminary (January)
8:30 a.m. Manufacturing Payrolls (January)
8:30 a.m. U.S. Nonfarm Payrolls
Previous: 256k
Forecast: 170k
10:00 a.m. Michigan Sentiment (February)
10:00 a.m. Wholesale Inventories (December)
3:00 p.m. Consumer Credit (December)
Another busy week is upon us.More than 120 S&P 500 companies are scheduled to report. Some of them include Amazon, Alphabet, Walt Disney and PepsiCo.
So far, the reporting season has been good.Most companies have beaten expectations, according to FactSet data.What investors will be paying close attention to in the earnings this week is the future guidance of each business.
Policy will be market-moving this week.President Trump tapped the green light with tariffs in Canada, Mexico, and China.The impact of these tariffs could be far-reaching and could even trigger retaliatory tariffs from the targeted countries.A high level of uncertainty will be felt in the market.
Nonfarm payrolls are due out on Friday.It is expected that the economy added 165,000 jobs last month, down from 223,000 new hires the prior month.The unemployment rate is forecast to have remained unchanged at 4.1%
Another perspective on AI
Last week, Deep Seek - even with everything we don’t know about it, - stopped investors in their tracks and caused discomfort and disquiet, to say the least.So much so, that seeds of doubt over everything investors thought they knew about artificial intelligence has become the new narrative.
Everything is being questioned, including the stock market valuations on AI stocks.
Investors are rethinking their Nvidia investment.Are Nvidia’s chips worth the price?This question caused the shares of the AI leader to plunge 17% last Monday, stripping around$600 billion in market value from the stock.
And what about AI data centre operators - Amazon, Microsoft, and Alphabet?Will they be able to justify the fees and spending if Deep Seek is so cheap?
Furthermore, Deep Seek has also called into question the projections about electricity demand related to more AI usage.Are they vastly exaggerated?Power producers took it on the nose last Monday with stocks like Constellation Energy, Vistra, and Talen Energy among others, being smacked lower.
Last Monday, certainty was challenged.Valuation multiples will need to find a new level.
President Trump introduces tariffs.
We are now beyond talk, as the first steps of implementation of Trump’s tariffs to match Trump’s promised policy agenda took place on the weekend.On Friday, Trump said he would implement a 25% tariff on Canada and Mexico and a 10% on China on Saturday.No exemptions are known yet.
Until the market becomes familiar with the details, uncertainty will influence the market environment. Jitters could become very evident in sectors that could be hit hard by a trade battle with America’s closest trading partners, such as autos, industrials, food and beverage companies.
If the administration builds on existing steel and aluminum tariffs with Mexico and Canada, that could create volatility given Trump’s plans to build new power infrastructure and re-energize the manufacturing sector.
How will Canada and Mexico respond?Will they issue their own tariffs?Canada could slap tariffs on critical minerals, natural gas, and electricity.Furthermore, the country could also ban U.S. dairy, cattle, and fresh meat.And some provinces could choose to ban the purchase of U.S. alcohol, which would certainly cause ripples amongst some stocks.
Mexico, too, could implement an offensive approach by targeting U.S. corn or soybean exports, before expanding its retaliation into other areas.
One thing is for sure, the market could be very turbulent.
MARKET UPDATE
S&P500
The index will be choppy, particularly with the introduction of tariffs on several countries.This will create uncertainty in various markets/sectors.The ranging action of the index shows a bigger picture topping action.
Support = ~ $5955/65.The base of the rising wedge since October 2023 lies around $5750/75.Any break/close below here argues a major top has formed and the market is rolling over (9-12 months or more).I strongly recommend everyone take some profits now and enter a limit order for a put option or bear put spread to come into play on the SPY on any break and close below $5770.Also, buy SDS as protection.If you are short-term focused, you should take profits on stocks. I am expecting a strong bear move in the market either this month or next month.
GOLD
Gold reached a new all-time high.The metal will continue to range and could continue to nudge to the upside for now.
Resistance = ~$2817/25
Support = ~$2785/90 and $2737/40
BITCOIN
Topping movement continues to play out here. I would expect any upside to be limited.Resistance remains at ~$109.30/$109.80k.Support is seen at around~ $91/$92, and below there at ~ $85,000k.
Market has gone from non-risk to high-risk overnight, with the leading names, like (NVDA) taking the biggest hits.
All interest rate plays remain dead in the water, including gold, silver, homebuilders, bonds, and REITS.
Deregulation and end of antitrust plays will continue to be bought, including banks, brokers, money managers, but maybe not nuclear, and Tesla.
US dollar finally takes a break on falling rates.
Big technology stocks get crushed by Deep Seek, small ok.
Energy sells off on Deep Seek as well, no power is needed.
Buy financial as the only sure thing this year.
THE GLOBAL ECONOMY – COOLING
Fed stays put with interest rates. Fed Minutes are turning hawkish.
Consumer Price Index cools at 0.2% or 3.2% YOY, the first drop in six months.
25% tariffs on Mexico and Canada will raise the US inflation rate by 1.0%
US Consumer Confidence dives amid renewed concerns about the labor market and inflation.
2025 Economic forecasts are all over the map, as confusion reigns supreme over the impact of coming tariffs.
Credit Card delinquencies soar.
U.S. Business Activity slowed to a nine-month low.
The Tariff wars have started.
STOCKS – PUNCH TO THE NOSE
Technology stocks destroyed on news of China’s Deep Seek.
Nvidia drops $600 billion in market capitalization, the largest in stock market history.
Morgan Stanley warns customers to cut stock exposure.
The Cruise business is rocketing, with Royal Caribbean (RCL), just running up its best five-week sales period in history.
JetBlue (JBLU) gets destroyed, knocking 25% off of the stock.
Lockheed Martin (LMT) dives 8% on a cautious outlook spurred by our new government.
EV and Hybrid Sales reach a record 20% of US vehicle sales in 2024.
BONDS – STABILIZING
Bonds have stalled near two-year lows, yields down to 4.53%
All fixed-income plays have gone dead.
“Higher Rates for longer” don’t fit in here anywhere.But there may be a BUY setting up for (TLT) at 5.0%.
Bond yields have rocketed 130 basis points since September.
National Debt tops record $36 trillion and could rise another $10 trillion.
TIPS are making a comeback.
FOREIGN CURRENCIES – FINALLY A WEAK US DOLLAR WEEK
Dollar backs off two-year high on interest rate pull back.
Ten-year US Treasuries have risen from 3.55% to 4.80%, then 4.53%.
The mere fact that rates have stalled has allowed currencies to rally.
Higher for longer interest rates mean higher for longer US dollar.
Don’t sell short the US dollar until the next recession is on the horizon.
Avoid (FXA), (FXE), (FXB), (FXC), and (FXY).
ENERGY & COMMODITIES
Deep Seek shock trashes all nuclear energy plays on fears that the new orders will be cancelled, as the extra power will no longer be needed.
New AI programming uses 1% of the chips, and therefore 1% of the power.
Nothing could be further from the truth.Buy all nuclear plays on this dip.
Ban lifted on new natural gas export facilities in 4 years, reversing a climate era climate initiative.
Many analysts expect an oversupplied oil market this year after demand growth slowed sharply in 2024 in the top consuming nations: the U.S. and China.
The EIA said it expects Brent Crude oil prices to fall 8% to average $74 a barrel in 2025, then fall further to $66 a barrel in 2026.
PRECIOUS METALS – STRUGGLING TO RECOVER
Gold has recovered half of the post-election losses on the central bank and Chinese flight to safety buying.
Interest rates higher for longer is a death knell for precious metals, with gold down 8.3% after November 5.
Gold has become the only way the average Chinese can save as they can no longer speculate in real estate or copper and don’t trust the Chinese Yuan, so there is support lower down.
Central banks in emerging market countries are continuing to buy gold, with 693 metric tonnes of buying, or $5.3 billion this year.
Avoid (GLD), (SLV), (AGQ), and (WPM)
REAL ESTATE – POOR OUTLOOK
Single Family Home starts plunged 6.9% in October.
Home Insurance costs are soaring for homeowners in the most affected regions, California and Florida.
U.S. Home Sales hit a 30-year low in 2024, the second year in a row of weak sales.
Housing starts were up 3.0% in December, with single-family homes up only 3%, while multifamily saw a 59% rise.
Shift away from home sales – crushed by 7.2% mortgage rates.
You can write off real estate in 2025.
TRADE SHEET
Stocks – buy the next big dip
Bonds – sell rallies
Commodities – stand aside
Currencies – stand aside
Precious Metals – stand aside
Energy – buy nuclear dips
Volatility – sell over $30
Real Estate – stand aside
NEXT STRATEGY WEBINAR
12:00 EST Wednesday, February 12, 2025, from Incline Village, NV.
Jacquie’s Post Portfolio Update
We are going to take some profits.
SELL
Equinix (EQIX)
Purchased on February 21, 2024, at $900.00
Price on January 30th, 2025, = $922.13.
Sell and take profits today at the best price.
Jacquie’s Post January Zoom Meeting
Thank you to all those who attended the meeting yesterday.It was great to see you all there.See you next month.
(OPTION STRIKES: WHY WE CHOOSE A PARTICULAR STRIKE)
January 29, 2025
Hello everyone
What strikes do I choose and why
Strike prices refer to the specific price you can buy or sell an underlying stock when exercising an option contract. In other words, it’s the fixed price defined within an option that determines whether you can profit based on the current market price of the underlying asset, categorized as “in the money”, “at the money”, or “out of the money” depending on its relation to the current market price.
“In the Money”
If the current market price is higher than the strike price, the option is considered “in the money”.When putting your strikes “in the money” you are being more conservative.
“At the Money”
If the current market price is equal to the strike price.This is also a conservative stance.
“Out of the Money”
If the current market price is below the strike price, the option is considered “out of the money” and has no intrinsic value.When putting your strikes “out of the money” you tend to be more aggressive in your approach and taking on a bit more risk.
What is intrinsic value?
In options trading, “intrinsic value” refers to the immediate profit an option holder would gain if they exercised the option today, which is calculated by subtracting the strike price from the current market price of the underlying asset.
So, for example, if a stock is trading at $100, and a call option has a strike price of $90, the intrinsic value of that call option would be $10 ($100-$90).
Only options that are currently “in the money” have intrinsic value.
The total price of an option (premium) is made up of intrinsic value and time value (extrinsic).
Implied Volatility
IV is the level of volatility embedded in the option price.Generally speaking, the bigger the stock movements, the higher the level of implied volatility.Most stocks have different levels of implied volatility for different strike prices.John often uses this volatility in his option trading decisions.He often trades Tesla because of the high volatility and sends out “in the money” trade alerts.
If the stock has very low implied volatility, you should avoid going for “out of the money” option strikes.
PORTFOLIO UPDATE
Nvidia lost around $600b in value in one day this week.That’s a pretty hefty number.And it was all because of one headline that completely freaked investors out.
I would be looking to take some profits on this stock, as I don’t think it has found a bottom yet and could have further to fall.
We have done well on this stock, so it is wise to lock in some profits now.
Recommendation:Take at least 50% of profits on Nvidia stock.
MY AIRBNB EXPERIENCE IN THE U.S.
Last week I gave an insight into some of my experiences with Uber drivers in the U.S. and what their outlook was.
Today, I’m going to talk about Airbnb and my experience with this company, and the hosts I have encountered throughout the U.S.
Airbnb is not everyone’s cup of tea.Particularly if you are staying in a room in someone’s home.A myriad of rules are put before you as though you were staying in some sort of compound.For anything you break or ruin, there is always a dollar penalty.Loud noise or parties are out of the question.Not that I was indulging in any of that frivolity.But, at times it can seem a bit constricting and somewhat unsettling.Furthermore, at a couple of places I was not able to use the kitchen, so had to resort to prepared food, which was not always enticing.
My experience sharing the home with one family was quite interesting.This lady had a couple of her adult children living with her at home as well as one grandchild. Her adult children did not seem to work, and I didn’t ask why.She smoked and had a smoker’s cough.I noticed she had a tin of air freshener on a side table in the family room and often used it to attempt to hide the smell of smoke. At other times I witnessed her waving the smoke away with her arm.None of these worked.
She appeared quite disgruntled with the world and would talk to me for what seemed like a long time about the state of the U.S.She almost religiously listened to all sorts of political podcasts and watched programs focused on the possibility of extra-terrestrial beings.She was a staunch Democrat and had expressed her alignment by putting up large photos of the Democrat candidate – Kamala Harris - at the front of her home.This was a trend I saw throughout the neighbourhood.So, it became obvious which candidate each home supported as larger-than-life photos were erected in the front yard or just near their front door.(In Australia, we have photos of candidates erected in strategic locations on footpaths before an election, but I have never seen households expressing their support for one or the other candidate by putting up large photos in their front yard.We don’t hero-worship our leaders like the U.S. does.We are more concerned with the environment than putting a leader on a pedestal.To Australians, the Prime Minister has a job to do, so he should just get on with it and do it.No fanfare needed).
Anyway, at this home I was usually always the first person up in the morning.I emptied the dishwasher and washed up a pile of plates that sat in the sink.Then I made my morning cup of tea and went to work.
On occasion, I also cooked them some homemade treats, such as biscuits, and slices.They were all demolished in a very quick time, almost as though they had never tasted a home-cooked treat. I must say it was great to be able to use a kitchen to make my meals.
One conversation we had focused on the bookings she was getting for her Airbnb room.She said that bookings had begun to slow, and she didn’t know why. She almost answered her own question by arguing that the U.S. now had a variety of accommodations for visitors, that were not necessarily hotels, so this may impact Airbnb long-term.
At another Airbnb, where I had a room in a family home, the host was a Chinese lady.She had three bedrooms upstairs, and two were left for Airbnb visitors.Another room was for storage.This lady – let’s call her Kathy - chose to sleep on a mattress on the floor in a corner of her living area, which was sectioned off with a sheet or some cloth that was hanging from a partition. Her husband had died a few years ago, and this provided a good income for her.She owned a home back in China but said she was not likely to return.Her son had been educated at a private university in the U.S. and worked as an interpreter and commentator on U.S./China international affairs.He highlighted events happening in China, that many people were not aware of, and drew attention to human rights abuses that were commonplace throughout China.I met him once.He was very well-spoken and said he would never go back to China.
Kathy had a Green Card, but she didn’t hold a U.S. passport.She seemed anxious about life in general; she had a car but never used it, she said she didn’t ever travel.She had her groceries; fruit & vegetables delivered and never ate any fast food. At one sitting I saw her eat a bowl of mixed green leaves.No dressing.She drank water – no tea or coffee.She knew I liked tea, so she would boil the kettle when she heard me get up in the morning and would place a nice cup and saucer & teabag on the dining table for me to use.
She often talked to me about China and how restrictive it was.She commented that if you were heard to be making disparaging comments about China, the government, or the country’s policies in general, you were often called upon to visit a special government office and explain your comments to see if they could help you better understand your position, and how you should be thinking, in some way.Seems like you can’t trust your neighbours in China.And Kathy pointed out that fact.She said the Chinese were very distrustful of each other but were more likely to trust a foreign visitor. She said the freedoms in America were taken for granted.
My Chinese Host
Anyway, I’ll end off here with a brief observation of and exchange witha hotel employee.He brought my luggage up to my room.I asked him about the hotel, and he described what was available at the hotel. I asked him how long he had been working at the hotel.He said a few years.He seemed very disillusioned with the world. His face looked drawn, and his non-verbal communication betrayed a brow-beaten experience.He had worked in the corporate world and called it a dog-eat-dog environment, where you have no friends.He was obviously well educated as he said he spoke a couple of languages. He was not in his later years, but he moved slowly and was looking forward to retirement on a ranch far away from suburbia. I gave him a tip and wished him luck.
(EARNINGS AND THE FED WILL TAKE CENTRE STAGE THIS WEEK)
January 27th, 2025
Hello everyone
WEEK AHEAD CALENDAR
MONDAY JAN. 27
8:00 a.m. Building Permits final (December)
8:30 a.m. Chicago Fed National Activity Index (December)
10:00 a.m. New Home Sales (December)
10:30 a.m. Dallas Fed Index (January)
10:35 a.m. Euro Area ECB Speech
Earnings:AT&T, Nucor
TUESDAY JAN. 28
8:30 a.m. Durable Orders (December)
9:00 a.m. FHFA Home Price Index (November)
10:00 a.m. Consumer Confidence (January)
10:00 a.m. Richmond Fed Index (January)
7:30 p.m. Australia Inflation Rate
Previous:2.8%
Forecast: 2.5%
Earnings: Starbucks, Boeing, Lockheed Martin, Royal Caribbean Group, Kimberly-Clark, General Motors, RTX, Synchrony Financial
WEDNESDAY JAN. 29
2:00 p.m. FOMC Meeting
2:00 p.m. Fed Funds Target Upper Bound
Earnings: ServiceNow, International Business Machines, Meta Platforms, Lam Research, Western Digital, Tesla, Microsoft, Hess, Corning, T-Mobil, Norfolk Southern, Raymond James Financial, Automatic Data Processing
It’s a mega week for earnings this week. Expect volatility.Investors will be watching closely to see if earnings can measure up to expectations. Among the many companies reporting this week, Tesla is one to watch.The stock has a history of volatility around earnings, and I expect this time to be no different.Margins will be important for the fourth quarter. Wall Street expects operating profit margins of about 10.5%, up from about 8% in 2023’s fourth quarter.Investors have their eyes on the company’s growth and will be wanting to hear that the lower-priced new model – Model 2 – is on track for a launch in the coming six months.Additionally, investors are keen to hear that orders for the updated Model Y are looking strong in the U.S. and China. Self-driving cars have also become important.Since Tesla’s Oct 10 robo-taxi event, the stock is up around 70%.Over the previous 12 months, Tesla is up some 122%.Tesla remains in our portfolio.It was recommended on September 27, 2024, at $260.46.
We’ve now seen the end of Trump’s first week as President. He has made some sweeping changes already.But the big unknown is still tariffs.Even though he has threatened several countries with tariffs, nothing concrete has been forthcoming yet.This week, inflation and interest-rate outlooks are in the spotlight for the financial markets. FedChair Jerome Powell steals the spotlight on Wednesday when he delivers his press conference. Trump and Powell appear to be at loggerheads as to who controls the stock market.
Disney has been named a top pick by Morgan Stanley for 2025.The bank rates the stock overweight and expresses in a December note that it expects substantial streaming profits in the future.The bank went on to say that Disney is also likely to benefit from another strong year of advertising growth in the U.S.Disney shares have soared 22% over the past six months.
We have 105/110 LEAPS on Disney that are due to expire around mid-year.I recommended the stock on June 21st, 2024 when it was sitting at $101. 52.
MARKET UPDATE
S&P500 broke above the Dec. 6th high at 6100.Despite an overbought market, there is still no confirmation of a short-term top in the chart patterns, so, for now, the trend remains on the upside.We should note that a close back below the 6090/6100 area may argue at least a near-term top.A topping pattern can show some volatile trading.Support = ~6030/40 and below that = ~5970.
GOLD has been rallying and there is still no sign of a confirmation of even a short-term top.Having said that gold is close to resistance in the $2790/95 area, and there is potential for gold to form a peak here for a few months.Again, this could be part of a larger topping playing out.Support = $2735/40 area.
BITCOIN is moving sideways and could be in the middle of a topping process.In other words, we could see consolidation to downside movement for the next month or so. The longer Bitcoin observes a tight range without making any sizeable new highs, the more likely we are seeing a topping play out.
Support:99,500/100,000.Any break/close below the rising trend line at around 91,500/92,000 would be a bigger-picture bearish sign.(That is not to say that is the end of the Bitcoin rally altogether, but rather a consolidation at a lower level before moving higher in the future).
TRADE ALERT
Powell Enterprises (POWL)
(POWL) designs develops, manufactures, sells, and services custom-engineered equipment and systems.The company’s principal products include integrated power control room substations, custom-engineered modules, electrical houses, medium-voltage circuit breakers, monitoring and control communications systems, motor control centres, switches, and bus duct systems, as well as traditional and arc-resistant distribution switchgears and control gears.The company serves onshore and offshore production, liquified natural gas facilities and terminals, pipelines, refineries, and petrochemical plants, as well as electric utility, light rail traction power, mining and metals, pulp and paper, data centres and other municipal, commercial, and industrial markets.The company has operations in the United States, Canada, the Middle East, Africa, Europe, Mexico, and Central and South America.Powell Industries – originally a metal-working shop - was founded in 1947 and is headquartered in Houston, Texas.
Powell Enterprises reported revenue of $275.06 million in the last reported quarter, which represented a year-over-year change of +31.8%.EPS of $3.77 for the same period compares with $1.95 a year ago.Next reported earnings are on Feb. 6.
Recommendation: Scale into/Buy the stock.
Powell Enterprises (POWL) Daily Chart $290.80
Powell Industries (POWL) Weekly Chart $290.80
QI CORNER
HISTORY CORNER
On January 27
1945 -Soviet Troops liberated the Nazi concentration camps Auschwitz and Birkenau in Poland.
President Trump is prioritizing the push forward of AI.
Which companies are likely to benefit?
Think of (ORCL) Oracle, (MSFT) Microsoft, and (ANET) Arista Networks
Earlier this week, a $500 billion joint venture was announced between OpenAI Oracle, and Softbank, which aims to strengthen artificial intelligence infrastructure in the U.S.
Shares of Oracle and Microsoft have rallied nearly 15% and 3%, respectively, since the start of the week.Microsoft is an investor in OpenAI.
Solita Marcelli from UBS notes that the project requires more computing and electricity, which may point to greater investments in grid infrastructure and power transmission.
Kash Rangan, a Goldman Sachs analyst, believes Oracle and Microsoft are prime winners from the government’s prioritization of AI.
Rangan notes that Microsoft is in a prime position to benefit from this project as the company has a strong balance sheet and capital expenditure for 2025.Oracle, however, may take longer to benefit, but the tailwind will certainly gather strength in the years to come.Analysts are seeing the probability of more capital AI investments for Oracle, which could boost its cloud infrastructure revenues at a compounded annual growth rate exceeding 50% through 2027.
The Stargate venture also sees Arista Networks as a potential big winner too.The company has exposure to Oracle, Microsoft, and OpenAI, as well as the strength of its ethernet switching portfolio.Piper Sandler’s James Fish argues that “given switching represents >50% of networking spends, and Arista’s? 30% share of high-end datacentre switching, we see this as a +$6B [serviceable addressable market] over 5 years.”
Fish also points to (PSTG) Pure Storage, as an “underappreciated way” to invest behind Stargate to meet storage capacity, estimating a $10 billion total addressable market.
(I recommended Oracle, Microsoft, and Arista Networks on January 6, 2024.
Oracle was at $104, Microsoft was at $372, and Arista Networks was at $248.00. Arista Networks had a stock split on December 4, 2024, which took it back to $62.00.
TRADE ALERT
(TPB) TURNING POINT BRANDS
Turning Point Brands manufactures, markets, and distributes branded consumer products.The company operates through three segments: Zig-Zag Products, Stoker’s Products, and Creative Distribution Solutions.Zig-Zag Products segment markets and distributes rolling papers, tubes, finished cigars, make-your-own cigar wraps, and related products as well as lighters and other accessories under the Zig-Zag brand.The Stoker’s Products segment manufactures and markets moist snuff tobacco and loose-lead chewing tobacco products under the Stocker’s, Beech-Nut, Durango, Trophy, and Wind River brands.Its Creative Distribution Solutions segment markets and distributes other products without tobacco and/or nicotine to individual consumers through the VaporFi B2C online platform, as well as non-traditional retail through Vapor Beast.In addition, it markets and distributes cannabis accessories and tobacco products.The company sells its products to wholesale distributors and retail merchandising, drug stores, and non-traditional retail channels.The company was formerly known as North Atlantic Holding Company Inc. It changed its name to Turning Point Brands Inc in November 2015.The company was founded in 1988 and is headquartered in Louisville, Kentucky.
A shareholder return of 138% over the last 12 months is not too shabby for this company.Most analysts rate it a strong buy or a buy and see it rising more than 20%.Earnings are forecast to grow by 14.04% per year.Earnings grew by 294.6% over the last year.
Recommendation:Scale into the stock. And/or you could try a bull call spread like a 60/65 with an April 17 expiration, or a 60/65 with a July expiration.
So, your trade would look like this:
Buy 1 TPB 60 call
Sell 1 TPB 65 call
When I was looking at these trades the limit price for the April expiration was $1.48 and the limit price for the July expiration was $1.95.
Prices will be all over the place by the time you receive this, so purchase at best.
Trump will seek to end birthright citizenship for US-born children whose parents lack legal status.
Trump will restore the death penalty.
Trump will require that official US documents such as passports reflect citizens’ gender as assigned at birth.
Trump said he “was saved by God to make America great again.” We can argue then, that we have a President portraying himself as a national saviour.
On stage with Trump was the business elite
Tesla and SpaceX CEO, Elon Musk, Amazon CEO Jeff Bezos, and Meta CEO Mark Zuckerberg.All had prominent seats on stage, next to cabinet nominees and members of Trump’s family.
Biden’s last official act
Biden pardoned several people, whom Trump has targeted for retaliation, including former White House chief medical advisor Anthony Fauci, former Republican US representative Liz Cheney, and former chairman of the Joint Chiefs of Staff General Mark Milley.
Now, to the markets…
Netflix earnings came out Tuesday, and they were a blockbuster.Stocks rallied strongly.
Do you have this stock in your portfolio?
I recommended it on January 17, 2024, when it was sitting at $480.The stock is now sitting at $994.80 (in extended hours) just shy of $1000.
The company surpassed 300 million paid memberships during the quarter, adding a record 19 million subscribers.The company beat on the top and bottom lines for the 4th quarter and raised its 2025 revenue forecast.
In 2025, the company says it plans to improve its core business with more series and films, enhance its product experience, and continue to grow its ads business. On top of that, Netflix is expected to explore the live event space and games, too.
Portfolio Update
After the holidays, in the first newsletter of the year, (01/06/25) I recommended that you scale into two Uranium Energy plays.
(VST) Vistra Energy at $163.95.At close today (01/21), the stock price is $$185.35.
(SMR) Nu-Scale Power Corporation at $23.66.At close today (01/21), stock price is $25.61
John tells us that this could be the year of the 5% correction, and you need to buy everyone.
Expect an OK first half and a weak second half.
All interest rate plays remain pariahs, including gold, silver, homebuilders, bonds, and REITS.
Deregulation and end of antitrust plays will continue to be bought, including banks, brokers, money managers, nuclear, and Tesla.
US dollar rockets at higher rates for longer.
Technology stocks fade on threats to international business and slowing growth sales.
Energy reaches top of recent trading range on a strong economy.
John says to buy financial as the only sure thing this year.
THE GLOBAL ECONOMY – STRONG U.S.
December Nonfarm Payroll comes in hot at 256,000.
Headlines unemployment rate at 4.1%
CPI comes in at six -month low at 3.2% YOY.
JOLTS soars, coming in at 8.0 million, versus an expected 7.7 million.
US Online sales rose by 3% over the holidays.
Services PMI comes in hot at 54.1
Los Angeles fires to cost $230 billion, with only $30 billion covered by insurance.Inflation will rise as the cost of construction, labour, and materials soar.
Tame PPI boosts stocks, with the Producer Price Index rising 3.3% on an annual basis in December 2024.
STOCKS – CORRECTION TIME
The Trump bump is gone – stock markets have given up all their post-election gains.
John says that bank stocks will be the leaders this year with the MAG7 catching up later.
Bonds are now the big market risk.If we break a 10-year Treasury yield of 5.0% and take a run to 5.5%, the 5% stock correction turns into an 11% stock correction.
Technology was hit very hard.
Cleveland Cliffs Ramps up its bid for US Steel, bringing in Nucor as a partner.
$4 Trillion in Asset Management disrupted by Los Angeles fires.
Elon Musk sued by SEC for insider trading.Stock is up $20.
(Financials are good stocks to buy this year – look at the banks).
John believes we will get a sideways range for around 6 months in tech and then an upside breakout.Tech boom is just getting started.John doubts whether we get more than a 10% correction. John thinks that the first half of 2025 will be strong and the second half weak.
John’s advice:
Buy 5% dips on (JPM) JPMorgan and 10%-20% dips in (TSLA)Tesla.
Buy 90-day T-bills – 4.4%
Banks/financials: buy in the money LEAPS after a down move. Buy call spreads.
2025 will offer a limited number of stocks to trade.Think banks/financials, nuclear energy, and Tesla among a few others.
BONDS – THE BIG MARKET RISK
Bonds hit 14-month lows at a 4.80% yield, as fixed-income dumping continues across the board.
“Higher rates for longer” don’t fit in here anywhere.But there may be a BUY setting up for (TLT) at 5.0%.
Bond yields have rocketed 130 basis points since September.
National debt tops record $36 trillion and could rise another $10 trillion.
TIPS are making a comeback.
FOREIGN CURRENCIES – U.S. dollar surges
Dollar hits two-year high, on rising U.S. interest rates, and higher highs beckon.
Ten-year U.S. Treasuries have risen from 3.55% to 4.80%, a 14-month high.
Higher for longer interest rates mean higher for longer US dollar.
Don’t sell the US dollar until the next recession is on the horizon.
Avoid (FXA), (FXE), (FXB), (FXC), and (FXY).
ENERGY & COMMODITIES – A RALLY AT LAST!
Oil finally rallies, but only to the top of the recent range with the Gaza peace deal back on the table.
China ratchets up the trade war, banning the export of crucial metals essential for all tech applications.
Strategic Petroleum Reserve at multi-year lows, but Biden has stepped in as a buyer.
Blame a weak China, lost OPEC discipline, and overproduction by Iraq.
Avoid the worst-performing asset class in the market.
IEA predicts price declines this year.
Unlimited new drilling and opening of federal lands will crash oil prices.
PRECIOUS METALS – STRUGGLING TO RECOVER
Gold has recovered half of its post-election losses on the central bank and Chinese flight to safety buying.
Interest rates higher for longer is a death knell for precious metals, with gold down 8.3% after November 5.
The opportunity cost of owning gold is about to rise sharply.
Gold has become the only way the average Chinese can save as they can no longer speculate in real estate or copper and don’t trust the Chinese Yuan, so there is support lower down.
Central banks in emerging market countries are continuing to buy gold - $5.3 billion this year.
Avoid (GLD), (SLV), (AGQ), and (WPM).
REAL ESTATE – POOR OUTLOOK
High rates could leave real estate dead in the water for all of 2025.
However, a strong economy is allowing commercial real estate to recover in New York and San Francisco.
LA fires are creating a massive housing shortage there, with 12,000 homes burned.Higher housing prices and rents are a consequence.
Mortgage demand grinds to a halt on 7.17% rates for the 30-year fixed.
TRADE SHEET
STOCKS – buy the next big dip
BONDS- sell rallies
COMMODITIES- stand aside
CURRENCIES – stand aside
PRECIOUS METALS – stand aside
ENERGY – buy nuclear dips
VOLATILITY – sell over $30
REAL ESTATE – stand aside
NEXT STRATEGY WEBINAR
12:00 PM EST Wednesday, January 29, 2025, from Salt Lake City UT.
There is a very high degree of risk involved in trading. Past results are not indicative of future returns. MadHedgeFundTrader.com and all individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein. Affiliates of MadHedgeFundTrader.com may have a position or effect transactions in the securities described herein (or options thereon) and/or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies.
