May 3, 2024
SUMMARY OF JOHN’S MAY 1, 2024, WEBINAR)
May 3, 2024
Hello everyone,
TITLE: Digestion Time
TRADE ALERT PERFORMANCE:
2024 YTD: +14.61%
Since inception: +690.24%
Average annualized return: +51.77% for 16 years
PORTFOLIO REVIEW:
Risk On:
NVDA 5/$710-$720 call spread
TLT 5/$82-$85 call spread
META 5/$360-$370 call spread
GLD 5/$200-$205 call spread
Risk Off:
NVDA 5/$960-$970 put spread.
NVDA 5/$980-$990 put spread.
MSFT 5/$430 - $440 put spread.
AAPL 5/$185-$195 put spread.
THE METHOD TO MY MADNESS:
A short-term top for all risk assets is in.
However, the downside is limited to 5%-8% with $8 trillion in cash on the sidelines and a further $26.8 trillion in short-term US treasury bills.
Technology stocks won’t crash, just have a sideways ‘time’ correction.
All economic data is globally slowing, except for the US, with the only good economy in the world.
Interest rates are higher for longer.
Buy stocks and bonds but only after substantial dips.
THE GLOBAL ECONOMY – STAGFLATION:
Personal Consumption Expenditures (PCE) come in warm for March, up 2.8% YOY, the same as for February. Service prices led.
GDP Bombs for Q1, at a 1.6% annualized rate. US economic growth slid to an almost two-year low last quarter.
Leading economic indicators drop 0.3% versus 1.1% expected after increasing by 0.2% in February.
Tariff wars heat up. US President Joe Biden is threatening China again and this time he wants to triple the China tariff rate on steel and aluminum imports.
China surprises with Q1 GDP growth at 5.3%, but John questions the validity of the numbers.
US Retail Sales come in hot, up 0.7% in March.
STOCKS – CORRECTION TIME:
Big Tech crashes, with all the Mag’ 7 breaking 50-day MA’s.
Meta crashes 15% sparking a selloff in big tech stocks after the social media giant signaled its costly bet on AI would take years to pay off.
Volatility Index ($VIX) hits six six-month high, on threats of a new Iran war, oil supply cut-offs, and topping stocks.
Next stop = 200-day moving averages.
If those hold this is just a correction. If they don’t, the bear market is back.
Short sellers pocketed record profits last week, on the technology crash and volatility explosion, raking in $10 billion. (NVDA) shorts accounted for $3 billion of this.
Airlines make contingency plans for new aircraft. United Airlines cut its aircraft-delivery expectations for the year as its main supplier of airplanes Boeing has signaled a slower production schedule.
BONDS – NO 2024 RATE CUTS:
Biggest Treasury Bill Auction in History is a huge success, at $69 billion for a two-year paper with a 4.898% yield.
That is almost a risk-free government guarantee 10% yield in two years.
Another $70 billion of five-year notes sold the next day.
Half of this is going to foreign investors and central banks.
Faith in America and the US$ remains strong.
Passage of the Ukraine aid bill was probably a help.
Junk Bonds see the biggest outflows in a year, as the Federal Reserve’s hawkish approach to inflation makes investors wary, sending yield soaring to 6.33%. Buy (JNK) and (HYG on dips.
FOREIGN CURRENCIES – 40 YEAR YEN LOWS:
Japanese yen collapses to 160.
Bank of Japan intervened, boosting the currency temporarily. Avoid (FXY)
Chinese Yuan remains weak. International trade is collapsing.
Declining exports, collapsing foreign investment, and minimal population growth, it all add up to a weaker Chinese currency.
Higher for Longer rates mean higher for longer greenback.
Falling interest rates = falling USD$.
ENERGY AND COMMODITIES:
Oil and Gas M&A hits record in Q1, hinting that the new bull market in oil may extend.
U.S. oil and gas deals hit a record $51 billion in the first quarter.
BHP makes a $39 billion bid for Agnico Eagle (AEM), to create the world’s largest copper producer.
Activist Elliot takes a run at mining giant Anglo American, accumulating a $1 billion stake. BHP is also making a takeover bid here.
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%.
The US is currently the largest oil-producing country in history at 13 million barrels/day and hardly needs any subsidies.
Buy energy stocks on dips, like (XOM) and (OXY), which are posing record profits.
PRECIOUS METALS – GEOPOLITICAL FEARS:
Gold hanging on to all-time highs, up 34.25% since October.
Central bank buying is accelerating, especially from China.
Gold is also being dragged up by the global commodity boom.
Traditional demand for gold has been absent until now.
ETF and jewelry demand fell in 2023.
Their return is what will take gold up to $3000 in 2025.
Silver is also starting to outperform.
REAL ESTATE – RATES BUZZ KILL:
Mortgage rates soar to 7.25%, bringing new applications to a grinding halt. In one shot the market has gone for six Fed rate cuts in 2024 to zero.
March New Home Sales Jump by 8.1% when only 1.1% expected, to 693,000.
The median price of a new home sold fell to $430,700.
Existing home sales dive by 4.3% in March to 4.19 million units.
Housing starts plunge, down 14.5% in March.
TRADE SHEET:
Stocks – buy 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 15 @ 12 EST from Incline Village, Nevada.
Cheers,
Jacquie
