Thanks, John for the Tesla trade.
I bought 40 contracts of the February $95-$100 vertical bull call spread at $3.75 and sold it this morning for $4.75 for a $4,000 gain.
NICE!
Penny in Florida
Global Market Comments
January 24, 2023
Fiat Lux
Featured Trade:
(TESTIMONIAL)
(HOW TO BUY A SOLAR SYSTEM),
(SPWR), (TSLA)
CLICK HERE to download today's position sheet.
Mr. John Thomas, you have changed my life. Before I found your service, I bounced from one terrible service to another, losing money at every step of the way. Even when I found you, I was pretty leery. I then pulled off 22 money-making trades in a row. I gained so much confidence that I really poured money into your strategies. Since I met you last year, I have made over $10 million. I bought call options on Tesla when it was at $80. I also filled all 45 trade alerts you send out selling short the (TLT). It really has been an amazing run.
Please accept the attached case of cabernet. It is a mixed case from boutique vineyards that aren’t sold to the public. These are all “know somebody” wines. If you could buy them, they would cost from $220-$500 a bottle.
If there are any charities you would like me to send a check to, just let me know. You’re really great!
Joseph
Napa, California
“With valuations rising and fundamentals deteriorating we are in Looney Tunes Land here. The coyote is running in midair”, said a hedge fund friend of mine about current stock market conditions.
Global Market Comments
January 23, 2023
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or WHERE IS THE BEAR MARKET?),
(GOLD), (GLD), (WPM), (SLV), (BRK/B), (TSLA), (OXY)
CLICK HERE to download today's position sheet.
The Pivot has started.
Not by the Fed, which is not expected to begin lowering interest rates by the summer or fall.
It's the stock market that has pirouetted, from bear to bull last October. The higher stocks rise in this miraculous, coming-from-nowhere rally, the more credibility this rally gains.
If a new bull market has well and truly begun, then there are an awful lot of portfolios out there that have the wrong stocks. Repositioning this late in the game could take the indexes to new all-time highs by yearend.
Some portfolio managers are whistling past the graveyard right now.
The Fed pivot may also take place ahead of schedule. The marketplace has shaved the February 1 interest rate hike from 50 basis points to only 25, which explains stocks’ recent virility.
My trading performance certainly shows the possibilities, which so far has tacked on a robust +20.65%. My 2023 year-to-date performance is the same at +20.65%, a spectacular new high. The S&P 500 (SPY) is up +1.86% so far in 2023.
It is the greatest outperformance on an index since Mad Hedge Fund Trader started 15 years ago. My trailing one-year return maintains a sky high +107.27%.
That brings my 15-year total return to +617.84%, some 2.8 times the S&P 500 (SPX) over the same period and a new all-time high. My average annualized return has ratcheted up to +47.22%, easily the highest in the industry.
Last week, I rode into the Friday options expiration with my 5X weighting in bonds, as well as additional longs in (TSLA), (GOLD), (WPM), and (BRK/B). Both my remaining positions are profitable, including longs in (TSLA) and (OXY) with 80% cash for a 20% net long position.
Stocks are not the only asset class on a tear because of an earlier than expected Fed easing.
Precious metals have been going virtually straight up. For the first time since the US went off the gold standard 50 years ago, gold (GLD) outperformed the S&P 500 in Q4, and silver (SLV) did even better.
Not only does gold benefit from falling inflation and interest rates, the end of the Fed’s quantitative tightening (QT) will provide a further steroid shot as well.
Sanctions against Russia and China have sent central bank purchases of the barbarous relic to new all-time highs. And you might speculate that the possible Russian use of nuclear weapons is also driving your gold northward, but you would be wrong. You may find this shocking, but Ukraine has their own nukes and if Russia attacked, Moscow would be radioactive that week.
The bottom line here is that the yellow metal could well remain strong all year and be a top performer.
Bonds continued their on again, off again rally. The prospects of falling interest rates pushes them up and then fears of a summer default push them back down again, some $2.50 for the (TLT) last week.
One thing is certain. If the Treasury is pushed into default the Fed definitely WILL NOT be raising interest rates. They won’t need to crush the economy. The House of Representatives will be doing their job for them.
The least appreciated piece of news last week was the report that China’s population fell for the first time in 50 years, thanks to a massive famine. I remember it like it was yesterday as I was there. Believe me, there are no substitutes for food. It took me a king’s ransom and some banned western books just for me to procure a single egg.
This will affect us all as there will be a sudden shortage of customers in the global economy in about 20 years. You may think that 20 years is a long time off, but the best run companies will start planning and investing for this now.
If you don’t think a shrinking population is bad for business, just ask Japan, where they’re not making Japanese anymore. Japan has suffered the worst performing stock market for the last 32 years and is still showing a negative return.
That was a nice bail!
Remember, demographics is destiny. Check out the population pyramid charts below.
The Fed May Retreat to 25 Basis Point, in their February 1 rate hike, according to a Reuters poll. It might explain why stocks have been so hot in January.
Treasury Secretary Warns of Coming US Bond Default, saying the government runs out of money by June. Bonds plunged $2.00 on the news. The House of Representatives need to raise the debt ceiling before then, or the Treasury will cease paying interest on the $31.4 trillion national debt. This is for money already spent by administrations going back to the 1980’s. Rising interest rates have already taken America’s debt service from 5% to 10% of the total budget.
This Year Won’t Be as Bad as Last, or so hope the bulls that have been piling into stocks since January 3. The weakness in tech stocks actually understates the ballistic moves in value, metals, and financial stocks, which Mad Hedge is long. Things are better than they appear. That’s what six months of deflation will do.
China Reopening Accelerates and may well head off a global recession. Letting everyone get covid and achieving heard immunity turned out to be the key. It’s demolished the entire January selloff scenario.
Wholesale Prices Drop 0.5% in December versus an expected 0.1% in another big step toward the unwind of inflation. The energy sub index fell by 7.9%. I am looking like a 4% inflation rate by yearend.
Builder Sentiment Rose 4 Points in December according to the National Association of Homebuilders. It’s the first positive data point for housing in ages. Could this be the beginning of the big turn?
Mortgage Rates Plunge to 6.04% for the 30-year fixed, sparking a 28% gain week to week. A massive rally in the bond market is the big incentive, taking ten-year Treasury bonds to 6.37%, a new five month low. Inventory remains low. Mortgage rates could easily shed another 100 basis points by summer just on falling to the traditional premium over Treasuries, which is why housing stocks like (LEN), PHM), and (KBH) have been on fire.
Business Inventories up 0.4%, right in line with expectations. Retail Sales are falling, as is Consumer Spending. Department store sales were down 6.5%, once unimaginable to see during the Christmas season.
Netflix Blows it Away with 6.7 million new subscribers., taking the stock up 7%, and 125% from the May low. It’s proof that the FANG’s are not dead yet and that the predicted Q4 earnings shortfall may be overstated. CEO Reed Hastings semi-retires. Don’t touch (NFLX) as this train has left the station. There are better fish to fry.
My Ten-Year View
When we come out the other side of the recession, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. The economy decarbonizing and technology hyper-accelerating, creating enormous investment opportunities. The Dow Average will rise by 800% to 240,000 or more in the coming decade. The new America will be far more efficient and profitable than the old. Dow 240,000 here we come!
On Monday, January 23 nothing of note is announced. Baker Hughes (BKR) reports earnings from the oil patch.
On Tuesday, January 24 at 8:45 AM EST, the S&P Global PMIs for December is out. Johnson & Johnson (JNJ) and Microsoft (MSFT) report earnings.
On Wednesday, January 25 at 7:30 AM, the Crude Oil Stocks are announced. Tesla (TSLA) and Boeing (BA) report earnings.
On Thursday, January 26 at 8:30 AM, the Weekly Jobless Claims are announced. Retail Sales for November are printed. We also get US Q4 GDP. Visa (V) and Intel (INTC) report earnings.
On Friday, January 27 at 5:30 AM, the Personal Income & Spending for December is disclosed. American Express (AXP) and Chevron (CVX) report earnings. At 2:00, the Baker Hughes Oil Rig Count is out.
As for me, I didn’t know what to expect when I landed on the remote South Pacific Island of Yap in 1979, one of the Caroline Islands, but I was more than pleasantly surprised.
Barely out of the Stone Age, Yap lies some 3,000 miles west of Hawaii. It was famed for the ancient lichen covered stone money that dotted the island which had no actual intrinsic value.
The value was in the effort that went into transporting them. With some cylindrical pieces larger than cars, geologists later discovered that they had been transported some 280 miles by outrigger canoe from the point of origin sometime in the distant past. Since Yap had no written language, there are no records about them, only folktales.
I often use the stone money of Yap as an example of the arbitrariness of fiat money. Who’s to say which is more valuable; a 500-pound piece of rock or a freshly printed $100 Benjamin from the US Treasury?
You decide.
The natives were a gentle and friendly people. They wore grass skirts purely for the benefit of Western visitors. They preferred to walk around as nature made them.
There was no hotel on the island at the time, so I was invited to stay with a local chief (picture below).
One of my hosts asked if I was interested in seeing a Japanese zero fighter. Yap wasn’t invaded by the US during WWII because it was bypassed by MacArthur on his way to the Philippines. The Japanese troops were repatriated after their war, but most of their equipment was left behind. It was still there.
So it was with some anticipation that I was led to a former Japanese airfield that had been abandoned for 35 years. There, still in perfect formation, was a squadron of zeroes. The jungle had reclaimed the field and several planes had trees growing up through their wings.
The natives had long ago stripped them of anything of value, the machine guns, nameplates, and Japanese language instruments. But the airframes were still there exposed to the elements and too fragile to move.
During my stay, I came across an American Peace Corp volunteer desperate for contact with home. A Jewish woman in her thirties, she had been sent there from New York City to teach English and seemed to have been forgotten by the agency.
I volunteered for the Peace Corps. myself out of college, but it turned out they had no need of biochemists in Fiji, so I was interested in learning about her experience. She confided in me that she had tried wearing a grass skirt to blend in but got ants on the second day. We ended up spending a lot of time together and I got a first-class tour of the island.
Suffice it to say that she was thrilled to run into a red-blooded American male. I wish I had taken a picture of her, but the nearest color film processing was back in Honolulu, and I had to be judicious in my use of film.
The highlight of the trip was a tribal stick dance put on in my honor around an evening bonfire among much yelping and whooping. It was actually a war dance performed with real war clubs and their furiousness was impressive.
I had the fleeting thought that I might be on the menu. Cannibalism had been practiced here earlier in the century. During the war when starvation was rampant, several of the least popular Japanese soldiers went missing, their bodies never found. When men come screaming at you with a club in the night, your imagination runs wild.
Alas, I could only spend a week on this idyllic island. I was on a tight schedule courtesy of Air Micronesia, and deadlines beckoned. Besides, there was only one plane a week off the island.
It was on to the next adventure.
A Few New Friends
Large Denomination Stone Money
My Accommodation
A Neglected Japanese Zero
China
Japan
US
“The less time you have left, the more valuable it becomes,” said the late rock legend David Crosby, who died at 81 last week.
Global Market Comments
January 20, 2023
Fiat Lux
Featured Trade:
(WILL SYNBIO SAVE OR DESTROY THE WORLD?),
(XLV), (XPH), (XBI), (IMB), (GOOG), (AAPL), (CSCO), (BIIB)
CLICK HERE to download today's position sheet.
Some 50 years ago, when I was a biotechnology student at UCLA, a handful of graduate students speculated about how dangerous our work really was.
It only took us an hour to figure out how to synthesize a microbe that had a 99% fatality rate, was immune to antibiotics and was so simple it could be produced in your home kitchen.
Basically, a bunch of bored students discovered a way to destroy the world.
We voiced our concerns to our professors, who immediately convened a national conference of leaders in the field. Science had outpaced regulation, as it always does. They adopted standards and implemented safeguards to keep this genie from getting out of the bottle.
Four decades later scientists have been successful at preventing a “doomsday” bug from accidentally escaping a lab and wiping out the world’s population.
That is, until now.
In 2010, Dr. Craig Venter created the first completely synthetic life form able to reproduce on its own. Named “Phi X174,” the simple virus was produced from a string of DNA composed entirely on a computer. Thus was invented the field of synthetic biology, better known as “Synbio.”
Venter’s homemade creature was your basic entry-level organism. Its DNA was composed of only 1 million base pairs of nucleic acids (adenine, thymine, cytosine, guanine, and uracil), compared to the 3 billion pairs in a human genome. Shortly thereafter, Venter one-upped himself by manufacturing the world’s first synthetic bacteria.
The work was hailed as the beginning of a brave new world that will enable biology to make the same dramatic advances in technology that computer science did in the 20th century. Dr. Drew Endy of Stanford University says that Synbio already accounts for 2% of US GDP and is growing at a breakneck 12% a year. He predicts that Synbio will eventually do more for the economy than the Internet and social media combined.
You may recall Craig Venter as the man who first decoded the human genome in 2003. The effort demanded the labor of thousands of scientists and cost $3 billion. We later learned that the DNA that was decoded was Craig’s own. Some five years later, the late Steve Jobs spent $1 million to decode his own genes in a vain attempt to find a cure for pancreatic cancer.
Today, you can get the job done for $1,000 in less than 24 hours. That’s what movie star Angelina Jolie did, who endured a voluntary double mastectomy when she learned her genes guaranteed a future case of terminal breast cancer.
The decoding industry is now moving to low-cost China, where giant warehouses have been built to decode the DNA of a substantial part of humanity. That should soon drop the price to $100. It’s all about full automation and economies of scale.
This technology is already spreading far faster than most realize. In 2004, MIT started the International Genetically Engineered Machine Contest where college students competed to construct new life forms. Recently, a high school division was opened, attracting 194 entries from kids in 34 countries. Gee, when I went to wood shop in high school, it was a big deal when I finished my table lamp.
This will make possible “big data” approaches to medical research that will lead to cures of every major human disease, such as cancer, heart disease, diabetes, and more within our lifetimes. This is why the healthcare (XLV), biotechnology (XBI), and pharmaceutical (XPH) sectors have been top performers in the stock market for the past two years. It’s not just about Obamacare.
The implications spread far beyond healthcare. IBM (IBM) is experimenting with using DNA-based computer code to replace the present simple but hugely inefficient binary system of 0’s and 1’s. “DNA-based computation” is prompting computer scientists to become biochemists and biochemists to evolve into computer scientists to create “living circuit boards.” Google (GOOG), Apple (AAPL), and Cisco (CSCO) have all taken notice.
We are probably only a couple of years away from enterprising hobbyists downloading DNA sequences from the Internet and building new bugs at home with a 3D printer. Simple organisms, like viruses, would need a file size no larger than one needed for a high-definition photo taken with your iPhone. They can then download other genes from the net, creating their own customized microbes at will.
This is all great news for investors of every stripe, and will no doubt accelerate America’s economic growth. But it is also causing governments and scientists around the world to wring their hands, seeing the opening of a potential Pandora’s box. What if other scientists lack Venter’s ethics, who went straight to President Obama for security clearance before he made his findings public?
If we can’t trust our kids to drink, drive, or vote, then how responsibly will they behave when they get their hands on potential bioterror weapons? How many are familiar with Bio Safety Level 4 (BSL) standards? None, I hope.
In fact, the race is already on to weaponize synbio. In 2002, scientists at SUNY Stonybrook synthesized a poliovirus for the first time. In 2005, another group managed to recreate the notorious H1N1 virus that caused the 1918 Spanish Flu epidemic. Some 50-100 million died in that pandemic within 2 years.
Then in 2011, Ron Fouchier of the Erasmus Medical Center in Holland announced that he had found a way to convert the H5N1 bird flu virus, which in nature is only transmitted from birds to people, into a human to human virus. Of the 565 who have come down with bird flu so far, which originates in China, 59% have died.
It didn’t take long for the Chinese to get involved. They have taken Fouchier’s work several steps further, creating over 127 H5N1 flu varieties, five of which can be transmitted through the air, such as from a sneeze. The attributes of one of these just showed up in the latest natural strain of bird flu, the H7N9.
The World Health Organization (WHO) and the Center for Disease Control (CDC) in Atlanta, Georgia are charged with protecting us from outbreaks like this. But getting the WHO, a giant global bureaucracy, to agree on anything is almost impossible unless there is already a major outbreak underway. The CDC has seen its budget cut by 25% since 2010 and has lost another 5% due to the US government sequester.
The problem is that the international organizations charged with monitoring all of this are still stuck in the Stone Age. Current regulations revolve around known pathogens, like smallpox and the Ebola virus, that date back to the 1960s when the concern was about moving lethal pathogens across borders via test tubes.
That is, oh so 20th century. Thanks to the Internet, controlling information flow is impossible. Just ask Muammar Gaddafi and Bashar Al Assad. Al Qaida has used messages embedded in online porn to send orders to terrorists.
Getting international cooperation isn’t that easy. Only 35 countries are currently complying with the safety, surveillance, and research standards laid out by the WHO. Indonesia refused to part with H5N1 virus samples spreading there because it did want to make rich the western pharmaceutical companies that would develop a vaccine. African countries say they are too poor to participate, even they are the most likely victims of future epidemics.
Scientists have proposed a number of safeguards to keep these new superbugs under control. One would be a dedicated sequence of nucleic acid base pairs inserted into the genes that would identify its origin, much like a bar code at the supermarket. This is already being used by Monsanto (MON) with its genetically modified seeds. Another would be a “suicide sequence” that would cause the germ to self-destruct if it ever got out of a lab.
One can expect the National Security Agency to get involved, if they haven’t done so already. If they can screen our phone calls for metadata, why not high-risk DNA sequences sent by email?
But this assumes that the creators want to be found. The bioweapon labs of some countries are thought to be creating new pathogens so they can stockpile vaccines and antigens in advance of any future conflict.
There are also the real terrorists to consider. When the Mubarak regime in Egypt was overthrown in 2011, demonstrators sacked the country’s public health labs that had been storing H5N1 virus. Egypt has one of the world’s worst bird flu problems, due to the population’s widespread contact with chickens.
It is hoped that the looters were only in search of valuable electronics they could resell, and tossed the problem test tubes. But that is only just a hope.
I have done a lot of research on this area over the decades. I even chased down the infamous Unit 731 of the Japanese Imperial Army that parachuted plagued infected rats into China during WWII, after first experimenting on American POWs.
The answer to the probability of biowarfare always comes back the same. Countries never use this last resort for fear of it coming back on their own population. It really is an Armageddon weapon. Only a nut case would want to try it.
Back in 1976, I was one of the fortunate few to see in person the last living cases of smallpox. As I walked through a 15th century village high in the Himalayas in Nepal, two dozen smiling children leaned out of second-story windows to wave at me. The face of everyone was covered with bleeding sores. And these were the survivors. Believe me, you don’t want to catch it yourself.
Sure, I know this doesn’t directly relate to what the stock market is going to do today. But if a virus escaped from a rogue lab and killed everyone on the planet, it would be bad for prices, wouldn’t it?
I really hope one of the kids competing in the MIT contest doesn’t suffer from the same sort of mental problems as the boy in Newton, Connecticut did.
I Think Woodshop Would Have Been Easier
Cause of the Next Bear Market, or the End of the World?
“It’s not like stocks are so compelling. It’s that there is nowhere else to put your cash. There’s a ton of capital coming in here. When it feels this easy, it’s usually time to be cautious,” said Barry Sternwood, CEO of the Starwood Capital Group.