Global Market Comments
February 28, 2025
Fiat Lux
Featured Trade:
(FEBRUARY 26 BIWEEKLY STRATEGY WEBINAR Q&A),
(BTC), (NVDA), (TSLA), (BRK/B), (JNK), (TLT), ($WTIC)
Below, please find subscribers’ Q&A for the February 26 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Incline Village, NV.
Q: Isn’t this just a cyclical thing? Don’t all bull markets come to an end?
A: Yes, they do. But this time around, it looks like the market is being pushed off a cliff. I guess you have to say that uncertainty is the new element here. Depending on who you talk to, uncertainty is either at a 5-year high, a 30-year high, or a 96-year high (the 1929 crash). Suffice it to say that with the election results being so close (it was the 3rd closest election in history), that means essentially half of all voters are going to be pissed off no matter what happens. It’s a no-win situation. Plus, you go in with multiples at—depending on how you measure them—30-year highs or 96-year highs and dividend yields at all-time lows. A lot of these stocks have gotten stupidly expensive and are begging for a selloff. That is not a good environment to ratchet off the uncertainty.
Q: Should I buy Bitcoin (BTC) on the dip since it’s down about 15 or 20% from the highs?
A: Absolutely not. If you’re going to take a flyer, it was when it was at $6,000, not at $90,000. You can always tell when an asset class is topping because suddenly, I get a bunch of people asking if they should buy it. I've been getting that from Bitcoin all year, and the answer is absolutely not. We're looking for value here, and there's no value to be found anywhere. With Bitcoin, the question you really have to ask is: What happens when Trump leaves office? Does Bitcoin become regulated again? The answer is probably yes, so if the entire rally from $50,000 to $108,000 was based on deregulation, what happens when you re-regulate? So, no thank you, Bitcoin.
Q: Should I sell Tesla (TSLA) and Nvidia (NVDA) LEAPS?
A: It depends on your strike prices, if you're still deep in the money, I would hang on. I think the worst case is Nvidia drops to maybe $100 and Tesla drops to maybe $250. What you should have done is take profits 3 months ago when these things were at all-time highs. I did. Whenever you get up to 80% or 90% of the maximum potential profit on profit LEAPS, you should take that, especially if you have more than a year to run to expiration, because they will go to money heaven if you get a correction like this. Leave the last 10% for the next guy. So yes, I would be de-risking, you know, give all your portfolios a good house cleaning and get rid of whatever you’re not happy to keep for the next several years.
Q: What about LEAPS on financials?
A: I do think financials will come back; it’s just a question of how far they’ll drop first, and you can see I put my money where my mouth is with two financial LEAPS for the short term.
Q: Apple (APPL) expects to increase its dividends. Should I buy the stocks?
A: Actually, Apple has gone down the least out of any of the magnificent 7, but they all tend to trade as a bunch. Apple’s had a terrific run since last summer. Those are the ones that will get paired back the most. So it’s nice to get a dividend, but it’s no reason to buy a stock because you can wipe out a year’s worth of a dividend in a single day’s negative trading.
Q: What do you think of Chinese tech stocks?
A: I think they’re peaking out here; the same with Europe—they’ve had this tremendous rally this year NOT because of the resurgence of Chinese or European economies. It’s happening because of the uncertainty explosion in the United States and the fact that these European and Chinese stocks all got insanely cheap—well into single-digit price-earnings multiples. So, people are just readjusting a decade and a half long short positions in these areas. I don’t see a sustainable bull market in China or Europe based purely on fundamentals. This is just a trading play, which you’ve already missed, by the way—the big move has happened.
Q: Doesn’t it seem like the unemployment claim numbers are being told more truthfully now?
A: Nothing could be further from the truth. The unemployment claims are collected by the states and then collated by the federal government—the Bureau of Labor Statistics. I've been hearing for 50 years that the government rigs the statistics it publishes. The way you'll see that is when you get a major divergence between government data and private sector data, which we have a lot of. When they diverge, you'll know the government is fudging the data. I have a feeling they may be faking the inflation data in the not-too-distant future.
Q: Should I buy Tesla (TSLA) on the dip?
A: Absolutely not. There is no indication that the rot at the top of Tesla has ended. You basically have a company that’s leaderless and rudderless, with falling sales in China and Europe and a boycott going on in Europe against all Tesla products. Sales down 50% year on year isn't an economic thing, it’s a political thing. Suddenly, Europe doesn't like Elon Musk's politics since he’s advocating the destruction of their economies and interfering in their elections. This is why CEOs of public companies should NEVER get involved in politics—once you voice an opinion, you lose half of your customers automatically. But at a certain point, no amount of money you lose can move the needle with Elon Musk; he’s too rich to care about anything and has said as much.
Q: How much cash should I have?
A: It depends on the person. I am watching the markets 12 hours a day. I can go 100% cash and be 100% invested tomorrow. You, I'm not so sure. A lot of you have heavy index exposures, so it really is different for each person. How much do you want to sleep at night? That's what it really comes down to. Are we going to have a big recession or not? That is the question plaguing investors right now.
Q: What are your thoughts on Berkshire Hathaway (BRK/B)?
A: Buy the dips. I mean it's, you know, 50% cash right now, so it's a great place to hide out if you're a conventional money manager who isn't allowed to own cash or more than 5% cash. So yeah, I think we could go higher. Just expect a 5% correction when Warren Buffet dies. He’s 95.
Q: Why buy SPDR Bloomberg High Yield Bond ETF (JNK) and not iShares 20+ year Treasury Bond ETF (TLT)?
A: JNK has a yield that is now almost 2.3% higher than the (TLT), and that gives you a lot of downside protection, you know, a 6.54% yield. That is the reason you buy junk.
Q: Why have you changed your opinion on the markets when you've been bullish for the last many years?
A: I have a Post-it note taped to my computer monitor with a quote from John Maynard Keynes: “When the facts change, I change. What do you do, sir? The answer is very simple: the principal story of the market up until the end of last year was the miracle of AI and how it was going to make us all rich. Now, the principal story of the market is the destruction of government spending, the chaos in Washington, and tariffs. That is not an investor-friendly backdrop on which to invest. The government is 25% of the GDP, and if you cut back even a small portion of that, even just 5%, that is called a recession, ladies and gentlemen, and nobody wants to own stocks in a recession. And this is all happening with valuations at all-time highs, so it is a very dangerous situation. Suffice it to say, the Trump that campaigned and the Trump we got are entirely different people with far more extreme politics. The market is just figuring that out now, and the conclusion is the same everywhere: sell, sell, go into cash, hide. Certain markets trade at rich premiums, while uncertain markets trade at deep discounts. Guess what we have now.
Q: Isn’t $65-$77 a barrel the new trading range for crude oil ($WTIC)?
A: This has recently been true, but if we go into recession, that breaks down completely, and we probably go to the $30s or $40s, and a severe recession takes us to zero. So that is a higher risk play than you may realize; that is where the charts can get you into big trouble if you ignore the fundamentals.
Q: Do you expect interest rates to drop?
A: No, they have dropped 50 basis points this year on a weak dollar and declining confidence, and the US Treasury has issued almost no long-term bonds this year. So that has created a bond shortage, which has created a temporary shortage and a fall in long-term interest rates. That will change as soon as the new budget is passed, and the earliest that can happen is March 14th. After that, we may get a new surge in interest rates as the government becomes a big seller of bonds once again, which will drive up interest rates massively. The Treasury has to issue $1.8 trillion in new bonds this year just to break even, and now it has only 10 months to do it. So there may be a great short setting up here in the (TLT), and of course, we’ll let you know when we see that.
To watch a replay of this webinar with all the charts, bells, whistles, and classic rock music, just log in to www.madhedgefundtrader.com, go to MY ACCOUNT, click on GLOBAL TRADING DISPATCH, then WEBINARS, and all the webinars from the last 12 years are there in all their glory.
Good Luck and Good Trading,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
When you develop your opinions on the basis of weak evidence, you will have difficulty interpreting subsequent information that contradicts these opinions, even if this new information is obviously more accurate,” said Nassim Nicholas Taleb, author of Antifragile: Things That Gain from Disorder.”
Global Market Comments
February 27, 2025
Fiat Lux
Featured Trade:
(RIGHT SIZING YOUR TRADING)
I can’t tell you how many times I have been woken up in the middle of the night by an investor who was sleepless over a position that was going the wrong way.
The Dow Average cratered by 1,200 points, Gold was down $50, the Euro was spiking two cents, and oil was making one of its periodic $5 moves.
Of course, my answer is always the same.
Cut your position in half. If your position is so large that it won’t let you sleep at night on the bad days, then you have bitten off more than you can chew.
If you still can’t sleep, then cut it in half again.
Which brings me to an endlessly recurring question I get when making my rounds calling readers.
What is the right size for a single position? How much money should they be pouring into my Trade Alerts?
Spoiler alert! The answer is different for everyone.
For example, I will not hesitate to pour my entire net worth into a single option position. The only thing that holds me back is the exchange contract limits. But then I spend 12 hours a day in front of screens making sure it goes the right way.
That’s just me.
If you have a day job, would rather spend your time on a golf course, or are only interested in a five-year view, this may not be for you.
I have been trading this market for over half a century. I have probably done more research than you ever will (I basically do nothing but research all day, even when I’m backpacking, by audio book).
And I have been taking risks for my entire life, the financial and the other kind, quite successfully so, I might add. So my taking a risk is not the same as your taking a risk.
Taking risks is like drinking a fine Kentucky sipping Bourbon. The more frequently you drink, the more you have to imbibe to get a good buzz.
Eventually, you have to quit and start the cycle all over again. Otherwise, you become an alcoholic.
So, you can understand why it is best to start out small when taking on your first positions. Imagine if the first time you went out to drink with your college dorm roommates, you finished off an entire bottle of Ripple or Thunderbird. The results would be disastrous and nauseous, as they were for me.
So, I’ll take you through the drill that I always used to break in beginning traders at Morgan Stanley’s institutional equity trading desk.
You may be new to investing, new to trading, and find all of this money stuff scary. Or you may be wary, entrusting your hard-earned money to advice from a newsletter you found on the Internet!
What if my wife finds out I’m doing this with our money?
YIKES!
That is totally understandable, given that 99% of the newsletters out there are fake, written by fresh-faced kids just out of college with degrees in Creative Writing but without a scintilla of experience in the financial markets. And I know most of the 1% who are real.
I constantly hear of new subscribers who are now on their tenth $5,000 a year subscription, and Mad Hedge Fund Trader is the first one they have actually made money with.
So, it is totally understandable that you proceed with caution.
I always tell new readers to start out paper trading. Virtually all online brokers now have these wonderful paper trading facilities where you can practice the art with pretend money.
Don’t know how to use it?
They also offer endless hours of free tutorials on how to use their platform. These are great. After all, they want to get you into the market, trading, and paying commission as soon as possible.
You can put up any conceivable strategy, and they will elegantly chart out the potential profit and loss. Whenever you hit the wrong button and your money all goes “poof” and disappears, you just hit the reset button and start all over again.
No harm, no foul.
After you have run up a string of two or three consecutive winners, it’s now time to try the real thing. But start with only one single options contract, or a few shares of stock or an ETF. If you completely blow up, you will only be out a few hundred dollars.
Again, it’s not the end of the world.
Let’s say you hit a few singles with the onesies. It’s now time to ramp up. Trade 2, 3, 4, 5,1 0, 50, or 100 contracts. Pretty soon, you’ll be one of the BSDs of the marketplace.
Then, you’ll notice that your broker starts following your trades since you always seem to be right. That is the story of my life.
This doesn’t mean that you will enjoy trading nirvana for the rest of your life. You could hit a bad patch, get stopped out of several positions in a row, and lose money. Or you could get bitten by a black swan (it hurts!).
Those of you who have been following me for 17 years have seen this happen to me several times and now know what to expect. I shrink the size, reduce the frequency, and stay small until my mojo comes back.
And my mojo always comes back.
You can shrink back to trading one contract or quit trading altogether. Use the free time to analyze your mistakes, rethink your assumptions, and figure out where you went wrong.
Was I complacent? Was I greedy? Did hubris strike again? My favorite: I was in a meeting when I should have been selling. Having a 100% cash position can suddenly lift the fog of war and be a refreshingly clarifying experience. By the way, perennially losing traders always have lots of excuses.
We all get complacent and greedy. To err is human.
Then, reenter the fray once you feel comfortable again. Start out with a soft pitch.
Over time, this will become second nature. You will automatically know when to increase and decrease your size.
And you won’t have to wake me in the middle of the night.
Here is one last tip. Beginners try to hit home runs while pros aim for hundreds of singles. Home runs only happen in the movies (Trading Places, Wall Street, Margin Call).
Good luck and good trading.
Watch Out! They Bite!
“Interest rates are gravity. When they are zero, shares prices can go to infinity. When they are high, as they were during the early 1980’s, the gravitational pull can be very strong,” said Oracle of Omaha, Warren Buffet.
Global Market Comments
February 26, 2025
Fiat Lux
Featured Trade:
(THE LEAGUE OF EXTRAORDINARY TRADERS)
I never cease to be impressed with the readers of this newsletter.
I was reminded of this once again in Salt Lake City, Utah a few weeks ago.
Readers seem to fall into three categories.
1) Entrepreneurs whose businesses become so successful that they are throwing off plenty of excess cash to invest. This led them to an online search (they are also technically very savvy) that brought them to my Mad Hedge Fund Trader.
One of my guests runs a manufacturing business that builds drones. In five years, his one-time hobby grew from gross revenues from $400,000 a year to $40 million, and with big military contracts coming he says the best has yet to come.
Ten years ago, the Federal Aviation Administration predicted that there would be 1,500 drones in the air by 2020. Today, there are millions.
Interestingly, he says he is now besieged by constant foreign takeover offers. These are from European and Asian firms that have gone ex-growth and are desperately searching for new profit streams at any cost. So far, he has rebuffed all comers. More than a few friends have sold their companies to Germans lately.
2) Financial advisors who have been following my long-term macro and trading advice and who have also become very successful. Rampant cutting in their world means dumping expensive research analysts. Winning financial advisors always have new clients and cash coming which they need to know how to invest. All of my clients seem to have this problem.
3) Young men and women in their twenties and thirties who dropped out of the mainstream economy and taught themselves to become professional full-time traders. They keep begging me to go back into Bitcoin research, which I abandoned three years ago as too theft-prone.
Perhaps several hundred earn a full-time living just off of my own Trade Alerts alone. This business took a quantum leap with my introduction of the Mad Hedge Technology Letter.
My first-hand observation of the current inflation rate is that it is taking off again, and it is not just eggs at $10 a dozen….if you can find them.
Airplanes going anywhere are all full and ticket prices are soaring, while service is shrinking. The airports are packed. The cost of overnight parking in San Francisco has risen by 100% to $50 a day. The free electric charging stations, of which there are now over 50, are always full.
Mt favorite Pendleton store in Monterey, CA no longer has sales. It’s full price for everything all the time now. People have plenty of money to spend.
Stores are stocking more expensive, higher margin profits, and offering imaginative displays.
Placing your goods on top of worn-out industrial heavy machines is a popular new marketing approach. I spend more time analyzing the machines than the goods for sale.
The irony is rich.
Restaurants are more expensive too, always are full, and are also making the grab for higher margins. They now offer food that is gluten-free, locally grown, and “artisanal.” There are only five items on the menu at twice the prices and many restaurants no longer open for lunch.
When I ordered a steak, I was informed that it was hormone and preservative-free. I asked if I could have one WITH hormones and preservatives, as they put hair on my chest and preserve me as well.
No wonder everyone thinks I’m Mad.
Yet there is evidence too of the failed America, the people who got left behind. At one stoplight, I encountered a family of four holding a big sign in the freezing weather “We need money.”
They had recently been evicted from their home. All had serious health problems and were morbidly obese. They looked legit. Maybe it was a healthcare-induced bankruptcy?
I asked no questions, made no judgments, and gave them $20. They reacted like they had won the lottery.
The country clearly is not perfect.
Global Market Comments
February 25, 2025
Fiat Lux
Featured Trade:
(WHY YOUR OTHER INVESTMENT NEWSLETTER IS SO DANGEROUS)
Not a day goes by without me hearing from a reader about the competition.
They previously subscribed to a newsletter that promised a top-drawer education, an insider’s insights, and spectacular returns, sometimes 100% or more a month.
“Doubled in a day” is a frequently heard term.
The entry-level costs are only a few bucks, but they are ever teased onward by the “trade of the century”, a certain 100X winner that they will reveal to you only after another upgrade to their service.
Customers eventually spend outrageous amounts of money, $5,000, $10,000, or even $100,000 a year for the service.
They then lose their shirts.
I hear from readers who have gone through as many as ten of these scams before they find me. Some have lost millions of dollars. Others have been wiped out.
The sob stories are legion.
Then, they find the Diary of a Mad Hedge Fund Trader.
This is the source of all those effusive testimonials you find on my website (click here)
Believe me, they come in every day. I don’t make this stuff up.
Here is the problem. I work in an industry where 99% of the participants are frauds. They are giant Internet marketing firms with hundreds or thousands of employees.
They spend millions to buy your email address. They then spend millions more on copywriters and programmers to pen and distribute top-rate invitations to you to get rich.
Some of these pitches are so compelling that even I take a look from time to time. These guys are slick, really slick.
None of these people have ever worked on Wall Street. They have never been employed as traders. They have not even traded for their own account.
They would know which end of a stock to hold upward if you handed one to them.
For the most part, they are twenty-something kids who got an “A” in creative writing if they ever went to school. Many haven’t.
So, by putting your faith and your wealth in these newsletters and “trade-mentoring” services, you are placing them in the hands of kids without any experience whatsoever.
Hence the disastrous results. You’d have a better outcome tossing a coin or throwing darts at a dartboard.
Some of the larger services hire washed-out has-been investment professionals who become the “face” of the company and lend it some bogus credibility.
They know the lingo, can quote you statistics all day long, and may even boast of proprietary models and hidden indicators. But chances are they have never made a trading dollar in their life.
Without exception, they are lightweight, has-beens, and wannabes who never made it to the big show. None have ever traded for a living. If they did, they would be broke.
Better to sell the shovels to the gold miners than to try it themselves.
They include the oil newsletter that never saw the crash coming, the fixed income service that is always predicting the return of hyperinflation and a crash, and the perennial prediction that the Dow Average is about to plunge to 3,000.
And because these guys are lousy at their jobs, they always tell you to do THE EXACT OPPOSITE of the right thing to do at market extremes.
Just saw a flash crash? Sell everything! The next crash is here! Just hit a new all-time high? Load the boat! The market is about to double! For them, markets are always about zero or to infinity.
Here’s another problem. Negativity outsells a positive outlook hugely, sometimes by 10:1. It makes people look smarter. That’s the source of all of these Armageddon scenarios. They make a ton of money for their purveyors.
It’s not about being right or dispensing sage advice and proper guidance. It’s only about making a dollar, nothing else. There is no guilt or responsibility involved whatsoever.
All of this is done at your expense. I get emails from victims who sold their houses at the market bottom and want to know what to do now that the house has doubled in value and rents are rising.
There are a lot of people out there who drank the Master Limited Partnership Kool-Aid and put all of their assets there to get double-digit yields. If they are lucky, they are down only 90%.
The precious metal area is a favorite of Internet marketers during the 2010’s. Readers who bought this sector on margin, as they were urged to do with great urgency, lost everything.
I know this all sounds like sour grapes coming from me. The sad reality is that out of hundreds of competing investment and trading newsletters in the industry, I can count on one hand those run by true professionals, and I know most of them.
The rest are all crooks.
Yes, I know who these people are. But I am not going to name any names. No time to sling mud here. I can hear the collective sighs of relief already.
This is why I strive to provide the opposite of the con men. To me, it is more important to be right than to be rich. I will give you my unvarnished, undiluted views, even if it is bad for my business, which it often is.
This is why we publish our model trading performance on a daily basis, warts and all.
Notice that no other newsletter does this. If they did, they would only show huge losses, which don’t sell well. It’s all about making tons of incredible claims without a shred of documentation.
So please continue trolling the web for new investment insights and trading opportunities. After all, that’s how you found me all those years ago. But I will give you a piece of advice:
Caveat emptor!
Buyer beware!