Newsletter Archives - Mad Hedge Fund Trader

August 24 Biweekly Strategy Webinar Q&A

Below please find subscribers’ Q&A for the August 24 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Silicon Valley in California.

Q: I’ve heard another speaker say that we are not heading for a Roaring Twenties; instead, we are heading for a Great Depression. Who is right?

A: There are many different possible comments to this. Number one, in the newsletter business, the easiest way to make money is to predict the Great Depression and panic people. Stock market Gurus have been predicting the next Great Depression for all of the 54 years that I have been in the financial markets. We’ve gone through a whole series of Dr. Doom's over this time. We had Nouriel Roubini, we had Henry Kaufman, and before that, there was Joe Granville who predicted Dow 300 when the Dow was at 600 and never gave up. The reason is very simple: the people making these dire forecasts are based in depressionary places. If you live in Puerto Rico, or Ukraine, or Europe, it’s easier to be depressed right now, because the economy is falling to pieces. If you live in Silicon Valley, like I do, and you see these incredible technologies delivering every day, it’s easy to be bullish about the future. So, that is another part of it. On top of that, we’ve just had a recession. And even during this last recession, earnings continued to grow at 5% for the main market, and 20-30% for individual technology companies. The market goes up 80% of the time so if you’re bullish, you’re right 80% of the time. In fact, that may increase going into the future because we just had six months of down days behind us.

Q: How do you know when to buy?

A: Well, I have about 100 different market indicators that I look at, but my favorite one is the Volatility Index (VIX). The (VIX) is the perfect contrary indicator because when fear is high the payoff for taking on risk is huge. The risk/reward swings overwhelmingly in your favor. The simplest indicators are usually the best ones. When (VIX) gets to $30—I don’t think I’ve ever lost money in my life adding on a new trade with (VIX) at $30. If I add positions with the (VIX) at under $30, the loss rate goes up; so, I’m inclined to only do trades when the (VIX) gets close to $30. If that means doing nothing for a month, that’s fine with me. If telling you to stay out of the market makes more money than getting you into the market, I’ll keep you out of the market. I’m not a broker so, I don’t get paid commission; I get paid to give you the highest annual returns so you’ll renew because I only get paid if you renew. Our renewal rate is about 80% these days, and the other 20% either die or retire.

Q: What about the Tesla (TSLA) 3:1 split?

A: In the short term I would stand back and do nothing because you often get a “buy the rumor sell the news” selloff in stocks after splits. Long term, Tesla is a strong buy; short term, we are up close to 60% in a couple of months. Betting that Tesla would rise going into this split was one of the most successful trades that I’ve ever done.

Q: Did you know Julian Robertson?

A: Yes, I did. Julian was one of the first investors in my hedge fund, and then he was one of the first buyers of my Mad Hedge newsletter. He was also my first concierge client. He had one heck of a temper; if you didn’t know your stuff cold, he would just absolutely blow up at you. But he did tend to surround himself with geniuses. He drew on Morgan Stanley people a lot, so I knew a lot of the tiger cubs. But he certainly knew stocks, and he knew markets.

Q: What do we do on the SPDR S&P 500 ETF (SPY) position?

A: Just run it into expiration. As it is my only position, I don’t really have anything else to do and I don’t really see any explosive upside moves in markets this month. And then after that, we will be 10 days to expiration; so there may be enough profit there at that time.

Q: As a long-term investor, should I take Tesla profits now?

A: If you're really a long-term investor and sell now, you’ll miss the move to $10,000. However, if you’re a trader, you should take some profits now and look to buy and scale in down $50 and more down $100, and so on, depending on what the market does.

Q: What are your thoughts on Nvidia Corporation (NVDA) and semis?

A: When recession fears exist, you will have sharp downturns in the semis, because this is the most volatile sector in the market. However, in the long term in Nvidia you might be looking at a 20% of downside, and 200% of upside on a three-year view. It just depends on how much pain you want to take while keeping your long-term position.

Q: Why is September typically the worst month of the year for stocks?

A: You need to go back 120 years when farmers accounted for 50% of the US population. In the farming business, September/October is your maximum stress point, because you’ve put out all your money for seed, for water, for fertilizer, but you don’t get paid until you sell your crop in September/October. That creates a point of maximum stress—when farmers have to max out the loans from the banks, and that creates cascading stresses in the financial system. That’s why almost every stock market crash happened in October. And of course, since that cycle started, it has become a self-fulfilling prophecy to this day. Even though only 2% of the population is in farming now, that selloff in September/October is still there. There’s no real current reason behind it.

Q: How do you find good spreads?

A: You find a good stock first, then a good chart, and then wait for the market to come to you with a high Volatility Index (VIX) with a good micro and macro tailwind. It’s that simple.

Q: Do you think healthcare will sell off once the recession fear is gone?

A: It may not because it had a massive selloff across the entire industry when COVID went away. They've taken that COVID hit. That's a recession if you’re a healthcare company. Now COVID is essentially gone, so they haven’t got it left to lose. In the meantime, technology continues to hyper-accelerate in the healthcare area, just in time for old people like me.

Q: How would you invest $1 million in a retirement portfolio today?

A: Call me—that’s a longer conversation. Or better yet, sign up for the concierge service, and we can talk as long as you want.

Q: Any hope for Facebook (META)?

A: No, when you’re advertising that you’re going to lose money and that you’re not going to make money for five years, that’s bad for the stock. I’m sorry Mr. Zuckerberg, but you should have taken those financial markets classes instead of just doing the programming ones.

Q: Will Powell be dovish or hawkish in his speech?

A: I think he has to go hawkish because he needs to justify the next interest rate hike in September. That’s why I’m 90% cash. The market is set up here not to take disappointments on top of a 4,000-point rally in two months. It’s very sensitive to disappointment, so it’s a good time to be in cash.

Q: What stocks go down the most if we get a 5-10% correction?

A: Semiconductors. Nvidia (NVDA), Advanced Micro Devices (AMD), Micron Technology (MU) are your high beta stocks. Having said that, those are the ones you want to buy at market bottoms. I’ve caught many doubles on Nvidia over the years just using that strategy. When you’ve had a horrible market, you want to go for the highest beta stocks out there, and those are the semis. Plus, semis have a long-term undercurrent of always making more money, always improving their products, always increasing market shares. So, you want to invest with tailwinds behind you all the time. 30 years ago, a new car needed ten chips. Now they need 100. That accelerates exponentially as the entire auto industry goes EV.

Q: What’s your opinion on Lithium companies?

A: You know, I haven’t really done much in this area because it is a basic commodity. The profit margins are minimal, there is no Lithium shortage in the world like there is an oil shortage. Plus, no one has a secret method of mining Lithium that is more profitable than another. No one has an advantage.

Q: Is there a logical maximum number of stocks to have in a share portfolio?

A: I keep mine at ten. You should be able to cover every good sector in the market with ten. When I talk to new concierge customers and review their portfolios, one of the most common mistakes is they own too many stocks – there can be 50, 100, 200 stocks, even several gold stocks. And you never want to own more than you can follow on a daily basis. It’s better to follow ten stocks very closely than 100 stocks just occasionally.

Q: How low do you think Apple (APPL) will go on this dip?

A: Minimum 10%, maybe 20%. Just depends on how weak the market will go in this correction.

Q: What was your defensive plan when you sold short Tesla puts?

A: If they got exercised against me and the Tesla shares were sold to me at my strike price, I was going to take the stock, then let the stock rally. If my long-term view for Tesla is $10,000, it’s not such a problem having a $500 put exercise against you—you just take the stock and run the stock. That was always the strategy. Never sell short more puts than you can take delivery of in the stock. Your broker won’t let you do it anyway to protect themselves.

Q: Do you think we could get a strong rally on the next CPI report?

A: Yes. The report is due out on September 13. But some of a sharp drop in the CPI in the next report is already in the market, so don’t expect another 2,000-point stock market rally like we got last time. It’ll be a much lesser move and after that, we’ll need to see more data. We may get 1,000 points out of it, probably not much more. After that, the November midterm election becomes the dominant factor in the market.

Q: When is natural gas (UNG) going to roll over?

A: When the Ukraine War ends, and that day is getting closer and closer. I think it’ll be sometime in 2023. And if you get an end to the war (and the resumption of Russian supplies is not necessarily a sure thing) you’d get a move in natgas from $9 down to $2. So, that’s why I’m very cautiously avoiding energy plays right now. The big money has been made; next to happen is that the big money gets lost.

Q: What are your thoughts on Florida’s pension fund now banning ESG stocks? I live on Florida state pension fund payments.

A: You might start checking out other income opportunities, like becoming an Uber (UBER) driver or working at MacDonalds (MCD). What the Florida governor has done is ban the pension fund from the sector that is most likely to go up over the next ten years and restricted them to the sector (oil) which is most likely to go down. That is very bad for Florida’s pension fund and any other pension funds that follow them. And I’ve seen this happen before, where a pension fund gets politicized, and it’s 100% of the time a disaster. Governors aren't great market timers; politicians are terrible at making market calls. There are too many examples to name. ESG stocks were one of the top performing sectors of the market for 5 years until we got the pandemic crash. So, that is an awful idea (and one of the many reasons I don’t live in Florida besides hurricanes, humidity, alligators, and the Bermuda Triangle).

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 or TECHNOLOGY LETTER, or BITCOIN LETTER, whichever applies to you, then select WEBINARS, and all the webinars from the last 12 years are there in all their glory.

Good Luck and Stay Healthy,

John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader

August 25, 2022

Diary, Newsletter, Summary

Global Market Comments
August 25, 2022
Fiat Lux

Featured Trade:

(ABOUT MY TRIP TO SPACE)
(TSLA)

About My Trip To Space

Diary, Newsletter

Last month, I thrilled you with my aerobatics flying a WWII Spitfire over the White Cliffs of Dover (click here if you missed it).

This month, I one-upped myself.

In appreciation to the early buyers of Model S-1’s, Tesla invited me to submit a photo to be etched on the side of a satellite launch into space. Having purchased chassis no. 125, I certainly qualified. Those who referred 25 other buyers were allowed to send videos.

Of course, I had to send a picture of me piloting a 1929 Travelaire D4D biplane, which you can find below. The photo was inserted into the mosaic below. I sent the Spitfire video on an SD card and it’s in orbit as well.

The blast-off took place at Cape Canaveral, Florida on August 4, 2022.

You have to hand it to Tesla, they really know how to do PR, and their advertising budget is nearly zero. The Detroit Big 3 spend $50 billion a year on advertising and get a lesser result.

To watch a video of me blasting off into space on a Space X Falcon 9, or at least my laser etched image, please click here.

Oh, and buy (TSLA) on dips as well.

August 24, 2022

Diary, Newsletter, Summary

Global Market Comments
August 24, 2022
Fiat Lux

Featured Trade:

(THE MAD HEDGE TRADERS & INVESTORS SUMMIT IS ON FOR SEPTEMBER 13-15)

August 23, 2022

Diary, Newsletter, Summary

Global Market Comments
August 23, 2022
Fiat Lux

Featured Trade:

(BETTER BATTERIES HAVE BECOME BIG DISRUPTERS)
(TSLA), (XOM), (USO)

Better Batteries Have Become Big Disrupters

Diary, Newsletter

We are on the verge of seeing the greatest advancement in technology this century, the mass production of solid-state batteries. The only question is whether Tesla (TSLA) will do it, which is remaining extremely secretive, or whether one of the recent spates of startups pulls it off.

When it happens, battery efficiencies will improve 20-fold, battery weights will fall by 95%, and electric car ranges will improve by double. There isn’t much point in extending your battery range beyond your bladder range.

Car prices will collapse and the global economy will receive a huge boost.

With alternative energy sources growing by leaps and bounds, with a gale force tailwind provided by the Biden administration, it’s time to take another look at battery technologies.

I have been arguing for years that oil is on its way out. Today, I am going to tell you what will replace it.

Sony Corp. (SNE) invented the lithium-ion battery in 1991 to power its high-end consumer electronic products.

It is now looking like that was a discovery on par with Bell Labs’ invention of the transistor in 1947 and Intel’s creation of the microprocessor in 1971, although no one knew it at the time.

After all, Alexander Graham Bell invented the telephone as an aid for the deaf, and Thomas Edison invented records to replay telegraph messages. He had no idea there was a mass market for recorded music.

Until then, battery technology was essentially unchanged since it was invented by Alessandro Volta in 1800 and Gaston Plante upgraded it to the lead acid version in 1859. Not a lot of progress.

That is the same battery that starts your conventional gasoline-powered car every morning.

The Sony breakthrough proved to be the springboard for a revolution in battery power. It has fed into cheaper and ever more powerful iPhones, electric cars, laptops, and even large-scale utilities.

In 1995, the equivalent of today’s iPhone 13 battery cost $10. Today, it can be had for less than ten cents if you buy in bulk, which Apple does by the shipload. That’s a cost reduction of a mind-blowing 99%.

Electric car batteries have seen prices plunge from $1,000/kilowatt in 2009 to only $100 today.

Tesla (TSLA) expects that price to drop well under $100 with its new $6 billion “Gigafactory” in Sparks, Nevada. A second one is under construction. That is important as $100 has long been seen as the holy grail, where electric cars become cheaper than gasoline-powered ones on a day-to-day basis.

The facility is producing cookie cutter, off-the-shelf batteries made under contract by Japan’s Panasonic (Matsushita) that can fit into anything.

If you took existing battery technologies and applied them as widely as possible, it would have the effect of reducing American oil consumption from 22 to 16 million barrels a day.

That’s what the oil market seems to be telling us, with prices hovering just under $90 a barrel, less than a half of where they were a decade ago on an inflation-adjusted basis.

Improve battery capabilities just a little bit more and that oil consumption drops by half very quickly.

Both national and state governments are doing everything they can to make it happen.

The US now has a commanding technology lead over the rest of the world (I can’t believe the Germans fell so far behind on this one).

In 2009, President Obama chipped in $2.4 billion for battery and electric car development as part of his $787 billion stimulus package. He got a lot of bang for the buck.

So far, I have been the beneficiary of not one, but four $7,500 federal tax credits for my purchase of my Nissan Leaf and two Tesla S-1s, and a Model X. The Feds also chipped in another $75,000 for my new solar roof panels and six Powerwalls.

A reader told me yesterday that Sweden will ban the sales of gasoline and diesel-powered vehicles starting 2030. China and the UK will do the same. Japan wants electric and hybrids to account for half of its new car sales by 2030.

California has been the most ambitious, investing to obtain 100% of its power from alternative sources by 2030. Some one million homes here already have solar panels, and these are not even counted in the alternative’s equation.

Solar and wind are already taking over in much of Europe on a nonsubsidized, cost-competitive basis.

By 2030, a ten-pound battery in your glove compartment (glove box to you Brits in London) will be able to take your car 300 miles. The cost of energy will essentially be free.

And guess what?

I am able to use my solar panels to charge my 81-kilowatt Tesla battery during the day and then use it to power my home at night.

That is enough juice to keep the lights on forever, as the system recharges every day. Then, I will be totally off the grid for good, with utility bills of zero.

Want to know where I live? Just wait for the next power outage. I am the only one with lights. That’s when I charge my neighbors a bottle of chardonnay to charge their phones and laptops.

To say this will change the geopolitical landscape would be a huge understatement.

The one-liner here is that oil consumers will benefit enormously, like you, while the producers will get destroyed. I’m talking Armageddon, mass starvation levels of destruction.

In the Middle East, some 1 billion people with the world’s highest birth rates will lose their entire source of income.

Russia, which sees half its revenues come from oil, will cease to be a factor on the international stage, and may even undergo a third revolution. Take oil away, and all they have left is hacking, bots, borscht, and half an antiquated army.

Norwegians will have to start paying for their social services instead of getting them for free.

Venezuela, which couldn’t make it at $100 a barrel, will implode, destabilizing Latin America. It’s already started.

It's going to be an interesting decade for us geopolitical commentators.

Further improvements in battery power per dollar will change the US economy beyond all recognition.

This will be a big win for the 90% of the economy that consumes energy and an existential crisis for the 10% that produce it.

Public utilities will have to change their business models from power producers to distributors.

No less an authority than former Energy Secretary Dr. Steven Chu (another Berkeley grad) has warned the industry that they must change or get “FedExed”, much the same way that overnight delivery replaced the US Post Office.

US oil majors will suffer some very tough times but won’t disappear. My bet has always been that they will buy the entire alternatives industry the second it becomes profitable.

After all, they are not in the oil business, but in the profit-making business, and they certainly have the cash and the management and engineering expertise to pull this off. Exxon (XOM) will turn green out of necessity. It’s already talking as such.

As is always the case, there are very few publicly listed stock plays in a brand-new emerging technology like the battery sector.

Many of the early-stage entrants have already filed for bankruptcy and had their assets taken over for pennies on the dollar.

It’s a business you want to be in because Citibank expects that giant grid-scale batteries alone will be a $400 billion a year market by 2030.

When I visit friends at the oil majors in Houston, I chided them to be kind to that Birkenstock-wearing longhaired visitor.

He may be their future boss.

Tesla’s Solid-State Battery Design

Is that a Double Top?

Quote of the Day - August 23, 2022

Diary, Newsletter, Quote of the Day

“Rational people don’t risk what they have and need for what they don’t have and don’t need,” said Oracle of Omaha Warren Buffet.

August 22, 2022

Diary, Newsletter, Summary

Global Market Comments
August 22, 2022
Fiat Lux

Featured Trade:

(MARKET OUTLOOK FOR THE WEEK AHEAD, or THE PARTY IS OVER)
(SPY), (QQQ), (TLT), (VIX)

The Market Outlook for the Week Ahead, or The Party is Over

Diary, Newsletter

It’s been one heck of a party for the last two months. We’ve been wearing lampshades on our heads, dancing the Lindyhop, and drinking hopium by the barrel.

But even the best of parties must come to an end.

It's time to put the empty bottles into the recycling bin. I’ve called Uber for the guests who can no longer walk. The hangovers have already started. The cleaning lady is probably going to fire me tomorrow.

The Party is Over, at least for now, as are the big money vacations at the Hamptons, Aspen, and Lake Tahoe. This year, wildly overbought markets are perfectly coinciding with peak vacation time.

September brings bigger worries with a Fed rate rise, doubled QT, and a looming election. I’m now net short for the first time since March.

A Volatility Index (VIX) at $19, a Mad Hedge Market Timing Index at 51, and a rally worth half of this year’s losses are telling you to stay away in droves.

Cash is king right now. Just sit back and count all the money you made with me this year. The reality is that there is a honking great dilemma in the market right now. The Fed is talking hawkish, while traders are trading dovish. The Fed ALWAYS wins this kind of bust-up.

I’m looking for stocks to give up at least half their heroic (SPY) 70-point June-August gains. That would take us down to (SPY) 50-day Moving Average at $395.

After that, we might bounce between the 50-day moving average at $395 and the 200-day at $432 all the way until the November midterm elections. Thereafter, we will launch on a meteoric yearend rally that could take us all the way up to (SPY) $480.

It couldn’t go any other way because there is too much cash lying around. In fact, short term positioning is only at 10% of historical norms, and there is still at least $500 billion worth of company share buybacks still in the pipeline, especially in tech.

That’s all fine with me because at $395, the free money trades start to set up again. At (SPY) $395, the (VIX) should be back up to $30. That means you can set up call spreads, assume we will double bottom at (SPY) $362, and STILL make the maximum potential profit. Such is the magic of vertical bull call debit spreads.

In the meantime, we might be able to squeeze out $30 or $40 worth of short-term trading profits in short positions. This will be the only place to make money for the next month or two. If you’re interested, I’m currently short the (SPY), (QQQ), and (TLT).

Yes, trading is all about alternating pain and pleasure. That’s why you must be a sadomasochist to be a great trader.

It all totally works for me.

It's no surprise that the second the yield on the ten-year US Treasury yield recovered 3.00%, the stock market rally promptly died. Message: watch the ten-year US Treasury yield like an eagle.

Tesla (TSLA) Production Tops 3 million and Elon Musk is aiming for 100 million by 2030. Mine was chassis number 125 and my name is still on the Fremont factory wall. They have driven 40 million miles since 2010, pushing their autonomous learning program far down the road when compared to others. Tesla is the third largest car maker in China. It was worth a $40 pop in the stock. The shares split 3:1 on Friday, sucking in meme interest.

Oil (USO) Collapses to New Two-Month Low to $88 a barrel, down $44, or 33% from the highs. There’s another 50-cent decline in gasoline prices in the cards. Disastrous battlefield setbacks for Russia have been the real driver. Putin has resorted to clearing out the prisons to reinforce his army. He is also forcing Ukrainian POWs to fight their own countrymen. Maybe he'll let our woman’s basketball star go free?

The Fed Minutes are out from the last meeting six weeks ago. Interest rates will rise, but not as much as expected. A pivot to flat or lower interest rates may come sooner than expected. Look for 3.50% for the overnight rate sometime in 2023, up 100 basis points from here.

Why Isn’t the Fed Balance Sheet Falling? It’s still stuck at $9 trillion, despite a massive reduction on bond buybacks via QT. The dam is about to break, with $2-$3 trillion in bond buybacks disappearing in the coming months.

Money Supply Growth Has Ground to a Halt, showing zero growth so far in 2022. It is about to start shrinking dramatically, once QT doubles up to $95 billion a month in September. This could deliver our next buying opportunity for stocks, but also might give us a recession.

Housing Starts Collapse, down 9.6% YOY in July. Labor costs are still soaring while affordability has been shattered. If you’re thinking of buying stocks now, lie down and take a long nap first, a very long nap.

Existing Home Sales Dive 6%, off for the sixth consecutive month. Sales dropped to a seasonally adjusted 4.81 million units. It’s no surprise that we are now in a housing recession while the rest of the economy remains small. Homebuyers are also still contending with tight supply. There were 1.31 million homes for sale at the end of July, unchanged from July 2021. At the current sales pace, that represents a 3.3-month supply.

20 Electric Vehicles Will Get the $7,500 Tax Credit on Day One, Biden just signed the climate bill, with Tesla far and away the leader. Only cars with 70% or more of its parts coming from the US qualify. Used EVs get a $4,000 tax credit. MSRPs must be below $55,000 and individual income no more than $150,000. The credit begins in 2023. Left out in the cold are EVs made in Japan and South Korea.

Bitcoin Hits Three-Week Low, as “RISK OFF” returns. Suddenly, stocks, oil prices, and interest rates have started going the wrong way. Avoid Crypto.

Why the IRS is Not Interested in You. Treasury secretary Yellen says the priorities will be clearing the backlog of unprocessed tax returns and improving customer service, overhauling technology, and hiring workers.

My Ten-Year View

When we come out the other side of pandemic and the recession, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With oil prices now rapidly declining, and technology hyper-accelerating, there will be no reason not to. The Dow Average will rise by 800% to 240,000 or more in the coming decade. The America coming out the other side will be far more efficient and profitable than the old. Dow 240,000 here we come!

With some of the market volatility (VIX) now dying, my August month-to-date performance appreciated to +3.96%.

My 2022 year-to-date performance ballooned to +58.79%, a new high. The Dow Average is down -5.91% so far in 2022. It is the greatest outperformance on an index since Mad Hedge Fund Trader started 14 years ago. My trailing one-year return maintains a sky-high +73.78%.

That brings my 14-year total return to +571.35%, some 2.56 times the S&P 500 (SPX) over the same period and a new all-time high. My average annualized return has ratcheted up to +45.11%, easily the highest in the industry.

We need to keep an eye on the number of US Coronavirus cases soon reaching 94 million, up 300,000 in a week and deaths topping 1,040,000. You can find the data here.

On Monday, August 22 at 8:30 AM, the Chicago Fed National Activity Index for July is released.

On Tuesday, August 23 at 7:00 AM, New Home Sales for July are out.

On Wednesday, August 24 at 7:00 AM, Durable Goods for July are published.

On Thursday, August 25 at 8:30 AM, Weekly Jobless Claims are announced. US GDP for Q2 is released.

On Friday, August 26 at 7:00 AM, the Personal Income and Spending are disclosed. At 2:00, the Baker Hughes Oil Rig Count is out.

As for me, I have met countless billionaires, titans of industry, and rock stars over the last half-century, and one of my favorites has always been Sir Richard Branson.

I first met Richard when I was living in London’s Little Venice neighborhood in the 1970s. He lived on a canal boat around the corner. I often jogged past him sitting alone on a bench and reading a book at Regent’s Park’s London Zoo, far from the maddening crowds.

Richard was an entrepreneur from day one, starting a magazine when he was 16. That became the Virgin magazine reviewing new records, then the Virgin record stores, and later the Virgin Megastore where he built his first fortune.

When the money really started to pour in, Richard moved to a mansion in Kensington in London’s West End. It wouldn’t be long before Richard owned his own Caribbean Island.

In 1984, Branson was stuck in the Virgin Islands because of a cancelled British Airways flight. He became so angry that he chartered a plane and started Virgin Airlines on the spot, which soon became a dominant Transatlantic carrier and my favorite today.

A British Airways CEO later admitted that they did not take Branson seriously because “He did not wear a tie.” The British flag carrier resorted to unscrupulous means to force Virgin out of business. They hired teams of people to call Virgin customers, cancel their fights, and move them over to BA.

When British Airways got caught, Branson won a massive lawsuit again BA over the issue. He turned the award over to his employees.

Richard would do anything to promote the Virgin brand. He attempted to become the first man to cross the Atlantic Ocean by balloon, making it as far as Ireland.

When he opened a hotel in Las Vegas, he jumped off the roof in a hang glider. The wind immediately shifted and blew him against the building, nearly killing him.

Richard later went on to start ventures in rail, telecommunications, package tours, and eventually space.

When I flew to Moscow in 1992 for my MiG 29 flight, I picked Virgin Atlantic, one of the few airlines flying direct from London to Moscow (I never trusted Aeroflot). Who was in the first-class seat next to me but Richard Branson. We spent hours trading aviation stories, of which I have an ample supply.

As we approached Sheremetyevo Airport, he invited me up to the cockpit and told the pilot “This is my friend Captain Thomas. Would you mind if he joined you for the landing?”

He handed me a headset so I could listen in on a rare Moscow landing. When the tower called in the field air pressure, they were off by 1,000 feet. If we were flying under instrument flight rules, we would have crashed. I pointed this out to the pilot, and he commented that this was not the first time they had had a problem landing in Moscow.

Richard once confided in me that he was terrible at math and didn’t understand the slightest thing about balance sheets and income statements. A board member once tried to explain that business was like using a net (company) to catch a fish (profit) but to no avail.

Branson had built up his entire business empire through relationships, using other people to run the numbers. He was the ultimate content and product creator.

I always thought of Richard Branson as a kindred spirit. He is just better at finding and retaining great people than I am. That is always the case with billionaires, both the boring and the adventurous, iconoclastic kind.

Stay healthy,

John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader