Global Market Comments
October 11, 2024
Fiat Lux
Featured Trade:
(THE MAD HEDGE SEPTEMBER 17-19 SUMMIT REPLAYS ARE UP),
(OCTOBER 9 BIWEEKLY STRATEGY WEBINAR Q&A),
(TLT), (IWM), ($VIX), (DUK), (NEE), (GLD), (FCX), (BHP), (USO)
Listen to all 22 speakers opine on the best strategies, tactics, and instruments to use in these volatile markets. It is a true smorgasbord of investment strategies. Find the best one to suit your own goals.
The product discounts offered last week are still valid. Start, stop, and pause the videos at your leisure. Best of all, access to the videos is FREE. Access them all by clicking here.
We look forward to working with you and the next summit is scheduled for December.
Below please find subscribers’ Q&A for the October 9 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Lake Tahoe, Nevada.
Q: Is the iShares 20+ Year Treasury Bond ETF (TLT) a buy here?
A: I think we are testing the 200-day moving average, which is at 92.75. Let’s see if that holds, and if it does, we want to do at-the-money LEAPS one year out because the Fed has basically said it’s going to keep lowering interest rates until June, and bonds can’t lose on that. That would also be a nine-point pullback from the recent high.
Q: I found a YouTube video about your Uncle Mitchell Paige, who won the first Medal of Honor in WWII.
A: Yes, there’s a ton of stuff on the internet about Uncle Mitch, even though he passed away 22 years ago. There’s even a Mattel G.I Joe version of Uncle Mitch that you can buy, which he gave me. I also inherited his samurai swords.
Q: When will small caps turn around?
A: That’s the iShares Russell 2000 (IWM). Small caps are joined at the hips with interest rates, so when interest rates go up, and bond prices go down, small caps also go down. That is because small caps are much more dependent on borrowed money than any other section of the market, 60% lose money, 40% are regional banks, and they have much weaker credit ratings. They are a leverage play on everything going great—when interest rates are rising, they aren’t great. I would hold off on the (IWM). Even when interest rates start going back down again, which I expect they will do going into the next Fed meeting, (IWM) will be about number ten on the list of interesting things to do.
Q: The hiring numbers were great with the nonfarm payroll on Friday, so will the recession be pushed back to 2026?
A: I don’t think we’re going to have a recession. I think we have a growth scare, a growth slowdown, and then we reaccelerate again as more companies start booking AI profits to their bottom lines. Also, the recovery of China would be nice, recovery of Europe would be nice—so there are many other factors at play here. The fact is the United States has the world’s strongest economy, and we are going from strength to strength. That’s why everybody in the world is sending their money over here.
Q: Do you expect heightened volatility going into the year-end?
A: I expect heightened volatility going into the election; after that, it may collapse. Right now, the Volatility Index ($VIX) is in the low $20s, which is the high end of the recent range. I expect that to fall, and then we get a ballistic market after the election once all the uncertainty is gone.
Q: Should I buy utilities and industrials now?
A: Yes, these are two of the most interest-sensitive sectors in the market—especially utilities, which are very heavy borrowers. They’ve already had tremendous runs—things like Duke Energy (DUK) and NextEra (NEE). However, I think I’m going up more if we’re going to get interest rates down to 3%. Even if we get them down to 3.5 or 4%, the rallies in all the interest-sensitive sectors will continue.
Q: If the global economy recovers, would that lead to increased inflation and an increase in interest rates?
A: In an old-fashioned economy—one driven by, for instance, the car industry—yes, that would be happening. Back then, wage settlements with the United Auto Workers had the biggest impact on your portfolio. In the modern economy, technology is dropping prices so fast that even during periods of high growth, prices are still falling. The example I give is: the cheapest PC you could get in 1990 cost $5,000, which was a Compact. Now you could get the same computer for $300. You can bet going forward that eliminating all port workers will also be highly disinflationary; we won’t have to pay those $200,000 salaries for port workers, so that goes to zero. You can cite literally hundreds of examples in the economy where technology is collapsing prices.
Q: Should I go with a safe strategy now or increase my risk?
A: I think if we don’t sell off in the next two weeks, you have to buy the hell out of the market because we have had every excuse to sell off, and the market just won’t do it. Middle Eastern war, uncertainty in the election, gigantic hurricanes which will definitely shrink economic growth this year, the port strike and the Boeing strike, which will take a month out of GDP growth on the coast—and it still won’t go down. So, if you throw bad news on a market and it still won’t go down, you buy the heck out of it. The last chance for this to go down is literally this month. After that, the seasonals turn strongly positive. What’s the opposite of “sell in May, and go away”? It’s “buy in October and ring the cash register.”
Q: Will gold (GLD) go to 3,000/oz soon?
A: Yes. That’ll happen on the next Fed interest rate cuts as we go into the end of the year. We'll probably get two more cuts of 25 basis point cuts. Gold loves that. And guess what? Chinese have nowhere else to save their money except gold. So, yes, I'm looking for $3,000 and then $4,500 after that. You definitely want to own gold.
Q: Should I dump Chinese (FXI) stocks after this short-term spike?
A: Yes, for the short term, but not for the long term. Some kind of recovery will come, because if this Chinese stimulus package fails, they'll bring another one, and you'll get another one of those monster rallies. So, if you're a long-term holder, then I would stay in. The blue-chip stocks are incredibly cheap. But I still believe the best China plays are in the US, in oil (USO), copper (FCX), iron ore (BHP), and gold (GLD).
Q: Is oil headed down after the Israel and Lebanon war?
A: That really isn’t the main factor in the oil market. These people have been fighting for a century, literally, and any geopolitical influence has not had any sustainable impact on the price of oil. Really, the sole driver for oil prices now is China. You get China back in the game, oil goes back to $95 a barrel. If China remains in recession, then oil stays low and goes back to the $60s. It’s purely a China play. The US economy will continue to grow, but most of our oil consumption is domestic now—we are the world’s largest oil producer at 13.5 million barrels a day. We do not need any Middle Eastern oil anymore, really, we’re just running out our existing contracts.
Q: Do you think cryptocurrencies will have a bull market with the stock market?
A: No, I don’t. Cryptocurrencies did well when we had a liquidity surplus and an asset shortage. Now, we have the opposite; we have a liquidity shortage and an asset surplus, and the theft problem is still rampant with the cryptocurrencies keeping most institutional and individual investors out of that market.
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, select your subscription (GLOBAL TRADING DISPATCH, TECHNOLOGY LETTER, or Jacquie's Post), then click on 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
"Everything is expensive now. Worries about the future can cause safe assets to become highly-priced. I call it the 'Titanic Effect.' When the Titanic was going down, people would pay a fortune for anything that floats. We may be in a Titanic situation now," said my buddy, Nobel Prize winner Robert Shiller.
Global Market Comments
October 10, 2024
Fiat Lux
Featured Trade:
(PROSHARES ULTRA SILVER ETF LEAPS),
(AGQ)
Trade Alert - (AGQ) – BUY
BUY the ProShares Ultra Silver January 2026 $49-$50 out-of-the-money vertical Bull Call spread LEAPS at $0.30 or best
Opening Trade
10-10-2024
expiration date: January 16, 2026
Number of Contracts = 1 contract
There are a few times in your life when bold action and extreme leverage are called for. This is one of those times.
Having 6,000 paid subscribers does have its benefits.
It gives me 6,000 reliable information sources in all 50 states and 135 countries. I pick up a lot of pretty interesting information from this network. It’s like having the “Baker Street Irregulars” on call that Sherlock Holmes frequently relied on.
So today, I learned from one of the largest car importers in the United States that the East and Gulf Coast port strike would knock 0.5% of GDP growth in Q3. Everything from bananas to car parts is trapped at sea.
A few minutes later, I received a call from an analyst in the Southeast US informing me that Hurricane Helene would knock a full 1.0% off of growth.
Add these two events together, and the Fed will read these as a recession that will crush inflation and accelerate the need for interest rate cuts. There is only one possible response to these developments.
You need to run out and buy as much gold (GLD) and silver (SLV) RIGHT NOW!
In addition, the blockbuster Chinese stimulus package will lead to greater savings, and there is only one place people in the Middle Kingdom can save right now, and that is through buying gold.
I am therefore buying the ProShares Ultra Silver (AGQ) January 2026 $49-$50 out-of-the-money vertical Bull Call spread LEAPS at $0.30 or best.
DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES.
If you don’t do options, buy the stock. My target for (AGQ) in 2025 is $85, up 99%.
This is a bet that ProShares Ultra Silver (AGQ) will not fall below $50.00 by the January 16, 2026 option expiration in 15 months.
To learn more about the company, please click here to visit their website.
Don’t pay more than $0.45 or you’ll be chasing on a risk/reward basis.
Please note that these options are illiquid, and it may take some work to get in or out. Executing these trades is more an art than a science.
Let’s say the ProShares Ultra Silver (AGQ) January 2026 $49-$50 out-of-the-money vertical Bull Call spread LEAPS are showing a bid/offer spread of $0.20-$0.40. Divide your money into five pieces and enter a good-until-cancelled orders for one contract at $0.30, another for $0.32, another for $0.34, another for $0.36, and a final one at $0.38.
Eventually, you will enter a price that gets filled immediately. That is the real price. Then, enter an order for your full position at that real price.
Notice that the day-to-day volatility of LEAPS prices is minuscule, less than 10%, since the time value is so great, and you have a long position simultaneously offset by a short one.
This means that the day-to-day moves in your P&L will be small. It also means you can buy your position over the course of a month, just entering new orders every day. I know this can be tedious but getting screwed by overpaying for a position is even more tedious.
Look at the math below, and you will see that a 16.93% rise in (AGQ) shares, or an 8.47% rise in silver (SLV) over 15 months will generate a 233% profit with this position, such is the wonder of LEAPS. That gives you an implied leverage of 27.51:1 across the $49-$50 space. LEAPS stands for Long-Term Equity Anticipation Securities.
Only use a limit order. DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES. Just enter a limit order and work it.
Here are the specific trades you need to execute this position:
Buy 1 January 2026 (AGQ) $49.00 calls at………….………$12.00
Sell short 1 January 2026 (SLB) $50.00 calls at….,………$11.70
Net Cost:………………………….………..………….….................$0.30
Potential Profit: $1.00 - $0.30 = $0.70
(1 X 100 X $0.70) = $70 or 233% in 15 months.
To see how to enter this trade in your online platform, please look at the order ticket below, which I pulled off of Interactive Brokers.
If you are uncertain on how to execute an options spread, please watch my training video on “How to Execute a Vertical Bull Call Debit Spread” by clicking here at
https://www.madhedgefundtrader.com/ltt-vbcs/
The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you. The difference between the bid and the offer on these deep in-the-money spread trades can be enormous.
Don’t execute the legs individually or you will end up losing much of your profit. Spread pricing can be very volatile on expiration months farther out.
Keep in mind that these are ballpark prices at best. After the alerts go out, prices can be all over the map.
Global Market Comments
October 9, 2024
Fiat Lux
Featured Trade:
(THE MAD HEDGE SEPTEMBER 17-19 SUMMIT REPLAYS ARE UP),
(SCHLUMBERGER LEAPS),
(SLB)
Trade Alert - (SLB) – BUY
BUY the Schlumberger (SLB) January 2026 $47.50-$50 out-of-the-money vertical Bull Call spread LEAPS at $0.90 or best
Opening Trade
10-9-2024
expiration date: January 16, 2026
Number of Contracts = 1 contract
China certainly brought out a big bazooka with its massive stimulus package last week. If this one proves inadequate, they can bring out many more. Government agencies have also promised to invest $1 billion into Chinese stock markets. China is no longer the poor country I knew 50 years ago. For a start, they own $869 billion worth of US Treasury bonds.
And what is the best leverage China plays out there?
Oil.
It just so happens that energy is virtually the only cheap sector in the stock market and the worst stock market performer of 2024.
Oil consumption in China amounted to 16.6 million barrels per day in 2023, up from 15 million barrels daily in the prior year. That is 17.2% of the 96.4 million barrels in global oil production last year. Between 1990 and 2023, figures increased by more than 14 million barrels per day, up from 1 million barrels a day.
It has been China’s lagging economy that has dragged down the price of West Texas Intermediate Crude by 31%, from $94 a barrel to $65. China has published GDP growth figures this year of 5%, but most who know China well believe the real figure is close to zero. Get China back in business, and we could revisit $94 in no time.
We have just seen a healthy 34% correction in the shares of California-based oil major Schlumberger (SLB), and I am starting to salivate.
If you don’t do options, buy the stock. My target for (SLB) in 2025 is $65, up 20.3%.
I am therefore buying the Schlumberger (SLB) January 2026 $47.50-$50 out-of-the-money vertical Bull Call spread LEAPS at $0.90 or best
DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES.
Simply enter your limit order, wait five minutes, and if you don’t get done, cancel your order and increase your bid by 10 cents with a second order.
This is a bet that Schlumberger (SLB) will not fall below $50.00 by the January 16, 2026 option expiration in 15 months.
To learn more about the company, please visit their website at https://www.slb.com
Don’t pay more than $1.30 or you’ll be chasing on a risk/reward basis.
Please note that these options are illiquid, and it may take some work to get in or out. Executing these trades is more an art than a science.
Let’s say the Schlumberger (SLB) January 2026 $47.50-$50 out-of-the-money vertical Bull Call spread LEAPS at $0.90 are showing a bid/offer spread of $0.90-$1.50. Enter a good-until-cancelled order for one contract at $0.90, another for $1.00, another for $1.10, another for $1.20, and so on. Eventually, you will enter a price that gets filled immediately. That is the real price. Then, enter an order for your full position at that real price.
Notice that the day-to-day volatility of LEAPS prices is minuscule, less than 10%, since the time value is so great, and you have a long position simultaneously offset by a short one.
This means that the day-to-day moves in your P&L will be small. It also means you can buy your position over the course of a month just entering new orders every day. I know this can be tedious but getting screwed by overpaying for a position is even more tedious.
Look at the math below, and you will see that a 13.79% rise in (SLB) shares over 15 months will generate a 177% profit with this position, such is the wonder of LEAPS. That gives you an implied leverage of 12.84:1 Across the $47.50-$50 space. LEAPS stands for Long Term Equity Anticipation Securities.
(SLB) doesn’t even have to get to a new all-time high to make the max profit. It only has to get back to $50.00, where it traded in July.
Here are the specific trades you need to execute this position:
Buy 1 January 2026 (SLB) $47.50 calls at………….………$5.60
Sell short 1 January 2026 (SLB) $50.00 calls at…………$4.70
Net Cost:………………………….………..………….…..............$0.90
Potential Profit: $2.50 - $0.90 = $1.60
(1 X 100 X $1.60) = $160 or 177% in 15 months.
To see how to enter this trade in your online platform, please look at the order ticket below, which I pulled from Interactive Brokers.
If you are uncertain on how to execute an options spread, please watch my training video on “How to Execute a Vertical Bull Call Debit Spread” by clicking here at
https://www.madhedgefundtrader.com/ltt-vbcs/
The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you. The difference between the bid and the offer on these deep in-the-money spread trades can be enormous.
Don’t execute the legs individually or you will end up losing much of your profit. Spread pricing can be very volatile on expiration months farther out.
Keep in mind that these are ballpark prices at best. After the alerts go out, prices can be all over the map.
Global Market Comments
October 8, 2024
Fiat Lux
Featured Trade:
(OCCIDENTAL PETROLEUM LEAPS),
(OXY)
Trade Alert - (OXY) – BUY
BUY the Occidental Petroleum (OXY) January 2026 $60-$62.50 out-of-the-money vertical Bull Call spread LEAPS at $0.80 or best
Opening Trade
10-8-2024
expiration date: January 16, 2026
Number of Contracts = 1 contract
China certainly brought out a big bazooka with its massive stimulus package last week. If this one proves inadequate, they can bring out many more. China is no longer the poor country I knew 50 years ago. For a start, they own $869 billion worth of US Treasury bonds.
And what is the best leverage China plays out there?
Oil.
It just so happens that energy is virtually the only cheap sector in the stock market and the worst stock market performer of 2024.
Oil consumption in China amounted to 16.6 million barrels per day in 2023, up from 15 million barrels daily in the prior year. That is 17.2% of the 96.4 million barrels in global oil production last year. Between 1990 and 2023, figures increased by more than 14 million barrels per day, up from 1 million barrels a day.
It has been China’s lagging economy that has dragged down the price of West Texas Intermediate Crude by 31%, from $94 a barrel to $65. China has published GDP growth figures this year of 5%, but most who know China well believe the real figure is close to zero. Get China back in business, and we could revisit $94 in no time.
We have just seen a healthy 32% correction in the shares of California-based oil major Occidental Petroleum (OXY), and I am starting to salivate. Finally, I can put to work my 50-year relationship with the company (see research piece below).
If you don’t do options, buy the stock. My target for (OXY) in 2025 is $74, up 37%.
I am therefore buying the Occidental Petroleum (OXY) January 2026 $60-$62.50 out-of-the-money vertical Bull Call spread LEAPS at $0.80 or best.
DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES.
Simply enter your limit order, wait five minutes, and if you don’t get done, cancel your order and increase your bid by 5 cents with a second order.
This is a bet that Occidental Petroleum (OXY) will not fall below $62.50 by the January 16, 2026, option expiration in 15 months.
To learn more about the company, please visit their website at https://www.oxy.com
Don’t pay more than $1.20 or you’ll be chasing on a risk/reward basis.
Please note that these options are illiquid, and it may take some work to get in or out. Executing these trades is more an art than a science.
Let’s say the Occidental Petroleum (OXY) January 2026 $60-$62.50 out-of-the-money vertical Bull Call spread LEAPS are showing a bid/offer spread of $0.50-$1.50. Enter an order for one contract at $0.50, another for $0.60, another for $0.70 and so on. Eventually, you will enter a price that gets filled immediately. That is the real price. Then, enter an order for your full position at that real price.
Notice that the day-to-day volatility of LEAPS prices is minuscule, less than 10% since the time value is so great and you have a long position simultaneously offset by a short one.
This means that the day-to-day moves in your P&L will be small. It also means you can buy your position over the course of a month, just entering new orders every day. I know this can be tedious but getting screwed by overpaying for a position is even more tedious.
Look at the math below, and you will see that a 15.74% rise in (OXY) shares will generate a 212% profit with this position, such is the wonder of LEAPS. That gives you an implied leverage of 13.46:1. Across the $60-$62.50 space. LEAPS stands for Long-Term Equity Anticipation Securities.
(OXY) doesn’t even have to get to a new all-time high to make the max profit. It only has to get back to $62.50, where it traded in July.
Only use a limit order. DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES. Just enter a limit order and work it.
Here are the specific trades you need to execute this position:
Buy 1 January 2026 (OXY) $60 calls at………….…....……$5.25
Sell short 1 January 2026 (OXY) $62.50 calls at…………$4.45
Net Cost:………………………….………..………….…...............$0.80
Potential Profit: $2.50 - $0.80 = $1.70
(1 X 100 X $1.70) = $170 or 212% in 15 months.
To see how to enter this trade in your online platform, please look at the order ticket below, which I pulled off of Interactive Brokers.
If you are uncertain on how to execute an options spread, please watch my training video on “How to Execute a Vertical Bull Call Debit Spread” by clicking here.
The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you. The difference between the bid and the offer on these deep-in-the-money spread trades can be enormous.
Don’t execute the legs individually, or you will end up losing much of your profit. Spread pricing can be very volatile on expiration months farther out.
Keep in mind that these are ballpark prices at best. After the alerts go out, prices can be all over the map.
Take a Look at Occidental Petroleum (OXY)
There are a lot of belles at the ball, but you can’t dance with all of them.
While a student at UCLA in the early seventies, I took a World Politics course, which required me to pick a country, analyze its economy, and make recommendations for its economic development.
I chose Algeria, a country where I had spent the summer of 1968 caravanning among the Bedouins, crawling out of the desert starved, lice-ridden, and half-dead.
I concluded that the North African country should immediately nationalize the oil industry and raise oil prices from $3/barrel to $10. I knew that Los Angeles-based Occidental Petroleum (OXY) was interested in exploring for oil there, so I sent my paper to the company for review.
They called the next day and invited me to their imposing downtown headquarters, then the tallest building in Los Angeles.
I was ushered into the office of Dr. Armand Hammer, one of the great independent oil moguls of the day, a larger-than-life figure who owned a spectacular impressionist art collection and who confidently displayed a priceless Fabergé egg on his desk. He said he was impressed with my paper and then spent two hours grilling me.
Why should oil prices go up? Who did I know there? What did I see? What was the state of their infrastructure? Roads? Bridges? Rail lines? Did I see any oil derricks? Did I see any Russians? I told him everything I knew, including the two weeks in an Algiers jail for taking pictures in the wrong places.
His parting advice was to never take my eye off the oil industry, as it is the driver of everything else. I have followed that advice ever since.
When I went back to UCLA, I told a CIA friend of mine that I had just spent the afternoon with the eminent doctor (Marsha, call me!). She told me that he had been a close advisor of Vladimir Lenin after the Russian Revolution, had been a double agent for the Soviets ever since, that the FBI had known this all along, and was currently funneling illegal campaign donations to President Richard Nixon.
Shocked, I kicked myself for going into an interview so ill-prepared and had missed a golden opportunity to ask some great questions. I never made that mistake again.
Some 50 years later, while trolling the markets for great buying opportunities set up by the recent China bazooka, I stumbled across (OXY) once more (click here for their site at http://www.oxy.com /). (OXY) has a minimal offshore presence, nothing in deep water, and huge operations in the Middle East and South America.
OXY’s horizontal multistage fracturing technology will enable it to dominate California shale. The company offers a respectable dividend of 1.65% and has a submarket earnings multiple of only 13.7 times. Need I say more?
Oh, and I got an A+ on the paper, and the following year, Algeria raised the price of oil to $12.
Lenin and Hammer
A Faberge Egg