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april@madhedgefundtrader.com

The Market Outlook for the Week Ahead, or Goldilocks is Back!

Diary, Newsletter

After too long of an absence, Goldilocks has moved back in once again. She arrived with Santa Claus too, a month ahead of schedule.

Can life get any better than that, Goldilocks and Santa Claus?

Santa confused Thanksgiving with Christmas this year. I saw it coming a mile off, and it’s not because my failing eyesight has suddenly improved.

Since October 26, Mad Hedge followers have earned an impressive 25%. We are on track to top an 86.5% profit for 2023, the best in the 15-year history of the service.

Concierge members who own our substantial LEAPS portfolio, now at 33 names, are up much more.

I hate to boast but let me take my victory lap. I earned it.

Stocks and bonds should continue rising but at a much slower rate. More likely is the diversification of the rally from Big Tech and big bonds (TLT) to medium tech, commodities (FCX), industrials (CAT), junk bonds (JNK), (HYG), and REITS (NLY).

Buy everything on dips.

And here are your assumptions. Collapsing energy prices will lead the inflation rate down to the Fed’s well-publicized 2% inflation rate target in the coming months. Accelerating technology and AI will reign in this year’s runaway wage increases, if not reverse them.

The UAW’s 25% salary increase over four years will only hasten the demise of General Motors (GM), as well as their own. Interest rates have to take a swan dive, supercharging all risk assets.

Goldilocks is not moving in for a fling, but a long-term relationship. Your retirement funds will love it.

Last spring, with 75 feet of snow over the winter, the rivers pouring out of the High Sierras were at record levels. That brought the solo hobbyist gold miners out in force.

It is widely believed that the 1849 gold rush extracted only 10% of the gold in the mountains and the remaining 90% is still up there. Heavy rainfalls like we received last winter flushed out some of the rest.

Rounding a turn in the river, I spotted a group of modern-day 49ers equipped with shoulder-high waders and inner tubes floating pumps and sluice boxes. So I parked the car and waded out in the freezing, fast-running water to get an update on this market.

One man proudly showed off a one-ounce gold nugget that he had found only that morning worth about $1,800. Nuggets are worth more than spot gold because they attract a collector’s market.

A record eight-ounce nugget was discovered in a river near Merced the week earlier. This year, the state government in Sacramento issued a record number of gold mining licenses.

I explained to my newfound friend that he should hang on to his gold because it would be worth a lot more the following year. Inflation was falling and that would eventually induce the Federal Reserve to cut interest rates sharply.

That meant less interest rate competition for gold and silver, which yielded nothing taking prices upward. Personally, I think this gold could hit $3,000 an ounce and silver $50 an ounce in 2025.

In addition, there was a constant bid from Russia, China, and North Korea looking to dodge financial sanctions. Money managers are also picking up the yellow metal as a hedge against any unanticipated volatility in 2024.

My friend looked at me quizzically, wondering if perhaps I was some kind of nutjob who had waded out mid-river to rob him of his prized nugget.

I’ll do anything to gain a trading edge, even freezing off my cajones.

It was a tough week for 90- and 100-year-olds with the passing of Charlie Munger, Henry Kissinger, and Supreme Court Justice Sandra Day O’Connor. I had the privilege of knowing all three.

I was in the White House Press Room one day when the press secretary James Brady asked if any of the press could ride a horse. Sheepishly, I was the only one to raise a hand.

I was ordered to pick up my riding boots and report to the White House Stables on 17th Street. I had no idea why. Back then, even the press didn’t ask some questions.

When I arrived, I understood why. Supreme Court Justice Sandra Day O’Connor was already there kitted out ready to ride. It turns out that the justice from Arizona rode weekly with Ronald Reagan. This week, an international crisis prevented the president from doing so. I was the fill-in escort.

We talked about growing up in the Colorado Desert, and pre-air conditioning, as we enjoyed a peaceful ride along the Potomac River. A security detail kept a safe distance.

A lot of history is being in the right place at the right time.

The clock is ticking.

November closed out at +15.54%. My 2023 year-to-date performance is still at an eye-popping +81.71%. The S&P 500 (SPY) is up +19.73% so far in 2023. My trailing one-year return reached +80.80% versus +18.19% for the S&P 500.

That brings my 15-year total return to +678.90%. My average annualized return has exploded to +52.26%, another new high, some 2.48 times the S&P 500 over the same period.

I am 90% fully invested, with longs in (MSFT), (NLY), (BRK/B), (CCJ), (GOOGL), (SNOW), (CAT), and (XOM). I have one short in the (TLT). I took profits on (CRM) on Friday.

Some 56 of my 61 trades this year have been profitable this year.

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, December 4, at 8:30 AM EST, the US Factory Orders are out.

On Tuesday, December 5 at 2:30 PM, the JOLTS Job Openings Report is released.

On Wednesday, December 6 at 8:30 AM, the ADP Private Employment Report is published.

On Thursday, December 7 at 8:30 AM, the Weekly Jobless Claims are announced.

On Friday, December 8 at 2:00 PM the Baker Hughes Rig Count is printed and at 2:30 PM, the November Nonfarm Payroll Report is published.

As for me, back in the early 1980s, when I was starting up Morgan Stanley’s international equity trading desk, my wife Kyoko was still a driven Japanese career woman.

Taking advantage of her near-perfect English, she landed a prestige job as the head of sales at New York’s Waldorf Astoria Hotel.

Every morning we set off on our different ways, me to Morgan Stanley’s HQ in the old General Motors Building on Avenue of the Americas and 47th street and she to the Waldorf at Park and 34th.

One day, she came home and told me this little old lady living in the Waldorf Towers needed an escort to walk her dog in the evenings once a week. Back in those days, the crime rate in New York was sky-high, and only the brave or the reckless ventured outside after dark.

I said “Sure” “What was her name?”

Jean MacArthur.

I said THE Jean MacArthur?

She answered “Yes.”

Jean MacArthur was the widow of General Douglas MacArthur, the WWII legend. He fought off the Japanese in the Philippines in 1941 and retreated to Australia in a dramatic night PT Boat escape.

He then led a brilliant island-hopping campaign, turning the Japanese at Guadalcanal and New Guinea. My dad was part of that operation, as were the fathers of many of my Australian clients. That led all the way to Tokyo Bay where MacArthur accepted the Japanese in 1945 on the deck of the battleship USS Missouri.

The MacArthur then moved into the Tokyo embassy where the general ran Japan as a personal fiefdom for seven years, a residence I know well. That’s when Jean, who was 18 years the general’s junior, developed a fondness for the Japanese people.

When the Korean War began in 1950, MacArthur took charge. His landing at Inchon Harbor broke the back of the invasion and was one of the most brilliant tactical moves in military history. When MacArthur was recalled by President Truman in 1952, he had not been home for 13 years.

So it was with some trepidation that I was introduced by my wife to Mrs. MacArthur in the lobby of the Waldorf Astoria. On the way out, we passed a large portrait of the general who seemed to disapprovingly stare down at me taking out his wife, so I was on my best behavior.

To some extent, I had spent my entire life preparing for this job.

I had stayed at the MacArthur Suite at the Manila Hotel where they had lived before the war. I knew Australia well. And I had just spent a decade living in Japan. By chance, I had also read the brilliant biography of MacArthur by William Manchester, American Caesar, which had only just come out.

I also competed in karate at the national level in Japan for ten years, which qualified me as a bodyguard. In other words, I was the perfect after-dark escort for Midtown Manhattan in the early eighties.

She insisted I call her “Jean”; she was one of the most gregarious women I have ever run into. She was grey-haired, petite, and made you feel like you were the most important person she had ever run into.

She talked a lot about “Doug” and I learned several personal anecdotes that never made it into the history books.

“Doug” was a staunch conservative who was nominated for president by the Republican party in 1944. But he pushed policies in Japan that would have qualified him as a raging liberal.

It was the Japanese that begged MacArthur to ban the army and the navy in the new constitution for they feared a return of the military after MacArthur left. Women gained the right to vote on the insistence of the English tutor for Emperor Hirohito’s children, an American Quaker woman. He was very pro-union in Japan. He also pushed through land reform that broke up the big estates and handed out land to the small farmers.

It was a vast understatement to say that I got more out of these walks than she did. While making our rounds, we ran into other celebrities who lived in the neighborhood who all knew Jean, such as Henry Kissinger, Ginger Rogers, and the UN Secretary-General.

Morgan Stanley eventually promoted me and transferred me to London to run the trading operations there, so my prolonged free history lesson came to an end.

Jean MacArthur stayed in the public eye and was a frequent commencement speaker at West Point where “Doug” had been a student and later the superintendent. Jean died in 2000 at the age of 101.

I sent a bouquet of lilies to the funeral.

Kyoko passed away in 2002.

In 2014, Chinas Anbang Insurance Group bought the Waldorf Astoria for $1.95 billion, making it the most expensive hotel ever sold. Most of the rooms were converted to condominiums and sold to Chinese looking to hide assets abroad.

The portrait of Douglas MacArthur is gone too. During the Korean War, he threatened to drop atomic bombs on China’s major coastal cities.

 

 

Good Luck and Good Trading,

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

 

 

 

 

 

 

 

 

 

https://www.madhedgefundtrader.com/wp-content/uploads/2022/08/macarthur-family-e1661786429655.jpg 345 450 april@madhedgefundtrader.com https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png april@madhedgefundtrader.com2023-12-04 09:02:522023-12-04 09:30:03The Market Outlook for the Week Ahead, or Goldilocks is Back!
april@madhedgefundtrader.com

December 4, 2023 - Quote of the Day

Diary, Newsletter, Quote of the Day

“You want to hire the guy with an IQ of 130 who thinks it’s 120. The guy whose IQ is 150 but thinks it’s 170 will kill you every time.”
said Warren Buffet’s partner, Charlie Munger.

 

https://www.madhedgefundtrader.com/wp-content/uploads/2023/12/formula-baby-genius.png 596 1014 april@madhedgefundtrader.com https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png april@madhedgefundtrader.com2023-12-04 09:00:582023-12-04 09:29:56December 4, 2023 - Quote of the Day
april@madhedgefundtrader.com

December 1, 2023

Diary, Newsletter, Summary

Global Market Comments
December 1, 2023
Fiat Lux

Featured Trade:

(NOVEMBER 29 BIWEEKLY STRATEGY WEBINAR Q&A),
($VIX), UNG), (PANW), (SNOW), (HACK), (MSFT), (AAPL), (FCX), (TSLA), (F), (GM), (LLY), (CVX), (XOM), (RIVN), (TLT)

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 april@madhedgefundtrader.com https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png april@madhedgefundtrader.com2023-12-01 09:04:522023-12-01 12:55:29December 1, 2023
april@madhedgefundtrader.com

November 29 Biweekly Strategy Webinar Q&A

Diary, Newsletter

Below please find subscribers’ Q&A for the November 29 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Silicon Valley, CA.

Q: How much longer can the United States Natural Gas Fund (UNG) remain at such low levels?

A: They call this contract “The Widow Maker” for a reason. As long as the weather is warmer than usual, which has been a problem, (UNG) will remain cheap. We actually got up to $8 in the UNG a month ago and have since come back to $5.50. There are no signs of an energy shortage anywhere right now with the collapse of oil prices from $96 down to $70, so this could be the worst thing in the world if global warming continues. But I'm keeping my position. It’s basically worthless now anyway, but that has been a real shocker this year in the energy community—how cheap natural gas has gotten. And that is after supplying all on Germany’s Natgas needs with no notice.

Q: I still have Palo Alto Networks (PANW) open, what should I do?

A: You’re pretty much at a maximum profit now, so you might as well run it into the expiration because, at a Volatility Index ($VIX) of $12, there just aren’t many other attractive trades to put on right now. You’ll see that when we go through the charts. Everything has just had a massive move in our favor. It’s actually the sharpest move up in market history, so you don't want to go chasing things, and you certainly don't want to go short because that is against the long, medium, and short-term trends.

Q: Which of your positions would you suggest we can still buy right now?

A: None, except for two-year US treasury Bills to lock in high-interest rates at 4.8%. Everything is just wildly expensive on a short-term basis.

Q: When do you expect Freeport McMoRan (FCX) and the other commodities to rise?

A: Towards the middle of the year, the market will shift entirely out of technology and into domestic industrials and commodities, and we should expect exponential moves in those areas also as the economy recovers and interest rates fall. We are going to start putting LEAPS out on those pretty soon because those are the bargain of the century prices right now.

Q: I’m new to the program, and I noticed all of the trades are done as options spreads. What are the benefits of doing it in this way versus owning the underlying?

A: You get a leverage of 10X versus owning the underlying with limited risk. You also make money when markets do nothing because you are also short volatility when you do an options spread. In fact, every trade alert we send out gives you three choices usually: buy the stock, buy the options spread, or buy the ETF. So that way, you can cater your trading to your level of experience and risk tolerance. And if you want to know more, just go to our website, log in, and search for call spreads—there will be a vast library talking about the benefits of doing call spreads and how to execute them.

Q: What’s your favorite sector for next year?

A: Always a popular question for this time of the year, and that’s an easy answer.

Number one: cybersecurity. That means Palo Alto Networks (PANW), which we’re long, Snowflake (SNOW), which we’re also long, and Nvidia (NVDA), which we were long in October before it went completely nuts—it turns out that cyber security has a huge appetite for the high-end processors that Nvidia makes. There’s also an ETF on that—HACK, if you want lower volatility; so there’s three or four names for you right there. If I had to pick a single stock, the safest stock, I’d pick Microsoft (MSFT) right here; they have a 70% market share in PC operating systems worldwide, they are ramping up their efforts in AI with the ownership of ChatGPT, and it's really literally the safest stock in the market—likely to go up 30% next year. So if you can handle 30% plus a 0.80% dividend, Microsoft is your pick, but you might want to think about selling it mid-year when Freeport McMoRan (FCX) becomes my number one pick of the year.

Q: Is it too late to buy Microsoft (MSFT)?

A: Yes, wait for either a pullback of 10% or a flat line move sideways for a month, which is also called a time correction.

Q: I have several large companies I deal with that have all been hacked in the last couple of months. Several have been locked out of their systems or shut down for a month.

A: Yes, that’s absolutely going on everywhere. Also, governments have become favorite targets for hacking because they have the least amount of money to spend on cybersecurity. They are also the least sophisticated. So again, cybersecurity is a great business to be in; and by the way, I think we’re having gigantic moves in the cyber sector today. Palo Alto Networks (PANW) is up $11.61—who can beat that? That’s nice, watching your longs going up in double digits every day.

Q: Is Apple (APPL) going into the banking business now that they and Goldman are going through a divorce?

A: Yes, Apple has been slowly sneaking into the banking business for years. Look no further than Apple Pay. They have several advantages they can bring to bear here, like all of you personal information they could possibly imagine.

Q: I don’t like General Motors (GM) even though they’ve announced buybacks and dividend increases—too concerned about EV slack, market, and labor costs.

A: I couldn’t agree with you more; I think (GM) goes under in 10 years. They’ll never catch up on EVs, and basically, the company will either sell Teslas under license or be sold for scrap metal like they were back in 2008. And it really is the height of hubris to announce a 17% share buyback, which is enormous—10 billion dollars—right after they pleaded poverty with the unions to get them to agree to only a 25% wage increase. So it just absolutely fails the smell test on every front.

Q: Do you see healthcare making a big move as larger companies are really beaten down?

A: You’ll have rallies in healthcare, but basically, they’re a defensive sector and the last thing in the world that you want in a runaway bull market is a defensive sector. You will get single stock moves like Eli Lilly (LLY) from people who are specifically playing hot areas like weight loss drugs and other companies developing cancer cures with AI. That’ll be another big story next year.

Q: Any chance for Ford (F) at this point?

A: Not in the long term; again, you go back to that market share chart I showed you—Ford is only at a 7% market share in EVs and 14 years behind Tesla (TSLA), which has a 52% share. I don’t think anybody has a chance. What may happen is Tesla will take over Ford at some point, just to get at the factories; but again it will be a “pennies on the dollar” offer.

Q: What about Toyota (TM); how long can their hybrid push last?

A: A long time, because for a lot of people, hybrids are the right solution—especially people who have to go long distances and don't have time to recharge or don't have access to recharging. The hybrids that they have now are really great. They run the first 50, 60, or 70 miles solely on battery power. And I know people who have hybrids with short commutes who still have the original tank of gas the car came with when they bought it new a year ago. All-electric isn't perfect for everyone; hybrids will catch what's left of that market. Also, hybrids have thousands more parts than electric cars do. So the profit margin will never be what it is on an EV.

Q: Will Chevron (CVX) and ExxonMobil (XOM) go up?

A: Oil does absolutely, you can expect 20-30% gains on any recovery in oil, and that’s why we own them. But it’s a 2024 story.

Q: What do you think about Rivian (RIVN) here?

A: It's a long-term play; we have the LEAPS in them. The stock is just about recovered to our costs and they're increasing production. If anyone else is going to make it in the EV sector, it will be Rivian, who is run by some genius from MIT. So yeah, I would be buying dips in Rivian but I wouldn't chase.

Q: How will the iShares 20 Plus Year Treasury Bond ETF (TLT) perform in the next few months?

A: Kind of late for the LEAPS. That was really an October play, but any $ 5-point pullback and I will be in there with LEAPS because I think (TLT) hits $120 next year.

Q: Please explain the demise of Crypto.

A: Crypto did great when we had a cash surplus and an asset shortage like in 2019-2021. We now have the opposite—a cash shortage and an asset oversupply. Crypto doesn't do well in that situation. On top of that, the guys who runs every major crypto platform are looking at prison time now because of massive widespread theft. Although you do see crypto has gone up nearly a hundred percent this year, that doesn't back out all the Crypto losses from theft. It would be interesting to find out what the true performance of Crypto would be if you included the 50% that was stolen by the Crypto custodians in one way or the other. So Crypto is great when stocks were too expensive, but now they're all cheap and they pay dividends. So, much better fish to fry these days as opposed to the last market top.

Q: Do you think the election will have any effect on the stock market next year?

A: Absolutely not. Even a government shutdown won't have an effect because the fundamentals are now so powerful. We're basically discounting falling interest rates for the next 5 years. Your retirement funds will absolutely love that.


To watch a replay of this webinar with all the charts, bells, whistles, and classic rock music, just log on 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 Stay Healthy,

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

 

 

 

 

 

 

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 april@madhedgefundtrader.com https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png april@madhedgefundtrader.com2023-12-01 09:02:502023-12-01 12:55:25November 29 Biweekly Strategy Webinar Q&A
april@madhedgefundtrader.com

December 1, 2023 - Quote of the Day

Diary, Newsletter, Quote of the Day

“What I needed to get a head was to outperform the idiots. Fortunately, there is a large supply of idiots,” said Warren Buffet’s lat partner, Charlie Munger.

 

https://www.madhedgefundtrader.com/wp-content/uploads/2016/11/jim-carrey.jpg 207 312 april@madhedgefundtrader.com https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png april@madhedgefundtrader.com2023-12-01 09:00:532023-12-01 12:55:20December 1, 2023 - Quote of the Day
april@madhedgefundtrader.com

November 30, 2023

Diary, Newsletter, Summary

Global Market Comments
November 30, 2023
Fiat Lux

Featured Trade:

(SO WHAT IS YOUR “INFLUENCER” SCORE)
(REPORT FROM THE ORIENT EXPRESS)

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 april@madhedgefundtrader.com https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png april@madhedgefundtrader.com2023-11-30 09:06:032023-11-30 14:45:48November 30, 2023
MHFTR

Report from The Orient Express

Diary, Newsletter

I was awoken from a dead sleep in the middle of the night in my suite on the Orient Express by a juddering halt and the smell of burning breaks in the air.

We were somewhere high in the Swiss Alps, and every single passenger on the all-first-class train had to be thinking that a murder had just been discovered.

It turned out that in the darkness we had hit a 400-pound wild boar astride the tracks. We spent four hours on a remote siding waiting for Swiss National Rail to deliver us a new engine.

I elicited chuckles when I ordered boar for lunch the next day. The matre’d assured me it wasn’t ready yet, as the meat had to soak in vinegar for 48 hours before cooking. That’s the kind of thing you only hear in Europe.

I boarded the train that morning at London’s Victoria Station in anticipation of the trip of a lifetime. Venice Simplon Orient Express didn’t disappoint, although I would not be surprised if the IRS questioned the $8,500 cost for the 34-hour trip as a business expense on my tax return this year.

The legendary train has featured in a dozen films (James Bond and Agatha Christie), and two dozen television shows, and played a major part in countless novels. You can even buy a video game.

The modern Orient Express has three different trains.

From Victoria Station in London to Folkstone on the coast, I traveled on a vintage British train that was showing its age.

Then I boarded a bus, which drove on to a flatbed rail car that whisked us through the tunnel 1,500 feet under the English Channel. There, we claustrophobes closed our eyes and held our breath for 20 minutes.
The real luxury started when I boarded a vintage 1924 Pullman first-class sleeping car in Calais, France, lovingly restored to the day it was built.

I set my watch ahead one hour and back 100 years. Suddenly, the trees resembled those in impressionist paintings, the land was dotted with Norman fortresses, and gasoline was $8 a gallon.

 

The original Orient Express, from Paris to Istanbul, made its inaugural journey in 1882 and quickly became famous for its unheard-of luxury and speed. Modern bullet trains and cut-rate airlines put it out of business 100 years later.

The current incarnation started in 1977 when James Sherwood, who had built up a fortune through Sea-Land Containers, bought three dilapidated Pullman rail cars at an auction in Monte Carlo. Like all of us with insanely expensive hobbies, he sought a way for outsiders to fund his passion.

Hence, the Venice-Simplon Orient Express started luring big spenders and the romantically inclined in 1982 (click here for their site)

I became one of the original passengers in England when my broker chartered it for a day of client entertainment, an ancient steam engine laboring all the way.

Over the next 30 years, Sherwood built Orient Express into one of the world’s preeminent luxury brands, on par with Cartier, Tiffany, and Channel.

He developed a massive global network of cross-marketing deals that tied in package tours, hotels, cruises, and other vintage trains.

Today, the parent company, Belmond (BEL) carries a market cap of $1.3 billion (click here for that site).

Ironically, the company today still only owns one of its dozens of rail cars. The rest have been sold to Middle Eastern investors with long-term leaseback contracts.

The dinner onboard is the highlight of the trip, a fabulous six-course, three-hour affair. There you meet the other passengers, all dressed to the nines.

Most were wealthy elderly couples knocking off a bucket list item, along with a few young hedge fund managers and a passel of mistresses.

I was one of the few Americans. I ate with a casino operator in Ireland and the owner of a manufacturing company in the UK. All I can say is thank goodness for the elastic waist on my tux trousers.

Having spent a lifetime analyzing corporate management, I was fascinated by the operation of the train. While the onboard staff is limited to 79, they are supported by a management, marketing, and engineering team of no less than 4,500.

You don’t just show up with a 17-car train in Europe’s incredibly congested rail network. You must first file a route plan and get a clearance slot, much like any airline.

Engines and crews must be changed at every border. Mechanics are onboard with an ample stockpile of 1920s rail car parts. Oblivious passengers are frequently left stranded behind at stations along the way and must be retrieved by taxis, which catch the train down the line.

 

 

 

To make up for the time we lost due to the unlucky boar, the rail authorities routed us through the 12-mile long transalpine tunnel under Splügen Pass, then along the sublime shores of Lake Como, where the train rarely travels.

We roared past George Clooney’s house, who, I am told, is a frequent passenger on the train. Amazed Italians were waving and taking pictures of us with their cell phones at every stop. Suddenly the buildings were all shaded in pastels, the churches changed from Protestant to Catholic, and the trees resembled those in Renaissance religious paintings.

We raced over the causeway to Venice’s Marco Polo station that evening, dumping our considerable luggage into a private speedboat which whisked us away down a Grand Canal crowded with gondolas, en route to the fabled Cipriani Hotel.

 

 

In 2019, Belmond, the parent company of Orient Express, was taken over by the ultimate luxury brand, LVMH Moet Hennessy. I worked with the son of the current owner at Morgan Stanley 40 years ago, who everyone referred to as “Bubbles.”

Because of the scheduling difficulties of crossing the English Channel post-Brexit, this is the last year the train will operate from London. In 2024 you can only catch the fabled train from Paris.

 

 

https://www.madhedgefundtrader.com/wp-content/uploads/2018/07/john-thomas-onboard-1.png 558 564 MHFTR https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png MHFTR2023-11-30 09:02:522024-12-31 09:03:09Report from The Orient Express
april@madhedgefundtrader.com

November 30, 2023 - Quote of the Day

Diary, Newsletter, Quote of the Day

“I’ve always been big on lowering expectations. That’s how I got married, my wife lowered her expectations,” said Warren Buffet’s late partner, Charlie Munger.

 

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November 29, 2023

Diary, Newsletter, Summary

Global Market Comments
November 29, 2023
Fiat Lux

Featured Trade:

(AND MY PREDICTION IS….),
(HOW TO “SNOWBALL” YOUR FORTUNE WITH BENJAMIN FRANKLIN)

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MHFTR

How to "Snowball" Your Fortune with Benjamin Franklin

Diary, Newsletter, Research

Old Benjamin Franklin, one of the fathers of our country, was a pretty smart guy.

Not only was he a publisher, scientist, postmaster general, ambassador to the court of Louis the XVI, and delegate to the constitutional convention.

He also understood the basic mathematics that underlay modern investment theories centuries ahead of time.

When the United States was first founded, there was widespread belief in Europe that its experimental Republican form of government would soon fail.

After all, democracy hadn’t succeeded since the days of ancient Greece. Why should it now? The fact that the US was chronically broke didn’t help either.

One French mathematician, Charles-Joseph Mathon de la Cour, dared anyone to make a multi-century bet that the country would not survive.

Franklin happily took him up on it.

In 1789, he added to his will a codicil that endowed a trust with the city of Boston, where he was born, and the city of Philadelphia, where he built his career, with £1,000 each.

He specified that half the money be distributed in a century, and the balance in 200 years.

That initial investment equated to $5,000 at the time, or about $100,000 today in inflation-adjusted dollars. The British pound was the preeminent reserve currency of the day, and was good as gold, as it was still exchangeable into the yellow metal on demand.

Franklin died the following year days short of the age of 85.

The trust money was primarily invested in loans at a 5% interest rate in loans to young men under the age of 25 to finance apprenticeships in the trades. Later, it financed home mortgages.

So how did Ben do?

After the first 100 years, the Boston fund was worth $391,000, and half the money was eventually used to establish the Franklin Technical School, a two-year college that is still in operation today (click here for the link).

In 1990, at the end of the second century, the remaining Boston half was worth more than $5 million.

The money was promptly divvied up, with 26% going to the city, and the balance going to the State of Massachusetts. Much of the money went into the endowment of the Franklin Technical School.

Franklin did less well in his adopted hometown of Philadelphia. Corrupt politicians diverted some funds during the 19th century. Still, by 1990, the initial £1,000 had grown to $2 million.

The funds were used to set up a scholarship fund for Philadelphia high school graduates.

Interestingly, the two trusts never came close to their 200-year theoretical maximum value in the hundreds of millions of dollars. That’s because several early borrowers defaulted on their loans.

The Civil War also no doubt took its toll.

This story highlights the value of compounding interest, well known to all savvy money managers.

Every math student knows the fable of the mathematician who invented the game of chess for an ancient potentate. As a reward, he asked for a grain of rice to be doubled with each square on a chessboard. The king agreed.

The servant deserved the entire kingdom well before he reached the 64th square. The final total worked out to 18,446,744,073,709,551,615 grains of rice, or 66 trillion metric tonnes, which is 435,000 times the displacement of the Queen Mary 2.

The fairytale doesn’t tell us if the clever, mathematician ever collected his reward.

Investment legend Warren Buffett is also familiar with the concept of compounding interest. He invests only in companies with great cash flows and dividends and rarely sells.

He entered the market in 1942 when the Dow Average traded around $100, just before the tide was turned for WWII.

Timing is everything in this business.

He entitled his authorized biography “Snowball”, a reference to compounding, and a great read by the way.

Even I have my own two cents to throw in here on the compounding value of investments over the long term.

Before Morgan Stanley (MS) went public in 1986, I was allocated a part ownership of the private partnership at 25 cents a share. That is about one-third of the annualized dividend for today’s shares.

Today, they are worth $300 on a split-adjusted basis, including dividends. And since I never sold them, I never had to pay tax on the gain either.

As for how many shares I got, I’m not telling!

The original £2,000 came from Franklin’s salary for the three years he spent as the governor of Pennsylvania. He believed that the nation’s leaders should work for free and sought to set an example.

Unfortunately, it was an idea that never caught on.

The last amendment to the US Constitution, the 27th, provided for pay increases for members of Congress and was passed in 1992. It only took 203 years to ratify.

Franklin didn’t limit his charity to the Boston and Philadelphia Trusts. He also created an additional fund to award a silver medal to the most creative high school students of the day.

It is now known as the Franklin Legacy Prize Medal and is the oldest continuously funded scholarship in the country, awarded every year since 1793.

As for our friend, Charles-Joseph Mathon de la Cour, he didn’t fare so well. His head was chopped off by a guillotine only four years later during the French Revolution.

Over the 200 years in question, five different republics ruled France, which suffered through several revolutions, civil wars, and invasions.

As Warren Buffett never tires of telling fellow investors, it is a terrible idea to bet against America.

 

Old Ben Had a Way With Money

 

Franklin Legacy Prize Medal

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