November 16 Biweekly Strategy Webinar Q&A
Below please find subscribers’ Q&A for the November 16 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Silicon Valley in California.
Q: What do you see Tesla (TSLA) moving to from here until next year?
A: Not much; I mean if you’re lucky, Tesla won’t move at all. The problem is Twitter is looking like a disaster of huge proportions—firing half the staff on day one? Never good for building a business. Tesla has also been tied to the rest of big tech, which has been in awful condition and may not see a continuous move upward until the Fed actually starts lowering interest rates in the second quarter of next year. Tesla could be dead money here for a while; eventually, a company growing at 50% a year will go up—especially when it’s just had a 50% decline in the share price. As to when that is, I don’t know, and asking me 15 more times will get you just the same answer.
Q: Should we start piling into iShares 20 Plus Year Treasury Bond ETF (TLT) longs now or wait?
A: You go now. Every day you waited meant paying one point more in TLT. I think the bottom is in; we have a 20-30 point move ahead of us. Everybody in the world is now trying to get into this trade, just like I spent all this year trying to get out of it. And if anything, November CPI could be a long term-term top in inflation, especially if we came in with another cold number. So, I would start scaling in now, even though we’re over $100 in the (TLT) today and I first recommended this around $95.
Q: If the Fed keeps raising interest rates, will the US Treasury market fall?
A: Probably not because the Fed only has control of overnight interest rates—the discount rate, the interbank rate—whereas the (TLT) is a 10-to-20-year maturity bond. No matter what short term rates do, the inversion will just keep getting bigger, but in fact, the bond market itself was yielding 4.46%, yielding 8% with junk, has bottomed and will probably start going up from here. So that is the difference between the Fed and what the actual market does.
Q: Do you prefer Junk (JNK), (HYG), or (TLT)?
A: I always go for the highest risk. Junk has about an 8% yield here compared to 3.75% for the TLT. By the way, if you want to do one trade and go to sleep, buy the junk on 2 to 1 margin, get your 16% yield next year, and just take a one-year vacation. That’s what some people do.
Q: When you say the dollar is going to go down what do you mean?
A: I mean the US dollar, while Canadian (FXC) and Australian dollars (FXA) will go up.
Q: What is the best time to buy US dollars?
A: Maybe in five years, as it could go down for five or 10 years from here, now that it’s going to imminently give up its yield advantage.
Q: What's the forecast for casinos?
A: I think casinos do better. Las Vegas was absolutely packed, you couldn’t get into the best hotels—people are spending money like crazy.
Q: What’s the best way to play (TLT)?
A: With a one-year LEAP. I put out the $95/$100 last week for my concierge members. Here, you probably want to do the $100/$105; that’ll still give you a one-year return of 100%.
Q: How do you short the dollar?
A: There are loads of short dollar ETFs out there, or you can just sell short the Invesco DB US Dollar Index Bullish Fund (UUP), which is the dollar basket, or buy the (FXA) or (FXE).
Q: Freeport McMoRan (FCX) just went from 25 to 38; is it time to take a profit and re-enter at a lower point?
A: Short term yes, long term no. My long-term target for (FCX) is $100 because of the exponential growth of copper demand caused by EV production going from 1.5 million to 20 million a year in the next 10 years. Each EV needs 200 pounds of copper, so by 2030, annual copper demand for EVs only will be 20 billion pounds. In 2021, the total annual global copper production was 46.2 billion pounds. In order words, global copper production has to double in eight years just to accommodate EV growth only.
Q: Do you think there’ll be a rail worker strike?
A: I have no idea, but it will be a disaster if there is. There’s your recession scenario.
Q: What strike prices do you like for a Tesla LEAP?
A: Anything above here really. You could be cautious and do something like a $200/$210 two years out—that has a double in it. Or you could be more adventurous and go for a 400% return with like a $250/$260 in two years. I’m almost sure that we’ll have a major recovery in Tesla within two years.
Q: What’s your opinion on PayPal (PYPL) and Albemarle (ALB)?
A: I’m trying to stay away from the fintech area, partly because it’s tech and partly because the banks are recapturing a lot of the business they were losing to fintech a couple of years ago by moving into fintech themselves. That is the story and we’re clearly seeing that in the share prices of both banks and PayPal. I like Albemarle because the demand for lithium going forward is almost exponential.
Q: What’s your thought on the Australian dollar (AUD)?
A: Buy it with both hands as it is going to parity. Australia is a great indirect play on trade with China (FXI), gold (GLD), uranium (CCJ), and iron ore (BHP). It’s a great play on the recovery of the global economy, which will start next year.
Q: What do you think about Royal Caribbean Cruises Ltd (RCL)?
A: Probably a buy but remember all the cruise lines will be impaired to some extent by the massive debts they had to take on to survive two years of shutdown with the pandemic. I took the Queen Victoria last July on their Norwegian Fjord cruise, and it had not been operated for two years. None of the staff had any idea what to do. I had to show them.
Q: Will big tech have a good second half?
A: Probably, but it’s going to be a slow first quarter, and I think if we start getting actual cuts in interest rates, then it’s going to be off to the races for tech and they’ll all go to all-time highs as they always do.
Q: How come you haven’t issued any trade alerts yet on the currencies?
A: Calling a five-year turnaround is a big job. Now that we have the turnaround in play, we’re in dip-buying mode. So, you will see these in the future. But I also have to look at what currency trades are offering compared to other trades in other asset classes. And for the last year or two, the big opportunities have all been in stocks. You had volatility constantly visiting the mid $30s, you didn’t get that in the currencies, and more money was to be made in stock trades than foreign currency trades. That is changing now; let's see if we have a sustainable trend and if we get a good entry point. There’s a lot that goes into these trade alerts that you don’t always get to see. We only get a 95% success rate by being very careful in sending out trade alerts and that means long periods of doing nothing when the risk/reward is mediocre at best, which is right now. The services that guarantee you a trade alert every day all lose money.
Q: What is the recommended minimum portfolio size to amortize the cost of the concierge service?
A: I tell people to have a half a million in assets because we want people who are financially sophisticated to understand what we’re telling them. That said, we do have people with as little as 100,000 in the concierge service and they usually make the money back on the first trade. This is a very sophisticated high-return, very active service. You get my personal cell phone number and all that, plus your own dedicated website, and specific concierge-only research. It’s a much higher level of service. It’s by application only and we currently have no places available for new concierge members. However, if you’re interested, we can put you on the waitlist so that when another millionaire retires, we can open up a space.
Q: Despite recent moves, the algo looks bearish. There are lots of mixed signals.
A: Yes, it does. And yes, that’s often the case when the market timing index hangs around 50.
Q: Do concierges go for short term moves?
A: No, concierges are looking for the big, long-term trades that they can just buy and forget about. That is where the big money is made. At least 90% of the people that try day trading lose money but make all the brokers rich.
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, then 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
