Global Market Comments
August 9, 2024
Fiat Lux
Featured Trade:
TESTIMONIAL)
(AUGUST 15 LONDON ENGLAND STRATEGY LUNCHEON)
Hi, my name is Wilson and I've been with the Mad Hedge Fund Trader, John Thomas, since 2019. I caught the phenomenal returns in 2019 and 2020, somewhere in the order of the 80-90% returns for both of those years. I caught all of those trades—Nvidia (NVDA) the US Treasury bond fund (TLT), Tesla (TSLA), etc. Then in 2021, I started trading in some additional accounts and I have caught almost all of the trades since then as well, getting almost the entire amount of returns that John has received.
It’s been just fantastic!
Wilson
Mill Valley, California
"If you work forever, you can live forever," said my friend and mentor, Blackstone's Byron Wien.
Mad Hedge Biotech and Healthcare Letter
August 8, 2024
Fiat Lux
Featured Trade:
(WHEN A+ PROFITS MEET C-VALUATION)
(AMGN), (ABBV), (GILD)
It's time we talk about Amgen (AMGN), that biotech giant that's been acting more like a sleepy bear than the roaring lion it once was.
Don't get me wrong. I've got a soft spot for Amgen. Having personally witnessed the struggles of cancer survivors who sampled their wares, I can tell you their stuff works. It's like rocket fuel for your immune system.
But as an investor? Well, that's where things get messy.
Amgen's definitely no slouch. It's the 5th largest component of the Dow Jones Industrial Average.
For us dinosaurs who still think the Dow matters (guilty as charged), that's like being the biggest, baddest T-Rex in Jurassic Park. But we all know how that movie ended, don't we?
In the S&P 500 jungle, Amgen's the 40th largest beast and the 9th largest in the healthcare sector. Impressive, sure, but so was the Titanic before it met that iceberg.
Amgen’s work in therapeutics, from Epogen and Aranesp boosting red blood cell counts to Neupogen and Neulasta enhancing immune systems, makes it indispensable in the healthcare sector.
Still, I have to dig deeper. Amgen’s profitability is stellar, boasting an A+ grade, which checks a significant box in my evaluation criteria.
However, the valuation, growth, and momentum reveal a picture that’s less rosy. Amgen isn’t the growth powerhouse it once was compared to its sector peers like AbbVie (ABBV) and Gilead Sciences (GILD), and its valuation is teetering on the edge of extravagant. The price has surged, rendering it "overvalued."
Even when considering its price-to-sales ratio—a favorite metric of mine—Amgen is near its 10-year peak at 6x sales.
That's not just expensive – it's "I'll have what they're having" territory. Sure, lots of big stocks are trading at nosebleed levels, especially in tech. But just because everyone's jumping off the valuation cliff doesn't mean we should join the lemming parade.
Now, everyone knows I’m a dividend junkie. I like my yields high and my risks low. It's a bit like my approach to mountain climbing—I want the view, but I'd rather not plummet to my doom getting there.
At first glance, Amgen looks tempting. The dividend is safe, consistent, and growing. But context is key.
The healthcare sector, using the XLV ETF as a proxy, yields only 1.5%. Amgen's 2.66% yield beats that handily, but it's toward the low end of its 7-year range.
To make it worthwhile as a long-term holding, Amgen would need to offer a yield in the 3.2%-3.5% range and demonstrate a clear bottoming pattern in its stock price. We're not there yet, folks.
Next, let’s talk charts. Looking at its stock price, if this were an EKG, we'd be calling a code blue.
Amgen’s chart shows a stock struggling to breach its trendline, with two potential target zones below the current price that it might hit.
While anything is possible in investing, I see those lower price areas as more likely than Amgen soaring 15% to fresh highs.
Could Amgen surprise us all and rocket up 15%? Sure, and I could win "Dancing with the Stars." Anything's possible, but I wouldn't bet my last dollar on either.
But here’s the kicker—Amgen's not alone in this boat. The whole market seems to have decided to party like it's 1999, forgetting that what goes up must come down. When it does, it'll be faster than my descent from 90,000 feet in that MiG.
Still, I'm not saying Amgen's destined for the biotech graveyard. At this point, it's not a "never buy," but a "not at this price."
I like to think of it as a hibernating bear. When that yield creeps up and the price comes down, it might be time to poke it with a stick.
If it stretches and growls with renewed vigor, you’ll want to be ready to jump in. Until then, let’s enjoy the show from a safe distance.
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
When John identifies a strategic exit point, he will send you an alert with specific trade information on what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
Global Market Comments
August 8, 2024
Fiat Lux
Featured Trade:
(THE IDIOT’S GUIDE TO INVESTING),
(TSLA), (BYND), (JPM)
(TESTIMONIAL)
Until July 1, everyone seemed to have pretty much the same investment strategy.
What would you do if I recommended an investment strategy that would cause your accountant to disown you, your inheritance anticipating children to sue you, and your wife to file for divorce?
Chances are you would designate all my future mailings as SPAM, unfriend me from Facebook, and tear my card out of your Rolodex.
Well, here is anyway. I’ll call it my “Ignore All Risk” portfolio. It’s really quite simple. This is all you have to do:
1) Buy stocks that have already gone up the most, boast the highest year-to-date performance, and have momentum overwhelmingly on their side. Only do what every else is doing. Go for the easy trade.
2) Buy stocks with the highest price earnings multiples. I’m talking mid to high hundreds.
3) Lean towards stocks with the highest short interest. GameStop (GME) was a perfect example of this.
4) Put every free penny you have into cryptocurrency bets, like Bitcoin
5) Ignore all valuations and fundamentals. Don’t waste a minute reading a single page of research, especially from an old-line legacy broker. Seeking Alpha, where none of the information is independently verified, is a far better source of information than JP Morgan (JPM).
6) Big institutions should allocate all of their assets only to their youngest traders and portfolio managers. Old farts, or anyone with any memory or experience whatsoever, should be completely ignored. A person who’s never seen a stock go down is now your best friend.
7) Oh, and there is one more thing. Go hugely overweight bonds over equities in the face of unprecedented and massive government borrowing at all-time low interest rates.
Any professional manager pursuing an approach like this would surely get fired, lose all of their securities registrations and licenses, and get banned from the industry for life.
But there is one big offset to these career-ending consequences. They would also be the top-performing money manager of the year, beating the pants off of all competitors. Every investment they made this year worked.
They would be regarded as trading genius on par with my friends Paul Tudor Jones and Appaloosa’s David Tepper. If they invested their own money using this strategy, they would be so filthy rich they wouldn’t care what happened to themselves.
We are now in an environment where EVERY trade is crowded, be they in equities, fixed income, or foreign exchange. There is no value anywhere. The metaphors coming to mind are legion. There are too many passengers on one side of the canoe. The lemmings are mindlessly stampeding towards a giant cliff. I could go on.
Of course, incredible excess liquidity is to blame. That is the only time both stocks AND bonds go up at the same time. The world’s central banks have been flooding the globe with cash for decades now, and the pandemic has given them license to increase these efforts vastly.
The end result has been to overvalue all assets classes, be they paper or hard. Cash is trash, especially in Japan and Europe where until recently you had to PAY banks to take your money.
The fact is that shares with the fastest price appreciation over the past 12 months are trading at valuations that are almost 50% higher than normal.
I have traded and invested through all of this before; the Nifty Fifty of the early 1970’s, the Great Japan Bubble of the 1980’s, the Dotcom Bubble of the 1990’s, and of course the 2007 bubble top. And there is one thing all of these market apexes have in common. They inflated a lot longer than anyone expected, sometimes FOR YEARS!
You could be conservative, go into 100% cash, and just stay on the sidelines until mass groupthink, hysteria, and insanity leave the market. But that could be a very long time.
And after more than a half-century in this business, there is one thing I know for sure. Traders who don’t trade, investors who don’t invest, and newsletters that don’t recommend all have one thing in common. THEY GET FIRED. Just because investing gets hard is no reason to quit the market.
The Japanese have a great expression for this: “When the fool is dancing, the greater fool is watching.” So, I’m going to start dancing away. What will it be? The cha cha, the limbo, or the Watusi?
Hmmmm. Let me see. Let me Google what everyone else is doing.
