“There are old pilots and there are bold pilots, but there are no old, bold pilots,” according to the US Marine Corps flight school.
(PLTR), (LDOS), (CACI), (NVDA), (AMD), (AI), (IBM), (GOOGL), (CRWD), (PANW)
As the late, great Stephen Hawking once said, "The only way to win an AI arms race is not to fight it." And it seems like the Trump administration's allies are taking that advice to heart, but with a twist.
Former President Donald Trump's allies have drafted a sweeping AI executive order that's being compared to the Manhattan Project.
You know, the one that brought together some of the brightest minds in science to create the atomic bomb? Yeah, that one.
Only this time, instead of splitting atoms, they want to split the very fabric of reality with artificial intelligence.
Now, I know what you're thinking. "John, isn't this just another case of politicians blowing smoke and making grandiose promises they can't keep?" Well, maybe.
But there's no denying that AI is already transforming industries left and right, from healthcare to finance to manufacturing.
And if the U.S. government throws its weight behind AI research and development, we could see an explosion of innovation that makes the dot-com boom look like a kid's lemonade stand.
So, what exactly is in this proposed executive order?
For starters, it calls for launching several "Manhattan Projects" to advance military AI capabilities. Because apparently, the only thing scarier than a robot overlord is a robot overlord with a gun.
The plan also includes creating industry-led agencies to evaluate AI models and secure systems from foreign adversaries.
In other words, they want to make sure that the AI we create doesn't end up in the wrong hands, like some sort of digital doomsday device.
But here's where it gets even more interesting: the proposed order also calls for reducing AI regulations. That's right. They want to take the leash off of AI development and let it run wild.
The idea is that by getting rid of "burdensome regulations," we can accelerate AI innovation and implementation across various sectors. It's like giving a bunch of mad scientists the keys to the lab and telling them to go nuts.
Of course, there are plenty of companies that stand to benefit from this AI gold rush.
In the defense and AI contracting sectors, we've got heavy hitters like Palantir Technologies (PLTR), Leidos Holdings (LDOS), and CACI International (CACI).
These guys are already knee-deep in government contracts, and with the proposed boost in military AI spending, they could be swimming in cash faster than Scrooge McDuck.
But it's not just the defense industry that's poised for a payday.
The cloud computing and AI infrastructure sectors are also gearing up for a wild ride. NVIDIA Corporation (NVDA), the king of AI chips, is like the pick-and-shovel seller in a gold rush.
They provide the tools that make AI possible, and with increased AI investments, they could be raking in the dough.
Advanced Micro Devices (AMD) is another one to watch, with their fancy processors that make AI purr like a kitten.
And let's not forget about the software side of things.
Companies like C3.ai (AI), IBM (IBM), and Alphabet (GOOGL) are like the prospectors in this AI gold rush. They specialize in creating the AI solutions that businesses need to stay ahead of the curve.
With fewer regulatory hurdles to jump, these companies could be unleashing new AI innovations faster than you can say "Siri, what's the meaning of life?"
But wait, there's more. As AI becomes more ubiquitous, the need for cybersecurity is going to skyrocket.
After all, we don't want our shiny new AI toys to get hacked by some basement-dwelling teenager with a grudge.
That's where companies like CrowdStrike Holdings (CRWD) and Palo Alto Networks (PANW) come in. They're like the digital sheriff's keeping the AI wild west safe from outlaws and bandits.
Now, I know what you're thinking. "John, this all sounds too good to be true. What's the catch?"
Well, there are certainly risks and considerations to keep in mind. Regulatory uncertainty is always a big one.
While the proposed reduction in AI regulations could spur innovation, there's no guarantee that it will last forever.
One minute you're riding high on the AI hype train, the next minute you're getting slapped with a bunch of new rules and restrictions.
And then there's the international competition, particularly with China. It's like the space race all over again, only instead of landing on the moon, we're trying to create the most advanced AI possible.
This global game of one-upmanship could create all sorts of market volatility and geopolitical tensions.
But perhaps the biggest risk of all is the ethical concerns surrounding AI. As the technology advances at a breakneck pace, we're going to have to grapple with some tough questions.
How do we ensure that AI is being developed and used responsibly? How do we prevent it from being weaponized or used to violate privacy and civil liberties?
These are the kinds of issues that keep philosophers and policymakers up at night, and they're not going away anytime soon.
Despite these risks, however, the potential rewards of the AI revolution are simply too great to ignore.
With the right investments and a bit of luck, we could be riding the AI wave to untold riches. It's like the old saying goes: fortune favors the bold.
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
Mad Hedge Technology Letter
July 26, 2024
Fiat Lux
Featured Trade:
(THE UNBEATABLE PARTNERSHIP)
(EMR), (GRMN), (AMBA), (NVDA), (DXCM), (CSCO), (INTC), (QCOM)
Let me introduce to you one of the hottest trends in tech.
It has been on the tip of everyone's tongue for years, and that might be an understatement, but the interaction of the Internet of Things (IoT) and Artificial Intelligence (AI) offers companies a wide range of advantages.
In order to get the most out of IoT systems and to be able to interpret data, the symbiosis with AI is almost a must.
If the Internet of Things is merged with data analysis based on artificial intelligence, this is referred to as AIoT.
Moving forward, expect this to be the hot new phrase in an industry backdrop where investors love these hot catchphrases and monikers.
What is this used for?
Lower operating costs, shorter response times through automated processes, and helpful insights for business development are just a few of the notable advantages of the Internet of Things.
AI also offers a variety of business benefits: it reduces errors, automates tasks, and supports relevant business decisions. Machine learning as a sub-area of AI also ensures that models – such as neural networks – are adapted to data. Based on the models, predictions and decisions can be made. For example, if sensors deliver new data, they can be integrated into the existing modules.
The Statista Research Institute assumes that there will be 75 billion networked devices by 2025.
This is exactly where AI comes into play, which generates predictions based on the sensor values received.
However, many companies are still unable to properly benefit from the potential of connecting IoT and AI, or AIoT for short.
They are often skeptical about outsourcing their data - especially in terms of security and communication.
In part because the increased number of networked devices, which requires the connection of IoT and AI, increases the security requirements for infrastructure and communication structure enormously.
It is not surprising that companies are unsettled: Industrial infrastructures have grown historically due to constantly increasing requirements and present companies with completely new challenges, which manifest themselves, for example, in an increasing number of networked devices. With the combination of IoT and AI, many companies are venturing into relatively new territory.
By connecting IoT and AI, a continuous cycle of data collection and analysis is developing.
But companies can no longer deny the advantages of AIoT because this technical combination makes networked devices and objects even more useful.
Based on the insights generated by the models, those responsible can make decisions more easily and reliably predict future events. In this way, a continuous cycle of data collection and analysis develops. With predictive maintenance, for example, production companies can forecast device failures and thus prevent them.
The combination of the two technologies also makes sense from the safety point of view: continuous monitoring and pattern recognition help to identify failure probabilities and possible malfunctions at an early stage – potential gateways can thus be better identified and closed in good time.
The result: companies optimize their processes, avoid costly machine failures, and at the same time reduce maintenance costs and thus increase their operational efficiency.
In this way, IoT and AI represent a profitable fusion: While AI increases the benefit of existing IoT solutions, AI needs IoT data in order to be able to draw any conclusions at all.
AIoT is therefore a real gain for companies of all sizes. They thus optimize processes, are less prone to errors, improve their products and thus ensure their competitiveness in the long term.
Some hardware, software, and semiconductor stocks that will offer exposure into AIoT are Emerson Electric Co. (EMR), Garmin (GRMN), Ambarella (AMBA), Nvidia (NVDA), DexCom (DXCM), Cisco (CSCO), Intel (INTC), and Qualcomm (QCOM).
(SUMMARY OF JOHN’S JULY 24, 2024, WEBINAR)
July 26, 2024
Hello everyone
TOPIC
The Great Rotation is On
TRADE ALERT PERFORMANCE
July = +5.17% MTD
Since inception = 701.82%
Average annualized return = +51.62% for 16 years
Trailing one year return = +38.93%
PORTFOLIO REVIEW
Risk on
(GLD) 8/$210-$215 call spread 10%
(CCI) 8/$90-$95 call spread 10% (profits taken on this trade on July 25)
(BRK/B) 8/$405 - $415 call spread 10%
(DE) 8/$330-$340 call spread 10%
(IBKR) 8/$110-$115 call spread 10%
(SLV) 8/$23-$25 call spread 10%
(JPM) 8/$190-$195 call spread 10% (profits taken on this trade on July 25)
(DHI)8/$150-$155 call spread 10% (trade added on July 25)
Profits were taken on (TSLA) and (NVDA) put spreads this week.
METHOD TO MY MADNESS
The cool June CPI was a game changer, according to John, assuring a slower economy and lower interest rates.
Leadership flipped from big tech to industrials, precious metals, financials, and bonds. They will all be active for the rest of 2024.
The first interest rate cut in five years in September is now a certainty.
All interest rate sectors catch huge bids.
US dollar gets dumped and could stay weak for years. (So, you should be looking to go long these plays FXA, FXB, FXE. Scale in by buying small parcels of shares at different prices. You are then building a good position)
Technology stocks will recover after a correction lasting months.
Energy gets dumped on recession fears if the Fed acts too slowly.
Buy stocks and bonds on dips.
THE GLOBAL ECONOMY – SLOWING
Fed Beige Book shows a slowing economy, assuring a September interest rate cut.
Inflation plunges to 3.0%, a new two-year low.
US Manufacturing jumps, up 0.4% in June.
US Retail sales hit a three-month high, up 0.4% last month.
Chinese GDP disappoints at 4.7% in the second quarter, missing their 5.0% target. Inflation comes in weak, at only 0.2%.
PPI rises 0.2%, up 2.6% year over year.
Consumer sentiment is at a three-year low at 66.0%, down from 68.5 as the economic slide continues.
STOCK – SUMMER CORRECTION
Money pours into equities. According to LSEG data, investors bought a net $21.7 billion worth of U.S. equity funds during the week.
Bank earnings beat, and the stocks are rising in expectation of falling interest rates, with (JPM), (BAC), and (C) reporting. Wells Fargo (WFC) was disappointed again. Buy banks on dips which have been on a great run all day.
Small cap stocks poised for major chart breakouts, after underperforming for years. Remember, 60% of these are regional banks which would love to see lower interest rates.
Netflix grows subscribers, following a crackdown on password sharing ebbed and viewer attention moved to summer sporting events including the Euro soccer tournament.
CrowdStrike flaw crashes global transportation cancelling 4,000 flights in the U.S. alone, costing airlines billions.
New China chip bans send Big Tech stocks tumbling.
(Buy NVDA if it gets to $100 and/or deep in the money call spreads/LEAPS. AMZN is cheap – buy. ROM – buy pre-election. CAT, DE, and Home builders – all buys on dips. ITB – a great candidate for a LEAPS trade on a pullback).
BONDS – HOLDING UP
Cold CPI assures September interest rate cut. This sends all fixed-income securities soaring.
Bonds holding gains even in the face of a summer stock correction.
Bonds see the biggest cash inflows since 2021.
The top ticker symbols are (SLRN), (BRLN), (BKLN), and (FFRHN).
Buy (TLT), (JNK), (NLY), (SRRN) and REITS on dips.
FOREIGN CURRENCIES – GOODBYE DOLLAR
Dollar falls against all currencies, including the Japanese Yen.
A coming decade of falling interest rates makes the dollar a big “SELL”.
The prospect of falling interest rates means that the greenback is toast.
It’s all in response to the blockbuster negative CPI.
Buy (FXA), (FXE), (FXB), (FXC).
ENERGY & COMMODITIES – RECESSION FEARS
U.S. Oil production hits an all-time high, as are energy company profits, and is producing more oil than any country in history.
The world record was set by the U.S. in 2023, averaging about 12.9 million barrels per day. And this exceeded the Trump-era record, an average of about 12.3 million barrels per day in 2019.
U.S. production of dry natural gas = new high in 2023, as did U.S. crude oil exports.
Overproduction has crushed prices and made energy the worst-performing stock market sector of 2024.
Gasoline demand has been in long-term secular demand since 2019.
Replacement by EV’s and the shift out of cars into planes are big factors.
PRECIOUS METALS – NEW HIGHS
Gold hits new all-time highs.
Silver takes a break from the economic slowdown and enters a sideways range.
Miners have started to outperform metals for the first time in years, indicating an increase in investor leverage.
A global monetary easing is at hand.
Buy precious metals on the dip because rates have to fall eventually.
Miners are expanding their operations and ramping up production as prices for the precious metal climb to decade highs.
Buy (GLD), (SLV), and (WPM) on dips.
REAL ESTATE – WAITING FOR RATES
Single Family Home starts hit 8 month low, down 2.2%.
Higher mortgage rates hurt, suggesting the housing market was likely a drag on economic growth in the second quarter.
The report from the Commerce Department on Wednesday also showed permits for future construction of single-family houses dropped to a one-year low last month, indicating that any anticipated rebound in activity if the Federal Reserve cuts interest rate in September as expected, could be muted.
This market needs actual lower rates to pick up, not just hopes of one.
Record Prices but Scarce Sales Volume. U.S. housing is unaffordable but aggregate demand continues to push prices higher.
TRADE SHEET
Stocks – buy any dips
Bonds – buy dips
Commodities – buy dips
Currencies – sell dollar rallies, buy currencies
Precious metals – buy dips
Energy – buy dips
Volatility – buy $12
Real estate – buy dips
Cheers
Jacquie
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
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
July 26, 2024
Fiat Lux
Featured Trade:
(AUGUST 15 LONDON ENGLAND STRATEGY LUNCHEON)
(JULY 24 BIWEEKLY STRATEGY WEBINAR Q&A),
(UUP), (FXE), (FXC), (FXA), (FXB), (USO),
(FCX), (CCJ), (FXI), (CAT), (DE), (NVDA)
Below please find subscribers’ Q&A for the July 24 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Zermatt, Switzerland.
Q: Does the entry of Kamala Harris into the presidential election have any effect on the stock market?
A: No. I know someone who did research on markets and elections going all the way back to 1792 and the long-term effect has been absolutely zero over the 232-year period. Actually, what happens is you have the two candidates very close to each other in the polls, so uncertainty is at a maximum. Markets hate uncertainty, so they’ll wait until the uncertainty goes away, which will probably be about two weeks before the election. You can expect a really hot 4th quarter in the market though, so get all your cash freed up so you can pour all your money into the market for the last quarter of the year.
Q: How do falling interest rates affect the US dollar (UUP) and the currencies?
A: Currencies (FXE), (FXC), (FXA), (FXB) are always driven by interest rates. Those with high interest rates like the US dollar, are strong; those with low interest rates like Japan, are weak. Japan has had zero rates for over 20 years now. When that reverses, those currencies reverse, ending up with a weak US dollar and a strong euro, pound, etc. These changes in direction for the currency markets only happen every few years, so that will be a reliable trade.
Q: Why is oil (USO) so cheap when the rest of the economy is so strong?
A: There are many reasons. One is that the amount of barrels of oils needed to produce a unit of GDP has been falling for 30 years. That's a function of engines becoming more efficient at using gasoline. Plus more people are switching out of gasoline into electric, and more people flying instead of driving. The “work at home” movement hasn’t helped oil demand either. It’s also the most subsidized industry in the US, and you always get overproduction leading to price crashes, which we now seem to be witnessing.
Q: I have Freeport McMoRan (FCX) as a long-term hold; why has it recently been so weak?
A: Well, the number one reason is China (FXI). China is the biggest consumer of copper in the world and their economy is dead in the water. You know, 4.5% or 4.7% is a long way from the 13% we used to get during the 2000s and when copper was absolutely on fire. Eventually, I expect industrial demand in the US to make up for the shortage of demand from China, but that isn’t happening right now. It isn’t just copper—all the industrial metals have been weak the last couple of months and that is the reason.
Q: Cameco Corporation (CCJ) has been down lately, even with seemingly good news out of Kazakhstan. Is this a good buy here at the 200-day?
A: I would say it is. It’s being dragged down by the rest of the industrial metals and the energy plays. If you watch carefully, the uranium stocks trade very closely with oil, and we have an oil glut, so it tends to drag down all the other energy forms with it, including uranium and natural gas. I love uranium demand long term; it's growing far faster than oil demand and that’s why I own (CCJ).
Q: Do you think falling interest rates will bail out the real estate market?
A: Absolutely, yes. 30-year fixed-rate mortgages hanging around the mid-sixes, you get a couple of rate cuts and we could be back into the fives and even the fours in no time. So yes, big impact on real estate, all the subsidiary plays, on home builders, on the entire economy.
Q: If the market reverses today or tomorrow, what are some of the best call options to put money into?
A: Caterpillar (CAT), Deer & Co. (DE), and you might even go $50 into the money on Nvidia (NVDA). Home builders I would love to get into as well. All of these things have had great runs, but these are just the 1st leg of moves that could go on for years. So yes, this is where the barbell portfolio works: half big tech, half domestic recovery plays.
Q: Are you stopping at Edelweiss for a frosty beer on your hike?
A: Absolutely, I go to Edelweiss every year and don’t mind climbing the 1,200 feet to get there. You certainly have an appetite when you get to the top. It has a fantastic view of the town and you can stay there overnight there as well.
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 Stay Healthy,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
