“Greatness does not come from intelligence. Greatness comes from character, and character isn't formed out of smart people: it's formed out of people who have suffered.” – Said Nvidia CEO Jensen Huang
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
(CHINA AND RUSSIA ARE HUSTLING TO EXERT INFLUENCE GLOBALLY)
June 21, 2024
Hello everyone,
Tensions have been rising in the South China Sea. Clashes between Philippines vessels and Chinese ships have been increasing over recent months. Most recently, several Philippine workers were injured, and one lost his thumb. The Chinese military build-up in the area is increasing as China continues to flex its muscles in the area. These types of incidents are a growing problem for the world.
Second Thomas Shoal is the most dangerous flashpoint today between the U.S. and China. The Shoal is part of the many reefs and shoals in the Spratly Islands which are much closer to the Philippines in the South China Sea.
The skirmishes that keep happening can be interpreted as a crisis waiting to ignite.
China and the Philippines have been in conflict over control of these waters for decades. But in the past years, tensions are close to the highest they have been.
There have been many reports of clashes and water cannoning against Philippine boats.
The waterway encompasses 1.4 million square miles, larger than the Mediterranean. Much of the sea is disputed. China, Vietnam, Malaysia, Brunei, the Philippines, and Taiwan all claim specific land features.
It is a thriving fishing zone yielding some 10% of the global fishing catch and a vast amount of trade transits through. In 2016, that amounted to some $3 trillion, including more than 30% of the global maritime crude oil trade.
It also holds promising oil and gas deposits which each nation in the area would like to get their hands on in the coming years.
China claims the biggest patch of the South China Sea making it difficult for the Philippines to tap into their reserves.
In 2016, a UN-backed court ruled that China’s claim of historic rights was unlawful and the Philippines has the sovereign right to extract resources like fish and oil. The problem is that the Philippines does not have the military capacity to enforce these rights.
It is important to note that these waters are not just about fishing and oil, but rather they hold military and strategic value for all the area’s claimants and crucially, the U.S.
Maintaining freedom of navigation is a global interest for the U.S. and it is important in the South China Sea.
The U.S. also has other interests here. Upholding the international law of protecting the ability of countries to really exercise sovereignty.
China wants to assert its sovereignty and deny US military access to the region.
Over the last decade, China has been building military bases in the area. The establishment of airstrips, of listening posts, of refueling stations have been well documented; this enables China to send its vessels to those islands and be able to better control much of the greater South China Sea. Today, China operates Navy ships, Coast Guard vessels, maritime, and militia 24/7 around virtually every feature that is disputed.
The U.S. and the Philippines have a mutual defense treaty dating back to 1951, and the circumstances that may trigger US involvement have become clearer recently.
Southeast Asian leaders are anxious over the prospect of war between the U.S. and China, whether it be over Taiwan or in the South China Sea.
A Significant Move by Putin
Russia and North Korean leaders have pledged military cooperation as part of a strategic treaty signed in Pyongyang during Putin’s first visit to the nation in 24 years. The treaty, signed this week, could strengthen Russia’s efforts in Ukraine, give North Korea the freedom to bolster its nuclear weapons program, and potentially lead to a war on the Korean peninsula that could dramatically impact world security.
The two countries have been allies since North Korea’s founding after World War II and have drawn even closer since Russia’s invasion of Ukraine.
Malcolm Davis, senior analyst at the Australian Strategic Policy Institute (ASPI) argues that these two countries are coming closer together as part of this axis of authoritarianism that includes China and Iran as well. Davis sees it as a “significant development” and one that has a substantive impact, thereby increasing the risk of a crisis that has the potential of turning into something much larger.
Davis said the military cooperation dimension of the agreement was “really worrying” because it implied that assistance would increase, and Putin may intend to escalate the war in Ukraine. Davis went on to say that it would certainly imply that North Korea is going to step up its production of munitions to supply to Russia and could provide additional ballistic capabilities, and this assistance would go through China.
If Russia grows stronger over time and if Western military support for Ukraine begins to edge off over the course of 2024, particularly if Donald Trump is elected in November, then it places Ukraine in a really bad situation in 2025. Trump has threatened to cut US aid to Ukraine quickly if re-elected.
Davis points out that if Russia provides more advanced military capabilities to North Korea, this increases its threat to South Korea, which could escalate into something much larger that could also threaten Japan and the United States.
Ray Dalio comments on the Changing World Order
Ray Dalio has recently commented on the geopolitical situation in the world and the jostling by countries to engineer authority and power.
I will quote Dalio from a recent article he posted.
Preparing for War: You can see the sides lining up for a fight both domestically (between the hard rights and the hard lefts in most countries) and the allied powers (the United States, the NATO countries, Japan, Australia, and the Philippines) and the axis powers (China, Russia, North Korea, Iran) in a manner that is similar to what happened prior to World Wars I and II.
The great power conflict between these major powers that are in or entering into alliances is intertwined with regional conflicts that are defining other countries (e.g. Israel, Saudi, Jordan, Hezbollah, Turkey, India, Pakistan, etc.) alignments with the great powers and with their neighbor countries in their region. This will likely lead to bigger conflicts (between the hard right and hard left within countries and between allied and axis powers internationally) in the next year or two.
If you want to learn more, read Dalio’s book, Principles for Navigating the Changing World Order
Review of some Stocks
I’m going to review a few stocks here. The stocks include GLD, OXY, CVX, PSX, XOM, and DIS. I have particularly focused on the energy sector as it has underperformed and is now undervalued.
GLD is setting up nicely for another bullish run. If you don’t own the stock start scaling in now.
I am also recommending LEAPS on GLD. You could look at June 2026, 250/260, LEAPS, or go with in-the-money LEAPS.
The SPDR Gold Shares ETF (GLD) tracks the price of gold bullion in the over-the-counter ((OTC) market.
There are a variety of factors that will drive the gold price higher, including rising geopolitical tensions, interest rate cuts, and central bank buying of gold, among other factors. I am expecting the gold price to keep rising for the next few years at least.
XLE Energy Select SPDR Fund - Stock Price: $88.64 as of 06/18
The energy sector has underperformed the broader market this year. All the energy stocks shown here, including the (XLE) energy ETF, are sitting on their 200-day moving average.
Oil giant, Chevron is currently trading at a forward P/E ratio below its 5-year average, indicating potential growth ahead. As I have detailed in a previous post, Chevron is battling against Exxon Mobil over offshore oil assets in Guyana. The company also acquired Hess for $53 billion earlier in 2024. Year to date, Chevron shares are up just 2.8%.
There are three key trends driving the energy sector: decarbonisation, decentralisation, and digitalization. These not only influence the way we generate energy but also how we use and distribute it.
Crude oil prices are being driven by tight supply, increasing geopolitical risk, and strengthening global demand for energy, and are likely to remain elevated in 2024. In addition, continued investment in energy production will support growth in energy stocks.
If you do not have any energy stocks in your portfolio, I suggest you either scale into one of the energy stocks or buy LEAPS. In the money is more conservative whereas out of the money is more aggressive.
Chevron Daily Chart (CVX) - Stock Price: $153.33 as of 06/18
We are still holding the CVX January 17, 2025, $165/$170 out of the money LEAPS if you took this trade, HOLD.
Exxon Mobil (XOM) - Stock Price: $109.38 as of 06/18
On February 7, 2024, I recommended January 17, 2025, 105/110 out of the money LEAPS. The stock price was then $102.20. Continue to HOLD.
Occidental Petroleum (OXY) - Stock Price: $61.26 as of 06/18
Warren Buffett has been scaling into (OXY) all the way down to the recent lows. It’s a great buy here, or you could buy in the money LEAPS.
Phillips 66 Daily Chart (PSX) - Stock Price: $135.85 as of 06/18
Recommended on April 30, 2024 (monthly zoom meeting). Now I am recommending the stock again as a buy or a LEAPS trade.
Walt Disney Daily Chart - Stock Price: $101.52 as of 06/18
Disney is a favourite amongst Wall Street analysts going into the second half of the year. According to the stock’s consensus price target, shares could rally nearly 25% in the next 12 months. Disney parks still show a healthy demand trend, and around three-quarters of analysts covering the stock have a strong buy or buy rating. I am favouring an option over a buy on this stock. That healthy demand trend over the long term can change, so I would prefer to dip my toe in via an option trade.
Suggestion:
June 20, 2025, 105/110 bull call LEAPS, but you could also do an in-the-money LEAPS trade as an alternative.
QI CORNER
Cheers.
Jacquie
Global Market Comments
June 21, 2024
Fiat Lux
Featured Trade:
(I’M TAKING OFF FOR THE ALASKA SEMINAR AT SEA)
I need a vacation.
I have been working nonstop for decades and desperately need a break. It seems that the older I get, the more I know, and the more in demand I become.
You can tear up your Rolodex card for me, unfriend me on Facebook, designate my email address as SPAM, and block my X account. It won’t do you any good.
If I don’t take some time off, I am going to start raving MAD!
Over the last 16 years, I have worked the hardest in my entire life. And the last six months I have had to work with a bullet wound in my hip courtesy of the Russian Army in Ukraine. Whenever I have free time, I go fight a war. That’s who you want calling your trades.
So far in 2024, I have brought in a total return of +20.00%, versus +11.00% for the S&P 500. If you got half of my performance, you beat virtually everyone else in the industry, even the best hedge funds. In other words, I underpromised and over delivered….in spades.
If you wonder why I do this it’s really very simple. Read my inbox and you would burst into tears.
Every day, I learn tales of mortgages paid off, student loans dealt with, college educations financed, and early retirements launched. I am improving lives by the thousands. That’s far better than any hedge fund bonus could offer me, although I wouldn’t mind owning the Golden State Warriors.
At this late stage in my life, the most valuable thing is to be needed and listened to. If that means becoming a cult leader that’s fine with me. After all, the last guy to try this route got crucified.
When horrific uncontrollable wildfires broke out in California, I flew volunteer spotter planes for Cal Fire, holding the stick with one hand and a pair of binoculars with the other, looking for trouble and radioing in coordinates, and directing aerial tankers. Nobody can fly wildfires like I can.
I lost access to my Lake Tahoe house when the big fire hit right in the middle of a remodel. All the contractors disappeared chasing much higher-paying insurance work. At least we now have a 20-mile-wide fire break to the southwest of the lake.
On top of all this, I was on speed dial at the Joint Chiefs and the US Marine Corps. A major? Really? And now I’m a major in two armies, the US and Ukraine. Seems you’re not the only one in desperate need of global macro advice.
The best compliment I received last year was when my commander in Ukraine told me I was the bravest man he ever met. I told him all Americans are like me. Whenever I enter the Marines Club in San Francisco they call me a hero. In a building full of heroes that is a big deal.
So, I will spend the next two weeks on Cunard’s Queen Elisabeth reading the deep research, speaking with old hedge fund buddies, the few still left alive, and trying to come up with a game plan for the rest of 2024. One thing is certain: We are at the beginning of a bull market that could last five or ten years.
Instead of sending out urgent trade alerts, emergency news flashes, and more research than you can read, I’ll be hosting my Seminar at Sea in my owner's suite, practicing my foxtrot, fencing, playing my banjo, and watching for orcas off the bow deck.
In the meantime, I’ll be running some of my favorite research pieces from the past over the next two weeks. Hot Tips will publish as usual.
John Thomas
CEO and Publisher
The Diary of a Mad Hedge Fund Trader
Cunard’s Queen Elisabeth
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
Mad Hedge Biotech and Healthcare Letter
June 20, 2024
Fiat Lux
Featured Trade:
(VAX TO THE FUTURE)
(AMGN), (RHHBY), (BNTX), (MRNA), (GNCA), (IOVA)
Let's have a heart-to-heart, you and me – about cancer, jabbers, and snake oil. If you think vaccines have been around for a while, you're on the money, my friend.
Over centuries, they've done a bang-up job wrestling down deadly infectious diseases and picking our collective life expectancy off the floor.
But what if I told you there's a different kind of magic we're still waiting for in the world of vaccines?
God's truth, I kid you not, science has been hammering away at this for years: creating vaccines to kick cancer square in the posterior. Yet, like an ardent investor waiting for the grand payoff, we've seen more flops than a fish outta water.
You can count on your one hand the number of cancer vaccines approved by the FDA since that first green-lit in 1990.
Let's not stammer about the bush, it's three – Provenge by Dendreon Pharmaceuticals, Imlygic by Amgen (AMGN), and Tecentriq by Roche (RHHBY).
Meanwhile, our old reliables – chemo, radiation, and the surgeon's knife – have, like battle-weary soldiers, been holding the fort for decades. But even they face formidable foes: nasty side effects, a bill that'll make a Rockefeller blanch and a diminishing punch against advanced cancer.
And the stats tell a story, but it ain't a happy one. Barely 59% of cancer patients treated with standard chemo make it through the five-year mark.
Until now.
Looking back, it's clear we've been a few beans short of a chili in our understanding of how the immune system and tumors get along — or rather, don't.
Now we know these devious cancers have been hoodwinking us with a starter kit of escape tools, literally tricking the immune system into playing “hide and seek.”
That’s where the likes of BioNTech (BNTX), Moderna (MRNA), Genocea (GNCA), and Iovance (IOVA) come in. To date, there are over 350 clinical trials focused on this field.
And if these new kids on the block deliver, we'll be singing hallelujahs with 83% five-year survival odds instead of the grim 59% chemo gives us.
As for those already in late-stage battles, where chemo only offers a bleak 4% five-year survival, immunotherapy could boost that to 23%.
So, what's the game-changer? Immune-modulating cancer vaccines.
Unlike traditional treatments that attack cancer cells directly, these vaccines train your immune system to recognize and destroy cancer cells like a well-trained bouncer booting out unruly party crashers.
Contrasted to the old brute force methods like chemo, and trust me, I’ve had some friends go through that ordeal, these vaccines are more like a sniper - taking precise aim only at cancer cells.
Plus, side effects? Minimal, my friends. But the cherry on top? These vaccines could potentially be your long-term bodyguards against cancer.
Now, I'm sure you love crunching numbers as much as I do, so here's some food for thought - the global cancer vaccine market was worth a cool $4.06 billion in 2019 and is projected to triple to $12.85 billion by 2027.
I mean, come on, that's a compound annual growth rate of 17.4%. It’s like watching your favorite sports team go on a championship run, season after season.
And the broader cancer immunotherapy market, sitting pretty at $75 billion in 2022, is on track to hit $120 billion by 2030, boasting a 14% CAGR.
These are not just empty promises either. We're seeing real progress - BioNTech and Moderna are developing personalized cancer vaccines that target unique tumor antigens.
Then there’s Genocea and Iovance, busy rolling out “off-the-shelf” cancer vaccines like fresh donuts off a conveyor belt.
This is a critical development, as around 70% of cancer patients develop resistance to chemotherapy.
These new immunotherapy contenders, with an overall survival rate of 50% compared to just 22% for those resistant to chemo, with every single patient potentially scoring against the dreaded C, and not fretting about chemoresistance. Talk about a fighting chance.
Overall, I think the cancer vaccine field is the Wild West of biotech – exciting, unpredictable, and potentially very rewarding. With companies pouring money into R&D, fueled by rising cancer rates and expedited FDA approvals, the race is on.
Immune-modulating cancer vaccines might just be the sheriff that this Wild West of cancer treatment needs, flipping the script on what used to be a death sentence into something we can manage.
Now, I'm not saying you should throw all your eggs in one basket, but keep a close eye on those mavericks like BioNTech, Moderna, Genocea, and Iovance. They could be the dark horses in this race.
Add them to your watchlist, and when the market hiccups and those share prices dip, that could be your chance to get a piece of the action.
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