Global Market Comments
June 14, 2024
Fiat Lux
Featured Trade:
(TESTIMONIAL),
(JUNE 12 BIWEEKLY STRATEGY WEBINAR Q&A),
(NVDA), (AVGO), (ARM), (GM), (TSLA), (SQM), (FMC), (ALB), (AAPL), ($VIX), (AMZN), (MO), (NFLX), (ABNB)
Hi John and Maddies,
Catching up on the most compelling view of the year, your June Mad Hedge Summit reviews. You sold yourself a bit short on the NVIDIA example. You gave (NVDA) a strong buy in October 2022. I might have missed the absolute bottom but was happy to get in at $150.
Approaching a ten bagger in two years.
Amazing.
Wishing you good health AND longevity.
Malcolm
Author’s note: I actually first recommended (NVDA) at a split adjusted 60 cents in 2016. It is up 214 times since then. Here is the link:
Below please find subscribers’ Q&A for the June 12 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Incline Village, NV.
Q: How will Nvidia (NVDA) trade post-split?
A: Well, it’ll probably keep going up, because I think the year-end target—the old $1400, which is now $140—is still good. And I have a whole bunch of LEAPS, which are post-split $40, $50, $60 in-the-money, and I’m just keeping those. It’s a good cash management tool to have. So, even $500 points in the money, you’re still looking at about 20% returns by the end of the year on a January LEAPS. If you can buy the January 2025 $70-$71 LEAPS for 83 cents that’s a 20.48% profit at expiration in six months. So if you want a safe, very high return, that is the best way to do it in the financial markets, is to go way in the money. LEAPS will still pay you a lot of money amazingly. This trade will disappear someday but it’s there now and I’m taking it. Screw 90-day T-bills—I’m going into $500 in-the-money LEAPs on Nvidia, which pays four times as much.
Q: Is Broadcom Inc (AVGO) the next Nvidia?
A: There is no next Nvidia—the next Nvidia is Nvidia. Buy Nvidia on a 20% decline, which I think we may get sometime this summer. That’s a dip you want to buy for a year-end run to $140. Also, Broadcom isn’t exactly undiscovered at this point. It has doubled since October, while Nvidia is up 4 times. So if the bargain in the market for you is double in six months, I’m not sure you should be in the market. That said, I put out a report on split candidates last week and (AVGO) is very high on the list.
Q: What’s the best way to trade split candidates?
A: I actually just wrote a newsletter about this last week. There are in fact 36 high-priced, good money-earning split candidates, and I listed them all. You can buy really any of those if you’re looking for a high-priced stock that is growing. And management has a huge incentive to do splits because it makes the stock go up faster, and they’re all paid in stock options. So that is another reason you go into these. The best way to trade splits is buying the candidates because the biggest move is on the announcement of the split—you usually get 10%, 15%, or even 20% returns on the announcement.
Q: How do you envision AI in 10 years?
A: Well, it’s unimaginable. I can tell you from experiencing a lot of these big technology changes—it’s always tremendously underestimated by the markets, and you can safely bet on that. It’ll go up a lot more than you realize. That’s what happened when we jumped from six track tapes to cassettes, Betamax to VHS, teletypes to faxes, and faxes to emails. I thought Steve Jobs was crazy when he introduced the iPhone. Nobody makes money in handsets. But he proved me wrong. That makes my $240,000 DOW by 2030 projection completely reasonable.
Q: What will inflation do for the rest of the year, and how will it affect stocks?
A: Inflation will go flat to down for the rest of the year. And that is being driven by artificial intelligence—the greatest deflationary product ever created in the history of the economy. It’s unbelievable the rate at which AI is replacing real people in jobs. If you want a good example of that, I had to call Verizon yesterday to buy an international plan, and I never even talked to a human. They listed out three international plans in a calm, even male voice, and I picked one. Or go to McDonald's where $500 machines are replacing $40,000 a year workers. This is going on everywhere at the same time at the fastest speed I have ever seen any new technology adopted. So buy stocks, that’s all I can say.
Q: What’s your opinion on Arm Holdings (ARM)?
A: I love it. There are very few serious companies in the chip area, and this is one of them.
Q: Do you expect gold mining stocks to continue upward?
A: Yes, but the better play here is the metal. Gold and silver aren't being held back by inflation while the miners are. Plus, the main buyers in the market now are the Chinese, and they don’t buy gold miners—they buy gold, silver, copper, platinum, and uranium outright.
Q: What about Tesla (TSLA) long-term? Kathy Woods's target is $2000 long-term.
A: I think Kathy Woods is right. But we have to get through the nuclear winter in the EV space first, where suddenly the market got saturated. I think Tesla is the only one who could come out of this alive by cutting costs and advancing technology, as they have always done. When I bought my first Tesla Model S1 in 2010, the battery cost $32,000. Now it’s $6,000, and you get a lot more range. Did (GM) offer an equivalent cost improvement with internal combustion engines? So, yes, never bet against Elon Musk—that’s a good 25-year lesson on my part, and should be for you too.
Q: Can you elaborate on the lithium trades?
A: I listed three names in my letter last week, (SQM), (FMC), (ALB), and the only thing you know for sure is that they’re cheap now. They could stay cheap for another six or 12 months. But when you get a turnaround in the global EV market and the manufacturers start screaming for more lithium, and all of the lithium stocks will double, or triple and they’ll do it fairly quickly. You can’t beat a market bottom for getting involved. Just look at my above (NVDA) trade. Not only would they be good stocks buy, but it would be a good LEAPS buy down here because then you could get 4 or 5 times your money on a small move.
Q: Can you suggest Amazon (AMZN) LEAPS?
A: January 2025 $195-200 just out of the money, should give you a return of about 120% over the next 6 months. That gets you the annual yearend run-up. And that’s my conservative position. My aggressive ones are all in Nvidia.
Q: Do you think zero-day options have permanently forced the Volatility Index ($VIX) to the $12 handle?
A: Yes, I do; it’s killed that market. Something like 40% of all the option traders on the CBOE were trading the ($VIX) from the short side. Shorting the ($VIX) now would be madness. That has to bring tough times for that whole industry. Trading call spreads at a $12 volatility, you’re better off buying the LEAPS because the LEAPS give you much bigger returns with much less risk. And a $12 ($VIX) means you’re getting your LEAPS at half the historic price. I’m just waiting for a new market low to start pumping out the LEAPS recommendations. All the more reason to sign up for the Mad Hedge Concierge Service to get an early read into the LEAPS recommendations. For more information on that, contact support at support@madhedgefundtrader.com
Q: What will happen to Apple (AAPL) after the 11% surge?
A: It goes to $250 by the end of the year. Now that it has the kiss of AI on it, people will pour into it.
Q: Why is value lagging?
A: Because AI is entirely a growth story, and you look at all the domestic value stocks, they’re going absolutely nowhere. Value has been in the dog house for years and I’m in no hurry to get in there.
Q: What is the best dividend stock I can invest in right now?
A: That’s an easy one. Altria (MO) has a 9% dividend—you can’t beat that. But you have to hold your nose when you buy this stock because they are in the cigarette business. However, their big growth now is in Asia ex-Japan where the government has a monopoly on tobacco, particularly China. Note that this is not an undiscovered idea; lots of people like a 9% dividend stock and (MO) has already gone up 20% this year, but I think there is still some money to be made here.
Q: How can we subscribe to get early LEAPS recommendations?
A: That would be the Concierge Service. Contact Filomena at customer support, and they will get you taken care of right away.
Q: What about the small nuclear plays?
A: I actually happen to know quite a lot about nuclear plant design, having worked for the Atomic Energy Commission in my youth, and the new designs address every major issue that held back nuclear power with the old 1950s designs. For example, building them underground and eliminated the need for these giant billion-dollar four-foot-thick reinforced concrete containment structures that dot the horizon. Not using pure Uranium alloys that can’t go supercritical is another great idea. So I like them. Are they good stock plays? Not right now. It takes a long time to introduce a new energy technology. Bill Gates is financing a new plant built by Terrapower in Wyoming, and it looks like a fantastic plant, but only Bill Gates could invest at this stage and expect to make money on it. He has very long-term money and you don’t. I would wait until you get a working model plant in the United States before going into these things, but potentially you’re looking at a 10 to 100 times return on your money if it works.
Q: Should I invest in Airbnb (ABNB) because of increased international travel?
A: Yes, we like Airbnb. Especially since they will get a push with the Paris Olympics next month. Not only does that get people to Paris, but it gets people to all of Europe because they usually add on additional trips to a visit to the Olympics.
Q: What would you do in Netflix (NFLX), and what strikes would you use?
A: I would do a LEAPS. Wait for a correction, at least 10%, preferably 20%, and then I would go at the money one year out and that would get you about 100% return. So, that’s the way to do that. This is not LEAPS territory right here —all-time highs are not LEAPS territory. You want to put on LEAPS when everyone else is throwing up on their shoes; the last time they did that was October 26.
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
You Only Need One Big Hit to Make a Great Year
“Volatility will be our traveling companion for a while,” said one strategist.
Mad Hedge Biotech and Healthcare Letter
June 13, 2024
Fiat Lux
Featured Trade:
(THE TORTOISE IN THE BIOTECH RACE THAT’S ABOUT TO CROSS THE FINISH LINE)
(AMGN), (LLY), (NVO), (IMVT), (ARGX)
You know how every golfer dreams of donning the green jacket at the Masters, every chess player longs for the title of Grandmaster, and every football player fantasizes about hoisting the Lombardi Trophy?
Well, healthcare and biotech companies have their own version of the ultimate dream: launching a product that's as successful as the latest weight loss drugs from Eli Lilly (LLY) and Novo Nordisk (NVO).
These two pharma heavyweights have been on an absolute tear, with their shares skyrocketing 611% and 471% respectively over the past five years. It's the kind of rally that'll make your head spin and your wallet sing.
And guess what? The good news just keeps on coming. Analysts have cranked up their forecast for the obesity market. They're now predicting it'll hit a jaw-dropping $130 billion by 2030, up from their previous estimate of $100 billion.
That's an extra $30 billion. I don't know about you, but I call that a pretty sweet cherry on top.
Thanks to this obesity drug frenzy, Lilly has become the world's biggest healthcare company, and Novo Nordisk is now the most valuable company in Europe. It's like watching a couple of underdogs become the kings of the castle overnight.
Now, don't get me wrong, I love a good growth story as much as the next guy, and I wouldn't bet against Lilly or Novo Nordisk. But you know what I like even more? Biotech companies that are flying under the radar. The ones that are quietly innovating and positioning themselves for big things down the road.
That's where Amgen (AMGN) comes in.
I've been singing this company's praises in almost every piece I write, and for good reason. Amgen is one of the most innovative healthcare companies out there, with a massive product portfolio, a robust pipeline, and a balance sheet that's healthier than a triathlete on a kale smoothie diet.
Let me break it down for you. Established biotech companies with strong product portfolios are like fortresses in the business world.
They've got wide moats that are harder to cross than the Strait of Gibraltar. Why? Because bringing a new drug to market costs an arm and a leg.
We're talking anywhere from $314 million to $2.8 billion, depending on who you ask. That's not exactly chump change.
But Amgen? They've got it all figured out. Their portfolio spans a variety of therapeutic areas, including general medicine, oncology, inflammation, and rare diseases.
And in the first quarter of this year, these products helped Amgen rake in a whopping $7.4 billion in revenue, a 22% increase from the same period last year.
Key drugs like Repatha, Evenity, Blincyto, and Tezpire are leading the charge, with growth rates that'll make your head spin.
Repatha alone saw record sales of $517 million, thanks to a 44% increase in volume. And get this: expanded coverage and the removal of prior authorization requirements made the drug more accessible to patients.
It's like Amgen waved a magic wand and made all the red tape disappear.
Still, Amgen isn't just content with dominating the US market. They're taking their show on the road and expanding their international footprint.
Evenity, for example, has become the segment leader in Japan, capturing a staggering 46% of the bone builder market. And Uplinza, Amgen's fastest-growing biologic for a rare neurological disorder called neuromyelitis optica spectrum disorder (NMOSD), has been launched in multiple markets, including Canada.
Speaking of Uplinza, this little powerhouse came to Amgen via their $27.8 billion acquisition of Horizon last year. And let me tell you, it's paying off in spades.
In the first quarter of 2023, sales of Uplinza shot up by roughly 60%. And its smaller sibling, Tavneos, which targets a rare blood vessel disorder, saw a mind-boggling 122% growth.
The good news doesn't stop there. Amgen just released some hot-off-the-press Phase 3 data for Uplinza in another autoimmune condition, bringing it one step closer to yet another FDA approval.
This could put some serious pressure on competitors like Immunovant (IMVT) and argenx (ARGX), who have hit a few speed bumps lately.
Now, I know what you're thinking. "But John, what about the obesity market? Isn't that where the real action is?" Well, let me tell you, Amgen's got its fingers in that pie too.
They've got a unique obesity drug candidate called MariTide, which I talked about in detail last month, and the early clinical trial data suggests that it could blow Eli Lilly and Novo Nordisk's drugs out of the water.
But Amgen isn't just about cutting-edge drugs and international expansion. They're also rewarding their shareholders with cold, hard cash.
Last December, they hiked their dividend by 5.6%, and they're now paying out $2.25 per share every quarter.
That translates to a juicy 3% yield, and it's backed by a payout ratio that's lower than a limbo stick at a beach party.
Plus, Amgen's been raising its dividend like clockwork, with a five-year compound annual growth rate of 9.6% and 12 consecutive annual hikes. That's the kind of consistency that'll make any investor smile.
Overall, it’s clear that Amgen is a standout in the biotech world, plain and simple.
Besides, this company isn’t some Johnny-come-lately to the biotech game. They've been in this fight since the beginning, and their very name is proof of their founding principles. In fact, “Amgen” is a fancy-pants word for "applied molecular genetics."
That's right, when they picked that name back in 1980, they were already knee-deep in the groundbreaking science of genetic engineering, cooking up new therapies that would change the face of medicine as we know it.
So here’s my advice. When the chips are down and the stakes are high, you can never go wrong to bet on the OG of applied molecular genetics. Buy the dip on Amgen.
Global Market Comments
June 13, 2024
Fiat Lux
Featured Trade:
(THE TWO CENTURY DOLLAR SHORT)
(UUP)
(INTC), (AMD), (QCOM), (NVDA)
I'm at my annual Silicon Valley poker night, trading barbs and bluffs with some of the biggest names in tech. The whiskey is flowing, the cigars are lit, and the pot is growing faster than a startup's user base.
Suddenly, the conversation takes a turn. One of the chip industry bigwigs, flush with a recent win, starts going on about how AI PCs are going to change the game.
Before I know it, the whole table is buzzing. CEOs are swapping stats, CTOs are arguing about architectures, and the VCs are practically salivating at the thought of the potential returns.
Being the grizzled veteran of the group, I lean back and take it all in. I've heard this kind of talk before - the next big thing, the revolution that's going to change everything. But something about this feels different.
As the night wears on and the stakes get higher, I can't shake the feeling that these AI PCs are more than just smoke and mirrors.
The numbers are just too damn compelling - a market set to soar from $225 billion in 2024 to over $270 billion by 2028, with a staggering compound annual growth rate of 44%.
It's the kind of growth that would make even the most seasoned investor's heart skip a beat.
But it's not just the money that's got me intrigued. It's the potential for these machines to fundamentally change the way we live and work.
Imagine a world where your computer is more than just a tool - a partner in crime that can help you solve problems, generate ideas, and even write that Great American Novel you've been putting off for years.
A world where the line between human and machine intelligence blurs, and the impossible becomes possible.
And the heavyweights of the chip world - Intel (INTC), Advanced Micro Devices (AMD), Qualcomm (QCOM), Nvidia (NVDA) - they're all in on the action, racing to stake their claim in this new frontier of computing.
They've been throwing around buzzwords like "revolutionary" and "game-changing" like they're going out of style, and they're backing it up with some serious muscle.
In fact, the personal computing devices market, which includes AI PCs, is predicted to see a rise in shipments reaching 398.6 million units in 2024, up 2.6% from the previous year.
That's a sign that the market is ready to embrace AI capabilities within personal and commercial computing spaces.
And let's not forget about the recent PC market recovery. A 3.2% year-on-year growth in PC shipments was reported in the first quarter of the year, after two years of weak sales following the work-from-home boom during the pandemic.
Needless to say, the stage is set for AI PCs to take the market by storm.
But perhaps the most exciting thing about the AI PC revolution is the way that it's going to reshape the global tech landscape.
In China, Lenovo (LNVGY) estimates that 54.7% of all new PCs sold in 2024 will be AI PCs, and that number is set to jump to a jaw-dropping 84.6% by 2027.
Clearly, this isn't just a US phenomenon - it's a global movement that's going to change the way we think about computing forever.
As the night winds down and the chips are cashed in, I can't help but feel a sense of excitement. The AI PC revolution might just be the real deal, and I'll be damned if I'm going to miss out on the action.
So the next day, I do what any self-respecting tech investor would do: I start making calls, cashing in favors, and doing my homework.
I'm not just looking for the next big win - I'm looking for the companies that are going to define the future.
Will it be Intel, with its decades of experience and unmatched expertise in the PC market? Will it be AMD, the scrappy underdog that's been nipping at Intel's heels for years?
Will it be Qualcomm, the mobile chip giant that's looking to make a splash in the PC world? Or will it be Nvidia, the graphics powerhouse that's been quietly building an AI empire behind the scenes?
Only time will tell, but one thing's for sure: the AI PC arms race is on, and I'm ready to saddle up and join the charge. Because if there's one thing I've learned in all my years in the Valley, it's that fortune favors the bold - and the well-informed.
So keep your eyes on the heavy hitters like Intel, AMD, Qualcomm, and Nvidia. They're the ones to watch in this AI PC revolution. And you can bet your bottom dollar that I'll be keeping my ear to the ground, ready to pounce on the next big thing.
Mad Hedge Technology Letter
June 12, 2024
Fiat Lux
Featured Trade:
(WHAT WILL DROPPING INFLATION DO TO TECH STOCKS?)
($COMPQ), ($TNX), (CPI)
It’s “all systems go” for tech stocks ($COMPQ) as the latest inflation report offers us juicy morsels of data laying out a more attractive backdrop for tech companies in the short term.
The Mad Hedge Tech portfolio has benefited from this “bet on the Fed pivot” trend to great effect and I took profits on my Micron June bull call spread.
Remember that short-term rates ($TNX) are the most important variable to whether certain stocks go up and down in the short term.
Long term, the story could be very much different.
A higher-than-consensus report would have resulted in a red day for tech stocks, a pullback of commodities, bond yields spiking, and the dollar launching into the orbit.
We got the inverse of that and this is a strong signal that tech stocks will be like a stallion bolting out the back of the stable because tech stocks are the biggest winners of a lower rate environment.
The Consumer Price Index (CPI) remained flat over the previous month and rose 3.3% over the prior year in May — a deceleration from April's 0.3% month-over-month increase and 3.4% annual gain in prices.
Inflation has remained stubbornly above the Federal Reserve's 2% target on an annual basis.
Fed officials have categorized the path down to 2% as "bumpy," while other recent economic data has fueled the Fed's higher-for-longer narrative on the path of interest rates.
On Friday, the Bureau of Labor Statistics showed the labor market added 272,000 nonfarm payroll jobs last month, significantly more additions than the 180,000 expected by economists. Wages also came in ahead of estimates at 4.1%, although the unemployment rate rose slightly to 4% from 3.9%.
Notably, the Fed's preferred inflation gauge, the so-called core PCE price index, has remained particularly high. The year-over-year change in core PCE, closely watched by the Fed, held steady at 2.8% for the month of April, matching March.
The Fed has been unbelievably late in controlling inflation, but that market doesn’t care and tech stocks care less as the AI narrative has been able to supersede anything and everything.
The market is controlled and dictated to by a bunch of algorithms.
Food up 2% after a double is in fact a “victory” to the algorithms even if the middle class in the United States has felt the heavy brunt of it.
It is probably accurate to say that tech stocks are in a world of their own and the price action certainly behaves as if this is the case.
What does this all mean?
Get ready for higher-tech share prices.
Lower rates will help emerging tech companies tap the debt market to fund operations.
Many smaller tech firms don’t have the privilege to tap a multi-trillion dollar balance sheet for cash whenever they want.
In the short-term, except the AI stocks to gap up yet another leg as the market prices at lower rates for companies that hardly need it.
Talk about having your cake and eating it too – this would be it!
For the best of the rest, it helps but won’t move the needle in terms of catching up to big tech, but this should stimulate the investors on the sidelines nudging them to handpick certain stocks that have been ignored during the time of high rates.
Either way, the Fed has really put itself in a box here and without even killing inflation to the 2% mandate.
The markets fully expect the Fed to cut once or twice by the end of the year.
Whether this decision is political or not, the new developments have put a floor under many high-quality tech names.
Consequently, the second half of the year should see some ample returns in tech stocks that preside over good business models.
