“Don’t confuse schooling with education. I didn’t go to Harvard but the people that work for me did.” – Said Founder of Tesla Elon Musk
(SUMMARY OF JOHN’S NOVEMBER 29, 2023, WEBINAR)
December 1, 2023
Hello everyone,
Welcome to December and the start of a new season – winter or summer, depending on where you live in the world.
Let’s get into the summary of John’s most recent webinar.
Title: Approaching the Finish Line
December 5-7 Mad Hedge Traders & Investors Summit – 9:00 to 5:00 p.m. EST
Attendance is free. $100,000 in prizes. A wide choice of trading strategies is offered.
Performance:
November 2023- +17.15
Average Annualized Return: +48.57
2023 year to date: +83.32%
Since inception: 680.51%
Positions:
90% Long, 10% short.
Risk On
(MSFT) 12 /$320-$330 call spread
(NLY) 12/$15-$16 call spread.
(BRK/B) 12/$320-$330 call spread
(CCJ) 12/$35-$38 call spread
(CRM) 12/$185 - $195 call spread
(GOOGL) 12/ $110-$120 call spread
(SNOW) 12/$135-$140 call spread
(CAT) 12/ $220- $230 call spread
(XOM) 12/ $97-$100 call spread
Risk Off
(TLT) 12/$95-$98 call spread
Expiration Value: +86.17%
The Method to My Madness:
This is not the time to be buying stocks. It appears the Fed is done raising rates and markets are now discounting the first rate cut in March.
Bonds, REITs, precious metals, and financials have all responded.
We will probably continue this rally until the end of the year, but what happens in January?
The government shutdown is delayed until February – and markets have responded well to this.
Oil prices and commodities are now trading as one – selling off on a slowing economy.
After a rest, the tech market is marching higher again, which will probably continue for many years.
Go long stocks and bonds on any pullbacks in the market.
Commodities and industrials are a second-half play.
Stocks – Best in 18 months:
Just saw the fastest 10% rise in history.
Big tech leads, with financials catching up and energy suddenly cheap.
Company buybacks are about to increase, as companies race to pick up their stocks before the yearend deadline.
Apple is the top buyback stock followed by Alphabet (GOOGL) and Microsoft (MSFT)
Money is pouring into Defence ETFs, like (PPA) and (ITA), with $600 million entering the sector.
Fisker dives 18% after a disastrous earnings report. Companies trying to challenge TSLA are coming off second-best.
Short seller, Jim Chanos shuts down after a large short in TSLA shares blew up. His capital diving from $6 billion to $200 million.
2024 favorite sector is cyber security. Look at PANW, SNOW, and the ETF HACK. Governments are big targets for cybercriminals.
Safest Stock: Microsoft (MSFT) – ramping up efforts in AI. The future will see cancer cures with AI.
The government shutdown was delayed until February.
Bonds – Prices Taking a Break:
Government bond auctions suddenly improve, taking prices to two-month highs.
The Fed will cut interest rates as early as March – the futures market gives this a 40% probability.
Investors poured $5 billion into Bond ETFs in October.
10-year Treasury yields hit a new 16-year high, at 5.08%, then retreated to 4.33%
The whole falling interest rate and rising bond prices have been delayed for three months – hotter than expected economic growth at 4.9% for Q3 and more Fed rate rises.
Junk Bond ETFs (JNK) and (HYG) are holding up extremely well with an 8.74% yield and an 18-month high.
Buy (TLT) on the dip.
Foreign Currencies:
Sizeable pay hikes will lead to a strong Japanese Yen.
Whiskey Maker, Suntory offering 7% pay hikes.
The expectation of falling US interest rates is adding fuel to the fire.
Buy (FXY) on dips.
Bank of Japan eases grip on Bond Yields, ending its unlimited buying operation to keep interest rates down.
Japan is the last country to allow rates to rise.
Expect the Japanese yen to rise.
The 2024 story will be the US$ short.
Energy and Commodities:
Oil dropped from $96 down to $72 in less than two months as fears of an economic slowdown continued.
US Gasoline prices hit three three-year- lows, on recession fears and replacement concerns by EVs.
Energy stocks are lower and pulling down all other commodities.
There is a BUY setting up here when the global economy reaccelerates on a lower interest rates world. Watch (XOM) and (OXY).
China’s oil imports have fallen for six consecutive months, the world’s largest importer.
Biden provided a floor bid from the Strategic Petroleum Reserve at $79.
Warm weather is capping rallies in Natural Gas (UNG)
(XOM) is moving into Lithium.
(OXY) Buffett is an owner – 45% of the company.
(FCX) in buy territory – LEAPS territory soon.
Precious Metals:
The sharp drop in interest is very positive for Gold.
Goldman Sachs goes bullish on Gold: The investment bank expects the S&P GSCI, a commodities market index, to deliver a 21% return over the next 12 months.
Investors are picking up gold as a hedge for 2024 volatility.
Gold is headed for $3000 by 2025.
Falling interest rates are the accelerator.
Silver is the better play with a higher beta.
Russia and China are also stockpiling gold to sidestep international sanctions.
(GOLD) $50 is the 2024 target.
Real Estate- Hopes Abound
Pending Home Sales Plunge to 13 year-low, down 4.1% in October, on a signed contracts basis.
Sales were down 14.6% year over year.
The median price of an existing home sold in October was $391,800, an increase of 3.4% from October 2022.
These are the last poor sales numbers before the collapse in interest rates.
At the end of October, there were 1.15 million homes for sale, down 5.7% from a year earlier.
This is about half as many homes as were available for sale pre-Covid.
At the current sales pace, that represents a 3–6-month supply.
Six-month supply is considered a balanced market between buyer and seller.
Homebuilder sentiment drops, down six points to 34 in November.
Trade Sheet:
Stocks: buy the big dips at the bottom of the range.
Sell big rallies to hedge holdings.
Bonds: buy dips.
Commodities: buy dips.
Currencies: sell dollar rallies, buy currencies.
Precious Metals: buy dips.
Energy: buy dips.
Volatility – buy $12.
Real Estate – buy dips.
Next Webinar: December 13, 2023
Cheers,
Jacquie
Global Market Comments
December 1, 2023
Fiat Lux
Featured Trade:
(NOVEMBER 29 BIWEEKLY STRATEGY WEBINAR Q&A),
($VIX), UNG), (PANW), (SNOW), (HACK), (MSFT), (AAPL), (FCX), (TSLA), (F), (GM), (LLY), (CVX), (XOM), (RIVN), (TLT)
Below please find subscribers’ Q&A for the November 29 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Silicon Valley, CA.
Q: How much longer can the United States Natural Gas Fund (UNG) remain at such low levels?
A: They call this contract “The Widow Maker” for a reason. As long as the weather is warmer than usual, which has been a problem, (UNG) will remain cheap. We actually got up to $8 in the UNG a month ago and have since come back to $5.50. There are no signs of an energy shortage anywhere right now with the collapse of oil prices from $96 down to $70, so this could be the worst thing in the world if global warming continues. But I'm keeping my position. It’s basically worthless now anyway, but that has been a real shocker this year in the energy community—how cheap natural gas has gotten. And that is after supplying all on Germany’s Natgas needs with no notice.
Q: I still have Palo Alto Networks (PANW) open, what should I do?
A: You’re pretty much at a maximum profit now, so you might as well run it into the expiration because, at a Volatility Index ($VIX) of $12, there just aren’t many other attractive trades to put on right now. You’ll see that when we go through the charts. Everything has just had a massive move in our favor. It’s actually the sharpest move up in market history, so you don't want to go chasing things, and you certainly don't want to go short because that is against the long, medium, and short-term trends.
Q: Which of your positions would you suggest we can still buy right now?
A: None, except for two-year US treasury Bills to lock in high-interest rates at 4.8%. Everything is just wildly expensive on a short-term basis.
Q: When do you expect Freeport McMoRan (FCX) and the other commodities to rise?
A: Towards the middle of the year, the market will shift entirely out of technology and into domestic industrials and commodities, and we should expect exponential moves in those areas also as the economy recovers and interest rates fall. We are going to start putting LEAPS out on those pretty soon because those are the bargain of the century prices right now.
Q: I’m new to the program, and I noticed all of the trades are done as options spreads. What are the benefits of doing it in this way versus owning the underlying?
A: You get a leverage of 10X versus owning the underlying with limited risk. You also make money when markets do nothing because you are also short volatility when you do an options spread. In fact, every trade alert we send out gives you three choices usually: buy the stock, buy the options spread, or buy the ETF. So that way, you can cater your trading to your level of experience and risk tolerance. And if you want to know more, just go to our website, log in, and search for call spreads—there will be a vast library talking about the benefits of doing call spreads and how to execute them.
Q: What’s your favorite sector for next year?
A: Always a popular question for this time of the year, and that’s an easy answer.
Number one: cybersecurity. That means Palo Alto Networks (PANW), which we’re long, Snowflake (SNOW), which we’re also long, and Nvidia (NVDA), which we were long in October before it went completely nuts—it turns out that cyber security has a huge appetite for the high-end processors that Nvidia makes. There’s also an ETF on that—HACK, if you want lower volatility; so there’s three or four names for you right there. If I had to pick a single stock, the safest stock, I’d pick Microsoft (MSFT) right here; they have a 70% market share in PC operating systems worldwide, they are ramping up their efforts in AI with the ownership of ChatGPT, and it's really literally the safest stock in the market—likely to go up 30% next year. So if you can handle 30% plus a 0.80% dividend, Microsoft is your pick, but you might want to think about selling it mid-year when Freeport McMoRan (FCX) becomes my number one pick of the year.
Q: Is it too late to buy Microsoft (MSFT)?
A: Yes, wait for either a pullback of 10% or a flat line move sideways for a month, which is also called a time correction.
Q: I have several large companies I deal with that have all been hacked in the last couple of months. Several have been locked out of their systems or shut down for a month.
A: Yes, that’s absolutely going on everywhere. Also, governments have become favorite targets for hacking because they have the least amount of money to spend on cybersecurity. They are also the least sophisticated. So again, cybersecurity is a great business to be in; and by the way, I think we’re having gigantic moves in the cyber sector today. Palo Alto Networks (PANW) is up $11.61—who can beat that? That’s nice, watching your longs going up in double digits every day.
Q: Is Apple (APPL) going into the banking business now that they and Goldman are going through a divorce?
A: Yes, Apple has been slowly sneaking into the banking business for years. Look no further than Apple Pay. They have several advantages they can bring to bear here, like all of you personal information they could possibly imagine.
Q: I don’t like General Motors (GM) even though they’ve announced buybacks and dividend increases—too concerned about EV slack, market, and labor costs.
A: I couldn’t agree with you more; I think (GM) goes under in 10 years. They’ll never catch up on EVs, and basically, the company will either sell Teslas under license or be sold for scrap metal like they were back in 2008. And it really is the height of hubris to announce a 17% share buyback, which is enormous—10 billion dollars—right after they pleaded poverty with the unions to get them to agree to only a 25% wage increase. So it just absolutely fails the smell test on every front.
Q: Do you see healthcare making a big move as larger companies are really beaten down?
A: You’ll have rallies in healthcare, but basically, they’re a defensive sector and the last thing in the world that you want in a runaway bull market is a defensive sector. You will get single stock moves like Eli Lilly (LLY) from people who are specifically playing hot areas like weight loss drugs and other companies developing cancer cures with AI. That’ll be another big story next year.
Q: Any chance for Ford (F) at this point?
A: Not in the long term; again, you go back to that market share chart I showed you—Ford is only at a 7% market share in EVs and 14 years behind Tesla (TSLA), which has a 52% share. I don’t think anybody has a chance. What may happen is Tesla will take over Ford at some point, just to get at the factories; but again it will be a “pennies on the dollar” offer.
Q: What about Toyota (TM); how long can their hybrid push last?
A: A long time, because for a lot of people, hybrids are the right solution—especially people who have to go long distances and don't have time to recharge or don't have access to recharging. The hybrids that they have now are really great. They run the first 50, 60, or 70 miles solely on battery power. And I know people who have hybrids with short commutes who still have the original tank of gas the car came with when they bought it new a year ago. All-electric isn't perfect for everyone; hybrids will catch what's left of that market. Also, hybrids have thousands more parts than electric cars do. So the profit margin will never be what it is on an EV.
Q: Will Chevron (CVX) and ExxonMobil (XOM) go up?
A: Oil does absolutely, you can expect 20-30% gains on any recovery in oil, and that’s why we own them. But it’s a 2024 story.
Q: What do you think about Rivian (RIVN) here?
A: It's a long-term play; we have the LEAPS in them. The stock is just about recovered to our costs and they're increasing production. If anyone else is going to make it in the EV sector, it will be Rivian, who is run by some genius from MIT. So yeah, I would be buying dips in Rivian but I wouldn't chase.
Q: How will the iShares 20 Plus Year Treasury Bond ETF (TLT) perform in the next few months?
A: Kind of late for the LEAPS. That was really an October play, but any $ 5-point pullback and I will be in there with LEAPS because I think (TLT) hits $120 next year.
Q: Please explain the demise of Crypto.
A: Crypto did great when we had a cash surplus and an asset shortage like in 2019-2021. We now have the opposite—a cash shortage and an asset oversupply. Crypto doesn't do well in that situation. On top of that, the guys who runs every major crypto platform are looking at prison time now because of massive widespread theft. Although you do see crypto has gone up nearly a hundred percent this year, that doesn't back out all the Crypto losses from theft. It would be interesting to find out what the true performance of Crypto would be if you included the 50% that was stolen by the Crypto custodians in one way or the other. So Crypto is great when stocks were too expensive, but now they're all cheap and they pay dividends. So, much better fish to fry these days as opposed to the last market top.
Q: Do you think the election will have any effect on the stock market next year?
A: Absolutely not. Even a government shutdown won't have an effect because the fundamentals are now so powerful. We're basically discounting falling interest rates for the next 5 years. Your retirement funds will absolutely love that.
To watch a replay of this webinar with all the charts, bells, whistles, and classic rock music, just log on 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
“What I needed to get a head was to outperform the idiots. Fortunately, there is a large supply of idiots,” said Warren Buffet’s lat partner, Charlie Munger.
Mad Hedge Biotech and Healthcare Letter
November 30, 2023
Fiat Lux
Featured Trade:
(A SLEEPER HIT IN THE BIOPHARMA WORLD)
(PFE), (LLY), (VTRS), (BNTX), (SEGN)
Eli Lilly's (LLY) recent strides in the weight-loss treatment market have made headlines, especially with Mounjaro, their diabetes drug doubling as a weight-loss medication. The real buzz began when Zepbound, another of Lilly’s offerings, got the green light for weight management.
These developments have propelled Lilly into a potentially profitable orbit, but let's not get carried away just yet. While this company’s stock has been climbing the ladder, partly priced in with the latest news, it's worth casting a wider net.
In the world of pharmaceuticals, opportunities abound, and sometimes the best catches are not the shiniest. Enter Pfizer (PFE), a familiar name that’s been a bit under the weather, stock-wise.
Pfizer's shares have taken a 40% hit this year, a response to the waning demand for their COVID-19 vaccine and treatment.
But let's not forget that we're shifting gears to a post-pandemic era, and such shifts in demand are part of the course. Add to this the impending loss of exclusivity on some of their key products, and you've got a recipe for some financial heartburn.
In 2023, Pfizer’s performance didn’t quite match up to the market, a stark contrast to its 2021 and 2022 glory days, driven by its COVID-19 portfolio. However, looking at Pfizer through the narrow lens of recent performance alone is like judging a book by its last chapter.
Let's rewind a bit. Pfizer took some bold steps in recent years, steps that have shaped its current narrative.
The big move was shedding its consumer health and off-patent drug business, Upjohn, which led to the creation of Viatris (VTRS). The goal? To sharpen focus on innovative pharmaceuticals.
Then came the historic collaboration with BioNTech (BNTX) on a COVID-19 vaccine, marking the first U.S. authorization for an mRNA-based vaccine and bringing in substantial revenue in 2021 and 2022.
Fast forward to 2023, and Pfizer's investment fruits are beginning to ripen. This year alone, it has launched seven new products, from Litfulo for alopecia areata to the RSV vaccine Abrysvo.
Pfizer's non-COVID revenue forecast is promising, projecting up to $84 billion by 2023.
But the plot thickens. Pfizer recently announced a $43 billion acquisition of Seagen (SEGN), an oncology-focused biotech. This isn’t just a new chapter for Pfizer; it’s a whole new book, potentially leading to groundbreaking developments in cancer treatment.
With these in mind, it’s reasonable to believe that Pfizer’s current stock-market blues are but a temporary cloud.
With 83 candidates in development and a robust pipeline, partly fueled by its COVID-19 success, a rebound is on the horizon.
The dividend yield, sitting pretty at 5.5%, along with a decade-long streak of increasing payouts, adds to Pfizer's charm as a long-term investment.
So, investors should see Pfizer’s current price not as a red flag but as a golden ticket – an opportunity to get in on the ground floor before the elevator goes up. Its revenue forecast doesn’t even include its COVID-19 products, which could continue to generate significant revenue, especially during flu season.
Now, back to Eli Lilly. Yes, its revenue has seen double-digit growth recently, and it has been facing the same headwinds as Pfizer. It’s important to note, though, that its valuation makes sense in the context of its current earnings and potential growth. That makes it difficult to truly make a fair comparison at this point.
But, if we're talking opportunity, Pfizer is the one that's looking like a hidden gem. To put it simply, it's all about opportunity cost.
Pfizer, at present, is the underdog with untapped potential. Investing in Pfizer now could mean reaping substantial rewards down the line.
I’m talking about a company with a proven track record, a solid pipeline, and a knack for innovation. And for its current valuation, Pfizer is a deal that's hard to pass up.
For investors willing to play the long game, this could be the moment to seize an opportunity that could pay dividends in the future.
Global Market Comments
November 30, 2023
Fiat Lux
Featured Trade:
(SO WHAT IS YOUR “INFLUENCER” SCORE)
(REPORT FROM THE ORIENT EXPRESS)
I was awoken from a dead sleep in the middle of the night in my suite on the Orient Express by a juddering halt and the smell of burning breaks in the air.
We were somewhere high in the Swiss Alps, and every single passenger on the all-first-class train had to be thinking that a murder had just been discovered.
It turned out that in the darkness we had hit a 400-pound wild boar astride the tracks. We spent four hours on a remote siding waiting for Swiss National Rail to deliver us a new engine.
I elicited chuckles when I ordered boar for lunch the next day. The matre’d assured me it wasn’t ready yet, as the meat had to soak in vinegar for 48 hours before cooking. That’s the kind of thing you only hear in Europe.
I boarded the train that morning at London’s Victoria Station in anticipation of the trip of a lifetime. Venice Simplon Orient Express didn’t disappoint, although I would not be surprised if the IRS questioned the $8,500 cost for the 34-hour trip as a business expense on my tax return this year.
The legendary train has featured in a dozen films (James Bond and Agatha Christie), and two dozen television shows, and played a major part in countless novels. You can even buy a video game.
The modern Orient Express has three different trains.
From Victoria Station in London to Folkstone on the coast, I traveled on a vintage British train that was showing its age.
Then I boarded a bus, which drove on to a flatbed rail car that whisked us through the tunnel 1,500 feet under the English Channel. There, we claustrophobes closed our eyes and held our breath for 20 minutes.
The real luxury started when I boarded a vintage 1924 Pullman first-class sleeping car in Calais, France, lovingly restored to the day it was built.
I set my watch ahead one hour and back 100 years. Suddenly, the trees resembled those in impressionist paintings, the land was dotted with Norman fortresses, and gasoline was $8 a gallon.
The original Orient Express, from Paris to Istanbul, made its inaugural journey in 1882 and quickly became famous for its unheard-of luxury and speed. Modern bullet trains and cut-rate airlines put it out of business 100 years later.
The current incarnation started in 1977 when James Sherwood, who had built up a fortune through Sea-Land Containers, bought three dilapidated Pullman rail cars at an auction in Monte Carlo. Like all of us with insanely expensive hobbies, he sought a way for outsiders to fund his passion.
Hence, the Venice-Simplon Orient Express started luring big spenders and the romantically inclined in 1982 (click here for their site)
I became one of the original passengers in England when my broker chartered it for a day of client entertainment, an ancient steam engine laboring all the way.
Over the next 30 years, Sherwood built Orient Express into one of the world’s preeminent luxury brands, on par with Cartier, Tiffany, and Channel.
He developed a massive global network of cross-marketing deals that tied in package tours, hotels, cruises, and other vintage trains.
Today, the parent company, Belmond (BEL) carries a market cap of $1.3 billion (click here for that site).
Ironically, the company today still only owns one of its dozens of rail cars. The rest have been sold to Middle Eastern investors with long-term leaseback contracts.
The dinner onboard is the highlight of the trip, a fabulous six-course, three-hour affair. There you meet the other passengers, all dressed to the nines.
Most were wealthy elderly couples knocking off a bucket list item, along with a few young hedge fund managers and a passel of mistresses.
I was one of the few Americans. I ate with a casino operator in Ireland and the owner of a manufacturing company in the UK. All I can say is thank goodness for the elastic waist on my tux trousers.
Having spent a lifetime analyzing corporate management, I was fascinated by the operation of the train. While the onboard staff is limited to 79, they are supported by a management, marketing, and engineering team of no less than 4,500.
You don’t just show up with a 17-car train in Europe’s incredibly congested rail network. You must first file a route plan and get a clearance slot, much like any airline.
Engines and crews must be changed at every border. Mechanics are onboard with an ample stockpile of 1920s rail car parts. Oblivious passengers are frequently left stranded behind at stations along the way and must be retrieved by taxis, which catch the train down the line.
To make up for the time we lost due to the unlucky boar, the rail authorities routed us through the 12-mile long transalpine tunnel under Splügen Pass, then along the sublime shores of Lake Como, where the train rarely travels.
We roared past George Clooney’s house, who, I am told, is a frequent passenger on the train. Amazed Italians were waving and taking pictures of us with their cell phones at every stop. Suddenly the buildings were all shaded in pastels, the churches changed from Protestant to Catholic, and the trees resembled those in Renaissance religious paintings.
We raced over the causeway to Venice’s Marco Polo station that evening, dumping our considerable luggage into a private speedboat which whisked us away down a Grand Canal crowded with gondolas, en route to the fabled Cipriani Hotel.
In 2019, Belmond, the parent company of Orient Express, was taken over by the ultimate luxury brand, LVMH Moet Hennessy. I worked with the son of the current owner at Morgan Stanley 40 years ago, who everyone referred to as “Bubbles.”
Because of the scheduling difficulties of crossing the English Channel post-Brexit, this is the last year the train will operate from London. In 2024 you can only catch the fabled train from Paris.
“I’ve always been big on lowering expectations. That’s how I got married, my wife lowered her expectations,” said Warren Buffet’s late partner, Charlie Munger.
