Big developments happening in the tech sector abroad and investors should take notice.
The CEO of technology giant Nvidia Jensen Huang said he believes that Malaysia will become a potential hub for artificial intelligence “manufacturing.”
This is big news for South Asia and this is the first stage of Silicon Valley looking to harness the power of South Asia to progress its narrative and developmental footprint.
It’s essential they find some low-cost countries to partner with because it’s not always sensible to manufacture in the United States because of cost restrictions.
Take AI, the need for large-scale servers is intense, and opting for a better cost-efficient place is a good strategy.
Huang mentioned that Malaysian conglomerate YTL Corp. could play an important role in setting up AI data centers.
Malaysia “is a very important hub for SEA’s computing infrastructure. It requires access to land, facilities, power, which is extraordinarily important,” he said. “I think YTL could play a great role in that.”
Malaysia’s expertise in packaging, assembly, and other aspects of manufacturing makes it well-suited for the manufacturing of artificial intelligence.
Nvidia is working with 80 AI startups in the country.
In Malaysia, the data center infrastructure layer of computing, which is one of the most important parts of the AI and the cloud, is very successful.
Southeast Asia will likely be a hub for AI computing because countries need their own AI data centers to refine and transform data into valuable information. Old data processing centers were designed to hold data files and run applications. AI requires the use of each place's culture, language, values, literature, and common sense.
The prospects of Southeast Asia are highly positive as it attempts to turn into an important technology hub. It’s already experienced in packaging, assembly, and battery manufacturing. It has rounded out to perform well throughout the entire technological supply chain.
The smart move here is to decouple from China as geopolitics threaten to spin out of control.
Also, consider that Chinese demographics are one of the grimmest in the world.
China simply isn’t producing young workers anymore and wages have skyrocketed.
It doesn’t make sense to build factories there anymore.
India will have a big role to play in the advancement of Silicon Valley production in the next generation.
Apple will shift a quarter of its iPhone production to India in the next two to three years.
The decision will translate into more than 50 million iPhones a year being built in India.
The iPhone production in India lagged seriously behind China but that changed with the iPhone 14, which began manufacturing in the same month as in China.
In 2023, Apple built more iPhone 15 units in India than any other model and it marked the first time it managed to release a model made in India on launch day.
Foxconn is currently building a plant in Karnataka state that should open for business in April 2024.
As Silicon Valley marches on, they will have an interest in partnering in other parts of the world to fine-tune their business models.
Expect a heavy dose of South Asia for the next generation because that is where the low-hanging fruit is.
India will come into its own in the next few years, and Malaysia certainly is a good value player.
The most important takeaway is the accretive effect they will have on American technology companies.
In the short term, I believe NVDA is a better stock player than Apple, although Apple is a great long-term investment.
https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png00april@madhedgefundtrader.comhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngapril@madhedgefundtrader.com2023-12-08 14:02:472023-12-08 16:21:24South Asia Partners
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
We have recently had a large influx of new subscribers.
I have no idea why. Maybe it’s my sterling personality and rapier-like wit.
For whatever reason, I think it's time for all to undergo a refresher course on how to most efficiently go long the market with the best possible risk/reward ratio.
I’m talking about buying vertical bull call debit spreads.
Most investors make the mistake of investing in positions with only a 50/50 chance of success, or less. They’d do better with a coin toss.
The most experienced hedge fund traders find positions that have a 99% chance of success and then leverage up on those trades. Stop out of the losers quickly and you have an approach that will make you well into double digits, year in and year out, whether markets go up, down, or sideways.
For those readers looking to improve their trading results and create the unfair advantage they deserve, I have posted a training video on How to Execute a Vertical Bull Call Spread.
This is a matched pair of positions in the options market that will be profitable when the underlying security goes up, sideways, or down in price over a defined limited period.
It is the perfect position to have on board during markets that have declining or low volatility, much like we have experienced for most of the last several years, and will almost certainly see again.
I have strapped on quite a few of these babies across many asset classes this year, and they are a major reason why I am up so much this year.
To understand this trade I will use the example of the Apple trade, which most people own and know well.
On October 8, 2018, I sent out a Trade Alert by text messages and email that said the following:
BUY the Apple (AAPL) November 2018 $180-$190 in-the-money vertical BULL CALL spread at $8.80 or best
At the time, Apple shares were trading at $216.17. To accomplish this, they had to execute the following trades:
Buy 11 November 2018 (AAPL) $180 calls at….……..…$38.00
Sell short 11 November 2018 (AAPL) $190 calls at…...$29.20
Net Cost:…………………….………..…...............……….….....$8.80
A screenshot of my own trading platform is below:
This gets traders into the position at $8.80, which costs them $9,680 ($8.80 per option X 100 shares per option X 11 contracts).
The vertical part of the description of this trade refers to the fact that both options have the same underlying security (AAPL), the same expiration date (November 16, 2018), and only different strike prices ($180 and $190).
The maximum potential profit can be calculated as follows:
Another way of explaining this is that the call spread you bought for $8.80 is worth $10.00 at expiration on November 16, giving you a total return of 13.63% in 27 trading days. Not bad!
The great thing about these positions is that your risk is defined. You can’t lose any more than the $9,680 you put up.
If Apple goes bankrupt, we get a flash crash or suffer another 9/11-type event, you will never get a margin call from your broker in the middle of the night asking for more money. This is why hedge funds like vertical bull call spread so much.
As long as Apple traded at or above $190 on the November 16 expiration date, you will make a profit on this trade.
As it turns out, my take on Apple shares proved dead-on, and the shares rose to $222.22, or a healthy $32 above my upper strike.
The total profit on the trade came to:
($10.00 expiration - $8.80 cost) = $1.20
($1.20 profit X 100 shares per contract X 11 contracts) = $1,320.
To summarize all of this, you buy low and sell high. Everyone talks about it but very few actually do it.
Occasionally, Vertical Bull Call Spreads don’t work and the wheels fall off. As hard as it may be to believe, I am not infallible.
So if I’m wrong and I tell you to buy a vertical bull call spread, and the shares fall not a little, but a LOT, you will lose money. In those rare cases when that happens, I’ll shoot out a Trade Alert to you with stop-loss instructions before the damage gets out of control.
I start looking at a stop loss when the deficit hits 10% of the size of the position or 1% of the total capital in my trading account.
To watch the video edition of How to Execute a Vertical Bull Call Spread complete with more detailed instructions on how to execute the position with your online platform, please click here.
Good luck and good trading.
Vertical Bull Call Spreads Are the Way to Go in a flat to Rising Market
https://www.madhedgefundtrader.com/wp-content/uploads/2022/10/john-thomas-bull-ride.png594506Arthur Henryhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngArthur Henry2023-11-09 09:02:382023-11-09 10:51:54How to Execute a Vertical Bull Call Spread
Tech (QQQ) earnings turned out to produce some positive performances.
Dominant companies can produce dominant earnings even in troubled times.
So what is the problem?
The sales outlook underwhelmed as the American consumer and business keep getting stretched to the limit.
I believe that traders shouldn’t expect a quick turnaround of sales projections for 2024 unless there are some material structural improvements in the business and consumer environment.
No savior is coming for 2024.
All signs point to more uncertainty and not less and rightly so as high inflation has only been replaced by a decrease in the rate of inflation.
Things are still expensive and that means less opportunity for tech to build a growth story.
Apple, Alphabet, Meta, and Tesla all gave investors reason to rub smiles off faces.
From Apple’s unimpressive holiday outlook to Alphabet’s tepid cloud computing sales results, a recurring theme for the group was weakness.
Meta warned that the year ahead is looking less predictable, while Tesla raised concerns that demand for electric cars is starting to weaken.
Despite Tesla's missing earnings, the group is poised to surpass the 36% increase estimates called for before earnings season began.
The tech sector in the S&P 500 still carries a nearly 36% premium to the index on a forward price-to-earnings basis, per data compiled by Bloomberg Intelligence.
There’s a lot of AI hype, but not every company is market-ready.
Everything can change in a heartbeat if there is economic or geopolitical upheaval, which would directly impact stocks.
The market is still pricing in no spreading of military activity as it looks through it as a self-contained area.
Therefore, the pendulum has swung the completely opposite direction as the U.S. 10-year treasury yield has dropped from 5% to 4.6%.
The strength in treasuries could be short-lived, because several have told me that traders are jumping back into the short-term trade which would signal higher for longer.
The Fed Futures show that the first 25 basis rate is forecasted for May 2024 with 2 more consecutive .25% rate cuts following the first.
The American consumer just might have enough juice for one more splurge that would then push back rate cuts from May to somewhere closer to July or August.
Therefore, it’s easy for me to see how this 6.5% surge has a little longer follow through only to soon clash with a “higher for longer” narrative.
The true tailwind for tech stocks here is that much of the bad news has been priced in and any violent surge in treasury yields seems like a low probability for the last 7 weeks of the year, unless another global conflict breaks out.
Seasonal buying could mean that November is more positive than negative for tech stocks and any big draw down should be bought in a quality tech name. December could be a harder slog for tech.
https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png00april@madhedgefundtrader.comhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngapril@madhedgefundtrader.com2023-11-06 14:02:192023-11-06 15:09:35Higher For Longer Is Not Off The Table
The weakness in stock prices is emblematic of the broader malaise in the Eurozone economy.
The positive here is that the US economy keeps chugging along and on a relative basis, is leaps and bounds stronger than its counterpart.
Why does that matter?
The less money invested into European tech can be diverted into the likes of Tesla (TSLA), Nvidia (NVDA), Apple (APPL), and the rest of the American tech companies.
I absolutely see this as a zero sum game in a world where all the low-hanging fruit has been plucked.
In a globalized world, investors can really just dabble in whatever national market they seek to profit from with ease.
It’s really just a few taps of the screen.
Silicon Valley is already heavily entrenched in Europe with sprawling workforces in many of the 27 countries in which they arbitrage lower wages to their benefit.
If one ever hoped a local rival would root out American variants, it’s a hard slog ahead.
France’s worldline shares plummeted a record 59%, erasing €3.8 billion ($4 billion) of market value, after the French payments company slashed future forecasts.
The stock’s plunge echoes August’s huge fall in peer Adyen NV and follows Tuesday’s 72% drop in fintech CAB Payments Plc. Shares in Adyen declined 7.5% on Wednesday, while another peer, Nexi SpA, slid 18%.
Since then, worries over lofty valuations and a broader slowdown in consumer spending have brought the high-flying stocks back to earth. Adyen, Nexi, and Worldline have lost more than $33 billion in market value combined in the year to date.
Worldline said it now sees full-year organic revenue growth of 6% to 7%, down from a previous forecast of 8% to 10%. The company’s third-quarter sales also missed estimates.
Small fintech companies growing in the single digits is one of the biggest fopaux an up-and-coming fintech company can commit.
Management also complained that European consumers are tapped out.
They don’t have the money to allocate to “non-discretionary” items.
Europeans are basically paying for shelter, energy, and food.
If there is anything else left over, it’s not much. That’s what happens when the cost of living rises between two and three times.
Management also emphasized an acute slowdown in German consumer spending which hurts since these consumers are some of Europe fintechs biggest customers.
I do believe that many investors aren’t going to stay invested in Europe’s fintech space and it is ripe for consolidation which ironically could come from America’s magnificent 7 who have the deep pockets.
It’s a fragmented sub-sector of tech with some operators pigeonholed into one microscopic area of Europe like Andorra or Slovenia.
Technology scales but Europe is hard in the sense it must cut through a vast language, sprawling bureaucracy, high tax regimes, and cultural barriers not to mention different laws. Throw into the mix that multinationals have stopped supporting work visas for non-EU citizens and it is easy to understand why Europe is not ideal for starting tech firms.
The narrow path is why a company like Worldline generates revenue of around $1.2 billion per quarter as opposed to an American PayPal (PYPL) which does $8 billion per quarter.
If we look at the big boys like Google, quarterly revenue goes up to $80 billion per quarter highlighting how far back Europe is from the real upper echelon of American tech.
If Europe is getting trounced by the likes of PayPal, then investors can’t get angry when they get labeled the bush leagues of global technology.
Look at Silicon Valley and especially the tier 2 firms like Uber (UBER) or AirBnb (ABNB) for the real growth instead of Europe’s suffocation of free market technology.
https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png00april@madhedgefundtrader.comhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngapril@madhedgefundtrader.com2023-10-25 14:02:052023-10-25 14:11:08America Shines While Europe Slumbers
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