Global Market Comments
April 8, 2025
Fiat Lux
Featured Trade:
(A REFRESHER COURSE AT SHORT SELLING SCHOOL),
(SH), (SDS), (PSQ), (DOG), (RWM), (SPXU), (AAPL), (TSLA),
(VIX), (VXX), (IPO), (MTUM), (SPHB), (HDGE)
Tag Archive for: (AAPL)
I’m not necessarily advocating a short sale here after markets have lost a staggering $10 trillion in market cap, from $50 trillion down to $40 trillion.
But a single tweet could trigger a 5% rip-your-face-off rally at any time and only then can you have another shot at betting the market will continue its downtrend.
So I am going to review my short-selling school once again so you can witness the spectacular performance that all of these short plays have delivered.
Some asset classes are reflecting the fact that we are already in a full-blown recession, while others are not. In case we DO go into a recession, knowing how to sell short stocks will be a handy skill to have.
It will become essential to be knowledgeable about all the different ways to add downside protection.
While you are all experts in buying stocks, selling them short is another kettle of fish.
I therefore think it is timely to review how to make money when prices are falling. I call it Short Selling School 101.
I don’t think we are going to crash to new lows from here, maybe drop only 10% at worst. So, some of the most aggressive bearish strategies described below won’t be appropriate.
If you have big positions in single stocks, like Apple (AAPL), you can execute the same kind of strategy. Selling short the Apple call options to hedge an existing long in the stock looks like the no-brainer here. You should sell one option contract for every 100 shares.
There is nothing worse than closing the barn door after the horses have bolted or hedging after markets have crashed.
No doubt, you will receive a wealth of short-selling and hedging ideas from your other research sources and the media right at the next market bottom.
That is always how it seems to play out, great closing the barn doors after the horses have bolted.
So I am going to get you out ahead of the curve, putting you through a refresher course on how to best trade falling markets now, while stock prices are still rich.
I’m not saying that you should sell short the market right here. But there will come a time when you will need to do so.
Watch my Trade Alerts for the best market timing. So here are the best ways to profit from declining stock prices, broken down by security type:
Bear ETFs
Of course, the granddaddy of them all is the ProShares Short S&P 500 Fund (SH), a non-leveraged bear ETF that is supposed to match the fall in the S&P 500 point for points on the downside. Hence, a 10% decline in the (SPY) is supposed to generate a 10% gain in the (SH).
In actual practice, it doesn’t work out like that. The ITF has to pay management operating fees and expenses, which can be substantial. After all, nobody works for free.
There is also the “cost of carry,” whereby owners have to pay the price for borrowing and selling short shares. They are also liable for paying the quarterly dividends for the shares they have borrowed, around 2% a year. And then you have to pay the commissions and spread for buying the ETF.
Still, individuals can protect themselves from downside exposure in their core portfolios by buying the (SH) against it (click here for the prospectus). Short selling is not cheap. But it’s better than watching your gains of the past seven years go up in smoke.
Virtual equity indexes now have bear ETFs. Some of the favorites include the (PSQ), a short play on the NASDAQ (click here for the prospectus), and the (DOG), which profits from a plunging Dow Average (click here for the prospectus).
My favorite is the (RWM), a short play on the Russell 2000, which falls 1.5X faster than the big cap indexes in bear markets (click here for the prospectus).
Leveraged Bear ETFs
My favorite is the ProShares Ultra Short S&P 500 (SDS), a 2X leveraged ETF (click here for the prospectus). A 10% decline in the (SPY) generates a 20% profit, maybe.
Keep in mind that by shorting double the market, you are liable for double the cost of shorting, which can total 5% a year or more. This shows up over time in the tracking error against the underlying index. Therefore, you should date, not marry this ETF, or you might be disappointed.
3X Leveraged Bear ETF
The 3X bear ETFs, like the UltraPro Short S&P 500 (SPXU), are to be avoided like the plague (click here for the prospectus).
First, you have to be pretty good to cover the 8% cost of carry embedded in this fund. They also reset the amount of index they are short at the end of each day, creating an enormous tracking error.
Eventually, they all go to zero and have to be periodically redenominated to keep from doing so. Dealing spreads can be very wide, further adding to costs.
Yes, I know the charts can be tempting. Leave these for the professional hedge fund intraday traders for which they are meant.
Buying Put Options
For a small amount of capital, you can buy a ton of downside protection. For example, the April (SPY) $182 puts I bought for $4,872 on Thursday allow me to sell short $145,600 worth of large-cap stocks at $182 (8 X 100 X $6.09).
Go for distant maturities out several months to minimize time decay and damp down daily price volatility. Your market timing better be good with these, because when the market goes against you, put options can go poof and disappear pretty quickly.
That’s why you read this newsletter.
Selling Call Options
One of the lowest-risk ways to coin it in a market heading south is to engage in “buy writes.” This involves selling short-call options against stocks you already own but may not want to sell for tax or other reasons.
If the market goes sideways or falls, and the options expire worthless, then the average cost of your shares is effectively lowered. If the shares rise substantially, they get called away, but at a higher price so you make more money. Then you just buy them back on the next dip. It is a win-win-win.
Selling Futures
This is what the pros do, as futures contracts trade on countless exchanges around the world for every conceivable stock index or commodity. It is easy to hedge out all of the risks for an entire portfolio of shares by simply selling short futures contracts for a stock index.
For example, let’s say you have a portfolio of predominantly large-cap stocks worth $100,000. If you sell a short 1 September 2025 contract for the S&P 500 against it, you will eliminate most of the potential losses for your portfolio in a falling market.
The margin requirement for one contract is only $5,000. However, if you are short, the futures and the market rise, then you have a big problem, and the losses can prove ruinous.
However, most individuals are not set up to trade futures. The educational, financial, and disclosure requirements are beyond mom-and-pop investing for their retirement fund.
Most 401Ks and IRAs don’t permit the inclusion of futures contracts. Only 25% of the readers of this letter trade the futures market. Regulators do whatever they can to keep the uninitiated and untrained away from this instrument.
That said, get the futures markets right, and it is the quickest way to make a fortune, if your market direction is correct.
Buying Volatility
Volatility (VIX) is a mathematical construct derived from how much the S&P 500 moves over the next 30 days. You can gain exposure to it by buying the iPath S&P 500 VIX Short-Term Futures ETN (VXX) or buying call and put options on the (VIX) itself.
If markets fall, volatility rises, and if markets rise, then volatility falls. You can therefore protect a stock portfolio from losses by buying the (VIX).
I have written endlessly about the (VIX) and its implications over the years. For my latest in-depth piece with all the bells and whistles, please read “Buy Flood Insurance With the (VIX)” by clicking here.
Selling Short IPOs
Another way to make money in a down market is to sell short recent initial public offerings. These tend to go down much faster than the main market. That’s because many are held by hot hands, known as “flippers,” and don’t have a broad institutional shareholder base.
Many of the recent ones don’t make money and are based on an as-yet, unproven business model. These are the ones that take the biggest hits.
Individual IPO stocks can be tough to follow to sell short. But one ETF has done the heavy lifting for you. This is the Renaissance IPO ETF (click here for the prospectus). As you can tell from the chart below, (IPO) was a warning that trouble was headed our way since the beginning of March. So far, a 6% drop in the main indexes has generated a 20% fall in (IPO).
Buying Momentum
This is another mathematical creation based on the number of rising days over falling days. Rising markets bring increasing momentum while falling markets produce falling momentum.
So, selling short momentum produces additional protection during the early stages of a bear market. Blackrock has issued a tailor-made ETF to capture just this kind of move through its iShares MSCI Momentum Factor ETF (MTUM). To learn more, please read the prospectus by clicking here.
Buying Beta
Beta, or the magnitude of share price movements, also declines in down markets. So, selling short beta provides yet another form of indirect insurance. The PowerShares S&P 500 High Beta Portfolio ETF (SPHB) is another niche product that captures this relationship.
The Index is compiled, maintained, and calculated by Standard & Poor's and consists of the 100 stocks from the (SPX) with the highest sensitivity to market movements, or beta, over the past 12 months.
The Fund and the Index are rebalanced and reconstituted quarterly in February, May, August, and November. To learn more, read the prospectus by clicking here.
Buying Bearish Hedge Funds
Another subsector that does well in plunging markets is publicly listed bearish hedge funds. There are a couple of these that are publicly listed and have already started to move.
One is the Advisor Shares Active Bear ETF (HDGE) (click here for the prospectus). Keep in mind that this is an actively managed fund, not an index or mathematical relationship, so the volatility could be large.
Oops, Forgot to Hedge
Global Market Comments
April 4, 2025
Fiat Lux
Featured Trade:
(APRIL 4 BIWEEKLY STRATEGY WEBINAR Q&A),
(DAL), (LCID), (RIVN), (MSTR), (PLTR),
(AAPL), (GLD), (TSLA), (SLV), (SPY)
Below please find subscribers’ Q&A for the April 2 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Incline Village, NV.
Q: Why are there days when both bonds and interest rates are going up?
A: Well, there is a tug-of-war going on in the bond market. When recession fears are the dominant theme of the day, interest rates go down and bond prices go up. Remember, it's an inverse relationship. When the deficit and inflation are the big fears and you get those on the inflation announcement days—we get three or four of those a month—then interest rate goes up and bonds go down. That will be a big driver of stock prices because they are very sensitive to interest rates always.
Q: Do you think Tesla (TSLA) has hit bottom?
A: I don't think so. I think the declining sales continue. I think the Tesla brand has been severely damaged as long as Elon Musk stays in politics. Also, no one buys cars in recessions—sorry, but that is the last thing that people or companies want to buy is a brand-new car.
Q: What will happen to the smaller EV makers?
A: They will all go bankrupt. You know, unless they have a very rich uncle like Lucin Group (LCID) does—Saudi Arabia can keep pumping money in there forever. Amazon owns a big piece of Rivian Motors (RIVN) I don't think any of the small EV makers will make it because they now have Tesla to compete against.
Q: Do you have any way to short restaurant stocks as an industry?
A: I don't know of a single industry ETF for restaurants only. Restaurants are not an industry I have spent a lot of time studying because the margins are so low. I prefer a 70% margin to a 3% margin ones. There are a lot of things like consumer discretionary, so you just have to go shopping in the ETF world. There are more than 3,000 listed ETFs these days in every conceivable subsector of the economy, more than there are listed stocks, so there might be something out there somewhere. Yes, you are correct in wanting to short restaurants going into a recession as well as airlines, rental car companies, and hotels, but these things are already down a lot—you know, 40% or so. So, be careful shorting after these things have already had enormous declines in a very short time.
Q: Will the recession cause Democrats to win midterm elections?
A: If I were a betting man—and of course I'm not, I only go after sure things, —I would say yes. But, you know, 18 months might as well be 18 years in the political world. So, who knows what will happen? Suffice it to say that yesterday's election results were overwhelmingly positive for the Democrats and represent a very strong “no vote” for Trump policies and Musk policies. Even in Florida where they won, the victory margin shrank from 35% six months ago to 12%. That is an enormous swing in the electorate away from Republicans, and that's why the Republicans are very nervous about any election. That's why the Texas governor is blocking a by-election there. He’s afraid he’ll lose.
Q: Is Tesla (TSLA) toast for good?
A: If Elon Musk went back to Silicon Valley and just managed Tesla and kept his mouth shut on non-Tesla issues, I bet the stock would double from these levels over the medium term. So yes, it just depends on how much Elon Musk wants his $200 billion back. That's how much he's lost on the stock depreciation since December.
Q: Is it time to short Delta Air Lines (DAL)?
A: You kind of missed the boat. No point in closing the barn door after the horses have bolted. This was a great short in February, and the same with hotels and rail companies. So be careful of your biggest recession indicators; they have all already collapsed and are more likely to bounce along the bottom.
Q: What are the probabilities that the tariff war could backfire, and we end up with massive job losses and a shortage of goods?
A: Actually, that is the most likely outcome. In my humble opinion, we know big layoffs are coming already. Prices are going to go up, so people will buy less. And prices will go up a lot because of the tariffs, so it's the perfect, perfect economy destruction strategy. And of course, that all feeds directly into the stock market.
Q: Do you think a 10% decline is enough to reflect all of that?
A: Absolutely not. More like down 20% or down 30% to discount the destruction of the economy—some say by half. So, that's an easy question to answer.
Q: Do you think Palantir (PLTR) will recover from this dip?
A: Only when government spending resumes. That could happen sooner once we get some clarity on where the government is actually going to spend its money. Palantir claims they can save masses of money for the government by getting it just to use their software, and a lot of companies are making that claim, like Arthur Anderson, who also had all their contracts axed. So, we don't know. “We don't know” is the most commonly heard expression in the country today. We just don't know what's going to happen.
Q: And is Palantir (PLTR) cheap after a 40% sell-off?
A: No. It's still incredibly expensive and that is the concern.
Q: Is crypto a good short-term bet in this type of high volatility?
A: No, it's not. It's a horrible bet. A 10% decline in the S&P 500 delivered a 30% decline in crypto. If we drop another 10%, you can expect crypto to drop another 30%. You know, it's like a 3x long NASDAQ ETF. That's how it's behaving. So, I watch it very carefully as a risk indicator. If we get a substantial rally, I'm looking to short the big players in crypto, which would be MicroStrategy (MSTR) and ProShares Bitcoin Strategy ETF (BITO). Looking for a good short there or at least to write calls. The call premiums are extremely high on all these crypto plays—sometimes they're 84%.
Q: How much more inflation can the economy handle before we are in a deep recession?
A: Well, I think we're in recession now. Almost every inflation indicator is pointing to lots of upside and, of course, the tariffs haven't even started yet. They start today, and it'll take at least a month or two to see what the actual impact of the tariffs will be on local prices.
Q: Why do you think the tariffs will be damaging to the economy?
A: Virtually every economist in the world has agreed that the trade wars of the 1930s were a major cause of the Great Depression, but not the sole cause. The only economists that have changed their minds now are the ones that have just gotten Trump appointments. I mean, that's it, clear and simple. You raise the price, you get less demand—basic supply and demand economics. I'm not inventing anything new here. It’s basic economics 101.
Q: Here's a good question that has puzzled people for a century: If Copper is up, why is Freeport McMoRan (FCX) down?
A: Freeport is a stock first and a commodity producer second. When stocks crash, people flee to commodities, and that is what is happening. Chinese are buying up copper ingots as a gold alternative, and people are dumping Freeport because it's in an index. Some 80% of all the selling is index selling. So if you're in that index, your stock goes down regardless of your individual fundamentals. Whether it's a good company or not, whether your earnings are expanding or not, I'm seeing this happen in lots of other great companies.
Q: Is gold (GLD) subject to 25% import duties? What will that do to the pricing of gold?
A: Physical gold got an exemption, so it is not. However, gold stocks in COMEX warehouses in New York hit record highs as the managers rushed to bring in gold to beat the tariffs to meet the ETF demand in the United States. So there’s a lot of turmoil in that market, as there are in all markets now—people trying to beat the tariffs. By the way, I bought all the computer equipment my company needs for the rest of this year in order to beat the tariff increases because all my Apple (AAPL) stuff comes from China and they're looking at 60% tariffs.
Q: If the silver (SLV) does go to a new all-time high, does that mean the S&P 500 is going to an all-time high?
A: No, if anything (SPY) goes to a multi-year low. We may be losing a generation of stock investors here. That puts silver within easy range at $50.
Q: Will biotech stocks shift because of the policy changes?
A: They're losing their government research funding, the authorization process for new drug approvals has had sand thrown at it. Time delays have been greatly extended on new approvals and suffice to say, the leadership does not have the confidence of the industry, and biotech stocks are doing horribly. You know, when you appoint someone to head a department whose main job is to dismantle that department, that's generally really horrible for the industry, especially when the industry is dependent so much on government grants for research. We are losing a generation of new scientists. That puts off any cures for cancer, Alzheimer’s, or diabetes into the far future.
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, click on GLOBAL TRADING DISPATCH, TECHNOLOGY LETTER, or JACQUIE'S POST, then WEBINARS, and all the webinars from the last 12 years are there in all their glory.
Good Luck and Good Trading,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
March 27, 2025
Fiat Lux
Featured Trade:
(HOW TO GAIN AN ADVANTAGE WITH PARALLEL TRADING),
(GM), (F), (TM), (NSANY), (DDAIF), BMW (BMWYY), (VWAPY),
(PALL), (GS), (EZA), (CAT), (CMI), (KMTUY),
(KODK), (SLV), (AAPL)
One of the most fascinating things I learned when I first joined the equity trading desk at Morgan Stanley during the early 1980s was how to parallel trade.
A customer order would come in to buy a million shares of General Motors (GM), and what did the in-house proprietary trading book do immediately?
It loaded the boat with the shares of Ford Motors (F).
When I asked about this tactic, I was taken away to a quiet corner of the office and read the riot act.
“This is how you legally front-run a customer,” I was told.
Buy (GM) in front of a customer order, and you will find yourself in Sing Sing shortly.
Ford (F), Toyota (TM), Nissan (NSANY), Daimler Benz (DDAIF), BMW (BMWYY), and Volkswagen (VWAPY), were all fair game.
The logic here was very simple.
Perhaps the client completed an exhaustive piece of research concluding that (GM) earnings were about to rise.
Or maybe a client's old boy network picked up some valuable insider information.
(GM) doesn’t do business in isolation. It has thousands of parts suppliers for a start. While whatever is good for (GM) is good for America, it is GREAT for the auto industry.
So through buying (F) on the back of a (GM) might not only match the (GM) share performance, it might even exceed it.
This is known as a Primary Parallel Trade.
This understanding led me on a lifelong quest to understand Cross Asset Class Correlations, which continues to this day.
Whenever you buy one thing, you buy another related thing as well, which might do considerably better.
I eventually made friends with a senior trader at Salomon Brothers while they were attempting to recruit me to run their Japanese desk.
I asked if this kind of legal front-running happened on their desk.
“Absolutely,” he responded. But he then took Cross Asset Class Correlations to a whole new level for me.
Not only did Salomon’s buy (F) in that situation, they also bought palladium (PALL).
I was puzzled. Why palladium?
Because palladium is the principal metal used in catalytic converters, it removes toxic emissions from car exhaust and has been required for every U.S.-manufactured car since 1975.
Lots of car sales, which the (GM) buying implied, ALSO meant lots of palladium buying.
And here’s the sweetener.
Palladium trading is relatively illiquid.
So, if you catch a surge in the price of this white metal, you would earn a multiple of what you would make on your boring old parallel (F) trade.
This is known in the trade as a Secondary Parallel Trade.
A few months later, Morgan Stanley sent me to an investment conference to represent the firm.
I was having lunch with a trader at Goldman Sachs (GS) who would later become a famous hedge fund manager, and asked him about the (GM)-(F)-(PALL) trade.
He said I would be an IDIOT not to take advantage of such correlations. Then he one-upped me.
You can do a Tertiary Parallel Trade here by buying mining equipment companies such as Caterpillar (CAT), Cummins (CMI), and Komatsu (KMTUY).
Since this guy was one of the smartest traders I ever ran into, I asked him if there was such a thing as a Quaternary Parallel Trade.
He answered “Abso******lutely,” as was his way.
But the first thing he always did when searching for Quaternary Parallel Trades would be to buy the country ETF for the world’s largest supplier of the commodity in question.
In the case of palladium, that would be South Africa (EZA).
Since then, I have discovered hundreds of what I call Parallel Trading Chains and have been actively making money off of them. So have you, you just haven’t realized it yet.
I could go on and on.
If you ever become puzzled or confused about a trade alert I am sending out (Why on earth is he doing THAT?), there is often a parallel trade in play.
Do this for decades as I have and you learn that some parallel trades break down and die. The cross relationships no longer function.
The best example I can think of is the photography/silver connection. When the photography business was booming, silver prices rose smartly.
Digital photography wiped out this trade, and silver-based film development is still only used by a handful of professionals and hobbyists.
Oh, and Eastman Kodak (KODK) went bankrupt in 2012.
However, it seems that whenever one Parallel Trading Chain disappears, many more replace it.
You could build chains a mile long simply based on how well Apple (AAPL) or NVIDIA (NVDA) is doing.
And guess what? There is a new parallel trade in silver developing. Whenever someone builds a solar panel anywhere in the world, they use a small amount of silver for the wiring. Build several tens of millions of solar panels and that can add up to quite a lot of silver.
What goes around comes around.
Suffice it to say that parallel trading is an incredibly useful trading strategy.
Ignore it at your peril.
Global Market Comments
March 24, 2025
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD or THE SPECIAL NO CONFIDENCE ISSUE)
(GM), (SH), (TSLA), (NVDA), (GLD), (TLT), (LMT), (BA), (NVDA), (GOOGL), (AAPL), (META), (AMZN), (PANW), (ZS), (CYBR), (FTNT), (COST)
(AMGN), (ABBV), (BMY), (TSLA), GM), (GLD), (BYDDF)
It’s official: Absolutely no one is confident in their long-term economic forecasts right now. I heard it from none other than the chairman of the Federal Reserve himself. The investment rule book has been run through the shredder.
It has in fact been deleted.
That explains a lot about how markets have been trading this year. It looks like it is going to be a reversion to the mean year. Forecasters, strategists, and gurus alike are rapidly paring down their stock performance targets for 2025 to zero.
When someone calls the fire department, it’s safe to assume that there is a fire out there somewhere. That’s what Fed governor Jay Powell did last week. It raises the question of what Jay Powell really knows that we don’t. Given the opportunity, markets will always assume the worst, that there’s not only a fire, but a major conflagration about to engulf us all. Jay Powell’s judicious comments last week certainly had the flavor of a president breathing down the back of his neck.
It's interesting that a government that ran on deficit reduction pressured the Fed to end quantitative tightening. That’s easing the money supply through the back door.
For those unfamiliar with the ins and outs of monetary policy, let me explain to you how this works.
Since the 2008 financial crisis, the Fed bought $9.1 trillion worth of debt securities from the US Treasury, a policy known as “quantitative easing”. This lowers interest rates and helps stimulate the economy when it needs it the most. “Quantitative easing” continued for 15 years through the 2020 pandemic, reaching a peak of $9.1 trillion by 2022. For beginners who want to know more about “quantitative easing” in simple terms, please watch this very funny video.
The problem is that an astronomically high Fed balance sheet like the one we have now is bad for the economy in the long term. They create bubbles in financial assets, inflation, and malinvestment in risky things like cryptocurrencies. That’s why the Fed has been trying to whittle down its enormous balance sheet since 2022.
By letting ten-year Treasury bonds it holds expire instead of rolling them over with new issues, the Fed is effectively shrinking the money supply. This is how the Fed has managed to reduce its balance sheet from $9.1 trillion three years ago to $6.7 trillion today and to near zero eventually. This is known as “quantitative tightening.” At its peak a year ago, the Fed was executing $120 billion a month quantitative tightening.
By cutting quantitative tightening, from $25 billion a month to only $5 billion a month, or effectively zero, the Fed has suddenly started supporting asset prices like stocks and increasing inflation. At least that is how the markets took it to mean by rallying last week.
Why did the Fed do this?
To head off a coming recession. Oops, there’s that politically incorrect “R” word again! This isn’t me smoking California’s largest export. Powell later provided the forecasts that back up this analysis. The Fed expects GDP growth to drop from 2.8% to 1.7% and inflation to rise from 2.5% to 2.8% by the end of this year. That’s called deflation. Private sector forecasts are much worse.
Just to be ultra clear here, the Fed is currently engaging in neither “quantitative easing nor “quantitative tightening,” it is only giving press conferences.
Bottom line: Keep selling stock rallies and buying bonds and gold on dips.
Another discussion you will hear a lot about is the debate over hard data versus soft data.
I’ll skip all the jokes about senior citizens and cut to the chase. Soft data are opinion polls, which are notoriously unreliable, fickle, and can flip back and forth between positive and negative. A good example is the University of Michigan Consumer Confidence, which last week posted its sharpest drop in its history. Consumers are panicking. The problem is that this is the first data series we get and is the only thing we forecasters can hang our hats on.
Hard data are actual reported numbers after the fact, like GDP growth, Unemployment Rates, and Consumer Price Indexes. The problem with hard data is that they can lag one to three months, and sometimes a whole year. This is why by the time a recession is confirmed by the hard data, it is usually over. Hard data often follows soft data, but not always, which is why both investors and politicians in Washington DC are freaking out now.
Bottom line: Keep selling stock rallies and buying bonds and gold (GLD) on dips.
A question I am getting a lot these days is what to buy at the next market bottom, whether that takes place in 2025 or 2026. It’s very simple. You dance with the guy who brought you to the dance. Those are:
Best Quality Big Tech: (NVDA), (GOOGL), (AAPL), (META), (AMZN)
Big tech is justified by Nvidia CEO Jensen Huang’s comment last week that there will be $1 trillion in Artificial Intelligence capital spending by the end of 2028. While we argue over trade wars, AI technology and earnings are accelerating.
Cybersecurity: (PANW), (ZS), (CYBR), (FTNT)
Never goes out of style, never sees customers cut spending, and is growing as fast as AI.
Best Retailer: (COST)
Costco is a permanent earnings compounder. You should have at least one of those.
Best Big Pharma: (AMGN), (ABBV), (BMY)
Big pharma acts as a safety play, is cheap, and acts as a hedge for the three sectors above.
March is now up +2.92% so far. That takes us to a year-to-date profit of +12.29% in 2025. That means Mad Hedge has been operating as a perfect -1X short S&P 500 ETF since the February top. My trailing one-year return stands at a spectacular +82.50%. That takes my average annualized return to +51.12% and my performance since inception to +764.28%.
It has been another busy week for trading. I had four March positions expire at their maximum profit points on the Friday options expiration, shorts in (GM), and longs in (GLD), (SH), and (NVDA). I added new longs in (TSLA) and (NVDA). This is in addition to my existing longs in the (TLT) and shorts in (TSLA), (NVDA), and (GM).
Some 63 of my 70 round trips, or 90%, were profitable in 2023. Some 74 of 94 trades have been profitable in 2024, and several of those losses were really break-even. That is a success rate of +78.72%.
UCLA Andersen School of Business announced a “Recession Watch,” the first ever issued. UCLA, which has been issuing forecasts since 1952, said the administration’s tariff and immigration policies and plans to reduce the federal workforce could combine to cause the economy to contract. Recessions occur when multiple sectors of the economy contract at the same time.
Retail Sales Fade, with consumers battening down the hatches for the approaching economic storm. Retail sales rose by less than forecast in February and the prior month was revised down to mark the biggest drop since July 2021.
This Has Been One of the Most Rapid Corrections in History, leaving no time to readjust portfolios and put on short positions.
The rapid descent in the S&P 500 is unusual, given that it was accomplished in just 22 calendar days, far shorter than the average of 80 days in 38 other examples of declines of 10% or more going back to World War II.
Home Builder Sentiment Craters to a seven-month low in March as tariffs on imported materials raised construction costs, a survey showed on Monday. The National Association of Home Builders/Wells Fargo Housing Market Index dropped three points to 39 this month, the lowest level since August 2024. Economists polled by Reuters had forecast the index at 42, well below the boom/bust level of 50.
BYD Motors (BYDDF) Shares Rocket, up 72% this year, on news of technology that it claims can charge electric vehicles almost as quickly as it takes to fill a gasoline car. BYD on Monday unveiled a new “Super e-Platform” technology, which it says will be capable of peak charging speeds of 1,000 kilowatts/hr. The EV giant and Tesla rival say this will allow cars that use the technology to achieve 400 kilometers (roughly 249 miles) of range with just 5 minutes of charging. Buy BYD on dips. It’s going up faster than Tesla is going down.
Weekly Jobless Claims Rise 2,000, to 223,000. The number of Americans filing new applications for unemployment benefits increased slightly last week, suggesting the labor market remained stable in March, though the outlook is darkening amid rising trade tensions and deep cuts in government spending.
Copper Hits New All-Time High, at $5.02 a pound. The red metal has outperformed gold by 25% to 15% YTD. It’s now a global economic recovery that is doing this, but flight to safety. Chinese savers are stockpiling copper ingots and storing them at home distrusting their own banks, currency, and government. I have been a long-term copper bull for years as you well know. New copper tariffs are also pushing prices up. Buy (FCX) on dips, the world’s largest producer of element 29 on the Periodic Table.
Boeing (BA) Beats Lockheed for Next Gen Fighter Contract for the F-47, beating out rival Lockheed Martin (LMT) for the multibillion-dollar program. Unusually, Trump announced the decision Friday morning at the White House alongside Defense Secretary Pete Hegseth. Boeing shares rose 5.7% while Lockheed erased earlier gains to fall 6.8%. The deal raises more questions than answers, in the wake of (BA) stranding astronauts in space, their 737 MAX crashes, and a new Air Force One that is years late. Was politics involved? You have to ask this question about every deal from now on.
Carnival Cruise Lines (CCL) Raises Forecasts, on burgeoning demand from vacationers, including me. The company’s published cruises are now 80% booked. Cruise lines continue to hammer away at the value travel proposition they are offering. However, the threat of heavy port taxes from the administration looms over the sector.
My Ten-Year View – A Reassessment
We have to substantially downsize our expectations of equity returns in view of the election outcome. My new American Golden Age, or the next Roaring Twenties is now looking at multiple gale-force headwinds. The economy will completely stop decarbonizing. Technology innovation will slow. Trade wars will exact a high price. Inflation will return. The Dow Average will rise by 600% to 240,000 or more in the coming decade. The new America will be far more efficient and profitable than the old. My Dow 240,000 target has been pushed back to 2035.
On Monday, March 24, at 8:30 AM EST, the S&P Global Flash PMI is announced.
On Tuesday, March 25, at 8:30 AM, the S&P Case Shiller National Home Price Index is released.
On Wednesday, March 26, at 1:00 PM, the Durable Goods are published.
On Thursday, March 27, at 8:30 AM, the Weekly Jobless Claims are disclosed. We also get the final report for Q1 GDP.
On Friday, March 28, the Core PCE is released, and important inflation indicator. At 2:00 PM, the Baker Hughes Rig Count is printed.
As for me, I received calls from six readers last week saying I remind them of Ernest Hemingway. This, no doubt, was the result of Ken Burns’ excellent documentary about the Nobel Prize-winning writer on PBS last week.
It is no accident.
My grandfather drove for the Italian Red Cross on the Alpine front during WWI, where Hemingway got his start, so we had a connection right there.
Since I read Hemingway’s books in my mid-teens I decided I wanted to be him and became a war correspondent. In those days, you traveled by ship a lot, leaving ample time to finish off his complete work.
I visited his homes in Key West, Cuba, and Ketchum Idaho.
I used to stay in the Hemingway Suite at the Ritz Hotel on Place Vendome in Paris where he lived during WWII. I had drinks at the Hemingway Bar downstairs where war correspondent Ernest shot a German colonel in the face at point-blank range. I still have the ashtrays.
Harry’s Bar in Venice, a Hemingway favorite, was a regular stopping-off point for me. I have those ashtrays too.
I even dated his granddaughter from his first wife, Hadley, the movie star Mariel Hemingway, before she got married, and when she was also being pursued by Robert de Niro and Woody Allen. Some genes skip generations and she was a dead ringer for her grandfather. She was the only Playboy centerfold I ever went out with. We still keep in touch.
So, I’ll spend the weekend watching Farewell to Arms….again, after I finish my writing.
Oh, and if you visit the Ritz Hotel today, you’ll find the ashtrays are now glued to the tables.
As for last summer, I stayed in the Hemingway Suite at the Hotel Post in Cortina d’Ampezzo Italy where he stayed in the late 1940’s to finish a book. Maybe some inspiration will run off on me.
Hemingway’s Living Room in Cuba, Untouched Since 1960
Earnest in 1918
Typing at Hemingway’s Typewriter in Italy from the 1940’s
The Red Cross Uniform Hemingway Wore when He was Blown Up in 1917
Good Luck and Good Trading
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Mad Hedge Technology Letter
March 12, 2025
Fiat Lux
Featured Trade:
(SHOULD I CARE ABOUT ORACLE?)
(ORCL), (AAPL), (META), (AMZN)
If readers want to know if the Oracle AI story is dead or not, then listen here.
The story is still alive, so don’t give up on a good thing.
Oracle is getting swept up with the wider macroeconomic scare that has been triggered by geopolitics.
The fear porn has reached fever pitch and is causing tech stocks to detour from their usual self.
The question now is if the sabre-rattling will result in the economic recession we have been waiting 6 years for.
The flood of government money for at least 4 of those years carried spending habits even if those jobs were unproductive or fraudulent.
As it relates to Oracle’s business model, there is no recession in the sub-sector they are in, but I believe they chose to tank the earnings result since all equities were getting dragged down.
The truth is that Oracle’s business is experiencing great growth in the cloud, and AI demand is accelerating sales growth.
The macroeconomic volatility gave Oracle’s management the perfect excuse to guide down since a high forecast would have resulted in a selloff anyway.
Oracle's leadership encouraged investors to focus on the potential for its cloud business to benefit from enterprise AI spending.
A growing backlog for cloud services is giving the company clear visibility for beating growth metrics.
Meanwhile, sales of Oracle's closely watched cloud-infrastructure business increased 49%, compared with 52% growth for the segment in Oracle's November-ended quarter. Oracle's guidance for the May-ending quarter of 9% revenue growth missed previous forecasts of 9.5% growth.
Oracle's cloud infrastructure business is racing to build out computing capacity for AI startups and other users of the cloud. The Oracle Cloud Infrastructure business rents computing power to other companies, competing against much larger hyperscalers Amazon.com (AMZN), Microsoft (MSFT), and Alphabet's (GOOGL) Google.
Chairman and Chief Technology Officer Larry Ellison said that Oracle is on track to double its data-center capacity during the calendar year. The company now expects capital expenditures to grow to $16 billion for its May-ending fiscal 2025, roughly doubling from a year earlier.
Ellison appeared at the White House in late January with President Donald Trump, OpenAI leader Sam Altman, and SoftBank Chief Executive Masayoshi Son to announce an AI infrastructure effort costing $100 billion called Stargate.
While tight data center capacity has demanded some patience from investors, I believe that we move past some of the capacity constraints in the second half of this calendar year.
The deep selloff from $190 per share to $140 has to hurt.
It was just only a short time ago when Oracle was a deadbeat tech stock left behind by the likes of Apple and Facebook.
They have reinvented themselves as an AI infrastructure company, and that has done wonders for their stock.
When they were down in the dumps, ORCL stock was trading below $50, so we are a far cry from that.
Once the tech market gets its mojo back, ORCL will definitely return back in form to that buy the dip stock that did so well in 2023 and 2024.
Just bide your time until we can jump back into ORCL.
