Global Market Comments
July 16, 2021
Fiat Lux
Featured Trade:
(JULY 14 BIWEEKLY STRATEGY WEBINAR Q&A),
(JPM), (MS), (GS), (TLT), (TBT), (CRSP), (AAPL), (TSLA), (QS), (SPCE), (AMZN),
(FCX), (FEYE), (PANW), (HACK)
Tag Archive for: (AAPL)
Below please find subscribers’ Q&A for the July 14 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Lake Tahoe, NV.
Q: Which banks are best?
A: JP Morgan (JPM), Morgan Stanley (MS), and Goldman Sachs (GS). That's the trifecta. If you look at the charts, the brokers Morgan Stanley and Goldman Sachs are overwhelmingly outperforming everyone else. They will continue to do that, as the bull market in stocks is a money machine for them.
Q: What has caused interest rates to continue to drop so much in the last 1-2 months? Why are you confident you will see them rise from here on?
A: The reason they've dropped so much is there is a bond shortage (TLT). There is more demand for bonds and reach for yield around the world than the US government is able to supply. Therefore, the US government should do more borrowing and issue more bonds. That's what the market is telling them to do. When your 10-year yield goes to 1.2%, the message is that you're not borrowing enough, not that you're borrowing too much. How does this end? Eventually, the sheer volume of bond issuance will reach global demand. And we will also see some inflation, not much but some, and that will be enough to take us back up to the 1.75% yield that we had in March. I think we will see that by the end of the year, especially if the Fed tapers and cuts back at least the mortgage bond purchases, which is $40 billion/month. Why subsidize housing when there are nationwide bidding wars?
Q: Are you positive on CRISPR Technologies (CRSP)?
A: Yes, but it is a long-term play and I recommend the LEAPS on those that go out to 2023. That said, we did just have a big rally up to the 140s from the 100s so that 40% was pretty good. But that's the way these small biotech’s trade you get long periods of no movement and then sudden explosive moves to the upside when they make a breakthrough.
Q: Are we going to see inflation?
A: We will have some inflation; but the major component of inflation now is used cars and rental cars, which are up 100% year on year, and that is totally unsustainable. That means a year from now, increase in used car prices will be zero, and will actually be a big drag on inflation. So that's what the Fed means when they say that any inflation will be temporary as we go through these tremendous YOY comparisons when demand goes from zero to near infinite. And that's happening in many sectors of the economy right now. You never get rich betting against a 40-year trend, and for inflation that is down.
Q: Has the market peaked for the short term?
A: My bet on a short-term peak is the last week of July when all the big tech companies report. And then we classically get reasonable selloffs after that—buy the rumor, sell the news. That's our next entry point for long positions in this market. Since the presidential election, the index has been unable to drop more than 4.8% as there is so much money on the sidelines trying to get in.
Q: Should I be max long ProShares Ultra Short Treasury Bond Fund (TBT) LEAPS?
A: Just make sure they’re long-dated LEAPS—at least six months to a year or longer. That way you have plenty of time for them to work. The current return on the (TBT) June 2022 $17-$19 vertical bull call LEAPS at $0.75 is 166%.
Q: What’s the chance of Biden’s budget passing?
A: 100%. It’s just a question of how much will be in there—we’re at $597 billion on infrastructure and $3.5 trillion for the rest of spending. That gives you a $4.1 trillion budget for the next fiscal year starting October 30, which is the biggest in history and biggest since WWII on an inflation-adjusted basis. That will go through and keep the stock market percolating for several more years. Dow $240,000 here we come!
Q: Would you sell calls against Apple (AAPL) today?
A: I would, I would do something like the August $165’s. Even then, it’s a high-risk trade because Apple has been on such a parabolic move for the last 2 months. So do that at your own risk; notice I’m not putting out trade alerts telling you to short Apple in any way shape or form. My target for the yearend is $200.
Q: Will Tesla (TSLA) use QuantumScape (QS) batteries to make their own solid-state ones?
A: Tesla will make their own solid-state batteries They are far ahead of QuantumScape with their own technology and eventually, they will wipe them out. So, I am not recommending QuantumScape—they are 10 years behind Tesla. Sorry, I didn’t make that clearer in my research piece.
Q: When do you expect the 7% drop in the market?
A: August/September is usually when the market bottoms. Let’s see if we get it this time. Predicting down moves has been somewhat of a fool's errand in a market when you have infinite QE, infinite fiscal stimulus, infinite monetary stimulus, and the highest economic growth in history. And again, I am upgrading my 10-year forecast for the market; I’m not looking for a Dow 120,000 by 2030 anymore, I’m looking for a Dow 240,000, and when you’re still at only a measly 34,933, you don’t get many 7% drops. In fact, we’ve had none since the election.
Q: Could Tesla make an all-time high by the end of the year?
A: Yes, especially if they make progress on the solid-state batteries. Tesla (TSLA) tends to have sideways periods that can last years and then explosive moves to the upside. It almost trades like a biotech stock.
Q: Is Virgin Galactic (SPCE) a buy here off the back of their successful rocket launch last week?
A: No, any business dependent on retail sales of tickets at $250,000 each has absolutely no chance of ever making a profit in its life. As much as I like Richard Branson, who I used to fly with, the fact is that this business will never make money. It's more of a public relations vehicle for all of the hundreds of Virgin Brands. They’ll never get the cost low enough to make this economic for the average person. Spaceships aren’t cheap, and they don’t sell them at Costco. In fact, you notice that after the rocket launch, the stock dropped 20%. However, if they do drop the price to $100,000 even I might buy a ticket but only if they let me fly the thing.
Q: What is your favorite FANG stock other than Apple?
A: It is Amazon (AMZN). I think it hits $5,000 by the end of the year. If they try to break it up it’ll be worth $10,000, which it will get to eventually (in like 5 years) anyway. They just have absolutely everything working there.
Q: Why is Alaska the worst state to do business in?
A: Well, first of all, it’s only habitable for like 6 months of the year, and otherwise it’s too cold and heating bills are enormous. Also, nothing is produced in Alaska besides tourism and oil, which is subject to enormous volatility. They actually canceled the oil payouts for Alaskan citizens last year. Anything else you want to do in Alaska requires transportation costs from the US. So essentially there are 49 other better states to bring business ideas to.
Q: Will Amazon ever split their stock?
A: No, there's no reason or net benefit to it. Jeff Bezos has never been prone to financial engineering because he never needed to. Natural earnings growth was always so enormous he didn’t need to bother with any of these side games to jack the stock price. So, I would say “no” on a stock split.
Q: In a two-year LEAPS, you’re taking a long position, yes?
A: When you do a LEAPS spread, you're buying a 1-2 year call and you’re selling short a 1-2 year call against it. That cuts your price by ⅔ and increases your leverage by a factor of 3 and is a far greater risk/reward than just buying the 2-year call outright. If you want to learn more about LEAPS, send us an email about the Mad Hedge Concierge Service that is by application only.
Q: When is the recording up?
A: About two hours.
Q: Do you still love Freeport McMoRan (FCX)?
A: Yes, it’s taking the inflation vacation right now with the rest of the commodities, but I expect it to come roaring back by the end of the year. Electric vehicles need 200 pounds of copper compared to only 20 pounds for internal combustion cars.
Q: Thoughts on FireEye (FEYE)?
A: Yes, we love FireEye along with the rest of the cybersecurity plays, so buy on the dips. Hacking is a growth market and will never go out of fashion. BUY (PANW) and (HACK) on dips.
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 or TECHNOLOGY LETTER, then WEBINARS, and all the webinars from the last ten years are there in all their glory.
Good Luck and Stay Healthy.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
July 14, 2021
Fiat Lux
Featured Trade:
(TEN TECH TRENDS DEFINING YOUR FUTURE, or THE BEST TECH PIECE I HAVE EVER WRITTEN)
(TSLA), (GOOG), (AMZN), (AAPL), (CRSP)
Not a day goes by without a reader asking me what is the next stock ten, hundred, or thousand bagger. After all, I nailed the 295X move in Tesla (TSLA) starting in 2010.
Can’t I do better?
Well actually, I can, which is the purpose of the Diary of a Mad Hedge Fund Trader. There are many potentially Google (GOOG), Amazon (AMZN), and Apple (AAPL)-sized opportunities out there today. It’s just a matter of time before they become public and investable.
One thing I will tell you today is that they will have some or all of the following gale-force tailwinds below. These will turbocharge the value of everything you own now, as well as anything new you might pick up going forward.
The future is happening fast!
1) People are Getting Richer, as the middle-income population continues to rise worldwide. That means more customers for everything and astronomically greater earnings for the companies inventing and selling them. Everyday goods and services (finance, insurance, education, and entertainment) are being digitized and becoming fully demonetized, available to the rising billion on mobile devices. Thank the convergence of high-bandwidth and low-cost communication, ubiquitous AI on the cloud, growing access to AI-aided education, and AI-driven healthcare.
2) And they are Communicating with Each Other More. The deployment of both licensed and unlicensed 5G, plus the launch of a multitude of global satellite networks (Starlink, OneWeb, Viasat, etc.), allow for ubiquitous, low-cost communications for everyone, everywhere, all the time––not to mention the connection of trillions of devices. And today’s skyrocketing connectivity is bringing online an additional 3 billion individuals, driving tens of trillions of dollars into the global economy and into the pockets of shareholders. Thank the convergence of low-cost space launches (Space-X), hardware advancements, 5G networks, artificial intelligence, a new generation of materials science, and exponentially surging computing power.
3) Your Lifespan Will Increase by at Least Ten Years. A dozen game-changing biotech and pharmaceutical solutions (currently in Phase 1, 2, or 3 clinical trials) will reach consumers this decade as covered by the Mad Hedge Biotech & Healthcare Letter (click here for the link). Technologies include stem cell supply restoration, senolytic or age-related medicines, a new generation of Endo-Vaccines, GDF-11, and supplementation of NMD/NAD+, among several others. And as machine learning continues to mature, AI is set to unleash countless new drug candidates, ready for clinical trials. Thank the convergence of genome sequencing, CRISPR technologies (CRSP), AI, quantum computing, and cellular medicine.
4) More Capital for Everything Will Become Abundant. Over the past few years, humanity hit all-time highs in the global flow of seed capital, venture capital, and sovereign wealth fund investments. It is expected to continue its overall upward trajectory. Capital abundance leads to the funding and testing of "crazy" entrepreneurial ideas, which in turn accelerate innovation. Already, $300B in crowdfunding is anticipated by 2025, democratizing capital access for entrepreneurs worldwide. And even during a pandemic (2020), the world deployed more venture capital than ever before, handily beating out the last high-water mark in 2019. Thank global connectivity, dematerialization, demonetization, and democratization.
5) Distribution is Becoming Vastly Easier. The combination of Augmented Reality (yielding Web 3.0, or the Spatial Web) and 5G networks (offering lighting fast 100Mb/s - 10Gb/s connection speeds) will transform how we live our everyday lives, impacting every industry from retail and advertising, to education and entertainment. Consumers will play, learn and shop throughout the day in a new intelligent, virtually overlaid world. This is where technologies like SpatialWeb.net, Vatoms (new digital connections between products and customers), and Apple’s (AAPL) next generation AR & VR headsets will shine. Thank hardware advancements, 5G networks, artificial intelligence, materials science, and surging computing power.
(6) Everything is Getting Smarter: The price of specialized machine learning chips is dropping rapidly with a rise in global demand. Imagine a specialized $5 chip that enables AI for a toy, a shoe, a kitchen cabinet? Combined with the explosion of low-cost microscopic sensors and the deployment of high-bandwidth networks, we’re heading into a decade wherein every device becomes intelligent. Your child’s toy remembers her face and name. Your kid's drone safely and diligently follows and videos all the children at the birthday party. Appliances respond to voice commands and anticipate your needs. Thank AI, 5G networks, and more advanced sensors.
(7) Artificial Intelligence is Getting Smarter than We are. Artificial intelligence will reach human-level performance this decade (by 2030). Through the 2020s, AI algorithms and machine learning tools will be increasingly made open source, available on the cloud, allowing any individual with an internet connection to supplement their cognitive ability, augment their problem-solving capacity, and build new ventures at a fraction of the current cost. Thank global high-bandwidth connectivity, neural networks, and cloud computing. Every industry, spanning industrial design, healthcare, education, and entertainment, will be impacted.
(8) AI is Becoming a Service: The rise of “AI as a Service” (AIaaS) platforms will enable humans to partner with AI in every aspect of their work, at every level, in every industry. AI will become entrenched in everyday business operations, serving as cognitive collaborators to employees—supporting creative tasks, generating new ideas, and tackling previously unattainable innovations. In some fields, partnership with AI will even become a requirement. For example: in the future, making certain diagnoses without the consultation of AI may be deemed malpractice. And try trading stocks today without AI behind you. Thank increasingly intelligent AI, global high-bandwidth connectivity, neural networks, and cloud computing.
(9) Software Will Become an Integrated Part of Our Lives. As services like Alexa, Google Home, and Apple Homepod expand in functionality, such services will eventually travel beyond the home and become your cognitive prosthetic 24/7. Imagine a secure software shell that you give permission to listen to all your conversations, read your email, monitor your blood chemistry, etc. With access to such data, these AI-enabled software shells will learn your preferences, anticipate your needs and behavior, shop for you, monitor your health, and help you problem-solve in support of your mid- and long-term goals. Thank increasingly intelligent AI, neural networks, and cloud computing.
(10) Energy Will Become Effectively Free when compared to today’s all-in costs. Continued advancements in solar, wind, geothermal, hydroelectric, small nuclear, and localized grids will drive humanity towards cheap, abundant, and ubiquitous renewable energy. The price per kilowatt-hour will drop below 1 cent for renewables, just as storage drops below a mere 3 cents per kilowatt-hour, resulting in the elimination of fossil fuels globally. And as the world’s poorest countries are also the world’s sunniest, the democratization of both new and traditional storage technologies will grant energy abundance to those already bathed in sunlight. We are also on the cusp of many breakthroughs in fusion power at nearby Lawrence Livermore Labs as capital, new materials, and entrepreneurs pour in this arena. Thank materials science, hardware advancements, AI/algorithms, and improved battery technologies.
I just thought you’d like to know.
Mad Hedge Technology Letter
July 12, 2021
Fiat Lux
Featured Trade:
(RIDE THE MOMENTUM)
(SHOP), (NFLX), (FB), (AMZN), (GOOGL), (NFLX), (AAPL), (MSFT)
Just as millions of people in the United States are sensing that life has returned to something that resembles normalcy, the Coronavirus’ delta variant has emerged as American technology stocks biggest upcoming inflection point.
This certainly ups the ante in the struggle to grapple with the pandemic and has wide-reaching consequences for your technology portfolio.
Fresh data from the U.S. Centers for Disease Control and Prevention shows that more than half of all new cases in the U.S. were attributed to the delta variant, which is believed to be easily transmissible.
About 50% of Americans are fully unvaccinated meaning 50% are not, which could lead to hellacious autumn for the 175 million who are not.
The tech market has sniffed this out.
Data suggesting this variant is three times as infectious as the original coronavirus strain is the catalyst for a massive rotation into premium big tech who boast glamorous balance sheets.
It is still unclear if this virus is actually deadlier or leads to more severe illness, but the health of Facebook, Google, Apple, Microsoft, and Amazon aren’t reliant on the outcome of the delta variant or at least relative to companies that have physical storefronts.
I believe the momentum in these names will continue in the short term as more countries prepare to carve up new movement restrictions and quasi lockdowns to combat the new variant.
The recent tech rotation has been inconspicuous but powerful and the who’s who of big tech are enjoying a stellar run in the past month with FB up 6%, GOOGL up 4.5%, AAPL up 13%, MSFT up 8%, and AMZN up 11%.
These premium tech stocks are acting almost like U.S. treasuries and are increasingly defined as a perceived flight to safety because of
the net high quality of the assets.
Whether there is another virus that kills another 4 million globally again, investors are confident that these prioritized tech stocks are immune to any meaningful weaknesses.
On a granular level, pullbacks are becoming highly rare and mini pullbacks are becoming the only practical entry points into these stocks.
Readers waiting for a 5% drop are still waiting.
Reading waiting for 10% drops risk never getting in when the going is good.
Fresh news of Japan banning spectators for the upcoming and badly organized Tokyo Olympics took down GOOGL and FB 2% intraday only for shares to make up half the losses in one afternoon.
The delta variant has strengthened the “buy the dip” philosophy that is deeply entrenched in these 5 tech names.
The strength of tech can be seen further down the totem pole in inferior names.
Shopify (SHOP), Canada’s ecommerce crown jewel, is another winner with shares up 19% in the past 30 days.
If this rotation continues, I can realistically expect dips or sideways price action in Uber (UBER), Lyft (LYFT), and Airbnb (ABNB) because their investment case weakens relative to the big 5 in a delta variant world.
Netflix (NFLX) is another one that will harvest the low-hanging fruit with strong near-term action resulting in a 9% gain in the past 30 days.
It’s highly likely that in more than several regions around the world, the delta variant will re-silo consumers and hamstring businesses.
Crushing any green shoots that the reopening is supposed to deliver isn’t an ideal runway to growth.
Epidemiologists are starting to come out of the woodwork with Hungarian virologist Ferenc Jakab saying Hungary will be lucky to “get away with August” when referring to a possible 4th wave.
This hasn’t been fully priced into the U.S. tech market and tech will enjoy a full-scale rotation if the 4th wave arrives in full force.
However, I don’t believe we are on the cusp of another $12+ trillion bailout for the delta like last time go around, which does cap momentum to the upside.
There will also be a lack of meme stock profit-taking and bitcoin profit-taking that can be rolled into the big tech safety trade.
Sensibly, this could be a short-term boost for emerging growth tech as well with the likes of DocuSign (DOCU), Zoom Video (ZM), and Teladoc (TDOC) benefiting from investors dusting off the 2020 playbook again.
I forgot to mention that U.S. treasuries falling to $1.36% is the primary reason why at the balance sheet level, growth tech will also get the benefit of the doubt in the short term.
This won’t just be a big 5 momentum encore, others will enjoy the fruits of labor.
Loss-making tech is inordinately reliant on rates being low to subsidize losses and as the 10-year rate has gone from 1.72% to 1.36%, it’s no surprise that growth tech looks like eye candy now too.
Big tech is certainly more durable and has the capacity to navigate around rising rates which is the deal-clincher for me.
I am inclined to get back into the market with any delta scare that cheapens tech before the next leg up.
The embarrassing loss in the judicial system against FB by the Feds is the cherry on top.
I am bullish tech in the short term.
Mad Hedge Technology Letter
July 9, 2021
Fiat Lux
Featured Trade:
(BUYER BEWARE)
(DIDI), (PGJ), (FB), (AMZN), (GOOGL), (NFLX), (AAPL)
Chinese regulators announced on our Independence Day that they were banning downloads of Uber’s China DiDi in the app stores in the country because it poses cybersecurity risks and broke privacy laws.
This was after DiDi raised $4.4 billion by listing its shares in New York.
However, unnamed sources leaked that China's cybersecurity watchdog suggested to DiDi that it delay its IPO before it happened.
Delaying a wealth generating event like the IPO is controversial.
At this point, DIDI, the Uber of China, is worth a speculative trade at $1 and that’s if the Chinese tech firm doesn’t delist before that.
No — scratch that — it’s not even worth your time at $1 if you hold currency denominated in USD or anything even half as credible.
But if you’re from somewhere like Venezuela wielding infamous bolivars then take a wild stab around $1 or double up at $0.50 for a trade.
There is a reason that I have never in the history of the Mad Hedge Technology Letter recommended buying a Chinese technology stock.
The astronomical risk isn’t justified.
The evidence is now out in public with Chinese big tech and the Chinese Communist Party (CCP) airing their dirty laundry.
Most sensitive business dealings are usually dealt with in-house in the land of pan-fried dumplings and Beijing roasted duck, so things must be spiraling out of control on the inside.
No doubt that inflation spikes are causing chaos everywhere, but China is particularly vulnerable because of the high volume of Chinese living in poverty.
It’s unrelated to this IPO, but another valid reason why Chinese “growth” is weakening fast.
Stateside, cashing out is normal for tech growth companies who want to reward earlier seed investors, their own management teams, and in this case the early-stage investors were Japanese Softbank (21.5%), Silicon Valley’s Uber (12.8%), and China’s Tencent (6.8%).
This was pretty much a big middle finger to these three along with the other Chinese investors which were about to profit big.
This is on the heels of the CCP nixing the Jack Ma Alipay IPO.
Chinese big tech has gone from darlings to pariahs in a short time proving that in the U.S., you get too big to fail, but in China, you get too big to exist.
Silicon Valley tech princelings are also validated for leaving China such as Facebook (FB), Google (GOOGL), Amazon (AMZN) and Netflix (NFLX).
If local Chinese tech can’t flourish in China, then forget about foreign tech in China.
It’s a non-starter.
Apple (AAPL) is the only exception because they are grandfathered in when China had no smartphone and now they provide too many local jobs to be kicked out.
There is definitely a plausible case that U.S. retail investors who were part of that $4.4 billion holdings should be refunded their capital because DiDi didn’t truthfully disclose the risk of potential Chinese regulations properly.
There is also the logic that Chinese companies should never be able to list in New York in the first place which would be sensible.
As it stands, Chinese companies don’t need to follow U.S. GAAP accounting standards and cannot be prosecuted by the U.S. legal system if they commit fraud, embezzlement, or any other financial crime and decline to leave Chinese soil.
This incentivizes Chinese companies listed in the U.S. to cheat U.S. investors with fraudulent accounting and deceitful behavior because they aren’t accountable at the end of the day.
The Invesco Golden Dragon China ETF (PGJ), which tracks the performance of US-listed Chinese stocks, has lost more than one-third of its value since February.
I can tell you from close friends who call themselves frontier investors that investing in China is not worth your time and the fear of missing out (FOMO) rationale is all marketing chutzpah and nothing much else.
China’s economy hasn’t had any positive growth in the past 10 years according to Chinese insiders off record.
This FOMO narrative is often peddled by Wall Street “professionals” who are making exorbitant fees for selling retail investors Chinese junk stocks masquerading as real companies.
Out of many financial pros I have talked to, China leads in terms of horror stories from foreign investors.
The Chinese financial system is a hoax created to lure foreign capital in and for it to never leave often viewed as a free lunch for the local recipients.
And I am not only talking about Chinese tech, but this phenomenon also extends to every reach of the financial system there.
At the end of the day, China’s tech aristocracy wished they originated in the United States which is why they went public here because our markets work and theirs don’t.
They got to New York in the first place by marketing false numbers to U.S. investors and concealing regulatory issues, and U.S. investors must not fall for this trap.
If you look at the Shanghai Stock Exchange Composite Index ($SSEC), it’s gone nowhere in the past year and rightly so.
Even Chinese investors don’t buy Chinese stocks because there is no trust in their financial system. They buy property instead or buy U.S. tech stocks.
Don’t be the next sucker.
Global Market Comments
July 7, 2021
Fiat Lux
Featured Trade:
(JUNE 30 BIWEEKLY STRATEGY WEBINAR Q&A),
(QQQ), (BRKB), (GOOG), (NVDA), (FB), (TSLA), (JPM), (BAC), (C), (GS), (MS), (NASD), ((X), (FCX), (AMZN), (MSFT), (AAPL), (FCX)
Global Market Comments
July 6, 2021
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or ALL EYES ON THE FANGS)
(FB), (AAPL), (AMZN), (MSFT), (NFLX), (NVDA), (AMD), (MU)
