Global Market Comments
October 31, 2019
Fiat Lux
Featured Trade:
(WELCOME TO THE LAND OF ZEROS),
(TLT), (VIX), (GLD), (SLV), (FXY),
(A NOTE ON OPTIONS CALLED AWAY), (BA)
(TESTIMONIAL)
Tag Archive for: (AAPL)
Global Market Comments
October 30, 2019
Fiat Lux
Featured Trade:
(HOW TO EXECUTE A VERTICAL BULL CALL SPREAD),
(AAPL)
(THANK GOODNESS, I DON’T LIVE IN SWEDEN), (EWD),
Global Market Comments
October 29, 2018
Fiat Lux
Featured Trade:
(PLAYING THE SHORT SIDE WITH VERTICAL BEAR PUT SPREADS), (TLT)
(WHY TECHNICAL ANALYSIS DOESN’T WORK)
(FB), (AAPL), (AMZN), (GOOG), (MSFT), (VIX)
Global Market Comments
October 28, 2019
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or DON’T FIGHT THE FED),
(BIIB), (IBB), (TSLA), (VIX), (BA), (AMZN), (AAPL), (MSFT), (GM)
Don’t fight the Fed.
That was the overwhelming message of the market last week as it ground up to a new intraday all-time high. The economy may be going to hell in a handbasket. But as long as the Fed keeps lowering interest rates, stocks will go up, kicking and screaming all the way. It’s that simple.
America’s central bank will get its next chance to cut rates on Wednesday at 2:00 PM from the current overnight rate of 2.00%.
The big question is: Will the curse of the Fed continue? For the last two times the Fed lowered interest rates, substantial stock market selloffs ensued, the last one reaching a 7.5% haircut. We will know shortly.
The Mad Hedge Lake Tahoe Conference held last weekend was a blowout success, with a great time had by all. The weather couldn’t have been more perfect, with the lake waters calm and crystal clear. A day of market insights were delivered by me and Mad Hedge Technology Letter author Arthur Henry.
The only drawback was that several guests were prevented from going home by mandatory evacuations of several Bay Area cities and the closure of Interstate 80 going back to San Francisco. A handful (including me), had no electric power to return to when they got home.
I’ll share with you the most disturbing chart of the entire day showing the S&P 500 (SPY) has been grinding up to new highs, earnings forecasts have been absolutely falling off a cliff. Clearly, with the Volatility Index (VIX) back down to the lowly $12 handle, this is a market that is cruising for a bruising….someday.
Brexit failed again, taking the quagmire into its fourth year. An EC deal is postponed until January 31, but they’re really not interested at all. British pounds collapsing, creating a new “RISK OFF” leg worldwide. Prime minister Johnson has lost 5 consecutive parliamentary votes, an all-time record. When will he get the message?
US Capital Investment has ground to a halt, with business fixed investment down 1% YOY. No one knows where to put their money, inside the US or not, so they're doing nothing until it is sorted out. Call me when its over.
Biogen (BIIB) exploded to the upside on its FDA application for its new Alzheimer’s drug. Written off for dead six months ago, the company secretly kept working on Aducanumab until today’s blockbuster announcement. The drug reverses amyloid plaques thought responsible for Alzheimer’s. The stock is up an incredible 38% and has even dragged up the biotech ETF (IBB) 3%. Buy (BIIB) on dips.
Boeing soared on accelerated production timeline for 2020. Good thing I bought it just recently. The stock had been severely oversold on a $45 dive in two days. Buy (BA) on the dips.
The trade war is back in business with the Chinese demanding a total end to tariffs before any big ag buys. The rumors knocked stocks back on their heels. The Middle Kingdom also takes issue with recent Pence comments about basketball. Trump is definitely cornered. The trade war pain has gone global, with Europe taking the biggest hit. Some 40% of Germany’s GDP comes from exports. Growth will be on the skids for the next two years, even if a deal is done tomorrow.
Tesla shocked, bringing in a profit for only the third time in company history, and causing the stock to soar $55. The 100,000-unit production target within yearend looks within reach. Most importantly, they opened up a new supercharger station in Incline Village, Nevada! Tesla is now America’s most valuable car maker, beating (GM). The ideological Exxon-financed shorts have been destroyed once and for all. Buy (TSLA) on dips. There’s a ten bagger in this one.
Amazon put out a gloomy Christmas forecast on the back of a disappointing earnings report, crushing the shares by 7%. Looks like the trade war might cause a recession next year. Q3 revenues were great, up 24% to an eye-popping $70 billion. Good thing I took profits on the last option expiration. Poor Jeff Bezos, the abandoned son of an alcoholic circus clown, dropped $7 billion in net worth on Thursday. Buy (AMZN) on the dips.
The safest stock in the market, Microsoft, says it’s all about the cloud. Azure revenues grew a stunning 59% in Q3. (MSFT) is now up 37% on the year. Keep buying every dip, if we ever get another one.
Apple stock soared to new all-time high, taking the market cap just short of $1.1 trillion. iPhones are now less than 50% of total sales. The company is firing on all cylinders. My target is $200. Buy (AAPL) on dips.
Existing Home Sales dropped, down 2.2% in September to 5.38 million units. It’s shocking given the incredibly low level of interest rates. A shortage of supply?
This was a week for the Mad Hedge Trader Alert Service to stay level at an all-time high. With only one position left in Boeing (BA), not much else was going to happen.
My Global Trading Dispatch reached new pinnacle of +349.47% for the past ten years and my 2019 year-to-date accelerated to +48.42%. The notoriously volatile month of October stands at a blockbuster +11.91%. My ten-year average annualized profit held steady at +35.24%.
With my Mad Hedge Market Timing Index sitting around the neutral 62 level, it is too close to neutral to do anything dramatic.
The coming week is pretty non eventful of the data front. Maybe the stock market will be non-eventful as well.
On Monday, October 28 at 8:30 AM, the September Chicago Fed National Activity Index is published. Alphabet (GOOGL), and AT&T (T) report.
On Tuesday, October 29 at 9:00 AM, we get a new S&P Case Shiller National Home Price Index for August. Amgen (AMGN) and Pfizer (P) report.
On Wednesday, October 30, at 8:30 AM, the first read on US Q3 GDP is announced. At 10:30 AM, EIA Energy Stocks are published. Then at 2:00 PM, we obtain the FOMC interest rate decision. Apple (AAPL) and Facebook (FB) report.
On Thursday, October 31 at 8:30 AM, Weekly Jobless Claims are out. US Steel (X) reports.
On Friday, November 1 at 8:30 AM, the October Nonfarm Payroll Report is released. AbbVie (ABBV) and ExxonMobile (XOM) report.
The Baker Hughes Rig Count follows at 2:00 PM.
As for me, I’ll be driving back home from Lake Tahoe. I wonder if I’ll make it.
Good luck and good trading.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Mad Hedge Technology Letter
October 21, 2019
Fiat Lux
Featured Trade:
(THE CLOUD BASICS)
(AMZN), (MSFT), (GOOGL), (AAPL), (CRM), (ZS)
Mad Hedge Technology Letter
October 18, 2019
Fiat Lux
Featured Trade:
(THE ROAD OUT OF SILICON VALLEY),
(AAPL), (CRM), (MSFT), (FB), (AMZN), (GOOGL)
In a new study, 44% of Millennials plan to move out of the Bay Area in the “next few years.”
In the same study, 8% of Millennials will move out of the Californian tech peninsula within the next 365 days.
Tech companies are in serious danger of stagnating because they won’t be able to hire the talent needed to keep their companies afloat while the number of foreign HB-1 visas has dried up.
All of this could come home to roost and early cracks can be found in the local housing migratory trends.
The robust housing demand, lack of housing supply, mixed with the avalanche of inquisitive tech money has made living with a roof over your head a tall order.
The area has also become squalid like some third world countries due to the homeless problem that is growing faster than any software company.
Salesforce Founder and CEO Marc Benioff has lamented that San Francisco, where ironically he is from, is a diabolical “train wreck” and urged fellow tech CEOs to “walk down the street” and see it with their own eyes to observe the numerous homeless encampments dotted around the city limits.
The leader of Salesforce doesn’t mince his words when he talks and beelines to the heart of the issues.
In condemning large swaths of the beneficiaries of the Silicon Valley ethos, he has signaled that it won’t be smooth sailing forever.
He has also urged companies to transform their business model if they are irresponsible with user data.
The tech lash could get messier this year because companies that go rogue with personal data will face a cringeworthy reckoning as government policy stiffens.
I have walked around the streets of San Francisco myself.
Places around Powell Bart station close to the Tenderloin district are eyesores littered with used syringes that lay in the gutter.
South of Market Street (SoMa) isn’t a place I would want to barbecue on a terrace either.
Summing it up, the unlimited tech talent reservoir that Silicon Valley gorged on isn’t flowing anymore because people don’t want to live there anymore.
This is exactly what Apple’s $1 billion investment into a new tech campus in Austin, Texas, and Amazon adding 500 employees in Nashville, Tennessee are all about.
Apple also added numbers in San Diego, Atlanta, Culver City, and Boulder just to name a few.
Apple currently employs 90,000 people in 50 states and is in the works to create 20,000 more jobs in the US by 2023.
Most of these new jobs won’t be in Silicon Valley.
Jobs simply flock to where the talent is.
The tables have turned but that is what happens when the heart of western tech becomes unlivable to the average tech worker earning $150,000 per year.
Sacramento has experienced a dizzying rise of newcomers from the Bay Area escaping the sky-high housing.
Millennials are reaching that age of family formation and they are fleeing to places that are affordable and possible to take the first step onto the property ladder.
These are some of the practical issues that tech has failed to address, and part of the problem with unfettered capitalism which doesn’t consider quality of life.
No wonder why Silicon Valley real estate has dropped in the past year, people and their paychecks are on the way out.
Global Market Comments
October 14, 2019
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or UNICORNS AND CANDY CANE)
(AAPL), (FDX), (SPY), (IWM), (USO), (WMT), (AAPL), (GOOGL),
(X), (JPM), (WFC), (C), (BAC)
I have to tell you that flip-flopping from extreme optimism to extreme pessimism and back is a trader’s dream come true. Volatility is our bread and butter.
Long term followers know that when volatility is low, I struggle to make 1% or 2% a month. When it is high, I make 10% to 20%, as I have for two of the last three months.
That is what the month of October has delivered so far.
To see how well this works, the S&P 500 is dead unchanged so far this month, while the Mad Hedge Fund Trader alert service is up a gangbuster 10% and we are now 70% in cash.
While the market is unchanged in two years, risk has been continuously rising. That's because year on year earnings growth has fallen from 26% to zero. That means with an unchanged index, stocks are 26% more expensive.
Entire chunks of the market have been in a bear market since 2017, including industrials, autos, energy, and retailers. US Steel (X), which the president’s tariffs were supposed to rescue, has crashed 80% since the beginning of 2018.
The great irony here is that while the Dow Average is just short of an all-time high, all of the good short positions have already been exhausted. In short, there is nothing to do.
So, the wise thing to do here is to use the 1,200-point rally since Thursday to raise cash you can put to work during the next round of disappointment, which always comes. If we do forge to new highs, they will be incremental ones at best. That’s when you let your passive indexing friends pick up the next bar tab, who unintentionally caught the move.
In the meantime, we will be bracing ourselves for the big bank earnings due out this week which are supposed to be dismal at best. JP Morgan (JPM), Wells Fargo (WFC), and Citigroup (C) are out on Tuesday and Bank of America (BAC) publishes on Wednesday.
That’s when we find out how much of this move has been about unicorns and candy canes, and how much is real.
Trump demoed his Own trade talks, creating a technology blacklist and banning US pension investment into the Middle Kingdom. He also hints he’ll take a small deal rather than a big one. Great for American farmers but leaves intellectual property and forced joint ventures on the table, throwing the California economy under the bus. I knew it would end this way. It’s very market negative. Without a trade deal, there is no way to avoid a US recession in 2020.
The Inverted Yield Curve is flashing “recession.” The three-month Treasury yield has been above the 10-year bond yield since May, and that always says a downturn is coming. The time to batten down the hatches is now.
US Producer Prices plunged in September, down 0.3%, the worst since January. It’s another recession indicator but also pushes the Fed to lower rates further.
Inflation was Zero in September, with the Consumer Price Index up 1.8% YOY. Slowing economy due to the trade war gets the blame, but I think that accelerating technology gets the bigger blame.
New Job Openings hit an 18-month low, down 123,000 to 7.05 million in August, as employers pull back in anticipation of the coming recession. Trade war gets the blame. The smart people don’t hire ahead of a recession.
FedEx (FDX) is dead money, says a Bernstein analyst, citing failing domestic and international sales. No pulling any punches, he said “The bull thesis has been shredded.” Not what you want to hear from this classic recession leading indicator. Nobody ships anything during a slowdown.
Loss of SALT Deductions cost you $1 trillion, or about 4% per home, according to an analysis by Standard & Poor’s. Quite simply, losing the ability to deduct state and local tax deductions creates a higher after-tax cost of carry that reduces your asset value. If you bought a home in 2017 you lost half of your equity almost immediately. The east and west coast were especially hard hit.
Fed to expand balance sheet to deal with the short-term repo funding crisis, which periodically has been driving overnight interest rates up to an incredible 5%. Massive government borrowing is starting to break the existing financial system. What they’re really doing is trying to head off to the next recession.
The Fed September minutes came out, and traders seem to be expecting more rate cuts than the Fed is. Trade is still the overriding concern. The next meeting is October 29-30. It could all end in tears.
Apple (AAPL) raised iPhone 11 Production by 10%, to 8 million more units, according Asian parts suppliers. Great news for its $1,089 top priced product ahead of the Christmas rush. It turns out that an Apple app is helping Hong Kong protesters manage demonstrations. I’m keeping my long, letting the shares run to a new all-time high. Buy (AAPL) on the dips.
The Mad Hedge Trader Alert Service has blasted through to yet another new all-time high. My Global Trading Dispatch reached new apex of +347.48% and my year-to-date accelerated to +47.24%. The tricky and volatile month of October started out with a roar +9.82%. My ten-year average annualized profit bobbed up to +35.64%.
Some 26 out of the last 27 trade alerts have made money, a success rate of 94%! Underpromise and overdeliver, that's the business I have been in all my life. It works. This is rapidly turning into the best year of the decade for me. It is all the result of me writing three newsletters a day.
I used the recession fear-induced selloff after October 1 to pile on a large aggressive short-dated portfolio which I will run into expiration. I am 60% long with the (SPY), (IWM), (USO), (WMT), (AAPL), and (GOOGL). I am 10% short with one position in the (IWM) giving me a net risk position of 50% long. All of them are working.
The coming week is pretty non-eventful of the data front. Maybe the stock market will be non-eventful as well.
On Monday, October 14, nothing of note is published.
On Tuesday, October 15 at 8:30 AM, the New York Empire State Manufacturing Index is released. JP Morgan (JPM), Wells Fargo (WFC), and Citigroup (C) kick off the Q3 earnings season with reports.
On Wednesday, October 16, at 8:30 AM, we learn the September Retail Sales. Bank of America (BAC) and CSX Corp. (CSX) report.
On Thursday, October 17 at 8:30 AM, the Housing Starts for September are out. Morgan Stanley (MS) reports.
On Friday, October 18 at 8:30 AM, the Baker Hughes Rig Count is released at 2:00 PM. Schlumberger (SLB), American Express (AXP), and Coca-Cola (KO) report.
As for me, I’ll be going to Costco to restock the fridge after last week’s two-day voluntary power outage by PG&E. Expecting Armageddon, I finished off all the Jack Daniels and chocolate in the house. We managed to eat all of our frozen burritos, pork chops, steaks, and ice cream in a mere 48 hours. But that’s what happens when you have two teenagers.
Hopefully, it will rain soon for the first time in six months bringing these outages to an end.
Good luck and good trading.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
