Below please find subscribers’ Q&A for the January 29 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Salt Lake City, UT.
Q: Are AI stocks going to crash?
A: Some already have, and others haven’t. It’s really about single-stock-picking the chip area and the pure AI plays, which have been enormously overextended. If you boil it down to a single sentence, if you offer AI for free, AI users like (META) and (AMZN) do really well, while AI producers, like (NVDA) and (AMD) get crushed. I’ve been warning for months that these things were getting too high. The end result is that in two weeks the price earnings multiple for Nvidia has gone from 40 to 25. You know, at 25, it really is quite attractive. It'll be even more attractive at 20 or even 15 if we get that low. I'll show you where we hit that on the charts. Don't forget their earnings are still growing at tremendous rates—we'll talk about that in a second.
Q: What stocks are good to invest in now?
A: Watch the banks. Watch the financials. They’ve hardly sold off. I was begging for Goldman Sachs (GS) to tank. It didn't—we only got a $10 drop. It's just not letting people in, which means higher highs for all the banks and financials are coming. That has become the no-brainer one-way trade of 2025. You know, I had an enormous number of bank LEAPS expire in my personal account on the January 17 option expiration. I'm waiting to get back in now. So that is the play.
Q: What's happening with Starbucks (SBUX)? Are they investable?
A: Starbucks was a disaster area until the summer when they brought in new management, which has a fantastic track record. The stock has since gone up 30%. You're kind of late to get in on this one. I don't really follow the stock anyway. Selling cups of coffee is not a high-margin business. I'd rather stick with the Tesla’s (TSLA) and Nvidia’s (NVDA) of the world where the value added is very high
Q: What will happen with Bitcoin in the new administration?
A: It's the same with everything. Higher highs first, lower lows later. If you're a Bitcoin investor now at 100,000, the big question is what happens when Donald Trump leaves office in four years? Does it go back to 5,000? We really don't know so, why touch Bitcoin when you can get 10 to 1 returns on all these other great companies which make stuff that you can actually touch and feel? Plus, you can leverage up with the LEAPS, and no one's going to steal your account, which happens frequently with Bitcoin holdings.
Q: Do you think tariffs are a good idea for the economy?
A: No, tariffs shrink global trade, they shrink globalization. It's a race to see if we can make other countries more poor than they can make us. It's an economy-shrinking strategy. It was a major contributor to causing the Great Depression in the 1930’s. That's why we abandoned tariffs 80 years ago with the end of World War II. I mean, the last cause of the 1930’s tariffs was World War II. That was a major contributing factor. So do I like tariffs? No. It turns out it's a great defensive strategy. If someone's making a fortune off you, they tend not to blow you up. So I think that's a big mistake and I will be an anti-tariff person to my grave. There are special situations like Chinese EVs, for example, where they're using a huge cost advantage to flood the emerging markets with cheap EVs. If that happened to the US, it would crash the US economy. In that one case, I'm in favor of tariffs. By the way, their EVs are using technology they basically stole from Tesla.
Q: What are your thoughts on defense stocks? With so many wars occurring all over the world.
A: Don't touch defense stocks with a 10-foot poll if the government is in favor of cost-cutting, the largest cost after Social Security is defense. We had a defense budget of about $824 billion in 2024. We have a 2.8 million man military and that cutting there and running down our weapons stocks would mean that you don't want to buy Lockheed Martin (LMT), General Dynamics (GD), Raytheon (RTX), all the big suppliers of weapons to the Ukraine war, for example, which looks like it's going to get cut off completely. They cut off all humanitarian aid to Ukraine last week. And of course, I was personally involved in delivering some of that humanitarian aid to Ukraine in the recent past. Yeah, defense looks bad if people really get serious about cost-cutting.
Q: Do you see the Fed dropping interest rates later this year?
A: That is possible. I tend to think we don't go into recession this year. It's a next year or year after type of thing. But markets can discount recession in six months to a year in advance like they did in 2007 and 2008. I don't think we get any more interest rate cuts. We'll just have to see what policies the new government implements, and how inflationary they are. And if they are inflationary, interest rates are going up, not down. That is why everybody's sitting on their hands right now and doesn't know what to do. Uncertainty at an eight-year high. You know, the government often talks one game but does the opposite. So, there’s nothing to do but wait and see.
Q: Well, what happened to the US housing market in 2025?
A: Nothing, you know volumes are shrinking. The last two years were the lowest volume sales in housing market history since the numbers were collected, and higher interest rates for longer. It's just more bad news. You know, something like 40% of all of the sales now are all cash. Prices are still going up again on paper, but there's almost no trade happening at these higher prices. And of course, the Millennials have been almost completely shut out of the market—the largest generation in history by the way—because they don't have enough money. They can't earn enough money; especially when AI is wiping out all the entry-level jobs, as it has been doing for two years in Silicon Valley.
Q: Here's a good question. How much time do we need to spend researching a company before we make an investment there?
A: Well, not that much, really. You can spend an hour or two reading the annual report, browsing through the most recent financial statement, and doing some news searches and you'll have a better read than most individual investors are going to have on a single stock. Then you start to see trends on what makes a good company, what makes a bad company, and over time, you get a feel for a company—when to get in, when to get out. That's one way. Or you can listen to the Mad Hedge Fund Trader, who's been doing this for 55 years and watching the same stocks. You wonder why you always have the same stocks up here and it's because I've been following these guys for forever or more. So you really get a handle on when they're doing well and when they're doing awful.
Q: Should we sell Nvidia (NVDA) stock for now?
A: No, I was telling people to cut positions the next time it ran to $150, which it did a few weeks ago. Now we're probably entering buy territory more than sell territory. Nvidia will come back. I just don't know where the bottom is for now, and it depends on your own investing style. If you're a five-year investor, you can forget about all this volatility, if you're a day trader, yeah, you probably should sell Nvidia now because you could buy it back $10 cheaper.
Q: Do you expect a new high after the Fed meeting?
A: No, I don't. I think we're stuck in a range for the S&P 500 for the next six months. After that, we may get a move. Depending on what effect government policies have on the economy.
Q: What about an alert for Adobe (ADBE)?
A: I didn't put out the alert to buy Adobe. The Adobe alert is part of the Mad Hedge Technology Letter service, and if you want to get purely tech trade alerts, go to the Mad Hedge website, go to the store, and you can see the technology letter is offered for sale up there. Here is the link: https://hi290.infusionsoft.app/app/orderForms/techletter
Q: What is the right size of account for doing this kind of trading?
A: We literally have college students trading with $500 accounts. We have lots of individuals trading with $5,000 accounts—that way you can buy 10 $400 positions and still have some room. We only recommend you put 10% of your cash in any one trade. A lot of retired people will keep a large portion of their money in an index like the S&P 500 (SPY) and take 10% of their money and use it to do our trade alerts, which then adds an extra return to the index position. So, the answer is different for different people.
Q: Do I see a meaningful correction like 20% or 30% in the next six months?
A: No, I really don't, but that could be 2026 business. When we get a big correction, we get a recession. Again, it's dependent on government policies and we have no idea what those are right now. People can only guess. I'm not in the guessing business. I'm in the sure thing business.
Q: Can you explain how to complete the trade alerts you send out?
A: What all the professionals do is they put out a spread of orders. If I put out an order to buy something at $9.00, you put in a bid at $9.00, $9.10, $9.20, $9.30, and $9.40. By the close, some or all of those will get done. Often they all get done by the end of the day when the high-frequency traders have to dump their positions because they're not allowed to carry overnight positions. You make them good-until-canceled orders. So if you get a low opening the next morning, you'll get entirely filled at the $9.00 level, and this is what my clients in Australia do. They only do overnight good-until-cancelled orders since the market's open from 11:30 PM until 6:00 AM in the morning, Australia time. They tend to make more money than any of my other clients because they only enter overnight GTC orders. So, people trying to outsmart the market on an intraday basis generally don't do very well.
Q: Should I sell the Cameco Corporation (CCJ) stock I bought on the nuclear trade?
A: No, I think (CCJ) recovers. I was looking at it yesterday. Elimination of the electricity trade is complete nonsense. I think the nuclear thing is real. It'll come back. And in fact, I bought Vistra Energy (VST) yesterday, so use this extreme sell-off to get into the nuclear trade if you missed it the first time around.
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
