(AMZN) Archives - Page 6 of 101 - Mad Hedge Fund Trader

The Market Outlook for the Week Ahead or The Round Trip to Nowhere

I am writing this to you from the airport in Vilnius, Lithuania, which is under construction. The airport is packed because people are flying all planes to Paris to catch the closing ceremony of the 2024 Olympics. There is also the inflow of disappointed Taylor Swift fans returning from three concerts in Vienna, Austria that had been canceled due to terrorist threats. Some 150,000 tickets had to be refunded.

It is hard to focus on my writing because every 30 seconds, a beautiful woman walks by.

And I am told at my age I am not supposed to learn. I should know better.

Well, that was some week!

If you had taken a ten-day cruise to Alaska, you would wonder what all the fuss was about, for last week the stock market was basically unchanged. The worst day in two years, down 3%, followed by the best, up 2 ½% amounts to a big fat nothing burger.

It all reminds me of one of those advanced aerobatics classes I used to take. I was busier than a one-armed paper hanger, sending out some 13 trade alerts in all.

And while the volatility is certainly not over, it is probably at least two-thirds over, meaning that we can step out for a cup of coffee and NOT expect a 1,000 move in the Dow Average by the time we get back.

Is the Bottom IN?

I don’t think so. The valuation disparity between big tech and value is still miles wide. Uncertainty reaches a maximum just before the US presidential election. A bottom for the year is coming, but not quite yet. When it does, it will be the buying opportunity of the year. Watch this space! And watch (ROM) and (TQQQ) too.

The average drawdown per year since 2020 stands at 15%, so with our 10% haircut, the worst is over. What will remain in high volatility? After staying stuck at $12 for most of 2024 and then spiking to $65 in two days, the $20 handle should remain for the foreseeable future.

That is a dream come true and a license to print money for options traders because the higher options prices effectively double the profit per trade. So, expect a lot of trade alerts from the Mad Hedge Fund Trader going forward. That is, until the ($VIX) returns to $36, then the potential profit triples.

Up until July, I had been concerned that the market might not sell off enough to make a yearend rally worth buying into. There was still $8 trillion in cash sitting under the market buying even the smallest dips.

The Japanese took care of that in a heartbeat with a good old-fashioned financial crisis. In hours trillions of dollars’ worth of yen carry trades unwound, creating an unprecedented 14% move UP in the Japanese currency and a 26% move DOWN in the Japanese stock market.

Suddenly, the world was ending. Or at least the financial media thought it was.

Some hundreds of hedge funds probably went under as their leverage is so great at 10X-20X. But we probably won’t know who until the redemption notices go out at yearend.

It couldn’t happen to a nicer bunch of people.

Don’t expect the Fed to take any emergency action, such as a surprise 50 basis point rate cut, to help us out. Things are just not bad enough. The headline Unemployment Rate is still a low 4.3%. Corporate profits are at all-time highs. We are nowhere near a credit crisis or any other threats to the financial system. The US still has the strongest major economy in the world.

Of course, if you followed my advice and went heavy into falling interest rate plays, as I have been begging you to do for months, last week was your best of the year. The United States US Treasury Bond Fund (TLT) rocketed to a year high at $100. Junk bonds (JNK), REITS (CCI), BB-rated loan ETFs (SLRN), and high-yield stocks (MO) went up even more.

It's still not too late to pile into yield plays because the Fed hasn’t actually cut interest rates YET.

Volatility Index ($VIX) Hits Four-Year High at $65, the most since the 2020 pandemic. That implies a 2% move in the S&P 500 (SPX) every day for the next 30 days, which is $103.42 (SPX) points or $774 Dow ($INDU) points. No doubt, massive short covering played a big role with traders covering shorts they sold in size at $12. Spikes like this are usually great long-term “BUY” signals.

$150 Billion in Volatility Plays were Dumped on Monday. Volatility-linked strategies, including volatility funds and equities trend-following commodity trading advisers (CTAs), are systematic investment strategies that typically buy equities when markets are calm and sell when they grow turbulent. They became heavy sellers of stocks over the last few weeks, exacerbating a market rout brought on by economic worries and the unwind of a massive global carry trade.

Weekly Jobless Claims Drop to 233,000, sparking a 500-point rally in the market. It’s a meaningless report, but traders are now examining every piece of jobs data with a magnifying glass.

Commercial Real Estate Has Bottomed, which will be great news for regional banks. Visitations are up big in Manhattan, with Class “A” properties gaining the most attention. New leasing is now exceeding vacations.

Warren Buffet Now Owns More T-Bills than the Federal Reserve. The Omaha, Nebraska-based conglomerate held $234.6 billion in short-term investments in Treasury bills at the end of the second quarter. That compared with $195.3 billion in T-bills that the Fed owned as of July 31. The Oracle of Omaha wisely unloaded $84 billion worth of Apple at the market top.

No Recession Here says shipping giant Maersk. U.S. inventories are not at a level that is worrisome says CEO Vincent Clerc, as fears of a recession in the world’s largest economy mount. Chinese exports have helped drive overall container demand in the most recent quarter reported a decline in year-on-year underlying profit to $623 million from $1.346 billion in the second quarter and a dip in revenue to $12.77 billion from $12.99 billion.

A Refi Boom is About to Begin. Mortgage rates in the high fives are now on offer. Over 40% of existing mortgages have rates of over 6%. It’s all driven by the monster rally in the bond market this week which took the (TLT) to $100 and ten-year US Treasury yields down to 3.65%.

Google (GOOG) Gets Hit with an Antitrust Suit, a Federal judge ruling that the company has a monopoly in search, with a 92% market share. The smoking gun was the $20 billion a year (GOOG) paid Apple (AAPL) to remain their exclusive search engine. Apple is the big loser here, which I just sold short.

In July we ended up a stratospheric +10.92%. So far in August, we are up by +2.51% My 2024 year-to-date performance is at +33.45%. The S&P 500 (SPY) is up +7.34% so far in 2024. My trailing one-year return reached +51.92.

That brings my 16-year total return to +710.08. My average annualized return has recovered to +51.94%.

I used the market crash to stop out of three STOP LOSS positions in (CAT), (AMZN), and (BRK/B). When the ($VIX) hit $65 I then made all the losses back when I piled on four new technology longs in (NVDA), (TSLA), (AAPL), and (META). After the Dow Average ($INDU) rallied 2,000 points and volatility was still high I then pumped out short positions in (TSLA), (DHI), (DE), (AAPL), and (JPM). I stopped out of my position in (DE) at breakeven.

This is in addition to existing longs in (GLD) and (DHI), which I will likely run into the August 16 option expiration.

Some 63 of my 70 round trips, or 90%, were profitable in 2023. Some 48 of 66 trades have been profitable so far in 2024, and several of those losses were really break-even. That is a success rate of 72.73%.

If you were wondering why I was sending out so many trade alerts out last week it is because we were getting months’ worth of market action compressed into five days. Make hay while the sun shines and strike while the iron is hot!

Try beating that anywhere.

My Ten-Year View

When we come out the other side of the recession, we will be perfectly poised to launch into my new American Golden Age or the next Roaring Twenties. The economy decarbonizing and technology hyper accelerating, creating enormous investment opportunities. 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.

Dow 240,000 here we come!

On Monday, August 12 at 8:30 AM EST, the Consumer Inflation Expectations is out.

On Tuesday, August 13 at 9:30 AM, the Producer Price Index is published.

On Wednesday, August 14 at 8:30 AM, the new Core Inflation Rate is printed.

On Thursday, August 15 at 8:30 AM, the Weekly Jobless Claims are announced. Retail Sales are also printed.

On Friday, August 16 at 8:30 AM, Building Permits are disclosed. We also get the University of Michigan Consumer Sentiment. At 2:00 PM, the Baker Hughes Rig Count is printed.

As for me, with the overwhelming success of the Oppenheimer movie, I thought I’d review my long and fruitful connection with America’s nuclear program.

When the Cold War ended in 1992, the United States judiciously stepped in and bought the collapsing Soviet Union’s entire uranium and plutonium supply.

For good measure, my client George Soros provided a $50 million grant to hire every Soviet nuclear engineer. The fear then was that starving scientists would go to work for Libya, North Korea, or Pakistan, which all had active nuclear programs. They ended up here instead.

That provided the fuel to run all US nuclear power plants and warships for 20 years. That fuel has now run out and chances of a resupply from Russia are zero. The Department of Defense attempted to reopen our last plutonium factory in Amarillo, Texas, a legacy of the Johnson administration.

But the facilities were deemed too old and out of date, and it is cheaper to build a new factory from scratch anyway. What better place to do so than Los Alamos, which has the greatest concentration of nuclear expertise in the world?

Los Alamos is a funny sort of place. It sits at 7,320 feet on a mesa on the edge of an ancient volcano so if things go wrong, they won’t blow up the rest of the state. The homes are mid-century modern built when defense budgets were essentially unlimited. As a prime target in a nuclear war, there are said to be miles of secret underground tunnels hacked out of solid rock.

You need to bring a Geiger counter to garage sales because sometimes interesting items are work castaways. A friend almost bought a cool coffee table which turned out to be part of an old cyclotron. And for a town designing the instruments to bring on the possible end of the world, it seems to have an abnormal number of churches. They’re everywhere.

I have hundreds of stories from the old nuclear days passed down from those who worked for J. Robert Oppenheimer and General Leslie Groves, who ran the Manhattan Project in the early 1940s. They were young mathematicians, physicists, and engineers at the time, in their 20’s and 30’s, who later became my university professors. The A-bomb was the most important event of their lives.

Unfortunately, I couldn’t relay this precious unwritten history to anyone without a security clearance. So, it stayed buried with me for a half century, until now.

Some 1,200 engineers will be hired for the first phase of the new plutonium plant, which I got a chance to see. That will create challenges for a town of 13,000 where existing housing shortages already force interns and graduate students to live in tents. It gets cold at night and dropped to 13 degrees F when I was there.

I was allowed to visit the Trinity site at the White Sands Missile Test Range, the first visitor to do so in many years. This is where the first atomic bomb was exploded on July 16, 1945. The 20-kiloton explosion set off burglar alarms for 200 miles and was double to ten times the expected yield.

Enormous targets hundreds of yards away were thrown about like toys (they are still there). Half the scientists thought the bomb might ignite the atmosphere and destroy the world but they went ahead anyway because so much money had been spent, 3% of US GDP for four years. Of the original 100-foot tower, only a tiny stump of concrete is left (picture below).

With the other visitors, there was a carnival atmosphere as people worked so hard to get there. My Army escort never left me out of their sight. Some 78 years after the explosion, the background radiation was ten times normal, so I couldn’t stay more than an hour.

Needless to say, that makes uranium plays like Cameco (CCJ), NextGen Energy (NXE), Uranium Energy (UEC), and Energy Fuels (UUUU) great long-term plays, as prices will almost certainly rise and all of which look cheap. US government demand for uranium and yellow cake, its commercial byproduct, is going to be huge. Uranium is also being touted as a carbon-free energy source needed to replace oil.

At Ground Zero in 1945

What’s Left of a Trinity Target 200 Yards Out

Playing With My Geiger Counter

Atomic Bomb No.3 Which was Never Used on Tokyo

What’s Left from the Original Test

Good Luck and Good Trading,

John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader

August 5, 2024

Diary, Newsletter, Summary

Global Market Comments
August 5, 2024
Fiat Lux

Featured Trade:

(MARKET OUTLOOK FOR THE WEEK AHEAD or DID JAY POWELL BLOW IT?) and CHASING EARNEST HEMINGWAY),
($VIX), (INTC), (CCI), (TLT), (COPX), (BHP), (USO) (NVDA), (SLV), (FXY), (CAT), (IWM), (IBKR), (AMZN), (GLD), (BRK/B), (DE)

August 1, 2024

Diary, Newsletter, Summary

Global Market Comments
August 1, 2024
Fiat Lux

Featured Trade:

(WHY AMAZON IS THE MOST UNDERVALUED AI PLAY OUT THERE),
(AMZN), (NVDA), (GOOGL), (META), (AAPL), (MSFT), (WMT)

Why Amazon is the Most Undervalued AI Play Out There

Diary, Newsletter

Before I took off for the current trip to Europe, I logged into my Amazon Prime account to buy some lightweight polyester T-shirts, size 4XL. Not only are these ideal for long-distance hiking but they can be washed in a hotel sink and dried quickly when I am traveling too fast to use the house laundry.

The next morning when I logged into my laptop, my email account was flooded with ads for every kind of T-shirt in the world, from heavy-duty sports types FOR $100 to bargain basement $5 ones from China (although the Chinese ones were a little light on the 4X sizes).

That is Amazon’s AI at work. And you know what? It is getting smarter. And while the big fear among investors is that the US government will break up this retail giant for antitrust reasons, Amazon is integrating faster than ever. The impact on profits will be enormous.

My friend Jeff Bezos’ creation has a lot to work with. Amazon not only pioneered online retail. It subsequently invented the Kindle, an e-reader (click here where the John Thomas autobiography is for sale) Alexa, a smart speaker and, more consequentially, cloud-computing—Amazon Web Services has a 31% share of that $300bn market (full disclosure: Mad Hedge uses their service).

It also runs Prime Video, America’s fourth-most-watched video-streaming service (full disclosure: Mad Hedge is a Prime member). Its newish, high-margin advertising business is already the third largest in the world behind Alphabet (GOOGL) (Google’s parent company) and Meta (META) (Facebook’s).

Amazon also has a few moonshot projects of its own. One subsidiary, Zoox, is building self-driving cars. Another, Kuiper, is developing a fleet of communications satellites in low-Earth orbit, in competition with SpaceX Starlink (full disclosure: Mad Hedge is a Starlink user).

This year, Amazon’s websites will sell a staggering $554bn-worth of goods in America. That gives it a 42% share of American e-commerce, far beyond the 6% captured by Walmart (WMT), its nearest online competitor (and the country’s biggest retailer overall). The reward for all these efforts was a $2 trillion market capitalization in June and an all-time high share price of $203.

Amazon’s fourth decade looks poised to be an era of integration. The company has grown to the size that any needle-moving new investment is costly and high-risk. Andy Jassy, the former boss of AWS whom Bezos appointed as his successor as CEO in 2021, therefore appears keen to generate value by stitching the company’s existing businesses together more tightly.

Jeff, who I knew at Morgan Stanley, still retains a 9% stake after some hefty recent sales and a big say over strategy, seems to approve. This metamorphosis would make Amazon more similar to Apple (AAPL) and Microsoft (MSFT), two older big-tech rivals that have bundled and cross-sold their way to world domination in consumer devices and business software, respectively—and to $3trn valuations.

Retail and advertising appear to be the first to integrate. The thread running through the two businesses is Prime, Amazon’s $139 a-year subscription service, which has 300m-odd members around the world, providing shoppers with free delivery and access to Prime Video. Prime members like me spend twice as much on Amazon’s websites as non-members do and they tend to be logged in more often. Amazon also has intimate knowledge of their shopping behavior, which allows it to target ads more accurately.

Advertising is another great hope at Amazon. Advertisers are willing to pay handsomely for this service: analysts estimate that Amazon’s ads business enjoys operating margins of around a mind-blowing 40%, higher even than those of the cloud operation, not to mention the much less lucrative retail division.

Most of these ads, responsible for four-fifths of the company’s ad sales, are nestled among search results on its app or next to information about products, as with my above-mentioned T-shirts. But a growing share is coming from third-party websites and, most recently, from Prime Video. In January Amazon started showing commercials to viewers in America, Britain, Canada, and Germany.

Analysts reckon that video ads alone will boost Amazon’s ads sales by about 6% this year, adding $3bn to the top line. Given the ad operation’s fat margins, the impact on profit will be considerably larger.

To turn more Prime members into actual ad-watchers, Amazon is splurging on content. It recently signed a contract with Mr. Beast (??), a YouTube superstar, rumored to be worth $100m. It is trying to seal a deal in which it would pay $2bn a year for the rights to show National Basketball Association games on Prime Video. It is already reportedly spending $1bn annually to stream some National Football League (NFL) fixtures.

This hefty price tag is worth it, the company thinks, because popular sporting moments, such as “Thursday Night Football”, have turned out to be among the biggest sign-up days for Prime. Ads aired during sports events are some of the most lucrative in all of the ad business.

Analysts speculate that clever AWS software may also be assisting the retail operation’s 750,000 warehouse robots in sorting shoppers’ packages. And having a business as gigantic as Amazon’s retail arm as a captive customer gives AWS the confidence to scale up, helping spread costs.

The most important thread stitching Amazon’s two main businesses together is generative AI. Most rivals will struggle to match Amazon’s access to specialized AI hardware, which is in short supply but which it has in abundance thanks to long-standing commercial partnerships with companies like Nvidia (NVDA), which makes advanced AI semiconductors.

Amazon’s recent share-price rise was uninterrupted by a Fair Trade Commission lawsuit. But for every cloud customer that AWS loses to rivals such as Microsoft Azure or Google Cloud Platform, it could win one that is repelled by Microsoft’s and Google’s new businesses in their own increasingly tightly-knit empires.

It all looks like a giant, super-efficient machine to me which should justify at least a 50% gain in Amazon’s share price in the next year or two.

July 24, 2024

Diary, Newsletter, Summary

Global Market Comments
July 24, 2024
Fiat Lux

Featured Trade:

(WHAT AI CAN AND CAN’T DO FOR YOU)
(AAPL), (GOOGL), (AMZN), (AMZN), (TSLA), (NVDA), (MU)

What AI Can and Can’t Do for You

Diary, Newsletter

The future has arrived!

Over the last few weeks, I picked up some astonishing developments in artificial intelligence.

*Mainframes at Stanford University and the University of California at Berkeley were given a direct connection to speak freely with each other. Within 30 minutes they dumped English as a means of communication because it was too inefficient and developed their own language which no human could understand. They then began exchanging immense amounts of data. Fearful of what was going on, the schools unplugged the machines after only eight hours.

*All of the soccer videos ever recorded were downloaded into two robots, but they were not taught how to play the game or given any rules. Not only did it figure out how to play the game, it developed plays and maneuvers no one in the sport has ever thought of in its 150-year history.

*It normally takes a PhD candidate five years to 3D map a protein. An AI app 3D mapped all 200 million known proteins in seven weeks, shortcutting one billion years of PhD level research with existing technology. These new maps have already been used to design a malaria vaccine and enzymes that eat plastic. They will soon cure all human diseases.

*A developer asked an AI program a half dozen questions in Bengali, which is not an easy language. Within an hour it spoke the language fluently, without any instructions to do so.

By now, word has gotten out about the incredible opportunities AI presents. Our only limitation is our own imagination on how to use it. AI will instantly triple the value of any company that uses it.

What has changed is that we now have millions of computers powerful enough and an Internet fast enough to realize its full potential.

It all vindicates my own long-term vision, unique in the investing community, that in the coming decade, immense technology profits will more than replace the trillions of dollars worth of Fed liquidity we feasted on during the 2010s. Extended QE is proving just a bridge to a much more prosperous future.

The Internet has created about $10 trillion in value since its inception. AI will create triple that in half the time. That’s what will take the Dow from 33,000 to 240,000.

No surprise then that the top ten AI companies have delivered 120% of the stock market gains so far in 2023. The other 490 companies in the S&P 500 have either gone nowhere to down.

However, there are many things that AI can’t do. Here is the list.

1) AI Can’t Predict large anomalous events, otherwise known as Black Swans. AI takes past trends and extrapolates them into the future. It in no way could have seen 9/11, the 2008 crash or the pandemic coming, although I warned my hedge fund clients for years that we were overdue. All of the AI stock trading apps I have seen so far, including my own, max out at 90% accuracy. The other 10% is accounted for by black swans: earnings shocks, foreign crises, sudden FDA stage three denials, surprise legal judgments, foreign invasions, or the murder of a key man in a tech company, as recently happened in San Francisco.

2) AI Lies and Lies Often. AI was asked to write a scientific paper on a specific subject. It came back with an elegant and well-researched piece. The problem was that all of the books it referred to didn’t exist. AI learned early to tell humans what they want to hear.

3) AI Requires Exponential Computing Capacity. Only five companies have the muscle to pursue true AI. No surprise that these, including (AAPL), (GOOGL), (AMZN), (AMZN), and (TSLA), account for the bulk of stock market performance this year. This won’t always be the case. Some 30 years ago it required thousands of mainframes to contain all human knowledge. Today that task can be accomplished by a cheap $1,000 laptop.

4) Internet Capacity Will Be a Limiting Factor for AI for Years. To accommodate the traffic that is taking place right now, the Internet will have to grow 500% practically overnight, and that is with five main players. What happens when we have 5 million? That’s why NVIDIA (NVDA) has gone nuts.

5) AI Hallucinates, as anyone who drives a Tesla will tell you. If a car makes a left turn in Florida, the 4 million vehicles in the world’s largest neural network learn from it. The problem is that sometimes the data from that Florida car is placed directly in front of a California one, prompting it to brake abruptly, causing accidents. This is known as “ghost breaking.” I have explained to Elon Musk that his database has grown so large, eight video feeds per 4 million cars going back many years and billions of miles, that he may be going behind the limits of known physics.

6) While the Growth Opportunities for AI are Unlimited, the ability of humans and society to absorb it isn’t. All jobs will be affected by AI and millions destroyed, starting with low-level programmers and call centers, and millions more will be created. People are talking about regulating AI but have no idea where to start. Maybe with (AAPL), (GOOGL), (AMZN), (AMZN), and (TSLA)?

7) The Terminator Issue. Can AI be controlled? Or have we started an unstoppable chain reaction, as with an atomic bomb? AI researchers have noticed a disturbing issue where AI programs are learning skills on their own, without our instructions. This is referred to as “emergent properties.” If AI is using humans as its example, we can’t exactly count on it to be benign.

Needless to say, AI will be at the core of your investment approach, probably for the rest of your life.

2014 at Micron Technology

June 20, 2024

Diary, Newsletter, Summary

Global Market Comments
June 20, 2024
Fiat Lux

Featured Trade:

(THE MAD HEDGE JUNE 4-6 SUMMIT YOUTUBE VIDEOS ARE UP),
(WHAT AI CAN AND CAN’T DO FOR YOU)
(AAPL), (GOOGL), (AMZN), (AMZN), (TSLA), (NVDA), (MU)

June 14, 2024

Diary, Newsletter, Summary

Global Market Comments
June 14, 2024
Fiat Lux

Featured Trade:

(TESTIMONIAL),
(JUNE 12 BIWEEKLY STRATEGY WEBINAR Q&A),
(NVDA), (AVGO), (ARM), (GM), (TSLA), (SQM), (FMC), (ALB), (AAPL), ($VIX), (AMZN), (MO), (NFLX), (ABNB)

June 12 Biweekly Strategy Webinar Q&A

Diary, Newsletter

Below please find subscribers’ Q&A for the June 12 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Incline Village, NV.

Q: How will Nvidia (NVDA) trade post-split?

A: Well, it’ll probably keep going up, because I think the year-end target—the old $1400, which is now $140—is still good. And I have a whole bunch of LEAPS, which are post-split $40, $50, $60 in-the-money, and I’m just keeping those. It’s a good cash management tool to have. So, even $500 points in the money, you’re still looking at about 20% returns by the end of the year on a January LEAPS. If you can buy the January 2025 $70-$71 LEAPS for 83 cents that’s a 20.48% profit at expiration in six months. So if you want a safe, very high return, that is the best way to do it in the financial markets, is to go way in the money. LEAPS will still pay you a lot of money amazingly. This trade will disappear someday but it’s there now and I’m taking it. Screw 90-day T-bills—I’m going into $500 in-the-money LEAPs on Nvidia, which pays four times as much.

Q: Is Broadcom Inc (AVGO) the next Nvidia?

A: There is no next Nvidia—the next Nvidia is Nvidia. Buy Nvidia on a 20% decline, which I think we may get sometime this summer. That’s a dip you want to buy for a year-end run to $140. Also, Broadcom isn’t exactly undiscovered at this point. It has doubled since October, while Nvidia is up 4 times. So if the bargain in the market for you is double in six months, I’m not sure you should be in the market. That said, I put out a report on split candidates last week and (AVGO) is very high on the list.

Q: What’s the best way to trade split candidates?

A: I actually just wrote a newsletter about this last week. There are in fact 36 high-priced, good money-earning split candidates, and I listed them all. You can buy really any of those if you’re looking for a high-priced stock that is growing. And management has a huge incentive to do splits because it makes the stock go up faster, and they’re all paid in stock options. So that is another reason you go into these. The best way to trade splits is buying the candidates because the biggest move is on the announcement of the split—you usually get 10%, 15%, or even 20% returns on the announcement.

Q: How do you envision AI in 10 years?

A: Well, it’s unimaginable. I can tell you from experiencing a lot of these big technology changes—it’s always tremendously underestimated by the markets, and you can safely bet on that. It’ll go up a lot more than you realize. That’s what happened when we jumped from six track tapes to cassettes, Betamax to VHS, teletypes to faxes, and faxes to emails. I thought Steve Jobs was crazy when he introduced the iPhone. Nobody makes money in handsets. But he proved me wrong. That makes my $240,000 DOW by 2030 projection completely reasonable.

Q: What will inflation do for the rest of the year, and how will it affect stocks?

A: Inflation will go flat to down for the rest of the year. And that is being driven by artificial intelligence—the greatest deflationary product ever created in the history of the economy. It’s unbelievable the rate at which AI is replacing real people in jobs. If you want a good example of that, I had to call Verizon yesterday to buy an international plan, and I never even talked to a human. They listed out three international plans in a calm, even male voice, and I picked one. Or go to McDonald's where $500 machines are replacing $40,000 a year workers. This is going on everywhere at the same time at the fastest speed I have ever seen any new technology adopted. So buy stocks, that’s all I can say.

Q: What’s your opinion on Arm Holdings (ARM)?

A: I love it. There are very few serious companies in the chip area, and this is one of them.

Q: Do you expect gold mining stocks to continue upward?

A: Yes, but the better play here is the metal. Gold and silver aren't being held back by inflation while the miners are. Plus, the main buyers in the market now are the Chinese, and they don’t buy gold miners—they buy gold, silver, copper, platinum, and uranium outright.

Q: What about Tesla (TSLA) long-term? Kathy Woods's target is $2000 long-term.

A: I think Kathy Woods is right. But we have to get through the nuclear winter in the EV space first, where suddenly the market got saturated. I think Tesla is the only one who could come out of this alive by cutting costs and advancing technology, as they have always done. When I bought my first Tesla Model S1 in 2010, the battery cost $32,000. Now it’s $6,000, and you get a lot more range. Did (GM) offer an equivalent cost improvement with internal combustion engines? So, yes, never bet against Elon Musk—that’s a good 25-year lesson on my part, and should be for you too.

Q: Can you elaborate on the lithium trades?

A: I listed three names in my letter last week, (SQM), (FMC), (ALB), and the only thing you know for sure is that they’re cheap now. They could stay cheap for another six or 12 months. But when you get a turnaround in the global EV market and the manufacturers start screaming for more lithium, and all of the lithium stocks will double, or triple and they’ll do it fairly quickly. You can’t beat a market bottom for getting involved. Just look at my above (NVDA) trade. Not only would they be good stocks buy, but it would be a good LEAPS buy down here because then you could get 4 or 5 times your money on a small move.

Q: Can you suggest Amazon (AMZN) LEAPS?

A: January 2025 $195-200 just out of the money, should give you a return of about 120% over the next 6 months. That gets you the annual yearend run-up. And that’s my conservative position. My aggressive ones are all in Nvidia.

Q: Do you think zero-day options have permanently forced the Volatility Index ($VIX) to the $12 handle?

A: Yes, I do; it’s killed that market. Something like 40% of all the option traders on the CBOE were trading the ($VIX) from the short side. Shorting the ($VIX) now would be madness. That has to bring tough times for that whole industry. Trading call spreads at a $12 volatility, you’re better off buying the LEAPS because the LEAPS give you much bigger returns with much less risk. And a $12 ($VIX) means you’re getting your LEAPS at half the historic price. I’m just waiting for a new market low to start pumping out the LEAPS recommendations. All the more reason to sign up for the Mad Hedge Concierge Service to get an early read into the LEAPS recommendations. For more information on that, contact support at support@madhedgefundtrader.com

Q: What will happen to Apple (AAPL) after the 11% surge?

A: It goes to $250 by the end of the year. Now that it has the kiss of AI on it, people will pour into it.

Q: Why is value lagging?

A: Because AI is entirely a growth story, and you look at all the domestic value stocks, they’re going absolutely nowhere. Value has been in the dog house for years and I’m in no hurry to get in there.

Q: What is the best dividend stock I can invest in right now?

A: That’s an easy one. Altria (MO) has a 9% dividend—you can’t beat that. But you have to hold your nose when you buy this stock because they are in the cigarette business. However, their big growth now is in Asia ex-Japan where the government has a monopoly on tobacco, particularly China. Note that this is not an undiscovered idea; lots of people like a 9% dividend stock and (MO) has already gone up 20% this year, but I think there is still some money to be made here.

Q: How can we subscribe to get early LEAPS recommendations?

A: That would be the Concierge Service. Contact Filomena at customer support, and they will get you taken care of right away.

Q: What about the small nuclear plays?

A: I actually happen to know quite a lot about nuclear plant design, having worked for the Atomic Energy Commission in my youth, and the new designs address every major issue that held back nuclear power with the old 1950s designs. For example, building them underground and eliminated the need for these giant billion-dollar four-foot-thick reinforced concrete containment structures that dot the horizon. Not using pure Uranium alloys that can’t go supercritical is another great idea. So I like them. Are they good stock plays? Not right now. It takes a long time to introduce a new energy technology. Bill Gates is financing a new plant built by Terrapower in Wyoming, and it looks like a fantastic plant, but only Bill Gates could invest at this stage and expect to make money on it. He has very long-term money and you don’t. I would wait until you get a working model plant in the United States before going into these things, but potentially you’re looking at a 10 to 100 times return on your money if it works.

Q: Should I invest in Airbnb (ABNB) because of increased international travel?

A: Yes, we like Airbnb. Especially since they will get a push with the Paris Olympics next month. Not only does that get people to Paris, but it gets people to all of Europe because they usually add on additional trips to a visit to the Olympics.

Q: What would you do in Netflix (NFLX), and what strikes would you use?

A: I would do a LEAPS. Wait for a correction, at least 10%, preferably 20%, and then I would go at the money one year out and that would get you about 100% return. So, that’s the way to do that. This is not LEAPS territory right here —all-time highs are not LEAPS territory. You want to put on LEAPS when everyone else is throwing up on their shoes; the last time they did that was October 26.

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, select your subscription (GLOBAL TRADING DISPATCH, TECHNOLOGY LETTER, or Jacquie's Post), then click on WEBINARS, and all the webinars from the last 12 years are there in all their glory

Good Luck and Stay Healthy,

John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader

You Only Need One Big Hit to Make a Great Year

June 3, 2024

Diary, Newsletter, Summary

Global Market Comments
June 3, 2024
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