(AMZN) Archives - Page 7 of 101 - Mad Hedge Fund Trader

The Market Outlook for the Week Ahead, or Welcome to the Mallard Market

There’s nothing like the comfort and self-satisfaction of having a 100% cash position in a falling market. While everyone else is bleeding red ink, I am happily plotting my next trades.

Of course, the rest of the market isn’t really bleeding red ink, just giving up windfall profits. Still, it’s better to trade from a position of strength than weakness. It makes identifying the next winners easier.

Think of this as the “Mallard Market”. On the surface, it seems calm and peaceful, while underwater, it is paddling along like crazy. The damage has been unmistakable. Dell, the faux AI stock (DELL) crashed by 28%, Salesforce (CRM) got creamed for 34%, and ServiceNow (NOW) got taken to the woodshed for 22%.

It all belies a market that is incredibly nervous and fast on the trigger. The tolerance for any bad news is zero. Yet there has been no market crash as I expected. The 5,300 level for the (SPX) seems to possess a gravitational field, powered by $250 earnings per share and a multiple of 51X.

It was NVIDIA that put the writing on the wall by announcing a 10:1 split that has opened the floodgates for similar prosperous and high-priced companies.

There are now 36 stocks with share prices of $500 or more ripe for splits with $7 trillion in market cap, or 16% of the total market. While splits don’t change the value of a company, perceptions are everything, as they prove shareholder-friendly policies. While individual investors are confused by an onslaught of contradictory research recommendations, splits are a great “tell” on what to buy next.

Apple (AAPL), Alphabet (GOOGL), Amazon (AMZN), and Tesla (TSLA) have already carried out splits, some multiple times, to great success. Of the Magnificent Seven, only Microsoft (MSFT) and Meta (META) have yet to split.

In the tech area Broadcom (AVGO), Lam Research (LRCX), Super Micro Computer (SMCI), and Service Now (NOW) have yet to split. In the non-tech area, there are NVR Inc. (NVR), Booking Holdings (BKNG), Eli Lilly (LLY), and Netflix (NFLX). Many of these are well-known Mad Hedge recommended stocks.

History has shown that stocks rise 25% one year after a split compared to 12% for the market as a whole. A stock’s addition to the Dow Average or the S&P 500 (SPY) provides a boost. If both occur, stocks will absolutely explode. Stock splits are also much more attractive than buybacks at these high prices.

So, I’ll be trolling the market for split-happy candidates.

You should too.

Since it may be some time before we capitulate and take a worthwhile run at new highs, I thought I’d update you on the global demographic outlook, which is always a long-term driver of economies and markets.

People are now living longer than ever before. But postponing death is only a part of the demographic story. The other is the decline in births. The combination of the two is creating huge changes in the global economy.

The notion of a “demographic transition” is almost a century old. Human societies used to have roughly stable populations, with high mortality matched by high fertility. Families had eight kids and 3-5 usually died in childhood, barely maintaining population growth.

In England and Wales in the 18th and 19th centuries, death rates suddenly plummeted. But fertility did not. The result was a population explosion. As the benefits of economic growth and advances in medicine and public health spread, most of the world has followed a similar transition, but far faster. As a result, human numbers rose fourfold over the last hundred years, from 2 billion to 8 billion.

In time, fertility followed mortality on a downward path across most of the world. As a result, fertility rates in more than half of all countries and territories in 2021 fell below the replacement level. For the world as a whole, the fertility rate was 2.3 in 2021, barely above the replacement of 2.1, down from 4.7 in 1960.

For high-income countries, the fertility rate was a mere 1.6, down from 3.0 in 1960. In general, poor countries still have higher fertility rates than richer ones, but they have been falling there, too.

What explains this collapse in fertility rates? An important part of the answer is the wonderful surprise that more children survived than expected. So, people started to practice various forms of birth control.

But the desire to have many children also shrank sharply. When husbands realized that smaller families meant high standards of living for themselves, family sizes dropped sharply. Even in ultra-conservative Iran, the fertility rate has collapsed from 6.6 in 1980 to only 1.7 in 2021.

A big reason for this shift was that, for their parents, children have moved from being a valuable productive asset in the 19^th century to an expensive luxury today. That was back when 50% of our population worked on farms. Today it’s only 2%.

In the meantime, female participation in the economy rose dramatically in the 20th century, including in highly skilled careers. That raised the “opportunity cost” of producing children, especially for mothers. So, they have children later, or even not at all.

Where public childcare is more generous women are encouraged to combine careers with having children. The absence of such help helps explain the exceptionally low fertility rates in much of East Asia and Southern Europe, where parental support is limited.

This global shift towards very low fertility, with the exception (so far) of sub-Saharan Africa, is among the most important events driving the global economy. One implication is that the population of Africa is forecast to be larger than that of all today’s high-income countries, plus China by 2060, thanks to the elimination of many diseases there.

Why is all this important?

Because rising populations create larger markets, more profits for corporations, and rising share prices. Shrinking populations have the opposite effect, as China is learning about its distress now. One reason the US is growing faster than the rest of the world is that a continuous stream of new immigrants since its foundation has created endless numbers of new workers and customers. Dow 240,000 here we come!

Just thought you’d like to know.

So far in May, we are up +3.74%. My 2024 year-to-date performance is at +18.35%. The S&P 500 (SPY) is up +10.48% so far in 2024. My trailing one-year return reached +35.74%.

That brings my 16-year total return to +694.78%. My average annualized return has recovered to +51.48%.

As the market reaches higher and higher, I continue to pare back risk in my portfolio. I bailed on my last position early in the week, covering a short in Apple for a profit.

Some 63 of my 70 round trips were profitable in 2023. Some 27 of 37 trades have been profitable so far in 2024.

The Fed’s Favorite Inflation Gauge Cools by 0.2% in April, with the PCE, or the Personal Consumer Inflation Expectations Price Index. This one strips out the volatile food and energy components. It gives more credibility to a September rate cut and gave bonds a good day.

NVIDIA Shares Continues to Go Ballistic, creating another $800 billion in market capitalization in three trading days. That is the most in history. That took NASDAQ to a new all-time high at 17,000. At $2.8 trillion (NVDA) could become the largest publicly traded company in the world in another day. Today’s tailwind came from an Elon Musk comment that his new xAI start-up would buy the company's high-end H100 graphics cards. Buy (NVDA) on the next 20% dip.

Pending Home Sales Dive, down 7.7% in April, the worst since the Covid market three years ago. The impact of escalating interest rates throughout April dampened home buying, even with more inventory in the market. But the anticipated rate cuts later this year should lead to better conditions, with improved affordability and more supply. Buy (LEN) and (KBH) on dips.

Money Supply Rises for the First Time in More than a Year. Remember money supply? As measured by M2, it sums up the currency, coins, and savings deposits held by banks, balances in retail money-market funds, and more. Data for April released on Tuesday afternoon showed an increase of 0.6% from a year ago. The Fed balance sheet has shrunk by $1.5 trillion in two years, the fastest decline in history, slowing the economy.

AT&T’s (T) Copper is Worth More Than the Company, and with plans to convert half its copper network to fiber by 2025 could free up billions of tons of the red metal to sell on the market. Copper prices have doubled over the past two years, and they could double again by next year. Worldwide there are 7 trillion tons of copper wire in place. Fiber is cheaper and exponentially more efficient than copper, which is facing huge demands from AI, EVs, and the electrification of the grid. Buy copper (COPX) on dips.

Markets are Underpricing Low Volatility (VIX), not a good thing at all-time highs. Volatility across equity and currency markets is low. The Volatility Index (VIX) at $12.46 compares with an average over five years of $21.5 and over the longer term of $19.9. Markets are heavily discounting good news and a disinflationary environment. It is not only stocks. There is also low volatility across currency markets. The DB index of foreign exchange volatility is at $6.3 versus an average of $7.6 over five years and $9.3 over the longer term. This will end in tears.

S&P Case Shiller Jumps to New All-Time High, with its National Home Price Index. The index rose by 1.29%, the fastest growth since April 2023. All 20 major metro cities were up last month and gained 6.5% YOY. Four cities are currently at all-time highs: San Diego, Los Angeles, Washington, D.C., and New York. Prices in San Diego saw the biggest gain, up 11.4% from February of 2023. Both Chicago and Detroit reported 8.9% annual increases. Portland, Oregon, saw the smallest gain in the index of just 2.2%. Unaffordability is the big story in the market right now. The sunbelt is seeing the most weakness, thanks to a post-pandemic construction boom.

Space X’s Starlink Tops 3 million Subscribers, and is rapidly moving towards a global WiFi network. I set up a dozen of these in Ukraine last October and even the Russians couldn’t hack them. It sets a global 200 Mb standard usable in most countries, even the remote Galapagos Islands in the Pacific. It’s only a VC investment now but could become Elon Musk’s next trillion-dollar company.

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 800% 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, June 3, the ISM Manufacturing PMI is released.

On Tuesday, June 4 at 7:00 AM, the JOLTS Job Openings Report will be published.

On Wednesday, June 5 at 7:00 AM, the ISM Services PMI is published.

On Thursday, June 6 at 8:30 AM, the Weekly Jobless Claims are announced. We also get the Challenger Job Cuts Report.

On Friday, June 7 at 8:30 AM, the Nonfarm Payroll and headline Unemployment Rate are announced. At 2:00 PM the Baker Hughes Rig Count is printed.

As for me, when Anne Wojcicki founded 23andMe in 2007, I was not surprised. As a DNA sequencing pioneer at UCLA, I had been expecting it for 35 years. It just came 70 years sooner than I expected.

For a mere $99 back then they could analyze your DNA, learn your family history, and be apprised of your genetic medical risks. But there were also risks. Some early customers learned that their father wasn’t their real father, learned of unknown brothers and sisters, that they had over 100 brothers and sisters (gotta love that Berkeley water polo team!), and other dark family secrets.

So, when someone finally gave me a kit as a birthday present, I proceeded with some foreboding. My mother spent 40 years tracing our family back 1,000 years all the way back to the 1086 English Domesday Book (click here)

I thought it would be interesting to learn how much was actually fact and how much fiction. Suffice it to say that while many questions were answered, alarming new ones were raised.

It turns out that I am descended from a man who lived in Africa 275,000 years ago. I have 311 genes that came from a Neanderthal. I am descended from a woman who lived in the Caucuses 30,000 years ago, which became the foundation of the European race.

I am 13.7% French and German, 13.4% British and Irish, and 1.4% North African (the Moors occupied Sicily for 200 years). Oh, and I am 50% less likely to be a vegetarian (I grew up on a cattle ranch).

I am related to King Louis XVI of France, who was beheaded during the French Revolution, thus explaining my love of Bordeaux wines, women wearing vintage Channel dresses, and pate foie gras.

Although both my grandparents were Italian, making me 50% Italian, I learned there is no such thing as pure Italian. I come out only 40.7% Italian. That’s because a DNA test captures not only my Italian roots, plus everyone who has invaded Italy over the past 250,000 years, which is pretty much everyone.

The real question arose over my native American roots. I am one-sixteenth Cherokee Indian according to family lore, so my DNA reading should have come in at 6.25%. Instead, it showed only 3.25% and that launched a prolonged and determined search.

I discovered that my French ancestors in Carondelet, MO, now a suburb of Saint Louis, learned of rich farmland and easy pickings of gold in California and joined a wagon train headed there in 1866. The train was massacred in Kansas. The adults were all killed, and the young children were adopted into the tribe, including my great X 5 Grandfather Alf Carlat and his brother, then aged four and five.

When the Indian Wars ended in the 1880s, all captives were returned. Alf was taken in by a missionary and sent to an eastern seminary to become a minister. He then returned to the Cherokees to convert them to Christianity. By then, Alf was in his late twenties so he married a Cherokee woman, baptized her, and gave her the name of Minto, as was the practice of the day.

After a great effort, my mother found a picture of Alf & Minto Carlat taken shortly after. You can see that Alf is wearing a tie pin with the letter “C” for his last name Carlat. We puzzled over the picture for decades. Was Minto French or Cherokee? You can decide for yourself.

Then 23andMe delivered the answer. Aha! She was both French and Cherokee, descended from a mountain man who roamed the western wilderness in the 1840s. That is what diluted my own Cherokee DNA from 6.50% to 3.25%. And thus, the mystery was solved.

The story has a happy ending. During the 1904 World’s Fair in St. Louis (of Meet Me in St. Louis fame), Alf, then 46, placed an ad in the newspaper looking for anyone missing a brother from the 1866 Kansas massacre. He ran the ad for three months and on the very last day, his brother answered and the two were reunited, both families in tow.

Today, getting your DNA analyzed starts from $119, but with a much larger database, it is far more thorough. To do so, click here.

My DNA Has Gotten Around

It All Started in East Africa

1880 Alf & Minto Carlat, Great X 5 Grandparents

The Long-Lost Brother

Good Luck and Good Trading,

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

May 31, 2024

Diary, Newsletter, Summary

Global Market Comments
May 31, 2024
Fiat Lux

Featured Trade:

(The Mad June traders & Investors Summit is ON!)
(MAY 29 BIWEEKLY STRATEGY WEBINAR Q&A),
(TSLA), (AMZN), (META), (NFLX), (GLD), (SLV), (NVDA), (MSFT), (GOOG), (DELL), (MSFT), (TLT), (BRK/B), (PYPL), (BABA), (DD), (XOM), (OXY)

May 29 Biweekly Strategy Webinar Q&A

Diary, Newsletter

Below please find subscribers’ Q&A for the May 29 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Incline Village, NV.

Q: Since Elon Musk is raising tons of money for his AI startup called xAI, will this impact Tesla’s (TSLA) stock price?

A: Yes, it's a very positive move for Tesla because anytime Elon Musk raises money anywhere in his network, it takes the need off of him to sell Tesla shares for cash. And I think his xAI will be the next trillion-dollar company, and SpaceX is in front of it as another trillion-dollar company. Those stocks, he can sell any time and raise a lot of money, but the other two are still private companies. We can't buy them yet unless we buy some of the public vehicles offered by venture capitalists like Ron Baron who has heavy positions in both Tesla and SpaceX. So, no direct plays yet on these companies, but no doubt when they become incredibly valuable, he'll take them all public and become the richest man in the world two or three times over. So yes, that is a positive.

Q: Where do you think (TLT) will be in the next few months?

A: In a narrow trading range. I think we're basically in a $86 to $91 trading range, and we'll go nowhere until we get clarification on Fed interest rate cuts. At the rate the economy is slowing, we may get one in September, and even if the Fed doesn't cut, the rest of the world will, including Japan, Europe, Great Britain, and so on. So we may get our interest rates dragged down here by foreign countries that all have much weaker economies than the US.

Q: Should I keep buying big tech stocks after Nvidia's (NVDA) blowout earnings?

A: Well, if you recall back in the ancient times of April, Nvidia had a 20% sell-off, and most of the tech stocks were down at least 10%. So, I would wait for the next 20% sell-off of Nvidia not only to buy Nvidia but all other big tech stocks as well, because it basically is a big tech story and will continue for the rest of the year like that. So we're really looking to buy dips among the big tech winners, and those would include Amazon (AMZN), Meta (META), Microsoft (MSFT), and so on.

Q: How long can the US economy go without a recession?

A: Five years. The way our economic cycle works is after a long period of growth, companies get overconfident, over-invest, create excessive capacity in the markets for everything, and that leads to a crash and a recession, deflation, and lower interest rates. So even if we don't get major moves in the (TLT) upside now, you always will over the long term get interest rates going back to 2 or 3% for the 10-year so it’s a great long-term hold. That is the economic cycle—that's what creates bear markets and it’s known as “Boom and Bust”. Long may it live because that’s where we traders earn our crust of bread. But this time may be different. We may go longer than 5 years because AI is still in its infancy, still rolling out, and the number of companies making actual profits in AI will go from 3 to 300 over the next five years.

Q: I'm looking to buy gold in an investment account (GLD). Would you do that now, if so, what would you recommend?

A: I would recommend GLD (SPDR Gold Trust) because the metals are still outperforming the miners, miners being held back by the inflation rates unique to the mining industry, which are much higher than the 3.3% for the general economy. And if you want to add a little more spice to your portfolio, buy some silver (SLV) because it is rising at three times the rate of gold thanks to Chinese speculation. You might buy some copper while you're at it too—it's moving almost as fast as gold is.

Q: Which big tech firm is next to issue a dividend?

A: That's an easy answer, it's Netflix (NFLX). But there's a more important question out here— Which is the next tech stock to issue a stock split? And guess what the answer is? Netflix again, which needs to declare both a dividend and a stock split. It's at an all-time high, has a very high share price, and over time, stocks that split deliver double the performance of the S&P 500. So, the mere announcement will suck in a lot of new retail investors as we just saw with Nvidia (NVDA), where we got a $250 move on the split announcement. So, watch your splits, and in fact, I'm going to be devoting a major piece of next Monday's newsletter to splits and how to play them.

Q: Why has the stock market been so strong this year when interest rates are high?

A: The answer to that is AI. We are still in the very early days of AI, and as I mentioned earlier, only three companies are making money from AI right now. That's Nvidia (NVDA), Microsoft (MSFT), and Google (GOOG). That number will increase as AI moves down the food chain and everybody starts using it, including you and me. I view the AI development as similar to 1995 when all of a sudden we got Netscape, a navigator that made the Internet available to the public, Dell Computers (DELL), and Microsoft (MSFT) software all at once hitting the market and creating the online economy essentially from scratch. Something of that magnitude is what the stock market is discounting now. Think of it in terms of the revolutionary new technologies of 1995, which means we have another 5 or 6 years to go, and that's why the stock market is so strong.

Q: Should I invest in Berkshire Hathaway (BRK/B), or do you think their magic will run out soon?

A: I don't think their magic will ever run out. Of course, the day that Warren Buffett dies it'll be down 10%, but then you'll want to buy it with both hands because Warren has already replaced himself with a first-class management team who is carrying on his strategy. Any selloffs in Berkshire you get this summer, go in there and buy the calls, the call spreads, the stock, the LEAPS, and the kitchen sink. Still a great long-term BUY, and I see $500 either late this year or next year in (BRK/B).

Q: I'm a member of IM Academy.

A: Oh my gosh. I would let your membership expire, except you're probably on auto-renewal, and the only way to stop your subscription is to call your credit card company and ask them to block the billings. That is the problem with these predatory financial newsletters, they're impossible to get out of, even when they promise refunds anytime.

Q: Are there any Chinese stocks you like now?

A: No, but the highest quality stock in China is Alibaba (BABA). It's basically a combination of Amazon and PayPal in China, but you still have a very high political risk investing in anything in China. The currency is very weak, so better fish to fry is my opinion. And I tend to avoid countries suffering from demographic implosions.

Q: Should we buy (TLT) now or wait?

A: I would wait until we get some upside momentum going and we complete a few more downside tests.

Q: What's the best place to put cash in the summer?

A: The answer is always good old 90-day US Treasury bills. They are still paying 5.25%.

Q: What are your thoughts on PayPal (PYPL)?

A: I'm avoiding that sector because of over-competition crushing profit margins; that has been a problem for a couple of years now. Don't confuse “gone down a lot” with cheap.

Q: Which oil companies are the best to invest in right now?

A: You can buy Exxon Mobil (XOM) for the high dividend and the sheer size of the company. My second is Occidental Petroleum (OXY), because Warren Buffett owns 25% of the company, has shrunk the float, and that has a result in magnifying any moves up in the stock. Also, I somewhat admire Warren Buffett's stock-picking ability. And of course, I’ve been following the California company OXY since 1970, back when it was run by Armand Hammer, a friend of Vladimir Lenin, so my connections with the company go back a very long time.

Q: Do you like DuPont (DD) for the three-way split?

A: I do, but DuPont has a major problem looming with lawsuits over the PFAS chemicals—those are the forever chemicals which are all over the country, all over the food supply, and cause cancer. So that could be sort of like a Johnson & Johnson-type liability problem with the talcum powder. So again…why look for trouble? Buying a stock facing that kind of liability could be another tobacco situation.

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

May 28, 2024

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
May 28, 2024
Fiat Lux

Featured Trade:

(GET YOUR GEIGER COUNTERS READY)

(NVS), (LLY), (BMY), (AZN)

April 30, 2024

Diary, Newsletter, Summary

Global Market Comments
April 30, 2024
Fiat Lux

Featured Trade:

(MAY 8 GALAPAGOS ISLANDS STRATEGY LUNCHEON)
SPECIAL AMAZON ISSUE
(WHY I’M LOOKING AT AMAZON), (AMZN)

April 22, 2024

Tech Letter

Mad Hedge Technology Letter
April 22, 2024
Fiat Lux

Featured Trade:

(TIK TOK IN HOT WATER)
(SMCI), (NVDA), (TIKTOK), (META), (MSFT), (GOOGL), (AMZN)

Tiktok In Hot Water

Tech Letter

Tech is getting real political and that’s a problem for tech valuations.

On one side, there are foreign companies hoping to make a buck stateside and they are finding out it is not always smooth sailing.

The cradle of capitalism isn’t unfettered access to unlimited Benjamin’s.

The difficulties and examples are sprinkled through the sub-sectors of tech.

For example, to secure the EV battery plant subsidies from the US federal government, Korean companies have to produce the battery inside the United States.

Being a Korean company, Hyundai and Kia, pulling this off delivered painful financial expenses related to the companies.

Another Asian company grappling with additional political fallout is the social media app TikTok.

The most recent House bill easily passed meaning that if Senate approved the bill, TikTok might need to divest or be banned from the US.

TikTok told employees it will fight in the courts if a US bill forcing a ban or divestiture of the Chinese-owned app is signed into law.

US President Joe Biden has said he will sign the legislation promptly if it reaches his desk.

TikTok’s 170 million American users and 7 million small businesses would need to find a different platform.

ByteDance, the Chinese communist party-sponsored owner of TikTok, intends to fight the US ban in court and exhaust all legal actions before it considers any kind of divestiture, people familiar with the matter have said.

Beijing, in the meanwhile, will have to green light any TikTok deal on the tech-export ground, and it has reiterated it opposes a forced sale.

The environment for trading tech stocks has nudged into this ferocious backdrop of trading barbs and its increasingly disturbing tech companies from carrying out their duty to serve the end customer.

Tech customers don’t like that and it doesn’t matter if it’s waiting on an iPhone or software product that can’t be delivered in full, the product gets watered down or withheld.

Irreparable harm is being caused if customers don’t have full faith that tomorrow they will wake up and see an app not disappear from the app store or a device become obsolete because of regulation or government saber-rattling.

Part of this is the angst in which traders are seeing the market now as highly fraught, and tech stocks have run into a logjam at these higher levels because profit-taking is the best recipe of the day.

There needs to be a great reason for incremental investors to jump in, because let’s not kid ourselves, tech stocks are expensive at this point.

We pile into them because there are more or less 5 stocks growing robust earnings while many zombie companies don’t punch above their weight.

This is why traders are piling into Nivida, Meta, Microsoft, Amazon, and Google. I would put Super Micro Computers (SMCI) on that list too as a volatile super growth stock.

Tech still is the place to be, but the geopolitical strife is exacerbating the short-term consolidation of tech and we are experiencing larger selloffs than would be otherwise.

Tech readers must be patient as expectations for this earning season must be scaled back and we wait to unload on the next move up.

April 8, 2024

Diary, Newsletter, Summary

Global Market Comments
April 8, 2024
Fiat Lux

Featured Trade:

(MARKET OUTLOOK FOR THE WEEK AHEAD, or THE WINDFALL YEAR),
(FCX), (TLT), (TSLA), (NVDA), (FCX),
(XOM), (WPM), (GLD), (CCJ), (META), (AMZN),
(AN EVENING WITH TRAVEL GURU ARTHUR FROMMER)

The Market Outlook for the Week Ahead, or The Windfall Year

Diary, Newsletter

This year seems to be the year of the windfall.

In January, we loaded up on Big Tech (AMZN), (MSFT), which then went ballistic.

In February, we doubled up on NVIDIA (NVDA), which then nearly doubled.

In March, spotting the shift into commodities, energy, and precious metals we loaded the boat with gold Freeport McMoRan (FCX), gold (GLD), silver (WPH), and oil (XOM), (OXY), which launched into torrid two-week straight up moves which continue. And for good measure, we dove into NVIDIA one more time.

Even the trades I thought about and talked about but never executed took off like a scalded chimp, such as uranium producer Cameco (CCJ), up 30% in weeks.

And while you’d think that trades like this would generate the performance of a lifetime, in fact, I begrudgingly admit I'm lagging behind the index this year. It’s incredibly annoying when after working 12 hours a day seven days a week, the indexers, the investors who sit on their hands all day and do nothing, are making more money than I am.

That’s because I put out a handful of ill-timed short positions in the S&P 500 (SPY) and Freeport McMoRan (FCX) which cut my numbers by half.

You may ask why I suffered the madness of putting out shorts when we are in a bull market and that everything is going straight up every day! That’s because I am the Mad Hedge Fund Trader, not the Mad Long-Term Investor. And hedge funds are always supposed to have balanced longs and shorts. I can tilt this by keeping only one short position against a basket of longs. But even those single longs have proved painfully expensive.

The issue here is that the market is not breathing as it normally does. There is no ebb and flow to let you in and out of positions. Sectors flatline, then launch into bull moves that take them up almost every day for months. That is an impossible market to trade.

I have only seen this twice during my lifetime: during the Great Japanese Stock Bubble of the 1980s and the Dotcom Bubble of the 1990s, which means we are in another one of these great bubbles, which will probably be the last of my lifetime.

The previous two great bubbles went on for five years. Greed can last a long time. If you count the October 26, 2023 low as the start of the new bull market, we have 4 ½ years to run in this one. What is more likely is that the pandemic low in April of 2020 was the start of this new bull market and we have averaged a 25% a year return in stocks since then. That means we have at least another year to run…. or more.

Valuations are at the high end of their recent range at 21 times S&P 500 earnings. But during the 1990’s bubble, the market average reached an earnings multiple in the 30s, and technology stocks reached a stratospheric 100 times earnings.

And today, earnings are still rising, sometimes quite sharply, such as the case with (NVDA) and (META). It’s when earnings are falling but stocks are still rising that you have to worry, as happened in 1999 and the first four months of 2000. In the 1980s in Tokyo, nobody ever looked at earnings.

Another frustration with trading today is the collapse of market volatility from $22 to $12 over the past year. That means we are getting paid half of what we were a year ago for the same options trade. You can make up for this loss of volatility by getting more aggressive with strike prices or maturities, but then that increases the number of stop losses.

And that’s the way it is.

You trade the market you have, not the one you want. But what do I know? I’ve only been doing this for 55 years.

I just thought you’d like to know.

NVIDIA Quarterly Earnings

So far in March, we are down -1.44%. My 2024 year-to-date performance is at +6.67%. The S&P 500 (SPY) is up +7.93% so far in 2024. My trailing one-year return reached +41.09% versus +38.92% for the S&P 500.

That brings my 16-year total return to +684.56%. My average annualized return has recovered to +51.57%.

Some 63 of my 70 round trips were profitable in 2023. Some 13 of 19 trades have been profitable so far in 2024.

I stopped out of my short position in Freeport McMoRan (FCX) last week. Markets that go straight up are hard to trade. I also came off my long in (TLT) close to cost. I initiated new longs in Tesla (TSLA) and NVIDIA (NVDA). I let my existing longs run in Freeport McMoRan (FCX), Occidental Petroleum, ExxonMobile (XOM), Wheaton Precious Metals (WPM), and Gold (GLD).

I am 70% invested and 30% in cash given the massive upside breakout in commodity, precious metals, and energy we have witnessed.

Nonfarm Payroll Jumps by 303,000 in March, almost double what was expected. The headline unemployment rate drops 0.1% to 3.8%. Wages rose 0.3% for the month and 4.1% from a year ago, both in line with Wall Street estimates. Health care led with 72,000 new jobs, followed by government (71,000), leisure and hospitality (49,000), and construction (39,000). Interest rate cuts fade into the future.

Weekly Jobless Claims Jump to 221,000, up 9,000, a two-month high. The weekly claims report from the Labor Department on Thursday also showed fewer people remaining on jobless rolls towards the end of March, suggesting that laid-off workers continued to find work, though not as easily as two years ago. There were 1.36 job openings for every unemployed person in February compared to 1.43 in January. Worker shortages persist in industries like construction.

Investors are Piling into Cash, with Money-Market funds getting $82 billion in the week through Wednesday. Investors are still flocking to cash funds, and history suggests redemptions won’t begin until a year after the Federal Reserve starts cutting interest. 5.35% for 90-day US Treasury Bond yields are still a huge draw for the cautious.

Commodities Trading Firms Harvest Record Profits, some $104 billion in 2023. The surprise increase from 2022, when the fallout from the war in Ukraine pushed up prices and supercharged profits, was driven by a wave of new entrants into the sector — including tech-focused traders and hedge funds — and rising returns from power trading activities. The figures reflect profits from the entire sector, including independent traders, banks, hedge funds, and national oil companies. This year will be even better.

Oil Continues to Bubble of Tight Supplies, supported by geopolitical tensions in the Middle East, concerns over tightening supply, and expectations about demand growth as economies improve. I’m keeping my longs in (XOM) and (OXY) and looking to pick up (COP) and (FANG).

US Dollar to Stay Higher for Longer, as a result of the higher for longer Fed tilt on interest rates. High-yielding currencies are always the strongest. The buck is up 3.3% this year against a currency basket.

Toyota Sales Soar by 20% in Q1, closely followed by Honda at 17.3%. General Motors delivered a pitiful 1.5% decline. Hybrids are the name of the day, outselling EVs and ICE cars. Toyota played it safe and won, at least for now.

Disney Wins Proxy Fight with Nelson Peltz, retaining complete control of the board. It’s a defeat for Peltz and a stamp of approval for the company’s board and CEO Bob Iger’s efforts to turn around the company. Nelson can now sell his shares for a big profit, up 30%.

PCE Comes in Hot at 0.3% for February, and 2.8% YOY, taking bonds. Personal Consumption Expenditures give an early read on inflation trends that the Fed loves. The economy is clearly much hotter than traders understand. Consumer spending shot up 0.8% on the month, well ahead of the 0.5% estimate. Personal income increased 0.3%, slightly softer than the 0.4% estimate.

Tesla Sales are Disastrous as expected, coming in at only 386,810, down 8.5% YOY. Shares drop as much as 6.7%, extending the biggest rout in the S&P 500. Analysts slashed projections in recent days, but not by enough. The Berlin factory was shut down and competition in China is ramping up. Still, Tesla produced 46,561 more cars than it sold in the quarter. For what it’s worth, BYD sales in China were even worse. The bottom for (TSLA) is fast approaching.

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 800% 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, April 8, at 7:00 AM EST, the US Consumer Inflations Expectations are announced.

On Tuesday, April 9 at 8:30 AM, the NFIB Business Optimism Index will be released.

On Wednesday, April 10 at 11:00 AM, the Core Inflation Rate for March is published

On Thursday, April 11 at 8:30 AM, the Weekly Jobless Claims are announced. The final read of the Q2 US GDP is also out.

On Friday, April 12 at 8:30 AM, the Producer Price Index is out. At 2:00 PM, the Baker Hughes Rig Count is printed.

As for me, since many of you are now planning long overdue summer vacations, I thought I would pass on what I learned from the ultimate travel guru of all time.

After all, who knows how long it will be until the next pandemic? The next decade, next year, or next week?

When I backpacked around Europe in 1968, I relied heavily on Arthur Frommer’s legendary paperback guide, Europe on $5 a Day, which then boasted a cult-like following among impoverished, but adventurous Americans. The charter airline business was then booming, plunging airfares, and suddenly Europe came within reach of ordinary Americans like me.

Over the following years, he directed me down cobblestoned alleyways, dubious foreign neighborhoods, and sometimes converted WWII air raid shelters, to find those incredible travel deals. When he passed through town some 50 years later, I jumped at the chance to chat with the ever-cheerful worshipped travel guru.

Frommer believes there are three sea change trends going on in the travel industry today. Business is moving away from the big three travel websites, Travelocity, Orbitz, and Priceline, who have more preferential lucrative but self-enriching side deals with airlines than can be counted, towards pure aggregator sites that almost always offer cheaper fares, like Kayak.com, Sidestep.com, and Fairchase.com.

There is a move away from traditional 48-person escorted bus tours towards small group adventures, like those offered by Gap Adventures, Intrepid Tours, and Adventure Center, that take parties of 12 or less on culturally eye-opening public transportation.

There has also been a huge surge in programs offered by universities that turn travelers into students for a week to study the liberal arts at Oxford, Cambridge, and UC Berkeley. His favorite was the Great Books program offered by St. John’s University in Santa Fe, New Mexico.

Frommer says that the Internet has given a huge boost to international travel, but warns against user-generated content, 70% of which is bogus, posted by the hotels and restaurants touting themselves.

The 94-year-old Frommer turned an army posting in Berlin in 1952 into a travel empire that publishes 340 books a year, or one out of every four travel books on the market. I met him on a swing through the San Francisco Bay Area (his ticket from New York was only $150), and he graciously signed my tattered, dog-eared original 1968 copy of his opus, which I still have.

Which country has changed the most in his 60 years of travel writing? France, where the citizenry has become noticeably more civil since losing WWII. Bali is the only place where you can still actually travel for $5/day, although you can see Honduras for $10/day. Always looking for a deal, Arthur’s next trip is to Chile, the only country in the world he has never visited.

With the advent of AI, Arthur has been met with an onslaught of new competition. Recently, Amazon (AMZN) has been flooded with hundreds of new travel books written entirely by algorithms. They have no human author who’s ever visited the country in question and are written entirely from existing information found on the Internet. But they’re cheap.

You can easily spot them from their wishy-washy non-committal language and factual errors and omissions. For example, I recently found a travel book about Ukraine that neglected to mention that there was a war going on there and that its cities were being bombed by Russians daily.

Not for me.

Good Luck and Good Trading,

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