I was all ready to write another hyper-bullish report for the week. That was at least until noon EST on Friday. That’s when NVIDIA (NVDA) Peaked at $955 and then free fell $100 to $855. New all-time and then a new intraday low on huge volume and that is the textbook definition of a market top.

Not that we should be complaining. At the high, (NVDA) was up an unimaginable 105% so far this year. I spent my week buying back short put options for 50 cents that I initially sold for $20. With a quarterly quadruple witching due this Friday, anything can happen.

By the end of February, more than half of all analyst 2024 yearend targets were met. The response was a rush to raise yearend targets, triggering the current melt-up.

It always ends in tears.

And I’m about to tell you something that you will absolutely love to hear. Lower interest rates dramatically increase corporate stock buybacks, already set at $1.25 trillion for 2024. That’s because of the lower cost of capital.

What do more share buybacks automatically bring? High stock prices, especially for large positive cash flow companies like big tech.

As much as the permabears hate to admit it, good news really is good news.

With all of the media obsession with NVIDIA (NVDA), my largest holding, and Meta (META), the fact is that the rally is broadening out. More than half of all industrial stocks are trading at all-time highs. Long-forgotten small caps (IWM) are also approaching 2021 all-time highs.

Going into this week managers were either overweight big tech and extremely nervous or out of big tech and kicking themselves. The urge to rotate is strong. But your standby rotation sectors, industrials, biotech, and banking have also seen big moves.

Which brings us to the subject of gold (GLD).

After a tedious one-year sideways consolidation, the barbarous relic blasted out to the upside above $2,200 an ounce, a new all-time high. After soaking up as much gold as they could over the past decade, China and Russia have finally taken the gold market net short, which is why we saw such dramatic price action.

With interest rates in the US soon to fall, the opportunity cost of owning non-yielding gold is about to shrink. That will cut the knees out from under the US dollar prompting a stampede into precious metals and Bitcoin.

Except this time, it’s different.

Gold miners usually outperform the yellow metal by four to one to the upside. Not so this time. Barrick Gold (GOLD) and Newmont Mining (NEM) were barely able to keep pace with the barbarous relic. That’s because inflation has boosted their costs and cut profit margins. After all, they are stock first and gold plays second.

Still, if gold reaches my $3,000 target in 2025 the LEAPS I sent out for (GOLD) last June should easily hit its maximum profit point of 298%.

That other weak dollar play, oil (USO) may not deliver the joys of past cycles and may in fact be trapped in a fairly narrow $60-$80 range. The futures markets are saying that the price of Texas tea will be lower in a year.

The US is now the world’s top oil producer at 13 million barrels/day and that is rising (thanks to enormously generous tax breaks), capping prices. Non-OPEC+ production is increasing, especially from Brazil and Canada. China, the world’s largest oil importer is missing in action. But low inventories, especially at the American Strategic Petroleum Reserve, are preventing a crash as well. Shale production is growing.

Still, even a $20 rally can have a dramatic impact on the share prices of the big US producers, like Exxon (XOM) and Occidental Petroleum (OXY), some 25% of which is now owned by Warren Buffet. Even without some sexy price action, this sector pays some of the highest dividend yields in the markets.

In February we closed up +7.42%. So far in March, we are up +0.70%. My 2024 year-to-date performance is at +3.21%. The S&P 500 (SPY) is up +7.11% so far in 2024. My trailing one-year return reached +54.28% versus +40.94% for the S&P 500.

That brings my 16-year total return to +689.74%. My average annualized return has recovered to +52.05%.

Some 63 of my 70 trades last year were profitable in 2023. Some 11 of 15 trades have been profitable so far in 2024.

I used the ballistic move in (NVDA) to take profits in my double long there. I am maintaining longs in (AMZN) and Snowflake (SNOW). I am both long and short the bond market (TLT) and I am 60% in cash given the elevated level of the stock markets.

Nonfarm Payroll Report Rose 275,000 in February. The Headline Unemployment Rate rose to 3.9%, a two-year high. The report illustrates a labor market that is gradually downshifting, with more moderate job and pay gains that suggest the economy will keep expanding without much risk of a reacceleration in inflation. These are very Fed friendly numbers.

JOLTS Job Openings Report Rises by 140,000 to 8,890,000, less than expected. Leisure and hospitality led with 41,000 new jobs, construction added 28,000 and trade, transportation and utilities contributed 24,000. Growth was concentrated among larger companies, as establishments with fewer than 50 employees contributed just 13,000 to the total.

Rivian Shares Soar, on news it is halting plans to build a new $2.25 billion factory in Georgia, an abrupt reversal aimed at cutting costs while the company prepares to launch a cheaper electric vehicle. Shifting planned production of the forthcoming R2 model to an existing facility in Illinois will allow Rivian to begin deliveries in the first half of 2026, earlier than expected. Buy (RIVN) on dips.

New York Community Bancorp Bailed Out, with a cash infusion led by former Treasury secretary Steve Mnuchin. The shares soared from $2 to $3.41. That takes the heat off the sector….until the next one. The US is shrinking from 4236 banks to only six banks. Who says politics doesn’t pay?

Europe Moves Towards Interest Rate Cuts, igniting a global bond market rally. Staff projections now see economic growth of 0.6% in 2024, from a previous forecast of 0.8%. They presented a more positive picture of inflation, with the forecast for the year brought to an average 2.3% from 2.7%. Market bets increased on rate cuts taking place as early as June, with the euro trading 0.35% lower against the British pound following the news.

Beige Book Comes in Moderate, saying "labor market tightness eased further," in February but noted "difficulties persisted attracting workers for highly skilled positions." The Beige Book is a review of economic conditions across all 12 Fed districts.  Fed Chair Jerome Powell told Congress on Wednesday that the U.S central bank expected "inflation to come down, the economy to keep growing," but shied away from committing to any timetable for interest rate cuts.

China Targets 5% Growth for 2024, but nobody buys it for a second. A covid hangover, residential real estate crisis triggering a financial crisis, and constant invasion threats over Taiwan, make this target a pipe dream. Avoid (FXI) and all Middle Kingdom plays.

Gold Hits New All-Time High, at $2,141 an ounce on expectations of imminent rate cuts by the Fed. Gold, often used as a safe store of value during times of political and financial uncertainty, has climbed over $300 dollars since the start of the Israel-Hamas war. Buy (GLD), (GOLD), and (NEM) on dips.

Dell (DELL) Becomes an AI Stock, sending the shares up 47% in a Day. That’s been changing over the past year, as Dell has been reporting strong orders of servers designed to power generative AI workloads—many of which use chips supplied by AI kingmaker Nvidia. The company’s fourth quarter results convinced any doubters.  Can Apple (AAPL) do the same?

Tesla Plunges on Poor China Sales, down $14.50 on sales data dimmed the outlook for Tesla's global deliveries, at a time when the top EV maker is battling a decline in demand and is weighed down by a lack of entry-level vehicles and the age of its product line-up. Not the time to be in EVs or solar. Buy (TSLA) on bigger dip.

US National Debt is Rising by $1 Trillion Every 100 Days. A trillion here, a trillion there, sooner or later that adds up to a lot of money. Eventually, someone is going to have to do something about this. The US national debt stands at $34.5 trillion, or $104,545 per person.

The Uranium Shortage is Getting Extreme, with yellow cake up 112% in a year. Owners of left-for-dead uranium mines are restarting operations to capitalize on rising demand for the nuclear fuel. Most of those American mines were idled in the aftermath of Fukushima when uranium prices crashed and countries like Germany and Japan initiated plans to phase out nuclear reactors. Now, with governments turning to nuclear power to meet emissions targets and top uranium producers struggling to satisfy demand, prices of the silvery-white metal are surging. Buy (Cameco (CCJ) on dips.

Japan’s Nikkei ($NIKK) Tops 40,000, a new 34-year high. The ultra-weak Japanese economy is giving the economy there a free lunch, but better hedge your currency exposure. Good thing I missed a dead market for 34 years.

NVIDIA Replaces Tesla as Top Traded Stock, with volumes migrating to the options market as well. Blockbuster profits are catnip for traders, while EV price wars aren’t. Tesla is down 52% from its all-time high two years ago and is one of the biggest percentage decliners in the Nasdaq 100 Index this year.

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, March 11 at 7:00 AM EST, the Consumer Inflation Expectations are announced.

On Tuesday, March 12 at 8:30 AM, Inflation Rate for February is released.

On Wednesday, March 13 at 2:00 PM, MBA Mortgage Applications are published

On Thursday, March 14 at 8:30 AM, the Weekly Jobless Claims are announced. We also get the Producer Price Index.

On Friday, March 15 at 2:30 PM, the University of Michigan Consumer Sentiment is published. At 2:00 PM the Baker Hughes Rig Count is printed.

As for me, I have met many interesting people over a half-century of interviews, but it is tough to beat Corporal Hiroshi Onoda of the Japanese Army, the last man to surrender in WWII.

I had heard of Onoda while working as a foreign correspondent in Tokyo. So, I convinced my boss at The Economist magazine in London that it was time to do a special report on the Philippines and interview President Ferdinand Marcos. That accomplished, I headed for Lubang island where Onoda was said to be hiding, taking a launch from the main island of Luzon.

I hiked to the top of the island in the blazing heat, consuming two full army canteens of water (plastic bottles hadn’t been invented yet). No luck. But I had a strange feeling that someone was watching me.

When the Philippines fell in 1945, Onoda’s commanding officer ordered the remaining men to fight on to the last man. Four stayed behind, continuing a 30-year war.

As a massive American military presence and growing international trade raised Philippine standards of living, the locals eventually were able to buy their own guns and kill off Onoda’s companions one by one. By 1972 he was alone, but he kept fighting.

The Japanese government knew about Onoda from the 1950s onward and made every effort to bring him back. They hired search crews, tracking dogs, and even helicopters with loudspeakers, but to no avail. Frustrated, they left a one-year supply of the main Tokyo newspaper and a stockpile of food and returned to Japan. This continued for 20 years.

Onoda read the papers with great interest, believing some parts but distrusting others. His worldview became increasingly bizarre. He learned of the enormous exports of Japanese automobiles to the US, so he concluded that while still at war, the two countries were conducting trade.

But when he came to the classified ads, he found the salaries wildly out of touch with reality. Lowly secretaries were earning an incredible 50,000 yen a year, while a salesman could earn an obscene 200,000 yen.

Before the war, there was one Japanese yen to the US dollar. In the hyperinflation that followed the yen fell to 800, and then only recovered to 360. Onoda took this as proof that all the newspapers were faked by the clueless Americans who had no idea of true Japanese salary levels.

So he kept fighting. By 1974 he had killed 17 Philippino civilians.

After I left Lubang island, a Japanese hippy named Norio Suzuki with long hair, beads, and sandals followed me, also looking for Onoda. Onoda tracked him as he had me but was so shocked by his appearance that he decided not to kill him. The hippy spent two days with Onoda explaining the modern world.

Then Suzuki finally asked the obvious question: what would it take to get Onoda to surrender? Onoda said it was very simple, a direct order from his commanding officer. Suzuki made a beeline straight for the Japanese embassy in Manila and the wheels started turning.

A nationwide search was conducted to find Onoda’s last commanding officer and a doddering 80-year-old was turned up working in an obscure bookstore. Then the government custom-tailored a prewar Imperial Japanese Army uniform and flew him down to the Philippines.

The man gave the order and Onoda handed over his samurai sword and rifle, or at least what was left of it. Rats had eaten most of the wooden parts. You can watch the surrender ceremony by clicking here on YouTube.

When Onoda returned to Japan, he was a sensation. He displayed prewar mannerisms and values like filial piety and emperor worship that had been long forgotten. Emperor Hirohito was still alive.

When I finally interviewed him, Onoda was sympathetic. I had by then been trained in Bushido at karate school and displayed the appropriate level of humility, deference, mannerisms, and reference.

I asked why he didn’t shoot me. He said that after fighting for 30 years he only had a few shells left and wanted to save them for someone more important.

Onoda didn’t last long in the modern Japan, as he could no longer tolerate modern materialism and cold winters. He moved to Brazil to start a school to teach prewar values and survival skills where the weather was similar to that of the Philippines. Onoda died in 2014 at the age of 91. A diet of coconuts and rats had extended his life beyond that of most individuals.

Onoda wasn’t actually the last Japanese to surrender in WWII. I discovered an entire Japanese division in 1975 that had retreated from China into Laos and just blended in with the population. They were prized for their education and hard work and married well.

During the 1990’s a Japanese was discovered in Siberia. He was released locally at the end of the war, got a job, married a Russian woman, and forgot how to speak Japanese. But Onoda was the last to stop fighting.

The Onoda story reminds me of the fact that journalists learn very early in their careers. You can provide all the facts in the world to some people. But if they conflict with their own deeply held beliefs, they won’t buy them for a second.

Hiro Onoda Surrenders

 

Budding Journalist John Thomas

 

Good Luck and Good Trading,

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