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June 21 Biweekly Strategy Webinar Q&A

Below please find subscribers’ Q&A for the June 21 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Lake Tahoe, NV.

Q: When do we buy Nvidia (NVDA) and Tesla (TSLA)?

A: On at least a 20% dip. We have had ballistic moves—some of the sharpest up moves in the history of the stock market for large stocks—and certainly the greatest creation of market caps since the market was invented under the Buttonwood Tree in 1792 at 68 Wall Street. Tesla’s almost at a triple now. Tripling one of the world's largest companies in 6 months? You have to live as long as me to see that.

Q: Is it a good time to invest in Bitcoin?

A: No, absolutely not. You only want to invest in Bitcoin when we have an excess of cash and a shortage of assets. Right now, we have the opposite, a shortage of cash and an excess of assets, and that will probably continue for several years.

Q: Should I short Apple (APPL)?

A: Only if you’re a day trader. It’s hugely overbought for the short term, but still in a multiyear long-term uptrend. I think we could see Apple at $300 in the next one or two years.

Q: Is it better to focus on single stocks or ETFs?

A: Single stocks always, because a single stock will outperform a basket that's in an ETF by 2 to 1 or even 3 to 1. That's always the case; whenever you add stocks to a basket, it diversifies risk and dilutes the performance. Better to just own Tesla, and if you want to diversify, diversify to Nvidia, but then I live next door to these two companies. That's what I tell my friends. You only diversify if you don’t know what is going to happen, which is most investors and financial advisors.

Q: Is the bottom of the housing market in, and are we due for a spike in home prices when interest rates can only go lower?

A: Yes, absolutely. In fact, we will enter a new 10-year bull leg for housing because we have a structural shortage of 10 million homes and 82 million millennials desperately trying to buy them at any price. I just got a call from my broker and she is panicking because she is running out of inventory. Even the lemons are starting to move.

Q: When do you think energy will rise?

A: Falling interest rates could be a good key because it sets the whole global economy on fire and increases energy demand.

Q: Outlook for the S&P 500 (SPY) second half of the year?

A: We hit 4,800 at least, maybe even higher. That's about a little more than 10% from here, so it’s not that much of a stretch, not like it was at the beginning of the year when it needed to rise 25% to reach my yearend target.

Q: Best time to invest from here on?

A: Either a 10% pullback in the market, or a sideways move of 3 months—that's called a time correction. It usually counts as a price correction because of course, over 3 months, earnings go up a lot, especially in tech.

Q: I’m seeing grains (WEAT) in rally mode.

A: Yes, that's true. They are commodities, and just like copper’s been rallying, and it’s yet another signal that we may get a much broader global commodity rally in everything: iron ore, coal, energy, gold, silver, you name it.

Q: Will inflation drop to 2%, causing stocks to go on another epic run?

A: The answer is yes, I do see inflation dropping to 2% —maybe not this year, but next year; not because of any action the Fed is doing, but because technology is hyper-accelerating, and technology is highly deflationary. The tech product you bought two years ago is now half the price, and they offer you twice as much functionality with an auto-renew for life. So, that is happening across the entire technology front and feeds into the inflation numbers big time, including labor. There's going to be a lot of labor replacement by machines and AI in the coming years.

Q: Is Airbnb (ABNB) a good stock to buy?

A: Well, if we’re going into the most perfect travel storm of all time, which is this summer, and which is why I’m going to remote places only like Cortina, Italy. Airbnb is the perfect stock to own. It’s a well-run company even in normal times.

Q: Should I buy gold here on the pullback?

A: Yes, you should. Gold is also highly sensitive to any decline in interest rates, and by the way: buy silver, it always moves 2.5x as much as the barbarous relic.

Q: How can inflation not go up if commodities and wage demands are going up due to state and federal unions? What about farm equipment and truck supplies? Costs keep rising, should we buy John Deere (DE)?

A: There are three questions here. Inflation will not go up because, though commodities will rise, they are only 0.6% of the $100 trillion global economy, or $660 billion in 2022. That will be more than offset by technology cutting prices, which is 30% of the stock market. You have to realize how important each individual element is in the global picture. And regarding wage demands going up caused by state and federal unions, less than 11.3% of the workforce is now unionized and that figure has been declining for 40 years. Most growth in the economy has been in non-unionized technology firms which largely depend on temporary workers, by design. What IS unionized is mostly teachers, the lowest paid workers in the economy, so incremental pay rises will be small. Unions were absolutely slaughtered when 25 million jobs were offshored to China during the Bush administration. Buy farm equipment and trucks? Absolutely, buy John Deere (DE) and buy Caterpillar (CAT) on the next dip. I was actually looking at Caterpillar for the next LEAPS the other day, but it’s already had a big run; I'm going to wait for a pullback before I get CAT and John Deere. So, again, people see headlines, see union wage headlines—I say focus on the 89% and not on the 11% if you want to make good decisions.

Q: Is Boeing (BA) a buy on the dip?

A: Yes, they got 1,000 new aircraft orders and the stock hasn't moved. So yes, if you get any kind of selloff down to $200, I'd be hoovering this thing up.

Q: Can you please explain how the profit predictor works?

A: It’s a long story; just go to our website, log in and do a search for “profit predictor,” and you’ll get a full explanation of how it works. It’s actually where Mad Hedge has been using artificial intelligence for 11 years, which is why our performance has doubled. Just for fun, I'll run the piece next week.

Q: Gold (GLD) is having a hard time going up because Russia is being squeezed by other governments. Since they need cash, they may be either selling their gold or stop buying new gold.

A: That is a good point, but at the end of the day, interest rates are the number one driver of all precious metals—period, end of story. We’re long gold too, I’ve got lots of gold coins stashed around the world in various safe deposit boxes, and I'm keeping them. I’ve got even more silver coins, which take up a lot of space.

Q: Do you like India (INDA) long term?

A: Yes, it’s the next China. But as Apple is finding out it is very difficult to get anything done there. A radical reforming Prime Minster Modi may be changing things there with his recent Biden visit and (GE) contract to build jet engines.

Q: What do you think of General Dynamics Corp (GD)?

A: I like General Dynamics because I think defense spending is in a permanent long term upcycle as a result of the Ukraine war. And it won’t end with the Ukraine war—the threat will always be out there, and the buying is done by not only us but all the other countries that think Russia is a threat.

Q: Do you like MP Materials Corp (MP)?

A: Yes, I do. The whole commodities space is ready to take off and go on fire.

Q: What about Square (SQ)?

A: The only reason I’m not recommending Square right now is huge competition in the entire sector, where all the stocks including PayPal (PYPL) are getting crushed. I will pass on Square for now, especially when I can buy US Steel (X) at close to its low for the year.

Q: If you had to pick one: Nvidia (NVDA), Tesla (TSLA), Microsoft (MSFT), Meta (META), and Google (GOOGL), which is the best to buy for next year?

A: All of them. Diversify. If I have to pick the top performer, it’s going to be either Tesla or Nvidia, probably Nvidia. But you need at least a 10% correction before you do anything. Actually, the split-adjusted price for our first (NVDA) recommendation eight years ago was $2 a share.

Q: Do you like Crown Castle International (CCI)?

A: Yes, I like it very much—it has very high dividend yield at 5.5%. The reason it hasn’t moved yet is that as long as interest rates are high, any REIT structure will suffer, and (CCI) has a REIT structure. Sure, it’s in a great sector—5G cell towers—but it is still a REIT nonetheless, and those will start to recover when interest rates go down; that’s why we did a 2.5-year LEAPS on CCI. For sure interest rates are going to go down in the next 2.5 years, and you will double your money on (CCI). That’s why we put it out.

Q: Which mid cap will do best over the long term: Airbnb (ABNB), Snowflake (SNOW), or Palantir (PLTR)?

A: That’s easy: Snowflake. They have such an overwhelming technology on the database and security front; I would be buying Snowflake all day long. Even Warren Buffet owns Snowflake, so that’s good enough for me.

Q: Could you comment on the pace of EV adoption/potential for (TSLA) robot fleet acceleration and implications for oil investments in holding pattern till the eventual collapse to near 0?

A: Yes, oil may collapse to near zero, but it may take twenty years to do it—that’s how long it takes to transition an energy source. That’s how long it took the move from horses and hay to gasoline-powered cars at the beginning of the 20th century. A national robot fleet of taxis with no drivers at all is a couple of years off. There are about 1,000 of them working in San Francisco right now, but they still have more work to do on the software. When it gets foggy, they often congregate at intersections causing traffic jams. Suffice it to say that eventually Tesla shares go to $1,000 and after that, $10,000—that’s my bet. By the way, my Tesla January 2025 $595-$600 LEAPS are starting to look pretty good.

To watch a replay of this webinar with all the charts, bells, whistles, and classic rock music, just log in to www.madhedgefundtrader.com , go to MY ACCOUNT, click on GLOBAL TRADING DISPATCH or TECHNOLOGY LETTER, then 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

2018 in Australia

May 16, 2023

Diary, Newsletter, Summary

Global Market Comments
May 16, 2023
Fiat Lux

Featured Trades:

(LAST CHANCE TO ATTEND THE THURSDAY, MAY 18, 2023 TAMPA FLORIDA STRATEGY LUNCHEON)
(LOOKING AT THE LARGE NUMBERS)
(TLT), (TBT) (BITCOIN), (MSTR), (BLOK), (HUT)

CLICK HERE to download today's position sheet.

May 14, 2023

Diary, Newsletter, Summary

Global Market Comments
May 14, 2023
Fiat Lux

Featured Trades:

(MARKET OUTLOOK FOR THE WEEK AHEAD, or I’M GOING ON STRIKE!)
(TSLA), (TLT), (AAPL), (BRK/B), (BA), (GOOGL)

CLICK HERE to download today's position sheet.

The Market Outlook for the Week Ahead, or I’m Going on Strike!

Diary, Newsletter

I think it’s time for me to go out on strike. I’m downing my tools, tearing up my punch card, and manning a picket line.

I get up at 5:00 AM every morning, well before the sun rises here on the west coast, looking for great low-risk high return trades. But for the last several weeks, there have been none, nada, bupkiss.

I have gotten spoiled over the last few years. The financial crisis, pandemic, recovery, and banking crisis provided me with an endless cornucopia of trading opportunities which doubled my average annualized return from 24% to a nosebleed 48.94%.

Part of the problem is that with a success rate of 90%, so much of the market is now copying my trades so that they are getting harder to execute. That wasn’t a problem when markets were booming. It is when trading volumes have shrunk dramatically, as they have done this year.

At The Economist magazine in London whenever plagiarism was discovered, they used to say that “Imitation is the sincerest former of flattery.”

There is no doubt that the economy is weakening, as the data has definitively shown over the last two weeks. It appears that after 500 basis points in interest rate rises in a year, the Fed’s harsh medicine is finally starting to work. The debt ceiling crisis, and regional banking crisis are scaring more investors further to the sidelines.

Notice how every stock market rally has become increasingly short-lived? Which all raises a heightened risk of recession.

Economies are like families. All are happy for the same reasons but are unhappy in myriad different ways.

In fact, they provide a generous helping of alphabet soup. If you look very closely, you can find some bay leaves, oregano, black pepper, and lots of V’s, W’s, U’s, and L’s.

Now, let’s play a game and see who can pick the letter that most accurately portrays the current economic outlook.

Here is a code key:

V – The very sharp collapse we saw in 2008 and again in 2020 is followed by an equally sharp recovery. I think it is safe to say we can now toss that one out the window. With technology hyper-accelerating, it is safe to write off the “V” recovery scenario.

W – The sharp recovery that began in October 2022 fails and we see a double dip back to those lows.

U – The economy stays at the bottom for a long time before it finally recovers.

L – The economy collapses and never recovers.

The question is, in which of these forecasts should we invest our hard-earned cash?

For a start, you can throw out the “L”. Every recession flushes out a lot of financial Cassandras who predict the economy will never recover. They are always wrong. Usually, they know more about marketing newsletters than economics.

I believe what we are seeing play out right now is the “W” scenario. This is the best possible scenario for traders, as it calls for a summer correction in the stock market when we can load the boat a second time. If you missed the October low you will get a second bite of the Apple (AAPL), both literally and figuratively.

If I’m wrong, we will get a “U”, a longer recovery. This cannot be dismissed lightly as the unemployment rate is clearly about to rise.

If I limited the outlook to only four possible scenarios, I’d be kidding you. The truth is far more complicated.

Each industry gets its own letter of the alphabet. Technology, some 27% of total stock market capitalization, gets no letter at all because it is thriving, thanks to the explosion of AI applications. That explains the single-minded pursuit of big tech by investors since January.

Someone asked me last week how long I would continue trading and I cited the example of Warren Buffett, who at 92 is 21 years older than me.

I have since found a better example.

Former Secretary of State under Nixon, Henry Kissinger, turns 100 this week, the only man in the world who President Biden, Vladimir Putin, and President Xi Jinping would immediately take a call from.

During the shuttle diplomacy between Israel and Egypt in 1974, I rode with the Secretary on Air Force One, then an antiquated Boeing 727, which is now in a museum in Seattle. For the rest of that story see below.

He gave me “Henry” privileges, while everyone else had to address him as “Mr. Secretary” because my knowledge of history exceeded that of anyone else then in the White House Press Corps, even those who had degrees in the subject.

It also helped that at that point I had already had six years of experience on the ground in the Middle East. It was all heady stuff for a journalist who at 22 was just starting out.

So, that sets the bar higher for me. The good news for you is that I’ll be sending out my wit, wisdom, and trade alerts for at least another 29 years.

So far in May, I have managed a modest +1.70% profit. My 2023 year-to-date performance is now at an eye-popping +63.45%. The S&P 500 (SPY) is up only a miniscule +8.15% so far in 2023. My trailing one-year return reached a 15-year high at +122.11% versus +6.70% for the S&P 500.

That brings my 15-year total return to +660.64%. My average annualized return has blasted up to +48.94%, another new high, some 2.80 times the S&P 500 over the same period.

Some 41 of my 44 trades this year have been profitable. My last 21 consecutive trade alerts have been profitable.

I initiated only one new trade last week, a long in Tesla (TSLA). That leaves me with my two remaining positions. Those include longs in Tesla and the bond market (TLT), which expires this coming Friday. I now have a very rare 80% cash position due to the lack of high-return, low-risk trades.

Treasury Secretary Yellen Warns of Economic Catastrophe, if the debt ceiling is not raised. Congress has voted 98 times to raise the debt ceiling to $31 trillion over 106 years to pay for money already spent. One-third of this was under the previous president who back then warned that he would default. It’s a grasp for power the House just doesn’t have. There really isn’t such a thing as a debt ceiling which has gained an importance far beyond its original housekeeping intention.

Boeing Lands Blockbuster 300 Plane Order, from Ireland’s Ryan Air worth $40 billion. Europe’s Top budget air carrier is loading up on the once troubled 737 MAX. Keeping buying (BA) on dips, now the world’s largest aircraft manufacturer.

CPI Hits 4.9% YOY, after the 0.40% report for April. It’s still headed in the right direction as far as the Fed is concerned and puts a September cut on the table. Eggs were the leader, up 21.4%, while fuel oil is the laggard, down 20.2%. My own 4% inflation rate forecast by yearend is starting to look conservative. Perish the thought!

The Oil Collapse is Signaling a Recession, as is weakness in all other commodities, even lithium. Texas tea has plunged 22% I three weeks to a new two year low at $62. It’s one of the worst performing asset classes of 2023. Widespread EV adoption is finally making a big dent, as are the price wars there. OPEC Plus production cuts were unable to stem the decline. Buy (USO) on dips as an economic recovery play.

Is a Bank Short Selling Ban Coming? The Feds could bar hedge funds from launching raids on small regional bank shares with the aim of taking them to zero. Such a ban was enforced for all banks in 2008.

Elon Musk Appoints New Twitter CEO, removing a major management distraction. Linda Yaccarino is the new CEO of Twitter, poached from her from online advertising at NBC. This is a positive for Tesla, as it frees up the heavy burden of turning around Twitter from Musk, allowing him to devote more time to Tesla. It also reduced the risk that Musk will sell more Tesla shares to finance said turnaround. Guess who just got the worst job in the world? Buy (TSLA) on dips.

Weekly Jobless Claims jump to 264,000, a new 18 month high, providing another recession indicator.

US Budget Deficit Shrinks to $1.5 Trillion, down from a $3 trillion peak during the previous administration. Government Bond selling will drop by a similar amount. That’s still up $130 billion from 2022. Increased tax revenues from a recovering economy is the reason. Buy (TLT) on every dip.

Google Ramps Up AI Effort, launching a new suite of AI tools at its annual developer conference. With a 93% market share in online search (GOOGL) has a lot to defend. The stock popped 4% on the news.

FANGS to Rise 50% by Yearend, says Fundstrat’s ultra-bull Tom Lee. I think he’s right, once the debt ceiling debacle gets out of the way. The contribution of AI is being vastly underestimated.

Berkshire Hathaway (BRK/B) Earnings Soar, with operating earnings up 12.6% in Q1, but Warren Buffet expects business to slow. Many companies now have to unwind big pandemic inventories with aggressive sales, crimping inflation. That’s why Berkshire owns $130 billion in cash and Treasury bills.

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, May 15 at 7:30 AM EST the NY Emore State Manufacturing Index is out.

On Tuesday, May 16 at 6:00 AM, Retail Sales are announced.

On Wednesday, May 17 at 11:00 AM the US Building Permits are printed.

On Thursday, May 18 at 8:30 AM, the Weekly Jobless Claims are announced. We also get the Producer.

On Friday, May 19 at 2:00 PM the University of Baker Hughes Rig Count is released.

As for me, Egypt and I have a long history together. However, when I first visited there in 1974, they tried to kill me.

I was accompanying US Secretary of State Henry Kissinger on Air Force One as part of his “shuttle diplomacy” between Tel Aviv and Cairo. Every Arab terrorist organization had vowed to shoot our plane down.

When we hit the runway in Cairo, I looked out the window and saw a dozen armored personnel carriers chasing us just down the runway. All on board suddenly got that queasy, gut-churning feeling, except for Henry.

When the plane stopped, they surrounded us, then turned around, pointing their guns outward. They were there to protect us.

The sighs of relief were audible. In a lifetime of heart-rending landings, this was certainly one of the most interesting ones. Those State Department people are such wimps! Henry was nonplussed, as usual.

As a result of the talks Israel eventually handed back Sinai in return for an American guarantee of peace which has held to this day. Egyptian president Anwar Sadat was assassinated by his own bodyguard for his efforts shortly afterwards.

Israel was so opposed to the talks that when I traveled to Tel Aviv, El Al Airline security made sure my luggage got lost. So the Israeli airline gave me $25 to buy replacement clothes until my suitcase was delivered. On that budget, all I could afford were the surplus Israeli army fatigues at the Jerusalem flea market.

A week later, my clothes still had not caught up with me when I boarded the plane with Henry. That meant walking the streets of Cairo in my Israeli army uniform. It would be an understatement to say that I attracted a lot of attention.

I was besieged with offers to buy my clothes. Egypt had lost four wars against Israel in the previous 30 years, and war souvenirs were definitely in short supply.

By the time I left the country, I was stripped bare of all Israeli artifacts, down to my towels from the Tel Aviv Hilton, and boarded the British Airways flight to London wearing a cheap pair of Russian blue jeans I had taken in trade.

Levi Strauss never had a thing to worry about.

The bewitching North African country today is still a prisoner of a medieval religion that has left its people stranded in the Middle Ages. While its GDP has doubled in the last 70 years, so has its population, to 110 million, meaning there has been no improvement per capital income at all in a half century. That is a staggering number for a country that is mostly desert.

In 2019, I took my two teenaged daughters to Egypt to visit the pyramids and ride camels as part of an impromptu trip around the world. My logic then was that at the current rate of climate change, this trip might not be possible in five years.

As it turns out, it was not possible in six months when the pandemic started.

We were immediately picked up by Egyptian Intelligence right at the gate who remembered exactly who I was. It seems they never throw anything out in Egypt.

After a brief interrogation where I disclosed my innocent intentions, they released us. No, I wasn’t working for The Economist anymore. Yes, I was just a retired old man with his children. They even gave us a free ride to the Nile Hilton where I spent my first honeymoon in 1977.

Some people will believe anything! And I never did get that suitcase back.Good luck and good trading!

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

2019 Over Sinai

February 27, 2023

Diary, Newsletter, Summary

Global Market Comments
February 27, 2023
Fiat Lux

Featured Trade:

(MARKET OUTLOOK FOR THE WEEK AHEAD, or MAKING A SILK PURSE FROM A SOW’S EAR)
(META), (GOOGL), (MSFT), (AAPL), (AMZN), (NFLX), (TSLA), (SPY), (TLT), (ENPH), (UUP), (GLD), (SLV), (EEM)

CLICK HERE to download today's position sheet.

February 24, 2023

Diary, Newsletter, Summary

Global Market Comments
February 24, 2023
Fiat Lux

Featured Trade:

(FEBRUARY 22 BIWEEKLY STRATEGY WEBINAR Q&A)
(SPY), (BA), (CCI), (HD), (TLT), (TSLA), (PPLT), (PALL),
(JPM), (NVDA), (AAPL), (GOOGL), (META), (AMZN)

CLICK HERE to download today's position sheet.

February 22 Biweekly Strategy Webinar Q&A

Diary, Free Research, Newsletter

Below please find the subscribers’ Q&A for the February 22 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Silicon Valley in California.

Q: Will Russia use nuclear weapons on Ukraine?

A: No, they won’t. If you’re trying to take over a country, you don’t exactly want to drop atomic bombs on it first and render it useless. If they do, Ukraine will retaliate in kind with the nukes they have. Most of the nuclear weapons the old Soviet Union had were assembled in Ukraine and the machinery is still there. We know Ukraine has four nuclear power plants and hundreds of tons of fuel so they have uranium. You only need to increase the purity from 80% to 93% and then convert it to plutonium to get weapons-grade and you only need 20 pounds to make a small bomb. At the very least, they could build a dirty truck bomb and make Moscow uninhabitable for 100 years. If the Russians did explode a nuke, the fallout cloud would blow back on them the next day, China in three days, the US in 10 days, and back on Russia again in two weeks. If Ukraine doesn’t remember how to make nuclear weapons, they can just ask me. I do have “Nuclear Test Site” on my resume.

Q: What would be the impact on the markets of a government debt default?

A: Bonds would collapse, causing interest rates to spike, and taking down stocks big time. Higher interest rates would crash the real estate market. You also can’t do real estate closings during a shutdown because Fannie Mae and Freddie Mac aren’t there to buy the debt. Commodities would fall sharply on recession fears. Even gold and silver do poorly on a massive liquidity squeeze. Government payments would cease, including Social Security, Medicare, and military salaries. Air traffic control would stop unless they are happy to work for free. The only place to hide is cash under your mattress since US Treasury bills and commercial banks will also be at risk. This is what the House Republicans are risking. It really depends on how long the shutdown lasts. Every time Georgia representative Marjorie Taylor Greene shouted “liar” at the State of the Union address you could see bond prices ticking down. She is one of the people who has to agree to a rise in the debt ceiling and she didn’t inspire a lot of confidence in bondholders. All that said, a $10 dip is a good place to buy the (TLT).

Q: Would you buy Boeing up here?

A: I loved Boeing at $100 and we did a could trades down there. At $220 not so much. It’s more than doubled off the October low and all the best-case scenarios have happened. The 737 MAX, which crashed twice due to an AI issue, got back in the air. The 787 Dreamliner is selling well. The company now has a two-year order backlog. And Air India followed up with the biggest aircraft order in history, some 450 planes over ten years. If Boeing dips $50 that would be another story because I think it hits a new all-time high at $450 in a couple of years. By the way, I took a 737 MAX on my flight back from Hawaii last weekend and the crew loved it. There are no screens on the seats. Instead, they broadcast the 800 greatest movies of all time on free WIFI.

Q: How do we know if your trade alert is for the stock, the ETF, or another underlying position?

A: Look at the ticker symbol—it always tells you exactly which security we are working in.

Q: With Bullard signaling a 50 basis-point rate hike, will the S&P (SPY) go down in the near term and how much?

A: Well Bullard is only one guy out of nine, so he doesn’t have the final say. It really depends on what Jay Powell wants. And if the data continues hot and inflation keeps rising, we will get a 50 basis point rise, and that should take the index down 10% from the recent high, or give up half of its recent year-to-date gains, so that’s a good rule of thumb. As long as we’re waiting for bad news, (which we won’t get until March 22) the markets will do nothing until then.

Q: What do you think about Crown Castle International (CCI), the cell tower company, taking a big hit with the bond market?

A: It pretty much moves in sync with the bond market, which has just dropped 10 points, so you probably want to be buying or doubling up on (CCI) right here, because it will be the first thing to recover once we see a negotiated increase in the debt ceiling which has to happen before the summer. The 5G buildout continues unabated.

Q: Would you recommend buying Tesla (TSLA) shares again?

A: Yes, but at least $50 lower, which we may get. Or at least $50 off the $217 top. I think Tesla goes to $1,000 sometime in the next couple of years and so does Elon Musk. All of the factors that could drive the stock that high are in progress. I know it’s happening over there, and that’s easily a $1,000 stock once their current breakthroughs go mass-market.

Q: Any interest in Iron Condors?

A: It is the same as Strangles, with more limited risk with four legs, a call spread and a put spread because you stop out your losses at much lower levels. But they are very trading-intensive, commission-intensive trades, and it’s really too much for most beginners to handle. However, if you’re a professional, you might consider doing iron condors on these positions. Iron Condors also max profits when nothing moves, and lately, no move is a pretty rare event. We’re going to get it for the next couple of months, but don’t count on that being a frequent trade.

Q: Any iShares 20 Plus Year Treasury Bond ETF (TLT) LEAPS to buy now?

A: Yes I've been kind of sitting on my hands waiting to see if this bottom here holds at 99 before I put out LEAPS, but we’re so close it really almost makes no difference. And if I were to do a LEAPS here it probably would be the $100-$105 one-year out. That might get you about a 100% profit in a year. That’s a very safe LEAPS, and I’ll get the numbers out when I get a chance.

Q: What’s your opinion on Home Depot (HD)?

A: I like it for the long term. Clearly, their disastrous earnings report shows that the economy for home repair is not as strong as we thought it was, so it may go lower first. I would hold off until we get a real capitulation selloff in those stocks.

Q: Are gold and silver possible candidates for LEAPS?

A: Yes, especially in view of the recent correction in these metals. And we did put these out last October at the market bottom. I probably will be updating that sometime in the next few weeks.

Q: How much longer will the Ukraine/Russia war last?

A: The general consensus among the military now is that this goes on for several more years, and both sides will just keep pouring troops into the meat grinder until they get exhausted.

Q: Any way to play Platinum (PPLT) or Palladium (PALL)?

A: Yes, there are ETFs on each of them.

Q: Any thoughts on the crypto industry?

A: I have given up on the crypto industry because it has been shown that so many of these trading platforms were stealing from their customers. Once you lose the confidence of a customer on trust, you never get it back in the financial industry. Also, crypto was interesting a couple of years ago when it was going up and everything else in the world was too expensive, but now you have all the best stocks trading not far from multi-year lows, and that makes quality stocks much more attractive than a crypto where you really don't know what’s going to happen. Crypto could be another Nikkei, which after 32 years still hasn’t reached its old highs. That is unless it gets taken over by big banks like (JPM) and regains respectability that way.

Q: Any thoughts on investing in the AI trend?

A: AI has suddenly become what crypto was 2 years ago, and what 3D printing was 15 years ago. It’s just the theme of the day, and something to promote. There are no pure AI plays. Basically, all companies have been using it for 10 or 15 years, it’s not a new thing. In fact, AI is already in every aspect of your life, you just might not know it yet. NVIDIA (NVDA) is probably the purest AI play out there whose chips everyone needs to execute AI. Beyond that, the biggest AI users are Apple (AAPL), Alphabet (GOOGL), Meta (META), and Amazon (AMZN). When Amazon makes ten more recommendations on books you might like or movies you might watch, that is AI.

To watch a replay of this webinar with all the charts, bells, whistles, and classic rock music, just log in to www.madhedgefundtrader.com, go to MY ACCOUNT, click on GLOBAL TRADING DISPATCH or TECHNOLOGY LETTER, then 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

With Medal of Honor Winner Colonel Mitchel Paige

November 14, 2022

Diary, Newsletter, Summary

Global Market Comments
November 14, 2022
Fiat Lux

Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or THE TOP FIVE TECHNOLOGY STOCKS OF 2023),
(RIVN), (ROM), (ARKK), (PANW), (CRM), (FXE), (FXY), (FXA), (LEN), (KBH), (DHI), (TLT), (UUP), (META), (TSLA), (BA), (JNK), (HYG), (BRKB), (USO)

The Market Outlook for the Week Ahead, or The Top Five Technology Stocks of 2023

Diary, Newsletter, Research

The year 2022 has been driven by rising interest rates, a strong dollar, a weak economy, a bear market in stocks.

A massive reversal is about to take place. 2023 will gain the benefit of gale force macroeconomic tailwinds for the right stocks.

So far this year, Mad Hedge earned an astounding 77.20% profit cashing in on this year’s trends. We could earn the same return taking advantage of next year’s trends.

If you want to ride along on my coattails next year, that is fine with me. But it requires you to take a leap of faith.

I refer you to the motto of Britain’s Special Air Service: “Qui audet adipiscitur,” or “Who dares wins.”

For it only makes sense that the worst stocks of 2022 will be the best performers of 2023.

I have no doubt that tech stocks will bottom out sometime in 2023. Those who get in early will build some of the largest fortunes of this century. Those who miss the boat will spend their retirement years working at Taco Bell.

The reasons are very simple.

*Ultra-high interest rates will force a mild recession in early 2023. Then suddenly, inflation will plummet. We know this has already started because the largest element in the inflation calculation is housing costs, which are in free fall.

*The Fed will panic and deliver 2023 the sharpest DECLINE in interest rates in American history.

*Plunging interest rates will bring a crash in the US dollar.

*Foreign currencies like the Euro (FXE), the Japanese Yen (FXY), and the Australian dollar (FXA) will soar.

*And guess who gets the bulk of their earnings from abroad, sometimes up to two-thirds? The technology industry.

Kaching!

If you think I’m out of my mind, just look at the top performers of the historic stock market rally last week.

All the interest rate-sensitive sectors caught on fire. Technology stocks took off like a scalded cat, with Cathie Woods’ Ark Innovation Fund (ARKK) up an astounding 14% in a single day.

Bank shares soared. Homebuilders (LEN), (KBH), (DHI) caught a strong bid for the first time in ages. Junk bonds went bid only. US Treasury Bonds had their best day in 20 years (TLT), while the greenback (UUP) had its worst.

The bottom line here is so clear that I’ll write it on a wall for you. Falling interest rates will be the primary driver of stock prices for 2023 and 2024.

Of course, there is a better way to play this than buying the first technology index you stumble across.

So, let me boil this strategy down to just five names, close your eyes, and buy them.

Rivian (RIVN) – ($34) - Rivian is widely believed to be the next Tesla (TSLA). Some 25% owned by its largest customer, Amazon (AMZN), Rivian produces three types of EVs: the R1T pickup truck, the R1S SUV, and Amazon's EDV (electric delivery van). Its R1 vehicles start at under $70,000 and can travel more than 300 miles on a single charge. To learn more about Rivian, please click here.

To say that Rivian is the hot car of the day would be a vast understatement. New cars are trading for double list on the grey market. Owners complain of getting mobbed with gawkers whenever they hit the beach or the ski slopes. The buzz has led to an outstanding order book of an impressive 98,000, or four years of current production. The obvious cool factor allows enormous pricing power.

And here is the key to buying Rivian at this time. At 25,000, it is right at the mass production point where Tesla shares went ballistic all those years ago. And it already has an 80% decline in the price, in the rear-view mirror.

In 2024, Rivian plans to open its second plant in Georgia. After it fully expands its Illinois plant, it expects its annual production capacity to reach 600,000 vehicles.

Inflation Reduction Act passed this summer greatly accelerated rollout of the entire EV industry, which created a $7,500 per vehicle tax credit on top of state benefits.

Yes, this company offers venture capital-type risks. But it offers venture capital-type returns as well, up 10X-50X from here.

Ark Innovation Fund (ARKK) – ($40) – Cathie Woods’ high-tech fund was the proverbial red-headed stepchild of this bear market. It fell a gut-punching 80% from the 2021 top until last week. Just to get back to its old high, likely over the next five years, it has to rise by 400%. Its largest holdings are a real rollcall of the severely abused, Tesla (TSLA), Roku (ROKU), Exact Sciences (EXAS), Intellia (INTL), and Teladoc Health (TDOC), which Woods actively trades. But they are also a valuable insight into the future, EVs, CRISPR technology, robotic surgery, and molecular diagnostics. To learn more about the Ark Innovation Fund, please click here.

ProShares Ultra Technology ETF (ROM) – ($27) – This is a 2X long technology ETF that gives you an extremely aggressive position across the tech sector. It has 19% of its holdings in Apple (AAPL), 16% in Microsoft (MSFT), 10% in Alphabet (GOOGL) and Google (GOOG), at 3.5% in NVIDIA (NVDA), and 120 other smaller names. (ROM) shares are down a breathtaking 67% just in the past year. To learn more about the (ROM), please click here.

Palo Alto Networks (PANW) - $165 – Hacking is one of the fastest-growing sectors in technology, it is recession-proof and immune to the economic cycle. As a result, spending on the defense against hacking is absolutely exploding. Palo Alto Networks, Inc. is an American multinational cybersecurity company with headquarters in Santa Clara, California. Its core products are a platform that includes advanced firewalls and cloud-based offerings that extend those firewalls to cover other aspects of security. I have already earned a tenfold return over the past decade and expect to make another 10X in the coming years. You won’t find any dips in this stock as too many people are trying to get into it. To learn more about the Palo Alto Networks, please click here.

Salesforce (CRM) - $157 – The baby of tech genius Mark Benioff, this company is the dominant player in customer relationship management. If you want to do any business in the cloud, and almost all big companies do, you are up to your eyeballs in customer relationship management. Salesforce is the largest San Francisco-based cloud-oriented software company with virtually all of the Fortune 500 as its customer list. It provides customer relationship management software and applications focused on sales, customer service, marketing automation, analytics, and application development. Salesforce shares have been the target of a haymaker, down 55% in a year. To learn more about Salesforce, please click here.

You know what? I can do better than this.

I can create customized options LEAPS for you that will deliver a tenfold return on whatever performance these ultra-high beta stocks deliver. If the shares of one of my picks rise by 100%, you will make 1,000%.

This is an investment strategy that will enable you to retire early, real early. Tired of punching a time clock or logging into the next Zoom meeting on time?

Those will become a distant memory if you pursue my Mad Hedge Investment strategy for 2023.

As a result, my November month-to-date performance went off to the races, already achieving a hot +2.20%.

That leaves me with a very rare 100% cash position. With midterm election results out on Wednesday and the next report on the Consumer Price Index on Thursday, that sounds like a prudent place to be.

My 2022 year-to-date performance ballooned to +77.57%, a new high. The Dow Average is down -11.85% so far in 2022.

It is the greatest outperformance on an index since Mad Hedge Fund Trader started 14 years ago. My trailing one-year return maintains a sky-high +75.53%.

That brings my 14-year total return to +590.13%, some 2.86 times the S&P 500 (SPX) over the same period and a new all-time high. My average annualized return has ratcheted up to +49.51%, easily the highest in the industry.

Bonds Clock Best Day in Years, taking the ten-year US Treasury bond fund up $3.64. All low interest rate plays had monster days. Junk bond ETFs (JNK) and (HYG) were up two points. 30-year fixed rate mortgages dropped 60 basis points to 6.60%, the biggest drop in history. Long bonds will be THE big trade of 2023.

US Dollar has Worst Day in 20 Years, driven by plunging interest rates. Big tech, which gets a major share from overseas sales, rocketed. Apple alone was up $12. Cathy Wood’s Ark Innovation Fund (ARKK) was up an incredible 14%. It vindicates my view that tech will turn when interest rates and the dollar fall.

Oil Companies (USO) Book Record $200 Million Profit this year, using the Ukraine War to double your cost of gasoline. If we have a recession next year, or the war ends, energy share prices should be peaking around here. Even if they don’t, the risk-reward here is terrible. It means we will have to pay a much higher price to decarbonize the economy at a later date.

Wells Fargo Gets Hit with $1 Billion Fine for its many regulatory transgressions over the last decade. Looting of customer accounts with bogus fees has been a recurring problem. Use any selloffs to buy (WFC) on dips.

Berkshire Hathaway's 20% Profit Increase YOY and buys back another $1 billion worth of stock. However, they did take a $10 billion loss on stocks in Q3 during the market meltdown. Keep buying (BRKB) stock and LEAPS on dips.

$1.5 trillion in Homeowners Equity Lost Since May, thanks to interest rates at 20-year high and a shrinking money supply. Since July, the median home price has dropped by $11,560. The average borrower has lost $30,000 in equity. It’s not a great time to rent either as prices there are soaring. Residential housing could remain weak for another 12-24 months, compared to the six-year drawdown we had from 2006.

Boeing Orders Rise in October, but deliveries fall. The company is finally out of the penalty box, up 40% since October 1. Don’t buy (BA) up here.

The Red Wave Fails to Show, with control of congress still too close to call. Republican House control has shrunk from an expected 60 seats six months ago to maybe two today. Donald Trump threw the election for his party, picking unelectable extremist candidates and campaigning where he wasn’t wanted. A pro-life Supreme Court brought out millions of women voters across the country. If the Republicans can’t win with inflation at 8.7%, they are toast in 2024 when it drops back down to 2%.

Market Dives 646 Points on Democratic Win, with technology stocks taking the biggest hit. The red wave no-show was a black swan traders were not looking for. Energy was the worst performing sector because they aren’t getting the air cover they paid for with a red wave. The result was much as I expected, which is why I went into November 8 with a rare 100% cash position waiting to buy the next low. It turns out that rights are more important than prices.

Elon Musk Sells More Tesla Shares and Warns of a Twitter Bankruptcy, some $3.9 billion worth, bringing this year’s total to $36 billion. Musk is raising money to head off a bankruptcy of Twitter now that major advertisers are fleeing en masse. This certainly is a distress sale. If Musk was looking to build a real business, re-tweeting fringe conspiracy theories was the worst thing he could have done. Endorsing the Republican party will cost him half of his customers. Is this Musk’s Waterloo, or his Dien Bien Phu?

Facebook to Lay Off 11,000, about 13% of its total employees. Zuckerberg admits the error of pushing the company into the metaverse too far too fast. With the stock down 77%, there are not a lot of happy campers at One Hacker Way. Avoid (META) for now, but it may be a 2023 play when we get closer to a new final product.

FTX Becomes an Epic Bankruptcy, with $9.5 billion missing from its balance sheet, in one of the biggest blowups of the crypto age. Losses are expected to reach $50-$60 billion, with the bankruptcy of 130 affiliated companies. It is also a potential Dept of Justice target. All affiliated tokens and coins have gone to zero. So, placing your money with a fresh-faced kid in the Bahamas wearing baggy shorts and with no financial background was not such a great idea after all. It’s amazing how many serious people were sucked in on this one. At least Sam Bankman-Fried said he was sorry.

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. With the economy decarbonizing and technology hyper-accelerating, there will be no reason not to. The Dow Average will rise by 800% to 240,000 or more in the coming decade. The America coming out the other side will be far more efficient and profitable than the old. Dow 240,000 here we come!

On Monday, November 14 at 8:00 AM, the Consumer Inflation Expectations for October are released.

On Tuesday, November 15 at 8:30 AM, the Producer Price Index for October is released.

On Wednesday, November 16 at 8:30 AM, Retail Sales for October are published.

On Thursday, November 17 at 8:30 AM, Weekly Jobless Claims are announced. Housing Starts and Permits for October are also out.

On Friday, November 18 at 10:00 AM, the Housing Starts for October are printed. At 2:00 the Baker Hughes Oil Rig Count is out.

As for me, I am often told that I am the most interesting man people ever met, sometimes daily. I had the good fortune to know someone far more interesting than myself.

When I was 14, I decided to start earning merit badges if I was ever going to become an Eagle Scout. I decided to start with an easy one, Reading Merit Badge, where you only had to read four books and write one review.

I was directed to Kent Cullers, a high school kid who had been blind since birth. During the late 1940s, the medical community thought it would be a great idea to give newborns pure oxygen. It was months before it was discovered that the procedure caused the clouding of corneas and total blindness. Kent was one of these kids.

It turned out that everyone in the troop already had Reading Merit Badge and that Kent had exhausted our supply of readers. Fresh meat was needed.

So, I rode my bicycle over to Kent’s house and started reading. It was all science fiction. America’s Space Program had ignited a science fiction boom and writers like Isaac Asimov, Jules Verne, Arthur C. Clark, and H.G. Welles were in huge demand. Star Trek came out the following year, in 1966. That was the year I became an Eagle Scout.

It only took a week for me to blow through the first four books. In the end, I read hundreds to Kent. Kent didn’t just listen to me read. He explained the implications of what I was reading (got to watch out for those non-carbon-based life forms).

Having listened to thousands of books on the subject, Kent gave me a first class education and I credit him with moving me towards a career in science. Kent is also the reason why I got an 800 SAT score in math.

When we got tired of reading, we played around with Kent’s radio. His dad was a physicist and had bought him a state-of-the-art high-powered short-wave radio. I always found Kent’s house from the 50-foot-tall radio antenna.

That led to another merit badge, one for Radio, where I had to transmit in Morse Code at five words a minute. Kent could do 50. On the badge below the Morse Code says “BSA.” In those days, when you made a new contact, you traded addresses and sent each other postcards.

Kent had postcards with colorful call signs from more than 100 countries plastered all over his wall. One of our regular correspondents was the president of the Palo Alto High School Radio Club, Steve Wozniak, who later went on to co-found Apple (AAPL) with Steve Jobs.

It was a sad day in 1999 when the US Navy retired Morse Code and replaced it with satellites. However, it is still used as beacon identifiers at US airfields.

Kent’s great ambition was to become an astronomer. I asked how he would become an astronomer when he couldn’t see anything. He responded that Galileo, the inventor of the telescope, was blind in his later years.

I replied, “good point”.

Kent went on to get a PhD in Physics from UC Berkely, no mean accomplishment. He lobbied heavily for the creation of SETI, or the Search for Extra Terrestrial Intelligence, once an arm of NASA. He became its first director in 1985 and worked there for 20 years.

In the 1987 movie Contact written by Carl Sagan and starring Jodie Foster, Kent’s character is played by Matthew McConaughey. The movie was filmed at the Very Large Array in western New Mexico. The algorithms Kent developed there are still in widespread use today.

Out here in the west aliens are a big deal, ever since that weather balloon crashed in Roswell, New Mexico in 1947. In fact, it was a spy balloon meant to overfly and photograph Russia, but it blew back on the US, thus its top secret status.

When people learn I used to work at Area 51, I am constantly asked if I have seen any spaceships. The road there, Nevada State Route 375, is called the Extra Terrestrial Highway. Who says we don’t have a sense of humor in Nevada?

After devoting his entire life to searching, Kent gave me the inside story on searching for aliens. We will never meet them but we will talk to them. That’s because the acceleration needed to get to a high enough speed to reach outer space would tear apart a human body. On the other hand, radio waves travel effortlessly at the speed of light.

Sadly, Kent passed away in 2021 at the age of 72. Kent, ever the optimist, had his body cryogenically frozen in Hawaii where he will remain until the technology evolves to wake him up. Minor planet 35056 Cullers is named in his honor.

There are no movies being made about my life…. yet. But there are a couple of scripts out there under development.

Watch this space.

Stay healthy,

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

September 6, 2022

Diary, Newsletter, Summary

Global Market Comments
September 6, 2022
Fiat Lux

Featured Trade:

(MARKET OUTLOOK FOR THE WEEK AHEAD, or WELCOME TO THE ROLLING RECESSION),
(AAPL), (NVDA), (TSLA), (USO), (BTC), (MSFT), (CRM), (V), (BA), (MSFT), (CRM), (DIS)