The writing has been on the proverbial wall as central banks around the world struggled for years to contain inflation without destabilizing financial systems.
A steady stream of economic data over the past several years has highlighted how fragile the global financial balance became after the pandemic, with inflation emerging as one of the most persistent challenges.
Central banks were slow to tighten policy because moving too aggressively risked triggering recession, asset market stress, or outright financial accidents. For a long time, it was simply easier to keep policy loose than to risk being blamed for breaking the system.
That hesitation reshaped how investors viewed scarce assets.
The appeal of Bitcoin has consistently strengthened during periods when inflation outpaced wages and purchasing power eroded. While Bitcoin is not mechanically linked to inflation data, its narrative as a hedge against monetary debasement gained traction as inflation surged across developed economies between 2021 and 2023.
Canada was an early warning sign. Inflation surged to levels not seen in decades as supply chain disruptions, labor shortages, and rising energy costs collided. Prices for housing, transportation, and food rose sharply, forcing central banks to abandon the idea that inflation was merely transitory.
Similar dynamics played out across Europe and the United States.
Supply chains proved far more fragile than expected, and they did not normalize quickly. Worker shortages, geopolitical disruptions, and energy market volatility repeatedly pushed costs higher, even after headline inflation began to cool.
Governments were forced to step in at times simply to keep essential goods moving. Fuel shortages, transport bottlenecks, and labor constraints became recurring reminders that modern economies are more brittle than they appear.
Inflation acted as a quiet tax on consumers, businesses, and savers. Wage increases often failed to keep pace with rising prices, meaning higher nominal income did not translate into higher real purchasing power. For many households, raises were effectively absorbed by higher rent, food, energy, and insurance costs.
That erosion of purchasing power pushed more people to reconsider where they stored long-term value.
Rising interest in crypto during high inflation periods was not driven by optimism alone, but by frustration with traditional systems that appeared unable to preserve real wealth. For many investors, crypto represented an opt-out mechanism rather than a speculative gamble.
Supply shocks compounded the problem. Energy disruptions, extreme weather, and geopolitical tensions repeatedly slowed logistics and increased costs. Food prices were especially sensitive, with meat, eggs, and dining costs rising sharply during peak inflation periods, even as other categories stabilized later.
These pressures reinforced a broader narrative. When trust in institutions weakens and policy responses lag behind economic reality, alternative systems attract attention.
The rise in crypto adoption has reflected that shift in sentiment. It has been less about chasing rapid gains and more about hedging against policy uncertainty, currency debasement, and institutional fragility.
Crypto price cycles have remained volatile, but the underlying demand story has matured. Participation has broadened, infrastructure has improved, and access through regulated investment products has expanded globally.
The result is an asset class that responds not just to speculation, but to macroeconomic stress.
High inflation did not single-handedly drive crypto adoption, but it accelerated it. And as long as confidence in monetary policy remains imperfect, digital assets will continue to benefit from that uncertainty.
https://www.madhedgefundtrader.com/wp-content/uploads/2021/10/us-inflation.png900936Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2026-01-15 13:04:332026-01-22 09:49:44High Inflation is a Gift to Crypto
This article is not a joke. This is an article about a parody token that is now a real thing.
There are meme stocks, and there are meme tokens.
There is the argument out there that the flood of liquidity is giving these assets their time in the sun.
I am not saying these assets are great to buy and hold long-term, hardly not, but they do offer the volatility for traders to jump in and out of them for a nice profit.
Shiba Inu Coin (SHIB), a popular meme token based on another alternative coin, Dogecoin (DOGE), is a decentralized cryptocurrency created in August 2020 by an anonymous person or persons known as “Ryoshi.”
SHIB experienced its most explosive run during the 2021 meme-asset cycle and has since settled into a more mature, volatility-driven trading range.
While this dog-inspired cryptocurrency continues to see sharp rallies during periods of market enthusiasm, it remains well below its 2021 all-time high of approximately $0.000088.
Shiba Inu Coin now typically ranks around No. 34 by market capitalization, with a market value fluctuating between roughly $4.7 billion and $5.2 billion, still firmly placing it among the largest meme-based cryptocurrencies, but far from the very top of the market.
Before investing in any altcoins, it’s important to understand that these coins are a great deal riskier than something like Bitcoin (BTC).
It sounds funny just saying that but yes, there are different degrees of risk with different coins.
There has been a lot of hype surrounding the Fear of Missing Out (FOMO) movement, but I would say, only deploy capital in altcoins if you are willing to write off the entire investment.
And I’ll say this, it’s a speculative investment in general, so at least do a little due diligence before you take the plunge.
Shiba Inu Coin is an Ethereum-based ERC-20 token, which means it was developed on the Ethereum blockchain, rather than its own blockchain.
Ryoshi decided to launch SHIB on Ethereum (ETH) because it’s “already secure and well-established,” according to the SHIB white paper, or, as its community calls it, the “woof paper.”
I have gone on record saying that Ethereum will go higher than Bitcoin in the future because it’s that attractive platform that every DeFi developer wants to build on, and SHIB is just one iteration of that.
Developers also choose to roll out their projects using the ETH platform because it’s way cheaper than building a platform from scratch.
SHIB launched with a total supply of 1 quadrillion tokens, though a meaningful portion has since been burned, bringing the circulating supply down to roughly 589 trillion SHIB over time.
Ryoshi is on record saying he doesn’t have any SHIB, and nearly half of its initial supply was locked in a liquidity pool on the decentralized exchange Uniswap.
The rest was sent to Ethereum co-founder Vitalik Buterin.
According to SHIB’s white paper, Ryoshi sent tokens to Buterin with hopes that he’d keep the tokens.
However, Buterin did not.
He donated a significant amount to the India Covid Relief Fund and other charities, which goes to show that not all Covid Relief Funds are created equal.
This is not a joke, and some people might be laughing when they read what this coin is based on.
That is why altcoins may require additional caution due to their differences from something like Bitcoin, including their structure, supply, and utility.
SHIB supporters might point to a comprehensive ecosystem, which now includes smart contract functionality, NFTs, liquidity mining opportunities, and a dedicated Layer-2 network, Shibarium, aimed at lowering transaction costs and expanding real utility beyond pure community hype.
Another juicy piece of news saw rising support for a Change.org petition urging trading platform Robinhood to list SHIB on the broker’s platform.
That effort ultimately succeeded.
SHIB has been listed on Robinhood since 2022, improving accessibility and liquidity, though the listing did not translate into a sustained re-rating of the token’s price.
When asked by analysts, Robinhood CEO Vladimir Tenev had initially been noncommittal, but the listing was later approved as part of a broader expansion of the company’s crypto offerings.
That’s the thing about these altcoins — they can come out of nowhere, and even a “fake it till you make it,” SHIB created real wealth during its peak cycle for early participants.
Now the secret is out about SHIB, I would scale in slowly, but don’t bet the ranch on this speculative bet, and prepare for high volatility.
https://www.madhedgefundtrader.com/wp-content/uploads/2021/10/shiba.png8881178Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2026-01-15 13:02:102026-01-21 13:23:42Shiba Inu Coin
South Korea’s public pension ecosystem has long been viewed as conservative, but that perception has been steadily eroding. One of the country’s largest institutional pools of capital, the Korean Teachers’ Credit Union (KTCU), has explored digital asset exposure as part of its broader effort to improve long term returns.
The fund considered gaining Bitcoin exposure through exchange-traded funds in early 2022, a move that would have been unthinkable for most public pensions just a few years earlier.
I am not going to touch on whether there is a moral high ground when it comes to investing employee retirement assets. The reality is that the fixed-income instruments pension funds traditionally rely on have struggled to deliver adequate returns in a prolonged low-yield environment.
The definition of insanity is repeating the same approach when it no longer works.
Faced with a shrinking menu of viable options, institutional allocators have been forced to expand their definition of alternative assets, and crypto has increasingly entered that conversation.
Pension fund managers have performance targets like everyone else and are ultimately judged on results.
This shift does not represent the old status quo for retirement capital, but it does reflect a broader change in how alternative investments are evaluated.
KTCU’s exploration of Bitcoin-linked exchange-traded products included funds associated with South Korean asset manager Mirae Asset Global Investments, which launched Bitcoin futures-based ETFs through its Canadian subsidiary Horizons ETFs in 2021.
Today, KTCU oversees more than $45 billion in assets under management, with a substantial portion allocated to alternative investments alongside domestic and international equities.
The mere consideration of crypto and blockchain exposure by pension funds has opened a new chapter in the digital asset market, one where the most conservative capital pools in the world no longer dismiss the asset class outright.
What once seemed bizarre has become increasingly rational when viewed through the lens of portfolio construction and risk management.
Despite lingering concerns about volatility, crypto has established itself as one of the most actively traded and institutionally monitored asset classes globally.
Regulatory clarity has improved over time, particularly following the approval of spot Bitcoin exchange-traded funds in major markets, including the United States, which significantly lowered the barrier to entry for large institutional investors in Bitcoin.
Traditional stewards of retirement capital have begun voting with their currency, and this trend has extended beyond Korea into other parts of Asia.
Family offices were early adopters of crypto funds, but pension plans and endowments have since followed, accelerating the professionalization of the digital asset ecosystem.
The market has grown more sophisticated and more institutional, driven by post pandemic monetary policy, inflation concerns, and the search for assets that behave differently from traditional markets.
Being risk-averse no longer automatically means avoiding cryptocurrency. Increasingly, it means understanding it.
Several high-profile pension-related moves have underscored this evolution.
The Houston Firefighters’ Relief and Retirement Fund confirmed allocations to Bitcoin and Ethereum, marking one of the earliest United States public pension entries into digital assets.
Canada’s Ontario Teachers’ Pension Plan Board participated in a major funding round for crypto exchange FTX. That investment was later written down following FTX’s collapse, reinforcing the importance of counterparty risk management rather than reversing institutional interest in digital assets more broadly.
This growing channel of institutional capital has reshaped the crypto market structure, providing deeper liquidity and a more resilient base of long-term participants.
With more buyers able to access the market through regulated products, crypto has moved further into the financial mainstream, even as volatility remains a defining feature of the asset class.
https://www.madhedgefundtrader.com/wp-content/uploads/2021/10/the-K.png562936Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2026-01-15 13:00:292026-01-21 13:20:36Global Pension Funds Next in Line
As some of you may have figured out, there are other cryptocurrencies out there besides Bitcoin (BTC).
In fact, there are thousands of different cryptocurrencies out there.
Generated, in part, by the transformational narrative of BTC, many have tried to replicate the success of Bitcoin in terms of percentage gain of the underlying asset.
These other peer-to-peer digital currencies have emerged over the last decade and are all chasing BTC.
First, let me get it out of the way by saying that BTC has extraordinarily benefited from its first-mover advantage and the subsequent snowballing network effect.
Altcoins, not even one, have replicated these super boosters.
These digital currencies, better known as altcoins, are mainly designed to overcome the structural and technical limitations of BTC while supporting a diverse set of real-world use cases.
Why should investors keep tabs on altcoins?
Per the date of this writing, BTC has reached market capitalizations well over one trillion dollars at cycle peaks, and altcoins have represented a comparable share of total crypto market capitalization across cycles.
Commanding a substantial portion of the crypto market is enough to warrant attention.
Since altcoins are such a large part of the market, every crypto investor should understand how they work.
In fact, the way you might profit from crypto is not in BTC itself, but in the diverse set of other assets in the space.
It’s true that many missed the BTC boat. Make sure you don’t miss the next boat.
Owing to the growth of the decentralized finance ecosystem, the increased use of smart contracts, and the introduction of environmentally friendly consensus mechanisms, altcoins expanded their market capitalization rapidly between 2020 and 2021, followed by consolidation and shakeouts in subsequent years.
Altcoin popularity signaled the growing breadth of high-quality crypto assets entering the industry.
Many blockchain companies and projects issue their own cryptocurrency tokens, making them the primary utility token for users to interact with their network.
Since there are hundreds of projects and decentralized finance opportunities available, such as staking and yield farming, together with an open market to choose from, it has proven increasingly difficult to determine the most promising projects.
One major variable that must be baked into the pie is that altcoins tend to offer higher risk and higher reward as a cryptocurrency investment.
Although Bitcoin is volatile, it remains the market leader and has already gained substantial value and name recognition, so investors looking for extra juice gravitate toward lower-priced, nascent coins with more upside.
Altcoins have more room to grow, but they also carry higher idiosyncratic and survivorship risk. Therefore, I can’t advise readers to pour their entire net worth into altcoins.
A wonky altcoin has repeatedly gone to zero across cycles, and there is no way to recover fiat capital once that happens.
Readers looking for altcoin exposure should only allocate a small portion of their portfolio into this space, and I would still emphasize using reputable platforms such as Robinhood or Coinbase.
Altcoins are often more experimental. Since they came out after Bitcoin, they have attempted to improve on its technology. In terms of transaction speeds and costs, many altcoins are superior to Bitcoin in narrow technical dimensions, though often at the expense of decentralization or security.
Should you consider investing in altcoins?
The proverbial low-hanging fruit in BTC was harvested earlier, although Bitcoin remains the benchmark asset in the space.
Another serious challenge with altcoins is how to pick the right one in a crowded setup, which is where we come in.
We continue to navigate through altcoins and give readers the best chance to succeed.
Like real estate, many altcoins are priced relative to the value proposition they offer when compared to a high-five figure or six-figure BTC, which is essentially seen as the best house in the best neighborhood and therefore priced the highest.
The altcoin that performs best in the short run is often the worst house in the best neighborhood, while the greatest long-term potential tends to come from the best house in a rapidly gentrifying neighborhood.
Altcoins and their underlying prices have behaved in a similar fashion to real estate prices, which is why Ethereum and some others have cycled between periods of apparent undervaluation and excess when measured against BTC.
In short, the rising tide lifting all boats has applied unevenly across digital assets over multiple cycles. Bitcoin itself moved through a full market cycle after 2021, but the broader crypto asset class survived, matured, and validated its existence through repeated stress tests.
https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png00Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2026-01-13 13:04:192026-01-28 10:49:58Are Altcoins Relevant?
One might postulate that the price of Bitcoin and Chinese housing have no relevant correlation with each other.
Think again!
Granted, Chinese citizens aren’t denominating their mortgages in Bitcoin to snap up their ritzy Shanghai townhouses overlooking the Bund.
I don’t mean that.
But Bitcoin is an asset just like stocks, bonds, and commodities, and is exposed to one-off events that shake out the financial system.
What’s brewing in the Middle Kingdom?
China’s biggest property builder, Evergrande, has since collapsed into one of the largest restructurings in global property history.
Add it up, Chinese bank deposits are estimated at over $45 trillion, more than 2x the US.
Would any Chinese financial crisis lead to an epic flight to fiat alternatives?
Does nobody recognize that this is a planned liquidity drain of the property market in China by the CCP?
All escape "exits" have already been shut. You can't even buy paper gold in China either. Forget Bitcoin!
So I don’t believe that the potential disorderly selling of Chinese flats or the bust of a major property developer would end up boosting the price of Bitcoin because the Chinese government has made it abundantly clear that Bitcoin remains a hard prohibition for its citizens, with enforcement expanded through 2024.
If there is a 20% dip in Chinese property prices, the Chinese would believe that’s a once-in-a-century buy-the-dip type of event, which ultimately became a multi-year decline exceeding 30% in many tier-2 and tier-3 cities.
That doesn’t mean that some won’t try to sell on the down low and get their money out of China through hell or high water.
Some certainly will. China made it clear they didn’t want their citizens investing in overseas assets. I know of the odd millionaire spinning out a random credit card to put a down payment on a house in Vancouver.
What this does scream is policy error big time, an overtightening that could result in a hard landing that is ruinous for global growth.
That would be the worst-case scenario, and I would put that at 10%, which in hindsight proved directionally correct, though slower and more structural than abrupt.
Why is this company systemically important?
Evergrande was once China’s darling real estate developer. Now, it has defaulted, been restructured, and effectively dismantled.
It was founded in 1997 by Xu Jiayin. It has completed around 1,300 commercial, residential, and infrastructure projects, and at its peak, employed over 200,000 people directly, with millions indirectly exposed.
The company’s success came because it was aligned perfectly with the parabolic boom in real estate that has been driven by the last two decades of staggering Chinese growth, growth for a country that is unparalleled in all of modern human history.
The tragedy in all this is that over 1.6 million Chinese put deposits down on homes that hadn’t been built, and this was more often than not their entire life savings.
Most likely, it is they who held the bag, many of whom faced long delays, partial recoveries, or state-mediated completions.
Better them than me.
For a soft landing to happen, the Chinese government has selectively intervened while still allowing developers to fail.
Even though I categorize this as a quasi-gray swan, opposed to a solid black swan, it is highly likely that it did not spill over into the broader global market, and when large bitcoin dips occurred, bitcoin buyers were ultimately gifted lower prices to enter.
These opportunities were few and far between in that cycle, and I can guarantee that MicroStrategy CEO Michael Saylor went on to repeatedly execute additional bitcoin purchases, often financed with corporate paper.
Limiting the fallout proved more complex than initially assumed, with piecemeal liquidity support and moral-hazard constraints shaping policy responses, plugging holes before they became unpluggable, not unlike our own debt ceiling mess.
The larger issue remains to ponder. Was this the tip of the iceberg?
The silence and lack of major actions from policymakers made everyone nervous at the time, but most likely, they were managing it quietly through state banks and local governments.
The response was largely driven by the People’s Bank of China, which initiated targeted liquidity operations that became a multi-year pattern rather than a single rescue event.
Evergrande was ultimately confirmed to have over $300 billion in liabilities, more than any other property developer in the world. At its peak, it was a beast in China’s high-yield dollar bond market.
A lackluster response to an already expensive market proved costly, with real estate still estimated to account for roughly 35 to 40% of household assets in China despite price declines. At the time, home sales by value showed their sharpest drop since the onset of the coronavirus.
Isolating Evergrande became a point of emphasis for the Chinese Communist Party, using the firm as a scapegoat for sky-high property prices.
They were the fall guy.
This was more of a political show than anything else, a show of power, letting the world know that this economic pain was nothing to even bat an eyelid about.
Bitcoin, perceived as a riskier asset along the risk curve, was not immune from sell-offs, and risk-off sentiment contributed to episodic drawdowns during the 2021 to 2022 cycle.
I had faith in the Chinese government’s authority to contain systemic fallout, and while $40,000 proved only a temporary reference point for Bitcoin, the asset ultimately moved through a full cycle drawdown before reaching new highs in subsequent years.
Short-term relief rallies did occur as headlines improved, though always within a broader macro tightening cycle.
This episode should be understood as part of a standard risk reset, where a 5% equity drawdown translated into roughly double that in crypto volatility.
Booking some of those gaudy profits earlier in the cycle to lower cost basis while deploying capital at lower levels ultimately proved to be the correct play.
https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png00Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2026-01-13 13:02:222026-01-21 13:22:37Understanding the Fog of War
I’ll take you on a short journey on the next best thing after Bitcoin in crypto land.
Ethereum, or ETH.
It’s most likely the most profitable opportunity from the established crypto assets today.
ETH is the second-largest cryptocurrency by valuation, coming in at over $400 billion.
I know many of the readers out there have a hard time wrapping their heads around Bitcoin, and I will vouch that ETH could be the real catch up trade if the initial breakout phase in Bitcoin was missed.
Let’s take a look at what’s driving Ethereum’s price action.
Why is Ethereum on the rise?
ETH was launched in 2015, and it’s famous for being the first cryptocurrency with a programmable blockchain.
While other cryptocurrencies were using blockchain technology to record transactions, ETH offered a blockchain that developers could use.
Through ETH, developers can create decentralized apps, or dApps.
These dApps are a fundamental part of some of the biggest current trends in cryptocurrency. They are used for decentralized finance, or DeFi, which are platforms that provide financial services without a middleman, such as a bank. They are also used with non fungible tokens, or NFTs, which are digital assets that people buy and sell as collectibles.
Offering a robust platform to build other apps on it is one of the biggest differences between bitcoin and ETH and also why ETH could have more upside to the price in the long term.
As of last count, about 60% of dApps are built on ETH, reflecting increased competition from alternative layer one networks.
Fortunately, ETH benefits from the first mover advantage in this respect and continues to attract high quality developers to work on dApps.
The development of dApps has created an ecosystem that far exceeds anything bitcoin can produce at the base layer.
Another critical reason for higher prices in ETH is that the asset has gone through a series of structural upgrades.
The Ethereum network’s long planned transition to a scalable, proof of stake consensus model was completed in September 2022.
This transition, commonly referred to as Ethereum 2.0, fundamentally changed how the network operates.
Major upgrade milestones did produce classic buy the rumor sell the news price action, with strong rallies into events followed by periods of volatility afterward.
These upgrades made ETH significantly more environmentally friendly and improved security, while scalability has increasingly been achieved through layer two rollups rather than the base layer itself.
More specifically, Ethereum’s upgrades fulfilled its original vision of becoming an efficient, global scale, general purpose transaction platform while retaining crypto economic security and decentralization.
Should you buy Ethereum right now?
I believe ETH could outperform Bitcoin on a relative use basis over time, even though Bitcoin remains dominant as a monetary asset.
Why?
Its co originator, Vitalik Buterin, is an Elon Musk type figure in the crypto community, capable of moving mountains and pulling off technical breakthroughs time and time again.
He is the individual who built ETH from scratch.
Second, ETH remains the cryptocurrency of choice for creating dApps.
Ethereum’s transition to proof of stake proved to be a major improvement, allowing it to support far greater transaction volumes through scaling layers while reducing energy usage by more than 99%.
It is relevant in terms of volume and market capitalization, meaning there is a minimal chance this is a fly-by-night phenomenon.
After Bitcoin, ETH has remained the most popular asset for institutional allocation, particularly through ETFs, custody products, and staking-enabled investment vehicles.
Access to ETH is also top-notch and available for purchase at most cryptocurrency exchanges. It is easy to buy compared to many irrelevant coins.
ETH prices have continued to trade through macro uncertainty driven by global rate cycles, regulatory shifts, and alternating risk-on and risk-off regimes.
Historically, ETH has been volatile, reflecting its dual role as both a technology platform and a financial asset.
It has recently traded around $3,000, and ETH continues to position itself as core infrastructure for the digital asset economy.
Ultimately, while near term price targets are always speculative, ETH has already traded well beyond prior cycle highs, and future upside will likely be driven less by hype and more by adoption, fee generation, and real economic usage.
https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png00Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2026-01-13 13:00:092026-01-21 13:21:10The Appeal of Ethereum
(MARKET OUTLOOK FOR THE WEEK AHEAD, or IT’S ALL ABOUT INTEREST RATES),
(HOOD), (CRWV), (BTC), (ORCL), (NFLX), (GS), (ZM), (MS), (BLK),
(GT), (WHR), ORCL), (INTC), (BABA)
Below, please find subscribers’ Q&A for the February 26 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Incline Village, NV.
Q: Isn’t this just a cyclical thing? Don’t all bull markets come to an end?
A: Yes, they do. But this time around, it looks like the market is being pushed off a cliff. I guess you have to say that uncertainty is the new element here. Depending on who you talk to, uncertainty is either at a 5-year high, a 30-year high, or a 96-year high (the 1929 crash). Suffice it to say that with the election results being so close (it was the 3rd closest election in history), that means essentially half of all voters are going to be pissed off no matter what happens. It’s a no-win situation. Plus, you go in with multiples at—depending on how you measure them—30-year highs or 96-year highs and dividend yields at all-time lows. A lot of these stocks have gotten stupidly expensive and are begging for a selloff. That is not a good environment to ratchet off the uncertainty.
Q: Should I buy Bitcoin (BTC) on the dip since it’s down about 15 or 20% from the highs?
A: Absolutely not. If you’re going to take a flyer, it was when it was at $6,000, not at $90,000. You can always tell when an asset class is topping because suddenly, I get a bunch of people asking if they should buy it. I've been getting that from Bitcoin all year, and the answer is absolutely not. We're looking for value here, and there's no value to be found anywhere. With Bitcoin, the question you really have to ask is: What happens when Trump leaves office? Does Bitcoin become regulated again? The answer is probably yes, so if the entire rally from $50,000 to $108,000 was based on deregulation, what happens when you re-regulate? So, no thank you, Bitcoin.
Q: Should I sell Tesla (TSLA) and Nvidia (NVDA) LEAPS?
A: It depends on your strike prices, if you're still deep in the money, I would hang on. I think the worst case is Nvidia drops to maybe $100 and Tesla drops to maybe $250. What you should have done is take profits 3 months ago when these things were at all-time highs. I did. Whenever you get up to 80% or 90% of the maximum potential profit on profit LEAPS, you should take that, especially if you have more than a year to run to expiration, because they will go to money heaven if you get a correction like this. Leave the last 10% for the next guy. So yes, I would be de-risking, you know, give all your portfolios a good house cleaning and get rid of whatever you’re not happy to keep for the next several years.
Q: What about LEAPS on financials?
A: I do think financials will come back; it’s just a question of how far they’ll drop first, and you can see I put my money where my mouth is with two financial LEAPS for the short term.
Q: Apple (APPL) expects to increase its dividends. Should I buy the stocks?
A: Actually, Apple has gone down the least out of any of the magnificent 7, but they all tend to trade as a bunch. Apple’s had a terrific run since last summer. Those are the ones that will get paired back the most. So it’s nice to get a dividend, but it’s no reason to buy a stock because you can wipe out a year’s worth of a dividend in a single day’s negative trading.
Q: What do you think of Chinese tech stocks?
A: I think they’re peaking out here; the same with Europe—they’ve had this tremendous rally this year NOT because of the resurgence of Chinese or European economies. It’s happening because of the uncertainty explosion in the United States and the fact that these European and Chinese stocks all got insanely cheap—well into single-digit price-earnings multiples. So, people are just readjusting a decade and a half long short positions in these areas. I don’t see a sustainable bull market in China or Europe based purely on fundamentals. This is just a trading play, which you’ve already missed, by the way—the big move has happened.
Q: Doesn’t it seem like the unemployment claim numbers are being told more truthfully now?
A: Nothing could be further from the truth. The unemployment claims are collected by the states and then collated by the federal government—the Bureau of Labor Statistics. I've been hearing for 50 years that the government rigs the statistics it publishes. The way you'll see that is when you get a major divergence between government data and private sector data, which we have a lot of. When they diverge, you'll know the government is fudging the data. I have a feeling they may be faking the inflation data in the not-too-distant future.
Q: Should I buy Tesla (TSLA) on the dip?
A: Absolutely not. There is no indication that the rot at the top of Tesla has ended. You basically have a company that’s leaderless and rudderless, with falling sales in China and Europe and a boycott going on in Europe against all Tesla products. Sales down 50% year on year isn't an economic thing, it’s a political thing. Suddenly, Europe doesn't like Elon Musk's politics since he’s advocating the destruction of their economies and interfering in their elections. This is why CEOs of public companies should NEVER get involved in politics—once you voice an opinion, you lose half of your customers automatically. But at a certain point, no amount of money you lose can move the needle with Elon Musk; he’s too rich to care about anything and has said as much.
Q: How much cash should I have?
A: It depends on the person. I am watching the markets 12 hours a day. I can go 100% cash and be 100% invested tomorrow. You, I'm not so sure. A lot of you have heavy index exposures, so it really is different for each person. How much do you want to sleep at night? That's what it really comes down to. Are we going to have a big recession or not? That is the question plaguing investors right now.
Q: What are your thoughts on Berkshire Hathaway (BRK/B)?
A: Buy the dips. I mean it's, you know, 50% cash right now, so it's a great place to hide out if you're a conventional money manager who isn't allowed to own cash or more than 5% cash. So yeah, I think we could go higher. Just expect a 5% correction when Warren Buffet dies. He’s 95.
Q: Why buy SPDR Bloomberg High Yield Bond ETF (JNK) and not iShares 20+ year Treasury Bond ETF (TLT)?
A: JNK has a yield that is now almost 2.3% higher than the (TLT), and that gives you a lot of downside protection, you know, a 6.54% yield. That is the reason you buy junk.
Q: Why have you changed your opinion on the markets when you've been bullish for the last many years?
A: I have a Post-it note taped to my computer monitor with a quote from John Maynard Keynes: “When the facts change, I change. What do you do, sir? The answer is very simple: the principal story of the market up until the end of last year was the miracle of AI and how it was going to make us all rich. Now, the principal story of the market is the destruction of government spending, the chaos in Washington, and tariffs. That is not an investor-friendly backdrop on which to invest. The government is 25% of the GDP, and if you cut back even a small portion of that, even just 5%, that is called a recession, ladies and gentlemen, and nobody wants to own stocks in a recession. And this is all happening with valuations at all-time highs, so it is a very dangerous situation. Suffice it to say, the Trump that campaigned and the Trump we got are entirely different people with far more extreme politics. The market is just figuring that out now, and the conclusion is the same everywhere: sell, sell, go into cash, hide. Certain markets trade at rich premiums, while uncertain markets trade at deep discounts. Guess what we have now.
Q: Isn’t $65-$77 a barrel the new trading range for crude oil ($WTIC)?
A: This has recently been true, but if we go into recession, that breaks down completely, and we probably go to the $30s or $40s, and a severe recession takes us to zero. So that is a higher risk play than you may realize; that is where the charts can get you into big trouble if you ignore the fundamentals.
Q: Do you expect interest rates to drop?
A: No, they have dropped 50 basis points this year on a weak dollar and declining confidence, and the US Treasury has issued almost no long-term bonds this year. So that has created a bond shortage, which has created a temporary shortage and a fall in long-term interest rates. That will change as soon as the new budget is passed, and the earliest that can happen is March 14th. After that, we may get a new surge in interest rates as the government becomes a big seller of bonds once again, which will drive up interest rates massively. The Treasury has to issue $1.8 trillion in new bonds this year just to break even, and now it has only 10 months to do it. So there may be a great short setting up here in the (TLT), and of course, we’ll let you know when we see that.
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Good Luck and Good Trading,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
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