(COIN) Archives

June 1 Biweekly Strategy Webinar Q&A

Below please find subscribers’ Q&A for the June 1 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Silicon Valley.

Q: What are the 3 best stocks to own for the end of the year?

A: Apple (AAPL), Alphabet Inc. (GOOGL), and Microsoft (MSFT). Those you want to buy on meltdown days, kind of like today. Make sure you scale into these—so maybe buy 20% on every down-500-point Dow day. Eventually, you’ll end up with a pretty decent position at a market low in a stock that will double in 3-5 years.

Q: Why these three stocks?

A: Lots of reasons: They’re huge, they’re safe, two out of three pay dividends, Alphabet is about to split, and they have huge moats so nobody can get into their sectors. They have near monopolies in what they do, and they have immense cash on the balance sheet. These are the kind of stocks that portfolio managers dream about. And watch what rallied the hardest in the last dead cat bounce we had—it was these three names. That tells you that they will lead any long-term bull market in the future. These are the stocks that people want to own.

Q: What will bring your predicted second half-bull market in the stock market?

A: Inflation drops from 8% to 4%. That will happen for a couple of reasons. The year-on-year comparisons become highly favorable starting from next month when inflation started to take off a year ago. Inflation numbers are going to be climbing the wall of worry from here on out. That could get us down to 4% by the end of the year. The second reason is the Ukraine War either ends or becomes a stalemate and is no longer a factor in the global markets, and we’ve had time to replace all the Russian oil and Ukrainian wheat.

Q: Are banks positioned to benefit from the coming rally?

A: Absolutely. I think big tech and banks will be the top-performing stock sectors for the next five years because inflation will go away, recession fears will go expire, and credit quality will improve, but interest rates will remain 300 basis points higher than they were during the pandemic. Buy (JPM), (BAC), and (C) on dips.

Q: What will be the worst performing sector?

A: Energy—anything energy-related will get absolutely slaughtered, which is why I don't want to touch it with a ten-foot pole right now. That includes oil companies, exploration companies, E&P companies, and master limited partnerships, as well as coal and other natural gas stocks. So, if you’re long these names don’t forget to sit down when the music stops playing. You could get your head handed to you at the end.

Q: Can we make lower lows?

A: Yes, that’s entirely possible. Market moves are basically random when you get down to these levels— down more than 20%. And on all future downturns, I would be spending your cash going back into the market expecting a second half rally.

Q: What about green energy?

A: Unfortunately, green energy is very tied to old energy because $120 oil makes green companies much more competitive from a cost point of view. So, I’m not going to go piling into green companies right here, especially if I think oil is topping out in the near future. Buying green energy companies here is the same as buying oil at $120 a barrel.

Q: What is the best way to play the declining US dollar?

A: Buy the iShares MSCI Emerging Markets ETF (EEM). Also, the Aussie dollar (FXA) and the Canadian Dollar (FXC), which benefit tremendously from commodity prices, which will rise for another decade in a global economic recovery.

Q: Why will energy be the worst sector?

A: If you end the war in the Ukraine or you replace Russian oil, either by finding new sources of oil, getting other producers to increase production which they can do (including the US), or by accelerating the move to alternatives, then you move oil back to pre-invasion prices which were about $70 a barrel or $50 lower than they are here.

Q: Best way to hedge a falling market?

A: Do what I'm doing: keep a balanced portfolio of longs and shorts, that way you always have something that’s going up. And if you do it through the options, you have time decay working for you on both sides of the equation. If you want to go outright, buy outright puts on individual stocks because they had double the moves of the indexes. And go to my short selling school which you can find by going to my website at https://www.madhedgefundtrader.com. There’s actually 12 different ways to benefit from falling markets.

Q: How deep in the money can we go on our call spreads?

A: Wait for the Volatility Index (VIX) to go over $30, and then go 15-20% in the money. And yes, you only make 10, 15, or 20% on those positions in a month but then you put together ten of them and that adds up to quite a lot of money. You want to find the position that has the greatest probability of happening—i.e. something that’s 20% in the money. Do that when the market has just dropped 20%, which it already has, and then you have a position that has a minuscule chance of losing money.

Q: How much longer do you see this current bear market bounce lasting?

A: Until yesterday.

Q: What's your favorite commodity ETF?

A: My favorite commodity stock is Freeport McMoRan (FCX), the world’s largest copper producer. Rather than pay the extra management fees for an ETF, I prefer just to go straight to the source and buy (FCX).

Q: When do you think the Fed will pivot to dovish or neutral?

A: This summer. It’s just a question of whether it’s the July or the September meeting.

Q: When you say “buy on dips”, what does that mean? 1%, 3%, 5%?

A: Well in this market, a dip would be a retest of the previous lows which is going to be down 10% or 15% on the major positions in your portfolio. If you’re day trading, a dip is only 1%, so it really depends on your timeframe and your risk tolerance. That’s why I always tell people to scale by doing everything in incremental pieces—20%, 25%, and so on. You never know what the market’s actually going to do on a short-term basis. Randomness can’t be predicted.

Q: If you plan to enter a LEAPS on Apple, what strikes would you do?

A: Well, first of all, I want to see if Apple drops all the way to $125, which is a lot of people’s downside target. If it did, then I would do the $125/$135 call spread two years out, and that will probably double. And if it starts a long term up trend, then I’ll keep rolling up the strike prices. If, say, Apple goes to $125, you put your LEAPS on. If the stock rises to 150, then take profits on the $125/$135 and roll into the $150/$160. That’s how you can get like 1,000% returns like we got on Tesla (TESLA) a few years ago. You just keep rolling up your strike prices on every weak day and maintain your leverage.

Q: When do we bet the farms on Editas Medicine Inc. (EDIT) and Crispr (CRSP) Therapeutics?

A: Never. These are small, highly speculative companies which will make money someday, but if the someday is in five years and you’re betting the farm with a LEAPS, you lose the farm. It's going to take a long time for these smaller biotech stocks to come back. If you want to play biotech, go with the big ones like Amgen. It takes a long time to convert cutting-edge technology into profits. The big companies already have a stable of reliable money-making drugs on hand.

Q: Salesforce Inc. (CRM) is up big on earnings—what should I do with the stock?

A: Buy the dips. It’s still way, way below its all-time highs, so use the weekdays to accumulate Salesforce for the long term. It’s one of the best cloud plays out there.

Q: What do you think about NVIDIA Corporation (NVDA)?

A: I absolutely love it. It rallied 20% off the bottom. Use any other additional weak days like today to increase your position. This stock someday is worth $1,000, up from today’s $195.

Q: Do you like SPACS?

A: No, I hate them and think they’re a rip-off. And a lot of them have become totally illiquid and untradable, so you have no choice but for them to shut down and return their money if they have any left. I’ve hated SPACS from day one and people are now getting their comeuppance on these.

Q: What do you think about the weakness in Coinbase Global Inc. (COIN) down here?

A: It’s just going down with all the other high-risk, speculative, meme stock type plays, which include all of the crypto plays like Bitcoin. I would avoid all of those. You want to buy quality at the discount now, and you want to buy the Cadillacs at Volkswagen prices and leave the speculative plays for the next generation, Gen Z, who are already highly interested in stocks.

Q: What is your favorite non-US country to invest in?

A: Australia, because you get a double play there on the currency, which should go up 30% from here, and they will benefit from a global commodity boom which continues for another ten years. They pretty much sell a lot of the major commodities like iron ore, wheat, sheep, and so on. It’s also a really nice country to visit. The only negative with Australia are the sharks.

Q: Biotech takeover targets?

A: Well (EDIT) and (CRSP) would be two of them. Things in the sector are so cheap that they are all potential takeover targets. M&A (Mergers and Acquisitions) will be a major play in the biotech sector for the foreseeable future.

Q: Should we sell short the defense industry here?

A: No, even if the war ends tomorrow, you might get some profit-taking, but the fact is that long term military spending is increasing permanently. The peace dividend now has to be paid back, and that is great for all the defense companies, so I would not be shorting them. If anything, I’d be buying on dips. Buy Lockheed Martin (LMT), Raytheon (RTX), who make the Javelin antitank missile for which there is now a two-year order backlog. You can also throw in General Dynamics (GD) for good measure which builds nuclear submarines and the Stryker armored vehicle.

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, 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

Keep Those Defense Plays

May 19, 2022

Bitcoin Letter

Mad Hedge Bitcoin Letter
May 19, 2022
Fiat Lux

Featured Trade:

(EXCHANGES LOSE CONFIDENCE)
(BTC), (COIN), (TGT)

Exchanges Lose Confidence

Bitcoin Letter

Where there’s smoke, there is fire.

That is how you need to approach the crypto industry right now as systemic risks creep in.

Withdraw your money from Coinbase (COIN) immediately and switch to trading crypto-based ETFs on the New York Stock Exchange.

Why?

In the event the crypto exchange goes bankrupt, Coinbase says, its users might lose all the cryptocurrency stored in their accounts too.

Coinbase told us “crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings.”

Coinbase users would become “general unsecured creditors,” meaning they have no right to claim any specific property from the exchange in proceedings. Their funds would become inaccessible.

CEO of Coinbase Brian Armstrong is trying to swindle investors out of their money by putting in place the infrastructure to not return funds if bankruptcy happens.

To even talk about this in public is stirring unease and sowing mistrust within the management team there.

If Armstrong wanted a crypto winter, he is doing everything in his power to trigger it by his behavior by killing crypto adoption rates.

Bank accounts in the U.S. are protected by deposit insurance offered by the Federal Deposit Insurance Corporation. In the event a bank fails, the FDIC steps in to protect deposits up to $250,000, preventing depositors from going broke along with the bank.

Crypto exchanges are unsecure and not insured so that’s where the risk is.

As customers had to pay Coinbase a fee for every crypto transaction, the fintech generated rip-roaring growth over the last two years - revenue surged from less than $200 million in the first quarter of 2020 to $2.5 billion in the fourth quarter of 2021. Similarly, net profit increased more than 26-fold from $32 million to $840 million.

Bitcoin dropping to under $30,000 from the high of $65,000 has been a catastrophic disaster for Coinbase.

They essentially rely on higher volume to build growth and when their customers are busy getting impoverished, it doesn’t set the stage for Coinbase to build higher trading volume.

Setting up management to secure a get out of jail-free card for utter failure is another issue I have as an investor.

At the bare minimum, the optics are terrible, and questions arise about fiduciary duty which could result in a tsunami of lawsuits against Armstrong and Coinbase.

Sadly, the price of Bitcoin, which was promoted as an inflation hedge has in fact proved to be the polar opposite.

In times of hyperinflation, people want physical stuff like food, medicine, gas, and housing. Not digital currency.

I do believe cryptocurrency is a great investment when people aren’t paying $6 per gallon of gasoline.

The sudden spike in energy costs was triggered by terrible foreign policy mistakes by the current administration.

Now everyone in the crypto industry is running around with their head cut off scared of potential liability to these digital coins and digital exchanges for which there is no historical precedent.

How does the court behave if a crypto exchange blows up?

Nobody has a clue.

This is where we are at this point in the crypto narrative and the bears are piling in like no other.

Target (TGT) reported dire earnings reporting severe margin contraction because of higher costs.

The net result is yet another ax to risk assets and crypto is one of the most speculative out there.

The rest of the year will be a tough slog for crypto and it won’t work itself out until inflation is back under control.

But as many people understand, the US Central Bank is not interested in taming inflation and is professional at downplaying any risk.

The result is that hyperinflation explodes, risk assets sell-off, and investors go to cash.

Brian Armstrong gleefully telling investors he will fleece us is just another strong signal and supportive data point of my overarching thesis.

Price of Bitcoin is on its way to $20,000 soon.

December 23, 2021

Bitcoin Letter

Mad Hedge Bitcoin Letter
December 23, 2021
Fiat Lux

Featured Trade:

(HOW TO SET UP A CRYPTO TRADING ACCOUNT)
(BTC), (COIN)

December 17, 2021

Diary, Newsletter, Summary

Global Market Comments
December 17, 2021
Fiat Lux

Featured Trade:

(DECEMBER 15 BIWEEKLY STRATEGY WEBINAR Q&A),
(FCX), (FCI), (TLT), (TBT), (BITO), (AAPL), (AMZN), (T), (TSLA), (BABA), (BLOK), (MSTR), (COIN)

December 15 Biweekly Strategy Webinar Q&A

Diary, Newsletter

Below please find subscribers’ Q&A for the December 15 Mad Hedge Fund Trader Global Strategy Webinar broadcast from the safety of Silicon Valley.

Q: With interest rates going up, would it make sense to short heavily indebted companies as a class?

A: Yes it does; those would be old-line industrials and auto companies with very heavy debts. Technology companies essentially have no debt unless they’re startups. So yeah, that’s a good idea; unless of course inflation is peaking right now, which it may be if you solve these supply chain problems, and it becomes evident that retailers overordered to beat the supply chain problems and now have a ton of excess inventory they can’t meet—then the inflation plays will crash. So, not a low-risk environment right now. No matter where you look, you’re screwed if you do, you’re screwed if you don't. So that is an issue to keep in mind.

Q: What do you think of Freeport McMoRan (FCX) short-term?

A: Short term, (FCX) only sees the Chinese (FXI) real estate crisis, which is getting worse before it gets better and could bring a complete halt to all known construction in China. The government is forcing the real estate companies there to run at losses in order to bring the bottom part of their society into the middle class with houses in third and fourth-tier cities. Long term, as annual electric car production goes from a million cars a year to 25 million cars a year and each car needs 200 lbs. of copper, we have to triple world production practically overnight to accommodate that. That can’t happen, therefore that means much higher prices. If you’re willing to take some pain, picking up freeport McMoRan in the low $30s has to be the trade of the century.

Q: Do you see a Christmas rally or a bigger correction?

A: Rally first. Once we get the Fed out of the way today, we could get our Christmas rally resumed and go to new highs by the end of the year. But, January is starting to look a little bit scary with all the unknowns going forward and massive long positions. January could be okay as hedge funds put positions back on in tech that they’re dumping right now. If they don’t show up…Houston, we might have a problem.

Q: Thoughts on the iShares 20 Plus Year Treasury Bond ETF (TLT) Dec 2022 $150-$155 vertical bear put spread?

A: Since I'm in low-risk mode, I would go up $5 or $10 points and not be greedy. Not being greedy is going to be one of the principal themes of 2022 therefore I’m recommending that people do the $160-$165 or even the $165-$170, which still gives you a 30% return in a year, and I think next year this will be seen as a fabulous return.

Q: What about the $100,000 target for Bitcoin (BITO) by the end of the year?

A: That’s off the table thanks to the Fed tightening and Omicron triggering a massive “RISK OFF” and flight to safety move. Non-yielding instruments tend not to do well during periods of rising interest rates, so gold along with crypto is getting crushed.

Q: What will happen in the case of a black swan event in early 2022, like Russia invading Ukraine?

A: Market impact for that would be a bad couple of days, a buying opportunity, and then you’d want to pile into stocks. Every geopolitical event that’s happened in the last 20 years has been a buying opportunity for stocks. Of course, I would feel bad for the Ukrainians, but it’s kind of like Florida seceding from the US, then the US invading Florida to take it back, and the rest of the world not really caring. Plus, it doesn’t help that their heavily nationalist post-coup government has some fascist tendencies. However, we could get global economic sanctions against Russia like an import/export embargo, which would hurt them and destroy their economy.

Q: Will the European natural gas shortage continue?

A: Yes because the Europeans are at the mercy of the Russians, who have all the gas and none of the economy. Therefore, they can export as much or as little as they want, depending on how much political control they’re trying to exert in Europe.

Q: Apple Inc. (AAPL) price target?

A: Well, my price target for next year was $200; we could hit that by the end of the year if we get a rally after the Fed meeting.

Q: 33% of the population is in collection status with personal debt, credit cards, etc—is that a harbinger of a 2008 crash?

A: No, it is a harbinger of excess liquidity, interest rates being too low, and lenders being too lax. However, we aren’t at the level where it could wipe out the entire economy like with defaulting on a third of all housing market debt in 2008.

Q: What should I do with my call spreads for Amazon.com, Inc. (AMZN)?

A: Well, November would have been a great sell. Down here, I’d be inclined to hold onto the spreads you have, looking for a yearend rally and a new year rally. But remember, with all these short-dated plays risk is rising, so keep that in mind.

Q: What do you think of AT&T Inc (T)?

A: The whole sector has just been treated horrifically; I don’t want to try to catch a falling knife here even though AT&T pays a 10% dividend.

Q: What about quad witching day?

A: Expect a battle by big hedge funds trying to push single stocks options just above or below strike prices. It’s totally unpredictable because of the rise of front-month trading, which is now 80% of all options trading with the participation of algorithms.

Q: Is the Alibaba Group Holding Limited (BABA) $230-$250 LEAP in June 2023 worth keeping?

A: I would say yes, I think the Chinese will come to their senses by then, and all the Chinese tech plays will double, but there’s no guarantee. That is still a high-risk trade.

Q: Does the US have an opportunity to export petroleum products?

A: The answer is yes, we are already a net energy exporter thanks to fracking. But, it is a multi-year infrastructure build-out to add foreign export destinations like Europe, which hasn’t bought our petroleum since WWII. Right now, almost all of our exports are going to Asia. No easy fixes here.

Q: Is Tesla Inc (TSLA) a buy at 935 down 300 in change?

A: Not yet; 45% seems to be the magic number for Tesla correction. We had one this year. And Elon Musk hasn’t quit selling yet, although I suspect he’ll end his selling by the end of the year because he’ll have met all his tax obligations for the year. He has to sell these options before they expire and are rendered useless. So that is what’s happening with Tesla, Elon Musk selling. And can you blame him? He almost worked himself to death making that company, time to spend some money and have a good time, like me.

Q: What if your Chinese company gets delisted?

A: Try to get out before it is delisted. Otherwise, the domicile moves to Hong Kong and you’ll have to sell equivalent shares there. I don’t know what the details of that are going to be, but the Chinese companies are trying to force companies to delist from the US and list in Hong Kong so they have complete control over what's going on. Also, I never liked these New York listings anyway because the disclosures were terrible, with Cayman Island PO Boxes and so on…

Q: Is the ProShares UltraShort 20+ Year Treasury (TBT) a good long-term position to hold?

A: It is to an extent—only if you expect any big moves up in interest rates, which I kind of am. This is because the cost of carry for (TBT) is quite high; you have to pay double the 10-year US Treasury rates, which is double 1.45% or about 2.90%, and then another management fee of 1%, so you have kind of a 4% a year headwind on that because of cost. Remember, if you’re short a bond, you’re short a coupon; if you’re double short a bond you’re short twice the coupon and you have to pay that and they take it out of the share price. But, if you’re expecting bonds to go down more than 4%, you’ll cover that and then some and I think bonds could drop 10-20% this year.

Q: What’s the difference between GBTC and BITO?

A: Nothing, both are Bitcoin plays that are tracking reasonably well. I prefer to go with the miners—the Bitcoin providers, that’s a selling-shovels-to-the-gold-miners play. They tend to have more volatility than the underlying Bitcoin, so that’s why I’m in (BLOK) and (MSTR) when I’m in it.

Q: What’s the best way to buy Crypto?

A: If you really want to buy Crypto directly, the really easy way is to go through one of the top crypto brokerage houses, and we’ve recommended several of those. Coinbase (COIN) is the one I’m in. It literally takes you five minutes to set up an account and you can instantly buy Bitcoin linked to your bank account.

Q: What are the fees like for Coinbase?

A: The fees at (COIN) are exorbitant only if you’re buying $10 worth of Bitcoin. If you’re buying like $1 million worth, they’re much, much smaller. But I recommend you start at $10 and work your way up as I did, and sooner or later you’ll be buying million-dollar chunks of Bitcoin which then double in three months, which happened to me this year.

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, then WEBINARS, and all the webinars from the last ten years are there in all their glory.

Good Luck and Stay Healthy.

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

November 5, 2021

Diary, Newsletter, Summary

Global Market Comments
November 5, 2021
Fiat Lux

Featured Trade:

(NOVEMBER 3 BIWEEKLY STRATEGY WEBINAR Q&A),
(BRKB), (COIN), (IWM), (GOOGL), (MSFT), (MS), (GS), (JPM),
(BABA), (BIDU), (JD), (ROM), (PYPL), (FXE), (FXA), (FXB), (CRSP), (TSLA), (FXI), (BITO), (ETHE), (TLT), (TBT), (BITO), (CGW)

November 3 Biweekly Strategy Webinar Q&A

Diary, Newsletter

Below please find subscribers’ Q&A for the November 3 Mad Hedge Fund Trader Global Strategy Webinar broadcast from the safety of Silicon

Valley.

Q: Have you considered buying Coinbase (COIN)?

A: Yes, we actually recommended it as part of our Bitcoin service in the early days back in July. It’s gone up 62% since then, right along with the Bitcoin move itself. So yeah, buy (COIN) on dips—and there will be dips because it will be at least triple the volatility of the main market. And be sure to dollar cost average.

Q: Do you think the breakout in small caps (IWM) will hold and, if so, should we focus on small-c growth?

A: Yes it will hold, but no I would focus on the big cap barbells, which will lead this rally for the next 6 months. And there you’re talking about the best of tech which is Google (GOOGL) and Microsoft (MSFT), and the best of financials which is Morgan Stanley (MS), Goldman Sachs (GS), and JP Morgan (JPM).

Q: Why not time the webinar for after the FOMC? What will be the market reaction?

A: Well, first of all, we already know what they’re going to say—it’s been heavily leaked in the last week. The market reaction will be initially a potential sharp down move that lasts a few minutes or hours, and then we start a grind up for the next two months. So that's why I wanted to be 80% leverage long going into this. Second, we have broadcast this webinar at the same time for the last 13 years and if we change the time we will lose half our customers.

Q: Why do you always do debit spreads?

A: They’re easier for beginners to understand. That’s the only reason. If you’re sophisticated enough to do a credit spread, the results will be the same but the liquidity will be slightly better, and you can also apply that credit to meet your margin requirements. We have a lot of basic beginners signing up for our service in addition to seasoned pros and I always encourage people to do what they're most comfortable with.

Q: Are you still comfortable with the Morgan Stanley (MS) and Berkshire Hathaway (BRKB) positions?

A: I expect both to go up 10-20% by March, so that’s pretty comfortable. By the way, if you have extremely deep in the money call spreads on Goldman Sachs or Morgan, consider taking profits on those and rolling your strikes up. If you have like the $360-$380 vertical bull call spread in Goldman Sachs, realize that gain and roll up to the $420-$430 March position in Goldman Sachs—that will give you another 100% profit by March. With the $360-$ 380s, you have like 97% of the profit already in the price, there’s no leverage left and no point in continuing, you can only go down.

Q: What should I do with my China position?

A: Sell all your positions in China, realize all the losses now so you can offset those with all the huge profits on all your other positions this year. There I’m talking about Ali Baba (BABA), Baidu (BIDU), and (JD), which have been absolutely hammered anywhere from down 50% to down 70%. And do it now before everyone else does it for the same reasons.

Q: Thoughts on Paypal (PYPL) lately?

A: The stock is out of favor as money is moving out of PayPal into newer fintech stocks. The move down is totally unjustified and screaming long term buy here, but for the short-term investors are going to raid the piggy bank, sell the PayPal, and go into the newer apps. This has been my biggest money-losing trade personally this year because PayPal long-term has a great story.

Q: Will earnings fall off next year due to prior year comparisons or supply chain?

A: No, if anything, earnings are accelerating because supply chain problems mean you can charge customers whatever you want and therefore increase margins, which is why the stock market is going up.

Q: Long term, what would your wrong strikes be?

A: I would say don’t get greedy. I’m doing the ProShares Ultra Technology (ROM) $120-$125 call spread for May expiration—the longest expiration they offer. That gives you about 100% return in 6 months; 100% is good enough for me because then I’ll do the same thing again in May and get another 100%. What’s 100% x 100%? It’s 400% because you’re reinvesting a much larger capital base the second time around. If a 100% profit in six months is not enough for you then you are in the wrong line of business.

Q: Do you think Ethereum (ETHE) has long-term potential upside?

A: Yes, is a 10X move enough? We just had a major new high in Ethereum because they made moves to limit the production of new Ethereum. Ethereum is the superior technology because its architecture avoids the code repeats that Bitcoin does and therefore only uses a third of the electricity to create. But Bitcoin is attracting the big institutional cash flows because they have an early mover advantage. By the way, how much electricity does crypto mining consume? The entire consumption of Washington state in a year, so it’s a big deal.

Q: What should I do about Crisper Therapeutics (CRSP)?

Crispr Therapeutics (CRSP) is my other disaster for this year because ignored the move up to $170—we’re now back into the $90’s again. So, I have 2023 LEAPS on that; I’m going to keep them, I’ve already suffered the damage, but the next time it goes up to $170 I’m selling! Once burned, twice forewarned. And part of the problem with the whole biotech sector is we are now in the back end of the pandemic and anything healthcare-related will get hit, except for the vaccine stocks like Pfizer (PFE) which are still making billions and billions of dollars.

Q: I bought Baidu (BIDU) and Alibaba (BABA) years ago at a much lower price and I'm still up quite a lot; what should I do?

A: If you have the big cushion, I would keep them and look for #1 recovery in the Chinese economy next year and #2 for the government to back off from their idiotic anticapitalism strategy because it’s costing them so much money.

Q: Is Robinhood (HOOD) a good LEAP candidate?

A: Only on a really big dip, and then you want to go out two years. With a stock that’s volatile as hell like Robinhood and could drop by half on no notice, so you only buy the big dips. It’s not a slowly grinding upward stock like Goldman Sachs (GS) and Morgan Stanley (MS) where you can add LEAPS now because you know it’s going to keep grinding up.

Q: How can Morgan Stanley go up when the chief strategist is bearish?

A: Their customers aren't listening to their chief strategist—they’re buying. And the volume of the stock, which is where Morgan Stanley makes money, is going through the roof, they’re making record profits there. And I've got Morgan Stanley stock coming out of my ears in LEAPS and so forth.

Q: What are 5 stocks you would buy right now?

A: Easy: Google (GOOGL), Microsoft (MSFT), Morgan Stanley (MS), Goldman Sachs (GS), and JP Morgan (JPM). Buy whatever is down that day. They’re all going up.

Q: Too late to buy Tesla (TSLA) calls?

A: Yes, it is. Tesla has a long history of 40% corrections; we had one that ended in May, and then it doubled (and then some). So yeah, too late to buy the calls here. Go back and read my research from May which said buy the stock and you get a car for free—and that worked again, except this time, you can get three free Tesla’s. A lot of subscribers have sent me pictures of their Teslas they got for free on my advice; I’m probably the largest salesman for Tesla for the last 10 years and all I got out of it was a free Powerwall (the red one)..

Q: How much higher do you think semiconductor companies will go?

A: Higher but it’s impossible to quantify. You’re getting very speculative short-term buying in there. So, I think it continues to the rest of the year, but with chips, you never know.

Q: Would you be buying Crispr Therapeutics (CRSP) at these levels?

A: Yes, but I would either just buy the stock and not be dependent on the calendar or buy a 2 ½ year LEAP and get an easy double on that.

Q: What about the currencies?

A: I don’t see much action in the currencies as long as the US is raising interest rates. I think the Euro (FXE), the Aussie (FXA), and the British pound (FXB) will be dead for the time being. Nobody wants to sell them but nobody wants to buy them either when you’re looking at a potential short term rise in the dollar from rising interest rates.

Q: What stable coins are the right answer for cryptocurrency?

A: The US dollar stable coin, but for price appreciation, you’re really looking at Bitcoin and Ethereum. Stable coins are stable, they don’t move; you want stuff that’s going to go up 5, 10, or 20 times over the next 10 years like Bitcoin (BITO) and Ethereum (ETHE). That is my crypto answer.

Q: What should I do about the iShares 20 Plus Year Treasury Bond ETF (TLT) $135-$140 put spread expiring in January?

A: If we get another run down to the $141 level that we saw last month, I would come out of all short treasury positions because you’re starting to run into time decay problems with the January expirations. And in case we remain in a range for some reason, I would be taking profits at the bottom end of the range. It was my mistake that I didn’t grab those profits when we hit $141 last time. So don’t let profits grow hair on them, they tend to disappear. We lost six months on this trade due to the delta virus and the mini-recession it brought us.

Q: Will there be accelerated tech selling in December because of the new tax rates?

A: What new tax rates? There has been no new tax bill passed and even if there were, I think people wouldn’t tax sell this year because the profits are enormous. They would rather do any selling in January at higher prices and then defer payment of those taxes by 18 months. I don’t think there will be any tax issues this year at all.

Q: What’s your return on solar power investments?

A: My break-even was four years because our local utility, PG&E, went bankrupt and the only way they're getting out of bankruptcy is raising electricity prices by 10% a year. It turns out that as a result of global warming, the panels have operated at a higher efficiency as well, so we’re getting a lot more power output than originally expected. Now I get free electricity for the remaining 20-year life of the panels which is great because with two Tesla’s and all-electric heating and air conditioning I use a lot of juice. My monthly bill is a sight to behold. I also power the 20 surrounding houses and for that PG&E pays me $1,800 a month.

Q: Do you see China (FXI) invading Taiwan as a potential threat to the market?

A: China will never invade Taiwan. They own many of the companies they're already in, they de facto control Taiwan government from a distance; they would not risk the international consequences of an actual invasion. And we have the US seventh fleet there to stop exactly that. So, they can make all the noise they want but nothing will come of it. I’ve been watching this for 50 years and nothing has ever happened.

Q: Would you buy ProShares Ultrashort 20+ Treasury ETF (TBT) here?

A: Absolutely, with both hands, all I can get.

Q: Can you recommend any water ETF opportunity?

A: Yes there is one I wrote a piece on last month. It’s the Claymore S&P Global Water Index ETF (CGW).

Q: How long can you hold the (TBT) before time decay hurts?

A: It doesn’t hurt, the cost of the TBT is two times the 10-year rate. So that would be 3%, plus 1% a year for management fees, and that’s your slippage on the TBT in a year right now—it’s 4%. Remember if you’re short the bond market, you have to pay the coupon when you’re short. Double the bond market and you have to pay double the coupon.

Q: Is the ProShares Bitcoin Strategy ETF (BITO) a good alternative to buying bitcoin?

A: I would say yes because I’ve been watching the tracking on that very carefully and it’s pretty damn close. Plus there’s a lot of liquidity there, so yeah, buy the (BITO) ETF on dips and dollar cost average.

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, then WEBINARS, and all the webinars from the last ten years are there in all their glory.

Good Luck and Stay Healthy.

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

October 8, 2021

Diary, Newsletter, Summary

Global Market Comments
October 8, 2021
Fiat Lux

Featured Trade:

(OCTOBER 6 BIWEEKLY STRATEGY WEBINAR Q&A),
(FCX), (TSLA), (BLK), (MS), (JPM), ($NATGAS), (UNG), (BIDU), (MRNA), (COIN), (ROM), ($BTCUSD), (ETHE), (FB), (DAL), (ALK), (LUV) (MSTR), (BLOK), (V), (NVDA), (SLV), (TLT), (TBT)

October 6 Biweekly Strategy Webinar Q&A

Diary, Newsletter

Below please find subscribers’ Q&A for the October 6 Mad Hedge Fund Trader Global Strategy Webinar broadcast from the safety of Silicon Valley.

Q: When will Freeport McMoRan (FCX) go up?

A: When the China real estate crisis ends, and they start buying copper again to build new apartment buildings.

Q: Do rising interest rates imply trouble for tech?

A: Yes, they do, but only for the short term. Long term, these things all double on a three-year view; and the next rise up in tech stocks will start when interest rates peak out, probably with 10-year yields at 1.76% or 2.00%. The great irony here is that all the big techs profit from higher rates because they have such enormous cash flows and balances. But that is just how markets work.

Q: I know you’ve been promoting Tesla (TSLA) for a very long time. What do you think about it here?

A: We’ve just gone from $550 to over $800. It actually has been one of the best performing stocks in the market for the past four months. Short term, you want to take profits; long term you want to hold it because it could go up 10 times from the current level. They just broke all their sales records and are the fastest growing car company in the US or Europe.

Q: If Blackrock (BLK) is reliant on interest rates, will the rise in interest rates hurt them?

A: No, it’s the opposite. Rising interest rates are positive for Blackrock because it improves the return on their investments, which they get a piece of; so rising interest rates mean more money and more fees. That's why I own it— it is a rising interest rate play, not a falling interest rate play.

Q: What do you think about Baidu (BIDU)?

A: Stay away from all China trades right now, it’s uninvestable. Not only do I not know what the Chinese are going to do next—they seem to be attacking a new industry every week—but the Chinese don’t even seem to know. This is all new to them; they had been embracing the capitalist model for the last 40 years and they now seem to be backtracking. There are better fish to fry, like Morgan Stanley (MS) and JP Morgan (JPM).

Q: Don’t you have a bear put spread on Baidu (BIDU)?

A: We did have a bear put spread on Baidu, but that's only a very short term, front month trade. It does look like it’s going to make money; but keep in mind those are high-risk trades.

Q: Could Natural Gas (UNG) trigger an economic crisis?

A: Not really. In the US, natgas is only a portion of our total energy needs, about 34%, and that’s mostly in the Midwest and California. The US has something like a 200-year supply with fracking. Plus, we’re on a price spike here—we’ve gone from $2 to $20/btu in Europe, entirely manipulated by Russia trying to get more money on their exports and more political control over Europe. So, it’s a short-term deal, and you can bet a lot of pros are out there shorting natgas like crazy right here. The real issue here is that no one wants to invest in carbon-based energy anymore and that is creating bottlenecks in the energy supply chain.

Q: How long will it take to provide EV infrastructure to mass gas station availability?

A: The EV infrastructure has in fact been in progress for 20 years, if you count the first generation of EV in the late 90s, which bombed. Tesla has been building power stations in the US for 10 years. They have 10,000 chargers now in 1,800 stations and their goal is 20,000 charging stations. In fact, most people already have the infrastructure for EV charging—you just charge them at home overnight, like I do. The only time I ever need a charge is when I go to Lake Tahoe. For gasoline engines, on the other hand, it took 20 years to build infrastructure from 1900 to 1920 to replace horses. Believe it or not, gasoline cars were the great environmental advance of the day, because it meant you could get rid of all the horses. New York City used to have 150,000 horses, and the city was constantly struggling through streets of two-foot-deep manure piles. So that was the big improvement. It only took 100 years to take the next step.

Q: The latest commodity with supply constraints I hear about is cotton. Is this all just a temporary thing and can we expect supply capacity to be back to normal next year? Is this just the failing of a just-in-time model that simply doesn’t work in the age of deglobalization?

A: We are losing possibly one third of our current economic growth due to part shortages, labor shortages, supply chain problems—those all go away next year, and that one third of economic growth just gets postponed into 2022 which means that the economic recovery is extended over a longer period of time, and so is the bull market in stocks, how about that! That’s why I’m loading the boat right here. It’s the first time I've been 100% invested since May.

Q: What do you think about the airlines here?

A: High risk, but high return play for the next year. Delta (DAL) is a play on business travel recovery. Alaska Airlines (ALK) and Southwest(LUV) are a play on a vacation travel return flying return, which has already started—we’re back to pre-pandemic TSA clearances at airports.

Q: Is Facebook (FB) a buy now?

A: No, I want to wait for the dust to settle before I go back in. I think it does recover and go to new highs eventually but will go to lower lows first. Regulation is certainly coming but we don’t know what.

Q: When will the chip shortage end?

A: Two years. My prediction is much longer than anybody else's because people are designing chips into new products like crazy. All predictions for the chip shortage to end in only a year don’t take that into account.

Q: When do we go into the (ROM) ProShares Ultra Technology long play?

A: When interest rates peak out sometime early next year. It’s probably a great entry point for tech; until then they go nowhere.

Q: Does the appetite for financials extend to Canada and their banks with higher dividends?

A: Yes, US and Canadian interest rates tend to move fairly closely so that rising rates here should be just as good for banks in Canada, and you might even be able to get them cheaper.

Q: Do you suggest we buy Altcoin?

A: No, not unless you're a Bitcoin professional like a miner, who can differentiate between all the different Altcoins. You can buy up to 100 different Altcoins on the main exchanges like Coinbase (COIN). In the crypto business, there is safety and size; that means Bitcoin ($BTCUSD) and Ethereum (ETHE), which between them account for about three quarters of all the crypto ever issued. A Lot of the smaller ones have a risk of going to zero overnight, and that has already happened many times. So go with the size—they’re less volatile but they’ll still go up in a rising market. And you should subscribe to our bitcoin letter just to get the details on how that market works.

Q: Target for Bitcoin by Christmas?

A: My conservative target is $66,000, but if we really go nuts, we could go as high as $100,000. That’s the “laser eyes” target for a lot of the early investors.

Q: Suggestions for a Crypto ETF?

A: It’s not out yet but will be shortly. I think that Crypto will run like crazy in anticipation of the Bitcoin ETF that we don’t have yet.

Q: Should I buy Moderna (MRNA) on this dip at 320 down from 400, or is this a COVID revenue flash in the pan that won’t come back?

A: It’ll come back because they’re taking their COVID technology and applying it to all other human diseases including cancer, which is why we got in this thing two years ago. But we may have to find a lower low first. So I would wait on all the drug/biotech plays which right now are getting hammered with the demise of the delta virus.

Q: What’s your favorite ETF right now?

A: Probably the (TBT) Double Short Treasury ETF. I’m looking for it to go up another 30% from here to 24 or 25 by sometime next year.

Q: EVs have been hot this year; Lordstown Motors is down to only $5 from $27 and just got downgraded by an analyst to $2. Should I buy, or is this a dangerous strategy?

A: I would say highly dangerous. This company has been signaling that it’s on its way to bankruptcy essentially all year, so don’t confuse “gone down a lot” with being “cheap” because that’s how you buy stuff on the way to zero.

Q: What about Anthony Scaramucci’s ETF?

A: We will have Anthony Scaramucci as a guest in our December summit. And the ETF is a basket of stocks as diverse as MicroStrategy (MSTR), Blok (BLOK), Visa (V), and Nvidia (NVDA), so you will only get a fraction of the Bitcoin volatility. That means if Bitcoin goes up 100% you might get a 40% or 50% move in the actual ETF.

Q: Do you have a Bitcoin book coming out soon?

A: I do, it should be out by the end of this month. That’s The Mad Hedge Guide to Trading Bitcoin, and it will have all the research I’ve accumulated on trading Bitcoin in the past year.

Q: Why have you only issued one trade alert in Bitcoin?

A: You don’t get a lot of entry points for Bitcoin. You buy the periodic bottoms and then you run them. Dollar cost averaging is very useful here because there are no traditional valuation measures to use, like price earnings multiples or price to book. When it comes time to sell, we'll let you know, but there aren’t a lot of Bitcoin plays outside the Bitcoin exchanges.

Q: Thoughts on silver (SLV)?

A: It’s horribly out of favor now and will continue to be so as long as Bitcoin gets the spotlight. Also, there’s a China problem with the precious metals.

Q: There are 8 or 10 good public Bitcoin and Ethereum ETFs in Canada.

A: That’s true, if you’re allowed to trade in Canada.

Q: Can the US ban Bitcoin like China did?

A: No, if they did, it would just move offshore to the Cayman Islands or some other place outside the world of regulation.

To watch a replay of this webinar with all the charts, bells, whistles, and classic rock music, just log on to www.madhedgefundtrader.com, go to MY ACCOUNT, click on GLOBAL TRADING DISPATCH, then WEBINARS, and all the webinars from the last ten years are there in all their glory.

Good Luck and Stay Healthy.

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

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