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Tag Archive for: (DIS)

Mad Hedge Fund Trader

August 7 Biweekly Strategy Webinar Q&A

Diary, Newsletter
March 20 Options Expiration

Below please find subscribers’ Q&A for the Mad Hedge Fund Trader August 7 Global Strategy Webinar with my guest and co-host Bill Davis of the Mad Day Trader. Keep those questions coming!

Q: Are we headed for a worldwide depression with today’s crash and interest rates?

A: No, I think the interest rates are more of an anomaly unique to the bond market. There is a global cash glut all around the world and all that money is pouring into bonds—not for any kind of return, but as a parking place to avoid the next recession. The economic data is actually stronger than usual for pre-recession indicators. US interest rates going to zero is just a matter of coming in line with the rest of the world. Three to six months from now we may get our final bear market and recession indicators.

Q: Do you think the market has more downside?

A: Yes; if the 200-day moving average for the (SPY) doesn’t hold, then you’re really looking at a potential 20% correction, not the 8% correction we have seen so far.

Q: Which sector would you focus on for any dips?

A: Technology (XLK). If they lead the downturn, they’re going to lead the upturn too. It’s the only place where you have consistent earnings growth going out many years. You’re really all looking for an opportunity to go back into Tech, but the answer is a firm not yet.

Q: Would you buy gold (GLD), even up here?

A: Only if you can take some pain. We’re way overdue for a correction on essentially everything—stocks, bonds, gold, commodities—and when we get it, you can get a real snapback on all these prices. The time to enter gold trade was really a month ago before we took off, and I’ve been bullish on gold all year. So, I think you kind of missed the entry point for gold just like you missed the entry point for shorts on the stock market last week. You only want to be selling decent rallies now. You don’t want to be selling into a hole that makes the risk/reward no good.

Q: What can you say about the (FXA) (the Australian dollar)?

A: It’s holding up surprisingly well given the carnage seen in the rest of the financial markets. I want to stand aside until we get some stability, at which point I think (FXA) will pop up back to the $71 level. New Zealand cutting their rates by 50 basis points really came out of the blue and could eventually feed into a weaker Aussie.

Q: Do you think China (FXI) has no reason to make a trade deal until the US elections?

A: Absolutely not; and this puts a spotlight on the administration’s total inexperience in dealing with China. I could have told you on day one: there’s no way they’re going to settle. Pride is a major factor in China. They have long memories of the opium wars and all the abuses they received at the hands of the western powers and are highly sensitive to any kind of foreign abuse. If you want to get the opposite of a settlement, do exactly what Trump is doing. The administration’s policy has no chance of accomplishing anything. He’s willing to take a lot more pain in the stock market until he gets a deal and that’s bad for all of us.

Q: How does the extra 10% tariff affect the market?

A: Think of everything you’re buying for Christmas; the price goes up 10%. That’s the effect, and it completely wipes out any earnings the retail industry might have had. It’s only bad. We are suffering less harm than China in the trade war, but we are suffering, nonetheless.

Q: Do you think volatility will spike soon?

A: It may very well have already spiked. I don’t think we’ll get a spike as high as in past selloffs because there’s a big short volatility industry that has come back. Any moves more than $30, you have short sellers come in there very quickly to hammer things back down. Also (VIX) isn’t necessarily something you want to be buying after the stock market has already dropped 8%. That train has left the station.

Q: Would a weaker dollar benefit the US economy?

A: Yes; it makes our exports cheaper on the global market. However, if the rest of the world is weakening their currencies as well, it will have no effect. Also, the last time this kind of currency war was attempted was in the early 1930s, and the outcome was the Great Depression.

Q: Defensive stocks—the China story is getting uglier?

A: In this kind of market, I’ve never been a big fan of defensive stocks like utilities or healthcare because defensive stocks go down in bear markets, just at a slower rate than growth stocks because they never went up in the first place. The best defensive stock is cash.

Q: If US interest rates are going to zero, how about buying leaps on (TLT)?

A: Multi-year highs is just not leap buying territory. Multiyear lows are where you buy LEAPS, which are Long Term Equity Participation Certificates. They are basically long-dated 1-2-year call options on stocks that are rising over the long term. The better trade—when we get to zero interest rates and it becomes impossible for rates to go any lower—would be to do a reverse leap. If (TLT) goes up to $200, I would do something like a $150-$160 on the put side betting that sometime over the next 2 years, interest rates go back up again and bonds go down. Too late for LEAPS on bonds, too early for LEAPS on equities.

Q: Do you buy out of the money LEAPS?

A: Yes; that is where you get the triple-digit returns. For example, you can buy the Walt Disney (DIS) June 2021 $150-$160 vertical bull call spread today for $3.30. If we close over $160 by then the spread will be worth $10, up 203% from your cost. And you only need a rise of 25% from here to get that return. This is why I love LEAPS, but only at medium term market bottoms.

Q: Is crude oil (USO) going to $25 on a barrel global slowdown fears?

A: I think you need an actual recession to go down to $25; in the current environment, $42 is a nice target. The basic problem is global structural oversupply and falling demand, which is a classically unfortunate combination for prices. 

Q: When will interest rates go to zero?

A: Sooner than later, I would say. My original guess was sometime next year but at the rate we’re going, we could be there by the end of the year.

Q: Would you get involved in natural gas (UNG)?

A: Absolutely not; this is the high season for natural gas right now when summer air conditioner use creates peak demand. It certainly has been hot this summer, especially on a global basis, and if you can’t rally natural gas in this environment you never will. There is also a huge contango in (UNG) which most people can’t beat.

 

 

 

 

https://www.madhedgefundtrader.com/wp-content/uploads/2019/08/john-snake.png 433 391 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2019-08-09 01:02:502019-09-06 16:52:24August 7 Biweekly Strategy Webinar Q&A
Mad Hedge Fund Trader

August 7, 2019

Tech Letter

Mad Hedge Technology Letter
August 7, 2019
Fiat Lux

Featured Trade:

(CORD-CUTTING IS ACCELERATING)
(DIS), (T), (NFLX), (CMCSA)

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2019-08-07 01:04:552019-09-06 16:49:54August 7, 2019
Mad Hedge Fund Trader

Cord-Cutting is Accelerating

Tech Letter

Cord-cutting is picking up steam – that is the last thing traditional media want to hear.

There are several foundational themes that this newsletter has glued onto readers' foreheads.

The generational pivot to cloud-based media is one of them.

It’s easy to denominate this phenomenon down to Netflix (NFLX) but in 2019, this trend is so much more than Netflix.

E-marketer published a survey showing that cord-cutters will surpass 20% of all U.S. adults by the end of 2019.

The rapid demise of traditional television has been equally as mind-numbing with the 100.5 million subscribers in 2014 turning into 86.5 million subscribers today.

Comcast (CMCSA) has tried to buck the trend by homing in on fast broadband internet, but that strategy can only go so far.

Disney (DIS), WarnerMedia, and NBCUniversal Disney have really gotten their ducks in a row and are on the verge of launching their own unique streaming services.

Disney's service entails a 3-segment strategy bringing in Hulu and ESPN Plus to the Disney fold.

The Disney service will revolve around family content at its core so don’t expect Game of Thrones lookalikes.  

WarnerMedia's hopes to cash in on its HBO brand while peppering it with original series and programming from Warner Bros. and DC.

Disney will be able to lean on family brands of Marvel, Star Wars, and Pixar, and newly acquired National Geographic.

Marvel Cinematic Universe is a growth asset pumping out more than $22 billion at the box office across 23 movies.

Disney Plus will also have a solid collection of Disney films to play with, which could make it indispensable to parents and comes with no ads making it even more appealing to kids.

Disney will also deploy some mix of bundles to diversify its offerings and personalize services for viewers who do not want its entire lineup of content.

The soon-to-be HBO Max will implement HBO original content along with WarnerMedia brands like Warner Bros., DC Entertainment, TBS, TNT, and CNN.

HBO Max will have a treasure trove of old Warner Bros. movies and TV shows, like "Friends" and "The Fresh Prince of Bel Air," that has played extremely well on Netflix.

HBO will get those titles back at the end of 2019.

HBO has also tied up with BBC Studios to stream "Doctor Who."

"You should assume that HBO Max will have live elements," said Randall Stephenson, chairman and CEO of AT&T, on the company's second quarter conference call.

This roughly translates into HBO Max snapping up live sports and music events to complement scripted content.

This is something that Netflix has shied away from and live events are best monetized through live ads.

The last big label service to go into effect is NBC’s yet to be named streaming service.

NBCUniversal will have the luxury of offering their cable subscribers a chance to pivot to an in-house online streaming service making the move seamless.

At first, the 21 million US cable-TV subscribers will receive the streaming content for free.

Some of the assets that will trot out on the NBC platform are "The Office," because NBC is removing it from Netflix for 2021.

As cord-cutters hasten their move to streaming, this trio of loaded content-creating firms will benefit as long as they maintain a high quality of content and the pipeline to please fidgety consumers.

 

 

 

https://www.madhedgefundtrader.com/wp-content/uploads/2019/08/us-cord-cutters.png 629 974 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2019-08-07 01:02:372019-09-06 16:49:47Cord-Cutting is Accelerating
Mad Hedge Fund Trader

July 5, 2019

Tech Letter

Mad Hedge Technology Letter
July 5, 2019
Fiat Lux

Featured Trade:

(THE BALL IS IN NETFLIX’S COURT)
(NFLX), (DIS), (AAPL), (IQ), (KHC)

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2019-07-05 07:04:162019-08-05 17:50:24July 5, 2019
Mad Hedge Fund Trader

The Ball is in Netflix's Court

Tech Letter

Being as volatile as it is, investors are afforded ample opportunity to get into one of the premium tech stocks in the land Netflix (NFLX).

Chasing this one higher is a dangerous thought, as habitual 30% dips is part and parcel of being attached to this supreme online streaming stock.

December of 2018 gave you that sinking feeling when Netflix dropped off a cliff dipping to $260 but spiking after the turn of the year as the Fed swiveled on a dime to save the equity market from implosion.

Let’s make no bones about it, the long-term narrative for Netflix is intact as it’s ever been.

The company simply makes a great product, period, and systematically taps endless demand.

What many cable companies don’t understand is that you cannot make a high-quality film product that wedges in annoying commercials and equally as obnoxious, dictate the window of time in which they should watch the content.

Optionality is value and Netflix has this spot on.

I know many Millennial consumers that would rather jump off a building than subject themselves to commercials.

These factors erode the quality of the product just as if an employer would dictate to one of his or her employees that wanted to take a vacation to Africa.

But the vacation to Africa would have some strings attached.

He or she would only be able to visit at the height of summer in 120-degree Fahrenheit weather while every activity he or she chose to do, would be pre-empted by numerous advertisements that he or she must be shown.

Consumers don’t need these sideshows anymore; the world has developed away from these models and corporates have lost this control.

The loss of corporate control of the consumers is because the internet gives consumers millions of different options at the tip of their fingers.

Tapping into the optionality and the habits that revolve around it is paramount to corporate America.

This is the same reason why big box food companies like Kraft Heinz (KHC) is getting smacked around, consumers have better options and are more aware of them because of technology.

Another example of corporate miscalculation comes in the form of supply chains being redirected from China to South East Asia.

It was clear as day that during my time in China that companies were making a terrible mistake going into China in the first place.

This shows how many corporates are dragged down by a lack of vision and do an awful job of anticipating paradigm shifts that are becoming more common because of the accelerating rate of change of the corporate climate, weather, technology, rule of law, and human migration.

Netflix is effectively blocked from China and China has its own Netflix called iQIYI (IQ), they had no chance from the beginning like Google, Amazon, Facebook, and the many other American tech firms.

Netflix’s business model now has scale working for them and growth numbers will be the main recipients going forward if they focus on high quality content.

That means expect high pay packages to the best media talent in the world.

They can afford to pay a tier 1 actor $50 million per movie because the data buttresses this strategy.

At the same time, Netflix is crushing competition by hoarding the talent with extraordinary pay packages while allowing these highly paid specialists 100% creative control over what they do.

Who would want to work for a company that paid more than double and whose management gave them free reign on creative decisions?

Sounds like an artist’s dream and it’s exactly that for actors like Will Smith who have signed onto Netflix’s project.

I would even suggest that Netflix needs to overpay actors just for the reason of taking them off the market for competitors.

This truly is the lucrative golden age for actors, producers, and directors who are the top 1% of their craft, but for everyone else, it’s a hard slog.

This usually means becoming a tier 1 actor before the migration to online streaming happened.

The picture I am painting is that Netflix’s success and future prospects aren’t about Disney or other competitors, but entirely about them.

He who has the most chips at the table with the best cards is in best position to win and the same goes for Netflix.

The rest of the bunch like Apple (AAPL) and Disney who are late to the party will be feeding off the rest of what Netflix cannot exploit and that’s the best-case scenario.

Disney should be able to have moderate success with its array of great movie, television, and sports content.

I’d be surprised if Disney failed because they possess the ingredients to concoct a delicious cocktail.  

Apple has a harder proposition because of the lack of entertainment value in their content. They are still tied to the hardware sales and much of the service sales come from their app store and servicing the hardware.

But Apple does have money, and a lot of it to throw at the problem, but I don’t believe CEO of Apple Tim Cook is the right man to navigate through the travails of the online content world. He’s an operations guy and has never proved anything more than that.

Netflix still has substantial opportunity to grow its brand and the runway is long.

The demand for watching great original movies and television programs without commercials whenever consumers want is still in the first innings.

Even though Disney will remove some non-original content from Netflix’s platform, the content spend on a massive pipeline of new projects will more than fill the void left by Disney’s content.

In fact, Netflix should thank Disney for all those years that Disney allowed them to build their brand through 3rd party premium content like the television program Friends.

I believe Netflix does not need 3rd party content anymore, that is how much Netflix has bolted ahead in the past few years.

The company has introduced price hikes with its 4K premium package going from $14 to $16 per month.

But Netflix is still underpricing itself to the consumer to grab market share, and there is still pricing headway in the future if the company wants it.

In the coming months, Netflix plans to offer more detailed reporting on its metrics and the transparency will give investors even more insight into why this company is brilliant.

I believe the numbers will show that Netflix is absolutely killing it.

As for the trading, Netflix has settled in a range of $320 to $380 and any dips to the $340 range should be quite appetizing.

Add incrementally and use any large dip to drop your cost basis.

Stand aside if you cannot handle heightened volatility.

 

https://www.madhedgefundtrader.com/wp-content/uploads/2019/07/dis-july5.png 564 972 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2019-07-05 07:02:152019-08-05 17:50:19The Ball is in Netflix's Court
Mad Hedge Fund Trader

June 14, 2019

Diary, Newsletter, Summary

Global Market Comments
June 14, 2019
Fiat Lux

Featured Trade:

(WEDNESDAY JUNE 26 BRISBANE, AUSTRALIA STRATEGY LUNCHEON)
(MAY 29 BIWEEKLY STRATEGY WEBINAR Q&A),
(TSLA), (BYND), (AMZN), (GOOG), (AAPL), (CRM), (UT), (RTN), (DIS), (TLT), (HAL), (BABA), (BIDU), (SLV), (EEM)

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2019-06-14 02:06:172019-06-14 09:17:34June 14, 2019
Mad Hedge Fund Trader

June 12 Biweekly Strategy Webinar Q&A

Diary, Newsletter

Below please find subscribers’ Q&A for the Mad Hedge Fund Trader June 12 Global Strategy Webinar with my guest and co-host Bill Davis of the Mad Day Trader. Keep those questions coming!

Q: Do you think Tesla (TSLA) will survive?

A: Not only do I think it will survive, but it’ll go up 10 times from the current level. That’s why we urged people to buy the stock at $180. Tesla is so far ahead of the competition, it is incredible. They will sell 400,000 cars this year. The number two electric car competitor will sell only 25,000. They have a ten-year head start in the technology and they are increasing that lead every day. Battery costs will drop another 90% over the next decade eventually making these cars incredibly cheap. Increase sales by ten times and double profit margins and eventually, you get to a $1 trillion company.

Q: Beyond Meat (BYND)—the veggie burger stock—just crashed 25% after JP Morgan downgraded the stock. Are you a buyer here?

A: Absolutely not; veggie burgers are not my area of expertise. Although there will be a large long-term market here potentially worth $140 billion, short term, the profits in no way justify the current stock price which exists only for lack of anything else going on in the market. You don’t get rich buying stocks at 37 times company sales.

Q: Are you worried about antitrust fears destroying the Tech stocks?

A: No, it really comes down to a choice: would you rather American or Chinese companies dominate technology? If we break up all our big tech companies, the only large ones left will be Chinese. It’s in the national interest to keep these companies going. If you did break up any of the FANGS, you’d be creating a ton of value. Amazon (AMZN) is probably worth double if it were broken up into four different pieces. Amazon Web Services alone, their cloud business, will probably be worth $1 trillion as a stand-alone company in five years. The same is true with Apple (AAPL) or Google (GOOG). So, that’s not a big threat overhanging the market.

Q: Is it time to buy Salesforce (CRM)?

A: Yes, you want to be picking up any cloud company you can on any kind of sizeable selloff, and although this isn’t a sizeable selloff, Salesforce is the dominant player in cloud plays; you just want to keep buying this all day long. We get back into it every chance we can.

Q: Do you think the proposed merger of United Technologies (UT) and Raytheon (RTN) will lower the business quality of United Tech’s aerospace business?

A: No, these are almost perfectly complementary companies. One is strong in aerospace while the other is weak, and vice versa with defense. You mesh the two together, you get big economies of scale. The resulting layoffs from the merger will show an increase in overall profitability.

Q: I had the Disney (DIS) shares put to me at $114 a share; would you buy these?

A: Disney stock is going to go up ahead of the summer blockbuster season, so the puts are going to expire being worthless. Sell the puts you have and then go short even more to make back your money. Go naked short a small non-leveraged amount Disney $114 puts, and that should bring in a nice return in an otherwise dead market. Make sure you wait for another selloff in the market to do that.

Q: What role does global warming play in your bullish hypothesis for the 2020s?

A: If people start to actually address global warming, it will be hugely positive for the global economy. It would demand the creation of a plethora of industries around the world, such as solar and other alternative energy industries. When I originally made my “Golden Age” forecast years ago, it was based on the demographics, not global warming; but now that you mention it, any kind of increase in government spending is positive for the global economy, even if it’s borrowed. Spending to avert global warming could be the turbocharger.

Q: Why not go long in the United States Treasury Bond Fund (TLT) into the Fed interest rate cuts?

A: I would, but only on a larger pullback. The problem is that at a 2.06% ten-year Treasury yield, three of the next five quarter-point cuts are already priced into the market. Ideally, if you can get down to $126 in the (TLT), that would be a sweet spot. I have a feeling we’re not going to pull back that far—if you can pull back five points from the recent high at $133, that would be a good point at which to be long in the (TLT).

Q: Extreme weather is driving energy demand to its highest peak since 2010...is there a play here in some energy companies that I’m missing?

A: No, if we’re going into recession and there’s a global supply glut of oil, you don’t want to be anywhere near the energy space whatsoever; and the charts we just went through—Halliburton (HAL) and so on—amply demonstrate that fact. The only play here in oil is on the short side. When US production is in the process of ramping up from 5 million (2005) to $12.3 million (now), to 17 million barrels a day (by 2024) you don’t want to have any exposure to the price of oil whatsoever.

Q: What about China’s FANGS—Alibaba (BABA) and Baidu (BIDU). What do you think of them?

A: I wanted to start buying these on extreme selloff days in anticipation of a trade deal that happens sometime next year. You actually did get rallies without a deal in these things showing that they have finally bottomed down. So yes, I want to be a player in the Chinese FANGS in expectation of a trade deal in the future sometime, but not soon.

Q: Silver (SLV) seems weaker than gold. What’s your view on this?

A: Silver is always the high beta play. It usually moves 1.5-2.5 times faster than gold, so not only do you get bigger rallies in silver, you get bigger selloffs also. The industrial case for silver basically disappeared when we went to digital cameras twenty years ago.

Q: Does this extended trade war mean the end for emerging markets (EEM)?

A: Yes, for the time being. Emerging markets are one of the biggest victims of trade wars. They are more dependent on trade than any of the major economies, so as long as we have a trade war that’s getting worse, we want to avoid emerging markets like the plague.

Q: We just got a huge rebound in the market out of dovish Fed comments. Is this delivering the way for a more dovish message for the rest of the year?

A: Yes, the market is discounting five interest rate cuts through next year; so far, the Fed has delivered none of them. If they delayed that cutting strategy at all, even for a month, it could lead to a 10% selloff in the stock market very quickly and that in and of itself will bring more Fed interest rate cuts. So, it is sort of a self-fulfilling prophecy. The bottom line is that we’re looking at an ultra-low interest rate world for the foreseeable future.

Good Luck and Good Trading.

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

 

 

 

 

 

 

https://www.madhedgefundtrader.com/wp-content/uploads/2019/04/john-thomas-6.png 387 291 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2019-06-14 02:02:482019-07-17 10:25:01June 12 Biweekly Strategy Webinar Q&A
Mad Hedge Fund Trader

May 6, 2019

Diary, Newsletter, Summary

Global Market Comments
May 6, 2019
Fiat Lux

Featured Trade:

(MARKET OUTLOOK FOR THE WEEK AHEAD, OR HERE’S ANOTHER BOMBSHELL),
(DIS), (QQQ), (AAPL), (INTU), (GOOGL), (LYFT), (UBER), (FCX))

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2019-05-06 02:07:322019-05-06 02:14:10May 6, 2019
Mad Hedge Fund Trader

The Market Outlook for the Week Ahead, or Here’s Another Bombshell

Diary, Newsletter

I was all ready to write this week that massive monetary stimulus created by the Federal Reserve will cause the stock market to continue its slow-motion melt up.

The president had other ideas.

As of this writing, the US will impose without warning a surprise 25% increase in tariffs on $200 billion worth of Chinese imports, effective Friday, or in four days.

Clearly, the trade negotiations are not going as well as advertised by the administration. My bet is that the stock market won’t like this. All I can say is that I’m glad I’m 90% in cash and 10% in a Walt Disney vertical bull call spread that expires in nine trading days.

The bigger and unanswerable question is whether this is just a negotiating strategy already well known by the Bronx Housing Authority that sets up a nice dip to buy? Or is it this the beginning of a long overdue summer correction?

Nobody knows.

Certainly, the rally was getting long in the tooth, rising almost every day in 2019, with NASDAQ reaching new all-time highs. Those who kept their big-cap technology stock through the sturm und drang of the December meltdown have been rewarded handsomely. Index players reigned supreme.

However, we live in unprecedented times. Never before has a stock market received this much artificial stimulus at an all-time high unless you hark back to the Tokyo 1989 top. Japanese shares are now trading at 43% lower than that high….30 years later. We all know that our own decade-old bull market will eventually end in tears, but will it be in days, weeks, months, or years?

I had plenty of great wisdom, wonderful sector selections, colorful witticisms, and killer stock picks to serve up to you this week, but they have all be outrun by events. There’s nothing to do now but wait and see how the market responds to this tariff bombshell at the Monday morning opening.

After three months of decidedly mixed data, the information flow on the economy suddenly swung decidedly to the positive. The jobs data could have been more positive.

Of course, the April Nonfarm Payroll Report was a sight to behold. It came in at 263,000, about 80,000 more than expected, and more than makes up for last month’s dismal showing. It was a bull’s dream come true. This is what overheating looks like fueled by massive borrowing. Play now, pay later.

The headline Unemployment Rate fell a hefty 0.2% to 3.6%, the most since 1969 when the Vietnam War was raging, and the economy was booming. I remember then that Levi Strauss (LEVI) was suffering from a denim shortage then because so much was being sent to Southeast Asia to use as waterproof tarps. Wages rose 3.2% YOY.

Professional and Business Services led at a massive 76,000 jobs, Construction by 33,000 jobs, and Health Care by 27,000 jobs. Retail lost 12,000 jobs.

The ADP came in at a hot 275,000 as the private hiring binge continues. Then the April Nonfarm Payroll Report blew it away at 263,000. The headline unemployment rate plunged to a new 49-year low at 3.6%.

Consumer Spending hit a decade high, up 0.9% in March while inflation barely moved. Is Goldilocks about to become a senior citizen?

Apple (AAPL) blew it away with a major earnings upside surprise. The services play is finally feeding into profits. Stock buybacks were bumped up from $100 billion to $150 billion. Don’t touch (AAPL) up here with the stock just short of an all-time high. How high will the shares be when Apple’s revenue split between hardware and software revenues is 50/50?

Pending Home Sales jumped 3.8% on a signed contract basis. No doubt the market is responding to the biggest drop on mortgage rates in a decade. At one point, the 30-year fixed rate loan fell as low as 4.03%. Avoid housing for now, it’s still in a recession.

Topping it all off, the Fed made no move on interest rates. Like this was going to be a surprise? This may be the mantra for the rest of 2019. The big revelation that the Fed will start ending quantitative tightening now and not wait until September, as indicated earlier. More rocket fuel for the stock market. Let the bubble continue.

Uber (UBER) hit the Road for its IPO with valuations being cut daily, from a high of $120 billion to a recent low of $90 billion. The issue goes public on Friday morning. Rival Lyft (LYFT) definitely peed on their parade with their ill-fated IPO plunging 33%.

It wasn’t all Champaign and roses. San Francisco home prices fell for the first time in seven years. The median price is now only $830,000, down 0.1% YOY. Back up the truck! Clearly a victim of the Trump tax bill, this market won’t recover until deductions for taxes are restored. That may take place in two years….or never!

The Mad Hedge Fund Trader suffered a modest setback with the sudden collapse of copper prices last week, thus giving up all its profit in Freeport McMoRan (FCX). Global Trading Dispatch closed the week up 14.48% year to date and is down -1.48% so far in May. My trailing one-year retreated to +18.85%. 

Reflecting the huge sector divergence in the market, the Mad Hedge Technology Letter leaped to another new all-time high on the back of two new very short-term positions in Intuit (INTU) and Google (GOOG), which we picked up after the earnings debacle there. Some 11 out of 13 Mad Hedge Technology Letter round trips have been profitable this year.
 
My nine and a half year profit shrank to +314.62%. The average annualized return backed off to +33.11%. With the markets at all-time highs and my Mad Hedge Market Timing Index forming a 2 ½ month high, I am now 90% in cash with Global Trading Dispatch and 80% cash in the Mad Hedge Tech Letter.

The coming week will be pretty boring after last week’s excitement, at least on the hard data front.

On Monday, May 6, Occidental Petroleum (OXY), now engaged in a ferocious takeover battle for Anadarko, reports. So does (AIG).

On Tuesday, May 7, 3:00 PM EST, we obtain March Consumer Credit. (LYFT), one of the worst performing IPOs this year, gives its first ever earnings report.

On Wednesday, May 8 at 2:00 PM, we get the most important earnings report of the week with Walt Disney (DIS), along with (ROKU).

On Thursday, May 9 at 8:30 the Weekly Jobless Claims are produced. At the same time, we get the March Producer Price Index. Dropbox (DBX) reports.

On Friday, May 10 at 8:30 AM, we get the Consumer Price Index. The Baker-Hughes Rig Count follows at 1:00 PM. (UBER)’s IPO will be priced at the opening. Viacom (VIA) Reports.

As for me, I’ll be watching the Kentucky Derby on Saturday. The field is wide open, now that the favorite, Omaha Beach, has been scratched.

As I will be attending the Las Vegas SALT conference during the coming week, the Woodstock of hedge fund managers, I will take the opportunity to rerun some of my oldies but goodies. We also have recently enjoyed a large number of new subscribers so I will be publishing several basic training pieces.

Maybe it was something I said?

For more on the SALT conference, please click here (you must be logged in to your account to access this piece).

Good luck and good trading.

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

 

 

 

 

 

 

 

https://www.madhedgefundtrader.com/wp-content/uploads/2018/11/John-Thomas-bear.png 402 291 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2019-05-06 02:06:282019-05-06 02:14:36The Market Outlook for the Week Ahead, or Here’s Another Bombshell
Mad Hedge Fund Trader

April 29, 2019

Diary, Newsletter, Summary

Global Market Comments
April 29, 2019
Fiat Lux

Featured Trade:

(MARKET OUTLOOK FOR THE WEEK AHEAD, OR ANOTHER LEG UP FOR THE MARKET),
(SPY), (TLT), (DIS), (INTU), (FCX), (MSFT),
 (QQQ), (CVX), (XOM), (OXY), (TSLA)

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