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The Market Outlook for the Week Ahead, or Bet the Ranch Time is Approaching

September is notorious as the worst month of the year for the market. Boy, did it deliver, down a gut busting 9.7%!

As for the Mad Hedge Fund Trader, September was one of the best trading months of my 54-year career. But then I knew what was coming.

So did you.

With some of the greatest market volatility in market history, my September month-to-date performance exploded to exactly +9.72%.

I used last week’s extreme volatility and move to a Volatility Index (VIX) of $34 to add longs in Freeport McMoRan (FCX), S&P 500 (SPY), NVIDIA (NVDA), and Berkshire Hathaway (BRKB). I added shorts in the (SPY) and the (TLT). That takes me to 70% long, 20% short, and 10% cash. I am holding back my cash for any kind of rally to sell into.

My 2022 year-to-date performance ballooned to +69.68%, a new high. The Dow Average is down -23.44% so far in 2022. It is the greatest outperformance on an index since Mad Hedge Fund Trader started 14 years ago. My trailing one-year return maintains a sky high +80.08%.

That brings my 14-year total return to +582.24%, some 3.03 times the S&P 500 (SPX) over the same period and a new all-time high. My average annualized return has ratcheted up to +45.45%, easily the highest in the industry.

It was in May of 2020 when 34 of my clients became millionaires through buying TESLA at precisely the right time…

Well, the stars have aligned once again!!!!

In my TESLA free report, I list 10 reasons I’d tell my grandmother to mortgage her house and go all in.

Go to MADHEDGERADIO.com and download my “Tesla takes over the world” free report…that’s

madhedgeradio.com.

At the end of the month, the market was down six days in a row. That has only happened 20 times since 1950.

However, bet the ranch time is approaching. It’s time to start scaling in in a small way into your favorite long term names where the value is the greatest.

The Fed has taken away the free put that the stock market has enjoyed for the last 13 years. Now, it’s the bond market that has the free put. Hint: always own the market where the Fed is giving you free, unlimited downside protection.

People often ask what I do for a living. I always answer, “Talking people out of selling stocks at the bottom.” Here is the cycle I see repeating endlessly. They tell me they are long term investors. Then the markets take a sudden dive, like to (SPX) $3,300, a geopolitical event takes place, and the TV networks only run nonstop Armageddon gurus. They sell everything.

Then the market turns sharply, and they helplessly watch stocks soar. When they get frustrated enough, they buy, usually near a market top.

Sell low, buy high, they are perfect money destruction machines. And they wonder why they never make money in the stock market!

If any of this sounds familiar you have a problem and need to read more Mad Hedge newsletters. The people who ignore me I never hear from again. Those who follow me stick with me for decades.

Don’t make the mistake here of only looking at real GDP growth which, in recessions, is always negative. Nominal GDP is growing like a bat out of hell, 12% in 2021 and 8% in 2022. That’s 20% in two years, nothing to be sneezed at.

The problem is that all economic data has been rendered useless by the pandemic, even for legitimate and accomplished Wall Street analysts. The US economy was put through a massive restructuring practically overnight, the long-term consequences of which nobody will understand for years. Typical is the recently released Consumer Price Index, which said that real estate prices are rocketing, when in fact they are crashing.

A lot of people have asked me about the comments from my old friend, hedge fund legend Paul Tudor Jones, that the Dow Average would show a zero return for the next decade.

For Paul to be right, technological innovation would have to completely cease for the next decade. Sitting here in the middle of Silicon Valley, I can tell you that is absolutely not happening. In fact, I’m seeing the opposite. Innovation is accelerating at an exponential rate. For goodness sakes, Apple just brought out a satellite phone with its iPhone 14 pro for a $100 upgrade!

Remember, Paul got famous, and rich, from the trades he did 40 years ago with me, not because of anything he did recently. Paul has in fact been bearish for at least five years.

Still, we have a long way to go on earnings multiples. The trailing S&P 500 market multiple is now at 19. The historic low is at 15. Current earnings are $245 per (SPX) share. The 3,000 target the bears are shouting from the rooftops assumes that a severe recession takes earnings down to $200 a share ($3,000/$200 = 15X).

I don’t think earnings will get that bad. Big chunks of the economy are still growing nicely. Companies are commanding premium prices for practically everything. There is no unemployment because the jobs market is booming.

That suggests to me a final low in this market of $3,000-$3,300. That means you can buy 15%-20% deep in-the-money vertical bull call spreads RIGHT HERE and make a killing, as Mad Hedge has done all year.

Let me plant a thought in your mind.

After easing for too long, then tightening for too long, what does the Fed do next? It eases for too long….again. You definitely want to be long stocks when that happens, which will probably start some time next year.

Let me give you one more data point. The (SPY) has been down 7% or more in September only seven times since 1950. In six of the Octobers that followed, the market was up 8% or more.

Sounds like it’s time to bet the ranch to me.

Capitulation Indicators are Starting to Flash. Cash levels at mutual funds are at all-time highs. The Bank of America Investors Survey shows the high number of managers expecting a recession since the 2020 pandemic low, the last great buying opportunity. Commercial hedgers are showing the largest short positions since 2020. And of course, my old favorite, the Volatility Index (VIX) hit $34.00 on Tuesday. The risks of NOT being invested are rising.

Bank of England Moves to Support a Crashing Pound (FXB), by flipping from a seller to a buyer in the long-dated bond market, thus dropping interest rates. The move is designed to offset the new Truss government’s plan to cut taxes and boost deficit spending. The BOE also indicated that interest rate hikes are coming. The bond vigilantes are back.

Here’s the Next Financial Crisis, massive unrealized losses in the bond market. The (TLT) alone has lost 43% in 2 ½ years. Apply that to a global $150 trillion bond market and it adds up to a lot of money. Anybody who used leverage is now gone. How many investors without swimsuits will be discovered when the tide goes out?

Will the Strong Dollar (UUP) Do the Fed’s Work, forestalling a 75-basis point rate rise? It will if the buck continues to appreciate at the current rate, up a record five cents against the British pound, taking it to a record low of $1.03. Such is the deflationary impact of weak foreign currencies, which are seriously eating into US multination earnings.

Weekly Jobless Claims Hit Five-Month Low at 195,000, far below expectations. If the Fed is waiting for the job market to roll over before it quits raising interest rates, it could be a long wait.

EV Sales to Hit New All-Time High in 2022, to 13% of global new vehicle sales, up from 9% last year. The IEA expects this figure to reach 50% by 2030. That works out to 6.6 million EVs in 2021, 9.5 million in 2022, and 36 million by 2030. Buy (TSLA), the world’s largest EV seller, and (RIVN), the fastest grower in percentage terms, on dips.

EVs Take 25% of China New Vehicle Sales, and Tesla’s Shanghai factory is a major participant. Tesla just double production there. Some 403,000 EVs were sold in China in May alone. China is also ramping up its own EV production, up 183% YOY. China is much more dependent on imported oil than other large nations, most of which goes to transportation. Global EV production is expected to soar from 8 to 60 million vehicles in five years and Tesla is the overwhelming leader. Buy (TSLA) on dips again.

Oil (USO) Hits New 2022 Low at $78 a Barrel, cheaper than pre–Ukraine War prices, thanks to exploding recession fears. Is Jay Powell the most effective weapon against Russia with his most rapid interest rate rises in history?

Consumer Sentiment Hits Record Low at 59.1 according to the University of Michigan. That’s worse than the pandemic low and the 2009 Great Recession low. It could be that politics has ruined this data source making everyone permanently negative about the future. Inflation at a 40-year high isn’t helping either, nor is the prospect of nuclear war.

Case Shiller Delivers a Shocking Fall, down from 18.7% to 16.1% in June. The other shoe is falling with the sharpest drop in this data series in history. Tampa was up (31.8%), Miami (31.7%), and Dallas (24.7%). Many more declines to come.

30-Year Fixed Rate Mortgage Hits 7.08%, up from 2.75% a year ago. You can kiss those retirement dreams goodbye. It has been the sharpest rise in mortgage rates in history. Real estate has just become an all-cash market. That screeching juddering sound you hear is the existing home market shutting down.

Pending Home Sales Drop, down 2.0% in August on a signed contract basis. Sales are down for the third month in a row and are off 24% YOY. Only the west gained. Mortgage interest rates are now at 20-year highs. Buyers catching recession fears are breaking contracts and walking away from deposits.

Stock Crash Wipes Out $9 Trillion in Personal Wealth, which is the fall in equity holdings and mutual funds as of the end of June. The drop has been from $42 to $33 trillion. The bad news: it’s still going down, putting a dent in consumer spending.

My Ten-Year View

When we come out the other side of pandemic and the recession, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With oil in a sharp downtrend and technology hyper-accelerating, there will be no reason not to. The Dow Average will rise by 800% to 240,000 or more in the coming decade. The America coming out the other side will be far more efficient and profitable than the old. Dow 240,000 here we come!

On Monday, October 3 at 8:30 AM, the ISM Manufacturing PMI for September is released.

On Tuesday, October 4 at 7:00 AM, the JOLTS Report for private job openings for September is out.

On Wednesday, October 5 at 7:00 AM, ADP Private Employment Report for September is published.

On Thursday, October 6 at 8:30 AM, Weekly Jobless Claims are announced.

On Friday, October at 8.30 AM, the Nonfarm Payroll Report for September is disclosed. At 2:00 PM, the Baker Hughes Oil Rig Count is out.

As for me, while working for The Economist magazine in London, I was invited to interview some pretty amazing people: Margaret Thatcher, Ronald Reagan, Yasir Arafat, Zhou Enlai.

But one stands out as an all time favorite.

In 1982, I was working out of the magazine’s New York Bureau off on Third Avenue and 47^th Street, just seven blocks from my home on Sutton Place, when a surprise call came in from the editor in London, Andrew Knight. International calls were very expensive then, so it had to be important.

Did anyone in the company happen to have a US top secret clearance?

I answer that it just so happened that I did, a holdover from my days at the the Nuclear Test Site in Nevada. “What’s the deal,” I asked?

A person they had been pursuing for decades had just retired and finally agreed to an interview, but only with someone who had clearance. Who was it? He couldn’t say now. I was ordered to fly to Los Angeles and await further instructions.

Intrigued, I boarded the next flight to LA wondering what this was all about. What I remember about that flight is that sitting next to me in first class was the Hollywood director Oliver Stone, a Vietnam veteran who made the movie Platoon. When Stone learned I was from The Economist, he spent the entire six hours grilling me on every conspiracy theory under the sun, which I shot down one right after the other.

Once in LA, I checked into my favorite haunt, the Beverly Hills Hotel, requesting the suite that Marilyn Monroe used to live in. The call came in the middle of the night. Rent a four-wheel drive asap and head out to a remote ranch in the mountains 20 miles east of Santa Barbara. And who was I interviewing?

Kelly Johnson from Lockheed Aircraft (LMT).

Suddenly, everything became clear.

Kelly Johnson was a legend in the aviation community. He grew up on a farm in Michigan and obtained one of the first masters degrees in Aeronautical Engineering in 1933 at the University of Michigan.

He cold called Lockheed Aircraft in Los Angeles begging for a job, then on the verge of bankruptcy in the depths of the Great Depression. Lockheed hired him for $80 a month. What was one of his early projects? Assisting Amelia Earhart with customization of her Lockheed Electra for her coming around-the-world trip, from which she never returned.

Impressed with his performance, Lockheed assigned him to the company’s most secret project, the twin engine P-38 Lightning, the first American fighter to top 400 miles per hour. With counter rotating props, the plane was so advanced that it killed a quarter of the pilots who trained on it. But it allowed the US do dominate the air war in the Pacific early on.

Kelley’s next big job was the Lockheed Constellation (the “Connie” to us veterans), the plane that entered civil aviation after WWII. It was the first pressurized civilian plane that could fly over the weather and carried an astonishing 44 passengers. Howard Hughes bought 50 just off of the plans to found Trans World Airlines. Every airline eventually had to fly Connie’s or go out of business.

The Cold War was a golden age for Lockheed. Johnson created the famed “Skunkworks” at Edwards Air Force base in the Mojave Desert where America’s most secret aircraft were developed. He launched the C-130 Hercules, which I flew in Desert Storm, the F-104 Starfighter, and the high altitude U-2 spy plane.

The highlight of his career was the SR-71 Blackbird spy plane where every known technology was pushed to the limit. It could fly at Mach 3.0 at 100,000 feet. The Russians hated it because they couldn’t shoot it down. It was eventually put out of business by low earth satellites. The closest I ever got to the SR-71 was the National Air & Space Museum in Washington DC at Dulles airport where I spent an hour grilling a retired Blackbird pilot.

Johnson greeted me warmly and complimented me on my ability to find the place. I replied, “I’m an Eagle Scout.” He didn’t mind chatting as long as I accompanied him on his morning chores. No problem. We moved a herd of cattle from one field to another, milked a few cows, and fertilized the vegetables.

When I confessed to growing up on a ranch, he really opened up. It didn’t hurt that I was also an engineer and a scientist, so we spoke the same language. He proudly showed off his barn, probably the most technologically advanced one ever built. It looked like a Lockheed R&D lab with every imageable power tool. Clearly Kelley took work home on weekends.

Johnson recited one amazing story after the other. In 1943, the British had managed to construct two Whittle jet engines and asked Kelly to build the first jet fighter. The country that could build jet fighters first would win the war. It was the world’s most valuable machine.

Johnson clamped the engine down to a test bench and fired it up surrounded by fascinated engineers. The engine immediately sucked in a lab coat and blew up. Johnson got on the phone to England and said “Send the other one.”

The Royal Air Force placed their sole remaining jet engine on a plane which flew directly to Burbank airport. It arrived on a Sunday, so the scientist charged with the delivery took the day off and rode a taxi into Hollywood to sightsee.

There, the Los Angeles police arrested him for jaywalking. In the middle of WWII with no passport, no ID, a foreign accent, and no uniform, they hauled him straight off to jail.

It took two days for Lockheed to find him. Johnson eventually attached the jet engine to a P-51 Mustang, creating the P-80, and eventually the F-80 Shooting Star (Lockheed always uses astronomical names). Only four made it to England before the war ended. They were only allowed to fly over England because the Allies were afraid the Germans would shoot one down and gain the technology.

But the Germans did have one thing on their side. The Los Angeles Police Department delayed the development of America’s first jet fighter by two days.

Germany did eventually build 1,000 Messerschmitt Me 262 jet fighters, but too late. Over half were destroyed on the ground and the engines, made of steel and not the necessary titanium, only had a ten hour life.

That evening, I enjoyed a fabulous steak dinner from a freshly slaughtered steer before I made my way home. I even helped Kelly slaughter the animal, just like I used to do on our ranch in Montana. Steaks are always better when the meat is fresh and we picked the best cuts. I went back to the hotel and wrote a story for the ages.

It was never published.

One of the preconditions of the interview was to obtain prior clearance from the National Security Agency. They were horrified with what Johnson had told me. He had gotten so old he couldn’t remember what was declassified and what was still secret.

The NSC already knew me well from our previous encounters, but MI-6 showed up at The Economist office in London and seized all papers related to the interview. That certainly amused my editor.

Johnson died at age 80 in 1990. As for me, it was just another day in my unbelievable life.

Stay healthy,

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

SR-71 Blackbird

My Former Employer

September 19, 2022

Diary, Newsletter, Summary

Global Market Comments
September 19, 2022
Fiat Lux

Featured Trade:

(MARKET OUTLOOK FOR THE WEEK AHEAD, or THE FART HEARD ROUND THE WORLD)
(SPY), (TLT), (TSLA), (RIVN), (FDX), (FCX)

The Market Outlook for the Week Ahead, or The Fart Heard Round the World

Diary, Newsletter

It was the fart heard around the world.

Every investor was positioned for inflation to crater and stocks to soar. We got the opposite instead with the Dow delivering its worst day since the pandemic lows 2 ½ years ago.

But every trader I know thought the recent rally smelled of three-day old fish and was poised for a selloff. I was expecting the latter and went into a rare 100% cash position. I have probably had 100% cash positions maybe six days over the last 15 years.

A lot of traders who only trade the CPI got flushed out of the market on Wednesday at the lows because they were the wrong way.

I attended karate school in Japan for ten years, and besides learning a fearsome attitude and losing my front teeth I also picked up a valuable lesson. ALWAYS kick a man when he is down because that is when he is least likely to hit you back.

The market got that second kick-in with the FedEx earnings on Friday indicating that the economy is in much worse shape than traders realize. Not only did (FDX) crater by 23%, the entire technical structure of the market broke down.

A double bottom in the (SPY) at $362 is now not only a possibility, but a probability and a cycle final low of (SPY) $330 is now on the table, if only for seconds. The latter would give us a top to bottom bear market of $150, or 31.25%. This is “screaming buy” territory.

It’s an old market that has seen the stock market discount 12 of the last six recessions. This is one of those “non-recessions.” Tuesday saw only 1% of stocks up on the day. Whenever this happens the return for the following 12 months averages 15.6%. Sell here at your peril.

The next major market event will be a Fed interest rate rise of 75 basis points on September 21. That will probably be the last hike of this magnitude this decade. After that, we’re dealing with quarter-point rate rises at worst and cuts at best.

Inflation expectations are falling. Consumers are morphing from “I’ll take it whatever the price” to “can you give me a deal.” Price competition is returning after a long absence. Supply chain problems have disappeared. All those ships in the harbor have gone.

Competition from imports is also increasing, thanks to a super strong US dollar. Look how fast they turned the lights out in the residential real estate market.

I have been in the market for 54 years and can tell you that when inflation peaks, stocks bottom. That means you should start scaling into your favorite positions right now.

With my Mad Hedge Market Timing Index gaping down to 32, I decided to dip my toe in the water with what will probably be the lead sector in the market for the next decade. You may not have noticed, but we have just entered the golden age of the electric vehicle, thanks to climate change and massive government support.

That draws me to Tesla (TSLA), the overwhelming leader and Rivian (RIVN), the top up and comer, or should I say it, the next Tesla.

Of course, whenever a report defies expectations like the CPI, naysayers come out of the woodwork decrying its validity. My old friend, Dr. Jeremy Siegel of Wharton School of Business, says the CPI is overreading inflation by employing an arcane method of calculating housing costs that make up half the index.

The result is a read on real estate costs which is 18 months out of date. The CPI says home costs are still rising sharply, while any real estate broker in the country will tell you it’s in free fall.

My own agent has six homes for sale and expects to get another seven this month. The only people showing up for her open houses are neighborhood gawkers. Actual buyers are a thing of yesterday and prices have easily dropped 10% in six months and that’s being charitable.

And here is the bet that you are going long here. In 2021, technology stocks, the overwhelming lead sector in the market, saw earnings increase by 30%. In 2022, they will probably come in at 6%. In 2023, they will likely bounce back to 10-12%. Here, today, the market has not yet discounted next year’s bounce. If there is a recession, it is a small one and is already fully backed into prices.

I have been fighting off requests for LEAPS (Long Term Equity Anticipation Securities) all year. Well, start checking your inbox because my LEAPS alerts are going to start coming hot and heavy. I sent out LEAPS for Tesla (TSLA) and Rivian (RIVN) last week and there are more to come. Hint: watch the price of copper with an eagle eye.

Consumer Price Index Came in at a hot 8.3% in August, much higher than expected. Stocks dropped 500 points in a heartbeat. It’s not what traders wanted to hear, up from 8.2% last month. It guarantees a 75-basis point rate hike next week. Is 100 basis points now on the table? Good thing I’m 100% cash.

Yikes! That’s Going to Leave a Bruise after the worst day in the markets since the pandemic low 2 ½ years ago. Investors were perfectly positioned for falling inflation. Tech stocks led the charge to the downside, with NASDAQ off 5%. Bitcoin crashed 10%. Bonds almost hit my 2022 target with a 2.43% yield. The US Dollar (UUP) soared. Get the Volatility Index (VIX) over $30 and I will start adding call spreads from my 100% cash position.

Are US Treasury Bonds Now a “BUY” with yields approaching my 2022 target of 3.50%? Even allowing for overshoot, you can start adding longs close to here. Notice how the (TLT) opened low and then rallied all day, despite despicable trading conditions. We all know that inflation will be back to 2% in a year.

Google gets hit with a $4.1 Billion fine in Europe over antitrust concerns where it controls 92% of the online advertising market. It’s the largest fine in corporate history, but it’s like water off a duck's back with a $1.67 trillion market capitalization. Just a cost of doing business. Buy (GOOGL) on dips.

It’s Like They Shut the Lights Out in the real estate market, which flipped from the offer to the bid side of the market in weeks. A 30-year fixed at 5.89% hasn’t helped. Open Houses are now clogged with gawking neighbors and few buyers. Six months ago, you needed an appointment. No More. It’s a global problem. I can get you a great deal on a mansion.

British Pound Hits 37-Year Low at $1.14 to the US dollar. Traders cite a lack of confidence in the new prime minister Liz Truss. The real reason is the structural toll taken by Brexit, the consequences of which will take a half-century to play out. It means a weak economy, falling standards of living, and a much lower British pound.

US Oil Reserves Hit 38-Year Low at 434 million barrels, down 39% from maximum capacity. That is about 22 days of consumption. Capping oil prices to save consumers has its price.

Weekly Jobless Claims Come in at 213,000, down 5,000 and lower for the fifth consecutive week according to the Department of Labor. The data gives ample room for a 75-basis point Fed rate hike next week.

Rail Strike Averted at the last possible minute after an all-night session. Biden clearly called in his IOUs with the unions to get a deal done. A rail strike would have been a complete disaster for the economy and demolished his election hopes.

Ether Dives on the Merge, down 6%, with the short sellers piling in at the highest possible prices. The merge involved the transition from a proof-of-work to proof-of-stake model. Avoid all crypto while the winter continues, especially (ETHE). Looks like a great head-and-shoulders top on the charts to me.

My Ten-Year View

When we come out the other side of pandemic and the recession, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With oil peaking out soon, and technology hyper-accelerating, there will be no reason not to. The Dow Average will rise by 800% to 240,000 or more in the coming decade. The America coming out the other side will be far more efficient and profitable than the old. Dow 240,000 here we come!

With some of the greatest market volatility in market history, my September month-to-date performance clawed its way up to +2.45%. My 2022 year-to-date performance ballooned to +62.41%, a new high.

I used the monster selloff to add my first new longs in a while, in EV makers Tesla (TSLA) and Rivian (RIVN).

The Dow Average is down -18.26% so far in 2022. It is the greatest outperformance on an index since Mad Hedge Fund Trader started 14 years ago. My trailing one-year return maintains a sky-high +74.75%.

That brings my 14-year total return to +574.97%, some 2.66 times the S&P 500 (SPX) over the same period and a new all-time high. My average annualized return has ratcheted up to +44.84%, easily the highest in the industry.

We need to keep an eye on the number of US Coronavirus cases at 95.6 million, up 100,000 in a week and deaths topping 1,053,000 and have only increased by 1,000 in the past week. You can find the data here.

On Monday, September 19 at 8:30 AM, the NAHB Housing Market Index for September is released.

On Tuesday, September 20 at 7:00 AM, the Housing Starts and Building Permits for August are out.

On Wednesday, September 21 at 7:00 AM, Existing Homes Sales for August are published. At 11:00 AM EDT, we get the Fed interest rate decision where they are likely to raise by 75 basis points.

On Thursday, September 22 at 8:30 AM, Weekly Jobless Claims are announced.

On Friday, September 23 at 7:00 AM, the S&P Global Flash PMI for September is disclosed. At 2:00 the Baker Hughes Oil Rig Count is out.

As for me, I am reminded of my own summer of 1967, back when I was 15, which may be the subject of a future book and movie.

My family summer vacation that year was on the slopes of Mount Rainer in Washington state. Since it was raining every day, the other kids wanted to go home early. So my parents left me and my younger brother in the hands of Mount Everest veteran Jim Whitaker to summit the 14,411 peak (click here for his story). The deal was for us to hitchhike back to Los Angeles when we got off the mountain.

In those days, it wasn’t such an unreasonable plan. The Vietnam war was on, and a lot of soldiers were thumbing their way to report to duty. My parents figured that since I was an Eagle Scout, I could take care of myself.

When we got off the mountain, I looked at the map and saw there was this fascinating country called “Canada” just to the north. So, we were off to Vancouver. Once there, I learned there was a world’s fair going on in Montreal some 2,843 away, so we hit the TransCanada Highway going east.

Crossing the Rockies, the road was closed by a giant forest fire. The Mounties were desperate and were pulling all abled-bodied men out of the cars to fight the fire. Since we looked 18, we were drafted, given an ax and a shovel, and sent to the front line for a week, meals included.

We ran out of money in Alberta, so we took jobs as ranch hands. There we learned the joys of running down lost cattle on horseback, working all day at a buzz saw, inseminating cows with a giant hypodermic, and eating steak three times a day.

I made friends with the cowboys by reading them their mail, which they were unable to do. There were lots of bills due, child support owed, and alimony demands. Now I know where all those country western lyrics come from.

In Saskatchewan, the roads ran out of cars, so we hopped on a freight train in Manitoba, narrowly missing getting mugged in the rail yard in the middle of the night. We camped out in a box car occupied by other rough sorts for three days. There’s nothing like opening the doors and watching the scenery go by with no billboards and the wind blowing through your hair!

When the engineer spotted us on a curve, he stopped the train and invited us to up to the engine room. There, we slept on the floor, and he even let us take turns driving! That’s how we made it to Ontario, the most mosquito-infested place on the face of the earth.

Our last ride into Montreal offered to let us stay in his boat house as long as we wanted, so there we stayed. Thank you, WWII RAF bomber pilot Group Captain John Chenier!

Broke again, we landed jobs at a hamburger stand at Expo 67 in front of the imposing Russian pavilion. The pay was $1 an hour and all we could eat. At the end of the month, Madame Desjardin couldn’t balance her inventory, so she asked how many burgers I was eating a day. I answered 20, and my brother answered 21. “Well, there’s my inventory problem” she replied.

And then there was Suzanne Baribeau, the love of my life. I wonder whatever happened to her?

I had to allow two weeks to hitchhike home in time for school. When we crossed the border at Niagara Falls, we were arrested as draft dodgers as we were too young to have driver’s licenses. It took a long conversation between US Immigration and my dad to convince them we weren’t.

Then they asked Dad if we should be arrested and sent back on the next plane. He replied, “No, they can make it on their own.”

We developed a clever system where my parents could keep track of us. Long-distance calls were then enormously expensive. So, I called home collect and when my dad answered, he asked what city the call was coming from. When the operator gave him the answer, he said he would not accept the call. I remember lots of surprised operators. But the calls were free, and dad always knew where we were.

We had to divert around Detroit to avoid the race riots there. We got robbed in North Dakota, where we were in the only car for 50 miles. We made it as far as Seattle with only three days left until school started.

Finally, my parents had a nervous breakdown. They bought us our first air tickets ever to get back to LA, then quite an investment.

I haven’t stopped traveling since, my tally now topping all 50 states and 135 countries.

And I learned an amazing thing about the United States. Almost everyone in the country is honest, kind, and generous. Virtually every night our last ride of the day took us home and provided us with an extra bedroom or a garage to sleep in. The next morning, they fed us a big breakfast and dropped us off at a good spot to catch the next ride.

It was the adventure of a lifetime and am a better man for it.

Stay healthy.

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

Summit of Mt. Rainier 1967

McKinnon Ranch Bassano Alberta 1967

American Pavilion Expo 67

Hamburger Stand at Expo 67

Picking Cherries in Michigan 1967

September 13, 2022

Diary, Newsletter, Summary

Global Market Comments
September 13, 2022
Fiat Lux

Featured Trade:

(THE NEXT COMMODITY SUPERCYCLE HAS ALREADY STARTED),
(COPX), (GLD), (FCX), (BHP), (RIO), (SIL),
(PPLT), (PALL), (GOLD), (ECH), (EWZ), (IDX)

September 9, 2022

Diary, Newsletter, Summary

Global Market Comments
September 9, 2022
Fiat Lux

Featured Trade:

(SEPTEMBER 7 BIWEEKLY STRATEGY WEBINAR Q&A),
(MSFT), (NVDA), (RIVN), (AMZN), (POAHY), (SPWR), (FSLR), (CLSK), (FCX), (CCJ), (GOOG), (TLT), (TSLA)

September 7 Biweekly Strategy Webinar Q&A

Diary, Newsletter

Below please find subscribers’ Q&A for the September 7 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Silicon Valley in California.

Q: Do you think a snapback rally has started? If so, should we increase the size of the September Microsoft (MSFT) spread?

A: Absolutely not. There is no money in 7-day-to-expiration trades. That's why you never see them from me. If you are going to do a position, we’re now looking at October, which has five weeks to run; and I'm waiting for a better entry point. One day does not make a bull market. We also have the volatility index at $25, which is not a good entry point either, so don’t double up on Microsoft here, and avoid 7-day options trades unless you want to be a day trader.

Q: What is your target for the year-end S&P 500?

A: I’m still looking at 4,800. I think we could bottom sometime in the next few weeks—the worst case is the beginning of October—and then it’ll be straight up for the rest of the year. Once we go from discounting the next CPI, which is out on Tuesday the 13th, then we have sort of a no man's land and in October, we start discounting the midterm election, which at the moment is looking like a Democratic win on all fronts.

Q: Amazon (AMZN) has been losing money over the past 2 quarters due to fuel expenses. Is the solution investment in new electric delivery trucks?

A: Yes. In fact, Amazon owns 25% of Rivian (RIVN), and their initial order was to manufacture 100,000 all-electric delivery trucks for Amazon. That has always been the basis for investing in Rivian. It’s been a fantastic investment for Amazon as a stock so far, and when Amazon goes all electric you can bet they’ll power that largely with solar energy. Then they will be out of the energy business entirely; they’ll be producing their own energy and then consuming it, which is the most efficient way to use alternatives, cutting out about 10 different middlemen.

Q: Will the UK pound perform well with this new prime minister?

A: No, the pound is being driven down by rising US interest rates and the energy crisis in Europe, and in fact, I think no matter who the prime minister is, they’re going to have a really difficult time with the economy because of Brexit, which I believe over the long term will reduce British standards of living by half. I don’t know much about the new prime minister as she was in diapers when I was living in England, but it’s a terrible place to invest for the foreseeable future for all of those reasons.

Q: Is it time to buy Tesla (TESLA) for a trade?

A: Well you know me, I’m a perfectionist always trying to buy the bottom. I’m waiting for the market to throw up on its shoes, which it just hasn’t done this year. And I did make a killing on that last move down to $210. We then went up to $310. So, I'm sitting here, 100% cash, waiting to go 100% into Tesla again. It just seems to be a money-making machine for me, and the good news about the company just keeps coming every day.

Q: What strategy would you recommend for income?

A: I would go short dated. 2-year papers now paying 3.5%. I would not go long dated at all, that would be just throwing your money away. Locking in a 3.5% yield for 10 or 20 years would be a perfect money destruction machine. So, go to 2 years, which is essentially going to cash. At least you’ll get the 3.5% with no volatility.

Q: Prediction for the midterms?

A: I’m looking for a Democratic sweep. I analyzed all 33 Senate seats last night that are up for grabs and the Democrats could pick up 2 or even 3 seats. The weak candidates the Republican party has put forward in the most important states are performing very poorly in both fundraising and the polls.

Q: When do you think would be a good time to buy a house for your personal residence?

A: I would say the next time they start to cut interest rates in a couple of years. That is when housing takes off again. I was actually researching this just yesterday—the worst housing crisis we had in 100 years, you had a bear market for houses that only lasted 2 years. That was of course the 2008-2009 disaster driven by massive overbuilding of speculative housing. We haven't had that happen this time. And in fact, we’re short 10 million houses because the capacity cutbacks that happened in ‘08 and ‘09 never recovered. So, I’m kind of thinking, you don’t get crashes in real estate prices now, you get flatlines, and then they take off again because everybody in the world now has 2.75% interest rates and if they sell their house and move their cost-of-living doubles because their mortgage interest rate doubles. So we’re all kind of trapped in our houses now and can’t sell because the alternatives are so much more expensive. That takes enormous pressure off the real estate market, which leans in favor of the flat market thesis.

Q: Do you still love Nvidia (NVDA)?

A: I still love Nvidia. They’ll make up the China losses in no time. And by the way, guess who else uses Nvidia chips? The HIMARS missiles, where demand has suddenly rocketed from 3,000 to 14,000 missiles a year, which is more than the Chinese were ever going to use, and we’re using those up very rapidly by giving them to Ukraine. Every time one of those missiles gets fired uses a whole batch of Nvidia AI cards. So use this dip to load the boat, you’re looking at 20% of downside and maybe 300% of upside on Nvidia on a three-year view. NVIDIA is now down 58% from its high so averaging anywhere around here is fine.

Q: Can you suggest a hedge for the next 4-6 weeks?

A: The only hedge that works is cash. I’ve tried a million hedging strategies over the last 50 years, and the only thing you can rely on is cash. And by the way, cash actually pays you money now. You can earn 2% in interest or more if you’re going to deposit it with a broker.

Q: With electricity shortages already happening, what electricity infrastructure company would you be looking at for investing in the future of EVs?

A: I’ve been investing based on exploding electric power costs myself for the last 15 years. A lot of my plays like SunPower (SPWR) and First Solar (FSLR) have already had enormous moves. That said, I’d use any weakness in the market to buy those on dips because one thing we know for sure is that alternative electricity demand is going to be soaring over the next several years as oil and gas are phased down to zero. And of course, the whole sector got a huge push from Vladimir Putin, who’s massively bringing forward the shift to alternative because he’s using carbon-based energy as a weapon of war against us now.

Q: What’s a good entry point on Nvidia?

A: I tell people to start scaling. A perfect scale would be, let’s say, if you want to put $100,000 into Nvidia, break it up into 10 $10,000 pieces, put in $10,000 today and $10,000 every day until you have a full position, and then you get a nice low average. This is what the companies themselves do when they’re buying their own stock—they just buy small pieces every day to minimize the market impact.

Q: How do you see the Euro?

A: Down 10% in another year, because Jay Powell is going to keep raising interest rates. And even if he doesn’t and the next rate rise is the last one, we’re still going to have interest rates 3.5% higher than everyone else in the world for at least 1 or 2 years, so you could easily get another 10% against all the currencies and maybe more. The outlook for foreign currencies: grim. Outlook for dollar: great.

Q: What about the Porsche (POAHY) IPO?

A: I always avoid IPOs because they get overhyped at the beginning, prices get too high, and then when the restrictive stock comes off, everybody dumps. So wait. I did that with Tesla. Tesla was overhyped—it had a $15 IPO price that went straight up to $30 on opening day. I waited for it to back off to the original IPO price and that’s when I went in and split-adjusted that price which today is $2.35.

Q: Wouldn’t it be good to pick up the speculator houses that aren’t really selling even 50% down with a 5% mortgage?

A: If you could get them 50% down, that would be great; but I don't think any place in the country has seen a 50% drawdown yet—maybe 5% or 10%. The markets that will have the biggest drops will be rural markets that saw the biggest increases, and I’m thinking specifically about Boise, Idaho, where prices doubled in two years, and then they’ll give up a major piece of that. That's where you’ll see the biggest declines the fastest. But, for your bigger quality markets like New York and San Francisco, they went down maybe 5% at worst, and then they go back up again. The only selling you have now is demographic selling, where people die, get married, have more kids and need to change houses for those reasons.

Q: On the electric power side, any thoughts about Clean Sparks (CLSK)?

A: I would be careful not to buy things just because they are “electrical”. You have to be discriminating in your alternative power plays because a lot of these will never make money. In the case of (CLSK), they have yet to make any money and the stock is down 90%. They are in low-margin businesses. Buying electric power and reselling it for charging stations is not a high-margin business. You’re in competition with your local utilities and unless you have something special about your business model, like putting them in shopping malls like Tesla does, the added value there is not that great. I would look very carefully at their business plans and figure out if they’re actually going to make money doing this. Tesla has the perfect model— a giant 20,000 charging station network that only Tesla cars can use, and they’re making the cars that use the power and the panels that generate it and the batteries that store it. It’s a fully integrated vertical model. Remember, anything entering alternative anything now is competing against Tesla, which has a 15-year head start and a dominant market share. So, that is the issue there.

Q: What is the risk of a European crisis and how is that going to affect the US?

A: It is going to affect the US, and we don’t have to wait for a crisis—there's one happening now. I looked at the numbers this morning, and the average British household is looking at a $4,000 annual power bill this year against a per capita income of $47,000 pretax, and their taxes are much higher than ours. Moreover, this is for a country that is a net energy producer. It’s going to be double that cost in energy-consuming countries in eastern Europe and Germany. About ⅓ of all US exports go to Europe, so yes it will affect us but we’ll have to see how it plays out.

Q: What’s your forecast for profit margins for next year?

A: I’m looking for S&P 500 earnings of 10% for 2023. That may be one reason why stocks keep failing to break down.

Q: Would a price cap on oil prices raise the price of oil?

A: No, it’s having the opposite effect, making oil go down; and you’re seeing this at the free market price, which is the price at which Russia is selling their oil to China and India. That’s happening at a 20% discount to market, so all the Russian oil going to China now is happening at $12 below the current spot price for oil, which is around $82.

Q: How about Nuclear energy plays?

A: Yeah, we did put out one recommendation for Cameco (CCJ) in the spring. I’m still buying that on the dips. Germany resuscitated three nuclear power plants, California one, and Japan is doing the same. Of course, France is sitting pretty—they already have 75% of their electric power coming from nuclear. Who ever knew the French would outsmart the Germans? But betting your energy future on Russia was a terrible idea, and only happened because a lot of key German politicians were bribed by Russians. So yes, oil is dropping and you should expect it to continue.

Q: Did we just see the peak in interest rates for the year?

A: No, at a minimum we’re looking at 3.50% on the yield. We were 3.35% yesterday but could easily overshoot to 3.60% or 3.70% which is why I’m being a little cautious jumping in on the long side here.

Q: When is the time to do LEAPS on Freeport McMoRan (FCX)?

A: Soon. If we can double bottom at around $24, that would be great LEAP territory because I expect in 2 to 3 years this will be a $100 stock and a good LEAPS to do here. If we get down to $24, then you really want to look hard at doing something like a $30/$32, because then you could get like a 500% return on that maybe a year or two out. The leverage in LEAPS is astronomical as many of you discovered with my (TLT) put LEAPS last year. If you want more specific information about LEAPS, please sign up for my Concierge service.

Q: When will you send out LEAP recommendations?

A: On a cataclysmic capitulation selloff day—that is the time to do them.

Q: If Tesla does attempt to raise more capital with new share issues, will that drive the price down?

A: Yes, that's usually what happens, but Elon Musk is a great market timer, and you can bet that he’ll wait for a massive run-up in the stock first before he does this. Every one of these capital races he’s done has been after a massive run-up in the stock and then it tends to cap the stock for 6 months after that. You can safely buy it now because Elon doesn’t think the stock has topped out yet, since he hasn’t announced any new secondary equity issues yet.

Q: What is the actual cause of the surge in natural gas prices?

A: The complete shutoff of natural gas flows from Russia to Europe, especially Germany, which used to get 55% of its total natural gas from Russia.

Q: What is your take on the current Ukraine situation?

A: Ukraine is winning—they’re doing it slowly. The US has quadrupled production of the HIMARS missiles, from 3,000 a year to 14,000 a year, and that has made all the difference in the world. Ukraine has been able to take the upper hand in this war because of literally just 16 vehicles we gave them to fire these missiles. My guess is it goes on for another year, there's a coup in Russia, Putin gets assassinated or deposed, giving us a new government in Russia, and Ukraine gets all its old territory back, joining NATO and the EC.

Q: Thoughts on Google (GOOGL)?

A: Good long-term hold but could be an antitrust target in the near future.

Q: Some say energy will be in critical shortage for many years. Why are you long-term bearish on energy/oil?

A: You have to separate the two; I’m long-term bullish on energy, which is why I built this massive solar system. But oil will be illegal within a decade—that you can count on. Demand will go to zero. It won’t be governments that do this, it’ll be the market. By the way, we’ve already gone to zero once before. If you look at the Spring of 2020, we had negative $37 in the futures market on oil. This is not some far-out thing—the zero prices will just come back. On the way to zero though, you will get several doubles, triples, and quadruples in the price. The smaller the market becomes, the more volatile the price becomes; oil is no exemption from that. That’s why Elon Musk says we need to increase our oil production for the short term to get ourselves on the way to zero—you have to do the transition. The problem is that nobody wants to make 30-year investments in a product that is going to be banned in eight years, hence the shortages.

Q: What's a flight-to-safety asset right now?

A: There are three: Cash, cash, and cash.
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

Teslas are Great, but they are not Crash Proof

August 12, 2022

Diary, Newsletter, Summary

Global Market Comments
August 12, 2022
Fiat Lux

Featured Trade:

(AUGUST 10 BIWEEKLY STRATEGY WEBINAR Q&A),
(NVDA), (TSLA), (GOOGL), (ROM), (FCX), (AMZN), (AAPL), (MSFT), (MU), (ARKK), (TSLA), (F), (GM)

August 10 Biweekly Strategy Webinar Q&A

Diary, Newsletter

Below please find subscribers’ Q&A for the August 10 Mad HedgeFund Trader Global Strategy Webinar broadcast from Silicon Valley in California.

Q: What are your yearend targets for Nvidia (NVDA), Tesla (TSLA), and Google (GOOGL)?

A: Higher for all but I can’t give you the exact date and time. Google has a special situation in that they might be hit with an anti-trust suit in September, so that could cap things. For Tesla, we have the Twitter overhang, and Elon Musk sold $6.9 billion worth of stock last week to fund that. And then Nvidia could have another dive, depending on how much of a glut in chips there is, but I'd be buying any chips from here on. By the way, if Tesla breaks the old high of $1,200, which I expect by the end of the year, we could get to $2,000 very rapidly on yet another massive short squeeze against the permanent Tesla haters, who’ve already been completely decimated by the last 60% move.

Q: How would I play Amazon (AMZN) going forward?

A: Buy the dips. I think they’re going to be the world's dominant retailer going forward and they’re doing the right things and going crazy.

Q: Which sectors?

A: Well, for ETFs, you can look at the ProShares Ultra Technology ETF (ROM). That’s 2x leveraged long tech. But only do that on dips because the volatility of the ROM is enormous since it’s 2x in the most volatile sector. Also, I think we can start taking a look at banks again, what with interest rates rising and a recovery on the horizon, banks could come back into play after sitting at the bottom for the last 3 or 4 months.

Q: I’m doing a LEAP on Freeport-McMoRan Inc. (FCX); should I go for January 2025 or 2024?

A: I’d go longer dated—that way you can get a bigger move and will almost certainly be on a full-on economic recovery, and massive electrification of the auto fleet by 2025, thanks to the climate bill that will be passed Friday. That means the demand for copper is about to go absolutely through the roof—I'm looking for (FCX) to go from $30 to $100 in the next 3 years.

Q: Thoughts on Disney (DIS)?

A: No one can believe how cheap Disney has gotten, it’s been a disaster. Obviously (DIS) took it on the nose with the recession and some of the parks still have limitations on the number of visitors. It should do better and I'm amazed it got this cheap. I would expect a move to the $200 level by the end of next year.

Q: What LEAPS do you recommend for January 2023?

A: Well it’s not really a LEAPS if you’re only going out 6 months; that’s just a long-dated call spread. LEAPS are usually a year or longer. I’d say pretty much anything in any sector will be higher except maybe energy by 2023. We’re not at LEAPS territory yet, but we’re getting close. The next major selloff I might start putting LEAPS out there.

Q: Is the Consumer Price Index (CPI) dropping from 9.1% YOY down to 8.5% meaning the top is in and deflation’s over?

A: I think so, because there are a lot of price declines that were not reflected in this July number that have yet to come. I'm talking about wheat, lumber, and energy. So yes, we could get another big move down in August, and if that’s the case, the Fed may only raise by 50 basis points in September. That's the hope. The things that aren’t going to go down are rental costs and labor costs. We may never get back to the inflation rate that we had 2 years ago of 2%. The long-term average for the last 100 years is 3% and certainly a move down to 4% is possible this year (and would be very welcome by the stock market as part of my long-term bull case).

Q: What are your thoughts on Elon Musk selling $6.9 billion worth of Tesla shares?

A: It’s amazing he sold that amount of stock last week and only went down $100. It does remove a big overhang on the stock and paves the way on a much bigger move up later in the year. By selling the $9 in January and $7 now, that’s $16 billion he sold this year. He could almost pay for Twitter with a little outside bank financing.

Q: How far above current prices should I place a LEAPS?

A: It depends on where the market is; if we’re having a cataclysmic selloff down 1,000-point days, then you can have the luxury of going 10%, 20%, or even 30% out-of-the-money; and that of course gets you a 100%, 200% and 300% returns. If we have a higher low, then you may want to go lower risk and go at the money, that might get you a 50% return. On LEAPS that are only slightly in-the-money, even those generate 25% returns one year out with the most conservative possible position.

Q: Would you load the boat on dips?

A: I would but remember: a dip is not one hour or on down days, it’s like half of the recent gain, which would be down 1,500 Dow points, or all of the recent gain, which would be down 3,000 points. So be careful that you don’t get too aggressive just because you’ve gotten bullish.

Q: Do you think the semiconductor chips will lead the tech recovery in the second half of the year?

A: I do, but we do have an inventory problem to digest first, and we have to figure out the implications of the CHIPS act that was signed this week which makes available a couple hundred billion dollars to build new chip factories in the US. Chip companies are particularly challenged right now because they have to provision for a recession which is going to cut chip demand, and they also have to provision for a potential oversupply created by the CHIPS Act. Remember that for the industry, creating safe supplies of chips means more lots of chips at lower prices for consumers. Great for us, great for the auto industry, not so great for chip companies. You have to be careful. On the other hand, on the bullish side, chips are being designed into more products faster and in larger numbers than ever before. This is the main reason why most investors underestimated the chip industry for the last 10 years. That also is a factor that’s accelerating. The average car now has 100 chips. 20 years ago they had maybe 10 chips, and 30 years ago they had none.

Q: Will the eventual big win of Ukraine against Russia result in inflation going back to 2%?

A: No, but it will result in it going back to 3% or 4%, which we could hit next year. You get oil back down below $50, gasoline down to $2/gallon, and the world's food supply opened up once again, and inflation will disappear in a heartbeat.

Q: What’s the deal with the 1% buyback tax in the inflation reduction package?

A: Well they had to get revenue somewhere, and 1% is so small it won’t inhibit anyone from buying back stock, especially if it makes the CEO a billionaire. That is a great incentive—even if you had a 50% tax, they would still be doing buybacks for things like Apple (AAPL), Microsoft (MSFT), and the other buyback players.

Q: What will high energy prices do to crypto?

A: It might actually make it go up because the cost of electricity feeds straight into the manufacturing/programming cost of crypto. And if you notice, Bitcoin bottomed at $17,000 per bitcoin. But that's exactly where the new mining cost is. Just like all of the commodities, when you hit cost of production, the supply suddenly dries up because nobody can make any money at it.

Q: Will US homebuyers buy the dip since mortgage rates have come down?

A: Yes, and we’re already seeing that in the statistics. The fact is we still have a huge housing shortage in the United States. You don’t get big price falls when you have a shortage of supply, and you have 10 million millennials who still need to trade up from their one and two-bedroom apartments all over the country. So, things may stall a bit in home buying, but I don’t think you get very big price drops.

Q: Do you think the US consumer is strong?

A: They never stopped being strong, even throughout recession fears. Never, ever bet against the propensity of Americans to spend money, both individuals and governments.

Q: What are the chances the US goes to war with China over Taiwan?

A: Zero. # 1 China doesn't have ships, #2 we have the 7th Fleet there, and #3 they have been threatening to invade Taiwan for 70 years and done nothing. The Taiwanese are used to this. Though there is the other side issue that most of the other private companies in Taiwan are already owned by the Chinese and have Chinese capital, so it’s unlikely they want to blow up their own facilities. So, the answer is no.

Q: What is the Long term outlook for gold and silver?

A: It’s been dead for so long that I’m not inclined to rush into gold. But you have to expect that when you get a recovery in the commodity boom, it’s going drag gold and silver along with it. I see upsides for both of these, especially silver.

Q: Should student loans be paid off by the federal government?

A: I think yes, because as long as these people have massive debts, they cannot borrow and they cannot enter the US economy as consumers. If you forgive all student debt, you unleash 10 million new customers onto the market who can now borrow, get credit cards, and take out home mortgages. As long as they have massive debts, they can’t do that.

Q: With all the major companies in the world moving to EVs, where are we going to get these commodities?

A: We’re not. Tesla (TSLA) has already locked up major supplies of commodities over the next 10 years, and everyone else will have to pay more money. Some of the weaker producers like Ford (F) and General Motors (GM), are being restrained on shortages of not just chips but also basic commodities like chromium for stainless steel. They’re going to have a real problem competing with Tesla, which is why you own Tesla.

Q: What do you think about the unprofitable tech companies like those in the ARK ETFs (ARKK)?

A: I would avoid those for now. Why take on additional risk buying a non-earning company when the highest quality companies are selling at the cheapest valuations in ten years? Maybe when the big companies like Apple get overvalued—go up another 100% — then you might look at the smaller companies if they’re still cheap. But the risk/reward on the nonearners right now is no good, while it’s fantastic in the large tech companies. That is my opinion and I’m sticking to it.

Q: It seems Russia’s strategy has mirrored those of the Czars.

A: Actually, what they’re doing is repeating their WWII strategy, which worked in 1945— not so much in 2022; and that was massive artillery barrages against retreating Germans. Except this time Ukrainians are not retreating and have far more modern weapons than the Russians.

Q: Would you buy Micron Technology (MU) on bigger dips?

A: Absolutely yes; but again, wait for the down days. You have plenty of volatility in chip stocks, no need to pay up or chase higher prices.

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