Global Market Comments
March 18, 2024
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or THE BIG ROTATION IS ON),
(SNOW), (FCX), (XOM), (TLT), (ALB), (NVDA), (MSFT), (AAPL), (META), (GOOGL), (GOLD), (WPM), (UNP) (FDX), (UNG)
Tag Archive for: (FCX)
Here is the only statistic you need to know right now.
If NVIDIA (NVDA) continues growing at the same rate it has for the last year it will be larger than the entire global economy by 2030, about $100 trillion, up from the current $2 trillion.
Which suggests that it might not actually achieve that lofty goal. Others have reached the same conclusion as I and the stock held up remarkably well in the face of absolutely massive profit-taking last week.
I have been through past market cycles when other stocks seemed to want to go to infinity. There was Apple (AAPL) in the 1980s which went ballistic, then died, was reborn, and then went ballistic again. It is now capped out at a $2.7 trillion market valuation.
Then we all had a great time trading Tesla, which exploded from a split-adjusted $2.35 to $424 and now seems mired in one of its periodic 80% corrections. But mark my word, it is headed to $1,000 someday, taking it up to a $3.2 trillion valuation.
So if NVIDIA isn’t going to $100 trillion what else should be buying right now?
The answer has been apparent in the market for the past two weeks. Interest rate-sensitive commodities have been on a tear, rising 15%-20% across the board. Investors have been using expensive stocks like (NVDA), (MSFT), (AAPL), (META), and (GOOGL) as ATMs to fund purchases of cheap stocks which in some cases have not moved for years.
It really has been an across-the-board move with money pouring into the entire interest rate-sensitive sectors, including copper (FCX), gold (GOLD), silver (WPM), lithium (ALB), Aluminum (AA), and energy (XOM).
It has spread to other economically sensitive stocks like Union Pacific (UNP) and FedEx (FDX). There seems to be an American economic recovery underway, and the bull market is broadening out. The good news is that it’s not too late to get involved.
A lot of it is investor psychology. Investors fear looking stupid more than they fear losing money. If you buy NVIDIA here on top of a one-year tripling and it tanks you will look like an idiot. If you buy commodities here and they grind up for the rest of 2024 you will look like a genius.
While many of you got slaughtered by the collapse of natural gas this winter, with (UNG) cratering from $32 down to a lowly $15, there is in fact a silver lining to this cloud. Cheap energy costs are now permeating throughout the entire global economy and are filtering down to the bottom lines of companies, municipalities, and even governments.
This has been made possible by the growth of US natural gas production from 1 trillion MM BTUs to 7.5 trillion in just the past ten years. The US is now the largest gas and oil producer in the world by a large margin. Replacing Russia as Europe’s largest energy source in just a year was thought impossible and is now a fact and is also enabling the Continent to stand up to Russian Aggression.
There is hope after all.
One question I constantly received during last week’s Mad Hedge Traders & Investors Summit was “When will Tesla (TSLA) shares bottom? The answer is a very firm “Not yet!”
I have been trading the shares of Elon Musk’s creation for 15 years and can tell you that big surges in the stock always precede major generational changes at the company.
We had a nice run from my $2.35 split-adjusted cost when the first Model S came out (I got chassis number 125 off the assembly line), replacing the toy-like two-seat Tesla Roadster, which was built on a cute little Lotus Elise body from England.
The next big run came with the advent of the much cheaper Model 3 in 2017. The ballistic melt up to $424 began with the launch of the small SUV Model Y in 2020, now the biggest-selling car in the world. All we needed was for Elon Musk to sell $10 billion worth of his own stock by early 2022 to put the final top in.
Which raises the question of when the next major generational change at Tesla. That would be the introduction of the $25,000 Model 2 in 2025. Since everything at Tesla happens late (Elon uses deadlines to flog his staff), it better count on late 2025. That means you should start scaling in around the summer. I am already running the numbers on call spreads and LEAPS now.
Can it fall more in the meantime? Absolutely. $150 a share looks like a chip shot. But to only focus on the EV business, which will account for a mere 10% of Tesla’s final total profits, is to miss Elon’s long-term grand vision of a carbon-free world.
Tesla is in the process of becoming the largest electric power utility in the US, eventually providing charging for 150 million cars. It is taking over the car insurance business. My own premiums on my Model X have plunged by 90%.
It's on the way to becoming the world’s largest processor and recycler of lithium. Tesla has a massive large-scale power storage business that no one knows about.
I fully expect Tesla to become the world’s largest company in a decade. Tesla at $1,000 a share here we come. And while the car business may be slow to turn around, the ingredients that go into the cars, like copper (FCX), Aluminum (AA), and lithium (ALB) are starting to move now.
In February we closed up +7.42%. So far in March, we are up +1.34%. My 2024 year-to-date performance is at +4.48%. The S&P 500 (SPY) is up +6.92% so far in 2024. My trailing one-year return reached +48.70% versus +27.25% for the S&P 500.
That brings my 16-year total return to +681.11%. My average annualized return has recovered to +51.40%.
Some 63 of my 70 round trips were profitable in 2023. Some 11 of 19 trades have been profitable so far in 2024.
I stopped out of my position in Snowflake (SNOW) for a small loss figuring that the tech rally’s days may be number after the most heroic move in history. I then rotated the money into new longs in Freeport McMoRan (FCX) and ExxonMobile (XOM). I also took profits on my short in bonds (TLT) after a $3.50 point dive there. I am maintaining a long in (TLT). I am 70% in cash and am looking for new commodity plays to pile into.
CPI Comes in Hot at 0.4% in February. YOY inflation crawled up to 3.2% to 3.1% expected. Higher shelter and gasoline prices are to blame. Bonds tank as interest rate cuts get pushed back. So do stocks. The market was ripe for a correction anyway.
PPI Comes in Hotter than Hot, at 0.6%. That was higher than the 0.3% forecast from Dow Jones and comes after a 0.3% increase in January. Stocks dipped for two minutes and then rocketed back up. Bad news is good news. Go figure.
Weekly Jobless Claims Dip, to 209,000 to an expected 218,000, and down 1,000 from the previous week. It’s a go-nowhere number.
Next-Generation Boeing Delayed Until 2027, says Delta Airlines, a major customer. The 737-10, Boeing's biggest Max plane with a maximum seating capacity of 230 passengers, is pending certification by the U.S. Federal Aviation Administration (FAA). Expect a hard look. Buy (BA) on the next meltdown.
BYD Launches its $12,500 Car, the Model e2 Hatchback, firing another shot across Tesla’s Bow. The EV will initially be available only in China, Tesla’s biggest market, and then in emerging countries without vehicle standards. Don’t expect to see them in the US.
Toyota Agrees to Biggest Wage Hike in 25 Years. Toyota, the world's biggest carmaker and traditionally a bellwether of the annual talks, said it agreed to the demands of monthly pay increases of as much as 28,440 yen ($193) and record bonus payments. Is the Bank of Japan about to raise interest rates? Is the Japanese yen about to rocket?
Inverted What? Economists are going up on the Inverted Yield Curve as a recession indicator. Short-term interest rates have been higher than long-term ones for two years now, but the recession never showed. Relying on obsolete data analysis can be fatal to your wealth.
My Ten -Year View
When we come out the other side of the recession, we will be perfectly poised to launch into my new American Golden Age or the next Roaring Twenties. The economy decarbonizing and technology hyper accelerating, creating enormous investment opportunities. The Dow Average will rise by 800% to 240,000 or more in the coming decade. The new America will be far more efficient and profitable than the old.
Dow 240,000 here we come!
On Monday, March 18, at 7:00 AM EST, the NAHB Housing Index is announced.
On Tuesday, March 19 at 8:30 AM, Housing Starts for February are released.
On Wednesday, March 20 at 11:00 AM, the Federal Reserve Interest rate decision is published
On Thursday, March 21 at 8:30 AM, the Weekly Jobless Claims are announced.
On Friday, March 15 At 2:00 PM, the Baker Hughes Rig Count is printed.
As for me, with all of the hoopla over the Oppenheimer movie winning six Academy Awards, including one for best picture, I thought I’d recall my own experience with the nuclear establishment buried in my long and distant past.
If you were good at math there were only two career choices during the early 1970s: teaching math or working for the Dept of Defense. Since I was sick of university after six years, I chose the latter.
That decision sent me down a long bumpy, dusty road in Mercury Nevada headed for the Nuclear Test Site. There was no sign. You could only find the turnoff from US Highway 95 marked by four trailers owned by the nearest hookers to the top-secret base.
Oppenheimer himself had died three years earlier, a victim of throat cancer induced by the chain-smoking of Luck Strikes that was common in those days. But everyone on the base knew him as they had all worked on the Manhattan Project when they were young men. They worshiped him like a god.
I did meet Edward Teller, who argued in the movie that the atomic bomb was a waste of time because his design of a hydrogen bomb was 100 times more powerful. The problem was that there was no target big enough to justify a bomb of that size (there still isn’t).
As I watched the film with my kids, now junior scientists in their own right, I kept pointing out “I knew him,” except they were gnarly old and white-haired by the time I met them. Of course, they are all gone now.
My memories of the Nuclear Test Site were never to ask questions, my visit to the Glass Desert where the sand had been turned into glass by above-ground tests in the fifties, and skinny dipping with the female staff in the small swimming pool at midnight.
The MPs were pissed.
With the signing of the SALT I Treaty in 1972, underground testing moved to computer models and I lost my job. So I was sent to Hiroshima to interview survivors and write a 30-year after-action report. These were some of the most cheerful people I ever met. If an atomic bomb can’t kill you, then nothing can.
When the Cold War ended in 1992, the United States judiciously stepped in and bought the collapsing Soviet Union’s entire uranium and plutonium supply.
For good measure, my hedge fund client George Soros provided a $50 million grant to hire every unemployed Soviet nuclear engineer. The fear then was that starving scientists would go to work for Libya, Iraq, North Korea, or Pakistan, which all had active nuclear programs. They ended up in the US instead.
That provided the fuel to run all US nuclear power plants and warships for 20 years. That fuel has now run out and chances of a resupply from Russia are zero. The Department of Defense attempted to reopen our last plutonium factory in Amarillo, Texas, a legacy of the Johnson administration.
But the facilities were deemed too old and out of date, and it is cheaper to build a new factory from scratch anyway. What better place to do so than Los Alamos, which has the greatest concentration of nuclear expertise in the world.
Los Alamos is a funny sort of place. It sits at 7,320 feet on a mesa on the edge of an ancient volcano so if things go wrong, they won’t blow up the rest of the state. The homes are mid-century modern built when defense budgets were essentially unlimited. As a prime target in a nuclear war, there are said to be miles of secret underground tunnels hacked out of solid rock.
You need to bring a Geiger counter to garage sales because sometimes interesting items are work castaways. A friend almost bought a cool coffee table which turned out to be part of an old cyclotron. And for a town designing the instruments to bring on the possible end of the world, it seems to have an abnormal number of churches. They’re everywhere.
I have hundreds of stories from the old nuclear days passed down from those who worked for J. Robert Oppenheimer and General Leslie Groves, who ran the Manhattan Project in the early 1940s. They were young mathematicians, physicists, and engineers at the time, in their 20’s and 30’s, who later became my university professors. The A-bomb was the most important event of their lives.
Unfortunately, I couldn’t relay this precious unwritten history to anyone without a security clearance. So, it stayed buried with me for a half century, until now.
Some 1,200 engineers will be hired for the first phase of the new plutonium plant, which I got a chance to see. That will create challenges for a town of 13,000 where existing housing shortages already force interns and graduate students to live in tents. It gets cold at night and dropped to 13 degrees F when I was there.
I was allowed to visit the Trinity site at the White Sands Missile Test Range, the first visitor to do so in many years. This is where the first atomic bomb was exploded on July 16, 1945. The 20-kiloton explosion set off burglar alarms for 200 miles and was double to ten times the expected yield.
Enormous targets hundreds of yards away were thrown about like toys (they are still there). Some scientists thought the bomb might ignite the atmosphere and destroy the world but they went ahead anyway because so much money had been spent, 3% of US GDP for four years. Of the original 100-foot tower, only a tiny stump of concrete is left (picture below).
With the other visitors, there was a carnival atmosphere as people worked so hard to get there. My Army escort never left me out of their sight. Some 79 years after the explosion, the background radiation was ten times normal, so I couldn’t stay more than an hour.
Needless to say, that makes uranium plays like Cameco (CCJ), NextGen Energy (NXE), Uranium Energy (UEC), and Energy Fuels (UUUU) great long-term plays, as prices will almost certainly rise all of which look cheap. US government demand for uranium and yellow cake, its commercial byproduct, is going to be huge. Uranium is also being touted as a carbon-free energy source needed to replace oil.
At Ground Zero in 1945
What’s Left of a Trinity Target 200 Yards Out
Playing With My Geiger Counter
Atomic Bomb No.3 Which was Never Used in Tokyo
What’s Left from the Original Test
Good Luck and Good Trading,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
March 7, 2024
Fiat Lux
Featured Trade:
(REMEMBERING THE OLD DAYS AT MORGAN STANLEY),
(MS), (GS), (GLD), (FCX), (FXE), (FXY), (CCJ)
Global Market Comments
January 8, 2024
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or HERE IS THE TRADE OF THE YEAR),
(TLT), (TSLA), (BYDDY), (FCX), (TLT) (F), (GLD), (X)
During 2023, the market spent the entire year climbing the proverbial wall of worry. The question is how much we have to give back from deferred tax selling from the profitable 2023 trades before 2024 can start anew.
It could be weeks. It could be months.
Last year was the Year of the Magnificent Seven. So far this year, it is looking like the Year of the Magnificent 493, when everything else goes up.
Which brings me to the most important topic of the day.
The best trade out there this year may be the most boring one of all, the ten-year US Treasury notes, now yielding 4.10%.
Let’s say the Federal Reserve delivers on its promise to cut interest rates three times in 2024 from 5.5% taking the overnight rate down to 4.75%. The futures markets are giving us a 70% probability this will start in March, but I think that Jay Powell will want to torture us for a few extra months until June to make sure inflation is well and truly dead.
In that case, bond prices (TLT) should rise at least from $96 to $110 by the end of the year, taking the yield down from 4.10% today to 3.60% Add in the current 4.10% yield and that should give you a very low-risk total return for the year of 18% or better.
But what if the 2024 yearend liquidity surge discounts the 3 additional interest rate cuts to take place in 2025? That could add another $10 to this trade, taking the total return for the year up to 28%. Most investors will take an annual return of 28% all day long.
There is in fact a better way to do this.
Don’t buy the (TLT), which has high management and administration costs and wide dealing spreads that probably top 2% a year. Bypass all of that through buying the ten-year US Treasury note directly from your broker. That’s easy to do, has minimal commissions and the bonds trade like water.
After all, the US government has a unique talent for issuing bonds and there are already trillions of dollars’ worth outstanding. That shifts the 2% take of the (TLT) from Wall Street into your pocket.
It gets better.
What are the chances that another pandemic will occur in the next decade? I’d say about 50/50. After all, with a global population of 8 billion and rising, international travel and trade reaccelerating, pandemic risks are rising once again.
If you don’t believe me, just try and get an Airbnb (ABNB) in Florence, Italy, the epicenter of the last breakout in Europe. There are hardly any Italians left in Florence because they can’t compete with tourists on housing costs and can’t afford to live there anymore. So it is now more important to hedge your portfolio from pandemic risks.
It just so happens that there is a way you can do this: buy ten-year US Treasury notes. What happened with the last pandemic (see chart below)? The (TLT) doubled in value from $80 to $165, taking yields from 5.0% all the way down to 0.32%. Back then, investors were worried about return OF capital, not return ON capital, for which the US government has a perfect record.
It turns out that bonds will not only hedge all of your stocks from pandemic risks, but ALL INVESTMENTS OF EVERY KIND, including commodities, the dollar, precious metals, energy, and even your own home.
And with a 4.1% yield, bonds offer an insurance policy that pays you to own it.
Ten-year US Treasury notes are also the perfect position to have during times of inflation. Falling inflation enables more Fed rate cuts, which automatically increase the value of the notes….by a lot.
How do I know inflation is falling? Because I went bowling last week in Incline Village, Nevada. The establishment is under new ownership. They gutted the place, fired all the staff, and remodeled it in a cool sixties motif. Then they hired two people to run the place.
All payments have to take place online, even for video games, where you also now have to reserve your lanes. As a result, instead of casually walking in to take a lane, you have to book them two weeks in advance. The place is always full.
Cut costs, and soaring revenues, you want to own this bowling alley, as you do for the Magnificent 493. This is going on across the entire US economy, like it or not. This is highly deflationary.
Hedge funds are piling into the ten-year US Treasury note trade in record numbers because you only see a low-risk, high-return setup like this once every decade or so.
My bet is that there are maybe four points of downside risk in this trade against a potential gain of 28 points. That’s a risk/reward ratio of 7:1.
I Like it!
I just thought you’d like to know.
So far in January, we are up 0% since I have done no trades and have a 100% cash position. My 2024 year-to-date performance is also at 0%. The S&P 500 (SPY) is down -2.51% so far in 2024. My trailing one-year return reached +73.94% versus +34.46% for the S&P 500.
My 15-year total return is +676.63% and my average annualized return is +54.05%.
Some 63 of my 70 trades last year were profitable in 2023.
Did We Just See Another 2009 Bottom? If so, we could be looking at rising stocks for another 13 years, making my own Dow 120,000 forecast look conservative. Certainly, the fundamentals are there, as long as we don’t get another pandemic or 100 other things go wrong.
The Nonfarm Payroll Report Sizzles, at 216,000, better than expected. The headline Unemployment Rate maintained a near 50-year low at 3.7%. December’s payroll gains were driven by three categories: Education/health, leisure/hospitality, and government. The overall level of leisure/hospitality jobs remains below the pre-pandemic high, showing that some parts of the job market are still normalizing after the COVID-19 shock.
JOLTS Falls in December, nudging lower to 8.79 million, about in line with the Dow Jones estimate for 8.8 million and the lowest level since March 2021. The ratio of job openings to available workers fell to 1.4 to 1, still elevated but down sharply from the 2 to 1 level that had been prevalent in 2022.
Weekly Jobless Claims Dropped to 202,000, a two-month low. pointing to underlying labor market strength even as demand for workers is easing. With the report from the Labor Department on Thursday also showing the number of people on unemployment rolls remained elevated towards the end of December, financial markets continued to anticipate that the Federal Reserve would start cutting interest rates in March.
Tesla (TSLA) is Still the World’s Largest EV Maker. BYD (BYDDY) delivered 1.57 million EVs in 2023 compared to 1.8 million for Tesla (TSLA). BYD, which I visited in China 12 years ago when Warren Buffet bought a stake in it, is building factories in Europe, Latin America, and across Asia as part of a broader effort to expand sales across these continents, and its cars and buses are popping up in cities all over the world. They could never meet quality standards in the US. They offer a cheaper, lower margin, lesser quality product, but that is all that is needed in many emerging markets.
Copper (FCX) to Rise 75% in 2024, say industry analysts. Copper is headed for a price spurt over the next two years, as mining supply disruptions coincide with higher demand for the metal. Rising demand driven by the green energy transition and a decline in the U.S. dollar strength come the second half of 2024 will fuel support for copper prices. I’m going to keep telling you this until you buy more copper.
The Auto Business is Booming, at 15.6 million units delivered in 2023, a four-year high. Ford (F) saw a 7.6% increase in sales. Also a sign of a strong economy. The company’s F series pickup trucks remain the best-selling vehicle in America.
Pending Home Sales were Unchanged in November, despite record 30-year fixed-rate mortgages at 8.0%. The underlying real estate is far stronger than people realize. Mortgage rates are now solidly in the mid-6% range, but the supply of homes for sale is still very low. REMAX CEO Nick Baily says the market is short 4.5 to 5 million homes which will take a decade to build.
Gold (GLD) to Hit New High in 2024, with fundamentals of a dovish pivot in U.S. interest rates, continued geopolitical risk, and central bank buying is expected to support the market after a volatile 2023. Spot gold posted a 13% annual rise in 2023, its best year since 2020, trading around $2,060 per ounce.
Nippon Steel Buys US Steel (X) for $55 a Share, or $14.9 billion. That is double the next competing offer from Cleveland Cliffs (CLF). In clearly what is a trophy purchase, the buyer will honor all existing union deals. That certainly puts my December 2025 $20-$23 LEAPS issued last June at its maximum profit of 132%. Sell now if you still have it. There is only downside risk from here.
Home Prices Hit New All-Time Highs, according to S&P Case Shiller, up 0.6% in October and 4.8% YOY. That is nine consecutive months of gains. A 30-year fixed rate mortgage down to 6.7% is a help. Detroit had the biggest increase at 8.1%, followed by San Diego with 7.2% and New York with 7.1%. Portland, Oregon, was the only one of the 20 cities where prices fell year over year. A decade-long bull market has begun.
Core PCE Dives to a 3.2% YOY Rate. Headline Personal Consumption Expectation fell to only 2.6%, closing in on the Fed’s 2.0% target. It’s no longer a question of if the Fed will cut interest rates, but how much and how fast.
My Ten-Year View
When we come out the other side of the recession, we will be perfectly poised to launch into my new American Golden Age or the next Roaring Twenties. The economy decarbonizing and technology hyper accelerating, creating enormous investment opportunities. The Dow Average will rise by 800% to 240,000 or more in the coming decade. The new America will be far more efficient and profitable than the old.
Dow 240,000 here we come!
On Monday, January 8, at 8:30 AM EST, the Consumer Inflation Expectations are out, one of the Fed’s favorite inflation reads.
On Tuesday, January 9 at 8:30 AM, the NFIB Business Optimism Index will be released.
On Wednesday, January 10 at 2:00 PM, the MBA Mortgage Applications will be published.
On Thursday, January 11 at 8:30 AM the Weekly Jobless Claims are announced. We also get the Consumer Price Index for December.
On Friday, January 12 at 2:30 PM, the December Producer Price Index is published. At 2:00 PM the Baker Hughes Rig Count is printed.
As for me, when I drove up to visit my pharmacist in Incline Village, Nevada, I warned him in advance that I had a question he never had heard before: How good is 80-year-old morphine?
He stood back and eyed me suspiciously. Then I explained in detail.
Two years ago, I led an expedition to the South Pacific Solomon Island of Guadalcanal for the US Marine Corps Historical Division (click here for the link). My mission was to recover physical remains and dog tags from the missing in action there from the epic 1942 battle.
Between 1942 and 1944, nearly four hundred Marines vanished in the jungles, seas, and skies of Guadalcanal. They were the victims of enemy ambushes and friendly fire, hard fighting, malaria, dysentery, and poor planning.
They were buried in field graves, in cemeteries as unknowns, if not at all left out in the open where they fell. They were classified as “missing,” “not recovered,” and “presumed dead.”
I managed to accomplish this by hiring an army of kids who knew where the most productive battlefields were, offering a reward of $10 a dog tag, a king's ransom in one of the poorest countries in the world. I recovered about 30 rusted, barely legible oval steel tags.
They also brought me unexploded Japanese hand grenades (please don’t drop), live mortar shells, lots of US 50 caliber and Japanese 7.7 mm Arisaka ammo, and the odd human jawbone, nationality undetermined.
I also chased down a lot of rumors.
There was said to be a fully intact Japanese zero fighter in flying condition hidden in a container at the port for sale to the highest bidder. No luck there.
There was also a just discovered intact B-17 Flying Fortress bomber that crash-landed on a mountain peak with a crew of 11. But that required a four-hour mosquito-infested jungle climb and I figured it wasn’t worth the malaria.
Then, one kid said he knew the location of a Japanese hospital. He led me down a steep, crumbling coral ravine, up a canyon, and into a dark cave. And there it was, a Japanese field hospital untouched since the day it was abandoned in 1943.
The skeletons of Japanese soldiers in decayed but full uniform lay in cots where they died. There was a pile of skeletons in the back of the cave. Rusted bottles of Japanese drugs were strewn about, and yellowed glass sachets of morphine were scattered everywhere. I slowly backed out, fearing a cave-in.
It was creepy.
I sent my finds to the Marine Corps at Quantico, Virginia, who traced and returned them to the families. Often the survivors were the children, or even grandchildren of the MIA’s. What came back were stories of pain and loss that had finally reached closure after eight decades.
Wandering about the island, I often ran into Japanese groups with the same goals as mine. My Japanese is still fluent enough to carry on a decent friendly conversation with the grandchildren of their veterans. It turned out I knew far more about their loved ones than they did. After all, it was our side that wrote the history. They were very grateful.
How many MIAs were they looking for? 30,000! Every year they found hundreds of skeletons and cremated them in a ceremony, one of which I was invited to. The ashes were returned to giant bronze urns at Yasakuni Ginja in Tokyo, the final resting place of hundreds of thousands of their own.
My pharmacist friend thought the morphine I discovered had lost half of its potency. Would he take it himself? No way!
As for me, I was a lucky one. My dad made it back from Guadalcanal, although the malaria and post-traumatic stress bothered him for years. And you never wanted to get in a fight with him….ever.
I can work here and make money in the stock market all day long. But my efforts on Guadalcanal were infinitely more rewarding. I’ll return as soon as I get the chance, now that I know where to look.
True MIA’s, the Ultimate Sacrifice
My Collection of Dog Tags and Morphine
My Army of Scavengers
Dad on Guadalcanal (lower right)
Good Luck and Good Trading,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
December 26, 2023
Fiat Lux
Featured Trade:
(THE NEXT COMMODITY SUPERCYCLE HAS ALREADY STARTED),
(COPX), (GLD), (FCX), (BHP), (RIO), (SIL),
(PPLT), (PALL), (GOLD), (ECH), (EWZ), (IDX)
Global Market Comments
December 4, 2023
Fiat Lux
Featured Trade:
Featured Trade:
(The Mad Hedge December Traders & Investors Summit is ON!)
(MARKET OUTLOOK FOR THE WEEK AHEAD, or GOLDILOCKS IS BACK!),
(TLT), (FCX), (CAT), (JNK), (HYG), (NLY), (GM), (MSFT), (NLY), (BRK/B), (CCJ), (GOOGL), (SNOW), (XOM), (CRM)
After too long of an absence, Goldilocks has moved back in once again. She arrived with Santa Claus too, a month ahead of schedule.
Can life get any better than that, Goldilocks and Santa Claus?
Santa confused Thanksgiving with Christmas this year. I saw it coming a mile off, and it’s not because my failing eyesight has suddenly improved.
Since October 26, Mad Hedge followers have earned an impressive 25%. We are on track to top an 86.5% profit for 2023, the best in the 15-year history of the service.
Concierge members who own our substantial LEAPS portfolio, now at 33 names, are up much more.
I hate to boast but let me take my victory lap. I earned it.
Stocks and bonds should continue rising but at a much slower rate. More likely is the diversification of the rally from Big Tech and big bonds (TLT) to medium tech, commodities (FCX), industrials (CAT), junk bonds (JNK), (HYG), and REITS (NLY).
Buy everything on dips.
And here are your assumptions. Collapsing energy prices will lead the inflation rate down to the Fed’s well-publicized 2% inflation rate target in the coming months. Accelerating technology and AI will reign in this year’s runaway wage increases, if not reverse them.
The UAW’s 25% salary increase over four years will only hasten the demise of General Motors (GM), as well as their own. Interest rates have to take a swan dive, supercharging all risk assets.
Goldilocks is not moving in for a fling, but a long-term relationship. Your retirement funds will love it.
Last spring, with 75 feet of snow over the winter, the rivers pouring out of the High Sierras were at record levels. That brought the solo hobbyist gold miners out in force.
It is widely believed that the 1849 gold rush extracted only 10% of the gold in the mountains and the remaining 90% is still up there. Heavy rainfalls like we received last winter flushed out some of the rest.
Rounding a turn in the river, I spotted a group of modern-day 49ers equipped with shoulder-high waders and inner tubes floating pumps and sluice boxes. So I parked the car and waded out in the freezing, fast-running water to get an update on this market.
One man proudly showed off a one-ounce gold nugget that he had found only that morning worth about $1,800. Nuggets are worth more than spot gold because they attract a collector’s market.
A record eight-ounce nugget was discovered in a river near Merced the week earlier. This year, the state government in Sacramento issued a record number of gold mining licenses.
I explained to my newfound friend that he should hang on to his gold because it would be worth a lot more the following year. Inflation was falling and that would eventually induce the Federal Reserve to cut interest rates sharply.
That meant less interest rate competition for gold and silver, which yielded nothing taking prices upward. Personally, I think this gold could hit $3,000 an ounce and silver $50 an ounce in 2025.
In addition, there was a constant bid from Russia, China, and North Korea looking to dodge financial sanctions. Money managers are also picking up the yellow metal as a hedge against any unanticipated volatility in 2024.
My friend looked at me quizzically, wondering if perhaps I was some kind of nutjob who had waded out mid-river to rob him of his prized nugget.
I’ll do anything to gain a trading edge, even freezing off my cajones.
It was a tough week for 90- and 100-year-olds with the passing of Charlie Munger, Henry Kissinger, and Supreme Court Justice Sandra Day O’Connor. I had the privilege of knowing all three.
I was in the White House Press Room one day when the press secretary James Brady asked if any of the press could ride a horse. Sheepishly, I was the only one to raise a hand.
I was ordered to pick up my riding boots and report to the White House Stables on 17th Street. I had no idea why. Back then, even the press didn’t ask some questions.
When I arrived, I understood why. Supreme Court Justice Sandra Day O’Connor was already there kitted out ready to ride. It turns out that the justice from Arizona rode weekly with Ronald Reagan. This week, an international crisis prevented the president from doing so. I was the fill-in escort.
We talked about growing up in the Colorado Desert, and pre-air conditioning, as we enjoyed a peaceful ride along the Potomac River. A security detail kept a safe distance.
A lot of history is being in the right place at the right time.
The clock is ticking.
November closed out at +15.54%. My 2023 year-to-date performance is still at an eye-popping +81.71%. The S&P 500 (SPY) is up +19.73% so far in 2023. My trailing one-year return reached +80.80% versus +18.19% for the S&P 500.
That brings my 15-year total return to +678.90%. My average annualized return has exploded to +52.26%, another new high, some 2.48 times the S&P 500 over the same period.
I am 90% fully invested, with longs in (MSFT), (NLY), (BRK/B), (CCJ), (GOOGL), (SNOW), (CAT), and (XOM). I have one short in the (TLT). I took profits on (CRM) on Friday.
Some 56 of my 61 trades this year have been profitable this year.
My Ten-Year View
When we come out the other side of the recession, we will be perfectly poised to launch into my new American Golden Age or the next Roaring Twenties. The economy decarbonizing and technology hyper-accelerating, creating enormous investment opportunities. The Dow Average will rise by 800% to 240,000 or more in the coming decade. The new America will be far more efficient and profitable than the old.
Dow 240,000 here we come!
On Monday, December 4, at 8:30 AM EST, the US Factory Orders are out.
On Tuesday, December 5 at 2:30 PM, the JOLTS Job Openings Report is released.
On Wednesday, December 6 at 8:30 AM, the ADP Private Employment Report is published.
On Thursday, December 7 at 8:30 AM, the Weekly Jobless Claims are announced.
On Friday, December 8 at 2:00 PM the Baker Hughes Rig Count is printed and at 2:30 PM, the November Nonfarm Payroll Report is published.
As for me, back in the early 1980s, when I was starting up Morgan Stanley’s international equity trading desk, my wife Kyoko was still a driven Japanese career woman.
Taking advantage of her near-perfect English, she landed a prestige job as the head of sales at New York’s Waldorf Astoria Hotel.
Every morning we set off on our different ways, me to Morgan Stanley’s HQ in the old General Motors Building on Avenue of the Americas and 47th street and she to the Waldorf at Park and 34th.
One day, she came home and told me this little old lady living in the Waldorf Towers needed an escort to walk her dog in the evenings once a week. Back in those days, the crime rate in New York was sky-high, and only the brave or the reckless ventured outside after dark.
I said “Sure” “What was her name?”
Jean MacArthur.
I said THE Jean MacArthur?
She answered “Yes.”
Jean MacArthur was the widow of General Douglas MacArthur, the WWII legend. He fought off the Japanese in the Philippines in 1941 and retreated to Australia in a dramatic night PT Boat escape.
He then led a brilliant island-hopping campaign, turning the Japanese at Guadalcanal and New Guinea. My dad was part of that operation, as were the fathers of many of my Australian clients. That led all the way to Tokyo Bay where MacArthur accepted the Japanese in 1945 on the deck of the battleship USS Missouri.
The MacArthur then moved into the Tokyo embassy where the general ran Japan as a personal fiefdom for seven years, a residence I know well. That’s when Jean, who was 18 years the general’s junior, developed a fondness for the Japanese people.
When the Korean War began in 1950, MacArthur took charge. His landing at Inchon Harbor broke the back of the invasion and was one of the most brilliant tactical moves in military history. When MacArthur was recalled by President Truman in 1952, he had not been home for 13 years.
So it was with some trepidation that I was introduced by my wife to Mrs. MacArthur in the lobby of the Waldorf Astoria. On the way out, we passed a large portrait of the general who seemed to disapprovingly stare down at me taking out his wife, so I was on my best behavior.
To some extent, I had spent my entire life preparing for this job.
I had stayed at the MacArthur Suite at the Manila Hotel where they had lived before the war. I knew Australia well. And I had just spent a decade living in Japan. By chance, I had also read the brilliant biography of MacArthur by William Manchester, American Caesar, which had only just come out.
I also competed in karate at the national level in Japan for ten years, which qualified me as a bodyguard. In other words, I was the perfect after-dark escort for Midtown Manhattan in the early eighties.
She insisted I call her “Jean”; she was one of the most gregarious women I have ever run into. She was grey-haired, petite, and made you feel like you were the most important person she had ever run into.
She talked a lot about “Doug” and I learned several personal anecdotes that never made it into the history books.
“Doug” was a staunch conservative who was nominated for president by the Republican party in 1944. But he pushed policies in Japan that would have qualified him as a raging liberal.
It was the Japanese that begged MacArthur to ban the army and the navy in the new constitution for they feared a return of the military after MacArthur left. Women gained the right to vote on the insistence of the English tutor for Emperor Hirohito’s children, an American Quaker woman. He was very pro-union in Japan. He also pushed through land reform that broke up the big estates and handed out land to the small farmers.
It was a vast understatement to say that I got more out of these walks than she did. While making our rounds, we ran into other celebrities who lived in the neighborhood who all knew Jean, such as Henry Kissinger, Ginger Rogers, and the UN Secretary-General.
Morgan Stanley eventually promoted me and transferred me to London to run the trading operations there, so my prolonged free history lesson came to an end.
Jean MacArthur stayed in the public eye and was a frequent commencement speaker at West Point where “Doug” had been a student and later the superintendent. Jean died in 2000 at the age of 101.
I sent a bouquet of lilies to the funeral.
Kyoko passed away in 2002.
In 2014, Chinas Anbang Insurance Group bought the Waldorf Astoria for $1.95 billion, making it the most expensive hotel ever sold. Most of the rooms were converted to condominiums and sold to Chinese looking to hide assets abroad.
The portrait of Douglas MacArthur is gone too. During the Korean War, he threatened to drop atomic bombs on China’s major coastal cities.
Good Luck and Good Trading,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
December 1, 2023
Fiat Lux
Featured Trade:
(NOVEMBER 29 BIWEEKLY STRATEGY WEBINAR Q&A),
($VIX), UNG), (PANW), (SNOW), (HACK), (MSFT), (AAPL), (FCX), (TSLA), (F), (GM), (LLY), (CVX), (XOM), (RIVN), (TLT)
Below please find subscribers’ Q&A for the November 29 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Silicon Valley, CA.
Q: How much longer can the United States Natural Gas Fund (UNG) remain at such low levels?
A: They call this contract “The Widow Maker” for a reason. As long as the weather is warmer than usual, which has been a problem, (UNG) will remain cheap. We actually got up to $8 in the UNG a month ago and have since come back to $5.50. There are no signs of an energy shortage anywhere right now with the collapse of oil prices from $96 down to $70, so this could be the worst thing in the world if global warming continues. But I'm keeping my position. It’s basically worthless now anyway, but that has been a real shocker this year in the energy community—how cheap natural gas has gotten. And that is after supplying all on Germany’s Natgas needs with no notice.
Q: I still have Palo Alto Networks (PANW) open, what should I do?
A: You’re pretty much at a maximum profit now, so you might as well run it into the expiration because, at a Volatility Index ($VIX) of $12, there just aren’t many other attractive trades to put on right now. You’ll see that when we go through the charts. Everything has just had a massive move in our favor. It’s actually the sharpest move up in market history, so you don't want to go chasing things, and you certainly don't want to go short because that is against the long, medium, and short-term trends.
Q: Which of your positions would you suggest we can still buy right now?
A: None, except for two-year US treasury Bills to lock in high-interest rates at 4.8%. Everything is just wildly expensive on a short-term basis.
Q: When do you expect Freeport McMoRan (FCX) and the other commodities to rise?
A: Towards the middle of the year, the market will shift entirely out of technology and into domestic industrials and commodities, and we should expect exponential moves in those areas also as the economy recovers and interest rates fall. We are going to start putting LEAPS out on those pretty soon because those are the bargain of the century prices right now.
Q: I’m new to the program, and I noticed all of the trades are done as options spreads. What are the benefits of doing it in this way versus owning the underlying?
A: You get a leverage of 10X versus owning the underlying with limited risk. You also make money when markets do nothing because you are also short volatility when you do an options spread. In fact, every trade alert we send out gives you three choices usually: buy the stock, buy the options spread, or buy the ETF. So that way, you can cater your trading to your level of experience and risk tolerance. And if you want to know more, just go to our website, log in, and search for call spreads—there will be a vast library talking about the benefits of doing call spreads and how to execute them.
Q: What’s your favorite sector for next year?
A: Always a popular question for this time of the year, and that’s an easy answer.
Number one: cybersecurity. That means Palo Alto Networks (PANW), which we’re long, Snowflake (SNOW), which we’re also long, and Nvidia (NVDA), which we were long in October before it went completely nuts—it turns out that cyber security has a huge appetite for the high-end processors that Nvidia makes. There’s also an ETF on that—HACK, if you want lower volatility; so there’s three or four names for you right there. If I had to pick a single stock, the safest stock, I’d pick Microsoft (MSFT) right here; they have a 70% market share in PC operating systems worldwide, they are ramping up their efforts in AI with the ownership of ChatGPT, and it's really literally the safest stock in the market—likely to go up 30% next year. So if you can handle 30% plus a 0.80% dividend, Microsoft is your pick, but you might want to think about selling it mid-year when Freeport McMoRan (FCX) becomes my number one pick of the year.
Q: Is it too late to buy Microsoft (MSFT)?
A: Yes, wait for either a pullback of 10% or a flat line move sideways for a month, which is also called a time correction.
Q: I have several large companies I deal with that have all been hacked in the last couple of months. Several have been locked out of their systems or shut down for a month.
A: Yes, that’s absolutely going on everywhere. Also, governments have become favorite targets for hacking because they have the least amount of money to spend on cybersecurity. They are also the least sophisticated. So again, cybersecurity is a great business to be in; and by the way, I think we’re having gigantic moves in the cyber sector today. Palo Alto Networks (PANW) is up $11.61—who can beat that? That’s nice, watching your longs going up in double digits every day.
Q: Is Apple (APPL) going into the banking business now that they and Goldman are going through a divorce?
A: Yes, Apple has been slowly sneaking into the banking business for years. Look no further than Apple Pay. They have several advantages they can bring to bear here, like all of you personal information they could possibly imagine.
Q: I don’t like General Motors (GM) even though they’ve announced buybacks and dividend increases—too concerned about EV slack, market, and labor costs.
A: I couldn’t agree with you more; I think (GM) goes under in 10 years. They’ll never catch up on EVs, and basically, the company will either sell Teslas under license or be sold for scrap metal like they were back in 2008. And it really is the height of hubris to announce a 17% share buyback, which is enormous—10 billion dollars—right after they pleaded poverty with the unions to get them to agree to only a 25% wage increase. So it just absolutely fails the smell test on every front.
Q: Do you see healthcare making a big move as larger companies are really beaten down?
A: You’ll have rallies in healthcare, but basically, they’re a defensive sector and the last thing in the world that you want in a runaway bull market is a defensive sector. You will get single stock moves like Eli Lilly (LLY) from people who are specifically playing hot areas like weight loss drugs and other companies developing cancer cures with AI. That’ll be another big story next year.
Q: Any chance for Ford (F) at this point?
A: Not in the long term; again, you go back to that market share chart I showed you—Ford is only at a 7% market share in EVs and 14 years behind Tesla (TSLA), which has a 52% share. I don’t think anybody has a chance. What may happen is Tesla will take over Ford at some point, just to get at the factories; but again it will be a “pennies on the dollar” offer.
Q: What about Toyota (TM); how long can their hybrid push last?
A: A long time, because for a lot of people, hybrids are the right solution—especially people who have to go long distances and don't have time to recharge or don't have access to recharging. The hybrids that they have now are really great. They run the first 50, 60, or 70 miles solely on battery power. And I know people who have hybrids with short commutes who still have the original tank of gas the car came with when they bought it new a year ago. All-electric isn't perfect for everyone; hybrids will catch what's left of that market. Also, hybrids have thousands more parts than electric cars do. So the profit margin will never be what it is on an EV.
Q: Will Chevron (CVX) and ExxonMobil (XOM) go up?
A: Oil does absolutely, you can expect 20-30% gains on any recovery in oil, and that’s why we own them. But it’s a 2024 story.
Q: What do you think about Rivian (RIVN) here?
A: It's a long-term play; we have the LEAPS in them. The stock is just about recovered to our costs and they're increasing production. If anyone else is going to make it in the EV sector, it will be Rivian, who is run by some genius from MIT. So yeah, I would be buying dips in Rivian but I wouldn't chase.
Q: How will the iShares 20 Plus Year Treasury Bond ETF (TLT) perform in the next few months?
A: Kind of late for the LEAPS. That was really an October play, but any $ 5-point pullback and I will be in there with LEAPS because I think (TLT) hits $120 next year.
Q: Please explain the demise of Crypto.
A: Crypto did great when we had a cash surplus and an asset shortage like in 2019-2021. We now have the opposite—a cash shortage and an asset oversupply. Crypto doesn't do well in that situation. On top of that, the guys who runs every major crypto platform are looking at prison time now because of massive widespread theft. Although you do see crypto has gone up nearly a hundred percent this year, that doesn't back out all the Crypto losses from theft. It would be interesting to find out what the true performance of Crypto would be if you included the 50% that was stolen by the Crypto custodians in one way or the other. So Crypto is great when stocks were too expensive, but now they're all cheap and they pay dividends. So, much better fish to fry these days as opposed to the last market top.
Q: Do you think the election will have any effect on the stock market next year?
A: Absolutely not. Even a government shutdown won't have an effect because the fundamentals are now so powerful. We're basically discounting falling interest rates for the next 5 years. Your retirement funds will absolutely love that.
To watch a replay of this webinar with all the charts, bells, whistles, and classic rock music, just log on to www.madhedgefundtrader.com, go to MY ACCOUNT, select your subscription (GLOBAL TRADING DISPATCH, TECHNOLOGY LETTER, or Jacquie's Post), then click on 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
