Global Market Comments
December 4, 2020
Fiat Lux
FEATURED TRADE:
(WHY WATER WILL SOON BE WORTH MORE THAN OIL),
(CGW), (PHO), (FIW), (VE), (TTEK), (PNR), (BYND),
(WHY WARREN BUFFETT HATES GOLD),
(GLD), (GDX), (ABX), (GOLD)
Global Market Comments
December 4, 2020
Fiat Lux
FEATURED TRADE:
(WHY WATER WILL SOON BE WORTH MORE THAN OIL),
(CGW), (PHO), (FIW), (VE), (TTEK), (PNR), (BYND),
(WHY WARREN BUFFETT HATES GOLD),
(GLD), (GDX), (ABX), (GOLD)
Global Market Comments
November 9, 2020
Fiat Lux
FEATURED TRADE:
(MARKET OUTLOOK FOR THE WEEK AHEAD,
or THE ROARING TWENTIES HAVE JUST BEGUN),
(SPY), (TLT), (TSLA), (CAT), (JPM), (GOLD), (UNP), (UPS), (AMGN)
I have a prediction to make.
If you are unhappy about the election result, the world will still turn, the sun will rise in the east and set in the west, and the moon will continue to wax and wane every month.
There, I promise I won’t talk about politics for another four years unless it’s for the Official Incline Village, Nevada Bear Wrangler.
The plywood has started coming down from storefronts in San Francisco, no doubt stored away for another day. Mass celebrations have broken out everywhere.
It is now back to the serious business of making money.
That is easy for me to do because I have just enjoyed the most profitable week in the 13-year history of the Mad Hedge Fund Trader. From the Thursday low last week, our 2020 year-to-date performance has rocketed by an eye-popping 11.46%. This was a once-in-a-decade setup and I struck while the iron was hot.
For only the third time this year, I went 100% fully invested right before the election, and every position dutifully made money across all asset classes. Stocks (SPY) and gold (GLD) soared, while the US Treasury bond market (TLT) and the US dollar (UUP) crashed. On the stock side, everything went up like the true quantitative easing, liquidity-driven market that it is.
My fundamental call on the market came true. It made no difference who won the election, the mere fact that it is over is a major positive for stocks.
With such a historic move last week, the major indexes have pulled forward performance from the rest of 2020 and possibly a piece of 2021 as well. So, I expect to see sideways chop for the next seven weeks with a slight upward bias.
I don’t need to remind the veterans out there that this is the perfect environment for vertical bull call spreads. We may stay fully invested for a while and shoot for a record performance for 2020.
The chance of a market crash now is effectively zero. If for some reason we do get a 5% pullback, for Heaven’s sake please dive in with both hands. The Roaring Twenties and the next American Golden Age have only just begun. Globalization resumes its inevitable course.
The only thing that would trigger a selloff is an exponential growth of the pandemic, which with 122,000 cases and 1,200 deaths yesterday has already started. I have believed all along that the third peak in cases will be the final hyperbolic one, with deaths eventually topping the 1919 Spanish Flu peak of 650,000.
So far, the stock market has chosen to ignore these grim numbers, preferring instead to focus on vaccine hopes. There is effectively no government in Washington until January 21, 2021 so there is no one to step in and stop it. When the market does notice, the next buying opportunity of the decade may be at hand.
Stocks started expecting a Biden Win on Monday when they exploded right out of the gate. The Volatility Index (VIX) will plunge from $40 to $24 in a heartbeat. This was the biggest post-election rally in 100 years, with a 65% voter turnout not seen since women first got to vote in 1918. Buy dips in the (SPY).
The flip side is that massive spending will create monster deficits. Abuse from Trump has prompted the world’s largest buyer of US Treasury Bonds (TLT), China, to cut back their holdings from $1.24 trillion to $1 trillion. If China won’t buy our debt, who will? Sell short the (TLT) on rallies.
The Senate is another story. If the Republicans win, it will block most Biden programs and gridlock government for two years. Gridlocked government is normally good for stocks, except when you have a global pandemic and a Great Depression. No bold action is possible.
Expect slower economic growth as a result, fewer trading opportunities, and less asset appreciation. The Senate’s main job now is to make sure Biden fails. However, if Biden takes Georgia, we won’t know for sure until two Senate runoff elections take place there in January.
Jay Powell isn’t going anywhere, so interest rates are staying at near zero for three more years, according to yesterday’s press conference. Quantitative easing is still the name of the game.
Gold has turned, with the standard 100-day correction over. New highs beckon. The drivers are US interest rates remaining near zero for years, stockpiling by foreign central banks, and a recovering US economy. Notice also that the correlation between US stocks and gold this year has been 1:11. Gold is just another quantitative easing asset class these days. I’m starting to look at silver too, which usually has much more upside volatility.
China’s PMI is up for eight months, to 51.6%, better than expected. The world’s first post-pandemic economic keeps powering on. Anything over 50 is showing expansion.
The US ISM Nonmanufacturing Index hit a two-year high in October, down from 57.5 estimated to 57.5. That’s a two-year high.
The Nonfarm Payroll Report surprises at 638,000 for October, taking the headline Unemployment Rate down to a still recessionary 6.9%. Some 268,000 government jobs were lost, including 147,000 census workers. The rest came from teachers laid off by cash-starved local governments. Leisure & Hospitality jumped by 271,000. There are still 10 million fewer employed than when the pandemic started. The news crushed the bond market, where I’m short. Keep selling rallies in the (TLT).
When we come out the other side of pandemic, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With interest rates still at zero, oil cheap, there will be no reason not to. The Dow Average will rise by 400% to 120,000 or more in the coming decade. The American coming out the other side of the pandemic will be far more efficient and profitable than the old. Dow 120,000 here we come!
My Global Trading Dispatch exploded to another new all-time high last week.
The Friday prior to election week, I picked up new longs in the (SPY), (TSLA), and (CAT). Then on Monday, I bet the ranch, going 100% “RISK ON,” throwing the dice on a post-election melt-up and adding the (TLT), (JPM), (GOLD), (UNP), (UPS), and (AMGN).
It worked in spades.
That keeps our 2020 year-to-date performance at a blistering +44.16%, versus a LOSS of -.06% for the Dow Average. That takes my 11-year average annualized performance back to +36.82%. My 11-year total return stood at new all-time high at +401.96%. My trailing one-year return appreciated to +52.23%.
The coming week will be a sleeper compared to the previous one. We also need to keep an eye on the number of US Coronavirus cases and deaths, now over 10 million and approaching 240,000, which you can find here.
When the market starts to focus on this, we may have a problem.
On Monday, November 9 at 12:00 PM EST, US Consumer Inflation Expectations for October are out.
On Tuesday, November 10 at 7:00 AM EST, we get the NFIB Business Optimism Index for October.
Wednesday, November 11 is Veterans Day and I’ll be leading the local parade. The stock market is still open.
On Thursday, November 12 at 8:30 AM EST, the Weekly Jobless Claims are announced. At 9:30 AM EST, the US Inflation Rate for October is released.
On Friday, November 13, at 9:30 AM EST, the US PPI for October is printed. At 2:00 PM we learn the Baker-Hughes Rig Count.
As for me, driving back from Lake Tahoe, I couldn’t help but sadly notice what a terrible wreck the country is in.
Stores everywhere are shuttered and schools are closed down. Many of my favorite businesses and restaurants are gone for good. Parts are unobtainable because someone in the supply chain either went out of business or died. You can’t go anywhere without being swathed in masks and hand sanitizer.
The new president has a big job ahead of him.
Stay healthy.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
November 5, 2020
Fiat Lux
FEATURED TRADE:
(A NOTE ON OPTIONS CALLED AWAY),
(SPY), (UNP), (TSLA), (CAT), (JPM), (GOLD), (UPS), (AMGN), (TLT)
Global Market Comments
November 3, 2020
Fiat Lux
Featured Trade:
(FIVE REASONS GOLD IS GOING TO A NEW HIGH),
(GLD), (GOLD), (NEM), (GDX)
Global Market Comments
November 2, 2020
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or THE ELECTION IS HERE!)
(INDU), (SPY), (TLT), (CAT), (TSLA), (GOLD), (JPM), (VIX), (VXX)
That was a great lead into Halloween last week, where frightening share price movements scared the living daylights out of all of us. The Dow Average dove by 7.0% last week and is down 8.9% from the September 1 peak. It was the worst performance in seven months.
Of course, I saw it all coming a mile off, predicting a selloff going into the November 3 presidential election and a rally once the great uncertainty is removed. That’s why I have run several short positions over the past month, all of which proved successful, and am long flipping to the long side.
The next generational peak at 120,000 is now only 93,499 points away. Time to get moving.
Of course, technical analysts who were eternally bullish at the market top are now wringing their hands over the double top on the charts that even a two-year-old can spot. It’s only giving us a better entry point for longs that will carry us through to yearend.
The stock market has priced in a contested election. If that doesn’t happen, and the winning candidate takes the White House by a landslide, markets will have to immediately back out that dire scenario. Stocks could soar by 1,000 points immediately on the first whiff of a challenge0-proof victory margin.
This time, we have the luxury of trading against a line in the sand at a (SPY) of $310, the 200-day moving average. Look at the chart below and you’ll see that this was not only close to the highs in 2018 and 2019 and a recent bottom in 2020. As if driven by the force of gravity, the market seems strangely driven to the $310 level.
It’s almost impossible to lose money on call spreads bought at market bottoms when the Volatility Index (VIX) is over 40%, as it was on Thursday and Friday. It’s time to strike while the iron is hot, and other investors are jumping off of bridges.
I’ll be piling into domestic recovery stocks like banks, construction, couriers, railroads, and gold and selling short bonds and the US dollar.
The election has already taken place, as 85 million votes have been cast in early voting. Many states have already seen double their 2016 turnouts. We just don’t know the outcome yet. It’s likely that new Covid-19 infections could top 100,000 on election day.
I’ll be up all night on Tuesday watching the results come in and keeping a hawk-eye on the overnight futures trading in Asia, the only open markets. Watch for Florida and North Carolina to report first.
One of the great ironies of trading last week was that after delivering the best earnings performance in stock market history, we saw one of the worst share price performances.
That’s because all of the great stimulants for the economy in recent months, the prospect of a massive stimulus package, declining Covid-19 cases, and plunging interest rates, will take a three-month vacation while the United States changes governments.
We really do work in a “what have you done for me lately” industry.
It was all about tech earnings last week, with Amazon (AMZN), Alphabet (GOOGL), and Microsoft all reporting. We have to wait until next week for Apple (AAPL). They all knocked the cover off the ball. Only Apple (AAPL) disappointed on a 20% YOY sales drop.
It seems everyone was waiting for the iPhone 12. Stock was off $10. Sales in China also took a big hit. Expect a massive resurgence in Q4. iPhones are selling faster than Apple can make them. Buy (AAPL) on dips. The stock jumps 8%. Forget about the DOJ antitrust suit. Buy (GOOGL) on dips.
Crashing bond prices show that a recovery is imminent, with ten-year US Treasury yields ($TNX) jumping 20 basis points in a month to a four-month high. Buy (SPY) on dips and sell short (TLT) on rallies.
Existing Home Sales soared by 9.4% in September, up a staggering 20% YOY. Inventories fell to a record low 2.7 months. Median prices are up an astounding 14.8% YOY to $311,800. Zillow believes this madness will continue for at least another year. Sales were strongest in the Northeast, with most of the action in single-family homes. Homes over $1 million have doubled, and vacation homes are up 35%.
Q3 GDP exploded with a 33.1% rate, double the highest on record and in line with expectations. All cylinders are firing, except for the 20% of the economy that went bankrupt during the pandemic. The stock market fully discounted this on September 1 when stocks peaked. The US won’t recover its 2019 GDP until 2023. With Corona cases now soaring, are we about to go back into the penalty box?
Weekly Jobless Claims posted at 751,000, an improvement, but still near a record high. It’s the lowest report since pre-pandemic March 14. I think a lot of these losses are structural….and permanent.
The World’s Biggest ETF is bleeding funds, with the (SPY) losing $33 billion this year. Massive selling at market tops has been a major factor. Most of the selling was in February and March when the pandemic started, and the money never came back. It also belies the widespread shift into tech stocks this year. Out with the boring, in with the exciting. Dry powder for the coming Roaring Twenties?
When we come out the other side of the pandemic, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With interest rates still at zero, oil cheap, there will be no reason not to. The Dow Average will rise by 400% to 120,000 or more in the coming decade. The American coming out the other side of the pandemic will be far more efficient and profitable than the old. Dow 120,000 here we come!
My Global Trading Dispatch hit another new all-time high last week. October closed out at a moderate 1.51% profit.
I took a big hit on a long in Visa (V), thanks to a surprise prosecution from the Department of Justice over their Plaid merger. I more than offset that with short positions in the (SPY) and (JPM). Then on Friday, I leaned into the close, picking up new longs in the (SPY), (TSLA), and (CAT) betting on a post-election rally.
That keeps our 2020 year-to-date performance at a blistering +36.03%, versus a LOSS of -7.5% for the Dow Average. That takes my 11-year average annualized performance back to +35.90%. My 11-year total return stood at a new all-time high at +391.94%. My trailing one-year return appreciated to +42.48%.
The coming week will be one of the most exciting in history as election results trickly out Tuesday night. As if we didn’t have enough to worry about, it is also jobs week. We also need to keep an eye on the number of US Coronavirus cases and deaths, now over 9 million and 232,000, which you can find here.
On Monday, November 2 at 8:00 PM EST, US Vehicle Sales for October are released. Alibaba (BABA) and Sanofi (SNY) report earnings.
On Tuesday, November 3, we get the US Presidential Election. Early results in Florida will start coming out at 7:30 PM EST. TV networks, makers of campaign tchotchke and bumper stickers, and talking heads will go into mourning. Coca-Cola (K) reports earnings.
On Wednesday, November 4 at 9:15 AM EST, the ADP Private Employment Report is out. QUALCOMM (QCOM) and Wynn Resorts (WYNN) report earnings.
On Thursday, November 5 at 8:30 AM EST, the Weekly Jobless Claims are announced.
On Friday, November 6 at 8:30 AM EST, the October Nonfarm Payroll Report is announced. Barrick Gold (GOLD) reports earnings. At 2:00 PM we learn the Baker-Hughes Rig Count.
As for me, I went to San Francisco for dinner with an old friend last night and I couldn’t believe what I saw. Storefronts were boarded up, the streets vacant, with only the homeless ever present. The cable cars have quit running.
We ate outside at my favorite Italian restaurant Perbacco on Market Street where the heat lamp blasted away. The restaurant is owned by my transplanted Venetian friend Umberto Gibin. He was running it at 50% capacity with 25% of the staff just to break even.
I hope he makes it.
Stay healthy.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
August 24, 2020
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or ON FIRE EVERYWHERE)
(INDU), (JPM), (GLD), (GDX), (GOLD), (FB),
(TLT), (AAPL), (AMZN), (TSLA)
I am no longer able to breathe. The pandemic demands that I wear a mask. The wildfires prevent me from going outside, as the air is so heavy from smoke.
So, I decided to flee the San Francisco Bay Area south to Big Sir for a couple of days to catch up on my writing. On the way, I passed dozens of sadly abandoned schools as the pandemic has moved all of California to online distance learning.
By the second day, I was surrounded by fire. At an afternoon wine tasting, I tipped the waiter to hurry up as my glass was filling with ash and fire trucks were passing every five minutes.
By the next morning, I was surrounded by out-of-control wildfires and there was only one open road out of town. What really lit a fire under my behind was a text message from Tesla stating they would shut down charging at the Monterey station after 3:00 PM to help head off rolling blackouts.
The Golden State was not the only place on fire last week. Stocks were en flagrante as well, led by Tesla, Amazon, and Apple. The S&P 500 hit a new high for the year. It is the most concentrated market in history, with only 12 technology names accounting for 85% of the 2020 gains. Yet, 57% of shares are showing losses for 2020.
With a 33X multiple, Apple is pricing in only a 3% annual gain in the coming years. The price of Tesla at $2,100 a share is assuming the 2040 earnings have already arrived. We are firmly in bubble territory.
Having been in many bubbles over my half-century of trading, I can tell you they all have one thing in common. They run a lot longer than anyone imagines possible. In the meantime, traders, analysts, and investors are tearing their hair out wondering why they are so underweight stocks.
So trade if you must. But understand that the risk/reward here is terrible. You are better off here buying gold and banks and selling short US Treasury bonds and the US dollar.
Much has been made about share splits, which were the primary drivers of markets last week. However, the history of these things as that share prices fade shortly after the splits are completed. That was last Friday for Tesla and this Friday for Apple.
Apple may run a little longer, as it typically sees shares peak right after new generational cell phone launches, due in October.
Weekly Jobless Claims topped 1.1 million, ending a four-month downtrend. New Jersey, New York, and Texas were worst hit. Without further stimulus, they should continue to rise from here. These are Great Depression levels, and now massive layoffs from state and local governments are starting to kick in.
Apple topped $2 trillion in market cap. It is hard for those of us to believe it who bought the stock under $1 in 1998. It looks like more gains are to come. The coming 5G iPhone is going to market the peak in the shares this year, as new generational phones always do.
Uber and Lyft received a stay of execution, for 60 days, over whether they must treat drivers as full-time employees with benefits. Looks like I won’t have to take BART until October.
The U.S. Economy is falling back into the abyss. Last week’s total for new claims was well above the pre-pandemic Great Recession high of 665,000. Over 57.4 million Americans have now filed new unemployment insurance claims.
The airline industry is about to implode. With six months of operating at 20% capacity, how can they not? At least 75,000 in layoffs are imminent. Avoid the sector at all costs. You won’t recognize what comes out the other end. The next administration won’t be so generous to shareholders.
US Corona cases are slowing, even though we’ve just seen five consecutive days above 1,000 deaths. It’s the temporary ebb in the epidemic I was expecting that would rally the “recovery” stocks and sink the bond market. It’s sad, but we are celebrating suffering another 9/11 every three days instead of two.
Warren Buffet hates gold (GLD), but loves gold miners (GDX), loading the boat on Barrick Gold (GOLD) in Q2. It’s a rare move for the Oracle of Omaha into precious metals and the only way the cash flow king can collect a dividend in the sector. Warren seems to share my own long-term view on rising inflation caused by massive government bond issuance and spending.
U.S. Housing Starts mushroomed, surging 22.6% on the month to a seasonally adjusted annual rate of 1.496 million. Building permits also came in ahead of expectations, up 18.8% to 1.495m. Migration to the suburbs may explain some of the increase in activity but record-low mortgage rates and tight existing home inventory are the primary drivers. Soaring lumber prices mean growth in single-family starts will slow over the remainder of the year, not to mention the extra 0.50% fee on refinances.
When we come out the other side of this, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With interest rates still at zero, oil cheap, there will be no reason not to. The Dow Average will rise by 400% or more in the coming decade. The American coming out the other side of the pandemic will be far more efficient and profitable than the old.
My Global Trading Dispatch suffered one of the worst weeks of the year, giving up most of its substantial August performance. If you trade for 50 years, occasionally you get a week like this. The good news is that it only takes us back to unchanged on the month.
Longs in banks (JPM) and gold (GLD) and shorts in Facebook (FB) and bonds (TLT) held up fine, but we paid through the nose with shorts in Apple (AAPL), Amazon (AMZN), and Tesla (TSLA).
That takes our 2020 year to date down to 28.88%, versus -2.00% for the Dow Average. That takes my eleven-year average annualized performance back to 36.06%. My 11-year total return retreated to 384.79%.
It’s a relatively low rent week on the data front. The only numbers that count for the market are the number of US Corona virus cases and deaths, which you can find here.
On Monday, August 24 at 8:30 AM EST, the Chicago Fed National Activity Index is out.
On Tuesday, August 25 at 9:00 AM EST, the S&P Case Shiller National Home Price Index for June is released.
On Wednesday, August 26, at 8:30 AM EST, Durable Goods for July are printed. At 10:30 AM EST, the EIA Cushing Crude Oil Stocks are out.
On Thursday, August 27 at 8:30 AM EST, the Weekly Jobless Claims are announced. We also get the second estimate for Q2 GDP.
On Friday, August 28, at 8:30 AM EST, US Personal Spending is announced. At 2:00 PM, the Bakers Hughes Rig Count is released.
As for me, I am reading up on bios and generally preparing for my upcoming Mad Hedge Traders & Investors Summit, which I will be hosting for three days and starts on Monday morning at 9:00 AM EST. The attend please click here.
See you there.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
July 17, 2020
Fiat Lux
Featured Trade:
(JULY 15 BIWEEKLY STRATEGY WEBINAR Q&A),
(EEM), (GLD), (GDX), (NEM), (GOLD), (UUP), (FXA), (FXE), (FXY), (AMZN), (AAPL), (GOOGL), (FB), (BIDU), (TLT), (TBT), (IBB), (ROM)
Legal Disclaimer
There is a very high degree of risk involved in trading. Past results are not indicative of future returns. MadHedgeFundTrader.com and all individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein. Affiliates of MadHedgeFundTrader.com may have a position or effect transactions in the securities described herein (or options thereon) and/or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies.
This site uses cookies. By continuing to browse the site, you are agreeing to our use of cookies.
OKLearn moreWe may request cookies to be set on your device. We use cookies to let us know when you visit our websites, how you interact with us, to enrich your user experience, and to customize your relationship with our website.
Click on the different category headings to find out more. You can also change some of your preferences. Note that blocking some types of cookies may impact your experience on our websites and the services we are able to offer.
These cookies are strictly necessary to provide you with services available through our website and to use some of its features.
Because these cookies are strictly necessary to deliver the website, refuseing them will have impact how our site functions. You always can block or delete cookies by changing your browser settings and force blocking all cookies on this website. But this will always prompt you to accept/refuse cookies when revisiting our site.
We fully respect if you want to refuse cookies but to avoid asking you again and again kindly allow us to store a cookie for that. You are free to opt out any time or opt in for other cookies to get a better experience. If you refuse cookies we will remove all set cookies in our domain.
We provide you with a list of stored cookies on your computer in our domain so you can check what we stored. Due to security reasons we are not able to show or modify cookies from other domains. You can check these in your browser security settings.
These cookies collect information that is used either in aggregate form to help us understand how our website is being used or how effective our marketing campaigns are, or to help us customize our website and application for you in order to enhance your experience.
If you do not want that we track your visist to our site you can disable tracking in your browser here:
We also use different external services like Google Webfonts, Google Maps, and external Video providers. Since these providers may collect personal data like your IP address we allow you to block them here. Please be aware that this might heavily reduce the functionality and appearance of our site. Changes will take effect once you reload the page.
Google Webfont Settings:
Google Map Settings:
Vimeo and Youtube video embeds: