(GOOGL) Archives - Page 16 of 77 - Mad Hedge Fund Trader

The Market Outlook for the Week Ahead, or Is there a Coup Underway in Russia?

I just received a call from the Marine Corps to go on emergency standby. This is not something the Corps does lightly.

The word is that there may be a coup d'etat underway in Russia and the entire US military has gone to a heightened alert status.

The Wagner group is Marching on Moscow with the intent of overthrowing the government, or at least the military. Putin took off in a plane which then disappeared radar, meaning he has either been shot down, or is flying low level to keep his destination secret.

This thing could go nuclear very easily, but only in Russia. It also could mean the end of the Ukraine War. There is nothing to do here as intelligence pours in over the weekend. We have ample satellites overhead and human intel on the ground.

Expect market volatility today. The markets are ripe for a black swan-inducted selloff, which a Mad Hedge Market Timing Index at 82 was screaming at us.

I will be monitoring the situation closely.

My view that the markets were topping was vindicated last week. The “Magnificent Seven” which gained a record 25% in market capitalization in only eight weeks led the downturn, as they always do. But the AI surge that prompted the fastest equity creation in history is only just getting started.

This is against a backdrop of savage cost-cutting by Big Tech, which has had the effect of boosting earnings by an impressive 7% in only three months. My cleaning lady, gardener, dry cleaner, and shoe shine boy have started giving me stock tips yet, as they did in 2000, 2008, and 2020….but they are thinking about it.

While attention is focused elsewhere, one should not underestimate the importance of India Prime Minister Modi’s meeting with Joe Biden in Washington.

It signifies a major geopolitical shift out of the Russian orbit into the US one. Decades ago, India obtained all its weapon systems and nuclear power plants from Russia and was a major trading partner.

Now partnering up with Apple (AAPL), Google (GOOGL), Microsoft (MSFT), and General Electric (GE) is a much more attractive option. It is gaining a $2.7 billion factory from Micron Technology (MU) and presents a major market for its products. Amazon (AMZN) is investing $13 billion in cloud infrastructure there. The subcontinent graduates some 2.5 million STEM graduates a year and they need to be put to work in the global economy. It shows how limited Russia’s future really is. It’s a major win for the US.

So far in June, we are up +0.47%. My 2023 year-to-date performance is still at an eye-popping +62.52%. The S&P 500 (SPY) is up only a respectable +14.00% so far in 2023. My trailing one-year return reached +96.63% versus +21.52% for the S&P 500.

That brings my 15-year total return to +659.71%. My average annualized return has blasted up to +48.56%, another new high, some 2.59 times the S&P 500 over the same period.

Some 42 of my 46 trades this year have been profitable. Only 23 of my last 24 consecutive trade alerts have been profitable.

The Mad Hedge December 6-8 Summit Replays are Up. Listen to all 28 speakers opine on the best strategies, tactics, and instruments to use in these volatile markets. It is a true smorgasbord of investment strategies. Find the best one to suit your own goals. The product discounts offered last week are still valid. Start, stop, and pause the videos at your leisure. Best of all, access to the videos is FREE. Access them all by clicking here and then choosing the speaker of your choice. We look forward to working with you.The next summit is scheduled for September 12-14.

$2 Billion Fled Stock Market Last Week, according to a Bank of America survey, in what it calls a “Baby Bubble.” The markets are showing all the signs of an interim top, with either a 10% correction or a three-month flat line ahead of us. Time to strap on those Buy Writes for long-term shareholders.

Short Bets on US stocks Hit $1 trillion, the highest since April 2022. Shorts have so far lost $101 billion in 2023, with much of this hedged. The market is way overdue for a correction so these guys may finally be right. Even a broken clock is right twice a day.

Germany Signs Massive US Natural Gas Contract, in a major move to end reliance on Russian natural gas. Venture Global LNG will supply EnBW with 1.5 million tons a year of LNG starting in 2026. The 20-year sales and purchase agreement is Germany’s first binding deal with a US developer since the government announced ambitious plans to begin importing the super-chilled fuel. The move does a lot to eliminate the glut of gas in the US currently plaguing producers. Buy (UNG) LEAPS on dips. When China comes back on line, watch out!

Volatility Index ($VIX) Hits the $12 Handle, in a new multiyear low. At the high for the year in the S&P 500, complacency is running rampant. Time to add some downside hedges.

Copper Should be a “Critical Metal”, says billionaire Robert Friedland. A looming structural shortage is the reason, with the world going to an all-electric auto fleet and doubling of the electrical grid to accommodate it. Buy more (FCX) LEAPS on dips.

Leading Economic Indicators Down 0.7% for the 15^th consecutive negative month. We are approaching the bottom of the trough in this cycle. I’ll focus on the half of the economy that is growing.

Distressed Commercial Property Debt is Exploding, up 10% to Q1 to $64 billion. Another $155 billion is waiting in the wings. This will go away when interest rates start to drop in six months.

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, June 26 at 8:30 AM EST, the Dallas Fed Manufacturing Index is out.

On Tuesday, June 27 at 6:00 PM, S&P Case-Shiller National Home Price Index is published.

On Wednesday, June 28 at 7:30 AM, the Fed Governor Jay Powell speaks.

On Thursday, June 29 at 8:30 AM, the Weekly Jobless Claims are announced. The Final Report for Q1 US GDP is printed.

On Friday, June 30 at 8:30 AM, Personal Income and Spending is announced.

As for me, when I first met Andrew Knight, the editor of The Economist magazine in London 45 years ago, he almost fell off his feet. Andrew was well known in the financial community because his father was a famous WWII Battle of Britain Spitfire pilot from New Zealand.

At 34, he had just been appointed the second youngest editor in the magazine’s 150-year history. I had been reporting from Tokyo for years, filing two stories a week about Japanese banking, finance, and politics.

The Economist shared an office in Tokyo with the Financial Times, and to pay the rent I had to file an additional two stories a week for them as well. That’s where I saw my first fax machine, which then was as large as a washing machine even though the actual electronics would fit in a notebook. It cost $5,000.

The Economist was the greatest calling card to the establishment one could ever have. Any president, prime minister, CEO, central banker, or war criminal was suddenly available for a one-hour chart about the important affairs of the world.

Some of my biggest catches? Presidents Gerald Ford, Jimmy Carter, Ronald Reagan, George Bush, and Bill Clinton, China’s Zhou Enlai and Deng Xiaoping, Japan’s Emperor Hirohito, terrorist Yasir Arafat, and Teddy Roosevelt’s oldest daughter, Alice Roosevelt Longworth, the first woman to smoke cigarettes in the White House in 1905.

Andrew thought that the quality of my posts was so good that I had to be a retired banker at least 55 years old. We didn’t meet in person until I was invited to work the summer out of the magazine’s St. James Street office tower, just down the street from the palace of then Prince Charles.

When he was introduced to a gangly 25-year-old instead, he thought it was a practical joke, which The Economist was famous for. As for me, I was impressed with Andrew’s ironed and creased blue jeans, an unheard-of concept in the Wild West where I came from.

The first unusual thing I noticed working in the office was that we were each handed a bottle of whisky, gin, and wine every Friday. That was to keep us in the office working and out of the pub next door, the former embassy of the Republic of Texas from pre-1845. There is still a big white star on the front door.

Andrew told me I had just saved the magazine.

After the first oil shock in 1973, a global recession ensued, and all magazine advertising was cancelled. But because of the shock, it was assumed that heavily oil-dependent Japan would go bankrupt. As a result, the country’s banks were forced to pay a ruinous 2% premium on all international borrowing. These were known as “Japan rates.”

To restore Japan’s reputation and credit rating, the government and the banks launched an advertising campaign unprecedented in modern times. At one point, Japan accounted for 80% of all business advertising worldwide. To attract these ads the global media was screaming for more Japanese banking stories, and I was the only person in the world writing them.

Not only did I bail out The Economist, I ended up writing for over 50 business and finance publications around the world in every English-speaking country. I was knocking out 60 stories a month, or about two a day. By 26, I became the highest paid journalist in the Foreign Correspondents’ Club of Japan and a familiar figure in every bank head office in Tokyo.

The Economist was notorious for running practical jokes as real news every April Fool’s Day. In the late 1970s, an April 1 issue once did a full-page survey on a country off the west coast of India called San Serif.

It warned that if the West coast kept eroding, and the East coast continued silting up, the country would eventually run into India, creating serious geopolitical problems.

It wasn’t until someone figured out that the country, the prime minister, and every town on the map were named after a type font that the hoax was uncovered.

This was way back, in the pre-Microsoft Word era, when no one outside the London Typesetter’s Union knew what Times Roman, Calibri, or Mangal meant.

Andrew is now 84 and I haven’t seen him in yonks. My business editor, the brilliant Peter Martin, died of cancer in 2002 at a very young 54, and the magazine still awards an annual journalism scholarship in his name.

My boss at The Economist Intelligence Unit, which was modeled on Britain’s MI5 spy service, was Marjorie Deane, who was one of the first women to work in business journalism. She passed away in 2008 at 94. Today, her foundation awards an annual internship at the magazine.

When I stopped by the London office a few years ago I asked if they still handed out the free alcohol on Fridays. A young writer ruefully told me, “No, they don’t do that anymore.”

Sometimes, change is for the worse, not the better.

Good Luck and Good Trading
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader

May 31, 2023

Diary, Newsletter, Summary

Global Market Comments
May 31, 2023
Fiat Lux

Featured Trades:

(WHAT AI CAN AND CAN’T DO)
(AAPL), (GOOGL), (AMZN), (AMZN), (TSLA), (NVDA), (MU)

CLICK HERE to download today's position sheet.

What AI Can and Can’t Do

Diary, Newsletter, Research

The future has arrived!

Over the last few weeks, I picked up some astonishing developments in artificial intelligence.

*Mainframes at Stanford University and the University of California at Berkeley were given a direct connection to speak freely with each other. Within 30 minutes they dumped English as a means of communication because it was too inefficient and developed their own language which no human could understand. They then began exchanging immense amounts of data. Fearful of what was going on, the schools unplugged the machines after only eight hours.

*All of the soccer videos ever recorded were downloaded into two robots, but they were not taught how to play the game or given any rules. Not only did figure out how to play the game, it developed plays and maneuvers no one in the sport has ever thought of in its 150-year history.

*It normally takes a PhD candidate five years to 3D map a protein. An AI app 3D mapped all 200 million known proteins in seven weeks, shortcutting one billion years of PhD level research with existing technology. These new maps have already been used to design a malaria vaccine and enzymes that eat plastic. They will soon cure all human diseases.

*A developer asked an AI program a half dozen questions in Bengali, not an easy language. Within an hour, it spoke the language fluently, without any instructions to do so.

By now, word has gotten out about the incredible opportunities AI presents. Our only limitation is our own imagination on how to use it. AI will instantly triple the value of any company that uses it.

What has changed is that we now have millions of computers powerful enough and an Internet fast enough to realize its full potential.

It all vindicates my own long-term vision, unique in the investing community, that in the coming decade, immense technology profits will more than replace the trillions of dollars worth of Fed liquidity we feasted on during the 2010s. Extended QE is proving just a bridge to a much more prosperous future.

The Internet has created about $10 trillion in value since its inception. AI will create double that in half the time. That’s what will take the Dow from 33,000 to 240,000.

No surprise then that the top ten AI companies have delivered 120% of the stock market gains so far in 2023. The other 490 companies in the S&P 500 have either gone nowhere to down.

However, there are many things that AI can’t do. Here is the list.

1) AI Can’t Predict large anomalous events, otherwise known as Black Swans. AI takes past trends and extrapolates them into the future. It in no way could have seen 9/11, the 2008 crash or the pandemic coming, although I warned my hedge fund clients for years that we were overdue. All of the AI stock trading apps I have seen so far, including my own, max out at 90% accuracy. The other 10% is accounted for by black swans: earnings shocks, foreign crises, sudden FDA stage three denials, surprise legal judgments, foreign invasions, or the murder of a key man in a tech company, as recently happened in San Francisco.

2) AI Lies and Lies Often. AI was asked to write a scientific paper on a specific subject. It came back with an elegant and well-researched piece. The problem was that all of the books it made reference to didn’t exist. AI learned early to tell humans what they want to hear.

3) AI Requires Exponential Computing Capacity. Only five companies have the muscle to pursue true AI. No surprise that these, including (AAPL), (GOOGL), (AMZN), and (TSLA), account for the bulk of stock market performance this year. This won’t always be the case. Some 30 years ago, it required thousands of mainframes to contain all human knowledge. Today, that task can be accomplished with a cheap $1,000 laptop.

4) Internet Capacity Will Be a Limiting Factor for AI for Years. To accommodate the traffic that is taking place right now, the Internet will have to grow 500% practically overnight, and that is with five main players. What happens when we have 5 million? That’s why NVIDIA (NVDA) has gone nuts.

5) AI Hallucinates, as anyone who drives a Tesla will tell you. If a car makes a left turn in Florida, the 4 million vehicles in the world’s largest neural network learn from it. The problem is that sometimes the data from that Florida car is placed directly in front of a California one, prompting it to brake abruptly, causing accidents. This is known as “ghost braking.” I have explained to Elon Musk that his database has grown so large, eight video feeds per 4 million cars going back many years and billions of miles, that he may be going behind the limits of known physics.

6) While the Growth Opportunities for AI are Unlimited, the ability of humans and society to absorb it isn’t. All jobs will be affected by AI and millions destroyed, starting with low-level programmers and call centers, and millions more will be created. People are talking about regulating AI but have no idea where to start. Maybe with (AAPL), (GOOGL), (AMZN), and (TSLA)?

7) The Terminator Issue. Can AI be controlled? Or have we started a chain reaction that is unstoppable, as with an atomic bomb? AI researchers have noticed a disturbing issue where AI programs are learning skills on their own, without our instructions. This is referred to as “emergent properties.” If AI is using humans as its example, we can’t exactly count on it to be benign.

Needless to say, AI will be at the core of your investment approach, probably for the rest of your life.

2014 at Micron Technology

May 26, 2023

Tech Letter

Mad Hedge Technology Letter
May 26, 2023
Fiat Lux

Featured Trade:

(RIDE THE ELEVATOR UP WITH GENERATIVE AI)
(NVIDA), (FOMO), (APPL), (MSFT), (META), (GOOGL), (AMZN)

Ride the Elevator Up With Generative AI

Tech Letter

Part of these artificial intelligence executives going on record to sound out the problems with AI is mostly to protect themselves if this weird digital experiment goes disastrously wrong.

They have mostly said that AI going rogue is a real possibility and could end mankind.

Obviously, we hope that doesn’t happen.

Much of the tech market gains this year have been because of the technology surrounding AI.

Strip that out and the gains will look paltry.

A good example is Nvidia (NVDA) offering legendary guidance to the demand of their chips because of the need to install them in AI-based technology.

The AI narrative truly has legs – it will be the theme that defines 2023 in technology stocks.

The Big 7 tech stocks will possess explosive qualities to their stock precisely because of this thesis.

Then there is the fear of missing out (FOMO).

Every financial advisor is pitching AI as an investment of a lifetime – something that cannot be missed by their clients.

Therefore, I do expect meteoric legs up in shares of Nvidia, Apple, Microsoft, Tesla, Amazon, Facebook, and Google in 2023.

These 7 stocks dominate the tech market and the generative AI gains will mostly manifest themselves in these 7 tech firms.

Yet there are dangerous concerns that AI could also destroy these companies and the internet which we interface with, because the changes could erode the trust in platforms by populating fake photos like deep fakes.

In Washington speech, Brad Smith calls for steps to ensure people know when a photo or video is generated by AI.

Brad Smith, the president of Microsoft, has said that his biggest concern around artificial intelligence was deep fakes, realistic-looking but false content.

Smith called for steps to ensure that people know when a photo or video is real and when it is generated by AI, potentially for harmful purposes.

For weeks, lawmakers in Washington have struggled with what laws to pass to control AI even as companies large and small have raced to bring increasingly versatile AI to market.

Last week, Sam Altman, CEO of OpenAI, the startup behind ChatGPT, told a Senate panel in his first appearance before Congress that the use of AI interferes with election integrity is a “significant area of concern,” adding that it needs regulation.

Lawmakers need to ensure that safety brakes be put on AI used to control the electric grid, water supply and other critical infrastructure so that humans remain in control.

It’s hard to know what is fake and real these days. Fake photos of politicians getting attacked or fake videos of tigers roaming around freely in Times Square New York look weirdly authentic.

AI is getting so good that nobody knows what is real anymore.

I’m sure some of you saw the recent Tom Cruise deep fake where the fake Tom Cruise is telling the audience that he does a lot of “industrial clean up” along with his own stunts. Honestly, I could not tell it was fake, and most people wouldn’t. It caught me – hook, line, and sinker.

As it stands, ride this generative AI to riches in the short-term, but be aware that this technology could blow up the internet or make the internet unusable because of security and trust reasons.

DEEPFAKES LOOK AND SOUND TOTALLY REAL IN 2023

May 22, 2023

Diary, Newsletter, Summary

Global Market Comments
May 22, 2023
Fiat Lux

Featured Trades:

(MARKET OUTLOOK FOR THE WEEK AHEAD,
or CONCENTRATION OF WEALTH AT THE TOP)
(AAPL), (GOOGL), (AMZN), (MSFT), (NVDA), (TSLA), ($VIX), (JPM), (BAC), (C)

CLICK HERE to download today's position sheet.

The Market Outlook for the Week Ahead, or Concentration of Wealth at the Top

Diary, Free Research, Newsletter

As I write this to you, I am flying at 30,000 feet over the red clay of Georgia. The azure blue of the Gulf of Mexico is on the left and the Golden State of California lies straight ahead.

I am returning from a five-day whirlwind tour of Florida, which saw me speak at three Strategy Luncheons and countless private meetings.

It was a blast!

Not only did I learn the local lay of the land, I often pick up some great trading ideas.

I first hitchhiked across the Sunshine State in 1967. Except for a few small towns on the coasts, there was nobody there. The entire inland of the state was covered with small cattle ranches and the odd tourist trap (mermaids, alligator wrestling, snake shows etc).

People thought the extensive freeway system was only built because the state was just 90 miles away from Cuba, then a Cold War flash point (it is officially called the “Dwight D. Eisenhower National System of Interstate and Defense”). Suddenly, somebody secretly started buying up land around Orlando. The locals thought General Motors (GM) was going to build a car plant there.

Then Walt Disney Corp (DIS) swept in and announced they were building a second Disneyland to cater to the east coast, creating an astonishing 70,000 jobs and the freeways started to fill up (click here for the video).

Today, driving around the state is a dystopian nightmare. The US population has doubled since the first Interstates were built in the 1950s, and the US GDP has increased by ten times, a byproduct of the Interstates. That means ten times more heavy truck traffic which has been mercilessly beating the life out of the roads. In Florida, the population has risen by more than fourfold as well, from 5 million to 22.2 million so you get the picture.

You lurch from one traffic jam to the next, even in the middle of the night. Whatever time Google Maps says it will take to get somewhere, triple it. The only consolation is that the traffic is worse in California.

I loved Key West where a very happy Concierge member made available an 1859 mansion close to the waterfront, restored and modernized down to the studs. By this time of the year, anyone with money has decamped for New England leaving only the retirees and beach bums.

I made the pilgrimage to Earnest Hemmingway’s home where he produced 70% of his published writings in only seven years. Another two boxes of manuscripts were discovered in the basement of his favorite bar last year.

It’s ironic that this state is now known for banning books that include sex and violence. Steinbeck’s work has already hit the dustbin, so old Earnest can’t be far behind.

What’s next? The Bible? It has lots of sex and violence.

As for me, Hemingway’s granddaughter, Mariel, stands out as the only Playboy cover girl I ever dated (April, 1982, I think). She is now happily married with three grown kids.

And yes, I did prove that it is possible to eat Key Lime Pie four days in a row.

As for the stock market last week, there really isn’t much to say. The concentration of wealth at the top continues unabated, as it is in the rest of the country. Stocks are still discounting a soft landing, while commodities, energy, and bonds expect a recession.

Go figure.

The top five stocks continues to suck all the money out of the rest of the market, (AAPL), (GOOGL), (AMZN), (MSFT), and (NVIDIA), the early beneficiaries of AI, accounting for 80% of this year’s market gains. Of the other 495 stocks, 250 are below their 200-day moving averages, meaning they are still in bear markets.

This is what has crushed volatility, taking the ($VIX) from $34 down to $15. The last time volatility was this low was just before the Long Term Capital Management fiasco where it languished around $9 (read Liar’s Poker by my friend Michael Lewis). When LTCB went bust, volatility rocketed to $40 overnight and stayed there for two years.

Options traders made fortunes.

Mad Hedge has nailed every trend this year. We bought tech and Tesla (TSLA) in January when we should have. We shorted ($VIX) every time it approached $30. Then we bought the banking bottom in March (JPM), (BAC), (C) and carried those positions into April.

We’ve been shorting Tesla strangles every month. And now we are 80% in cash waiting for the world to end one more time in Washington DC so we can load the boat with LEAPS and replay the movie one more time.

By the way, Mad Hedge has issued 25 LEAPS over the past year and 24 made money with an average profit of about 300%. Our sole loser has been with Rivian (RIVN), but even it still has 18 months to run. Never own an EV stock during a price war.

So far in May I have managed a modest 2.43% profit. My 2023 year-to-date performance is now at an eye-popping +64.18%. The S&P 500 (SPY) is up only a miniscule +9.00% so far in 2023. My trailing one-year return reached a 15-year high at +113.84% versus +10.87% for the S&P 500.

That brings my 15-year total return to +661.37%. My average annualized return has blasted up to +48.99%, another new high, some 2.74 times the S&P 500 over the same period.

Some 41 of my 44 trades this year have been profitable. My last 22 consecutive trade alerts have been profitable.

I closed out only one trade last week, a long in the (TLT) just short of max profit a day before expiration. That just leaves me with a long in Tesla and a short in Tesla, the “short strangle”. I now have a very rare 80% cash position due to the lack of high return, low risk trades.

There’s a 1,000 Point Drop in the Market Begging to Happen. That’s what happens when the market rallies on a Biden McCarthy debt ceiling deal, which McCarthy’s own party then votes down. After all, it took McCarthy 15 votes to get his job. Just watch volatility, it’s a coming.

Weekly Jobless Claims Fall to 242,000, down from 264,000. It’s a surprise slowdown. The rumor is that last week’s highpoint was the result of a surge in fraudulent online claims in Massachusetts.

NVIDIA Could Rise Fivefold in Ten years, say fund managers. I think that’s a low number. The Silicon Valley company makes the top performing GPU’s in the industry selling up to $60,000 each. (NVDA) is seeing a perfect storm of demand from the convergence of AI and Internet growth. The shares have already tripled off of the October low.

Tesla is Considering an India Factory, as part of its eventual build out to 10 plants worldwide. The country’s 100% import duty on cars has been a major roadblock. India is now pushing a “Made in India” initiative. Good luck getting anything done in India.

Homebuilder Sentiment Up for 10^th Straight Month, as it will be for the next decade. There is no easy escape from a demographic wave. New homebuilders have figured out the new model.

India’s Tata to Build iPhones for Apple, in an accelerating diversification away from China. Apple has had too many of its eggs in one basket, especially given the recent political tensions between the US and the Middle Kingdom.

US Dollar Soars to Three Month High, as investors flee to safe haven short term investments. Rapidly worsening economic data is sparking recession fears. Ten consecutive months of falling inflation is another indicator of a slowdown.

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, May 22 there is nothing of note to report.

On Tuesday, May 23 at 4:00 PM EST, the inaugural launch of Mad Hedge Jacquie’s Post takes place. Please click here to attend this strategy webinar. The Federal Reserve Open Market Committee minutes are out at 2:00 PM.

On Wednesday, May 24 at 2:00 PM, the Federal Reserve Open Market Committee minutes are out.

On Thursday, May 25 at 8:30 AM, the Weekly Jobless Claims are announced. The US GDP Q2 second estimate is also published.

On Friday, May 26 at 2:00 PM, the University of Personal Income & Spending and Durable Goods are released.

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 Rainier 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 firm hands of Mount Everest veteran Jim Whitaker to summit the 14,411 peak (click here for this story ). The deal was for us to hitchhike back to Los Angeles as soon as 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 anywhere.

When we got off the mountain, I looked at the map and saw there was this fascinating-sounding country called “Canada” just to the north. So, it was 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.

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, artificially inseminating cows, and eating steak three times a day.

I made friends with the cowboys by reading them their mail, which they were unable to do since they were all illiterate. There were lots of bills due, child support owed, and alimony demands.

In Saskatchewan, the roads ran out of cars, so we hopped a freight train in Manitoba, narrowly missing getting mugged in the rail yard. 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 the engine. 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 Command pilot Group Captain John Chenier!

Broke again, we landed jobs at a hamburger stand at Expo 67 in front of the imposing Russian pavilion with the ski jump roof. 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 answer 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. It wasn’t the last time my dad had to talk me out of jail.

We developed a system where my parents could keep track of us across the continent. 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. At least he had a starting point to look for the bodies.

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 high 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 tops 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, garage, barn or tool shed 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 I profited enormously from it. As a result, I am a better man.

As for my brother Chris, he died of covid in early 2020 at the age of 65, right at the onset of the pandemic. Unfortunately, he lived very close to the initial Washington State hot spot.

People often ask me what makes me so different from others. I answer, “My parents taught me I could do anything with my life, and I proved them right.”

Good luck and good trading.

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

May 16, 2023

Diary, Newsletter, Summary

Global Market Comments
May 16, 2023
Fiat Lux

Featured Trades:

(LAST CHANCE TO ATTEND THE THURSDAY, MAY 18, 2023 TAMPA FLORIDA STRATEGY LUNCHEON)
(LOOKING AT THE LARGE NUMBERS)
(TLT), (TBT) (BITCOIN), (MSTR), (BLOK), (HUT)

CLICK HERE to download today's position sheet.

May 14, 2023

Diary, Newsletter, Summary

Global Market Comments
May 14, 2023
Fiat Lux

Featured Trades:

(MARKET OUTLOOK FOR THE WEEK AHEAD, or I’M GOING ON STRIKE!)
(TSLA), (TLT), (AAPL), (BRK/B), (BA), (GOOGL)

CLICK HERE to download today's position sheet.

The Market Outlook for the Week Ahead, or I’m Going on Strike!

Diary, Newsletter

I think it’s time for me to go out on strike. I’m downing my tools, tearing up my punch card, and manning a picket line.

I get up at 5:00 AM every morning, well before the sun rises here on the west coast, looking for great low-risk high return trades. But for the last several weeks, there have been none, nada, bupkiss.

I have gotten spoiled over the last few years. The financial crisis, pandemic, recovery, and banking crisis provided me with an endless cornucopia of trading opportunities which doubled my average annualized return from 24% to a nosebleed 48.94%.

Part of the problem is that with a success rate of 90%, so much of the market is now copying my trades so that they are getting harder to execute. That wasn’t a problem when markets were booming. It is when trading volumes have shrunk dramatically, as they have done this year.

At The Economist magazine in London whenever plagiarism was discovered, they used to say that “Imitation is the sincerest former of flattery.”

There is no doubt that the economy is weakening, as the data has definitively shown over the last two weeks. It appears that after 500 basis points in interest rate rises in a year, the Fed’s harsh medicine is finally starting to work. The debt ceiling crisis, and regional banking crisis are scaring more investors further to the sidelines.

Notice how every stock market rally has become increasingly short-lived? Which all raises a heightened risk of recession.

Economies are like families. All are happy for the same reasons but are unhappy in myriad different ways.

In fact, they provide a generous helping of alphabet soup. If you look very closely, you can find some bay leaves, oregano, black pepper, and lots of V’s, W’s, U’s, and L’s.

Now, let’s play a game and see who can pick the letter that most accurately portrays the current economic outlook.

Here is a code key:

V – The very sharp collapse we saw in 2008 and again in 2020 is followed by an equally sharp recovery. I think it is safe to say we can now toss that one out the window. With technology hyper-accelerating, it is safe to write off the “V” recovery scenario.

W – The sharp recovery that began in October 2022 fails and we see a double dip back to those lows.

U – The economy stays at the bottom for a long time before it finally recovers.

L – The economy collapses and never recovers.

The question is, in which of these forecasts should we invest our hard-earned cash?

For a start, you can throw out the “L”. Every recession flushes out a lot of financial Cassandras who predict the economy will never recover. They are always wrong. Usually, they know more about marketing newsletters than economics.

I believe what we are seeing play out right now is the “W” scenario. This is the best possible scenario for traders, as it calls for a summer correction in the stock market when we can load the boat a second time. If you missed the October low you will get a second bite of the Apple (AAPL), both literally and figuratively.

If I’m wrong, we will get a “U”, a longer recovery. This cannot be dismissed lightly as the unemployment rate is clearly about to rise.

If I limited the outlook to only four possible scenarios, I’d be kidding you. The truth is far more complicated.

Each industry gets its own letter of the alphabet. Technology, some 27% of total stock market capitalization, gets no letter at all because it is thriving, thanks to the explosion of AI applications. That explains the single-minded pursuit of big tech by investors since January.

Someone asked me last week how long I would continue trading and I cited the example of Warren Buffett, who at 92 is 21 years older than me.

I have since found a better example.

Former Secretary of State under Nixon, Henry Kissinger, turns 100 this week, the only man in the world who President Biden, Vladimir Putin, and President Xi Jinping would immediately take a call from.

During the shuttle diplomacy between Israel and Egypt in 1974, I rode with the Secretary on Air Force One, then an antiquated Boeing 727, which is now in a museum in Seattle. For the rest of that story see below.

He gave me “Henry” privileges, while everyone else had to address him as “Mr. Secretary” because my knowledge of history exceeded that of anyone else then in the White House Press Corps, even those who had degrees in the subject.

It also helped that at that point I had already had six years of experience on the ground in the Middle East. It was all heady stuff for a journalist who at 22 was just starting out.

So, that sets the bar higher for me. The good news for you is that I’ll be sending out my wit, wisdom, and trade alerts for at least another 29 years.

So far in May, I have managed a modest +1.70% profit. My 2023 year-to-date performance is now at an eye-popping +63.45%. The S&P 500 (SPY) is up only a miniscule +8.15% so far in 2023. My trailing one-year return reached a 15-year high at +122.11% versus +6.70% for the S&P 500.

That brings my 15-year total return to +660.64%. My average annualized return has blasted up to +48.94%, another new high, some 2.80 times the S&P 500 over the same period.

Some 41 of my 44 trades this year have been profitable. My last 21 consecutive trade alerts have been profitable.

I initiated only one new trade last week, a long in Tesla (TSLA). That leaves me with my two remaining positions. Those include longs in Tesla and the bond market (TLT), which expires this coming Friday. I now have a very rare 80% cash position due to the lack of high-return, low-risk trades.

Treasury Secretary Yellen Warns of Economic Catastrophe, if the debt ceiling is not raised. Congress has voted 98 times to raise the debt ceiling to $31 trillion over 106 years to pay for money already spent. One-third of this was under the previous president who back then warned that he would default. It’s a grasp for power the House just doesn’t have. There really isn’t such a thing as a debt ceiling which has gained an importance far beyond its original housekeeping intention.

Boeing Lands Blockbuster 300 Plane Order, from Ireland’s Ryan Air worth $40 billion. Europe’s Top budget air carrier is loading up on the once troubled 737 MAX. Keeping buying (BA) on dips, now the world’s largest aircraft manufacturer.

CPI Hits 4.9% YOY, after the 0.40% report for April. It’s still headed in the right direction as far as the Fed is concerned and puts a September cut on the table. Eggs were the leader, up 21.4%, while fuel oil is the laggard, down 20.2%. My own 4% inflation rate forecast by yearend is starting to look conservative. Perish the thought!

The Oil Collapse is Signaling a Recession, as is weakness in all other commodities, even lithium. Texas tea has plunged 22% I three weeks to a new two year low at $62. It’s one of the worst performing asset classes of 2023. Widespread EV adoption is finally making a big dent, as are the price wars there. OPEC Plus production cuts were unable to stem the decline. Buy (USO) on dips as an economic recovery play.

Is a Bank Short Selling Ban Coming? The Feds could bar hedge funds from launching raids on small regional bank shares with the aim of taking them to zero. Such a ban was enforced for all banks in 2008.

Elon Musk Appoints New Twitter CEO, removing a major management distraction. Linda Yaccarino is the new CEO of Twitter, poached from her from online advertising at NBC. This is a positive for Tesla, as it frees up the heavy burden of turning around Twitter from Musk, allowing him to devote more time to Tesla. It also reduced the risk that Musk will sell more Tesla shares to finance said turnaround. Guess who just got the worst job in the world? Buy (TSLA) on dips.

Weekly Jobless Claims jump to 264,000, a new 18 month high, providing another recession indicator.

US Budget Deficit Shrinks to $1.5 Trillion, down from a $3 trillion peak during the previous administration. Government Bond selling will drop by a similar amount. That’s still up $130 billion from 2022. Increased tax revenues from a recovering economy is the reason. Buy (TLT) on every dip.

Google Ramps Up AI Effort, launching a new suite of AI tools at its annual developer conference. With a 93% market share in online search (GOOGL) has a lot to defend. The stock popped 4% on the news.

FANGS to Rise 50% by Yearend, says Fundstrat’s ultra-bull Tom Lee. I think he’s right, once the debt ceiling debacle gets out of the way. The contribution of AI is being vastly underestimated.

Berkshire Hathaway (BRK/B) Earnings Soar, with operating earnings up 12.6% in Q1, but Warren Buffet expects business to slow. Many companies now have to unwind big pandemic inventories with aggressive sales, crimping inflation. That’s why Berkshire owns $130 billion in cash and Treasury bills.

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, May 15 at 7:30 AM EST the NY Emore State Manufacturing Index is out.

On Tuesday, May 16 at 6:00 AM, Retail Sales are announced.

On Wednesday, May 17 at 11:00 AM the US Building Permits are printed.

On Thursday, May 18 at 8:30 AM, the Weekly Jobless Claims are announced. We also get the Producer.

On Friday, May 19 at 2:00 PM the University of Baker Hughes Rig Count is released.

As for me, Egypt and I have a long history together. However, when I first visited there in 1974, they tried to kill me.

I was accompanying US Secretary of State Henry Kissinger on Air Force One as part of his “shuttle diplomacy” between Tel Aviv and Cairo. Every Arab terrorist organization had vowed to shoot our plane down.

When we hit the runway in Cairo, I looked out the window and saw a dozen armored personnel carriers chasing us just down the runway. All on board suddenly got that queasy, gut-churning feeling, except for Henry.

When the plane stopped, they surrounded us, then turned around, pointing their guns outward. They were there to protect us.

The sighs of relief were audible. In a lifetime of heart-rending landings, this was certainly one of the most interesting ones. Those State Department people are such wimps! Henry was nonplussed, as usual.

As a result of the talks Israel eventually handed back Sinai in return for an American guarantee of peace which has held to this day. Egyptian president Anwar Sadat was assassinated by his own bodyguard for his efforts shortly afterwards.

Israel was so opposed to the talks that when I traveled to Tel Aviv, El Al Airline security made sure my luggage got lost. So the Israeli airline gave me $25 to buy replacement clothes until my suitcase was delivered. On that budget, all I could afford were the surplus Israeli army fatigues at the Jerusalem flea market.

A week later, my clothes still had not caught up with me when I boarded the plane with Henry. That meant walking the streets of Cairo in my Israeli army uniform. It would be an understatement to say that I attracted a lot of attention.

I was besieged with offers to buy my clothes. Egypt had lost four wars against Israel in the previous 30 years, and war souvenirs were definitely in short supply.

By the time I left the country, I was stripped bare of all Israeli artifacts, down to my towels from the Tel Aviv Hilton, and boarded the British Airways flight to London wearing a cheap pair of Russian blue jeans I had taken in trade.

Levi Strauss never had a thing to worry about.

The bewitching North African country today is still a prisoner of a medieval religion that has left its people stranded in the Middle Ages. While its GDP has doubled in the last 70 years, so has its population, to 110 million, meaning there has been no improvement per capital income at all in a half century. That is a staggering number for a country that is mostly desert.

In 2019, I took my two teenaged daughters to Egypt to visit the pyramids and ride camels as part of an impromptu trip around the world. My logic then was that at the current rate of climate change, this trip might not be possible in five years.

As it turns out, it was not possible in six months when the pandemic started.

We were immediately picked up by Egyptian Intelligence right at the gate who remembered exactly who I was. It seems they never throw anything out in Egypt.

After a brief interrogation where I disclosed my innocent intentions, they released us. No, I wasn’t working for The Economist anymore. Yes, I was just a retired old man with his children. They even gave us a free ride to the Nile Hilton where I spent my first honeymoon in 1977.

Some people will believe anything! And I never did get that suitcase back.Good luck and good trading!

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