(GOOGL) Archives

February 16 Biweekly Strategy Webinar Q&A

Below please find subscribers’ Q&A for the February 16 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Incline Village, Nevada.

Q: Is it a mistake to try to be nimble with the ProShares UltraShort 20+ Year Treasury ETF (TBT), or is it better just to hold it through the rest of the year?

A: You should do both; have a core long position which you keep through the end of the year, and you also have a second position that you trade. A good example is how I just took profits on the short iShares 20+ Year Treasury bond ETF (TLT) even though it had a month to run because we had 91.67% of the profit in hand. So, when you get way in the money and still have a lot of time duration left, there’s no point in continuing with these put spreads to catch the last 5 or 10% in the position. The risk/reward is no good.

Q: The iShares 20+ Year Treasury bond ETF (TLT) seems washed out.

A: There is a risk of that, which is why I went long the (TLT) $127-$130 March vertical bull call spread. I think even if we get down to $130, it will take us at least a month to get down that far. There will be several short-covering rallies along the way that we can run out the clock with, and I think even my 3/$127-$130 should expire at max profit.

Q: Should we buy puts or spreads?

A: When you get the CBOE Volatility Index (VIX) over 30, it’s only because you get a very sharp collapse in stocks, and there you’re looking at very deep in the money call spreads— 10-20% in the money can still make you $1,000 or $2,000 a month. And if you get extreme selloffs with (VIX) up to $40, then you’re really looking for long-term LEAPS, one-year call spreads on your favorite stocks, like Tesla (TSLA), NVIDIA (NVDA), and Microsoft (MSFT), and so on.

Q: Is it time to enter Tesla (TSLA) now?

A: I’m waiting for one more final selloff—if we get that, we could get back into the low 800s or even the 700s in Tesla. That's the figure I’m hanging on for, and that's where you get into Tesla LEAPS because Tesla is clearly expanding beyond just the electric car business. SpaceX is now worth $100 billion dollars, and the boring company could be worth just as much if they get more contracts for building underground mass transit. There is also Solar City to consider plus some other stuff they haven’t even announced yet.

Q: What are your thoughts on Google (GOOGL)?

A: The 20 to 1 split is in the price already. But any selloff and I would go back into there with call spreads because Google is a fantastic company and a legal monopoly which I love owning.

Q: What about the ProShares Ultra Technology ETF (ROM)?

A: Yes, I’m watching very closely. It had a huge dive in January, then made back nearly half its losses. So again, I'm waiting for another dip to go back into (ROM) with lots of leverage.

Q: Do we get Volatility Index (VIX) over $30 within 2 months?

A: Yes, I think we probably will. We’re pretty close to it now; we got up to $26 this morning. So yes, I’d be a buyer of that.

Q: Is a (TLT) $128-$131 call spread for March still ok?

A: Yes, I kind of like that. I don’t think we’ll get down below $131 in four weeks, and at the very least we’ll get one rally of several points, and that’ll be your chance to get out of that position.

Q: Is it too early for (TLT) LEAPS?

A: No, it’s too late for TLT LEAPS. You should have been doing put LEAPS in November, and everybody who did that got profits of nearly 100% on that position. I don’t see a call side LEAPS in TLT for at least 5 to 10 years when interest rates get up over 6% on 10 year US Treasury bonds. We are a long way from a (TLT) call LEAP.

Q: Are we at a Bitcoin bottom?

A: Possibly, 50/50 chance we go back and retest the lows. We’ll just have to see how Bitcoin behaves in a rising interest rates scenario because ever since Bitcoin was invented, interest rates have been falling. Rising rates are a new thing for Bitcoin and no one knows what that will look like.

Q: When will you update your long-term portfolio?

A: Soon; things have been kind of busy issuing 30 trade alerts a month.

Q: How high will the ProShares UltraShort 20+ Year Treasury bond fund (TBT) go?

A: Looking for $26 from current levels, so yes, much higher to go. And we have a double in three months on (TBT) at the $28 level.

Q: If one believes in the war in Ukraine happening soon, what companies or sectors do you invest in for the short term?

A: None; if we actually do get a war, everything gets absolutely slaughtered, and then you’re looking for the buy. And that will be buys in tech especially. I don’t think there’s going to be a war in Ukraine, but the only things that go up in a Ukraine war scenario are energy stocks (USO), oil companies, and so on.

Q: Do you like China EV stocks?

A: No, I don’t. I visited BYD Motors 15 years ago and they just don’t have the technology, the battery lengths are poor, and they tend to catch on fire. They have never been able to reach American quality standards on any of their cars, not only the EVs but also the conventional internal combustion engines as well..

Q: Which index will outperform in the second half, the Invesco QQQ Trust (QQQ) or iShares Russell 2000 ETF (IWM)?

A: I vote (QQQ). I think we have a technology-led bull market in the second half, and the Russel will be lagging.

Q: What’s better, copper or copper miners?

A: You always go for the miners like Freeport McMoRan (FCX)—they will outperform the physical metal by at least three or four to one, to the upside. That’s also true with gold miners and other derivative plays; the miners always outperform the metals.

Q: What is a bond vigilante?

A: That is a term we heard from the ‘70s and ‘80s when you would get enormous selling of bonds on even the slightest negative piece of economic data or inflation data. They called the bond traders the bond vigilantes because they just crushed the bond market for the slightest transgression on the inflation/economic front. And they are back, by the way, hugely punishing the market as we have seen ($20 points in two months is a lot of punishment) on even the slightest increase in inflation.

Q: Do you have a yearend price for Freeport McMoRan (FCX)?

A: Over $50—just rallied from $30 in September.

Q: Isn’t inflation wildly understated?

A: Yes, you can find individual items that are up 30 or 50%, but the inflation calculation is actually based on 105 different items, and some of them are going down in price. For example, you had an enormous increase in used car prices in December, but they actually went down last month. So, whenever you get a basket this big, eight groups of 80,000 items, you get smaller moves. As anyone will tell you who trades baskets of stocks against the individual stocks, the same mathematical effect happens in the calculation. And while it is being wildly understated now, it’ll be wildly overstated in a few months when we get back to the 3% level, which I am expecting.

Q: What is your TLT prediction after the next 3 or 4 interest rate hikes?

A: Remember, the interest rate hikes only affect the overnight rate. TLT is a 10 to 20-year basket of bonds, so they don’t trade one for one. We may reach a bottom by the end of the year in the (TLT) somewhere in the $120s, but it’s not going to 100 this year and it’s not going to zero like some people are predicting.

Q: The inflation measure is a joke.

A: Yes, it has always been a joke. Any collection of data among 330 million people is going to be inaccurate, late, and have huge lags—but you trade the data you have, not what you wish you had, and that is the real world. I've been trading economic data for 50 years and that is my conclusion.

Q: Martial Law was declared in Canada— is there anything to trade off of that news?

A: No; even a major international event only gets a stock market reaction of usually one day or two at the most. Whatever’s happening on a bridge in Canada, nobody here really cares.

Q: Are you doing a cruise?

A: Yes, I’m doing a Norwegian cruise. Just go to the lunches section on the madhedgefundtrader.com website, and you can still buy tickets. We would love to have you for lunch on the Queen Victoria, a Norwegian Fjord cruise. We’re coming up to payment time on the tickets.

Q: Will there be earnings disappointment in April?

A: Yes, the year-on-year comparisons are going to be difficult. That will be another problem for the market in the spring in addition to the Fed.

Q: What happens with the FOMC out today at 2:00?

A: It will show a heightened fear of inflation and a greater urgency to raise interest rates.

To watch a replay of this webinar with all the charts, bells, whistles, and classic rock music, just log in to www.madhedgefundtrader.com , go to MY ACCOUNT, click on GLOBAL TRADING DISPATCH, then WEBINARS, and all the webinars from the last ten years are there in all their glory.

Good Luck and Stay Healthy.

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

1932 De Havilland Tiger Moth

February 17, 2022

Bitcoin Letter

Mad Hedge Bitcoin Letter
February 17, 2022
Fiat Lux

Featured Trade:

(ANOTHER 130 MILLION PEOPLE JUMP ON THE CRYPTO WAGON)
(BTC), (AMZN), (GOOGL), (MSFT)

Another 130 Million People Jump on the Crypto Wagon

Bitcoin Letter

First Turkey and now Ukraine.

Yes, these are two sovereign currencies, the lira and the hryvnia, that have absolutely lost any credibility whatsoever.

We forget that there are many of these banana republics out there that might as well adopt some sort of alternative currency.

El Salvador anointed Bitcoin their national currency and now that isn’t as bizarre as it first seemed.

Americans sometimes forget that the pandemic ripped through emerging nations like a hot knife through butter and there were no stimuli or handouts, let alone handouts for corporations, and there has never been a longer queue for U.S. green cards.

Well, Russia is on Ukraine’s doorstep and the threat of it crowding the Ukraine border means that no foreign capital or investment will penetrate Ukraine for the foreseeable future.

Every Ukrainian under 40 years old is now making a mad dash for higher ground to the European Union or if they can, the United States, United Kingdom, or Canada.

The Ukrainian hryvnia has lost 10% of its value in a few days and this could be a beginning of a much bigger collapse in purchasing power for Ukrainians who don’t leave.

It could trigger a vicious cycle all the way to zero where like a hot potato, Ukrainian citizens try to rid themselves of local currency as fast as possible.

Like I said, there are others out there, pretty much every ex-Soviet republic not in the European Union of the likes of Georgia, Kazakhstan, Moldova, Azerbaijan, and Armenia of the South Caucasus.

When you add up the population of the likes of Uzbekistan and such, then that totals roughly 130 million people.

These 130 million people, like El Salvadoreans, would be foolish not to adopt Bitcoin if they can’t secure US dollars.

For people who haven’t traveled to these esoteric places, US dollars are in high demand and hard to find and families hold on to them for dear life.

So if the choices are Bitcoin or worthless paper, then between those two, the decision is rather straightforward.

Ukrainians are slowly coming to the realization that these are their options.

Don’t think that any one of these similar countries is immune to political strife or war either.

Georgia has already given up a sliver of their country to Russia already.

And in an incredible set of events, the Government of Ukraine has passed a law that legalizes Bitcoin and other cryptocurrencies.

The law grants legal status to virtual assets. The law not only grants users the right to operate cryptocurrencies but also defines the clear rights and duties of all market participants.

The Ukraine’s government also approved the law on cloud services as a whole. The bill’s goal is to create conditions for the processing and protection of data when using cloud computing technology, as well as providing cloud services and determining the specifics of public authorities’ use of cloud services, as well as more efficient use of public resources through the introduction of new technologies.

The new law will expedite the entry in Ukraine of the world’s top cloud service providers – Microsoft (MSFT), Amazon Web Services (AMZN), and Google (GOOGL) Cloud – and encourage the construction of data centers.

The Ministry of Digital Development has previously said that it planned to expand the market for “virtual assets.”

Virtual assets are divided into two categories in the draught law: secured and unsecured virtual assets.

A secured VA is an asset that verifies property or non-property rights, such as the right of claim on other objects like stable coins, and is secured by fiat currency, securities, or any sort of offline asset.

All other sorts of cryptocurrencies and crypto-based assets, such as non-stable coins like Bitcoin, non-fungible tokens, and so on, are classified as unsecured VAs.

Therefore, it’s not surprising to find out in the latest data that adoption into Bitcoin and other crypto in Ukraine has skyrocketed.

Non-profit donors looking for donations are also being paid via Bitcoin.

The rapid legislation of course would not have occurred if not for the Russian situation, but either way, adoption is adoption and add another 50 million or so Ukrainians to Bitcoin’s growth story.

Eventually, Africa and South America will join the adoption phase as they also preside over rapidly depreciating fiat currency.

I’m shocked that Argentina hasn’t ventured this way yet, put them down for the next country in the crypto queue.

Even if Bitcoin is suffering a bout of weakness due to exogenous shocks, the long-term price trajectory is well above $100,000.

February 11, 2022

Tech Letter

Mad Hedge Technology Letter
February 11, 2022
Fiat Lux

Featured Trade:

(THE GROWING CLOUT OF TWILIO)
(TWLO), (ADBE), (CRM), (GOOGL), (AAPL)

The Growing Clout of Twilio

Tech Letter

Twilio (TWLO) cranked the ball out of the ballpark in its latest quarterly performance.

For a company that’s been burning cash for years, such as 2021’s performance of negative $950 million, analysts expected another few years of losses.

That’s not the only loss, the years before were saddled with unprofitable times like the $490 million burnt in 2020 and they still haven’t recorded a single profitable year yet.

So for Chief Executive Officer of Twilio Jeff Lawson to tell us that he expects Twilio to be profitable in 2023 is a gamechanger.

This guy has elevated Twilio to the dominant provider of business-to-consumer communications tools, powering messages such as the Uber notification you receive after ordering a ride, into an estimated $79 billion market for software to help optimize customer experiences.

Busting out the “P word” when many analysts were expecting to count the losses is a big deal for growth tech and TWLO can expect a new breed of institutional investors to enter the fold because of their positive signaling.

It’s not only them.

They have been tactical in a series of aggressive moves adding new companies to their core like Segment.

Segment, the customer data platform provider that Twilio purchased in 2020 for $3.2 billion is one of the reasons why the juice might be worth the squeeze.

It was the company’s biggest acquisition to date and the most-watched by investors.

The integration of Segment is expected to enhance the bulk of Twilio’s product portfolio.

It effectively functions as a repository of continually updated first-party customer information that businesses can use to improve marketing and support, with the goal of fostering loyalty and higher sales.

The timing of the deal was critical given Apple’s (AAPL) stricter data treatment and Google’s (GOOGL) narrowing of its web-tracking software.

At the same time, the acquisition of Segment nudged Twilio towards the direction of competing with Silicon Valley stalwarts like Salesforce (CRM) and Adobe (ADBE).

A key difference between Twilio and its rivals is the ability for developers within businesses to conveniently build customized programs on top of the company’s base tools.

Not only did management indicate that profitability is arriving next year, but they signaled strong revenue growth of over 30% for the next three years.

Easily said, TWLO is morphing into an indestructible force that is harnessing soon-to-be profitability, growth, and future success all wrapped into one company.

In this era, it’s hard to get all broad strategies working simultaneously because most tech firms will sacrifice profits for growth.

On top of that, management shared that they fully expect gross margins to surpass 60% in the long-term translating into a highly profitable company.

That’s the beauty of the software as a service (SaaS) model, the scalability works well inside the financial parameters which is why companies like Adobe and Salesforce bust out such great metrics.

Three other acquisitions Lawson believes will make a difference are Engage for the marketer, which is still very early in its cycle, most recently, a software called Frontline, which can be used by frontline workers and even sales teams to be more efficient, and lastly, Flex for the contact center.

All indications show this is nowhere near a “pandemic stock” and the fourth-quarter revenue jumping to 54% to $842.7 million while guiding for $865 million next quarter validates that.

This communication as a software company is sticky as can be and has a valid use case in many different apps that need to link the back-end interfaces with customer functionality.

TWLO will move from strength to strength going forward and this software company has a real chance to make its mark as not just a company considered second tier, but even a flight to safety type of tech stock which are few and far between.

The stock is still highly volatile which makes it easy to add on the big dips, but readers should avoid the small dips.

I am bullish TWLO.

February 7, 2022

Tech Letter

Mad Hedge Technology Letter
February 7, 2022
Fiat Lux

Featured Trade:

(A MIXED BAG FOR AMAZON)
(FB), (AMZN), (GOOGL)

A Mixed Bag for Amazon

Tech Letter

Ecommerce had to cool off, didn’t it?

After 2 years of breakneck growth, Amazon (AMZN) came crashing back down to life reporting its slowest revenue growth in 4 years.

Amazon’s online stores reported $206 million in losses for the U.S. revealing that American online shopping has plateaued for the short-term.

Much of this was baked into the equation as Amazon shares have really done nothing for the past 6 months.

The sugar high it received from the pandemic is starting to wear off.

AMZN experienced more than $4 billion in costs from inflationary pressures, lost productivity, and disruptions. The inflation primarily relates to wage increases and incentives in the operations, as well as higher pricing from third-party carriers supporting AMZNs fulfillment network. Lost productivity and network disruptions were driven primarily by labor capacity constraints due to challenges in staffing up AMZN facilities.

Then when the omicron variant reared its ugly head, there was a certain conflict with retaining staff as many workers called out sick, making an already tight labor force less efficient.

If the earnings report stopped just there, no doubt AMZN would have braced for a Facebook-like 25% selloff, but the silver linings in the AMZN report were more like a gold lining.

Three positive data points that couldn’t be downplayed were in the Amazon Web Services (AWS) business, the advertising business, and pricing for Amazon Prime membership.

AWS delivered a strong quarter of growth, as enterprises and developers continued to look to AWS for critical, innovative cloud solutions.

A vivid example of AWS is with Amazon’s relationship with parent company of Chrysler, Dodge, Fiat, Jeep, and Ram.

They selected AWS as its preferred global cloud provider for vehicle platforms to accelerate new digital products and upskill its global workforce.

There’s a whole list of the world's largest companies that now use AWS like Adidas, Goldman Sachs, Pfizer, Rivian.

AWS revenue expanded to 40% from a year ago to $17.8 billion, and represents the anchor for the financial health of Amazon.

It allows AMZN to pursue other growth levers like advertising.

What happens is that there is an intense feedback loop with customers, to keep building and making that better.

The end result is building more relevancy and better engaging experiences.

Interaction promotes an understanding that AMZN can build better analytic tools, provide better measurement, give them better insight to performance.

Amazon’s focus on serving brands has really differentiated themselves from the likes of Facebook (FB) and Google (GOOGL).

The sponsored ad space with regards to video advertising is certainly a great opportunity.

And again, this is about delivering good recommendations to customers and helpful when they're making their purchase decisions and giving them information around that.

In the end, advertising grew 32% year over year and is a $10 billion business.

The most aggressive move that Amazon told us about is their price rise for Prime Membership.

Amazon will increase the price of a Prime membership in the United States, with the monthly price going from $12.99 to $14.99 and the annual membership going from $119 to $139.

The 15% increase is the first price increase since 2018 which should be a boon to the bottom line.

Ultimately, I believe the Amazon Prime Membership price hike was the reason for the investor response of bidding up AMZN shares.

Although the ecommerce numbers were a little disappointing, they should rebound nicely in 2022.

The bar was set extremely low coming into the earnings and AMZN gave us enough juice for shares to surge.

When combining the positives of AWS and advertising strength, this ecommerce behemoth’s momentum is just too hard to ignore.

If inflation starts to moderate, expect AMZN’s stock to be 25% higher by the end of the year and I do believe investors will sell out of Facebook and buy into a quality stock like AMZN.

February 4, 2022

Diary, Newsletter, Summary

Global Market Comments
February 4, 2022
Fiat Lux

Featured Trades:

(FEBRUARY 2 BIWEEKLY STRATEGY WEBINAR Q&A),
(PYPL), (PLTR), (BRKB), (MS), (GOOGL), (ROM), (MSFT), (ABNB), (VXX), (X), (FCX), (BHP), (USO), (TSLA), (EDIT), (CRSP)

February 2 Biweekly Strategy Webinar Q&A

Diary, Newsletter, Research

Below please find subscribers’ Q&A for the February 2 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Incline Village, Nevada.

Q: Thoughts on Palantir Technologies Inc. (PLTR)?

A: Well, we got out of this last summer at $28 because the CEO said he didn’t care what the share price does, and when you say that, the market tends to trash your stock. But Palantir is also in a whole sector of small, non-money-making, expensive stocks that have just been absolutely slaughtered. And of course, PayPal (PYPL) takes the prize for that today, down 25% and 60% from the top. So, we’re giving up on that whole sector until proven otherwise. Until then, these things will just keep getting cheaper.

Q: Given the weakness in January, do you think we still have to wait until the second half of the year for a viable bottom?

A: Definitely, maybe. If things are going to happen, they are going to happen fast; we got the January selloff, but that’s nowhere near a major selloff of 20%. And the fact is, the economy is still great so that’s why this is a correction, not a bear market. At some point, you want to buy into this, but definitely not yet; I think we take another run at the lows again sometime this month. We just have to let all the shorts come out and take their profits so they can reestablish again.

Q: Why are bank stocks struggling?

A: A lot of the interest rate rises that we’re getting now were already discounted last year—banks had a great year last year—so they were front running that move, which is finally happening. To get more moves out of banks, you’re going to have to get more interest rate rises, which we will get eventually. We still like the banks long term, we still like financials of every description, but they are taking a break, especially on the “sell everything” index days. A lot of the recent selling was index selling—banks have a heavy weighting in the index, about 15%. So, they will go down, but they will also be the ones that come back the fastest. We’re seeing that in some of the financials already, like Berkshire Hathaway (BRKB) and Morgan Stanley (MS) which are both close to all-time highs now.

Q: What about the situation with Russia and Ukraine?

A: It’s all for show. This is a situation where both the US and Russia need a war, or threat of a war, because the leaders of both countries have flagging popularity. Wars solve those problems—that’s why we have so many of them by the United States. We’ve been at war essentially for most of the last 40 years, ever since Ronald Reagan came in.

Q: I didn’t exit my big tech positions before the crash, should I just hang onto them at this point?

A: The big ones—yes. The Apples (AAPL), the Googles (GOOGL), the Amazons (AMZN) —they’re only going to drop about 20% at the most, maybe 25%, and then they’ll go to new highs, probably before the end of the year. If you’re good enough to get out and get back in again on a 20% move, go for it. But most people can’t do that unless they’re glued to their screens all day long. So, if you have stock, keep the stock; if you have options, get out of the options, because there the time decay will wipe you out before a turnaround can happen. This is not an options environment, unless you’re playing on the short side in the front month, which is what we’re doing.

Q: When you send out the trade alerts, I have a hard time getting them executed. How do you advise?

A: Move the strike price, go out in maturity, and you can get our prices at slightly higher risk. Or, just leave it and, quite often, people’s limit orders get done at the end of the day when the algorithms have to dump their positions at the close because they’re not allowed to carry overnight positions. Also, even if you get half of my trade alerts, you’re doing pretty good—we’re running at a 23% rate in 6 weeks, or 200% annualized. And remember, when I send out a trade alert, you’re not the only one trying to get in there, so you can even go onto a similar security. If I recommend Alphabet (GOOGL), consider going over to Microsoft (MSFT), because they all tend to move together as a group.

Q: I am sitting on a 16% profit in the ProShares Ultra Technology (ROM), which you recommended. Should I take the money and run, and get back in at a lower price?

A: Yes, this is just a short covering rally in a longer-term correction, and you make the money on the volume. You win games by hitting lots of signals, not hanging on to a few home runs where people usually strike out.

Q: You said inflation will be short lived, so why would there be 9 interest rates after the initial 4?

A: It’s going to take us 8 interest rates just to get us back to the long-term average interest rate. Remember the last 2% is totally artificial and only happened because there was a financial crisis 13 years ago. So, to normalize rates you really need to get overnight rates back up to about 3.0%. And that means 12 interest rate hikes. If you don’t do that, you risk inflation going from controllable to uncontrollable, and that is the death of the Fed. So, that’s why I expect a lot more interest rate rises.

Q: Will the tension between Russia and the Ukraine affect the market?

A: No, it hasn’t so far and I don’t expect it to. Although, it’s hard to imagine going through all of this and not seeing a shot fired. When that one shot gets fired, then maybe you get a down-500-point day, which it then makes back the next day.

Q: Anything to do with Alphabet (GOOGL) announcing its 20 to one split?

A: No, it’s too late. We had a trade alert out on a Google 20 call spread which we actually took profits on this morning. So, nice win for the Mad Hedge Technology Letter there. There’s nothing to do with these splits, it’s not like they’re going to un-announce it, this isn’t a risk-arbitrage situation where there’s always an antitrust risk hovering over the deal that may crash it. This is pretty much a done deal and doesn’t even happen until July 1. People think bringing the share price from $3,000 down to $150 makes it available for a lot more potential retail buyers, which it does. It also makes call spreads on the options a lot cheaper too. When we put out these alerts, we can only do one or two contracts, even tying up $10,000—divide that by 20 and all of a sudden your cheapest Google call spread cost $500 instead of $10,000.

Q: Can you speak about the liquidity on your strikes? Sometimes we’re trading against strikes that have no open interest.

A: Whenever you put in an order for one strike, even if there’s nothing outstanding on that strike, algorithms will arbitrage against that strike—where your order is—against all the other strikes on the whole options chain. So, don’t worry if you have limited open interest or no open interest on our trade alerts. They will get done, and it may get done by some algorithm or some market maker taking more of another strike, that’s how these things get done. It’s all thanks to the magic of computers.

Q: Do you have thoughts about Freeport-McMoRan (FCX)? I have some profitable LEAP positions open.

A: It’ll go higher, keep them. And I like the whole commodity space, which means iron ore (BHP), copper, steel (X), etc.

Q: Would you trade Barclays iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX) at this point?

A: No, because we’re dead in the middle of the recent range. That’s a horrible place to enter—you only enter (VXX) on extremes on the upsides and the downside.

Q: What should I do about Airbnb (ABNB) at this price? They’ve been profitable for 2-3 years, with revenues rising.

A: I think Airbnb is one of the best run companies in the world, and I expect their earnings to keep growing like crazy, especially once we get out of the pandemic. I am also a very frequent Airbnb user, having stayed in Airbnb’s in at least 10 countries, so I’m a big fan of them. The stock just got dragged down by the small tech bust but it will come back. This is a “throwing the baby out with the bathwater” situation.

Q: Are there any good LEAPS candidates now?

A: I’m not doing any LEAPS until we reach the final cataclysmic selloff of the correction. Otherwise, the time value will run against you enormously; I’d rather wait for better prices.

Q: Do you see a cataclysmic selloff?

A: Yes, I do. Maybe in a few more weeks, and maybe next week if we get a really hot 8%+ inflation rate—that would really kill the market.

Q: What will tell you if inflation is ending or slowing labor?

A: Labor is 70% of the inflation calculation. So, when these huge pay awards slow down, that's when inflation slows down. By the way, a lot of pay increases that are happening now are catch-up from the last 40 years of no pay increases for American workers in real inflation adjusted terms. So, a lot of this is catch-up—once that’s done, you can forget about inflation. Also, the long-term pressure of technology on prices is downwards, so allow that to reignite deflation, and that will be your bigger issue over the long term.

Q: What should I do about Editas Medicine Inc (EDIT) or CRSPR Therapeutics AG (CRSP)?

A: Don’t touch the sector, it’s out of favor. Let this thing die a slow death. When they come up with profitable products, that’s when the sector recovers. So far, everything they have works in labs but there are no mass-produced Crispr products, they’re trying for mass production on sickle cell anemia and a couple of other things, but still very early days in CRSPR technology.

Q: When will this recording be posted?

A: In two hours, it will be posted on the website. Go to “My Account” and you’ll find the last 13 years of recorded webinars.

Q: What do you mean by “stand aside from Foreign Exchange”?

A: The volatility in the foreign exchange market is just so low compared to equities and bonds, it’s not worth trading right now. When you can trade everything in the world—foreign exchange is at the bottom of the list. If I see a good entry point, I’ll do a trade; but do I trade Tesla (TSLA) with a volatility of 100%, or foreign exchange with a volatility of 5%? Those are the choices.

Q: Should I do any short plays in oil (USO)?

A: Generally, you don’t want to short any commodity unless you're a professional; I say that having been short beef futures when Mad Cow Disease hit in 2003 and you had three limit-up days in a row in the futures market. That happens in the commodity areas—liquidity is so poor compared to stocks and bonds that if you get caught in one of these one-way moves, you can’t get out. So that is the risk; and I’ve known people who have gone bust trading oil both long and short, so this is for professionals only. With stocks you get vastly more data and information than you do in the commodity markets where industry insiders have a much bigger advantage.

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Good Luck and Stay Healthy!

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