Global Market Comments
January 17, 2023
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or GOING AGAINST THE CONSENSUS),
(TLT), (MUB), (JNK), (HYG), (GLD), (SLV), (GOLD), (WPM), (FCX), (BHP), (EEM), (MS), (GS), (JPM), (BAC), (C), (BRK/B), (SPY), (QQQ), (IWM), (VIX)
Going against the market consensus has been working pretty well lately.
When the world prayed for a Santa Claus rally, I piled on the shorts. When traders expected a New Year January crash, I filled my boots with longs.
That’s how you earn an eye-popping 19.83% profit in a mere nine trading says, or 2.20% a day.
The other day, someone asked me how it is possible to get mind-blowing results like these. It’s very simple. Get insanely aggressive when everyone else is terrified, which I did on January 3. I also knew that with the Volatility Index (VIX) falling to $18, pickings would quickly get extremely thin. It was make money now, or never.
To quote my favorite market strategist, Yankees manager Yogi Berra, “No one goes to that restaurant anymore because it’s too crowded.”
My performance in January has so far tacked on a welcome +19.83%. Therefore, my 2023 year-to-date performance is also +19.83%, a spectacular new high. The S&P 500 (SPY) is up +3.78% so far in 2023.
It is the greatest outperformance on an index since Mad Hedge Fund Trader started 15 years ago. My trailing one-year return maintains a sky-high +103.30%.
That brings my 15-year total return to +617.03%, some 2.73 times the S&P 500 (SPX) over the same period and a new all-time high. My average annualized return has ratcheted up to +47.17%, easily the highest in the industry.
I took profits in my February bonds last week (TLT), taking advantage of a $5 pop in the market. All my remaining positions are profitable, including longs in (GOLD), (WPM), (TSLA), (BRK/B), and (TLT), with 30% in cash for a 10% net long position.
Since my New Year forecasts have worked out so well, I will repeat the high points just in case you were out playing golf or bailing out from a flood when they were published.
Buy Falling Interest Rate Plays, as I expect the yield on the ten-year US Treasury yield to fall from 3.50% to 2.50% by yearend. That means Hoovering up any kind of bond, like (TLT), (MUB), (JNK), and (HYG). Falling interest rates also shine a great spotlight on precious metals like (GLD), (SLV), (GOLD), and (WPM).
The US Dollar Will Continue to Fall. Commodities love this scenario, including (FCX), (BHP), and emerging markets (EEM).
Inflation Will Decline All Year and should go below 4% by the end of 2023. In fact, we have had real deflation for the past six months. Financials do well here, like (MS), (GS), (JPM), (BAC), (C), and (BRK/B).
Which creates another headache for you, if not an opportunity. We may have a situation where the main indexes, (SPY), (QQQ), and (IWM) go nowhere, while individual stocks and sectors skyrocket. That creates a chance to outperform benchmarks…and everyone else.
There has been a lot of discussion among traders lately about the collapse of the Volatility Index ($VIX) to $18, a two-year low and what it means.
They are distressed because a ($VIX) this low greatly shrinks the availability of low risk/high return trading opportunities. A ($VIX) this low is basically shouting at you to “STAY AWAY!”
Does it mean that an explosion of volatility is following? Or are markets going to be exceptionally boring for the next six months?
Beats me. I’ll wait for the market to tell me, as I always do.
Current Positions
Risk On
(TSLA) 1/$75-$80 call spread 10.00%
(GOLD) 1/$15.50-$16.50 call spread. 10.00%
(WPM) 1/$$36-$39 call spread. 10.00%
(BRKB) 1/$290-$300 call spread 10.00%
Risk Off
(TLT) 1/$96-$99 call spread - 10.00%
(TLT) 1/$95-$98 call spread -20.00%
Total Net Position 10.00%
Total Aggregate Position 70.00%
Consumer Price Index Falls 0.1% in December, continuing a trend that started in June. Stocks popped and bonds rallied. YOY inflation has fallen to 6.5%. “RISK ON” continues. Now we have to wait another month to get a new inflation number. The economy has now seen de facto deflation for six months. Gas prices led the decline, now 9.4%. We might get away with only a 0.25% interest rate hike at the February 1 Fed meeting.
Bond Default Risk Rises, as well as a government shutdown, as radicals gain control of the House. This is the group that lost the most seats in the November election. Bonds are the only asset class not performing today, and paper with summer maturities is trading at deep discounts. It certainly casts a shadow over my 50% long bond position. However, I don’t expect it to last more than a month and my longest bond maturity is in February.
The US Consumer is in Good Shape, according to JP Morgan’s Jamie Diamond. Spending is now 10% greater than pre covid, and balance sheets are healthy. No sign of an impending deep recession here.
Boeing Deliveries Soar from 340 to 480 in 2022, and 479 new orders. A sudden aircraft shortage couldn’t have happened to a nicer bunch of people. The 737 MAX has shaken off all its design problems after two crashes four years ago. Cost-cutting here can be fatal. Europe’s Airbus is still tops, with 663 deliveries last year. Don’t chase the stock up here, up 79% from the October lows, but buy (BA) on dips.
Small Business Optimism Hits Six-Month Low to from 91.9 to 89.8, adding to the onslaught of negative sentiment indicators, so says the National Federation of Independent Business (NFIB).
Copper Prices Set to Soar Further with the post-Covid reopening of China, according to research firm Alliance Bernstein. After a three-year shutdown, there is massive pent-up demand. Copper prices are at seven-month highs. Keep buying (FCX) on dips.
Australian Metals Exports Soar, as the new supercycle in commodities gains steam. Shipments topped $9 billion in November, 20% higher than the most optimistic forecasts. Keep buying copper (FCX), aluminium (AA), iron ore (BHP), gold (GLD) and silver (SLV) on dips.
My Ten-Year View
When we come out the other side of the recession, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. The economy decarbonizing and technology hyper-accelerating, creating enormous investment opportunities. The Dow Average will rise by 800% to 240,000 or more in the coming decade. The new America will be far more efficient and profitable than the old. Dow 240,000 here we come!
On Monday, January 16, markets are closed for Martin Luther King Day.
On Tuesday, January 17 at 8:30 AM EST, the New York Empire State Manufacturing Index is out
On Wednesday, January 18 at 11:00 AM, the Producer Price Index is announced, giving us another inflation read.
On Thursday, January 19 at 8:30 AM, the Weekly Jobless Claims are announced. US Housing Starts and Building Permits are printed.
On Friday, January 20 at 7:00 AM, the Existing Home Sales are disclosed. At 2:00, the Baker Hughes Oil Rig Count is out.
As for me, the University of Southern California has a student jobs board that is positively legendary. It is where the actor John Wayne picked up a gig working as a stagehand for John Ford which eventually made him a movie star.
As a beneficiary of a federal work/study program in 1970, I was entitled to pick any job I wanted for the princely sum of $1.00 an hour, then the minimum wage. I noticed that the Biology Department was looking for a lab assistant to identify and sort Arctic plankton.
I thought, “What the heck is Arctic plankton?” I decided to apply to find out.
I was hired by a Japanese woman professor whose name I long ago forgot. She had figured out that Russians were far ahead of the US in Arctic plankton research, thus creating a “plankton gap.” “Gaps” were a big deal during the Cold War, so that made her a layup to obtain a generous grant from the Defense Department to close the “plankton gap.”
It turns out that I was the only one who applied for the job, as postwar anti-Japanese sentiment then was still high on the West Coast. I was given my own lab bench and a microscope and told to get to work.
It turns out that there is a vast ecosystem of plankton under 20 feet of ice in the Arctic consisting of thousands of animal and plant varieties. The whole system is powered by sunlight that filters through the ice. The thinner the ice, such as at the edge of the Arctic ice sheet, the more plankton. In no time, I became adept at identifying copepods, euphasia, and calanus hyperboreaus, which all feed on diatoms.
We discovered that there was enough plankton in the Arctic to feed the entire human race if a food shortage ever arose, then a major concern. There was plenty of plant material and protein there. Just add a little flavoring and you had an endless food supply.
The high point of the job came when my professor traveled to the North Pole, the first woman ever to do so. She was a guest of the US Navy, which was overseeing the collection hole in the ice. We were thinking the hole might be a foot wide. When she got there, she discovered it was in fact 50 feet wide. I thought this might be to keep it from freezing over but thought nothing of it.
My freshman year passed. The following year, the USC jobs board delivered up a far more interesting job, picking up dead bodies for the Los Angeles Counter Coroner, Thomas Noguchi, the “Coroner to the Stars.” This was not long after Charles Manson was locked up, and his bodies were everywhere. The pay was better too, and I got to know the LA freeway system like the back of my hand.
It wasn’t until years later when I had obtained a high-security clearance from the Defense Department that I learned of the true military interest in plankton by both the US and the Soviet Union.
It turns out that the hole was not really for collecting plankton. Plankton was just the cover. It was there so a US submarine could surface, fire nuclear missiles at the Soviet Union, then submarine again under the protection of the ice.
So, not only have you been reading the work of a stock market wizard these many years, you have also been in touch with one of the world’s leading experts on Artic plankton.
Live and learn.
CLICK HERE to download today's position sheet.
1981 On Peleliu Island in the South Pacific
Global Market Comments
February 18, 2022
Fiat Lux
Featured Trades:
(FEBRUARY 16 BIWEEKLY STRATEGY WEBINAR Q&A),
(NVDA), (MSFT), (VIX), (ROM), (TSLA), (GOOGL), (TLT), (TBT), (IWM), (QQQ), (FCX)
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
Global Market Comments
January 7, 2022
Fiat Lux
Featured Trades:
(JANUARY 5 BIWEEKLY STRATEGY WEBINAR Q&A),
(IWM), (RUA), (TSLA), (NVDA), (USO), (TBT), (ROM), (SDS), (ZM), (AAPL), (FCX), (HOOD), (BRKB)
Below please find subscribers’ Q&A for the January 5 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Incline Village, Nevada.
Q: What’s a good ETF to track the Russell 3,000 (RUA)?
A: I use the Russell 2,000 (IWM) which is really only about the Russell 1500 because 500 companies have been merged or gone bankrupt and they haven't adjusted the index yet. This is the year where value plays and small caps should do better, maybe even outperforming the S&P500. These are companies that do best in a strong economy.
Q: Should I focus on value dividends growth, or stick with the barbell?
A: I think you have to stick with the barbell if you’re a long-term investor. If you’re a short-term trader, try and catch the swings. Sell tech now, buy it back 10% lower. Keep financials; when they peak out you, dump them and go back into tech. It’ll be a trading year, but if a lot of you are just indexing the S&P500 or doubling up through a 2x ETF like the ProShares ultra S&P 500 (SSO), it may be the easiest way to go for this year.
Q: Will higher rates sabotage tech, particularly smaller companies?
A: They’ve already done so with PayPal (PYPL) down 44% in six months—I’d say that’s sabotaged. Same with Square (SQ) and a lot of the other smaller tech companies. So that has happened and will continue to happen a bit more, but we’re really getting into the extreme oversold levels on a lot of these companies.
Q: Should we cash out on the iShares 20 Plus Year Treasury Bond ETF (TLT) summer 150/155 put spread LEAPS?
A: No, because you haven't even realized half of the profit in that yet since there is so much time value left in those options. As long as you stay below $150 in the (TLT), which I'm pretty sure we will, you will get your full 100% profit on that position. On the six month and one year positions, they don’t really move very much because they have so much time value in them. Once you get into the accelerated time decay, which is during the last 3 months before expiration, they catch like a house on fire. So, if you're willing to keep a safe long-term position, this thing will write you a check every day for the next six months or a year to expiration. I know we have absolutely everybody in these deep in the money TLT puts; some people even did $165-$170’s—you know, my widows and orphans crowd—and they are doing well, but not as much as if you’d had a front month.
Q: What scares you most for the next 12 months?
A: Another variant that is more fatal than either Delta or Omicron. Unlikely, but not impossible.
Q: Do you expect Freeport McMoRan (FCX) to break out to the upside?
A: I do, I did the numbers over the vacation for copper production to meet current forecast demands for electric vehicle production. Global copper has to increase 11 times, and that can’t be done, so prices are going to have to go up a lot. One of my concerns with these lofty EV projections (that even I make) is that there aren’t enough commodities in the world to make all these cars with the current infrastructure. And you’re not going to find a replacement for copper—it's just too perfect of an electrical conductor. So, that means higher prices to me—you increase demand 11 times on a stable supply, and it takes 10 years to bring a new copper mine online.
Q: Do you have any open trades?
A: No, and one reason is that I figured they would probably crash the market on the last trading day of the year, which they did. If I had positions, they would have crushed them on the last year and my performance. And all hedge fund traders do this; they try to go 100% cash at the end of the year to avoid these things. And whatever you lost on Friday you made back on Monday morning at the expense of last year's performance. But you have to wait 15 months to get paid on today's performance, and, that is the reason I do that. So, looking for higher highs to sell, lower lows to buy.
Q: Should I be buying NVIDIA (NVDA) and Tesla (TSLA) on the dip?
A: Absolutely yes, but Tesla's prone to 45% corrections—we had one last year and the year before—and Nvidia tends to have 25% corrections. So yes, NVIDIA could well be the stock of the decade, but you don’t want to buy it right now. It’s starting to lose steam already.
Q: Will ProShares Ultra Technology (ROM) be under pressure?
A: Keep your position small now, take some profits, look to buy on a bigger dip. If the big techs drop 10%, (ROM) will drop 20% and get you below $100.
Q: Do you offer trade alerts on small caps for short term traders?
A: No, because you can’t execute those trades. A lot of them are just so illiquid, you can’t even trade one share unless you want to pay a huge spread. Keep in mind, when I worked at Morgan Stanley (MS), I covered the Rockefeller Foundation, the Ford Foundation, George Soros, Paul Tudor Jones, the government of Abu Dhabi, California State Pension Fund, and a lot of other huge funds; and the last thing they’re interested in is short term trades for the small-cap stocks. So, I don't really know much about those, but they tend to change the names every year anyway. And it really is a beginner trader type area because the volatility is so enormous. You can get 10x moves one day going to zero the next. It is also an area full of scams, cons, and pump and dump schemes.
Q: What is your advice when it comes to the ProShares UltraShort 20+ Year Treasury (TBT)?
A: Short term, take the profits—you just got a $14 point rally in your favor. Short term traders, take profits on bonds here, cover your shorts. Long term investors keep it, the cost of carry is only about 4% right now, not that high, so I would keep it for a great year-end move for 2.5% yields on the ten-year.
Q: I hate oil (USO) because it’s going to zero. Should I keep trading in it?
A: Very few are nimble enough to trade oil, it’s really an insider’s game. No new capital is moving into the oil industry and oil companies themselves won’t invest in their own businesses anymore.
Q: Would you put on a new position on the iShares 20 Plus Year Treasury Bond ETF (TLT) today?
A: No, you don’t sell short things after they move down $14 points. You put them on before that. If I were to do a short-term trade in (TLT) I would be a buyer, I’d maybe buy it for a countertrend rally of maybe $4 or $5 points.
Q: What should I do with my FCX 2023 LEAP?
A: There is enough time on it, so I would keep running it along as is—don’t get greedy. Keep the LEAPS you have and you should do well by it.
Q: Could the iShares 20 Plus Year Treasury Bond ETF (TLT) bottom out in the near term?
A: Yes, it could, on a short-term basis. $141 is the nine-month low for the (TLT), so a great place to take short term profits. (TLT) is right now at $142.56, so we’re approaching that $141 handle closely. Every technical trader on the market’s going to cover their shorts on the $141 or $142 handle, so just congratulate yourself going into this move short, and take the money and run. You take every $14 point move in your favor in the (TLT); and let it rally 5 points and then reestablish, that’s how you trade.
Q: Do you think there will be a delay in the first interest rate hike due to COVID?
A: Yes, Jay Powell is the ultra-dove—any excuse to delay rate hikes, he’ll do it. And the way you’ll know is he’ll delay the end of other things which you don’t see, like daily mortgage bond purchases, daily US Treasury purchases, and other backdoor forms of QE. We’ll know well in advance if he’s going to raise or not by March or even June. We watch this stuff every day, we talk to people at the Fed every week. And remember, the Treasury Secretary Janet Yellen is a good friend of mine, I get a good handle on these things; this is why 99% of my bond trades make money.
Q: What if I have the $135-$140 put spread in January?
A: Sell it now, take what you can, take the hit; because that’ll expire at zero unless we break down to new lows on the (TLT) in the next ten days or so. That's not a good bet, especially on top of a $14 point drop. Capture what you can on that one and keep the cash for a better entry point. That’s exactly what I did—I sold all my January positions yesterday no matter what they were, because when you get to two weeks to expiration the moves become random.
Q: Do you think inflation will last longer than expected?
A: No, I think it will last shorter than expected because I think at least half of the inflation rate, if not more, are caused by supply chain problems which will end within the next six months, and therefore lead to the over-order problem that I was talking about earlier.
Q: What’s your outlook on energy this year?
A: It could go higher. On the way to zero, you’re going to have several double, tripling’s, even 10x increases in the price of oil, like we saw in the last 18 months. We went from negative numbers to 80, and what happens is oil becomes more volatile as the supply becomes more variable, that's a natural function. But trading this is not for non-professionals.
Q: Since sector rotation is happening, do you think we should sell all tech positions?
A: Short term yes, long term no. Tech will still lead with earnings, and even if they have a bad five months coming, they have a terrific long-term view. For the last 30 years, every sale of tech has been a mistake, especially in Apple (AAPL). So if you’re a trader, yes, you should have been selling since November. If you’re a long-term investor, keep them all.
Q: Is the ProShares UltraShort S&P 500 (SDS) a good position to buy up when the market timing index goes into sell territory?
A: Yes it is, and that will probably work better this year than it did last year because narrow range volatile markets are much more technically oriented than straight-up markets or long term bull markets. Pay close attention to those markets, you could make a lot of money trading them.
Q: Do Teslas have good car heaters for climates up North in -25 or -30?
A: You plug them in. When it gets below zero you actually get a warning message on your Tesla app telling you to plug it in, and then the car heats itself off of the power input. Otherwise, if you get to below zero, the range on the car drops by half. If you have a 300-mile range car like I do and then you freeze it, it drops to like 150 miles. In Tahoe, I keep my car plugged in all the time when I'm not using it, just to keep it warm and friendly.
Q: Is Zoom (ZM) a good buy here?
A: No, I think they’re going to keep punishing these overpriced small cap techs like they have been. We’re a long way from value on small tech. That was a 2020 story.
Q: What about Berkshire Hathaway (BRKB)?
A: Berkshire Hathaway is doing a major breakout because they own financials up the wazoo and they’re all breaking out. And YOU should be long up the wazoo on these things because I’ve been recommending them for the last 4 months.
Q: What do you think of Robinhood (HOOD)?
A: Robinhood I like long term, but it is high risk, high volatility. It is down 78% from the IPO so it is busted. Kind of tempting down here, but again, all the non-earning overvalued stocks are getting their clocks cleaned right here; I'm not in a rush to get involved.
Q: When you enter a LEAP, is the straight call or call spread?
A: It’s a call spread. You finance the high cost of one-year options by selling short a call option against it further out of the money. And that way you can get enormous leverage for practically nothing, 10 or 20 times in some cases, depending on how you structure the strikes.
Q: Best stock to play Copper?
A: Freeport McMoRan (FCX). I’ve been recommending it since it was $4.00.
Q: Oil is the pain train until EVs actually take over.
A: That’s true, and they haven’t. EVs have about a 6% market share now of new car sales worldwide, but that could rapidly accelerate given all the subsidies that EVs are getting. Also, we have many future recessions to worry about, during which oil could easily drop 290% like it did last year. If you can hack that kind of volatility, go for it, but I find better things to do quite honestly. And I think my next oil trade will be a short, especially if we go over $100.
Q: What about Bitcoin?
A: It could go sideways in a range for a while. If we can’t hold the 200-day, we’re going back down to the high 30,000s, where we were at the start of the year—we could give up the entire year of 2021. Bitcoin also suffers from rising interest rates since they don’t yield anything.
Q: Is this recorded?
A: Yes, the webinar recording goes out in about 2 hours. Log into the madhedgefundtrader.com website and go to my account, where you’ll find it with all the different products you’ve purchased.
Q: I just closed out my (TLT) 150 put option for the biggest single trade profit in my life; I just made 20% of my annual salary alone today. Thank you, John!
To watch a replay of this webinar with all the charts, bells, whistles, and classic rock music, just log in to www.madhedgefundtrader.com , go to MY ACCOUNT, click on GLOBAL TRADING DISPATCH, then WEBINARS, and all the webinars from the last ten years are there in all their glory.
Good Luck and Stay Healthy.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
December 8, 2021
Fiat Lux
Featured Trade:
(ON EXECUTING MY TRADE ALERTS),
(TEN REASONS WHY STOCKS CAN’T SELL OFF BIG TIME),
(SPY), (INDU), ($COMPQ), (IWM), (TLT), (GME)
Global Market Comments
November 5, 2021
Fiat Lux
Featured Trade:
(NOVEMBER 3 BIWEEKLY STRATEGY WEBINAR Q&A),
(BRKB), (COIN), (IWM), (GOOGL), (MSFT), (MS), (GS), (JPM),
(BABA), (BIDU), (JD), (ROM), (PYPL), (FXE), (FXA), (FXB), (CRSP), (TSLA), (FXI), (BITO), (ETHE), (TLT), (TBT), (BITO), (CGW)
Below please find subscribers’ Q&A for the November 3 Mad Hedge Fund Trader Global Strategy Webinar broadcast from the safety of Silicon
Valley.
Q: Have you considered buying Coinbase (COIN)?
A: Yes, we actually recommended it as part of our Bitcoin service in the early days back in July. It’s gone up 62% since then, right along with the Bitcoin move itself. So yeah, buy (COIN) on dips—and there will be dips because it will be at least triple the volatility of the main market. And be sure to dollar cost average.
Q: Do you think the breakout in small caps (IWM) will hold and, if so, should we focus on small-c growth?
A: Yes it will hold, but no I would focus on the big cap barbells, which will lead this rally for the next 6 months. And there you’re talking about the best of tech which is Google (GOOGL) and Microsoft (MSFT), and the best of financials which is Morgan Stanley (MS), Goldman Sachs (GS), and JP Morgan (JPM).
Q: Why not time the webinar for after the FOMC? What will be the market reaction?
A: Well, first of all, we already know what they’re going to say—it’s been heavily leaked in the last week. The market reaction will be initially a potential sharp down move that lasts a few minutes or hours, and then we start a grind up for the next two months. So that's why I wanted to be 80% leverage long going into this. Second, we have broadcast this webinar at the same time for the last 13 years and if we change the time we will lose half our customers.
Q: Why do you always do debit spreads?
A: They’re easier for beginners to understand. That’s the only reason. If you’re sophisticated enough to do a credit spread, the results will be the same but the liquidity will be slightly better, and you can also apply that credit to meet your margin requirements. We have a lot of basic beginners signing up for our service in addition to seasoned pros and I always encourage people to do what they're most comfortable with.
Q: Are you still comfortable with the Morgan Stanley (MS) and Berkshire Hathaway (BRKB) positions?
A: I expect both to go up 10-20% by March, so that’s pretty comfortable. By the way, if you have extremely deep in the money call spreads on Goldman Sachs or Morgan, consider taking profits on those and rolling your strikes up. If you have like the $360-$380 vertical bull call spread in Goldman Sachs, realize that gain and roll up to the $420-$430 March position in Goldman Sachs—that will give you another 100% profit by March. With the $360-$ 380s, you have like 97% of the profit already in the price, there’s no leverage left and no point in continuing, you can only go down.
Q: What should I do with my China position?
A: Sell all your positions in China, realize all the losses now so you can offset those with all the huge profits on all your other positions this year. There I’m talking about Ali Baba (BABA), Baidu (BIDU), and (JD), which have been absolutely hammered anywhere from down 50% to down 70%. And do it now before everyone else does it for the same reasons.
Q: Thoughts on Paypal (PYPL) lately?
A: The stock is out of favor as money is moving out of PayPal into newer fintech stocks. The move down is totally unjustified and screaming long term buy here, but for the short-term investors are going to raid the piggy bank, sell the PayPal, and go into the newer apps. This has been my biggest money-losing trade personally this year because PayPal long-term has a great story.
Q: Will earnings fall off next year due to prior year comparisons or supply chain?
A: No, if anything, earnings are accelerating because supply chain problems mean you can charge customers whatever you want and therefore increase margins, which is why the stock market is going up.
Q: Long term, what would your wrong strikes be?
A: I would say don’t get greedy. I’m doing the ProShares Ultra Technology (ROM) $120-$125 call spread for May expiration—the longest expiration they offer. That gives you about 100% return in 6 months; 100% is good enough for me because then I’ll do the same thing again in May and get another 100%. What’s 100% x 100%? It’s 400% because you’re reinvesting a much larger capital base the second time around. If a 100% profit in six months is not enough for you then you are in the wrong line of business.
Q: Do you think Ethereum (ETHE) has long-term potential upside?
A: Yes, is a 10X move enough? We just had a major new high in Ethereum because they made moves to limit the production of new Ethereum. Ethereum is the superior technology because its architecture avoids the code repeats that Bitcoin does and therefore only uses a third of the electricity to create. But Bitcoin is attracting the big institutional cash flows because they have an early mover advantage. By the way, how much electricity does crypto mining consume? The entire consumption of Washington state in a year, so it’s a big deal.
Q: What should I do about Crisper Therapeutics (CRSP)?
Crispr Therapeutics (CRSP) is my other disaster for this year because ignored the move up to $170—we’re now back into the $90’s again. So, I have 2023 LEAPS on that; I’m going to keep them, I’ve already suffered the damage, but the next time it goes up to $170 I’m selling! Once burned, twice forewarned. And part of the problem with the whole biotech sector is we are now in the back end of the pandemic and anything healthcare-related will get hit, except for the vaccine stocks like Pfizer (PFE) which are still making billions and billions of dollars.
Q: I bought Baidu (BIDU) and Alibaba (BABA) years ago at a much lower price and I'm still up quite a lot; what should I do?
A: If you have the big cushion, I would keep them and look for #1 recovery in the Chinese economy next year and #2 for the government to back off from their idiotic anticapitalism strategy because it’s costing them so much money.
Q: Is Robinhood (HOOD) a good LEAP candidate?
A: Only on a really big dip, and then you want to go out two years. With a stock that’s volatile as hell like Robinhood and could drop by half on no notice, so you only buy the big dips. It’s not a slowly grinding upward stock like Goldman Sachs (GS) and Morgan Stanley (MS) where you can add LEAPS now because you know it’s going to keep grinding up.
Q: How can Morgan Stanley go up when the chief strategist is bearish?
A: Their customers aren't listening to their chief strategist—they’re buying. And the volume of the stock, which is where Morgan Stanley makes money, is going through the roof, they’re making record profits there. And I've got Morgan Stanley stock coming out of my ears in LEAPS and so forth.
Q: What are 5 stocks you would buy right now?
A: Easy: Google (GOOGL), Microsoft (MSFT), Morgan Stanley (MS), Goldman Sachs (GS), and JP Morgan (JPM). Buy whatever is down that day. They’re all going up.
Q: Too late to buy Tesla (TSLA) calls?
A: Yes, it is. Tesla has a long history of 40% corrections; we had one that ended in May, and then it doubled (and then some). So yeah, too late to buy the calls here. Go back and read my research from May which said buy the stock and you get a car for free—and that worked again, except this time, you can get three free Tesla’s. A lot of subscribers have sent me pictures of their Teslas they got for free on my advice; I’m probably the largest salesman for Tesla for the last 10 years and all I got out of it was a free Powerwall (the red one)..
Q: How much higher do you think semiconductor companies will go?
A: Higher but it’s impossible to quantify. You’re getting very speculative short-term buying in there. So, I think it continues to the rest of the year, but with chips, you never know.
Q: Would you be buying Crispr Therapeutics (CRSP) at these levels?
A: Yes, but I would either just buy the stock and not be dependent on the calendar or buy a 2 ½ year LEAP and get an easy double on that.
Q: What about the currencies?
A: I don’t see much action in the currencies as long as the US is raising interest rates. I think the Euro (FXE), the Aussie (FXA), and the British pound (FXB) will be dead for the time being. Nobody wants to sell them but nobody wants to buy them either when you’re looking at a potential short term rise in the dollar from rising interest rates.
Q: What stable coins are the right answer for cryptocurrency?
A: The US dollar stable coin, but for price appreciation, you’re really looking at Bitcoin and Ethereum. Stable coins are stable, they don’t move; you want stuff that’s going to go up 5, 10, or 20 times over the next 10 years like Bitcoin (BITO) and Ethereum (ETHE). That is my crypto answer.
Q: What should I do about the iShares 20 Plus Year Treasury Bond ETF (TLT) $135-$140 put spread expiring in January?
A: If we get another run down to the $141 level that we saw last month, I would come out of all short treasury positions because you’re starting to run into time decay problems with the January expirations. And in case we remain in a range for some reason, I would be taking profits at the bottom end of the range. It was my mistake that I didn’t grab those profits when we hit $141 last time. So don’t let profits grow hair on them, they tend to disappear. We lost six months on this trade due to the delta virus and the mini-recession it brought us.
Q: Will there be accelerated tech selling in December because of the new tax rates?
A: What new tax rates? There has been no new tax bill passed and even if there were, I think people wouldn’t tax sell this year because the profits are enormous. They would rather do any selling in January at higher prices and then defer payment of those taxes by 18 months. I don’t think there will be any tax issues this year at all.
Q: What’s your return on solar power investments?
A: My break-even was four years because our local utility, PG&E, went bankrupt and the only way they're getting out of bankruptcy is raising electricity prices by 10% a year. It turns out that as a result of global warming, the panels have operated at a higher efficiency as well, so we’re getting a lot more power output than originally expected. Now I get free electricity for the remaining 20-year life of the panels which is great because with two Tesla’s and all-electric heating and air conditioning I use a lot of juice. My monthly bill is a sight to behold. I also power the 20 surrounding houses and for that PG&E pays me $1,800 a month.
Q: Do you see China (FXI) invading Taiwan as a potential threat to the market?
A: China will never invade Taiwan. They own many of the companies they're already in, they de facto control Taiwan government from a distance; they would not risk the international consequences of an actual invasion. And we have the US seventh fleet there to stop exactly that. So, they can make all the noise they want but nothing will come of it. I’ve been watching this for 50 years and nothing has ever happened.
Q: Would you buy ProShares Ultrashort 20+ Treasury ETF (TBT) here?
A: Absolutely, with both hands, all I can get.
Q: Can you recommend any water ETF opportunity?
A: Yes there is one I wrote a piece on last month. It’s the Claymore S&P Global Water Index ETF (CGW).
Q: How long can you hold the (TBT) before time decay hurts?
A: It doesn’t hurt, the cost of the TBT is two times the 10-year rate. So that would be 3%, plus 1% a year for management fees, and that’s your slippage on the TBT in a year right now—it’s 4%. Remember if you’re short the bond market, you have to pay the coupon when you’re short. Double the bond market and you have to pay double the coupon.
Q: Is the ProShares Bitcoin Strategy ETF (BITO) a good alternative to buying bitcoin?
A: I would say yes because I’ve been watching the tracking on that very carefully and it’s pretty damn close. Plus there’s a lot of liquidity there, so yeah, buy the (BITO) ETF on dips and dollar cost average.
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
Global Market Comments
April 30, 2021
Fiat Lux
Featured Trade:
(APRIL 28 BIWEEKLY STRATEGY WEBINAR Q&A),
(PFE), (MRNA), (USO), (DAL), (TSLA), (CRSP), (ROM), (QQQ), (T), (NTLA),
(EDIT), (FARO), (PYPL), (COPX), (FCX), (IWM), (GOOG), (MSFT), (AMZN)
