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March 17 Biweekly Strategy Webinar Q&A

Below please find subscribers’ Q&A for the March 17 Mad Hedge Fund Trader Global Strategy Webinar broadcast from frozen Incline Village, NV.

Q: I’ve heard that the COVID-19 cases are being understated by 16 million. Do you think this is true?

A: Yeah, I've always argued that the previous government's numbers were vastly underestimating the true number of cases out there for political purposes, but we are on the downslide regardless, so that’s good.

Q: When are tech stocks going to bottom out and when can I buy them?

A: I knew I would get this question. This is the question of the day. Picking bottoms is always tough because these are momentum plays and not valuation plays. I’ll give you a couple of levels though. The tech (QQQ) multiple is now at 25X earnings and the S&P 500 (SPY) is at 22X, so your first bottom will be down about 10% from here, or a 22X multiple. And I don’t think we will get much lower than that because tech stocks are growing at 20-25% a year, versus the (SPY) growing at maybe 10%, and I don’t think tech goes to much of a discount in that situation. So, you’re just waiting for interest rates to top out and start to go down, which will be the other indicator of a tech bottom. We had a slowdown in the rise of rates for just a couple of days this week, and tech stocks took off like a rocket. Those are your two big signals.

Q: With the Fed announcement, are you still in the Invesco QQQ Trust NASDAQ ETF (QQQ) bear put spread?

A: Yes, one of them expires in two days so that’s a piece of cake. The other one expires in a month, but it is way out-of-the-money—the April $240-$245 bear put spread, so I’ll keep that for a real meltdown day. But if it looks like we’re getting a breakout, I will come out of that short position so fast it will make your head spin.

Q: Do you like Palantir (PLTR)?

A: Absolutely yes—screaming LEAP candidate. It traded all the way down to $20 two weeks ago and is trading around $25 now. It’s a huge data firm, lots of CIA and defense work, huge government contracts extending out for years, cutting edge technology, and run by a nut job, so yes screaming buy at this level.

Q: Freeport McMoRan (FCX) is taking some pain here, is this still a buy and hold?

A: Yes, it’s taking the pain along with all the other domestic stocks, which is natural. In their case though, it’s up almost 10x from its bottom a year ago where we recommended it, so yeah I'd say time for a rest. So I’m still a buyer of the metals and (FCX) on dips, but like all other metals, it did get overextended. EV manufacturing is doubling this year, which uses a ton of copper. The same is true with solar panels and Chinese industrial recovery. When all your major markets are doubling in size, it’s usually good for the stock. I peaked at $50 in the last cycle and could touch $100 in this one.

Q: What are your thoughts about the Lucid EV SPAC, Churchill Capital IV (CCIV)?

A: Don’t touch it with a ten-foot pole. They only have 1 or 2 concept vehicles for high-end investors to test drive. The rumor is that their main factory will be in Saudi Arabia where the bulk of the seed capital came from. They’ll never catch up with Tesla (TSLA) on the technology. There's always going to be a few niche $250,000 cars out there, and they have no proof they can actually make these things. When they get to a million vehicles a year, then I might be interested. But they haven't done the hard part yet, which is mass-producing battery packs for a million cars. They've only done the easy part which is designing one sexy prototype to raise money. So, stay away from Lucid, I don’t think they’re going to make it.

Q: What about oil?

A: I am avoiding oil plays like the plague.

Q: When do you anticipate your luncheons to be back?

A: Maybe in 2023. I don’t want to scare off my customers by inviting them to a lunch where they all get COVID-19. If I did have a lunch, I’d have a vaccine requirement and a temperature gun to hit them at the door like everywhere else. I really miss meeting subscribers in person.

Q: Should I buy banks like JP Morgan (JPM) at this level?

A: I would say no. That ship has sailed. Wait for a steeper selloff or just let it run. We’ve already had an enormous move and you don’t want to chase it with a low discipline trade, which is what that would be.

Q: What do you think of silver (SLV)?

A: It’s a buy long term, short term it’s in the grim spiral of death along with the other precious metals, which absolutely hate rising interest rates. A silver long here is the equivalent of a bond (TLT) long. When you do go into silver, buy Wheaton Precious Metals (WPM) for the leveraged long play.

Q: Is 3M (MMM) going to extend the upside?

A: Probably yes, that's a classic American industrial play and a great company. I have friends who work there. How could we live without Post-it notes, Scotch Tape, and Covid-19 N-95 masks?

Q: What about Square (SQ)?

A: I love it in the long term, buy on the dips and buy it through LEAPS (long term equity anticipation securities).

Q: Should I unwind my leveraged financial ETF?

A: I’d say take a piece off, yeah; you never get fired for taking a profit. And they have had a tremendous move. Plus of course, the flip side of taking profits on domestic recovery stocks is to buy tech with that money. And eventually, that's what the entire market will do, it just may still be a little bit early.

Q: What’s a good target for LEAPS for CRISPR (CRSP) and Palantir (PLTR)?

A: Put your first strike 30% higher than today’s stock price and go 2 years out in maturity. I noticed on some names, the June 2023’s are starting to trade, but they’re highly illiquid. But if you put a bid in there and you get a market meltdown, you will get hit.

Q: If the long-term future for oil (USO) is so bad, why is it $65?

A: A few reasons. #1, huge short covering action. #2, economy recovery faster than people expected because of the stimulus. #3, a lot of people, mostly in Texas, Oklahoma, and Louisiana, don’t believe that there will be an all-electric grid in 20 years and think that oil will be in demand forever, including the entire oil industry, so they’re in there buying. And #4, the Saudis have held back with production increases to push the price up, so they’re letting it run so they can sell at a higher price. When they do sell, oil crashes again.

Q: Can we re-watch this presentation?

A: Yes, we post it about 2 hours later on the website so all our people in about 135 countries can access it whenever they like. 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.

Q: How often do you have these webinars?

A: Every two weeks, and if you need help accessing it on your account page, email customer support at support@madhedgefundtrader.com.

Q: Is it time to initiate short positions on oil companies?

A: Not yet but keep it in the back of your mind. When some of the super-hot economic data come out after Q2, that may be your short in oil—then we may get into the $70’s a barrel. But not yet, there’s still too much upward momentum.

Q: Do you think we will see the 30-year fix below a 3.00% yield again?

A: Yes, in the next recession, which may be 5 or 10 years off because we’re starting at such a low base.

Q: Regarding copper, EV motors require a ton of copper. Doesn’t that make the metals a BUY?

A: That is true, and why we recommended Freeport McMoRan at $4 a year ago and recommended buying every dip. Each one of these rotor motors on each wheel of a Tesla weighs about 100 lbs—I’ve lifted them. Remember I tore apart a Tesla once just to see what made it tick, and they’re really heavy, and they use a lot of copper, and silver as well. So that has always been the bull market case for copper, as well as the fact that China re-emerged as a major buyer for their industrial buildout. That’s why we had a long in the SPDR S&P Metals and Mining ETF (XME).

Q: Do you foresee a good opportunity to go heavy into margin again?

A: Maybe if we get a decent selloff this summer, but you’ll never get the opportunity we had a year ago when you really wanted to put 100% of your portfolio into 2-year LEAPS. The people who did that made many tens of millions of dollars, which is why I get a free bottle of Bourbon every month. That was a once in 20 years event.

Q: What is your 2021 target for the S&P 500 (SPX)?

A: $4,860. It’s in my strategy letter which I sent out on January 6th, and that is all still posted on the website, click here for it.

Q: How do I renew my subscription with your company, and how do I figure out what I bought?

A: Email customer support at support@madhedgefundtrader.com and they will answer you immediately.

Q: Do you follow the iShares IBoxx High Yield Corporate Bond ETF (HYG)?

A: Yes, that is the high yield junk bond fund, but I have been avoiding long bond plays, as you may have noticed with my screaming short of the past year. We list (HYG) in these slides in the Bonds section.

To watch a replay of this webinar, just log in to www.madhedgefundtrader.com , go to MY ACCOUNT, click on GLOBAL TRADING DISPATCH or TECHNOLOGY LETTER (as the case may be), 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

March 8, 2021

Diary, Newsletter, Summary

Global Market Comments
March 8, 2021
Fiat Lux

Featured Trade:

(MARKET OUTLOOK FOR THE WEEK AHEAD, or WHAT’S UP WITH TECH?),
(MSFT), (TSLA), (AAPL), (QQQ), (NVDA), (MU), (AMD), (BRKB), (ARRK), (ROM), (VIX), (FCX), (TLT), (BRKB), (TSLA), (JPM), (SPY), (QQQ), (SPX)

The Market Outlook for the Week Ahead, or What’s Up with Tech?

Diary, Newsletter

That great wellspring of personal wealth, technology stocks, has suddenly run dry.

The leading stock market sector for the past decade took some major hits last week. More stable stocks like Microsoft (MSFT) only shed 8%. Some of the highest beta stocks, like Tesla (TSLA), took a heart-palpitating 39% haircut in a mere two months.

Have tech stocks had it for good? Has the greatest investment miracle of all times ground to a halt? Is it time to panic and sell everything?

Fortunately, I have seen this happen many times before.

Technology is a sector that is prone to extremes. Most of the time it is a hero, but occasionally it is a goat. When too many short-term traders sit in one end of the canoe, we all end up in the drink.

This is one of those times.

Technology stocks undeniably need a periodic shaking out. You need to get rid of the day traders, the hot money, the excessively leveraged, and find out who has been swimming without a swimsuit. The sector rotates between being ridiculously cheap to wildly overvalued. We are currently suffering the latter.

During the past 12 years, Apple’s (AAPL) price earnings multiple has traded from 9X to 36X. It was a value play for the longest time, all the way up to 2016. Nobody believed in it. It is currently at a 33X multiple. While the stock has gone nowhere since August, its earnings have increased by more than 10%, and better is yet to come.

After trading tech stocks for more than 50 years, I can tell you one thing with certainty.

They always come back.

And this time, they are in position to come back sooner, faster, and bigger than ever before. Remember the Great Dotcom Bust of 2000-2003? It lasted two years and nine months and saw NASDAQ (QQQ) crater by 82%, from 5,000 to 1,000. This time, it’s only dropped by 13%, by 1,850 from 14,250 to 12,400.

I don’t see the selloff lasting much longer or lower, no more than another 5%-10% until September. For these are not your father’s technology stocks.

There are only three numbers you need to know. Technology now accounts for a mere 2% of the US workforce, but a massive 27% of stock market capitalization and 37% of total us company earnings. A sector with such an impressive earnings output won’t fall for very long, or very far.

The pandemic accelerated technological innovation tenfold. Companies now have mountains of cash with which to bring forward their futures.

This is no more true than for biotech stocks. The technologies used to create Covid-19 vaccines can be applied to cure all human diseases. And they now have mountains of cash to implement this.

So, I’ll be taking my time with tech stocks. But they are setting up the best long side entry point since the March 20, 2020 pandemic low.

The biggest call remaining for 2021 is when to take profits and sell domestic recovery value stocks and rotate back into tech. But if you are running the barbell strategy I have been harping about since the presidential election, the work is already being done for you.

Nonfarm Payroll comes in at a blockbuster 379,000 in February, far better than expected. It a preview of explosive numbers to comes as the US economy crawls out of the pandemic. That’s with a huge drag from terrible winter weather. The headline Unemployment rate is 6.2%. The U-6 “discouraged worker” rate is still a sky-high 11%, those who have been jobless more than six months. Leisure & Hospitality were up an incredible 355,000 and Retail was up 41,000. Government lost 86,000 jobs. We are still 12 million jobs short of the year-ago trend. See what employers are willing to do when they see $20 trillion about to hit the economy?

Will US GDP Growth hit 10% this year? That is the sky-high number that is being mooted by the Atlanta Fed for the first three months of 2021. The vaccine is working! They do tend to be high in the home of Gone with the Wind. This Yankee would be happy at 7.5% growth. Manufacturing just hit a three-year high as companies try to front-run imminent explosive growth. The only weak spot is employment, which is still at recessionary highs.

Herd Immunity is here or says the latest numbers from Johns Hopkins University. New cases have plunged from 250,000 to 46,000 in a month, the fastest disease rollback in human history. We may be seeing new science at work here, where mass vaccinations combine with mass infections to obliterate the pandemic practically overnight. If true, the Dow has another 8,000 points in it….this year. Buy everything on dips. The economic data is about to get superheated.

Warren Buffet’s Berkshire Hathaway blows it away, buying back a staggering $25 billion worth of his own stock in 2020, including $9 billion in the most recent quarter. It’s what I’m always looking for, buying quality at a discount. Warren pulled in $5 billion in profits during the last quarter of 2020, up 13.6% over a year earlier. Net earnings were up 23%. If Buffet, a long time Mad Hedge reader, is buying his stock, you should too. Buy (BRKB) on dips. It's also a great LEAP candidate as the best domestic recovery play out there.

Rising rates have yet to hurt Real Estate, as the structural shortage of housing is so severe. Historically speaking, interest rates are still very low, even though the ten-year yield has soared by 82% in two months. Cash is still pouring into REITs coming off the bottom. Home prices always see their fastest moves up at the beginning of a new rate cycle as everyone rushes to beat unaffordable mortgages.

The Chip Shortage worsens, with Tesla shutting down its Fremont factory for two days. The Texas deep freeze made matters much worse, where many US fabs are located, like Samsung, NXP Semiconductors, and Infineon Technologies. Buy (NVDA), (MU), and (AMD) on dips.

Jay Powell lays an egg at a Wall Street Journal conference. He said it would take some time to return to a normal economy. The speed of the interest rate rise was “notable.” We are unlikely to return to maximum employment in a year. We couldn’t have heard of more dovish speech. But all that traders heard was that inflation was set to return, but will be “temporary.” That was worth a 600-point dive in the stock market and a 5-basis point pop in bond yields. My 10% correction is finally here!

Here today, gone tomorrow. Cathie Wood was far and away the best fund manager of 2020. She, value investor Ron Baron, and I, were alone in the darkness four years ago saying that Tesla (TSLA) could rise 100-fold. Cathie’s flagship fund The Ark Innovation ETF (ARKK) rose a staggering 433% off the March 2020 bottom. Alas, it has since given up a gut-punching 30% since the February high, exactly when ten-year US Treasury bonds started to crash. Watch (ARKK) carefully. This is the one you want to own when rates stabilize. It’s like another (ROM).

When we come out the other side of pandemic, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With interest rates still at zero, oil cheap, there will be no reason not to. The Dow Average will rise by 400% to 120,000 or more in the coming decade. The American coming out the other side of the pandemic will be far more efficient and profitable than the old. Dow 120,000 here we come!

It’s amazing how well selling tops and buying bottoms can help your performance. My Mad Hedge Global Trading Dispatch reached a super-hot 11.61% during the first five days in March on the heels of a spectacular 13.28% profit in February. The Dow Average is up a miniscule 4.00% so far in 2021.

It was a week of frenetic trading, with the Volatility Index (VIX) all over the map. I took profits in Freeport McMoRan (FCX) and my short in US Treasury bonds (TLT) and buying Berkshire Hathaway (BRKB), Tesla (TSLA), JP Morgan (JPM). I opened new shorts in the S&P 500 (SPY) and the NASDAQ (QQQ).

This is my fifth double digit month in a row. My 2021 year-to-date performance soared to 35.10%. That brings my 11-year total return to 457.65%, some 2.12 times the S&P 500 (SPX) over the same period. My 11-year average annualized return now stands at an unbelievable 40.68%.

My trailing one-year return exploded to 110.25%, the highest in the 13-year history of the Mad Hedge Fund Trader.

We need to keep an eye on the number of US Coronavirus cases at 29 million and deaths topping 525,000, which you can find here.

The coming week will be a boring one on the data front.

On Monday, March 8, at 11:00 AM EST, Consumer Inflation Expectations for February are out.

On Tuesday, March 9, at 7:00 AM, The NFIB Business Optimism Index for February is published.

On Wednesday, March 10 at 8:30 AM, the US Inflation Rate for February is printed.

On Thursday, March 11 at 8:30 AM, Weekly Jobless Claims are out.

On Friday, March 12 at 8:30 AM, the Producer Price Index for February is disclosed.

At 2:00 PM, we learn the Baker-Hughes Rig Count.

As for me, it was with great sadness that I learned of the passing of my old friend, Sheikh Zaki Yamani, the great Saudi Oil Minister. Yamani was a true genius, a self-taught attorney, and one of the most brilliant men of his generation.

It was Yamani who triggered the first oil crisis in 1973, raising the price from $3 to $12 a barrel in a matter of weeks. Until then, cheap Saudi oil had been powering the global economy for decades.

During the crisis, I relentlessly pestered the Saudi embassy in London for an interview for The Economist magazine. Then, out of the blue, I received a call and was told to report to a nearby Royal Air Force base….and to bring my passport.

There on the tarmac was a brand-new Boeing 747 with “Kingdom of Saudi Arabia” emblazoned on the side in bold green lettering. Yamani was the sole passenger, and I was the other. He then gave me an interview that lasted the entire seven-hour flight to Riyadh. We covered every conceivable economic, business, and political subject. It led to me capturing one of the blockbuster scoops of the decade for The Economist.

When Yamani debarked from the plane, I asked him “why me.” He said he saw a lot of me in himself and wanted to give me a good push along my career. The plane then turned around and flew me back to London. I was the only passenger on the plane.

When the pilot heard I’d recently been flying Pilatus Porters for Air America, he even let me fly it for a few minutes while he slept on the cockpit floor.

Yamani later became the head of OPEC. At one point, he was kidnapped by Carlos the Jackal and held for ransom, which the king readily paid.

And if you wonder where I acquired my deep knowledge of the oil and energy markets, this is where it started. Today, the Saudis are among the biggest investors in alternative energy in California.

We stayed in touch ever since.

Stay healthy.

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

March 1, 2021

Diary, Newsletter, Summary

Global Market Comments
March 1, 2021
Fiat Lux

Featured Trade:

(MARKET OUTLOOK FOR THE WEEK AHEAD, or WAKE UP CALL),
(TLT), (JPM), (BAC), (C), (MS), (GS),
(JNJ), (AAPL), (FB), (AMZN), (GOOGL)

The Market Outlook for the Week Ahead, or Wake Up Call

Diary, Newsletter

This was the week the stock traders learned there was such a thing as a bond market. They know this because it was bonds that completely demolished their stock trading books.

Suddenly, markets went from zero offered to zero bid. Many strategists labored under the erroneous assumption that ten-year US Treasury yields would never surpass 1.50% in 2021. Yet, here we are only in March and it’s already topped 1.61%. It’s become the one-way trade of the year.

The bond market seems to be discounting an imminent runaway inflation rate. But at a 1.4% annual figure, it's nowhere to be seen, not with 20 million unemployed and Main Streets everywhere looking like ghost towns.

I still believe that technology is evolving so fast, hyper-accelerated by the pandemic, that it will wipe out any return of inflation. I will not believe in inflation until I see the whites of its eyes, to paraphrase Colonel William Prescott at the Battle of Bunker Hill.

Of course, it is I who has been screaming from the rooftops about the coming crash of the bond markets, since March 20. Being short the bond market has been one of my most profitable trades of 2020 AND 2021. If I am annoyed by anything, it happened too fast, depriving me several more round trips a slower crash would have permitted.

When you have to own stocks, make them financials (JPM), (BAC), (C), which benefit from rising rates. Their loan rates are rocketing while their cost of money is fixed at the Fed overnight cost of funds at 0.25%. Trading volumes at the brokers (MS), (GS) are through the roof, especially for options traders.

It is all a perfect money-making machine. At least, the stock market thinks so.

I’ll tell you something that markets are not paying attention to at all, and it is the tremendous improvement in the pandemic. Since January 20, news cases have cratered from 250,000 a day to only 70,000, down 72%. The best-case scenario which markets discounted by near doubling in 11 months is happening.

With the addition of the Johnson & Johnson (JNJ) vaccine, some 700 million doses will be available by June. We could be back to normal by summer, at least in the parts of the country that don’t believe it is still a hoax.

This breathes life into the blockbuster 7.5% GDP growth scenarios now making the rounds. I think people have no idea how hot the economy is really going to get. Labor and materials shortages may be only three months off, but with no inflation.

So, what does all this mean for the markets? It all sets up the normal 5%-10% correction that I have been predicting. If you have two-year LEAPS on your favorite names, hang on to them. We are going much higher.

I went into the Monday selloff with a rare 100% cash position. The 20% I have now in commodities I picked up on puke out, throw up on your shoe capitulation days.

The barbell is still the winning strategy.

Domestic recovery stocks have been on fire for six months, with small banks up a ballistic 80%. Big tech has gone nowhere. But their earnings are still exploding, in effect, making them 20% cheaper over the same time period.

It’s just a matter of time before markets rotate back into tech and give domestic recovery a break. Think (AAPL), (FB), (AMZN), and (GOOGL). That is where the smart money is going right now.

The bond auction was a total disaster. The US Treasury offered $62 billion worth of seven-year US Treasury bonds, double the amount a year earlier. At a 1.95% yield and no one showed. Foreign participation was the worst in seven years. The bid-to-cover ratio was pitiful. Over issuance by the government crushing the market? Who knew? Imagine how high interest rates would be if the Fed wasn’t buying $120 billion a month of bonds?

The insanity is back, with GameStop (GME) doubling in the last 15 minutes of the month. Nobody knows why. It was why stocks tanked at the close on Thursday, scaring away real investors in real stocks. (GME) has become an indicator of all that’s wrong with the market.

Copper demand is rocketing, says Freeport McMoRan (FCX) CEO Richard Adkerson. That’s why he is opening three new US mines this year, adding 250 million pounds in annual output. Biden’s ambitious EV plans are the trigger. You can’t build an EV without a lot of the red metal. The world’s largest copper producer has become a major climate change and ESG play.

NVIDIA blows it away, with sales up a blockbuster 66%. Demand from gamers locked up at home was overwhelming. Purchases by bitcoin miners were through the roof. Even demand from the auto industry was up 16%, even though card sales aren’t. Too bad they picked the wrong day to announce, with the stock off 8.2%. (NVDA) is the one tech stock I would buy on dips.

Fed says business failures will continue at record pace, mostly occurring among small, unlisted local businesses. Biden’s $1.9 trillion rescue budget will come too late for many. Unemployment could stay chronically high for years, as the Weekly Jobless Claims are suggesting.

Housing starts fell in January, down 6.0% to 1.58 million units. A much smaller drop was expected. Rising land and lumber costs are cutting into the economics of new construction. Home prices are going to have to accelerate to suck in more supply. Housing Permits for new construction soared by 10.4% last month, so the future looks bright for builders.

Tesla (TSLA) crashed, down $180 in two days. We have just suffered a perfect storm of bad news about Tesla. Interest rates have been soaring, bad for all tech in the mind of the market. Competitor Lucid Motors announced a SPAC valued at $11 billion. And Elon Musk said Bitcoin looked “high” after investing $1.5 billion. Get ready to buy the dip, but not yet.

Quantitative easing to continue, says Fed governor Jay Powell, even if the economy improves. The $120 billion in bond-buying remains, even if the economy improves. He’s doing everything possible to create inflation.

Panic hits the crypto markets, dragging down technology equities with them. The two have been trading 1:1 for four months. Bitcoin suffered an eye-popping 25% plunge from $58,000 to 43,600. The tail is now wagging the dog. All risk-taking may have spiked with the Friday options expiration. Watch Bitcoin for a tech stock revival and vice versa. Stocks have earnings multiple support. Crypto doesn’t. I’ll buy Bitcoin when they post a customer support number.

Australian dollars soars as predicted, from $58 to $79 in 11 months. We could hit parity in 2022. The Aussie is basically a call option on a synchronized global economic recovery. End of the pandemic will also bring a resumption of massive Chinese investment in the Land Down Under. Keep buying the dips in (FXA).

Case-Shiller explodes to the upside, up 10.4% in December. It’s the hottest read in seven years for the National Home Price Index. Phoenix (14.4%), San Diego (13.0%), and Seattle (13.6%) were the strongest cities. The flight from the cities continues.

(TLT) breaks $138, surpassing my end 2021 target of a 1.50% ten-year US Treasury yield. So, I lied. My new yearend target is now $120, which would take ten-year yields to 2.00%. With a $1.9 trillion rescue budget about to kick in after the $900 billion that passed in December, the economy and demand for funds are about to rocket. Better hurry up and buy that house before mortgage rates rise out of reach.

Weekly Jobless Claims sink to 730,000. I can’t believe that 730,000 is now considered a good number, compared to 50,000 a year ago.

When we come out the other side of pandemic, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With interest rates still at zero, oil cheap, there will be no reason not to. The Dow Average will rise by 400% to 120,000 or more in the coming decade. The American coming out the other side of the pandemic will be far more efficient and profitable than the old. Dow 120,000 here we come!

My Mad Hedge Global Trading Dispatch closed out with a 13.28% profit in February after a blockbuster 10.21% in January. The Dow Average is up a miniscule 1.1% so far in 2021.

This is my fourth double-digit month in a row. My 2021 year-to-date performance soared to 23.49%. After the February 19 option expiration, I am now 80% in cash, with longs in (XME) and (FCX).

That brings my 11-year total return to 446.04%, some 2.12 times the S&P 500 (SPX) over the same period. My 11-year average annualized return now stands at an unbelievable 39.64%.

My trailing one-year return exploded to 93.48%, the highest in the 13-year history of the Mad Hedge Fund Trader. We have earned 103.31% since the March 20, 2020 low.

We need to keep an eye on the number of US Coronavirus cases at 28 million and deaths topping 510,000, which you can find here.

The coming week will be a boring one on the data front.

On Monday, March 1, at 10:00 AM EST, the ISM Manufacturing Index is out. Zoom (ZM) reports.

On Tuesday, March 2, at 9:00 AM, Total US Vehicle Sales for February are announced. Target (TGT) and Hewlett Packard (HPQ) report.

On Wednesday, March 3 at 8:15 AM, the ADP Private Employment Report is released. Snowflake (SNOW) reports.

On Thursday, March 4 at 9:30 AM, Weekly Jobless Claims are printed. Broadcom (AVG) and Costco (CSCO) report.

On Friday, March 5 at 8:30 AM, The February Nonfarm Payroll Report is announced. Big Lots (BIG) reports. At 2:00 PM, we learn the Baker-Hughes Rig Count.

As for me, the deed is done, I got my first Covid-19 shot, pure Pfizer.

The Marine Corps failed to deliver, as only active duty are getting shots. Washoe County ran out. Incline Village said I couldn’t get a shot until July. My own doctor had no clue.

Then I got an automated call from the doctor who did my stem cell treatment on my knees five years ago. They belonged to a large group that had my birthday in their system and my number came up on the first day the under ’70s opened up.

Going there was a celebration. Everyone was thrilled to death to get their shot. It was like winning the lottery. Our little local hospital operated with machine-like efficiency, inoculating 1,300 a day. It was a straight drive in, dive out. It was an “all hands-on deck” effort, with everyone from the board directors to the billing clerks manning the needles. It took longer to buy a Big Mac than to get my shot.

To make sure I didn’t pass out, I was sent to a holding area, where a person was assigned to each car. I got the CEO and grilled him relentlessly on his business model for 30 minutes.

I haven’t felt this good since I got my polio vaccine sugar cube in 1955.

Stay healthy.

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

January 20 Infection Rate

March 3 Infection Rate

February 8, 2021

Diary, Newsletter, Summary

Global Market Comments
February 8, 2021
Fiat Lux

Featured Trade:

(MARKET OUTLOOK FOR THE WEEK AHEAD, or THE SWEET SPOT CONTINUES),
(INDU), (SPY), (SLV), (GME), (TLT), (JPM), (BAC), (C), (BLK)

The Market Outlook for the Week Ahead, or the Sweet Spot Continues

Diary, Newsletter

We just completed the best week in the 13-year history of the Mad Hedge Fund Trader.

Kudos have been coming in from all over the world, with stories of retirements financed, mortgages paid off, and college educations paid for. Some Mad Hedge Concierge clients are reporting windfall profits of $1 million a day.

The key was calling the GameStop (GME) fiasco the one hit wonder that it was, and using it as an opportunity to go 100% long, pedal to the metal, and bet the ranch. When the market gives you a gift, you grab it with both hands as if your life depended on it and don’t let go.

It worked.

That’s what 50 years of practice gets you, the ability to spot the gold coins lying on the street ignored by everyone else and pocket them immediately.

A record $4.2 billion poured into technology stock funds last week as investors call the end of the six-month big tech correction. The barbell approach is working like a charm, with buying bouncing back and forth like a ping pong ball between domestics, technology, or both sectors go up at the same time. It’s better than owning a printing press for $100 bills.

The Mad Hedge Technology Letter also spotted which way the gale force winds were blowing and piled on the longs as well. (AMZN), (QCOM), and (CRWD), it’s all music to my ears. My old friend Jeff retired, paving the way for another doubling in his stock (AMZN).

We now are getting a clearer picture of how 2021 will play out in the stock market. Periods of sideways action will be followed by big gaps up, eventually taking us to a Dow Average of 40,000.

The sweet spot continues. As low as interest rates and inflation remain low and a tidal wave of new money is pouring into the economy, you have a rich uncle writing you a check every month from the stock market.

We have not had a correction of more than 4% since October. This could go on for years.

Where will the next surprise come from?

When Joe Biden gets his full $1.9 trillion in upfront rescue spending. With the grim tidings of three disastrous monthly jobs reports out, it couldn’t go any other way. The cost of waiting is just too high, especially for the 18 million U-6 unemployed and millions of small businesses hanging on by their fingernails.

The Nonfarm Payroll Report came in very weak, at 49,000 in January. The headline Unemployment Rate was at 6.3%, a decline as more people are leaving the workforce. The U-6 broader “discouraged worker” unemployment rate is still at 11%. December was revised down to an even bigger 227,000 loss. Construction was down 10,000, Retail down 37,000, and Government Jobs were up 43,000. It’s the third disappointing month in a row so a double-dip recession is still on the table. We have a very long road to recovery.

Weekly Jobless Claims improved, dropping to 779,000, the lowest since November. The correlation with falling Covid-19 cases is almost perfect, which have declined by 35% in two weeks. Is the stock market getting ready to roar?

US GDP fell by 3.5% in 2020, wiping out all of 2019 and a good chunk of 2018 as well. The last quarter of 2020 came in at -4.8%, much worse than expected, and further downward revisions are coming, according to the Bureau of Economic Analysis. The economy won’t recover pre-pandemic levels until late 2022 or 2023. The biggest drags on the economy were dramatic falls in consumer spending, nonresidential fixed investment, and a trade war-induced plunge in exports.

Pending Home Sales fell, 0.3% in December, but are still up a staggering 21.4% YOY. It is the highest December reading on record, but the fourth straight month of declines. A historic shortage of supply is the main reason.

The short squeeze play moved to silver, with prices hitting an eight-year high. Many local dealers are seeing business rise tenfold over the weekend and are running out of inventory. The white metal was up 35% in two days. It’s the largest one-day volume every. This time, the kids may have got it wrong, since all short positions in the options market are fully hedged with long positions in silver futures or silver bars. The GameStop players only saw the short side. Long term, I love (SLV) for industrial demand from electric cars and solar panels and see it going from today’s $28 to $50, but not today.

Apple (AAPL) is boosting share buybacks and is borrowing to do it. It’s issuing $14 billion in bonds out to 40 years in maturity at 95 basis points above Treasuries. If Apple is so aggressive in buying its own stock, maybe you should too.

The Apple car is moving forward, as incredible as it may seem. The company is in talks with South Korea’s Hyundai to produce autonomous self-driving electric vehicles that will be available by 2024. I’ll believe it when I see it. I’ve seen Apple self-driving cars in the Bay Area for years. It’s an interesting combination: Apple software, a South Korean design, and non-union Georgian metal bashing combined. Sounds like a winner to me.

The GameStop (GME) game ends. Back to selling used video games in shopping malls. Millions were lost in the crash from $483 to $49. Back to buying real stocks with the systemic threat to the main market over.

Jeff Bezos retired, putting the operation of Amazon into the hands of Andy Jassy, the inventor and head of the cloud unit AWS. No move in the stock beyond the first few seconds. Jassy has been there since the beginning. If I were the second richest man in the world, after Elon Musk, I’d take some time off too. Now, maybe my former Morgan Stanley colleague will have drinks with me. Buy (AMZN) on dips. My two-year target is $5,000.

Bombs away for the bond market, as the (TLT) hits a new 2021 low, taking ten-year yields up to 1.13%. I’m taking profits on the last of my bond shorts and piling money into financials, which love higher interest rates. Buy (JPM), (BAC), (C), and (BLK) on dips. A 1.50% yield on the ten-year US Treasury bond here we come! This is the quality trade of 2021.

The ADP Private Employment recovered, up 174,000 in January after a 74,000 plunge in December. Leisure & Hospitality is the big variable.

PayPal transactions were up 25% in 2020, showing the incredible extent of the online migration of the economy. Keep going with Fintech. There’s another double in (PYPL).

When we come out the other side of the pandemic, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With interest rates still at zero, oil cheap, there will be no reason not to. The Dow Average will rise by 400% to 120,000 or more in the coming decade. The American coming out the other side of the pandemic will be far more efficient and profitable than the old. Dow 120,000 here we come!

My Mad Hedge Global Trading Dispatch earned an amazing 14.15% during the first week of February after a blockbuster 10.21% in January. The Dow Average is up 3.47% so far in 2021. This is my fourth double-digit month in a row. My 2021 year-to-date performance soared to 24.36%.

I absolutely nailed the market bottom created by the GameStop fiasco, which I didn’t expect to last any more than days. I went 100% leveraged long, which enabled me to achieve the astounding numbers I am reporting today.

Not only did I get the market right, I picked the perfect sectors as well. I jumped 60% into financials, 20% in Tesla, 10% for commodities, and 10% in chips. I used the bond market meltdown to cover the last of my bond shorts. But all of my financial longs are essentially bond shorts.

That brings my 11-year total return to 446.81%, some 2.08 times the S&P 500 over the same period. My 11-year average annualized return now stands at an Everest-like new high of 40.02%.

My trailing one-year return exploded to 87.85%, the highest in the 13-year history of the Mad Hedge Fund Trader. We have earned 105.58% since the March 20, 2020 low.

We need to keep an eye on the number of US Coronavirus cases at 27 million and deaths 465,000, which you can find here. We are now running at a heartbreaking 3,000 deaths a day. But that is down 35% from the recent high.

The coming week will be a boring one on the data front.

On Monday, February 8 at 11:00 AM EST, Consumer Inflation Expectations for January are out. Softbank (SFTBY) and KKR & Co. (KKR) report.

On Tuesday, February 9 at 6:00 AM, the NFIB Business Optimism Index is released. Cisco Systems (CSCO) and Twitter (TWTR) report.

On Wednesday, February 10 at 8:30 AM, the US Core Inflation Rate is announced. Coca-Cola (KO) and Uber (UBER) report.

On Thursday, February 11 at 9:30 AM, Weekly Jobless Claims are printed. Walt Disney (DIS) and AstraZeneca (AZN) report.

On Friday, February 12 at 2:00 PM, we learn the Baker-Hughes Rig Count. As we have a three day weekend following, option volatility should collapse. Moody’s (MCO) reports.

As for me, I went into Reno last week to replace the windshield on my Toyota Highlander, my Tahoe car, which below zero temperatures had cracked. One-third of the town was shut down and boarded up, while what remained was booming. A giant shopping mall near downtown has resumed construction, but with less retail and more residential. Reno is the third fastest-growing city in the US and has become a metaphor for the entire country.

Still waiting for my Covid-19 vaccination. I’m at the top of four lists. Even the military can’t get enough. With any luck, I’ll have it in weeks.

Stay healthy.

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

Markets Can Be Tricky

February 2, 2021

Diary, Newsletter, Summary

Global Market Comments
February 2, 2021
Fiat Lux

Featured Trade:

(MY NEWLY UPDATED LONG-TERM PORTFOLIO),
(PFE), (BMY), (AMGN), (CELG), (CRSP), (FB), (PYPL), (GOOGL), (AAPL), (AMZN), (SQ), (JPM), (BAC), (MS), (GS), (BABA), (EEM), (FXA), (FCX), (GLD), (SLV), (TLT)

My Newly Updated Long-Term Portfolio

Diary, Newsletter

I am really happy with the performance of the Mad Hedge Long Term Portfolio since the last update on July 21, 2020. In fact, not only did we nail the best sectors to go heavily overweight, we also completely dodged the bullets in the worst-performing ones.

For new subscribers, the Mad Hedge Long Term Portfolio is a “buy and forget” portfolio of stocks and ETFs. If trading is not your thing, these are the investments you can make, and then not touch until you start drawing down your retirement funds at age 72.

For some of you, that is not for another 50 years. For others, it was yesterday.

There is only one thing you need to do now and that is to rebalance. Buy or sell what you need to reweight every position to its appropriate 5% or 10% weighting. Rebalancing is one of the only free lunches out there and always adds performance over time. You should follow the rules assiduously.

Despite the seismic changes that have taken place in the global economy over the past nine months, I only need to make minor changes to the portfolio, which I have highlighted below.

To download the entire new portfolio in an excel spreadsheet, please go to www.madhedgefundtrader.com, log in, go “My Account”, then “Global Trading Dispatch”, then click on the “Long Term Portfolio” button.

Changes

I am cutting back my weighting in biotech from 25% to 20% because Celgene (CELG) was taken over by Bristol Myers (BMY) at a 110% profit compared to our original cost. We also earned a spectacular 145% gain on Crisper Therapeutics (CRSP). I’m keeping it because I believe it has more to run.

My 30% weighting in technology also gets pared back to 20% because virtually all of my names have doubled or more. These have been in a sideways correction for the past six months but are still an important part of any barbell portfolio. So, take out Facebook (FB) and PayPal (PYPL) and keep the rest.

I am increasing my weighting in banks from 10% to 20%. Interest rates are finally starting to rise, setting up a perfect storm in favor of bank earnings. Loan default rates are falling. Banks are overcapitalized, thanks to Dodd-Frank. And because of the trillions in government stimulus loans they are disbursing, they are now the most subsidized sector of the economy. So, add in Morgan Stanley (MS) and Goldman Sachs (GS), which will profit enormously from a continuing bull market in stocks.

Along the same vein, I am committing 10% of my portfolio to a short position in the United States Treasury Bond Fund (TLT) as I think bonds are about to go to hell in a handbasket. I rant on this sector on an almost daily basis, so go read Global Trading Dispatch.

I am keeping my 10% international exposure in Chinese Internet giant Alibaba (BABA) and the iShares MSCI Emerging Market ETF (EEM). The Biden administration will most likely dial back the recent vociferous anti-Chinese stance, setting these names on fire.

I am also keeping my foreign currency exposure unchanged, maintaining a double long in the Australian dollar (FXA). The Aussie has been the best performing currency against the US dollar and that should continue.

Australia will be a leveraged beneficiary of the synchronized global economic recovery, both through strong commodity prices and gold which has already started to rise, and the post-pandemic return of Chinese tourism and investment. I argue that the Aussie will eventually make it to parity with the US dollar, or 1:1.

As for precious metals, I’m baling on my 10% holding in gold (GLD), which delivered a nice 20% gain in 2020. From here, it is having trouble keeping up with other alternative assets, like Bitcoin, and there are better fish to fry.

Yes, in this liquidity-driven global bull market, a 20% return is just not enough to keep my interest. Instead, I add a 5% weighting in the higher beta and more volatile iShares Silver Trust (SLV), which has far wider industrial uses in solar panels and electric vehicles.

As for energy, I will keep my weighting at zero. Never confuse “gone down a lot” with “cheap”. I think the bankruptcies have only just started and will stretch on for a decade. Thanks to hyper-accelerating technology, the adoption of electric cars, and less movement overall in the new economy, energy is about to become free. You are looking at the next buggy whip industry.

My ten-year assumption for the US and the global economy remains the same. I’m looking at 3%-5% a year growth for the next decade.

When we come out the other side of this, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With interest rates still at zero, oil cheap, there will be no reason not to. The Dow Average will rise by 400% or more in the coming decade. The America coming out the other side of the pandemic will be far more efficient, productive, and profitable than the old.

You won’t believe what’s coming your way!

I hope you find this useful and I’ll be sending out another update in six months so you can rebalance once again.

Stay healthy.

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