(JPM) Archives - Page 23 of 29 - Mad Hedge Fund Trader

The Market Outlook for the Week Ahead, or On Fire Everywhere

I am no longer able to breathe. The pandemic demands that I wear a mask. The wildfires prevent me from going outside, as the air is so heavy from smoke.

So, I decided to flee the San Francisco Bay Area south to Big Sir for a couple of days to catch up on my writing. On the way, I passed dozens of sadly abandoned schools as the pandemic has moved all of California to online distance learning.

By the second day, I was surrounded by fire. At an afternoon wine tasting, I tipped the waiter to hurry up as my glass was filling with ash and fire trucks were passing every five minutes.

By the next morning, I was surrounded by out-of-control wildfires and there was only one open road out of town. What really lit a fire under my behind was a text message from Tesla stating they would shut down charging at the Monterey station after 3:00 PM to help head off rolling blackouts.

The Golden State was not the only place on fire last week. Stocks were en flagrante as well, led by Tesla, Amazon, and Apple. The S&P 500 hit a new high for the year. It is the most concentrated market in history, with only 12 technology names accounting for 85% of the 2020 gains. Yet, 57% of shares are showing losses for 2020.

With a 33X multiple, Apple is pricing in only a 3% annual gain in the coming years. The price of Tesla at $2,100 a share is assuming the 2040 earnings have already arrived. We are firmly in bubble territory.

Having been in many bubbles over my half-century of trading, I can tell you they all have one thing in common. They run a lot longer than anyone imagines possible. In the meantime, traders, analysts, and investors are tearing their hair out wondering why they are so underweight stocks.

So trade if you must. But understand that the risk/reward here is terrible. You are better off here buying gold and banks and selling short US Treasury bonds and the US dollar.

Much has been made about share splits, which were the primary drivers of markets last week. However, the history of these things as that share prices fade shortly after the splits are completed. That was last Friday for Tesla and this Friday for Apple.

Apple may run a little longer, as it typically sees shares peak right after new generational cell phone launches, due in October.

Weekly Jobless Claims topped 1.1 million, ending a four-month downtrend. New Jersey, New York, and Texas were worst hit. Without further stimulus, they should continue to rise from here. These are Great Depression levels, and now massive layoffs from state and local governments are starting to kick in.

Apple topped $2 trillion in market cap. It is hard for those of us to believe it who bought the stock under $1 in 1998. It looks like more gains are to come. The coming 5G iPhone is going to market the peak in the shares this year, as new generational phones always do.

Uber and Lyft received a stay of execution, for 60 days, over whether they must treat drivers as full-time employees with benefits. Looks like I won’t have to take BART until October.

The U.S. Economy is falling back into the abyss. Last week’s total for new claims was well above the pre-pandemic Great Recession high of 665,000. Over 57.4 million Americans have now filed new unemployment insurance claims.

The airline industry is about to implode. With six months of operating at 20% capacity, how can they not? At least 75,000 in layoffs are imminent. Avoid the sector at all costs. You won’t recognize what comes out the other end. The next administration won’t be so generous to shareholders.

US Corona cases are slowing, even though we’ve just seen five consecutive days above 1,000 deaths. It’s the temporary ebb in the epidemic I was expecting that would rally the “recovery” stocks and sink the bond market. It’s sad, but we are celebrating suffering another 9/11 every three days instead of two.

Warren Buffet hates gold (GLD), but loves gold miners (GDX), loading the boat on Barrick Gold (GOLD) in Q2. It’s a rare move for the Oracle of Omaha into precious metals and the only way the cash flow king can collect a dividend in the sector. Warren seems to share my own long-term view on rising inflation caused by massive government bond issuance and spending.

U.S. Housing Starts mushroomed, surging 22.6% on the month to a seasonally adjusted annual rate of 1.496 million. Building permits also came in ahead of expectations, up 18.8% to 1.495m. Migration to the suburbs may explain some of the increase in activity but record-low mortgage rates and tight existing home inventory are the primary drivers. Soaring lumber prices mean growth in single-family starts will slow over the remainder of the year, not to mention the extra 0.50% fee on refinances.

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

My Global Trading Dispatch suffered one of the worst weeks of the year, giving up most of its substantial August performance. If you trade for 50 years, occasionally you get a week like this. The good news is that it only takes us back to unchanged on the month.

Longs in banks (JPM) and gold (GLD) and shorts in Facebook (FB) and bonds (TLT) held up fine, but we paid through the nose with shorts in Apple (AAPL), Amazon (AMZN), and Tesla (TSLA).

That takes our 2020 year to date down to 28.88%, versus -2.00% for the Dow Average. That takes my eleven-year average annualized performance back to 36.06%. My 11-year total return retreated to 384.79%.

It's a relatively low rent week on the data front. The only numbers that count for the market are the number of US Corona virus cases and deaths, which you can find here.

On Monday, August 24 at 8:30 AM EST, the Chicago Fed National Activity Index is out.

On Tuesday, August 25 at 9:00 AM EST, the S&P Case Shiller National Home Price Index for June is released.

On Wednesday, August 26, at 8:30 AM EST, Durable Goods for July are printed. At 10:30 AM EST, the EIA Cushing Crude Oil Stocks are out.

On Thursday, August 27 at 8:30 AM EST, the Weekly Jobless Claims are announced. We also get the second estimate for Q2 GDP.

On Friday, August 28, at 8:30 AM EST, US Personal Spending is announced. At 2:00 PM, the Bakers Hughes Rig Count is released.

As for me, I am reading up on bios and generally preparing for my upcoming Mad Hedge Traders & Investors Summit, which I will be hosting for three days and starts on Monday morning at 9:00 AM EST. The attend please click here.

See you there.

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

August 17, 2020

Diary, Newsletter, Summary

Global Market Comments
August 17, 2020
Fiat Lux

Featured Trade:

(JOIN THE AUGUST 24-26 MAD HEDGE TRADERS & INVESTORS SUMMIT),
(MARKET OUTLOOK FOR THE WEEK AHEAD, or WELCOME BACK FROM YOUR CRUISE),
(INDU), (TLT), (GLD), (TBT), (FB), (AMZN), (AAPL), (BAC), (JPM)

The Market Outlook for the Week Ahead, or Welcome Back from Your Cruise

Diary, Newsletter

I have long advocated a long cruise as the best of all long-term investment strategies. After all, over the past 100 years, stocks have gone up 80% of the time, including the last Great Depression and WWII. Almost all news is negative, so ignoring should boost your investment returns immensely.

The last six months offer the most recent example. If you had departed on February 14 and return on Friday, August 14, the index return would have been absolutely zero, but you would have collected 1% in dividends. If you had been overweight in technology and biotech stocks, as I have been advocating for the past decade, you would have been up 20-30%.

Of course, this year, cruising presented its own risks, not from a sinking ship, pirates, or the norovirus, but from Covid-19. Many guests departed in the best of spirits to return DOA in the ship’s overcrowded meat locker.

The stock markets are offering more than the usual amount of risks as well. Think of an irresistible force, massive liquidity, meeting the immovable object, record-high valuations.

Only action in Washington could break this stalemate to the upside, a deal between the House and the White House that brings yet another stimulus package. Most of whatever money gets approved will head straight for the stock market, either directly or indirectly. Until then, we will be trapped in a narrow range.

These conditions could last into September, or until after the election. Nobody knows. That’s why eight of my nine positions expire on Friday, in four trading days.

Trump took executive action to help the economy but offers not a penny in funding. He expects states running record deficits to pay for a big chunk. It’s a symbolic act that will have no impact on the economy. The bottom line is no more stimulus for the economy. Stocks will hate it. Trump fiddles while America burns.

A bond market collapse is imminent, with record new issuance in the coming week and a strong July Nonfarm Payroll Report last Friday. Expect ten-year Treasury yields to go back to 0.95% and prices to collapse. Inflation is ticking up, with Consumer prices rising to 1.6% YOY. Fed buying of $80 billion a month is already in the price. I am selling short the (TLT).

Warren Buffet was a major buyer of His own stock, picking up a record $5.1 billion worth of Berkshire Hathaway (BRK/B). With $146.6 billion in cash on hand, what else is he going to do? Berkshire Class A shares were down 7.4% for the year through Friday’s close, compared with the 3.7% gain in the S&P 500. It’s his way of betting on the long-term future of industrial America at a discount.

Russia claimed Covid-19 Vaccine, causing stocks to pop. The rotation trade continues with a vengeance, with tech (I’m short), bonds (I’m short), and gold down big and “recovery” stocks like cruise lines, hotels, restaurants, and banks (I’m long) on a tear. Some $5 trillion in cash is pouring in from the sidelines, so there is only “UP” and “UP BIG”. (SPY) hit a new all-time high.

Tesla announced 5:1 stock split on August 21, which is the options expiration day. Long expected, it is just the latest in a series of Elon Musk attacks against the shorts, of which I am now one. The shares are up only 7% on the announcement. The impact won’t be so great, as it only takes the shares back to where they were in March.

Biden picked Kamela Harris as VP. It is the safe choice, not that California was ever in doubt in the electoral college. A moderate choice clearly takes aim at the conservative Midwest. Markets will rally because she is not Elisabeth Warren, who would have pilloried the banks and big tech and is essentially anti-capitalist.

College Football is postponed for 2020-2012, delivering a $4 billion hit to sponsoring colleges and another drag on GDP. No more free Corvettes for USC players. It's another example of local government taking the lead on Corona measures where the federal government is totally absent.

Van Eck targets $3,400 for gold. One of the original players in gold mutual funds who I know from the big bull market during the 1970s sees a 72% increase in the barbarous relic coming. With the government running the printing presses 24/7 to end the Great Depression collapsing the US dollar, it’s a no-brainer.

Consumer Prices unexpectedly jump, up 0.6% in July and 1.6% YOY. It’s a legitimate “green shoot” and provided yet another reason for the recovery trade. Rebounding inflation is always a great time to be short the US Treasury bond market (TLT). Keep selling every rally in the (TLT).

Retail Sales jump 1.2% in July, despite rising Corona cases, taking it back above pre-pandemic levels. Industrial Production picked up 3%. A lot was bought on credit. The problem is that all of those stimulus and unemployment dollars are now gone. In the meantime, further aid is frozen in Washington. No shopping, no growth.

Weekly Jobless Claims drop below one million for the first time since March. It’s still terrible, but it’s progress. Take what you can get. However, the rate of decline is flagging, and the next report could well bring an upturn.

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

Nothing refreshes and clears the mind like a vacation.

As a result, my Global Trading Dispatch blasted through to a substantial new all-time high. August is running at a blistering 6.03%, delivering a 2020 year to date of 34.66%, versus -2.00% for the Dow Average. That takes my eleven-year average annualized performance to a new all-time high of 36.61%. My 11-year total return has rocketed to 390.57%.

It certainly helped being short big tech (AAPL), (AMZN), (FB), short US Treasury bonds (TLT), (TBT), long banks (JPM), (BAC), and long gold (GLD).

The only numbers that count for the market are the number of US Corona virus cases and deaths, which you can find here.

On Monday, August 17 at 8:30 AM EST, the August New York Empire State Manufacturing Index is published.

On Tuesday, August 18 at 8:30 AM EST, Housing Starts for July are released.

On Wednesday, August 19 at 10:30 AM EST, the EIA Cushing Crude Oil Stocks are out.

On Thursday, August 20 at 8:30 AM EST, the Weekly Jobless Claims are announced.

On Friday, August 14, at 10:00 AM EST, Existing Home Sales for July are printed. At 2:00 PM The Bakers Hughes Rig Count is released.

As for me, with six days of 100-degree temperatures forecast, I attempted to go to the beach. A car crash on the Richmond Bridge trapped me in traffic for an hour. By the time I made it to the coast, the beaches were unreachable, thanks to unprecedented crowding.

With the local real unemployment rate at 25%, people have a lot of free time on their hands these days. It’s all part of the times we live in.

Stay healthy,

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

August 14, 2020

Diary, Newsletter, Summary

Global Market Comments
August 14, 2020
Fiat Lux

Featured Trade:

(AUGUST 12 BIWEEKLY STRATEGY WEBINAR Q&A),
(GLD), (TLT), (TSLA), (AAPL), (FB), (AMZN), (VXX), (VIX), (JPM), (BAC), (GDX), (NUGT), (MRNA), (BRK/B), (SLV), (FCX)

August 12 Biweekly Strategy Webinar Q&A

Diary, Newsletter

Below please find subscribers’ Q&A for the August 12 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Lake Tahoe, NV with my guest and co-host Bill Davis of the Mad Day Trader. Keep those questions coming!

Q: I just joined your service. Can you explain the logic to your current model trading portfolio?

I always try to balance long positions with short position. That greatly mitigates the risk of an out-of-the-blue crash, like we saw in February. Also, every individual position has a long and short, further reducing volatility. And you never can lose more money than you put up, so your risk is defined. That’s another classic risk control measure.

There is a further four hedge in that the portfolio is spread across all asset classes. So, I am long banks (JPM), (BAC), short US Treasury bonds (TLT), short a basket of big tech stocks (AAPL), (AMZN), (FB) and long gold (GLD). Something is always working where you can take profits. Our proprietary Mad Hedge Market Timing Index is always a big help in judging the best time to enter and exit these asset classes.

That is the short course on hedge fund risk management 101.

Q: Is it a good time to add in gold (GLD) here?

A: Yes, my long-term target for gold is $3,000/oz, possibly higher—it’s very common once you get a breakout from a 7-year bottoming process to get a big move like that. You always go back and retest that breakout level, that’s what’s happening now. I would use this dip to buy gold. You can look at (GLD) itself, the (GDX) gold miners which will give you 4:1 leverage over gold, or any of the 2x or 3x gold leveraged ETFs like (NUGT). There are lots of ways to play gold this time left from over the last bull market in gold ten years ago. So yes, bullish on gold with a temporary pullback in store. This recovery trade, which is buying banks, casinos, hotels, restaurants, weak dollar, weak buy market, weak gold—this is all temporary, this is just a trade. Those will all reverse themselves, probably by September if not sooner. So, if you missed the first round in the gold bull market, there’s certainly another chance to get back in.

Q: Do you think Biden and Harris will crash the stock market if elected?

A: No, since Biden started to run away in the polls, the stock market basically went straight up every day, and I prefer the stock market’s judgment on these things to opinion polls or talking heads. As far as Harris is concerned, she was the most middle of the road conservative pick of the 12 or so people they were looking at for vice president. Certainly, she’s a favorite with Wall Street, and isn’t it interesting they’re looking for the talents of a prosecutor in the White House? Who do you think they have in mind? So yes, that’s a net positive for the market. If anything, a new administration will bring a whole new round of Quantitative Easing and deficit spending, except it will be focused on bailing out Main Street, not Wall Street.

Q: Is the vaccine drug maker Moderna (MRNA) overbought here at 70?

A: Yes, I think to get any more appreciation you need to get an actual result on the many vaccines that are out there.

Q: Will Tesla (TSLA) pass 2,000 by year end?

A: I tend not to think so; Tesla had a once-in-a-lifetime 10-fold increase over a year. That is a very big move to digest, and while I’m saying people should keep their Tesla longs for the long term, short term you want to be selling calls against your long positions to hedge any downside and to take in some extra income.

Q: What caused ten-year US Treasury yields (TLT) to jump 14% yesterday? What will yields do from here?

A: Yields will go up and retest the 95-basis point level we saw a couple of months ago. That means we’re going to have a clear shot at adding shorts, probably for the next several weeks or months.

Q: I got the first TLT trade, but when I added the second one, I had to automatically close out my 175 short position to add the long 175 put position.

A: That is the correct way to do this. And what you end up with is a wider spread with a much larger size. So, you take all three positions we currently have, and you now have a (TLT) August $170-177.5 bear put spread in triple the original size and triple the profit, which expires in 5 trading days. It’s a trade with a very high return over a very short time frame. It’s the kind of trade that’s only available with very high volatilities in the market—at $25 in the (VIX), and you get very high accelerated time decay going into the close. So, it really was a two-week expiration play on the (TLT).

Q: Apple (AAPL) has been able to avoid any major damage in its share price in this trade war. How long can it last?

A: It can last 3 more months, until the election. It’s really quite amazing that the Chinese have not retaliated against Apple in all of these trade wars, and the reason for this is that Apple employs a million people in China, and they make a ton of money out of it. Apple has also managed their relationship with the communist government perfectly. So, that’s why they haven’t been hit. General Motors, other US companies—they could get expropriated. If the US can expropriate TikTok, what’s to stop China from expropriating General Motors, Starbucks, or even Apple for that matter?

Q: How do we know who has a real vaccine and who has a fake one? There’s so much information out there, I have a hard time filtering through what is real.

A: Wait for 100,000 people to try it out first—that’s what my plan is. That will be the safe way to do it. And if that means quarantining another couple of months to make sure you get the real deal, it’s worth the investment. Most industry safety standards, like animal trials, have been ditched by the FDA in order to get Trump a vaccine before the election. Putin is doing the same in Russia.

Q: Why is Warren Buffet buying back shares of Berkshire Hathaway (BRK/B) in record amounts? Is it because he sees no good investments?

A: He’d rather buy his own shares at parity or at a small premium than pay record PE multiples for essentially anything else in the market. Because the government rushed in so quickly to support the stock market, there never were any real deals in stocks, they never really got cheap. Yes, it sounds like down 40% in 2 months is cheap, but stocks weren’t, not even close to cheap, on a PE multiple basis. We never got close to the 9 ½X we saw in 2009. Also, if you believe in a recovery play, the ultimate recovery play is Berkshire Hathaway because they own predominantly old-line industrial cash flow stocks, which will lead any real recovery in the economy. So, at this point, Berkshire Hathaway will probably get you a higher return on a 12-month view than say Apple, Facebook or Amazon.

Q: Gold (GLD) vs Silver (SLV)? Which is better? And what about Copper (FCX)?

A: Silver always outperforms gold by at least 2 to 1 in any real economic recovery. Copper prices have risen 30% in 4 months; that is discounting a real economic recovery someday, so I would be buying copper on dips also.

Q: How do we learn more about options?

A: I suggest you go to the “How to Trade” section on our website, and that has links. Every trade alert we send out also has a link to a video that tells you exactly how to do the options part of that trade. And if you don’t want to do options, we also propose ETF and single stocks.

Q: What year end effect on the market do you see from a Biden tax plan on long term capital gains and qualified dividends at the ordinary income rate?

A: Well, if he actually proposes that, there will be a rush to sell assets by the end of the current year so people can take advantage of the very favorable capital gains tax that exist now. However, it’s not known whether that is actually the tax increase he’s proposing; it’s more likely he’ll simply return to the pre-Trump tax rates. However, I do expect him to come up with highly punitive tax rates on any real estate-related investment as a way of getting back at Trump. And that’s like loss carry forwards, steps up in the cost basis, 1031 exchanges—things specific to the real estate industry.

Q: If you think markets are going to come off, why aren’t you more aggressive buying the iPath Series B S&P 500 VIX Short Term Futures ETN (VXX)?

A: (VXX) has become such a professional market it really has become a day trading vehicle. It’s hard to get customers in and out of this thing fast enough to make them money, as most of my followers are not set up to be day traders. It’s a market where 90% of the professionals are playing from the short side, so when you get moves up, they essentially happen over 1 or 2 days, and then they spend weeks or months bleeding off. It really is a tough trade for a retail trader to do; and it is an area where the insiders in Chicago trade this thing and really do have an in-house advantage that I would rather not try to bet against.

Q: I sold the top on all precious metals positions and started buying back today. Was that the right thing to do?

A: Yes, I have a feeling it is. Start scaling in—if you’re nervous about buying gold here, buy a third of a position now, a third if it’s higher or lower, and a third if it’s higher or lower again. That’s what any pro would do.

Q: Do you see another big economic crisis in 2021?

A: I don’t think so; I think any continued weakness will be hit with massive liquidity from the Fed and more government spending. Now that they found the model to keep the economy going, they’re going to just keep at it, no matter who is in power. Roosevelt kept at it for 5 years to end the Great Depression, until he was bailed out by WWII, so hopefully we don’t have to bail our economy out the same way with WWIII.

Q: What about Bitcoin here?

A: We don’t trade Bitcoin as we think the whole thing is a giant scam. There’s also no value added by anyone. Insiders have a huge advantage, the people who are creating the bitcoin to sell. So, it’s a security with no fundamentals—thus unanalyzable.

Good Luck and Stay Healthy

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

August 12, 2020

Diary, Newsletter, Summary

Global Market Comments
August 12, 2020
Fiat Lux

Featured Trade:

(THE IDIOT’S GUIDE TO INVESTING),
(TSLA), (BYND), (JPM)

July 22, 2020

Diary, Newsletter, Summary

Global Market Comments
July 22, 2020
Fiat Lux

Featured Trade:

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

My Newly Updated Long-Term Portfolio

Diary, Newsletter, Research

I am really happy with the performance of the Mad Hedge Long Term Portfolio since the last update on October 17, 2019. In fact, not only did we nail the best sectors to go heavily overweight, we completely dodged the bullets in the worst-performing ones, especially in energy.

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 70 ½.

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 in red.

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

My 5% holding in Biogen (BIIB) was taken over by Bristol Myers (BMY) at a hefty premium at an all-time high, so I’ll take the win. I am replacing it with Covid-19 vaccine frontrunner Bristol Myers (BMY) itself.

I am also taking out healthcare provider Cigna (CI), whose profits have been hammered by the pandemic. A future Biden administration might also move to a national healthcare system that will cap profits. I am replacing it with another Covid-19 vaccine leader Pfizer (PFE).

My 30% weighting in technology remains the same. Even though these stocks are 30% more expensive than they were three years ago, I believe they will lead the charge into the 2020s. It’s where the big growth is. These have doubled or more over the past nine months.

I am sticking with a 10% weighting in banking. Thanks to trillions in stimulus loans, they are now the most government-subsidized sector of the economy. I also believe that massive bond issuance by the US Treasury will deliver a sharply steepening yield curve, another pro bank development.

With my 10% international exposure, I am taking out a 5% weight in slow-growth Japan and replacing it with Chinese Internet giant Alibaba (BABA). The US will most likely dial back its vociferous anti-Chinese stance next year and (BABA) will soar.

I am executing another switch in my foreign currency exposure, taking out a long in the Japanese yen (FXY) and a short in the Euro (EUO) and substituting in a double long in the Australian dollar (FXA).

Australia will be a leveraged beneficiary of a recovery in the global economy, both through a recovery on commodity prices and gold which has already started, 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.

I’m quite happy with my 10% holding in gold (GLD), which should move to new all-time highs imminently….and then go ballistic.

As for energy, I will keep my weighting at zero, no matter how cheap it has gotten. 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.

My ten-year assumption for the US and the global economy remains the same.

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

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

July 13, 2020

Diary, Newsletter, Summary

Global Market Comments
July 13, 2020
Fiat Lux

Featured Trade:

(MARKET OUTLOOK FOR THE WEEK AHEAD, or HERE COME HERD IMMUNITY),
(INDU), (TSLA), (SPY), (GLD), (JPM), (IBB), (QQQ), (AAPL), (MSFT), (DCUE), (NVDA)

The Market Outlook for the Week Ahead, or Here Comes Herd Immunity

Diary, Newsletter

The US passed a single-day record of 70,000 new cases for Covid-19 over the weekend, with Florida bringing in an astounding 15,300.

We missed a chance to stop the epidemic in January because we were blind. Then we missed again in April because we were lazy, when New York City was losing nearly 1,000 souls a day and ignored the lessons therein.

So, we relentlessly continue our march towards herd immunity, when two-third of the population gets the disease, protecting the remaining one third. That’s about a year off.

That implies total American deaths will reach 2.2 million, more than we have lost from all our wars combined.

The faster people die, the closer we are to the end of the plague, which is good news for everyone.

And the stock market keeps going up every day, the worse the news, the faster. That may be happening because the more severe the shock to the system, the faster companies must evolve to survive, making them ever more profitable.

Out with the Old America, in with the new. The future is happening fast.

We here at Mad Hedge Fund Trader have just delivered the most astonishing quarter in our 13-year record, up some 41.98% from the March 16 low.

That makes me cautious. Things never stay that good for long. Just because I can’t see the next black swan doesn’t mean it isn’t going to happen.

If stocks rise when corona cases are exploding, what do they do when cases fall? Do they fall too, or do they rise even faster?

That’s above my pay grade. I’m only a captain, not a general.

So, I will be moving to a 100% cash position in coming days and then let the next black swan tell me what to do. If we suffer a severe dive, and 10%-20% is entirely possible, then I’ll jump back in with my “BUY” hat on. That means testing the lower up of my six-month (SPX) 2,700-$3,200 range.

If we suddenly surge to far greater heights and new all-time highs, then I will be selling short as fast as I can write the trade alerts.

In the meantime, we have Q2 earnings to look forward to in the coming week, which will certainly be one for the history books. The bullish view is that they will be down only 44% from a dismal Q1. The bearish view is far worse. Banks (JPM) kick off on Tuesday.

NASDAQ (QQQ) hit a new high at 10,622, with Apple (AAPL) and Microsoft (MSFT) leading the charge. Elon Musk is now looking at another $1.7 billion payday with his shares touching $1,500. I’m moving to 100% cash, peeling off one profitable position a day as each option play reaches its maximum profit. I just had the best quarter in a decade, up an eye-popping 40%, and I’m just not that smart to keep it going. Humility always wins in the long-term.

Goldman Sachs chopped its growth forecast in the face of soaring Covid-19 cases, paring their Q3 prediction from +33% to +25%. Political campaign rallies are spreading the disease faster than expected. Q1 most likely came in at negative -5%. Expect worse to come. If the stock market can’t break at 135,000 corona deaths, it will at 260,000 or 520,000, which is certainly coming.

NVIDIA topped Intel as most valuable chip company. No surprise here. High-end graphics cards are worth a lot more money than plain commodity processors. Keep buying dips on (NVDA) which we’ve been loading the boat with now for four years. There’s an easy double from here.

Warren Buffet bought Dominion Energy (DCUE), in one of the only distressed sales available this year, thanks so much to government support. With natural gas prices at all-time lows, the big boys are throwing in the towel. Immense public pressure is forcing public utilities to abandon fossil fuels. Warren will sell all of his newfound energy in the $10 billion deal to China. It’s the beginning of the end for carbon. Buy (TSLA) on dips.

Dividend Cuts will drive stock trading in H2. Energy, airline, cruise lines, casinos, movie theaters, and hotels are most at risk, while big technology companies like Apple are the safest. Currently, the S&P 500 is yielding 2.0%, while the ten-year US Treasury bond is paying out 0.65%. Room for a cut?

Tesla to reach $100 billion in annual revenue by 2025, says San Francisco-based JMP Securities. The logic goes that if they can produce 90,000 vehicles a quarter during a pandemic, 140,000 a quarter should be no problem by yearend. The news delivered a move in the shares to a new all-time high of $1,549. Inclusion of (TSLA) in the S&P 500 would also deliver a lot of forced institutional buying, which might take the shares up 40% more. The future is happening fast. Keep buying (TSLA) on dips for a 2021 target of $2,500. If this keeps up, we may see it next week. Remember, I traded Tokyo in 1989. Nothing is impossible.

US student visas were canceled in ostensibly an administration coronavirus-fighting measure, but really in the umpteenth measure to shut foreigners out. “America first” is turning into “America only.” Midwestern schools in particular will be hurt by the loss of 400,000 full tuition-paying international students, especially when state education budgets are getting cut to the bone. That’s down from 800,000 three years ago. If they’re already here, how does this help us? Most colleges are moving to online-only models to limit infections.

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.

My Global Trading Dispatch enjoyed another blockbuster week, up an astounding +2.28. It was a week when everything worked in the extreme….again.

My eleven-year performance rocketed to a new all-time high of 381.74%. A triple weighting in biotech and a double weighting in gold were a big help. A foray into the banks proved immediately successful. I seem to have the Midas touch these days.

That takes my 2020 YTD return up to an industry-beating +25.83%. This compares to a loss for the Dow Average of -8.8%, up from -37% on March 23. My trailing one-year return popped back up to a record 66.22%, also THE HIGHEST IN THE 13-YEAR HISTORY of the Mad Hedge Fund Trader. My eleven-year average annualized profit recovered to a record +36.07%, another new high.

The only numbers that count for the market are the number of US Coronavirus cases and deaths, which you can find here. It’s jobs week and we should see an onslaught of truly awful numbers.

On Monday, July 13 at 10:00 AM EST, the June Inflation Expectations are out.

On Tuesday, July 14 at 7:30 AM EST, US Core Inflation for June is published

On Wednesday, July 15, at 7:30 AM EST, US Industrial Production for June is announced. At 10:30 AM EST, the EIA Cushing Crude Oil Stocks are out.

On Thursday, June 16 at 8:30 AM EST, Weekly Jobless Claims are announced. At 7:30 AM, US Retail Sales for June is printed.

On Friday, June 17, at 7:30 AM EST, the US Housing Starts for June are released.

The Baker Hughes Rig Count is out at 2:00 PM EST.

As for me, I am training hard for my upcoming 50-mile hike with the Boy Scouts, knocking off 10 miles a day at 9,000 feet on the Tahoe Rim Trail. I have to confess that I’m feeling the knees like never before.

As they used to say in the Marine Corps, “Pain is fear leaving the body.” More than knowledge comes with age. Pain is there as well.

Marine Corps to Boy Scout leader. It’s been a full life.

Stay healthy.

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