(JPM) Archives - Page 25 of 29 - Mad Hedge Fund Trader

The Market Outlook for the Week Ahead, or Mad Hedge Goes Positive on the Year

There is no doubt that the Corona pandemic will be the WWII challenge of our generation. Since we are Americans, we will rise to the task. We all have our jobs to do, being it working as a front-line medical professional, or simply staying at home.

We will get through this.

I was standing in front of a Reno gun store yesterday waiting my turn to enter. Under Nevada’s strict shelter-in-place rules, only one person is allowed to enter a store at a time. I needed some ammo and black powder for my 1860 Army Colt revolver, which is hard to find in California.

I struck up a casual conversion about the pandemic with other waiting customers on a clear, brisk Nevada morning. A blue-collar worker with an AR-15 said he really wasn’t paying attention to it. A latino gang member with a heavily tattooed neck and fingers looking for a box of 9mm Glock shells confessed he hadn’t heard about it. A white nationalist with a heavily militarized SUV argued that the whole thing was a left-wing conspiracy meant to discredit Donald Trump.

Which can only mean one thing.

The worst days of the of the pandemic are ahead of us, as are the consequences for the stock market. Remember, 40% of the country don’t read newspapers or watch the news and are only barely aware of the seriousness of the disease.

The White House us currently forecasting 12 million cases and 250,000 deaths. That’s just an optimistic guess. Only one third of the country started their shutdowns early, one third were late, and the last third not at all. This means that the highest death rates will be in southern and midwestern states that are following the presidents advance and dismissing the pandemic out of hand, refusing to wear face masks.

So, we are really looking at a potential US 120 million cases and 2.4 million deaths. On that scale the food distribution system will start to break down for shear lack of workers. No one really knows how effective shelter-in-place will be, although the early data is encouraging. We are all living in one giant experimental petri dish right now.

And we will be the lucky country. Deaths in the Southern Hemisphere, which is just going into the winter, will be much higher.

Anytime I consider adding a long position, I first ask myself how it will stand up against a picture on the front page of the New York Times showing a pile of a thousand bodies outside a local hospital. I saw that sort of thing in Asia a half century ago. Markets will crash.

The game we are now in for the coming weeks is to trade an $18,000 to $22,000 range in the Dow Average. The sharp selloff in the Volatility Index (VIX) last week, which we caught with both hands, suggests that the next retest of the $18,000 low will be successful.

Further down the road, I’m not so sure. Any prediction beyond tomorrow in this environment is dubious at best. The world is moving on fast-forward now and the unbelievable is happening every day.

But here’s a shot. If the $18,000 to $22,000 range doesn’t hold, then we are moving to a $15,000 to $18,000 range. If that fails, then we are looking at $12,000 to $15,000 range. Then we will be looking at Great Depression levels of stock market sell-off, with a total corporate capitalization loss of an eye-popping $17 trillion.

The great challenge here is to buy your best stocks and LEAPs as low as possible before an unprecedented $6 trillion in federal stimulus that is coming our way. There will be the $2 trillion in jobs and corporate bailout money already passed, a $2 trillion infrastructure bill coming, and a second jobs and bailout bill that will be needed. On top of that, the Federal Reserve has committed to $8 trillion backstopping of the financial.

And here is the problem. Trump has spent the last three years shrinking the government. The pandemic is a very large government event. So, the Feds may simply not have enough bodies in place to spend, or to lend, all the money that has already been authorized.

That is your economic and market risk.

There is no doubt that the next month will be grim. The U-6 Unemployment Rate published on Friday was 8.9%, indicating the total number of jobless is already at 14.4 million. If the Fed is right and we soon hit 32%, total joblessness will soar to 52 million. During the Great Depression, that unemployment rate peaked at only 25%, throwing 20 million out of work. We could exceed those levels in the coming week!

Dr. Fauci predicts 200,000 US deaths. I think that’s a low number, given that 100 million Americans are still not sheltering-in-place. Corona is starting to take its toll on Wall Street, claiming the life of the Jeffries CFO, Peg Broadbent. Every state and city should prepare for a New York-style spike in cases.

The Fed is expecting 47 million unlucky individuals to lose jobs. This week, Macy’s (M) chopped 150,000, while Tillman Fertitta laid off 40,000 restaurant workers in place like Morton’s Steakhouse and the Bubba Gump Shrimp Company. Many more are to come. Weekly Jobless Claims have already exploded to 6.64 Million. That is three full recessions worth of job losses in two weeks.

The March Nonfarm Payroll Report was a disaster. Here is another number to put in your record book of awful numbers, the report showing 701,000 job losses in March. It’s the first negative number since 2010. Leisure & Hospitality fell by a staggering 459,000.

A second Corona wave might arrive in the fall, warns JP Morgan (JPM). We may not have visited the Volatility Index at $80 for the last time. I’m setting up more (VXX) shorts if we do revisit there. Sell all substantial stock market rallies.

It’s worse than you think. Brace yourself. Bank of America (BAC) has come out with the first GDP forecast I’ve seen that factors in a second wave of Coronavirus cases in the fall. It is not a pretty picture. They see every quarter of 2020 as coming in negative. These easily takes US GDP back to levels not seen since the Obama administration. The only consolation is that (BAC) has never been that great at forecasting the economy, basically leaving it to a bunch of kids. Here they are:

2020 Q1 -7%
2020 Q2 -30%
2020 Q3 -1%
2020 Q4 -30%

Oil rich countries will have to dump $225 billion in stocks, thanks to the collapse of oil to a once impossible $20 a barrel. An 80% plunge in national revenues is forcing asset sales at fire sale prices to avoid a brewing revolutions. They don’t retire former heads of states to golf clubs in the Middle East, they stand them up in front of a firing squads.

Oil Hit an 18-year low at $19.30 a barrel and it could get a lot worse. All of the world’s storage is full, so producers might have to PAY wholesalers to take Texas tea off their hands. Yes, negative oil prices are possible. Otherwise, producing wells will be permanently damaged with a total shutdown. Most of the industry has a negative net worth, save the majors. I told you to stay away!

China PMIs turn positive, coming in at 52 versus an expected 45 indicating a recovering economy. Watch the Middle Kingdom’s economic data more than usual. US PMIs are still in free fall. However, consumers still are staying at home. Their economy went first into the pandemic and will be the first out. There’s hope for us all the quarantine is working.

A $2 trillion infrastructure budget is in the works, and the Democrats will support it because the money won’t be spent until they get control of government in 2021. With most of the construction industry closed, the government’s cumbersome bidding process can’t even start until the summer.

You wonder how that last $2 trillion rescue package got done in five days? This will take us to Great Depression levels of bailout spending. The Fed balance sheet has exploded from $3.5 trillion to $5 trillion in weeks. I know 10,000 bridges that need to be fixed.

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 at zero, oil at $20 a barrel, and many stocks down by three quarters, there will be no reason not to. The Dow Average will rise by 400% or more in the coming decade.

My Global Trading Dispatch performance had a spectacular week, blasting my performance back to positive numbers for the year. That is thanks to the ten-point collapse in the Volatility Index (VIX) on Thursday and Friday, which had a hugely positive effect on all our positions.

We are now up an amazing +11.02% for the first three days of April, taking my 2020 YTD return up to +2.60%. We are a mere 68 basis points short of an all-time high. That compares to an incredible loss for the Dow Average of -28.8%, with more to go. My trailing one-year return was recovered to 46.74%. My ten-year average annualized profit recovered to +34.85%.

My short volatility positions (VXX) are almost back to cost. I used every rally in the Dow Average to increase my short positions in the (SPY) to almost obscene levels. Now we have time decay working big time in our favor. These will all come good well before their ten-month expiration.

I bought two very deep in-the-money, very short-dated call spreads in Amazon (AMZN) and Microsoft (MSFT), the two safest companies in the entire market, betting that we don’t go to new lows in the next nine trading days.

At the slightest sign of a break in the pandemic, the economy and shares should come roaring back. Right now, I have a 30% cash position.

All economic data points will be out of date and utterly meaningless this week. The only numbers that count for the market are the number of US Coronavirus cases and deaths, which you can find here at https://coronavirus.jhu.edu

On Monday, April 6 at 6:00 AM, the Consumer Inflation Expectations for March are out.

On Tuesday, April 7 at 9:00 AM, the US JOLTS Job Openings Report is published.

On Wednesday, April 8, at 2:00 PM, the Fed Minutes for the previous meeting six weeks ago are released.

On Thursday, April 9 at 8:30 AM, Weekly Jobless Claims are announced. The number could top 3,000,000 again.

On Friday, April 10 at 7:30 AM, the US Core Inflation is released. The Baker Hughes Rig Count follows at 2:00 PM. Expect these figures to crash as well.

As for me, I have temporarily moved back to Oakland to retrieve my printer. As I left, my Tahoe neighbors told me I was nuts to go back to a big city. I then drove across an almost totally vacated Golden State, emptied by a pandemic.

With my free time, I have planted a victory garden. I managed to obtain tomatoes, eggplants, chili peppers, strawberries, lettuce, and bell peppers from the nearest Home Depot (HD) garden center. In two weeks, I should have something new to eat.

Stay healthy.

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

Still Sheltering in Place

March 13, 2020

Diary, Newsletter, Summary

Global Market Comments
March 13, 2020
Fiat Lux

Featured Trade:

(MARCH 11 BIWEEKLY STRATEGY WEBINAR Q&A),
(INDU), (SPX), (LVMH), (CCL), (WYNN), (AXP), (JPM), (MSFT), (AAPL), (NVDA)

March 11, 2020 - Biweekly Strategy Webinar Q&A

Diary, Newsletter, Summary

Below please find subscribers’ Q&A for the Mad Hedge Fund Trader March 11 Global Strategy Webinar broadcast from Silicon Valley, CA with my guest and co-host Bill Davis of the Mad Day Trader. Keep those questions coming!

Q: What is the worst-case scenario for this bear market?

A: The average earnings loss for a recession is 13%. Last year, we earned $165 a share for the S&P 500. So, a recession would take us down to $143 a share. Multiply that by the 15.5X hundred-year average earnings multiple, where we are now, and that would take the (SPX) down to 2,200. However, if we get 100 million cases and 5 million deaths, as some scientists are predicting, we could get a 2008 repeat and a 50% crash in the (SPX) to 1,700. With the administration asleep at the switch, that is clearly a possibility. Nice knowing you all.

Q: Do you think we’re still setting up for another roaring 20s?

A: Yes, absolutely. We could not have a roaring 20s unless we got a major selloff and clearing out of old positions like we're getting now. That flushes out all the old capital and positions and paves the way for people to set up brand new positions at really bargain prices. If you missed the 2009 bottom, here's another chance.

Q: Will the fiscal stimulus help defeat the coronavirus?

A: No, viruses are immune to money. They don’t take PayPal or American Express (AXP). The president has been able to buy his way out of all his other problems until now; there’s no way to buy his way out of this one.

Q: Is JP Morgan’s (JPM) Jamie Dimon getting a heart attack related to the financial crisis?

A: Probably, yes. In a normal time, the pressure of a CEO in these big banks is enormous. All of a sudden half of your small customers are looking at bankruptcy—the pressure has to be immense. You've got customers screaming for short term loan facilities, you’ve got risk managers asking for margin extensions. And you certainly don't want to buy the banks here. I think this may be the final selloff with legacy banks, from which they never recover. The banks will disappear and come back online.

Q: What would you do with a $45,000-dollar portfolio right now? I don’t do options.

A: Look at my story on Ten Leaps to Buy at Market Bottom. Use those names—Microsoft (MSFT), Apple (AAPL), NVIDIA (NVDA), etc.—and just buy the stocks. Buy half now and a half in a month. This is a time to dollar cost average. And you’re looking at doubles at a minimum 3 years down the road—at the end of this year if you’re lucky. Once the virus burns out, it will only take a couple months to do that. Then it will be off to the races once again.

Q: Since the 2018 low was never tested, what do you think of 2400/2450?

A: I think that’s great. And you can get a half dozen different analyses that all come up with numbers around 2400, 2500, 2600. That’s where the final low will be—where you get a convergence of multiple support lines and opinions.

Q: Will buybacks come back or are they over for now?

A: They will come back once markets bottom. Companies aren’t stupid; they don’t like buying their own stocks at all-time highs, but they certainly will come in with major amounts of buying when they see their stocks down 20% or 30%. That's certainly what Apple is going to do.

Q: Will luxury retail shares get killed in the current market?

A: Yes, especially stocks like (LVMH), the old Louis Vuitton Moet Hennessey. They’re already down 37% this year. When it becomes clear that we are in an actual recession, these luxury names across the board will get completely abandoned. By the way, I worked with the son of the founder of this company when I was at Morgan Stanley. We called him “Bubbles.”

Q: Are there any similarities to 2008?

A: Yes; it’s worse because the market is dropping much faster than it ever has before. The 52% selloff in 2008 was spread out over the course of 18 months. Here, it’s taken only 14 trading days to see half of the damage done back then. It’s truly unbelievable.

Q: What do you think about gold (GLD)?

A: Even though gold is going up, gold miners (GDX) are doing terribly because they are stocks. They get tarred with the same brush blackening all other stocks. This is exactly what happened during the 2008-2009 crash. Fundamentals go out the window in these kinds of trading conditions, but they always come back.

Q: Is Europe in recession?

A: Absolutely, yes. I saw an interview with the Adidas CEO (ADDYY) this morning on TV and they said sales are off 90% on a month-on-month basis. Their stock is down 49% this year. You can bet that every other consumer company in Europe is suffering similar declines.

Q: What will real estate do in the next 3 months?

A: It's impossible to price real estate so finely because it's so illiquid. However, I expect it to hold up here because of super low interest rates, and then keep rising over the long term. We’re not going to get anything like the crashes we saw in 2008-2009 because all the excess leverage is not in the real estate market now, it’s in the stock market, where we are getting a much-deserved crash. If anything, I’d be buying rental properties here in low cost cities.

Q: What if the Dow Average (INDU) reaches the 300-day moving average?

A: It’s a nice theory, but technicals are meaningless in the face of panic selling. You don't want to get too fancy looking at these charts. When you have a billion shares to go at market, the 200 or 300 day moving average means nothing.

Good Luck and Good Trading. And stay healthy.

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

January 24, 2020

Diary, Newsletter, Summary

Global Market Comments
January 24, 2020
Fiat Lux

Featured Trade:

(LAST CHANCE TO ATTEND THE FRIDAY, FEBRUARY 7 PERTH, AUSTRALIA STRATEGY LUNCHEON)
(JANUARY 22 BIWEEKLY STRATEGY WEBINAR Q&A),
(BA), (IBM), (DAL), (RCL), (WFC),
(JPM), (USO), (UNG), (KOL), (XLF),
(SEE YOU IN TWO WEEKS)

January 22 Biweekly Strategy Webinar Q&A

Diary, Newsletter, Summary

Below please find subscribers’ Q&A for the Mad Hedge Fund Trader January 22 Global Strategy Webinar broadcast from Silicon Valley, CA with my guest and co-host Bill Davis of the Mad Day Trader. Keep those questions coming!

Q: Are you concerned about a kitchen sink earnings report on Boeing (BA) next week?

A: No, every DAY has been a kitchen sink for Boeing for the past year! Everyone is expecting the worst, and I think we’re probably going to try to hold around the $300 level. You can’t imagine a company with more bad news than Boeing and it's actually acting as a serious drag on the entire economy since Boeing accounts for about 3% of US GDP. If (BA) doesn’t break $300, you should buy it with both hands as all the bad news will be priced in. That's why I am long Boeing.

Q: Do you think IBM is turning around with its latest earnings report?

A: They may be—They could have finally figured out the cloud, which they are only 20 years late getting into. They’ve been a lagging technology stock for years. If they can figure out the cloud, then they may have a future. They obviously poured a lot into AI but have been unable to make any money off of it. Lots of PR but no profits. People are looking for cheap stuff with the market this high and (IBM) certainly qualifies.

Q: Will the travel stocks like airlines and cruise companies get hurt by the coronavirus?

A: Absolutely, yes; and you’re seeing some pretty terrible stock performance in these companies, like Delta (DAL), the cruise companies like Royal Caribbean Cruises (RCL), and the transports, which have all suffered major hits.

Q: Will the Wells Fargo (WFC) shares ever rebound? They are the cheapest of the major banks.

A: Someday, but they still have major management problems to deal with, and it seems like they’re getting $100 million fines every other month. I would stay away. There are better fish to fry, even in this sector, like JP Morgan (JPM).

Q: Will a decrease in foreign direct investment hurt global growth this year?

A: For sure. The total CEO loss of confidence in the economy triggered by the trade war brought capital investment worldwide to a complete halt last year. That will likely continue this year and will keep economic growth slow. We’re right around a 2% level right now and will probably see lower this quarter once we get the next set of numbers. To see the stock market rise in the face of falling capital spending is nothing short of amazing.

Q: Do you think regulation is getting too cumbersome for corporations?

A: No, regulation is at a 20-year low for corporations, especially if you’re an oil (USO), gas (UNG) or coal producer (KOL), or in the financial industry (XLF). That’s one of the reasons that these stocks are rising as quickly as they have been. What follows a huge round of deregulation? A financial crisis, a crashing stock market, and a huge number of bankruptcies.

January 15, 2020

Tech Letter

Mad Hedge Technology Letter
January 15, 2020
Fiat Lux

Featured Trade:

(THE TRADE ALERT DROUGHT EXPLAINED)
(GOOGL), (AMZN), (MSFT), (FB), (JPM)

The Trade Alert Drought Explained

Tech Letter

Why has there been a dearth of Mad Hedge Tech trade alerts to start the year?

Let me explain.

Love it or hate it – earnings' season is about to kick off.

And now, this is the part where it starts to get ugly with consensus of a 2% year-over-year decline in fourth-quarter S&P 500 earnings.

Banks are expected to be a rare bright spot and JPMorgan (JPM) delivered us stable results as one of the first to report.

The unfortunate part of the equation is that a lot has to go right for tech shares to go unimpeded for the rest of the year.

What we have seen in the first 2 weeks of the year is a FOMO (fear-of-missing-out) environment in which valuations have lurched forward to 20 times forward earnings.

Tech is overwhelmingly carrying the load and I have banged on the drums about this thread advising readers to be acutely aware of a heavy positive bias towards the FANGs in 2020.

Well, that is already panning out in the first two weeks.

Examples are widespread with Facebook (FB) up over 8% and Apple (AAPL) already topping 6% to start the year.

It would be farfetched to believe that the tech sector can keep pilfering itself higher in the face of negative earnings growth.

However, behind the scenes, relations between China and America are improving, the threat of war with Iran is subsiding, and the Fed continues strong support tempering down risk to tech shares.

The situation we find ourselves in is that of an expensive tech sector that will again guide down on upcoming earnings’ reports telegraphing softness moving into the middle part of the year.

The ensuing post-earnings sell-off in specific software stocks will offer optimal short-term entry points.

The current risk-reward of chasing FANGs at these levels is unfavorable.

Another glaring example of the FANG outperformance is Alphabet who rose 26% last year.

They are on the brink of joining the $1 trillion club that Apple and Microsoft (MSFT) have joined.

Its market value currently sits idling at $985 billion and its surge towards the vaunted trillion-dollar mark is more of a case of when than if.

Alphabet (GOOGL), more or less, still expands at the same rate of low-20% annually that it did 10 years ago.

Sales have ballooned to $160 billion annually and they sit at the forefront of every cutting-edge sub-sector in technology from artificial intelligence, autonomous driving, and augmented reality.

The engine that drives Google is still its core advertising business and strategic premium acquisitions like YouTube and penetration into other fast-growing areas such as cloud computing.

It has rounded out into a broad-based revenue accumulator.

Apple was the first public company to surpass a $1 trillion market cap and ended the year up 86% in 2019, and it has only gone up since then currently checking in at a $1.36 trillion market cap.

Microsoft followed Apple, hitting the $1 trillion mark during the first half of 2019, and it is now worth $1.23 trillion.

Amazon fell back after surging past the $1 trillion mark but inevitably will achieve it on the next heave up.

Amazon shares have been quickly heating up since its capitulation from $2,000 in July 2019 and round out the group of overperforming tech behemoths.

Although the rush into big-cap tech stocks in the first two weeks has been a bullish signal, it still doesn’t marry up with the lack of earnings growth in the overall tech sector.

Companies beating meager expectations will experience strong share appreciation although not at the pace of last year and will still serve investors pockets of overperformance.

We will find our spots to trade shortly, but better to keep our gunpowder dry at the moment.

October 17, 2019

Diary, Newsletter, Summary

Global Market Comments
October 17, 2019
Fiat Lux

Featured Trade:

(UPDATING THE MAD HEDGE LONG TERM MODEL PORTFOLIO),
(USO), (XLV), (CI), (CELG), (BIIB), (AMGN), (CRSP), (IBM), (PYPL), (SQ), (JPM), (BAC), (EEM), (DXJ), (FCX), (GLD)

October 14, 2019

Diary, Newsletter, Summary

Global Market Comments
October 14, 2019
Fiat Lux

Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or UNICORNS AND CANDY CANE)
(AAPL), (FDX), (SPY), (IWM), (USO), (WMT), (AAPL), (GOOGL),
(X), (JPM), (WFC), (C), (BAC)

The Market Outlook for the Week Ahead, or Unicorns and Candy Cane

Diary, Newsletter

I have to tell you that flip-flopping from extreme optimism to extreme pessimism and back is a trader’s dream come true. Volatility is our bread and butter.

Long term followers know that when volatility is low, I struggle to make 1% or 2% a month. When it is high, I make 10% to 20%, as I have for two of the last three months.

That is what the month of October has delivered so far.

To see how well this works, the S&P 500 is dead unchanged so far this month, while the Mad Hedge Fund Trader alert service is up a gangbuster 10% and we are now 70% in cash.

While the market is unchanged in two years, risk has been continuously rising. That's because year on year earnings growth has fallen from 26% to zero. That means with an unchanged index, stocks are 26% more expensive.

Entire chunks of the market have been in a bear market since 2017, including industrials, autos, energy, and retailers. US Steel (X), which the president’s tariffs were supposed to rescue, has crashed 80% since the beginning of 2018.

The great irony here is that while the Dow Average is just short of an all-time high, all of the good short positions have already been exhausted. In short, there is nothing to do.

So, the wise thing to do here is to use the 1,200-point rally since Thursday to raise cash you can put to work during the next round of disappointment, which always comes. If we do forge to new highs, they will be incremental ones at best. That’s when you let your passive indexing friends pick up the next bar tab, who unintentionally caught the move.

In the meantime, we will be bracing ourselves for the big bank earnings due out this week which are supposed to be dismal at best. JP Morgan (JPM), Wells Fargo (WFC), and Citigroup (C) are out on Tuesday and Bank of America (BAC) publishes on Wednesday.

That’s when we find out how much of this move has been about unicorns and candy canes, and how much is real.

Trump demoed his Own trade talks, creating a technology blacklist and banning US pension investment into the Middle Kingdom. He also hints he’ll take a small deal rather than a big one. Great for American farmers but leaves intellectual property and forced joint ventures on the table, throwing the California economy under the bus. I knew it would end this way. It’s very market negative. Without a trade deal, there is no way to avoid a US recession in 2020.

The Inverted Yield Curve is flashing “recession.” The three-month Treasury yield has been above the 10-year bond yield since May, and that always says a downturn is coming. The time to batten down the hatches is now.

US Producer Prices plunged in September, down 0.3%, the worst since January. It’s another recession indicator but also pushes the Fed to lower rates further.

Inflation was Zero in September, with the Consumer Price Index up 1.8% YOY. Slowing economy due to the trade war gets the blame, but I think that accelerating technology gets the bigger blame.

New Job Openings hit an 18-month low, down 123,000 to 7.05 million in August, as employers pull back in anticipation of the coming recession. Trade war gets the blame. The smart people don’t hire ahead of a recession.

FedEx (FDX) is dead money, says a Bernstein analyst, citing failing domestic and international sales. No pulling any punches, he said “The bull thesis has been shredded.” Not what you want to hear from this classic recession leading indicator. Nobody ships anything during a slowdown.

Loss of SALT Deductions cost you $1 trillion, or about 4% per home, according to an analysis by Standard & Poor’s. Quite simply, losing the ability to deduct state and local tax deductions creates a higher after-tax cost of carry that reduces your asset value. If you bought a home in 2017 you lost half of your equity almost immediately. The east and west coast were especially hard hit.

Fed to expand balance sheet to deal with the short-term repo funding crisis, which periodically has been driving overnight interest rates up to an incredible 5%. Massive government borrowing is starting to break the existing financial system. What they’re really doing is trying to head off to the next recession.

The Fed September minutes came out, and traders seem to be expecting more rate cuts than the Fed is. Trade is still the overriding concern. The next meeting is October 29-30. It could all end in tears.

Apple (AAPL) raised iPhone 11 Production by 10%, to 8 million more units, according Asian parts suppliers. Great news for its $1,089 top priced product ahead of the Christmas rush. It turns out that an Apple app is helping Hong Kong protesters manage demonstrations. I’m keeping my long, letting the shares run to a new all-time high. Buy (AAPL) on the dips.

The Mad Hedge Trader Alert Service has blasted through to yet another new all-time high. My Global Trading Dispatch reached new apex of +347.48% and my year-to-date accelerated to +47.24%. The tricky and volatile month of October started out with a roar +9.82%. My ten-year average annualized profit bobbed up to +35.64%.

Some 26 out of the last 27 trade alerts have made money, a success rate of 94%! Underpromise and overdeliver, that's the business I have been in all my life. It works. This is rapidly turning into the best year of the decade for me. It is all the result of me writing three newsletters a day.

I used the recession fear-induced selloff after October 1 to pile on a large aggressive short-dated portfolio which I will run into expiration. I am 60% long with the (SPY), (IWM), (USO), (WMT), (AAPL), and (GOOGL). I am 10% short with one position in the (IWM) giving me a net risk position of 50% long. All of them are working.

The coming week is pretty non-eventful of the data front. Maybe the stock market will be non-eventful as well.

On Monday, October 14, nothing of note is published.

On Tuesday, October 15 at 8:30 AM, the New York Empire State Manufacturing Index is released. JP Morgan (JPM), Wells Fargo (WFC), and Citigroup (C) kick off the Q3 earnings season with reports.

On Wednesday, October 16, at 8:30 AM, we learn the September Retail Sales. Bank of America (BAC) and CSX Corp. (CSX) report.

On Thursday, October 17 at 8:30 AM, the Housing Starts for September are out. Morgan Stanley (MS) reports.

On Friday, October 18 at 8:30 AM, the Baker Hughes Rig Count is released at 2:00 PM. Schlumberger (SLB), American Express (AXP), and Coca-Cola (KO) report.

As for me, I’ll be going to Costco to restock the fridge after last week’s two-day voluntary power outage by PG&E. Expecting Armageddon, I finished off all the Jack Daniels and chocolate in the house. We managed to eat all of our frozen burritos, pork chops, steaks, and ice cream in a mere 48 hours. But that’s what happens when you have two teenagers.

Hopefully, it will rain soon for the first time in six months bringing these outages to an end.

Good luck and good trading.

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