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The Market Outlook for the Week Ahead, or Here is your Post Election Portfolio

Remember Y2K?

The world was supposed to end at midnight on December 31, 1999 because computers would be unable to cope with the turnover of the new millennium. I remember making presentations to big hedge funds, predicting that Y2K was a big nothing burger and, worst case, somebody’s toaster wouldn’t work.

I spent that New Year’s Eve with my kids at Disneyland in Orlando, watching one heck of a fireworks display. What happened the next morning? Even the toasters worked.

I think we are setting up for another Y2K outcome, except that this time, it’s the presidential election that has everyone in a tizzy.

The polls are tied at 48%-48% with a margin of error of 4%. In fact, for the last 50 years, the opinion polls have been wrong by an average of 3.4%. One side already has that 3.4% and probably more, plus all seven battleground states, but we won’t know for sure until November 6.

As an investment manager, it is not my job to pick a side or impose my view upon you but to deliver the best possible investment returns for my clients.

And let me tell you how.

Remember the Pandemic? Four years after the event, we now have the luxury of copious hard data. Out of 103,436,829 cases, some 1,203,648 Americans died, or 1.3%. But, the death rate in red states was much higher than in blue states.

For example, California suffered only 101,159 deaths out of a population of 39,128,162 for a death rate of 0.26%. Florida saw 86,850 deaths out of a population of 22,634,867 for a death rate of 0.38%. Deaths in Florida were 68% higher in the Sunshine State than in the Golden State.

Florida, in effect, traded lives for business profits. Florida also had a Typhoid Mary effect in that by staying open for spring breaks and vacations; it increased the death rates in surrounding red states.

Assume that half of those who died were voters and apply this math to the entire country, and Republicans lost 393,059 votes to the pandemic compared to only 268,935 for Democrats. Some 124,125 more Republican voters died than Democrats. Is 124,125 votes enough to decide this election?

Absolutely!

In the 2020 presidential election, Biden won the three battleground states of Georgia by the famous 11,779 votes, Arizona by 10,457 votes, and Nevada by 33,596 votes. That’s 33 electoral college votes right there out of 270 needed.

The opinion polls have missed these numbers by a mile because their algorithms don’t take the pandemic into consideration. They are counting dead voters, while the actual election polls only count live ones. I predict that the opinion polls will be spectacularly wrong….again.

Of course, these are back-of-the-matchbook ballpark calculations. I’ll leave it to some future aspiring PhD candidate to research his thesis with more precise figures. I have better things to do.

So, how do we make money off of all this? I have never seen investors so underweight and cautious going into a major risk event like this election. They have been scared out of the market by the media. Therefore, I expect the stock market to rise by 10% after the election, taking the S&P 500 as high as 6,400.

Let the great chase begin!

Here is your model portfolio for the rest of 2024.

(NVDA), (META), (CRM) – Underweight fund managers will chase this year’s best performers so they can look good at yearend. Similarly, they will dump their worst performers in the energy sector. So will individual investors for tax loss harvesting.

(TLT), (JNK), (CCI) – All interest rate plays make back recent losses as the threat of $10-$15 trillion in new borrowing by a future president, Trump, disappears.

(DHI), (LEN), (PHM) – There is no better interest rate play than new homebuilding. It’s tough to beat a structure shortage of 10 million homes.

(GLD), (SLV), (NEM) – Precious metals also do very well as they have less yield competition from other interest rate plays. These have become the principal savings vehicle for Chinese individuals.

(FXE), (FXB), (FXA) – A falling interest rate advantage for the US dollar means you want to buy all the currencies.

(JPM), (BAC), (GS) – Banks also do exceedingly well in a falling interest rate environment, and brokers and money managers will cash in on exploding stock market volume.

Also, on November 6, your toaster will probably still work. And I will never understand why the Center for Disease Control never accepted my application out of college. So, I went to Vietnam instead.

So far in October, we have gained a breathtaking +5.46%. My 2024 year-to-date performance is at an amazing+50.70%. The S&P 500 (SPY) is up +21.38% so far in 2024. My trailing one-year return reached a nosebleed +66.31. That brings my 16-year total return to +727.33%. My average annualized return has recovered to +52.58%.

I am remaining cautious with a 70% cash, a 20% long, and a 10% short. I maintained two longs in (GLD) and (JPM) that are well in the money. I sold short (TSLA) to take advantage of a massive 29% gain in two days off the back of blockbuster earnings.

Some 63 of my 70 round trips, or 90%, were profitable in 2023. Some 61 of 81 trades have been profitable so far in 2024, and several of those losses were really break evens. Some 16 out of the last 19 trade alerts were profitable. That is a success rate of +75.30%.

Try beating that anywhere.

New Home Sales Jumped 4.1% in September at 738,000 seasonally adjusted units on a signed contract basis. The median home price rose to 426,300. This despite a roller coaster month on interest rates, falling to 6.0% for the 30-year, then jumping back up to 7.0%.

Fusion is going Commercial in San Francisco, with a German company, Focused Energy, making a $65 million investment. The firm will draw heavily from staff from nearby Lawrence Livermore National Labs, which achieved a net energy gain for the first time in 2022. Focused Energy is one of eight companies given grants to accommodate a doubling of power demand by 2050. Commercial fusion will be the next big thing, where three soda cans of heavy hydrogen can power San Francisco for a day.

Money Market Funds See Massive Pre-Election Inflows, as investors see to avoid promised post-election violence. According to LSEG data, investors acquired a net $29.98 billion worth of money market funds during the week, posting their fourth weekly net purchase in five weeks. Personally, I think it is another Y2K moment.

Tesla Earnings Shock to the Upside, with both third-quarter profits and margins topping estimates. Elon Musk said that he expects 20% to 30% vehicle growth next year, sending the company's shares up 11% in post-market trading. The company still sees 2025 production of a cheaper model, maybe the Model 2. The Cybertruck has reached profitability for the first time and is reaching mass production. Tesla will see “slight growth” in deliveries this year. I am using the spike in the share price to take profits on my long to avoid election risk.

Apple iPhone Sales are Lagging, according to a leading analyst, with a drop in 10 million orders expected, down to 84 million units. The stock dropped 4% from an all-time high.

Boeing Reports $6 Billion Loss, a disastrous report from a dying company with awful management. This is going to be a very long-term workout. A strike resolution may market the bottom. Avoid (BAC) like a stalling airplane.

Newmont Mining Dives 7% after missing Wall Street expectations for third-quarter profit on Wednesday. Higher costs and lower production in Nevada took the shine away from a rise in total output. Newmont said that its costs rose due to planned maintenance at the Lihir project in Papua New Guinea — which it acquired following a $17 billion buyout of Newcrest — and higher expenditure for contract services across its portfolio. Buy (NEM) on dips.

McDonald's Kills Two in E.Coli Outbreak, linked to quarter pounders sold in Colorado and Nebraska. The stock dropped 10%. It’s clearly a supply chain problem. Given their vast size, with 45,000 stands in 100 countries, it’s amazing that this doesn’t happen more often. Avoid (MCD).

Bonds Plunge Anticipating a Trump Win, with the (TLT) down $10 from the recent high. If he does win, expect another $10 decline to $82. If Harris wins, expect a $10 rally. This is the best election trade out there.

Nvidia Tops $3.5 Trillion, as the shares hit a new all-time high at $144.45. It looks like it’s on a run to $150, then $160. Earnings are about to double when reported on November 20. Before then, investors will get some insight into demand for Nvidia’s newest Blackwell chips with earnings reports from big technology companies, including Microsoft (MSFT) coming at the end of this month. Buy (NVDA) on dips.

Hedge Funds Pour into Technology Stocks, such as semiconductors and hardware, at the fastest in five months amid the start of the third-quarter earnings season, according to Goldman Sachs on Friday. Outside the U.S., diverging reports from chipmaker Taiwan Semiconductor Manufacturing (TSM) and chipmaking equipment supplier ASML Holding (ASML) in opposite directions while investors await semiconductor companies such as Advanced Micro Devices (AMD) and Nvidia (NVDA) to unveil their earnings as they seek a trend. They are betting on a big post-election move-up.

My Ten-Year View

When we come out the other side of the recession, we will be perfectly poised to launch into my new American Golden Age or the next Roaring Twenties. The economy is decarbonizing, and technology hyper accelerating, creating enormous investment opportunities. The Dow Average will rise by 600% to 240,000 or more in the coming decade. The new America will be far more efficient and profitable than the old.

Dow 240,000, here we come!

On Monday, October 28 at 8:30 AM EST, the Dallas Fed Manufacturing Index is published.

On Tuesday, October 29 at 6:00 AM, the S&P Case Shiller National Home Price Index is out. We also get the US JOLTS Job Openings Report. Alphabet (GOOGL) and (AMD) report.

On Wednesday, October 30 at 11:00 AM, the ADP Employment Change Report is printed. (META) and (MSFT) report.

On Thursday, October 31 at 8:30 AM, the Weekly Jobless Claims are announced. We also get the US Core PCE Price Index. (AMZN) reports.

On Friday, November 1 at 8:30 AM, the October Nonfarm Payroll Report is announced. At 2:00 PM, the Baker Hughes Rig Count is printed.

As for me, with silver on fire once again and at 12-year highs, I thought I’d recall the last time a bubble popped for the white metal. I picked up this story from my late friend Mike Robertson, who ran the Dallas-based Robertson Wealth Management, one of the largest and most successful registered investment advisors in the country.

Mike is the last surviving silver broker to the Hunt Brothers, who in 1979-80 were major players in the run-up in the “poor man’s gold” from $11 to a staggering $50 an ounce in a very short time. At the peak, their aggregate position was thought to exceed 100 million ounces.

Nelson Bunker Hunt and William Herbert Hunt were the sons of the legendary HL Hunt, one of the original East Texas wildcatters and heirs to one of the largest Texas fortunes of the day. Shortly after President Richard Nixon took the US off the gold standard in 1971, the two brothers became deeply concerned about financial viability of the United States government. To protect their assets, they began accumulating silver through coins, bars, the silver refiner, Asarco, and even tea sets, and when it opened, silver contracts on the futures markets.

The brother’s interest in silver was well-known for years, and prices gradually rose. But when inflation soared into double digits, a giant spotlight was thrown upon them, and the race was on. Mike was then a junior broker at the Houston office of Bache & Co., in which the Hunts held a minority stake and handled a large part of their business. The turnover in silver contracts exploded. Mike confesses to waking up some mornings, turning on the radio to hear silver limit up, and then not bothering to go to work because they knew there would be no trades.

The price of silver ran up so high that it became a political problem. Several officials at the CFTC were rumored to be getting killed in their personal silver shorts. Eastman Kodak (EK), whose black and white film made them one of the largest silver consumers in the country, was thought to be borrowing silver from the Treasury to stay in business.

The Carter administration took a dim view of the Hunt Brothers’ activities, especially considering their funding of the ultra-conservative John Birch Society. The Feds viewed it as an attempt to undermine the US government. The proverbial sushi hit the fan.

The CFTC raised margin rates to 100%. The Hunts were accused of market manipulation and ordered to unwind their position. They were subpoenaed by Congress to testify about their motives. After a decade of litigation, Bunker received a lifetime ban from the commodities markets, a $10 million fine, and was forced into a Chapter 11 bankruptcy.

Mike saw commissions worth $14 million in today’s money go unpaid. In the end, he was only left with a Rolex watch, his broker’s license, and a silver Mercedes. He still ardently believes today that the Hunts got a raw deal and that their only crime was to be right about the long-term attractiveness of silver as an inflation hedge. Nelson made one of the greatest asset allocation calls of all time and was punished severely for it. There never was any intention to manipulate markets. As far as he knew, the Hunts never paid more than the $20 handle for silver and that all of the buying that took it up to $50 was nothing more than retail froth.

Through the lens of 20/20 hindsight, Mike views the entire experience as a morality tale, a warning of what happens when you step on the toes of the wrong people.

The white metal’s inflation-fighting qualities are still as true as ever, and it is only a matter of time before prices once again take another run to the upside.

Unfortunately, Mike won’t be participating in the next silver bubble. Suffering from morbid obesity, he died from a heart attack a decade ago.

Silver is Still a Great Inflation Hedge

Good Luck and Good Trading,

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

October 21, 2024

Diary, Newsletter, Summary

Global Market Comments
October 21, 2024
Fiat Lux

Featured Trade:

(MARKET OUTLOOK FOR THE WEEK AHEAD or COMPLACENSE IS RUNNING RAMPANT)
(JPM), (TSLA), (AMZN), (FXA), (FXE), (FXB), (FXY), (NEM), (DHI), (NFLX), (AAPL), (GLD), (AGQ), (SLV), (AAPL), (NVDA), (MS), (CCJ). (VST), (AVGO), (ASML), (MU), (LRCX), (DHI), (PHM), (LEN), (CCJ), (VST), (CEG), (BWXT), (OKLO)

The Market Outlook for the Week Ahead, or Complacence is Running Rampant 

Diary, Newsletter

We are now nearly three months into an almost straight-up move in the stock market, and money managers everywhere are scratching their heads. We are now only 136 points or 2.32% from my yearend (SPX) target of 6,000, which is starting to look pretty conservative. The price-earnings multiple for the S&P 500 is now 21X, the Magnificent Seven 28X, and NVIDIA 65X.

I’ve seen all this before.

We are about as close to a perfect Goldilocks scenario as we can get. Interest rates and inflation are falling. A 3% GDP growth rate means the US has the strongest major economy and is the envy of the world. We have entered the euphoria stage of the current market move in almost all asset glasses. Gold (GLD) has gone up almost every day. Some big tech remains on fire. Energy prices are in free fall. Even bonds (TLT) are trying to put in a bottom.

Complacence is running rampant.

So, how the heck do we trade a market like this? You play the laggard trade.

The biggest risk to the gold trade is that it has gone up 40% in a year. So, what do you do? The response by traders has been to move into lagging silver (SLV) (AGQ), which has been on a tear since September.

Had enough with the Mag Seven? Then, rotate in the sub $1 trillion part of the market with Broadcom (AVGO), ASML Holdings NV (ASML), Micron Technology (MU), and Lam Research (LRCX).

Tired of watching your DH Horton (DHI) go up every day? Then, flip into smaller homebuilders like Pulte Homes (PHM) and Lennar (LEN).

And then there is the biggest laggard of all, the nuclear trade, which is just crawling out of a 40-year penalty box. With news that Amazon (AMZN) was planning to order up to eight Small Modular Reactors to power its AI efforts, all uranium plays continue to go ballistic. The proliferation of power-hungry data centers is driving the greatest growth of power needs since WWII and the Manhattan Project.

Fortunately, I got in early. This is a trend that could become the next NVIDIA, as the public stocks involved are coming off such a low base. I have personally interviewed the founders and examined Nuscale’s plans with a fine tooth come and consider them genius. The company is, far and away, the overwhelming leader in the sector. The puzzle for the pros who understand the technology is why it took so long. Buy (CCJ), (VST), (CEG), (BWXT), and (OKLO) on dips.

It's like everything is racing towards a key, even with an unknown outcome. There happens to be a big one coming up: the US presidential elections on November 6.

Speaking of elections, I took the time to participate in the first day of voting in Nevada on Saturday, October 19, at the Incline Village Public Library. I waited in line for two hours in a brisk and breezy 40 degrees. I wore my Marine Corps cap and Ukraine Army ID just to confuse people. Some got so tired of waiting in the cold that they went home, retrieved their mail-in ballots, and returned to the polls to drop them off.

I looked back on the line, and women outnumbered the men by three to one. Where did all these women come from? There used to be such a shortage of women at Lake Tahoe that it was impossible to get a date. Hunting, fishing, long-distance backpacking, and skiing weren’t used to attract such large numbers of the female gender. Maybe now they do? But now they’re driving up in Mercedes AMG’s and Range Rovers.

When I finally arrived at the front of the line, I was asked to sign an agreement with my finger, acknowledging that I knew it was illegal to vote twice. The poll worker noticed my ID. When I explained what it was in the Cyrillic alphabet, she burst into tears, apologized, and said she had goosebumps all over.

It was another blockbuster week, up over 6%. So far in October, we have gained +4.89%. My 2024 year-to-date performance is at +50.13%. The S&P 500 (SPY) is up +22.43% so far in 2024. My trailing one-year return reached a nosebleed +65.90. That brings my 16-year total return to +726.76%. My average annualized return has recovered to +52.56%.

With my Mad Hedge Market Timing Index at the 70 handles for the first time in five months, I am remaining cautious with a 70% cash and 30% long. I look for a small profit in (TSLA) to reduce risk. Two of my positions expired at their maximum profit point for (NEM) and (DHI) on Friday, October 18 options expiration.

Some 63 of my 70 round trips, or 90%, were profitable in 2023. Some 60 of 80 trades have been profitable so far in 2024, and several of those losses were really break-even. Some 16 out of the last 19 trade alerts were profitable. That is a success rate of +75.00%.

Try beating that anywhere.

Risk Adjusted Basis

Current Capital at Risk

Risk On

(TSLA) 11/$165-$175 call spread 10.00%

(JPM) 11/$195-$205 call spread 10.00%

(GLD) 11/230-$235 call spread 10.00%

Risk Off

NO POSITIONS 0.00%

Total Net Position 30.00%

Total Aggregate Position 30.00%

Netflix Soars on Blockbuster Earnings, up 11% at the opening on a 5 million gain in subscribers. The company posted earnings per share of $5.40 for the period ended Sept. 30, higher than the $5.12 LSEG consensus estimate.

Crucially, Netflix saw momentum in its ad-supported membership tier, which surged 35% quarter over quarter. The streaming wars are over, and (NFLX) won. Buy (NFLX) on dips.

Silver is Ready to Break Out to the Upside after a year-long-range trade. The white metal is a predictor of a healthy recovery and a solar rebound. It’s a long overdue catch-up with (GLD). Buy (AGQ) on dips.

Apple China Sales Jump 20% on the new iPhone 16 launch. Both Apple and Huawei's (HWT.UL) latest smartphones went on sale in China on Sept. 20, underscoring intensifying competition in the world's biggest smartphone market, where the U.S. firm has been losing market share in recent quarters to domestic rivals. Buy (AAPL) on dips.

Taiwan Semiconductor Soars on Spectacular Earnings, dragging up the rest of the chip sector with it. The world's largest contract chipmaker raised its expectation for annual revenue growth and said sales from AI chips would account for mid-teen percentage of its full-year revenue. U.S.-listed TSMC shares rose nearly 9%, and if gains hold, the company's market capitalization would cross $1 trillion. Buy (NVDA) on dips.

Weekly Jobless Claims Fall. Initial claims for state unemployment benefits dropped 19,000 last week to a seasonally adjusted 241,000 for the week ended Oct. 12, the Labor Department said on Thursday. Economists polled by Reuters had forecast 260,000 claims for the latest week. Claims jumped to more than a one-year high in the prior week, attributed to Helene, which devastated Florida and large swathes of the U.S. Southeast in late September.

Morgan Stanley Announces Blowout Earnings, fueling a 32% profit jump for the third quarter. Revenue from the trading business rose 13%. That followed gains recorded by its biggest rivals as the market business lifted fortunes across the industry, and a steady rebound in investment banking fees increased dealmaking. The wealth unit generated revenue of $7.27 billion, higher than analysts’ expectations, with $64 billion in net new assets. The unit boosted its pretax margin to 28%, driven by growth in fee-based assets. Buy (MS) on dips.

Global EV Sales Up 30% in September, with the largest gains in China. Gains in the U.S. market have been lagging in anticipation of the Nov. 5 election. Chinese carmakers are seeking to grow their sales in the EU despite import duties of up to 45% and amid cooling global demand for electric cars. Chinese and European automakers were going head-to-head at the Paris Car Show on Monday. Buy (TSLA) on dips.

Dollar Hits Two Month High on rising US interest rates. Ten-year US Treasuries have risen from 3.55% to 4.12% since the September Nonfarm Payroll Report. A string of U.S. data has shown the economy to be resilient and slowing only modestly, while inflation in September rose slightly more than expected, leading traders to trim bets on large rate cuts from the Fed. Buy all foreign currencies on dips (FXA), (FXE), (FXB), (FXY).

S&P 500 Value Gain Hits $50 Trillion, since the 1982 bottom, which I remember well and is up 50X. The index hit a record high Wednesday and is trading Thursday at around 5770, up 21% so far in 2024. The index’s value is up sixfold since it stood at $8 trillion at year-end 2008, near the depth of the bear market during the financial crisis.

JP Morgan Delivers Blowout Earnings. Its stock, trading around $223, was on course for its biggest daily percentage gain in 1-1/2 years.

(JPM)'s investment-banking fees surged 31%, doubling guidance of 15% last month. Equities propelled trading revenue up 8%, exceeding an earlier 2% forecast. These earnings are consistent with the soft-landing narrative of modest U.S. economic growth. Buy (JPM) on dips.

My Ten-Year View

On Monday, October 21 at 8:30 AM EST, nothing of note takes place is out.

On Tuesday, October 22 at 6:00 AM, the Richmond Fed Manufacturing Index is out.

On Wednesday, October 23 at 11:00 AM, the Existing Home Sales is printed.

On Thursday, October 24 at 8:30 AM, the Weekly Jobless Claims are announced. We also get New Homes Sales.

On Friday, October 25 at 8:30 AM, the US Durable Goods Orders are announced. At 2:00 PM, the Baker Hughes Rig Count is printed.

As for me, I am headed out for early voting in Nevada this morning. It’s been a year since I came back from Ukraine badly wounded, so I thought I would recall my recollections from that time.

You know you’re headed into a war zone the moment you board the train in Krakow, Poland. There are only women and children headed for Kiev, plus a few old men like me. Men of military age have been barred from leaving the country since the Russians Invaded. That leaves about 8 million to travel to Ukraine from Western Europe to visit spouses and loved ones.

After a 15-hour train ride, I arrived at Kiev’s magnificent Art Deco station. I was met by my translator and guide, Alicia, who escorted me to the city’s finest hotel, the Premier Palace on T. Shevchenka Blvd. The hotel, built in 1909, is an important historic site as it was where the Czarist general surrendered Kiev to the Bolsheviks in 1919. No one in the hotel could tell me what happened to the general afterward.

Staying in the best hotel in a city run by Oligarchs does have its distractions. Thanks to the war, occupancy was about 10%. That didn’t keep away four heavily armed bodyguards from the lobby 24/7. Breakfast was well populated by foreign arms merchants. And for some reason, there are always a lot of beautiful women hanging around with nothing to do.

The population is definitely getting war-weary. Nightly air raids across the country and constant bombings take their emotional toll. Kiev’s Metro system is the world’s deepest and, at two cents a ride, the cheapest. It’s where the government hid out during the early days of the war. They perform a dual function as bomb shelters when the missile attacks become particularly heavy.

My Look Out Ukraine has duly announced every incoming Russian missile and its targeted neighborhood. The buzzing app kept me awake at night, so I turned it off. Let the missiles land where they may. For this reason, I reserved a south-facing suite and kept the curtains drawn to protect against flying glass.

The sound of the attacks was unmistakable. The anti-aircraft drones started with a pop, pop, pop until they hit a big 1,000-pound incoming Russian cruise missile, then you heard a big kaboom! Disarmed missiles that were duds are placed all over the city and are amply decorated with colorful comments about Putin.

The extent of the Russian scourge has been breathtaking, with an epic resource grab. The most important resource is people to make up for a Russian population growth that has been plunging for the last century. The Russians depopulated their occupied territory, sending adults to Siberia and children to orphanages to turn them into Russians. If this all sounds medieval, it is. Some 19,000 Ukrainian children have gone missing since the war started.

Everyone has their own atrocity story, almost too gruesome to repeat here. Suffice it to say that every Ukrainian knows these stories and will fight to the death to avoid the unthinkable happening to them. There will be no surrender.

It will be a long war.

Touring the children’s hospital in Kiev is one of the toughest jobs I ever undertook. Kids are there shredded by shrapnel, crushed by falling walls, and newly orphaned. I did what I could to deliver advanced technology and $10,000 in cash, but their medical system is so backward, maybe 30 years behind our own, that it couldn’t be employed. Still, the few smiles I was able to inspire made the trip worth it. This is the children’s hospital that was bombed a few months ago.

The hospital is also taking the overflow of patients from the military hospitals. One foreign volunteer from Sweden was severely banged up, a mortar shell landing yards behind him. He had enough shrapnel in him, some 250 pieces, to light up an ultrasound and had already been undergoing operations for months. It was amazing he was still alive.

To get to the heavy fighting, I had to take another train ride a further 15 hours east. You really get a sense of how far Hitler overreached in Russia in WWII. After traveling by train for 30 hours to get to Kherson, Stalingrad, where the German tide was turned, is another 700 miles east!

I shared a cabin with Oleg, a man of about 50 who ran a car rental business in Kiev with 200 vehicles. When the invasion started, he abandoned the business and fled the country with his family because they had three military-aged sons. He now works at a minimum-wage job in Norway and never expects to do better.

What the West doesn’t understand is that Ukraine is not only fighting the Russians but a Great Depression as well. Some tens of thousands of businesses have gone under because people save during war and also because 20% of their customer base has fled.

I visited several villages where the inhabitants had been completely wiped out. Only their pet dogs remained alive, which roved in feral starving packs. For this reason, my major issued me my own AK47. Seeing me heavily armed also gave the peasants a greater sense of security.

It’s been a long time since I’ve held an AK, which is a marvelous weapon. It’s it’s like riding a bicycle. Once you learned, you never forget.

I’ve covered a lot of wars in my lifetime, but this is the first fought by Millennials. They post their kills on their Facebook pages. Every army unit has a GoFundMe account where doners can buy them drones, mine sweepers, and other equipment.

Everyone is on their smartphones all day long, killing time, and units receive orders this way. But go too close to the front, and the Russians will track your signal and call in an artillery strike. The army had to ban new Facebook postings from the front for exactly this reason.

Ukraine has been rightly criticized for rampant corruption, which dates back to the Soviet era. Several ministers were rightly fired for skimming off government arms contracts to deal with this. When I tried to give $10,000 to the Children’s Hospital, they refused to take it. They insisted I send a wire transfer to a dedicated account to create a paper trail and avoid sticky fingers.

I will recall more memories from my war in Ukraine in future letters, but only if I have the heart to do so. They will also be permanently posted on the home page at www.madhedfefundtrader.com under the tab “War Diary”.

Donating $10,000 to the Children’s Hospital

On the Front at Crimea with a Dud Russian Missile

A Gift or Piroshkis from Local Peasants

One of 2,000 Destroyed Russian Tanks

The Battle of Kherson with my Unit

This Blown Bridge Blocked the Russians from Entering Kiev

Good Luck and Good Trading,

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

September 20, 2024

Diary, Newsletter, Summary

Global Market Comments
September 20, 2024
Fiat Lux

Featured Trade:

(THIS WILL BE YOUR BEST PERFORMING ASSET FOR THE NEXT 30 YEARS),
(IYR), (PHM), (LEN), (DHI), (TLT), (HYG), (MUB), (SPY)

This Will Be Your Best Performing Asset for the Next 30 Years

Diary, Newsletter, Research

Lately, I have spent my free time strolling the worst slums of Oakland, CA.

No, I’m not trying to score a drug deal, hook up with some ladies of ill repute, or get myself killed.

I was looking for the best-performing investment for the next 30 years.

Yup, I was looking for new homes to buy.

As most of you know, I try to call all of my readers at least once a year and address their individual concerns.

Not only do I pick up some great information about regions, industries, businesses, and companies, but I also learn how to rapidly evolve the Diary of a Mad Hedge Fund Trader service to best suit my voracious, profit-seeking readers.

So when a gentleman asked me the other day to reveal to him the top-performing asset of the next 30 years, I didn’t hesitate: your home equity.

He was shocked.

I then went into the economics of the Oakland trade with him.

West Oakland was built as a working-class neighborhood in the late 1890s. Many structures still possess their original Victorian designs and fittings.

Today, it is a 5-minute BART ride under the Bay to the San Francisco financial district.

A one-three bedroom two bath home I saw was purchased a year ago for $450,000, with a $50,000 down payment and a 6.5% loan on the balance.

The investor quickly poured $50,000 into the property, with new paint, heating, hot water, windows, a kitchen, bathrooms, and flooring.

A year later, he listed it for sale at $650,00, and the agent said there was a bidding war that would probably take the final price up to $700,000.

Excuse me, gentlemen, but that is a 400% return on a 50,000 investment in 12 months.

As Oakland rapidly gentrifies, the next buyer will probably see a doubling in the value of this home in the next five years.

Try doing that in the stock market.

Needless to say, housing stocks like Lennar Homes (LEN), DH Horton (DHI), and Pulte Homes (PHM) need to be at the core of any long-term stock portfolio.

I then proceeded to list off to my amazed subscriber the many reasons why residential housing is just entering a Golden Age that will drive prices up tenfold, if not 100-fold, in the decades to come. After all, over the last 60 years, the value of my Dad’s home in LA went up 100-fold and the equity 1,000-fold.

1) Demographics. This started out as the hard decade for housing when 80 million downsizing baby boomers unloaded their homes for greener pastures at retirement condos and assisted living facilities.

The 65 million Gen Xers who followed were not only far fewer in number, they earned much less, thanks to globalization and hyper-accelerating technology.

All of this conspired to bring us a real estate crash that bottomed out in 2011.

During the 2020s, the demographics math reverses.

That’s when 85 million millennials start chasing the homes owned by 65 million Gen Xers.

And as they age, this group will be earning a lot more disposable income, thanks to a labor shortage.

2) Population Growth

If you think it's crowded now, you haven’t seen anything yet.

Over the next 30 years, the US population is expected to soar from 335 million today to 450 million. California alone will rocket from 38 million to 50 million.

That means housing for 115 million new Americans will have to come from somewhere. It sets up a classic supply/demand squeeze.

That’s why megaprojects like the San Francisco to Los Angeles bullet train, which may seem wasteful and insane today, might be totally viable by the time they are finished.

3) They’re Not Building Them Anymore

Or at least not as much as they used to.

Total housing starts for 2023 were 1.55 million, a 3% decline from the 1.60 million total from 2022. Single-family starts in 2023 totaled 1.01 million, down 10.6% from the previous year. That means they are producing a half of peak levels.

The home building industry has to more than triple production just to meet current demand.

Builders blame regulation, zooming, the availability of buildable land, lack of financing, and labor shortages.

The reality is that the companies that survived the 2008 crash are a much more conservative bunch than they used to be. They are looking for profits, not market share. They are targeting a specific return on capital for their business, probably 20% a year pretax.

It is no accident that new homebuilders like Lennar (LEN), Pulte Homes (PHM), and (DHI) make a fortune when building into rising prices and restricted supply. Their share prices have been on an absolute tear and are at all-time highs. And that is with a 6.1% mortgage rate.

This strategy is creating a structural shortage of 10 million new homes in this decade alone.

4) The Rear View Mirror

The Case Shiller CoreLogic National Home Price Index (see below) has started to rise again after a year of declines. Net out of the many tax breaks that come with ownership, the real annual return is closer to 8%.

That beats 90-day T-bills at 4.75%, tax-free municipal bonds (MUB) at 2.20%, US Treasury bonds (TLT) at 3.70%, S&P 500 (SPY) equities with dividends at 2.2%, and junk (HYG) bonds at 6.0%.

Unless you have a new Internet start-up percolating in your garage, it is going to be very hard to beat your own home’s net return.

5) The Last Leverage Left

A typical down payment on a new home these days is 25%. That gives you leverage of 4:1. So, in a market that is rising by 5.0% a year, your increase in home equity is really 20% a year.

Pay a higher interest rate, and down payments as low as 10% are possible, bringing your annual increase in home equity to an eye-popping 50%.

And if you qualify for an FHA loan up to $633,000, only a 3.5% deposit is required.

There are very few traders who can make this kind of return, even during the most spectacular runaway bull market. And to earn this money in your house, all you have to do is sleep in it at night.

6) The Tax Breaks are Great

The mortgage interest on loans up to $750,000 million is deductible on your Form 1040, Schedule “A” with a $10,000 limitation.

You can duck the capital gains entirely if the profit is less than $500,000, you’re married and lived in the house for two years or more.

Any gains above that are taxed at only a maximum 20% rate. These are the best tax breaks you can get anywhere without being a member of the 1%. Profits can also be deducted on the sale of a house if you buy another one at the equivalent value within 18 months.

7) Job Growth is Good and Getting Better

The monthly Non-Farm Payroll reports are averaging out at about 150,000 a month. As long as we maintain this level or higher, enough entry-level homeowners are entering the market to keep prices rising.

And you know those much-maligned millennials? They are finally starting to have kids, need larger residences, and are turning from renting to buying.

8) There is No Overbuilding Anywhere

You know those forests of cranes that blighted the landscape in 2006? They are nowhere to be seen.

The other signs of excess speculation, liars’ loans, artificially high appraisals, and rapid flipping no longer exist. Much of this is now illegal, thanks to new regulations.

No bubble means no crash. Prices should just continue grinding upwards in a very boring, non-volatile way.

9) Foreign Capital is Pouring In

The problem has become so endemic that the US Treasury is demanding proof of beneficial ownership on sales over $2 million to get behind shell companies and frustrate money laundering and tax evasion.

Remember, they are fleeing negative rates at home.

US real estate has become the world’s largest high-yield asset class.

So, the outlook is a petty rose for individual homeownership in the foreseeable future.

Just don’t forget to sell by 2030.

That is when the next round of trouble begins.

For Sale

September 18, 2024

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September 18, 2024
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It’s fall again when my most loyal readers are to be found taking transcontinental railroad journeys, crossing the Atlantic in a first-class suite on the Queen Mary 2, or getting the early jump on the Caribbean beaches.

What better time to spend your trading profits than after all the kids have gone back to school and the summer vacation destination crush has subsided?

It’s an empty nester’s paradise.

Trading in the stock market is reflecting as much, with increasingly narrowing its range since the August 5 flash crash, and trading volumes are subsiding.

Is it really September already?

It’s as if through some weird, Rod Serling-type time flip, August became September, and September morphed into August. That’s why we got a rip-roaring August followed by a sleepy, boring September.

Welcome to the misplaced summer market.

I say all this because the longer the market moves sideways, the more investors get nervous and start bailing on their best-performing stocks.

The perma bears are always out there in force (it sells more newsletters), and with the memories of the 2008 and 2020 crashes still fresh and painful, the fears of a sudden market meltdown are constant and ever-present.

In the minds of many newly gun-shy traders, the next 1,000-point flash crash is only an opening away.

In fact, nothing could be further from the truth.

What we are seeing unfold here is not the PRICE correction that people are used to but a TIME correction, where the averages move sideways for a while, in this case, a few months.

Eventually, the moving averages catch up, and it is off to the races once again.

The reality is that there is a far greater risk of an impending market melt-up than a meltdown. But to understand why, we must delve further into history and then the fundamentals.

For a start, many investors have not believed in this bull market for a nanosecond from the very beginning. They have been pouring their new cash into the generous 5% yielding bond market instead.

Some 95% of active managers are underperforming their benchmark indexes this year, the lowest level since 1997, compared to only 76% in a normal year.

Therefore, this stock market has “CHASE” written all over it.

Too many managers have only three months left to make their years, lest they spend 2025 driving a taxi for Uber and handing out free bottles of water. The rest of 2025 will be one giant “beta” (outperformance) chase.

You can’t blame these guys for being scared. My late mentor, Morgan Stanley’s money management guru Barton Biggs, taught me that bull markets climb a never-ending wall of worry. And what a wall it has been.

Worry has certainly been in abundance this year, with China collapsing, Gaza exploding, Ukraine and now Russia invaded, the contentious presidential elections looming, oil in free fall, and the worst fire season in decades.

When in doubt, Jay Powell is all about easy money until proven otherwise. Until then, think lower rates for longer, especially on the heels of a disappointing weak August Nonfarm Payroll Report.

So, I think we have a nice setup here going into Q4. It could be a Q4 2023 lite-- a gain of 5%-10% in a cloud of dust.

The sector leaders will be the usual suspects: big technology names, health care, and biotech (IBB). Banks like (BAC), (JPM), (KBE) will get a steroid shot from rising interest rates, no matter how gradual.

To add some spice to your portfolio (perhaps at the cost of some sleepless nights), you can dally in some big momentum names, like Tesla (TSLA), Netflix (NFLX), DH Horton (DHI), Lennar Housing (LEN), and Facebook (FB).

September 3, 2024

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September 3, 2024
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Diary, Newsletter

It's great to be back in California, even just temporarily.

Driving down to visit a Concierge client, the weather is hot and dry, the scenery is spectacular. What were once endless hills of dry grass are now countless miles of vineyards. Boy, has the Golden State changed a lot since 1952.

The vines are heavy with grapes. I stopped by and picked a purple bunch to test out the fruit. The grapes were rich and sweet. It looks like 2024 is going to be a good vintage. No wonder there is a wine glut.

It's going to be a vintage year for Mad Hedge performance as well. We picked up a welcome +3.74% in the testing month of August, +33.61% so far in 2024, and +711.32% since inception.

The harder I work, the luckier I get.

Which raises the most important question of the day: Did September just happen in August? The price action we saw last month is certainly reminiscent of many recent faith-testing Septembers and Octobers.

If that is the case, then it could be off to the races from now. Except this time, it won’t be just a Magnificent Seven rally. It will be an everything rally as the bull broadens out to include all interest rate sectors, which is almost everything.

(SPX) 6,000 by yearend looks like a piece of cake.

The bottom line for all of this is that investors and the markets are still wildly underestimating the impact artificial intelligence will have on our futures, and therefore stock prices. Publishing the Mad Hedge AI Letter three times a week (click here for the link), I can see AI sneaking into every aspect of our lives without our knowledge.

I visited my doctor the other day and they asked for my Medicare card. I didn’t have it because there is no use for this US government ID in Europe from where I just returned. The receptionist said, “Don’t worry, may I have your phone please?” She went into my photos app, searched for “Medicare” and there it appeared instantly. Apple had surreptitiously installed an AI search function on my phone without even telling me.

Try it!

What we are witnessing is the greatest capital spending binge since WWII 83 years ago, when in three short years, the US produced 297,000 aircraft, 193,000 artillery pieces, 86,000 tanks, and two million army trucks. It also double-tracked all east-west rail lines and created from scratch four atomic bombs.

And you want to short that???

The indexes certainly have plenty of room to run. Since the 2020 pandemic bottom, virtually all money has gone into big tech and out of the rest of the market, generating net outflows out of equities and into bonds. What happens when you get net inflows into big tech AND the rest of the market? Markets go up a….lot.

Dow 240,000 here we come.

Now for the challenging chore of sector picking.

Bonds (TLT) are usually the first pick at the beginning of any interest rate-cutting cycle. However, this has been the best telegraphed interest rate cut in history so most of the juice has already been squeezed out of this one. The (TLT) has moved a prolific $18 off the $82 bottom with no interest rate cuts at all. So there might be $5 or $10 of upside left this year, but no more.

Derivative high-yield plays have much more to offer. Those would include junk bonds (JNK), (HYG), BB-rated loans (SLRN), and REITS like the Vornado Realty Trust (VOR), my favorite Crown Castle International (CCI), and Health Properties (DOC).

Utilities usually do well in falling interest rate cycles as they are such big borrowers. In this basket, you can throw NextEra Energy (NEE), Southern Company (SO), and Duke Energy (DUK).

Falling rates also reliably deliver a weak US dollar, so buy every foreign currency play out there (FXA), (FXE), (FXB), (FXC). Also, buy foreign stock markets like the (EEM).

And then there are always big borrowing small caps (IWM), poor performers for the last decade which can always use the life jackets of falling interest rates. Keep in mind that 40% of small caps are regional banks and another 40% are money losers.

And then there are the old reliables. Any of the Magnificent Seven will probably work if you can get them on any selloff like we had on August 5.

So far in August, we are up by +2.67%. My 2024 year-to-date performance is at +33.61%. The S&P 500 (SPY) is up +18.23% so far in 2024. My trailing one-year return reached +52.25. That brings my 16-year total return to +710.24. My average annualized return has recovered to +51.91%.

I executed no trades last week and am maintaining a 100% cash position. I’ll text you next time I see a bargain in any market. Now there are none. I am running one short in Tesla (TSLA).

Some 63 of my 70 round trips, or 90%, were profitable in 2023. Some 49 of 66 trades have been profitable so far in 2024, and several of those losses were really break-even. That is a success rate of +74.24%.

Try beating that anywhere.

NVIDIA Dives on Fabulous Earnings, one of the greatest “Buy the rumor, sell the news” moves of all time. The stock dropped to $25, or 17.85% off its all-time high. Production snags with its much-awaited Blackwell chips are to blame. The company’s quarterly met or beat analysts’ estimates on nearly every measure. But Nvidia investors have grown accustomed to blowout quarters, and the latest numbers didn’t qualify. Buy (NVDA) on this dip.

PCE Rises a Modest 02% in July. That is the so-called core personal consumption expenditures price index, which strips out volatile food and energy items, according to Bureau of Economic Analysis data out Friday. On a three-month annualized basis — a metric economists say paints a more accurate picture of the trajectory of inflation — it advanced 1.7%, the slowest this year

Pending Home Sales Drop 5%, and 8.5% YOY, on a signed contracts basis. Many buyers are waiting until after the presidential election to make a move. Pending home sales fell in all four regions last month. The positive impact of job growth and higher inventory could not overcome affordability challenges and some degree of wait-and-see related to the upcoming U.S. presidential election.

Sales of new U.S. single-family homes rocketed by 10.6%, their highest level in more than a year in July. A drop in mortgage rates boosted demand, offering more evidence that the housing market is recovering. Sales reached a seasonally adjusted annual rate of 739,000 units last month, the highest level since May 2023. It was also the sharpest increase in sales since August 2022. New home sales are counted at the signing of a contract. Buy homebuilders on dips (LEN), (DHI), (KBH).

US GDP Reaccelerates to 3.0% Growth in Q2, up from the previous estimate of 2.8%, according to the Bureau of Economic Analysis. Stronger consumer spending more than offset other categories. Can’t beat the USA.

Weekly Jobless Claims Remain Unchanged at 231,000, down 2,000. After being inflated by weather and seasonal factors in July, initial jobless claims in August are stabilizing at a slightly lower level, another indication that layoffs remain low.

Is Costco (CSCO) the Next Stock Split? Costco, which has risen nearly 40% since the start of 2024, is a potential candidate. Given the company’s share price—over $900 as of Tuesday—and the trend among other retailers with similarly high prices to split.

Hindenburg Research Attacks Super Micro, alleging "accounting manipulation" at the AI server maker, the latest by the short seller whose reports have rocked several high-profile companies. Close ties with chip giant Nvidia have allowed Super Micro, known for its liquid cooling technology for high-power semiconductors, to capitalize on the surge in demand for AI servers.

Though revenue has surged, margins have taken a hit recently due to the rising costs of server production and pricing pressure from rivals including Dell. Avoid (SMCI).

Berkshire Hathaway Tops $1 Trillion Market Cap, a long-time Mad Hedge recommendation. It’s the first nontech company ever to do so, even though (BRK/B) has a major holding in Apple (AAPL). Keep buying the big dips. The stock has rallied this year on strong insurance results and economic optimism. The Omaha, Nebraska-based company joins the ranks of a small group to crack the milestone, dominated by technology giants like Alphabet Inc. (GOOGL), Meta Platforms Inc. (META) and Nvidia Corp. (NVDA).

S&P Case Shiller Hits New All-Time High in June. Prices nationally rose 5.4% in June from the year prior. An index measuring prices in 20 of the nation’s large metropolitan areas gained 6.5% from the year prior. On an unadjusted basis, it was the national index’s fourth consecutive all-time high. Prices in New York, San Diego, and Las Vegas grew the most, with year-over-year gains ranging from 8.5% and 9%, while those in Portland, Ore., Denver, Colo., and Minneapolis grew the least.

Canada Imposes 100% Tariff on Chinese EVs. The problem for Tesla is that they had been supplying the Canadian market from their China factory. The supply can be replaced with US-made cars but at a much higher cost. Tesla sold off $8 on the news. Sell rallies in (TSLA).

Is the US Tipping into Recession? A continued drop in job openings will translate into faster increases in unemployment, an argument in favor of the Fed beginning to cut interest rates to guard the labor market. The next jobs reports could be crucial. Policymakers face the dilemma of two risks: being too slow to ease policy, potentially causing a 'hard landing' with high unemployment ... or cutting rates prematurely, leaving the economy vulnerable to rising inflation

Yield Chasers Post Record Demand for Junk Bonds. That’s helped make 2024 the busiest year for the issuance of new corporate high-yield bonds, with $357 billion sold so far, since the easy money days during the pandemic. Issuance of US leveraged loans, meanwhile, is running at its fastest pace on record. Buy (JNK) and (HYG).

My Ten-Year View

When we come out the other side of the recession, we will be perfectly poised to launch into my new American Golden Age or the next Roaring Twenties. The economy decarbonizing and technology hyper accelerating, creating enormous investment opportunities. The Dow Average will rise by 600% to 240,000 or more in the coming decade. The new America will be far more efficient and profitable than the old.

Dow 240,000 here we come!

On Monday, September 2 we have Labor Day. All US markets will be closed.

On Tuesday, September 3 at 6:00 AM EST, the ISM Manufacturing PMI is released.

On Wednesday, September 4 at 7:30 PM, the JOLTS Job Openings Report is printed.

On Thursday, September 5 at 8:30 AM, the Weekly Jobless Claims are announced. We also get the ADP Employment Report.

On Friday, September 6 at 8:30 AM, the August Nonfarm Payroll Report is released. At 2:00 PM, the Baker Hughes Rig Count is printed.

As for me, having visited and lived in Lake Tahoe for most of my life, I thought I’d pass on a few stories from this historic and beautiful place.

The lake didn’t get its name until 1949 when the Washoe Indian name was bastardized to come up with “Tahoe”. Before that, it was called the much less romantic Lake Bigler after the first governor of California.

A young Mark Twain walked here in 1863 from nearby Virginia City where he was writing for the Territorial Enterprise about the silver boom. He described boats as “floating in the air” as the water clarity at 100 feet made them appear to be levitating. Today, clarity is at 50 feet, but it should go back to 100 feet when cars go all-electric.

One of the great engineering feats of the 19^th century was the construction of the Transcontinental Railroad. Some 10,000 Chinese workers used black powder to blast a one-mile-long tunnel through solid granite. They tried nitroglycerine for a few months but so many died in accidents they went back to powder.

The Union Pacific moved the line a mile south in the 1950s to make a shorter route. The old tunnel is still there, and you can drive through it at any time if you know the secret entrance. The roof is still covered with soot from woodfired steam engines. At midpoint, you find a shaft to the surface where workers were hung from their ankles with ropes to place charges so they could work on four faces at once.

By the late 19^th century, every tree around the lake had been cut down for shoring at the silver mines. Look at photos from the time and the mountains are completely barren. That is except for the southwest corner, which was privately owned by Lucky Baldwin who won the land in a card game. The 300-year-old growth pine trees are still there.

During the 20^th century, the entire East Shore was owned by one man, George Whittell Jr., son of one of the original silver barons. A man of eclectic tastes, he owned a Boing 247 private aircraft, a custom mahogany boat powered by two Alison aircraft engines, and kept lions in heated cages.

Thanks to a few well-placed campaign donations, he obtained prison labor from the State of Nevada to build a palatial granite waterfront mansion called Thunderbird, which you can still visit today (click here ). During Prohibition, female “guests” from California crossed the lake and entered the home through a secret tunnel.

When Whittell died in 1969, a Mad Hedge Concierge Client bought the entire East Shore from the estate on behalf of the Fred Harvey Company and then traded it for a huge chunk of land in Arizona. Today the East Shore is a Nevada State Park, including the majestic Sand Harbor, the finest beach in the High Sierras.

When a Hollywood scriptwriter took a Tahoe vacation in the early 1960s, he so fell in love with the place that he wrote Bonanza, the top TV show of the decade (in front of Hogan’s Heroes). He created the fictional Ponderosa Ranch, which tourists from Europe come to look for in Incline Village today.

In 1943, a Pan Am pilot named Wayne Poulson who had a love of skiing bought Squaw Valley for $35,000. This was back when it took two days to drive from San Francisco. Wayne flew the China Clippers to Asia in the famed Sikorski flying boats, the first commercial planes to cross the Pacific Ocean. He spent time between flights at a ranch house he built right in the middle of the valley.

His wife Sandy bought baskets from the Washoe Indians who still lived on the land to keep them from starving during the Great Depression. The Poulson’s had eight children and today, each has a street named after them at Squaw.

Not much happened until the late forties when a New York Investor group led by Alex Cushing started building lifts. Through some miracle, and with backing from the Rockefeller family, Cushing won the competition to host the 1960 Winter Olympics, beating out the legendary Innsbruck, Austria, and St. Moritz, Switzerland.

He quickly got the State of California to build Interstate 80, which shortened the trip to Tahoe to only three hours. He also got the state to pass a liability limit for ski accidents to only $2,000, something I learned when my kids plowed into someone, and the money really poured in.

Attending the 1960 Olympic opening ceremony is still one of my fondest childhood memories, produced by Walt Disney, who owned the nearby Sugar Bowl ski resort.

While the Cushing group had bought the rights to the mountains, Poulson owned the valley floor, and he made a fortune as a vacation home developer. The inevitable disputes arose and the two quit talking in the 1980’s.

I used to run into a crusty old Cushing at High Camp now and then and I milked him for local history in exchange for stock tips and a few stiff drinks. Cushing died in 2003 at 92 (click here for the obituary)

I first came to Lake Tahoe in the 1950s with my grandfather who had two horses, a mule, and a Winchester. He was one-quarter Cherokee Indian and knew everything there was to know about the outdoors. Although I am only one-sixteenth Cherokee with some Delaware and Sioux mixed in, I got the full Indian dose. Thanks to him I can live off the land when I need to. Even today, we invite the family medicine man to important events, like births, weddings, and funerals.

We camped on the beach at Incline Beach before the town was built and the Weyerhaeuser lumber mill was still operating. We caught our limit of trout every day, ten back in those days, ate some, and put the rest on ice. It was paradise.

During the late 1990’s when I built a home in Squaw Valley I frequently flew with Glen Poulson, who owned a vintage 1947 Cessna 150 tailwheel, looking for untouched high-country lakes to fish. He said his mother had been lonely since her husband died in 1995 and asked me to have tea with her and tell her some stories.

Sandy told me that in the seventies she asked her kids to clean out the barn and they tossed hundreds of old Washoe baskets. Today Washoe baskets are very rare, highly sought after by wealthy collectors, and sell for $50,000 to $100,000 at auction. “If I had only known,” she sighed. Sandy passed away in 2006 and the remaining 30-acre ranch was sold for $15 million.

To stay in shape, I used to pack up my skis and boots and snowshoe up the 2,000 feet from the Squaw Valley parking lot to High Camp, then ski down. On the way up I provided first aid to injured skiers and made regular calls to the ski patrol.

After doing this for many winters, I finally got busted when they realized I didn’t have a ski pass. It turns out that when you buy a lift ticket you are agreeing to a liability release which they absolutely had to have. I was banned from the mountain.

Today Squaw Valley is owned by the Colorado-based Altera Mountain Company, which along with Vail Resorts owns most of the ski resorts in North America. The concentration has been relentless. Last year Squaw Valley’s name was changed to the Palisades Resort for the sake of political correctness. Last weekend, a gondola connected it with Alpine Meadows next door, creating the largest ski area in the US.

Today there are no Washoe Indians left on the lake. The nearest reservation is 25 miles away in the desert in Gardnerville, NV. They sold or traded away their land for pennies on the current value.

Living at Tahoe has been great, and I get up here whenever I can. I am now one of the few surviving original mountain men and volunteer for North Tahoe Search & Rescue.

On Donner Day, every October 1, I volunteer as a docent to guide visitors up the original trail over Donner Pass. Some 175 years later the oldest trees still bear the scars of being scrapped by passing covered wagon wheels, my own ancestors among them. There is also a wealth of ancient petroglyphs, as the pass was a major meeting place between Indian tribes in ancient times.

The good news is that residents aged 70 or more get free season ski passes at Diamond Peak, where I sponsored the ski team for several years. My will specifies that my ashes be placed in the Middle of Lake Tahoe. At least I’ll be recycled. I’ll be joining my younger brother who was an early Covid-19 victim and whose ashes we placed there in 2020.

Stay Healthy,

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

The Ponderosa Ranch

The Poulson Ranch

At the Reno Airport

Donner Pass Petroglyphs

June 3, 2024

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June 3, 2024
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