Global Market Comments
February 9, 2024
Fiat Lux
Featured Trade:
(FEBRUARY 7 BIWEEKLY STRATEGY WEBINAR Q&A),
(LLY), (FXI), (TSM), (BABA), (PLTR), (MSBHF), (SMCI), (JPM), (INDY), (INDA), (TSLA), (BYDDF), (NFLX), (META), (UNG)
Global Market Comments
February 9, 2024
Fiat Lux
Featured Trade:
(FEBRUARY 7 BIWEEKLY STRATEGY WEBINAR Q&A),
(LLY), (FXI), (TSM), (BABA), (PLTR), (MSBHF), (SMCI), (JPM), (INDY), (INDA), (TSLA), (BYDDF), (NFLX), (META), (UNG)
Global Market Comments
December 1, 2023
Fiat Lux
Featured Trade:
(NOVEMBER 29 BIWEEKLY STRATEGY WEBINAR Q&A),
($VIX), UNG), (PANW), (SNOW), (HACK), (MSFT), (AAPL), (FCX), (TSLA), (F), (GM), (LLY), (CVX), (XOM), (RIVN), (TLT)
Global Market Comments
November 3, 2023
Fiat Lux
Featured Trade:
(NOVEMBER 1 BIWEEKLY STRATEGY WEBINAR Q&A),
(BRK/B), (TSLA), (LLY), (SNOW), (BIB), (BIB), (CCJ), (FXA), (FXB), (FXE), (EEM), (GLD), (SLV) (UNG), (LNG)
I've been riveted by the healthcare sector's most extravagant stocks lately.
Just look at Eli Lilly (LLY), with its jaw-dropping market value of $412 billion, making it the richest pure-play biopharma company ever. And right on its heels is Novo Nordisk (NVO), boasting a market value of $377 billion. It's enough to make your head spin.
But if you're on the hunt for value, these sky-high prices might leave you feeling a bit queasy. That's why I embarked on a mission to uncover some hidden gems in the healthcare sector.
Now, don't get me wrong. These stocks may be cheap for a reason, and it's crucial to exercise caution. When it comes to investment opportunities, it's essential to separate the diamonds in the rough from the fool's gold.
Enter Viatris (VTRS), a rising star in the generic drug manufacturing arena that has caught the attention of savvy investors seeking long-term holdings. But is it the real deal, or just another flash in the pan?
Viatris shows potential with solid revenue from branded generics like Lipitor, Viagra, and EpiPens. These household-name medicines have a lasting market demand. Plus, its generous 5.2% dividend yield surpasses the market average.
But here's the catch: Viatris is currently undervalued and has yet to prove its growth potential. Its stock price took a hit, and sales in the core generic and branded segments dipped. However, there's hope in the pipeline.
With a range of injectable generic medicines awaiting approval, Viatris could be at the forefront of the market.
By 2027, these programs could yield over $1 billion in annual revenue. While not a game-changer for the company's overall revenue, it sets the stage for future earnings growth.
At this stage, I don’t see Viatris as a slam-dunk investment. However, monitoring their strategic plan to reduce debt, improve efficiency, and drive growth is prudent. It's a work-in-progress worth monitoring for future opportunities.
Another company that caught my attention is Organon (OGN), a recent spinout from Merck (MRK) that focuses on women's health and biosimilars. This hidden gem trades at an attractive valuation of just 4.8 times earnings.
Organon & Co. is a pioneering developer and provider of prescription therapies and medical devices catering to contraception and fertility needs.
The female contraceptive market is projected to experience robust growth, with a compound annual growth rate (CAGR) of 8.5% from 2022 to 2027. Notably, Organon is among the top 5 major corporations addressing the demands in this market segment.
But that's not all.
Organon boasts a diverse portfolio that extends beyond women's health. They also offer biosimilar immunology products, two oncology treatments, hypertension therapies, respiratory solutions, dermatology products, non-opioid pain management pills, and cures for male pattern hair loss.
On its first day of official existence, June 3, 2021, Organon's management proudly announced a lineup of over 60 drug products to enhance female health, along with Merck's (MRK) former biosimilars portfolio.
The biosimilars market is projected to soar to $44.7 billion by 2026, showing an impressive CAGR of 23.5%.
As expected, the biosimilars arena has become a bustling hub with both established and emerging companies eagerly entering the space. For instance, Teva Pharmaceutical Industries Limited (TEVA) has high hopes for its biosimilar drug targeting arthritis treatment, expecting it to boost Teva's revenue significantly.
Organon has already witnessed promising revenue growth from its biosimilar drugs, with a remarkable 17% increase amounting to $116 million.
Several drug sales have experienced a surge of over 30% in the United States, Canada, and Brazil. Moreover, Organon's brands have shown strong performance in China and the Asia Pacific/Japan region.
Investing in women's health is not only a wise choice; it's a strategic move that can yield significant rewards for individual investors and portfolios. With Organon's innovative solutions, broad product portfolio, and forward-thinking approach, it stands out as a compelling opportunity in the market.
Now, let's take a look at some intriguing names that have found their way onto the list.
We have health insurance behemoth Cigna Group (GI), trading at a mere 9.9 times earnings, alongside the health insurer Centene (CNC) at 10.3 times earnings. Not to mention the presence of renowned drugmakers Pfizer (PFE), Gilead Sciences (GILD), and Amgen (AMGN) gracing this list of bargain stocks.
These seemingly cheap healthcare stocks warrant close attention for the savvy investor seeking hidden gems. Sure, the term "cheap" can sometimes be misleading, but within these underappreciated names lies the potential for hidden value waiting to be discovered.
Global Market Comments
May 12, 2023
Fiat Lux
Featured Trades:
(THURSDAY, MAY 16, 2023 KEY WEST, FLORIDA STRATEGY LUNCHEON)
(MAY 10 BIWEEKLY STRATEGY WEBINAR Q&A),
(SCHW), (AAPL), (TLT), (BITCOIN), (FXA), (USO), (FCX), (LLY), (PYPL)
CLICK HERE to download today's position sheet.
Below please find subscribers’ Q&A for the May 10 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Incline Village, NV.
Q: Why is the market down on such great inflation data?
A: Yes, a 4.9% annualized inflation rate is a big improvement from 9.1% nine months ago. The market only cares about the debt ceiling debacle right now. I’ve been teaching people about the stock market for about 55 years, and I can tell you that all investors have one great fear, and it's not the fear of losing money—that they can handle. It’s the fear of looking stupid. And if they load the boat with stock now, and the US government defaults and the market drops 25%, they will look really stupid. This is not a black swan. It has probably been the most advertised market negative in history. We’ve known about the debt default since December when the Democrats chose not to raise the debt ceiling because they thought they could gain a political advantage by letting the Republicans fumble the issue, and they are reaping such advantages by the bucketload. So, even though everyone knows that this will be settled, it has settled 98 consecutive times in the last 106 years, and they don’t want to do anything before a deal. And by the way, this was only put into place during WWI to meter the rate of government borrowing during the war, so I would say it’s lost its purpose. However, it's hard to make any changes at all in the government these days. What that does do, is create big gaps up in the market when they are resolved, and big gaps down when they are not resolved. That’s why we’re doing nothing.
Q: Do you like regional banks here—are they a buy? And do you like the Schwab LEAPS?
A: Yes on the Charles Schwab LEAPS (SCHW), because you have two years for that to work out. With regional banks as a stock buy here, you’re really buying a lottery ticket because if they do get attacked by short sellers, you get wiped out practically overnight (as has happened 4 times.) On the other hand, if the US Treasury or the FCC makes selling bank shares or lending bank shares illegal, then you’ll have the regional banks just roar, because the sellers will be gone. There are too many better things to do than to make a high-risk trade on bank shares, especially after the debt ceiling is resolved.
Q: Is Apple (APPL) trade a long?
A: Yes, on any pullback. I think big tech leads for the next 10 years once we get out of our current quagmire. So it’s a question of how much pain you’re willing to take in the meantime. My target for Apple this year is $200.
Q: iShares 20 Plus Year Treasury Bond ETF (TLT) is up today; would it be worth selling out of the money call spreads with the same expiration date as our long position?
A: No, it is not. At $104, it’s not a great short, or otherwise, I’d do it myself. When we get up to $109, then you want to go short like with the $114 puts or $115 puts. But down here if you’re shorting say, the $109s, and we go to $109 the next day or week, then you get stopped out. Remember any shorts of bonds here is now a long-term counter-trend trade—you’re betting that your position expires in the money before a long-term trend to the upside reasserts itself. So no, that’s why I’m not doing any shorts right here. Also, we’re not low enough to buy it yet. You get down to $101 or $102, I’ll look at buying call spreads, but here in the middle is never a good place to trade.
Q: Are you still expecting a correction in May?
A: May isn’t over yet. When they say “Sell in May and go away,” they don’t tell you if it’s May 1st or May 30th, so I’m happy where I am. There’s no law that says you have to get every trade of the year. I think doing nothing is the best solution right now, especially with a 62% profit already in the bank this year.
Q: Is it too late for bank LEAPS?
A: I would say, on a two-year view, no. I’m looking for these shares to double in two years, so a bet that it’s unchanged or higher right now is a pretty good bet, I would say—especially if it gives you a 100% return in one or two years. So yes, all the big bank LEAPS are still good, and with small banks, too much is unknown right now for a highly leveraged bet in that sector.
Q: What do you mean when you say one-year LEAPS is a call spread?
A: When I say one year LEAP, I mean at the money, and then short the next strike higher, and that gives you the maximum leverage. Something like 20:1 leverage when you go that aggressive. But now is the time to be aggressive; that's when these LEAPS are all on sale.
Q: Near-term iShares 20 Plus Year Treasury Bond ETF (TLT) move?
A: Sorry to say, sideways. That's why I'm doing nothing. I’m waiting for the market to tell me what to do. If it goes down, I want to buy it, if it goes up, I want to sell it, if it goes sideways, I want to go on vacation—very simple trading strategy.
Q: What about commercial real estate?
A: I don’t want to touch it, and the Real Estate Investment Trusts (REITs) on those have been horrible. Maybe later in the year when the REITs are at bankruptcy levels, it might be worth a buy. But you have to be careful on your REITs; there are good REITs and there are bad REITs, and you don’t want to be anywhere near the commercial ones. With things like cell phone towers, assisted care living facilities—you know, dedicated LEAPS in safe areas would be a good place. And the yields, by the way, are very high, if they pay.
Q: If the US defaults, what would you buy?
A: Everything, because everything will be at a low for the year; so that’s an easy one. By the way, when we got the banking crisis in March, I adopted an everything strategy then: buy all big banks and brokers—and it turned out to be the best trade of the year. The same is going to happen with the debt default.
Q: How long will it take for the regional bank construction to play out?
A: I think the regional banks have completely separated themselves out from the big banks. You only want to own the big banks because you get big returns on those, and the risk/reward ratio is overwhelmingly in favor of big banks, unlike with small banks. Therefore, you only buy the big banks in that situation. If you feel like buying a lottery ticket on your local bank because it’s down 80%, go ahead and do so, but remember that's what it is—a lottery ticket, with a big payoff if you win.
Q: Bitcoin has recently been weak off its top. Do you expect another leg up in Bitcoin prices?
A: I do not. Bitcoin was the perfect asset to have when we had a huge oversupply of cash and a shortage of assets. Now, is the opposite: we have an oversupply of assets and a shortage of cash, and that may remain true for another 10 years or so. So, if you have Bitcoin, I’d be unloading any positions you have now and falling down on your knees, thanking goodness you were able to recover this much of your loss. The other problem is you now have a lot of the intermediaries going bankrupt or shut down by the SEC or the US Treasury. So, that is an additional risk, which you don’t have buying JP Morgan (JPM), for example, or the Australian dollar (FXA), or oil (USO), or copper (FCX). It’s just so far out there on the risk/reward basis. Only large institutions and miners are in the market now—most individuals have been scared away for life.
Q: Would you buy PayPal (PYPL) on the dip? The earnings were terrible.
A: Yes, I would. It is now discounting a recession. If you don't get a recession, you get a big recovery in PayPal.
Q: Do you think that a Ukraine-Russia war will end soon?
A: I would doubt that the Russia-Ukraine war lasts more than a year, and when it ends, it will create the biggest global economic stimulus since the Marshall Plan. Also, American companies will be at the front of the line on the reconstruction deals because we supplied a lot of the weapons and intelligence. Looking at the Marshall Plan in modern terms: $17 billion in 1947 money would be on the order of a $1 trillion today—you basically have to rebuild an entire country. And guess who’s good at building countries? We are. We have all the big engineering companies to do it. Buy Caterpillar (CAT) for sure. By the way, I’ll be spending my summer vacation working on the Ukraine War for the US Marine Corps and NATO. At least the Belgians have better food.
Q: What do you think about pharmaceuticals like Eli Lilly (LLY)?
A: We’ve been recommending them in the Mad Hedge Biotech & Health Care letter for literally years. They’re absolutely kicking butt with their weight loss drug Mounjaro—to the extent that there are shortages of supplies, a black market, and big price increases coming, so it’s all about the weight loss boom. I hate to think of what the combined overweightness of America is, but it’s got to be somewhere in the millions of tons (and I am one of the guilty parties myself.)
Q: There's talk that EVs put out a lot of sulfur that increases climate change issues. What do you think?
A: Absolutely not true, as there is no sulfur in an EV. I don't know where they would come out of an electric engine running on a lithium battery. It’s just another bit of fake news coming out of the oil industry, which is pretty much around us all day, every day. You just have to get used to that. Conventional international combustion engines do emit a lot of sulfur in the form of sulfur dioxide and the big three have been sued over this for at least 50 years.
Q: When will the debt ceiling negotiations end?
A: There are two indicators you look for in predicting the end of a debt ceiling crisis (the last one of which was 12 years ago): #1. When the government announces it can’t send out social security checks anymore because they have no more money, and #2. A big drop in the stock market that scares all the billionaires, cuts their wealth, and makes them threaten to withdraw funding from the politicians who are blocking this thing. Another big indicator is when the Department of Defense announces they have no more money to pay military salaries. Almost all military presence in the United States is in red states and is a major support for economies. And the reason is that's where land was cheapest during WWI, which was when we did a very rapid buildup in the number of military bases. So, watch for those indicators and look for a massive rally when this happens. The US government is basically a giant recycling machine. It takes money off the coast, where all the wealth and taxes are paid, and spends it inland, where all the infrastructure and military have to be paid for. The only military spending on the coasts is in Hawaii, cyber warfare in California, and shipbuilding on the east coast. Anything that interferes with the process of moving money off the coasts and inland is doomed to fail for sure. That’s my one-minute analysis on the cash flows inside the US economy.
Q: I read that the clarity of Lake Tahoe is the best ever. Is this true?
A: Yes, it is. It is an example of a major effort to save the environment that succeeded, but you had to live 70 years to see it. The biggest factor was improving gas mileage for cars. The average fuel economy for new model cars has increased from 12 miles per gallon in 1950 to 35 today. Notice that cars have gotten a lot smaller too. That cuts by two-thirds the carbon dioxide going into the atmosphere which can combine with nitrogen to make nitric acid which fell into the lake. Several big development projects were stopped in their tracks. So was a planned freeway around the lake. Some 17 golf courses are now banned from using fertilizer. Sewage is now piped out of the valley instead of into the lake. A record 70 inches of rainfall this year helped dilute the water. Finally, an ill-conceived freshwater shrimp farming industry ended when the shrimp all starved to death when the lake became too clear, eliminating their poop from the picture. There is now a campaign to clean garbage off the bottom which I help fund. We even found “Fredo’s” body from The Godfather! As a result, the lake clarity has improved from 50 feet in 1970 to 115 feet, the same as when Mark Twain first visited Lake Tahoe in 1861.
To watch a replay of this webinar with all the charts, bells, whistles, and classic rock music, just log in to www.madhedgefundtrader.com , go to MY ACCOUNT, click on GLOBAL TRADING DISPATCH, then WEBINARS, and all the webinars from the last 12 years are there in all their glory.
Good Luck and Stay Healthy,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Want to Know What Happens Next?
Global Market Comments
January 27, 2023
Fiat Lux
Featured Trade:
(JANUARY 25 BIWEEKLY STRATEGY WEBINAR Q&A),
(RIVN), ($VIX), (SPX), (UUP), (NVDA), (TLT), (LLY), (AAPL), (RTX), (LMT), (USO), (OXY), (TSLA), (UNG), (MSFT)
CLICK HERE to download today's position sheet.
Below please find subscribers’ Q&A for the January 25 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Silicon Valley in California.
Q: What do you think about LEAPS on Rivian (RIVN)?
A: Yes, I would do those, but a smaller position with closer strike prices. Go to the maximum maturity 2 years out and be conservative—bet on only a 50% rise in the stock. I’m sure it’ll double, but with the LEAPS you’ll have tremendous upside leverage, like 10 to 1, so don’t get greedy. Go for the 500% profit in 2 years rather than the 1,000%, because it is still a startup, and we need economic recovery for startups to get traction. If anything, Tesla (TSLA) will drag this stock back up as it dragged it down. They all move together.
Q: What’s the number of contracts on your $100,000 model portfolio?
A: Our model portfolio basically assumes we have 10 positions of $10,000 each totaling $100,000 in value. You can then change the number of contracts to suit your own private portfolio—take on as much or as little risk as you want. If you’re new. I recommend trading on paper first to make sure you can make money before you use the real thing.
Q: I’m new to this service. What’s the difference between the long-term portfolio and the short-term portfolio?
A: A long term portfolio is a buy-and-forget portfolio, with maybe a 5- or 10-year view. We only change it and make adjustments twice a year so we can average back into the new positions and take profits on the old ones. The main part of this service is usually front-month, and that’s where we take advantage of anomalies in the options market and market timing to make profits 95% of the time. And a big part of the short-term portfolio is cash; we often go 100% cash when there are no trades to be had. It’s actually more valuable knowing when not to trade than when to trade. If you have any more questions, just email customer support at support@madhedgefundtrader.com and we’ll address them individually.
Q: Is it time for a CBOE Volatility Index ($VIX) trade?
A: I hate trading ($VIX). I only do it from the short side; when you get down to these low levels it can flatline for several months, and the time decay eats you to death. I only do it from the short side, and then only the 5% of the time that we’re peaking in ($VIX). The big money is made on the short side, that’s how virtually the entire options trading industry trades this.
Q: Would you be loading up with LEAPS in February?
A: No, it’s the worst time to do LEAPS. You do LEAPS at long-term market bottoms like we had in October, and then we issued 12 different LEAPS. If you get a smaller pullback, there may be LEAPS opportunities, but only in sectors that are near all-time lows, like gold or silver. It depends on the industry and where we are in the market, but basically, you’re looking to do LEAPS at lows for the year because the leverage is so enormous, and so are the potential profits.
Q: Is the increasing good performance a result of your artificial intelligence? Learning from past mistakes?
A: Partly yes, and partly my own intelligence is improving. Believe it or not, when you go from year 54 to 55 in experience in the markets, you understand a lot more about the markets. Sometimes you just get lucky being on the right side of black swan events. Of course, knowing when the market is especially sensitive and prone to black swans is also a handy skill to have.
Q: Is it too late to get into Freeport McMoRan (FCX)?
A: Yes, I wouldn’t touch (FCX) until we get at least a $10 selloff, which we may get in February, so I think the long term target for (FCX) is $100. The stock has nearly doubled since the LEAPS went out in October from $25 a share to almost $50, so that train has left the station. Better off to wait for the next train or find another stock, there are a lot of them.
Q: Where do you park cash in the holding pattern?
A: Very professional hedge fund managers buy 90-day T-bills, because if you keep your cash in your brokerage account—their cash account—and they go bankrupt, it’ll take you 3 years to get your money back in a bankruptcy proceeding. If you own 90-day T-bills and your broker goes bankrupt, they’re required by law to just hand over the T-bills to you immediately. You take delivery of the T-bills, you park them at another brokerage house, and you keep them there. There is no loss of the use of funds.
Q: What about Long term US dollar (UUP)?
A: We go down for 10 years. Falling interest rates are poison for a currency; our rates are probably going to be falling for the next several years.
Q: Thoughts on Tesla (TSLA)?
A: Short term way overbought, we almost got up 60% from the low in weeks, but that’s Tesla, that’s just how it trades. It is the best performing major stock in the market this year. I wouldn’t be looking to go back into it until we drop back, give up half of that gain, get back down to about $135—then it would be a good options trade and a good LEAPS.
Q: Would you be taking profits in Nvidia (NVDA)?
A: I would take like half here and look to buy it back on the next dip because I think Nvidia’s got higher highs ahead of it.
Q: I can’t get a password for the website.
A: Please contact customer support on the homepage and they will set you up immediately. If not, you can call them at (347) 480-1034.
Q: Would you be selling long term positions?
A: No I would not, because if you sell a long term position they’re very hard to get back into; and I’m expecting $4,800 in the (SPX) by the end of the year. Everything goes up by the end of the year, even things you hate. So no, selling is what you did a year ago, now you’re basically looking for chances to get back in.
Q: Would you hold Tesla (TSLA) over this earnings report?
A: No, I sold my position yesterday, at 70% of its maximum potential profit. I don't need substantial selloff; I’m just going to go right back in again.
Q: Have you heard anything about Tesla silicon roof tiles tending to catch fire?
A: No I have not, but if your house got struck by lightning or if someone fired a bullet at it, that might do the trick. Otherwise, you need a huge input of energy to get silicon to catch on fire as it’s a pretty stable element. And if it was already happening on a large scale, you know the media would be absolutely all over it—the media loves to hate Tesla and loves to hate Elon Musk. That certainly would draw attention if it were happening; what's more likely is that fake news is spreading rumors that are not true. That's been a constant problem with Tesla from the very beginning.
Q: Would you open the occidental spread here today?
A: I would, but I would use strike prices $5 lower. I'd be doing the February $50-$55 vertical bull call spread to give yourself some extra protection, given that the general market itself is so high.
Q: Should I be shorting Apple (APPL) here?
A: No, but the smart thing to do is to sell the $160 calls because I don’t think we’ll get up to $160. You could take any extra premium income, and if you don’t get hit this month, keep doing it every month until you are hit, and then you can take in quite a lot of premium income by the time we get to new highs in Apple, possibly as much as $10 or $15. So, that would be a smart thing to do with Apple.
Q: What's your favorite in biotech and big pharma?
A: Eli Lilly (LLY), which just doesn't seem to let anybody in.
Q: If China were to shut down again, would it hurt the stock market?
A: Yes, but not much. The much bigger falls would be in Chinese stocks (which have already doubled since October) not ours.
Q: Thoughts on biotech?
A: Biotech is the new safety trade that will continue. Also, they’re having their secular ramp-up in technology and new drugs so that is also a good long-term bull call on biotech.
Q: What’s the dip in iShares 20+ Year Treasury Bond ETF (TLT)?
A: $4 points at a minimum, $5 is a nice one, $6 would be fantastic if you can get it.
Q: Could we get a trade-up in oil (USO)?
A: Yes, maybe $5 or $10 a barrel. But it’s just that, a trade. Long term, oil still goes to zero. Short term, China recovery gives a move up in oil and that's why we went long (OXY).
Q: You talk about California NatGas being dead, but California gets 51% of its electricity from natural gas, up from 48% in 2018.
A: Yes, but that counts all of the natural gas that gets brought in from other states. In fact, if you look at the longer-term trend over the last 20 years, coal has gone to zero, nuclear is going to zero, hydro has remained the same at about 10%. NatGas has been falling and green sources like wind and solar, have been rising quite substantially. And now, approximately 25% of all the homes in California get solar energy, or 8.4 million homes, and it is now illegal to put gas piping into any new construction. New York is doing the same. That means it will be illegal to do new natural gas installations in a third of the country. So, I think that points to lower natural gas consumption, and in fact, the 22-year target is to take it to zero, which might be optimistic but you never know. All they need is a smallish improvement in solar technology, and that 100% from green sources is doable by 2045, not only for California but for everybody. All energy plays are a trade only, not an investment.
Q: Any thoughts on the implications for the US and Germany providing tanks to Ukraine?
A: You can throw Poland in there, which is also contributing a tank division—so a total of 58 M1 Abrams tanks are going to Ukraine. By the way, I did command a Marine Corps tank battalion for two weeks on my reserve duty, so I know them really well inside and out. They are powered by a turbine engine, have a suspension as soft as a Cadillac, a laser targeting system accurate to three miles even for beginners, and fire recycled uranium shells that can cut through anything like a knife through butter. The answer is the war gets prolonged, and eventually forces Russia into a retreat or a negotiation. Even though the M1 is an ancient 47-year-old design, its track record against the Russian T72 is pretty lopsided. In the first Gulf War, the US destroyed 5,000 T72s and the US lost one M1 tank because he parked on a horizon, which you should never do with a tank. And every driver of a T72 knows that track record. So that explains why Russian tanks have been running out of gas, sugaring their gas tanks, sabotaging their diesel engines, and doing everything they can to avoid combat because of massive fatal design flaws in the T72. We only need to provide about 50 or 60 of the M1 tanks as a symbolic gesture to basically scare the entire Russian tank force away.
Q: Why do you think Elon kept selling Tesla? Did he think it would go lower?
A: Elon thinks the stock’s going to $10,000, but he needed up-front cash to build out six remaining Tesla factories, and for that, he needed about $40 billion, which is why he sold $40 billion worth of stocks last year when it was peaking. He also is sensitive to selling at tops; it’s better to sell stock in with Tesla at an all-time high than at an all-time low, so he clearly times the market to meet his own cash flows.
Q: What about military contractors?
A: I know Raytheon (RTX) and Lockheed Martin (LMT) have a two-year backlog in orders for javelin missiles and stingers, which are now 47-year-old technology that has to be redesigned from scratch. The US just placed an order for a 600% increase in artillery shells for the 155 mm howitzer. I thought we’d never use these again, which is why US stocks for ammunition got so low. But it looks like we have more or less a long term or even permanent customer in Ukraine for everything we can produce, in old Vietnam-era style technologies. How about that? I’m telling the military to give them everything we’ve got because everything we’ve got is obsolete.
Q: When should we buy Microsoft (MSFT)?
A: On the next 10% dip. It’s the quality stock in the US.
Q: Do you place an order to close the spread at profit as soon as you have filled in the trade?
A: You can do that, but it’s kind of a waste of time. Wait until we get close to the strikes; most of the big companies we deal in, you don't get overnight 10% or 20% moves, although it does happen occasionally.
Q: Natural Gas (UNG) prices are collapsing.
A: Correct, because the winter energy crisis in Europe never showed and spring is just around the corner.
Q: On the Tesla (TSLA) LEAPS, what about the January 2025 $600-$610 vertical bull call spread
A: That is way too far out of the money now. I would write that off and go back into it but do something like a January 2025 $180-$190. It has a much higher probability of going in the money, and still an extremely high return. It would be something like 500% if you get in down at these levels.
Q: How do you see Bitcoin short term/long term?
A: I think the loss of confidence in the asset has been so damaging that it may not come back in my lifetime. It could be another Tokyo situation where it takes 30 years to recover, or only recovers when the entire sector gets taken over by the big banks. So, I don’t see any merit in the crypto trade, probably forever. Once you lose confidence in the financial markets, it’s impossible to get it back. And it turns out that every one of these mainline trading platforms was stealing from the customers. No one ever comes back from that in the financial markets.
To watch a replay of this webinar with all the charts, bells, whistles, and classic rock music, just log in to www.madhedgefundtrader.com, go to MY ACCOUNT, click on GLOBAL TRADING DISPATCH or TECHNOLOGY LETTER, then WEBINARS, and all the webinars from the last 12 years are there in all their glory.
Good Luck and Stay Healthy,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
At 29 Palms in my M1 Abrams Tank in 2000
Global Market Comments
November 4, 2022
Fiat Lux
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