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September 22 Biweekly Strategy Webinar Q&A

Below please find subscribers’ Q&A for the September 22 Mad Hedge Fund Trader Global Strategy Webinar broadcast from the safety of Silicon Valley.

Q: When’s the United States US Treasury bond fund (TLT) going to go down?

A: When J. Powell tapers, which will be either today or in 6 weeks. That's the time frame we’re looking at now, and people are positioning now for the taper—that's why financials are taking off like a rocket. Buy those financials and don't expect too much from your tech stocks for the next few months.

Q: What do you think of adding corporate or municipal bonds to my portfolio?

A: Don’t do that on pain of death please; you will lose money. Corporate bonds will get slaughtered the second interest rates turn because they have the most exposure from a credit point of view to any downgrades resulting from rising interest rates. Better to keep your money in cash than buy bonds here. It was a great idea 10 years ago, but a terrible idea today. Just buy cash or buy extremely deep-in-the-money LEAPS which will get you a 10-20% per year return.

Q: What are the chances that the government defaults?

A: Zero, because corporate profits this year will increase from $2 trillion to $10 trillion, spinning off massive tax revenues for the government. The deficit will come down substantially in the future as a result. Keep expecting upwards surprises in profits and taxable revenues. That may be why the (TLT) is staying so high.

Q: I need a customized LEAPS on a stock.

A: We do those for our concierge customers. If you’re interested, then email Filomena at customer support at support@madhedgefundtrader.com.

Q: What brand of shot did you get?

A: Pfizer (PFE).

Q: The Government is showing no sign of balancing a budget and the hole will only get deeper; what are your thoughts?

A: I agree, and that’s why I'm short the (TLT). All we need is a taper to really get some juice under that trade; we really don’t need that much. Ten-year US Treasury yields are now around 1.30% and we only need the yield to get up to about 1.70% for us to make a maximum profit on our positions. One taper hint and it could get us up to those levels.

Q: Why is Visa (V) dropping so much?

A: Fear of being replaced by Bitcoin. This is the big thing dragging all three credit card companies down, including American Express (AXP) and master Card (MA). That's why I have not added a Visa position among my financials in this go around.

Q: How can the Fed unwind their balance sheet and normalize interest rates to a historical average of 4-5%?

A: Quite easily: quit buying bonds. They’re still buying $120 billion/month worth. Technology has accelerated with the pandemic and we all know this is highly deflationary. I expect the next peak in interest rates to be only 3% or 3.5%, not the 6% we saw in the last peak in interest rates in the 2000s. So yeah, bonds are going to go down but not back to 2000’s level.

Q: Thoughts on the Johnson & Johnson (JNJ) shot?

A: No thank you. If you get to choose, Moderna (MRNA) is now producing the best immunity data on a year-to-date basis if you’re starting out from scratch. Some people are mixing, they start out with Pfizer and then get Moderna. They get a worse reaction because the Moderna initial reaction shot sees the Pfizer vaccine as a new virus, so you may get a small flu as a result of that.

Q: What is the put spread you’re recommending on the TLT?

A: The May 2022 $150-$155 vertical put spread. That is the sweet spot now on the short side on (TLT) LEAPS. You should earn a 115% profit in eight months on this trade if interest rates remain unchanged or fall.

Q: Do you expect the ProShares Ultra Short 20 year+ Treasury ETF (TBT) to make it to $20 this year?

A: Yes, I do; $16 to $20 isn’t that much of a move. Remember, the (TBT) is a two times short ETF.

Q: Are you recommending bank stocks?

A: Yes, Morgan Stanley (MS) and JP Morgan (JPM) are two of the best. They will lead the yearend rally starting from here.

Q: When do you expect the semiconductor shortage to end?

A: End of next year, or maybe even 2023, because what all the analysts keep underestimating is that the end of shortages is based on companies getting the chips they want today. The actual issue is that companies are designing billions of chips into their products at an exponential rate, and what they’ll need in a year from now is far higher than most people realize. The semiconductor shortage is much more structural than people realize—that's my theory. They don’t throw up a $2 billion fab overnight. So, this will keep going on for a while and be a drag on economic growth.

Q: Are you sure we won’t see $100 oil (USO)?

A: With oil, you're never sure about anything, although I highly doubt it. We’d have to have monster economic growth in China to get oil up to $100 a barrel. Right now, China is going the other way.

Q: What’s your view on the debt ceiling? Will it give us a good buying opportunity?

A: Probably not, our good buying opportunity was yesterday or Monday. These debt crises are always one minute before midnight solutions. They always get solved. Never underestimate the ability of Congressmen to spend money in their own district. So, I don’t think that would create a stock market crash like it might have done 20 years ago.

Q: What about Freeport McMoRan (FCX)?

A: It’s taking a dip here because of a possible real estate crash in China, and of course China is the world’s largest buyer of copper for apartment construction. I’m kind of taking a break here on Freeport McMoRan and US Steel (X) until we learn a little more about the China situation. They did move to start a bailout today. Let’s see if that continues.

Q: When will the airlines come back?

A: They’ll come back when business travel returns, which I think could be next year. If you eliminate the virus completely, these things double easily. That's the bet you’re making. Let’s see if the covid boosters work, the childhood shots work, and then you can take another look at Delta (DAL) and Alaska (ALK).

Q: If Bitcoin gains mass adoption, does that put banks out of business just like electric vehicles are making oil obsolete?

A: No, not if the banks go into the Bitcoin business. And the banks actually have the cash, resources, and infrastructure to take over the Bitcoin area once the technology matures. And the corollary to that is that the oil industry is that the majors have the infrastructure, the manpower, and the capital to take over the alternative energy business if they choose to do so and oil goes to zero, which it eventually will. The proof of that is the largest investor in all the Silicon Valley energy startups are Saudi Arabian venture capital funds. They’re huge investors in solar here. If Saudi Arabia has a lot of oil, they have even more solar. Believe me, I’ve been there.

Q: Will a lack of inventory and rising interest rates end the bidding wars on houses soon?

A: Only if you consider 10 years soon. That is how long it will take for the sizes of different generations to come into balance, the Millennials (85 million) versus the Gen Xers (45 million). That’s when the housing bubble will end, but that won’t be for another decade. We still have a structural shortage of new home construction (about 5 million units a year) because all the home builders who went bust in the financial crisis in 2008/2009 and never came back—all of that new construction is still missing. And the surviving ones haven’t increased production to meet that shortfall because they want to manage their risk. Eventually, they will and that probably will be the next top, but that’s really 2030 type business.

Q: What about Federal Express (FDX)?

A: Labor shortages. It's hitting (UPS), (FDX), the Post Office, and DHL too—all the couriers.

Q: When do you think gold (GLD) and silver (SLV) rise back to 2,000?

A: I am avoiding gold and silver as long as Bitcoin has buyers. The action in Bitcoin is 10x the movement you get in gold and that’s attracted all the speculative capital in the market, draining all interest from gold, which hit a new six-month low just last week.

Q: What’s your buy target for Apple (AAPL)?

A: I would say if you can get it at $135, that would be a gift. We did get close to $140 at the lows this week; that’s when you start nibbling, and then you double up again at $135. I doubt Apple is going down more than 10% in this cycle. There are too many people still trying to get into it. And they’re still the largest buyer of stock in the world. They only buy one stock, their own.

Q: I never got any IPath Series B S&P 500 VIX Short Term Futures ETN (VXX) alerts.

A: That's because we never sent any out. (VIX) has become an incredibly difficult game to play, accumulating positions for months and then trying to get out on a one-day spike that lasts a few minutes. The insiders have too much of a house advantage here, who only play from the short side. There are too many better fish to fry.

Q: What about the Apple electric vehicle?

A: I’ll believe it when I see it; I've been hearing about this for something like seven years. My guess is that Apple is more likely to supply consoles and parts to other EV makers and help them get into the game with software and so on. I think that will be Apple's role in all of this.

Q: How much has China Evergrande Group stock fallen?

A: It’s a really illiquid stock in China so we never got involved in it. I think it’s down more than half. Even the professional short-sellers like Jim Chanos and Kyle Bass, have been targeting that stock for 10 years are now screaming they’re vindicated. Of course, they lost fortunes in the meantime. So, I'll pass on that one.

Q: What about stop losses on LEAPS trades?

A: I don’t really run LEAPS portfolios or issue stop losses. The idea is to run these into expiration, and we’ve never had one expire out of the money, although I may break that record if TLT doesn’t turn around in the next three months.

Q: How would autonomous trucking impact rail transportation?

A: They’re two totally different things. Trucking companies like Yellow Corporation (YELL) carry smaller cargo for local deliveries or small long-distance deliveries. 7Some 70% of all railroad traffic is coal going to China, and the rest is bulk commodities like wood chips, iron ore, etc. Trucks don’t carry any of that, so they’re totally separate businesses. But, if we went totally autonomous on trucking, it would make all the main trucker companies massively profitable, as they get rid of their drivers. Right now, every trucking company in the US has a driver shortage.

Q: United Airlines (UAL) pilots are now ordered to get vaccinated.

A: I think within months to hold a job anywhere in the US, you will have to get vaccinated. They do not want you in the office without a vaccination. Jobs are not worth risking lives, and we hit 2,000 deaths again yesterday. The corporations are taking the lead, not the government. The exception will be the politically motivated companies, like the My Pillow Guy; I doubt they'll ever require vaccinations at My Pillow. And there are a few other companies such as Hobby Lobby that are also anti-vaxers. But all public transport companies, hospitals, etc., are going to say get vaccinated or get out—it’s very simple.

Q: Should I buy Berkshire (BRKB) here?

A: Yes, it’s a great entry point, even if you can't get my price. Go higher in the strikes or go farther out in maturity.

Q: Is copper metal (CPER) a buy here?

A: Probably long term, but short term will be subject to the whims of the Chinese real estate crisis if there is one.

Q: Won’t Natural Gas (UNG) outperform in the power grid since all EVs must be charged?

A: Not if the grid is 100% electric. Natural gas still has carbon in it, although only half as much as oil or gasoline. I think even natural gas eventually gets phased out because you can expect solar panels to improve by 80% over the next ten years. At that point, any other energy source won’t be able to compete—oil, natural gas, you name it. And that is why you don’t see any long-term money going into carbon energy sources.

Q: Iron ore has just gone from $200 to $100, why are you bullish?

A: Yes, Because it has just gone from $200 to $100. Eventually, China recovers, despite a short-term financial and housing crisis. Buy low, sell high—that’s my revolutionary new strategy.

Q: What are your thoughts on Bitcoin vs Ethereum?

A: I think Ethereum will outperform Bitcoin because it has a more modern technology. It’s only six years old, vs 12 years for Bitcoin. It’s also more efficient, using less energy in its production. In fact, we did get a double in Ethereum in August as opposed to only a 50% move in Bitcoin.

Q: Do you have any concerns on holding the financials through earnings in October?

A: No, I think the results will be fantastic, and I want to be long going into those.

Q: What does the current situation with China mean for Alibaba (BABA)?

A: Keep your stocks, you’ve already taken the hit—down 53%. The next surprise is that China quits beating up on capitalism and these things will all recover bigtime. However, any options you may have could expire before that happens. So, keep the stocks, get rid of the options, salvage whatever time value you can, and then wait for China to start doing the right thing.

Q: What are the best solar stocks?

A: First Solar (FSLR) and SunPower (SPWR), which have both done great.

Q: If bonds are a no-no, and governments are getting more indebted than ever, who will buy them?

A: Governments. The only buyers of bonds now are non-economic buyers. Those would be governments, central banks, and banks who are required by law to own certain amounts of bonds to meet regulatory capital requirements. No individual in their right mind is buying any bonds here at all, nor is any financial advisor recommending them.

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 ten years are there in all their glory.

Good Luck and Stay Healthy.

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

August 17, 2021

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
August 17, 2021
Fiat Lux

FEATURED TRADE:

(EYES ON THE PRIZE)
(STAA), (UNH), (LLY), (AMZN), (V), (NKE), (MA), (GOOGL)

Eyes on the Prize

Biotech Letter

The investing world is filled with buzzwords, and one of the most widespread lately is “compounders” – aka stocks with the capacity to generate double-digit compound growth in terms of revenue and earnings.

They’re typically dubbed as the “next” Amazon (AMZN), Visa (V), or Nike (NKE), making them heavy favorites among growth investors aggressively looking for companies that can generate high returns in the next five to 10 years.

Ultimately, the goal is to find the next “10 bagger.”

Most investors are perfectly content with big and popular compounders like Mastercard (MA) and Alphabet (GOOGL).

Since the healthcare and biotechnology sector has its own well-known compounders, such as Eli Lilly (LLY) and UnitedHealth Group (UNH), it’s easy to miss the smaller lesser-known companies that are consistently generating high growth in their profits over the past years.

A good example of this is Staar Surgical (STAA).

Founded way back in 1982, this under-the-radar stock is up by over 243% over the past 12 months and more than 85% this year alone.

Saying that the company has had an impressive 2020 despite the pandemic is an understatement.

The company’s latest product is an implantable lens that works to correct myopia or nearsightedness.

This technology addresses a potentially massive market, taking into consideration the growing number of vision-related problems globally.

Staar anticipates the lens, which has already been made available across Europe and even Asia for roughly five years now, to enter the US market by the fourth quarter of 2021.

Inasmuch as the human eyes are considered powerful organs, they are definitely far from perfect. That’s why eyeglasses and even contact lenses have been in the market for decades.

Aside from its new product, Staar’s bread and butter is its Visian implantable collamer lenses, which are designed to deal with various vision issues including myopia (nearsightedness), presbyopia (an incapability to focus on nearby objects), and astigmatism (blurred or distorted vision).

Although they are quite different, many people confuse Staar’s solution with LASIK.

The key difference is that LASIK surgeries necessitate trimming of the cornea using lasers to correct the vision of the patient.

In contrast, what Staar does is to implant the corrective lenses directly in the eye, specifically behind the patient’s iris but right in front of the cornea.

This makes Staar’s solution reversible and, of course, less invasive compared to LASIK.

To date, Staar’s surgery is more expensive at $3,500 per eye, while LASIK costs roughly $2,246 for each eye.

However, this cost is expected to go down as more doctors eventually choose Staar implants over other options.

Looking at its trajectory, Staar could lead to LASIK becoming obsolete in the same way that radial keratotomy stopped being the norm before.

So far, Staar remains profitable and continues to grow its quarterly profits by 18.3% year over year. However, it’s the long-term revenue that shareholders would stand to gain most.

At this point, roughly 30% of the world is diagnosed as nearsighted. By 2050, over half of the population may require vision for myopia alone.

Meanwhile, 75% to 80% of adults between ages 45 and 74 are already struggling with presbyopia.

These figures spell massive opportunities and lucrative markets for Staar’s vision lines, with the annual spending on cheaper alternatives like eyeglasses projected at $48 billion.

Silently growing companies in the seemingly humdrum market are often pretty sneaky.

Vision correction doesn’t appear to be a white-hot investment sector that calls for urgent investment.

Only a handful of investors possess the foresight to view mundane products and services, like eye surgeries, as lucrative investments.

However, there’s usually a flicker of greatness in the most unlikely markets.

May 14, 2021

Diary, Newsletter, Summary

- Global Market Comments
  May 14, 2021
  Fiat Lux
  
  Featured Trade:
  (MAY 12 BIWEEKLY STRATEGY WEBINAR Q&A),
  (FCX), (QQQ), (JWN), (DAL), (MSFT), (PLTR), (V), (MA), (AXP), (UUP), (FXA), (SPWR), (FSLR), (TSLA), (ARKK), (CLX), (NIO), (EPEV), (SOX), (VIX), (USO), (XLE)

March 10, 2021

Tech Letter

Mad Hedge Technology Letter
March 10, 2021
Fiat Lux

Featured Trade:

(2 FINTECH BETS TO JUMP ON)
(PYPL), (SYF), (V), (MA)

2 Fintech Bets to Jump On

Tech Letter

I cannot overstate the importance of digital financial innovation to the success of PayPal (PYPL) and Synchrony Financial (SYF).

Consumers are rapidly adopting technologies that enable contactless commerce and expect engagement along their digital purchase journeys.

These fintech firms are leveraging robust digital assets and continuously investing to ensure their partners are well-positioned in this rapidly evolving dynamic.

These investments include the capabilities to empower SaaS and seamless integration with partners' digital assets, enable customer choice at the point of sale, enhance contactless experiences, facilitate a seamless and easy application process, bring the in-store experience to a customer's digital devices for applications and payment, and integrate financing office throughout the entire digital shopping experience.

They also continue to make headway in digital penetration of all aspects of the customer journey.

Lockdown requirements and 14-day quarantine are forcing consumers to resort to online transactions for payment networks, online lending, money transfers, business-to-business payments, personal finance, banking, and more.

The key factor driving the growth of the fintech market is high investments in technology-based solutions by banks and other financial institutions. In addition, infrastructure-based technology and APIs (application programming interface) are reshaping the future of fintech.

The behavioral changes induced by the pandemic, such as online shopping and cashless payments, are here to stay and will continue to propel fintech’s growth this year and beyond.

PYPL is one of the most entrenched digital payment operating technology platforms that enables digital and mobile payments on behalf of consumers and merchants worldwide.

It has more than 361 million active users globally and is available in more than 200 markets around the world, enabling consumers and merchants to receive money in more than 100 currencies.

The overperformance of late is not a fluke, in just the last quarter, PYPL added more than 15.2 million new accounts. Its top-line has increased 25% year-over-year to $5.46 billion.

The company is now doing total payment volume (TPV) of $247 billion, growing 38% from the year-ago quarter.

Profitability is another check off the list with EPS for the third quarter coming in at $0.86, rising 121% year-over-year.

The company has been propelled by a spike in e-commerce sales and is one of the preeminent fintech stocks in the U.S.

A less entrenched name but worth a speculative look is Synchrony Financial (SYF).

SYF delivers a wide range of specialized financing programs as well as innovative digital banking products across key industries including retail, home, auto, travel, and pet care.

They have a private labeled credit card business with around 60% of SYF applications done digitally during the fourth quarter and grew 18% in mobile channel applications. In Retail Card, 51% of total sales occurred online. Finally, approximately 65% of payments were made digitally.

Synchrony is the 10th-largest credit card issuer in the U.S., with a roughly 2% market share.

But unlike other issuers, Synchrony primarily issues store credit cards, which offer users rewards and benefits.

Synchrony offers more than 100 of these store cards, including the Amazon.com Store Card, which can only be used for Amazon purchases, as well as cards from Lowe's, Banana Republic, Ashley Furniture, and Sam's Club.

Synchrony also offers about 30 store-branded cards that can be used on the broader Mastercard (MA) or Visa (V) network. Among them are the Nissan Visa card and the PayPal Cashback Mastercard.

Synchrony saw earnings plummet to $286 million in the first quarter, down from $731 million in the fourth quarter of 2019. Then, earnings dropped to a low of $46 million in the second quarter before climbing back up to $313 million in the third quarter.

But they rebounded in the fourth quarter of 2020 with earnings surging to $738 million signifying an expansion from pre-pandemic performances.

The Venmo card is also a huge growth opportunity and the possibility of linking up with other fintech groups to create attractive products.

Synchrony added 25 new relationships in 2020, including two major deals that should drive growth in 2021 and beyond.

One was with PayPal to launch the Venmo credit card fueled by Visa.

Venmo is PayPalʻs hugely popular mobile app to send and receive money.

The Venmo credit card, which can be used virtually, provides Venmo users with cashback on purchases and comes with a QR code that allows contactless payments.

Synchrony also signed two other major credit card deals with Walgreens and Verizon.

The Walgreens relationship gets Synchrony into the health space, which allows people to pay for health and wellness expenses at some 225,000 different healthcare providers.

The company also acquired Allegro Credit, a provider of point-of-sale consumer financing for audiology products and dental services, to be part of the growing CareCredit network.

The other big move last year was launching the Verizon Visa card, which offers benefits and discounts for Verizon customers.

Synchrony and PayPal are dynamic fintech companies with savory futures.

PayPal is the bigger and safer bet of the two, but Synchrony will benefit more if their risks turn out well because the law of large numbers isn’t counting against them yet.

October 12, 2020

Diary, Newsletter, Summary

Global Market Comments
October 12, 2020
Fiat Lux

Featured Trade:

(MARKET OUTLOOK FOR THE WEEK AHEAD, or BACK TO THE NIFTY FIFTY),
(CAT), (JPM), (BAC), (NSC), (UNP), (V),
(MA), (FDX), (UPS), (IP), (AAPL), (TSLA)

The Market Outlook for the Week Ahead, or Back to the Nifty Fifty

Diary, Newsletter, Research

My daughter needed a desk so she could go to high school from her bedroom. So, I drove around Northern Nevada to get the perfect piece, visiting Reno, Sparks, Carson City, and Minden. It is one of the most conservative parts of the country, probably 90% republican.

What I saw was amazing.

There were Biden/Harris signs everywhere. Yes, there will still some Trump signs, but they were in a definite minority. Four years ago, you only saw Trump signs. The rare Clinton/Kaine sign was full of bullet holes, torn down, or copiously marked with offensive graffiti.

I thought, hmm, there must be a trade here.

We seem to be on the verge of massive changes in the US economy. Get in front of them and you’ll make a fortune. Lag behind, and you’ll be seen driving an Uber cab.

Technology undoubtedly led the decade, bringing in a 30% annual return since 2009. Industrial and other domestic stocks brought in no more than 12%. The “Roaring Twenties” could bring the reverse.

Technology will continue to do OK. Ever falling prices and greater service is a tough business model to beat. But let’s face it, none of these things are cheap. Apple (AAPL) going from a 9X multiple to 45X?

Industrials could be playing a massive catch up game initiating a new supercycle as they did from 2000-2010 when tech lagged in the wake of the Dotcom Bust.

This switch is made easier by the fact that most big industrial companies are now de facto technology ones. They all now use advanced cloud software, sophisticated robots, and state of the art distribution systems. Caterpillar (CAT) even has a 290-ton dump truck that drives itself like a giant Tesla (TSLA)!

Many of these companies I have covered for nearly 50 years, when they last belonged to the Nifty Fifty. So, for me, it’s a matter of dusting off my old research, seeing who is left, and giving them a modern spin. The great thing about these stocks is that many pay decent dividends.

I’ll give you a short list of where to buy the dips.

Banks – JP Morgan (JPM), Bank of America (BAC)
Railroads – Norfolk Southern (NSC), Union Pacific (UNP)
Credit Cards – Visa (V), Master Card (MA)
Couriers – FedEx (FDX), UPS (UPS)
Consumer Discretionary – International Paper (IP)

Hmm, a market where everything goes up. I like it! Dow 120,000 here we come!

Trump ordered all Stimulus Negotiations to cease, and then changed his mind six hours later. Clearly, the president has given up on the election and wants the next administration to inherit a Great Depression. Or is this Covid-19 talking? It’s the perfect scorched earth strategy. Write off another 2 million small businesses. Down ticket republican candidates will be beaten like a red-headed stepchild. Stocks plunged 600, with airlines in free fall, then bounced 700.

Jay Powell REALLY wants a stimulus package, claiming the economy desperately needs fiscal help to maintain a recovery or face a prolonged depression. “The risks of overdoing it seem, for now, to be small,” the central bank chief told the National Association for Business Economics. Are his pleas falling on deaf ears in Washington? Trump just gave our Fed governor the middle finger salute.

Share Buybacks vaporized T\this year and will be miniscule next year, with companies whose earnings have been crushed by the pandemic not participating. The ban on bank share buybacks imposed by the Fed continues. This has been the largest portion of net stock buying for the past decade. The good news is that foreign investors stepped in as big buyers in 2020, taking the indexes to new highs.

Apple to announce new 5G iPhone this week. The release came a month late, thanks to the pandemic. Scheduled for October 13, the event is called “High Speed”. Apple’s biggest sales quarter in history has just begun. Buy dips in (AAPL).

The Election is Noise and its best to focus on the bull market that has just begun, says JP Morgan. Record fiscal stimulus and quantitative easing in the face of near-zero interest rates create a perfect storm in favor of equities. The best stock to own going into the October 13 Prime Day?

Weekly Jobless Claims edged down to 840,000, still missing 200,000 from California, due to an upgrading computer system. California stopped reporting data so they can rebuild the antiquated computer system of the Employment Development Department, which has been breaking down due to overwhelming demand. Some 26.5 million workers are now claiming unemployment benefits.

Banks are making record trading profits on the back of the US Treasury market where volume has exploded. Even though there has been little net movement in prices in six months, the two-way bets have been enormous. It helps to have a massive home refi boom, incredible QE, and a government that is printing new debt like there’s no tomorrow.

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

My Global Trading Dispatch maintained a new all-time high last week by staying 100% in cash. I was just as grateful for having no positions on the up 600-point days as I was on the down 600-point days. Safe to say that I will be an increasingly more aggressive buyer on ever smaller dips.

That keeps our 2020 year-to-date performance at a blistering +35.46%, versus a gain of 0.5% for the Dow Average. That takes my eleven-year average annualized performance back to +36.14%. My 11-year total return stood at new all-time high of +391.37%. My trailing one-year return dropped to +44.26%.

The coming week will be a dull one on the data front. The only numbers that really count for the market are the number of US Coronavirus cases and deaths, now at 210,000, which you can find here.

On Monday, October 12 at 8:30 AM EST, the government is closed for Columbus Day so there will be no data releases, even though the stock market is open.

On Tuesday, October 13 at 9:00 AM EST, the US Inflation Rate for September is out.

On Wednesday, October 14, at 8:30 AM EST, The Producer Price Index for September is released. At 10:30 AM EST, the EIA Cushing Crude Oil Stocks are out.

On Thursday, October 15 at 8:30 AM EST, the Weekly Jobless Claims are announced. We also get the Empire State Manufacturing Index.

On Friday, October 16, at 8:30 AM EST, US Retail Sales are printed. At 2:00 PM we learn the Baker-Hughes Rig Count.

As for me, I eventually found the perfect desk on Craigslist Reno. It was from the 1930s and had once occupied the office of the Metropolitan Life Insurance Company of New York, complete with two inkwells.

The company logo was prominently displayed in its wrought iron legs. When the Metropolitan modernized its offices in the 1950s, it sold off its furniture, which has been in circulation in the antique market ever since.

I told the seller, who had just moved from the east coast, of my amazing connection with the company. My Uncle Ed spent three years on a Navy destroyer in the Pacific during WWII. Enlistees in the 1940s were required to take out life insurance policies before they went off to war.

When Ed passed away a few years ago, I went through his papers and what did I find but a life policy from the Metropolitan Life Insurance Company for $1,000.

Ever the history buff, I called the company to find out if the policy was worth anything 70 years later. It turned out to have a cash value of $100,000, which they paid out immediately. I divided the money among my mom’s 20 grandchildren to pay for their college educations. Several now have PhDs. Got to love that compounding of interest.

Stay healthy.

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

Bring on the Roaring Twenties

June 23, 2020

Diary, Newsletter, Summary

Global Market Comments
June 23, 2020
Fiat Lux

Featured Trade:

(HERE ARE THE FOUR BEST PANDEMIC-INSPIRED TECHNOLOGY TRENDS),
(AMZN), (CHWY), (EBAY), NFLX), (SPOT), (TMUS), (ATVI), (V), (PYPL), (AAPL), (MA), (TDOC), (ISRG), (TMDI)

Here the Four Best Pandemic-Inspired Technology Trends

Diary, Newsletter, Summary

By now, we have all figured out that the pandemic has irrevocably changed the course of technology investment. Some sectors are enjoying incredible windfalls, while others are getting wiped out.

The digitization of the economy has just received a turbocharger. It has become a stock pickers market en extemus.

The good news is that we are still on the ground floor of trends that have a decade to run, like working from home, more online food purchases, and a rise in touchless payments. This means there's a huge upside for investors willing to make big bets on what’s expected to become some of the most important technologies in the years ahead.

Covid-19 is a wake-up call to accelerate trends that have been around for years and are now greatly speeding up. The pandemic seems to have triggered a new survival instinct: innovate fast or die. Let me list some of the frontrunners.

1. E-commerce

E-commerce is the No. 1 shelter-in-place beneficiary by miles, as a combination of stay-at-home orders, reduced spending on dining, and government stimulus have sent Americans in search of other ways to spend their money. Even though Covid-19 restrictions are now being eased, the e-commerce industry should still see about 25% growth across all of 2020.

The estimated $60 billion spent by consumers from their stimulus checks has also been a tailwind. While the world is now re-opening, we expect these buckets of available dollars to remain e-commerce tailwinds for the foreseeable future as we expect adjusted retail and travel spend to decline an aggregate of 18% in and for as much as half of all small retail stores to potentially close this year.

When Amazon shares were at $1,000, I wrote a report calculating that its breakup value was at least $3,000 a share. It looks like Amazon may hit that target before yearend….without the breakup.

Want to know the winners? Try Amazon (AMZN), Chewy (CHWY), and eBay (EBAY).

2. Digital Entertainment

The Covid-19 pandemic has also left more Americans in search of digital, at-home entertainment, a trend that’s delivered a huge push for companies like Activision Blizzard that develop online games. New users, time spend gaming and in-game purchases are only accelerating and spell even more lasting benefit for game developers.

Content names like video streaming site Netflix (NFLX), as well as bandwidth and connectivity companies including Comcast (CMCSA) and T-Mobile (TMUS), are names to focus on.

This increased use of high bandwidth applications is likely to continue post-COVID-19 and has the impact of similarly increasing the demand for bandwidth and connectivity. This increases the value of upstream assets in the infrastructure sectors like fiber-based wireline broadband networks and nascent 5G build-outs.

Names to play the space: Netflix (NFLX), Spotify (SPOT), T-Mobile (TMUS), Activision Blizzard (ATVI).

3. Touchless payments

Another trend the stock market still underappreciated is a generational surge in contactless payments, which has recently seen a jump higher amid Covid-19 fears and efforts to minimize physical contact. Companies like Visa (V), Mastercard (MA), and PayPal (PYPL), already integral to the payments world, should be major beneficiaries in the years ahead.

The market assumes that COVID-19 related adoption of digital payments is a near-term benefit for payment service providers, offsetting some of the consumer spending headwinds. However, digitization of payments is part of a multi-year secular growth driver, with COVID-19 as just the latest accelerator.

Names to play the space: Visa (V), PayPal (PYPL), Apple (AAPL), and Mastercard (MA).

4. Telemedicine

Healthcare is one of the most inefficient industries left in the United States. I call it a 19^th century industry operating with 21^st century technology. While progress has been made, those massive stacks of paper records are finally disappearing, there still is a long way to go.

These days, even doctors don’t want to see patients in person, as they may contract the Coronavirus. Far better to see them online, which could address 90% of most patients. Teledoc (TDOC) does exactly that (click here for my full report).

So does Intuitive Surgical (ISRG), maker of DaVinci Surgical Systems, which enables remote operations for a whole host of maladies. Titan Medical (TMDI) is another name to look at here.

Names to play the space: (TDOC), (ISRG), (TMDI).

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