Global Market Comments
January 16, 2024
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or WHAT WILL KILL THIS MARKET)
(MSFT), (BA), (AMZN), (DAL), (V), (PANW), (CCJ), (TLT), (NVDA), (META), (TSLA), (GOOGL)
Posts
What if Goldilocks decided to hang around for a while? I’ve always been in favor of a long-term relationship.
It could be weeks. It could be months.
Certainly, the widely predicted New Year selloff has failed to materialize.
Failure to fall after the first week of 2024 has delivered a rally almost as ferocious as the one that launched in October. (NVDIA) up 15% in a week? Good thing I have a double position. Cameco (CCJ) up 25%? The market action was so positive that it rushed me into a rare 100% fully invested portfolio.
Which all begs the question of what WILL eventually kill this market. After all, nothing goes up forever.
It's very simple.
If the coming Fed interest rate cuts become so certain that companies start aggressively investing for the recovery NOW, there could be a problem. The headline Unemployment Rate never falls, inflation reaccelerates, and even the idea of interest rate cuts gets pushed off until 2025. That would thrust a dagger through the heart of the current rally post haste, which has been interest rate-driven from day one.
If there’s anyone who will save our bacon from this dire scenario, it is the legion of dour analysts out there who are perpetually behind the curve with their ultra-conservative earnings forecasts. That is scaring companies from expanding too quickly and is why every announcement delivers an upside surprise. That alone could provide enough of a drag on the economy to keep the Goldilocks scenario on track.
Watch Out Above!
If that is the case, then the ten positions I added last week to achieve a rare 100% invested portfolio should do pretty well, which has a strong technology bent. In the AI-dominated world, data is king. Let’s see who owns the data.
Microsoft (MSFT) – knows every keystroke you have executed since you bought your first PC in 1990.
Google (GOOGL) – knows every search you have performed since 2005 plus every YouTube video you have watched, even the X-rated ones (oops!).
Tesla (TSLA) – knows every function your car has performed since 2010 and has 12 videos of where you have been (double oops!).
Meta (META)– knows every keystroke you have performed on your social media accounts.
If all of this sounds scary, it should be. But it also means that while these stocks may be expensive relative to 2023 earnings, they are still in the bargain basement regarding 2024 and 2025 earnings. Buy everything on dips. Investors are adding to what they already own because it’s been working big time, including me.
On a completely different topic, Uranium is going nuclear again. Yellow cake, the fuel used by nuclear power plants, has seen prices up 45% since May. Before the Ukraine war, Russia produced 50% of the world’s nuclear fuel. Now it is banned due to sanctions. The US has announced the creation of a nuclear fuel stockpile.
Congress is about to vote on a ban on Russian fuel. France just announced the addition of 14 large nuclear plants. Oh, and it’s green.
Uranium prices endured a long nuclear winter starting with the Three Mile Island accident in 1979, followed by Chernobyl in 1986, and Fukushima in 2011. That time is now over, thanks to more advanced reactor designs and better risk control.
I used to collect Czech uranium glass, which emits a very low level of gamma radiation and glows in the dark under ultraviolet light. Time to collect some of Canadian uranium miner Cameco (CCJ) also … again.
So far in January, we are up +6.19% with a 100% invested position. My 2024 year-to-date performance is also at +6.19%. The S&P 500 (SPY) is down -0.07% so far in 2024. My trailing one-year return reached +67.65% versus +37.82% for the S&P 500.
That brings my 15-year total return to +682.82%. My average annualized return has exploded to +52.19%, another new high.
Some 63 of my 70 trades last year were profitable in 2023.
I am going into 2024 with longs in (MSFT), (BA), (AMZN), (DAL), (V), (PANW), (CCJ), (TLT), and a double long in (NVDA).
FAA Grounds the Boeing 737 Max….Again, after a huge chunk of the fuselage fell off on a passenger flight which made an emergency landing in Portland. Dozens of the troubled aircraft were grounded. The move affects about 171 planes worldwide. The 737 Max is by far Boeing’s most popular aircraft and its biggest source of revenue. United Airlines is the biggest operator of the type followed by Alaska. Use any major dips to buy (BA) stock, which is facing a golden age.
NVIDIA Ramps Up its Graphics Cards. Nvidia is playing up its strength in consumer GPUs for so-called “local” AI that can run on a PC or laptop from home or an office. The new chip can be used to generate images on Adobe Photoshop’s Firefly generator to remove backgrounds in video calls, or even make games that use AI to generate dialogue. Buy (NVDA) on dips, as I did this last week.
Energy Prices Collapse Again, with Texas tea diving 4% to $70 on Saudi price cuts. This is despite steady buying from the US government for the SPR. The kingdom is moving to shortcut cheating by lesser OPEC members, as it usually does. If you throw good news in the market and it fails to go up, you sell it. Avoid (USO), (XOM), and (OXY).
Natural Gas Goes Ballistic, up 50% in three weeks. The 2026 $8-9 LEAPS I recommended over Christmas have already doubled. Expansion of export facilities to China is the reason, for accommodating more demand. BUY (UNG) on dips.
Mortgage Demand Soars by 10% in the first week of the year, and the next leg in the bull market for residential housing begins anew. Applications to refinance a home loan jumped 19% from the previous week and were 30% higher than the same week one year ago.
Consumer Price Index Flies, coming in at 0.3% for December instead of the anticipated 0.2%, a 3.4% annual rate. Fed rate cuts just got pushed back from March to June, where they belong. Used car and apparel prices get the blame. Car insurance was up a shocking 20% YOY. Go figure.
Bitcoin ETF’s SEC Approved, after a ten-year wait, potentially marking a market top. The SEC is still warning about market risks, even if the ETF sellers don’t. During the last crypto spike, there was an absence of cheap quality growth stocks. Now there is an abundance. Bitcoin prospered when we had a cash surplus and asset shortage. Now we have the opposite.
Global EV and Hybrid Sales Jump by 31% in 2023, compared to only 10% for internal combustion driven cars. Global sales of fully electric and plug-in hybrid vehicles (PHEVs) rose 31% in 2023, down from 60% growth in 2022, according to market research firm Rho Motion. For 2024, there are forecasts of global EV sales growth of between 25% and 30%. That’s really quite amazing given the weak 2023 global economy.
Microsoft Tops Apple, as the world’s most valuable publicly traded company, with a $3 trillion market cap. A huge lead in AI and a growing storage presence with Azure are the reasons. I’m long (MSFT) lower down.
US Budget Deficit Tops $500 Billion in Q1, starting October 1, 2023. But the frenetic price action, up a mind-blowing $19 in 2 ½ months proves the government isn’t borrowing too much money, it isn’t borrowing enough! There is a severe bond shortage in the marketplace. Never argue with Mr. Market as he is always right. Buy the (TLT) on dips, as I have.
Tesla to Halt Production in Germany, thanks to soaring shipping costs in the Red Sea. Tesla has been selling Berlin-made Model Ys to China via the Suez Canal. Shipping costs have doubled to $5,000 per container since October.
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 800% 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, January 15, markets are closed for Martin Luther King Day.
On Tuesday, January 16 at 8:30 AM EST, the New York Empire State Manufacturing Index will be released.
On Wednesday, January 17 at 2:00 PM, the Retail Sales are published.
On Thursday, January 18 at 8:30 AM, the Weekly Jobless Claims are announced. We also get the Building Permits for December.
On Friday, January 19 at 2:30 PM, the December University of Michigan Consumer Sentiment is published. At 2:00 PM, the Baker Hughes Rig Count is printed.
Uranium Glass
As for me, when you make millions of dollars for your clients, you get a lot of pretty interesting invitations. $5,000 cases of wine, lunches on superyachts, free tickets to the Olympics, and dates with movie stars (Hi, Cybil!).
So it was in that spirit that I made my way down to the beachside community of Oxnard, California just north of famed Malibu to meet long-term Mad Hedge follower, Richard Zeiler.
Richard is a man after my own heart, plowing his investment profits into vintage aircraft, specifically a 1929 Travel Air D-4-D.
At the height of the Roaring Twenties (which by the way we are now repeating), flappers danced the night away doing the Charleston and the bathtub gin flowed like water. Anything was possible, and the stock market soared.
In 1925, Clyde Cessna, Lloyd Stearman, and Walter Beech got together and founded the Travel Air Manufacturing Company in Wichita, Kansas. Their first order was to build ten biplanes to carry the US mail for $125,000.
The plane proved hugely successful, and Travel Air eventually manufactured 1,800 planes, making it the first large-scale general aviation plane built in the US. Then, in 1929, the stock market crashed, the Great Depression ensued, aircraft orders collapsed, and Travel Air disappeared in the waves of mergers and bankruptcies that followed.
A decade later, WWII broke out and Wichita produced the tens of thousands of the small planes used to train the pilots who won the war. They flew B-17 and B-25 bombers and P51 Mustangs, all of which I’ve flown myself. The name Travel Air was consigned to the history books.
Enter my friend Richard Zeiler. Richard started flying support missions during the Vietnam War and retired 20 years later as an Army Lieutenant Colonel. A successful investor, he was able to pursue his first love, restoring vintage aircraft.
Starting with a broken down 1929 Travel Air D4D wreck, he spent years begging, borrowing, and trading parts he found on the Internet and at air shows. Eventually, he bought 20 Travel Air airframes just to make one whole airplane, including the one used in the 1930 Academy Award-winning WWI movie “Hells Angels.”
By 2018, he returned it to pristine flying condition. The modernized plane has a 300 hp engine, carries 62 gallons of fuel, and can fly 550 miles in five hours, which is far longer than my own bladder range.
Richard then spent years attending air shows, producing movies, and even scattering the ashes of loved ones over the Pacific Ocean. He also made the 50-hour round trip to the annual air show in Oshkosh, Wisconsin. I have volunteered to copilot on a future trip.
Richard now claims over 5,000 hours flying tailwheel aircraft, probably more than anyone else in the world. Believe it or not, I am also one of the few living tailwheel-qualified pilots in the country left. Yes, antiques are flying antiques!
As for me, my flying career also goes back to the Vietnam era as well. As a war correspondent in Laos and Cambodia, I used to hold Swiss-made Pilatus Porter airplanes straight and level while my Air America pilot friend was looking for drop zones on the map, dodging bullets all the way.
I later obtained a proper British commercial pilot license over the bucolic English countryside, trained by a retired Battle of Britain Spitfire pilot. His favorite trick was to turn off the fuel and tell me that a German Messerschmidt had just shot out my engine and that I had to land immediately. He only turned the gas back on at 200 feet when my approach looked good. We did this more than 200 times.
By the time I moved back to the States and converted to a US commercial license, the FAA examiner was amazed at how well I could do emergency landings. Later, I added on additional licenses for instrument flying, night flying, and aerobatics.
Thanks to the largesse of Morgan Stanley during the 1980s, I had my own private twin-engine Cessna 421 in Europe for ten years at their expense where I clocked another 2,000 hours of flying time. That job had me landing on private golf courses so I could sell stocks to the Arab Prince owners. By 1990, I knew every landing strip in Europe and the Persian Gulf like the back of my hand.
So, when the first Gulf War broke out the following year, the US Marine Corps came calling at my London home. They asked if I wanted to serve my country and I answered, “Hell, yes!” So, they drafted me as a combat pilot to fly support missions in Saudi Arabia.
I only got shot down once and escaped with a crushed L5 disk. It turns out that I crash better than anyone else I know. That’s important because they don’t let you practice crashing in flight school. It’s too expensive.
My last few flying years have been more sedentary, flying as a volunteer spotter pilot in a Cessna-172 for Cal Fire during the state’s runaway wildfires. As long as you stay upwind, there’s no smoke. The problem is that these days, there is almost nowhere in California that isn’t smokey. By the way, there are 2,000 other pilots on the volunteer list.
Eventually, I flew over 50 prewar and vintage aircraft, everything from a 1932 De Havilland Tiger Moth to a Russian MiG 29 fighter.
It was a clear, balmy day when I was escorted to the Travel Air’s hanger at Oxnard Airport. I carefully prechecked the aircraft and rotated the prop to circulate oil through the engine before firing it up. That reduced the wear and tear on the moving parts.
As they teach you in flight school, better to be on the ground wishing you could fly than be in the air wishing you were on the ground!
I donned my leather flying helmet, plugged in my headphones, received a clearance from the tower, and was good to go. I put on max power and was airborne in less than 100 yards. How do you tell if a pilot is happy? He has engine oil all over his teeth. After all, these are open-cockpit planes.
I made for the Malibu coast and thought it would be fun to buzz the local surfers at wave top level. I got a lot of cheers in return from my fellow thrill seekers.
After a half hour of low flying over elegant sailboats and looking for whales, I flew over the cornfields and flower farms of remote Ventura County and returned to Oxnard. I haven’t flown in a biplane in a while and that second wing really put up some drag. So, I had to give a burst of power on short finals to make the numbers. A taxi back to the hangar and my work there was done.
There are old pilots and there are bold pilots, but there are no old, bold pilots. I can attest to that.
Richard’s goal is to establish a new Southern California aviation museum at Oxnard airport. He created a non-profit 501 (3)(c), the Travel Air Aircraft Company, Inc. to achieve that goal, which has a very responsible and well-known board of directors. He has already assembled three other 1929 and 1930 Travel Air biplanes as part of the display.
The museum’s goal is to provide education, job training, restoration, maintenance, sightseeing rides, film production, and special events. All donations are tax-deductible. To make a donation, please email the president of the museum, my friend Richard Conrad at rconrad6110@gmail.com
Who knows, you might even get a ride in a nearly 100-year-old aircraft as part of a donation.
To watch the video of my joyride, please click here.
Where I Go My Kids Go
Good Luck and Good Trading,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Mad Hedge Biotech and Healthcare Letter
December 19, 2023
Fiat Lux
Featured Trade:
(HIDDEN IN PLAIN SIGHT)
(VRTX), (CRSP), (NVDA), (GOOGL), (AMZN), (AAPL), (META), (MSFT), (TSLA)
In the high-pressure game of stock market investments, where volatility is the norm and certainty a luxury, the Nasdaq Composite’s 36% uptick this year is nothing short of remarkable.
The credit largely goes to the “Magnificent Seven” – a septet of tech behemoths comprising Nvidia (NVDA), Alphabet (GOOGL), Amazon (AMZN), Apple (AAPL), Meta Platforms (META), Microsoft (MSFT), and Tesla (TSLA). These giants have not just captured the market’s imagination; they've powered its ascent.
However, while these tech titans have been capturing the spotlight, there's been a different kind of giant, hidden in plain sight, quietly making significant strides in a sector just as crucial as technology – biotechnology and healthcare.
This is where Vertex Pharmaceuticals (VRTX) emerges, a standout performer in the industry, demonstrating that groundbreaking innovation and solid investment opportunities aren't exclusive to the tech world.
The tech sector's rebound this year, following a tumultuous 2022, wasn't just luck. It was a confluence of a resilient economy and consumer spending that stayed robust.
This buoyancy proved a boon for the Magnificent Seven, whose fortunes often mirror economic trends. Apple's case is illustrative. Its iPhones, a blend of luxury and necessity, see fluctuating demand based on economic health.
But Vertex operates on a different plane.
Vertex specializes in life-saving drugs for cystic fibrosis (CF). This isn't a market swayed by economic tides. CF patients depend on the company’s drugs, literally, for survival.
What's more, Vertex is the only game in town for these medications. This unique position grants Vertex significant pricing power, ensuring stable financial performance, come rain or shine.
Now, let’s zoom in on Trikafta, Vertex’s CF superstar.
This is not just another drug; it’s a lifeline, a revenue juggernaut with 13 years of patent protection left.
While rivals scramble to find footholds in CF therapy, Vertex is already eyeing the next big thing: a once-daily treatment, promising more convenience than Trikafta’s twice-daily regimen.
In short, Vertex isn’t just leading the CF market; it's redefining it.
Vertex's ambition doesn't end with CF. The company is making bold strides in pain management with VX-548, a potential opioid alternative. This pill is a beacon of hope in a field littered with failed attempts at non-opioid pain solutions. The recent Phase 2 study results? Encouraging. The study revealed significant pain reduction in patients with chronic neuropathic pain.
But there's more. Vertex is also pioneering gene-editing therapies. Its latest triumph is Casgevy, developed with CRISPR Therapeutics (CRSP).
This treatment, a potential cure for sickle cell disease (SCD) and transfusion-dependent beta-thalassemia (TDT), recently received UK approval. It’s a complex treatment, not a simple pill. This complexity translates to both a high price and a shield against generic competition. With an initial target market of 32,000 patients, Vertex is looking at a potential goldmine.
Contrast this with the struggles of smaller gene-editing firms. Vertex stands out with its deep pockets and negotiation expertise. It's not just about developing groundbreaking therapies; it's about successfully bringing them to market. As it has shown over the years, Vertex’s prowess in this arena is unrivaled.
Of course, biotech is a realm of high risks and high rewards.
Vertex is no stranger to setbacks. Remember October 2020? The company saw its shares plummet by over 15% in a day after discontinuing a promising program. But it's the rebound that tells the story. Since then, Vertex’s shares have soared, making that drop a mere blip in its upward trajectory.
In the pantheon of biotech, Vertex Pharmaceuticals is a rare breed. It's a company that has not only conquered the CF domain but is also making significant inroads in pain management and gene editing. The financials are solid, the pipeline robust, and the market potential vast. Its collaboration with CRISPR Therapeutics on Casgevy is just one example of its strategic foresight.
So while the Magnificent Seven continue to dominate headlines, Vertex Pharmaceuticals emerges as a compelling, if quieter, story. It’s a narrative of a company not content with leading just one market but expanding its prowess into new, uncharted territories. I suggest you buy the dip.
Mad Hedge Technology Letter
December 6, 2023
Fiat Lux
Featured Trade:
(POSITIVE SIGNS FOR 2024)
(AMZN), (APPL), (GOOGL), (MSFT), (TSLA), (META), (NVDA)
There have been a lot of whispers as to who the tech leadership group could be in 2024.
The notion that for the tech rally to continue, more participation is needed is unequivocally false.
A strong but narrow group of tech stocks coined the magnificent seven don’t need smaller stocks to help buoy the broader tech indices.
The law of large numbers also dictates price action meaning even if smaller stocks have the time of their life next year, they still won’t make a dent compared to the absurdly expensive tech stocks that are aiming at $4 trillion in market cap.
Therefore, I believe there is a high likelihood that these potent 7 stocks outperform the rest of tech yet again and I will explain why.
Faster growth rates and reasonable valuations bode well for mega-cap tech stocks.
The seven stocks I am talking about refer to Apple, Amazon, Alphabet, Meta, Microsoft, Tesla, and Nvidia, are responsible for 76% of the S&P 500's 2023 gain of nearly 20%.
Nvidia is up more than 200% year-to-date, and even Apple, the world's largest company, saw its stock price surge nearly 50% this year. The seven companies represent a collective $11.5 trillion in market value
The fundamentals are superior.
The seven mega-cap tech stocks have more attractive fundamentals when compared to the S&P 500's bottom 493 stocks.
They boast faster growth, higher profit margins, stronger balance sheets, and reasonable valuations on a relative basis.
And while price-to-earnings valuations are elevated for the tech stocks, when accounting for growth, they're actually in line with the rest of the market.
Mega-cap tech stocks cratered in 2022.
The sharp outperformance in the mega-cap tech stocks this year comes after a brutal 2022 in which a number of the stocks were severely punished because of the Fed hiking like they have never hiked before.
From their peak, Meta fell more than 70%, Nvidia dropped more than 60%, and Amazon's share price was cut in half in 2022.
The dominance of mega-cap tech in 2023 largely reflected a reversal of meaningful underperformance in 2022 so much so that the group of tech stocks fell a collective 39% that painful year.
The pullback was a healthy consolidation and psychologically, it feels like this bullish year means we are back to neutral.
There is a high chance that tech stocks rally on the belief that a recession will cause the Fed to drop interest rates.
Indicators are starting to look a little sluggish suggesting that earnings could come somewhat soft in the first quarter.
No doubt that the US consumer is stretched to its limit and thinking twice before spending.
The knock-on effect will be delayed iPhone purchases, delayed Tesla purchases and the other 5 of the Magnificent 7 could feel the slowdown as well.
Tech’s path to the recession could cause another rally into the recession when investors are likely to take profits when we finally arrive at the recession that every investor has been waiting for years.
In the meantime, there is a high likelihood that these 7 stocks will continue success in the short-term.
Mad Hedge Technology Letter
November 6, 2023
Fiat Lux
Featured Trade:
(HIGHER FOR LONGER IS NOT OFF THE TABLE)
(BIG TECH), (QQQ), (AAPL), (GOOGL), (META), (TSLA)
Tech (QQQ) earnings turned out to produce some positive performances.
Dominant companies can produce dominant earnings even in troubled times.
So what is the problem?
The sales outlook underwhelmed as the American consumer and business keep getting stretched to the limit.
I believe that traders shouldn’t expect a quick turnaround of sales projections for 2024 unless there are some material structural improvements in the business and consumer environment.
No savior is coming for 2024.
All signs point to more uncertainty and not less and rightly so as high inflation has only been replaced by a decrease in the rate of inflation.
Things are still expensive and that means less opportunity for tech to build a growth story.
Apple, Alphabet, Meta, and Tesla all gave investors reason to rub smiles off faces.
From Apple’s unimpressive holiday outlook to Alphabet’s tepid cloud computing sales results, a recurring theme for the group was weakness.
Meta warned that the year ahead is looking less predictable, while Tesla raised concerns that demand for electric cars is starting to weaken.
Despite Tesla's missing earnings, the group is poised to surpass the 36% increase estimates called for before earnings season began.
The tech sector in the S&P 500 still carries a nearly 36% premium to the index on a forward price-to-earnings basis, per data compiled by Bloomberg Intelligence.
There’s a lot of AI hype, but not every company is market-ready.
Everything can change in a heartbeat if there is economic or geopolitical upheaval, which would directly impact stocks.
The market is still pricing in no spreading of military activity as it looks through it as a self-contained area.
Therefore, the pendulum has swung the completely opposite direction as the U.S. 10-year treasury yield has dropped from 5% to 4.6%.
The strength in treasuries could be short-lived, because several have told me that traders are jumping back into the short-term trade which would signal higher for longer.
The Fed Futures show that the first 25 basis rate is forecasted for May 2024 with 2 more consecutive .25% rate cuts following the first.
The American consumer just might have enough juice for one more splurge that would then push back rate cuts from May to somewhere closer to July or August.
Therefore, it’s easy for me to see how this 6.5% surge has a little longer follow through only to soon clash with a “higher for longer” narrative.
The true tailwind for tech stocks here is that much of the bad news has been priced in and any violent surge in treasury yields seems like a low probability for the last 7 weeks of the year, unless another global conflict breaks out.
Seasonal buying could mean that November is more positive than negative for tech stocks and any big draw down should be bought in a quality tech name. December could be a harder slog for tech.
Global Market Comments
October 20, 2023
Fiat Lux
Featured Trade:
(TESTIMONIAL)
(OCTOBER 18 BIWEEKLY STRATEGY WEBINAR Q&A),
(LMT), (MS), (GOOG), (NVDA), (TSLA), (MSFT), (AMZN), (APPL), (META), (FXI), (RIVN), (NFLX)
Below please find subscribers’ Q&A for the October 18 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from London England.
Q: Is Nvidia (NVDA) a buy at the current price?
A: Absolutely, if your view is more than, say, a month. This stock will easily be $1,000 in the next year or two. They have such a huge moat on their business, and the high-end chips that are banned in China are only a tiny fraction of their overall business—they’re still allowed to sell small and medium-sized chips.
Q: Where do you see bond yields peaking out?
A: My pet target is 5.2% on a spike. We may get there in a few weeks or months. The position we have breaks even at 5.15% in 21 trading days. So any kind of rally on that position becomes profitable—even a one-day rally.
Q: Are you hitting Israel next?
A: No, I covered the Middle Eastern wars for 10 years starting with the ‘73 Yom Kippur wars, and I got sick of it. They’re using the same arguments to justify their positions that they were 50 years ago. In fact, the disputes have been going on for hundreds of years. So, I moved on to other more interesting wars like Ukraine. There are plenty of newbies cutting their teeth as war correspondents in Gaza now—I'll leave it to them.
Q: Are the results for all of the newsletters or just for one?
A: Those alerts that I send out personally are the results for the Mad Hedge Global Trading Dispatch. All of the other services (we have six now) have their own trade histories which we don’t publish, as it’s too much of an account job effort to update six independent track records. People know whether they’re making money or not—that's good enough for me. That’s how we’re set up; we’re a staff-light operation so that we can keep the prices low.
Q: What do you expect for Tesla (TSLA) earnings today?
A: I never make same-day earnings calls, but I would expect they’d be good. They would be less than they were in the past because the price wars are cutting into margins, but they’re gaining market shares at everybody else’s expense, which makes (TSLA) a “BUY”. In fact, if you look at the charts, it seems to be moving sideways into an upside breakout.
Q: Is it too late to buy military?
A: No, I’d be buying any of the big military stocks like Lockheed Martin (LMT), because the increase in demand for weapons is not a short-term thing—it is a more or less permanent thing which will go out decades. Also, they all already have massive government contracts to rebuild our own weapons. Most people don't realize that almost every weapons system in the United States is more than 50 years old. The reason is we quit investing in conventional weapons because we all thought the next war would be cyber. Well, Russia got absolutely nowhere on cyber—they made a few weak attempts to shut down Ukraine and couldn't even break into Elon Musk’s Skylink system, which all of Ukraine is running on.
Q: Why is Morgan Stanley (MS) doing so poorly?
A: All the financials are getting hit because of the collapsing bond market. Once the bond market finds a bottom you want to be buying financials with both hands.
Q: When the market recovers, which sector will lead?
A: Technology. The Magnificent Seven will lead. There’s safety in size. Google/Alphabet (GOOG), Nvidia (NVDA), Tesla (TSLA), Microsoft (MSFT), Amazon (AMZN), Apple (APPL), Facebook/Meta (META). They’re already leading now, so if you have those positions, I’d keep them. If you don’t, you should start picking them up.
Q: Is Rivian (RIVN) a buy at this level?
A: Absolutely. Amazon, which owns 25% of the company, just hit 10,000 Rivian delivery vans. I’ve seen them in California, they’re completely silent—very interesting cars. It’s just a question of how quickly they can produce them.
Q: Why is there a market drop today?
A: It’s the bond market. The first thing you look at every day is the bond market—if it's doing crappy, everything sells off.
Q: Do you still suggest 90-day T-bills at this point?
A: We may end up getting a stock buying opportunity into the year-end. Even if we have to wait for a yearend rally, you get paid every day for 90-day T-bills, and you can sell them at any time and get interest up to the day you sell them because they’re discount bonds that appreciate every day to reflect the yield. It’s a great way to park money, and most brokers will let you buy stocks against your 90-day T-bill position. So say you want to go fully invested in stocks—you could do that while selling your 90-day T-bills the same day. Most brokers will let you do that, worst case charging you one day of margin.
Q: Do you think China is using the Hamas attack on Israel to distract the US?
A: No, China wouldn’t want to get involved in this. Iran has its fingerprints all over it. Iran supplied all the missiles used to attack Israel, and if the Israelis turn around and attack Iran by destroying all of their nuclear and missile-making facilities, I would not be surprised one bit. That may be what Biden is really doing over there—trying to convince the Israelis not to escalate the war.
Q: What are the chances of a US default on November 17 (TLT)?
A: So far on all of these government shutdowns, the US Treasury has been able to come up with magic tricks to keep from defaulting; but if the default is long enough, even they will have to stop paying interest to bondholders, which will increase the debt burden of the US government because a lower credit rating will cause it to pay higher interest rates. Why people think this is a great strategy is beyond me.
Q: Gasoline is down and oil is up—what’s going on?
A: That’s usually driven by the crack spread—the availability of gasoline from refineries in the US, so I wouldn’t use that as any kind of indicator.
Q: Do you think China (FXI) is shifting priorities away from economic growth to military strength?
A: No I don’t, they would love to have economic growth if they could, and in fact, their central bank has been stimulating their economy, and it's working; that’s how this morning’s report got back up to 5%. At the end of the day, they just want peace. All this military stuff—they’re just bluffing and posturing, which is really all they’ve ever done, at least since the Korean War. They weren’t even big participants in the Vietnam War, so China doesn’t worry me at all; there are bigger things to worry about. But they definitely have hit a wall in economic growth, and a big part of that is Covid, and a big part of that is a shrinking population—a shortage of workers, and a shortage of workers who can support older parents.
Q: Will there be an oil embargo against Israel? The US and Europe by OPEC countries?
A: No. The Middle Eastern governments know what's really going on here, even though what they may say in public is completely different. The fact is that Hamas started this war, and none of these other countries want Hamas in their countries because they know that the first thing they'll do is overthrow the local government. Effectively, Hamas doesn’t exist anymore either—they've really all been killed, so you just have to give some time for things to cool down out there, and of course, the US is working overtime to keep the situation from escalating, but we can only try—we can’t enforce this thing. One question I've been getting from a lot of people lately is: will the US send troops to Israel or to Gaza? The answer is no—we were in Iraq and Afghanistan for 20 years! We’re in no hurry to get back into a new war, especially a new 20-year war, and that would not be in our own interest. By the way, Israel can amply defend itself; they have the best military in the Middle East by far, largely supported by the United States. For me, the big mystery is how intelligence in Israel missed this attack. They were just completely asleep at the switch, and some day in the future there will be an investigation about this, but don’t expect it from the current government.
Q: Why won’t Egypt and Jordan take the Palestinian refugees?
A: They are both poor countries. Neither of them is oil-rich, and Egypt especially has a horrendous population problem—they are in fact the world's second largest food importer after China. They have 110 million people to feed and not enough production locally to do that, so it isn’t easy to take in 2 million Palestinians. If you don't believe me, go to Cairo—it's just incredibly crowded. With a population of 10 million you can't go anywhere, so where are they going to put 2 million more people? So this is a difficult problem, there's no easy fix depending on what side you’re on.
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The Diary of a Mad Hedge Fund Trader
2021 Mount Rose Summit Nevada
