(META) Archives - Page 10 of 18 - Mad Hedge Fund Trader

The Market Outlook for the Week Ahead, or Too Much of a Good Thing?

There can be too much of a good thing.

Inflation is dramatically falling, with Core PCE down to an amazing 2.6% YOY rate in December. At the same time, GDP growth came in at an incredible 3.3% in Q4 and 2.5% for all of 2023. The long-term average is 3.0%. It’s about as close to a Goldilocks scenario as we’ll ever get.

The problem arises when the economy gets TOO healthy right when the Fed is considering its first interest rate CUTS in four years. That could lead our nation’s central bank to postpone cuts or not to announce them at all.

That would suddenly put the three-month-old bull market on ice, perhaps indefinitely, which has given us one of the worst whipsaw markets I have ever seen. Sector leadership has changed three times so far in 2024. First, there was the AI 5, (MSFT), (META), (GOOGL), (AMZN), and (NVDA). Next came stocks that benefit the most from falling interest rates, financials, precious metals, base metals, industrials, bonds, and foreign currencies.

To say this would be a tough market to trade would be an understatement, evidenced by my multiple stop losses this month. The remedy for this is to shrink your portfolio, sit back, and wait for the market to tell you what to do. I have to say that with the Volatility Index ($VIX) camped out at the $12 handle, options are not offering a lot for you to chew on either.

If you are looking for any further proof that technology is accelerating far faster than we can understand, I shall recall for your edification my last weekend.

After my youngest went off to college, I had to get her headboard refinished because she spent two years in bed looking at her computer while enrolled in high school during COVID-19. She had completely worn the finish off but got all A’s.

So I went to Yelp to look for a furniture restoration business. I clicked on one restorer who had good reviews and lots of pictures, described the job, and included pictures. Within 60 seconds, I received not one bid for the job but four, as Yelp had put the job out for bid across its entire network. One offered to do the job the next day for $100.

Learning how easy it is to refinish furniture, I put a second job out for bid, a small beat-up desk which I picked up at an estate sale for $20. I learned that this was a 100-year-old Craftsman desk highly sought after by collectors worth $2,500. Absolutely, yes, it was worth the $750 cost of a total stripped-down restoration.

I’m thinking “poor furniture restorers”, but what they are losing in the price, they make up in volume. Their craft is in fact a dying one and they can charge whatever they want.

And now you know why I go to estate sales.

What kind of homework is my daughter getting these days? As a Computer Science major at the University of California, she was handed a box of calculators smashed with a hammer. Over a weekend, she was required to invent a tool that identified the good chips from the bad, write code to reprogram the chips, and then glue the good calculators back together.

By Sunday afternoon she had a box full of working but somewhat ugly calculators, thanks to my donation of Gorilla Glue. And this for a sophomore! Needless to say, I didn’t see much of my daughter last weekend, except when she came downstairs to do her laundry.

Next week, they have to fix cell phones.

Gulp! I doubt I could even get into the UC today, even though I graduated Magna Cum Laude 50 years ago. Such is life with college students.

Watch out! The future is happening fast!

So far in January, we are down -4.33%. My 2024 year-to-date performance is also at -4.33%. The S&P 500 (SPY) is up +1.14% so far in 2024. My trailing one-year return reached +54.54% versus +21.14% for the S&P 500.

That brings my 15-year total return to +672.30%. My average annualized return has retreated to +51.06%.

Some 63 of my 70 trades last year were profitable in 2023.

I am maintaining longs in (MSFT), (AMZN), (V), (PANW), and (CCJ).

US GDP Rocketed by 2.5% in 2023, cementing its position as the strongest major economy in the world. Q4 came in at a hot 3.3%. We’re going from soft landing to no landing at all. Unfortunately, the report also put our bond trade to sleep.

Inflation Falls, with the Core PCE index easing to 2.9% last month, the lowest since 2021. That’s in the face of consumer spending posting the biggest back-to-back increase in nearly a year. This is very positive for bond bulls. Buy (TLT) LEAPS on dips.

The Roaring Twenties are Back, says investment guru and old friend Ed Yardeni. He draws parallels with the runaway stock prices that followed the 1918 Spanish flu pandemic, which killed millions. Of course, you had a 10:1 margin during the twenties which made speculation much easier. Are same-day options any worse?

New Homes Sales Recover, on a falling interest rate push, up 8.0% to 664,000. Sales, however, can be volatile on a month-to-month basis. Sales increased 4.4% on a year-on-year basis in December.

Netflix Soars on Big Subscriber Beat, up 8.6% on an add of 13 million new subscribers. It moved solidly into more sports content with the World Wrestling Entertainment deal. Buy (NFLX) on dips, which clearly won the streaming wars. I can’t get enough of The Rock, who is a genuinely nice guy.

Microsoft Tops $3 Trillion Valuation, cementing its hold on the AI lead. (MSFT) has been a top Mad hedge holding for years which we are currently long. Buy (MSFT) on dips which may have another $100 in it this year.

Freeport McMoRan Kills it, with an earnings upside blowout, taking the stock up 5%. CEO Richard Adkerson, a long-time Mad Hedge subscriber, says any problems are short-term. Political problems in Chile and Peru are an issue, which generates 40% of the world’s copper. Electrification of the US economy will continue to be a driving theme.

Mortgage Rates Plunge to 8-Month Low. The average fixed-rate 30-year mortgage fell to 6.60% as of Thursday from 6.66% the week prior, Freddie Mac said in its weekly report on home loan borrowing costs. The next Golden Age of Housing is here.

China Markets Dive, on news that the central bank was forced into the currency markets to support the yuan. Stock markets didn’t like it a bit, down 2.7% on the day. Overseas funds have sold roughly $1.6 billion in Chinese equities so far this year, with investor confidence bruised by signs of a slowdown in the world's second-largest economy. Offshore yuan tomorrow-next forwards jumped to a more than two-month high of 4.25 points late on Monday, reflecting signs of tighter liquidity conditions. Avoid China (FXI) like some stale egg foo young.

“Oppenheimer” Sweeps the Oscars, with a record 13 nominations. It’s a movie where I knew half the characters in real life from my work at the Nuclear Test site in Nevada. It was another opportunity to discuss advanced nuclear physics over dinner with my kids. Click here for the full list. The winners will be announced on March 10.

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 29, the Dallas Fed Manufacturing Index was announced.

On Tuesday, January 30 at 8:30 AM EST, the S&P Case Shiller National Home Price Index is released. We also get the JOLTS Job Openings Report.

On Wednesday, January 31 at 2:00 PM, the ADP Private Jobs Opening Report is published. The Federal Reserve announces its interest rate decision.

On Thursday, February 1 at 8:30 AM, the Weekly Jobless Claims are announced.

On Friday, February 2 at 2:30 PM, the December Nonfarm Payroll Report and Unemployment Rate is published. At 2:00 PM the Baker Hughes Rig Count is printed.

As for me, I received calls from six readers last week saying I remind them of Ernest Hemingway. This, no doubt, was the result of Ken Burns’ excellent documentary about the Nobel prize-winning writer on PBS last week.

It is no accident.

My grandfather drove for the Italian Red Cross on the Alpine front during WWI, where Hemingway got his start, so we had a connection right there.

Since I read Hemingway’s books in my mid-teens I decided I wanted to be him and became a war correspondent. In those days, you traveled by ship a lot, leaving ample time to finish off his complete work.

I visited his homes in Key West, Florida, and Ketchum, Idaho. His Cuban residence is high on my list, now that Castro is gone. His home in Cuba is on the menu.

I used to stay in the Hemingway Suite at the Ritz Hotel on Place Vendome in Paris where he lived during WWII. I had drinks at the Hemingway Bar downstairs where war correspondent Ernest shot a German colonel in the face at point-blank range. I still have the ashtrays.

Harry’s Bar in Venice, a Hemingway favorite, was a regular stopping-off point for me. I have those ashtrays too.

I even dated his granddaughter from his first wife, Hadley, the movie star Mariel Hemingway, before she got married, and when she was still being pursued by Robert de Niro and Woody Allen. Some genes skip generations and she was a dead ringer for her grandfather. She was the only Playboy centerfold I ever went out with. We still keep in touch.

So, I’ll spend the weekend watching Farewell to Arms….again, after I finish my writing.

Oh, and if you visit the Ritz Hotel today, you’ll find the ashtrays are now glued to the tables.

As for last summer, stayed in the Hemingway suite at the Hotel Post in Cortina d’Ampezzo Italy where he stayed in the 1950s to finish a book. Maybe some inspiration will rub off on me.

Good Luck and Good Trading,

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

January 26, 2024

Diary, Newsletter, Summary

Global Market Comments
January 26, 2024
Fiat Lux

Featured Trade:
(JANUARY 24 BIWEEKLY STRATEGY WEBINAR Q&A)
(TLT), (IWM), (SPY), (ALK), (FXI), (UAL), (BA), (NVDA), (UUP), (UNG), (MSFT), (GOOGL), (AMZN), (NVDA), (META), (CCI)

January 24 Biweekly Strategy Webinar Q&A

Diary, Newsletter

Below please find subscribers’ Q&A for the January 24 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Silicon Valley, CA.

Q: Will you stop out of (TLT) if it breaches the $93 level?

A: Yes, and I'm actually hoping it will do that because that sets up some really great two-year LEAPS for the (TLT) going out long-term. It's trying to hold in here at the bottom. It's been in the $93 handle for several days now, so we'll just watch.

Q: There seems to be negativity all over the place, but markets continue upwards. What are the chances of a black swan this year, and what do you think it might be?

A: Well, there always is a possibility of a black swan. That's why we do risk control and risk management all the time because black swans are by definition unpredictable. The reason people are negative is that they don't own more stocks, and they keep going straight up, at least the tech ones do. Money managers always look dumber not owning a market that's going up than owning a market that's going down and losing money with everybody else. It's just the way investor psychology works.

Q: Do you expect small caps (IWM) to outperform the S&P 500 (SPY) this year?

A: Yes I do, but it'll be a second half of the year game. They really need the big drops in interest rates to get earnings moving.

Q: Would Boeing (BA) be good for a LEAPS?

A: Yes, it would, but I would go out to the maximum maturity, say two to two and a half years, and you may get a double on your money on that. Basically, there are only two airplane manufacturers in the world that have a monopoly (or a duopoly to be technically correct) and Boeing is one of them. So love them or hate them, you still have to buy their airplanes; look no further than Alaska Airlines (ALK) and United (UAL), which have had to cancel literally tens of thousands of flights because they don't have enough airplanes. They had to ground all their 737 maxes.

Q: With all the shooting going on in the Middle East, why isn't oil higher?

A: It's all about China (FXI). As long as China is in a recession which seems to be getting worse, oil demand falls. China is the world's largest importer of oil by a large margin. They're also taking all the natural gas that the US will produce, and that is a big drag on prices. That will end when China starts to recover, and we did get a major stimulus package out of the Chinese government this week.

Q: What about NVIDIA (NVDA)? It's gone up so much. I'm up 300% since my cost. Should I sell now and take profits or just run the long?

A: This whole group, which I now call the AI 5—Microsoft (MSFT), Google (GOOGL), Amazon (AMZN), NVIDIA (NVDA), and Meta (META) could drop 20% at any time and then go on to new highs, and that's exactly what happened in the fall. We had a 20% drop in everything and then it just shot off to the races. So as long as you can handle a 20% decline in these stocks, and if you're a long-term investor, then you should keep them. Because the risk is you'll take profits, generate a big tax bill, and then won't be able to get back in at the next low, and you'll end up missing the next $1,000 point move. If you're the trader of the century like me, you can do that. But for your average garden variety trading at-home investor, I would say keep what's winning—keep the AI 5.

Q: Thanks John, I got a double on your (UNG) LEAPS that you put out over Christmas. It's since given back much of the gains. Do you see another big rally in (UNG) this year?

A: Yes, that was a 2-year LEAPS I put out. It doubled in 2 weeks, and I do see a bigger recovery in the second half of the year once the Chinese economy starts to recover. Their marginal first choice for new energy supplies is American natural gas; it's not oil from the Middle East. They're trying to clean up their atmosphere as much as we are, so look for another big demand spike for (UNG) later in the year.

Q: Why has the dollar (UUP) been so strong?

A: Rising interest rates. Currencies are all about interest rates and where the next interest rate move is going to be. Money always pours into the currency that has the next rise in interest rates. That's been the US dollar for all of this year so far.

Q: Will the election have an effect on the market?

A: Absolutely not. Nobody cares about the election. If you're an election junkie, you may stay glued to your TV. I'm not interested myself. I don't expect any changes in the economy to take place this year, and that's all investors and money managers really care about—is how they will do by the end of this year. So you're better off watching sports on ESPN is all I can tell you. Oh yes, and this is supposed to be a record year for disinformation about elections and candidates. Another reason to not bother with the election this year. Go watch the Jack Reacher series. At least there you can keep track of the body count.

Q: Is it a good time to buy a home right now?

A: Yes, if you have cash. It is still too expensive to borrow money to buy a home with 30-year mortgages at 6.5% and 5/1 ARMs at 6% or even 5.5%, but if you have cash, it is a great time to buy a house because what is the next move? Interest rates go down. Suddenly everybody in the world can afford houses and they now want to buy your house. So very rapid price rises are coming for the housing market once the rates start to fall, which could be March, could be June, depending on how Jerome Powell feels that morning.

Q: With EV sales up 50% last year (TSLA), why has copper been so weak?

A: The old high price of copper was based on continuing 50% per year increases in EV sales for the indefinite future. In fact, we got a 50% increase last year and forecasts for 10% growth only this year, so that's a big part of it. Also, backing out the Chinese construction demand gives copper a huge hit. New construction in China is essentially at zero and will be at zero for quite some time because of the real estate crisis there. Some people in China are looking at prices on their homes down 80%, which sounds like a repeat of our 2008 financial crisis. So that is another major drag on copper.

Q: Is it a good time to “buy wrights”?

A: Absolutely yes. If you read today's newsletter, it tells you how to do a buy write, and you do “buy rights” on the most expensive stocks. For example, NVIDIA (NVDA) at $600 today—you can get $8 for the February $650 calls, which you sell short against your stock ownership at $600, or you can go out to March 15th and you can get $19 for the March $650 calls. That will reduce your average cost for the shares by $19, so actually (NVDA) is, in fact, one of the best stocks to do this in, because it has the highest implied volatility of any options, second to Tesla (TSLA), it turns out.

Q: How did you predict the S&P 500 so accurately last year? You got within a point, pretty amazing.

A: All I can say is 55 years of practice helps! And I am a bit of a contrarian person; so when everybody said the market was going to go down, I said, “How about new all-time highs?” But also the answer to all questions really is people are wildly underestimating the impact of technology and AI, which continues to surprise the upside and will keep doing so for the next decade. That is the driver of all asset prices everywhere right now, and people will figure that out in probably about 5 years.

Q: Crown Castle Inc. (CCI), is that a good one to watch, with renewed interest in REITS?

A: Absolutely yes, and it's also a great interest-rate play. It had a horrible selloff going into October and has since made back all of those losses. We actually had a LEAPS in (CCI), which is now making money.

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

January 18, 2024

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
January 18, 2024
Fiat Lux

Featured Trade:

(A WEIGHTY IMPACT)

(LLY), (NVO), (MRNA), (AAPL), (AMZN), (GOOGL), (MSFT), (META), (NVDA)

A Weighty Impact

Biotech Letter

Today, let's talk about something that's stirring up quite the buzz in the investment community, something that's not just about numbers and charts, but about potentially changing lives.

Now, I'm sure you've heard of Apple (AAPL), Amazon (AMZN), Alphabet (GOOGL), Microsoft (MSFT), Meta Platforms (META), and Nvidia (NVDA). These tech titans aren't just playing around with gadgets and gizmos; they're digging deep into the world of knowledge to uncover stuff we didn't even know was missing. And let's be clear, this isn't just some fancy artificial intelligence show-off; it's bigger, much bigger.

But, recently, other industries aren’t letting tech have all the fun.

The pharma industry, led by stars like Moderna (MRNA), Eli Lilly (LLY), and Novo Nordisk (NVO), is on the brink of what I'd call medical miracles.

We're looking at treatments that might kick some serious diseases to the curb – illnesses that we thought were just part of the unlucky draw in the genetic lottery.

Admittedly, figuring out the real worth of these innovations is a bit like trying to nail jelly to the wall – traditional financial analysis scratches its head at this sort of thing.

But for those of you who don't mind a bit of a rollercoaster ride, investing in these themes could be as rewarding as finding a forgotten winning lottery ticket in your old jeans.

Let's chew on obesity for a second. It's a big deal, literally and figuratively. It's the root of all sorts of nasty stuff like heart disease and diabetes.

Here's where Lilly and Novo Nordisk come in, swinging like heroes with their weight-loss drugs. These aren't just your average diet pills; we're talking about drugs that could turn the tables on major illnesses and even some curveballs like Alzheimer’s and sleep apnea.

Lilly's stock has been on a joyride, up 77% in the past year. Sure, by the bookworms' metrics, it's overvalued, but if you ask me, those numbers are playing catch-up to what these drugs could really do.

For context, imagine if you had bought Amazon or Apple back when they were just a bookstore and a computer company. Looking at their history and trajectory, Lilly and Novo Nordisk could be cooking up something similar.

And with over 20 studies lined up in the next five years, Lilly's stock, hanging around $625, could jump to a cool $840 by 2028 if things go well.

Keep in mind that the obesity treatment market is huge, and I mean, really huge. We're talking over 100 million potential customers in the U.S. alone.

And get this: insurance companies, those penny pinchers, are likely to cover these drugs because they're cheaper than surgeries.

Getting down to the specifics with Lilly, they've been making waves in the weight loss market with Mounjaro, raking in a sweet $2.9 billion in just nine months. And with Zepbound, it's like they've hit the jackpot twice.

Still, it's not a solo race; Novo Nordisk is right there with Wegovy and Ozempic. The demand is so hot that there were shortages last year. Talk about being in high demand!

But here's where Lilly might just have the upper hand. Their molecule, tirzepatide, is like the Usain Bolt of weight loss drugs – up to three times more effective than Novo Nordisk’s semaglutide.

And with the market expected to balloon to $100 billion by 2030, we're just seeing the opening act of what could be a blockbuster show.

With all this obesity talk, it’s important to understand that Lilly is no one-trick pony. They've got a whole stable of drugs treating everything from lymphoma to ulcerative colitis. And with over 20 programs in phase 3 studies, they're not running out of steam anytime soon.

Plus, here's the cherry on top: Lilly isn't just about making money; they're sharing the love with a 15% hike in their dividend.

That means if you jump on the Lilly train by Feb. 15, you're in for a treat in early March.

So, is Lilly a solid bet for the long haul? It sure looks like it. The excitement around their weight loss treatments is just one piece of the puzzle.

With a variety of drugs in their arsenal and an impressive pipeline, Lilly isn't just a flash in the pan. Sure, there are the usual hiccups like patent expiries and pipeline flops, but with their portfolio, they look set to weather any storms and keep the growth party going. I suggest you buy the dip.

January 16, 2024

Diary, Newsletter, Summary

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)

The Market Outlook for the Week Ahead, or What Will Kill this Market

Diary, Newsletter

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

December 19, 2023

Biotech Letter

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)

Hidden In Plain Sight

Biotech Letter

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.