It’s fascinating that Bitcoin was supposed to be the new currency of the Trump administration, and under those conditions, one might believe the price of Bitcoin will double and triple pretty soon.
The results have been dire since the new President took over, with the price of Bitcoin cratering to $77,000 per coin from $107,000.
These devastating results have caught traders off guard, and many have lost their shirts in the quiet storm.
I don’t really care about Bitcoin personally, and I’m usually not in the business of recommending the product, but I do care what it signals about liquidity and the risk on/off sentiment.
The tariffs are starting to scare investors, and we see it in the price of Bitcoin.
Liquidity being pulled can create a cascading effect where nobody knows where the floor is.
Bitcoin could fall a lot further, considering many could just not be bothered to fight through the tariffs and can’t stomach it.
Nobody ever went bankrupt from taking a profit, right?
With all-time highs in many asset classes, it is almost as if Trump thinks he is playing with house money to push through aggressive strategies that put enormous trade pressure on other countries.
It’s a political calculus that fosters uncertainty, and many know that markets hate uncertainty, especially tech stocks.
On the heels of a good Nvidia earnings report, we have received a sell on the news price action, and that is very negative to the overall tech sector.
Year to date, we stand 3.5% in the red, but looking to March expiration, I believe this is a short 3-week buying opportunity until the next bevy of geopolitical chaos.
I recommend keeping your portfolio small for the time being and let the trade rhetoric pass through until you go big.
I did execute 2 more bullish positions in Palantir and Microsoft today.
A rout in Bitcoin deepened forced money to the sideline in the face of the most popular Trump trades.
Alt coins also did poorly too with Ether, Polkadot, and XRP all dropping more than 7% in one day.
Remember in 2022 during the crypto winter, when prices plummeted amid rising interest rates and industry woes.
Trump said Thursday that 25% tariffs on Canada and Mexico would come into force from March 4, undermining hopes he might reverse course after a previous delay. He also said Chinese imports would face a further 10% levy, prompting officials in Beijing to promise “all necessary measures” in response.
The selloff underscores a swift change of fortunes for what was previously one of the most popular Trump trades in global markets: buying Bitcoin on the expectation that the president’s crypto-friendly approach would lead to a broad rally.
Traders are still waiting for Trump to come up with concrete steps for the sector, including a Bitcoin stockpile.
Trump has already made a few changes that have pleased crypto bulls, including putting crypto advocates in key positions. The Securities and Exchange Commission, which embarked on a year-long crackdown under former Chair Gary Gensler, has also closed investigations into several crypto outfits in recent weeks.
Readers shouldn’t get too rattled by the geopolitics.
More often than not, the bluster serves as a good entry point into tech stocks.
I do believe 2025 will be the year of volatility, and buying on these big dips is a big part of our benefit to it.
It’s been a steep drop for tech stocks the last few days and there is a lot to piece through here.
It was due at some point.
Look, we are at Himalayan highs in the Nasdaq and that doesn’t mean it will be smooth sailing from here.
To find that incremental dollar to push up tech stocks is not as easy as it once was.
We aren’t in the golden years of technology anymore.
The big question is why someone should input that extra dollar when there is a flattening of momentum in the entire tech establishment.
A.I. is the big two-letter acronym that everyone is focused on so it is not a surprise that profits are being taken leading up to Nvidia’s earnings.
Nvidia isn’t as ironclad as it used to be and that worries me.
Nvidia is carrying the market on its back like it has been doing for the past year and market breadth has remarkably narrowed.
If there was no Nvidia, we would be looking at a demonstrably lower stock market than this expensive stock market we are trading right now.
Remember that I urged readers to pile into tech stocks after that mid-January Deepseek selloff and that was the perfect elixir to profits.
Now, where do we find that indicator or signal to go green?
It’s a tough one and we must be patient.
All I have left in the portfolio is a bull call spread in Meta that has been taken out to the woodshed and beaten like the proverbial red-headed stepchild.
Then we look at other signs of liquidity and alternative barometers and Bitcoin has to scare you.
The quicksand drop to $85,000 per coin questions whether the bull market in tech stocks is still alive or kicking.
At the very minimum, the kicking is getting weaker and weaker each following earnings season.
But investors can hold on to hope for a few more hours. After the bell today, the world turns to fourth-quarter earnings for the linchpin of AI euphoria, Nvidia (NVDA).
This two-plus-year bull market has weathered several multi-month periods when Nvidia's stock price sputtered. But the company's stock hasn't contributed to the bull market since last June, as its share price has effectively gone nowhere in that time.
Over the last 10 years (40 reports), buying Nvidia stock just before the earnings announcement has yielded a median return of 3% to 4% on the one-day, one-week, and one-month time frames. Holding for three months has yielded nearly 18%.
The disparity highlights the volatile earnings reactions that might net bullish results but can also cause significant discomfort in the near term.
But for the entire Nvidia obsession, investors are right to question how much AI is still a picks-and-shovels or even an energy trade (as it morphed into in 2024).
If I had to nail down a date, investors expect the 2nd half of 2025 to calculate what exactly future cash flow will look like and if the infrastructure investment in AI is really worth the hassle.
A great deal of capital was asked to front AI and we are creeping towards that day where AI will need to sink or swim.
As it stands, the AI overlords like OpenAI helmed by Sam Altman, still puts on a happy face like nothing will fail to surpass expectation. It is easier to put on a good face when someone is worth billions upon billions.
In the short, we are preparing for a buying opportunity in the best and brightest.
https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png00april@madhedgefundtrader.comhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngapril@madhedgefundtrader.com2025-02-26 14:02:412025-02-26 14:16:20Nvidia Earnings To Sway The Nasdaq
Meta (META) migration into the eyewear business is a little bit of a head-scratcher until peeling back the layers and really understanding what is going on.
EssilorLuxottica’s agreement to prolong its long-term collaboration with Meta Platforms for the development of smart eyewear over the upcoming 10 years is a massive victory for Meta CEO Mark Zuckerberg.
This milestone offers meaningful insight into the direction of where the business model is heading.
Many have expected that Meta would start to branch out into other venues once their core businesses start to stagnate.
The digital ad game and social media platforms only go so far in terms of growth these days, and shareholders are waiting on the next big thing.
Short-term prospects are what drives the stock movement, and Meta is looking for that pixie dust.
EssilorLuxottica is the largest maker of eyewear in the world and the owner of many eyewear brands and retailers, including Ray-Ban, LensCrafters, and Pearle Vision in the U.S.
EssilorLuxottica also acquired Heidelberg Engineering, maker of imaging and healthcare machinery and technology, largely for the ophthalmic and eyecare markets worldwide.
Prescription glasses are not cheap, ranging into the thousands of dollars for designer frames and lenses.
If Meta can figure out how to do this all online without going to the optician, imagine the juicy margins they could extract from this sort of venture.
Meta and EssilorLuxottica have a relationship for the production of the Ray-Ban smart glasses. The glasses’ latest version gives consumers video, camera, and Bluetooth headset capability in a stylish eyewear frame with a cool brand on it.
Heidelberg Engineering makes complex, sophisticated, expensive equipment that you may be exposed to if you’re examined in an ophthalmologist’s office. Buying Heidelberg makes EssilorLuxottica more entrenched in the industry where it is the established leader.
The tie-up with EssilorLuxottica is the perfect onboarding situation to understand how to perfect the optimal glasses and lenses and then to transfer it into an online experience.
Remember, even if this investment is for VR purposes, the application revolves around virtual eyewear as well.
Meta now understands they need to secure a monopoly on eyewear, and it is a conscious decision to make that a launching point into more of their products.
In the future, Meta wants consumers to access Instagram, Whatsapp, and Facebook through EssilorLuxottica eyewear products.
Meta also hopes to secure the first mover advantage while other big tech firms lack the deep knowledge of eyewear. There have already been numerous failed attempts at smart glasses, and so Meta founder Mark Zuckerberg is doubling down with a relationship with Europe’s most deeply entrenched premium eyewear firm.
Although the boost to the bottom and top line won’t happen quickly with a possible relationship with EssilorLuxottica, this could anoint Meta as the gatekeeper to the new virtual world through this new eyewear tech.
It’s becoming clear that Meta is running up to certain upper limits in regards to the growth of their 3 platforms, and they are looking for another super booster to prop up profits.
I don’t believe that Meta will be allowed to acquire this eyewear company because of anti-competitive laws, but adopting its best products and practices and hiring their best talent seems a lot more on brand from Meta.
Meta has never been shy at poaching outside talent and rewarding them handsomely.
On the flip side, EssilorLuxottica would be smart to adopt some tech now by hiring the right people and trying to digitize the experience further otherwise, Meta will get what they are coming for.
Meta pushing the envelope is one of the big reasons why they have stayed ahead of other big tech companies and why the stock has done so well the past few years.
Meta stock is a great short-term and long-term proposition for patient and impatient investors.
Below, please find subscribers’ Q&A for the February 12 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Incline Village, NV.
Q: Can Nvidia (NVDA) go to $200 in the next three years?
A: I would imagine probably, yes. They still have a fabulous business—enormous orders and record profits. But it's not going to happen in the next six months. You need to get us out of the current stock market malaise before anything moves dramatically one way or the other, except for META, which is at an all-time high. Their basic business is still great, and the threat posed by DeepSeek is wildly overblown.
Q: Why is McDonald's (MCD) seeing declining sales?
A: Partly, it's because they have been cutting prices. So, of course, that automatically feeds into declining sales. Also, I think the weight loss drugs Mounjaro or Ozempic are having an impact. People just don't go in and eat three Big Macs for lunch anymore. They may not need any Big Macs at all. And forget about the fries and the super-size high fructose corn syrup drink. When these drugs first came out, it was speculated that fast food companies would be the number one victim of these drugs, and that is turning out to be true. Some 15.5 million people in the United States suddenly aren't hungry anymore; they just take one bite of a meal and then push their food around the plate with their fork. That’s better than taking amphetamines, which people like Judy Garland used to take to lose weight. I think that will affect not only McDonald's, but all fast-food companies which I avoid like the plague anyway because my doctor says I shouldn't eat that food.
Q: Should I buy First Solar (FSLR) based on the revised higher sales outlook?
A: I don't want to touch alternative energy anything right now. I think the government will eliminate all subsidies for all alternative energy—be it solar, windmills, hydrogen, nuclear, whatever—and turn us back into an all-oil and coal economy. That is the announced goal of the new administration. So that eliminates the subsidies for sure. It certainly will be a blow to the earnings of all solar-type companies. If you are going to do an energy form, I would do nuclear, which benefits from deregulation, if that ever happens.
Q: Do price caps fix supply problems? Because Europe is thinking about capping energy prices in the short term.
A: Price caps never work, nor does any other attempt to artificially control prices, because all it does is dry up supply. If you cap the prices, and therefore the profits that energy companies can make, they'll quit. They'll abandon the energy business, or they'll pare it down, or they won't expand. One way or the other, you reduce the return on capital. Capital is like water; it will go where it gets the highest return, and price caps certainly are not part of that formula. But what do I know? I only drilled for natural gas for six years.
Q: What's your top AI choice?
A: Well, I would say it's Nvidia (NVDA) still, and the big AI users which include Meta (META), Google (GOOG), and Amazon (AMZN). Nothing has changed here.
Q: Is there any chance that Ford Motors (F) will be bought out anytime soon or never?
A: My view of all of the legacy car companies, including Stellantis, which is the old Chrysler, Ford (F), and General Motors (GM), is that they are basically giant mountains of scrap metal and only have a scrap metal value, which is about 5 cents on the dollar. That's what they fell to in the 2008 financial crisis, and all of them except for Ford went bankrupt. So I am not a big fan of the legacy auto industry now. And now, they have a trade war. They happen to be one of the biggest victims of trade wars because to stay competitive with Tesla, they moved a lot of their production to Canada and Mexico, and now those plans are going up in flames. So it seems like they're damned if they do and they're damned if they don't. I'm happy driving my Tesla, but I'm wondering if my next car is a BYD. Prices are so low, it might even be worth paying 100% duty just to get a cheaper car that has better self-driving capability. But the future is unknown, to say the least.
Q: Is the next big rotation out of Silicon Valley and into Chinese tech stocks?
A: Over the long term, that may happen, but with the current administration and China (the number one target in restraint of trade and trade wars), I don't want to touch anything Chinese. There are too many better things to do in the U.S. Imagine you buy a Chinese stock, and then the administration announces a total cutoff of trade with China the next day. Not good. Chinese stocks are incredibly cheap. Most of the big ones are now single-digit multiples compared to multiples in the 20s, 30s, and 40s for our stocks. But they come with a very high political risk, and that has been true for several years now. There are better fish to fry than in China. I'd rather buy Europe than China right now if you really do want to go international. But I have no idea why they're going up unless they're discounting an end to the Ukraine War.
Q: Are junk bonds (JNK) and (HYG) a good play?
A: I would say yes. Their default risk has always been over-exaggerated thanks to their unfortunate name. They're yielding 6.54% and change, but it's a very slow mover. If we do get any improvement, any economy without inflation junk will go to $100. It's currently around $96. And you know, yield is a nice thing to have these days since the capital gain side seems to have dried up and turned into dust on almost any asset class.
Q: How can I decide when to sell the stocks that we bought on your recommendations?
A: Well, our trade alerts always have a buy recommendation and a sell recommendation or an expiration date. If you bought the stocks and kept it,just read Global Trading Dispatch for an updated market view. Watch our Mad Hedge Market Timing Index. When we get up into the 70s and 80s, that is definitely sell territory. It's hard for individuals to have an economic view going out to the rest of the year, but even the people who are economists have no idea what's going to happen right now. As I said, uncertainty is at an 8-year high, and that is being reflected in the market. So nothing beats cash, especially when you can earn 4.2% on 90-day US treasury bills. No one ever got fired for taking a profit.
Q: Can Intel (INTC) make a comeback this year?
A: No. I'm sorry, but they won’t. They had a horrible manager. They dumped him after a couple of disastrous years. I knew he was a horrible manager. I fought off all the pressure to buy Intel. So far, that's working. I mean, the stock has been terrible, so it is very cheap, but there is no guarantee that they will ever recover and, in fact, may get taken over by somebody else. So—too many better things to do. I'd rather be buying more Nvidia right now at these prices than sticking my neck out and praying for a miracle at Intel.
Q: A couple of years ago, I bought a bunch of Palantir (PLTR) on your recommendation for the next 10 bagger. I now have a 10 bagger. What should I do?
A: You know, we did recommend Palantir about 10 years ago, and it did nothing for the longest time. And then last year, it just took off like a rocket—I think it's up 400% last year. Price-earnings multiples are insanely high now. So what I would do is sell half your position. That way, the remaining half is all profit. You're playing with the house's money, and you're reducing your risk in a high-risk environment. Sell half, keep the other half. If it looks like it's starting to roll over and die, then you sell your remaining half.
Q: What's your favorite currency this year, and what should we do about it?
A: My favorite currency is the US dollar. If we're not going to get any interest rate cuts this year, the dollar will remain the highest-yielding currency in the world, and then everybody wants to buy it. It's really that simple. It’s all about interest rate differentials. Everybody else in the world has low interest rates, so stick with the dollar and don't touch the foreign currencies yet.
Q: Inflation expectations have exploded higher in view of today's number. Do you expect it to get worse?
A: If the trade war continues, it will absolutely get worse. 25% price increases are inflationary—period. End of story. A price increase is the definition of inflation, and right now, we are increasing the number of countries subject to high punitive tariffs, not decreasing them. You can expect markets to worry about that. And even if they put a temporary hold on these, people are raising prices now. They are not waiting for the actual tariff to hit; they are front-running that right now. So if you don't believe me, go to the grocery store where prices are through the roof. I actually went to a grocery store the other day, and I couldn't believe what things cost.
Q: I'd like to hedge my Nvidia (NVDA) position with a covered call. Which one should I do?
A: Well, it's not actually a hedge. What a covered call does is reduce your cost price and increase income. Right now, we have NVDA at $135. If you shorted something like the February $145 calls, you might get a dollar for that. That reduces your average price by a dollar. If you shorted the March $145 calls, that'll bring in probably $5, reduce your costs by $5, or bring in an extra $5 in income. And if you keep doing this every month and Nvidia stays stuck in a range, you can end up taking $10, $20, or even $30 in premium income over the next six months. And I have a feeling that will be the winning strategy for the first half of this year, using rallies to sell covered calls. You really could get your average cost down quite a lot; that way, if we have a massive sell-off, a lot of that loss will already be covered. If we get a massive rally, your stock just gets called away, and you buy it back on the next dip. The only negative here is the tax consequences of taking capital gains on the call-aways.
Q: You mentioned that the US has a demographic problem coming up; how will that affect the market in the short term?
A: It doesn't affect the market in the short term. Demographics are a long-term game. You have to think in terms of a generation being the round lot, which is about 20 years. Suffice it to say, when demographics go against you, like they did in Japan for 30 years, markets are horrible. Demographics are going against China now, and you're getting horrible markets. Demographics are good now in the US because we have millennials just entering their peak spending years, and that's when economies boom, and that should continue up to 2030. That is how to play demographics, and we keep updated here, although the government has suddenly ceased making available all demographic data to the public—I don't know why, but it's going to make the science of demographics much more difficult to follow without the government data. I don't know why they did that. I don't know what they hope to gain by clouding the demographic picture. Maybe it has to do with the allocation of congressional seats to the states or something like that.
Q: Do you have information on how to place a LEAPS order?
A: Just go to www.madhedgefundtrader.com, go to the search box, put in LEAPS in all caps, and you will find an encyclopedia of information on how to do LEAPS or Long Term Equity Anticipation Securities.
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, TECHNOLOGY LETTER, or JACQUIE'S POST, then WEBINARS, and all the webinars from the last 12 years are there in all their glory.
Good Luck and Good Trading,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Tech stocks have felt the full effect of the volatile nature of the new federal government in charge in Washington.
Tech stocks aren’t looking too pretty today.
The new admin levied a 25% tariff on goods from Mexico only to give the Mexicans a 1-month reprieve.
Like a game of high-stakes poker, but Trump is wielding the American economy at the poker table with reckless abandon.
Tech stocks whipsawed and most stocks opened up in the red, however, a stock like Meta was able to ride out the instability by surging at the open.
Not all tech stocks are created equal.
If many investors thought Trump wouldn’t follow through with his sabre-rattling, then think again.
He is hell-bent on going full throttle and pushing allies to the brink whether they can tolerate it or not.
The surge in interest rates because of the perception of higher inflation and higher geopolitical risk was the reason tech stocks were jolted at the beginning of this week.
Indeed, tech stocks are in for a sideways correction if American government policy becomes constantly aggressive and brutal.
Tech stocks will have a narrow path to go higher, but not like the prior 10 years when stocks were cheered higher by almost everyone.
Trump said this will boost US manufacturing.
The tariffs will grow the US economy, protect jobs, and raise tax revenue, he argues.
Canada’s Trudeau declared retaliatory 25% tariffs on $107 billion dollars worth of US goods on Saturday.
Mexican President Claudia Sheinbaum has directed the Secretary of Economy to impose a plan including "tariff and non-tariff measures in defense of Mexico's interests".
Together, China, Mexico, and Canada accounted for more than 40% of imports into the US last year.
Most goods from Mexico don’t affect tech stocks such as fruits like avocado, vegetables, tequila, and beer.
Canadian goods such as steel, lumber, grains, and potatoes are also likely to get pricier.
It is expected that the car manufacturing sector could see the brunt of the effects of the tariff.
It’s not like Trump is only going after Mexico and Canada, he also has the U.K. and Europe in his crosshairs.
Do tariffs cause inflation?
In the short term, tariffs will hit consumers in the U.S. with corporations front-running price increases by passing on the higher inputs to the end buyer.
The market also senses higher inflation and interest rate yields will get bid up, which is negative for tech stocks.
It is naïve to think that tech stocks will go up in a straight line like the past 10 years – they certainly will not.
If the government is hell-bent on this type of tactic, global markets will feel the pain.
Even if this doesn’t directly affect tech stocks, the American consumer will not go unscathed.
Interest rates exploding higher will certainly mean tech stocks opening up Monday mornings 3% down.
That is not a good starting point for the week and explains why the bellwether Nvidia (NVDA) is down 15% year to date.
Then throw in the chaos from the Deepseek fiasco that threatens the valuations of many AI stocks.
It’ll be tough sledding from here on out and tech investors need to be mindful to not get caved in out of nowhere.
https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png00april@madhedgefundtrader.comhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngapril@madhedgefundtrader.com2025-02-03 14:02:082025-02-03 14:50:27Tarrifs Come For Tech Stocks
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